ACCOUNTING SYSTEM

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.

The following accounting systems are:

a. Budgetary Accounts System; b. Receipts/Income and Deposits System; c. Disbursement System; and d. Financial Reporting System

Budgetary Accounts System - The Budgetary Accounts System encompasses the processes of preparing the Agency Budget Matrix (ABM), monitoring and recording of allotments received by the agency from the DBM, releasing of Sub-Allotment Release Order (SARO- to Regional Offices (RO) by Central Office (CO), issuance of Sub-SARO to operating units (OUs) by the RO and recording and monitoring obligations.

Agency Budget Matrix (ABM) - The ABM refers to a document showing the disaggregation of agency expenditures into components like, among others, by source of appropriation, by allotment class and by need of clearance. (Sample form Annex 1)

THE NATIONAL BUDGETGovernment budget defined

A government budget is a plan for financing the government activities of a fiscal year prepared and submitted by responsible executive to a representative body whose approval and authorization are necessary before the plan can be executed. It is more than mere estimate or statement of receipts and expenditures; it is a definite proposal to be approved or rejected.

Basically, budgeting is planning and controlling. Careful plans for the future should be laid and those who direct the operation of the government must be held strictly responsible for carrying out the plan. Purposes of budgeting:

1. Establish in advance the objective or end result of the budget period.2. Provides the means of coordinating the activities of the various sub-divisions and departments of the

business.3. Provide a period-to-period basis of comparison to show whether the plan is being realized and if not

realized indicate when changes must be made if current objectives are to be obtained.4. To serve as basis for orderly management of public finances.

Fundamental Principles of Fiscal Operations

Budget activities are governed by legal provisions/fundamental principles relating to the financial transactions and operations of the government. The principles, as provided for by law are:

1. No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority;

2. Government funds or property shall be spent or used solely for public purposes;3. Trust funds shall be available and may be spent only for the specific purpose of which the trust was

created;4. 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;5. Disbursements or disposition of government funds and property shall invariably bear the approval of the

proper officials;6. Claims against government funds shall be supported with complete documentation;7. All laws and regulations applicable to financial transactions shall be faithfully adhered to; and8. Generally accepted principles and practices of accounting as well as of sound management and fiscal

administration shall be observed, provided they do not contravene existing laws and regulations.

The Budget as the Framework of the Accounts

The budget is an estimate of the proposed expenditures for specified purposes and period, andembodies the means of financing them during the same period. It provides the means for controlling the estimated amounts to be raised as well as the proposed amounts to be spent for specified objects. It is a program that guides all activities relating to collections and expenditures; It is the framework of the accounts by which the transactions affecting such collections and expenditures shall be recorded; thus, the proper classification of income and expenditures should be reflected in the accounts so that recorded data may give adequate support to future budget estimates. Linkage Between Government Budgeting and State Accounting

A close linkage exists between government budgeting and state accounting. The accounting system provides the essential information needed to make resource allocation decisions, monitor budgetary performance, and assess the effectiveness of operations. The budget provides the framework within which transactions should be recorded, classified and summarized in the accounting system to permit comparison of actual results with budgeted standards.

A substantial output of the accounting system pertains to accountability reports needed to monitor performance in the execution and accountability phases of the budgetary process. The content, form, and other requirements of such reports are prescribed by the DBM. The Commission on Audit issues rules and regulations that may be applicable when the reporting requirements affect accounting functions.

What is a Balanced Budget?

It is a situation wherein the budget is equal or less than expected revenues. At present, the Philippine National government operates on a deficiency. The optimal situation would be policies of government that would increase revenues and decrease expenses. However, the national coffer is run by incurring government deficits that entails borrowing of funds by the national government from outside sources. Additional funding are from local and foreign borrowings.

Composition of Budgetary Accounts

Appropriations - legal authorization directing payment of government funds for a special purpose. This serves as a check and balance measure so government funds are only used for intended projects.

Allotment - authorization issued by the Department of Budget and Management (DBM) to allow disbursements within a specified appropriation. The DBM is tasked to give the go signal for agencies to disburse funds for projects that has been given funding by the national government. Without the later, monies could not be disburse from other sources.

Obligation - an act which binds an agency for the immediate payment of a sum of money from the National Treasury. Once an obligation is issued, the government agency and 3rd parties are assured of funds coming from the national coffers

Kinds of Budgets

1. As to Naturea. Annual Budget – a budget which covers a period of one year. It is the basis of an annual appropriation.

b. Supplemental budget – a budget which purports to supplement or adjust a previous budget which is deemed inadequate for the purpose for which it is intended. This is the basis for a supplemental appropriation.

c. Special budget – a budget of special nature and generally submitted in special forms on account of the fact that itemizations are not adequately provided in the Appropriation Act or that amounts are not at all included in the Appropriations Act.

2. As to Basisa. Performance Budget – a budget emphasizing the programs or services conducted and based on

functions, activities and projects which focus attention upon the general character and nature of the work to be done, or upon the services to be rendered, rather than the things to be acquired, such as personal services, supplies and equipment. It is management-oriented measures actual or estimated results in the basis, terms of benefits accruing to the public and their costs.

b. Line-Item Budget – a budget the basis of which are the objects of expenditures such as salaries and wages, travelling expenses, freight, supplies, materials and equipments, tec.

3. As to Approach and Techniquea. Zero-Based Budgeting – a process which requires systematic consideration of all programs, projects and

activities with the use of the defined ranking procedures. In ZBB, activities are analyzed and presented in “decision packages” or key budgetary inclusions.

The term “zero-base” refers to the yearly analysis, evaluation and justification of each activity, project or program, starting from a “zero” performance and budgeting level. ZBB does not accept the prior year’s budget as a starting point for analysis. The analysis of the levels of funding and performance as well as the expected impact of the objectives at each level will give enough leeway for management to decide whether to eliminate entirely a low priority to make way for a new one or to cut back the performance and funding level of the program to permit another to expand.

b. Incremental Approach – a budget where only additional requirements need justification. It focuses on analysis of incremental changes in the budget and may be done within the context of performance and program budgeting.

c. Capital Budgeting Approach - a budgeting technique which consists of a two-tiered strategy, as follows:

c.1 Setting a baseline budget that will correspond to the minimum level of operating requirements at which each agency of the national government will be able to perform its basic functions; and

c.2 Prioritization of the allocable balance (i.e. what is left of the budget ceiling after deducting the baseline budget) among the proposed projects and programs of agencies.

Agency baseline – refers to the cost of performing regular agency functions, including an allowance for inflation, but excluding the cost of non-recurring programs and projects.

Government-wide baseline – refers to the budget impact of decisions or policies enunciated by the government that require priority funding. These items are not traditionally reflected in the individual budgets of agencies but are shown as a lump sum to be distributed later on the basis of prescribed rules or procedures.

Examples are: a. Proposed salary adjustmentb. Miscellaneous personnel benefits, including retirement benefitsc. Mandatory allocations to local governmentsd. Projected level of support to GOCCse. Estimated provisions for contingencies due to calamity, foreign exchange fluctuations and

other adjustments

FAPs baseline – refers to the budgetary requirements, of ongoing programs/projects with foreign financial assistance.

Priority Program/Project Fund - the remaining balance after deducting the baseline budget requirements of the national government.

4. Other forms of budget

a. Regional budgeting – is a budget prepared consistent with the regional organization of the national government, wherein the DBM identifies by region the expenditures of government agencies and releases funds also on a regional basis.

b. Long-term budget – is a budget prepared for a four or five year period or longer; longer range estimate of revenue and expenditures requirements.

c. Key Budgetary Inclusions – refer to the financial commitments of agencies pertaining to a budget year. KBIs are maintained for the purpose of (1) controlling major financial commitments so that funds are not misappropriated or to prevent juggling of funds, (2) to disclose the funds and have a clear picture of the expenditures; and (3) to track down a mandatory obligations and insure funding of priority projects.

National Budget System

The National Budget System consists of the methods and practices of the government for planning, programming and budgeting. It shall include the adoption of sound economic and fiscal policies and the execution of the programs and projects geared towards the accomplishment of political, economic and social objectives. Its primary concern is the availability and use of money to provide the services required or expected from the government.

Legal Basis of the Budget System

The legal basis of the current national budget system is the Budget Reform Decree or PD No. 1177. The first premise of the Budget Reform Decree is that the national budget is an instrument for development and as such requires careful design and implementation of budget preparation, legislation, execution and accountability.

What is a national budget?

A national budget is the government’s estimate of its income and expenditures. It is the financial translation of the program and projects that best promote the development of the country. It is what the government plans 1) to spend for its programs and projects and 2) where the money will come from. It is based on what the government thinks it will spend during the year and the sources of what it hopes to have as funds either from the revenues or from borrowings with which to finance such expenditure.

On what is our national budget spent ?

Our national budget is allocated for the implementation of various programs and projects, the operation of government offices, payment of salaries of government employees and payment of public debts. These expenditures may be looked at in terms of expense class, sector, implementing unit of government and region.

Expenditures by expense class show how much is provided for:

1. Current operating expenditures – appropriations for the purchase of goods and services for the conduct of normal government operations within a budget year (e.g. salaries, maintenance and other operating expenses, interest payments etc.)

2. Capital outlays – appropriations for the purchase of goods and services the benefits of which extent beyond the budget year and which add to the assets of government including investments in the capital stock of government owned-or controlled corporations.

3. Net Lending – net advances by the national government for the servicing of government guaranteed corporate debt and loans outlays by the national government to government corporations; and

4. Debt amortization – contribution to the sinking fund which is utilized for principal repayment of our loans.

How may a national budget affect the country’s life ?

The national budget also serves as a stabilization role. It pump primes the economy, that is, when the economy is in recession and private sector activity is weak, the government through its budget speeds up and increases its spending. The intention is to stimulate demand for goods and purchases and the creation of more job opportunities.

Conversely, during economic booms when the private sector is active and economic growth is high, the government through the budget, assumes a more conservative spending, taxing, and borrowing stance so as not

to compete with the private sector in the demand for goods and credit. The objective is to slow down the rise in interest rates and prices, and avoid overheating the economy.

Furthermore, the budget serves as a tool for the redistribution of the country’s financial resources. This is most clearly manifested ion the sustained funding for the social services sector. Through various social programs especially those targeted for the poor, the government hopes to raise the rate of return on human capital; provide immediate relief to the needy; and extend better opportunities for slef-help, livelihood and employment activities. Why does the budget increase?

Expenditures may increase or decrease depending on the government’s policy of how much it would like to put into the economy. The more the government intends to raise the country’s level of development, the more expenditure rise.

Furthermore, the maturity of the country’s debt also determines the size of the budget and how it differs from year to year. When the loans which were incurred in the past fall due, scheduled payments for a given year are included in the year’s expenditure program. Also, government’s assumption of liabilities of government corporation and financial institutions contributes to the increase in the allocation of debt servicing. These, in turn, increase the budget deficit which contributes to higher interest payments and a bigger over-all budget.

Commodity price increase equated to inflation also require that the budget be adjusted so that it would still be able to buy the quantity of goods and services that the government is aiming for.

There are two major sources of our national budget: 1) revenues and 2) borrowings.

Revenues consist of tax and non-tax collections. Tax revenues are classified as follows:

a. excise taxb. license and business taxesc. income taxesd. import dutiese. other taxes and duties

Non-tax revenues include fees and service incomes of various government agencies,

foreign grants, including those from the sale of transferred, surrendered and privatized assets by the Asset Privatization Trust and the Presidential Commission on Good Government.

Borrowings come from domestic and foreign sources. Domestic borrowings are sources from the auction of Treasury bills, notes and bonds. Foreign borrowings are classified either as project and program loans being offered by foreign creditors such as the Asian Development Bank and the International Bank for Reconstruction and Development. Project loans are foreign loans obtained to finance a specific project such as the building of roads or bridges, while Program loans are multi-purpose foreign loans for the enhancement of a specific sector and conditioned on basic changes in certain economic, monetary or fiscal policies, among others.

Why does the government borrow from foreign sources? Why can’t it make do with what is collected locally.

Our government has to provide for the requirements of capital outlays projects such as roads and bridges, that are important to the attainment of our development objectives. In effect, capital outlays are investments for continuous economic activities and for future expansions. They generate local production and income.

Relying only on domestic or local resources to finance such projects will limit our government’s capacity to provide these needed support. If the government takes too large a share of domestic resources, local private

demand will have less for their own projects and activities. As a result, credit will be tight, interest charges will be high and prices of goods and services will go up.

The absence of a long-term domestic capital market and the limited savings in the country, moreover, render the domestic resources insufficient to finance the enormous requirements of development. By borrowing from foreign sources, the government takes advantage of long-term loans which are readily available abroad with lower interest rates in international capital markets.

It should be emphasized that our national government uses borrowing proceeds solely to finance carefully selected capital projects supportive of the country’s development goals. Wisely chosen and efficiently implemented, these projects are expected to build up the productive capacity of our economy and eventually pay back the loans obtained.

The national budget is composed of the funding requirements of all agencies, operations, and activities that are needed to run the government.

BUDGET PROCESS

How is the government budgeting undertaken? Government budgeting is undertaken using a process that consists of four (4) phases, namely: 1) budget preparation 2) budget legislation or authorization 3) budget execution or implementation 4) budget accountability or review

Budget Preparation

This process starts with the determination of budgetary priorities and activities guided by our national development plan, within the ceilings or constraints imposed by available revenues and borrowing limits and inclusion of amounts needed for approved priorities and activities into the expenditure levels.

The role of Development Budget Coordinating Committee (DBCC) is to review and approve the macroeconomic targets, determines the overall expenditure levels, the revenue projections, the deficit levels and the financing plan. The DBCC submits these to the Cabinet and to the President for approval.

The members of the DBCC have the following specific responsibilities:1. DBM - resource allocation and management2. DOF - revenue generation and debt management3. NEDA - overall macroeconomic policy4. BSP – resource institution and is responsible for the monetary measures and policies.

It is assisted by an Executive Technical Board (ETB) which serves as the clearing house of the DBCC..

Once approved, the DBM issued a Budget Call, a document reminding the different agencies in the government to prepare their respective budgets in accordance with approved overall budget ceilings and parameters. Upon receipt of the budget call, the agencies are also expected to have already started conducting their own internal budget consultations to firm up and to fit in their departmental plans and priorities for the specific year with the overall sectoral development strategy of government, as laid down in the Medium Term Development Plan.

DBM hold consultations with agencies to set indicative expenditure ceiling of department or agencies as set by DBCC to be used in preparation of official budget estimates to avoid and minimize bloated agency budget proposal

Agencies issue guidelines to their regional offices which are expected to conduct regional budget hearings with RDC and NGO. In this hearing, programs, plans and priorities in the regions are reviewed which will be incorporated in the budget proposal.

The regional offices submit their RDC – approved budget to their respective head offices in Manila which, in turn, collate all the regional budget proposals submitted by their different regional offices all over the Philippines and consolidate these into a single agency budget proposal of the department.

The DBM conducts consultation-workshops with RDCs and department heads on their criteria for the allocation of the agency budget to their regional offices. The intention is to ensure that the regional distribution of the national budget is consistent with the development plans and directions of the regions. This is in line with the allied policies of decentralization and creating greater popular participation in government concerns.

The DBM then undertakes a series of review activities to evaluate the merits of the budget proposals and determine the areas where possible cuts could be made. The objective is to make the overall expenditure level consistent with that determined by the DBCC and approved by the President.

Budget Legislation or Authorization

The President submits the overall budget that he/she approved to Congress in the form of a detailed Expenditure Program (National Expenditure Program) accompanied by the Budget of Expenditures and Sources of Financing, The President’s Budget Message and the Regional Allocation of the Expenditure Program.

A brief budget message stating the programs of government for the year, the national economic goals, impact of expenditures to economic activity, funding proposals and debt ceiling, and Financial Statements that show:

1. Appropriations for expenditures to support government programs and the funding sources of revenues generated and borrowings;

2. Estimated receipts/revenues in the coming year;3. Prior years’ actual expenditure, receipts, and appropriations;4. Estimated expenditures and receipts for projects that are work in progress during the fiscal year;5. Financial condition of the National Treasury during the current and the ensuing fiscal year.

In Congress, the proposed budget goes first to the House of Representatives, which assigns the task of initial budget review to its Appropriations Committee. The House Committee summons the different national agencies of the government to explain and to justify their budget. The proposed budget is then presented to the House Body as a bill (Gen. Appropriations Bill).

From the House of Representatives, the budget bill goes to the Senate and is referred to the Senate Finance Committee. The Senate Finance Committee, likewise, asks the various agencies to explain their respective budgets as contained in the budget bill. It then proposes amendments to the House Budget Bill to the Senate Body for approval.

To thresh out differences and arrive at a common version, a conference committee is created composed of members coming from both houses.

Once a common budget bill has been approved by both houses voting separately, it is submitted to the President for signing into law. It then known as a General Appropriations Act., which mandates the DBM, as the staff arm of the President to execute or implement the expenditures program.

Under the 1987 Constitution, it was indicated that, “No money shall be paid out of the National Treasury except in pursuance of an appropriation mandated by law.” What this means is that, government funds shall only be paid if there is a law authorizing payment, or a purpose that is indicated as to the manner of use.

Budget Execution or Implementation

The accounting for budgetary funds starts at the commencement of the General Appropriation Act. The act gives the legal authorization to fund the government projects and to finance government activities for a certain time frame. A detailed rundown of expenses and revenues accruing for each agency is prepared to state -- the character, purpose, and the detailed cost of each program of government

The budget serves as a framework to allocate funds for each project; hence, a proper accounting of all sources of income and expenses should be reflected in the financial statements to support the budget for the year. Upon the enactment of the General Appropriation Act (GAA), accounting for the budgetary accounts starts by listing down

the legal authorization in the use of public funds. These authorizations, or Approved Appropriations, shall serve as the basis for the Department of Budget and Management (DBM) to come up with government funding allocation for each government agencies to incur obligations, and enter into 3 rd party arrangements to commit funds for government projects.

This is the operational aspect of budgeting. After the President signs the GAA into law, the DBM requires the different agencies of government to prepare the Agency Budget Matrix (ABM) to be accompanied by the Annual Cash Program.

The allotment (based on the ABM) is the authority of the government agency to incur obligations and enter into contract. It is possible that sometimes the allotment is issued for the funding of projects even if these will take one year to finish. This is done to enable the agency to enter into contracts and begin the projects. However, the releases of Notices of Cash Allocation (NCAs) is being modified. NCAs to cover regular requirements of agencies shall be comprehensively released with a monthly breakdown of NCA requirements of the agency receiving NCA directly from DBM. Basis of releases is the Monthly Cash Program (MCP), a budget execution document, reflects the monthly disbursement requirement of OUs.

To promote greater budget efficiency, NBC #556 issued guidelines for all government agencies to execute their programs, activities and projects (P/A/Ps) and deliver planned results in a timely manner. Likewise, the implementation of vital reforms during budget execution includes the following:

1) General Appropriation Act-as-release-Document (GAARD) to facilitate the procurement process and bolster the efforts to minimize carry-over allotments in the succeeding year,2) Unified Accounts Code Structure (UACS) to ensure efficient fund release, accounting and reporting of financial transactions by agencies,3) Performance-Informed Budgeting (PIB) to make clear to the public and legislators the outputs and outcomes agencies are committing to deliver in exchange for their budgets,4) Checkless Payment System (CPS) through Advise to Debit Account (ADA) to settle government payables in a timely and transparent manner as well as ensure predictability of disbursements.

The NBC No. 556, dated January 5, 2015 provides the guidelines on the releases of funds for FY 2015. Pursuant to GAA RA No 10651, the validity of Appropriations and timeliness for PS is until December 31, 2015, while MOOE and CO is until December 31, 2016. For FY 2014 Continuing Appropriations; MOOE and CO appropriations under RA 10633 until December 31, 2015 and all programmed amounts under Automatic Appropriations for PS, MOOE, and CO shall be available for release and obligation up to December 31, 2015, only. The validity of NCAs issued and credited to the regular MDS Sub-Accounts of agencies/OUs for their regular operations, shall be valid until the last working day of the 3rd month of that quarter. NCA issued and credited to the specifically for payment utilized NCA corresponding to the book balance (net of outstanding checks) shall automatically lapse at the end of that month.

Other changes provided in NBC No. 556 is the use of income. Agencies which are already authorized by law to retain a portion of their income collections for their operating requirements, however, are no longer qualified to avail of the use of excess income.

DBM consider the following in determining excess income:1. If excess revenue collections resulted from improved efficiency in operation or upgraded service delivery.2. If collections come from new fees and charges implemented.3. Excess income is generated once actual income collected and deposited by the OU with the BTr during

the current year exceeds the revenue estimates under the FY 2015 BESF.

Guidelines in the issuance of disbursement authorities regarding NCAs and NCAA and CDC are provided under DBM No 556.

DBM shall provide the MDS-GSB and agency concerned, a monthly schedule of the NCA releases, ex. Monthly NCA requirement of the agency.

Upon receipt of the NCA, the MDS-GSB shall ensure that the amount programmed for the month, if there is any, shall be credited immediately to the Regular MDS accounts of the agency. Thereafter, the NCA requirements for the subsequent months shall be credited on the first working day of the month consistent with the schedule to be provided by DBM.

The NCA specifies the maximum amount of withdrawal that an agency can make from the government servicing bank for the period indicated.

DOF and DBM will meet every month to confirm or adjust the estimated cash availability and the program of NCA releases. In the event that cash balance of the government reaches a level where the budget cost cannot be met, DBM implements the across-the-board budget reduction.(Refer to the DBM Circular Letter #556 for the guidelines of NCA Releases for FY 2015)

Budget Accountability

This refers to the evaluation of actual performance and initially approved work targets. Obligation incurred, personnel hired and work accomplished are compared with the plans and targets submitted by the agencies at the time that their respective budgets are prepared. This work is entrusted with the DBM and COA.

Budget accountability is concerned with tracking and monitoring of actual expenditures, revenue, assets and liabilities of the government and is carried out largely through the accounting function. It consists of the periodic reporting by agencies of their performance, top management review of government activities and the fiscal and policy implications, and the actions of the COA in assuming the fidelity of officials and employees in the handling of receipts and expenditures.

Accounting for budgetary accountsIn order that the appropriation may be released, the agency, in consultation with the DBM, is required to

prepare and to submit the Agency Budget Matrix (ABM), the official document used as the basis in the release of the obligational authority. This is prepared by appropriation/financing sources to support expenditures to be made during the year broken down by allotment class/expenses. The ABM shall contain, among others, the following information:

d. The amount to be released categorized under “Not Needing Clearance” column, e. The amount that will be released through the issuance of Special Allotment Release Order (SARO)

categorized under “Needing Clearance” column including continuing appropriations based on the Statement of Allotments, Obligations and Balances (SAOB).

An Annual Cash Program, which shall provide cash to finance the programs reflected in the ABM and the prior year’s accounts payable, is also submitted with the ABM. Upon approval of the total comprehensive release by the DBM, it will be released to the agency.

For request “Non-Needing Clearance”, the Notice of Cash Allocation (NCA) is issued as requested. Pursuant to the Tax Remittance Advice (TRA) system as provided in Joint Circular No. 1-200 of the DOF, DBM and COA dated January 3, 2000, the NCA released to the agency is reduced by the amount of the taxes withheld to be remitted by the DBM for the Agency thru the TRA based on the request of the agency duly supported by the Summary of Taxes Withheld (STW).

Control and Recording of Appropriations, Allotments. Obligations and the NCA

The COA does not journalize the appropriations. The control of the release of allotments and the NCA shall be made by the DBM and the BTr, thru the registries that they shall maintain. The Agency shall also monitor the allotments and the obligations it incurs in the registry that it shall also maintain.

The agency shall journalize the NCA it receives as debit to Cash-MDS Regular and credit to Subsidy from the National Government. In effect it identifies the share of the agency in the income of the National Government.

Records of the DBM

Upon the approval and issuance of the ABM and the SARO, the DBM shall enter the pertinent data on releases for each government agency in the Registry of Appropriations and Allotments (RAPAL). The DBM shall maintain the Registry of Allotments and NCA (RANCA) for the allotments and the NCA issued to the agency. The RANCA shall be the control and monitoring record of the DBM and shall furnish the BTr a copy of the NCA.

Records of the BTr

Upon receipt of the NCA from DBM, the BTr shall enter it in the Registry of NCA and Replenishment (RENREP). It shall also enter the transfer of cash from its bank account(s) to the appropriate MDS account.

Records of the Agency

Pursuant to COA Circular No. 2015-002, dated Mar 9, 2015, The following are the revised budget forms and registries to be used/maintained by NGAs to facilitate the monitoring of budget information and the preparation of the budget and accounting reports:

1. Obligation Request and Status (ORS)2. Budget Utilization Request and Status (BURS)3. Registry of Revenue and Other Receipts (RROR)4. Registry of Appropriation and Allotments (RAPAL)5. Registry of Allotments, Obligation and Disbursements (RAOD)6. Registry of Budget, Utilization and Disbursements (RAUD)

Upon receipt of the approved ABM and ARO, the Budget Officer shall record the allotment to the respective registries through the Allotment and Obligation Slips (ALOBS. The four registries for the obligations it incur:

- Registry of Allotment, Obligations and Disbursements(RAOD) – Capital Outlay (RAOCO)- Registry of Allotment Obligations and Disbursements(RAOD) – Maintenance and Other Operating

Expenses (RAOMO)- Registry of Allotment Obligations and Disbursements(RAOD), – Personal Services (RAOPS)- Registry of Allotment, Obligations and Disbursements(RAOD- Financial Expenses (RAOFE)

Accounting of Obligations:

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.

The Head of the Requesting Unit shall prepare the Obligation Request (ObR) or Budget Utilization Request (BUR) and Disbursement Voucher. He shall certify on the necessity and legality of charges to appropriations/allotment under his direct supervision as well as the validity, propriety and legality of supporting documents.

The Head of the Budget Unit shall certify the availability of allotment and obligations incurred in the ObR or budget and utilization in the BUR. Obligations shall be taken up in the registries maintained by the Budget Unit through the ALOBS prepared/processed by the office. The Budget Officer verifies the completeness of the documents. If complete, then prepares the ALOBS. Verifies the availability of the allotment based on the RAOs. If no allotment is available, returns the documents to the office concerned, if there is an available balance of allotment to cover the obligations, prepares the ALOBS and record in the appropriate RAOs.

The obligation is recognized and will be entered in the appropriate RAOD when the obligation is incurred as evidenced by the approved ALOBS. Obligations shall be posted in the “Obligation Incurred” column of the RAODs to arrive at the balance of allotment still available at a given period. There is no need to prepare a new ALOBS for corrections/adjustments made by the accounting unit after the processing of the claims but before payment is made.

Adjustment in the RAODs shall be effected thru a positive entry (if additional obligation is necessary) or a negative entry (if reduction) in the Obligation Incurred column.

The Head of the Accounting Unit, for contract or purchase order, shall certify the availability of funds based on the ObR or BUR duly certified by the Budget Officer and certify the availability of cash and completeness of supporting documents in the DV.

A new ALOBS for the following adjustments of obligations as negative entries in the Obligation Incurred column shall be made:

1. Refund of cash advance granted during the year;

2. Overpayment of expenses during the year;3. Disallowances/charges which become final and executory

To support the negative entries, a certified copies of OR for the overpayment/refunds shall be furnished to the Budget Unit.

The Accountant shall credit “Cash-MDS, Regular” each time a payment is made charged against the NCA and debit the specific account being paid for, either asset or expense account.

Illustrative Entry:

a. Receipt of Allotment Posting in the allotment column to the respective registries.

b. Incurrence of obligation Posting in the obligation column of the RAOD’s Ex. RAOD-PS for PS obligations or expenditures

Notice of Cash Allocation(NCA) specifies the maximum amount of withdrawal that an agency can make from the National Treasury through the issuance of MDS checks or other authorized mode of disbursement. This is issued by DBM based on the Annual Cash Program or as requested and prescribed under the Modified Disbursement System (MDS).

Upon receipt of the NCA, the accountant shall record in the books as:

Cash- MDS, Regular 10104040 XX Subsidy from National Government 40301040 XX

Sample form of ABM