Government Accounting and Accounting for Non-Profit Organizations

Overview of the subject

- A specialization course designed to provide the students with accounting knowledge and
skills that are applicable to the financial reporting of government entities and non-profit
organizations.
- The financial reporting of government entities, unlike rapid business of accounting is
governed by the government accounting manual or national government agencies (NGAs)
as promulgated by the Commission on Audit.
- The financial reporting of non-profit entities is governed by the Philippine Financial
Reporting Standards (PFRS).

Chapter 1:Overview of Government Accounting

Definition of Government Accounting

"Government accounting encompasses the processes of analyzing, recording, classifying,
summarizing and communicating all transactions involving the receipt and disposition of
government funds and property, and interpreting the results thereof."
- State Audit Code of the Philippines,
P.D. No. 1445, Sec. 109)

Government Accounting vs. Business Accounting

Like accounting for business entities, financial reporting for government entities also has
the overall objective of providing information that is useful for decision making.

Compared to the accounting for business entities, government accounting places greater
emphasis on the following:
- Sources and utilization of government funds; and
- Responsibility, accountability and liability of entities entrusted with government funds
and properties.

3 main difference
- Accounting Standard Used
- Financial Statements Issued
- Reporting

Objectives of Government Accounting

- To produce information concerning past operations and present conditions;
- To provide a basis for guidance for future operations;
- To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and
- To report on the financial position and the results of operations of government agencies
for the information of all persons concerned.
- P.D. No. 1445, Sec. 110

Information of passed operations and present conditions will facilitate the evaluation of the
performance of an agency from one period to another, the results of the evaluation may
guide the manager or public official on what course of action to take as regards to future
operations, as well as come up with a proper analysis of the funds needed for a project or
program.
The accounting data resulting from the government accounting process will show whether
the agency is achieving its mandate, as well as it's operational objectives.

For example: Just like in PUP-Manila, being a state university, accounting for the university's
transaction is guided by the government accounting manual.
The result of the university's accounting process will provide evidence on how
the unversity is achieving it's mandate.

Moreover, the financial report will also show the extent of the agency's financial and non
financial resources, which have useful lives like buildings, laboratories, etc. which the users
of the information can evaluate in determining the service potential as well as give
indication when additional resources need to be injected into the operation

Responsibility, Accountability and Liability over Government Funds and Property

- Government resources must be utilized efficiently and effectively in accordance with the
law.
- Efficient - doing things right. The government agency can deliver a given quantity
and quality outputs with minimum inputs. Or the agency can maximize outputs
out of the limited resources entrusted to it.
- Effective - doing the right things. The operating units are able to achieve the
expected results and contribute to the achievement of the organization's goal.
- The head of government agency is directly reponsible in implementing this policy.
- All other personnel entrusted with the custody of government resources are responsible to
the head of the government agency, are accountable for the safeguarding thereof, and are
liable for any losses.

Accounting Reponsibility
The following offices are charged with government accounting responsibility:
1. Commission on Audit (COA)
2. Department of Budget and Management (DBM)
3. Bureau of Treasury (BTr)
4. Government agencies

Commission on Audit
Responsibilities of COA
- Promulgate accounting and auditing rules
- As mandate by the 1987 Constitution of the Philippines, the COA shall have
exclusive authority subject to the limitation to define its scope of its audit
and examination, established the techniques and methods required therefore,
and promulgate accounting and auditing rules and regulations including those
for the prevention of dissallowance of irregular, unnecessary, excessive,
extravagant or unconscionable expenditures or uses of government funds and
properties

- Keep the general accounts of the government

- Keeping of supporting vouchers and other documents. In government, we follow
voucher system fr authorizing cash disbursements. Which means every
transaction is supported with vouchers. In which case, the voucher is supported
with original supporting documents and submitted to COA. Photocopies and
duplicate will remain with the agencies.
- Submition of financial reports to the office of the president and congress
- Not later than the last day of September each year, as provided in Sec. 41 of P.D.
1445
- Reports Submitted:
- Annual report of the government, subdivisions, agencies,
instrumentalities, including government owned and contolled
corporations (consolidated fs)

Department of Budget and Management (DBM)

Responsibility of DBM
- Formulation and implementation of the national budget
- Pursuant to Section 2, Chapter 1, Title 17 of Book 4, of the administrative code
of the Philippines, or E.O. 292 . The DBM shall be responsible for the formulation
and implementation of the national budget with the goal of attaining our
national socio-economic plans and objective
- They are tasked to control and monitor appropriations and allotment

Bureau of Treasury (BTr)

Responsibility of BTr
- Cash custody and control of disbursements.
- The BTr plays a vital role in the cash operations of the national government. It
functions as the cash custodian of the government and is authorize to:
- receive and keep national funds
- manage and control the disbursements, thereof
- maintain accounts of financial transactions of all national government
offices, agencies, and instrumentalities.

Government Agencies
Responsibility of government agencies:
- Maintain accounting books and budget registries which are reconciled with the cash
records of the BTr and the budget records of the COA and DBM.

Accounting responsibilities are segregated to various government agenices, which are, the
COA, DBM, BTr, and the different government agencies. The segregation of responsibilities
serves the purpose of second balance. Segregation of duties involves three main functions
that must be conducted by different entities (incompatible duties)
- Incompatible duties - dapat di lang hawak ng isang entity lang.
The follwing are incomptible duties:
- Custody of asset
- Authorization for the use of the asset
- Record keeping of the asset

The government agencies being the implementor of the government programs and projects
accounting checking balance is properly observed by having the BTr as the cash custodian,
the DBM as the one in charge for the authorization for the use of cash, and the COA incharge
for the record keeping function.
The GAM for NGAs
- The Government Accounting Manual for National Government Agencies (GAM for NGAs)
is promulgated by the COA under the authority conferred to it by the Philippine Constitution
- The GAM for NGAs was promulgated primarily to harmonize the government accounting
standards with the International Publice Sector Accounting (IPSAS) . The IPSASs are based
on the IFRSs.

Prior to GAM for NGAs, government accounting system is based on new government
accounting system, untilit was replaced on January 1, 2016. The GAM for NGAs was
promulgated primarily to harmonize the government accounting standards with International
Accounting Standards, particularly IPSAS.

Government accounting in the Philippines, uses IPSAS adapted as Philippine Publis Sector
Accounting Standards (PPSAS) in the presentation and preparation of the Financial Statements

It is however to be noted, the IPSAS are based on the IFRS, since the PPSAS are based on the
IPSAS which is based on the IFRS or PRFS, most of the concepts used ay natutunan na rin
sa IAS.

Objective of the GAM for NGAs

To update the following:
- Standards, policies, guidelines and procedures in accounting for government funds and
property;
- Coding structure and accounts; and
- Accounting books, registries, records, forms, reports and financial statements.

Basic Accounting and Budget reporting Principles

- Compliance with PPSAS and relevant laws, rules and regulations
- Accrual basis of accounting
- Budget basis for presentation of budget information in the financial statements.
- Revised Chart of Accounts
- Double entry bookkeeping
- Financial statements based on accounting and budgetart records
- Fund Cluster accounting

Revised Charts of Accounts prescribed by COA

UACS sub- UACS Ocject Covering

Account Title RCA Code object code Code PPSAS
Assets
Cash and Cash Equivalents PPSAS 2. 28.
Cash on Hand 29 & 30
Cash-Collecting Officers 10101010 00 1010101000
Petty Cash 10101020 00 1010102000

Cash in Bank-Local Currency

Cash in Bank-Local Currency, Bangko Sentral
10102010 00 1010201000
ng Pilipinas
Cash in Bank-Local Currency, Current
10102020 00 1010202000
Account
 Cash in Bank-Local Currency, Current
10102020 01 1010202001
Account-Allied Bank
Cash in Bank-Loacl Currency, Current
10102020 02 1010202002
Account - Amanah Bank
Cash in Bank-Loacal Currency, Current
10102020 03 1010202003
Account-Asia United Bank Corporation
Cash in Bank-Loacl Currency, Curreny
Account -Australia and New Zealand 10102020 04 1010202004
Bank
Cash in Bank-Local Currency, Current
10102020 05 1010202005
Account-Banco de Oro (BDO)

The revised chart of accounts is a listing of account names and 10-digit account number.
10-digit is derived from 8-digit RCA code and 2-digit UACS sub-object code.

Fund Clusters

Code Fund Clusters

01 Regular Agency Fund
02 Foreign Assested Projects Fund
03 Special Account-Locally Funded/Domestic Grants Fund
04 Special Account-Foregin Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts

The books of accounts are maintained by fund cluster or according to the types of fund being
accounted for.
May sariling books and reporting with the different funds classified per cluster.

Qualitative Characteristics
- Understandability - Substance over form
- Relevance - Neautrality
- Materiality - Prudence
- Timeliness - Completeness
- Reliability - Comparability
- Faithful Representation

Components of General Purpose Financial Statements

1. Statement of Financial Position;
2. Statement of Financial Performance;
3. Statement of Changes in Net Assets/Equity;
4. Statement of Cash Flows
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements

In the Statement of Comparison of Budget and Actual Amounts, it shows the budget utilization
rate, wherein pinapakita kung ilang percent out of the authorized budget by the DBM was
utilized by the Agencies.
Recognition of an Asset
An item is recognized as asset if it meets all of the following criteria:
1. It meets the definition of an asset;
2. Probable inflow of future economic benefits; and
3. Reliable measurement of cost or other value (e.e., fair value)