SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 2649 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
'IJ FEB 16 
AlO :21 
PROFESSIONALIZING THE GOVERNMENT ACCOUNTING SERVICE TO 
SERVE AS A TOOL FOR EFFECTIVE MANAGEMENT AND CONTROL OF 
GOVERNMENT RESOURCES, CREATING FOR THE PURPOSE THE 
GOVERNMENT ACCOUNTANCY OFFICE UNDER THE DEPARTMENT OF 
BUDGET AND MANAGEMENT AND FOR OTHER PURPOSES 
EXPLANATORY NOTE 
This bill restructures and redesigns the existing outmoded government 
accounting system. While studies have been made in the past, including one 
commissioned to a US consulting firm in the early 1950s by the Budget 
Commission, the system essentially dates back to the colonial period. This will be 
the first time the country will have a law to govern Government Accounting. 
The draft of this bill was prepared by the Technical Working Group 
consisted of seasoned 
Certified 
Public Accountant (CPA) practitioners 
representing professional accounting aSSOCiations, a representative from the 
Department of Justice advising on legal aspects, and CPA's from the Economic 
Affairs staff. Advise was also kindly provided by former Budget Secretaries. The 
professional accounting associations represented in the Technical Working 
Group were the Philippine Institute of CPAs (PICPA), Association of CPAs in 
Commerce and Industry (ACPACI), Association of CPAs in Public Practice 
(ACPAPP), Government Association of CPAs (GACPA), and Institute of Internal 
Auditors Philippines (\lAP). 
The bill introduced reforms in the accounting service so that accounting 
may serve as an effective tool for managing government offices, as it does in 
private business. Accurate, relevant and timely financial information from the 
accounting system is essential for monitoring of programs and projects, budget 
control, economic analysis, policy formulation, decision-making, and spotting 
possible areas for anomalies. 
Salient features of the bill include the following: 
1. Reorganization of the Department of Budget and Management; 
2. Identification of the purposes to be served by the government 
accounting system; 


3. Institution of internal control systems as a primary responsibility of 
heads of agencies, government corporations and local government units; 
4. Vesting responsibility in the Executive Branch for the accounting 
function as an essential element in management of the financial and fiscal 
affairs of Government; 
5. Delimitation of the accounting jurisdiction of the Commission on Audit 
to: 
a. Promulgation of general government accounting principles; 
b. Keeping of the general accounts or unappropriated surplus 
accounts. 
6. Creation of a Central Government Accounting Authority to be solely 
responsible for administration of the government accounting service and 
preparation of government wide financial reports. 
7. Adoption of the "accrual basis" of accounting in addition to the 
"obligation" and "cash accounting," so as to generate more useful financial 
information. 
8. Delineation of accounting responsibilities of different agencies involved 
in the various functional accounting areas. 
The bill will streamline and improve effectiveness of the financial and 
internal control system at different levels of the bureaucracy. At present, such 
control is not available to managers in government such that reliance is placed 
mainly on the Commission on Audit for the control on expenses and on use of 
the government's resources. The internal control system set up in this bill will 
provide government managers with the information and tools for more efficient, 
economical and effective management of government operations and resources. 
This should contribute to reducing red tape and, by providing timely and accurate 
information on transactions, help minimize the causes and incidence of graft and 
corruption in government offices. 
The management tools that the system established in this bill are made 
available for the sincere and competent administrators to reduce graft and 
corruption in government offices. 
In view of the foregoing considerations, early passage of this bill is 
earnestly sought. 
JI 
Senator 


~'.}'~" 
... 
SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
) 
) 
) 
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;t1ltnlltr 
o.j :,: ,,<, 
1(J,{hrr I,f tfp' ~rnrt,;,ru , 
Second Regular Session 
T; FEB 16 1\10 :21 
1 
2 
3 
4 
SENATE 
Senate Bill No. 264 9 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
PROFESSIONALIZING THE GOVERNMENT ACCOUNTING SERVICE TO 
SERVE AS A TOOL FOR EFFECTIVE MANAGEMENT AND CONTROL OF 
GOVERNMENT RESOURCES, CREATING FOR THE PURPOSE THE 
GOVERNMENT ACCOUNTANCY OFFICE UNDER THE DEPARTMENT OF 
BUDGET AND MANAGEMENT AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
GENERAL PROVISIONS 
SECTION 1. Title. This Act shall be known and cited as the "Government 
Accounting Act of 2015". 
5 
SEC. 2. Declaration of Policy. All resources of government shall be 
6 
managed, expanded or utilized in accordance with law and regulations, and 
7 
safeguarded against loss or wastage through illegal and/or improper disposition, 
8 
with a view of ensuring efficiency, economy and effectiveness in government 
9 
operations. The responsibility to uphold that such policy is faithfully adhered to 
10 rests directly with the chief or head of the government agency concerned. 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
For this purpose, all government transactions shall be properly 
documented, recorded, classified and interpreted into meaningful data and 
communicated on a timely basis to fiscal authorities concerned so that the 
information generated therefrom can be made useful for economic analysis, 
policy formulation and decision-making purposes. The responsibility to document 
and record faithfully said transaction shall rest with government accountants. 
SEC. 3. Definition of Terms. - Wherever used in this Act, the following 
terms shall be taken and understood in the sense indicated hereunder, unless 
the context otherwise requires: 
1. "Government accounting" is the proper recording of all receipts and 
expenditures and other financial transactions of Government or any of its 
subdivisions, agencies or instrumentalities, the maintenance of records that 
reflect the propriety of transactions and give evidence of accountability for assets 
and other resources available for use, and the classification of data in a way that 
1 


1 
provides useful information for control and for effective and efficient management 
2 
of government operations, in accordance with generally-accepted accounting 
3 
principles where applicable. 
4 
5 
2. "Budgetary accounts" refers to the funds, resources, or surplus already 
6 
appropriated and made available for government expenditure during a given 
7 
fiscal year, consisting of appropriation, expenditure, revenue and borrowing 
8 
accounts. 
9 
10 
3. "General accounts" refers to the unappropriate surplus or uncommitted 
11 
resource of the Government, the utilization of which shall require an enabling act 
12 
of Congress. 
13 
14 
4. "Resources" refers to the actual assets of any agency of the 
15 
Government such as cash, instruments representing of convertible to money, 
16 
receivables, lands, buildings, as well as contingent asset such as estimated 
17 revenues applying to the current fiscal period not accrued or collected, and 
18 
bonds authorized and unissued. 
19 
20 
5. "Receipts" refers to all collections received by any collecting officer 
21 
irrespective of source and for whatever purpose. 
22 
23 
6. "Revenues" refers to earnings of the Government ariSing out of tax 
24 
levies, regulatory and investment transactions, including those in exchange for 
25 
direct services rendered by government agencies to the public. 
26 
27 
7. "Income" refers to revenues earned during and accruing to the 
28 
Government for a particular fiscal year. 
29 
30 
8."Accrued income" represents revenues earned during and pertaining to 
31 
the current fiscal year not yet collected as of the end of the year. 
32 
33 
9. "Obligation" represents goods and services ordered, without regard to 
34 
when ordered, delivered or paid. 
35 
36 
10."Cost" represents value of goods and services consumed, without 
37 
regard when ordered, delivered or paid. 
38 
39 
11. "Disbursement" represents bills paid without regard to when the goods 
40 
and services were ordered, delivered or paid. 
41 
42 
12. "Expense" means any item or class of cost of (or loss from) carrying 
43 
on an activity, a present operating cost, or representing an irrevocable cost or 
44 
loss. 
45 
46 
13. "Expenditure" means the incurring of a liability, the payment of cash, or 
47 the transfer of property for the purpose of acquiring an asset or service or setting 
48 
a loss; when unqualified, the accrual basis of accounting is assumed. 
49 
50 
14. "Surplus" is the excess of revenues over expenditures in a given fiscal 
51 
year. 
52 
53 
15. "Deficit" is the excess of expenditures over revenues in a given fiscal 
54 
year. 
2 


1 
SEC. 4. Fundamental Principle. - Financial transactions and operations 
2 
of any government agency shall be governed by the fundamental principles set 
3 
forth hereunder, to wit: 
4 
5 
(1) No money shall be paid out of any public treasury or depository except 
6 
in pursuance of an appropriation law or other specific statutory 
7 
authority; 
8 
9 
(2) Government funds or property shall be spent or used solely for 
10 
legitimate public purposes; 
11 
12 
(3) Trust funds may be spent only for the purpose for which that trust was 
13 
created or for which the funds were received. 
14 
15 
(4) Fiscal responsibility or accountability shall, to the greatest extent, be 
16 
shared by all those exercising authority over the financial affairs, 
17 
transactions, and operations of the agency; 
18 
19 
(5) Disbursement or disposition of government funds or property shall 
20 
bear the approval of the proper officials; 
21 
22 
(6) Claims against government funds shall be supported with complete 
23 
documentation; 
24 
25 
(7) All laws and regulations applicable to financial transactions shall be 
26 
faithfully adhered to; 
27 
28 
(8) General accepted principles and practices of accounting as well as of 
29 
sound management and fiscal administration shall be observed, 
30 
provided that they do not contravene existing laws and regulations. 
31 
32 
33 
SEC. 5. Organizational and Functional Framework and Delineation of 
34 
Accounting Responsibilities. - The organizational and functional framework 
35 
and accounting responsibilities shall be delineated as follows: 
36 
37 
(1) Pursuant to the primary fiscal responsibility of the agency head, 
38 
management decisions and prerogatives of such agency head shall be respected 
39 by other government agencies, and the Commission on Audit shall be authorized 
40 only to review these decisions in accordance with its mandate; 
41 
42 
(2) At the top level, the Government Accountancy Office (GAO) created 
43 
under Section 9, shall be responsible for accounting of all resources of the 
44 
Government. It shall provide overall technical supervision and direction of the 
45 agency accounting function and keep the budgetary accounts. It shall be 
46 
responsible for the submission of the consolidated financial results of operation 
47 
ofthe government. 
48 
(3) At the agency level, agency accountants shall be responsible for 
49 agency accounting functions. They shall be responsible for the preparation and 
50 
submission of financial reports required by the agency head and higher fiscal 
51 
authorities. 
52 
53 
(4) The Bureau of Treasury in close coordination with the Government 
54 Accountancy Office shall be responsible for cash accounting and debt 
55 
management. 
3 


1 
(5) The Commission shall conduct audits of and prepare audit reports 
2 
covering the overall financial operation of the Government. These audits shall be 
3 
performed on a post-audit basis within a reasonable period of time from 
4 
submission of pertinent reports. It shall promulgate general accounting principles 
5 
and keep the general or unappropriated surplus accounts. 
6 
7 
8 
CHAPTER I 
9 
BASIC POLICIES AND STANDARDS OF GOVERNMENT ACCOUNTING 
10 
11 
12 
SEC. 6. Concept and Basic Features of Government Accounting. -
13 
Government accounting is a process in which the transactions of an operating 
14 
agency are documented, classified, and recorded for the purpose of 
15 
accumulating and providing financial information essential to the conduct of 
16 
designated activities. It includes the design of accounting systems which 
17 
involves: (1) the development of recording methods, (2) the documentation and 
18 
review of financial transactions, (3) the maintenance of records and books of 
19 
accounts, and (4) the preparation of financial and other reports. 
20 
21 
22 
SEC. 7. Purposes of Government Accounting. - The range of purposes 
23 
to be served by government accounting is: 
24 
25 
1. The accounting system shall be so designed to comply with the 
26 
constitutional, statutory and other legal requirements and generally accepted 
27 
accounting principles, when applicable. 
28 
29 
2. The accounting system shall be related to the budget classifications 
30 
since budgetary and accounting functions are complementary elements of 
31 
financial management and therefore must be closely integrated. 
32 
33 
3. The accounts shall clearly identify the objects and purposes for which 
34 
funds have been received and expended, and the agency responsible for 
35 
custody and use offunds in the program implementation; 
36 
37 
4. The accounting system shall be maintained in a way to facilitate audit 
38 
by external review authorities, and to readily furnish the information needed for 
39 
an effective audit; 
40 
41 
5. The accounting system shall permit effective administrative control of 
42 
funds and operations, program management and internal audit and appraisal; 
43 
44 
6. The accounts shall effectively disclose the economic and financial 
45 
results of programs operations, including the measurement of revenues, 
46 
identification of costs and determination of the operating results (the surplus or 
47 
deficit pOSition) of the government and its programs and organizations; 
48 
49 
7. The accounting system shall be capable of serving the basic financial 
50 
information needs of development of planning and programming, and the review 
51 
and appraisal of performance in physical and financial terms; and 
52 
53 
8. The accounts shall provide financial data useful for economic analysis 
54 
and classification of governmental transactions, and assist in the development of 
55 
national accounts, 
4 


1 
SEC. 
8. 
General Standards of Government Accounting and 
2 
Reporting. -
Government accounting shall adopt the following general 
3 
standards. 
4 
5 
1. Except as may otherwise be specifically provided by law, all moneys 
6 
and property officially received by a public officer in any capacity or upon any 
7 
occasion must be accounted for as government funds and property. 
8 
9 
2. The accounting system shall basically serve the broad purpose of 
10 
accountability and management needs; 
11 
12 
3. The accrual basis of accounting shall be employed as a basic 
13 
component of management of government resources in addition to the existing 
14 
cash and obligation accounting; 
15 
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4. All financial transactions shall be property documented as the different 
17 
phases of the transactions take place and shall be recorded on a double-entry 
18 
basis; 
19 
20 
5. A complete set of books of accounts shall be maintained by agencies to 
21 
whom allotments or sUb-allotments ad vices have been released; agencies 
22 
without allotments or sUb-allotments but have financial accountabilities shall keep 
23 
appropriate books of accounts as required by the GAO; 
24 
25 
6. The financial statements and accounting reports shall satisfy the 
26 
information needs essential for purposes of : (a) budget accountability; (b) 
27 
economic analysis, (c) policy formulation, (d) executive decision -making \, and 
28 
(e) external audit; 
29 
30 
7. Reports must present factual data useful for evaluation, monitoring and 
31 
control of operations at different levels of management; 
32 
33 
8. The basic accounting reports shall include the statement of fiscal 
34 
operations, the balance sheet, costs of a given program or project, and 
35 
statements of appropriation, allotment, obligation, expenditure and payable 
36 
accounts and balances; 
37 
38 
9. The accounting function shall be performed by persons with adequate 
39 
knowledge of government accounting; and 
40 
41 
10. An agency accounting manual shall be developed and maintained by 
42 
each agency upon installation of its accounting system. 
43 
44 
In accordance therewith, Section 63 to 124 of Presidential Decree No. 
45 
1445 and Sections 40 to 53, book V, Title I, Sub-title B, of Executive Order No. 
46 
292 are hereby repealed. 
47 
48 
49 
CHAPTER" 
50 
CENTRAL GOVERNMENT ACCOUNTING AUTHORITY 
51 
52 
53 
SEC. 9. Establishment of Central Government Accounting Authority. 
54 
- There shall be created and established a Central Government Accounting 
55 
Authority, herein referred to as the Government Accountancy Office (GAO), 
56 
under the Department of Budget and Management (DBM) which shall be solely 
5 


1 
responsible for the technical supervision of accounting functions in all 
2 
government agencies. 
3 
4 
5 
SEC. 10. Statement of Objectives. - The following are the specific 
6 
objectives of the Government Accountancy Office: 
7 
8 
1. To initiate government accounting refoms needed in achieving effective 
9 
control of funds in-flow and out-flow without necessarily constricting agency 
10 management thus allowing them to assume greater fiscal 
responsibility as 
11 
provided by law; 
12 
13 
2. 
To improve accounting efficiency and capability at the agency 
14 operating level; and 
15 
16 
3. To facilitate preparation and submission of accounting and other 
17 financial reports for budget accountability, management decisions, and external 
18 audit purposes. 
19 
20 
21 
SEC. 11. Head of the Govemmen Accountancy Offices,· Deputies; 
22 Qualifications; and Salary. -
23 
24 
1. The GAO be headed by an Accountant General whose rank shall be 
25 equivalent to a Department Undersecretary. He shall be assisted by two 
26 deputies, whose ranks shall be equivalent to Department Assistant Secretaries. 
27 
28 
2. The Accountant General shall be appointed by the President for a term 
29 of seven (7) years. The Deputies shall be chosen by the President from among 
30 the Career Executive Services (CES) eligibles. In no case shall anyone of them 
31 
be appointed or designated in a temporary or acting capacity. 
32 
33 
3. The Accountant General and each deputy shall receive an annual 
34 salary as may be provided by law. 
35 
36 
37 
SEC. 12. The Office of the Accountant General. -
38 
39 
1. The Office of the Accountant General shall determine policies, 
40 promUlgate government accounting rules and regulations and prescribe 
41 
accounting systems, procedures and techniques and standards governing the 
42 performance by the agency of its duties and functions. 
43 
44 
2. It shall also formulate measures on internal control to ensure accuracy, 
45 integrity and reliability of accounting records and reports. 
46 
47 
48 
SEC. 13. The Central Offices and Regional Accounting Services.-
49 The GAO shall organize offices to handle the following areas of accounting: 
50 
51 
(1) technical accounting services; 
52 
(2) administration of chart of accounts and maintenance of budgetary 
53 
control accounts; 
54 
(3) systems and training; 
55 
(4) national government accounting; 
56 
(5) local government accounting; 
57 
(6) government corporation accounting; 
6 


1 
(7) financial management information; and, 
2 
(8) decentralized accounting services. 
3 
4 
These offices shall perform primarily staff functions, exercise technical 
5 
supervision over the agency accounting services, and perform such other 
6 
functions as may be assigned by the Accountant General. 
7 
8 
9 
CHAPTER 11/ 
10 
JURISDICTION, POWERS AND LINKAGES 
11 
12 
13 
SEC. 14. General Jurisdiction. - The following powers and duties shall 
14 
be within the functional jurisdiction of the Govemment Accountancy Office, to wit: 
15 
16 
(1) The design and prescription of accounting and financial reporting 
17 
systems, 
18 
(2) The administration of the Government Chart of Accounts; 
19 
(3) The keeping of the central books of accounts of the Government; and 
20 
(4) The preparations of government-wide management accounting. 
21 
22 
23 
SEC. 15. Keeping the Books of Appropriated Funds of the National 
24 
Government. -
The Department of Budget and Management thru the 
25 
Government Accountancy Office shan keep and maintain the central books of 
26 
accounts of the appropriated funds of the National Government. 
27 
28 
29 
SEC. 16. Examining Authority. - The GAO shall have the authority to 
30 
examine the agency books of accounts for the purpose of ascertaining whether 
31 
financial transactions are properly recorded and to determine compliance with 
32 
budgetary and accounting rules and regulations. 
33 
34 
35 
SEC. 17. Power to Withhold Release of Funds. - The GAO shall have 
36 
the authority to withhold the release of notice cash allocation to agencies which 
37 
have not complied with the financial reporting requirement fifteen (15) working 
38 
days after the prescribed deadline for its submission. 
39 
40 
41 
SEC. 18. Power to Exact Compliance with Financial Reporting 
42 Requirements. - The GAO shall have the power to exact strict compliance with 
43 
timely financial reporting requirements from all agencies of the Government. 
44 
45 
46 
SEC. 19. Adjustment of Accounts between Agencies. - The GAO shall 
47 
have the power, under such regulations as it may prescribe, to authorize and 
48 
enforce the adjustment of accounts subsisting between various agencies of the 
49 
Government. 
50 
51 
52 
SEC. 20. Col/ection of Indebtedness due the Government. - The GAO 
53 shall, through proper channels, assist in the collection and enforcement of all 
54 
debts and claims, and the restitution of all funds or the replacement or payment 
55 
at a reasonable price of property, found to be due the Government, or any of its 
56 
agencies, in the settlement and adjustment of its accounts. If any legal 
57 
proceeding is necessary to that end, the GAO shall refer the case to the Solicitor 
7 


1 
General, the Government Corporate Counsel, or the legal staff of the creditor 
2 
government office or agency concerned to institute such legal proceeding. The 
3 
GAO shall extend full support in the litigation. All such moneys due and payable 
4 
shall bear interest at the legal rate from the date of written demand by the GAO. 
5 
6 
7 
SEC. 21. Submission of the Annual Consolidated Financial Report. -
8 
The GAO, thru the Secretary of the Department of Budget and Management, 
9 
shall submit within four (4) months after the end of the fiscal year, to the 
10 President, Congress and the Commission on Audit, an audited annual 
11 
consolidated financial report reflecting the results of government operations. 
12 
13 
14 
CHAPTER IV 
15 
AGENCY ACCOUNTING FUNCTIONS 
16 
17 
18 
SEC. 22. Organization and Functions. - There shall be created in every 
19 government agency an accounting group to be headed by an accountant 
20 administratively under the head of the agency or under the financial management 
21 
service, but technically under the GAO who shall perform the following functions: 
22 
23 
(1) Maintain the agency books of accounts; 
24 
25 
(2) Analyze, record, classify and summarize all transactions involving the 
26 
receipt and disposition of government funds and property; 
27 
28 
(3) Prepare financial statements and interpret the results of financial 
29 
operations for agency management decision-making purposes; 
30 
31 
(4) Prepare regular financial reports for the budgetary control purposes for 
32 
guidance of agency management and for reporting to the DBM through 
33 
the GAO; 
34 
35 
(5) Prepare and submit accounting reports required by the Commission on 
36 
Audit; and 
37 
38 
(6) Certify to availability of funds. 
39 
40 
41 
SEC. 23. Keeping of Accounts. -
42 
43 
(1) The accounts of an agency shall be kept in such detail as is necessary 
44 to meet the needs of the agency and at the same time be adequate to provide 
45 the information needed by fiscal or control agencies of the Government; 
46 
47 
(2) The highest standards of honesty, objectivity and consistency shall be 
48 observed in the keeping of accounts to safeguard against erroneous, inaccurate 
49 or misleading information. 
50 
51 
52 
SEC. 24. Recording of Financial Transaction. - Each government 
53 agency shall record its financial transactions and operations conformably with 
54 generally accepted accounting prinCiples and in accordance with pertinent laws 
55 and regulations, and by using the standard chart of accounts as prescribed by 
56 the GAO. 
8 


1 
SEC. 25. Financial and Physical Reports and Statements. -
2 
3 
(1) The financial reports prepared by the agencies shall comply with the 
4 
specific requirements of applicable laws and regulations as to nature, accounting 
5 
basis, content, frequency, and distribution as well as with aU applicable 
6 
restrictions pertaining to information classified for national security purposes. 
7 
8 
(2) The financial statements shall be based on official accounting records 
9 
kept in accordance with law and the generally accepted accounting principles 
10 and standards and should be signed by agency heads and the Chief accountants 
11 
who must be Certified Public Accountants indicating his CPA certificate number. 
12 
13 
(3) The physical reports shall include the identification of the approved 
14 units or work measurements, work targets, work accomplished and manpower 
15 utilized for each budgeting functions, program or project. 
16 
17 
18 
SEC. 26. Submission of Reports. -
19 
20 
(1) All heads of accounting units shall submit within two (2) months after 
21 
the end of the fiscal year, to the GAO and the Commission on Audit, an annual 
22 
financial report reflecting the results of the agency or program operations. 
23 
24 
(2) Whenever deemed necessary in the exigencies of the service, the 
25 
GAO may under regulations issued by it require the agency heads, chief 
26 accountants, budget officers, cashiers, disbursing officers, administrative or 
27 
personnel officers, and other responsible officials of the various agencies to 
28 submit trial balances, physical inventory reports, current plantilla of personnel, 
29 
and such other reports as may be necessary for the exercise of its functions, 
30 
including physical performance indicators report. 
31 
32 
(3) Failure on the part of the officials concerned to submit the required 
33 documents and reports at the time mentioned herein shall automatically cause 
34 the suspension of payment of their salaries until they shall have complied with 
35 the requirements of the GAO. 
36 
37 
(4) Any other violation of the provisions of this Section shall likewise cause 
38 
the suspension of payment of salaries, without prejudice to any other disciplinary 
39 action that may be instituted against such concerned official or employee. 
40 
41 
42 
CHAPTER V 
43 
INTERNAL CONTROL SYSTEM 
44 
45 
46 
SEC. 27. Concept of Internal Control - Internal control is the plan of 
47 organization and all the coordinate methods and measures adopted within an 
48 
organization or agency to safeguard its assets, check the accuracy and reliability 
49 
of its accounting data, promote administrative and operational efficiency and 
50 
encourage adherence to prescribed managerial policies. 
51 
52 
53 
SEC. 28. Installation of Internal Control System. - The installation and 
54 
implementation of a sound system of internal control shall be the direct 
55 
responsibility of the agency head. For this purpose, such agency head shall 
56 
ensure that all actions of the officials concerned are properly monitored and 
57 
coordinated. 
9 


1 
SEC. 29. Internal Control System. - Subject to the provisions of existing 
2 
laws, rules and regulations and this Act, each Agency shall set up internal control 
3 
systems for the following areas: 
4 
5 
1. Cash receipt and disbursement 
6 
2. Property, supplies and other inventory items; 
7 
3. Accounting and bookkeeping; 
8 
4. Personnel recruitment, promotion and separation; and 
9 
5. Procurement, purchases, storage, requisitions, issuance and disposal. 
10 
11 
12 
SEC. 30. Organization. - There shall be created in every government 
13 agency an internal control unit which shall be responsible for assuring that steps 
14 are taken to safeguard the assets of the agency, checking the accuracy and 
15 reliability of the accounting data, promoting administrative and operational 
16 efficiency, encouraging adherence to prescribed managerial policies, and may 
17 conduct such other activities to achieve these ends. 
18 
19 
For this purpose, the agency head may absorb as member/s of the staff of 
20 the internal control unit the resident COA personnel at the time of the effectivity 
21 
of this Act. 
22 
23 
24 
SEC. 31. Functions. - The internal control unit shall have the following 
25 functions: 
26 
27 
1. Conduct spot cash audit of regular/special collecting disbursing officers 
28 
of the agency. 
29 
30 
2. Pre-Audit agency transactions. 
31 
32 
3. Review contracts before awarding. 
33 
34 
4. Inspect properties delivered. 
35 
36 
5. Certify unserviceable and condemned equipments before replacement 
37 
and disposal. 
38 
39 
6. Keep custody, and be responsible for the safekeeping and preservation 
40 
of paid expense vouchers, journal vouchers, stubs of treasury warrant or 
41 
checks, reports of collections and disbursements and similar documents 
42 
together with their respective supporting papers. 
43 
44 
Subsection 1 to 4 may be performed by the internal control unit on test 
45 basis or sampling method, in accordance with the implementing rules and 
46 regulations to be issued by GAO. 
47 
48 
49 
SEC. 32. Reporting Responsibilities. - The head of the internal control 
50 unit shall submit reports directly to the head of the agency, copy furnished the 
51 
DBM and the Commission on Audit, of his findings, observations and 
52 recommendations to maintain a sound financial management of the agency 
53 resources. 
54 
SEC. 33 Liability of the Head of the Internal Control Unit. -
All 
55 management reports required by central fiscal agencies shall be certified correct 
56 by the central fiscal agencies shall be certified correct by the head of the internal 
57 control unit and the agency head who will shall be liable solidarity with each other 
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for any malfeasance, and misrepresentation which may later on the discovered 
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by appropriate authorities. 
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SEC. 34. Implementing Rules and Regulations. - As part of its 
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functions, the GAO in coordination with the Commission on Audit shall develop 
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and promulgate internal control standards and procedures to be adopted by all 
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government agencies. 
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SEC. 35. Technical Supervision. - The Government Accountancy Office 
12 shall provide technical supervision and support in the development, installation 
13 and implementation of the agency internal control system. 
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SEC. 36. Management Audit. - As the exigency of the service requires, 
17 the Department of Budget and Management shall conduct management audit of 
18 government agencies to check on management adherence to prescribed internal 
19 control standard and effect immediate remedial measures if existing internal 
20 control system is found weak and inadequate. 
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FINAL PROVISION 
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SEC. 37. Reorganization of the Department of Budget and 
27 Management. - Within sixty (60) days after the approval of this Act, the 
28 Department of Budget and Management shall reorganized its functions and 
29 structure in accordance with the provisions herein. 
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SEC. 38. Administrative Disciplinary Action. - Subject to such rules and 
33 regulations as may formulated by GAO and approved by the President, any 
34 unjustified failure by the public officer concerned to comply with any requirement 
35 imposed in this Act shall constitute neglect of duty and shall be a ground fro 
36 administrative disciplinary action against the said public officer who, upon being 
37 found guilty thereof after hearing, shall be meted out such penalty as is 
38 commensurate with the agree of his guilt in accordance with the Civil Service 
39 Law. Repeated unjustified failure to comply with the requirements imposed in this 
40 Act shall be conclusive proof that the public officer concerned is notoriously 
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undesirable and corresponding penalties shall be imposed accordingly. 
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SEC. 39. Penal Provisions. - Any violation of the provisions of this Act or 
45 any rules and regulations issued pursuant thereto, shall be punishable by a fine 
46 not exceeding Five hundred thousand pesos (P500,000.00) or by imprisonment 
47 for a period not exceeding twelve (12) years or both, in the discretion of the court, 
48 without prejudice to the provisions of the Anti-Graft and Corrupt Practices Act 
49 and other applicable laws. In addition thereto, the penalty of perpetual 
50 disqualification from holding any public office and/or temporary disqualification 
51 from exercising any calling or profession shall be imposed when the court 
52 deemed it appropriate. 
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Any proceeds obtained by reason of any violation of this Act or any rules 
55 and regulations issued pursuant thereto shall be forfeited in favor of the 
56 Government. 
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SEC. 40. Appropriation. - The necessary appropriations to implement the 
provisions of this Act consisting of the annual operating expenses of the Offices, 
including the salaries, allowance and other emoluments of all the its officials and 
employees shall be included in the annual General Appropriations Law. The 
usage of these funds shall be governed by the general appropriations and other 
budget laws. 
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SEC. 41. Implementing Rules and Regulations. - The GAO shall 
10 formulate and issue the necessary implementing rules and regulations, except as 
11 othelWise specifically provided in this Act. 
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SEC. 42. Separability Clause. - Should any provision of this Act or any 
part thereof be declared invalid, the other provisions, so far as they are separable 
from the invalid one, shall remain in force and effect. 
SEC. 43. Repealing Clause. - All laws, executive orders, proclamations, 
decrees, instructions, rules and regulations, or part thereof, which are 
inconsistent or in conflict with any provision of this Act shall be deemed repealed 
or modified accordingly. 
SEC. 44. Effectivity Clause. - This Act shall take effect thirty (30) days 
after its complete publication in the Official Gazette or in complete publication in 
the newspaper of general circulation. 
Approved, 
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