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New Government Accounting System of the Philippines (NGAS): On Decentralization

Updated on April 14, 2014


Decentralization is not a new concept under the New Government Accounting System of the Philippines (NGAS). This has been in practice in the regional offices and operating units long before the adoption of the Integrated Reorganization Plan (IRP), PD No.1 by the National Government. However, under PD No. 1 the following measures were adopted:

  • The regional offices shall be established by all government departments;
  • There should be a provision for a unified pattern of a local government organization;
  • The general and specific authority given to regional offices should be clearly spelled out.

President Benigno (Noynoy) Aquino
President Benigno (Noynoy) Aquino | Source

Accounting Decentralization

Decentralized Accounting System means establishing a Home and Branch office accounting system, like the traditional methods followed in commercial establishments. Under this system, the books of accounts are kept by the Regional Office (RO) and the Operating Unit (OU) to meet its financial requirements with the Central Office and fiscal agencies that may be in need of it. Inter-office transfer of accounts is done to reflect transaction with the agencies. These transactions are reconciled and eliminated to reflect the true consolidated amount between the Central Office and the Regional Office.

Allotment transferred by the Central Office to its Regional Office

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It was a historic milestone when the first Local Government Code of 1991 recognized the need for decentralization of Local Government Units (LGUs)to become more self reliant.This was done by giving them full autonomy in the delivery of basic social services – such as health, education, and infrastructure among other services. This code also provided for the system of assigning revenue and expenditures to make the decentralization process doable.


Allotment and Notice of Cash Allocation can be sourced:

  • Directly from the Department of Budget and Management;
  • Transfer of allotment from the Central/Regional Office and the Operting Units.

Accounting Reports

Under NGAS, regional accountants are mandated to submit the following financial reports unless amended by the guidelines set the Commission on Audit:

  • Monthly Reports (Trial Balance, Cash Disbursement, Checks Issued/Cancelled)
  • Quarterly Reports (Trial Balance, Subsidiary Ledger, Collection, Disbursement, Other Officer Balances)
  • Semi-annual Reports (Accounts Payable, Accounts Receivable, Subsidiary Ledger Balances)
  • Annual Reports (Pre-Closing Trial Balance, Post Closing Trial Balance)

Release of Allotment and Budgets

The Department of Budget and Management (DBM) releases allotments and budgets through the Central Offices (CO) of each department. However, upon request - said allotments can be released through the Regional Office (RO) of the National Government Agencies (NGA).

The receipt of fund allotments and allocation may be in two forms:

  1. Allotment and Notice of Cash Allocation from the Department of Budget and Management (DBM).
  2. Allotment and Notice of Cash Allocation from the Central Office to the Regional Office and to the Operating Unit (OU).

Pertinent Facts About eNGAS

Status of Implementation
eNGAS Definition
400 agencies completed
Piloted in COA Apr-Sept 2003
New Government Acctg. software
All govt. agencies to implement
Roll-out in 3 NGAS & 2 LGUs Oct 2003
Correct, accurate, timely reports
Support from stakeholders
Number of agencies adopted in 2005
Generates reports accdg, to NGAs

Financial Statement Consolidation

At the end of the period, the financial statements of the CO, RO and OU should be consolidated, taking into account – Subsidies To/From Accounts, Inter-Office Receivables and Payables. Inter-department accounts should be reconciled eliminated to show the final figures after adjustments.

Poll Question on PDAF

Is there a need to completely abolish the PDAF as source of funds for LGUs

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Sources of Funding for Local Government Units

The Philippine National Government has given the LGUs the authority to deliver basic services by giving them a share of the national revenue and the authority to generate their own sources of funds. The funding may come from these sources:

  • Local taxes and fees - LGUs are given the authority to levy their own taxes. However, the funds generated from these sources are often inadequate to make them survive. In 2010, these taxes and fees only accounted for 26 percent of total revenues of all LGUs.
  • Internal Revenue Allotment (IRA) - the IRA scheme of 1991 allocates 40 percent of the country’s internal revenue income to LGUs in the following scheme:
  • Provinces and cities – 23 percent
  1. Municipalities – 34 percent
  2. Barangays – 20 percent

The share in the revenue of each component shall be determined by the following:

  1. Population – 50 percent
  2. Land area - 25 percent
  3. Equal sharing – 25 percent
  • Grants and Loans – the LGUs under the Local Government Code are authorized to secure grants, loans, and other form of indebtedness from local banks and financial institutions. Borrowed funds are used for operations, maintenance, construction of public facilities and infrastructure projects.

One of the sources of financing is the Priority Development Assistance Fund (PDAF) under the General Appropriation Act to fund priority development projects in the LGUs.

Department of the Interior and Local Government & National Police Commission Building (Philippines)


Financial Management in Local Government Units (LGUs)

Two aspects that were recently decentralized to local government units are planning and goal setting. These two areas have always been subjected to the city and municipal government control and the LGUs have a little say about it. With the recent change in governance, the LGUs have now been given the free hand to pursue their own development plans.

Hence, LGUs no longer have to submit their proposed development programs to the central government or to the Department of the Interior and Local Government (DILG) for review prior to implementation. Recent changes mandate the creation of the Planning and Development Coordination position in every LGUs whose primary task is to prepare studies, researches, and formulates fiscal plans and development programs for submission to the local development council.

In addition, the LGUs were given the power on financial management to increase their resources through tax impositions and adoption of local fees. Their share of the internal revenue allotment has also increased from 20 percent to 40 percent beginning 1992. All these measures were earmarked to give fiscal autonomy to LGUs in effectively managing their own operations.

The reforms in financial administration cover the following areas:

Budget planning and programming

Financial controls and systems

Accrual basis of accounting

Revenue mobilization

Zero-based management

Compensation Management


Fund management

Other areas


New Government Accounting System of the Philippines, 2013 by Angelito Puzalan, Milagros Cardona

ADB-World Bank Report on Strengthening Local Government Financing & Resource Management in the Short Term, 2003



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