An evaluation of the effectiveness of the

Electronic New Government Accounting

System
in accounting for supplies and property of
the
Local Government Unit of Loon

REY MARK MONDRAGON

EARL RYANN BAG-AO
MA. NOR PIA BUDIONGAN
INTRODUCTION

Over the years, mechanical accounting machines have come and

gone; electrical accounting have come and gone; even the huge main-frame
computers have entered and exited from the scene we are now in the era of
desktops and laptops, with memory measured in gigabytes and terabytes.
But the government accounting system still remains as it was in the middle
of the last century. (Carague, 2001)
Under the old accounting system, accounting entries were made
manually, thereby necessitating the maintenance of numerous special
journals complete with several wide columns. With so many journals and
records to maintain, the manual accounting system proved complex and
tedious. Moreover, the generated financial reports also provided financial
information, which often proved ineffectual to those who do not have a
background in government accounting. (Punzalan, 2009)
Cognizant of the foregoing and of the need for an accounting system
which will generate financial reports that reflect a more realistic picture of
government operations, the Commission on Audit(COA), under the
accounting stipulated in Art. IX-D, Sec.2, par.2 of the 1987 Constitution,
promulgated COA Circular No. 2001-004 prescribing a New Government
Accounting System (NGAS) for national government agencies, and COA
Circular no. 2001-005 for local government units, to take effect January 1,
2002. This NGAS was not just to improve or overhaul the old accounting
system but to replace it. (Carague, 2001)
Few years later, the COA has launched its Electronic New
Government Accounting System (e-NGAS), one of the major projects of
Chairman Guillermo Carague that aims to provide the Philippine
bureaucracy with a modern and sound governance-enhancing accounting
system.
During the said launching at the new COA Professional
Development Center Auditorium on September 16, 2003, Director Carmela
S. Perez revealed that the over-all implementation of the e-NGAS is spread
out over a period of six years and will cover 2,100 National Government
Agencies (NGAs), 1,700 Local Government Units (LGUs) and 160
Government Owned/ Controlled Corporations (GOCCs).
One of these 1,700 LGUs is the LGU of Loon. The implementation of
the e-NGAS in Loon was preceded by an awareness seminar on the system in
December 2004 through the coordination of Loon Municipal Accountant,
ArnulfoRelampagos and Vicky C. Quejada, head of the Government
Accountancy and Financial Management Information System.
(www.boholchronicle.com)
Three years passed, the municipality of Loon was awarded as the First
Municipality to Implement the e-NGAS, Local Government Unit with the
Most Updated Financial Statement, with the Most Updated Budget Reports
and with the Shortest Roll-out Period.
Pursuant to Section 356c of the Local Government Code, supplies or
property include everything, except real property, which may be needed in
the transaction of public business or in the pursuit of any undertaking,
project or activity, whether in the nature of equipment, furniture, stationary,
materials for construction or personal property of any sort, including
nonpersonal or contractual services. Governing the accounting for supply
and property management are Sections 355-383 entitled “Property and
Supply Management in the Local Government Units”.
With the aforementioned, we, the researchers, were motivated to
undertake a research for the following reasons:
To understand the policies and procedures of the e-NGAS with regards to
supply and property .
1. To determine how the e-NGAS affected the LGU-Loon for winning the
“ Most updated financial statements” awarded by COA.
2. To determine the effectiveness of the system in enhancing internal
control and quality of financial reporting.
 3. To provide information to other LGUs who are considering the
implementation of e-NGAS in their respective municipalities.

Review of related literature:

Presidential Decree 1445, Section 109 defined government accounting
as one which encompasses the process of analyzing, recording, classifying,
summarizing and communicating all transactions involving the receipts and
disposition of government fund and property and interpreting the results
thereof.
The importance of accounting in government has widely been
recognized. A. Premchand stated that accounting has a crucial role in the
formulation and implementation of fiscal policies and indeed lies in the heart
of modern governments.
A. Punzalan also identified this importance when he stated that
accounting information plays a crucial role in enabling public managers to
come up with appropriate and strategic decisions.
However, the importance of accounting system was not greatly
appreciated by nonaccountants. As Warren Ruppel said to the question of
who would be interested in his book:
“ On second thought, anyone who is impacted by a state or local
government might have an interest in understanding what at times seems
like the overly complex and confusing world of governmental accounting.”
Furthermore, government accounting is not highly recognized by
accountants as what G. Carague said:
“To those of us who have not served in government, perhaps our only
exposure to government accounting was the three-unit subject that we took
in college and which we would rather forget about. Even among CPA’s in
government, many who do not have a complete understanding of the present
accounting system.”
So, the shift to the New Government Accounting System(NGAS) was
in response to the needs of stakeholders. In reference to what A. Punzalan
said that it is imperative for the accounting system to be flexible and
responsive to diverse needs of users and that it must also be simple to
facilitate better understanding and appreciation, even by those who are not
technically knowledgeable in accounting. Aside from this, G. Carague
stressed this point when he said:
“The old system was good at the time it was conceptualized in the late
forties or early fifties, and for a time it served its purpose. However, we are
now in the age of powerful computers, globalization, interconnectivity and
the demand for real-time information, and more analytical reports. It is time
to adapt a new system and join the rest of the world.”
It is also in congruence with the Art. IX-D, sec. 2, par. 2 of 1987
Constitution stating “the COA shall have an exclusive authority,…to
promulgate accounting and auditing rules and regulations…”
The implementation of the NGAS was followed by the implementation
of e-NGAS. G. Carague also stated that “ … prompt and accurate recording
of financial transaction in the books of accounts, up to date, complete and
relevant financial reports for management decision-making, and ensured
compliance with the regulatory requirements are among the benefits that
would be derived from the e-NGAS.”
Quite relatively unknown to non-budget and non-accounting people,
the e-NGAS, based on COA’s e-NGAS website, is an accounting software
developed by the Commission on Audit to replace the old government
accounting system used by local government units and national government
agencies. It ensures correctness, reliability and timeliness in recording
government financial transactions, and in generating financial reports in
accordance with the policies and procedures of the New Government
Accounting System. It runs on Microsoft SQL Server environment with
security features to insure adequate internal controls.
A.Trenerrystressed out that it is these internal controlsthat ultimately
protect the assets of the business. One of these assets is supplies and
property. Supplies, as defined in the sec. 357 in the Local Government Code
of the Philippines, includes everything, except real property, which may be
needed in the transaction of public business or in the pursuit of any
undertaking, project, or activity, whether in the nature of equipment,
furniture, stationary materials for construction or personal property of any
sort, including non-personal or contractual services such as the repair and
maintenance of equipment and furniture, as well as trucking, hauling,
janitorial, security, and related services.
Based on Microsoft Encarta Premium Suite 2005, property has been
defined as any object or right that can be owned. Ownership involves, first
and foremost, possession; in simple societies to possess something is to own
it. Beyond possession, ownership in modern societies implies the right to
use, prevent others from using, and dispose of property, and it implies the
protection of such rights by the government. Property is usually obtained by
purchase, inheritance, or gift.
Research Questions:
Main Question: How effective is the e-NGAS in the accounting of supplies
and property of LGU-Loon?

1. What comprises Supplies and Property Accounting of the Local

Government Unit of Loon?
a. Requisition
b. Issuance of Purchase Orders and contracts
c. Acceptance and inspection of supplies and property
d. Issuance of supplies and materials
e. Inventory of supplies and property
f. Disposal of Supplies and property
2. How effective is the e-NGAS in enhancing the following:
a. Internal control of supplies and property
b. Quality of financial reporting

Significance of the study:

This study aims to examine the effectiveness of the Electronic New
Government Accounting System ( e-NGAS) in government financial reporting
through an in-depth study of the Accounting policies and procedures for
supplies and property of the Local Government Unit of Loon which is one of
the 51 LGU’s that implemented the said system. This study encompasses the
examination of the benefits and problems encountered by the LGU-Loon in
the system’s application. The benefits would cover whether the system
enhanced timeliness, completeness, correctness and reliability of the
agency’s financial reporting. The results of the said examination would help
the researchers create a clear view on whether the e-NGAS served its
purpose in enhancing government financial reporting.
The officials of LGU Loon could be furnished detailed evaluation of the
accounting policies and procedures they implement on their accounting for
supplies and property as a basis for evaluating the effectiveness of their
system in enhancing internal control and quality of financial reporting.
These could also serve as an eye opener to the weakness of the system and
guides in finding rooms for improvement.
Local Government units of other towns and cities would be aware of
the benefits and problems of the application of the e-NGAS in their
accounting for supplies and property. This might serve as a unit of
measurement in their decision making as whether to implement the e-NGAS
or not. It can give pointers to those who are in the early stage of the system
application to consider the benefits and to avoid the problems identified.
The academic community will be aware of realistic situations and
actual data that could serve as examples in the subject of government
accounting. Likewise, researchers and writers could take hold of a material
that could serve as a starting ground for further study of governmental
accounting policies and procedures.

Scope and Limitations:

The coverage of the study deals primarily with the evaluation of the
effectiveness of the Electronic New Government Accounting (e-NGAS). It
would specifically cover the implementation of the e-NGAS in Local
Government Units. This is limited only to the thorough study of the Local
Government Unit of Loon’s accounting policies and procedures for supplies
and property. This in-depth study of their accounting policies and
procedures would provide a background on the effectiveness of the system.
In our assessment of the system’s effectiveness, we established the criteria
of whether the system enhances internal control and quality of financial
reporting. The quality of financial reporting is based on the timeliness,
completeness, correctness and reliability of financial reports.
 The areas of supplies and property management for LGUs that we
included were requisition process, issuance of purchase order and contracts,
acceptance and inspection, issuance of supplies and materials, inventory
management and disposal of supplies and property. However, we are not
going to deal with every areas of supplies and property management, like in
the procurement process of supplies and property. RA 9184 stated that “All
Procurement shall be done through Competitive Bidding, except as provided
for in Article XVI of this Act.”, this study will not be dealing with the bidding
process of procurement.
The information gathered are only limited from the LGU-Loon
employees who are directly involve with the system.

Research Methodology:
A descriptive-analysis method is the research design applicable based
on the nature of the study undertaken. Descriptive analysis is a method that
determines or describes the nature of an object by separating it into parts.
It’s a research method that would determine the composition, structure,
substructure that occurs as units within the larger units or structure. It
would also determine what makes the system work and regulates it.

The research is performed through a case study of the main

respondent of the study. A case study captures the information about human
behavior through distinctive in-depth collection and analysis of data from a
relatively few examples of phenomena.

The data required are gathered through an inspection of their

manuals and standard operating procedures. It would also include an
examination of their accounting records and documents and an observation
of the actual performance of the accounting procedures. In addition, there
would be conduct of a personal interview with the employees that are
directly participating in the performance of the accounting system.

BIBLIOGRAPHY:
 Punzalan, A. et al. 2009 “Government Accounting System”.
Local Government Code of the Philippines (R.A. 7160)
www.coa.gov.ph/COA_News.htm
www.boholchronicle.com/2007/dec/9/comm6.htm
Trenerry, A. 1999“ Principles of Internal Control”.
1987 Constitution of the Republic of the Philippines
Premchand, A. 1995 “Effective Government Accounting”.
Ruppel, W. 2009 “Governmental Accounting Made Easy”.
Microsoft Encarta Premium Suite 2005