reconciliation of govt trans statistics

8/12/2019 Reconciliation of Govt Trans Statistics

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THE RECONCILIATION OF GOVERNMENT TRANSACTIONSTATISTICS: NATIONAL ACCOUNTS, COMMISSION ON AUDITAND OFFICE OF BUDGET AND MANAGEMENT REPORTS

j uanita AmatongI. INTRODUCTION

Government finance plays a major influence on the economicactivity of a country. This ismore so in developing countries than indeveloped ones except perhaps when the latter are welfare states.

A random sampling of government expenditures to GDP in de-veloped and developing countries as listed in IMFs InternationalFinancial Statistics indicates that the average ratio of governmentexpenditures to GDP in developed countries is from 10 to 15percent whereas for developing countries the ratio is as high as35 percent. For the Philippines national government expendituresto GDP averaged 17 percent from 1975 to 1981. If we add to thisthe expenditures of local governments and government corporationsthe share of government expenditures may reach as high as 25percent.

Government capital expenditures, comprising of infrastructureand noninfrastructure capital outlays have increased substantiallyespecially in the decade of the 1970s. The entire public sectorcapital program triggered a transformation in the economy whichbrought about changes in economic and social structures. Thesedevelopments naturally call for a continuous examination of thestatistical data bases. The development and adoption of releventgovernment financ_ statistics to serve the needs of the governmentand other data users as input remain a challenge to governmentbudget accounting and finance officers.

II. THE GOVERNMENT DATA SYSTEM The government data System has as its basis a Constitutional

provision which requires the PrimeMinister to submit to theNational Assembly a budget containing estimates of receipts andexpenditures of the National Government the estimates of receiptsto be based on both existing and proposed revenue measures(Article7 Section 17.1). Under Article 8 Section 18.1 n o money shall bepaid out of the TreasurY except in pursuance of an appropriation

Ministryof Finance.

72


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AMATONG: RECONCILING GOVERNMENT TRANSACTION STATISTICS 73

made by law. This provision makes it clear that the use of govern-ment funds must be authorized by enabling laws. There are generallythree Appropriation measures from which the program of expendi-tures are drawn:

I) General Appropriations Act2) Public Works Act (for infrastructure projects)3) Automatically Appropriated ExpendituresThe third one authorizes payments without the need for an

explicit appropriation measure. Government expenditures coveredby automatic appropriations are government contributions to GSlSMedicare and Pag-ibig Funds payments of principal and intereston public debt and certain revenueswhich are earmarked for specificoffices.

.. The Constitution further provides that Special AppropriationsBills may be introduced in the National Assembly only if supportedby available funds as certified to by the National Treasurer or ifaccompanied by a corresponding revenue measure included in thesame bill (Article 8 Section 16.4). This provision seeks to avoidauthorizing expenditures which are unlikely to be implementedbecauseof the unavailability of funds.

The idea therefore is to consolidate asmuch aspossible govern-ment activities within the General Appropriations Bill which shouldbe submitted to the National Assembly in. July of each year. Thosegovernment activities that cannot be included in the General Appro-priations Bill can be considered under Special Appropriations duringthe ensuing years budget preparation process but only if thereare excessfunds or there is a corresponding funding proposal.Article 12 Section 2.1 of the Constitution further providesamong others that the Commission on AUdit shall keep generalaccounts of the government and shall promulgate accounting andauditing rules and regulations including those for the preventionof irregular unnecessary excessive or extravagant expendituresor.usesof public funds and property.

Thus it is clear from these constitutional mandates that thereare three offices in government tasked to prepare record, andmonitor government activities. The budget preparation and budgetexecution phases are. the responsibility Of the Office of Budget.and Management. The. budget preparation involves the setting up ofpriorities for the budget year the review of the various agenciesbudgetary requests, and the consolidation of the agencies budgets


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74 JOURNAL OF PHILIPPINE DEVELOPMENT

into a one-piece document for legislative discussion and review.After the Batasang Pambansa shall have passed the AppropriationsBill, which is then signed into law by the President as the GeneralAppropriations Act, the Office of Budget and Management startswith the budget execution phase. This phase is concerned with therelease of funds in the form of obligational authority and cash dis-bursement ceilings and with the continuing review of the budgetprogram and other related activites. The Office of Budget andManagement likewise monitors budget-related aspects of governmentexpenditures such as expenditures by program, project, activity;object of expenditures including personal services operating andmaintenance expense, subsidy, interest, etc.; expenditures by regionor locality; obligational authority and cash disbursement transac-tions arising from fund releases, etc. The most relevant documentwhich reports on the budgetary performance is the BudgetMessage of the President. The actual figures in this documentrepresent a two-year lag at the end of the budget year.

The other office in government which records and monitorscomprehensively government transactions is the Bureau of theTreasury. In our governmental set-up the Bureau acts as the depo-sitory of funds of all national government agencies and thereforeof all disbursements of the national government. Letter of Instruc-tion 61 dated 5 March 1.973 requires all the funds of governmentagencies to be deposited with the Treasury and all disbursementsto be covered either by Treasury Warrants or by a Treasury CheckingAccount for Agencies (TCAA). Thus, checking accounts maintainedby agencies, offices and bureaus with depository banks are limitedonly to payroll and petty cash expenses. As a result of this change,the Bureau of the Treasury can now prepare a consolidatedstatement of cash operations which shows both inflows andoutflows. BOT reports are on cashbasis (check cashedbasis). Inflowsof cash are then recorded on the basis of the nature of this inflow,i.e. tax receipts nontax receipts such as fees and charges interestincome share of profits from corporations etc. Outflows arepresently recorded by object classification by fund classificationand by area of disbursements. BOT does not report governmentexpenditure by function. The Bureau of the Treasury s report oncash operations of the government is prepared monthly. Themonthly Treasury Cash Operations Statement has a 3 to 4 week lagafter the end of the month.


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The Commission on Audit (COA) is the third officeto form thetriumvirate in the planning programming, managing and controllingof government activities and accounts. COA s relevant functionsas regards the development, management and monitoring of govern-ment data as quoted from Presidential Decree No. 1445 are asfollows:

1. To develop and implement a comprehensive audit programthat shall encompass an examination of financial transac-tions, accounts and reports including evaluation of com-pliance with applicable laws and regulations;

2. To institute control measures through the promulgation ofrules and regulations governing the receipts, disbursements and uses of funds and property consistent with the totaleconomic development effort of the government;

3. To promulgate auditing and accounting rules and regula-tions so as to facilitate the keeping and enhance the infor-mation value of the accounts of the government.

The output arising from the above functions is manifested inthe Annual Financial Report of the National Government in theSummary Financial Audit Report of Government-owned or Con-tolled Corporations and in the Annual Financial Report on LocalGovernments. These reports are published by COA and are generallymade available with a considerable time lag of about 15 monthsafter the end of the calendar year.Obligational Authority Vs.CashBudget

From the General Appropriations Act the Public Works Actsand those expenditures which are automatically appropriated aprogram of expenditures is prepared for the year. However not allof the available appropriations are scheduled for expenditure in agiven year. The unprogrammed expenditures are either carried overto the succeeding budget year or are considered lapsed. This annualprogram of expenditures is what is generally termed as the budgetfor the year. Depending on the timing of government receipts, i.e.tax, nontax and government borrowing, the funds released are alsotimed in such a manner asto take into account the inflow of receiptsinto the government coffers in order to avoid any undue effectson the credit budget and on price levels. Additionally fund releasesare timed to give spending agencies some leeway in entering into


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contracts and to meet the delivery of goods and services.This is toensure that government work is not delayed or hindered by proce-dural requirements.The fund. releasedfrom the OBM involves two stages; the firststage is the issuance of the Advice of Allotment (AA) which isalso known as the Obligational Authority and the second stageis the issuance of the Cash Disbursement Ceiling (CDC). The for-mer allows the agency to issue purchase orders enter into contractson capital projects or otherwise enter into other obligations. TheCDC authorizes the agency to write checks and specifies the amountto be disbursed by month and by quarter. Prior to 1982 CDC andAA were releasedcomprehensively. After 1982 only personal serviceswere issued on a comprehensive basis. The Cash DisbursementCeiling for the year s budget cannot exceed the Advice of Allotment.However, Cash Disbursement Ceilings are issued to agencies whichhave certified accounts payable which are programmed to be paidin the current budget year. This is the excess of CDC to AA.Accounts payable arise out of work done or activities accomplishedin previous years for which no payments have been made.Both the Office of Management and Budget and COA recordgovernment activities on an obligational basis.

From the Cash Disbursement Ceiling issued by the OBM thespending agencies Could then issue Treasury Warrants or Treasurychecks. In some instances CDCs are not utilized by the agencies.Unutilized CDCs may be extended to the next quarter. Extensionof the validity of CDCs to the succeeding quarter/quarters dependson the nature of expenditures. For example capital expenditureshave automatic extension period up to the second quarter of thefollowing year. In certain instances and depending on strong justi-fication presented by agenciesCDCs are revalidated.

Checks issued by the spending agenciesare therefore presentedto the depository banks of the Bureau of the Treasury or the Treas-ury itself for encashment, it is on the basis of these encashed andcleared checks that the Treasury records its cash disbursementsand this is what appears in the CashOperations Statement.Classification of Government Accounts

The classification of government accounts depends on the needwhich, it serves. Traditionally government accounts are classifiedto satisfy the needs of accountability and administrative control


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of funds. Government accounts are therefore classified by objectof expenditures and by spending agencies (ministries).

The increased activities of government the introduction of per-formance and program budgeting together with the realizationthat the government budget is an affective management tool requirea system of classification of government accounts more responsiveto these developments. In the Philippines the introduction of eco-nomic and functional classification of expenditures was necessitatedby the Planning/Programming/Budgeting linkage.

The economic classfication of expenditures traces the relation-ship of government transactions with the rest of the economy.In the economic classification system expenditures are broadlyclassified into current and capital expenditures. Within this broadframework expenditures are further broken down into requitedand unrequited payments to employees to other levels of govern-ments or abroad etc. Capital accounts include equity contributionsto government corporations and loans.

Functional classification, on the other hand focuses on thepurpose for which outlays or payments are made. Thus expendi-tures are classified into General Government Defense AgricultureIndustry Transport etc.

In the present government data system COA reports expendi-tures by object cum organizational classification and functionalclassification. COA s object classification closely follows the econo-mic classification lines. The OBM on the other hand reports govern-ment expenditures in the President s Budget Message terms i.e.on very broad economic current and capital outlays with a furtherbreakdown of capital outlays into infrastructure equity contribu-tions and noninfrastructure capital expenditures. The functionalclassification or sectoral classification of expenditures in the OBMbudget document has not been consistently and continuouslyreported. The Bureau of the Treasury s monthly report at presentcovers only the economic classification of expenditures with detailslessaggregatedthan those in the COA report.

On the revenue side the three reporting offices are better har-monized than on the expenditure side. With the adoption by COAof the Government Accounting Manual in January 1979, tax receiptsare now classified according to the nature of the base on which thetax is levied, or on the kind of action which creates the tax liabilitye.g. income tax property tax sales tax export tax etc. Nontax


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receipts and capital revenues are well-defined in the COA Govern-ment Chart of Accounts. The difference however lies in the treat-ment of the so-called extra-ordinary income and receipts fromborrowings. COA and the OBM treat repayments of advances andloans as well as proceeds of borrowings as income. The Bureauof the Treasury on the other hand nets out repayments for advancesand loans outlay in its net lending account. Proceeds from borrowingin the Treasury books are treated as a financing item; thereforethey are excluded from the income/receipt of Government.

III. RELATIONSHIP OF GOVi:RNMENT TRANSACTIONSWITH NATIONAL ACCOUNTSThe System of National Accounts (SNA) provides an integrated

framework for presenting the main flows relating to national pro-duction consumption accumulation and external transactions.The SNA covers the whole economy; government accounts are oftenlimited to the entitles reflected in the budget. Thus in the defini-tion of general government in the National Accounts social securitytransactions are included. However in the government budgetonly that portion of dividends accruing to the National Govern-ment from SSS and GSIS are recorded on the receipt side. Thegovernments contribution to GSIS on account of the employeesand equity contributions to these two institutions is recorded onthe expenditure side.

Similarities between Government Account and SNA exist andthese are:1. Basis of reporting: The SNA records transactions includingimportations of values at the time they occur even if payments

were made in the past or in the future. This accrual basis ofrecording is followed by COA and the OBM where expendituresare recorded at the time liabilities are incurred. The recordingof receipts by both offices however follows more or less thecash basis.

2. Classification: The economic and functional classification ofexpenditures in the Government Accounts follows the mainlines of the SNA.Differences between SNA and Government Account should alsobe noted :

1. National income accounts involve a wide varity of imputationswhile government accounts aim at recording hard facts;


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2. Government transactions are generally recorded on a gross basiswhereas the SNA nets out many transactions, e.g. SNA saleand purchase of land is shown on a net basis; and borrowingsand lendings abroad in the Government Accounts are shown asreceipts and expenditures on a grossbasis so asto fully show theflow of resources through government;

3. The SNA treats government corporations as part of the privatesector whereasGovernment Consolidated Accounts treat govern-ment corporations aspart of government;

4. Account III of the SNA considers only the current receipts andoutlay of General Government and incorporates the capitaltransactions of government in Account IV (the CombinedCapital Reconciliation Account). Government budget, howevershows the current and capital receipts and outlays altogether.The budgetary presentation is better adopted if in an instanceore wishes to see the impact of the Government sector on theeconomy.

IV. ISSUES AND PROBLEMSThe issues/problemsdiscussedhere arise from the present meth-odology used in the treatment of Government transactions in theNational Income Accounts.1. The government sector in the National Income account

cannot be seen as an integrated government sector becauseof the separation of government corporations and quasi-government corporations from the government sector. Inorder to see the totality of the impact of government tran-sactions it may be worthwhile to recast the five Accountswith the end in view of setting up a Consolidated Govern-ment sector.

2. Following issueNo. 1, the Capital transactionsof the Govern-ment sectormay be incorporated into a consolidatedaccountfor the public sector. The Consolidated Public sectoraccount, therefore may be presented in the manner shownon pages80-84.3. It is apropos that the COA report on the transactions ofgovernment is used for the National Income Accountsbecauseboth systems of recordingare on an accrualJobliga,tional basis.However, given the considerable time lag beforeCOA reports are made available the status of the National


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A. PublicSector (Consolidated)Account 1. Income and Outlay Account

Government final consumption Operating surplusof publicexpenditures (1b.1.5) enterprises(la.3.2)

Property income Property income1. Interest 1. Interest2. Dividends 2. Dividends3 Rent 3. RentCasualty insurance claims Net casualty insurance premiumsSubsidies Indirect taxesSocial security benefits Direct taxesSocial assistancegrants Compulsory fees fines and

penaltiesUnfunded employee welfare Social security contributionsbenefitsCurrent transfers me.c, to: Unfunded employee contribu-tions inputed1. Residents2. The rest of the world Current transfers n.e.c. fromSaving .7.1 1. Residents2. The rest of the world

Disbursements Receipts

Account 2. Capital Finance AccountIncrease in stocks Savings 3.7.1 .Gross fixed capital formation Consumption of fixed capital

1a.3.3+1b.3.3Purchases of land and intangible

assets n.e.c. net Capital transfers net from:1. Residents2. The rest of the worldNet borrowing .7.8


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Account2 (Continued)GrossAccumulation Finance of GrossAccumulationNet borrowing (5.79) Currency and transferable

depositGold Other depositsCurrency and transferable Bills and bondsshort-term

depositsOther deposits Bonds long-termBillsand bondsshort-term Corporate equity securities,includingcapital participationsBonds long-term Short-term loansn.e.c.Corporate equity securities Long-termloans n.e.c.includingcapital participationsShort-term loansn.e.c. Net equity of householdson lifeinsurancereservesand on

pensionfundsLong-term loansn.e.c Trade credit and advancesTrade credit and advances Other liabilitiesOther financial assets

Net acquisition onfinancial Net incurrenceof liabilitiesassetsplusnet borrowingB. Corporate andQuasi-CorporatePublic Enterprises

Account 3. Incomeand Outlay AccountWithdrawals from entrepreneurial Operating surplusof publicincomeof quasi-corporate enterprises(1a.3.2 )enterprisesProperty income Property income1. Interest 1. Inrerest2. Dividends 2. Dividends3. Rent, 3. RentNet_sualty insurancepremiums Net casualty insurancepremiumsCasualty insuranceclaims Casualty insuranceclaimsDirect taxes Unfunded employee welfare

contributions imputed


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82 JOURNAL OFPHILIPPINE DEVELOPMENT

Account3 (Continued)Finesand penalties Current transfers n.e.c.Unfunded employee welfarebenefitCurrent transfersn.e.c.Saving (5.7.1 .)


Account 4. Capital FinanceAccountIncreasein stocks Saving(3.7.1)Fixed capital formation Consumption of fixed capital

(la3.3)Purchasesof land and intangible Capital transfers netassetsn.e.c. net Net borrowing (5.7.8)

GrossAccumulation Finance of grossaccumulationNet borrowing (5.7.9) Currency and transferabledepo-sitsGold Other depositsCurrency and transferable Bills and bonds, short-term

depositsofi. Monetary institutionsii. Other Bonds long-term

Other deposits Corporate equity securitiesin-cluding capital participationBillsand bonds short-term Short-term loans n.e.cBonds long-term Long-term loans n.e.c.Corporate equity securities Net equity of householdson life

including capital participation insurancereservesand onpension funds

Short-term loans n.e.c. Trade credit and advancesLong-term loansn.e.c. Other liabilities


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AMATONG: RECONCILING GOVERNMENT TRANSACTION STATISTICS g3

Account 4 (Continued)

Trade credit and advancesOther financial assetsNet acquisition of financial Net incurrenceof liabilitiesassetsplusnet borrowing

C. General Government (Consolidated)Account 5. Income andOutlay Account

Final consumption expenditure Operating surplus(1a.3.2 )(lb.1 .S)Property income Withdrawals from entrepreneu-

rial income of quasi-corpo-1 Interest rate enterprises2. RentNet casualty insurance premiums Property income

1. interest2. Dividends3. Rent

Subsidies Casualty insurance claimsSocial security benefits Indirect taxes

1. Import dutiesSocial assistance grants 2. Other indirect taxesUnfunded employee welfare Direct taxes

benefits 1. Direct taxes on income2. Direct taxes n.e.cCurrent transfers n.e.c, to:

Compulsory fees fines and1. Residents penalties2. The rest of the world Social security contributions

Unfunded employee welfareSaving .7.1 contributions imputed

Current transfers n.e.c. from:1. Residents2. The rest of the world



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Account 6. Capital Finance AccountIncreasein stocks Saving (3_7.1)Gross fixed capital formation Consumption of fixed capital

(Ib.3.3)Purchasesof land and intangible Capital transfers net from:assets,n.e.c. net I. Residents2. The rest of the world

Net borrowing (5.7.8)Grossaccumulation Finance of grossaccumulation

Net borrowing (5.7.9) Currency issued by Treasury andtransferable depositsGoldCurrency and transferable deposits Other depositsof:i. Central governmentii. Other Bills and bonds short-term

Other deposits Bonds long-termBills and bonds short-term Short-term loans, n.e.c.Bonds long-term Long-term loans n.e.c.Corporate equity securities in- Trade credit and advances

cluding capital participationsLoans, n.e.c. Other liabilitiesProprietors net additions to

accumulation of quasi-corporate enterprisesOther financial assetsNet acquisitionof financial Net incurrenceof liabilitiesassetsplusnet borrowing


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Accounts remains uncertain.4. To the extent that the Bureau of the Treasury report isused

in the absenceof COA data and knowing that the Treasuryusescash accounting as the basis for recording we wonder ifadjustments are made to reconcile accrual expenditures withcash payments. It may be noted that cash payments includeactivities that have been accomplished in the past or are stillto be accomplished in the future. Likewise the use of thereport of the Project Monitoring Staff of NEDA for theinfrastructure program of government is on a checks issuedbasis. Any adjustment on an accrual basiswould also be inorder in this case.

5. The individual income tax paid after the taxable periodshould be deducted from the Individual Income Tax collect-ed for the current year. For example an Individual IncomeTax collected by the BIR in 1980 may include the incometax liability of the taxpayer for the tax year 1979. The paid1979 income tax should be deducted from the 1980 col-lection.

6. In Account II (7) and Account III (3b) direct taxes on per-sons are not disaggregated in either the COA or OBM re-port except for income tax. Thus, direct taxes in the NationalIncome Accounts are understated unless assumptionsaremade as to the share of direct taxes paid by individuals.There is a need to institutionalize the method of segregatingthe direct taxes of individuals and corporations.7. Wide disparities in figures are shown between the NEDANational Income Account and the COA and OBM reportsin regard to the following items:1. General government income from property and entre-

preneurship2 Direct taxes3. Current transfers from the rest of the world4. General government consumption expenditures5. Subsidies6. Other current transfers to personsThese divergencies may be explained by: (1) different class-ification systems used by the concerned offices and (2)imputations made in the National Income Accounts.


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8. There is a need to include government transactions which areextrabudgetary in nature in the National Income. These arenot recorded in any of the reports of COA OBM or theTreasury and are therefore automatically excluded in theNational Accounts. An example would be the grants-in-aidreceived from abroad and in kind which are directly receivedby the agencies. At present there is difficulty in the sourcingof data.

reconciliation of govt trans statistics

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