SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES }
First Regular Session

House Bill ino. 296 8

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 Accountants (CPAs) representing professional accounting
associations, a representative from the Department of Justice advising on legal aspects, and
CPAs 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 (IIAP).

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 goverment 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.

MAXIMO B. RODRIGUEZ, JR.


SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. _2968

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 2013”.

SEC. 2. Declaration of Policy. All resources of government shall be managed,
expanded or utilized in accordance with law and regulations, and safeguarded against loss
or wastage through illegal and/or improper disposition, with a view of ensuring efficiency,
economy and effectiveness in government operations. The responsibility to uphold that such
Policy is faithfully adhered to rests directly with the chief or head of the government agency
concerned.

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 provides useful information for control and for effective
and efficient management of government operations, in accordance with generally-accepted
accounting principles where applicable,

2. “Budgetary accounts” refer to the funds, resources, or surplus already
appropriated and made available for government expenditure during a given fiscal year,
consisting of appropriation, expenditure, revenue and borrowing accounts.

3. “General accounts” refer to the unappropriated surplus or uncommitted resource of
the Government, the utilization of which shall require an enabling act of Congress.


4, “Resources” refer to the actual assets of any agency of the Government such as
cash, instruments convertible to money, receivables, lands, buildings, as well as contingent
assets such as estimated revenues applying to the current fiscal period not accrued or
collected, and bonds authorized and unissued,

6. “Receipts” refer to all collections received by any collecting officer irrespective of
source and for whatever purpose.

6. “Revenues” refer to earings of the Government arising out of tax levies,
regulatory and investment transactions, including those in exchange for direct services
rendered by government agencies to the public.

7. “Income” refers to revenues eared during and accruing to the Government for a
particular fiscal year.

8,"Accrued income” represents revenues eamed during and pertaining to the current
fiscal year not yet collected as of the end of the year.

9. “Obligation” represents goods and services ordered, without regard to when
ordered, delivered or paid

10."Cost" represents value of goods and services consumed, without regard when
ordered, delivered or paid

11. “Disbursement” represents bills paid without regard to when the goods and
services were ordered, delivered or paid.

12. “Expense” means any item or class of cost of (or loss from) carrying on an
activity, a present operating cost, or representing an irrevocable cost or loss.

13. “Expenditure” means the incurring of a liability, the payment of cash, or the
transfer of property for the purpose of acquiring an asset or service or setting a loss; when
unqualified, the accrual basis of accounting is assumed.

14. “Surplus” is the excess of revenues over expenditures in a given fiscal year.

16. ‘Deficit’ is the excess of expenditures over revenues in a given fiscal year.

SEC. 4, Fundamental Principle. — Financial transactions and operations of any
government agency shall be governed by the fundamental principles set forth hereunder, to
wits

(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 legitimate public
purposes;

(3) Trust funds may be spent only for the purpose for which that trust was created or
for which the funds were received,

(4) Fiscal responsibility or accountability shall, to the greatest extent, be shared by
all those exercising authority over the financial affairs, transactions, and
operations of the agency;

(5) Disbursement or disposition of government funds or property shall bear the
approval of the proper officials;

(6) Claims against goverment funds shall be supported with complete
documentation;

(7) All laws and regulations applicable to financial transactions shall be faithfully
adhered to;

(8) Generally accepted principles and practices of accounting as well as of sound
management and fiscal administration shall be observed, provided that they do
not contravene existing laws and regulations.

SEC. §. Organizational and Functional Framework and Delineation of
Accounting Responsibilities. - The organizational and functional framework and
accounting responsibilities shall be delineated as follows

(1) Pursuant to the primary fiscal responsiblity of the agency head, management
decisions and prerogatives of such agency head shall be respected by other government


agencies, and the Commission on Audit shall be authorized only to review these decisions in
accordance with its mandate;

(2) At the top level, the Government Accountancy Office (GAO) created under
Section 9, shall be responsible for accounting of all resources of the Government. It shall
provide overall technical supervision and direction of the agency accounting function and
keep the budgetary accounts. It shall be responsible for the submission of the consolidated
financial results of operation of the government.

(3) At the agency level, agency accountants shall be responsible for agency
accounting functions. They shall be responsible for the preparation and submission of
financial reports required by the agency head and higher fiscal authorities.

(4) The Bureau of Treasury in close coordination with the Government Accountancy
Office shall be responsible for cash accounting and debt management

(5) The Commission shall conduct audits of and prepare audit reports covering the
overall financial operation of the Government. These audits shall be performed on a post-
audit basis within a reasonable period of time from submission of pertinent reports. It shall
promulgate general accounting principles and keep the general or unappropriated surplus
accounts

CHAPTER I
BASIC POLICIES AND STANDARDS OF GOVERNMENT ACCOUNTING

SEC. 6. Concept and Basic Features of Government Accounting. -
Government accounting is a process in which the transactions of an operating agency are
documented, classified, and recorded for the purpose of accumulating and providing
financial information essential to the conduct of designated activities. It includes the design
‘of accounting systems which involves: (1) the development of recording methods, (2) the
documentation and review of financial transactions, (3) the maintenance of records and
books of accounts, and (4) the preparation of financial and other reports.

SEC. 7. Purposes of Government Accounting. - The range of purposes to be
served by government accounting is:

1. The accounting system shall be so designed to comply with the constitutional,
statutory and other legal requirements and generally accepted accounting principles, when
applicable

2. The accounting system shall be related to the budget classifications since
budgetary and accounting functions are complementary elements of financial management
and therefore must be closely integrated.

3. The accounts shall clearly identify the objects and purposes for which funds have
been received and expended, and the agency responsible for custody and use of funds in
the program implementation;

4, The accounting system shall be maintained in a way to facilitate audit by external
review authorities, and to readily furnish the information needed for an effective audit;

5, The accounting system shall permit effective administrative control of funds and
operations, program management and internal audit and appraisal;

6. The accounts shall effectively disclose the economic and financial results of
programs operations, including the measurement of revenues, identification of costs and
determination of the operating results (the surplus or deficit position) of the government and
its programs and organizations;

7. The accounting system shall be capable of serving the basic financial information
needs of development of planning and programming, and the review and appraisal of
performance in physical and financial terms; and

8, The accounts shall provide financial data useful for economic analysis and
classification of governmental transactions, and assist in the development of national
accounts,


SEC. 8. General Standards of Government Accounting and Reporting. -
‘Government accounting shall adopt the following general standards:

1. Except as may otherwise be specifically provided by law, all moneys and
properties officially received by a public officer in any capacity or upon any occasion must be
accounted for as government funds and properties.

2. The accounting system shall basically serve the broad purpose of accountability
and management needs;

3. The accrual basis of accounting shall be employed as a basic component of
management of government resources in addition to the existing cash and obligation
accounting;

4. All financial transactions shall be property documented as the different phases of
the transactions take place and shall be recorded on a double-entry basis;

5. A complete set of books of accounts shall be maintained by agencies to whom
allotments or sub-allotments advices have been released; agencies without allotments or
sub-allotments but have financial accountabilities shall keep appropriate books of accounts
as required by the GAO;

6. The financial statements and accounting reports shall satisfy the information needs
essential for purposes of: (a) budget accountability; (b) economic analysis, (c) policy
formulation, (d) executive decision - making, and (e) external audit;

7. Reports must present factual data useful for evaluation, monitoring and control of
operations at different levels of management;

8. The basic accounting reports shall include the statement of fiscal operations, the
balance sheet, costs of a given program or project, and statements of appropriation,
allotment, obligation, expenditure and payable accounts and balances;

9. The accounting function shall be performed by persons with adequate knowledge
of government accounting; and

10. An agency accounting manual shall be developed and maintained by each
agency upon installation of its accounting system.

In accordance therewith, Sections 63 to 124 of Presidential Decree No. 1445 and
Sections 40 to 53, Book V, Title |, Sub-tile B, of Executive Order No. 292 are hereby
repealed

CHAPTER Il
CENTRAL GOVERNMENT ACCOUNTING AUTHORITY

SEC. 9. Establishment of Central Government Accounting Authority. - There
shall be created and established a Central Government Accounting Authority, herein referred
to as the Government Accountancy Office (GAO), under the Department of Budget and
Management (DBM) which shall be solely responsible for the technical supervision of
accounting functions in all government agencies.

SEC. 10 . Statement of Objectives. - The following are the specific objectives of the
Government Accountancy Office:

1, To initiate government accounting reforms needed in achieving effective control of
funds in-flow and outflow without necessarily constricting agency management thus
allowing them to assume greater fiscal responsibility as provided by law;

2. To improve accounting efficiency and capability at the agency operating level; and

3. To facilitate preparation and submission of accounting and other financial reports
for budget accountability, management decisions, and external audit purposes.

SEC. 11. Head of the Government Accountancy Office; Deputies;
Qualifications; and Salary. -


4, The GAO shall be headed by an Accountant General whose rank shall be
equivalent to a Department Undersecretary. He shall be assisted by two (2) deputies, whose
ranks shall be equivalent to Department Assistant Secretaries

2. The Accountant General shall be appointed by the President for a term of seven
(7) years. The Deputies shall be chosen by the President from among the Career Executive
Services (CES) eligibles. in no case shall any one of them be appointed or designated in a
temporary or acting capacity.

3. The Accountant General and each deputy shall receive an annual salary as may
be provided by law.

SEC. 12. The Office of the Accountant General. -

1, The Office of the Accountant General shall determine policies, promulgate
government accounting rules and regulations and prescribe accounting systems, procedures
and techniques and standards governing the performance by the agency of its duties and
functions.

2. It shall also formulate measures on intemal control to ensure accuracy, integrity
and reliability of accounting records and reports.

SEC. 13. The Central Offices and Regional Accounting Services. - The GAO
shall organize offices to handle the following areas of accounting:

(1) technical accounting services;

(2) administration of chart of accounts and maintenance of budgetary control

accounts;

(3) systems and training;

(4) national government accounting;

(5) local government accounting;

(6) government corporation accounting;

(7) financial management information; and

(8) decentralized accounting services.

‘These offices shall perform primarily staff functions, exercise technical supervision
over the agency accounting services, and perform such other functions as may be assigned
by the Accountant General.

CHAPTER Il
JURISDICTION, POWERS AND LINKAGES

SEC. 14. General Jurisdiction. - The following powers and duties shall be within the
functional jurisdiction of the Government Accountancy Office, to wit

(1) The design and prescription of accounting and financial reporting systems,

(2) The administration of the Government Chart of Accounts;

(3) The keeping of the central books of accounts of the Government; and

(4) The preparation of government-wide management accounting

SEC. 15. Keeping the Books of Appropriated Funds of the National
Government. - The Department of Budget and Management through the Government
Accountancy Office shall keep and maintain the central books of accounts of the
appropriated funds of the National Government.

SEC. 16. Examining Authority. - The GAO shall have the authority to examine the
agency books of accounts for the purpose of ascertaining whether financial transactions are
properly recorded and to determine compliance with budgetary and accounting rules and
regulations.


SEC. 17. Power to Withhold Release of Funds. - The GAO shall have the authority
to withhold the release of notice cash allocation to agencies which have not complied with
the financial reporting requirement fifteen (|5) working days after the prescribed deadiine for
its submission.

SEC. 18. Power to Exact Compliance with Financial Reporting Requirements. -
The GAO shall have the power to exact strict compliance with timely financial reporting
requirements from all agencies of the Government.

SEC. 19. Adjustment of Accounts between Agencies. - The GAO shall have the
power, under such regulations as it may prescribe, to authorize and enforce the adjustment
of accounts subsisting between various agencies of the Government.

SEC. 20. Collection of Indebtedness due the Government. - The GAO shall,
through proper channels, assist in the collection and enforcement of all debts and claims,
and the restitution of all funds or the replacement or payment at a reasonable price of
property, found to be due the Government, or any of its agencies, in the settlement and
adjustment of its accounts. If any legal proceeding Is necessary to that end, the GAO shall
refer the case to the Solicitor General, the Government Corporate Counsel, or the legal staff
of the creditor government office or agency concemed to institute such legal proceeding.
The GAO shall extend full support in the litigation. All such moneys _due and payable shall
bear interest at the legal rate from the date of written demand by the GAO.

SEC. 21. Submission of the Annual Consolidated Financial Report. - The GAO,
through the Secretary of the Department of Budget and Management, shall submit within
four (4) months after the end of the fiscal year, to the President, Congress and the
Commission on Audit, an audited annual consolidated financial report reflecting the results of
government operations.

CHAPTER IV.
AGENCY ACCOUNTING FUNCTIONS

SEC. 22, Organization and Functions. - There shall be created in every
government agency an accounting group to be headed by an accountant administratively
under the head of the agency or under the financial management service, but technically
under the GAO who shall perform the following functions:

(1) Maintain the agency books of accounts;

(2) Analyze, record, classify and summarize all transactions involving the receipt and

disposition of government funds and properties;

(3) Prepare financial statements and interpret the results of financial operations for

agency management decision-making purposes;

(4) Prepare regular financial reports for the budgetary control purposes for guidance

of agency management and for reporting to the DBM through the GAO;

(5) Prepare and submit accounting reports required by the Commission on Audit; and

(6) Certify to availability of funds.

SEC. 23. Keeping of Accounts. —

(1) The accounts of an agency shall be kept in such detail as is necessary to meet
the needs of the agency and at the same time be adequate to provide the information
needed by fiscal or control agencies of the Government;

(2) The highest standards of honesty, objectivity and consistency shall be observed
in the keeping of accounts to safeguard against erroneous, inaccurate or misleading
information


SEC. 24, Recording of Financial Transaction. - Each government agency shall
record its financial transactions and operations conformably with generally accepted
accounting principles and in accordance with pertinent laws and regulations, and by using
the standard chart of accounts as prescribed by the GAO.

SEC. 25. Financial and Physical Reports and Statements. -

(1) The financial reports prepared by the agencies shall comply with the specific
requirements of applicable laws and regulations as to nature, accounting basis, content,
frequency, and distribution as well as with all applicable restrictions pertaining to information
classified for national security purposes.

(2) The financial statements shall be based on official accounting records kept in
accordance with law and the generally accepted accounting principles and standards and
should be signed by agency heads and the Chief accountants who must be Certified Public
Accountants indicating his CPA certificate number.

(3) The physical reports shall include the identification of the approved units or work
measurements, work targets, work accomplished and manpower utilized for each budgeting
function, program or project.

SEC. 26. Submission of Reports. -

(1) All heads of accounting units shall submit within two (2) months after the end of
the fiscal year, to the GAO and the Commission on Audit, an annual financial report
reflecting the results of the agency or program operations.

(2) Whenever deemed necessary in the exigencies of the service, the GAO may,
under regulations issued by it, require the agency heads, chief accountants, budget officers,
cashiers, disbursing officers, administrative or personnel officers, and other responsible
officials of the various agencies to submit trial balances, physical inventory reports, current
plantilla of personnel, and such other reports as may be necessary for the exercise of its
functions, including physical performance indicators report

(3) Failure on the part of the officials concerned to submit the required documents
and reports at the time mentioned herein shall automatically cause the suspension of
payment of their salaries until they shall have complied with the requirements of the GAO.

(4) Any other violation of the provisions of this Section shall likewise cause the
suspension of payment of salaries, without prejudice to any other disciplinary action that may
be instituted against such concemed official or employee

CHAPTER V
INTERNAL CONTROL SYSTEM

SEC. 27. Concept of Internal Control - Internal control is the plan of organization
and all the coordinate methods and measures adopted within an organization or agency to
safeguard its assets, check the accuracy and reliability of its accounting data, promote
administrative and operational efficiency and encourage adherence to prescribed managerial
policies.

SEC. 28. Installation of Internal Control System. - The installation and
implementation of a sound system of internal control shall be the direct responsibility of the
agency head. For this purpose, such agency head shall ensure that all actions of the officials
concerned are properly monitored and coordinated.

SEC. 29, Internal Control System. - Subject to the provisions of existing laws, rules
and regulations and this Act, each agency shall set up internal control systems for the
following areas


effect immediate remedial measures if existing internal control system is found weak and
inadequate

FINAL PROVISIONS

SEC. 37. Reorganization of the Department of Budget and Management. - Within
sixty (60) days after the approval of this Act, the Department of Budget and Management
shall reorganized its functions and structure in accordance with the provisions herein

SEC. 38. Administrative Disciplinary Action. - Subject to such rules and
regulations as may be formulated by GAO and approved by the President, any unjustified
failure by the public officer concemed to comply with any requirement imposed in this Act
shall constitute neglect of duty and shall be a ground for administrative disciplinary action
against the said public officer who, upon being found guilty thereof after hearing, shall be
meted out such penalty as is commensurate with the agree of his guilt in accordance with
the Civil Service Law, Repeated unjustified failure to comply with the requirements imposed
in this Act shall be conclusive proof that the public officer concemed is notoriously
undesirable and corresponding penalties shall be imposed accordingly,

SEC. 39. Penal Provisions. - Any violation of the provisions of this Act or rules and
regulations issued pursuant thereto, shall be punishable by a fine not exceeding Five
Hundred Thousand Pesos (P500,000.00) or by imprisonment for a period not exceeding
twelve (12) years or both, in the discretion of the court, without prejudice to the provisions of
the Anti-Graft and Corrupt Practices Act and other applicable laws. In addition thereto, the
penalty of perpetual disqualification from holding any public office and/or temporary
disqualification from exercising any calling or profession shall be imposed when the court
deemed it appropriate.

Any proceeds obtained by reason of any violation of this Act or any rules and
regulations issued pursuant thereto shall be forfeited in favor of the Government.

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,
allowances and other emoluments of all the its officials and employees shalll be included in
the annual General Appropriations Law. The usage of these funds shall be governed by the
general appropriations and other budget laws.

SEC. 41. Implementing Rules and Regulations. - The GAO shall formulate and
issue the necessary implementing rules and regulations, except as otherwise specifically
provided in this Act.

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 two (2) newspapers of general circulation.

Approved,