NGAS MODULE GOVERNMENT ACCOUNTING

NGAS Manual for National Government Agencies Volume I - Accounting Policies

Sec. 5. General Accounting Plan. The General Accounting Plan (GAP) shows the overall accounting system of a government agency/unit. It includes the source documents, the flow of transactions and its accumulation in the books of accounts and finally their conversion into financial information/data presented in the financial reports. Presented on next page is the General Accounting Plan for national government agencies. The following accounting systems are: a. Budgetary Accounts System; b. Receipts/Income and Deposit System; c.

Disbursement System; and

d. Financial Reporting System.

A. BUDGETARY ACCOUNTS Sec. 6. Budgetary Accounts System. The Budgetary Accounts System encompasses the processes of preparing Agency Budget Matrix (ABM), monitoring and recording of allotments received by the agency from the DBM, releasing of Sub-Allotment Release Order (Sub-SARO) to Regional Offices (RO) by the Central Office (CO); issuance of Sub-SARO to Operating Units (OU) by the RO; and recording and monitoring of obligations.

Sec. 7. Budgetary Accounts. Budgetary accounts consist of the appropriations, allotments and obligations. Appropriations refer to authorizations made by law or other legislative enactment for payments to be made with funds of the government under specified conditions and/or for specified purposes. Appropriations shall be monitored and controlled through registries and control worksheets by the DBM and COA, respectively. Budgetary accounts allotments and obligations are discussed in the succeeding sections.

Sec. 8. Agency Budget Matrix (ABM). The ABM refers to a document showing the disaggregation of agency expenditures into components like, among others, by source of appropriations, by allotment class and by need of clearance.

Sec. 9. Procedures for the Preparation of the ABM.

Sec. 10. Allotment Release Order (ARO). The ARO is a formal document issued by the DBM to the head of the agency containing the authorization, conditions and amount of an agency allocation. The document may be the ABM, where the amount of allocation not needing clearance is indicated, or the Special Allotment Release Order (SARO), where the release of which is subject to compliance with specific laws or regulations or is subject to separate approval or clearance by competent authority. In the case of agencies with decentralized accounting procedures, Sub-ARO/SubSARO is issued/released.

Sec. 11. Recording of Allotments. Upon receipt of the approved ABM and ARO, the Budget Officer/Head of the Budget Unit/Designated Budget Officer shall record the allotment in the respective registries through the Allotment and Obligations Slip (ALOBS). Separate registries shall be maintained for the four allotment classes by Program/Project/Activity (P/P/A), to wit: 1. Registry of Allotments and Obligations - Capital Outlay (RAOCO) 2. Registry of Allotments and Obligations - Maintenance and Other Operating Expenses (RAOMO) 3. Registry of Allotments and Obligations - Personal Services (RAOPS) 4. Registry of Allotments and Obligations - Financial Expenses (RAOFE)

Sec. 12. Procedures in the Monitoring and Recording of Allotments Received from DBM.

Sec. 13. Procedures for the Recording of Sub-Allotment Release Order (Sub-ARO) by RO/ OU.

Sec. 14. Accounting for Obligation. Obligation refers to a commitment by a government agency arising from an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum of money. The agency is authorized to incur obligations only in the performance of activities which are in pursuits of its functions and programs authorized in appropriation acts/laws within the limit of the ARO. Obligations shall be taken up in the registries through the ALOBS prepared/processed by the Budget Unit. The Budget Officer/ Head of the Budget Unit/designated Budget Officer shall certify to the availability of allotment and such is duly obligated by signing in the appropriate box of the ALOBS. On the other hand, the Accountant/Head of the Accounting Unit shall certify to the correctness and validity of obligations, and availability of funds. Both Budget and Accounting Units shall coordinate in the filling up of the Status of the Obligation in their respective copies of the ALOBS Sec. 15. Procedures for the Recording of Obligations.

B. INCOME/COLLECTIONS AND DEPOSITS Sec. 16. Receipts/Income Collections and Deposits System. The Receipts/Income Collections and Deposits System covers the processes of acknowledging and reporting income/collections, deposits of collections with Authorized Government Depository Bank (AGDB) or through the AGDB for the account of Treasurer of the Philippines, and recording of collections and deposits in the books of accounts of the agency.

Sec. 17. Sources of Income of the National Government. The income of the National Government are classified into general income accounts and specific income accounts. The following comprise the general income accounts, among others: 1. Subsidy Income from National Government 2. Subsidy from Central Office 3. Subsidy from Regional Office/Staff Bureaus 4. Income from Government Services 5. Income from Government Business Operations 6. Sales Revenue 7. Rent Income 8. Insurance Income 9. Dividend Income 10. Interest Income 11. Sale of Confiscated Goods and Properties 12. Foreign Exchange (FOREX) Gains 13. Miscellaneous Operating and Service Income 14. Fines and Penalties-Government Services and Business Operations 15. Income from Grants and Donations The specific income accounts of national government agencies are classified as follows: 1. Income Taxes 2. Property Taxes 3. Taxes on Goods and Services 4. Taxes on International Trade and Transactions 5. Other Taxes 6. Fines and Penalties-Tax Revenue

7. Other Specific Income The descriptions of all the accounts and the instructions as to when these are to be debited and credited are provided in Volume III of the NGAS Manual.

Sec. 18. Methods of Accounting for Income. methods of recording income:

National government agencies adopt the following accounting

1. Accrual Method - Accrual method of accounting shall be used by national government agencies when income is realized (earned) during the accounting period regardless of cash receipt. Accounts receivable is set up and the general or specific income accounts according to nature and classification are credited. 2. Modified Accrual – Under the modified accrual basis, income of an agency is recorded as "Deferred Credits to Income" and the appropriate receivable account is debited. The income account is recognized upon receipt of collection and the "Deferred Credits to Income" account is adjusted accordingly. 3. Cash Basis - Cash basis of accounting shall be used for all other taxes, fees, charges and other revenues where accrual method is impractical. The income account is credited upon collection of the cash or its equivalent.

Sec. 19. Fines and Penalties. Fines and penalties, either on tax revenues or other specific income accounts, shall be recognized as income of the year these were collected.

Sec. 20. Other Receipts. Other receipts of national government agencies shall be comprised of, but not limited to the following: 1. Refund of cash advances - When cash advances for official travels are granted, the account "Due from Officers and Employees" is debited and when refunds are made, the same account is credited. Cash advances for salaries and wages shall be recorded as debits to the account "Cash-Disbursing Officers" and any refunds thereof shall be credited to the same account. 2. Receipts of performance/bidders/bail bonds - Performance bond posted by contractor or supplier to guaranty full and faithful performance of their contract may be in the form of cash or certified checks or surety. Performance bond in cash or certified check shall be acknowledged by the issuance of official receipt and recorded in the book of accounts by the Accountant thru a Journal Entry Voucher (JEV) for the purpose. In case of surety bond, an acknowledgement receipt shall be issued by the authorized official. 3. Refund for overpayment of expenses - Refunds as a result of overpayment of expenses shall be recorded as a credit to the appropriate expense account if paid in the same year or to Prior Years’ Adjustments if paid in the ensuing year. This transaction shall reduce the amount of expense previously recorded. 4. Collections made on behalf of another agency or private companies - Collections made on behalf of other agencies which are later remitted to them are recorded under accounts "Due to NGAs", "Due to LGUs" or " Due to GOCCs" as the case maybe. Authorized collections made on behalf of private entities, like shares of proponents of Built-Operate-Transfer (BOT) Projects are recorded as "Other Payables". 5. Inter-agency transferred funds - Cash received from another agency for the purpose of implementing projects of that agency is recorded in the books as a credit to account "Due to NGAs" or "Due to LGUs", as the case maybe.

Sec. 21. Deposit of Collections. All Collecting Officers shall deposit intact all their collections, as well as collections turned over to them by sub-collectors/tellers, with AGDB daily or not later than the next banking day. They shall record all deposits made in the Cash Receipts Record.

Sec. 22. Reporting of Collections and Deposits. At the close of each business day, the Collecting Officers shall accomplish the Report of Collections and Deposits (RCD) in accordance with the instructions provided in Volume II of the NGAS Manual for the RCD. All collections shall be deposited with AGDB for the account of the agency or the Treasurer of the Philippines daily or not later than the next banking day.

Sec. 25. Dishonored Checks. There are instances that checks received by Collecting Officers in payment of taxes, fees and other debt due the government are dishonored by the drawee banks. A check is said to be dishonored by non-payment when, upon its being duly presented for payment, such payment is refused or cannot be obtained. (Sec. 83, RA No. 2031, Negotiable Instrument Law). It may also be defined as those checks paid to the agency, which were dishonored by the AGDB due to Drawn Against Insufficient Fund (DAIF) or Drawn Against Uncleared Deposits (DAUD).

C. DISBURSEMENTS Sec. 27. Disbursements Defined. Disbursements constitute all cash paid out during a given period either in currency (cash) or by check. It may also mean the settlement of government payables/obligations by cash or by check. It shall be covered by Disbursement Voucher (DV)/Petty Cash Voucher (PCV) or payroll.

Sec. 28. Basic Requirements for Disbursements. The basic requirements applicable to all types of disbursements made by national government agencies are as follows: 1. Existence of a lawful and sufficient allotment certified as available by the Budget Officer; 2. Existence of a valid obligation certified by the Chief Accountant/Head of Accounting Unit; 3. Legality of transactions and conformity with laws, rules and regulation; 4. Approval of the expense by the Chief of Office or by his duly authorized representative; and 5. Submission of proper evidence to establish the claim.

Sec. 29. Disbursements System. The Disbursements System involves the preparation and processing of disbursement voucher (DV); preparation and issuance of check; payment by cash; granting, utilization, and liquidation/replenishment of cash advances.

Sec. 30. Certification on Disbursements. following certifications on the DV:

Disbursements from government funds shall require the

1. Certification and approval of vouchers and payrolls as to validity, propriety and legality of the claim (Box A of DV) by head of the department or office who has administrative control of the fund concerned; 2. Necessary documents supporting the DV and payrolls as certified and reviewed by the Accountant/Head of Accounting Unit (Box B of DV); and 3. Certification that funds are available for the purpose by the Accountant/Head of Accounting Unit (Box B of DV). Sec. 31. Disbursements by Checks. Checks shall be drawn only on duly approved DV or PCV. These shall be reported and recorded in the books of accounts only when actually released to the respective payees. Two types of checks are being issued by government agencies as follows: 1. Modified Disbursement System (MDS) Checks - issued by government agencies chargeable against the account of the Treasurer of the Philippines, which are maintained with different MDS - Government Servicing Banks (GSBs). These are covered by Notice of Cash Allocation, an authorization issued by the DBM to government agencies to withdraw cash from the National Treasury through the issuance of MDS checks or other authorized mode of disbursements. 2. Commercial Checks - issued by government agencies chargeable against the Agency Checking Account with GSBs. These are covered by income/receipts authorized to be deposited with AGDBs; and funding checks received by RO/OUs from COs/ROs, respectively.

Sec. 32. Recording of Check Disbursements in the Check Disbursements Record (CkDR).

All

checks issued including cancelled checks shall be recorded chronologically in the CkDR. The dates checks were actually released shall be indicated in the appropriate column provided for in the CkDR.

Sec. 33. Reporting of Checks Issued/Released. All checks actually released to claimants shall be included in the Report of Checks Issued (RCI), which shall be prepared daily by the Cashier. The RCI shall be submitted to the Accounting Unit for the preparation of JEV. All unreleased checks as of the report date shall be enumerated in a "List of Unreleased Checks" to be attached to the RCI.

Sec. 34. Procedures for Disbursements by Checks. OMITTED

Sec. 35. Disbursements by Cash. Disbursements by cash shall be made from cash advances drawn and maintained in accordance with COA rules and regulations. Cash payments shall be made based on duly approved payrolls/disbursements vouchers.

Sec. 36. Cash Advances for Travel. Cash advances granted for travel shall be accounted for as Due from Officers and Employees and these are subject to liquidation upon travel completion. For liquidation of travel where the amount of cash advance is equal to or more than the travel expenses incurred, the Liquidation Report form shall be prepared by the officers/employees concerned and submitted to the Accounting Unit as basis for JEV preparation. The excess cash advance shall be refunded and an OR shall be issued to acknowledge receipt thereof. In case the amount of cash advance is less than the travel expenses incurred, a Liquidation Report shall be submitted to liquidate the cash advance previously granted and a DV shall be prepared to claim reimbursement of the deficiency in amount. Sec. 39. Disbursements Through Petty Cash Fund. Petty Cash Fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the agency. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be approved by authorized officials and signed by the payee to acknowledge the amount received. The official receipt or its equivalent is attached to the PCV.

G. PROPERTY, PLANT AND EQUIPMENT, AND INVENTORY ACCOUNTS Sec. 41. Purchase or Construction of Property, Plant and Equipment. Property, plant and equipment acquired through purchase shall include all costs incurred to bring them to the location necessary for their intended use, like transportation costs, freight charges, installation costs, etc. These are recorded in the books of accounts as Assets after inspection and acceptance of delivery. During construction period, property, plant and equipment shall be classified and recorded as "Construction in Progress" with the appropriate asset classification. As soon as these are completed, the "Construction in Progress" account shall be transferred to the appropriate asset accounts. Accounts "Public Infrastructures" and "Reforestation Projects" are closed to "Government Equity" account and the asset is recorded in the Registry of Public Infrastructures/Reforestation Projects at the end of the year.

Sec. 42. Property and Inventory Accounting System. The Property and Inventory Accounting System consists of the system of monitoring, controlling and recording of acquisition and disposal of property and inventory. The system starts with the receipt of the purchased inventory items and equipment. The requesting office in need of the inventory items and equipment after determining that the items are not available in stock shall prepare and cause the approval of the Purchase Request (PR). Based on the approved PR and after accomplishing all the required procedures adopting a particular mode of procurement, the agency shall issue a duly approved Purchase Order. Procedures relative to the obligation of the purchase order and payment of the deliveries are discussed under Sections 14 and 31, Accounting for Obligation and Disbursements by Check, respectively. The sub-systems are as follows:

1. Receipt, Inspection, Acceptance and Recording Deliveries of Inventory Items and Equipment 2. Requisition and Issuance of Inventory Items 3. Requisition and Issuance of Equipment

Sec. 43. Perpetual Inventory Method. Purchase of supplies and materials for stock, regardless of whether or not they are consumed within the accounting period, shall be recorded as Inventory account. Under the perpetual inventory method, an inventory control account is maintained in the General Ledger on a current basis. Regular purchases shall be recorded under the Inventory account and issuance thereof shall be recorded based on the Report of Supplies and Materials Issued. Purchases out of the Petty Cash Fund shall be charged immediately to the appropriate expense accounts. The Accounting Unit shall maintain perpetual inventory records, such as the Supplies Ledger Cards for each inventory stock, Property, Plant and Equipment Ledger Cards for each category of plant, property and equipment including work and other animals, livestock, etc. The subsidiary ledger cards shall contain the details of the General Ledger accounts. For check and balance, the Property and Supply Office/Unit shall maintain Property Cards (PC) for property, plant and equipment, and Stock Cards (SC) for inventories. The balance in quantity per PC and SC should always reconcile with the ledger cards of the Accounting Unit.

Sec. 44. Moving Average Method. The moving average method of costing shall be used for costing inventories. This is a method of calculating cost of inventory on the basis of weighted average on the date of issue. The Accounting Unit shall be responsible in computing the cost of inventory on a regular basis.

E. MISCELLANEOUS TRANSACTIONS Sec. 48. Miscellaneous Transactions. Miscellaneous transactions are transactions types that are unique and not recurring in the ordinary course of government operations. These seldom take place or should not happen at all. Some of the miscellaneous transactions are as follows: 1. Loss of Cash and Property 2. Request for Relief from Accountability 3. Cash Overage 4. Stale MDS and Commercial Checks 5. Set-up and Settlement of Disallowances 6. Refund of Overpayments

Sec. 49. Accounting for Loss of Cash and Property. malversation, theft, robbery, fortuitous event or other causes.

Loss of cash and property may be due to

Cash shortage discovered during cash examination conducted by auditors is reported through the Report of Cash Examination. The Auditor issues an audit report in case of shortage in property accountability. As soon as a shortage is definitely established, the Auditor shall issue a memorandum pertaining thereto and the Accountant shall draw a JEV to record the shortage as a receivable from the Accountable Officer concerned. In case of loss of property due to other causes like, theft, force majeure, fire, etc., a report thereon shall be prepared by the Accountable Officer concerned for purposes of requesting relief from accountability. No accounting entry shall be made but the loss shall be disclosed in the notes to financial statements pending result of request for relief from accountability. Sec. 50. Grant of Relief from Accountability. When a request for relief from accountability for shortages or loss of funds is granted, a copy of the decision shall be forwarded to the Chief Accountant who shall draw a JEV to record the transaction. The loss shall be debited to the Loss of Assets account and credited to the appropriate receivable account. In case the request for relief is denied, immediate payment of the shortage shall be demanded from the Accountable Officer. Restitution shall be acknowledged by the issuance of an official receipt.

In case the request for relief from accountability for loss of property caused by fire, theft, force majeure or other causes is granted, a copy of the decision shall likewise be forwarded to the Chief Accountant for the preparation of the JEV. The loss shall be debited to the Loss of Assets account and credited to the appropriate asset account. If request for relief from accountability is denied, the loss shall be taken up as a receivable from the Accountable Officer or employee liable for the loss and shall be credited to the appropriate asset account. Sec. 51. Accounting for Cash Overage. In case the cash examination disclosed cash overage, as determined by the Auditor during cash examination, the amount shall be forfeited in favor of the government and an official receipt shall be issued by the Cashier. The cash overage shall be taken up as Miscellaneous Income. Sec. 52. Accounting for Stale Checks. Checks may be cancelled when they become stale. The depository bank considers a check stale, if it has been outstanding for over six months from date of issue or as prescribed. A stale check shall be marked cancelled on its face and reported as follows: 1. Unclaimed stale checks which are still with Cashier shall be cancelled and reported in the List of Unreleased Checks as cancelled. The List of Unreleased Checks is attached to the RCI. 2. For stale checks which are in the hands of the payees or holders in due course and requested for replacements, new checks may be issued upon submission of the stale checks to the Accounting Unit. A certified copy of the previously paid DVs shall be attached to the request for replacement. A JEV shall be prepared to take up the cancellation. The replacement check shall be reported in the RCI.

Sec. 53. Accounting for Disallowances. Disallowances shall be taken up in the books of accounts only when they become final and executory. The Accountant shall prepare the JEV to take up the ReceivableDisallowances/Charges and credit the appropriate expense account for the current year or Prior Years’ Adjustment account if pertaining to expenses of previous years. Cash settlement of disallowances shall be acknowledged through the issuance of an official receipt and reported by the Cashier in the RCD. Sec. 54. Accounting for Overpayments. Sometimes overpayments or even double payment of expenditures do happen in agencies. These could be avoided with the institution of proper controls but some could not be avoided because of built-in procedures. One example is the payment of payrolls. Payrolls are prepared in advance and some agencies pay their employees through the banking system. All these are done before reports of attendance are submitted, making it impossible to know the exact amount to be paid in case there are absences without pay during the pay periods. In case of overpayments, refunds shall be demanded of the employees concerned. Sec. 55. Pro-forma Accounting Entries. miscellaneous transactions:

Particulars

The following are the pro-forma accounting entries for

Account Title

Acct. Code

Dr.

Cr.

1. Cash Shortage a. Cash shortage of the Disbursing Officer

To take up cash shortage

Due from Officers and Employees

128

Cash-Disbursing Officers

107

b. Cash Shortage of the Collecting Officer

150 150

To take up cash shortage

Due from Officers and Employees Cash-Collecting Officers

128

150

106

50

2. Relief from Accountability for Loss of Government Funds and Property a. Request for Relief from Accountability Granted.

To take up relief accountability for current year - -

Loss of Assets or

948

for prior years - -

Prior Years’ Adjustments

533

Due from Officers and Employees

128

50

50

b. Request for Relief from Accountability Denied.

To record the loss of Due from Officers and fund Employees by a Disbursing Cash-Disbursing Officer Officers (allegedly thru theft ) P150

128

150

107

150

c. Cash Settlement/Restitution in case of denial of Request for Relief from Accountability

To take up receipt of settlement

Cash-Collecting Officers Due from Officers and Employees

106 128

50

Subsidy Income from National Government

601

50

Cash-Collecting Officers

106

Prior Years’ Adjustment

533

Cash-Collecting Officers

106

Cash – Collecting Officers

106

50

To record deposit c.1 current year

c.2 prior year

50

50 50

3. Cash Overage

To take up cash

50

overage discovered during cash examination

Due to National Treasury Miscellaneous Operating and Service Income 50

433

To record deposit

Due to National Treasury Miscellaneous Operating and Service Income 50

433

Cash-Collecting Officers

106

50

50

50

4. Stale Checks a. Stale MDS check issued in the current year for replacement

Check cancellation

Cash-National Treasury, MDS Accounts Payable

Replacement

102

50

401

Accounts Payable

401

Cash-National Treasury, MDS

102

50

50 50

b. Stale MDS check issued in the prior years for replacement

Check cancellation

Replacement

Prior Years’ Adjustments

533

Accounts Payable

401

Accounts Payable

401

Cash-National Treasury, MDS

102

50 50

50 50

c. Stale commercial check issued in the current and prior years for replacement

Check cancellation

Cash in Bank-Local Currency, Current Account Accounts Payable

Replacement

110

50

401

Accounts Payable

401

Cash in Bank-Local Currency,

110

50

50 50

Current Account

5. Disallowances a. Recording of disallowances for current year’s transaction When the disallowances becomes final and executory overpayment of office supplies

ReceivablesDisallowances/ Charges Office Supplies Expenses

138

10

Settlement of Disallowance

Cash-Collecting Officers ReceivablesDisallowances/ Charges

106 138

10

Deposit of collection

Subsidy Income from National Government

601

10

Cash-Collecting Officers

106

849

10

Amount paid - P100 Should be - 90 Difference - 10

10

10

b. Recording of disallowance for prior year’s transaction

When the disallowance Receivables becomes final and Disallowances/ executory Charges Prior Years’ Adjustments

138 533

10 10

Settlement of disallowance

Cash - Collecting Officers Receivables Disallowances/ Charges

106 138

10

Deposit of collection

Prior Years’ Adjustments

533

10

Cash-Collecting Officers

106

10

10

6. Refund of Overpayment a. Overpayment taken up as receivable

To record overpayment Due from Officers and of salaries and Employees wages Salaries and Wages (When overpayment Regular Pay is

128 801

10 10

ascertained) To record receipt of refund

Cash-Collecting Officers Due from Officers and Employees

Deposit of collection

Subsidy Income from National Government Cash-Collecting Officers

106 128

10

601

10

10

106

10

b. Refund of overpayment not taken up as receivable

To record receipt of Cash - Collecting Officers refund of Salaries and Salaries and Wages – Wages - Regular Pay Regular during the current Pay year Deposit of collection

Subsidy Income from National Government

106 801

10

601

10

10

Cash-Collecting Officers

106

To record receipt of refund of 0verpayment in the ensuing year

Cash-Collecting Officers Prior Years’ Adjustments

106 533

10

Deposit of collection

Prior Years’ Adjustments

533

10

Cash-Collecting Officers

106

10

10

10