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ONLINE EDITION - COMPLIMENTARY COPY

 LOCAL TREASURY
OPERATIONS MANUAL
2ND EDITION

DEPARTMENT OF FINANCE
BUREAU OF LOCAL GOVERNMENT FINANCE
Manila, Philippines

ONLINE EDITION - COMPLIMENTARY

Local Treasury Operations Manual (LTOM), 2nd Edition

Second Printing, 2020.

Printed in the Philippines

Published by the Bureau of Local Government Finance

ISBN: 978-971-94098-8-5

Copyright © Bureau of Local Government

Finance, 2019 Telefax: +632 522-8771 / 527-
2803
Web: www.blgf.gov.ph
E-mail: central@blgf.gov.ph

All rights reserved.

No part of this book may be reproduced in any form or by any means without the
express permission of the copyright owner and the publisher.

Cover design and layout by: Jane Dianne S. Gaylican

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 LTOM, 2nD EDITIOn

BOOK III
Fund Management Practices,
Expenditures and
Disbursements

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 i

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 TABLE OF CONTENTS

TABLE OF CONTENTS
Section 92. Definition of Terms vi

CHAPTER 1 1
LOCAL AND OTHER SPECIAL FUNDS
Section 93. Concept of Funds 1
Section 94. Fundamental Principles Governing the Financial 1
Affairs, Transactions, and Operations of LGUs
Section 95. Classification of Funds in the Local Government 2

CHAPTER 2 4
LOCAL BUDGETING
Section 96. The Local Budget Process 4
Section 97. Use of Appropriated Funds and Savings 13

CHAPTER 3 14
EXPENDITURES AND DISBURSEMENTS
Section 98. Expenditures 14
Section 99. Prohibition against Expenditures 14
Section 100. Types of Unlawful Expenditures 15
Section 101. Disbursements 30
Section 102. Policies Related to the Budget, Accounting, and 30
Disbursement Functions in LGUs
Section 103. Disbursements by Check 31
Section 104. Cancellation of Lost Checks Issued 35
Section 105. Cancellation of Spoiled and Stale Checks 36
Section 106. Cash Disbursement 36
Section 107. Cash Advances 38
Section 108. Granting and Utilization of Cash Advances 39
Section 109. Liquidation of Cash Advances 43
Section 110. Guidelines and Procedures in the Write-off of 49
Unliquidated Cash Advances
Section 111. Special Education Fund (SEF) Disbursements 53
Section 112. Trust Fund Disbursements 55
Section 113. Utilization of Confidential Funds 56
Section 114. Guidelines on the Grant and Liquidation of Cash 61
Advance for Confidential Funds

CHAPTER 4 65
FUND MANAGEMENT PRACTICES
Section 115. Cash Programming Tools 65
Section 116. Medium Term Forecast 65
Section 117. Cash Flow Analysis (CFA) 66

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 LTOM, 2nD EDITIOn

Section 118. Information Provided by the Cash Flow Forecast 67

and Cash Flow Analysis
Section 119. Daily Cash Flow 68
Section 120. Number of Days’ Usage in Cash 68
Section 121. The Administrative Process for Capital Expenditures 69
Section 122. Payback Period 69

CHAPTER 5 70
EXAMINATION, AUDIT, AND SETTLEMENT OF ACCOUNTS
Section 123. General Principles, Rules, and Regulations 71
Section 124. Guidelines in the Issuance of Audit Observation 75
Memorandum(AOM)/Notice of Suspension
(NS)/Notice of Disallowance (ND)/Notice of
Charge (NC)/Notice
of Settlement of Suspension/ Disallowance/Charge
(NSSDC) and Statement of Audit Suspensions,
Disallowances
and Charges (SASDC)
Section 125. Service of Copies of ND/NS/NC 77
Section 126. Notice of Settlement of Suspension/ Disallowance/ 78
Charge (NSSDC)
Section 127. Statement of Audit Suspensions, Disallowances, and 78
Charges (SASDC)
Section 128. Issuance of Notices by Special Audit Team 79
Section 129. Decisions and Appeals 79
Section 130. Appeal to the Supreme Court 82
Section 131. Finality and Enforcement of Decisions 82
Section 132. Unsettled ND/NC/NS 84
Section 133. Determination of Balance of Accountability 84
Section 134. Cash Examination 84
Section 135. Objectives of Cash Examination 85
Section 136. Common Procedures and Techniques 85
Section 137. Specific Procedures and Techniques 87
Section 138. Accountable Officer’s Presence During the Count 89
Section 139. Sealing of the Vault, Safe, and Other Cash Receptacles 90
Section 140. Cash Shortage or Overage 90

CHAPTER 6 95
ACCOUNTABILITY, RESPONSIBILITY, AND
LIABILITY OF LOCAL TREASURERS AND
OTHER ACCOUNTABLE OFFICERS
Section 141. Determination of Persons Responsible/Liable 95
Section 142. Other Liabilities of Local Treasurer Under the Local 96
Government Code (LGC)
Section 143. Policies on Cash Examination 97
Section 144. Indemnity from Fidelity Fund 99
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 TABLE OF CONTENTS

Section 145. Filing of Request for Relief from Accountability 100

Due to Fortuitous Events or Natural Calamities,
or Due to Acts of Man; Theft, Robbery, Arson,
etc.

FORMS AND ANNEXES 111

112
Annex 21 Disbursement Voucher (DV) 115
Annex 22 Check Register 117
Annex 23 Report of Checks Issued 119
Annex 24 Report of 121
Disbursements Annex 25 123
Liquidation Report 125
Annex 26 Petty Cash Voucher (PCV) 126
Annex 27 Daily Cash Position Report 127
Annex 28 Confidential Fund-Physical and Financial Plan
Annex 29 Certification of the Accountable 128
Officer of the Confidential Fund 129
Annex 30 Accomplishment Report on the Use of CF
Annex 31 Transmittal Letter for the Audit Team Leader
Enumerating the Supporting Documents for the 131
Liquidation
132
of the Cash Advance
Annex 32 Confidential Fund-Liquidation Report
Annex 33 Transmittal Letter for the COA Chairperson
Enumerating the Supporting Documents for the
Liquidation
of the Cash Advance

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 LTOM, 2nD EDITIOn

INTRODUCTION
LTOM Book III discusses the fundamentals of fund management
practices, expenditures and disbursement process as components of
good local fiscal management. It also features the procedures and
remedies on cash shortages and the COA guidelines on the
examination of books of accounts of the LGUs.
It likewise highlights the role and responsibilities of local treasurers, as
well as their administrative, civil and criminal liabilities, in the
administration and custody of local government funds.
Book III consists of eight (8) Chapters, including Forms and Annexes, viz:
Chapter 1 Local and Other Special Funds
Chapter 2 Local Budgeting
Chapter 3 Expenditures and Disbursements
Chapter 4 Fund Management Practices
Chapter 5 Examination, Audit and Settlement of Accounts
Chapter 6 Accountability, Responsibility and Liability of Local Treasurers
and Other Accountable Officers

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 DEFINITION OF TERMS

SECTION 92. DEFINITION OF TERMS

The following terms shall be understood in the sense as hereunder defined,
unless
the context otherwise indicates:
A. Accountable Officer – officer of any government agency whose duties
permit or require the possession or custody of government funds or
property (e.g. the Local Treasurer, Collecting Officer, Disbursing
Officer, Cashier, Paymaster, Property Officer and the like) is mandated
by law to render account to the COA.1
B. Cash – means money, which is the standard medium of exchange in
business transactions. Cash includes “money and other negotiable
instrument that is payable in money and acceptable by the bank for
deposit and immediate credit.” It includes checks, bank drafts and
money orders. [3.1, Annex A, Commission on Audit (COA) Resolution
No. 2006-006, Philippine Government Accounting Standards (PGAS),
31 January 2006]
C. Check – is a negotiable instrument drawn against deposited funds, to
pay a
specific entity a specific amount of funds on demand.
D. Current Assets – cash and other assets that are not earmarked for
specific purposes other than the payment of a current liability or a
readily marketable investment. (p. 391, Glossary of Terms for State
Auditors)

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1 Governance for Sustainable Human Development, United Nations Development Programme (UNDP), 1997.

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CHAPTER LOCAL AND OTHER SPECIAL FUNDS
1
SECTION 93. CONCEPT OF FUNDS
A. Fund refers to a sum of money or other assets convertible to cash, set
aside for the purpose of carrying out specific activities or attaining
certain objectives in accordance with special regulations, restrictions,
or limitations, and constitutes an independent fiscal and accounting
entity. (Sec. 306 h, LGC)
B. Government Funds include public moneys of every sort and other
resources pertaining to any agency of the government. [Sec. 135,
Volume I, Government Accounting and Auditing Manual (GAAM)]
C. Local treasurers and other treasury personnel play an increasing role
in safeguarding local finance and improving financial performance of
LGUs. In particular, it is incumbent upon them to continuously
embrace and apply effective fund management practices in the daily
operations of LGUs to ensure good governance.

SECTION 94. FUNDAMENTAL PRINCIPLES

GOVERNING THE FINANCIAL
AFFAIRS, TRANSACTIONS, AND
OPERATIONS OF LGUS
A. No money shall be paid out of the local treasury except in pursuance
of an appropriations ordinance or law.
B. Local government funds and monies shall be spent solely for public
purposes.
C. Local revenue is generated only from sources expressly authorized by
law or ordinance, and collection thereof shall at all times be
acknowledged properly.
D. All monies officially received by a local government officer in any
capacity or on any occasion shall be accounted for as local funds,
unless otherwise provided by law.
E. Trust funds in the local treasury shall not be paid out except in fulfillment
of the
purpose for which the trust was created or the funds received.
F. Every officer of the LGU whose duties permit or require the possession
or custody of local funds shall be properly bonded, and such officer
shall be accountable and responsible for said funds and for the
safekeeping thereof in conformity with the provisions of law.
G. Local governments shall formulate sound financial plans, and local
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budgets shall
be based on functions, activities, and projects, in terms of expected
results.

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 LOCAL AND OTHER SPECIAL FUNDS

H. Local budget plans and goals shall, as far as practicable, be

harmonized with national development plans, goals, and strategies in
order to optimize the utilization of resources and to avoid duplication
in the use of fiscal and physical resources.
I. Local budgets shall operationalize approved local development plans.
J. LGUs shall ensure that their respective budgets incorporate the
requirements of their component units and provide for equitable
allocation of resources among these component units.
K. National planning shall be based on local planning to ensure that the
needs and aspirations of the people, as articulated by the LGUs in
their respective local development plans, are considered in the
formulation of budgets of national line agencies or offices.
L. Fiscal responsibility shall be shared by all those exercising authority
over the
financial affairs, transactions, and operations of the LGUs.
M. The LGU shall endeavor to have a balanced budget in each fiscal year of
operation.
[Sec. 305 (a to m), LGC]
N. No contract involving the expenditure of public funds shall be entered
into unless there is an appropriation therefor, the unexpended
balance of which, free of other obligations, is sufficient to cover the
proposed expenditure. [Sec. 85 (1), Presidential Decree (PD) No.
1445]

SECTION 95. CLASSIFICATION OF FUNDS

IN THE LOCAL GOVERNMENT
A. Local Funds
Every LGU shall maintain a General Fund which shall be used to
account for such monies and resources as may be received by and
disbursed from the local treasury. The General Fund shall consist of
monies and resources of the local government which are available
for the payment of expenditures, obligations or purposes not
specifically declared by law as accruing and chargeable to, or payable
from, any other fund. (Sec. 308, LGC)
Special Accounts shall be maintained in the General Fund for the following:
1. Public utilities and other economic enterprises;
2. Loans, interests, bond issues, and other contributions for specific
purposes;
and

2 3. Development projects funded from the share of the LGU

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concerned in the internal revenue allotment and such other
special accounts which may be created by law or ordinance. (Sec.
313, LGC)

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 LTOM, 2nD EDITIOn

B. Special Funds
There shall be maintained in every provincial, city or municipal
treasury the following special funds:
1. Special Education Fund (SEF) – consist of the respective shares of
provinces, cities, municipalities and barangays in the proceeds of
the additional tax on real property to be appropriated for
purposes prescribed in Sec. 272 of the LGC.
2. Trust Funds - consist of private and public monies which have
officially come into the possession of the local government or of a
local government official as trustee, agent or administrator, or
which have been received as guaranty for the fulfillment of some
obligation. A Trust Fund shall only be used for the specific
purpose for which it was created or for which it came into the
possession of the LGU. [Sec. 309 (b), LGC]

C. Separation of Books and Depository Accounts

Local accountants and treasurers shall maintain separate books and
depository accounts, respectively, for each fund in their custody or
administration under such rules and regulations as the COA may
prescribe. (Sec. 310, LGC)

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 CHAPTER LOCAL BUDGETING
2
SECTION 96. THE LOCAL BUDGET PROCESS
The budget process in LGUs is divided into five (5) phases:

Preparation

Authorization
Accountability

Execution Review

A. Budget Preparation Phase. It is the first phase of the local budget

process. It involves cost estimation per programs, projects and
activities (PPAs), preparation of budget proposals, executive review of
budget proposals, and preparation of Local Expenditure Program and
the Budget Message. This phase starts with the issuance of the Budget
Call and ends with the submission of the Executive Budget to the
Sanggunian.
The Local Chief Executive (LCE) shall prepare the executive budget for
the ensuing fiscal year upon receipt of the statements of income and
expenditures from the treasurer, the budget proposals from the heads
of various departments and offices and the estimates of revenue and
budgetary ceilings from the Local Finance Committee (LFC).
The LFC composed of the Local Planning and Development
Coordinator, Local Budget Officer and the Local Treasurer shall have
among others the following functions as defined in Sec. 316 of the
LGC:
1. Determine the income reasonably projected as collectible for the
ensuing
fiscal year;
2. Recommend the appropriate tax and other revenue measures or
borrowings considered realistic and feasible to support the
4 budget;
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3. Recommend to the LCE the level of annual expenditures and
ceilings of

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 LTOM, 2nD EDITIOn

spending for economic, social and general public services based on

the approved local development plan;
4. Recommend to the LCE the proper allocation of expenditures for
each development project/activity and between current operating
expenditures and capital outlays; and
5. Recommend to the LCE the amount to be allocated for capital outlay.
a. Role of the Local Treasurer in Budget Preparation
i. Certify jointly with the Local Accountant all statement of
income and expenditures of the preceding fiscal year,
the actual income and expenditures of the first two (2)
quarters of the current year and the estimated income
and expenditures for the last two (2) quarters of the
current year.
ii. Prepare budget proposal of the Local Treasurer’s Office
and submit this to the Local Budget Officer for review
and consolidation.
iii. Budget proposals of department or offices shall be
divided into two (2) primary categories, namely: the
current operating expenditures and the capital outlays.
Such budget proposals shall contain the following
information:
1. Objectives, functions, and projects showing the
general character and relative importance of the
work to be accomplished or the services to be
rendered, and the cost thereof;
2. Organizational charts and staffing patterns
indicating the list of plantilla positions with their
corresponding salaries, and proposals for
reclassification of positions and salary changes as
well as the creation of new positions with their
proposed salary grade, duly supported by proper
justification;
3. Brief description of the functions, projects and
activities for the ensuing fiscal year, expected
results for each function, project and activity, and
the nature of work to be performed, including the
objects of expenditures for each function, project
and activity;
4. Relation of the work and financial proposals to
approved
local development plans;
5. Estimated current operating expenditures and
capital outlays with comparative data for the last
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 two (2) preceding, current, and ensuing fiscal
years; and
6. Accomplishment reports for the last two (2) preceding
and
current fiscal years.

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 LOCAL BUDGETING

b. The LFC of which the Local Treasurer is a member shall:

i. Conduct technical budget hearings to validate the
revenue sources, PPAs, cost estimates and expected
outputs for the budget year.
ii. Evaluate all budget proposals using the output and cost
criteria.

The Budget Preparation Flow Chart

INDICATIVE RESPONSIBLE
ACTIVI SCHEDULE OFFICIAL

ISSUE THE
LC JUNE 16
BUDGET

CONDUCT LCE/LFC/
JUNE 16
BUDGET DEPARTMENT

PREPARE AND
SUBMIT BUDGET DEPARTMENT JULY 15
PROPOSALS HEADS

CONDUCT
BUDGET LCE/LFC AUGUST 15
HEARING

PREPARE THE
EXECUTIVE OCTOBER 10
BUDGET

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 LCE/LFC

PREPARE THE
LCE/LFC OCTOBER 10
BUDGET

SUBMIT
EXECUTIVE LCE/LFC OCTOBER 10
BUDGET TO THE
SANGGUNIAN

B. Budget Authorization Phase. It is the second phase in the local budget

process. This phase starts from the time the Sanggunian receives the
Local Expenditure Program (LEP) submitted by the LCE. The
Sanggunian shall deliberate on the

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 LTOM, 2nD EDITIOn

budget, and authorize the annual budget through an Appropriation

Ordinance (AO) in accordance with the fundamental principle that no
money shall be paid out of the Local Treasury except in pursuance of
an AO or law. The AO enacted by the Sanggunian shall be presented
to the LCE for approval.
1. Role of the Local Treasurer in Budget Authorization
Upon request of the Sanggunian through the LCE, the local
treasurer as head of the Local Treasurer’s Office may appear
before the body or the Committee on Appropriations/Finance to
explain or justify his/her proposal.
2. The LFC of which the local treasurer is a member, shall assist the
Sanggunian in the analysis and review of the annual and
supplemental budgets to determine compliance with statutory
and administrative requirements.

C. Budget Review Phase. It is the third phase in the local budget process.
Its primary purpose is to determine whether the AO has complied with
the budgetary requirements and general limitations set forth in the
LGC and provisions of other applicable laws. It starts from the time the
reviewing authority receives the AO for review and ends with the
issuance of the review action.
(Budget Operations Manual for LGUs 2016 Edition)
The Department of Budget and Management (DBM) shall review
ordinances authorizing the annual or supplemental appropriations of
provinces, highly urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in accordance with
Sec. 327 of the LGC. (Sec. 326, LGC)
The Sangguniang Panlalawigan shall review the ordinance authorizing
annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period
prescribed for the review of other ordinances. (Sec. 327, LGC)
D. Budget Execution Phase. The execution of the budget in accordance
with existing rules and regulations is the fourth phase of the budget
process in local governments. After the usual recording of
appropriations in the proper registries, the execution of the budget
involves the release of allotments, the certification of available
appropriations and cash, the recording of actual obligations and
disbursements of funds for approved PPAs and the delivery of goods
and services to target clients.
1. Role of the Local Treasurer in Budget Execution
a. The local treasurer takes charge of collection of revenues
and disbursement of local government funds and such other
funds of the LGU. He ensures that cash is available for
payment of obligations and disbursements do not exceed
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 appropriations.
b. He/She shall prepare the Detailed Financial and Physical
Performance Targets by Programs/Projects/Activities and
Performance Indicator of the Treasurer’s Office. This
document presents the quarterly breakdown

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 LOCAL BUDGETING

of the financial allocation that is needed to accomplish a

specific level of targets. It enables the office to match
available resources with the level of effort to deliver their
goods/services or outputs, and determine the magnitude
and timing of additional releases.
c. The LFC of which the Treasurer is a member shall prepare
the Summary of Financial and Physical Performance Targets
of the different departments/offices for the entire calendar
year to serve as basis in comparing actual level of
accomplishment for the preceding year and knowing the
available resources for the budget year.
d. The local treasurer shall prepare the cash program to
determine a realistic cash inflow on a monthly basis; Use as
basis the actual inflow of revenues for the past three (3)
years, and; Consider the months where revenue is high, like
when payments of taxes become due, or months where
revenue collection is low.
The Cash Flow Model of the BLGF may be used as reference.
Identify amounts considered as under-collection of taxes and
revenues. This is a signal that the original cash receipts
forecast is overstated. It becomes necessary to decrease the
cash disbursements program for the remaining months to
prevent the incurrence of a cash overdraft.
e. The LFC shall implement corrective measures by comparing
the actual performance in both the financial and physical
accomplishments vis-à- vis the targets for the quarter.
f. Proposed corrective action shall be submitted by
department heads to the Local Planning Development
Coordinator for review and evaluation after which it shall be
discussed with the LFC members for final deliberation. The
proposed corrective action is then recommended by the LFC
to the Local Chief Executive for approval. Upon approval,
the department head shall implement corrective action to
get back on track with planned targets for the fiscal year.
g. The LFC through the local treasurer, shall use the results of
the cash flow analysis as basis for adjusting the cash
program and the financial and physical targets.
h. The LFC shall compare the actual performance in both the
financial and physical accomplishments vis-à-vis the targets
for the quarter.
i. As department head, he/she shall adjust/revise their Project
Procurement Management Plan (PPMP) and the Annual
Procurement Plan (APP).

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j. The local treasurer adjusts the cash program for shortages
and overages and on the basis of the adjusted cash
program, the LFC adjusts the financial and physical targets.

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 LTOM, 2nD EDITIOn

k. The LFC shall determine amounts considered as over-

collection of taxes and effect upward adjustments in the
cash program to match the increase in the cash receipts
forecast. If this is not done, a significant amount of cash will
be idle at the end of the year.
2. The LFC of which the Local Treasurer is a member shall:
a. Prepare Summary of Financial/Physical Performance Targets.
b. Adjust Financial/Physical Performance Targets and
determine amounts considered as over-collection of taxes,
and effect upward adjustments in the cash program, to
match the increase in the cash receipts forecast.
3. Budgetary Accounts in Budget Execution
The budgetary accounts to be maintained in the budget execution
process include the following:
a. Appropriation – an authorization made by ordinance
directing payment of goods and services from local
government funds under specified conditions or purposes.
(Sec. 306 (b), LGC) Generally, there are appropriations for a
general purpose requiring expenditures to be made for a
number of incidental purposes without specifying an exact
amount for any one of the incidental purposes. There are
those which go into considerable detail and limit the
expenditure to certain amounts for certain specific
purposes. (Sec. 140, Book III, Volume 1, GAAM)
i. Annual Appropriation - an appropriation consisting of
specified amounts for salaries, wages, and sundry
expenses, etc., authorized by the sanggunian as
necessary for the regular operations of the LGU during
any given year. (Sec. 141, Book III, Volume 1, GAAM)
This is also the "Annual Budget" of an LGU which refers
to a financial plan embodying the estimates of income
and expenditures for one (1) fiscal year. [Sec. 306 (a),
LGC]
Failure to Enact the Annual Appropriations:
1. In case the sanggunian concerned fails to pass the
ordinance authorizing the annual appropriations at
the beginning of the ensuing fiscal year, it shall
continue to hold sessions, without additional
remuneration for its members, until such
ordinance is approved, and no other business may
be taken up during such sessions. If the
sanggunian still fails to enact such ordinance after
ninety (90) days from the beginning of the fiscal
year, the ordinance authorizing the appropriations
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 of the preceding year shall be deemed re-enacted
and remain in force and effect until the ordinance
authorizing the proposed appropriations is passed
by the sanggunian concerned. However, only the

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 LOCAL BUDGETING

annual appropriations for salaries and wages of

existing positions, statutory and contractual
obligations, and essential operating expenses
authorized in the annual and supplemental
budgets for the preceding year shall be deemed
re-enacted, and disbursement of funds shall be in
accordance therewith.
2. In the implementation of such re-enacted
ordinance, the local treasurer concerned shall
exclude from the estimates of income for the
preceding fiscal year those realized from
nonrecurring sources, like national aids, proceeds
from loans, sale of assets, prior year adjustments
and other analogous sources of income. No
ordinance authorizing supplemental appropriations
shall be passed in place of annual appropriations.
3. In case the revised income estimate be less than
the aggregate re-enacted appropriations, the local
treasurer concerned shall accordingly advise the
sanggunian concerned which shall, within ten (10)
days from the receipt of such advise, make the
necessary adjustments or reductions. The revised
appropriations authorized by the sanggunian
concerned shall then be the basis for
disbursements.
(Sec. 323, LGC)
ii. Continuing Appropriation – an appropriation available to
support obligations for a specified purpose or project,
such as those for the construction of physical
structures or for the acquisition of real property or
equipment, even when these obligations are incurred
beyond the budget year. [Sec. 306 (e), LGC] The
Continuing Appropriation includes the unexpended
balance of 20% development fund; unexpended
balance of capital outlay from the Local Disaster Risk
Reduction Management Fund (LDRRMF); and
unexpended balance of capital outlay of the different
departments of the local government, duly supported
by available cash.
Reversion of Unexpended Balances of
Appropriations, Continuing Appropriations:
1. Unexpended balances of appropriations
authorized in the annual appropriations ordinance
shall revert to the unappropriated surplus of the
general fund at the end of the fiscal year and shall
not thereafter be available for the expenditure
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 except by subsequent enactment.
2. However, appropriations for capital outlays shall
continue and remain valid until fully spent,
reverted or the project is completed.

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 LTOM, 2nD EDITIOn

3. Reversions of continuing appropriations shall not

be allowed unless obligations thereof have been
fully paid or otherwise settled.
4. The balances of continuing appropriations shall be
reviewed as part of the annual budget preparation
and the sanggunian concerned may approve, upon
recommendation of the LCE, the reversion of funds
no longer needed in connection with the activities
funded by said continuing appropriations subject
to the foregoing provisions.
(Sec. 322, LGC)
iii. Supplemental Appropriation – prepared to adjust the
equilibrium of the first approved budget which has been
disturbed by current economic, political or social
conditions, or to provide an additional amount to the
original appropriation which proved to be inadequate or
insufficient for the particular purpose intended. (Sec.
144, Book III, Volume I, GAAM) The local treasurer and
the local accountant shall submit a statement of
funding sources.
No ordinance providing for a supplemental budget
shall be enacted except for the following:
1. When supported by funds actually available as
certified by
the local treasurer:
Funds actually available refer to the amount of
money collected, as certified by the local treasurer
at any given point, during the fiscal year which is
over and above the estimated income collection
for that point in the year. Thus, funds are actually
available when realized income exceeds estimated
income as of the said fiscal year. Funds are
likewise deemed actually available when there are
savings. For this purpose, savings refer to portions
or balances as of any given point in the fiscal year
of any programmed or allotted appropriation which
remain free of any obligation or encumbrance and
which are still available after the satisfactory
completion or the unavoidable discontinuance or
abandonment of the work, activity or purpose for
which the appropriation was originally authorized,
or which result from unobligated compensation
and related costs pertaining to vacant positions
and leaves of absence without pay.
2. If covered by new revenue source(s):
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 New revenue source refers to money measures
not otherwise considered during the preparation
and enactment of the annual budget. Such new
revenue measures include ordinance passed by
the Sanggunian during the fiscal year but after the
annual budget had already been enacted into

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 LOCAL BUDGETING

law which imposes new local taxes, charges,

fees, fines or penalties, or which raises existing
local taxes, charges, fees, fines or penalties. Such
revenue sources also include new or higher
remittances, contributions, subsidies or grants in
aid from the National Government or from
government corporations and private entities
which have not been included in the estimate of
income which served as basis for the annual
budget.
An ordinance providing for a supplemental budget
may also be enacted in times of public calamity by
way of budgetary realignment to set aside
appropriations for the purchase of supplies and
materials or the payment of services, which are
exceptionally urgent or absolutely indispensable to
prevent imminent danger to, or loss of, life and
property, in the jurisdiction of the LGU or in
other areas declared in a state of calamity by the
President. Such ordinance shall clearly indicate the
sources of funds available for appropriations, as
certified under oath jointly by the local treasurer
and local accountant and attested to by the LCE,
and the various items of appropriations affected
and the reasons for the changes.
(Administrative Order No. 47, s. 1993 amending Art.
417 of the IRR of the LGC)

NOTE

xxx. Regarding the propriety of using these advance payments as source of fund for
To be clear, advance collections remain a liability of the LGU. Being an unrealized inc

b. Allotment – an authorization issued by the LCE to a

12
department/office of the LGU which authorizes it to incur
ONLINE EDITION - COMPLIMENTARY
obligations for a specific amount within its appropriation.

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 LTOM, 2nD EDITIOn

c. Obligation - the specific amount within the allotment which is

committed to be paid by the LGU for any lawful expenditure
made by an accountable officer for and in behalf of the LGU
concerned.
E. Budget Accountability Phase
Budget accountability is the last and final phase of the budget
process. It is the accounting for the budget. It involves the use of
management control techniques to assist in tracking receipts of
income/revenues and controlling expenditures. This mechanism
provides a venue for the LCE, local Sanggunian and stakeholders to be
continuously informed of the states of implementation of PPAs being
funded by public funds. It covers the monitoring and analysis of all
financial transactions, the recording of budgetary accounts in the
registries, recording in the books of accounts of all receipts and
expenditures and financial reporting of their current status. An
integral part of accountability is the evaluation of the financial and
physical performance of the LGU.
(Budget Operations Manual for Local Government Units 2016
Edition)

SECTION 97. USE OF APPROPRIATED FUNDS AND

SAVINGS
Funds shall be available exclusively for the specific purposes for which
they have been appropriated. No ordinance shall be passed authorizing
any transfer of appropriations from one item to another. However, the
LCE or the presiding officer of the sanggunian concerned may, by
ordinance, be authorized to augment any item in the approved annual
budget for their respective offices from savings in other items within the
same expense class of their respective appropriations. (Sec. 336, LGC)

13

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 CHAPTER EXPENDITURES AND DISBURSEMENT
3
SECTION 98. EXPENDITURES
Government expenditures include all charges against the fund of the
agency for current operating expenditures, capital outlays and provisions
for retirement of long term obligations. The charges are both the
amounts actually paid and those incurred and recorded as liabilities to be
paid in the future. [Sec. 154, Volume I, Government Accounting and
Auditing Manual (GAAM)]
Classification of Expenditures
A. Current Operating Expenditures refer to appropriations for the
purchase of goods and services for current consumption or for
benefits expected to terminate within the fiscal year. [Sec. 306 (f),
LGC]
Current Operating Expenditures are classified into:
1. Personal Services
2. Maintenance and Other Operating Expenses
B. Capital Outlays refer to appropriations for the purchase of goods and
services, the benefits of which extend beyond the fiscal year and
which add to the assets of government including investments in the
capital of government-owned or controlled corporations and their
subsidiaries as well as investments in public markets and slaughter
houses. [Sec.306 (d), LGC] (Sec. 155, Volume I, GAAM)

SECTION 99. PROHIBITIONS AGAINST EXPENDITURES

A. No public money or property shall be appropriated or applied for
religious or private purposes. (Sec. 335, LGC)
B. No money shall be paid on account of any contract under which no
services have been rendered or goods delivered. (Sec. 338, LGC)
C. No money shall be appropriated, used or paid for entertainment or
reception except to the extent of the representation allowances
authorized by law or for the reception of visiting dignitaries of foreign
governments or foreign missions, or when expressly authorized by the
President in specific cases. (Sec. 343, LGC)
D. Disbursements in accordance with appropriations in the approved
annual budget may be made from any Local Fund in the custody of
the local treasurer, but the total disbursements from any local fund
shall in no case exceed fifty percent (50%) of the uncollected
estimated revenue accruing to such local fund in addition to the actual
collections, provided however that no cash overdraft in any local fund
14

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shall be incurred at the end of the fiscal year.
In case of emergency arising from a typhoon, earthquake, or any
other calamity, the Sanggunian concerned may authorize the local
treasurer to continue making

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 LTOM, 2nD EDITIOn

disbursements from any local fund in his/her possession in excess of

the limitations herein provided, but only for such purposes and
amounts included in the approved annual budgets.
Any overdraft which may be incurred at the end of year in any local
fund by virtue of the provisions hereof shall be covered with the first
collections of the immediately succeeding fiscal year accruing to such
local fund. (Sec. 337, LGC)

SECTION 100. TYPES OF UNLAWFUL EXPENDITURES

A. Irregular Expenditure – signifies an expenditure incurred without
adhering to established rules, regulations, procedural guidelines,
policies, principles or practices that have gained recognition in laws.
Irregular expenditures are incurred if funds are disbursed without
conforming to prescribed usages and rules of discipline. There is no
observance of an established pattern, course, mode of action,
behavior, or conduct in the incurrence of an irregular expenditure. A
transaction conducted in a manner that deviates or departs from, or
which does not comply with standards set is deemed irregular. A
transaction which fails to follow or violates appropriate rules of
procedure is likewise irregular. (3.1, COA Circular No. 2012-003, 29
October 2012)
1. Cases that are considered “Irregular” Expenditures or Uses of
Government Funds and Property are:
a. Payments of salaries, allowances and other forms of
additional compensation under the following cases:
i. Payment of salaries and wages wherein the signatures
in the logbook vary with the signatures of the workers
in the payroll (COA Decision No. 2008-083, 11
September 2008);
Similar case that may also fall under this category follows:
Payment of salaries or wages of laborers under a labor
payroll to persons other than the payee unless properly
authorized by the latter.
ii. Honoraria granted to members of special committees
such as an Executive Committee, Program on Awards
and Incentives for Service Excellence and Regional
Selection and Promotions Board, Regional Therapeutic,
Regional Pre-qualification and Public Bids and Awards
and Inspection Committee, which are performing
functions inherent in the regular functions of the
agency (COA Decision No. 2008-126, 24 December
2008);
Similar cases that may also fall under this category follow:
15

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 1. Honoraria to private individuals sitting as
members of special committees (e.g., Ethics
Committee) of a government agency, without
authority of approval from the DBM; and

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 EXPENDITURES AND DISBURSEMENTS

2. Honoraria or Representation and Transportation

Allowance (RATA) granted to members of different
committees on various Regional and District
Offices (ex. Regional Acting Vice President and
District Supervisors) in violation of Sec. 4 of DBM
Budget Circular No. 2003-5, 23 September 2003,
as amended.
iii. Honoraria paid to members of the Bids and Awards
Committee (BAC) and Technical Working Group (TWG) in
excess of the rates provided for under Sec. 5 (5.3), DBM
Budget Circular No. 2004- 5A, 07 October 2005 and for
procurement activities pertaining to contracts not yet
awarded to the winning bidder (Joseph Peter Sison, et.
al vs. Rogelio Tablang, et. al. GR No. 1777011, 05 June
2009);
iv. Grant of Christmas bonuses, cash gift and other fringe
benefits to consultants and to members of the Board
who are not salaried officials of the government as they
are not considered employees of the hiring agency
(COA Decision No. 2006-030, 11 April 2006, BCDA vs.
COA, GR No. 178160, 26 February 2009);
v. Grant of amelioration allowance or any similar benefits
to private employees of service contractors contrary to
Administrative Order (A.O.) No. 365, 10 October 1997
(HDMF vs. COA, GR No. 157001, 19 October 2004);
vi. Loyalty service award granted to employees that have
not yet rendered the minimum service of ten (10) years
in the government required under Civil Service
Commission (CSC) Memorandum Circular No. 42, s.
1992 (BCDA vs. COA, GR No. 142760, 06 August 2002);
Similar case that may also fall under this category follows:
1. Annual payment of Anniversary Bonus to
government employees which is not consistent
with A.O. No. 263, 28 March 1996, authorizing the
grant thereof of their agencies’ milestone years-
that is, on the 15th anniversary and 5th year
thereafter.
vii. Payment of COLA and other allowances deemed
integrated in the salary per DBM-NCC No. 59 and DBM-
CCC No. 10 (Victoria
C. Gutierrez, et. al. vs. DBM, GR No. 153266, 18 March
2010);
viii. Grant of food allowance, rice subsidy and health care
allowance as there is no law authorizing the grant of
such allowances (BFAR Employees Union, R.O. VII vs.
16

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 COA, GR No. 169815, 13 August 2008 and Benguet
State University vs. COA, GR No. 169637, 8 June 2007);
Similar case that may also fall under this category follows:

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 LTOM, 2nD EDITIOn

1. Payment of health care insurance, except for LGUs

(The Province of Negros Occidental vs. The
Commissioners, COA, et. al., GR No. 182574, 28
September 2010)
ix. RATA and cash gift to the Office of the Government
Corporate Counsel (OGCC) Lawyers rendering legal
assistance to GOCCs without the presence of the three
concurring conditions required under Sec. 6 of
Executive Order (EO) No. 878, 4 March 1983 (COA
Decision No. 2006-030, 11 April 2006);
Similar case that may also fall under this category follows:
1. Attorney’s fees paid to regular employees.
x. Payment of Collective Negotiation Agreement (CNA)
signing bonus to members of governing board (non-
organic employees) and those occupying managerial
positions higher than division chief (COA Decision 2008-
029, 29 February 2008)
xi. Payment of CNA cash incentive/benefit to rank-and-file
employees where the conditions required in
determining “savings” under Public Sector Labor-
Management Council (PSLMC) Resolution No. 02, s.
2003, 19 May 2003 and DBM Budget Circular No. 2006-
1, 01 February 2006 are not met; and
xii. Premiums paid for the Personnel Accident Insurance of
officers and employees of GOCCs without prior authority
from the DBM and/or the Office of the President (COA
Decision No. 2006-030, 11 April 2006)
Similar case that may also fall under this category follows:
1. Procurement and payment of corresponding premiums
for
Directors and Officers Liability Insurance (DOLI).
b. Hiring of private lawyers by the GOCCs to handle their cases
and legal matters without prior written conformity and
acquiescence of the Solicitor General or the Government
Corporate Counsel, as the case may be, and the written
concurrence of the COA; (Phividec Industrial Authority, et al.
vs. Capitol Steel Corp., et al., GR No. 155692, 23 October
2003)
c. Hiring of casual and probationary employees under job order
with entitlement and benefits enjoyed by regular
government employees, in violation of CSC Resolution No.
020790, 5 June 2002 and CSC Memorandum Circular No. 15,
s. 1999;
17

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d. Hiring of consultants/retired employees such as:
i. Hiring of consultants and contractuals to perform
functions that will exercise control and supervision over
regular employees (CSC Memorandum Circular No. 26,
s. 1997);

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 EXPENDITURES AND DISBURSEMENTS

ii. Continuous extension of the services of a foreign

consultant to undertake relatively simple supervisory
work required for the final stages of the project that can
be done by the implementing agency itself or a local
consultant (NHA vs. COA, GR No. 101370, 02 September
1993); and
iii. Hiring of employees who had previously opted to
retire/be separated from the service as a result of
rationalization efforts of their agency within five (5)
years after retirement/separation (Civil Service
regulations; DBM Circular Letter No. 2011-14, 22
December 2011).
e. Payment for damages, litigation costs and attorney’s fees
awarded by the court to a contractor caused by serious
lapses and omissions of a public officer such as the issuance
of change orders without authority from the Sangguniang
Panlungsod and his/her failure to protect public funds from
being garnished (COA Decision No. 2008-043, 06 May 2008);
f. Reimbursement and/or payments of expenses such as:
i. Reimbursement of expenses incurred by persons who
are not authorized to attend conferences, meetings and
other official functions;
ii. Unless there is a law which provides otherwise,
reimbursement of legal expenses incurred by public
officials and employees against whom
criminal/civil/administrative suits have been filed, in
relation to the performance of their public functions.
g. Payment of rental contracts for service vehicles covering a
continuous period of more than 15 days without the
authority or approval of the Secretary of the DBM,
appropriation and certification of availability of funds (COA
Decision No. 2009-007, 09 February 2009);
h. Release of funds to non-government organization/people’s
organizations (NGOs/POs) for money market placement,
time deposit or other forms of investments (COA Circular No.
2007-001, 25 October 2007);
i. Release of assistance such as fertilizers, seeds and other farm
inputs
and equipment other than to the intended farmer beneficiaries;
j. Advertisements;
i. Media advertisements, except those required in the
issuance of agency guidelines, rules and regulations,
the conduct of public biddings, and the dissemination
18 of important public announcements (A.O. No. 103, 31
ONLINE EDITION - COMPLIMENTARY
 August 2004)
ii. Expenses for advertisements of anniversaries, etc. in
newspapers, TV or radio merely for publicity or
propaganda purposes except

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 LTOM, 2nD EDITIOn

when the nature of the agency’s mission would require

such expenses as in the case of promotion of trade and
business
k. Donations, contributions, grants and gifts, except if said
activities are undertaken pursuant to the mandate of the
donor-agency (A.O. No. 103, 31 August 2004);
Similar case that may also fall under this category follows:
i. Release of funds as financial assistance to civic
organizations such as Rotary, Jaycees and Lions, non-
stock non-profit corporations/ foundations and private
corporations.
l. Payment of foreign travel expenses to private individuals
purportedly as representatives of an international
organization for the purpose of attending a convention,
using the travel rates prescribed under F.O. 298, 23 March
2004 which governs government personnel only;
m. Including names or initials and/or images or pictures of
government officials in billboards and signages of
government programs, projects and properties banned
under Department of the Interior and Local Government
(DILG) Memorandum Circular No. 2010-101, 23 September
2010;
n. Acceptance of a project as 100 percent complete pursuant
to Certificate of Inspection Report when the project was not
yet completed (Manuel Leycano, Jr. vs. COA, GR No. 154665,
10 February 2006); and
Similar cases that may also fall under this category follow:
i. Acceptance of a project constructed not in accordance with
plans
and specifications and with noted deficiencies; and
ii. Acceptance of seeds and other articles/goods without
passing the required quality test by the responsible
government entity such as by the Bureau of Plant
Industry, in case of seeds.
o. Use of government motor vehicles for private social
functions such as receptions, balls, theaters and for other
personal purposes; use by spouse, children, friends and the
like, of the official entitled thereto, even if they are in the
company of said officials; or on Sundays, legal holidays or
out of their regular office hours or outside the route of
the official or employee, unless properly authorized (A.O.
No. 239, 15 September 2008)
(Annex A, COA Circular No. 2012-003, 29 October 2012)
19

ONLINE EDITION - COMPLIMENTARY

1. Illegal expenditures are expenditures which are contrary to law.
(The 2009 Rules and Regulations on Settlement of Accounts, COA
Circular No. 2009-006, 15 September 2009)

ONLINE EDITION - COMPLIMENTARY

 EXPENDITURES AND DISBURSEMENTS

Cases that are considered “Illegal” Expenditures or Uses of

Government Funds and Property:
a. Payment of claims under a contract awarded not strictly in
accordance with the procedures prescribed under Republic
Act (RA) No. 9184 and its Revised Implementing Rules and
Regulations (IRR):
i. For contracts entered into containing provisions that
substantially depart from the draft Agreement included
in the Bid Documents (Demosthenes P. Agan, Jr., et al.
vs. PIATCO, et al., GR No. 155001, 05 May 2003);
ii. For contracts awarded under an alternative mode of
procurement for items that should have undergone
complete public bidding process and eventually resulted
in overpricing (Director Fredric Villanueva, et al. vs.
COA, GR No. 151987, 18 March 2005; Nava vs. Palattao,
et al., GR 160211, 28 August 2006);
iii. For contracts awarded to a bidder who failed to meet
the minimum amounts required to be put up at the time
the bids were submitted (Demosthenes P. Agan, Jr., et
al. vs. PIATCO, et al., GR No. 155001, 05 May 2003);
iv. For delivery of equipment that is not brand new and
does not conform to the specifications called for in the
Invitation to Bid (Ramon T. Lim vs. COA, GR No. 130325,
12 March 2003);
Similar case that may fall under the category follows:
1. For deliveries of imported rice and other similar goods
not
conforming to the required specifications.
v. For base and portable radio communications
equipment without purchasers’ and dealers’ permits
from the National Telecommunications Commission
(NTC) in violation of Act No. 3846, otherwise known as
the “Radio Control Law” (Fe D. Laysa vs. COA, GR No.
128134, 18 October 2000).
b. Payment for contracts under the following conditions without
the prior approval or authorization of the local Sanggunian
which is required under Sec. 22 (c) of RA No. 7160 [Hon.
Gabriel Luis Quisumbing, et al. vs. Hon. Gwendolyn F.
Garcia, et al., GR No. 175527, 08 December 2008] as
clarified under COA Memorandum No. 2010-014, 22 April
2010;
i. In case of regularly enacted budget
1. For projects described in appropriation ordinances
20

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 in generic terms such as infrastructure projects,
inter- municipal waterworks, drainage and
sewerage, flood control, irrigation systems
projects, reclamation projects, roads and bridges

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 LTOM, 2nD EDITIOn

2. For purchase of goods and services which are

neither specified in the appropriation ordinance
nor encompassed within the regular personal
services and maintenance operating expenses
ii. In case of a reenacted budget
a. For new contracts entered into by the LCE covering
contractual obligations included in the previous
year’s annual and supplemental budgets
c. Payment of compensation or benefits to government personnel
under
the following circumstances:
i. Exemplary public service award incentive paid to three
term local officials as this is not among the
compensation and benefits enumerated under Art. 77 of
the IRR of the LGC as due the elective local officials,
and that such payment contravenes Art. 170 (c) of the
said IRR which provides that no elective or appointive
official shall receive additional, double or indirect
compensation unless specifically authorized by law
(COA Decision No. 2008- 088, 26 September 2008);
ii. Separation/disability/death plan benefits to retiring
employees which constitute supplementary retirement
plan prohibited under Sec. 28 (b) of Commonwealth Act
No. 186, as amended by RA No 4968 (COA Decision No.
2008-078, 20 August 2008);
iii. Financial assistance granted to retiring employees
which constitutes supplementary pension/retirement
benefit plan proscribed by law (Avelina B. Conte, et al.
vs. COA, GR No. 116422, 04 November 1996);
iv. Partial release/payment or enjoyment of retirement
benefits in whatever guise, such as in the form of loan
before actual retirement (DBP vs. COA, GR No. 144516,
11 February 2004);
v. Additional retirement benefits which are beyond that
allowed under existing retirement laws (COA Decision
No. 2006-030, 11 April 2006);
vi. Additional benefits paid to officials and employees of
GOCCs based on Governing Board resolutions whose
power to fix compensation and benefits were revoked
under RA No. 6758 effective 1 July 1989 unless
subsequently restored (SSS vs. COA, GR No. 149240, 11
July 2002);
vii. Fringe benefits paid to Board of Directors, officers and
employees exceeding the limitations prescribed under 21

ONLINE EDITION - COMPLIMENTARY

 RA No. 6758 such as Social Amelioration Benefits, two-
month Christmas bonus and Mid-year Financial
Assistance (COA Decision No. 2006-030, 11 April 2006);

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 EXPENDITURES AND DISBURSEMENTS

viii. Hazard pay paid to health workers/employees not

assigned in establishments specifically mentioned in
Sec. 21 of RA No. 7305 and without proof of exposure to
specific health hazards for at least 50 percent, of his/her
working hours (COA Decision No. 2010- 092, 21 October
2010);
ix. Hazard allowance paid to employees who are not
principally engaged in the delivery of health or health-
related services such as Social Insurance Group of
Government Service Insurance System (KMG vs. COA,
GR No. 150769, 31 August 2004);
x. Hazard pay of public health workers at a predetermined
or fixed amount (i.e., ₱4,988.75/month for Health
workers, receiving salary grade 20 and above) which
contravenes Sec. 21 of RA No. 7305 (Magna Carta for
Public Health Workers) and Rule XV, Sec. 7.1.5 of its IRR
(A.M. No. 03-9-02-SC, 27 November 2008);
xi. Payment of honoraria without covering appropriation
(Fe D. Laysa vs. COA, GR No. 128134, 18 October
2000);
xii. Grant of allowances and bonuses to Board Members of
water districts other than per diems allowed pursuant to
Sec. 13 of PD No. 198 (Rodolfo S. De Jesus, et al. vs.
COA, GR No. 156641, 05 February 2004);
xiii. Payment of transportation allowance paid to officials
who are assigned or presently use government motor
vehicles [Sec. 45, RA No. 10155 (GAA 2012)]. Similarly,
grant of gasoline allowance or reimbursement of
gasoline expenses to officials who are receiving
transportation allowance is also considered illegal;
xiv. Extraordinary and Miscellaneous Expenses (EME) of
LGUs in excess of the limitations provided for
discretionary expenses under Sec. 325(h) of the LGC;
xv. Payment of personal services expenditures such as
salaries, honoraria, allowances, bonuses, and other
similar forms of compensation out of financial subsidy
to LGUs [DBM Local Budget Circular (LBC) No. 89, 23
June 2008];
Similar case that may also fall under this category follows:
Payment of personal services expenditures in excess of
the limitation prescribed under Sec. 325(a) of the LGC.
xvi. Honoraria and other forms of allowances such as per
diems, representation allowance, Christmas gift checks
22 paid to Department
ONLINE EDITION - COMPLIMENTARY
 Secretaries/Undersecretaries/Assistant Secretaries or
their alternates as members of’ governing boards of
collegial bodies as these partake of the nature of
additional compensation or remuneration proscribed
under Sec. 13, Art. VII of the 1987 Philippine
Constitution (Bitonio, Jr. vs. COA, GR No. 147392, 12

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 LTOM, 2nD EDITIOn

March 2004; NAC vs. COA, GR No. 156982, 08

September 2004; and Dela Cruz, et al. vs. COA, GR No.
138489, 29 November 2001);
Similar cases that may also fall under this category follow:
1. Payment of per diems and allowances to Board of
Directors Secretariat and other officers in
subsidiaries of GOCCs acquired by the government
through Proclamation No. 50, s. 1986, 15
December 1986;
2. Payment of EME to an ex-officio member of the Board
(COA Decision No. 2010-048, 23 March 2010);
and
3. Additional benefits paid to officials, employees and
the members of the Board of GOCCs based on
issuances of the Department Secretary to which
the GOCCs are attached.
xvii. Payment of COLA and other allowances deemed
integrated in the salary per DBM NCC No. 59 and DBM-
CCC No. 10 (Victoria
C. Gutierrez, et al. vs. DBM, GR No. 153266, 18 March
2010);
d. Payments thru checks that are countersigned by the
Secretary to the LCE contrary to Sec. 345 of the LGC
which requires that the countersigning be made by the
local administrator or in his/her temporary absence or
incapacity by his/her immediate assistant (COA Decision No.
2008-061, 03 July 2008);
e. Use of public funds for private purposes [Sec. 4(2) of PD No.
1445]
such as:
i. For repair/rehabilitation or construction of multi-purpose
building or a specific cooperative composed of private
individuals where the lot and building subject of
improvement are privately owned (COA Decision No.
2008-127, 24 December 2008);
ii. For widening, repairing and improving sidewalks of a
privately- owned subdivision where the land on which
it is situated had not been transferred to the
government by way of donation or acquired by the
government through expropriation (Aniano A. Albon vs.
Bayani Fernando, et al., GR No. 148357, 30 June 2006);
and
iii. Use of government property such as office supplies and
office equipment, and government facilities and 23

ONLINE EDITION - COMPLIMENTARY

 buildings for personal purposes.
f. Entering into contract in an amount way beyond the
appropriated amount in violation of Sec. 85 of PD No. 1445
(Hon. Tomas R. Osmena vs. COA, GR No. 98355, 02 March
1994);

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 EXPENDITURES AND DISBURSEMENTS

g. Entering into contracts without covering certificates of

availability of funds issued by the Chief Accountant even if
the contract is signed by the Accountant as witness (DOH vs.
CVCAA, et al., GR Nos. 151373- 74, 17 November 2005);
h. Purchase of science education facilities by the Schools
Division Superintendent using funds intended for the
improvement of facilities of nationalized High Schools
(Venancio R. Nava vs. Rodolfo G. Palattao, et al., GR No.
160211, 28 August 2006);
i. Expenses for foreign travel of officials or employees,
including uniformed personnel of the DILG and Department
of National Defense (DND) who are due to retire within one
year after the said foreign travel [Sec. 16(c), General
Provisions, 2012 GAA or pertinent provisions of the GAA
for the year];
j. Charges to accounts payable not founded on valid claims in
violation of Sec. 46 of P. D. No. 1177 (Fe D. Laysa vs. COA,
GR No. 128134, 18 October 2000);
k. Hiring of private lawyers by LGUs except in cases where a
component city or municipality is a party adverse to the
provincial government or to another component city or
municipality (COA Circular No. 98-002, 09 June 1998);
l. Use of funds intended for a specific purpose/project, for
other purposes such as administrative and miscellaneous
expenses of the implementing agency, and for projects not
intended to be implemented under the program; and
m. Grant of cash advance for no specific stated public purpose
(Sec. 89, PD No. 1445).
(Annex B, COA Circular No. 2012-003, 29 October 2012)

B. Unnecessary Expenditures – pertains to expenditures which could not

pass the test of prudence or the diligence of a good father of a family,
thereby denoting non-responsiveness to the exigencies of the service.
Unnecessary expenditures are those not supportive of the
implementation of the objectives and mission of the agency relative to
the nature of its operation. This would also include incurrence of
expenditure not dictated by the demands of good government, and
those the utility of which cannot be ascertained at a specific time. An
expenditure that is not essential or that which can be dispensed with
without loss or damage to property is considered unnecessary. The
mission and thrusts of the agency incurring the expenditures must be
considered in determining whether or not an expenditure is
necessary. (4.1, COA Circular No. 2012-003, 29 October 2012)
Cases that are considered “Unnecessary” Expenditures or Uses of
24 Government Funds and Property are:
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 LTOM, 2nD EDITIOn

1. Creation or continued operation of subsidiaries, the function of

which duplicates that of the parent corporation;
2. Hiring of public relations (PR) companies;
3. PR expenses by government insurance corporations whose
members and where government properties are compulsorily
insured;
4. Hiring of consultants whose functions are redundant to the
respective functions of concerned officials, for example hiring of
procurement consultant, financial consultant or media consultant;
5. Hiring of consultants rendering services not aligned/related to the
mandate/ thrusts of the hiring Agency and/or exceeding the
agreed consultancy period including renewals;
6. Professional service contract for the design of a building with
already existing design/plan, and subject services of the Architect
was superfluous and unnecessary (COA Decision 94-117, 10
March 1994);
7. Purchase of high-end or expensive models/brands of electronic gadgets
such
as mobile phones, desktops, laptops, etc. unless justified by circumstances;
8. Construction of buildings and/or procurement of equipment not
actually needed or without any intended purpose, not put to use
or use for purposes other than the intended purpose, not
completed and could not be properly maintained or operations
sustained;
9. Construction of housing units which were not distributed/awarded
or disposed of within considerable period of time, as evidenced
by the deterioration of the units;
10. Replacement of serviceable structure/equipment;
11. Continuous repair of vehicles and equipment already considered
beyond economic repair as evidenced by frequent breakdown
and non-use after repair; and
12. Grant of overtime pay for work that is not of urgent nature as to
require completion within a specified time or that can be
undertaken during regular office hours.
(Annex C, COA Circular No. 2012-003, 29 October 2012)

C. Excessive Expenditures – signifies unreasonable expense or expenses

incurred at an immoderate quantity and exorbitant price. It also
includes expenses which exceed what is usual or proper as well as
expenses which are unreasonably high and beyond just measure or
amount. They also include expenses in excess of reasonable limits.
(5.1, COA Circular No. 2012-003, 29 October 2012)
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 EXPENDITURES AND DISBURSEMENTS

Cases that are considered “Excessive” Expenditures of Government Funds

are:
1. Overpricing of purchases, characterized by grossly exaggerated
or inflated quotations, in excess of the current and prevailing
market price by a 10 percent variance from the purchased item;
2. Payment for repair of government equipment at a cost exceeding
30 percent of the current market price of the same or similar
equipment;
3. Expenditures for supplies and materials including fuel inventory in
quantities exceeding the normal three-month requirements,
except under the circumstances enumerated under the pertinent
provision of the GAA;
4. Granting of cash advance in excess of estimated budget;
5. Provision of mobile phone, whether postpaid line subscription or
prepaid, in excess of one unit for each entitled official which
should not be lower than Division Chief rank;
6. Grant of cash advance for intelligence funds in excess of one-
month requirement. In emergency cases, cash advance in excess
of one- month requirement may be granted but not to exceed the
three-month requirements;
7. Release of funds to NGOs/POs in excess of the project requirements;
8. Using expensive thermoplastic materials with longer life span on
an asphalt overlay with shorter life span;
9. Installation of materials/items in excess of the requirements
prescribed under existing regulations and/or in places without the
need for the same or with already existing installations, such as:
a. Installation of another camera in places with existing
functional camera; and
b. Installation of raised pavement studs with spacing shorter
than the 9-meter requirement.
10. Procurement of materials/items in excess of the requirements
which eventually expires such as vaccines, medicines, seeds,
fertilizer, pesticides, among others;
11. Inclusion in the contract of a specific infrastructure project,
special items such as motor vehicles and computers which
unnecessarily increased project costs due to the provision of
indirect costs;
12. Procurement and distribution of seeds to farmers in excess of the
required number of bags of seeds per hectare;
13. Purchase of expensive specialized folders and other easily
26 accessible and readily available items which have limited useful
ONLINE EDITION - COMPLIMENTARY
 life;
14. Payment of cost of imported equipment in excess of the cost of
importation indicated in pro-forma Consular Invoice of the
foreign supplier, Bureau of

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 LTOM, 2nD EDITIOn

Internal Revenue (BIR) and Bureau of Customs (BOC) tax receipts,

and other cost of importation and reasonable mark-up;
15. Excessive expenditures in the celebration of Christmas,
anniversary and other special occasions;
16. Excessive allowances to participants and expenses in relation to
lakbay- aral, seminars or trainings; and
17. Claims for EMEs and other similar expenses of GOCCs in excess of
the amounts authorized in their corporate charters and in the
absence thereof, the amounts fixed under the GAA. The amount
provided to in the charter shall be included in the Corporate
Operating Budget (COB), subject to the approval of the DBM.
(Annex D, COA Circular No. 2012-003, 29 October 2012)

D. Extravagant Expenditures – signifies those incurred without restraint,

judiciousness and economy. Extravagant expenditures exceed the
bounds of propriety. These expenditures are immoderate, prodigal,
lavish, luxurious, grossly excessive, and injudicious. (6.1, COA Circular
No. 2012-003, 29 October 2012)
Cases that are considered “Extravagant” Expenditures of
Government Funds are:
1. Purchase of wines, liquors, cigars and cigarettes, except when
served during state functions and government-sponsored
international conferences and conventions;
2. Payment for rent of expensive halls or rooms in luxury hotels or
restaurants used for meetings/seminars and other official
functions, except when such hotels or restaurants are used for
government-sponsored international conventions, meetings and
the like;
3. Conduct of out-of-town meeting which can be made within the
office
premises;
4. Hiring of expensive vans, cars, aircraft when there is available
ordinary public conveyance, except in meritorious cases and
justified by prevailing circumstances;
5. Use of expensive decorative lamp posts and other similar
items/fixture;
6. Procurement and use of luxury vehicles by government officials,
except those allowed under Sec. 6 of Administrative Order No. 3
issued on 27 February 2001;
7. Luxurious furnishings for government buildings, except those
intended for showcase, trade and commerce, promotion of arts
and culture and use of dignitaries; and
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8. Installation of highly sophisticated outdoor signs, billboards and neon
signs

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 EXPENDITURES AND DISBURSEMENTS

advertising the office, except for banks, trading corporations,

hotels, or
buildings used for culture and arts.
(Annex E, COA Circular No. 2012-003, 29 October 2012)

E. Unconscionable Expenditures – pertains to expenditures which are

unreasonable and immoderate, and which no man in his/her right
sense would make, nor a fair and honest man would accept as
reasonable, and those incurred in violation of ethical and moral
standards. (7.1, COA Circular No. 2012-003, 29 October 2012)
Cases that are considered “Unconscionable” Expenditures of
Government Funds are the following:
1. Grant of exorbitant and unreasonable bonuses, allowances and
fringe
benefits to public officials and employees and members of governing boards;
2. Live-in seminars in five-star hotels with significant numbers of
participants
and unreasonable period of time;
3. Payment of excessive and unreasonable retirement benefits;
4. Purchase of supplies and materials including agricultural
equipment/ machineries and other farm inputs in significant
quantities far exceeding the requirements and were not actually
needed, thus, left idle and unused;
5. Extension of loans in significant and unreasonable amount to
unqualified
borrowers whereby recovery of the loans granted is remote;
6. Overpricing in significant amounts exceeding 100 percent of the
current and
prevailing market value;
7. Payment for repairs of government equipment involving
significant amount exceeding 100 percent of the current market
value price of the same or similar equipment; and
8. Release of significant amounts to NGOs/POs without evaluating
the necessity of the project, the needs of the intended recipients
and the reasonableness of the project requirements.
(Annex F, COA Circular No. 2012-003, 29 October 2012)

F. Inclusion of Situations Deemed IUEEU Expenditures in the Updated List

1. Need/Justification
As the lists of Irregular, Unnecessary, Excessive, Extravagant or
Unconscionable (IUEEU) expenditures cannot exhaust the
28 situations which are deemed such, there is a need to set up a
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system whereby a list of disallowed expenditures peculiar to an
agency or a class/category shall be made using a self-propelling
or time-adjusting mechanism such that a case declared IUEEU
expenditure in a particular situation/sector is, likewise,

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 LTOM, 2nD EDITIOn

deemed IUEEU expenditure in other cases/sectors similarly situated.

2. Criteria for Inclusion of an IUEEU situation in the Updated Lists – A
situation may be included in the updated list if it corresponds
positively to at least one of the following criteria:
a. There are no established judicial precedents relative to the
case/issue;
b. There is a substantial/notable recurrence of a particular
problem within a very limited time;
c. It results in losses or non-operation of the agency; and
d. The case is an accurate illustration of the substantive area of
the
IUEEU expenditure definition.
3. Procedure for Inclusion – In case an IUEEU situation corresponds
to any, several or all of the criteria set above, the following steps
should be observed in including the IUEEU situation into the
Updated List:
i. The Supervising Auditor/Audit Team Leader, through the
Cluster Director/Assistant Commissioner recommends to the
Commission Proper, IUEEU situations deemed ripe for
inclusion in the Updated List;
ii. The IUEEU situation will be taken up in a Commission Proper
meeting where the proposed inclusion will be deliberated,
upon resolving among other things, whether or not the
situation will apply only to the agency classification involved
or to the three sectors (national, local and corporate) of
government;
iii. Thereafter, the Commission Proper shall issue a Resolution
effecting the inclusion of the IUEEU situation in the Updated
List; and
iv. Finally, the Resolution shall be published and circularized for
the information of all sectors concerned.
(8.0, COA Circular No. 2012-003, 29 October 2012)

G. Liability for Unlawful Expenditures

1. Expenditures of funds or use of property in violation of Title V
(Local Fiscal Administration) of the LGC and other laws shall be a
personal liability of the official or employee responsible therefor.
(Sec. 351, LGC)
Any official or employee of the LGU knowingly incurring any
obligation, or authorizing any expenditure in violation of the
provisions of the Administrative Code of 1987 (FNG No. 292) or
taking part therein, shall be dismissed from the service, after due 29

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notice and hearing by the duly authorized appointing official. If
the appointing official is other than the President and should he/
she fail to remove such official or employee, the President may
exercise the power of removal. (Sec. 43, Book VI, E. O. No. 292)

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 EXPENDITURES AND DISBURSEMENTS

SECTION 101. DISBURSEMENTS

Disbursements refer to the settlement of government
payables/obligations by check or by cash. Another mode of disbursement
is payment by Authority to Debit Account (ADA).
Typical transactions for which disbursements are made are as follows:
A. Personal Services
B. Maintenance and Other Operating Expenses
C. Capital Outlay
D. Financial Expenses
[Sec.37, Chapter 3, Volume I, Manual on the New Government Accounting
System (MNGAS) for LGUs]
The official fiscal year of LGUs shall be the period beginning with the first
(1st) day of January and ending with the thirty-first (31st) day of December
of the same year. (Sec. 353, LGC)

SECTION 102. POLICIES RELATED TO THE BUDGET,

ACCOUNTING, AND DISBURSEMENT
FUNCTIONS IN LGUs
The responsibilities of the heads of the Requesting Unit, the Budget Unit,
the Accounting and the Treasurer are set forth as follows:
A. The Head of the Requesting Unit shall prepare the Obligation Request
(ObR) and the Disbursement Voucher (DV) and certify on the
necessity and legality of charges to appropriation and allotment under
his/her direct supervision. He/she shall also certify to the validity,
propriety and legality of supporting documents.
B. The Head of the Budget Unit shall certify the existence of available
appropriation, take charge of budgetary activities as provided
under Secs. 344 and 475 of the LGC, and shall maintain the
Registries of Appropriations, Allotments and Obligations as prescribed
under the MNGAS for LGUs.
C. The Head of the Accounting Unit shall certify the obligation of
allotment and completeness of supporting documents in the DV.
D. The Treasurer shall certify the availability of funds in the DV as
provided in the LGC and prepare the Daily Cash Position Report to be
submitted to the LCE.
(COA Circular No. 2006-002, 31 January 2006)
E. The approval of disbursements by the LCE himself/herself shall be
required whenever local funds are disbursed except for regularly
30 recurring administrative expenses such as; payrolls for regular or
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permanent employees, expenses for light, water, telephone,
remittances to government creditor agencies such as GSIS, LBP, DBP,
NPO, Procurement Service of the DBM and others where the

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 LTOM, 2nD EDITIOn

authority to approve may be delegated. DV for expenditures

appropriated for the operation of the Sanggunian shall be approved
by the Provincial Vice Governor, the City Vice Mayor or the Municipal
Vice Mayor, as the case may be. (Sec.39, Chapter 3, Volume I, MNGAS
for LGUs)

SECTION 103. DISBURSEMENTS BY CHECK

A. Checks shall be drawn only on duly approved disbursement vouchers.
It shall be drawn by the Local Treasurer and countersigned by the
Local Administrator. In case of temporary absence or incapacity of the
aforesaid officials, these duties shall devolve upon their immediate
assistants. In the case of municipalities where no Administrator has
been appointed, checks shall be countersigned by the Municipal
Mayor. In case, however, of expenditures appropriated for the
operation of the Sanggunian, checks drawn shall be countersigned by
the Provincial Vice Governor, the City Vice Mayor, or the Municipal
Vice Mayor, as the case may be. (Sec. 340, Chapter 3, Volume I,
MNGAS for LGUS)
B. All checks issued including cancelled checks shall be recorded
chronologically in the Cashbook – Cash in Bank. (Sec.41, Chapter 3,
Volume I, MNGAS for LGUs)
C. The Treasurer shall release the check only to the payee or his/her duly
authorized representative. For purposes of releasing checks, the
Treasurer shall maintain a Check Register where all checks issued
shall be recorded chronologically and where the claimants shall be
required to acknowledge receipt hereof. (Sec.42, Chapter 3, Volume I,
MNGAS for LGUs)
D. The checks released to claimants shall be reported in the Report of
Checks Issued (RCI) which shall be prepared daily by the Treasurer for
each fund. It shall be submitted to the Accountant, for preparation of
Journal Entry Voucher (JEV) and recording in the Checks
Disbursements Journal. (Sec.43, Chapter 3, Volume I, MNGAs for
LGUs)
E. Paid vouchers, including its supporting documents, shall be perforated
and conspicuously stamped PAID by the cashier. (COA Circular No. 92-
389, 3 November 1992)
F. To ensure that checks encashed by government depository banks are
for legitimate local government expenditures, the use of the
Accountant’s Advice of Local Check Disbursements is prescribed.
Government depository banks are enjoined to pay checks issued by
LGUs only if covered by the Accountant’s Advice. The Accountant’s
duly designated and authorized representative shall deliver to the
agency concerned their copies which shall be duly acknowledged by
the Bank’s Cashier or Bank’s Representative. A separate notice shall
be prepared for each financial institution where the LGU maintains its
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depository account. In order to identify the check issued for a
particular voucher, the provincial/city/municipal treasurer shall
indicate on the face of the check the number assigned to the
disbursement voucher by the province/city/municipal accountant.
(COA Circular No. 96-007, 15 May 1996)

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 EXPENDITURES AND DISBURSEMENTS

Guidelines and Principles on the Acceptability of the Evidence of

Receipt of Payment for Disbursements:
1. Generally, the objective of examining the evidence of receipt of
payment is to establish that the funds disbursed have actually
been received by the payee so that any liability arising from the
claim has indeed been extinguished or reduced in the amount
received by the payee.
2. Such evidence of receipt of payment may take several forms but
whatever form is taken, the minimum data content are as follows:
a. Name of Disbursing Officer making the payment
b. Date of Payment
c. Name of Recipient
d. Address of the Recipient
e. Purpose of the Payment
f. Amount of Payment Received
3. The evidence of receipt of payment may be a paper-based
document or an electronic document.
A paper-based evidence of receipt of payment may take any of the
following forms:
a. Official Receipt (OR) - The OR shall be required for
disbursements where the payee/recipient is a business
establishment required by the Bureau of Internal Revenue
(BIR) to issue official receipts for its collections. The OR
may also be in the form of cash receipt tape generated by
cash register with BIR seal.
b. Reimbursement Expense Receipt (RER) - The RER shall be
acceptable for disbursement where the payee is not a
business entity required by the BIR to issue ORs and the
money is advanced by the official concerned and the
expense is authorized to be reimbursed by the government
agency concerned.
c. Acknowledgment Receipt (AR) - The AR shall be acceptable
for disbursements made from the cash advance of the
disbursing official where the payee is not a business entity
required by the BIR to issue ORs. It may be printed,
typewritten or handwritten and must bear the signature of
the payee.
d. Voucher Receipt (VR) - The VR shall be acceptable for
disbursements made to individual persons. The VR is that
portion of the Disbursement Voucher/Payroll that is signed
by the payee to manifest his/her receipt of the indicated
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 amount.
e. Credit Card Payment Slip (CCPS) - The CCPS shall be acceptable
as support for claims of reimbursement of expenses where the official

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 LTOM, 2nD EDITIOn

concerned used his/her personal credit card to defray the

expenses and the expenses are authorized to be reimbursed
by the government agency concerned.
An electronic document refers to information or the
representation of information, data, figures, symbols or
other modes of written expression, described or however
represented, by which a right is established or an obligation
extinguished, or by which a fact may be proved and
affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.
It includes digitally-signed documents and any print-out or
output, readable by sight, or other means, which accurately
reflects the electronic data message or electronic document.
It is equivalent to electronic data message which refers to
information generated, sent, received or stored by
electronic optical and similar means, but not limited to the
following:
i. Electronic Data Interchange (EDI)
ii. Electronic mail
iii. Telegram
iv. Telex
v. Telecopy
4. The electronic document form of an evidence of receipt of
payment is acceptable on the basis of the following provisions of
RA 8792 otherwise known as the E-Commerce Act:
“Sec. 7. Legal Recognition of Electronic Documents- Electronic
documents shall have the legal effect, validity or enforceability as
any other document or legal writing and-
a. Where the law requires that a document to be in writing,
that requirement is met by an electronic document if the
said electronic document maintains its integrity and
reliability and can be authenticated so as to be usable for
subsequent reference, in that-
i. The electronic document has remained complete and
unaltered, a part from the addition of any endorsement
and any authorized change, or any change which arises
in the normal course of communication, storage and
display.
ii. The electronic document is reliable in the light of the
purpose for which it was generated and in the light of
all relevant circumstances.
b. Paragraph (a) applies whether the requirement therein is in 33

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 the form of an obligation whether the law simply provides
consequences for the document not being presented or
retained in its original form.

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 EXPENDITURES AND DISBURSEMENTS

c. Where the law requires that a document be presented or

retained in its original form, that requirement is met by an
electronic document if-
i. There exists a reliable assurance as to the integrity of
the document from the time when it was first generated
in its final form.
ii. That document is capable of being displayed to the
person to whom it is to be presented: Provided that
no provision of this Act shall apply to vary any and all
requirements of existing laws on formalities required in
the execution of documents for their validity.
For evidentiary purposes, an electronic document shall be
functional equivalent of a written document under existing
laws.
This Act does not modify any statutory rule relating to the
admissibility of electronic data messages or electronic
documents, except the rules relating to authentication and
best evidence.”
5. Since an evidence of receipt of payment is traditionally required
to be in writing and capable of being presented in its original
form, then the electronic record of such receipt may be
acceptable as evidence of receipt of payment for audit purposes
only if the following conditions are met:
a. The electronic document or record has remained complete
and unaltered.
b. The electronic document is reliable.
c. There is reliable assurance as to the integrity of the document
from the
time when it was first generated in its final form.
d. The document is capable of being displayed to the person to
whom it is to be presented.
(COA Circular No. 2004-006, 9 September 2004)
The steps in disbursements for General Fund through
issuance of check are as follows:

PROCESS PERSON/UNIT RESPONSIBLE

a. Gather supporting documents, Concerned
and offices
approved Obligation Request (ObR), (COA Circular No. 2006-002, 31
prepare Disbursement Voucher (DV) January 2006)
and
forward to the Accounting Unit.
b. Certify as to obligation of allotment Accounting Unit
34

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for the purpose as indicated and
completeness of supporting
documents, assign number to DV,
sign Box A and forward to
Treasurer.

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 LTOM, 2nD EDITIOn

PROCESS PERSON/UNIT RESPONSIBLE

c. Certify on the availability of fund (Box Treasurer (COA Circular No.
B) 2006- 002, 31 January 2006)
and forward to approving officer.
d. Approve on the payment covered Local Chief Executive or authorized
by the DV (Box C) and forward DV approving officer
to the Cashier
e. Prepare, sign check and forward Treasurer
check
with DV to countersigning officer.
f. Countersign check and forward to Administrator/Vice-Mayor for the
Accountant for preparation of the Local Sanggunian disbursements
Accountant’s Advice of Local
Check Disbursements.
g. Prepare Accountant’s Advice of Accountant
Local Check Disbursements and
submit to bank. Return DV, check
and supporting documents to
Cashier/ Treasurer.
h. Record check in the Check Register Treasurer
and release check to claimant.
Record disbursement in
Cashbook – Cash in Bank.
Prepare Report of Checks Issued
(RCI). Forward RCI with DV and
supporting documents to
Accounting Unit.
i. Prepare the Journal Entry Voucher Accounting Unit
(JEV) based on individual
checks/voucher; sign “Prepared
by” portion (Approved by Chief
Accountant), and record JEV in
the Check Disbursements Journal.
Post monthly to the General
Ledger/ Subsidiary Ledgers.
j. Forward RCI, DV, supporting Accountant
documents
and JEV to the Office of the Auditor.

[Sec.44, Chapter 3, Volume I, (MNGAS for LGUs)]

SECTION 104. CANCELLATION OF LOST CHECKS ISSUED

A check is considered lost when it is misplaced, waylaid or left behind
inadvertently/ negligently by the payee or holder in due course or by the
custodian/carrier thereof and after diligent search cannot be found or
located; or when it is lost due to fortuitous event, theft or robbery.
Upon submission of sworn statement from the payee that a check issued
by the LGU is lost, the treasurer shall immediately notify the bank
concerned for the stoppage of payment. He/She shall forward the sworn
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statement to the accountant who shall prepare the JEV to cancel the
payment made. Copy of the JEV shall be furnished the treasurer as basis
for him/her to debit the amount in the Cashbook-Cash in Bank. (Sec.58,
Chapter 3, Volume I, MNGAS for LGUs)

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 EXPENDITURES AND DISBURSEMENTS

SECTION 105. CANCELLATION OF SPOILED AND STALE

CHECKS
Checks may be cancelled when they become spoiled or stale. A check is
considered spoiled when it is torn, mutilated, defaced, or with
erasures/errors affecting the genuineness of any material information
contained therein. On the other hand, a check is considered stale when it
is outstanding for over six months from date of issue, or as prescribed by
the government authorized depository bank.
A spoiled or stale check shall be marked cancelled on its face and reported,
as follows:
A. For spoiled checks, which are immediately cancelled and for which the
RCI has not yet been prepared, the cancelled check shall be attached
to the RCI and reported chronologically with the other checks issued
and the word "Cancelled" shall be indicated on the report.
B. For stale checks, which have been unclaimed and thus, the original DV
and supporting documents are still with the Local Treasurer, the
cancelled check shall be presented in the RCI after the last check
issued for the period indicated in the report. The original DV and
supporting documents shall be returned to the Accountant who shall
prepare a JEV to record the transaction as Accounts Payable.

C. For checks which became spoiled or stale in the hands of the payee
and require replacement, a new check may be issued upon submission
of the spoiled or stale check to the Local Treasurer. A certified copy of
the DV shall be requested from the Auditor for presentation to the
Administrator/ LCE who shall countersign the check. The cancelled
check shall be reported and attached to the RCI prepared at the
period of cancellation. The replacement check shall be reported
chronologically in the RCI.
(Sec. 59, Chapter 3, Volume I, MNGAS for LGUs)

SECTION 106. CASH DISBURSEMENT

There are certain instances when it may be very difficult, impractical, or
impossible to make payments by check. In such a case, payments may
be made by the disbursing officer in the form of cash through his/her
cash advance. (COA Circular No. 97-002, 10 February 1997)
The cash disbursement process in the payment of salaries and wages out
of cash advance from General Fund is as follows:

PROCESS PERSON/UNIT RESPONSIBLE

36

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A. Processing of payrolls to be paid by Concerned offices
cash is the same as that of steps (a) to
(d) for check disbursements.

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 LTOM, 2nD EDITIOn

PROCESS PERSON/UNIT RESPONSIBLE

B. Gather duly certified and approved Office of the Treasurer
payrolls to be paid out of cash
advance. Prepare DV for cash
advance corresponding to the net
amount of payrolls and submit to the
Accounting Unit.
C. Certify on the availability of fund and Treasurer (COA Circular No.
forward 2006- 002, 31 January 2006)
to the Approving Officer
D. Approve on the payment and forward Local Chief Executive or Authorized
payroll to the Cashier. Approving Officer
E. Gather duly certified and approved Office of the Treasurer
payroll to be paid out of cash
advance. Prepare DV for cash
advance corresponding to the net
amount of payroll/s and submit to the
Accounting Unit.
F. Check completeness of document/ Accounting Unit
previous cash advance/s liquidated,
sign Box A of DV and forward to
Treasurer
G. Certify on the availability of fund (Box B) Treasurer
and
forward to the Approving Officer.
H. Approve on the payment covered by DV Local Chief Executive
(Box C) and forward to Treasurer for
preparation of checks.
I. Prepare and sign checks, and forward Treasurer
check
with DV to countersigning officer
J. Countersign check and forward Administrator
to Accountant for preparation of
Advice.
K. Prepare Accountant’s Advice of Local Accountant
Check Disbursements and return DV,
check and supporting documents to
Cashier/Treasurer.
L. Encash check and pay claimants. Treasurer/Disbursing Officer
Record disbursement in Cashbook-Cash
Advances.
M. Return unused cash to the Treasurer/ Disbursing Officer
Cashier. An official receipt (OR) shall be
issued by the Treasurer/Cashier to
acknowledge the return of unused
cash and indicate check number of
cash advance granted on the face of
the OR. Record the refund as credit to
cash advance and attach OR to the
Cashbook- Cash Advances.
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N. Prepare Report of Disbursement, attach Disbursing Officer
paid payrolls/supporting documents
and copy of Official Receipt (OR) for
unused cash advance returned to
Treasurer/Cashier. Sign “Certified
Correct” portion of Report of
Disbursement and submit to
Accounting Unit.

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 EXPENDITURES AND DISBURSEMENTS

PROCESS PERSON/UNIT RESPONSIBLE

O. Prepare JEV to record the liquidation Accountant
of cash advance. Record JEV in the
Cash Disbursement Journal (CDJ). Post
monthly to the General
Ledger/Subsidiary Ledger.
P. Forward Report of Disbursement and Accountant
supporting documents including JEV to
the Office of the Auditor.

(Sec. 49, Chapter 3, Volume I, MNGAS for LGUs)

SECTION 107. CASH ADVANCES

Cash payments shall be made only on duly approved
payrolls/disbursement vouchers out of regular cash advances or special
cash advances. (Sec. 45, Chapter 3, Volume 1, MNGAS for LGUs)
A. Regular cash advances are those granted to cashiers, disbursing
officers, paymasters and/or property/supply officers separately for any
of the following purposes:
1. Salaries and Wages;
2. Commutable Allowances;
3. Honoraria and other similar payments to officials and employees; and
4. Petty operating expenses consisting of small payments for
maintenance and operating expenses which cannot be paid
conveniently by check or are required to be paid immediately.
B. Special Cash Advances are those granted on the explicit authority of
the Head of the Agency only to duly designated disbursing officers or
employees for other legally authorized purposes as follows:
1. Current operating expenditures of the agency field office or of the
activity of the agency undertaken in the field when it is
impractical to pay the same by check, such as:
a. Salaries, Wages and Allowances
b. Maintenance and other operating services
2. Travel expenditures including transportation fare, travel
allowance, hotel room/lodging expenses and other expenses
incurred by officials and employees in connection with official
travel.
(COA Circular No. 97-002, 10 February 1997)

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 LTOM, 2nD EDITIOn

SECTION 108. GRANTING AND UTILIZATION OF CASH

ADVANCES
A. GUIDELINES:
1. No cash advance shall be given unless for a legally specific purpose.
2. No additional cash advance shall be allowed to any official or
employee unless the previous cash advance given to him/her is
first settled or a proper accounting thereof is made.
3. A cash advance shall be reported as soon as the purpose for
which it was given has been served.
4. Only permanently appointed officials shall be designated as
disbursing officers. Elected officials may be granted a cash
advance only for their official traveling expenses.
5. Only duly appointed or designated disbursing officers may
perform disbursing functions. Officers and employees who are
given cash advances for official travel need not be designated as
Disbursing Officers.
6. Only one disbursing officer shall be assigned/designated for a
specific legal purpose. Additional disbursing officers may be
assigned/designated for the same purpose only when fully
justified by the local chief executive. (COA Circular No. 92-382, 3
July 1992)
7. Transfer of cash advance from one Accountable Officer to another
shall not
be allowed.
8. The cash advance shall be used solely for the specific legal
purpose for which it was granted. Under no circumstance shall it
be used for encashment of checks or for liquidation of a previous
cash advance.
9. The Accountant shall obligate all cash advances granted. He/She
shall see that cash advances for a particular year are not used to
pay expenses of other years.
(COA Circular No. 97-002, 10 February 1997)

B. DOCUMENTARY REQUIREMENTS COMMON TO ALL CASH ADVANCES

EXCEPT FOR TRAVELS
1. Authority of the accountable officer issued by the Head of Agency
or his/her duly authorized representative indicating the maximum
accountability and purpose of cash advance (for initial cash
advance)
2. Certification from the Accountant that previous cash advances have
been
liquidated and accounted for in the books 39

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3. Approved application for bond and/or fidelity bond for the year
will be required for cash accountability of ₱5001 or more. (COA
Circular No. 2013-001, 10 January 2013 – Amendment to COA
Circular No. 2012-001, 14 June 2012)

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 EXPENDITURES AND DISBURSEMENTS

C. ADDITIONAL DOCUMENTARY REQUIREMENTS FOR SALARIES,

WAGES, ALLOWANCES, HONORARIA AND OTHER SIMILAR EXPENSES
The cash advance for payroll fund shall be equal to the net amount of
the payroll for the pay period.
1. Approved contracts (for initial payment)
2. Approved payroll or list of payees indicating their net payments
3. Approval/authority (presidential directive or legislative enactment) or
legal
basis to pay any allowance/salaries/wages/fringe benefits
4. Daily time record (DTR) approved by the supervisor
(COA Circular No. 2012-001, 14 June 2012)

D. PETTY CASH FUND FOR OPERATING EXPENSES:

1. The Petty Cash Fund (PCF) to be set up shall be sufficient for the
recurring petty operating expenses of the agency for one month.
The cash advance shall not be used for payment of regular
expenses, such as rentals, subscriptions, light and water bills and
the like. Payments out of PCF, which shall be through a Petty
Cash Voucher, shall be allowed only for amounts not exceeding
₱15,000 for each transaction, except when a higher amount is
allowed by law and/or specific authority by the Commission on
Audit. Splitting of transactions to avoid exceeding the Ceiling
shall not be allowed. (COA Circular No. 2012-001, 14 June 2012)
2. The Accountable officer may request replenishment of the cash
advance when the disbursements reach at least 75%, or as the
need requires by submitting a replenishment voucher with all
supporting documents duly summarized in a report of
disbursements. (COA Circular No. 97-002, 10 February 1997)
3. PCF shall be maintained under the imprest system.
Disbursements from the fund shall be through the Petty Cash
Voucher (PCV) which shall be signed by the payee to
acknowledge the amount received. The Official Receipt shall be
attached to the PCV.
4. PCF shall be set up at the beginning of the year. An Obligation
Request (ObR) shall be prepared for the fund and recorded in the
registers. A disbursement voucher shall be prepared for
replenishments of the PCF during the year duly supported by a
list/summary of the PCVs, the PCVs and its supporting documents.
5. At the end of the year, PCF shall be fully liquidated by preparing a
Report of Disbursement supported by the list/summary of the
PCVs and its supporting documents. The ObR setting up the fund
at the beginning of the year shall be cancelled. Another ObR shall
be prepared taking up the liquidation and recorded in the
registers based on the actual expenses incurred. Unused cash
shall be returned to the Treasurer who shall issue an official
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Receipt

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 LTOM, 2nD EDITIOn

to acknowledge the amount returned. A new cash advance for

PCF shall be set up in the ensuing year.
(Sec. 48, Chapter 3, Volume I, MNGAS for LGUs)
6. Additional Documentary Requirements for Initial Cash Advances:
a. Approved estimates of petty expenses for one month
(COA Circular No. 2012-001, 14 June 2012)

E. FIELD/ACTIVITY CURRENT OPERATING EXPENSES (COE):

1. The special cash advance shall be used to pay the salaries and
wages of the employees and the miscellaneous operating
expenses of the activity. Payment for each transaction shall not
be subject to amount limitation. However, all payments shall be
approved by the Director/Head of Field Office.

2. The amount of the cash advance shall be limited to the

requirements for two months. Within 5 days after the end of each
month, the Accountable Officer shall submit a Report of
Disbursements. Additional cash advances shall be granted on the
basis of the activity budget or the requirements for two months
whichever is lower.
(COA Circular No. 97-002, 10 February 1997)
3. Additional Documentary Requirement:
i. Approved Budget for COE of the agency field office or
agency activity in the field. (COA Circular No. 2012-001, 14
June 2012)

F. TRAVELLING ALLOWANCES:
1. Official local or foreign travels and assignments under this Order
shall cover only those which meet the following criteria: (i) it is
essential to the effective performance of an official or employee’s
mandates or functions; (ii) it is required to meet the needs of the
department, agency, bureau or office, or there is substantial
benefit to be derived by the State; (iii) the presence of the official
or employee is critical to the outcome of the meeting,
conference, seminar, consultation or any official activity to be
attended; and (iv) the projected expenses are not excessive or
involve minimum expenditure.
2. All officials authorized to approve local or overseas travels are
required, as far as practicable, to minimize travel cost. Hence, all
forms of communications, such as, but not limited to
teleconferencing and videoconferencing or submission of briefs
and position papers, as alternatives to travel, must be
explored, provided, these do not compromise national security
and confidentiality of official communications. 41

ONLINE EDITION - COMPLIMENTARY

 (EO No. 77, 15 March 2019)

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 EXPENDITURES AND DISBURSEMENTS

3. General Guidelines:
a. Both official local and foreign travels shall be treated and
accounted for as cash advances. Official local travel shall no
longer be treated as direct charges to appropriations of
allotments. The Accountant shall obligate all cash advances
granted.
b. No cash advance shall be granted to any official or
employee unless a proper accounting of the previous cash
advance for travel given to him/her is first made or the same
is first liquidated and/or settled:
c. Proper accounting shall mean the receipt by the Accountant
of the prescribed liquidation documents although not yet
recorded in the books of accounts nor audited by the
auditor.
d. Liquidation shall mean the recording of the liquidation
documents in the books of accounts by the accountant as a
credit to the cash advance account after verifying the same,
although not yet audited by the Auditor.
e. Settlement shall mean the issuance of the Credit Notice by
the Auditor after the audit of the liquidation documents.
f. Cash advances granted for purposes of official travel, both
local and foreign, shall not require bonding of the traveling
official or employee.
(COA Circular No. 96-004, 19 April 1996)
4. Documentary Requirements:
a. Local Travel
i. Office Order/Travel Order approved in accordance with Sec.
3 of
Executive Order (EO) No. 298
ii. Duly approved itinerary of travel
iii. Certification from the accountant that the previous cash
advance
has been liquidated and accounted for in the books
b. Foreign Travel
1. Office Order/Travel Order approved in accordance with the
provisions of Secs. 1 and 2 of EO No. 459, 01 September 2005
i. Provincial Governors and Mayors of highly
urbanized cities or independent component cities
- as approved by the Secretary of the Department
of Interior and Local Government
42

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 ii. Other government officials and employees - as
approved
by the head of agency
2. Duly approved itinerary of travel

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 LTOM, 2nD EDITIOn

3. Letter of invitation of host/sponsoring country

agency/organization
4. For plane fare, quotations of three travel agencies or its
equivalent

5. Flight itinerary issued by the airline/ticketing office/travel

agency
6. Copy of the United Nations Development Programme
(UNDP) rate for the daily subsistence allowance (DSA)
for the country of destination for the computation of
DSA to be claimed
7. Document to show the dollar to peso exchange rate at
the date of grant of cash advance
8. Where applicable, authority from the Office of the
President to
claim representation expenses
9. In case of seminars/trainings
a. Invitation addressed to the agency inviting
participants (issued by the foreign country)
b. Acceptance of the nominees as participants
(issued by the foreign country)
c. Programme Agenda and Logistics Information
10. Certification from the accountant that the previous cash
advance
has been liquidated and accounted for in the books
(COA Circular No. 2012-001, 14 June 2012)

SECTION 109. LIQUIDATION OF CASH ADVANCES

A. GENERAL GUIDELINES
1. The accountable officer shall liquidate cash advances within the
following
period:
a. Salaries, Wages, Allowances, Honoraria and other Similar
Payments
– within five (5) calendar days after the end of the pay period.
b. Field Operating Expenses – within 20 calendar days after the
end of the year subject to replenishment as frequently as
necessary during the year.
c. Petty Cash Fund (PCF) – as soon as the disbursement
reaches 75% or as needed, the PCF shall be replenished
43

ONLINE EDITION - COMPLIMENTARY

 which shall be equal to the total amount of expenditures
made therefrom. In case of termination, resignation,
retirement or dismissal of the PCF custodian, immediately
thereafter.
d. Travelling Expenses – within 30 days after the return of the
official/ employee concerned to his/her official station for
local travel and

ONLINE EDITION - COMPLIMENTARY

 EXPENDITURES AND DISBURSEMENTS

within 60 days after the return of the official/employee

concerned to
the Philippines in the case of foreign travel.
e. Special Purpose – as soon as the purpose of the cash
advance has been served.
2. The Accountable Officer (AO) shall prepare the Report of
Disbursements in three copies and submit the original and
duplicate of the same with duly accomplished vouchers/payrolls
and supporting documents to the accountant. For payments
based on receipts and invoices only, he/she shall also prepare a
liquidation voucher which shall be submitted with the report and
the supporting documents to the accountant. The AO shall be
deemed to have complied with the requirement of proper
accounting for the cash advance upon receipt by the Accountant
of the liquidation documents.
3. Within ten (10) days after receipt of the report and supporting
documents form the AO, the accountant shall verify the report,
record it in the books and submit the same with all the
vouchers/payrolls and supporting documents to the Auditor. The
cash advance shall be considered liquidated in the books of
accounts although not yet audited by the COA auditor.
4. Within thirty (30) days from receipt of the report and supporting
documents from the accountant, the auditor shall complete
the audit. He/she shall issue the corresponding Credit Notice
to the AO to inform the latter of the amount allowed and any
suspensions and/or disallowances made. In case of disallowance,
a copy of the Credit Notice shall be furnished the Accountant who
shall record the restoration of the cash advance for the amount
disallowed. The amount allowed in audit by the Auditor as
contained in the Credit Notice shall be deemed to have been
settled.
5. The AO shall submit to the Auditor the documents to settle his/her
suspension/ disallowance. When the documents are found in
order, the Auditor shall lift the suspension and/or issue another
Credit Notice for the settled disallowance, copy furnished the
Accountant who shall draw a Journal Voucher to record the credit
to the cash advance. In case of cash settlement, the AO shall
present the necessary Official Receipt to the Auditor for notation.
6. The Credit Notice issued by the Auditor to the AO shall be deemed
sufficient compliance with the requirements of COA Circular No.
94-001, 20 January 1994. (Prescribing the Manual on Certificate of
Settlement and Balance, Revised 1993)
7. When a cash advance is no longer needed, or has not been used
for a period of two (2) months, it must be returned to or refunded
immediately to the collecting officer.
44

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8. All cash advances shall be fully liquidated at the end of each year.
Except for petty cash fund, the AO shall refund any unexpended
balance to the Cashier/Collecting Officer who will issue the
necessary official receipt.
9. At the start of an ensuing year, a new cash advance may be
granted, provided that a list of expenses against the previous
cash advance is submitted.

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

However, when no liquidation of the previous cash advance is

received on or before January 20, the Accountant shall cause the
withholding of the AO’s salary.
(COA Circular No. 97-002, 10 February 1997)

B. DOCUMENTARY REQUIREMENTS
1. Payroll Fund for Salaries, Wages, Allowances, Honoraria and
other Similar Expenses
a. Report of Disbursements certified correct by the Accountable
Officer
b. Approved payrolls/vouchers duly acknowledged/signed by the
payee/s
c. Approved Daily Time Records (DTRs) or Certificate of Service
d. Approved application for leave
e. In case of payment of personnel under the “job order” status,
duly
verified/accepted accomplishment report
f. OR in case of refund for unclaimed salaries
g. Authority from the claimant and identification of documents, if
claimed
by person other than the payee
h. Such other pertinent supporting documents as are
required by the nature of expense
2. Petty Cash Fund
a. Summary of Petty Cash Vouchers
b. Report of Disbursements
c. Petty Cash Replenishment Report
d. Approved purchase request with Certificate of Emergency
Purchase,
if necessary
e. Bills, receipts, sales invoices
f. Certificate of inspection and acceptance
g. Report of Waste Materials in case of replacement/repair
h. Approved trip ticket for gasoline expenses
i. Canvass from at least three suppliers for purchases
involving ₱1,000 and above, except for purchases made
while on official travel
45

ONLINE EDITION - COMPLIMENTARY

j. Summary/Abstract of Canvass
k. Petty Cash Vouchers duly accomplished and signed
l. OR, in case of refund

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 EXPENDITURES AND DISBURSEMENTS

m. For reimbursement of toll receipts: toll receipts and trip tickets

n. Such other supporting documents that may be required
and/or required under the company policy depending on the
nature of the expenses
3. Field/Activity Current Operating Expenses
Same requirements as those for salaries, petty operating
expenses, other personal services, and maintenance and other
operating expenses depending on the nature of expenses
incurred.
4. Traveling Expenses
a. Local Travel
i. Paper/electronic plane, boat or bus tickets, boarding
pass, terminal fee
ii. Certificate of appearance/attendance
iii. Copy of previously approved itinerary of travel
iv. Revised or supplemental Office Order or any proof
supporting
the change of schedule
v. Revised Itinerary of Travel, if the previous approved
itinerary was not followed
vi. Certification by the head of agency (HoA) as to the
absolute necessity of the expenses together with the
corresponding bill or receipts, if the expenses incurred
for official travel exceeded the prescribed rate per day
(certification or affidavit of loss shall not be considered
as an appropriate replacement for the required
hotel/lodging bills and receipts)
vii. Liquidation report
viii. Reimbursement Expense Receipt (RER)
ix. Official Receipt (OR) in case of refund of excess cash
advance
x. Certificate of travel completed
xi. Hotel room/lodging bills with official receipts in the case
of official travel to places within 50-kilometer radius
from the last city or municipality covered by the Metro
Manila Area, or the city or municipality where their
permanent official station is located if outside the Metro
Manila Area, if the travel allowances being claimed
include the hotel room/lodging rate.
46 b. Foreign Travel
ONLINE EDITION - COMPLIMENTARY
 i. Paper/electronic plane tickets, boat or bus tickets, boarding
pass
ii. Certificate of appearance/attendance for training/
seminar
participation

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 LTOM, 2nD EDITIOn

iii. Bills/receipts for non-commutable representation

expenses approved by the President under Sec. 13 of
EO No. 248
iv. For reimbursement of actual travel expenses in
excess of the prescribed rate (EO No. 298)
1. Approval by the President
2. Certification from the HoA that it is absolutely
necessary
3. Hotel room bills with official receipts (certification
or affidavit of loss shall not be considered as an
appropriate replacement for the required
hotel/lodging bills and receipts)
v. Revised Itinerary of Travel, if applicable
vi. Narrative report on trip undertaken/Report on Participation
vii. OR in case of refund of excess cash advance
viii. Certificate of Travel Completed
ix. Liquidation Report
(COA Circular 2012-001, 14 June 2012)
5. HANDLING, CUSTODY AND DISPOSITION OF THE CASHBOOK
a. A newly- appointed or designated AO shall start with a new
cashbook. Before discharging his/her duties, the new AO
shall be briefed by the Accountant and the Auditor on the
proper recording of the transactions and other matters
related to his/her work.
b. The AO shall maintain separate cashbooks for salaries,
wages, allowances, etc. and for petty operating expenses.
The AO shall record the transactions in the prescribed
cashbook daily. He/She may record each
invoice/receipt/voucher individually or the total
disbursements for the day depending on the volume of the
transactions.
c. The AO shall reconcile the book balance with the cash on
hand daily. He/she shall foot and close the books at the end
of each month. The AO and the Accountant shall reconcile
their books of accounts at least quarterly.
d. The cashbooks shall be kept at the Office of the AO and then
placed inside the safe or cabinet when not in use. It may be
taken from his/her custody only by the Auditor or an official
duly authorized by the Agency Head, who shall issue the
necessary receipt.
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e. When the AO ceases to be one, the cashbook shall be
submitted to the Treasurer and shall form part of the
accounting records. No clearance shall be issued to an AO if
he/she fails to submit the cashbook as required.

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 EXPENDITURES AND DISBURSEMENTS

(COA Circular No. 97-002, 10 February 1997)

6. DUTIES AND RESPONSIBILITIES OF THE COA AUDITOR ON THE
GRANTING, UTILIZATION AND LIQUIDATION OF CASH ADVANCES
The resort to the cash advance system despite certain problems has
been
recognized as a facilitative tool in the financial operations of the
government.
The Auditor shall periodically evaluate the accountability of the
Accountable Officer (AO) and recommend reduction of the cash
advance if found excessive.
a. Cash Examination
i. The Auditor shall conduct an examination of the
accountability of each AO at least once every semester
or as existing regulations of the COA require.
ii. The Auditor shall demand the presentation by the AO of
his/her cashbook, cash and cash items for examination.
Failure by the AO to have duly forthcoming any public
funds with which he/she is chargeable, upon payment
by the Auditor shall be prima facie evidence of
misappropriation.
iii. The Auditor shall exclude from among the cash items
presented any accommodation checks, “vales”, IOUs,
chits or other forms of promissory notes and should not
accept them as credit to the account.
iv. The Auditor shall at once demand in writing the
production of the missing funds at the moment the
shortage or loss is discovered and established. The
granting of a grace period for the restitution is not
allowed by law.
v. The Auditor shall submit the cash examination report,
together with all the working papers/evidences
disclosing the shortage, to the Provincial/City Auditor (if
the offense is committed in an LGU) or to the COA
Director concerned for the filing of criminal proceedings
in accordance with COA Memorandum No. 83-81B, COA
Memorandum No. 90-660 and paragraphs 3.1 and 3.2 of
COA Memorandum No. 95-112, 26 December 1995.
b. During Periods Where No Cash Examination is Conducted
i. Upon failure of the AO to liquidate his/her cash advance
within two (2) months for AOs holding office within
the station and three (3) months for AOs outside the
station from date of grant of the cash advance, the
Auditor shall issue a letter demanding liquidation or
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 explanation for non-liquidation.
ii. If thirty (30) days have elapsed after the demand letter
is served and no liquidation or explanation is received,
or the explanation

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 LTOM, 2nD EDITIOn

received is not satisfactory, the Auditor shall advise the

head of the agency to cause or order the withholding of
the payment of any money due the AO.
c. The AO shall likewise be held criminally liable for failure to
settle his/ her accounts. For this purpose the Auditor shall:
i. Execute an affidavit stating the nature/purpose of the
cash advance; the amount not liquidated/accounted for;
the fact that no liquidation or explanation has been
submitted despite demand or if explanation has been
submitted, the same is not satisfactory; the date the
letter of demand was served on or received by the AO;
and other information which may be pertinent to the
case.
ii. State in the affidavit the violation of the provisions of
Sec. 89 of PD 1445 and the penal provisions under Sec.
128 of the same law, both of which are herein quoted in
full to wit:
“Sec. 89. Limitations on Cash Advance – No cash
advance shall be given unless for a legally authorized
specific purpose. A cash advance shall be reported on
and liquidated as soon as the purpose for which it was
given has been served. No additional cash advance
shall be allowed to any official or employee unless the
previous cash advance given to him/her is first settled
or a proper accounting thereof is made.”
“Sec. 128. Penal Provision – Any violation of the
provisions of Secs. xx 89, xx of this Code or any
regulation issued by the Commission implementing
these Sections shall be punished by a fine not
exceeding one thousand pesos (₱1,000) or by
imprisonment in the discretion of the court.”
iii. The affidavit shall be submitted to the COA Director
concerned who shall refer the case to the appropriate
Office of the Deputy Ombudsman, if the offense is
committed within the Metropolitan Manila Area, in
accordance with paragraphs 3.1.1 and 3.2, respectively,
of COA Memorandum No. 95-112, 26 Dec 1995.
(COA Circular No. 97-002, 10 February 1997)

SECTION 110. GUIDELINES AND PROCEDURES IN THE

WRITE-OFF OF UNLIQUIDATED CASH ADVANCES
As a rule, cash advances must be liquidated within the prescribed periods
depending upon the nature of the particular cash advance.
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Dormant unliquidated cash advances are advances granted to disbursing
officers, agency officers and employees which remained non-moving for
ten (10) years or more and when settlement/collectability could no longer
be ascertained.

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 EXPENDITURES AND DISBURSEMENTS

Write-off of dormant accounts is the process of derecognizing the

asset account and the corresponding allowance for impairment from the
books of accounts and transferring the same to the Registry of Accounts
Written Off (RAWO). This does not mean condoning/extinguishing the
obligation of the accountable officer/debtor.
A. SPECIFIC GUIDELINES:
The Accountant shall:
1. Conduct regular and periodic verification, analysis, and validation
of the existence of the receivables, unliquidated cash advance,
and fund transfers, and determine the concerned debtors,
accountable officers (Regular and Special Disbursing Officers,
Collecting Officers, Cashiers) and the source and implementing
government entities concerned;
2. Reconcile the unliquidated fund transfers between the source and
implementing government entities, prepare the adjusting entries
for the reconciling items noted, and require liquidation of the
balances;
3. Prepare the necessary adjusting entry/ies for the following:
a. Recognition of the computed/determined impairment in
accordance with the Philippine Public Sector Accounting
Standards or Philippine Financial Reporting Standards
b. Correction of inadvertent errors, or inaccurate calculation or
computation
c. Reclassification of accounts
d. Recovery/settlement of previously written off accounts
Adjustments made pursuant to items (2) and (3) need not be
submitted to the COA for approval but are subject to the
usual audit. However, the accountant or the auditor may
seek assistance from the Government Accountancy Sector;
and;
e. Prepare aging of dormant receivables, unliquidated cash
advances, and fund transfers on a quarterly basis to support
the request for write-off, and indicate in the remarks column
the existence of the applicable conditions, as follows:
i. Absence of records or documents to validate/support
the claim and/or unreconciled reciprocal accounts
ii. Death of the accountable officer/employee/debtor
iii. Unknown whereabouts of the accountable officer/
employee/ debtor, and that he/she could not be located
despite diligent efforts to find him/her
iv. Incapacity to pay or insolvency
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 LTOM, 2nD EDITIOn

v. Exhaustion of all possible remedies by the Management

to collect the receivables and to demand liquidation of
cash advances and fund transfers
vi. No pending case in court involving the subject dormant
accounts.
B. PROCEDURES IN THE WRITE-OFF
1. The Head of the government entity shall file the request for
authority to write-off dormant receivable accounts, unliquidated
cash advances, and fund transfers to the COA Audit Team Leader
(ATL) and/or Supervising Auditor (SA). No filing fee is required;
2. The request shall be supported by the following documents:
a. Schedule of dormant accounts by accountable
officer/debtor/ government entity and by account, certified
by the accountant and approved by the Head of the
government entity;
b. Certified relevant documents validating the existence of the
conditions,
as applicable, such as:
i. Death Certificate issued by Philippine Statistics
Authority (formerly National Statistics Office)
ii. Proof of Insolvency
iii. Certification from the Department of Trade and Industry
that
the debtor has no registered business
iv. Certification from the Securities and Exchange Commission
that
the Corporation is no longer active
v. Certificate of no residency in the barangay of the
municipality/
city of last known address
vi. Proof of exhaustion of all remedies to collect the
receivables and demand to liquidate the cash advances
and fund transfers, such as but not limited to copies of
served or returned demand letters
vii. Certification by Legal Officer of the entity of no pending
case
relative to the account
viii. Certification by the responsible officials of the entity to the
effect
that there are no records/documents available to validate
claim
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 ix. Other justifications, like in the case of request for
write-off due to loss of documents, the circumstances of
the loss should be stated in the letter-request
x. In case of fund transfer, the unliquidated amount after
reconciliation shall be supported by certification by the
Chief Accountants and approved by the Heads of the
source and implementing entities that the fund was
utilized for the purpose, and certification from

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 EXPENDITURES AND DISBURSEMENTS

the recipient that the project was partially or fully

implemented, supported by pictures of the implemented
projects.
(COA Circular No. 2016-005, 19 December 2016)
3. The COA Regional Directors (RD) shall have jurisdiction over
decisions of SAs/ATLs of LGUs within their respective regions. All
appeals shall be filed with the RD having jurisdiction over the
place where the auditee is situated. Appeals shall be by Appeal
Memorandum, with proof of service of copy thereof to the Auditor
concerned, as well as proof of payment of the filing fee.
4. Within five (5) calendar days from receipt of the Appeal
Memorandum, the RD shall issue an Order to Answer to the
SA/Regional Supervising Auditor (RSA)/ATL concerned. The
SA/RSA/ATL shall have fifteen (15) calendar days within which to
file the Answer, together with the entire records of the case.
5. Within five (5) calendar days from receipt of the Answer and the
entire records of the case, the RD shall transmit the same to the
concerned Cluster Director (CD) of the National Government
Sector (NGS)/ Corporate Government Sector, for adjudication. The
RD shall ensure that the documentary requirements in Rule V of
the Revised Rules of Procedure of the COA (RRPC) or COA Circular
No. 2016-005, as the case may be, are complete and that every
page thereof is numbered in continuous sequence, prior to
transmittal to the CD. The transmittal communication shall
indicate the number of pages consisting the records of the case.
6. Should additional documentary requirements be needed by the
CD, the same shall be addressed to the SA/RSA/ATL concerned,
through the RD. The SA/RSA/ATL shall have five (5) calendar days
within which to comply. The transmittal of these additional
documents back to the CD, shall likewise be coursed through the
RD, who shall act on them in the same manner and within the
same period prescribed.
7. The RD shall monitor the status of cases within his/her regional
jurisdiction and shall include the same in the required regional
reports.
8. The RD shall be furnished a copy of final decisions at the level of the
CD, for
information and monitoring.
(COA Circular No. 2019-002, 20 March 2019)
9. The Accountant shall:
a. Prepare the Journal Entry Voucher (JEV) within 15 working
days upon receipt of the decision granting the authority to
write-off, for approval of the Head of the government entity,
52 effect the adjusting entries in the books, and enter the gross
ONLINE EDITION - COMPLIMENTARY
 amount of the receivables in the Registry of Accounts
Written-Off (RAWO).
b. Submit the JEV to the COA ATL.

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 LTOM, 2nD EDITIOn

c. Maintain a RAWO to record the accounts written-off and

keep a copy of the approved request for write-off including
the records and documents pertaining thereto.
d. At the end of the year, foot entries in the RAWO and make
the appropriate disclosures in the Notes to Financial
Statement (FS).
(COA Circular No. 2016-005, 19 December 2016)

SECTION 111. SPECIAL EDUCATION FUND (SEF)

DISBURSEMENTS
A. The Treasurer and/or the concerned accountable officers shall
maintain separate cashbooks for the SEF which shall be in accordance
with the prescribed format. (Sec. 87, Chapter 5, Volume I, MNGAS for
LGUs)
B. Disbursement procedures including the reports to be submitted by the
accountable officer concerned are the same as those for the General
Fund. However, disbursements shall be approved by the Local Chief
Executive concerned as co- chairman of the local school board. The
division/city superintendent of schools or the district supervisor
concerned, as the cash maybe, shall certify vouchers or payrolls as
to validity, propriety, and legality of the claim involved. (Sec. 91,
Chapter 5, Volume I, MNGAS for LGUs).
C. Allowable Expenses Chargeable Against the Special Education Fund (SEF)
1. Operation and Maintenance of Public Schools
a. Payment of compensation/allowances of teachers locally
hired in elementary and secondary schools identified to
have shortages per the teacher deployment analysis of
Department of Education (DepEd); the rates of
compensation/allowances shall be determined by the Local
School Board (LSB) based on funds available, but not to
exceed the salary schedule being implemented by the LGU
concerned; Provided, that for the purpose of hiring teachers
chargeable against the SEF, the LSB in each province, city or
municipality shall utilize the list found in the Registry of
Qualified Applicants
b. Payment of salaries/wages of utility workers and security
guards hired in public elementary and secondary schools
which have not been provided such position in the DepEd
budget
c. Payment of expenses pertaining to the operation of schools,
which may include utilities and communication expenses
2. Construction and Repair of School Buildings
a. Construction, repair and maintenance of school buildings 53

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 and other facilities for public elementary and secondary
schools which are deemed to have shortage of classrooms
or of other facilities, as the case maybe per DepEd
classroom deployment analysis, subject to existing
standards/specifications set by DepEd and/or Department of
Public Works and Highways (DPWH); furthermore, this item
shall be given priority in the SEF budget

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 EXPENDITURES AND DISBURSEMENTS

b. Acquisition and titling of school sites

3. Facilities and Equipment
a. Acquisition of laboratory, technical and similar apparatus
and information technology equipment and corollary
supporting services (e.g. internet connection maintenance),
subject to the prevailing requirements and specifications set
by the DepEd
4. Educational Research
a. Educational research other than the research subject areas
funded in the DepEd budget, subject to the prevailing
policies and guidelines of the DepEd.
5. Purchase of Books and Periodicals
a. Purchase of library books and periodicals for the libraries
of the different elementary and secondary schools in the
province, city and municipality and purchase of instructional
materials, workbooks and textbooks needed by public
elementary and secondary schools, subject to the prevailing
policies and guidelines of the DepEd.
6. Sports Development
a. Expenses for school sports activities at the national,
regional, division, district, municipal and barangay levels, as
well as for other DepEd related activities subject to the
prevailing requirements and specifications set by the DepEd.
7. Funding for the Early Childhood Care and Development Council
(ECCD) Program under Republic Act No. 8980, 5 December 2000,
particularly for the following purposes:
a. Direct services related to the implementation of the ECCD
program, such as salaries/allowances of locally hired child
development teachers and/or day care workers, etc.
b. Organization and support of parent cooperatives to establish
community based ECCD programs.
c. Provision of counterpart funds for the continuing
professional development of ECCD public service providers.
d. Provision of facilities for the conduct of the ECCD Program.
e. Payment of expenses pertaining to the operations of the
National Child Development Centers, including but not
limited to, utilities (electricity and water expenses) and
communication (telephone expenses).
(DepEd/DBM/DILG Joint Circular No. 1, 26 May 2017,
Revised Guidelines on the Use of the SEF)
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 LTOM, 2nD EDITIOn

SECTION 112. TRUST FUND DISBURSEMENTS

A. The Treasurer and/or the concerned accountable officers shall
maintain separate cashbooks for the Trust Fund which shall be in
accordance with the prescribed format. (Sec.98, Chapter 5, Volume I,
MNGAS for LGUs)
B. Disbursements from trust funds shall be in accordance with the
specific purpose stated in the trust agreement/approved budget
between the trustor and trustee (LGU) as certified by the Chief
Accountant. The certification on the disbursement voucher as to
existence of funds held in trust shall serve this purpose. (Sec. 100,
Chapter 5, Volume I, MNGAS for LGUs)
C. Disbursements from the Trust Fund shall require:
1. Certification and approval of vouchers and payrolls as to validity,
propriety and legality of the claim involved by the
department/office head concerned
2. Certification as to existence of funds held in trust and
completeness and
propriety of supporting documents by the Accountant
3. Certification as to cash availability by the Treasurer (COA Circular
No. 2006- 002, 31 January 2006)
4. Approval by the Administrator of the fund
(Sec. 101, Chapter 5, Volume I, MNGAS for LGUs)
D. Disbursement from the trust fund shall be as follows:
1. DISBURSEMENT BY CHECK

PROCESS PERSON/UNIT RESPONSIBLE

a. Gather supporting documents, Concerned offices
prepare DV/payroll and forward to
the Accounting Unit.
b. Check completeness of documents Accounting Unit
and verify existence of funds held
in trust, assign number to
DV/payroll, sign box A and forward
to the Treasurer.
c. Verify claim, certify on the Treasurer (COA Circular
availability of fund (Box B) and No. 2006-002, 31
forward to the approving officer. January 2006)
d. Approve transaction (Box C) Local Chief Executive or
and forward DV to authorized approving officer
Cashier.
e. Prepare and sign check and Treasurer
forward
check with DV to countersigning officer. 55

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f. Countersign check and forward to Administrator
Accountant for preparation of the
Accountant’s Advice.

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 EXPENDITURES AND DISBURSEMENTS

PROCESS PERSON/UNIT RESPONSIBLE

g. Prepare Accountant’s Advice of Accountant
Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.
h. Issue check to claimant. Record Treasurer
disbursement in Cashbook -
Cash in Bank. Prepare Report of
Checks Issued (RCI), forward RCI
with DV and supporting
documents to Accounting Unit.
i. Prepare the JEV based on individual Accounting Unit
checks/voucher; sign “Prepared
By” portion )approved by Chief
Accountant) and record JEV in the
Check Disbursement Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers.
j. Forward RCI, DV, supporting Accountant
documents and JEV to the Office of
the Auditor for final custody and
post audit.

2. PAYMENTS THROUGH CASH ADVANCES

For payments through cash advances, procedures “a” to “d” for
check disbursement shall be followed. The rest of the procedures
shall be the same as that of the General Fund.
(Sec.102, Chapter 5, Volume I, MNGAS for LGUs)

SECTION 113. UTILIZATION OF CONFIDENTIAL FUNDS

Confidential Fund (CF) refers to the lump-sum amount provided as such in
the General Appropriations Act for National Government Agencies, in
appropriation ordinances for Local Government Units (LGUs) and in the
Corporate Operating Budgets for Government Owned and Controlled
Corporations, for their Confidential Expenses.
Confidential expenses refer to those expenses pertaining/related to
surveillance activities in civilian government agencies that are intended
to support the mandate or operations of the agency.
The utilization of this fund is generally confidential and classified by
nature which requires not only strong internal controls in the release and
utilization thereof, but also strict auditing rules to prevent mishandling or
improper application of funds.
A. GENERAL GUIDELINES
56

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 1. LGUs are entitled to Confidential Funds if the peace and order is a
priority
concern and which have duly allocated CF, but not Intelligence Fund in their

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 LTOM, 2nD EDITIOn

annual appropriations ordinances, provided that, specific amount

for Peace and Order Program (POP) is included in their Peace and
Order and Public Safety Plan and provided further, that there is a
specific appropriation for POP in their annual budget. The
computation of allowable CF of an LGU shall be based on the
budget of the LGU’s POP only.
POP refers to any or a combination of the following programs,
activities and projects which may be included as part of the
Peace and Order and Public Safety Plan of an LGU so that these
shall be eligible for funding the CF:
a. Crime prevention and law enforcement activities (e.g.
conduct of coordination meetings with partner
agencies/stakeholders, increase in police visibility, provision
of equipage and/or logistical support for law enforcement
agencies and conduct of awareness raising activities for the
community
b. Aid and/or capability development for personnel of law
enforcement agencies, and volunteers/partners
c. Programs for anti-illegal drug, illegal gambling, counter
insurgency and/or counter-terrorism, illegal logging, illegal
mining, illegal fishing, smuggling and human trafficking
2. All allocations of CF shall be supported with a Physical and
Financial Plan indicating the proposed amount allocated for each
program, activity, and project, where disbursements pertaining to
confidential expenses shall be based.
3. Release and utilization of the total CF shall be covered by a
resolution duly approved by two-thirds (2/3) of the total
membership of the Local Peace and Order Council.
4. In the event that additional CF in excess of the limitation is
extremely necessary, additional appropriation supported with
duly authorized supplemental budget shall be approved by the
Secretary of the Department of Interior and Local Government
(DILG).
5. CF shall be used only for the following Confidential Expenses:
a. Purchase of Information necessary for the formulation and
implementation of program, activities and projects relevant
to the national security and peace and order
b. Rental of transport vehicle related to confidential activities
c. Rentals and the incidental expenses related to the
maintenance of safe houses
d. Purchase or rental of supplies, materials and equipment for
confidential operations that cannot be done through regular
procedures without compromising the information gathering 57

ONLINE EDITION - COMPLIMENTARY

 activity concerned
e. Payment of rewards to informers (non-employee of
concerned government agency) subject to the following
conditions:

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 EXPENDITURES AND DISBURSEMENTS

i. Approval by the Head of Agency (the highest official of the

LGU)
ii. Supported with documents evidencing the success of
the information gathering and/or surveillance activities
on account of the information given by the informer
iii. Directly related to the conduct of the specific confidential
activities
of authorized agencies
f. Uncover/Prevent illegal activities that pose a clear and
present danger to agency personnel/property, or other
facilities and resources under the agency protection, done in
coordination with the appropriate law enforcement agencies
g. Others that may be authorized by the General
Appropriations Act or other special law/s
6. Conduct of confidential activities shall, as far as practicable, be done
with
proper collaboration with any of the following enforcement agencies:
a. The Philippine National Police (PNP)
b. The Armed Forces of the Philippines (AFP)
c. The Philippine Drug Enforcement Agency (PDEA)
d. Other agencies with law enforcement functions
Such collaboration,if undertaken, must be specified in the
accomplishment report of the concerned agency.
7. In no case shall CF be used for:
a. Salaries, wages, overtime, additional compensation,
allowance or other fringe benefits of officials and employees
who are employed by the government in whatever capacity
or elected officials, except when authorized by law
b. Representation, consultancy fees or entertainment expenses
c. Construction or acquisition of buildings or housing structures
8. Disbursements from CF shall be supported with documentary
evidence of payment among others, which shall be submitted to
the Intelligence and Confidential Fund Audit Unit (ICFAU) in a
sealed envelope and signed by the Special Disbursing Officer
(SDO).
ICFAU refers to the unit created under the Office of the Chairperson
of the
Commission on Audit in charge of the CF and Intelligence Fund (IF).
SDO refers to the head of the agency (HOA) or a regular
employee designated by the HOA to be in charge of making
58

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 disbursements of CF so received and accountable therefor.
9. Disbursements form CF shall be supported by Certification of the
Accountable Officer of the CF signed under oath, containing the
following:

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 LTOM, 2nD EDITIOn

a. That the certifying officer or employee is accountable for

the
disbursements from the cash advance of CF
b. That the expenses were incurred in connection with the
agency’s confidential operations and activities, with
supporting documents attached to the liquidation for CF,
documentary evidence of payment kept in a sealed
envelope in the vault in the Office of SDO
c. That the details and supporting documents of transactions
that are classified are in the custody of the agency and kept
in its vault which may be inspected by ICFAU if the
circumstances so demand
d. That the funds are not used for payment of salaries and
wages, overtime, additional compensation, allowance or
other fringe benefits of officials and employees,
representation/entertainment expenses, consultancy fees
and construction or acquisition of buildings or housing
structures
e. That the purchase of equipment (if there is any) is relevant
to the
confidential activities
f. That the expenditures are necessary and utilized for legal
purposes
10. In case of misuse of CF, and depending on the participation in the
transaction, the Budget Officer, Chief Accountant, the Treasurer
and Project Officer may likewise be held accountable with the
SDO.

B. PROCEDURAL GUIDELINES
1. LGUs with peace and order concerns shall allocate in their
respective Annual Appropriations Ordinance funds for POP, as
part of its Peace and Order and Public Safety Plan.
The total amount for CF shall not exceed thirty percent (30%) of the
total amount allocated for the LGU’s POP.
2. The release and use of CF shall be covered by a resolution duly
approved by two-thirds (2/3) of the total membership of the Local
Peace and Order Council.
3. LGUs shall secure certification from the concerned PNP chief in
their locality relative to the peace and order situation highlighting
in concrete details the circumstances which require the urgency
in allocating CF.
4. Additional CF shall be covered with a supplemental budget
59

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 authorized by the Sanggunian concerned and/or reviewed by the
DBM Secretary or his/ her authorized representative as the case
may be, the source of which shall not come from 20%
Development Fund of the LGU.
5. Request for additional CF in excess of the ceiling provided shall
be filed with the concerned DILG Field Officer justifying the need
thereof supported with the following documentary requirements:

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 EXPENDITURES AND DISBURSEMENTS

a. Duly approved Three-Year Peace and Order and Public Safety

Plan;
b. Annual and Supplemental Appropriations Ordinance
indicating the appropriations for CF;
c. Certification from the Budget Officer as to the availability
of
appropriations;
d. Certifications from the concerned PNP Chief in their locality
relative to the peace and order situation highlighting in
concrete details the circumstances which require the
urgency in allocating funds for confidential activities;
e. Physical and Financial Plans for both the original allocation
for CF and the subject request; and
f. Certification of Full Disclosure Policy (FDP) compliance.
6. Upon review of the documents and the field-verification of the
circumstances as to the need to allocate additional CF, the DILG
Regional Office shall forward the request within five (5) days to
the Director of the Bureau of Local Government Supervision
(BLGS) for further evaluation. The Director of the BLGS shall
submit his/her recommendation to the Secretary of the DILG, who
shall approve or disapprove the request.

C. REPORTING REQUIREMENTS
To strengthen accountability, all HoAs of LGUs which released CF shall
submit Quarterly Accomplishment Report on the use of CF, which
must be duly certified by the HoA, not later than the 15th day of the
first month of the succeeding quarter to the Secretary of the DILG.

D. PROTECTION OF SECURITY INFORMATION

With due regard for the protection from unauthorized disclosure of
classified information relating to sensitive, confidential and
intelligence matters, the following procedures shall be observed:
1. The HoA shall classify the information reflected on the required
status reports on CF as “confidential”, using as reference the
provisions of OP Memorandum Circular Nos. 78, S. 1964 and 196,
S. 1968; Letter of Instruction 1420 s. 1984; EO 608 s. 2007, and
its implementing rules and regulations ,14 April 2009.
2. The Security Officer duly designated by the HoA to handle the
intelligence report, and was issued security clearance to have
access to such classified information, shall submit
accomplishment report.
60

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 LTOM, 2nD EDITIOn

SECTION 114. GUIDELINES ON THE GRANT AND

LIQUIDATION OF CASH ADVANCE FOR
CONFIDENTIAL FUNDS
A. GRANT OF CASH ADVANCE
1. Cash advances shall be used for specific legal purpose related to
CF. Under no circumstance shall it be used for liquidation of the
previous cash advance or be transferred from one accountable
officer to another.
2. Cash advances for CF shall be drawn by duly designated and
bonded SDOs or HoA for the implementation of a program,
activity, and project chargeable to the corresponding CF of the
agency, upon approval of the HoA. In no case shall cash advance
for CF be utilized as reimbursement of the expenses prior to the
granting of cash advance.
3. The cash advance shall not exceed the maximum cash
accountability of the SDO/HoA as indicated in his/her designation
Order and approved bond application.
4. Cash advances chargeable against the CF of agencies shall not
exceed the
appropriation therefor and the ceilings as specified herein.
5. Cash advances shall be limited to the requirements for three (3)
months. The disbursement voucher (DV) shall clearly state the
duration of implementation of the projects. If the implementation
of the project will extend to more than 3 months, additional
amount may be granted only after liquidation of the previous
cash advance. If on the other hand, cash advances are drawn
monthly, liquidation shall also be done monthly. Cash advances
shall be granted only upon the certification of the Agency
Accountant stamped or printed on the DV that previous cash
advance for the same purpose, project or activity given to the
SDO requesting cash advance has been liquidated and proper
accounting was made.
6. No transfer of funds/appropriation through cash advances or any
form of payment from one agency to another for purposes of
confidential activities shall be allowed.
7. The following are the required documents to support the DV for
the grant of cash advance for CF:
a. Certified copy of the designation of the SDO. If the HoA is
the SDO, a certification by the HoA to that effect shall be
signed by him/her;
b. Certified copy of the approved application for fidelity bond
together with a copy of the official receipt evidencing
payment of premium of List of Accountable Officers with 61

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 Approved Bond issued and duly certified by the Bureau of
the Treasury;
c. Certified copy of the transmittal letter of the Liquidation
Report (LR) of the previous cash advances duly stamped,
“received” by the ICFAU, COA and certification of the
accountant that the SDO has no unliquidated CF advances;

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 EXPENDITURES AND DISBURSEMENTS

d. Original specimen signatures of signatories to DV and

Obligation Request (ObR);
e. Certified copy of the Physical and Financial Plan where
disbursements
of the cash advance of the CF shall be based;
f. Certified copy of the annual budget bearing approval of
proper
authorities concerned;
g. Certified copy of the Annual/Supplemental Budget supported
with the Annual Invest Program (AIP) showing the
allocation/budget for POP of the LGU, and the corresponding
Appropriation Ordinance approving the budget;
h. Statement of Itemized POP of the LGU where the allowable CF
was
computed duly certified by the Budget Officer;
i. Certified copy of the minutes of the meeting evidencing the
2/3 votes of the Local Peace and Order Council approving
the POP and the release of the CF;
j. Certification from the concerned PNP Chief in the locality
highlighting the peace and order situation in the locality and
supporting the need to release and use the CF;
k. Approval by the DILG Secretary in case of additional
appropriation for CF; and
l. Certified copy of the ObR.
8. Within seven (7) days after release of check, the cash advance
voucher with covering transmittal letter enumerating the
supporting documents shall be submitted by the Agency
Accountant or authorized representative in a sealed envelope to
the concerned COA Audit Team Leader (COA ATL) for post audit.

B. LIQUIDATION OF CASH ADVANCE

1. Liquidation of cash advance for CF shall be audited by the ICFAU.
2. All cash advances for CF shall be liquidated within 30 days after
every quarter, or from the approved target date of completion of
the project/activity, or after the cash advance had been fully
utilized whichever comes first in accordance with the following
procedures:
a. Submission of the Liquidation Report (LR) duly signed by the
HoA or SDO approved by the HoA, together with the
supporting documents and listed in the covering transmittal
letter of the LR. These shall be submitted directly to the
62 ICFAU in a sealed envelope with a visible label
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 “CONFIDENTIAL - For ICFAU Only” through any of the
following:
i. Registered mail

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 LTOM, 2nD EDITIOn

ii. Courier
iii. Authorized liaison officer
b. The agency liaison officer’s authorization by the HoA must be
presented
to the receiving staff designated by the ICFAU.
c. The ICFAU authorized receiving staff shall open the sealed
envelope in front of the liaison officer to verify the
completeness of the documents stated in the covering
transmittal letter. If incomplete, the ICFAU authorized
receiving staff shall not stamp “received” and shall return
the documents in a sealed envelope signed by the ICFAU
staff.
d. A copy of the transmittal letter, duly received by the ICFAU
authorized staff, shall be forwarded by the liaison officer to
the Agency Accountant and the COA ATL concerned. Upon
receipt of said transmittal letter, the Agency Accountant
shall record the liquidation of the cash advance in the books
of accounts.
e. In case of LR received by ICFAU thru mail, the “Received”
copy shall immediately be sent to the concerned agency
within five (5) days upon its receipt.
f. In case Notice of Disallowance is issued by ICFAU after
post audit of the liquidation of the cash advance, the
Agency Accountant shall restore in the books of accounts
the cash advance corresponding to the amount of
disallowance and shall form part of the unliquidated cash
advance of the SDO/HoA.
g. All cash advances for CF shall be liquidated at year-end.
3. The liquidation of cash advances for CF shall be supported by the
following documentary requirements:
a. Liquidation report;
b. Certified copy of the check and paid DV of the cash advance
being liquidated, signed and/or approved by the HoA with
certification by the Agency Accountant stamped or printed
on the DV;
c. Documentary evidence of payments and Certification by the HoA,
required under General Guidelines 8 and 9 of Sec. 113 of this Manual;
d. Copy of the Physical and Financial Plan;
e. Copy of the Accomplishment Report and its proof of
submission to the concerned agencies;
f. Copy of the transmittal letter of the DV and supporting
63

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 documents pertaining to the cash advance being liquidated
duly stamped “Received” by the office of the COA ATL; and
g. Other supporting documents the ICFAU deems necessary for
the proper evaluation of liquidation documents submitted.

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 EXPENDITURES AND DISBURSEMENTS

C. RESPONSIBILITIES OF THE SPECIAL DISBURSING OFFICER

1. Disburse the CF in accordance with the provisions of Joint Circular
No. 2015-01, 08 January 2015.
2. Maintain separate records of all transactions in Cash
Disbursement Record for CF and retain a certified
photocopy/duplicate copy of required supporting documents and
reports on the Utilization of CF.
3. Prepare and submit to the HoA, for approval, the LR and progress
reports of the cash advances and the quarterly accomplishment
report on the use of CF.
4. Prepare and submit to ICFAU the LR of cash advances supported
with documentary requirements.

D. HANDLING, CUSTODY AND DISPOSITION OF THE CASH

DISBURSEMENT RECORD (CDR)
Cash Disbursement Record (CDR) refers to a record maintained by the
Special Disbursing Officer (SDO) showing the receipt, disbursement
and balance of the Confidential Fund (CF).
1. The appointed or designated SDO shall maintain a CDR as
required in the New Government Accounting System (NGAS)
Manual. Before discharging his/her duties, the new SDO shall be
briefed by the Accountant on the proper recording of the CF
transactions and other matters related to his/her work.
2. The SDO shall record each invoice/receipt/voucher individually, or
the total disbursements for the day depending on the volume of
the transactions.
3. The SDO shall reconcile the balance of the CDR with cash on hand
daily. He/she shall foot and close the CDR and reconcile with the
cash on hand balance at the end of each month.
4. The CDR shall be kept in the safe and steel cabinet with lock in
the office of the SDO when not in use. It may be taken out from
his/her custody only by the ICFAU or a duly authorized
representative or an official duly authorized by the HoA, who shall
issue necessary receipt thereof.
5. When the SDO ceases to be one, he/she shall submit the CDR
together with files of the proof of payments in a sealed envelope
with his/her signature on the sealing tape to the treasurer who
shall place the same in the vault. Such turn-over shall be
evidenced by a receipt. No clearance shall be issued to an SDO if
he/she fails to submit the CDR, or if the requirements for
handling, custody, recording and reconciliation have not been
faithfully complied with.
6. The CDR shall be available to the ICFAU or a duly authorized
64

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representative of the COA Chairperson at any time for
examination.
(COA/ DBM/ DILG, Governance Commission for GOCCs,
Department of National Defense Joint Circular No. 2015-
001, 8 January 2015)

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CHAPTER FUND MANAGEMENT SERVICES
4
SECTION 115. CASH PROGRAMMING TOOLS
Cash Programming Tools that may aid the Local Treasurer in cash
management and programming are the Cash Flow Forecast (CFF) and the
Cash Flow Analysis (CFA).

SECTION 116. MEDIUM TERM FORECAST

A. Medium-Term Revenue Forecasting Model.
1. The BLGF medium-term revenue forecasting model arrives at
LGU-level projections via a three-step forecasting process.
a. Step 1: The annual growth rates (AGRs) for each revenue
category in the Statement of Receipts and Expenditures
(SRE), i.e. Real Property Tax, Business Tax, Fees and
Charges and Receipts from Economic Enterprises, and for
each LGU type — province, city, and municipality, are
forecasted. The calculation is based on estimated elasticities
econometrically estimated from available Budget Operation
Statement (BOS), Statement of Income and Expenditures
(SIE) and SRE data from 1991 up to the most recent data.
b. Step 2: The AGRs for each revenue category by individual
LGU are forecasted. The calculation utilizes individual LGU
revenue elasticities, by revenue category, with respect to
the LGU type to which they belong and calculated using 5-
year most recent SRE data.
c. Step 3: The AGRs for each revenue category, by individual
LGU, are applied on the actual base year (time = t) LGU
revenue estimates as stored in the SRE to come up with the
forecast revenue in year t+1. The forecast in year t+1
becomes the base year for forecasting t+2, and so on, for
multi-year forecasts.
2. For IRA, the forecasting process is as follows:
a. Step 1: Forecast the AGRs of the IRA using the elasticities
econometrically estimated from available data from the year
the IRA was implemented to the most recent data.
b. Step 2: Calculate the IRA distribution for each LGU type of
the forecasted IRA.
c. Step 3: Get the percentage distribution of particular LGU
over the total IRA for each LGU type using the most recent
IRA data. The application of the percentage distribution of
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 particular LGU to the total IRA forecasted for each LGU type
is the forecast IRA for year t+1, year t+1 becomes the base
year for forecasting t+2, and so on.

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 FUND MANAGEMENT SERVICES

3. The forecasting process for the transfers from Special Shares is as

follows:
a. Step 1: Forecast AGRs for Special Shares, which are Shares
from Economic Zone, Expanded Value Added Tax (EVAT),
National Wealth, Philippine Amusement Gaming Corporation
(PAGCOR) /Philippine Charity Sweepstakes Office (PCSO)/
Lotto and Tobacco Excise Tax, based on the total Special
Shares for each LGU type receiving Special Shares using
elasticities econometrically estimated. The annual growth
rates for each LGU type are applied on total Special Shares
of the actual base year (t) to come up with the forecast
value of Special Shares in year t+1, and so on.
b. Step 2: Determine the probability of a particular LGU to
receive its Special Shares using the joint probability, i.e. the
product of frequency distribution across years and frequency
distribution across LGUs per LGU Type.
c. Step 3: Compute the forecasted value of Special Shares by
applying the probability of a particular LGU to receive its
Special Shares to the forecast value for Special Shares for
particular LGU Type to determine the Special Shares of a
particular LGU for year t+1, and so on.

NOTE
r BLGF Memorandum Circular No. 16-2015, 19 June 2015, entitled “Local Public Financial Management T

B. Medium Term Forecast for Current Operating Expenditures (COE).

Refer to Budget Operations Manual (BOM) 2016 for LGUs of the
Department of Budget and Management (DBM) for the forecasting
model of the medium-term forecasts for COE.

SECTION 117. CASH FLOW ANALYSIS (CFA)

A. The CFA is a cash flow monitoring tool use to guide the LCE, the Local
Treasurer, and the Local Budget Officer to control the releases of
allotment depending on the collection/expenditure performance
during the period. It provides information on the cash overage/surplus
or cash shortage/deficit on a monthly or periodic basis, so that, timely
decisions can be made for wise and prudent cash utilization.
B. The preparation of the CFA requires the following information:
1. Actual cash receipts and disbursements of the month or period;

66
2. Actual cash receipts and disbursements from the beginning of the
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year to the end of the reporting month (Year-to-Date Actual). This
will become next month’s beginning balance;

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 LTOM, 2nD EDITIOn

3. Year to date forecast or estimates which is the cumulative total of

the projected cash flow from the beginning of the year to the
month under analysis, as indicated in the CFF;
4. Adjusted Estimated Annual Amount which is computed as follows:

AEAA = Aytd + P + Anc/d - Aac/d

Where:
AEAA is the adjusted estimated annual amount;
Aytd is the actual year to date;
P is the projected cash flow for remaining months;
Anc/d is the amount not yet collected/disbursed but projected for
previous/ this month and deemed to be still collectible or payable;
and
Aac/d is the amount already collected/disbursed but projected for
next months.
5. Annual Original Forecast which is the annual total amount in the CFF;
and
6. Variance between the Adjusted Estimated Annual Amount and
the Annual Original Forecast. The actual and adjusted figures are
subtracted from the Annual Original Forecast figure. (pp. 92-93,
Updated Budget Operations Manual (UBOM) for LGUs)

SECTION 118. INFORMATION PROVIDED BY THE

CASH FLOW FORECAST AND CASH
FLOW ANALYSIS
The analysis of the Cash Flow provides the following information to the
LCE, the Sanggunian, the LFC and other fiscal officers of the LGU, so that,
important fiscal decisions and policies could be promptly introduced and
implemented:
A. Excess in the Collection of Taxes and Other Revenues – This is
generally good, but a regular and very substantial excess in the
collection may mean an underestimated original cash collection
forecast. This is particularly applicable if the to-date variance is also
reflected in the annual variance. In this case, a re- evaluation of the
annual forecast may be required. If there is substantial net annual
excess in the receipts for whatever reason, the LCE may decide to
increase the annual budget for the succeeding year.
B. Under-Collection of Taxes and Other Revenues – This may require
increased efforts in the collection of such taxes or generation of such
revenues. A consistently big shortfall in collection should cause alarm
to the LCE and other local officials on possible problems in collection
efforts or in resource mobilization operations. In this instance, 67

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estimates should be adjusted to a more realistic level. The shortfall in
collection should be considered in deciding any subsequent release of
allotment.

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 CHAPTER

C. Excess in the Disbursement – This means unplanned expenditures are

being paid. Consistent material on disbursement excess should warn
the LCE on the possibility of imposing additional reserve, and
suspension or postponement of planned activities.
D. Under-Disbursement – This may mean savings if the annual variance
resulted from the non-incurrence of certain regular expenses or
project expenses costing less than the estimated amounts. Under-
disbursement may also result from postponement of payments to
contractors or for obligations that are not yet legally due. Long-
outstanding obligations should be investigated and proper action
should be undertaken to settle them if there are valid claimants, or to
revert them to surplus if there are no more valid claimants after the
lapse of two (2) years. Long-outstanding obligations should also warn
local officials of indiscriminate commitment or obligation of funds
even without valid claimants or contracts. Sources of savings should
be evaluated and determined as early as possible, so that funds can
be used or appropriated for some other purpose.

SECTION 119. DAILY CASH FLOW

The Local Treasurer may also prepare a Daily Cash Flow Statement to
show the highs and lows in cash inflows and cash outflows on a daily
basis. The daily cash flows are managed to avoid embarrassment arising
from the inability to meet immediate cash requirements of the LGU, to
pay suppliers on due dates, and to profitably make use of temporary idle
cash balance. The Daily Cash Flow Statement may be prepared in
addition to the monthly CFF and the CFA.

SECTION 120. NUMBER OF DAYS’ USAGE IN CASH

A. An LGU may adopt a policy of maintaining its cash at a level equal to a
certain number of days’ requirement. This may be done by computing
the average cash requirement per day and the number of days’
usage in cash. The following formulas are used in the computation:
Operating Expenses (net of depreciation and other non-cash charges)
1. Average Cash Requirement = Number of working Days in One
Year Cash Balance
2. Number of Days’ Usage in Cash = Average Cash Requirement Per Day
B. The resulting Number of Days’ Usage in Cash will show how many
days the current cash balance of the LGU will be able to cover current
operational requirements.
C. Capital Investment and Expenditure Assessment – With the
expanded role of the Local Treasurer as the financial adviser to the
LCE in the sourcing and management of LGU funds and the increasing
68 opportunity for LGUs to embark on long-term income-generating
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capital projects, it is becoming more imperative that the Local
Treasurer should have basic working knowledge of the different tools
used in the evaluation and assessment of capital investment
activities.

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 LTOM, 2nD EDITIOn

This is because capital projects involve the commitment of a large

amount of LGU resources and funds and increase the financial risk in
their operation, so much so that whatever decisions made in the
present would have future material repercussions to the LGU.

SECTION 121. THE ADMINISTRATIVE PROCESS

FOR CAPITAL EXPENDITURES
This involves searching for capital investment opportunities, submission
of project proposals to prospective funders/underwriters, evaluation of
various proposals, control of capital expenditures and follow-up of
results. To be assured that capital investment proposal would be
consistent with the LGU long-term plans and programs and to avoid
waste of time, effort and resources, criteria for the project proposal must
be established. The criteria may include the objective, relevance,
suitability to the LGU, and most importantly profitability or income-
generation potential of the proposed project. To guide the Local
Treasurer in the evaluation and analysis of the different project
proposals, the methods discussed in the succeeding sections may be
employed.

SECTION 122. PAYBACK PERIOD

A. The payback period refers to the length of time or number of years it
will take to recover the initial outlay for a project. The formula for this
is as follows:
Investment Payback Period = Annual Cash Inflow from Operations
B. The Annual Cash Inflow from Operations is the amount of cash a
project is expected to generate annually. It is equal to the cash
inflows from projected sales and or service fees minus the estimated
cash outflows for operational expenses. The payback period will
determine the number of years of recovering the cost of the project
within the economic life of the asset. The economic life of an asset is
its estimated useful life or that length of period during which
economic benefits can be derived therefrom. It is usually shorter than
the physical life of the asset.
C. Payback Period is Shorter than the Economic Life of the Asset – If the
payback period is shorter than the economic life of the asset, the LGU
is expected to realize profit or investment return between the
payback period and the economic life.
D. Payback Period is Equal to the Economic Life of the Asset – If the
economic life is just equal to the payback period, the investment
would not be bringing in any income and may even be considered a
losing proposition since the time value of money is disregarded.
E. Annual Cash Inflows is Uneven – If the annual cash inflows are 69

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uneven, the payback period is computed by adding the annual cash
inflows from year to year until the accumulated amount becomes
equal to the investment cost. If the asset has a scrap value, the
payback period may be computed by dividing the investment (less
scrap value) by the annual cash inflow from operation.

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 CHAPTER EXAMINATION, AUDIT, AND SETTLEME
5
The Commission on Audit (COA) is vested by the Constitution with the
power, authority and duty to examine, audit and settle all accounts
pertaining to the revenues and receipts of and expenditures or uses of
funds, owned or held in trust by, or pertaining to, the Government, or any
of its subdivisions, agencies, or instrumentalities, including government-
owned or controlled corporations.
COA has the exclusive authority to define the scope of its audit and
examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations, including
those for the prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable (IUEEU) expenditures or uses
of government funds and property.
Specifically, such jurisdiction shall extend over but not limited to the
following cases
and matter:
A. Disallowance of expenditures or uses of government funds, and
properties found to be illegal, irregular, unnecessary, excessive,
extravagant or unconscionable;
B. Money claims due from or owing to any government agency;
C. Determination of policies, promulgation of rules and regulations, and
prescription of standards governing the performance by the
Commission of its powers and functions;
D. Resolution of novel, controversial, complicated or difficult questions of law
relating
to government accounting and auditing;
E. Charges made in the audit of revenues and receipts resulting from
under-appraisal, under-assessment or under collection;
F. Audit of the books, records and accounts of public utilities as provided by
law;
G. Visitorial power over non-governmental organizations:
1. Subsidized by the government.
2. Those required to pay levies or government share.
3. Those funded by donations through the government.
4. Those for which government has put up a counterpart fund.
5. Those entrusted with government funds or properties.
H. Authorization and enforcement of the Settlement of Accounts
70 subsisting between agencies of the government;
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I. Compromise or release in whole or in part, of any settled claim or
liability to any government agency;

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 LTOM, 2nD EDITIOn

J. Power to require the submissions of papers relative to government

obligations;
K. Opening and revision of settled accounts;
L. Retention of money due to a person for satisfaction of his/her
indebtedness to the government;
M. Seizure by the Auditor of the office of the local treasurer found to have a
shortage
in cash;
N. Checking and audit of all property or supplies of the government agency;
O. Constructive distraint of property of any accountable officer with
shortage in his/ her accounts upon a finding of a prima facie case of
malversation of public funds or property against him/her; and
P. In coordination with appropriate legal bodies, collection of
indebtedness found to be due a government agency in the settlement
and adjustment of its accounts by the Commission.
(The 2009 Revised Rules of Procedure of the COA)

SECTION 123. GENERAL PRINCIPLES, RULES, AND

REGULATIONS
A. Settlement of Accounts
1. Settlement of Accounts is the process of determining the balance
of the account of an accountable officer, through an audit and
examination thereof, to verify the total debits and total credits
that may be allowed. Such balance represents the disallowance
or charge which shall be his/her accountability. A suspension may
likewise result from such audit as provided in these rules.
2. The settlement of accounts shall be evidenced by an appropriate
marking in the documents audited as prescribed by the
Commission. If no balance in the account is found or the
transaction is allowed in audit, the audited documents shall
indicate “Allowed in Audit”. Otherwise a Notice of Suspension
(NS), Notice of Disallowance (ND) or Notice of Charge (NC) shall
be issued, and the documents marked accordingly, with amount
suspended/disallowed/ charged indicated therein.
3. The audit and examination of transactions pertaining to an
account shall be done in accordance with laws, rules, regulations
and standards to determine whether these transactions may be
allowed, suspended, disallowed or charged in audit. In case an
audit decision cannot as yet be reached due to incomplete
documentation/information, or if the deficiencies noted refer to
financial or operational matters which do not involve pecuniary
loss, an Audit Observation Memorandum (AOM) shall be issued. 71

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a. A transaction is suspended in audit when it is temporarily
disallowed/ disapproved until the requirements on matters
raised in the course of audit are to be complied with. This
shall cover only transactions which

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

may result in pecuniary loss to the government. An NS shall be

issued
indicating the requirements to be complied by the officers
concerned.
b. A transaction is disallowed in audit when it is disapproved
either in whole or in part of being an illegal, irregular,
unnecessary, excessive, extravagant or unconscionable
expenditure. An ND is issued for the disallowed amount.
c. A transaction is charged in audit when the correct amount of
revenue/ receipt due the government is not received by the
agency as a result of under-appraisal/assessment/collection.
An NC is issued for the uncollected amount.
4. An Audit suspension or disallowance/charge shall be settled by
the persons responsible or liable therefor through compliance
with the requirements, or payment/restitution or by any of the
modes of extinguishment of obligation by law, respectively. A
Notice of Settlement of Suspension/Disallowance/ Charge
(NSSDC) shall be issued for such settlement.
5. The Auditor shall, within fifteen (15) calendar days after the end
of each quarter, prepare and issue a Statement of Audit
Suspensions, Disallowances and Charges (SASDC) to inform of the
total suspensions, disallowances and charges for the agency as
of the end of the quarter audited. In case of a
retiring/transferring officer, the Auditor shall issue the updated
list of outstanding suspensions, disallowances and charges for
said officer, within five (5) days from receipt of request for such
list.
6. The COA is authorized to withhold salary and other emoluments
of a Local Treasurer or Assistant Treasurer up to the amount of
his/her alleged shortage, but not to apply the withheld amount to
the alleged shortage for which his/ her liability is still under
litigation. (Encarnacion E. Santiago vs. COA, et al., GR No.
146824, 21 November 2017)

B. Linkage to the Annual Audit Report (AAR)

1. The total unsettled suspensions, disallowances and charges at the
end of the calendar year as reflected in the SASDC for the last
quarter, shall be reported in the AAR of the same year.
2. The AAR shall also include in its comments and observations
other
deficiencies noted in the audit of accounts as indicated in the
AOM.

C. Responsibilities for Audit and Settlement of Accounts

72 1. Responsibilities of the Head of the Agency (HoA)

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a. The HoA who is primarily responsible for all government
funds and property pertaining to his/her agency, shall
ensure that: (i) the required financial and other reports
and statements are submitted by the concerned agency
officials in such form and within the period prescribed by the
Commission; (ii) the settlement of disallowances and

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 LTOM, 2nD EDITIOn

charges is made within the prescribed period; (iii) the

requirements of transactions suspended in audit are
complied with; and (iv) appropriate actions are taken on the
deficiencies noted as contained in the AOM.
b. He/She shall initiate the necessary administrative and/or
criminal action in case of unjustified failure/refusal to effect
compliance with the foregoing requirements by subordinate
officials. Gross negligence in disciplining subordinates who
are the subject of repeated adverse audit findings shall
subject the officials concerned to disciplinary action by the
proper authorities as the evidence may warrant.
c. He/She shall enforce the COA Order of Execution (COE) by
requiring the withholding of salaries or other compensation
due the person liable in satisfaction of the disallowance or
charge.
d. He/She shall ensure that all employees who are retiring or
transferring to other agencies shall first settle the
disallowances and charges for which they are liable.
2. Responsibility of the Agency Accountant
a. The Chief Accountant, Bookkeeper or other authorized
official performing accounting and/or bookkeeping functions
of the audited agency shall ensure that:
i. The reports and supporting documents submitted by
the accountable officers are immediately recorded in
the books of accounts and submitted to the Auditor
within the first ten (10) days of the ensuing month;
ii. The financial records are made accessible at reasonable
hours to
the Auditor or his/her authorized representatives when
needed;
iii. The audit suspensions, disallowances and charges
including their settlements, are properly monitored and
reconciled with the SASDC issued by the Auditor in
accordance with these rules;
iv. The disallowances and charges that have become final
and executory as contained in the Notice of Finality of
Decision (NFD) are recorded in the books of accounts,
and settlements thereof under the NSSDC are dropped
therefrom; and
v. The subsidiary ledgers/records are maintained and
properly updated for each official/employee determined
to be liable/ responsible for the amount disallowed/
charged/ suspended.
73

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3. Responsibility of the
Auditor The Auditor
shall:
a. Enforce submission of the receipt and disbursement records
with all paid vouchers, official receipts, reports and
supporting documents as prescribed by the Commission
and the related laws, rules and

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

regulations, and as necessary in the course of audit;

b. Conduct the examination and audit of the records, reports
and documents submitted covering transactions under the
identified audit areas;
c. Prepare, as a result of his/her examination and audit, the
pertinent NS/ ND/NC and AOM;
d. Serve the AOM, NS, ND, NC, NFD or COE to persons
concerned/ responsible/liable;
e. Sign NFD for disallowances/charges made by him/her;
f. Prepare the COE for disallowances/charges made by
him/her, for signature of his/her Director;
g. Monitor the enforcement of the COE issued by the authorized
officers
and report to his/her Director the action taken by the agency;
h. Issue the NSSDC when an audit
suspension/disallowance/charge has been settled; and
i. Prepare and transmit a quarterly SASDC to the agency head
and the accountant.
4. Responsibility of the COA
Director The COA Director
shall:
a. Exercise general supervision and review in the audit and
settlement of accounts;
b. Act on appeals;
c. Sign the NFD for decisions rendered by him/her;
d. Sign the COE for decisions rendered by him/her and by the
Auditor; and
e. Consolidate the SASDCS, for all auditees under his/her
jurisdiction. In the regions, consolidation shall be by cluster
and sector for quarterly submission to the cluster/sector
concerned for purposes of national consolidation.

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 LTOM, 2nD EDITIOn

SECTION 124. GUIDELINES IN THE ISSUANCE OF

AUDIT OBSERVATION MEMORANDUM
(AOM)/NOTICE OF SUSPENSION
(NS)/NOTICE OF DISALLOWANCE
(ND)/NOTICE OF CHARGE (NC)/NOTICE OF
SETTLEMENT OF SUSPENSION/
DISALLOWANCE/ CHARGE (NSSDC) AND
STATEMENT OF AUDIT SUSPENSIONS,
DISALLOWANCES AND CHARGES (SASDC)
A. AOM and Management Reply
1. The Auditor shall issue an AOM for observations relating to
financial/ operational deficiencies such as accounting, internal
control or property management which do not involve pecuniary
loss. An AOM may also be issued for documentary or other
information requirements to enable the auditor to make a
decision in audit.
2. The AOM is addressed to the HoA and the officer/s concerned
stating the deficiencies noted and/or the requirements to be
complied with and requiring a response thereto. It shall be signed
by both the Audit Team Leader and the Supervising Auditor.
3. The AOM shall be replied to by the agency officials concerned within
fifteen
(15) calendar days from receipt thereof.
4. If the agency officials fail to reply within the period specified
above, the audit observation on financial/operational deficiencies
shall be deemed accepted and shall be included in the
Management Letter and/or Audit Report. In case of failure to
submit the required documents or information needed to reach
an audit decision, an NS/ND/NC may be issued by the Auditor, as
warranted, after a re-evaluation of available
documents/information.
5. The agency reply/comments shall be evaluated by the Auditor
vis-a-vis the audit observations and he/she shall inform the HoA
and officers concerned in writing, of the results of the evaluation.
6. The documents/information submitted in response to the
requirements of the AOM may, after audit and examination,
provide the basis for the allowance in audit of the transactions, or
the subsequent suspension, disallowance or charge thereof, as
warranted.
B. Notice of Suspension (NS)
1. The Auditor shall issue an NS for transactions of doubtful legality/
75

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 propriety/ regularity which may result in pecuniary loss of the
government, and which will be disallowed in audit if not
satisfactorily explained or validly justified by the parties
concerned.
2. The NS shall be addressed to the HoA and the accountant and
served on the persons responsible, stating the amount
suspended, the reasons for

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

the suspension, the justification/explanation/legal basis or

documentation required in order to lift the suspension, and the
persons responsible for compliance with the requirements. It shall
be signed by both the Audit Team Leader and Supervising
Auditor.
3. The NS shall be issued as often as suspensions are made by the
Auditor for the purpose of notifying the agency head and the
accountable officer concerned of the amount suspended in audit.
4. A suspension should be settled within ninety (90) calendar days
from receipt of the NS; otherwise the transaction covered by it
shall be disallowed/ charged after the Auditor shall have satisfied
himself/herself that such action is appropriate. Consequently, the
Auditor shall issue the corresponding ND/ NC.
5. The date of receipt of the NS by the responsible officers or their
authorized representatives as provided in Sec. 12 of The 2009
Rules and Regulations on the Settlement of Accounts, COA
Circular No. 2009-006, 15 September 2009, shall be the reckoning
date for purposes of counting the 90-day period.
C. Notice of Disallowance (ND)
1. The Auditor shall issue an ND for transactions which are irregular/
unnecessary/excessive and extravagant, and those which are
illegal and unconscionable.
2. The ND shall be addressed to the agency head and the
accountant; served on the persons liable; and shall indicate the
transaction and amount disallowed, reasons for the disallowance,
the laws/rules/regulations violated, and persons liable. It shall be
signed by both the Audit Team Leader and the Supervising
Auditor.
3. The ND shall be issued as often as disallowances are made by the
Auditor in order to notify the agency head, the accountant, and
the persons liable for the amount disallowed in audit.
4. The disallowance shall be settled within six (6) months from
receipt of the ND by the persons liable.
5. The date of receipt of the ND by the persons liable therefor or by
their authorized representatives as provided under Sec. 12 of The
2009 Rules and Regulations on the Settlement of Accounts, COA
Circular No. 2009-006, 15 September 2009, shall be the
reckoning date for purposes of counting the 6-month period for
appeal.
D. Notice of Charge (NC)
1. The Auditor shall issue the NC as follows:
a. If the amount assessed/appraised is less than what is due
76 the government, the difference shall be a proper audit
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 charge.
b. If the amount billed is less than the amount due the
government, the difference shall also be a proper audit
charge.

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 LTOM, 2nD EDITIOn

c. If the amount collected is less than what is due the

government, the difference shall likewise constitute a
proper audit charge.
2. The NC shall be addressed to the agency head and the
accountant; served on the persons liable; and shall indicate the
transaction and amount charged, reasons for the charge,
laws/rules/regulations violated; and persons liable. It shall be
signed by both the Audit Team Leader and the Supervising
Auditor.
3. The NC shall be used and issued as often as charges are made by
the Auditor to notify the agency head, the accountant and the
persons liable for the charges noted in the audit of
revenues/receipts/assessments.
4. The audit charge shall be settled within six (6) months from the
date of receipt of the NC.
5. The date of receipt of the NC by the persons liable therefor or by
their authorized representatives, as provided in Sec. 12 of The
2009 Rules and Regulations on the Settlement of Accounts, COA
Circular No. 2009-006, shall be the reckoning date for purposes of
counting the 6-month period for appeal.

SECTION 125. SERVICE OF COPIES OF ND/NS/NC

A. A copy of the NS/ND/NC shall be served to each of the persons liable/
responsible, by the Auditor, through personal service. If personal
service is not practicable, it shall be served by registered mail. In case
there are several payees, as in the case of a disallowed payroll,
service to the accountant who shall be responsible for informing all
payees concerned, shall constitute constructive service to all payees
listed in the payroll.
B. Personal service is done by delivering personally a copy to the party
or by leaving it in his/her office with his/her clerk or with a person
having charge thereof. If no person is found in his/her office, or his/her
office is not known, or he/she has no office, then by leaving the copy
between the hours of eight in the morning and six in the evening at
the party’s residence, if known, with a person of sufficient age and
discretion then residing therein.
C. Service by registered mail is done by sending a copy by registered
mail to the office address of the party, if known; otherwise at his/her
residence with instruction to the Postmaster to return the mail to the
sender after ten (10) days, if undelivered. If no registry service is
available in the locality of either the sender or the addressee, service
may be done by ordinary mail.
D. The Auditor shall maintain a record of the date of actual or
constructive service of notices for purposes of determining the
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running of the ninety (90) days maturity period of the suspension and
the six (6) months period to appeal the disallowances and charges.
This information shall be included in the Record of COA Decisions
(ROCD).

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

SECTION 126. NOTICE OF SETTLEMENT OF SUSPENSION/

DISALLOWANCE/CHARGE (NSSDC)
The Auditor shall issue the NSSDC whenever a suspension/disallowance
or charge is settled.
A. A suspension shall be settled by the submission of the justification/
explanation and/or documentation required under an NS and after the
Auditor becomes satisfied that the transaction is regular/legal/proper
and that no loss was suffered by the government. If the Auditor is not
satisfied with the justification/ explanation and/or documentation
submitted, he/she shall issue the corresponding ND/NC.
B. A disallowance or charge shall be settled by payment of the amount
disallowed or by such other applicable modes of extinguishment of
obligation as provided by law. In the case of the latter modes, the
Auditor may refer to the General Counsel, for evaluation and advice,
the propriety of the settlement.
C. Settlement of disallowance or charge may also result from a decision
of the Director, Adjudication and Settlement Board (ASB) or the
Commission Proper, lifting the disallowance or charge.
D. The NSSDC shall be addressed to the agency head and the
accountant, copy furnished the persons responsible/liable and shall
indicate the NS/ND/NC settled, amount, nature of transaction and the
mode of settlement. It shall be signed by the Audit Team Leader and
the Supervising Auditor.

SECTION127. STATEMENTOFAUDITSUSPENSIONS,
DISALLOWANCES AND CHARGES (SASDC)
A. The Auditor shall prepare the SASDC summarizing the total
suspensions, disallowances and charges of the audited transactions
of an agency at the end of each quarter. The SASDC shall indicate the
balance at the beginning of each quarter of the suspension/
disallowances/ charges, as well as the suspension/ disallowances/
charges, and settlements during the quarter. It shall be signed by the
Audit Team Leader and the Supervising Auditor.
B. The SASDC shall be issued to the agency head and the Chief
Accountant within fifteen (15) calendar days from the end of each
quarter, copy furnished the COA Director concerned.
C. The quarterly SASDC issued by the Auditor shall be the basis for the
preparation by the COA Director of a consolidated quarterly SASDC for
his/her region/cluster showing the total unsettled suspensions/
disallowances/ charges per auditee department/agency.
D. The Assistant Commissioner for the Sector shall be furnished with a
copy of the consolidated quarterly SASDC of each cluster/region for
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purposes of national consolidation into a Sector SASDC as input into
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a database to be maintained

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 LTOM, 2nD EDITIOn

by the Information Technology Office showing the total unsettled

disallowances,
charges and suspensions per sector.

SECTION 128. ISSUANCE OF NOTICES BY SPECIAL AUDIT

TEAM
A. The following procedures shall be observed in the issuance of the
notices for transactions disallowed and charged in special audits and
settlements thereof:
1. The Special Audit Team Leader and Supervisor shall sign the
ND/NC for transactions audited.
2. The ND and NC issued shall be marked as “Special Audit ND/NC No.
,
Office Order No. .”
3. The ND/NC/ issued shall be transmitted by the Cluster Director of
the Office that conducted the special audit, to the agency head
and the accountant through the Auditor of the agency audited
and the concerned Cluster/ Regional Director, together with the
special audit report. The Audit Team Leader shall serve the
copies of the ND/NC on the persons liable and such ND/NC shall
be included in the SASDC for the current quarter.
4. In case of settlement of the ND/NC by the persons liable,
evaluation thereof shall be made by the Director of the Office
which conducted the special audit, who shall then advise the
auditor of the agency concerned to issue the NSSDC.
B. The Special Audit Team shall be authorized to reopen accounts
already post- audited and/or settled pursuant to Sec. 52 of PD 1445.
The Office Order directing the special audit is deemed sufficient
authority to reopen the accounts.
C. In case the transaction subject of the special audit has been earlier
allowed in audit, the special audit team shall preliminarily discuss the
disallowance or charge with the Auditor concerned. If the latter
disagrees with the findings of the audit team, the written comment
shall be requested from the Auditor for evaluation of the special audit
team.
D. The Auditor shall consider the significance or impact of the
disallowances and charges issued by the special audit team on the
fairness of presentation of the balance of the accounts of the agency,
and consequently on the audit opinion.

SECTION 129. DECISIONS AND APPEALS

A. Period to Appeal
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1. Any person aggrieved by a disallowance or charge may within six
(6) months from receipt of the notice, appeal in writing as
prescribed in these Rules. A disallowance or charge not appealed
within the period prescribed shall become final and executory.
2. The filing by the aggrieved party of an appeal will suspend the
running of the
prescribed period.

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

3. The running of the 6-month period shall resume upon receipt of a

decision from the Director.
(The 2009 Rules and Regulations on the Settlement of
Account, COA Circular 2009-006, 15
September 2009)
B. Proceedings Before the Director
1. For purposes of the Unified Audit Approach, jurisdiction over
appeals from NDs/NCs and from denials of request for relief from
accountability, pursuant to Rule V of the 2009 Revised Rules of
Procedure of the COA (RRPC), the COA Regional Directors shall
have jurisdiction over the following:
a. Appeals from NDs/NCs issued by the SAs/ATLs of local
government units (LGUs)
b. Appeals from decisions of the SAs/ATLs of LGUs within their
respective regions, denying requests from relief from
accountability.
(COA Circular No. 2019-002, 20 March 2019)
A person aggrieved by a disallowance/charge may file an
Appeal Memorandum to the Director within six (6) months
from receipt of the ND/NC.
(COA Resolution No. 2009-006, 15 September 2009)
2. Within five (5) calendar days from receipt of the Appeal
Memorandum, the Director shall order the Auditor to file his/her
Answer, copy furnished the Appellant, and to submit the entire
records of the case including the Excerpt of Documents and
Summary of Events (EDSE), duly numbered at the bottom of each
page.
3. The Auditor shall comply with the order of the Director within
fifteen (15) calendar days from receipt thereof. The appellant may
file a reply within the same period from receipt of the Answer.
4. The Director shall decide the appeal within fifteen (15) calendar days
from
receipt of the complete documents necessary for evaluation and
decision.
5. If the Director reverses, modifies or alters the decision of the
Auditor, the case shall be elevated to the Commission Proper for
automatic review of the Director’s decision.
6. The Director shall not entertain a motion for reconsideration of his/her
decision.
(The 2009 Rules and Regulations on the Settlement of
Accounts, COA Circular No. 2009-006, 15
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 September 2009)
C. Abolition of the COA Adjudication and Settlement Board (ASB)
The CP resolves to abolish the ASB without prejudice to its restoration
should it become necessary in the future. All appeals from the
decisions of the Directors and all cases presently under the jurisdiction
of the ASB shall be filed with the CP,

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 LTOM, 2nD EDITIOn

and Rule VI (Proceedings before the ASB) of the RRPC is repealed. All
cases pending with the ASB shall be forwarded to the CP for decision.
(COA Resolution No. 2012-001, 22 March 2012)
D. Proceedings Before the Commission Proper (CP)
1. Appeal from the Decision of the Director
a. A party aggrieved by the decision of the Director involving
disallowances/charges exceeding one million
(₱1,000,000.00) pesos may file an appeal to the CP within
the time remaining of the six (6) months period to appeal;
b. The CP shall decide any case or matter brought before it within
sixty
(60) calendar days from the date of its submission for
decision or resolution.
c. A case or matter is deemed submitted for decision or
resolution upon the filing of the last pleading, brief, or
memorandum required by the rules of the Commission. If
the account or claim involved in the case needs reference to
other person or office, or to a party interested, the period
shall be counted from the time the last comment necessary
to a proper decision is received by it.
2. Automatic Review of the Decision of the Director.
a. A decision of the Director which reverses, modifies or alters a
decision
of the Auditor shall be automatically reviewed by the CP.
b. The CP shall within 60 calendar days from receipt of the
Auditor’s decision and the entire records of the case, review
the same and renders its own decision.
(The 2009 Rules and Regulations on the Settlement of
Account, COA Circular No. 2009-006, 15 September
2009)
3. Motion for reconsideration of CP Decision
a. A decision or resolution of the Commission upon any matter within its
jurisdiction shall become final and executory after the lapse of thirty
(30) days from notice of the decision or resolution.
The filing of a petition for certiorari shall not only stay the
execution of the judgment or final order sought to be
reviewed, unless the Supreme Court shall direct otherwise
upon such terms as it may deem just.
b. A Motion for Reconsideration (MR) may be filed within 30
days from notice of the decision or resolution, on the
grounds that the evidence is insufficient to justify the
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 decision; or that the said decision of the Commission is
contrary to law. Only one (1) motion for reconsideration of a
decision of the Commission shall be entertained.
(COA Resolution No. 2011-006, 12 August 2011)

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

c. A motion to reconsider a decision, suspends the running of

the period to elevate the matter to the Supreme Court.
Within two (2) days from its filing, the Commission Secretary
shall refer the motion to the concerned office of the Legal
Services Sector for study and recommendation. The latter,
shall, within 15 days from receipt thereof, submit for
consideration of the CP either a draft decision or resolution
upon meritorious grounds, or a recommendation to deny the
Motion for Reconsideration (MR) for having been filed out of
time, or for failure to raise a new matter or show sufficient
ground to justify a reconsideration of the assailed decision
or resolution.
In case the CP denies a motion for reconsideration for having
filed out of time or for failure to raise any new matter or
other sufficient ground to justify a reconsideration thereof,
the Secretary of the Commission shall issue a notice to the
parties, within five (5) days from the relevant Minutes of
Meeting of the CP are signed, informing them of the
Resolution of the CP.
(COA Resolution No. 2013-018, 30 September 2013)

SECTION 130. APPEAL TO THE SUPREME COURT

A. The party aggrieved by any decision, order, or ruling of the CP may
within thirty (30) days from his/her receipt of a copy thereof, appeal
on certiorari to the Supreme Court in the manner provided by law and
Rules of Court.
B. When the decision, order, or ruling of the CP adversely affects the
interest of any government agency, the appeal may be taken by the
head of the agency.

SECTION 131. FINALITY AND ENFORCEMENT OF

DECISIONS
A. Notice of Finality of Decision (NFD)
1. A decision of the CP, Director or Auditor upon any matter within
their
respective jurisdiction; if not appealed, shall become final and
executory.
2. The NFD shall be issued by the authorized COA official to the
agency head to notify that a decision of the Auditor, Director, or
CP has become final and executory, there being no appeal or
motion for reconsideration filed within the reglementary period.
3. The NFD shall be addressed to the Agency Head, Attention: The
Chief Accountant and shall indicate the particulars of the COA
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 decision that has become final and executory and the persons
liable.
4. A copy of the NFD shall be served by the Auditor of the agency
concerned on the persons liable or their authorized
representatives who shall indicate their printed name and
signature and the date of receipt thereof.
5. The Chief Accountant shall, on the basis of the NFD, record in the
books of accounts, the disallowance and/or charge as a
receivable.

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 LTOM, 2nD EDITIOn

6. COA Order of Execution (COE)

a. The COE shall be issued to enforce the settlement of an
audit disallowance/ charge, whenever the persons liable
therefor refuse or fail to settle them after the decision has
become final and executory.
b. The COE shall be approved by the following officers, not
earlier than five 5 days from receipt of the NFD by the
agency head:
i. Director, for NFD issued by him/her or by the Auditor
ii. General Counsel for NFD issued by him/her or by the
Commission Secretary, or for judgment rendered by the
Supreme Court
c. The COE shall be addressed to the Agency Head, Attention:
The Treasurer/ Cashier, and shall indicate the NFD, the
particulars of the decision being enforced and the persons
liable.
d. The Auditor shall monitor the implementation of the COE
and report to the Director the action taken by the agency
thereon. Unsettled COEs shall be referred to the General
Counsel for appropriate action including referral to the
Office of the Solicitor General and the Ombudsman.
B. Dropping from the Books of Accounts of Settled ND or NC
Recorded final disallowances and charges which are settled shall be
dropped
from the books of accounts upon receipt by the Accountant of the NSSDC.
C. Opening and Revision of Settled Accounts
1. At any time before the expiration of three (3) years after the
settlement of any account by an auditor, the Commission may
motu proprio review and revise the account or settlement and
certify a new balance. For the purpose, it may require any
account, voucher, or other papers connected with the matter to
be forwarded to it.
2. When any settled account appears to be tainted with fraud,
collusion, or error of calculation, or when new and material
evidence is discovered, the commission may, within 3 years
after the original settlement, open the account, and after a
reasonable time for reply or appearance of the party concerned,
may certify thereon a new balance. An Auditor may exercise the
same power with respect to settled accounts upon prior
authorization of the COA Chairman pertaining to the agency
under his/her jurisdiction.
3. Accounts once finally settled shall in no case be opened or reviewed
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 as herein above provided.
4. If a settled account is re-opened or reviewed, and a new balance
is certified in accordance with Sec. 52 of PD No. 1445, the
aggrieved party may appeal therefrom.

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

SECTION 132. UNSETTLED ND/NC/NS

A. ND/NC/NS which have not been settled as of effectivity of these
rules shall be covered by a special report (Report on ND/NC/NS Issued
prior to the 2009 Rules and Regulation on Settlement of Accounts) to
be prepared by the Auditor and submitted to his/her Director, together
with the copies of the ND/NC/NS. Disposition thereof shall be as
follows:
1. NDs and NCs for which an Auditor’s Order (AO) or Final Order of
Adjudication (FOA) had been issued but which have not been
settled shall be verified and monitored as to their settlement.
Information shall be given to the General Counsel through the
Director as to the reason/s for non- enforcement of the AO or FOA.
2. NDs and NCs which have become final and executory but are not
covered by an AO or FOA shall be forwarded to the officer
concerned for the issuance of the COE.
3. NDs and NCs issued which have not become final and executory
shall be
governed by these Rules.
4. NSs shall be evaluated by the Auditor and the corresponding
ND/NC or NSSDC shall be issued.

SECTION 133. DETERMINATION OF BALANCE OF

ACCOUNTABILITY
A. The SASDC shall be issued covering transactions commencing from
the effectivity of the Rules on Settlement of Accounts.
B. The first SASDC issued shall reflect a zero balance for uniformity and
simplicity in the application of the rules and for facility in the
monitoring of agency suspensions/ disallowances/charges. This is not
in any way intended to mean that there are no existing suspensions,
disallowances or charges.
C. The suspensions, disallowances, and charges existing at the effectivity
of these Rules shall continue to be monitored and enforced by the
Commission.
(The 2009 Rules and Regulations on the Settlement of
Accounts, COA Circular No. 2009-006, 15
September 2009)

SECTION 134. CASH EXAMINATION

Cash is the most liquid asset of an agency. Because of its liquidity, it is
attractive, that it is most susceptible to theft and misappropriation. To
guard against the loss of cash through theft or fraud, adequate cash
84 management mechanisms and controls must be in place.
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The COA is constitutionally mandated with the power, authority and duty
to examine, audit, and settle all accounts pertaining to the revenues and
receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the government.

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 LTOM, 2nD EDITIOn

Cash examination is an audit technique whereby an authorized examiner

of cash and accounts inquires into the correctness and physical existence
of the balance of cash in the custody of an Accountable Officer (AO), the
validity of his/her cash transactions, the reliability of the cash records and
his/her conformance with prescribed procedures.

SECTION 135. OBJECTIVES OF CASH EXAMINATION

The entire cash examination process involves a comprehensive review
that aims to provide an overall determination of whether:
A. all government funds in the hands of an AO are actually existing
and properly accounted for.
B. the agency and its AOs are adhering strictly to prescribed rules and
regulations on cash transactions.
C. the agency’s practices and provide adequate safeguards against fraud
and losses of government funds.
Cash examination seeks to establish what the AO has and what he/she
should
have at the time of the examination. It specifically aims to-
1. establish the actual existence of cash in the custody of the AO as
well as the validity of the cash items presented;
2. determine whether all monies received had been correctly
recorded and fully accounted for in accordance with laws, rules
and regulations;
3. ascertain whether disbursements are valid, duly authorized,
actually paid and properly recorded;
4. prove the accuracy of the cash balance reflected in the cashbook;
and
5. verify if accountable forms are duly accounted for.

SECTION 136. COMMON PROCEDURES AND TECHNIQUES

A. The Auditor will:
1. Require the AO to temporarily suspend all transactions. If the
cash count cannot be finished at the close of office hours, seal or
double lock their safe, vault or other cash receptacles at the end
of the day and continue the count on the succeeding business
day/s until completed.
2. Cause the production of all cash, cash items, etc., by signing and
serving the cash production notice in General Form No. 74(A).
Require the AO to acknowledge the notice by signing the “Noted
and Complied With” box.
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3. Require the AO to post all transactions (such as collections,
remittances, deposits, cash advances and disbursements) in
his/her cashbook up to the time of examination, foot balance, rule
in ink and write the certification as follows:

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

I hereby certify on my official oath that all cash and depository transactions
had by me in my capacity as(Designation) of (Name of Agency) at the time of
examination, showing the balance of(₱) have
been correctly and completely recorded in the Cashbook.

Date Signature over Printed Name

If the unrecorded transactions are voluminous, consider them as cash

items during the count.
4. Establish proper cut-off by taking note of the last number of
Official Receipt/ check issued, control paid voucher/payroll. Affix
full signature and indicate cut-off date at the back of the second
copy of the official receipt.
5. See to it that all cash, checks, money orders, paid vouchers, other
cash items, and unused accountable forms are presented. Inspect
the safe, vault or other cash receptacles where the cash and cash
items are usually kept.
6. Require the AO to segregate private and/or personal funds, if any,
count them and have them placed in an envelope properly
labeled as private/ personal funds.
7. Require the AO to segregate by currency and denomination, the
notes and coins presented. Have the notes arranged in bundles
and the loose coins in groups.
8. Segregate the cash items by group, such as: cash in pay
envelopes, checks, money orders, paid vouchers, partially paid
payrolls, etc. Proceed with the listing of the cash items. In the
case of checks, and money orders, indicate the serial number,
date, drawer, drawee and amount. In the case of paid
vouchers/partially paid payroll, indicate voucher number, date,
payee/ payrolls head and amount.
9. Proceed with the piece-by-piece count in the presence of the AO,
starting from the highest to the lowest denomination, listing them
in space in General Form 74 (A).
10. See to it that no note or coin presented has been demonetized.
Mutilated notes must be examined for acceptability. It is the
common practice of banks not to accept mutilated notes unless
the serial numbers at both ends are intact.
11. After the count of cash, cash items and accountable forms,
require the AO to accomplish and sign the certification in General
Form No. 74(A) in the presence of two responsible persons whose
signatures shall likewise be affixed on the appropriate spaces.

86
12. Check the footings of the cashbook to ascertain the correctness
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of its total and balances. Take note of errors and require the AO
to adjust/correct the

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 LTOM, 2nD EDITIOn

cashbook. Disclose in the cashbook that the adjustment, if any,

was made at the instance of the examining auditor with the AO
and the former affixing their initials and indicating the date of
adjustment.
13. Accomplish the Statement of Accountability in General Form 74
(A) starting from the date of last examination to current on the
basis of verified amounts of debits and credits to accountability of
the AO. Ensure that the beginning balance of the statement shall
reflect the amount of accountability determined during the last
examination.
14. Prepare the Reconciliation Statement of Accountability to
reconcile the established accountability with the accounting
records.
15. Prepare the Statement of Accountability for Accountable Forms.
16. Compare the balance of accountability arrived at with the
inventory of unused accountable forms. Require the AO to explain
discrepancies in writing, if any. Shortages of accountable forms
with money value shall, like a shortage, be covered by a letter of
demand.
17. Require the AO to accomplish and sign the certificate of
accountability
provided in General Form No. 74 (A).
18. Accomplish the required auditor’s certification provided in General
Form No.
74 (A).
19. Determine the adequacy of the bond using the Bureau of the
Treasury (BTr) guidelines on bonds.
20. Determine the adequacy of the precautionary measures adopted
by the agency to safeguard cash and whether the existing
measures adopted by the agency to safeguard cash and the
existing facilities of the AO provide adequate protection against
loss.
21. Review all necessary work papers and supporting documents.
Prepare the narrative report.

SECTION 137. SPECIFIC PROCEDURES AND TECHNIQUES

In addition to the common procedures and techniques, the auditor shall
perform the following:
A. Collecting Officer
1. Check all entries in the cashbook from the date of last
examination up to the date of current examination.
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 2. Examine all checks and money orders for regularity. Verify if
private checks were received in payment of taxes, dues, fees,
and other government obligations by tracing them to the
corresponding official receipts.
3. Ascertain that private checks are made payable to the agency or the
official
title or designation of the agency head. Disallow accommodated private

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

checks, including post-dated checks, stale checks/money orders, chits

and promissory notes.
4. Require the AO to explain the existence of obsolete checks and
other accountable forms, if any.
5. Count and list all unused accountable forms on hand. Inspect
unused booklets to make sure that each set of serial number is
complete. In case of missing copies, require the AO to explain the
loss in writing. See to it that the notice of loss is immediately
disseminated. Recommend the immediate destruction of obsolete
checks and other accountable forms.
6. Prepare the Statement of Accountability starting from the
balance of the last examination to the date of current
examination, on the basis of verified amounts of collections and
remittances/deposits.
7. Analyze collections and remittances/deposits to determine if
amounts collected are remitted/deposited.
8. Inquire into major steps, obtain flow chart, if any or narrative
procedures on the receiving, keeping, disposing and accounting
for collections. Identify deviations from prescribed regulations
and sound internal control structures on the basis of the duties of
the Collecting Officer (CO) and his/her staff, ascertain whether
the daily collections of the staff are turned over to the CO at the
end of the day.
B. Disbursing Officer (DO)
1. Examine all cash items for regularity. Ascertain that they are all
current and duly approved.
a. Unposted paid vouchers/payrolls
Determine why the paid vouchers/payrolls are not posted in
the Cashbook. If they are duly approved and acknowledged
in all respects, consider them as valid cash items.
b. Partially paid payrolls
Verify contents of pay envelopes, if any. Treat cash in pay
envelopes as cash items. Add payments already made in the
payroll. Consider the total of cash found inside the pay
envelopes and total payments already made as cash items.
Disallow chits and promissory notes inside the pay
envelopes.
c. Checks and money orders
Disallow checks and money orders paid by the DO out of
his/her cash advance. Allow checks drawn as cash advances
in favor of the DO as cash items.
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d. Paid invoices, reimbursement expense receipt (RER),
promissory notes, etc.

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 LTOM, 2nD EDITIOn

If the fund being examined is a cash advance for petty

expenses, consider paid invoices/receipts covering
authorized petty expenses for goods and services, as valid
cash items. Allow sales invoices and/ or charge invoices as
cash items only when supported with ORs. Disallow chits
and promissory notes under circumstances.
2. Count and list all unused checks on hand. Inspect unused
booklets for missing checks. In case of missing checks require the
DO to explain the loss in writing. See to it that the DO
immediately disseminated the notice of loss and notified the bank
for stoppage of payment.
3. Check all entries in the cashbook from the date of last
examination to the date of current examination.
a. Based on accounting records, determine whether all cash
advances/ withdrawals have been entered in the cashbook
on the dates they were received.
b. Check all disbursements against the corresponding
vouchers. Determine whether the vouchers were duly
approved and payments acknowledged. Pay particular
attention to erasures/alterations on the voucher and the
cashbook. Make sure that the amount entered in the
cashbook was the approved amount to the voucher. Where
the vouchers could no longer be made available to the
auditor, such as in the case of agencies with centralized
accounting systems, secure confirmation of the aforesaid
disbursements from the auditor of the agency where the
books are kept.
c. Trace refunds of cash advances to the original receipts issued.
d. Determine propriety and correctness of adjusting entries.
e. Consider all discrepancies affecting the DO’s accountability
in the preparation of the Statement of Accountability.
4. Prepare the Statement of Accountability starting from the last
date of examination to the date of current examination, on the
basis of verified cash advances, disbursements and refunds.
Require the DO to accomplish and sign the certificate of
accountability.

SECTION 138. ACCOUNTABLE OFFICER’S

PRESENCE DURING THE COUNT
The auditor will ensure the presence of the AO at all times during the
cash count. If, at any time during the cash count, the AO has to leave the
premises, stop the count immediately, segregate the cash counted and
cause the return of all cash to the safe, have it properly secured and 89

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resume the count only upon his/her return.

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

SECTION 139. SEALING OF THE VAULT, SAFE, AND OTHER

CASH RECEPTACLES
A. The auditor will:
1. Seal the vault, safe or other cash receptacles only in exceptional
cases, such as:
a. Absence or non-appearance of the AO on the date of the
count specially when the intention of the auditor to examine
the former has become obvious or made known to other
employees.
b. Refusal of the AO to submit himself/herself to cash examination.
c. Interruption or non-completion of the count during the day
or the necessity of controlling cash, cash items and records.
d. Death, incapacity, or absconding of the AO.
2. Require at least two agency personnel to witness the sealing and
sign the sealing paper.
3. Seal by pasting a sheet/s of paper on the appropriate place/s of
the vault, safe or receptacle. Make sure that the vault, safe or
receptacle could not be opened without breaking the seal.
4. Retain a duplicate copy of each properly accomplished sealing paper.
5. The public officer in charge with the custody of the vault, safe or
receptacle, who, shall break the seal placed by the auditor or
permit them to be broken, shall be liable for the penalties
prescribed under Art. 227 of the Revised Penal Code.

SECTION 140. CASH SHORTAGE OR OVERAGE

A. Cash
Shortage The
Auditor will:
1. Recheck all figures and computations if the examination discloses a
cash
shortage, before declaring the AO short of his/her funds.
2. Demand at once from the AO the immediate production of the
missing fund(s) the moment the amount of shortage is definitely
established. Execute the demand in writing and have the AO
acknowledge receipt thereof on the duplicate copy. Obtain from
the AO a written explanation of how the shortage occurred within
seventy-two (72) hours from his/her receipt of the letter of
demand.
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3. Recommend to the agency head the immediate relief of the
defaulting officer from his/her duties as AO. The recommendation
shall be in writing duly acknowledged by the agency head or
his/her duly authorized representative

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 LTOM, 2nD EDITIOn

on the duplicate copy which is to form part of the auditor’s work

papers. Institute such measures necessary to safeguard
adequately the cash and records.
4. If a shortage is discovered on the accounts of a local treasurer,
seize the office and its contents and notify the COA Director
concerned, the local chief executive and the local accountant.
5. Turnover immediately to the AO next-in-rank in the local treasury
service the Office of the Treasurer and its contents, close, and
render his/her account on the date of the turnover.
6. In case the AO next-in-rank is likewise under investigation, take
full possession of the office and its contents, close and render
his/her accounts on the date of taking possession, and
temporarily continue the public business of such office until such
time that the local treasurer is restored or a successor has been
duly designated.
7. Direct the proper officer to withhold the payment of salary and
other emoluments except retirement pay, terminal leave benefits
or gratuities, due the defaulting AO once his/her cash shortage
is ascertained. Sign the withholding order. Report such
withholding order promptly to the COA Chairperson.
The salaries and emoluments to be withheld shall correspond to
the amount of the alleged shortage. Said amount shall be
considered merely withheld and shall not be applied to the
shortage until final resolution by a competent court of the AO’s
indebtedness, if such is initiated. In the event that the AO is
found liable for the cash shortage, the withheld salary and other
emoluments shall be applied in payment of the indebtedness
otherwise, it shall be released to the AO.
8. The constructive distraint contemplated under Sec. 47 of
Presidential Decree No. 1445 may be effected under the following
circumstances:
a. A shortage in the accounts of an AO is discovered in audit;
b. The amount of the shortage has not been restituted;
c. A prima facie case of malversation of public funds or
property is found against him/her;
d. There is reasonable ground to believe that he/she is retiring
from the government service; or intends to leave the
Philippines; or intends to remove his/her personal property
from the Philippines; or intends to hide or conceal such
property;
e. The interest of the government has to be safeguarded.
9. The following are the procedures in effecting constructive distraint:
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a. The auditor who discovered the shortage shall immediately
submit a report to the Chairperson, thru the supervising
Auditor and Cluster/

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

Regional Director concerned, embodying his/her findings

and recommendation to place the personal property of the
defalcating AO under constructive distraint.
b. Upon evaluation of such report and finding a need for the
constructive distraint as recommended therein, the
Commission shall forthwith prepare a warrant directing the
auditor to place under constructive distraint, the goods,
chattels or effects and other personal property of whatever
character of the AO. The warrant shall be signed by the
Chairperson and shall show clearly the name and address of
the defalcating AO, the amount of shortage incurred, and
the fact of prior demand made for the restitution thereof.
c. The auditor directed to serve the warrant of constructive
distraint shall serve the same personally on the defalcating
AO himself/herself. In case, however, where the said AO
refuses to receive the warrant or is absent from his/her
given address, the warrant shall be served upon someone of
suitable age and discretion in the premises or upon the
person in possession or occupancy of the personal property
of the AO, who shall acknowledge all the copies of warrant.
In case actual service of the warrant upon the AO or upon
either of the two other persons just mentioned cannot be
made, a copy thereof shall be left in the premises or in the
office of the AO or in the place of the person in possession or
occupancy of the said property of the AO which fact shall be
attested to in said copy and in all the other copies of the
warrant by the distraining officer in the presence of at least
two credible witnesses, whereupon the warrant is deemed
properly served. A copy of the warrant thus served shall be
furnished to the AO with a notation that a copy of the same
was left with the person who is in possession or occupancy
of his/her personal property.
d. Upon service of the warrant, the distraining officer shall
require the defalcating AO or any other person having
possession or control of the personal property in question to
accomplish a receipt covering the property distrained and to
obligate himself/herself to preserve the same intact and
unaltered and to dispose of it in any manner whatsoever
without the express authority of the COA.
e. In case the said AO or other person having the possession
and/or control of the property sought to be placed under
constructive distraint refuses or fails to accomplish the
receipt herein referred to or lists only a number of such
personal property not sufficient to cover the amount of the
shortage, the distraining officer shall proceed to prepare a
list of the property choosing such quantity as is sufficient to
satisfy the shortage, and in the presence of two witnesses
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 leave a copy thereof in the premises where the property
distrained is located, after which the said property shall be
deemed to have been placed under constructive distraint.

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 LTOM, 2nD EDITIOn

f. Where some of the property distrained consists of stocks

and other securities, a copy each of the warrant of
constructive distraint and the receipt or list shall be served
upon the president, manager, treasurer or other responsible
officer of the corporation, company, or association which
issued the said stocks or securities. In case of debts and
credits, copies of such documents shall be left with the
person owing the debts or having in his/her possession or
under his/her control such credits, or with his/her agent. The
warrant of constructive distraint and the receipt or list shall
be sufficient authority to the person owing the debts, or
having in his/her possession or under his/her control any
credits belonging to the AO, to desist from the settlement
thereof without the written authority of the COA. In case of
bank accounts, the copies of the warrant and receipt or list
shall be served upon the president, manager, treasurer, or
other responsible officer of the bank concerned, whereupon
the bank shall desist from allowing withdrawals therefrom or
so much thereof, as may be sufficient to satisfy the shortage
of the AO without written authority of the COA.
g. If the property distrained are registered with any
government office, the distraining officer shall notify in
writing the government official concerned of the fact of the
constructive distraint, furnishing him/her with a copy each of
the warrant and the receipt or list. The notification shall
contain the following:
i. Nature and description of the property distrained.
ii. Date of distraint.
iii. Name of the owner and/or actual possessor thereof.
iv. Nature and amount of shortage for which the distraint was
effected.
h. A copy of such notice shall be sent to the last known address
of the AO through registered mail with return card or served
upon the AO or his/ her agent or to the occupant or
possessor of the property in question. Receiving copies of
the return card or the notice shall be kept secured together
with the audit work papers of the examining auditor.
10. The summary remedy by constructive distraint of personal
property may be repeated until the full amount of the shortage of
the defaulting AO, including the expenses of the distraint, is
satisfied.
11. A report on any constructive distraint effected pursuant to Sec. 47
of PD No. 1445 shall be submitted by the distraining officer to the
COA Chairperson, thru the Supervising Auditor and the
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Legal Services Sector of the Commission. Such report shall form
part of the supporting documents of the complaint for
malversation to be initiated against the defalcating AO. It shall
provide the Ombudsman or other government prosecutors with
basis to apply with the proper court for the attachment of the
property distrained with the rules of court.

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 EXAMINATION, AUDIT AND SETTLEMENT OF ACCOUNTS

12. If at any time after the constructive distraint has been effected,
the AO restitutes the full amount of the shortage, his/her personal
property placed under such distraint, shall be released therefrom.
Prosecution of the AO
13. Where a cash shortage is firmed up, submit the final narrative
report together with the affidavits, sworn statements and other
supporting documents to the Cluster/Region Director thru the
Supervising Auditor for review and evaluation.
14. If the facts and circumstances of the case warrant the filing of a
criminal action, the Cluster/Regional Director shall initiate such
action by forwarding the report accompanied by a letter-
complaint to the Deputy Ombudsman (for Luzon, Visayas or
Mindanao) concerned, recommending the initiation of criminal
proceedings against the defaulting AO. Where the shortage is
discovered by special audit teams of other offices of the
Commission, the responsibility to initiate the criminal action shall
fall upon the director or the head of such office.
15. For the purpose of prosecuting the defaulting AO, make the
following
documents available to the prosecuting officials:
a. Certified true copies of AO’s appointment, oath of office,
official
designation and approved application for bond.
b. A copy of the Report of Cash Examination, narrative report
and its supporting exhibits and schedules, letter of demand,
and the written explanation of the AO on how the shortage
occurred if any.
c. Affidavit or sworn statements of the auditors and other
witnesses.
16. If the shortage is material and a case has already been filed,
request thru the COA Chairperson, the Department of Foreign
Affairs the National Bureau of Investigation and the Bureau of
Immigrations and Deportation to deny the AO any clearance for
purposes of travel abroad unless cleared by the COA.

B. Cash Overage
1. In case a cash overage is determined, extend the examination as
may be necessary to establish the cause of the overage and
uncover any irregularity if any.
2. Obtain explanation from the AO. If the overage cannot be
satisfactorily explained by the AO, forfeit the amount in favor of
the government and request the Collecting Officer to issue an
official receipt therefor.
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(COA Memorandum No. 2013-004, 09 July 2013, Prescribing the
Use of the Revised Cash Examination Manual)

ONLINE EDITION - COMPLIMENTARY

CHAPTER ACCOUNTABILITY, RESPONSIBILITY AN
6
Accountability refers to the answerability for government funds of every
public officer whose duties permit or require the possession or
custody of such government funds in conformity with laws and
regulations. Other public officers, although not accountable for
government funds by the nature of their duties, may likewise be similarly
held accountable and responsible therefor through their participation in
the use or applications of such government funds.
Liability is a personal obligation arising from an audit disallowance or
charge which may be satisfied through payment or restitution as
determined by competent authority or by other modes of extinguishment
of obligation as provided by law.
Accountable Officer is the officer of any government agency who by the
nature of his/ her duties and responsibilities or participation in the
collection/receipt and expenditure/ use of government funds, is required
by law or regulation to render account to the Commission on Audit (COA).
(COA Circular No. 2009-006, 15 September 2009)

SECTION 141. DETERMINATION OF PERSONS

RESPONSIBLE/LIABLE
Persons liable are the persons determined to be answerable for an audit
disallowance, charge or decision.
Persons responsible are the persons determined to be answerable for
compliance with the audit requirements as called for in the Notice of
Suspension.
The liability of public officers and other persons for audit
disallowances/charges shall be determined on the basis of (a) the nature
of the disallowances/charge; (b) the duties and responsibilities or
obligations of officers/employees concerned; (c) the extent of their
participation in the disallowed/charged transactions; and (d) the amount
of damage or loss to the government, thus:
A. Public officers who are custodians of government funds shall be liable
for their failure to ensure that such funds are safely guarded against
loss or damage; that they are expended, utilized, disposed of or
transferred in accordance with law and regulations, and on the basis
of prescribed documents and necessary records.
B. Public officers who certify as to the necessity, legality and availability
of funds or adequacy of documents shall be liable according to their
respective certifications.
C. Public officers who approve or authorize expenditures shall be liable
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 for losses arising out of their negligence or failure to exercise the
diligence of a good father of a family.
D. Public officers and other persons who confederated or conspired in a
transaction which is disadvantageous or prejudicial to the government
shall be held liable jointly and severally with those who benefited
therefrom.

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 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

E. The payee of an expenditure shall be personally liable for a

disallowance where the ground thereof is his/her failure to submit the
required documents, and the Auditor is convinced that the disallowed
transaction did not occur or has no basis in fact.
The liability for audit charges shall be measured by the individual
participation and involvement of public officers whose duties require
appraisal/assessment/ collection of government revenues and receipts
in the charged transaction.
The liability of persons determined to be liable under a Notice of
Disallowance/ Notice of Charge shall be solidary and the COA may go
against any person liable without prejudice to the latter’s claim
against the rest of the persons liable.
(COA Circular No. 2009-006, 15 September 2009)

SECTION 142. OTHER LIABILITIES OF LOCAL

TREASURER UNDER THE LOCAL
GOVERNMENT CODE (LGC)
A. Prohibitions Against Pecuniary Interest
Without prejudice to criminal prosecution under applicable laws, any
local treasurer, accountant, budget officer, or other accountable local
officer having any pecuniary interest, direct or indirect, in any
contract, work or other business of the local government unit of which
he/she is an accountable officer shall be administratively liable
therefor. (Sec. 341, LGC)
B. Failure To Issue And Execute Warrant
Without prejudice to criminal prosecution under the Revised Penal
Code and other applicable laws, any local treasurer or his/her deputy
who fails to issue or execute the warrant of levy within one (1) year
from the time the tax becomes delinquent or within thirty (30) days
from the date of the issuance thereof, or who is found guilty of
abusing the exercise thereof in an administrative or judicial
proceeding shall be dismissed from the service. (Secs. 177 and 259,
LGC)
C. Failure To Collect Tax Due On Real Property
Any officer charged with the duty of collecting the tax due on real
property who willfully or negligently fails to collect the tax and
institute the necessary proceedings for the collection of the same shall
be punished by a fine of not less than One Thousand Pesos (₱1,000.00)
nor more than Five Thousand Pesos (₱5,000.00) or by imprisonment of
not less than one (1) month nor more than six (6) months or both such
fine and imprisonment, at the discretion of the Court. (Sec. 517, LGC)

96 D. Failure To Dispose Of Delinquent Real Property At Public Auction

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The local treasurer concerned who fails to dispose of delinquent real
property at public auction, in compliance with the pertinent provisions
of LGC and any other local government official whose acts hinder the
prompt disposition of delinquent real property at public auction, shall
upon conviction, be subject to a fine of not less than One Thousand
Pesos (₱1,000.00) nor more than Five Thousand Pesos

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 LTOM, 2nD EDITIOn

(₱5,000.00) or imprisonment of not less than one (1) month nor more
than six (6) months, or both such fine and imprisonment at the
discretion of the court. (Sec. 519, LGC)

SECTION 143. POLICIES ON CASH EXAMINATION

A. Responsibility
1. It is the declared policy of the State that all resources of the
government shall be managed, expended or utilized in accordance
with laws and regulations, and safeguarded against loss or
wastage through illegal or improper disposition, with a view to
ensuring efficiency, economy and effectiveness in the operations
of government. The responsibility to take care that such policy is
faithfully adhered to rests directly with the chief or head of the
government agency concerned.
2. Fiscal responsibility shall, to the greatest extent be shared by all
those exercising authority over the financial affairs, transactions,
and operations of the government agency.
3. The head of any agency of the government is immediately and
primarily responsible for all government funds and property
pertaining to his/her agency. Persons entrusted with the
possession or custody of the funds or property under the agency
head shall be immediately responsible to him/her, without
prejudice to the liability of either party to the government.
4. The head of an agency may designate such number of collecting
Officers (COs) or agents as may be deemed necessary. They
shall render reports of their collections, under the regulations of
COA, to be submitted promptly to the auditor concerned who shall
conduct the necessary examination and audit within thirty (30)
days from receipt thereof.
5. When an officer accountable for government funds or property
absconds with them, dies or becomes incapacitated in the
performance of his/her duties, the proper agency head shall
designate a custodian to take charge of the funds or property until
a successor shall have been appointed and qualified. The agency
head may appoint committee to count cash and take an
inventory of the property for which the Officer was accountable
and to determine the responsibility for any shortage therein. One
copy of the inventory and of the report of the committee duly
certified shall be filed with the Commission but the findings of the
committee shall not be conclusive until approved by the
Commission or its duly authorized representative.
When a local treasurer or officer accountable for government funds
or property absconds with them, dies or becomes incapacitated in
the performances of his/her duties, the Secretary of Finance, in the
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shall designate a custodian to take charge of the funds or property
until a successor shall have been appointed and qualified.

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 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

If the absconding, deceased, incapacitated or superseded officer is

responsible to another who is accountable, the latter may himself
designate the committee or take other lawful measures for the
protection of his/her interest.
6. At the close of each month, depositories shall report to the agency
head, in such form as he/she may direct, the condition of the
agency account standing on their books. The head of the agency
shall see to it that reconciliation is made between the balance
shown in the reports and the balance found in the books of the
agency.
7. An AO shall maintain his/her cashbook and such other records or
their equivalents as may be prescribed by the agency’s operating
procedures and reconcile with the accounting records at least
quarterly, unless the agency requires a more frequent
reconciliation.
8. An AO, upon ceasing to act in his/her official capacity as such,
shall submit to the auditor of the agency concerned a report of
his/her accountability. Any remaining balance of such
accountability shall be deposited in the proper treasury without
unnecessary delay.
9. Government cashiers are prohibited from holding positions as
cashiers or treasurer of savings and loan associations or any other
association or organization.
B. Accountability
1. Every Officer of any government agency whose duties permit or
require possession or custody of government funds or property
shall be accountable therefor and for the safekeeping thereof in
conformity with law. Every AO shall be properly bonded in
accordance with law.
The fidelity bonds covering government accountability and
responsibility of AOs shall be in accordance with the regulations
issued by the Bureau of Treasury (BTr). Copies of the approved
fidelity bonds as well as documents subsequently issued for their
cancellation shall be furnished to the Auditor.
2. Transfer of government funds from one officer to another shall,
except as allowed by law or regulation be made only upon prior
direction or authorization of Commission or its representative.
3. When government funds or property are transferred from one AO
to another, or from an outgoing officer to his/her successor, it shall
be done upon properly itemized invoice and receipt which shall
invariably support the clearance to be issued to the relieved or out-
going officer, subject to the regulations of the Commission.
C. Liability
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1. Expenditures of government funds or uses of government property
in violation of law or regulations shall be a personal liability of the
official or employee found to be directly responsible therefor.

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 LTOM, 2nD EDITIOn

2. Every officer accountable for government funds shall be liable for

all loses resulting from the unlawful deposit, use or application
thereof and for all loses attributable to negligence in the keeping
of the funds.
3. No AO shall be relieved from liability by reason of his/her having
acted under the direction of a superior officer in paying out,
applying, or disposing of the funds or property with which he/she is
chargeable; unless prior to the act, he notified the superior officer
in writing of the illegality of the payment, application or
disposition. The officer directing any illegal payment or disposition
of the funds or property shall be primarily liable for the loss, while
the AO who fails to serve the required notice shall be secondarily
liable.
4. Unless he/she registers his/her objection in writing, the local
treasurer, accountant, budget officer, or other AO shall not be
relieved of liability for illegal or improper use or application or
deposit of government funds or property by reason of his/her
having acted upon the direction of a superior officer, elective or
appointive, or upon participation of other department heads or
officers of equivalent rank. The superior officer directing, or the
department head participating in such illegal or improper use or
application or deposit of government funds or property, shall be
jointly and severally liable with the local treasurer, accountant,
budget officer, or other AO for the sum or property so illegally or
improperly used, applied or deposited.
5. Any public officer who commits any of the acts defined and
penalized under Arts. 213, 217, 218, 219 and 220 of the Revised
Penal Code shall suffer the penalty provided therefor.
6. In any criminal or civil proceedings against an officer for the
embezzlement or misappropriation of government funds or
property, or to recover an amount due the government from an
AO, it shall be sufficient, for the purpose of showing a balance
against him/her, to produce the working papers of the auditor
concerned. A showing in this manner of any balance against the
officer shall be prima facie evidence of the misappropriation of the
funds or property unaccounted for or of civil liability of the
officer as the case may be. The existence or contents of bonds,
contracts, or other papers relating to or connected with the
settlement of any account may be proved by the production of
certified copies thereof but the court may require the production of
the original when this appears to be necessary for the attainment
of justice.

SECTION 144. INDEMNITY FROM FIDELITY FUND

A. The Fidelity Fund shall be available for the purpose of replacing
defalcations, shortages, unrelieved losses in the accounts of bonded
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 public officers, for the payment of fees and costs incident to civil
proceedings brought against them to recover sums paid on their
account.
B. The relief from accountability of the accountable public officer granted
by the COA shall relieve the agency from responsibility for the loss or
damage to public funds or properly.

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 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

C. When no relief of accountability is granted by the COA, the agency

concerned may file claim for reimbursement from the Fidelity Fund to
the extent of the approved bond covered or amount of loss whichever
is lower.
D. Any and all claims against the Fidelity Fund shall be filed as a money
claim with the COA, with a copy to the Bureau of Treasury (BTr)
together with the evidence. Claims approved by the COA shall
constitute a legal claim against the Fidelity Fund.
E. The agency shall file claim for payment from the Fidelity Fund with the
BTr, attaching the favorable findings of the COA. The BTr shall process
the claim in accordance with existing budgeting, accounting and
auditing rules and regulations.
F. In case of defalcation, shortages and unrelieved losses in the account of
bonded
public officer, the claim shall be supported by the following documents:
1. Agency and COA findings and recommendations on the
defalcations,
shortages and unrelieved accountability;
2. Latest Statement of Assets and Liabilities of the bonded
official/employee;
3. Proof of current and subsisting bond and payment of bond premium;
4. Other document/s which may be required by the BTr.
G. Receipt of refund from Fidelity Fund shall be accounted for in the
same manner as cash settlement or restitution.

SECTION 145. FILING OF REQUEST FOR RELIEF

FROM ACCOUNTABILITY DUE TO
FORTUITOUS EVENTS OR NATURAL
CALAMITIES, OR DUE TO ACTS
OF MAN; THEFT, ROBBERY, ARSON, ETC.
When a loss of government funds or property occurs while they are in
transit or the loss is covered by fire, theft, or other casualty or force
majeure, the Officer accountable therefor or having custody thereof shall
immediately notify the Commission or the Auditor concerned and, within
30 days or such longer period as the Commission or Auditor may in the
particular case allow, shall present his/her application for relief with the
available supporting evidence. Whenever warranted by the evidence,
credit for the loss shall be allowed.
(COA Memorandum No. 2013-004, 09 July 2013, Prescribing the
Use of the Revised Cash Examination Manual)
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 LTOM, 2nD EDITIOn

PROCEDURE ON THE REQUEST FOR RELIEF OF ACCOUNTABILITY:

A. Who may file

1. Persons who are accountable for government funds and property
which were lost and/or damaged without negligence on their part in
the custody thereof.

2. Representative of the Accountable Officer

B. Where to file
1. Audit Team assigned at the government agency where the
accountable officer filing the request is assigned

C. What are the requirements

1. Notice of loss of government supplies and property to the head of
the agency and the auditor assigned thereat;

2. Request for relief from accountability of the person accountable for

government funds and property filed within thirty (30) days or of
such longer period as may be allowed by the Commission
accompanied by the following documents:

a. The basic notice of loss showing the exact date of filing and
receipt in the Office of the Auditor concerned;

b. Affidavit of the accountable officer containing a statement of

facts and circumstances of the loss, i.e. property lost and its
valuation, actual date in which the absence was first noted,
manner of disappearance, efforts exerted to recover the
same, provisions made to safeguard the property, date when
the loss was reported to the auditor and police authorities,
etc.,

c. Affidavits of two (2) disinterested persons cognizant of the facts

and
circumstances of the loss;

d. Final investigation report of the office or department head,

proper government investigating agency such as Philippine
National Police (PNP), Bureau of Fire Protection (BFP), National
Bureau of Investigation (NBI), etc.);

e. Comment/s and/or recommendation of the agency head;

f. List and description including book value, date of acquisition,

property number, account classification, condition of the
property, and other additional relevant information of the
properties lost as attested by the concerned officials, as the
case may be;

g. Latest inventory and inspection report preceding the loss and

inspection report on the extent of damage/loss;

h. Exact or accurate amount of government cash or book value

of the property, subject of the request for relief;
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i. Memorandum Receipt, if any, covering the properties subject
of the request;

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 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

j. Certification from Police/Fire Chief/Provincial Governor/Mayor

or other competent authority as to the destruction brought by
natural calamity and/or insurgency;

k. Report on Cash Examination conducted immediately after the

loss (for cash losses);

l. Certificate by the veterinarian as to the cause of death with a

description of the animal, if the property is a government
animal under the care of a veterinarian, and autopsy report;

m. Authenticated pictures of the site (loss through fire and theft or

robbery/
hold-up;

n. Fire insurance policy;

o. Certification of the proper official on the actual occurrence of

calamity specifying therein the approximate or exact time of
occurrence and the affected areas;

p. Insurance policy, if any, and the fact of receipt of the insurance

proceeds;

q. Affidavits of security guards pertaining to the incident, if manned

by
them, and the contract of security services;

r. Information on whether or not the accountable officer was

accompanied by police/security escorts during theft or
robbery/hold-up of cash (going to and fro the bank, office
break-in, etc.) and the appropriate explanation if none; and

s. Comments and/or recommendation of the auditor.

D. Who will decide on the request

1. Audit Team Leader if the amount does not exceed P100,000

2. Cluster/Regional Director if the amount if more than P100,000 but

not more than P500,000

3. Commission Proper if the amount exceeds P500,000.

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 LTOM, 2nD EDITIOn

A. File the request with the Auditor - For Amount not exceeding Php100,000.00

Accountable COA
Officer
or Persons
Procedures Specific Office
Representative Responsible

1 File request Ask for Audit Receiving Clerk

for relief with sufficient Group/Team
sufficient identification Concerned
identification and inquire about:
or
authorization • Properties lost or
. damaged and
their
corresponding
value:

• Name of
accountable officer
and the agency
from which he/she
belongs
2 Examine request for Audit Action Officer
relief from Group/Team
accountability to Concerned
determine if the
documents in support
of the relief
are complete (Secs. 498
and 499 of the
Government Accounting
and Auditing Manual
Volume I and Secs. 151
and 152 of COA Circular
No. 92-386, 20 October
1992,
for
LGUs)
3.a If the documents are Audit Action Officer
incomplete, inform the Group/Team
accountable officer / Concerned
counsel
/ representative to
comply with the
formalities and
procedural
requirements.

103

ONLINE EDITION - COMPLIMENTARY

3.b If the documents are Audit Receiving Clerk
complete, stamp Group/Team
“received” on at least Concerned
one request for relief
and the requesting
party’s receiving copy,
write down the date,
time of receipt, affix the
initial of the receiving
clerk then
give a copy to the said
accountable officer /
counsel
/ representative.

ONLINE EDITION - COMPLIMENTARY

 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

4 Inform the Audit Action Officer

accountable officer / Group/Team
counsel / Concerned
representative of
the proceedings
before the Auditor
(Secs. 5 to 9 of Rule
IV of the Revised
Rules of
Procedures (RRPC) of
the Commission on
Audit)

Inform also the period

during which an inquiry
on the status of the
request can be made.
5 Issue Decision Audit Audit Team
pursuant to Sec. 5, Group/Team Leader (ATL)
Rule IV of RRPC. concerned Supervisin
g Auditor
(SA)
6 Distribute the decision to Audit Releasing Clerk
the head of agency, Group/Team
auditor and agency Concerned
officials affected
by the decision
through personal
service, or if not
practicable through
registered mail
pursuant
to Secs. 6 and 7, Rule IV
of RRPC.

B. File the request with the Cluster/Regional Director through the Audit Team
assigned at government agencies - For amounts exceeding P100,000.00 but not
more than Php500,000

Accountable COA
Officer
or Persons
Procedures Specific Office
Representative Responsible

1 File the Ask for Audit Receiving Clerk

request with sufficient Group/Team
sufficient identification Concerned
identification and inquire about:
or
authorization • Properties lost or
. damaged and
their
104 corresponding
ONLINE EDITION - COMPLIMENTARY
 value
• Name of
accountable officer
and the agency
from which he/she
belongs

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

2 Examine request for Audit Action Officer

relief from Group/Team
accountability to Concerned
determine if the
documents in support
of the relief are
complete (Secs. 498
and 499 of the
Government Accounting
and Auditing Manual
Volume I and Secs. 151
and
152 of COA Circular No.
92-
386, 20 October 1992,
for LGUs)
3.a If the documents are Audit Action Officer
incomplete, inform the Group/Team
accountable officer / Concerned
counsel /
representative to
comply with the
formalities
and procedural
requirements
3.b If the documents are Audit Receiving Clerk
complete, stamp Group/Team
“received” on at least Concerned
one request for relief
and the requesting
party’s receiving copy,
write down the date,
time of receipt, affix the
initial of the receiving
clerk then
give a copy to the said
requesting party or his/
her representative.
4 Inform the Audit Action Officer
accountable officer / Group/Team
counsel / Concerned
representative of
the proceedings
before the Director
(Secs. 8 to 10 of Rule V
of the RRPC).

Inform also the period

during which an inquiry
on the status of the
request can be made.
5 Elevate the case, Audit Audit
together with the Group/Team Team 105

ONLINE EDITION - COMPLIMENTARY

 comments and Concerned Leader/
recommendations Supervisin
to the g Auditor
Cluster/Regional
Director concerned.

ONLINE EDITION - COMPLIMENTARY

 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

6 Upon receipt of the Cluster/COA Action Officer

request from the ATL/SA, Regional
inform the accountable Office
officer/counsel/ Concerned
representative in writing
of the receipt of the
request.

Inform also the period

during which an inquiry
on the status of the
request can be made.
7 Issue decision Cluster/COA Cluster/
pursuant to Secs. 8 Regional Regional
and 9, Rule V of RRPC Office Director
Concerned
8 Distribute the decision to Cluster/COA Releasing Clerk
the head of agency, Regional
auditor concerned and Office
agency Concerned
officials affected by
the decision
through
personal
service, or if not
practicable through
registered mail

C. File the request with the Commission Proper through the Audit Team and
Cluster/ Regional Director - For Amount in Excess of P500,000.00

Accountable COA
Officer
or Persons
Representative Procedures Specific Office
Responsible

1 File the Ask for sufficient Audit Receiving Clerk

request with identification and Group/Team
sufficient inquire about: Concerned
identification
or • Properties lost or
authorization damaged and
. their
corresponding
value
• Name of
accountable officer
and the agency
from which he/she
belongs

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ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

2 Examine request for Audit Action Officer

relief from Group/Team
accountability to Concerned
determine if the
documents in support of
the relief are complete
(Secs. 498 and 499 of
the Government
Accounting and
Auditing Manual Volume
I and Secs. 151 and
152 of COA Circular No.
92-
386, 20 October 1992,
for LGUs)

3.a If the documents are Audit Action Officer

incomplete, inform the Group/Team
accountable officer / Concerned
counsel
/ representative to
comply with the
formalities and
procedural
requirements.

3.b If the documents are Audit Receiving Clerk

complete, stamp Group/Team
“received” on at least Concerned
one request for relief
and the requesting
party’s receiving copy,
write down the date,
time of receipt, affix the
initial of the receiving
clerk then
give a copy to the said
accountable
officer/counsel/
representative.

4 Inform the Audit Action Officer

accountable officer / Group/Team
counsel / Concerned
representative of
the proceedings
before the
Commission Proper
(Secs. 1 and 4 of Rule VIII
of the RRPC).
Inform also the period
during which an inquiry
on the status of the
request can be made.
107

ONLINE EDITION - COMPLIMENTARY

 ACCOUNTABILITY, RESONSIBILITY AND LIABILITY OF LOCAL TREASURERS AND OTHER ACCOUNTABLE
OFFICERS

5 Elevate the request, Audit Audit

together with the Group/Team Team
comments and Concerned Leader/
recommendations to the Supervisin
Cluster/Regional Director g Auditor
concerned.

6 Upon receipt of the Cluster/COA Action Officer

request from the Regional
ATL/SA, inform the Office
accountable Concerned
officer/counsel/
representative in writing
of the receipt of the
request.

Inform also the period

during which an inquiry
on the status of the
request can be made.

7 Elevate the case, Cluster/COA Cluster/

together with the Regional Regional
comments and Office Director
recommendations to Concerned
the Assistant
Commissioner, Legal
Services Sector.

8 Upon receipt of the Legal Director

request from the Services concerne
Cluster/Regional Sector d
Director, inform the
accountable officer /
counsel
/ representative in writing
of the receipt of the
request.

Inform also the period

during which an inquiry
on the status of the
request can be made.

9 Refer the case to the Commissio Commissio

Cluster/COA Regional n n
Office concerned for Secretariat Secretary
comment and
recommendation
pursuant to Sec. 4, Rule
VIII of RRPC.

10 Submit comment to Cluster//COA Cluster/

the Commission Regional Regional
Secretary Office Director
108

ONLINE EDITION - COMPLIMENTARY

 concerned

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

11 Upon submission of the Commissio Commissio

comment, refer the case n n
with the complete Secretariat Secretary
records of the case to the
Legal Services Sector
(LSS) for review,
evaluation, preparation
of draft decision

12 Submit draft decision to Legal Assistant

the Commission Proper Services Commission
(CP) Sector er

13 Conduct formal Commissio

deliberation, submission n Proper
of concurring or
dissenting opinion and
finalization of decision,
pursuant to Secs. 4 and
5, Rule X of RRPC.

14 Distribute the Commissio Commissio

decision or Resolution n n
to the Central Office Secretariat Secretary
Records Division,
Rollo or folder of the
Commission
Secretary, LSS, Cluster/
Regional Director
concerned, Auditor
concerned and the
parties or their counsels,
pursuant to Sec. 8, Rule
X of RRPC.

(COA Key Services Procedural Flow)

The COA Regional Directors shall have jurisdiction over the appeals from
decisions of the Supervising Auditors/Audit Team leaders of local
government units within their respective regions, denying requests for
relief from accountability.
(COA Circular No. 2019-002, 20 March 2019)

109

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

110

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

FORMS AND
ANNEXES

ONLINE EDITION - COMPLIMENTARY

 111

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES
CHAPTER CHAPTER
TITLE
1 Annex B - COA Circular No. 2006-000, 31 January 2006

ANNEX 21 - DISBURSEMENT VOUCHER (DV)

Republic of the Philippines
Name of Province/City/Municipality
Address

DISBURSEMENT VOUCHER DV No.

MODE OF PAYMENT

MDS Commercial AD Others

Check Check A

TIN/ ObR No.

Payee
Employee
No.
Responsibility Center
Office/Unit/ Code
Address Project
EXPLANATION AMOUNT

A. Certified: B. Certified:
Obligation of Allotment for the Availability of Funds
purpose as indicated and
completeness of supporting
documents

Signature over Printed Date Signature over Printed Dat

Name/ Position Name/ Position e
C. Approved for Payment: D. Received Payment:

Signature over Printed Date Signature over Printed Dat

Name/ Position Name/ Position e
Check Number Date Bank
of Nam
Chec e
k
OR No./Date
JEV No. Date
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ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

INSTRUCTIONS
A. The DV shall be printed in one whole sheet of 81/2 x 11 size bond
paper. This shall be prepared in three copies to be distributed as
follows:
Original - Accounting Unit
Duplicate - Cash Unit
Triplicate - Payee
B. The Accounting Unit shall stamp the date of receipt on the face of this
form.
C. This form shall be accomplished in the following manner:
1. DV No. - Number assigned to the DV by the Accounting Unit. It
shall be numbered as follows:

0000 00 0000
Serial
number
(One series
for each
year) Month
Year
2. Mode of Payment - put a check mark () in the appropriate box
opposite the mode of payment.
3. Payee - name of the payee or creditor
4. TIN/Employee No. - Tax Identification Number (TIN) of the
claimant/ Identification Number assigned by the agency to the
officer/employee
5. Obligation Request No. - Number of the obligation request
supporting the DV
6. Address - address of the claimant
7. Responsibility Center (Office/Unit/Project and Code) - the office/unit/
project and code assigned to the cost center where the
disbursement shall be charged
8. Explanation - brief description of the disbursement
9. Amount - amount of claim
10. Certified (Box A) - certification of the Head of Accounting Unit or
his/her authorized representative as to obligation of allotment for
the purpose as indicated and completeness of supporting
documents
The certifying officer shall affix his/her signature, print his/her name,
indicate
his/her position, and the date of his/her signing on the spaces
provided
11. Certified (Box B) - certification by the Treasurer or his/her
Authorized
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ONLINE EDITION - COMPLIMENTARY

Representative on the availability of fund
The certifying officer shall affix his/her signature, print his/her name,
indicate
his/her position, and the date of his/her signing on the spaces
provided.

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

12. Approved for Payment (Box C) - approval by the Agency Head or

his/her Authorized Representative on the payment covered by the
DV
The approving officer shall affix his/her signature, print his/her name,
indicate
his/her position, and the date of his/her signing on the spaces
provided.
13. Received Payment (Box D) - acknowledgment by the claimant
or his/ her duly authorized representative for the receipt of the
check/cash and the date of receipt. The claimant/payee shall affix
his/her signature on the spaces provided and shall indicate the
number and the date of the check, bank name and number and
date of OR/other relevant documents issued to acknowledge the
receipt of payment.
14. JEV No. and Date - Number and date of the Journal Entry Voucher

114

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 LTOM, 2nD EDITIOn

Annex 39, Volume II, MNGAS for LGUs

ANNEX 22 - CHECK
REGISTER
CHECK REGISTER

LGU

Fund Bank Account No.

Accountable Officer Official Designation Statio

n
CHECK Received by:
Date Name
Date Amount Name/
Issue Number of Date
Release Signatur
d Payee
d e

For Accountable Officer’s Use

115

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

INSTRUCTIONS
A. The Check Register shall be accomplished as follows:
1. LGU - name of the municipality/province/city
2. Fund - fund name/code
3. Bank Account No. - name of Bank
4. Date - date of check issued
5. Check Number - serial number of the MDS checks drawn shall be
entered in numerical sequence, including cancelled ones
6. Check – Date Released - date when the check is released to the
payee.
7. Name of Payee - name of the payee/claimant
8. Amount - amount of check issued by the Accountable Officer
9. Received by - name and signature of the payee/claimant and
the date received
B. Each Disbursing Officer/Accountable Officer shall maintain this
record. All
transactions for the day shall be recorded immediately.

116

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 LTOM, 2nD EDITIOn

Annex 47, Volume II, MNGAS for LGUs

ANNEX 23 - REPORT OF CHECKS

ISSUED
REPORT OF CHECKS ISSUED

LGU

Bank Name/Acct. Name: Report No.:

Sheet No.:

Checks Responsibili Nature

DV No. Payee Amount
Date No. ty of
Center Paymen
t

117

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

INSTRUCTIONS
The RCI shall be accomplished as follows:
1. LGU - name of the province/city/municipality
2. Period Covered - period covered by the report
3. Sheet No. - sheet number of the report
4. Report No. - number assigned by the Treasury Office on the report. The
report
shall be numbered as follows:
00-00-00-0000
Series(One series per

year) Month
Year
Fund
5. Bank Name/Account No. - name of the bank and the account
number where the check is drawn
6. Check No. - number of the check issued covered by the report
including the cancelled ones.
7. Check Date - date of the check issued covered by the report
8. DV Number - number of the reference DV
9. Responsibility Center - code assigned to each cost center
10.Payee - name of the payee
11.Nature of Payment - nature of claim paid
12.Amount - amount of the check issued
13.Certification - the report shall be certified by the Disbursing Officer on
last
sheet of the report.
14.Date - date report was submitted to the Accounting Unit
15.Received by: - name and signature of the designated personnel
receiving the report
16.Date - date of receipt of the report by the Accounting Unit
Additional instructions:
a. The RCI shall be prepared in three copies by the Treasurer’s Office
daily to be
distributed as follows:
Original – COA Auditor thru the Accounting Unit together with
the original copy of the paid petty cash
vouchers/payroll/replenishment of Petty Cash Fund (PCF) and
supporting documents
2nd copy – Accounting Unit
3rdcopy – Treasurer’s file
b. One (1) RCI shall be prepared for each bank account and it shall be
the basis for the preparation of Journal Entry Voucher (JEV).
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ONLINE EDITION - COMPLIMENTARY

c. This report shall be prepared chronologically including cancelled/voided
checks.

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

Annex 46, Volume II, MNGAS for LGUs

ANNEX 24 - REPORT OF
DISBURSEMENTS
REPORT OF DISBURSEMENTS

LGU

Accountable Officer: Report No.:

Designation: Sheet No.:

Dat Payee Referenc Amoun

e e t

TOTAL
Certified Correct: Received by:

Disbursing Accounting
Officer Clerk

Date Date

119

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

INSTRUCTIONS
A. This report shall be accomplished as follows:
1. LGU - name of the province/city/municipality
2. Accountable Officer - name of the Accountable Officer
3. Designation - position or designation
4. Report No. - assigned RD number which shall be as follows:
00-00-00-00-0000
Serial number(one series per year)

Mont
h
Year
Disbursing Officers & Paymasters'
Code
Fund
5. Sheet No. - page number of the report
6. Date - date of the DV/source of documents
7. DV No. - assigned DV number
8. Payee - name of the person/office to whom payment is made
9. Nature of Payment - nature of claims paid
10.Responsibility Center - code assigned to each cost center
11.Amount - amount of disbursement covered in the DV or
supporting documents
12.Certified by - name and signature of Disbursing Officer/Paymaster
13.Received by - name and signature of the designated
Accounting personnel who will acknowledge the report
B. The Disbursing Officer/Paymaster shall prepare this report to
liquidate his/ her cash advance for each nature of cash advance
such as cash advance for salaries and field operating expenses and
petty cash fund (at end of the year).
C. This report shall be prepared in three (3) copies and to be
distributed as follows:
Original - COA thru the Accounting Unit together with the
original copy of the paid vouchers/payroll and
supporting documents
2 copy - Accounting Unit
nd

3rd copy - Disbursing Officer's File

120

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 LTOM, 2nD EDITIOn

Annex 45, Volume II, MNGAS for LGUs

ANNEX 25 - LIQUIDATION
REPORT
No.:
LIQUIDATION REPORT Date:
Responsibility Center
LGU

P ARTICULARS AMOUNT
Itinerary of Travel:

TOTAL AMOUNT SPENT

AMOUNT OF CASH ADVANCE PER DV NO. DTD.
AMOUNT
REFUNDED PER O.R. NO. DTD.
AMOUNT TO BE Received by:
REIMBURSED
Submitted by:

Accounting Unit

Date

121

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

INSTRUCTIONS
A. This report shall be accomplished as follows:
1. LGU - name of the province/city/municipality
2. No. - number assigned by the Accounting Office which shall be as
follows:
00-00-00-0000
Series(One series per year)

Mont
h
Year
Fund
3. Date - date of the preparation of the report
4. Responsibility Center - code assigned to each cost center
5. Particulars and Amount - brief description of what has transpired
of the travel and corresponding costs
6. Total Amount Spent - actual amount spent
7. Amount of Cash Advance - amount of cash advanced for the travel
8. Amount Refunded - excess amount on the cash advanced less
expenses incurred
9. Amount to be Reimbursed - amount of cash advanced less
expenses incurred in the travel
10.Certified by: - signature of the employees/officer who made the
cash
advance
11.Received by: - name and signature of the designated personnel in
the
Accounting Office receiving the report
12.Date - date of receipt of the report by the Accounting Unit
B. This report shall be prepared by the employees/officers who made the
cash
advance. It shall be prepared in three (3) copies:
Original - COA thru the Accounting Officer
Duplicate - Accounting Officer
Triplicate - employees/officer concerned

122

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 LTOM, 2nD EDITIOn

Annex 25, Volume II, MNGAS for LGUs

ANNEX 26 - PETTY CASH

VOUCHER (PCV)
PETTY CASH VOUCHER No.:
Date:
LGU
Payee/Office: Responsibility Center
Address :
I. To be filled up upon request II. To be filled up upon liquidation
Particular Amount Total Amount Granted
s
Total Amount Paid per
OR No.

Amount Refunded/
(Reimbursed)

A. Requested by: C.

Name of Received Refund

Requestor Approved by: Reimbursement

Paid
Immediate Supervisor

Disbursing Officer
B. Paid by: D.

Disbursing Officer Liquidation Submitted

Cash Received by: Reimbursement Received

by:
Signature over Printed Name of

Payee Date: Signature of Payee

Date:

123

ONLINE EDITION - COMPLIMENTARY

 FORMS AND ANNEXES

INSTRUCTIONS
A. The form shall be accomplished as follows:
1. LGU - name of the agency
2. No. - number and date assigned to the PCV by the date the
Accounting Section/Unit, it shall be numbered in the following
manner:
00-00-00-0000
Serial number (One series per year)

Mont
h
Year
Fund
3. Date - date of the preparation of PCV
4. Payee/Office & Address - name/office/address of payee requesting
for
petty cash advance.
5. Responsibility Center - code of the requesting office as assigned by
the
COA
I. To be filled up upon request
6. Particulars - purpose of the petty cash advance request
7. Amount - amount of the petty cash requested
8. Box A - Requested by - shall be signed by the requestor
9. Box A - Approved by - shall be signed by the Immediate
Supervisor of the Requestor
10.Box B - Paid by - shall be signed by the Disbursing Officer (DO)
11.Box B - Cash Received by - shall be signed by the recipient of cash
II. To be filled upon liquidation
12.Total Amount Granted - the amount of cash received by the
claimant
13.Total Amount Paid Per OR No. - the total amount paid as
shown in the invoice presented
14.Amount Refunded/Reimbursed - the difference between the
total amount granted less amount spent
15.Box C - the DO shall check the appropriate box and affix his/her
signature
16.Box D - the payee shall check the appropriate box and affix
his/her
signature
B. Part I shall be filled up upon request of the petty cash advance and
Part II shall be filled up upon liquidation.
C. The PVC shall be prepared in two (2) copies distributed as follows:
124

ONLINE EDITION - COMPLIMENTARY

Original - Auditor thru the Chief Accountant together with the
supporting documents
Duplicate - retained by the DO for his/her file

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

ANNEX 27 - DAILY CASH POSITION REPORT

LGU
DAILY CASH POSITION REPORT
General Fund
As of

Collections:
Local Taxes ₱ xxx
Internal Revenue Allotment xxx
Permits and Licenses xxx
Service Income xxx
Business Income xxx
Other Income xxx

Total Collections ₱ xxx

Less: Disbursements
Personal Services xxx
Maintenance and Other Operating Expenses xxx
Capital Outlays xxx
Financial Expenses xxx
Total Disbursements ₱ xxx
Net Cash Available for the day xxx
Add: Cash, Beginning Balance xxx
Total Cash Available to date ₱ xxx

Certified Correct:

Treasurer/Authorized Representative

Date

125

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 1

Annex A of COA/DBM/DILG/ Governance Commission for GOCCs/DND Joint Circular No. 2015-01, 8

FORMS AND
January 2015

ANNEX 28 - CONFIDENTIAL FUND-PHYSICAL AND FINANCIAL PLAN

ONLINE EDITION - COMPLIMENTARY

Physical and Financial Plan

Confidential Fund

CY 20

LGU:
Appropriation No.: Yearly CF Approved and Budget Appropriation: ₱

Programs, QUARTERLY/MONTHLY PHYSICAL TARGETS

Activities and Expecte 1st Quarter/Months of 2nd Quarter/Months of 3rd Quarter/Months of 4th Quarter/Months of
Projects d
(PAPs) Fund Outcom Physical Budget (₱) Physical Budget (₱) Physical Budget (₱) Physical Budget (₱)
Source e Target Target Target Target

Tota
l
Prepared by: Noted by: Approved by:

Project Accountable Officer Date Budget Officer Date Local Chief Executive Date
 LTOM, 2nD EDITIOn

Annex B of COA/DBM/DILG/ Governance Commission for

GOCCs/DND
Joint Circular No. 2015-01, 8 January
2015

ANNEX 29 - CERTIFICATION OF THE ACCOUNTABLE

OFFICER OF THE CONFIDENTIAL FUND
CERTIFICATION

Date
We hereby certify that the amount of
(₱ ) was incurred by the undersigned in connection with
PROJECT
(File Code No.) from the cash advance
drawn on
in the amount of .

We further certify that:

a. The certifying officer or employee is accountable for the
disbursement
from the cash advance of CF;
b. The expenses were incurred in connection with the agency's
confidential operations and activities, with supporting
documents attached to the liquidation for CF, documentary
evidence of payment kept in sealed envelope in the vault in
the office of the SDO;
c. The details and supporting documents of transactions that
are classified are in custody of the agency and kept in its
vault which may be inspected by Intelligence and
Confidential Fund Audit Unit if the circumstances so
demand;
d. The funds are not used for payment of salaries and wages,
overtime, additional compensation, allowance or other
fringe benefits of officials and employees,
representation/entertainment expenses, consultancy fees
and construction or acquisition of buildings or housing
structures;
e. The purchase of equipment is relevant to the confidential
activities;
and,
f. This expenditures are necessary and utilized for legal purposes.

PROJECT ACCOUNTABLE OFFICER/SDO

Attested:

HEAD OF THE AGENCY/ 127

GOVERNOR/MAYOR
Subscribed and sworn to me this of , 20 .

Name and Signature

ONLINE EDITION - COMPLIMENTARY

COPY
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Annex C of COA/DBM/DILG/ Governance Commission for GOCCs/DND Joint Circular No. 2015-01, 8

FORMS AND
January 2015

ANNEX 30 - ACCOMPLISHMENT REPORT ON THE USE OF CF

ACCOMPLISHMENT REPORT
ONLINE EDITION - COMPLIMENTARY

UTILIZATION OF CONFIDENTIAL
FUNDS
(Please check
Agency: one) AR No.:

Period Covered
AR Date:
Total Amount of CF Per Budget CY 20 ₱ Total Amount of Cash Advance for the Period: ₱
Program/Project/Ac-
tivities Per Physical
Actual Outcome/Accomplishment Amount Limiting Factor Facilitating Factor Reference*
& Financial Plan
Utilized
(Form in Annex C)

Summary:

Amount this Quarter: ₱

Cumulative 1st Quarter to End of this Quarter ₱

Prepared by Approved by

Special Disbursing Officer Date Local Chief Executive Date

*state available document attached as evidence of payment
 LTOM, 2nD EDITIOn

Annex D of COA/DBM/DILG/ Governance Commission for

GOCCs/DND
Joint Circular No. 2015-01, 8 January
2015

ANNEX 31 - TRANSMITTAL LETTER FOR THE AUDIT

TEAM LEADER ENUMERATING THE
SUPPORTING DOCUMENTS FOR THE
LIQUIDATION OF THE CASH ADVANCE

Name of Agency

Date

The Audit Team Leader

(Agency)
Dear Sir/ Madam;
We are submitting the herein documents relative to the cash
advance drawn for Confidential Fund of this agency in the amount of ₱
for the period by (name of SDO) as
follows:

a. Certified Copy of the Physical and Financial Plan

b. Certified copy of the designation of the Special
Disbursing Officer (SDO). If the Head of Agency
(HoA) is the SDO, a Certification by the HoA to
that effect shall be signed by him/her
c. Certified copy of the approved application for
fidelity bond together with a copy of the Official
Receipt (OR) evidencing payment of premium or
List of Accountable Officers with Approved Bond
issued and duly certified by the Bureau of
Treasury
d. Certified copy of the transmittal letter of the
Liquidation Report (LR) of the previous cash
advances duly stamped "received" by the
Intelligence and Confidential Fund
Audit Unit, COA and certification of the Accountant
that the
SDO has no unliquidated CF cash advances;
e. Original specimen signatures of signatories to
Disbursement Voucher (DV) and Obligation
Requests (ObR) in case of NGAs and LGUs;
Additional requirements for specific Sector
f. Certified copy of Annual/Supplemental Budget
supported with the Annual Investment Plan (AIP)
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 showing the allocation/budget for Peace and
Order Programs (POP) of the LGU, and the
corresponding Appropriation Ordinance approving
the budget
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 FORMS AND ANNEXES

g. Statement of Itemized POP of the LGU where the

allowable
CF was computed duly certified by the Budget Officer
h. Certified copy of the minutes of the meeting
evidencing the 2/3 votes of the Local Peace and
Order Council approving the POP and the release
of the CF
i. Certification from the concerned Philippine
National Police (PNP) Chief in the locality
highlighting the peace and order situation in the
locality and supporting the need to release and
use of the CF
j. Approval by the Department of Interior and
Local Government (DILG) Secretary in case
of additional appropriation for the CF
k. Certified copy of the Obligation Request (ObR)
l. Others:
l.1
l.2
l.3

Please acknowledge receipt

hereof.
Very truly yours,

(Local Chief Executive)

Page 2 of 2

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 LTOM, 2nD EDITIOn

Annex E of COA/DBM/DILG/ Governance Commission for

GOCCs/DND
Joint Circular No. 2015-01, 8 January
2015

ANNEX 32 - CONFIDENTIAL FUND-LIQUIDATION

REPORT

LIQUIDATION REPORT No.:

Date:

Agency Resp. Center Code:

Particulars Amoun
t

Total Amount Spent

Amount of Cash Advance Per DV No. Dtd
Amount Refunded Per OR No. Dtd
Amount to be Reimbursed

Certified: Correctness of Certified: Purpose of Certified: Supporting

the cash documents complete
above data advance duly and proper
accomplished

Head, Acctg. Unit or

Claiman SDO
t Immediate Supervisor

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 FORMS AND ANNEXES

Annex F of COA/DBM/DILG/ Governance Commission for

GOCCs/DND
Joint Circular No. 2015-01, 8 January
2015

ANNEX 33 - TRANSMITTAL LETTER FOR THE COA

CHAIRPERSON ENUMERATING THE
SUPPORTING DOCUMENTS FOR THE
LIQUIDATION OF THE CASH ADVANCE

Name of Agency

Date

The Honorable Chairperson

Commission on
Audit Quezon City

Attention: The
Head
Intelligence and Confidential Funds
Dear Audit Unit
Chairperson:
We are submitting the herein documents relative to the liquidation of
the
cash advance drawn for Confidential Fund (CF) of this agency in the
amount of
₱ for the period by (name of SDO) as follows:

1. Liquidation Report
2. Certified photocopies of the check and paid DV of the cash
advance being liquidated signed and/or approved by the
HoA
3. Documentary evidence of payments and Certification by
the HoA
4. Copy of the supporting documents attached to the
cash advance for the CF as submitted to the Audit
Team Leader as follows

a. Certified copy of the designation of the SDO.

If the HoA is the SDO, a certification by the
HoA to that effect shall be signed by him/her;
b. Certified copy of the approved application for
fidelity bond together with a copy of the
Official Receipt (OR) evidencing payment of
premium or List of Accountable Officers with
approved Bond issued and duly certified by
132 the Bureau of Treasury;
ONLINE EDITION - COMPLIMENTARY
 c. Certified copy of the transmittal letter of the
Liquidation Report of the previous cash
advances duly stamped "received" by the
ICFAU, COA and certification of the Accountant
that the SDO has no unliquidated CF cash
advances;
d. Original specimen signatures of signatories to
DV and Obligation Requests (ObR);

ONLINE EDITION - COMPLIMENTARY

 LTOM, 2nD EDITIOn

e. Others:
e.1
e.2
e.3

Additional requirements
f. Certified copy of Annual/Supplemental
Budget supported with the Annual
Investement Program showing the
allocation/budget for Peace and Order
Program (POP) of the LGU, and the
corresponding Appropriation Ordinance
approving the budget
g. Statement of Itemized POP of the LGU
where the allowable CF was computed duly
certified by the Budget Officer
h. Certified copy of the minutes of the
meeting evidencing the 2/3 votes of the
Local Peace and Order Council
approving the POP and the release of
the CF
i. Certification from the concerned PNP
Chief in the locality highlighting the peace
and order situation in the locality and
supporting the need to release and use of
the CF
j. Approval by the DILG Secretary in
case of additional appropriation for
the CF
k. Certified copy of the ObR
5. Certified Copy of the Physical and Financial Plan
6. Certified copy of the Accomplishment Report and its proof
of
submission to the Secretary of the DILG
a.Others
Please acknowledge receipt
hereof.
Very truly yours,

(Local Chief Executive)

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