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ACCTG 328- GOVERNMENT ACCOUNTINGChapter 1 – Nature and Scope of NGASQuestions & Answers: Define government accounting. Answer: Pursuant to Section 109 of PD 1445, government accounting is the one which “encompasses the process of analyzing, recording, classifying, summarizing and communicati...

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AC ACCT CT CTG G 328 328-- GO GOVER VER VERNMENT NMENT ACCO ACCOUNTING UNTING Chapter 1 – Nature and Scope of NGAS

Questions & Ans Answ wer ers: s: 1. Define government accounting. Answer: Pursuant to Section 109 of PD 1445, government accounting is the one which “encompasses the process of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and disposition of government fund and property and interpreting the result thereof.” 2. Enumerate the objectives of the government accounting according to Section 110, Presidential Decree 1445. Answer: Section 110, Presidential Decree 1445 sets down the following objectives of government accounting: a. To produce information concerning past operations and present conditions;

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b. To provide a basis for guidance for future operations; c. To provide for control of the acts of public bodies and offices in the receipt, disposition and utilization of funds and property; and d. To report on the financial position and the results of operations of government agencies for the information and guidance of all persons concerned. 3. Explain briefly the purposes of creating the Public Sector Accounting Standards Board (PSASB). Answer: Primarily, the Public Sector Accounting Standards Board (PSASB) was created in 2008 under COA Resolution No. 2008-12 dated October 10, 2008, in order to formulate and implement public sector accounting standards and establish linkages with international bodies, professional organizations and academe on accounting related fields on financial management, Accordingly, the PSASB shall assist the commission in formulating and 2

implementing Philippine Public Accounting Standards (PPSAS).\

Sector

4. Explain the processes of developing the Philippine Public Sector Accounting Standards (PPSAS). Answer: The following are the processes and other considerations in developing the Philippine Public Sector Accounting Standards (PPSAS): a. Applicability of IPSAS. Existing IPSAS were assessed to determine the applicability of the provisions in the Philippine setting as bases in the development of PPSAS. b. Exposure draft of PPSAS. The PSASB issues exposure drafts of all proposed PPSAS for comment by interested parties including COA officials and auditors, agency finance personnel, oversight agencies, professional organizations, academe and other stakeholders. The PSASB sets a reasonable time to allow interested 3

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parties to consider and comment on its proposals. The PSASB evaluates all comments received on exposure drafts and makes such modifications, where appropriate. c. Fundamental issues. Where an accounting principle or a significant element of a disclosure requirement contained in IPSAS is considered to be in conflict with the Philippine laws, rules and regulations, this would be regarded as a fundamental issue and the accounting principle or disclosure requirement may be changed. d. Statutory authority. Where the international standard deviates from the Philippine regulatory or legislative environment, Philippine application guidance shall be issued accordingly. e. Disclosure requirements.

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Disclosure requirements may be amended when the amendments are regarded as being significant for improving fair presentation of the matter. f. PPSAS numbering. The PPSAS is assigned the same number as the IPSAS to maintain the link. Where a PPSAS is developed and there is no IPSAS equivalent, the standard will be assigned a number in a series of PPSAS starting with 101. When IPSASB subsequently issues the equivalent standard as an IPSAS, the 100 series PPSAS will be withdrawn and reissued as a PPSAS with the IPSAS number. Standards of PPSAS have equal authority regardless of the numbering used. g. Financial reporting issues not dealt with by IPSAS. Where issues related to financial reporting emerged, researches were done and a discussion document prepared based on other relevant accounting 5

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standards not in conflict with Philippine laws. h. Submission of draft consideration of COA.

to

PSASB

for

Where there are significant changes or unresolved issues associated with an exposure draft, the PSASB may decide to re-expose a proposed PPSAS. i. If considered appropriate, focus group discussions will be held to obtain further opinions on issues identified by the exposure process. 5. What are the government offices primarily charged with accounting responsibility? Explain their respective responsibility. Answer: The offices charged with the accounting responsibility are the Commission on Audit (COA), the Department of Budget and Management (DBM), the Bureau of Treasury (BTr), and the government Agencies. Commission on A Audit udit 6

The Commission on Audit (COA) keeps the general accounts of the government, promulgates accounting rules and regulations, and submits to the President and Congress, within the time fixed by law (not later than the last day of September each year – Section 41, PD 1445), an annual report of the government, its subdivisions, agencies and instrumentalities, including government-owned or controlled corporations. As mandated by Article IX-D, Section 2 par. (2)of the 1987 Constitution of the Philippines, to wit: “The Commission on Audit shall have exclusive authority, subject to the limitation in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of Illegal, irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government 7

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funds and properties,” the Commission on Audit revised the previous government accounting system. Pursuant to the COA, DBM and DOF Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts Code Structures (UACS), the consistency of account classification and coding structures with the Revised Chart of Accounts shall be the responsibility of the COA. As mandated by Article IX-D Section 2 par. (2) of the 1987 Constitution of the Philippines, the Commission on Audit shall have exclusive authority, subject to the limitation in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefore, and promulgate accounting and auditing rules and regulations, inc including luding those for the prev prevention ention and disallow disallowance ance of: 1. IRREGULAR EXPENDITURES signify that expenditure

is

incurred

established

rules

and

without regulations,

adhering

the to

procedural

guidelines, policies, principles and practices that have gained recognition in law; incurred without conforming to or observing prescribed usages or 8

rules of discipline, established pattern, course, mode of action, behaviour or conduct. Cases considered ir irrregular uses of go gover ver vernment nment funds inc include lude the ffollo ollo ollowing wing: a. Payment of salaries, allowances and other forms of additional compensation such as: 1. Honoraria and other forms of allowances such as per diems, representation allowance, Christmas bonus, gift checks paid to Department Secretaries, Undersecretaries, Assistant Secretaries or their alternates as members of governing boards of collegial bodies as these partake of the nature of additional compensation/ remuneration proscribed under the Phil. Constitution (GR #s147392, 156982, 138489); 2. Payment of allowances and per diems to BOD, Secretariat and other officers of GOCC subsidiaries that were acquired through Proclamation 50; 3. Payment of additional benefits to officials/employees/BOD of GOCCs based on issuances of the Department Secretary to which the GOCC is attached; 4. Payment of EMEs (Emrgency Meeting Expenses) to members of the BOD; 9

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5. Honoraria granted to special committees which are performing functions inherent in the regular functions of the agency; 6. Honoraria granted to private individuals sitting as members of special committee/s of a government agency without authority or approval from proper authorities (DBM/OP); 7. Honoraria/RATA granted to members of committee/s in regional/district offices in violation of Section 4, Budget Circular No. 2003-5) 8. Honoraria paid to members of the BAC/TWG in excess of the rates provided in DBM Circular 2004-5A and for procurement activities pertaining to contracts not yet awarded to winning bidder; 9. Grant of loyalty/service awards to employees not in accord with the requirements of CSC MEMO Circ. No. 42 (GR142760); 10. Payment of CNA cash benefits/signing bonuses to members of governing boards and non-organic personnel and those occupying managerial positions higher than a division chief and payment to rank and file in excess of P5,000.00; 11. Grant of honoraria for performing functions inherent in the regular function of the government personnel/official; 10

12. Grant of RATA and other benefits to OGCC lawyers rendering legal assistance to GOCCs in the absence of three concurring conditions required under EO 878 (COA Dec. 2006-030); 13. Payment of COLA and other allowances deemed integrated in the salary (GR#153266); 14. Grant of food basket allowance/rice subsidy/health care allowance/health care insurance in the absence of a law authorizing the same; 15. Premiums paid for the personnel accident insurance of officers and employees of GOCCs in the absence of a prior authority from the OP and DBM; 16. Payment of CNA cash incentive/benefit to rank and file employees where the conditions for determining “savings” per PSLMC and DBM regulations are not met; 17. Payment of salaries and wages wherein signatures per logbook vary with those in the payroll/DTR; or unauthorized payment to person/s other than the payee; 18. Payment of personnel services out of financial subsidy to LGUs; 19. Overtime pay for services/tasks that can be undertaken during regular hours;

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b. Hiring of private lawyers: 1) by GOCCs/NGAs to handle cases and legal matters without the prior written authority from the OGCC/Solicitor General as the case maybe and the prior written concurrence of COA; or 2) by LGUs except in cases where the city/ municipality is the party adverse to the provincial government or to another component city or municipality; c. Hiring of consultants and contractuals to perform functions that will exercise control and supervision over regular employees (CSC Memo Circ. # 26); d. Attorney’s fees to lawyers holding plantilla positions; e. Payment of rental contracts for service vehicles covering a continuous period of more than 15 days in the absence of a prior authority from the DBM, appropriation and CAF; f. Payment for deliveries of goods without passing the required quality test such as that of the Bu. of Plant Industry, in case of seeds; g. Acceptance of a (infrastructure) project not constructed in accordance with plans and specs and with noted deficiencies; h. Release of funds to NGOs/Pos for money market placement/time deposit/investments; 12

i. Use of funds (intended for specific purpose) for purposes other than its original intent unless realignment thereof is authorized/approved by proper authorities; release of funds in the form of assistance to unauthorized beneficiaries j. Media advertisements for anniversaries/publicity propaganda (except when the nature of agency’s mandate requires such and those required for the issuance of agency guidelines/rules/regulations, conduct of public bidding, dissemination of important public announcements); k. Grant of cash advance for no specific purpose; l. Donations, contributions, grants and cash gifts, except when such activity is undertaken in pursuit of the mandate of the donor-agency (AO 103, dated 31 Aug. 2004) 2. ILLIGAL EXPENDITURES pertain to those incurred in violation of the law and its IRR. Illustrativ Illustrative e cases inc include lude the follo following wing payments: 1. Contracts awarded under an alternative mode of procurement for items that should have been subject of public bidding;

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2. Award of contracts to bidders who fail to meet the minimum amounts required to be put up at the time the bids were submitted; 3. Deliveries of equipment that do not conform to specs per PO/contract and bid invitation; 4. Communication equipment without the purchaser’s and dealer’s permit from the National Telecommunications Commission (RA 3846 on Radio Control Law) 5. Purchases from Jobbers/middlemen (government purchases shall be with reputable manufacturers/ licensed distributors) 6. Payment of claims awarded not strictly in accord RA 9184 and its IRR; 7. Payment for contracts which has no prior approval/authorization of the local Sanggunian (RA9160); 8. Payment of compensation or benefits to government personnel not in accord with provisions of existing laws such as the following: a) Additional retirement benefits beyond that allowed under existing laws b) Hazard pay to health workers/personnel not assigned in establishment not specifically mentioned in Section

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21, R.A.7305 and without proof of exposure to public health hazards for at least 50% of working hours c) Hazard allowance to employees not engaged in the delivery of health or health related services such as the social insurance group 9. Use of public funds for private purpose such as: Widening/repair/improvement of roads (in private subdivisions) ownership for which had not been formally turned over to the government 10. Entering into a contract, amount for which is over and beyond existing approved appropriations/not covered by an appropriation law; 11. Transportation allowance paid to officials with assigned or using government vehicle 12. Entering into a contract without the covering certificate of availability of funds signed/issued by the Chief Accountant, even if the contract is signed by said Chief Accountant as witness (GR151373-74, 17 Nov. 2005); 13. Grant of cash advance with no specific purpose 14. Expenses for foreign travel of officials/employees (including uniformed/DILG/DND) who are due to retire within one (1) year after the completion of said travel. (GAA provision);

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Grant of EME in excess of amounts authorized under existing LRRs; 16. Overpricing of goods/services purchased.; 17. Grant of Xmas bonuses, cash gift and other benefits to consultants, members of governing boards who are not organic personnel of the government agency; 18. Grant of amelioration allowance /similar benefits to private employees of service contractors (AO No. 365, GR #157001) 3. EX EXCESSIVE CESSIVE EXPENDI EXPENDITURES TURES signify incurrence of unreasonable expenses at immoderate quantity and/or exorbitant price; expenses that exceed what is usual or proper such as the following: a) Grant of cash advance in excess of estimated budget/requirement; b) Supplies and materials including fuel inventory in quantities exceeding the normal three-month requirement, except for circumstances authorized by law; c) Grant of cash advance for intelligence fund in excess of one-month requirement except in emergency cases which should not exceed the three-month requirement; d) Release of funds to NGOs/Pos in excess of approved project requirements; 16

e) Inclusion of unnecessary items/materials/equipment in an infrastructure contract (i.e. motor vehicle, computers, etc) resulting in increase project costs; f) Procurement and distribution of seeds to farmers in excess of requirements (as per study on requirements per hectare); g) Overpricing of purchases in excess of current/prevailing market price by 10%; h) Repair of equipment at a cost exceeding 30% of the current market price of the same/similar item; i) Provision of more than one (1) unit mobile phone for each entitled official which should not be lower than Division Chief rank; j) Provision of more than one (1) unit desktop/laptop/other electronic gadget to officials entitled thereto; k) Procurement of items in excess of the requirements specially those with near/short expirations dates such as vaccines, medicines, seeds, fertilizers, pesticides, etc.; l) Installation of materials/items in excess of requirements or in places where there is no need for the same/with already existing installations that additional item/s result to redundancy (such as 17

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installation of camera/s with existing functional items); m) Continuous extension of services of foreign consultant/s for relatively simple supervisory work during the final stages of the project, tasks which can be undertaken by local consultant/s or the implementing agency itself (GR101370); 4.Unnecessar Unnecessary y expenditures pertain to those that cannot pass the test of prudence or the diligence of a good father of a family, thereby denoting nonresponsiveness to the exigencies of the service; they are not supportive of the implementation of the objectives, goals and mission/mandate of a government agency; incurrence of expenditure not dictated by the demands of good governance; not essential to or can be dispensed with without incurring loss or damage to property; such as: a) Hiring of public relations companies; b) Creation/continued operation of subsidiary/ies that duplicate the functions of the parent government agency; c) Release of funds as financial assistance to civic organizations/non- profit corporations/ foundations; 18

d) PR expenses of insurance corporations with its members when its insurance services are compulsorily required; e) Hiring of consultants for functions included in the plantilla positions such as those of the procurement/financial/media consultants; f) Hiring of consultants for services not aligned to the mandate of the agency; g) Repeated renewal of consultancy services over and above agency requirements; h) Purchase of high-end/expensive models/brands of electronic gadgets (phones/ cell phones/desktops/laptops, etc.); i) Construction of structures/buildings/procurement of equipment not really needed/not put to use/not completed/could not be properly maintained/operations not sustained; j) Construction of housing units not distributed/awarded/disposed within considerable period of time as evidenced by the deterioration of the units; k) Replacement of serviceable structure/equipment

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l) Continuous repair of vehicles and equipment considered beyond economic repair as evidenced by frequent breakdowns/unseviceability after repair; m) Construction of roads/bridges left uncompleted for a number of years; n) Construction of structures/buildings without any intended purpose; using a structure/building/assets other than the intended purpose may also be an indication that the acquisition of the same is not necessary; 5.Extravagant expenditures signify those incurred without restraint, judiciousness and economy; they exceed the bounds of propriety being immoderate, prodigal, lavish, luxurious and injudicious such as the following: a) Rental of expensive halls/rooms in plush/luxury hotels/restaurants for purposes of holding office meetings/functions, except for government sponsored international conventions, meetings and the like; b) Procurement of luxury vehicles except when allowed by LRRs; c) Grant of exorbitant bonuses/allowances/fringe benefits; 20

d) Installation of highly sophisticated outdoor signs, billboards and neon signs advertising a government agency/office, except for banks, trading agencies, hotels, buildings for culture and arts; e) Installation of luxurious building furnishings except those intended for showcase, trade and commerce, promotion of arts and culture and for use of foreign dignitaries; f) Hiring of expensive transport service when there are available public conveyances except in meritorious cases and justified circumstances; g)...