Local Treasury Operations Manual 2nd Edition

2019 BUREAU OF LOCAL GOVERNMENT FINANCE LOCAL TREASURY OPERATIONS MANUAL 2ND EDITION BOOK III Fund Management Practices, Expenditures and Disbursements 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 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) CHAPTER 1 Local and Other Special Funds 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 budgets shall be based on functions, activities, and projects, in terms of expected results. 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 3. Development projects funded from the share of the LGU concerned in the internal revenue allotment and such other special accounts which may be created by law or ordinance. (Sec. 313, LGC) 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) CHAPTER 2 Local Budgeting SECTION 96. The Local Budget Process . The budget process in LGUs is divided into five (5) phases: 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 budget; 3. Recommend to the LCE the level of annual expenditures and ceilings of 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 Office 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 two (2) preceding, current, and ensuing fiscal years; and 6. Accomplishment reports for the last two (2) preceding and current fiscal years. 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 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 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 n 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 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 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--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--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). 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. 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 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 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 except by subsequent enactment. 2. However, appropriations for capital outlays shall continue and remain valid until fully spent, reverted or the project is completed. 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): 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 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 x x x. Regarding the propriety of using these advance payments as source of fund for supplemental budget, Sec. 321, Art. 1, Chapter III, Title V, Book III, of the Local Government Code of 1991 (LGC) sternly states; "[N]o ordinance providing for a supplemental budget shall be enacted, except when supported by funds actually available, as certified by the local treasurer, or by new revenue sources." Expounding on this point, Art. 417 (a) of the Implementing rules and regulations of the LGC states: "Funds actually available refers to the amount of money actually collected as certified by the local treasurer during a given fiscal year, which is over and above the realized income of that year." In other words, funds are actually available when realized income exceeds estimated income of that fiscal year. Thus, the advance payments may not qualify as source of fund for a supplemental budget. To be clear, advance collections remain a liability of the LGU. Being an unrealized income, they may not be a source of fund for a supplemental budget. (COA letter, 21 January 2019 to BLGF Executive Director) b. Allotment an authorization issued by the LCE to a department/office of the LGU which authorizes it to incur obligations for a specific amount within its appropriation. 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) CHAPTER 3 Expenditures and Disbursements 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 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 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: 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 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. 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: 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; 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); 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 of important public announcements (A.O. No. 103, 31 August 2004) ii. Expenses for advertisements of anniversaries, etc. in newspapers, TV or radio merely for publicity or propaganda purposes except 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) 1. n 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) 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 in generic terms such as infrastructure projects, inter-municipal waterworks, drainage and sewerage, flood control, irrigation systems projects, reclamation projects, roads and bridges 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 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); 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. , P4,988.75/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 paid to Department 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 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 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. Osmea vs. COA , GR No. 98355, 02 March 1994); 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 Government Funds and Property are: 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) 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 accessible and readily available items which have limited useful 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 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 8. Installation of highly sophisticated outdoor signs, billboards and neon signs 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 situations which are deemed such, there is a need to set up a 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, 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 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) 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 recurring administrative expenses such as; payrolls for regular or 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 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 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) 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 amount. e. Credit Card Payment Slip (CCPS) The CCPS shall be acceptable as support for claims of reimbursement of expenses where the official 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 the form of an obligation whether the law simply provides consequences for the document not being presented or retained in its original form. 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, and approved Obligation Request (ObR), prepare Disbursement Voucher (DV) and forward to the Accounting Unit. Concerned offices (COA Circular No. 2006-002, 31 January 2006) b. Certify as to obligation of allotment for the purpose as indicated and completeness of supporting documents, assign number to DV, sign Box A and forward to Treasurer. Accounting Unit c. Certify on the availability of fund (Box B) and forward to approving officer. Treasurer (COA Circular No. 2006-002, 31 January 2006) d. Approve on the payment covered by the DV (Box C) and forward DV to the Cashier. Local Chief Executive or authorized approving officer e. Prepare, sign check and forward check with DV to countersigning officer. Treasurer f. Countersign check and forward to Accountant for preparation of the Accountant's Advice of Local Check Disbursements. Administrator/Vice-Mayor for the Local Sanggunian disbursements g. Prepare Accountant's Advice of Local Check Disbursements and submit to bank. Return DV, check and supporting documents to Cashier/Treasurer. Accountant h. Record check in the Check Register 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. Treasurer i. Prepare the Journal Entry Voucher (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. Accounting Unit j. Forward RCI, DV, supporting documents and JEV to the Office of the Auditor. Accountant [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 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) 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 A. Processing of payrolls to be paid by cash is the same as that of steps (a) to (d) for check disbursements. Concerned offices B. Gather duly certified and approved 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. Office of the Treasurer C. Certify on the availability of fund and forward to the Approving Officer Treasurer (COA Circular No. 2006-002, 31 January 2006) D. Approve on the payment and forward payroll to the Cashier. Local Chief Executive or Authorized Approving Officer E. Gather duly certified and approved 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. Office of the Treasurer F. Check completeness of document/previous cash advance/s liquidated, sign Box A of DV and forward to Treasurer Accounting Unit G. Certify on the availability of fund (Box B) and forward to the Approving Officer. Treasurer H. Approve on the payment covered by DV (Box C) and forward to Treasurer for preparation of checks. Local Chief Executive I. Prepare and sign checks, and forward check with DV to countersigning officer Treasurer J. Countersign check and forward to Accountant for preparation of Advice. Administrator K. Prepare Accountant's Advice of Local Check Disbursements and return DV, check and supporting documents to Cashier/Treasurer. Accountant L. Encash check and pay claimants. Record disbursement in Cashbook-Cash Advances. Treasurer/Disbursing Officer M. Return unused cash to the Treasurer/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. Disbursing Officer N. Prepare Report of Disbursement, attach 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. Disbursing Officer O. Prepare JEV to record the liquidation of cash advance. Record JEV in the Cash Disbursement Journal (CDJ). Post monthly to the General Ledger/Subsidiary Ledger. Accountant P. Forward Report of Disbursement and supporting documents including JEV to the Office of the Auditor. Accountant (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 I, 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) 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 3. Approved application for bond and/or fidelity bond for the year will be required for cash accountability of P5001 or more. (COA Circular No. 2013-001, 10 January 2013 Amendment to COA Circular No. 2012-001, 14 June 2012) 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 P15,000 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 Receipt 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. (EO No. 77, 15 March 2019) 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 the Interior and Local Government ii. Other government officials and employees as approved by the head of agency 2. Duly approved itinerary of travel 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 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 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. 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. 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 P1,000 and above, except for purchases made while on official travel j. Summary/Abstract of Canvass k. Petty Cash Vouchers duly accomplished and signed l. OR, in case of refund 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. b. Foreign Travel i. Paper/electronic plane tickets, boat or bus tickets, boarding pass ii. Certificate of appearance/attendance for training/seminar participation 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. 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. (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 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 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. x x x 89, x x x of this Code or any regulation issued by the Commission implementing these Sections shall be punished by a fine not exceeding one thousand pesos (P1,000) 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. 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. 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 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 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 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, effect the adjusting entries in the books, and enter the gross amount of the receivables in the Registry of Accounts Written-Off (RAWO). b. Submit the JEV to the COA ATL. 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 cochairman of the local school board. The division/city superintendent of schools or the district supervisor concerned, as the cash may be, 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 and other facilities for public elementary and secondary schools which are deemed to have shortage of classrooms or of other facilities, as the case may be 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 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) 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, prepare DV/payroll and forward to the Accounting Unit. Concerned offices b. Check completeness of documents and verify existence of funds held in trust, assign number to DV/payroll, sign box A and forward to the Treasurer. Accounting Unit c. Verify claim, certify on the availability of fund (Box B) and forward to the approving officer. Treasurer (COA Circular No. 2006-002, 31 January 2006) d. Approve transaction (Box C) and forward DV to Cashier. Local Chief Executive or authorized approving officer e. Prepare and sign check and forward check with DV to countersigning officer. Treasurer f. Countersign check and forward to Accountant for preparation of the Accountant's Advice. Administrator g. Prepare Accountant's Advice of Local Check Disbursements and return DV, check and supporting documents to Cashier/Treasurer. Accountant h. Issue 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. Treasurer i. Prepare the JEV based on individual 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. Accounting Unit j. Forward RCI, DV, supporting documents and JEV to the Office of the Auditor for final custody and post audit. Accountant 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 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 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 the 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 activity concerned e. Payment of rewards to informers (non-employee of concerned government agency) subject to the following conditions: 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 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: 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 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: 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. 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 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; 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 ICFAU in a sealed envelope with a visible label "CONFIDENTIAL For ICFAU Only" through any of the following: i. Registered mail 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 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. 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 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) CHAPTER 4 Fund Management Services 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 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. 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 The revenue forecasting model and templates are provided under BLGF Memorandum Circular No. 16-2015, 19 June 2015, entitled "Local Public Financial Management Tools for the Electronic Statement of Receipts and Expenditures (eSRE)." 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; 2. Actual cash receipts and disbursements from the beginning of the year to the end of the reporting month (Year-to-Date Actual). This will become next month's beginning balance; 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, estimates should be adjusted to a more realistic level. The shortfall in collection should be considered in deciding any subsequent release of allotment. 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 opportunity for LGUs to embark on long-term income-generating 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. 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 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. CHAPTER 5 Examination, Audit, and Settlement of Accounts 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 subsisting between agencies of the government; I. Compromise or release in whole or in part, of any settled claim or liability to any government agency; 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. 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 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 1. Responsibilities of the Head of the Agency (HoA) 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 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. 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 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. 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--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/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 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 the government, the difference shall be a proper audit charge. b. If the amount billed is less than the amount due the government, the difference shall also be a proper audit charge. 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 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). 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. SECTION 127. Statement of Audit Suspensions, 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 purposes of national consolidation into a Sector SASDC as input into a database to be maintained 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 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. 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 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, 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 (P1,000,000.00) 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 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) 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 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. 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 except 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. 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 Regulations 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 management mechanisms and controls must be in place. 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. 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. 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: 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 _____________ (P_____________) 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. 12. Check the footings of the cashbook to ascertain the correctness of its total and balances. Take note of errors and require the AO to adjust/correct the 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. 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 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. d. Paid invoices, reimbursement expense receipt (RER), promissory notes, etc. 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 resume the count only upon his/her return. 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. 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 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: a. The auditor who discovered the shortage shall immediately submit a report to the Chairperson, thru the supervising Auditor and Cluster/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 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. 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 Cluster/Regional Director concerned, furnishing a copy to the 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. 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. (COA Memorandum No. 2013-004, 09 July 2013, Prescribing the Use of the Revised Cash Examination Manual) CHAPTER 6 Accountability, Responsibility and Liability of Local Treasurers and Other Accountable Officers 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 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. 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 (P1,000.00) nor more than Five Thousand Pesos (P5,000.00) 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) D. Failure to Dispose of Delinquent Real Property at Public Auction 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 (P1,000.00) nor more than Five Thousand Pesos (P5,000.00) 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 case of funds and property of the province, city and municipality shall designate a custodian to take charge of the funds or property until a successor shall have been appointed and qualified. 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 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. 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 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. 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 documents 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) 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. Comments 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; i. Memorandum Receipt, if any, covering the properties subject of the request; 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. A. File the request with the Auditor For Amount not exceeding Php100,000.00 Accountable Officer or Representative COA Procedures Specific Office Persons Responsible 1 File request for relief with sufficient identification or authorization. Ask for sufficient identification and inquire about: Properties lost or damaged and their corresponding value: Name of accountable officer and the agency from which he/she belongs Audit Group/Team Concerned Receiving Clerk 2 Examine request for relief from accountability to 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) Audit Group/Team Concerned Action Officer 3.a If the documents are incomplete, inform the accountable officer/counsel/ representative to comply with the formalities and procedural requirements. Audit Group/Team Concerned Action Officer 3.b If the documents are complete, stamp "received" on at least 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. Audit Group/Team Concerned Receiving Clerk 4 Inform the accountable officer/counsel/ 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. Audit Group/Team Concerned Action Officer 5 Issue Decision pursuant to Sec. 5, Rule IV of RRPC. Audit Group/Team concerned Audit Team Leader (ATL) Supervising Auditor (SA) 6 Distribute the decision to the head of agency, auditor and agency 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. Audit Group/Team Concerned Releasing Clerk 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 Officer or Representative COA Procedures Specific Office Persons Responsible 1 File the request with sufficient identification or authorization. Ask for sufficient identification and inquire about: Properties lost or damaged and their corresponding value Name of accountable officer and the agency from which he/she belongs Audit Group/Team Concerned Receiving Clerk 2 Examine request for relief from accountability to 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) Audit Group/Team Concerned Action Officer 3.a If the documents are incomplete, inform the accountable officer/counsel/ representative to comply with the formalities and procedural requirements. Audit Group/Team Concerned Action Officer 3.b If the documents are complete, stamp "received" on at least 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. Audit Group/Team Concerned Receiving Clerk 4 Inform the accountable officer/counsel/ 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. Audit Group/Team Concerned Action Officer 5 Elevate the case, together with the comments and recommendations to the Cluster/Regional Director concerned. Audit Group/Team Concerned Audit Team Leader/ Supervising Auditor 6 Upon receipt of the request from the ATL/SA, 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. Cluster/COA Regional Office Concerned Action Officer 7 Issue decision pursuant to Secs. 8 and 9, Rule V of RRPC Cluster/COA Regional Office Concerned Cluster/Regional Director 8 Distribute the decision to the head of agency, auditor concerned and agency officials affected by the decision through personal service, or if not practicable through registered mail Cluster/COA Regional Office Concerned Receiving Clerk 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 Officer or Representative COA Procedures Specific Office Persons Responsible 1 File the request with sufficient identification or authorization. Ask for sufficient identification and inquire about: Properties lost or damaged and their corresponding value Name of accountable officer and the agency from which he/she belongs Audit Group/Team Concerned Receiving Clerk 2 Examine request for relief from accountability to 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) Audit Group/Team Concerned Action Officer 3.a If the documents are incomplete, inform the accountable officer/counsel/ representative to comply with the formalities and procedural requirements. Audit Group/Team Concerned Action Officer 3.b If the documents are complete, stamp "received" on at least 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. Audit Group/Team Concerned Receiving Clerk 4 Inform the accountable officer/counsel/ 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. Audit Group/Team Concerned Action Officer 5 Elevate the request, together with the comments and recommendations to the Cluster/Regional Director concerned. Audit Group/Team Concerned Audit Team Leader/ Supervising Auditor 6 Upon receipt of the request from the ATL/SA, 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. Cluster/COA Regional Office Concerned Action Officer 7 Elevate the case, together with the comments and recommendations to the Assistant Commissioner, Legal Services Sector. Cluster/COA Regional Office Concerned Cluster/Regional Director 8 Upon receipt of the request from the Cluster/Regional 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. Legal Services Sector Director concerned 9 Refer the case to the Cluster/COA Regional Office concerned for comment and recommendation pursuant to Sec. 4, Rule VIII of RRPC. Commission Secretariat Commission Secretary 10 Submit comment to the Commission Secretary Cluster/COA Regional Office Concerned Cluster/Regional Director 11 Upon submission of the comment, refer the case with the complete records of the case to the Legal Services Sector (LSS) for review, evaluation, preparation of draft decision Commission Secretariat Commission Secretary 12 Submit draft decision to the Commission Proper (CP) Legal Services Sector Assistant Commissioner 13 Conduct formal deliberation, submission of concurring or dissenting opinion and finalization of decision, pursuant to Secs. 4 and 5, Rule X of RRPC. Commission Proper 14 Distribute the decision or Resolution to the Central Office 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. Commission Secretariat Commission Secretary (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) ANNEX 21 Disbursement Voucher (DV) ANNEX 22 Check Register ANNEX 23 Report of Checks Issued ANNEX 24 Report of Disbursements ANNEX 25 Liquidation Report ANNEX 26 Petty Cash Voucher (PCV) ANNEX 27 Daily Cash Position Report LGU DAILY CASH POSITION REPORT General Fund As of __________________ Collections: Local Taxes Pxxx Internal Revenue Allotment xxx Permits and Licenses xxx Service Income xxx Business Income xxx Other Income xxx Total Collections Pxxx Less: Disbursements Personal Services xxx Maintenance and Other Operating Expenses xxx Capital Outlays xxx Financial Expenses xxx Total Disbursements Pxxx Net Cash Available for the day xxx Add: Cash, Beginning Balance xxx Total Cash Available to date Pxxx Certified Correct: ______________________________ Treasurer/Authorized Representative ______________________________ Date ANNEX 28 Confidential Fund-Physical and Financial Plan ANNEX 29 Certification of the Accountable Officer of the Confidential Fund CERTIFICATION ___________________ Date We hereby certify that the amount of _____________________________ (P_________) 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/ GOVERNOR/MAYOR Subscribed and sworn to me this ____ of _____, 20__. _________________________ Name and Signature ANNEX 30 Accomplishment Report on the Use of CF 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 P____________ 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) showing the allocation/budget for Peace and Order Programs (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 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 the 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) 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 Name of Agency Date _____________ The Honorable Chairperson Commission on Audit Quezon City Attention: The Head Intelligence and Confidential Funds Audit Unit Dear 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 P______________ 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 the Bureau of Treasury; ___ 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); ___ e. Others: ___ e.1 __________________________ ___ e.2 __________________________ ___ e.3 __________________________ Additional requirements ___ f. Certified copy of Annual/Supplemental Budget supported with the Annual Investment 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) Footnotes 1. Governance for Sustainable Human Development, United Nations Development Programme (UNDP), 1997. n Note from the Publisher: Copied verbatim from the official document. Irregular numerical sequence.