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Government Accounting Process Overview

1. The government accounting process involves analyzing, recording, classifying, and communicating transactions involving government funds and property, as well as interpreting the results. It is similar to business accounting but incorporates budgetary controls. 2. Books of accounts include journals and ledgers to record transactions, as well as budget registries to monitor allotments, obligations, disbursements, and budget utilization for each expenditure object and fund cluster. 3. Obligations are incurred by an authorized official through an Obligation Request and Status form supported by valid claims, and are recorded in the Registries of Allotments, Obligations and Disbursements. Adjustments are made through a Notice of Obligation Request and Status Adjustment

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191 views2 pages

Government Accounting Process Overview

1. The government accounting process involves analyzing, recording, classifying, and communicating transactions involving government funds and property, as well as interpreting the results. It is similar to business accounting but incorporates budgetary controls. 2. Books of accounts include journals and ledgers to record transactions, as well as budget registries to monitor allotments, obligations, disbursements, and budget utilization for each expenditure object and fund cluster. 3. Obligations are incurred by an authorized official through an Obligation Request and Status form supported by valid claims, and are recorded in the Registries of Allotments, Obligations and Disbursements. Adjustments are made through a Notice of Obligation Request and Status Adjustment

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Kristine Tiu
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  • Government Accounting Process

CHAPTER 3 – THE GOVERNMENT ACCOUNTING PROCESS 3.

Registries of Allotments, Obligations and Disbursements (RAOD) – used to monitor


the allotments received, obligations incurred against the corresponding allotment,
Introduction and the actual disbursements made. This is to ensure that obligations incurred will
The government accounting process comprises the activities of analyzing, recording, not exceed allotments while actual disbursements will not exceed the obligations
classifying, summarizing and communicating transactions involving the receipt and disposition incurred.
of government funds and property, and interpreting the results thereof. This process is similar
to that of a business entity, except that it incorporates budgetary controls, such as recording in Separate RAOD shall be maintained or each object of expenditure.
the budget registries and preparing periodic budget accountability reports.
Object of Expenditures
Books Accounts and Registries
The books of accounts and registries of government entities consist of: The classifications of expenditures by object are as follows:
1. Journals a. Personnel Services (PS) – pertain to all types of employee benefits,
a. General Journal e.g., salaries, bonuses, allowances, cash gifts, etc.
b. Cash Receipts Journal
c. Cash Disbursements Journal b. Maintenance and Other Operating Expenses (MOOE) – pertain to
d. Check Disbursements Journal various operating expenses other than employee benefits and
financial expenses, e.g., travel, utilities, supplies, etc.
2. Legers
a. General Ledgers c. Financial Expenses (FE) – pertain to finance costs, e.g., interest
b. Subsidiary Ledgers expense, bank charges, etc. Financial expenses also include losses
on foreign exchange transactions.
3. Registries
a. Registries of Revenue and Other Receipts (RROR)
d. Capital Outlays (CO) – pertain to capitalize expenditures e.g.,
b. Registry of Appropriations and Allotments (RAPAL)
expenditures on the construction of public infrastructures, acquisition
c. Registries of Allotments, Obligations and Disbursements (RAOD)
costs of equipment, etc.
d. Registries of Budget, Utilization and Disbursements (RBUD)

Technically, only the Journals and Ledgers are considered accounting records. Accordingly, the following separate RAODs shall be maintained: (a) RAOD-PS; (B)
These are similar to the accounting records of a business entity. The Registries are budget RAOD-MOOE; (c) RAOD-FE; and (d) RAOD-CO.
records. These are used to monitor the budget. You may think of the registries like “logbooks”
or something, rather than accounting books with debit and credit columns. The accounting 4. Registries of Budget, Utilization and Disbursements (RBUD) – used to record the
unit of the agency maintains the Journals and Ledgers while the budget division of the agency approved special budget and the corresponding utilizations and disbursements
maintains the Registries. charged to retained income. Separate RBUDs are also maintained for each object of
Recall that separate accounting records and budget registries are maintained for expenditure, i.e., (a) RBUD-PS; (b) RBUD-MOOE; (c) RBUD-FE; and (d) RBUD-
each fund cluster (i.e., Regular Agency Fund, Foreign Assisted Projects Fund, etc.) CO.

Keeping of the General Accounts


Budget Registries The COA shall keep the general accounts of the Government and preserve the vouchers and
1. Registries of Revenue and Other Receipts (RROR) – used to monitor the budgeted other supporting documents.
amounts, actual collections and remittances of revenue and other receipts.
Basic Recordings
2. Registry of Appropriations and Allotments (RAPAL) – used to monitor appropriations
and allotments. This is to ensure that allotments will not exceed appropriations.  Appropriation – the receipt of the appropriation is posted (recorded) in the Registry
of Appropriations and Allotments (RAPAL).
 Allotment – the receipt of allotment is posted (recorded) in the RAPAL and RAOD.
 Obligation – is an act of a duly  Obligation is another term for
authorized official which binds the liability.
government to the immediate or
eventual payment of a sum of
money. Obligation maybe referred
Incurrence of Obligation to as a commitment that
encompasses possible future
Obligation Request and Status (ORS) liabilities based on current
Obligations shall be incurred through the issuance of Obligation Request and Status contractual agreement.
(ORS). The Requesting Office shall prepare this document, supported by valid claim
documents like disbursement vouchers, payrolls, purchase/job orders, itinerary of travel,
etc.
The Head of the requesting Office shall certify the necessity and legality of the
obligation and the validity of the supporting documents. The Head of the Budget Division Disbursement Authority – Notice of cash Allocation (NCA)
shall certify the availability of the allotment. This time a journal entry shall be made in the accounting books because the
financial statement elements of the entity are now affected, i.e., increase in cash and increase
The “obligations” are recorded in the RAOD. in revenue. The entry is as follows:

Notice of Obligation Request and status Adjustment (NORSA) Dat Cash Modified Disbursement System (MDS), xx
If the obligations recorded in the RAOD and ORS above need to be adjusted, the subsequent e Regular
adjustment shall be made through the use of the Notice of Obligation Request and Status Subsidy from National Government xx
Adjustment (NORSA). The adjustment shall be effected through a positive entry (addition) or a To recognize receipt of NCA from DBM
negative entry (reduction), as appropriate.
The registries used to monitor the NCA are the following:
Up to this point, nothing is recorded yet in the accounting books. The recordings above are a. Registry of Allotment and Notice of Cash Allocation (RANCA) – used to determine
made on the budget registries. Journal entries shall be made only after: amount of allotments not covered by NCA and to monitor the available balance of
a. The employees have rendered services; NCA.
b. The office supplies are delivered and received; and b. Registry of Allotment and Notice of Transfer of Allocation (RANTA) – used to
c. The office equipment is delivered and received. determine the amount of allotments not covered by Notice of Transfer of Allocation
(NTA) and to monitor the available balance of NTA.
Only after these events occur that the entity’s financial statement elements are affected, The NCA is posted (recorded in the RANCA.
and thus, an accountable event has occurred that needs to be recognized.
In the meantime, the “obligations” recorded in the registries (but not yet in the accounting I. JOURNALS
books) are referred to as “Not Yet Due and Demandable.”
Notice that government entities and business entities used the term “obligation” or the a. General Journal – used to record transactions not recorded in the Special
phrase “incurrence of obligation” differently. Journal.

Government entity Business entity Special Journals:


b. Cash Receipts Journal -

Common questions

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Budget registries in government accounting are distinct from traditional accounting records in that they focus on monitoring and controlling budgetary allocations rather than just recording financial transactions. The Registries of Revenue and Other Receipts (RROR), Registry of Appropriations and Allotments (RAPAL), and Registries of Allotments, Obligations, and Disbursements (RAOD) serve as 'logbooks' to ensure that expenditures are within the allocated budgets . This means that they are crucial for maintaining fiscal discipline by ensuring obligations do not exceed allotments, and disbursements do not exceed the obligations incurred .

Government expenditures are controlled through various registries like the Registry of Appropriations and Allotments (RAPAL), which monitor appropriations to prevent exceedance of allocations . Additional controls include Registries of Allotments, Obligations, and Disbursements (RAOD) that ensure obligations and disbursements align with appropriated funds . These measures are generally effective in maintaining fiscal discipline by providing a structured method for tracking and authorizing expenditures. However, their effectiveness also depends on proper oversight and adherence to financial protocols. Possible inefficiencies could arise if monitoring and adjustments mechanisms, such as NORSA, are not rigorously enforced .

The Registry of Allotment and Notice of Cash Allocation (RANCA) is a tool used to determine the amount of allotments that are not yet covered by the Notice of Cash Allocation (NCA) and to monitor the available balance . This registry helps ensure that cash outflows are adequately supported by legal budget allocations, thereby supporting fiscal accountability and preventing over-expenditure . It plays a critical role in aligning cash flow management with budgetary constraints, thereby enhancing financial control and integrity.

Having separate budget registries for different categories of expenditures allows for specialized monitoring and management of specific budget items, such as Personnel Services (PS), Maintenance and Other Operating Expenses (MOOE), Financial Expenses (FE), and Capital Outlays (CO). This separation enhances budget management by providing tailored oversight of allocations and expenditures within each category, minimizing the risk of over-spending and ensuring that financial resources are utilized within their designated purposes. It also facilitates detailed reporting and accountability, enabling precise tracking and analysis of budgetary performance across different areas .

'Not Yet Due and Demandable' obligations in government accounting are recorded in budget registries like the RAOD but are not yet entered in accounting books as journal entries . These obligations represent commitments that await fulfillment before being recognized as actual liabilities. This handling implies that financial oversight must account for these potential liabilities by maintaining effective controls and ensuring they do not evolve into fiscal deficiencies. It emphasizes the importance of rigorous monitoring and validation processes to avoid unanticipated fiscal demands .

Government accounting journals and ledgers are used for recording financial transactions with debit and credit columns, similar to traditional business records, whereas budget registries function as tools for monitoring budgets without recording the accounting entries themselves . This distinction is crucial for accurate financial reporting as journals and ledgers reflect the actual financial position and performance, while registries ensure budgetary allocations are not exceeded, thus preventing unauthorized spending and ensuring compliance with legal financial guidelines .

The concept of 'obligation' in government accounting refers to commitments that bind the government to future payments, encompassing potential liabilities from existing agreements . In business accounting, an obligation typically refers to recognized liabilities that are recorded once incurred. This distinction can lead to challenges in government accounting as the process requires extensive documentation and controls to manage potential future liabilities before they transform into actual liabilities, complicating financial management and oversight .

Journal entries are delayed in government accounting until obligations become due and demandable because entries are only made once a financial transaction has affected the entity's financial statement elements, such as services rendered or goods received . This delay is significant because it ensures that financial statements reflect actual and realizable economic activities, preventing premature recognition of obligations that may not fully mature into liabilities. It upholds the reliability and accuracy of financial reporting by recording financial impacts only when they materialize .

Personnel service expenditures in government accounting are categorized as benefits related to employees, such as salaries, bonuses, and allowances . These are controlled through separate Registries of Allotments, Obligations, and Disbursements (RAOD) specifically maintained for Personnel Services (PS). This approach ensures that expenditure is aligned with the budgeted amounts and that funds are available to meet personnel-related financial commitments, thereby maintaining financial discipline and ensuring that human resource costs remain within approved limits .

The Notice of Obligation Request and Status Adjustment (NORSA) is essential because it allows for adjustments to previously recorded obligations in the RAOD, ensuring that the financial records reflect accurate and up-to-date financial commitments . NORSA facilitates corrections through additions or reductions, aligning the budget records with actual events. This process ensures that financial reporting remains transparent and that obligations are accurately tracked until they are 'due and demandable' .

CHAPTER 3 – THE GOVERNMENT ACCOUNTING PROCESS Introduction The government accounting process comprises the activities
Incurrence of Obligation The “obligations” are recorded in the RAOD. Notice of Obligation Request and status Adjustment (NO

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