GAM
GAM
Position
Assistant Commissioner
State Auditor V
Supervising Administrative
Administrative Aide VI
Administrative Aide VI
Administrative Aide IV
Name
Position
Table of Contents
Chapter No.
Title
Page No.
Introduction
15
Responsibility Accounting
30
33
Disbursements
61
Financial Instruments
114
Inventories
130
Investment Property
145
10
164
11
Agriculture
213
12
Intangible Assets
227
13
Leases
236
14
251
15
258
16
265
17
Borrowing Costs
269
18
274
19
Financial Reporting
280
20
310
21
Bank Reconciliation
316
22
326
Table of Contents
Annex No.
Title
Page No.
327
A-1
328
343
B-1
344
352
353
D-1
354
360
361
405
406
430
443
447
Retained Income
450
452
461
462
464
Acronyms
479
Chapter 1
INTRODUCTION
standards, policies, guidelines and procedures in accounting for government funds and
property;
2
Chapter 2
GENERAL PROVISIONS, BASIC STANDARDS AND POLICIES
Sec. 1. Scope. This chapter covers the general provisions from existing laws, rules and
regulations; and the basic standards/fundamental accounting principles for financial reporting by
national government agencies.
Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used as stated
below shall be construed to mean as follows:
Accrual basis means a basis of accounting under which transactions and other events are
recognized when they occur (and not only when cash or its equivalent is received or
paid). Therefore, the transactions and events are recognized in the accounting records and
recognized in the financial statements of the periods to which they relate. The elements
recognized under accrual accounting are assets, liabilities, net assets/equity, revenue, and
expenses.
Assets are resources controlled by an entity as a result of past events, and from which future
economic benefits or service potential are expected to flow to the entity.
Contributions from owners means future economic benefits or service potential that have
been contributed to the entity by parties external to the entity, other than those that result
in liabilities of the entity, that establish a financial interest in the net assets/equity of the
entity, which:
conveys entitlement both to (i) distributions of future economic benefits or service
potential by the entity during its life, such distributions being at the discretion of the
owners or their representatives; and to (ii) distributions of any excess of assets over
liabilities in the event of the entity being wound up; and/or
can be sold, exchanged, transferred, or redeemed.
Distributions to owners means future economic benefits or service potential distributed by
the entity to all or some of its owners, either as a return on investment or as a return of
investment.
Entity refers to a government agency, department or operating/field unit. It may be referred
to in this GAM as an agency.
Expenses are decreases in economic benefits or service potential during the reporting period
in the form of outflows or consumption of assets or incurrence of liabilities that result in
decreases in net assets/equity, other than those relating to distributions to owners.
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. (Sec. 109,
Presidential Decree (P.D.) No. 1445)
Government Budget is the financial plan of a government for a given period, usually for a fiscal
year, which shows what its resources are, and how they will be generated
and used over the fiscal period. The budget is the government's key instrument for
promoting its socio-economic objectives. The government budget also refers to the
income, expenditures and sources of borrowings of the National Government (NG)
that are used to achieve national objectives, strategies and programs.
1 Liabilities are firm obligations of the entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources embodying
economic benefits or service potential.
2 Net assets/equity is the residual interest in the assets of the entity after deducting all its
liabilities.
3 Revenue is the gross inflow of economic benefits or service potential during the reporting
period when those inflows result in an increase in net assets/equity, other than increases
relating to contributions from owners.
4 Revenue funds comprise all funds derived from the income of any agency of the
government and available for appropriation or expenditure in accordance with law.
(Section 3, P.D. No. 1445)
Sec. 3. Responsibility, Accountability and Liability over Government Funds and
Property
1
It is the declared policy of the State that all resources of the government shall be
managed, expended or utilized in accordance with laws and regulations, and
safeguarded against loss or wastage through illegal or improper disposition, with a
view to ensuring efficiency, economy and effectiveness in the operations of
government. The responsibility to take care that such policy is faithfully adhered to
rests directly with the chief or head of the government agency concerned. (Sec. 2,
P.D. No. 1445)
Fiscal responsibility shall, to the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency. (Sec. 4(4), P.D. No. 1445)
The head of any agency of the government is immediately and primarily responsible
for all government funds and property pertaining to his agency. Persons entrusted
with the possession or custody of the funds or property under the agency head shall
be immediately responsible to him, without prejudice to the liability of either party to
the government. (Sec. 102, P.D. No. 1445)
Every officer of any government agency whose duties permit or require the
possession or custody of government funds or property shall be accountable
therefor and for the safekeeping thereof in conformity with law. Every AO shall
be properly bonded in accordance with law. (Sec. 101, P.D. No. 1445; Section 50,
Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)
Transfer of government funds from one officer to another shall, except as allowed by
law or regulation, be made only upon prior direction or authorization of the
Commission or its representative. (Sec. 75, P.D. No. 1445)
3
When government funds or property are transferred from one AO to another, or from an
outgoing officer to his successor, it shall be done upon properly itemized invoice and
receipt which shall invariably support the clearance to be issued to the relieved or
outgoing officer, subject to regulations of the Commission. (Sec. 77, P.D. No. 1445)
c. Liability over Government Funds and Property
1
Every officer accountable for government funds shall be liable for all losses
resulting from the unlawful deposit, use, or application thereof and for all losses
attributable to negligence in the keeping of the funds. (Sec. 105(2), P.D. No.
1445)
No AO shall be relieved from liability by reason of his having acted under the direction of
a superior officer in paying out, applying, or disposing of the funds or property with
which he is chargeable, unless prior to that act, he notified the superior officer in writing
of the illegality of the payment, application, or disposition. The officer directing any
illegal payment or disposition of the funds or property shall be primarily liable for the
loss, while the AO who fails to serve the required notice shall be secondarily liable. (Sec.
106, P.D. No. 1445)
When a loss of government funds or property occurs while they are in transit or the loss is
caused by fire, theft, or other casualty or force majeure, the officer accountable therefor
or having custody thereof shall immediately notify the Commission or the auditor
concerned and, within 30 days or such longer period as the Commission or auditor may in
the particular case allow, shall present his application for relief, with the available
supporting evidence. Whenever warranted by the evidence, credit for the loss shall be
allowed. An officer who fails to comply with this requirement shall not be relieved of
liability or allowed credit for any loss in the settlement of his accounts. (Sec. 73, P.D. No.
1445)
Sec. 4. Fundamental Principles for Revenue. All revenues accruing to the NGAs
shall be governed by the following fundamental principles:
Unless otherwise specifically provided by law, all revenues accruing to an entity by virtue of
the provisions of existing law, orders and regulations shall be deposited/remitted in the
National Treasury (NT) or in any duly authorized government depository, and shall
accrue to the General Fund (GF) of the NG. (Sec. 65(1), P.D. No. 1445)
Except as may otherwise be specifically provided by law or competent authority, all moneys
and property officially received by a public officer in any capacity or upon any occasion
must be accounted for as government funds and government property. (Sec. 42, Chapter
7, Title I(B), Book V, E.O. No. 292)
Amounts received in trust and from business-type activities of government may be
separately recorded and disbursed in accordance with such rules and regulations as
may be determined by a Permanent Committee composed of the Secretary of Finance
as Chairman, and the Secretary of Budget and Management and the Chairman, COA,
as members. (Sec. 65(2), P.D. No. 1445)
4
Under such rules and regulations as the COA and the Department of Finance (DOF)
may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge
receipt of all funds received by them, the acknowledgement bearing the date of actual
remittance or deposit and indicating from whom and on what account it was received.
(Sec. 70, P.D. No. 1445)
No money shall be paid out of any public treasury or depository except in pursuance
of an appropriation law or other specific statutory authority.
Government funds or property shall be spent or used solely for public purposes.
Trust funds shall be available and may be spent only for the specific purpose for
which the trust was created or the funds received.
Fiscal responsibility shall, to the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency.
Each entity of the National Government (NG) maintains complete set of accounting
books by fund cluster which is reconciled with the records of cash transactions
maintained by the BTr.
2
The BTr accounts for the cash, public debt and related transactions of the NG.
Each entity maintains budget registries which are reconciled with the budget records
maintained by the DBM and the Government Accountancy Sector (GAS), COA.
4
maintains budget records showing the overall approved budget of the NG and its
execution/implementation;
6
consolidates the FSs and budget accountability reports of all NGAs and the BTr
with COAs records to come up with an Annual Financial Report (AFR) for the
NG as required in Section 4, Article IX-D of the 1987 Philippine Constitution;
and
for individual entity/department FSs the head of the entity/department central office
(COf) or regional office (RO) or operating unit (OU) or his/her authorized
representative jointly with the head of the finance/accounting division/unit; and
for department/entity FSs as a single entity the head of the entity/department COf
jointly with the head of the finance unit.
Sec. 11. Components of General Purpose Financial Statements. The complete set of
GPFSs consists of:
1
2
3
4
5
6
Sec. 12. Books of Accounts and Registries. The books of accounts and registries of the
NG entities consist of:
1
Journals
1 General Journal (Appendix 1)
2 Cash Receipts Journal (Appendix 2)
3 Cash Disbursements Journal (Appendix 3)
4 Check Disbursements Journal (Appendix 4)
Ledgers
1 General Ledgers (Appendix 5)
2 Subsidiary Ledgers (Appendix 6)
Registries
1
2
3
4
Registries of Revenue and Other Receipts (Appendices 7, 7A, 7B, 7C and 7D)
Registry of Appropriations and Allotments (Appendix 8)
Registries of Allotments, Obligations and Disbursements (Appendices 9A, 9B, 9C
and 9D)
Registries of Budget, Utilization and Disbursements (Appendices 10A, 10B, 10C
and 10D)
Sec. 13. Fund Accounting. The books of accounts shall be maintained by fund cluster as
follows:
Code
01
02
03
04
05
06
07
Description
Regular Agency Fund
Foreign Assisted Projects Fund
Special Account-Locally Funded/Domestic Grants Fund
Special Account-Foreign Assisted/Foreign Grants Fund
Internally Generated Funds
Business Related Funds
Trust Receipts
Sec. 15. Fair Presentation. The FSs shall present fairly the financial position, financial
performance and cash flows of an entity. Fair presentation requires the faithful representation of
the effects of transactions, other events, and conditions in accordance with the definitions and
8
recognition criteria for assets, liabilities, revenue, and expenses set out in PPSAS. The application
of PPSAS, with appropriate disclosures, if necessary, would result in fair presentation of the FS.
Sec. 16. Compliance with PPSASs. An entity whose financial statements comply with
PPSASs shall make an explicit and unreserved statement of such compliance in the notes.
Financial statements shall not be described as complying with PPSASs unless they comply with
all the requirements of PPSASs. Inappropriate accounting policies that do not comply with
PPSAS are not rectified either by disclosure of the accounting policies used, or by notes or
explanatory material.
Sec. 17. Departure from PPSAS. In the event that Management strongly believes that
compliance with the requirement of PPSAS would result in misleading presentation that it would
contradict the objective of the FSs set forth in PPSAS, the entity may depart from that
requirement if the relevant regulatory framework allows, or otherwise does not prohibit, such a
departure.
Sec. 18. Going Concern. The FSs shall be prepared on a going concern basis unless there
is an intention to discontinue the entity operation, or if there is no realistic alternative but to do so.
Sec. 19. Consistency of Presentation. The presentation and classification of items in the
FSs shall be retained from one period to the next unless laws, rules and regulations, and PPSAS
require a change in presentation.
Sec. 20. Materiality and Aggregation. Each material class of similar items shall be
presented separately in the financial statements. Items of a dissimilar nature or function shall be
presented separately unless they are immaterial. If a line item is not material, it is aggregated with
other items either on the face of FSs or in the Notes to the FSs. A specific disclosure requirement
in a PPSAS need not be satisfied if the information is not material.
Sec. 21. Offsetting. Assets and liabilities, and revenue and expenses shall not be allowed
to offset unless required or permitted by a PPSAS except when offsetting reflects the substance of
the transaction or other event.
Sec. 22. Comparative Information. Comparative information shall be disclosed with
respect to the previous period for all amounts reported in the FSs. Comparative information shall
be included for narrative and descriptive information when it is relevant to an understanding of
the current periods FSs.
Sec. 23. Structure and Content. The FSs and each component shall be identified clearly
and distinguished from other information in the same published document.
Sec. 24. Statement of Financial Position. An entity shall present current and non-current
assets, as well as current and non-current liabilities, as separate classifications on the face of the
Statement of Financial Position (SFP).
Sec. 25. Statement of Financial Performance. The Statement of Financial Performance
(SFPer) shall include line items that present the revenue, expenses and net surplus or deficit for
the period.
Sec. 26. Statement of Changes in Net Assets/Equity. An entity shall present in the
Statement of Changes in Net Assets/Equity (SCNA/E) the following:
1
2
Each item of revenue and expenses for the period that, as required by Standards, is
recognized directly in net assets/equity, and the total of these items;
3
For each component of net assets/equity separately disclosed, the effects of changes in
accounting policies and corrections of errors recognized in accordance with PPSAS 3Accounting Policies, Changes in Accounting Estimates and Errors.
Sec. 27. Statement of Cash Flows. The Statement of Cash Flows (SCF) provides
information to users of FSs a basis to assess the ability of the entity to generate cash and cash
equivalents and to determine the entitys utilization of funds. This also provides information on
how the entity generates income authorized to be used in their operation and its utilization.
Sec. 28. Statement of Comparison of Budget and Actual Amounts. A comparison of
budget and actual amounts will enhance the transparency of financial reporting in government.
This shall be presented by government agencies as a separate additional financial statement
referred in this Manual as the Statement of Comparison of Budget and Actual Amounts (SCBAA).
Sec. 29. Notes to Financial Statements. The Notes to FSs contain information in
addition to that presented in the SFP, SFPer, SCNA/E, SCF and SCBAA. Notes provide narrative
descriptions or disaggregation of items disclosed in those FSs and information about items that do
not qualify for recognition in those statements.
Sec. 30. Qualitative Characteristics of Financial Reporting. An entity shall present
information including accounting policies in a manner that meets a number of qualitative
characteristics such as understandability, relevance, materiality, reliability and comparability.
These qualitative characteristics are the attributes that make the information provided in the FSs
useful to users.
Sec. 31. Key Features of Assets. The key features of an asset are:
future economic benefits or service potential must be expected to flow to the entity.
The following are indicators of control of the benefits by the entity:
1
the ability of an entity to benefit from the asset and to deny or regulate the access of
others to that benefit.
an entity can, depending on the nature of the asset, exchange it, use it to provide
goods or services, exact a price for others use of it, use it to settle liabilities, hold it,
or perhaps even distribute it to owners.
10
1024 the specification of a past event differentiates assets from intentions to acquire
assets, which are not to be recognized.
1025 a transaction or event giving rise to control of the future economic benefits must
have occurred.
The following are indicators of future economic benefits:
1
distinguishable from the source of the benefit i.e. the particular physical resource or legal
right;
does not imply that assets necessarily generate cash flows, the benefits can also be in the
form of service potential;
the fact that an asset cannot be sold does not preclude it from providing future economic
benefits.
Sec. 32. Recognition of an Asset. An asset shall be recognized in the financial position
when and only when (a) it is probable that the future economic benefits will flow to the entity; and
(b) the asset has a cost or value that can be measured reliably.
The following are indicators of probable inflow of future economic benefits:
1
the chance of benefits arising is more likely rather than less likely (e.g. greater than 50%).
2
5889
5890
reliable information will, without bias or undue error, faithfully represent those
transactions and events.
11
Sec. 33. Accounting Standards for Revenue. The following accounting standards shall
apply for revenue and receipts of government entities:
23 Revenue includes only the gross inflows of economic benefits or service potential
received and receivable by the entity in its own account. (PPSAS 9)
24 Receipts/Collections shall refer to all cash actually received from all sources during a
given accounting period.
25 Fines shall include economic benefits or service potential received or receivable by a
public sector agency, as determined by a court or other law enforcement body, as a
consequence of the breach of laws or regulations. Fines and penalties, either on tax
revenue or other specific income account, shall be recognized as income of the year
these were collected.
26 Gifts and donations shall consist of voluntary transfers of assets including cash or other
monetary assets, goods in-kind and services in-kind that one agency makes to another,
normally free from stipulations. (PPSAS 23)
27 Goods in-kind are tangible assets transferred to an agency in a non-exchange
transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind. (PPSAS 23)
28 Taxes are economic benefits or service potentials compulsory paid or payable to
public sector agencies, in accordance with laws and or regulations, established to
provide revenue to the government. Taxes do not include fines or other penalties
imposed for breaches of the law. (PPSAS 23)
29 Transfers are inflows of future economic benefits or service potential from nonexchange transactions, other than taxes. (PPSAS 23)
Sec. 34. Use of Appropriated Funds. All moneys appropriated for functions, activities,
projects and programs shall be available solely for the specific purposes for which these are
appropriated.
Sec. 35. Appropriation for Loan Proceeds. Expenditures funded by foreign and
domestic borrowings shall be included within the expenditure program of the entity concerned.
Loan proceeds, whether in cash or in kind, shall not be used without the corresponding release of
funds through a Special Budget.
Sec. 36. Basic Requirements for Disbursements and the Required Certifications.
Disbursements of government funds shall comply with the following basic requirements and
certifications:
23 Availability of allotment/budget for obligation/utilization certified by the Budget
Officer/Head of Budget Unit;
24 Obligations/Utilizations properly charged against available allotment/budget by the Chief
Accountant/Head of Accounting Unit;
25 Availability of funds certified by the Chief Accountant. The Head of the Accounting
Unit shall certify the availability of funds before an Agency Head or his duly
authorized representative enter into any contract that involves the expenditure of
public funds based on the copy of budget release documents;
12
23 Availability of cash certified by the Chief Accountant. The Head of the Accounting
Unit shall certify the availability of cash and completeness of the supporting
documents in the disbursement voucher and payroll based on the Registry of
Allotments and Notice of Cash Allocation/Registry of Allotment and Notice of
Transfer of Allocation;
24 Legality of the transactions and conformity with existing rules and regulations. The
requesting and approving officials shall ensure that the disbursements of government
funds are legal and in conformity with applicable rules and regulations;
25 Submission of proper evidence to establish validity of the claim. The Head of the
Requesting Unit shall certify on the necessity and legality of charges to allotments
under his/her supervision as well as the validity, propriety and legality of supporting
documents. All payments of government obligations and payables shall be covered by
Disbursement Vouchers (DV)/Payrolls together with the original copy of the
supporting documents which will serve as basis in the evaluation of authenticity and
authority of the claim. It should be cleared, however, that the submission of the
supporting documents does not preclude reasonable questions on the funding, legality,
regularity, necessity and/or economy of the expenditures or transactions; and
26 Approval of the disbursement by the Head of Agency or by his duly authorized
representative. Disbursement or disposition of government funds or property shall
invariably bear the approval of the proper officials. The DVs/Payrolls shall be signed and
approved by the head of the agencies or his duly authorized representatives.
Sec. 37. Certification of Availability of Funds. No funds shall be disbursed, and no
expenditures or obligations chargeable against any authorized allotment shall be incurred or
authorized in any department, office or agency without first securing the certification of its Chief
Accountant or head of accounting unit as to the availability of funds and the allotment to which
the expenditure or obligation may be properly charged.
No obligation shall be certified to accounts payable unless the obligation is founded on a
valid claim that is properly supported by sufficient evidence and unless there is proper authority
for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall
be considered void. The certifying official shall be dismissed from the service, without prejudice
to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under
such certification shall be illegal and every official authorizing or making such payment, or taking
part therein or receiving such payment, shall be jointly and severally liable to the government for
the full amount so paid or received. (Book VI, Section 41 of EO No. 292)
Sec. 38. Prohibition against the Incurrence of Overdraft. Heads of departments,
bureaus, offices and agencies shall not incur nor authorize the incurrence of expenditures or
obligations in excess of allotments released by the DBM Secretary for their respective
departments, offices and agencies. Parties responsible for the incurrence of overdrafts shall be
held personally liable therefor. (Book VI, Chapter 5, Section 41 of EO No. 292)
Sec. 39. Mode of Disbursements. Payments/Disbursements by NGAs may be effected
through the Treasury Single Account (TSA), by issuing Modified Disbursements System (MDS)
check or commercial check, cash through cash advance, Advice to Debit Account (ADA), or NonCash Availment Authority (NCAA).
13
Sec. 40. Authority to Disburse/Pay. NGAs are authorized to disburse/pay based on the Notice of
Cash Allocation (NCA), Notice of Transfer of Allocation (NTA), Cash Disbursement Ceiling (CDC) or
other authority that may be provided by law.
Sec. 41. Disbursement Voucher/Payroll. Checks/ADA shall be drawn based on duly approved
disbursement voucher or payroll.
Sec. 42. Maintenance of Records. All checks/ADA drawn during the day, whether released or
unreleased including cancelled checks shall be recognized chronologically in the Checks/ADA
Disbursement Record maintained by the Cash/Treasury Unit.
Sec. 43. Reporting of Disbursements. All payments/disbursements shall be reported using the
prescribed forms for recording in the books of accounts.