Publishing COA-DBM Joint Circular No. 1, s. 2021 (Guidelines Implementing E.O. No. 87 Re: Reversion of Accounts Payable to Accumulated Surplus or Deficit of the General Fund)

March 16, 2021 REVENUE MEMORANDUM CIRCULAR NO. 040-21 SUBJECT : Publishing the Full Text of COA-DBM Joint Circular No. 1, s. 2021 dated March 8, 2021 Entitled, "Guidelines Implementing Executive Order (E.O.) No. 87 Directing that All Accounts Payable which Remain Outstanding for Two Years or more in the Books of National Government Agencies be Reverted to the Accumulated Surplus or Deficit of the General Fund of the National Government" TO : All Internal Revenue Officials, Employees and Others Concerned For the information and guidance of all internal revenue officials and others concerned, attached is the photocopy of COA-DBM Joint Circular No. 1, s. 2021 dated March 8, 2021 entitled, "GUIDELINES IMPLEMENTING EXECUTIVE ORDER (E.O.) NO. 87 DIRECTING THAT ALL ACCOUNTS PAYABLE WHICH REMAIN OUTSTANDING FOR TWO YEARS OR MORE IN THE BOOKS OF NATIONAL GOVERNMENT AGENCIES BE REVERTED TO THE ACCUMULATED SURPLUS OR DEFICIT OF THE GENERAL FUND OF THE NATIONAL GOVERNMENT." HTcADC All concerned are hereby enjoined to be guided accordingly and give this Circular a wide publicity as possible. (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue ATTACHMENT March 8, 2021 COA-DBM JOINT CIRCULAR NO. 001-21 TO : Heads of Departments, Agencies, State Universities and Colleges (SUCs), Heads of Constitutional Offices Enjoying Fiscal Autonomy and Other Offices of the National Government; Heads of Government-Owned and/or Controlled Corporations (GOCCs); Heads of Budget and Accounting Units; COA Auditors; and All Others Concerned SUBJECT : Guidelines Implementing Executive Order (E.O.) No. 87 Directing That All Accounts Payable Which Remain Outstanding for Two Years or More in the Books of National Government Agencies Be Reverted to the Accumulated Surplus or Deficit of the General Fund of the National Government 1.0 PURPOSES 1.1 To prescribe guidelines and procedures relative to the reversion of accounts payable (A/Ps), pursuant to E.O. No. 87 dated 13 August 2019; and 1.2 To provide the guidelines required in the release of funds for legitimate obligations that may arise after the reversion of A/Ps. 2.0 COVERAGE This Circular covers all Accounts Payable (A/Ps) of National Government Agencies (NGAs) and Government Owned/or Controlled Corporations (GOCCs) maintaining Special Account in the General Fund (SAGF). It shall apply to all funds of NGAs, except for : (1) Trust or Fiduciary Funds for as long as the purposes for its creation have not been accomplished; and (2) A/Ps corresponding to Foreign-Assisted Projects for the duration of the said project. 3.0 DEFINITION OF TERMS The following terms as defined and used under existing guidelines are hereby reiterated or modified for the purpose of E.O. No. 87 and this joint circular: CAIHTE 3.1 Accounts Payable (A/Ps) or Due and Demandable Obligations refer to valid and legal obligations of NGAs/GOCCs for which goods/services/projects have been delivered/rendered/completed and accepted regardless of the year when these obligations were incurred. 3.2 Obligation a commitment, by a government entity arising from an act of a duly authorized official, which binds the government to the immediate or eventual payment of a sum of money. Obligation may be referred to as a commitment that encompasses possible future liabilities based on current contractual agreement. A government agency is authorized to incur obligations only in the performance of activities which are in pursuit of its functions and programs, authorized in appropriation acts/laws within the limit of the allotment released by the Department of Budget and Management (DBM). 3.3 Not Yet Due and Demandable Obligations commitments or obligations incurred by government agencies for which items have not yet been delivered or services not yet rendered. 3.4 Accumulated Surplus/(Deficit) refers to the cumulative results of normal and continuous operations of an agency including prior period effects of changes in accounting policy and errors, and other capital adjustments. 3.5 Custodial Funds refer to receipts or cash received by any government agency whether from a private source or another government agency to fulfill a specific purpose. Custodial receipts include receipts collected as an agent for another entity. These include trust receipts both from an individual or corporation that are required to be held by government until the outcome of a court's case or procurement activity is determined, as well as cases where a department or agency holds receipts as a trustee for the fulfillment of some obligations. DETACa 3.6 Foreign-Assisted Projects Government projects which are wholly or partly financed by foreign loans and/or foreign grants. 4.0 GENERAL GUIDELINES 4.1 In line with Section 1 of E.O. No. 87, NGAs/GOCCs shall revert all A/Ps for FY 2017 and prior years thereto in the Accumulated Surplus/(Deficit) on or before the end of 2021. 4.2 The following shall apply to FAPs-A/Ps: 4.2.1 Those which have remained outstanding for two (2) years after the completion date of the project per loan/grant documents, shall be reverted to the Accumulated Surplus/(Deficit); and 4.2.2 Those falling under direct payment scheme of loan availment shall not be reverted to the Accumulated Surplus/(Deficit); and instead be reviewed by the agencies concerned for purposes of requesting the issuance of a Non-Cash Availment Authority from the DBM pursuant to the provisions of DBM-COA-DOF Joint Circular No. 2-97 dated March 21, 1997. 4.3 All A/Ps that were reverted to the Accumulated Surplus/(Deficit); and which have been validated by competent authorities or by final and executory decisions, to be legitimate claims, shall be charged against the following: 4.3.1 Contingent Fund for the payment of validated claims and determined by DBM as urgent; and/or 4.3.2 The specific budget of the agency concerned under succeeding year's annual General Appropriations Act (GAA). aDSIHc 4.4 Item 4.3 hereof shall in no way be construed as authority to revive or validate claims and accounts payable that are already barred by prescription or disallowed by final judicial or administrative determination. 4.5 A Special Allotment Release Order (SARO) shall be issued for reverted and legitimate claims for which the actual transactions, i.e. , delivery of goods and services, have already been completed. The SARO to be issued shall have the following conditions: 4.5.1 It shall be effective only during the year it is issued; 4.5.2 It shall be treated as a "specific transaction release document" which cannot be re-issued. Thus, if for any reason the SARO for the reverted claim was not obligated during the year it was released, there can be no re-issuance of a SARO for the same purpose; and 4.5.3 It cannot be modified for whatever other purpose. 4.6 All government entities concerned shall prepare an inventory of A/Ps incurred in FY 2017 and years prior thereto, as of December 31, 2020. It shall reflect the name of creditor, Obligation Request and Status (ORS) Number, allotment class, funding source, year of incurrence and obligations, etc., and shall be submitted to DBM and COA not later than June 30, 2021. Such inventory shall serve as one of the bases for reversion of the A/P and for the purpose of payment after reversion, subject to agency validation procedures. 4.7 All agencies concerned are reminded of their submission of the Financial Accountability Report (FAR) No. 3, before January 31, 2021 which provides an inventory of Not Yet Due and Demandable Obligations (NYDDO) as of December 31, 2020. ETHIDa 5.0 PROCEDURAL GUIDELINES 5.1 NGAs/GOCCs shall review and analyze all recognized A/Ps in their respective books of accounts. On the other hand, A/Ps for infrastructure capital outlays, including those subsidy releases for GOCCs for infrastructure projects which remained outstanding for two (2) years or more, may not be reverted immediately if the following conditions are present: 5.1.1 On-going construction projects with at least 15% overall physical accomplishments as of December 31, 2020; and 5.1.2 Said on-going construction project shall be completed by December 31, 2021. 5.2 To effect the reversion of A/Ps, a Journal Entry Voucher (JEV) shall be prepared for the reversion to the Accumulated Surplus/(Deficit). A copy of the JEV certified by the Chief Accountant and supported with List of Reverted A/Ps (Annex A) , shall be submitted to DBM and GAS-COA. The Accounting Unit shall furnish the Budget Unit copies of JEV for the reversion of A/Ps, to adjust the Registry of Allotments, Obligations and Disbursements (RAOD) and ORS. The Chief Accountant shall record the reverted A/Ps to the Registry of Reverted Accounts Payable (RRAP) (Annex B) . The registry shall be maintained by the Accounting Division/Unit. 5.3 All A/Ps that were reverted to the Accumulated Surplus/(Deficit), pursuant to Section 1 of E.O. No. 87, may be considered for payment upon determination, thru administrative processes, of the existence, validity and legality of the claims, subject to the following procedures: cSEDTC 5.3.1 The claimants shall take the initiative to file their requests with the agency concerned; 5.3.2. The claimants shall submit pertinent documents such as: approved contracts; proof that services had been rendered; proof that assets and other properties had been delivered; projects have been completed and accepted by the agency and other documentation to prove the validity and legitimacy of their claims; 5.3.3 Upon establishment of the proof of validity to settle the claim, the agency head shall request for the issuance of SARO from DBM. The request shall be supported by the following: 5.3.3.1 Certified copy of the specific JEV showing that the A/Ps had been reverted to the Accumulated Surplus/(Deficit); and 5.3.3.2 Justification for the non-payment of the claims during the past years. 5.3.4 The SARO and Notice of Cash Allocation chargeable against the fund/s identified for the purpose, shall be released by the DBM after which the agency shall process the payment of the claims. 5.3.5 Upon receipt of the SARO by the Agency, the Budget Unit shall furnish the Accounting Unit of the copy thereof, for posting/recording in the RRAP. 6.0 ACCOUNTING ENTRIES Accounting entries pertinent to the provisions of this Circular is hereto attached as Annex C . SDAaTC 7.0 APPLICABILITY This Circular shall have a continuing application. Henceforth, agencies shall pay only those A/Ps which are outstanding for less than two (2) years, except those pertaining to exemptions as mentioned in this Circular. 8.0 SANCTIONS Failure of the officials and employees concerned to comply with the provisions of this Circular shall subject them to penalties imposed under Section 43, Chapter 5, Book VI of E.O. No. 292, the revised Administrative Code of the Philippines. AaCTcI 9.0 REPEALING CLAUSE All provisions of existing circulars and other issuances inconsistent with this Circular are hereby rescinded/repealed and/or modified accordingly. 10.0 SAVING CLAUSE Cases not covered in this Circular shall be referred to the DBM and shall be jointly resolved with COA. 11.0 EFFECTIVITY This Circular takes effect immediately. (SGD.) MICHAEL G. AGUINALDO Chairperson Commission on Audit (SGD.) WENDEL E. AVISADO Secretary Department of Budget and Management ANNEX A List of Reverted Accounts Payable ANNEX B Registry of Reverted Accounts Payable ANNEX C Illustrative Accounting Entries on the Implementation of E.O. No. 87 Prescribing the Reversion of Accounts Payable Outstanding for at Least Two Years