Operation of the Common Fund under the New Disbursement System

June 22, 1988 REVENUE MEMORANDUM CIRCULAR NO. 34-88 SUBJECT : Operation of the Common Fund under the New Disbursement System TO : Assistant Commissioner (Financial Service), Assistant Commissioner (Administrative Service), Regional Directors and Others Concerned For the information and guidance of all concerned, quoted hereunder is National Budget Circular No. 398 dated June 14, 1988 of the Department of Budget and Management, which is self-explanatory: National Budget Circular No. 398 June 14, 1988 Subject : Authority to Treat Cash Balances in Servicing Banks as Common Fund under the New Disbursement System To : All Heads of Departments, Constitutional Commissions, Bureau Offices and Agencies, including State Universities & Colleges, Schools and Hospitals, Chiefs of Financial and Management Service, Chief Accountants/Heads of Accounting Units, COA Unit Auditors and All Others Concerned 1.0 Purposes 1.1 To improve cash management by authorizing flexibility in the use of funding warrants released under the New Disbursement System (NDS). 1.2 To hasten the execution of programs/projects by facilitating the timely payment of obligations pertaining thereto. 1.3 To prescribe guidelines to be followed by agencies in the operation of the Common Fund. casia 2.0 Definition of Terms 2.1 Common Fund the total cash in bank as appearing in the books of an agency which can be availed of for payment of expenditures during the current year including terminal leave, retirement gratuity, separation pay, accounts payable, unbooked prior years obligations, etc. 2.2 Operating units - refer to organizational units below the agency regional offices with complete set of books of accounts. 2.3 Critical level - the cash in bank per books of the agency which is equivalent to or less than one (1) month operating requirements as shown in the approved Financial & Work Plan. 3.0 General Guidelines 3.1 The Common Fund is hereby authorized to be adopted for each Fund, by agency/region/operating units with complete set of books of accounts. 3.2 Initially, the Common Fund shall cover two (2) months operational requirements of each fund of an agency/operating unit (as shown in approved Financial & Work Plan), computed on the basis of the bank balance reported in the Monthly Status of Funds as of May 31, 1988. Agencies whose cash in bank as of May 31, 1988 approximately equal or exceeds (2) two months operational requirements shall not be issued additional funding warrants, until such time that the Common Fund reaches the critical level. However, agencies whose cash in bank as of May 31, 1988 is less than their two (2) months operational requirements shall be issued additional funding warrants, to constitute their common fund. 3.3 Agencies shall submit to the Accounting and Finance Bureau (AFB) concerned on or before June 15, 1988 their Trial Balance as of May 31, 1988 to be supported by the Status of Cash Advances to Regular and Special Disbursing Officers as of the same period, broken down by year when such cash advances were given. Henceforth, the monthly Trial Balance required to be submitted on or before the 20th day of the following month shall be supported by the Status of Cash Advances. casia 3.4 A Status of Common Fund, prescribed format attached as Annex "A", shall be submitted monthly and when the Common Fund is at its critical level. This report shall replace the Monthly Status of funds required under Joint Circular No. 4-86A dated January 2, 1988. To facilitate the preparation and submission of this report, agencies are advised to maintain a subsidiary ledger for each Advice of Allotment (AA) received wherein all Request for Obligation of Allotment (ROA) drawn for all allotment class chargeable thereto shall be entered/listed. 3.5 Agencies shall pay all their obligations including cash advances to disbursing officers from the Common Fund using allotment data in the AA as control ceiling. In no case shall the total funding warrants issued for current operation exceed the total allotment released for each allotment class for the current year. 3.6 The existing accounting and auditing policy to the effect that cash advances shall be given only for payment of salaries and petty expenses and that no subsequent cash advance shall be given unless the previous cash advance had been fully liquidated, is hereby reiterated. 3.7 Funding warrants to cover payment of prior years accounts payable shall, as usual, be separately requested from the DBM. Only those Accounts Payable listed in the submitted Statement of Accounts Payable (BF 304, revised) required under Circular Letter No. 88-4 shall be considered. 3.8 Terminal leave and retirement gratuity benefits of One Hundred Thousand Pesos and below per claimant shall be processed by the agency concerned and shall be paid out of the Common Fund after the covering AA shall have been issued and recorded in the books. 3.9 Terminal leave and retirement gratuity benefits of more than One Hundred Thousand Pesos, as well as separation pay benefits of employees regardless of amount, shall be processed/evaluated by the DBM. Funding warrant shall be issued for the purpose when the balance of the Common Fund as of the end of the month prior to the immediately preceding month is not sufficient to cover payment of said benefits after considering the operating requirements for the next two months. 3.10 Agency requests for allotments to cover payment of unbooked obligations shall be supported by original documents such as invoices, job orders, bills, contracts, agreements, statements of accounts, etc. and shall be processed and evaluated by the DBM. Funding warrant shall be issued depending on the status of the Common Fund as of the end of the month prior to the immediately preceding month. 3.11 Funding warrants issued to cover payment of the following shall be deposited to the same current account maintained for, and shall form part of the Common Fund: cd i 3.11.1 prior years accounts payable; 3.11.2 retirement gratuity and terminal lease of more than P100,000 3.11.3 separation pay; and 3.11.4 prior years unbooked obligations 3.12 Requests for replenishment of the Common Fund shall be made whenever the fund is at its critical level to be supported by the Status of Common Fund Report and the Statement of Charges to Accounts Payable (BF 305). Accordingly BF 305 shall now be submitted every month instead of every quarter. 3.13 Unutilized allotments in any expenditure item under Maintenance and Other Operating Expenses may be used to augment other items under the same allotment class, provided that no item of expenditure shall be augmented by more than twenty-five percent (25%) of the augmented (recipient) expenditure item, without the approval of the Secretary of Budget and Management. 3.14 The Department of Health, the Department of Education, Culture and Sports and the Department of Public Works and Highways shall convert the operation of their Common Fund into the procedures prescribed in this Circular. 3.15 At the end of the Calendar year 1988 and every year thereafter, all unobligated balances of allotments shall be reverted to the Unappropriated Surplus except those released from continuing appropriations. The corresponding cash, however, shall not be remitted to the National Treasury but shall remain with the agencies servicing banks to backup the allotments to be released in the ensuing year. 3.16 The Common Fund shall not be applicable to Trust Liabilities which are authorized to be maintained under a separate bank account. 4.0 Saving Clause Cases not covered by this Circular shall be referred to the concerned Accounting and Finance Bureau, Department of Budget and Management. 5.0 Repealing Clause All provisions of existing circulars and other issuances inconsistent with this circular are hereby rescinded/repealed and/or modified accordingly. 6.0 Effectivity This circular shall take effect July 1, 1988. (Sgd.) Guillermo N. Carague Secretary" Please be guided accordingly. (SGD.) BIENVENIDO A. TAN, JR. Commissioner