INTRODUCTION

Recent developments brought about by the Philippine Public Financial Management

Reforms and significant changes in the field of accounting prompted the harmonization of the
existing accounting standards with the international accounting standards. This Commission
revised the New Government Accounting System (NGAS) Manual prescribed under Commission
on Audit (COA) Circular No. 2002-002 dated June 18, 2002 to make it responsive to dynamic
changes and modern technology.

Sec. 1. Legal Basis. The Government Accounting Manual (GAM) is prescribed by COA
pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the
Philippines which provides that:

“The Commission on Audit shall have exclusive authority, subject to the

limitations in this Article, 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 expenditures, or uses of government funds
and properties". (Underscoring supplied)

Sec. 2. Coverage. This Manual presents the basic accounting policies and principles in
accordance with the Philippine Public Sector Accounting Standards (PPSAS) adopted thru COA
Resolution No. 2014-003 dated January 24, 2014 and other pertinent laws, rules and regulations.
It includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002
dated January 30, 2013, as amended; the accounting procedures, books, registries, records, forms,
reports, and financial statements; and illustrative accounting entries. It shall be used by all
National Government Agencies (NGAs) in the:

a. preparation of the general purpose financial statements in accordance with the PPSAS
and other financial reports as may be required by laws, rules and regulations; and

b. reporting of budget, revenue and expenditure in accordance with laws, rules and
regulations.

Sec. 3. Objective of the Manual. The Manual aims to update the following:

a. standards, policies, guidelines and procedures in accounting for government funds

and property;

b. coding structure and accounts; and

c. accounting books, registries, records, forms, reports and financial statements.

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 Chapter 2

GENERAL PROVISIONS, BASIC STANDARDS AND POLICIES

Sec. 1. Scope. This chapter covers the general provisions from existing laws, rules and
regulations; and the basic standards/fundamental accounting principles for financial reporting by
national government agencies.

Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used as stated
below shall be construed to mean as follows:

a. Accrual basis – means a basis of accounting under which transactions and other
events are recognized when they occur (and not only when cash or its equivalent is
received or paid). Therefore, the transactions and events are recognized in the
accounting records and recognized in the financial statements of the periods to which
they relate. The elements recognized under accrual accounting are assets, liabilities,
net assets/equity, revenue, and expenses.

b. Assets – are resources controlled by an entity as a result of past events, and from
which future economic benefits or service potential are expected to flow to the entity.

c. Contributions from owners – means future economic benefits or service potential that
have been contributed to the entity by parties external to the entity, other than those
that result in liabilities of the entity, that establish a financial interest in the net
assets/equity of the entity, which:

1. conveys entitlement both to (i) distributions of future economic benefits or

service potential by the entity during its life, such distributions being at the
discretion of the owners or their representatives; and to (ii) distributions of any
excess of assets over liabilities in the event of the entity being wound up; and/or

2. can be sold, exchanged, transferred, or redeemed.

d. Distributions to owners – means future economic benefits or service potential

distributed by the entity to all or some of its owners, either as a return on investment
or as a return of investment.

e. Entity – refers to a government agency, department or operating/field unit. It may be

referred to in this GAM as an agency.

f. Expenses – are decreases in economic benefits or service potential during the

reporting period in the form of outflows or consumption of assets or incurrence of
liabilities that result in decreases in net assets/equity, other than those relating to
distributions to owners.

g. Government Accounting – encompasses the processes of analyzing, recording,

classifying, summarizing and communicating all transactions involving the receipt
and disposition of government funds and property, and interpreting the results
thereof. (Sec. 109, Presidential Decree (P.D.) No. 1445)

h. Government Budget – is the financial plan of a government for a given period, usually
for a fiscal year, which shows what its resources are, and how they will be generated

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 and used over the fiscal period. The budget is the government's key instrument for
promoting its socio-economic objectives. The government budget also refers to the
income, expenditures and sources of borrowings of the National Government (NG)
that are used to achieve national objectives, strategies and programs.

i. Liabilities – are firm obligations of the entity arising from past events, the settlement
of which is expected to result in an outflow from the entity of resources embodying
economic benefits or service potential.

j. Net assets/equity – is the residual interest in the assets of the entity after deducting all
its liabilities.

k. Revenue – is the gross inflow of economic benefits or service potential during the
reporting period when those inflows result in an increase in net assets/equity, other
than increases relating to contributions from owners.

l. Revenue funds – comprise all funds derived from the income of any agency of the
government and available for appropriation or expenditure in accordance with law.
(Section 3, P.D. No. 1445)

Sec. 3. Responsibility, Accountability and Liability over Government Funds and

Property

a. Responsibility over Government Funds and Property

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.
(Sec. 2, P.D. No. 1445)

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. (Sec. 4(4), P.D. No. 1445)

3. The head of any agency of the government is immediately and primarily

responsible for all government funds and property pertaining to his agency.
Persons entrusted with the possession or custody of the funds or property under
the agency head shall be immediately responsible to him, without prejudice to the
liability of either party to the government. (Sec. 102, P.D. No. 1445)

b. Accountability over Government Funds and Property

1. Every officer of any government agency whose duties permit or require the
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. (Sec. 101, P.D. No. 1445; Section 50,
Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)

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 the
Commission or its representative. (Sec. 75, P.D. No. 1445)

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 3. When government funds or property are transferred from one AO to another, or
from an outgoing officer to his successor, it shall be done upon properly itemized
invoice and receipt which shall invariably support the clearance to be issued to
the relieved or outgoing officer, subject to regulations of the Commission.
(Sec. 77, P.D. No. 1445)

c. Liability over Government Funds and Property

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. (Sec. 103, P.D. No. 1445)

2. Every officer accountable for government funds shall be liable for all losses
resulting from the unlawful deposit, use, or application thereof and for all losses
attributable to negligence in the keeping of the funds. (Sec. 105(2),
P.D. No. 1445)

3. No AO shall be relieved from liability by reason of his having acted under the
direction of a superior officer in paying out, applying, or disposing of the funds or
property with which he is chargeable, unless prior to that 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. (Sec. 106, P.D. No. 1445)

4. When a loss of government funds or property occurs while they are in transit or
the loss is caused 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
application for relief, with the available supporting evidence. Whenever
warranted by the evidence, credit for the loss shall be allowed. An officer who
fails to comply with this requirement shall not be relieved of liability or allowed
credit for any loss in the settlement of his accounts. (Sec. 73, P.D. No. 1445)

Sec. 4. Fundamental Principles for Revenue. All revenues accruing to the NGAs
shall be governed by the following fundamental principles:

a. Unless otherwise specifically provided by law, all revenues accruing to an entity by

virtue of the provisions of existing law, orders and regulations shall be
deposited/remitted in the National Treasury (NT) or in any duly authorized
government depository, and shall accrue to the General Fund (GF) of the NG.
(Sec. 65(1), P.D. No. 1445)

b. Except as may otherwise be specifically provided by law or competent authority, all

moneys and property officially received by a public officer in any capacity or upon
any occasion must be accounted for as government funds and government property.
(Sec. 42, Chapter 7, Title I(B), Book V, E.O. No. 292)

c. Amounts received in trust and from business-type activities of government may be

separately recorded and disbursed in accordance with such rules and regulations as
may be determined by a Permanent Committee composed of the Secretary of Finance
as Chairman, and the Secretary of Budget and Management and the Chairman, COA,
as members. (Sec. 65(2), P.D. No. 1445)

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 d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds
other than the GF, only when authorized by law as implemented by rules and
regulations issued by the Permanent Committee. (Sec. 66, P.D. No. 1445)

e. No payment of any nature shall be received by a collecting officer without

immediately issuing an official receipt in acknowledgement thereof. The receipt may
be in the form of postage, internal revenue or documentary stamps and the like,
officially numbered receipts, subject to proper custody, accountability, and audit.
(Sec. 68(1), P.D. No. 1445)

f. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge
cash receipts, the COA may approve, upon request, exemption from the use of
accountable forms. (Sec. 68 (2), P.D. No. 1445)

g. At no instance shall temporary receipts be issued to acknowledge the receipt of public

funds. (Sec. 72, GAAM Volume I)

h. Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each
receipt shall be exact copies or carbon reproduction in all respects of the original.
(Sec. 73, GAAM Volume I)

i. An officer charged with the collection of revenue or the receiving of moneys payable
to the government shall accept payment for taxes, dues or other indebtedness to the
government in the form of checks issued in payment of government obligations, upon
proper endorsement and identification of the payee or endorsee. Checks drawn in
favor of the government in payment of any such indebtedness shall likewise be
accepted by the officer concerned.

At no instance should money in the hands of the CO be utilized for the purpose of
cashing private checks. (Sec. 67(1) and (3), P.D. No. 1445)

j. Under such rules and regulations as the COA and the Department of Finance (DOF)
may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge
receipt of all funds received by them, the acknowledgement bearing the date of actual
remittance or deposit and indicating from whom and on what account it was received.
(Sec. 70, P.D. No. 1445)

Sec. 5. Fundamental Principles for Disbursement of Public Funds. Section 4 of

P.D. No. 1445, the Government Auditing Code of the Philippines, provides that all financial
transactions and operations of any government entity shall be governed by the following
fundamental principles:

a. No money shall be paid out of any public treasury or depository except in pursuance
of an appropriation law or other specific statutory authority.

b. Government funds or property shall be spent or used solely for public purposes.

c. Trust funds shall be available and may be spent only for the specific purpose for
which the trust was created or the funds received.

d. 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.

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 e. Disbursement or disposition of government funds or property shall invariably bear the
approval of the proper officials.

f. Claims against government funds shall be supported with complete documentation.

g. All laws and regulations applicable to financial transactions shall be faithfully

adhered to.

h. Generally accepted principles and practices of accounting as well as of sound

management and fiscal administration shall be observed, provided that they do not
contravene existing laws and regulations.

Sec. 6. Basic Government Accounting and Budget Reporting Principles. Each entity
shall recognize and present its financial transactions and operations conformably to the following:

a. generally accepted government accounting principles in accordance with the PPSAS

and pertinent laws, rules and regulations;

b. accrual basis of accounting in accordance with the PPSAS;

c. budget basis for presentation of budget information in the financial statements (FSs)
in accordance with PPSAS 24;

d. RCA prescribed by COA;

e. double entry bookkeeping;

f. financial statements based on accounting and budgetary records; and

g. fund cluster accounting.

Sec. 7. Keeping of the General Accounts. The COA shall keep the general accounts of
the Government and, for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto, pursuant to Section 2, par. (1), Article IX-D of the 1987
Philippine Constitution.

Sec. 8. Financial Reporting System for the National Government. The financial
reporting system of the Philippine government consists of accounting system on accrual basis and
budget reporting system on budget basis under the statutory responsibility of the NGAs, Bureau
of the Treasury (BTr), Department of Budget and Management (DBM), and the COA, as follows:

a. Each entity of the National Government (NG) maintains complete set of accounting
books by fund cluster which is reconciled with the records of cash transactions
maintained by the BTr.

b. The BTr accounts for the cash, public debt and related transactions of the NG.

c. Each entity maintains budget registries which are reconciled with the budget records
maintained by the DBM and the Government Accountancy Sector (GAS), COA.

d. The COA, through the GAS:

1. maintains budget records showing the overall approved budget of the NG and its
execution/implementation;

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 2. consolidates the FSs and budget accountability reports of all NGAs and the BTr
with COA’s records to come up with an Annual Financial Report (AFR) for the
NG as required in Section 4, Article IX-D of the 1987 Philippine Constitution;
and

3. prepares other financial reports required by law for submission to oversight

agencies.

Sec. 9. Objectives of General Purpose Financial Statements. The objectives of

general purpose financial statements (GPFSs) are to provide information about the financial
position, financial performance, and cash flows of an entity that is useful to a wide range of users
in making and evaluating decisions about the allocation of resources. Specifically, the objectives
of general purpose financial reporting in the public sector are to provide information useful for
decision-making, and to demonstrate the accountability of the entity for the resources entrusted to
it.

Sec. 10. Responsibility for Financial Statements. The responsibility for the
preparation of the FSs rests with the following:

a. for individual entity/department FSs – the head of the entity/department central office
(COf) or regional office (RO) or operating unit (OU) or his/her authorized
representative jointly with the head of the finance/accounting division/unit; and

b. for department/entity FSs as a single entity – the head of the entity/department COf
jointly with the head of the finance unit.

Sec. 11. Components of General Purpose Financial Statements. The complete set of
GPFSs consists of:

a. Statement of Financial Position (Annex A);

b. Statement of Financial Performance (Annex B);
c. Statement of Changes in Net Assets/Equity (Annex C);
d. Statement of Cash Flows (Annex D);
e. Statement of Comparison of Budget and Actual Amounts (Annex E); and
f. Notes to the Financial Statements, comprising a summary of significant accounting
policies and other explanatory notes. (Annex F)

Sec. 12. Books of Accounts and Registries. The books of accounts and registries of the
NG entities consist of:

a. Journals

1. General Journal (Appendix 1)

2. Cash Receipts Journal (Appendix 2)
3. Cash Disbursements Journal (Appendix 3)
4. Check Disbursements Journal (Appendix 4)

b. Ledgers

1. General Ledgers (Appendix 5)

2. Subsidiary Ledgers (Appendix 6)

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 c. Registries

1. Registries of Revenue and Other Receipts (Appendices 7, 7A, 7B, 7C and 7D)
2. Registry of Appropriations and Allotments (Appendix 8)
3. Registries of Allotments, Obligations and Disbursements (Appendices 9A, 9B, 9C
and 9D)
4. Registries of Budget, Utilization and Disbursements (Appendices 10A, 10B, 10C
and 10D)

Sec. 13. Fund Accounting. The books of accounts shall be maintained by fund cluster
as follows:

Code Description
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/Domestic Grants Fund
04 Special Account-Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts

The composition of fund clusters is enumerated in Annex P.

Sec. 14. Components of Budget and Financial Accountability Reports. The budget
reports consist of the following Budget and Financial Accountability Reports (COA-DBM-DOF
Joint Circular No. 2013-1, as amended by COA and DBM Joint Circular No. 2014-1 dated July 2,
2014):

a. Quarterly Physical Report of Operation (QPRO) – BAR No. 1

b. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances

(SAAODB) – FAR No. 1

c. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances

by Object of Expenditures (SAAODBOE) – FAR No. 1-A

d. List of Allotments and Sub-Allotments (LASA) – FAR No. 1-B

e. Statement of Approved Budget, Utilizations, Disbursements and Balances

(SABUDB) – FAR No. 2 (for Off-Budget Fund)

f. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object

of Expenditures (SABUDBOE) – FAR No. 2-A (for Off-Budget Fund)

g. Aging of Due and Demandable Obligations (ADDO) – FAR No. 3

h. Monthly Report of Disbursements (MRD) – FAR No. 4

i. Quarterly Report of Revenue and Other Receipts (QRROR) – FAR No. 5

Sec. 15. Fair Presentation. The FSs shall present fairly the financial position, financial
performance and cash flows of an entity. Fair presentation requires the faithful representation of
the effects of transactions, other events, and conditions in accordance with the definitions and

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recognition criteria for assets, liabilities, revenue, and expenses set out in PPSAS. The application
of PPSAS, with appropriate disclosures, if necessary, would result in fair presentation of the FS.

Sec. 16. Compliance with PPSASs. An entity whose financial statements comply with
PPSASs shall make an explicit and unreserved statement of such compliance in the notes.
Financial statements shall not be described as complying with PPSASs unless they comply with
all the requirements of PPSASs. Inappropriate accounting policies that do not comply with
PPSAS are not rectified either by disclosure of the accounting policies used, or by notes or
explanatory material.

Sec. 17. Departure from PPSAS. In the event that Management strongly believes that
compliance with the requirement of PPSAS would result in misleading presentation that it would
contradict the objective of the FSs set forth in PPSAS, the entity may depart from that
requirement if the relevant regulatory framework allows, or otherwise does not prohibit, such a
departure.

Sec. 18. Going Concern. The FSs shall be prepared on a going concern basis unless
there is an intention to discontinue the entity operation, or if there is no realistic alternative but to
do so.

Sec. 19. Consistency of Presentation. The presentation and classification of items in

the FSs shall be retained from one period to the next unless laws, rules and regulations, and
PPSAS require a change in presentation.

Sec. 20. Materiality and Aggregation. Each material class of similar items shall be
presented separately in the financial statements. Items of a dissimilar nature or function shall be
presented separately unless they are immaterial. If a line item is not material, it is aggregated
with other items either on the face of FSs or in the Notes to the FSs. A specific disclosure
requirement in a PPSAS need not be satisfied if the information is not material.

Sec. 21. Offsetting. Assets and liabilities, and revenue and expenses shall not be
allowed to offset unless required or permitted by a PPSAS except when offsetting reflects the
substance of the transaction or other event.

Sec. 22. Comparative Information. Comparative information shall be disclosed with

respect to the previous period for all amounts reported in the FSs. Comparative information shall
be included for narrative and descriptive information when it is relevant to an understanding of
the current period’s FSs.

Sec. 23. Structure and Content. The FSs and each component shall be identified
clearly and distinguished from other information in the same published document.

Sec. 24. Statement of Financial Position. An entity shall present current and non-
current assets, as well as current and non-current liabilities, as separate classifications on the face
of the Statement of Financial Position (SFP).

Sec. 25. Statement of Financial Performance. The Statement of Financial Performance

(SFPer) shall include line items that present the revenue, expenses and net surplus or deficit for
the period.

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 Sec. 26. Statement of Changes in Net Assets/Equity. An entity shall present in the
Statement of Changes in Net Assets/Equity (SCNA/E) the following:

a. Net Income or Deficit for the period;

b. Each item of revenue and expenses for the period that, as required by Standards, is
recognized directly in net assets/equity, and the total of these items;

c. Total revenue and expenses for the period; and

d. For each component of net assets/equity separately disclosed, the effects of changes
in accounting policies and corrections of errors recognized in accordance with
PPSAS 3-Accounting Policies, Changes in Accounting Estimates and Errors.

Sec. 27. Statement of Cash Flows. The Statement of Cash Flows (SCF) provides
information to users of FSs a basis to assess the ability of the entity to generate cash and cash
equivalents and to determine the entity’s utilization of funds. This also provides information on
how the entity generates income authorized to be used in their operation and its utilization.

Sec. 28. Statement of Comparison of Budget and Actual Amounts. A comparison of

budget and actual amounts will enhance the transparency of financial reporting in government.
This shall be presented by government agencies as a separate additional financial statement
referred in this Manual as the Statement of Comparison of Budget and Actual Amounts
(SCBAA).

Sec. 29. Notes to Financial Statements. The Notes to FSs contain information in
addition to that presented in the SFP, SFPer, SCNA/E, SCF and SCBAA. Notes provide narrative
descriptions or disaggregation of items disclosed in those FSs and information about items that do
not qualify for recognition in those statements.

Sec. 30. Qualitative Characteristics of Financial Reporting. An entity shall present

information including accounting policies in a manner that meets a number of qualitative
characteristics such as understandability, relevance, materiality, reliability and comparability.
These qualitative characteristics are the attributes that make the information provided in the FSs
useful to users.

Sec. 31. Key Features of Assets. The key features of an asset are:

a. the benefits must be controlled by the entity;

b. the benefits must have arisen from a past event; and

c. future economic benefits or service potential must be expected to flow to the entity.

The following are indicators of control of the benefits by the entity:

a. the ability of an entity to benefit from the asset and to deny or regulate the access
of others to that benefit.

b. an entity can, depending on the nature of the asset, exchange it, use it to provide
goods or services, exact a price for others’ use of it, use it to settle liabilities, hold
it, or perhaps even distribute it to owners.

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 c. possession or ownership of an object or right would normally be synonymous
with control over the future economic benefits embodied in the right or object.

However, there are instances when an entity may possess an object or right but not expect
to enjoy the benefits embodied in it, e.g. under a finance lease agreement, control over the
leased property owned by the lessor is transferred to the lessee.

The following are indicators of past event:

a. the specification of a past event differentiates assets from intentions to acquire

assets, which are not to be recognized.

b. a transaction or event giving rise to control of the future economic benefits must
have occurred.

The following are indicators of future economic benefits:

a. distinguishable from the source of the benefit i.e. the particular physical resource
or legal right;

b. does not imply that assets necessarily generate cash flows, the benefits can also
be in the form of ‘service potential’;

c. in determining whether a resource or right needs to be accounted for as an asset,

the potential to contribute to the objectives of the entity should be the prime
consideration;

d. capacity to contribute to activities/objectives/programs; and

e. the fact that an asset cannot be sold does not preclude it from providing future
economic benefits.

Sec. 32. Recognition of an Asset. An asset shall be recognized in the financial position
when and only when (a) it is probable that the future economic benefits will flow to the entity;
and (b) the asset has a cost or value that can be measured reliably.

The following are indicators of probable inflow of future economic benefits:

a. the chance of benefits arising is more likely rather than less likely (e.g. greater
than 50%).

b. benefits can be expected on the basis of available evidence or logic.

The following are indicators of reliable measurement:

a. valuation method is free from material error or bias.

b. faithful representation of the asset’s benefits.

c. reliable information will, without bias or undue error, faithfully represent those
transactions and events.

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 Sec. 33. Accounting Standards for Revenue. The following accounting standards shall
apply for revenue and receipts of government entities:

a. Revenue includes only the gross inflows of economic benefits or service potential
received and receivable by the entity in its own account. (PPSAS 9)

b. Receipts/Collections shall refer to all cash actually received from all sources during a
given accounting period.

c. Fines shall include economic benefits or service potential received or receivable by a

public sector agency, as determined by a court or other law enforcement body, as a
consequence of the breach of laws or regulations. Fines and penalties, either on tax
revenue or other specific income account, shall be recognized as income of the year
these were collected.

d. Gifts and donations shall consist of voluntary transfers of assets including cash or
other monetary assets, goods in-kind and services in-kind that one agency makes to
another, normally free from stipulations. (PPSAS 23)

e. Goods in-kind are tangible assets transferred to an agency in a non-exchange

transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind. (PPSAS 23)

f. Taxes are economic benefits or service potentials compulsory paid or payable to

public sector agencies, in accordance with laws and or regulations, established to
provide revenue to the government. Taxes do not include fines or other penalties
imposed for breaches of the law. (PPSAS 23)

g. Transfers are inflows of future economic benefits or service potential from non-
exchange transactions, other than taxes. (PPSAS 23)

Sec. 34. Use of Appropriated Funds. All moneys appropriated for functions, activities,
projects and programs shall be available solely for the specific purposes for which these are
appropriated.

Sec. 35. Appropriation for Loan Proceeds. Expenditures funded by foreign and
domestic borrowings shall be included within the expenditure program of the entity concerned.
Loan proceeds, whether in cash or in kind, shall not be used without the corresponding release of
funds through a Special Budget.

Sec. 36. Basic Requirements for Disbursements and the Required Certifications.
Disbursements of government funds shall comply with the following basic requirements and
certifications:

a. Availability of allotment/budget for obligation/utilization certified by the Budget

Officer/Head of Budget Unit;

b. Obligations/Utilizations properly charged against available allotment/budget by the

Chief Accountant/Head of Accounting Unit;

c. Availability of funds certified by the Chief Accountant. The Head of the Accounting
Unit shall certify the availability of funds before an Agency Head or his duly
authorized representative enter into any contract that involves the expenditure of
public funds based on the copy of budget release documents;

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 d. Availability of cash certified by the Chief Accountant. The Head of the Accounting
Unit shall certify the availability of cash and completeness of the supporting
documents in the disbursement voucher and payroll based on the Registry of
Allotments and Notice of Cash Allocation/Registry of Allotment and Notice of
Transfer of Allocation;

e. Legality of the transactions and conformity with existing rules and regulations. The
requesting and approving officials shall ensure that the disbursements of government
funds are legal and in conformity with applicable rules and regulations;

f. Submission of proper evidence to establish validity of the claim. The Head of the
Requesting Unit shall certify on the necessity and legality of charges to allotments
under his/her supervision as well as the validity, propriety and legality of supporting
documents. All payments of government obligations and payables shall be covered
by Disbursement Vouchers (DV)/Payrolls together with the original copy of the
supporting documents which will serve as basis in the evaluation of authenticity and
authority of the claim. It should be cleared, however, that the submission of the
supporting documents does not preclude reasonable questions on the funding,
legality, regularity, necessity and/or economy of the expenditures or transactions; and

g. Approval of the disbursement by the Head of Agency or by his duly authorized

representative. Disbursement or disposition of government funds or property shall
invariably bear the approval of the proper officials. The DVs/Payrolls shall be signed
and approved by the head of the agencies or his duly authorized representatives.

Sec. 37. Certification of Availability of Funds. No funds shall be disbursed, and no

expenditures or obligations chargeable against any authorized allotment shall be incurred or
authorized in any department, office or agency without first securing the certification of its Chief
Accountant or head of accounting unit as to the availability of funds and the allotment to which
the expenditure or obligation may be properly charged.

No obligation shall be certified to accounts payable unless the obligation is founded on a

valid claim that is properly supported by sufficient evidence and unless there is proper authority
for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall
be considered void. The certifying official shall be dismissed from the service, without prejudice
to criminal prosecution under the provisions of the Revised Penal Code. Any payment made
under such certification shall be illegal and every official authorizing or making such payment, or
taking part therein or receiving such payment, shall be jointly and severally liable to the
government for the full amount so paid or received. (Book VI, Section 41 of EO No. 292)

Sec. 38. Prohibition against the Incurrence of Overdraft. Heads of departments,

bureaus, offices and agencies shall not incur nor authorize the incurrence of expenditures or
obligations in excess of allotments released by the DBM Secretary for their respective
departments, offices and agencies. Parties responsible for the incurrence of overdrafts shall be
held personally liable therefor. (Book VI, Chapter 5, Section 41 of EO No. 292)

Sec. 39. Mode of Disbursements. Payments/Disbursements by NGAs may be effected

through the Treasury Single Account (TSA), by issuing Modified Disbursements System (MDS)
check or commercial check, cash through cash advance, Advice to Debit Account (ADA), or Non-
Cash Availment Authority (NCAA).

13
 Sec. 40. Authority to Disburse/Pay. NGAs are authorized to disburse/pay based on the
Notice of Cash Allocation (NCA), Notice of Transfer of Allocation (NTA), Cash Disbursement
Ceiling (CDC) or other authority that may be provided by law.

Sec. 41. Disbursement Voucher/Payroll. Checks/ADA shall be drawn based on duly

approved disbursement voucher or payroll.

Sec. 42. Maintenance of Records. All checks/ADA drawn during the day, whether
released or unreleased including cancelled checks shall be recognized chronologically in the
Checks/ADA Disbursement Record maintained by the Cash/Treasury Unit.

Sec. 43. Reporting of Disbursements. All payments/disbursements shall be reported

using the prescribed forms for recording in the books of accounts.

14
 Chapter 3

BUDGET EXECUTION, MONITORING AND REPORTING

Sec. 1. Scope. This Chapter prescribes the guidelines in monitoring, accounting and
reporting of the budget in the financial statements. This also prescribes the records to be
maintained by the national government agencies, forms to be used and reports to be prepared to
effectively monitor the budget as well as the required information disclosure and presentation of
budget information in the financial statements in accordance with PPSAS 24.

Sec. 2. Definition of Terms. For the purpose of this Manual, the terms stated below
shall be construed to mean as follows:

a. Allotment – is an authorization issued by the DBM to NGAs to incur obligations for

specified amounts contained in a legislative appropriation in the form of budget
release documents. It is also referred to as Obligational Authority.

b. Appropriation – is the authorization made by a legislative body to allocate funds for

purposes specified by the legislative or similar authority.

c. Approved Budget – is the expenditure authority derived from appropriation laws,

government ordinances, and other decisions related to the anticipated revenue or
receipts for the budgetary period. The approved budget consists of the following:

UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08

d. Automatic Appropriations – are the authorizations programmed annually or for some

other period prescribed by law, by virtue of outstanding legislation which does not
require periodic action by Congress.

e. Budget Information – the budgetary information consists of, among others, data on
appropriations or the approved budget, allotments, obligations, revenues and other
receipts, and disbursements.

f. Continuing Appropriations – are the authorizations to support obligations for a

specific purpose or project, such as multi-year construction projects which require the
incurrence of obligations even beyond the budget year.

g. Disbursements – are the actual amounts spent or paid out of the budgeted amounts.

h. Final Budget – is the original budget adjusted for all reserves, carry-over amounts,
transfers, allocations and other authorized legislative or similar authority changes
applicable to the budget period.

15
 i. New General Appropriations – are annual authorizations for incurring obligations
during a specified budget year, as listed in the GAA.

j. Obligation – is an act of a duly authorized official which binds the government to the
immediate or eventual payment of a sum of money. Obligation maybe referred to as
a commitment that encompasses possible future liabilities based on current
contractual agreement.

k. Original Budget – is the initial approved budget for the budget period usually the
General Appropriations Act (GAA). The original budget may include residual
appropriated amounts automatically carried over from prior years by law such as
prior year commitments or possible future liabilities based on a current contractual
agreement.

l. Revenues – are increases in economic benefits or service potential during the

accounting period in the form of inflows or increases of assets or decreases of
liabilities that result in increases in net assets/equity, other than those relating to
contributions from owners.

m. Supplemental Appropriations – are additional appropriations authorized by law to

augment the original appropriations which proved to be insufficient for their intended
purpose due to economic, political or social conditions supported by a Certification of
Availability of Funds (CAF) from the BTr.

Sec. 3. Fund Release Documents. With the adoption of the UACS and the
Performance-Informed Budgeting (PIB), the following are the fund release documents:

a. Obligational Authority or Allotment – the following are the documents which

authorize the entity to incur obligations:

1. General Appropriations Act Release Document (GAARD) – serves as the

obligational authority for the comprehensive release of budgetary items
appropriated in the GAA, categorized as For Comprehensive Release (FCR).

2. Special Allotment Release Order (SARO) – covers budgetary items under For
Later Release (FLR) (negative list) in the entity submitted Budget Execution
Documents (BEDs), subject to compliance of required documents/clearances.
Releases of allotments for Special Purpose Funds (SPFs) (e.g., Calamity Fund,
Contingent Fund, E-Government Fund, Feasibility Studies Fund, International
Commitments Fund, Miscellaneous Personnel Benefits Fund and Pension and
Gratuity Fund) are also covered by SAROs.

3. General Allotment Release Order (GARO) – is a comprehensive authority issued

to all national government agencies, in general, to incur obligations not exceeding
an authorized amount during a specified period for the purpose indicated therein.
It covers automatically appropriated expenditures common to most, if not all,
agencies without need of special clearance or approval from competent authority,
i.e. Retirement and Life Insurance Premium.

b. Disbursement Authority – the following documents authorize the entity to pay

obligations and payables:

1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central,

regional and provincial offices and operating units to cover the cash requirements
of the agencies;

16
 2. Non-Cash Availment Authority (NCAA) – authority issued by the DBM to
agencies to cover the liquidation of their actual obligations incurred against
available allotments for availment of proceeds from loans/grants through
supplier’s credit/constructive cash;

3. Cash Disbursement Ceiling (CDC) – authority issued by DBM to the Department

of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to
utilize their income collected/retained by their Foreign Service Posts (FSPs) to
cover their operating requirements, but not to exceed the released allotment to the
said post; and

4. Notice of Transfer of Allocation – authority issued by the Central Office to its

regional and operating units to cover the latter’s cash requirements.

Sec. 4. Classification of Expenditures. Expenditures of NGAs shall be classified into

categories as may be determined by the DBM including, but not limited to the following:

a. Entity incurring the obligation;

b. Program, Activity and Project (PAP);

c. Object of expenditures, including personnel services (PS), maintenance and other

operating expenditures (MOOE), financial expenses (FE), and capital outlays (CO);

d. Region or locality of use;

e. Economic or functional classification of the expenditures;

f. Obligational authority and cash transactions arising from fund releases; and

g. Such other classifications as may be necessary for the budget process.

Sec. 5. Monitoring of the Budget. The budget shall be monitored by the Budget
Division/Units of NGAs through the maintenance of registries for that purpose.

Sec. 6. Registries of Revenue and Other Receipts. The Registries of Revenue and
Other Receipts (Appendices 7, 7A, 7B, 7C and 7D) shall be maintained by the Budget
Division/Unit of NGAs to monitor the revenue and other receipts estimated/budgeted, collected
and remitted/deposited.

Sec. 7. Procedures in Monitoring and Recognizing Revenue and Other Receipts

a. Recognizing Estimated Revenue/Other Receipts

Area of Seq.
Activity
Responsibility No.
Budget Division/Unit
Staff Concerned 1 Receives copy of the Estimated Revenue per
Approved Budget of the Agency (ERABA).
Records the same in the logbook and forwards
the ERABA and the supporting documents
(SDs) to the Budget Staff.

17
 Area of Seq.
Activity
Responsibility No.
Budget Staff 2 Records the estimated revenue/other receipts
in the appropriate column of the RROR.
Files the RROR and the copy of ERABA for
reference.

b. Recognizing Revenue/Other Receipts Collected and Deposited

Area of Seq.
Activity
Responsibility No.
Budget Division/Unit
Staff Concerned 1 Receives from the Cash/Treasury Unit or
other unit concerned of the entity the copy of
the Report of Collections and Deposits
(RCD), TRA (Note 1), Cash Receipts Register
(CRReg) (Note 2) and Credit Memo/Abstract
of Deposits (Note 3). Records the same in the
logbook and forwards the documents to the
Budget Staff.

Note 1 – The TRA is used by the Bureau

of Internal Revenue (BIR) to
recognize the income from
taxes withheld by various
NGAs.
Note 2 – The CRReg is used by
operating units of NGAs
without complete set of books
of accounts such as foreign-
based government agencies,
etc.
Note 3 – The Credit Memo/Abstract of
Deposits from the bank is used
to recognize revenue deposited
with the National Treasury
through the AGDBs or
Authorized Agent Banks
(AABs).

Budget Staff 2 Records the collections of revenue/other

receipts/constructive receipts of revenue
under the appropriate column of the RROR.
Files the RROR and the copy of RCD and
supporting documents for reference.

Sec. 8. Registry of Appropriations and Allotments. The Registry of Appropriations

and Allotments (RAPAL) (Appendix 8) shall be maintained by NGAs to monitor appropriations
and allotments charged thereto. It shall show the original, supplemental and final budget for the
year and all allotments received charged against the corresponding appropriation. The balance is
extracted every time an entry is made to prevent incurrence of overdraft in appropriations.
Separate RAPAL shall be maintained by fund cluster and by Major Final Output
(MFO)/PAP/Appropriation Acts.

18
 Sec. 9. Procedures in Recording Appropriations and Allotments. The procedures for
recording appropriations and allotments are as follows:

Area of Seq.
Activity
Responsibility No.
Staff Concerned 1 Receives the GAA and the allotment release documents from
the DBM. Records the same in the logbook and forwards
these documents to the Budget Staff for recording in the
RAPAL and RAOD.

Budget Staff 2 Records the appropriations and allotments in the

appropriate columns of the RAPAL and the RAOD.
Forwards a copy of the allotment release documents to the
Accounting Division/Unit for reference.

Note – The amount of allotment should not exceed the

authorized appropriations in the GAA. If the
allotment exceeds the appropriation, appropriate
actions should be taken.

Sec. 10. Registries of Allotments, Obligations and Disbursements. The Registries of

Allotments, Obligations and Disbursements (RAOD) shall be maintained by the Budget
Division/Unit of agencies to record allotments, obligations and disbursements. It shall show the
allotments received for the year, obligations incurred against the corresponding allotment and the
actual disbursements made. The balance is extracted every time an entry is made to prevent
incurrence of obligations in excess of allotment and overdraft in disbursements against obligations
incurred. The RAODs shall be maintained by appropriation act, fund cluster, MFO/PAP, and
allotment class.

a. Registry of Allotments, Obligations and Disbursements-Personnel Services (RAOD-

PS) (Appendix 9A) shall be used to record the allotments received, obligations
incurred and disbursements classified under PS.

b. Registry of Allotments, Obligations and Disbursements-Maintenance and Other

Operating Expenses (RAOD-MOOE) (Appendix 9B) shall be used to record the
allotments received, obligations incurred and disbursements classified under MOOE.

c. Registry of Allotments, Obligations and Disbursements-Financial Expenses (RAOD-

FE) (Appendix 9C) shall be used to record the allotments received, obligations
incurred and disbursements classified under FE.

d. Registry of Allotments, Obligations and Disbursements-Capital Outlays (RAOD-CO)

(Appendix 9D) shall be used to record the allotments received, obligations incurred
and disbursements classified under CO.

Sec. 11. Obligation Request and Status. The incurrence of obligations shall be made
through the issuance of Obligation Request and Status (ORS) (Appendix 11). The ORS shall be
prepared by the Requesting/Originating Office supported by valid claim documents like DVs,
payrolls, purchase/job orders, itinerary of travel, etc. The Head of the Requesting/Originating
Office or his/her authorized representative shall certify in the Section A of the ORS as to the
necessity and legality of charges to the budget under his/her supervision, and validity, propriety
and legality of SDs. The Head of the Budget Division/Unit shall certify to the availability of
allotment and such is duly obligated by signing in Section B of the ORS.

19
 Sec. 12. Subsidiary Record for Obligation. A subsidiary record to monitor a particular
obligation shall be maintained by the Budget Division/Unit in Section C of the ORS. It shall
contain the original amount of obligation, payable (goods delivered and services rendered) and the
actual amount paid.

Sec. 13. Adjustment of Obligation. Adjustment of obligation incurred after the

processing of the claim by the Accounting Division/Unit shall be made through the use of Notice
of Obligation Request and Status Adjustment (NORSA) (Appendix 12). The adjustment shall be
effected through a positive entry (if additional obligation is necessary) or a negative entry (if
reduction is necessary) in the ‘Obligation’ column of the ORS and RAOD.

Sec. 14. Notice of Obligation Request and Status Adjustment. The NORSA shall be
prepared by the Accounting Division/Unit after the processing of the claim which shall be used in
adjusting the original amount obligated to the actual obligations incurred in the RAOD. It shall
be forwarded by the Accounting Division/Unit to the Budget Division/Unit to take up the
adjustments of obligation in the RAOD. The following transactions shall also need adjustments
of obligations:

Transactions Supporting Documents

a. Refund of cash advance granted during Certified copies of official receipts and
the year other SDs
b. Over/Underpayment of expenditures Certified copies of official receipts and
during the year bills and other SDs
c. Disallowances pertaining to expenses Certified copies of official receipts and
incurred during the validity period of bills, notice that the disallowances are
the budget that became final and final and executory, and other SDs
executory during the same period

Sec. 15. Procedures in Recording Obligation. Obligation shall be recorded in the

appropriate RAOD through ORS with the following procedures:

Area of Seq.
Activity
Responsibility No.
Budget Division/Unit
Staff Concerned 1 Receives the ORS, duly signed by the Head of the
Requesting Office, including copies of DV/Payroll,
Contract/Purchase Order (PO) and other SDs from
office/personnel concerned. Verifies completeness of
the documents. If complete, records the same in the
logbook maintained for the purpose and forwards the
documents to the Budget Staff for processing. If
incomplete, returns the documents to the Requesting
Office for completion.

Budget Staff 2 Receives the ORS and its SDs from the Staff concerned.
Verifies availability of allotment based on the
appropriate RAOD. If allotment is not available, returns
the documents to the office/personnel concerned.

3 If allotment is available, assigns number on the ORS

based on the Control Logbook maintained for the
purpose. Records the amount obligated based on the
ORS in the ‘Obligation’ column of the RAOD. Initials

20
 Area of Seq.
Activity
Responsibility No.
in Section B of the ORS and forward all copies of the
documents to the Head of the Budget Division/Unit for
signature.

Head of Budget 4 Reviews the ORS and SDs. If in order, signs the
Division/Unit certification in Section B of the ORS. Forwards the ORS
and SDs to the Budget Staff.

Budget Staff 5 Forwards the ORS and SDs to the Accounting

Division/Unit for processing of the claim. Retains
original copy of the ORS for maintenance/monitoring of
obligation status.

Note – For the succeeding activities, refer to Chapter 6-

Disbursements.

Sec. 16. Recording of Disbursement in the RAOD. The disbursements shall be posted
under the ‘Payment’ column of Section C of the ORS based on the Reports of Checks Issued
(RCI)/Report of ADA Issued (RADAI) (Appendix 13)/TRA and JEV and recorded in the
appropriate RAOD by the Budget Division/Unit.

Sec. 17. Procedures for the Recording of Disbursements and Adjustment of

Obligation. The procedures for the recording of disbursements and adjustment of obligation are
as follows:

Area of Seq.
Activity
Responsibility No.
Budget Division/Unit
Staff Concerned 1 Receives copies of RCI, RADAI, TRA, JEV and
NORSA from the Accounting Division/Unit as basis for
posting in Section C of the ORS and recording to RAOD.
Records in the Logbook and forwards the RCI, RADAI,
TRA, JEV and NORSA to Budget Staff concerned for
recording in the RAOD and updating Section C of the
ORS.

Recording of Disbursements
Budget Staff 2 Posts the RCI/RADAI/TRA/JEV and pertinent
Check/ADA/TRA numbers in Section C, ‘Payment’
column of the ORS and ‘Disbursements’ column of the
RAOD.

3 In Section C of the ORS, determines the balance of

unpaid obligations by subtracting the amount of
disbursements from obligations. Files the RCI, RADAI,
TRA, JEV and other documents for reference.

Adjustment of Obligation
4 Posts the NORSA in the ‘Obligation’ column of Section
C of the ORS. If the original amount is lesser than the
actual obligation after the processing of the claim, a

21
 Area of Seq.
Activity
Responsibility No.
positive entry corresponding to additional obligation
shall be recorded in the RAOD based on the NORSA. If
the original obligation is greater, a negative entry
representing the excess shall be recorded in the RAOD.

Sec. 18. Registries of Budget, Utilization and Disbursements. The Registries of

Budget, Utilization and Disbursements (RBUD) shall be used to record the approved special
budget and the corresponding utilizations and disbursements charged to retained income
authorized under R.A. 8292 for SUCs and other retained income collection of a national
government agency with similar authority, Revolving Funds and Trust Receipts/Custodial Funds.
It shall be maintained by legal/authority, fund cluster, MFO/PAP and budget classification.

a. Registry of Budget, Utilization and Disbursements-Personnel Services (RBUD-PS)

(Appendix 10A) shall be used to record the budget utilizations and disbursements
classified under PS.

b. Registry of Budget, Utilization and Disbursements-Maintenance and Other Operating

Expenses (RBUD-MOOE) (Appendix 10B) shall be used to record the budget
utilizations and disbursements classified under MOOE.

c. Registry of Budget, Utilization and Disbursements-Financial Expenses (RBUD-FE)

(Appendix 10C) shall be used to record the budget utilizations and disbursements
classified under FE.

d. Registry of Budget, Utilization and Disbursements-Capital Outlays (RBUD-CO)

(Appendix 10D) shall be used to record the budget utilizations and disbursements
classified under CO.

Sec. 19. Budget Utilization Request and Status. The incurrence of budget utilization
shall be made through the issuance of Budget Utilization Request and Status (BURS) (Appendix
14). The BURS shall be prepared by the Requesting/Originating Office supported by valid claim
documents like DV, payroll, purchase/job order, itinerary of travel, etc. The Head of
Requesting/Originating Office or his/her authorized representative shall certify in Section A of the
BURS as to the necessity and legality of charges to the budget under his/her supervision, and
validity and propriety of SDs. The Head of Budget Division/Unit shall certify to the availability
of budget and its utilization in accordance with its purpose by signing in Section B of the BURS.

Sec. 20. Subsidiary Record for Budget Utilization. The Section C of the BURS shall
serve as the subsidiary record to monitor budget utilization to be maintained by the Budget
Division/Unit. It shall contain the original amount of utilization, payable (goods delivered and
services rendered) and the actual amount paid after the processing of the claim.

Sec. 21. Adjustment of Budget Utilization. Adjustment of budget utilization after the
processing of the claim by the Accounting Division/Unit shall be made through the use of Notice
of Budget Utilization Request and Status Adjustment (NBURSA) (Appendix 15). The adjustment
shall be effected thru a positive entry (if additional utilization is necessary) or a negative entry (if
reduction is necessary) in the ‘Utilization’ column of the BURS and RBUD.

Sec. 22. Notice of Budget Utilization Request and Status Adjustment. The
NBURSA shall be prepared by the Accounting Division/Unit after the processing of the claim
which shall be used in adjusting the original amount utilized to the actual utilizations in the
RBUD. It shall be forwarded by the Accounting Division/Unit to Budget Division/Unit to take up

22
the adjustments of utilization in the RBUD. The following transactions shall also need
adjustments of budget utilizations:

Transactions Supporting Documents

a. Refund of cash advance granted during Certified copies of official receipts and
the year other SDs
b. Over/Underpayment of expenditures Certified copies of official receipts and
during the year bills and other SDs
c. Disallowances pertaining to expenses Certified copies of official receipts and
incurred during the validity period of bills, notice that the disallowances are
the budget that became final and final and executory, and other SDs
executory during the same period

Sec. 23. Recording of Disbursement in the RBUD. The disbursement shall be posted
in Section C of the BURS and recorded in the appropriate RBUD based on the RCI, RADAI,
TRA and JEV furnished by the Cashier/Accounting Units to Budget Division/Unit.

Sec. 24. Procedures in Monitoring Budget, Utilizations and Disbursements charged

to Retained Income, Revolving Funds and Trust Receipts/Custodial Funds. The procedures
are as follows:

Area of Seq.
Activity
Responsibility No.
Posting of Approved Budget
Budget Division/Unit
Receiving/Releasing 1 Receives the approved budget (AB) from the concerned
Staff entity official. Records the same in the logbook and
forwards the AB to the Staff Concerned for recording in
the appropriate RBUD.

Staff Concerned 2 Records the AB in the ‘Budgeted Amount’ column of the

RBUD and forwards copies of the budget documents to
the Accounting Division/Unit for reference.

Posting of Utilization
Receiving/Releasing 3 Receives the BURS, duly signed by the head of the
Staff Requesting Office including copies of DV/Payroll,
Contract/PO and other SDs from concerned
office/personnel. Verifies completeness of the documents.
If complete, records the same in the logbook maintained
for the purpose and forwards the documents to Staff
Concerned for recording of utilizations in the appropriate
RBUD. If incomplete, returns the documents to
Requesting Office for completion.

Staff Concerned 4 Receives the BURS and its SDs from Receiving/Releasing
Staff. Verifies availability of budget based on the
appropriate RBUD.

5 If budget is available, assigns number on the BURS based

on the Control Logbook maintained for the purpose.
Records the amount utilized based on the BURS in the
‘Utilization’ column of the RBUD. Initials in Section B of
the BURS and forward all copies of the documents to the
Head of the Budget Division/Unit for signature. If budget

23
 Area of Seq.
Activity
Responsibility No.
is not available, returns the documents to the
office/personnel concerned.

Head of Budget 6 Reviews the BURS and SDs. Signs the certification in
Division/Unit Section B of the BURS. Forwards to the Staff Concerned
the BURS and SDs.

Staff Concerned 7 Records in the logbook the release of the BURS and SDs
to the Accounting Division/Unit for processing of the
claim. Retains original copy of the BURS for
maintenance/monitoring of utilization status.

Note – For the succeeding activities, refer to Chapter 6-

Disbursements.

Posting of Disbursement
Receiving/Releasing 8 Records in the logbook the receipt of the RCI and RADAI
Staff from the Cash Unit, and TRA, JEV and NBURSA from
the Accounting Division/Unit. Forwards the same to Staff
Concerned.

Staff Concerned 9 Posts the RCI/RADAI/TRA/JEV in Section C, Payment

column of the BURS and to the Disbursement column of
the RBUD.

10 In Section C of the BURS, determines the balance of

unpaid utilizations. Files the RCI, RADAI, TRA, JEV and
other documents for reference.

Adjustment of Utilization
Staff Concerned 11 Posts the NBURSA in the ‘Utilization’ column of Section
C of the BURS. For any excess of the actual budget
utilization over the original amount, a positive entry
corresponding to additional utilization shall be recorded in
the RBUD based on the NBURSA. If the original
utilization is greater, a negative entry representing the
excess shall be recorded in the RBUD.

Sec. 25. Presentation of Budget Information in the Financial Statements on a

Comparable Basis. An entity shall prepare a comparison of the budget and actual amounts spent
as a separate statement since the budget and the financial statements are not prepared on a
comparable basis in accordance with PPSAS (Par. 23, PPSAS 24).

Sec. 26. Statement of Comparison of Budget and Actual Amounts. This shall be
prepared based on the various registries maintained by the Budget Division/Unit such as the
RRORs, RAPAL, RAOD/RBUD and other SDs. The data on Actual Amounts shall be verified
by the Accounting Division/Unit in the Statement of Cash Flows (SCF). The statement shall
present the following:

a. The original (approved appropriations, prior year’s not yet due and demandable
obligations) and final budget (continuing appropriations, transfers, realignments and
withdrawals) amounts;
b. The actual amounts on a comparable basis; and

24
 c. By way of note disclosure, an explanation of the material differences between the
budget and actual amounts, which are not included in the financial statements.

(NAME OF THE ENTITY)

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT
(ALL FUNDS OR NAME OF FUND)
FOR THE YEAR ENDED DECEMBER 31, 2015
(in thousand pesos)

Actual Difference
Budgeted Amounts
Amounts on Final
Particulars
Comparable Budget
Original Final Basis and Actual
Notes
RECEIPTS
Tax Revenue 3.13 & 3.15 xxx xxx xxx xxx
Services and Business
Income 3.14 & 3.15 xxx xxx xxx xxx
Assistance and Subsidy 3.13 & 3.15 xxx xxx xxx xxx
Shares, Grants and
Donations 3.13 & 3.15 xxx xxx xxx xxx
Gains 3.14 & 3.15 xxx xxx xxx xxx
Others 3.15 xxx xxx xxx xxx
Total Receipts xxx xxx xxx xxx

PAYMENTS
Personnel Services 3.15 xxx xxx xxx xxx
Maintenance and Other
Operating Expenses 3.15 xxx xxx xxx xxx
Capital Outlay 3.15 xxx xxx xxx xxx
Financial Expenses 3.15 xxx xxx xxx xxx
Others 3.15 xxx xxx xxx xxx
Total Payments xxx xxx xxx xxx
NET RECEIPTS/PAYMENTS xxx xxx xxx xxx

The above statement should be read in conjunction with the accompanying notes.

Sec. 27. Changes from Original to Final Budget. An entity shall present an
explanation of whether the changes between the original and final budget are a consequence of
reallocations within the budget by way of note disclosure in the FSs.

Sec. 28. Reconciliation of Actual Amounts on a Comparable Basis (Budget) and

Actual Amounts in the Financial Statements. The actual amounts presented on a comparable
basis to the budget shall be reconciled with the actual amounts presented in the FSs identifying
separately the differences classified as follows:

a. Basis Differences, which occur when the approved budget is prepared on a basis
other than the accounting basis;

b. Timing Differences, which occur when the budget period differs from the reporting
period reflected in the FSs; and

c. Entity Differences, which occur when the budget omits program or entities that are
part of the entity for which the FSs are prepared.

The reconciliation shall be disclosed as part of the Notes to the FSs.

Sec. 29. Disclosures of Budgetary Basis, Period and Scope. An entity shall explain in
the notes to the FSs the budgetary basis (cash or accrual, or some modification thereof) used in
the preparation and presentation of the budget and the accounting basis used in the financial

25
statements. The period and the entities included in the approved budget shall also be identified in
the notes to financial statements.

Sec. 30. Procedures for the Preparation of the Statement of Comparison of Budget
and Actual Amounts

Area of Seq.
Activity
Responsibility No.
Budget Division/Unit
Staff Concerned 1 Based on the RRORs, RAPAL, RAODs/RBUDs and SDs,
obtain the data on budgeted and actual revenue,
appropriations, allotments, obligations/utilizations and
disbursements and post these in the appropriate column of the
SCBAA.

Note 1 – The number in the ‘Notes’ column shall

correspond to those shown in the Notes to FS
prepared by the agency.
Note 2 – The Receipts portion of the statement shall
contain the various revenue and other receipts
of the agency showing the following:
a. Budgeted Amount:
Original – the approved estimated
revenue of the entity per major
account based on the RROR
maintained by the agency
Final – the approved estimated revenue
of the entity after effecting the
adjustments as reflected in the
RROR.
In cases where the estimated revenue
was not reflected on the approved
budget, the actual collections shall be
considered as the estimated revenue
(final). The same shall be disclosed in
the notes to the FSs.
b. Actual Amounts on Comparable Basis –
refer to collections received from
revenue transaction based on the RCD,
CRReg (for OU without complete set of
books) and CM/Abstract of Deposit as
posted in the RROR
The NCA received for funding
requirements of the agency shall not be
considered as receipts for the purpose of
this statement.
Note 3 – The Payments portion of the SCBAA shall
contain the expenditures of the agency
classified into PS, MOOE, CO, FE and Other
Disbursements showing the following:
a. Budgeted Amount:

26
 Area of Seq.
Activity
Responsibility No.
Original – the approved appropriations
of the agency as reflected in the
GAA and other appropriations law.
Final – the approved appropriations of
the agency after effecting the
adjustments (transfers, realignments
and withdrawals) as reflected in the
RAPAL.
b. Actual Amounts on Comparable Basis –
refer to actual payments/disbursements
posted in the RAOD based on the RCI,
RADAI, TRA and JEV for disbursements
not recorded in the RCI and RADAI. For
Operating Units without complete set of
books, the source documents are the
CBReg, CDReg and the JEV.

Note 4 – This statement shall be prepared by fund

cluster based on the UACS.

Note 5 – In addition to Note 4, a consolidated/combined

statement of all fund clusters shall be prepared.

Budget Staff 2 Prepares the SCBAA in two (2) copies and forwards to the
Accounting Division/Unit for verification of the actual
amounts with the accounting records and the SCF.

Note 6 – The difference between the Final Budget and the

Actual Amounts in the SCBAA shall be
reconciled with the balances of unreleased
appropriations/budget, unobligated allotments/
unutilized budget, and unpaid obligations/
utilizations reflected in the SAAODB/SABUDB.

Head of Budget 3 Signs the “Certified Correct” portion of the SCBAA.

Division/Unit/
Budget Officer

Accounting
Division/Unit
Accounting Staff 4 Receives the 2 copies of the SCBAA from the Budget
Concerned Division/Unit and retrieves the copy of the SCF. Verifies the
receipts and payments on the Actual Amount columns of the
SCBAA with the inflows and outflows in the SCF.
Coordinate with the Budget Division/Unit discrepancy
discovered, if any. Once verified, forwards the 2 copies of the
SCBBA and SCF to the Head of Accounting Unit/Chief
Accountant.

27
 Area of Seq.
Activity
Responsibility No.
Head of 5 Signs the Certified Correct portion of the SCBAA.
Accounting
Division/Unit/Chief
Accountant

Concerned 6 Submits the signed SCBAA to the Audit Team Leader,

Accounting Staff together with other FSs. Furnish one signed copy of the
SCBAA to Budget Division/Unit for file.

Sec. 31. Preparation of the Budget Reports. The following budget reports/documents
as required by DBM and COA shall be submitted:

a. Quarterly Physical Report of Operation (QPRO) – Budget Accountability Report

(BAR) No. 1 (Appendix 16). This report shall reflect the Department’s/Agency’s
actual physical accomplishments as at a given quarter, in terms of the performance
measures indicated in its Physical Plan.

b. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances –

Financial Accountability Report (FAR) No. 1 (SAAODB) (Appendix 17). This report
shall reflect the authorized appropriations and adjustments, total allotments received
including transfers, total obligations, total disbursements and the balances of
unreleased appropriations, unobligated allotments, and unpaid obligations of a
department/office/entity by source and by allotment class. It shall be presented by:

1. Fund Authorization;
2. Major Final Output;
3. Program/Activity/Project; and
4. Major Programs/Projects - identified by Key Result area (KRA)

c. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances

by Object of Expenditures – FAR No. 1.A (SAAODBOE) (Appendix 18). This report
shall be prepared by Funding Source Code (FSC) as clustered and shall reflect the
summary of appropriations, allotments, obligations, disbursements and balances
detailed by object of expenditures consistent with the COA Revised Chart of
Accounts per COA Circular No. 2013-002 dated January 30, 2013 and the Adoption
of the PPSAS per COA Resolution No. 2014-003 dated January 24, 2014.

d. List of Allotments and Sub-Allotments – FAR No. 1.B (Appendix 19). This report
shall reflect the allotments released by the DBM and the sub-allotments issued by the
Entity Central Office/RO, their corresponding numbers, date of issuance, and
amounts by allotment class and FSC. The total allotments per this report should be
equal to the total allotments appearing in the SAAODB (FAR No. 1).

e. Statement of Approved Budget, Utilizations, Disbursements and Balances –

FAR No. 2 (Appendix 20). This report shall reflect the approved budget, the
utilizations, disbursements and balance of the entity’s income authorized by law to
use, such as OWWA/SUCs, duly approved by their Board of Trustee/Regents and
shall be prepared by FSC as clustered.

f. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object

of Expenditures – FAR No. 2.A (Appendix 21). This report shall reflect the details of
the approved budget, utilizations, disbursements and balance of the entity’s income
authorized by law to use presented by object of expenditures consistent with the COA

28
 Revised Chart of Accounts and shall be prepared by Funding Source Code as
clustered.

g. Aging of Due and Demandable Obligations – FAR No. 3 (Appendix 22). This report
shall be prepared by FSC as clustered and shall reflect the balance of unpaid
obligations as indicated in the Obligation Request (ObR) and the ADDOs as at year-
end.

h. Monthly Report of Disbursements – FAR No. 4 (Appendix 23). The report shall
reflect the total disbursements made by department, office or entity and operating unit
from the following disbursement authorities:

1. Notice of Cash Allocation;

2. NCA for Working Fund issued to BTr as an advance funding from loan/grant
proceeds in favor of an entity;
3. Tax Remittance Advice issued;
4. CDC issued by departments with foreign-based agencies or units;
5. Non-Cash Availment Authority; and
6. Others, e.g. Customs, Duties and Taxes (CDT), BTr Documentary Stamps.

The report shall track the actual disbursement of the departments/agencies against
their Disbursement Program. The reasons for over or under spending shall be
indicated.

i. Quarterly Report of Revenue and Other Receipts – FAR No. 5 (Appendix 24). This
report shall reflect the actual revenue and other receipts/collections from all sources
remitted with the BTr and deposited in other AGDB for the current year presented by
quarter, and by specific sources consistent with the COA Revised Chart of Accounts.

Sec. 32. Submission of Budget and Financial Accountability Reports. All

departments/agencies shall observe the following timelines in submitting the required FARs to
COA-GAS and DBM:

a. Within thirty (30) days after the end of each quarter –

1. SAAODB – FAR No. 1

2. SAAODBOE – FAR No. 1.A
3. List of Allotments/Sub-Allotments - FAR No. 1.B
4. SABUDB – FAR No. 2
5. SABUDBOE – FAR No. 2.A
6. QRROR – FAR No. 5

b. On or before 30th day following the end of the year – ADDO – FAR No. 3

c. On or before 30th day of the following month covered – MRD – FAR No. 4

d. On or before February 14 of the following calendar year – Consolidated Statement of

Allotments, Obligations, and Balances per Summary of Appropriations under FCR
under GAA, GARO, and SARO.

29
 Chapter 4

RESPONSIBILITY ACCOUNTING

Sec. 1. Scope. This Chapter covers the definition of terms, objectives, concepts,
presentation of costs and revenue in the financial statements, and the responsibility center code
structure.

Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used in this
chapter shall be construed to mean as follows:

a. Responsibility Accounting – provides access to cost and revenue information under

the supervision of a manager having a direct responsibility for its performance. It is a
system that measures the plans (by budgets) and actions (by actual results) of each
responsibility center.

b. Responsibility Center – is a part, segment, unit or function of a government agency,

headed by a manager, who is accountable for a specified set of activities. Except for
some, which derive most of their income from collection of taxes and fees, NGAs are
basically cost centers which primary purpose is to render service to the public at the
lowest possible cost. Cost centers are established to provide each government
agency’s accessibility to cost information and to facilitate cost monitoring at any
given period.

Sec. 3. Objectives of Responsibility Accounting. Responsibility accounting aims to: a)

ensure that all costs and revenues are properly charged/credited to the correct responsibility center
so that deviations from the budget can be readily attributed to managers accountable therefor; b)
provide a basis for making decisions for future operations; and c) facilitate review activities,
monitoring the performance of each responsibility center and evaluation of the effectiveness of
agency’s operations.

Sec. 4. Concepts of Responsibility Accounting. The following are the concepts of

responsibility accounting:

a. Responsibility accounting involves accumulating and reporting data on revenues and

costs on the basis of the manager’s action who has authority to make the day-to-day
decisions about the items;

b. Evaluation of a manager’s performance is based on the matters directly under his

control;

c. Responsibility accounting can be used at every level of management in which the

following conditions exist:

1. Cost and revenues can be directly associated with the specific level of
management responsibility;

2. Costs and revenues are controllable at the level of responsibility with which they
are associated; and

3. Budget data can be developed for evaluating the manager’s effectiveness in

controlling the costs and revenues.

30
 d. The reporting of costs and revenues under responsibility accounting differs from
budgeting in two respects:

1. A distinction is made between controllable and non-controllable costs.

i. A cost is considered controllable at a given level of managerial responsibility

if the manager has the power to incur it within a given period of time. It
follows that (1) all costs are controllable by top management because of the
broad range of its activity; and (2) fewer costs are controllable as one move
down to lower level of managerial responsibility because of the manager’s
decreasing authority.

ii. Non-controllable costs are costs incurred indirectly and allocated to a

responsibility level.

2. Performance reports either emphasize or include only items controllable by

individual manager.

e. A responsibility reporting system involves the preparation of a report for each level of
responsibility. Responsibility reports usually compare actual costs with flexible
budget data. The reports show only controllable costs and no distinction is made
between variable and fixed costs.

f. Evaluation of a manager’s performance for cost centers is based on his ability to meet
budgeted goals for controllable costs.

Sec. 5. Presentation of Revenue in the Financial Statements. An agency shall

present, in the notes of the SFPer the total revenue, classified by MFO/PAP and by major
classification of the nature of revenue attributed to the major offices/organizational unit of the
agency.

Sec. 6. Presentation of Costs in the Financial Statements. An agency shall present, in

the notes of the SFPer, an analysis of expenses using a classification based on the MFO/PAP and
by major classification of the nature of revenue attributed to the major offices/organizational unit
of the agency. The analysis of expense by MFO/PAP classifies expenses according to the
program or purpose for which they were made. This method can provide more relevant
information to users although allocating costs to functions may require arbitrary allocations and
involves considerable judgment.

31
 Sec. 7. Responsibility Center Code Structure. Each NGA shall be assigned a
responsibility center code defined as organization code in the UACS Manual. For monitoring
revenue and expenses, additional three digit codes for the agency’s major offices/departments
shall be appended to the organization code. The organization code and the agency’s major
offices/departments’ code shall consist of 15 digits as follows:

00 000 0000000 000

Organization
Department

Agency

Lower Level
Operating Unit

Additional code for major office/department

Major Office/
Department

Example: National Government of the Commission on Audit

31 000 0100000 000

Commission on Audit

Agency (none)

Central Office

Additional code for major office/departmen t

National Government
Sector

32
 Chapter 5

REVENUE AND OTHER RECEIPTS

Sec. 1. Scope. This Chapter provides the standards, policies, guidelines and procedures
in accounting for revenue and other receipts including those collections through authorized agent
banks, remittance of collections to the NT through AGDB and deposits with the AGDB in
accordance with PPSAS 9-Revenue from Exchange Transactions and PPSAS 23-Revenue from
Non-exchange Transactions.

Sec. 2. Definition of Terms. For the purpose of this Manual, the following terms shall
be construed to mean as follows:

a. Bequest – is a transfer made according to the provisions of a deceased person’s will.

The past event giving rise to the control of resources embodying future economic
benefits or service potential for a bequest occurs when the entity has an enforceable
claim, for example on the death of the testator, or the granting of probate, depending
on the laws of the jurisdiction. (Par. 90, PPSAS 23)

b. Concessionary loans – are loans received by an entity at below market terms.

c. Exchange transactions – are transactions in which one entity receives assets or

services, or has liabilities extinguished, and directly gives approximately equal value
(primarily in the form of cash, goods, services, or use of assets) to another entity in
exchange. (Par. 11, PPSAS 9)

d. Fair value – is the amount for which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arm’s length transaction

e. Fines – are economic benefits or service potential received or receivable by NGAs,

from an individual or other entity, as determined by a court or other law enforcement
body, as a consequence of the individual or other entity breaching the requirements of
laws or regulations. (Par. 88, PPSAS 23)

f. Gifts, Donations and Goods In-kind – are voluntary transfers of assets, including cash
or other monetary assets, goods in-kind and services in-kind that one entity makes to
another, normally free from stipulations. The transferor may be an entity or an
individual. For gifts and donations of cash or other monetary assets and goods in-kind,
the past event giving rise to the control of resources embodying future economic
benefits or service potential is normally the receipt of the gift or donation.
(Par. 93, PPSAS 23)

g. Non-exchange transactions – are transactions in which an entity either receives value

from another entity without directly giving approximately equal value in exchange, or
gives value to another entity without directly receiving approximately equal value in
exchange. (Par. 11, PPSAS 9)

h. Pledges – are unenforceable undertakings to transfer assets to the recipient entity.

i. Revenue – is the gross inflow of economic benefits or service potential during the
reporting period when those inflows result in an increase in net assets/equity, other
than increases relating to contributions from owners.

33
 j. Services in-kind – are services provided by individuals to public sector agencies in a
non-exchange transaction.

Sec. 3. Accrual of Revenue to the General Fund. Unless otherwise specifically

provided by law, all revenue (income) accruing to the departments, offices and agencies by virtue
of the provisions of existing laws, orders and regulations shall be deposited in the NT or in the
duly authorized depository of the Government and shall accrue to the xxx General Fund of the
Government: Provided, that amounts received in trust and from business-type activities of
government may be separately recorded and disbursed in accordance with such rules and
regulations as may be determined by the Permanent Committee. (Sec. 44, Chapter V, Book VI,
E.O. No. 292)

Sec. 4. Special, Fiduciary and Trust Funds. Receipts shall be recorded as revenue of
Special, Fiduciary or Trust Funds (TF) or Funds other than the GF, only when authorized by law
and following such rules and regulations as may be issued by the Permanent Committee
consisting of the Secretary of Finance as Chairman, and the Secretary of the Budget and the
Chairman, Commission on Audit, as members. The same Committee shall likewise monitor and
evaluate the activities and balances of all Funds of the NG other than the GF and may recommend
for the consideration and approval of the President, the reversion to the GF of such amounts as
are: (1) no longer necessary for the attainment of the purposes for which said Funds were
established, (2) needed by the GF in times of emergency, or (3) violative of the rules and
regulations adopted by the Committee: provided, that the conditions originally agreed upon at the
time the funds were received shall be observed in case of gifts or donations or other payments
made by private parties for specific purposes. (Sec. 45, Chapter V, Book VI, EO 292).

Sec. 5. Sources of Revenue and Other Receipts. Revenues received by NGAs may
arise from exchange and non-exchange transactions.

In a transaction where the entity may provide some consideration directly in return for the
resources received, but that consideration does not approximate the fair value of the resources
received, the entity determines whether there is a combination of exchange and non-exchange
transactions. Each component of which is recognized separately. (Par. 10, PPSAS 23)

There are transactions where it is not immediately clear whether they are an exchange or a
non-exchange transaction. In these cases, an examination of the substance of the transaction will
determine if they are on exchange or non-exchange transactions. For example, the sale of goods
is normally classified as an exchange transaction. If, however, the transaction is conducted at a
subsidized price, that is, a price that is not approximately equal to the fair value of the goods sold,
that transaction falls within the definition of a non-exchange transaction.

Agencies may receive trade discounts, quantity discounts, or other reductions in the
quoted price of assets for a variety of reasons. These reductions in price do not necessarily mean
that the transaction is a non-exchange transaction. (Par. 11, PPSAS 23)

Sec. 6. Revenue from Exchange Transactions. Revenues received by the NGAs from
exchange transactions are derived from the following:

a. Sale of goods or provisions of services to third parties or to other NGAs. Examples

are:

1. Service Income – Permit Fees, Registration Fees, Registration Plates, Tags and
Stickers Fee, Clearance and Certification Fees, Franchising Fees, Licensing Fees,
Supervision and Regulation Enforcement Fees, Spectrum Usage Fees, Legal

34
 Fees, Inspection Fees, Verification and Authentication Fees, Passport and Visa
Fees, Processing Fees and Other Service Income; and

2. Business Income – School Fees, Affiliation Fees, Examination Fees,

Seminar/Training Fees, Rent/Lease Income, Communication Network Fees,
Transportation System Fees, Road Network Fees, Waterworks System Fees,
Power Supply System Fees, Seaport System Fees, Landing and Parking Fees,
Income from Hostels/Dormitories and Other Like Facilities, Slaughterhouse
Operation, Income from Printing and Publication, Sales Revenue, Hospital Fees,
Share in the Profit of Joint Venture and Other Business Income.

b. Use by other entity of assets yielding interest, royalties and dividends or similar
distributions. Examples are:

1. Interest income – charges for the use of cash or cash equivalents, or amounts due
to the entity;

2. Royalties – fees paid for the use of entity’s assets such as trademarks, patents,
software, and copyrights; and

3. Dividends – share of the National Government from the earnings of its

capital/equity investments in Government-Owned or Controlled Corporations
(GOCCs) and other entities.

Sec. 7. Recognition and Measurement of Revenue from Exchange Transactions.

Revenue from exchange transaction shall be measured at fair value of the consideration received
or receivable.

a. Revenue shall be recognized when it is probable that future economic benefits or

service potential will flow to the entity and these benefits can be measured reliably.

1. Revenue from the sale of goods shall be recognized when all the following
conditions have been satisfied:

i. The entity has transferred to the purchaser the significant risks and rewards
of ownership of the goods; (Par. 28, PPSAS 9)

ii. The entity retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;

iii. The amount of revenue can be measured reliably;

iv. It is probable that the economic benefits or service potential associated with
the transaction will flow to the entity; and

v. The costs incurred or to be incurred in respect of the transaction can be

measured reliably.

2. Revenue from the supply of services shall be recognized on a straight line basis
over the specified period of the services unless an alternative method better
represents the stage of completion of the transaction.

35
 When the outcome of a transaction involving the rendering of services can be
estimated reliably, revenue associated with the transaction shall be recognized by
reference to the stage of completion of the transaction at the reporting date. The
outcome of a transaction can be estimated reliably when all the following
conditions are satisfied:

i. The amount of revenue can be measured reliably;

ii. It is probable that the economic benefits or service potential associated with
the transaction will flow to the entity;

iii. The stage of completion of the transaction at the reporting date can be
measured reliably; and

iv. The costs incurred for the transaction and the costs to complete the
transaction can be measured reliably. (Par. 19, PPSAS 9)

For practical purposes, when services are performed by an indeterminate

number of acts over a specified time frame, revenue is recognized on a straight
line basis over the specified time frame unless there is evidence that some other
method better represents the stage of completion. (Par. 24, PPSAS 9)

When the outcome of the transaction involving the rendering of services

cannot be estimated reliably, revenue should be recognized only to the extent of
the expenses recognized that are recoverable. (Par. 25, PPSAS 9).

3. Revenue arising from the use by others of entity assets yielding interest, royalties
and dividends or similar distributions shall be recognized when it is probable that
the economic benefits or service potential associated with the transaction will
flow to the entity; and the amount of the revenue can be measured reliably.
(Pars. 33 and 34, PPSAS 9)

i. Interest shall be recognized on a time proportion basis that takes into

account the effective yield on the asset;

ii. Royalties shall be recognized as they are earned in accordance with the
substance of the relevant agreement; and

iii. Dividends or similar distributions shall be recognized when the

shareholder’s or the entity’s right to receive payment is established.

Examples:

Revenue Revenue Recognition Point

Service Income
Permit Fees, Registration Fees, When services are rendered or if not
Registration Plates, Tags and practicable, when fees are collected upon
Stickers Fee, Clearance and issuance of the respective permits,
Certification Fees, Franchising certificates of registration, plates, stickers,
Fees and Licensing Fees, clearance, certification, franchises and

36
 Revenue Revenue Recognition Point
licenses
Supervision and Regulation When services are rendered or when
Enforcement Fees tickets or relevant document representing
violation are issued or if not practicable,
when fees are collected
Spectrum Usage Fees When bills are rendered for the use,
allocation and assignment of radio
frequency wave lengths or if not
practicable, when fees are collected
Inspection Fees When bills are rendered for the conduct of
inspection by authorized government
official or if not practicable, when fees are
collected
Legal Fees, Verification and When filing fees are billed or if not
Authentication Fees, practicable, when fees are collected
Passport and Visa Fees, When fees are billed upon issuance of the
passport and visa or if not practicable,
when fees are collected
Processing Fees When fees are billed or collected for the
processing of documents for securing
permits/applications.
Other Service Income When fees are billed or if not practicable,
when fees are collected
Business Income
School Fees, Affiliation Fees, When fees are billed or if not practicable,
Examination Fees, Seminar/ when fees are collected
Training Fees
Rent/Lease Income, When fees are billed for earned revenue
Communication Network Fees, from use of government property/facilities
Transportation System Fees, or if not practicable, when fees are
Road Network Fees, Waterworks collected
System Fees, Power Supply
System Fees, Seaport System
Fees, Landing and Parking Fees,
Income from Hostels/
Dormitories and Other Like
Facilities, Slaughterhouse, and
Other Service Income
Sales Revenue When the significant risks and rewards of
ownership have been transferred to the
buyer as indicated in the sales invoice
Hospital Fees When fees are billed for hospital and
related services rendered, or if not
practicable, when fees are collected

37
 Revenue Revenue Recognition Point
Share in the Profit of Joint When share in the profit is earned
Venture
Other Business Income When earned or if not practicable, when
fees are collected

b. Revenue shall be measured at the fair value of the consideration received or

receivable. Any amount of trade discounts and volume rebates allowed by the entity
shall be taken into account. (Par. 14-15, IPSAS 9)

Example: Entity A is authorized to print accounting manuals for sale to other NGAs.
Assume that on July 16, 2014, Entity A sold accounting manuals on account with a
list price of P100,000 less trade discounts of 10%, 10% and 5%. The invoice price of
the merchandise is computed as follows:

List price P100,000

Less: 10% x 100,000 10,000
90,000
Less: 10% x 90,000 9,000
81,000
Less: 5% x 81,000 4,050
Total P 76,950

The journal entry shall be as follows:

Account Title Account Code Debit Credit

Accounts Receivable 10301010 P 76,950
Sales Revenue 40202160 P 76,950
To recognize the sale of the accounting manuals

When the inflow of cash or cash equivalents received or receivable is deferred, the
fair value of the consideration may be less than the nominal amount of cash received or
receivable. The fair value of the consideration is determined by discounting all future
receipts using an imputed rate of interest. The difference between the fair value and the
nominal amount of the consideration is recognized as interest revenue. (Par. 16,
IPSAS 9)

Example: Assume that on August 5, 2015, Entity A received a 60-day, 9%, P12,000
promissory note from X entity for accounting manuals sold. On October 4, 2015, Entity
X paid cash in settlement of its note.

38
 The accounting entries shall be as follows:

Account Title Account Code Debit Credit

August 5
Notes Receivable 10301020 P12,000
Sales Revenue 40202160 P12,000
To recognize the sale

October 4
Cash-Collecting Officers 10101010 P12,180
Notes Receivable 10301020 P12,000
Interest Income 40202210 180
To recognize the collection of notes receivable
Interest = P12,000 x 9% x 60/360 = P180

Sec. 8. Exchanges of Goods or Services for Similar/Dissimilar Good or Services.

When goods or services are exchanged or swapped for goods or services which are of a similar
nature and value, the exchange is not regarded as a transaction which generates revenue.
However, when goods are sold or services are rendered in exchange for dissimilar goods or
services, the exchange is regarded as a transaction which generates revenue. The revenue is
measured at the fair value of the goods or services received, adjusted by the amount of any cash
or cash equivalents transferred. When the fair value of the goods or services received cannot be
measured reliably, the revenue is measured at the fair value of the goods given up, adjusted by the
amount of any cash or cash equivalents transferred. (Par. 17, PPSAS 9)

Sec. 9. Impairment Losses and Allowance for Impairment Losses. When an

uncertainty arises about the collectibility of an amount already included in revenue, the
uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is
recognized as an expense (impairment losses), rather than as an adjustment of the amount of
revenue originally recognized.

Entities shall evaluate the collectibility of accounts receivable on an ongoing basis based
on historical bad debts, customer/recipient credit-worthiness, current economic trends and
changes in payment activity. An allowance is provided for known and estimated bad debts.

Sec. 10. Disclosure. An entity shall disclose:

a. The accounting policies adopted for the recognition of revenue, including the
methods adopted to determine the stage of completion of transactions involving the
rendering of services;

b. The amount of each significant category of revenue recognized during the period,
including revenue arising from:

1. Rendering of services;
2. Sale of goods;
3. Interest;
4. Royalties;
5. Dividends or similar distributions; and
6. Amount of revenue arising from exchanges of goods or services included in each
significant category of revenue.

39
 Sec. 11. Revenue from Non-Exchange Transactions. Revenue of the NGAs from non-
exchange transactions are derived mostly from taxes, gifts and donations, goods in kind and fines
and penalties. Most NGAs derive revenues from transactions where they receive resources and
provide no or nominal consideration directly in return. These are as follows:

a. Tax Revenue

1. Tax Revenue-Individual and Corporation

2. Tax Revenue-Property
3. Tax Revenue-Goods and Services
4. Tax Revenue-Others

b. Fines and Penalties

1. Tax Revenue
2. Service Income
3. Business Income

c. Shares, Grants and Donations

1. Share from National Wealth

2. Share from Philippine Amusement and Gaming Corporation (PAGCOR)/
Philippine Charity Sweepstakes Office (PCSO)
3. Share from Earnings of GOCCs
4. Income from Grants and Donations in Cash
5. Income from Grants and Donations in Kind

d. Revenue from non-exchange transactions may also arise when, in respect of an inflow
of resources from a non-exchange transaction, the entity satisfies a present obligation
recognized as a liability which may be as follows:

1. Trust Liabilities – Customers’ Deposits Payable and Guaranty/Security Deposits

Payable
2. Deferred Credits – Deferred Finance Lease Revenue and Other Deferred Credits
3. Unearned Revenue – Investment Property and Other Unearned Revenue

Sec. 12. Recognition of Revenue from Non-Exchange Transactions. The cash basis
of accounting shall be applied by all government agencies in the recognition of revenue from non-
exchange transaction until a reliable model of measurement of this revenue is developed.
Therefore, asset and the corresponding revenue or liability that arises from non-exchange
transaction shall be recognized when collected or when these are measurable and legally
collectible.

a. Taxation revenue shall be determined at a gross amount. It shall not be reduced for
expenses paid through the tax system.
b. Gifts and donations, other than services in kind shall be recognized as assets and
revenue when it is probable that the future economic benefits or service potential will
flow to the entity and shall be measured at fair value.
c. Goods in-kind received without conditions shall be recognized as revenue
immediately.
d. Donation in cash or in kind shall be recognized as revenue.

40
 Sec. 13. Measurement of Revenue from Non-Exchange Transactions. Revenue from
non-exchange transactions shall be measured at the amount of the increase in net assets
recognized by the entity, unless it is also required to recognize a liability. Where a liability is
recognized and subsequently reduced, because the taxable event occurs, or a condition is satisfied,
the amount of the reduction in the liability will be recognized as revenue. (Pars. 48 and 49,
PPSAS 23)

Sec. 14. Measurement of Assets on Initial Recognition from Non-Exchange

Transactions. An asset acquired through a non-exchange transaction shall initially be measured
at its fair value as at the date of acquisition. (Par. 42, PPSAS 33)

Sec. 15. Measurement of Liabilities on Initial Recognition. Where the time value of
money is material, the liability will be measured at the present value of the amount expected to be
required to settle the obligation. (Par. 58, PPSAS 23)

Sec. 16. Tax Revenue. Taxes are economic benefits or service potential compulsory
paid or payable to public sector agencies, in accordance with laws and or regulations, established
to provide revenue to the government. Taxes do not include fines or other penalties imposed for
breaches of the law. Unless otherwise specified in laws and regulations, the taxable event for:

a. Income tax is the earning of assessable income during the taxation period by the
taxpayer;

b. Value added tax is the undertaking of taxable activity during the taxation period by
the taxpayer;

c. Goods and services tax is the purchase or sale of taxable goods and services during
the taxation period;

d. Customs duty is the movement of dutiable goods or services across the customs
boundary;

e. Death duty is the death of a person owning taxable property; and

f. Property tax is the passing of the date on which the tax is levied, or the period for
which the tax is levied, if the tax is levied on a periodic basis.

Sec. 17. Illustrative Accounting Entries. Refer to Annexes H to N for illustrative

accounting entries.

Sec. 18. Transfer of Internal Revenue Allotment. Where an NG imposes a tax, the
entire proceeds of which is collected by NGAs and transferred to LGUs through an appropriation,
the NGAs recognize assets and revenue for the tax, and a decrease in assets and an expense for
the transfer to LGUs. The LGUs will recognize the assets and revenue for the transfer. The
following is the accounting entry at the books of accounts of the DBM:

41
 Account Title Account Code Debit Credit
Financial Assistance to LGUs 50214030 P10,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P10,000
To recognize transfer of IRA to LGUs

Sec. 19. Expenses Paid Through the Tax System and Tax Expenditures. Taxation
revenue shall be determined at gross amount. It shall not be reduced for expenses paid through the
tax system. Expenses of the government paid through the tax system or as reduction from tax
revenue received should not be offset or deducted from that tax revenue. Therefore, taxation
revenue shall be recognized at the gross amount and the expenses deducted shall be recognized
and shall form part of the statement of financial performance. Expenses paid through the tax
system are those expenses which should be paid irrespective of whether the taxpayer pay taxes, or
use a particular mechanism to pay taxes. (Par. 71, PPSAS 23)

Sec. 20. Taxation Revenue Shall Not Be Grossed Up For the Amount of Tax
Expenditures. Tax expenditures are preferential provisions of the tax law that provide certain
taxpayers with concessions that are not available to others. Tax expenditures are foregone
revenue, not expenses, and do not give rise to inflows or outflows of resources that is, they do not
give rise to assets, liabilities, revenue, or expenses of the government. (Pars. 73 and 74,
IPSAS 23)

Examples are the tax expenditure fund, which is a subsidy released by the DBM to
government-owned or controlled corporations and government financial institutions to settle
customs duties and other taxes arising from the importation of goods; and benefits granted to
taxpayers like the tax credits.

Sec. 21. Recognition of Asset through Transfers. An entity shall recognize an asset in
respect of transfers when the transferred resources meet the definition of an asset and satisfy the
criteria for recognition as an asset. (Par. 76, PPSAS 23)

a. Transfers meet the definition of an asset when the entity controls the resources as a
result of a past event (the transfer), and expects to receive future economic benefits or
service potential from those resources. Transfers satisfy the criteria for recognition as
an asset when it is probable that the inflow of resources will occur, and their fair
value can be reliably measured. In certain circumstances, such as when a creditor
forgives a liability, a decrease in the carrying amount of a previously recognized
liability may arise. In these cases, instead of recognizing an asset as a result of the
transfer, the entity decreases the carrying amount of the liability.
(Par. 78, PPSAS 23)

b. Transfers include grants, debt forgiveness, fines, bequests, gifts, donations and goods
and services in-kind. All of these transactions transfer resources without approximate
equal value in exchange and are not taxes but some are with conditions.

c. Transfers are established by a binding arrangement that includes conditions, such as

inter-entity and intra-entity fund transfers:

1. From an NGA to another NGA;

2. From the NGA’s Central Office to its Regional/Bureau Offices and
Operating/Field Units;
3. From an NGA to an LGU and vice-versa;
4. From an NGA to a GOCC and vice-versa;

42
 5. From an entity that is created by law or regulation to perform specific functions
with operational autonomy; and
6. From donor entity to NGAs.

d. An entity shall recognize an asset in respect of transfers when the transferred

resources meet the definition of an asset and satisfy the criteria for recognition as an
asset.

e. An entity obtains control of transferred resources either when the resources have been
transferred to the entity, or the entity has an enforceable claim against the transferor.
Many arrangements to transfer resources become binding on all parties before the
transfer of resources takes place. (Par. 79, PPSAS 23)

f. Transfers of resources that satisfy the definition of contributions from owners will not
give rise to revenue. Agreements that specify that the entity providing resources (a) is
entitled to distributions of future economic benefits or service potential during the
recipient entity’s life, or distribution of any excess of assets over liabilities in the
event that the recipient entity is wound up, or (b) acquires a financial interest in the
recipient entity that can be sold, exchanged, transferred or redeemed, are, in
substance, agreements to make a contribution from owners. (Par. 80, PPSAS 23)

Sec. 22. Measurement of Transferred Assets. Transferred assets are measured at their
fair value as at the date of acquisition. (Par. 83, PPSAS 23)

Sec. 23. Debt Forgiveness and Assumption of Liabilities

a. Lenders will sometimes waive their right to collect a debt owed by a public sector
entity, effectively cancelling the debt. For example, an NGA may cancel a loan owed
by an LGU. In such circumstance, the LGU concerned recognizes an increase in net
assets because a liability it previously recognized is extinguished. (Par. 84,
PPSAS 23)

b. Entities recognize revenue in respect of debt forgiveness when the former debt no
longer meets the definition of a liability or satisfies the criteria for recognition as a
liability, provided that the debt forgiveness does not satisfy the definition of a
contribution from owners. (Par. 85, PPSAS 23)

c. Where a controlling entity forgives debt owed by a wholly owned controlled entity,
or assumes its liabilities, the transaction may be a contribution from owners.
(Par. 86, PPSAS 23)

d. Revenue arising from debt forgiveness is measured at the carrying amount of the debt
forgiven. (Par. 87, PPSAS 23)

Sec. 24. Recognition and Measurement of Fines

a. Fines are recognized as revenue when the receivable meets the definition of an asset
and satisfies the criteria for recognition as an asset. (Par. 89, PPSAS 23)

b. Where an entity collects fines in the capacity of an agent, the fine will not be
recognized as revenue of the collecting entity. (Par. 89, PPSAS 23)

c. Assets arising from fines are measured at the best estimate of the inflow of resources
to the entity. (Par. 89, PPSAS 23)

43
 Sec. 25. Recognition and Measurement of Bequests

a. Bequests which satisfy the definition of an asset are recognized as assets and revenue
when it is probable that the future economic benefits or service potential will flow to
the entity and the fair value of the assets can be measured reliably. Determining the
probability of an inflow of future economic benefits or service potential may be
problematic if a period of time elapses between the death of the testator and the entity
receiving any asset. The entity will need to determine if the deceased person’s estate
is sufficient to meet all claims on it, and satisfy all bequests. If the will is disputed,
this will also affect the probability of assets flowing to the entity. (Par. 91,
PPSAS 23)

b. The fair value of bequeathed assets is determined in the same manner as for gifts and
donations. Where deceased estates are subject to taxation, the tax authority may
already have determined the fair value of the asset bequeathed to the entity, and this
amount may be available to the entity. Bequests are measured at the fair value of the
resources received or receivable. (Par. 92, PPSAS 23)

Sec. 26. Recognition and Measurement of Gifts, Donations and Goods In-kind

a. Gifts and donations (other than services in-kind) are recognized as assets and revenue
when it is probable that the future economic benefits or service potential will flow to
the entity and the fair value of the assets can be measured reliably. With gifts and
donations, the making of the gift or donation and the transfer of legal title are often
simultaneous, in such circumstances, there is no doubt as to the future economic
benefits flowing to the entity. (Par. 95, PPSAS 23)

b. Goods in-kind are tangible assets transferred to an entity in a non-exchange

transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind. (Par. 94, PPSAS 23)

c. Goods in-kind are recognized as assets when the goods are received, or there is a
binding arrangement to receive the goods. If goods in-kind are received without
conditions attached, revenue is recognized immediately. If conditions are attached, a
liability is recognized, which is reduced and revenue recognized as the conditions are
satisfied. (Par. 96, PPSAS 23)

d. On initial recognition, gifts and donations including goods in-kind are measured at
their fair value as at the date of acquisition, which may be ascertained by reference to
an active market, or by appraisal. An appraisal of the value of an asset is normally
undertaken by a member of the valuation profession who holds a recognized and
relevant professional qualification. For many assets, the fair value will be readily
ascertainable by reference to quoted prices in an active and liquid market. For
example, current market prices can usually be obtained for land, non-specialized
buildings, motor vehicles and many types of plant and equipment.
(Par. 97, PPSAS 23)

Sec. 27. Grant with Condition. If conditions are attached to a grant, a liability is
recognized, which is reduced and revenue recognized as the conditions are satisfied. If the
government is required to recognize a liability in respect of any conditions relating to assets
recognized as a consequence of specific purposes, it does not recognize revenue until the
condition is satisfied and the liability is reduced. As an entity satisfies a present obligation
recognized as a liability in respect of an inflow of resources from a non-exchange transaction

44
recognized as an asset, it shall reduce the carrying amount of the liability recognized and
recognize an amount of revenue equal to that reduction.

Example: The NG received a foreign grant amounting to P10 million for the construction
of a railroad system. Under the terms of the grant, the construction project shall be
completed within a period of two years from the receipt of the grant, otherwise, the
money shall be returned to the grantor. The money can only be used as stipulated and the
NG is required to include a note in the financial statement detailing how the money was
spent. The Department of Public Works and Highways (DPWH) will be the implementing
entity. The transactions shall be recognized as follows:

a. Receipt of the Grant

Account Title Account Code Debit Credit

Books of the NG - BTr
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P10,000,000
Other Deferred Credits 20501990 P10,000,000
To recognize receipt of grant directly credited to the account of the NG
maintained by the BSP

Books of the Implementing NGA – DPWH

Cash-Modified Disbursement
System (MDS), Special Account 10104050 P10,000,000
Subsidy from National
Government 40301010 P10,000,000
To recognize receipt of the NCA for the construction of a railroad system

b. Purchase of construction materials and payment for labor for the construction of a
railroad system amounting to P10,000,000.

Account Title Account Code Debit Credit

Books of the Implementing NGA-DPWH
Construction in Progress-
Infrastructure Assets 10699020 P10,000,000
Cash-Modified Disbursement
System (MDS), Special
Account 10104050 P10,000,000
To recognize payment for the materials and labor for the construction of a
railroad system

Books of the NG-BTr

Subsidy from National Government 40301010 P10,000,000
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P10,000,000
To recognize replenishment of MDS checks issued for payment of the materials
and labor for the construction of a railroad system

c. Receipt of the report from DPWH for the completion of the construction of a railroad
system amounting to P10,000,000.

Account Title Account Code Debit Credit

Books of the NG - BTr
Other Deferred Credits 20501990 P10,000,000
Income from Grants and 40402010 P10,000,000

45
 Donations in Cash
To recognize the income from grants and donations representing payment for
expenses in connection with the grant agreement.

d. Turnover and Acceptance of Completed Infrastructure Asset

Account Title Account Code Debit Credit

Books of the Implementing NGA - DPWH
Railway Systems 10603100 P10,000,000
Construction in Progress-
Infrastructure Assets 10699020 P10,000,000
To recognize the turnover and acceptance of completed railway system

Sec. 28. Recognition and Measurement of Services In-kind. These services meet the
definition of an asset because the entity controls a resource from which future economic benefits
or service potential is expected to flow to the entity. These assets are, however, immediately
consumed and a transaction of equal value is also recognized to reflect the consumption of these
services in-kind. (Par. 98, PPSAS 23)

a. Public sector entities may be recipients of services in-kind under voluntary or

involuntary schemes operated in the public interest. For example:

1. Technical assistance from other governments or international organizations;

2. Persons convicted of offenses may be required to perform community service for
public sector entity;
3. Public hospitals may receive the services of volunteers; and
4. Public schools may receive voluntary services from parents as teachers’ aides or
as board members. (Par.100, PPSAS 23)

b. Due to the many uncertainties surrounding services in-kind, including the ability to
exercise control over the services, and measuring the fair value of the services, the
entity is not required to recognize services in-kind as revenue and as an asset but is
encouraged to disclose the nature and type of services in-kind received during the
reporting period. (Par.102, PPSAS 23)

Sec. 29. Recognition and Disclosure of Pledges. Pledges do not meet the definition of
an asset because the recipient entity is unable to control the access of the transferor to the future
economic benefits or service potential embodied in the item pledged. Agencies do not recognize
pledged items as assets or revenue. If the pledged item is subsequently transferred to the recipient
entity, it is recognized as a gift or donation. Pledges may warrant disclosure as contingent assets.
(Par. 104, PPSAS 23)

Sec. 30. Advance Receipts of Revenue. When an entity receives resources before a
transfer arrangement becomes binding, the resources are recognized as an asset when they meet
the definition and satisfy the criteria for recognition as an asset and recognized as a liability until
the event that makes the transfer arrangement binding occurs, and all other conditions under the
agreement are fulfilled. When that event occurs and all other conditions under the agreement are
fulfilled, the liability is discharged and revenue is recognized. (Par.105, PPSAS 23)

Sec. 31. Recognition and Measurement of Concessionary Loans

a. The portion of the loan that is repayable, along with any interest payments, is an
exchange transaction and is accounted for in accordance with PPSAS 29, Financial
Instruments: Recognition and Measurement, Chapter 7 of this Manual.

46
 b. An entity considers whether any difference between the transaction price (loan
proceeds) and the fair value of the loan on initial recognition is non-exchange
transaction. When an entity determines that the difference between the transaction
price (loan proceeds) and the fair value of the loan on initial recognition is non-
exchange revenue, an entity recognizes the difference as revenue, except if a present
obligation exists, e.g., where specific conditions imposed on the transferred assets by
the recipient result in a present obligation. Where a present obligation exists, it is
recognized as a liability. As the entity satisfies the present obligation, the liability is
reduced and an equal amount of revenue is recognized. (Par. 105A and B, PPSAS 23)

Sec. 32. Dishonored Checks. A check is dishonored either by non-payment or non-

acceptance. Dishonor by non-payment occurs when (a) the check is duly presented for payment
and payment is refused or cannot be obtained; or (b) presentment is excused and the check is
overdue and unpaid (Sec. 83, RA No. 2031, Negotiable Instruments Law). Dishonor by non-
acceptance happens when (a) the check is duly presented for acceptance, and such an acceptance
as is prescribed by law is refused or cannot be obtained; or (b) presentment for acceptance is
excused and the check is not accepted (Sec. 149, RA No. 2031, Negotiable Instruments Law). A
dishonored check may also be defined as a check paid to the agency that was dishonored by the
AGDB due to “Drawn Against Insufficient Fund (DAIF)” or “Drawn Against Uncleared Deposits
(DAUD).”

When a check drawn in favor of the government is not accepted by the drawee for any
reason, the drawer shall continue to be liable for the sum due and all penalties resulting from
delayed payments. Where the reason for non-acceptance by the drawee bank is insufficiency of
funds, the drawer shall be criminally liable therefor.

Responsibility over dishonored checks:

a. When a check is dishonored by non-payment or non-acceptance, the Collecting

Officer should issue a Notice of Dishonored Checks (NDC) (Appendix 25) to the
drawer and to each endorser, and any drawer or endorser to whom such notice is not
given is discharged from liability. The NDC shall be furnished to the Agency Head,
Accountant, Auditor and a copy thereof retained by the Collecting Officer. The
Collecting Officer shall cancel the OR covering the dishonored check. If necessary,
the head of the agency shall promptly institute the corresponding action for the
collection of the amount involved.

b. The Collecting Officer neglecting or failing to give the required NDC to the drawer
(or to the endorser-payor of the government check), who, as a result thereof, is
discharged from liability, shall be personally answerable for the resulting loss
suffered by the government.

c. The making, drawing and issuance of a check payment of which is refused by the
drawee because of insufficient funds in or credit with such bank, when presented
within ninety (90) days from the date of the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit unless such maker or drawer pays
the holder thereof the amount due thereon, or makes arrangements for payment in full
by the drawee of such check within five (5) banking days after receiving notice that
such check has not been paid by the drawee.

d. A dishonored check shall be settled by tendering payment in cash or by certified

check to the Collecting Officer concerned. No other mode of payment shall be
accepted.

e. Upon settlement of the dishonored check in the manner herein prescribed, the
Collecting Officer shall not return the check to the payor concerned unless the latter

47
 first surrenders the previous OR therefor. If the previous receipt is no longer
available, sworn statement to the effect that it has been lost or misplaced should be
submitted by the payor.

f. Dishonored checks shall remain in the custody of the Collecting Officer, pending
their redemption, unless the agency head or the court shall direct otherwise, in which
case appropriate receipts should be secured from the officer authorized to take
custody of the checks. The Collecting Officer shall immediately advise the transfer of
custody of the check.

Sec. 33. Procedures in Recording Dishonored Checks

Area of Seq.
Activity
Responsibility No.
Cash/Treasury
Division/Unit
Collecting Officer/ 1 Receives from AGDB the Debit Memo (DM) and copies of
Designated Staff dishonored checks.

2 Verifies the dishonored checks against previous months’

RCD/CRRec maintained on file to ascertain that the checks
were included in the previous months’ collections. If not
included, verifies from AGDB the details of the dishonored
checks.

3 If dishonored checks are included in the RCDs, prepares

NDC to inform the drawers/endorsers/payors that the checks
were dishonored by the AGDB.

Note 1 – The NDC shall be prepared in five copies and

distributed as follows:

Original – Drawer/Endorser (To be delivered

personally or thru registered mail)
Copy 2 – Accounting Division/Unit file
Copy 3 – Agency Head’s file
Copy 4 – COA Auditor’s file
Copy 5 – Cash/Treasury Unit file

4 Retrieves from file Copy 3 of the OR covering the

dishonored check and cancels the OR indicating the
following notation:

“Cancelled (date of Notice of Dishonored Checks) per Bank

Debit Memo/Voucher No. dated ”

5 Retrieves RCD/CRRec on file covering the dishonored

checks and stamps the following notation on the face of the
report/record:
“Cancelled OR No. dated amounting to P
due to dishonored Check No. per
Bank’s Debit Memo No. dated .”

48
 Area of Seq.
Activity
Responsibility No.
Note 2 – In case of collections of OUs without complete
set of books, CRReg will be used instead of
RCD/CRRec.

6 Prepares list of dishonored checks in two copies. Forwards

Copy 2 of the list of dishonored checks together with
originals of dishonored checks, AGDB’s Debit Memo and
Copy 2 of NDC to the Accounting Division/Unit for
preparation of the JEV.

Accounting
Division/Unit
Accounting Staff 7 Receives Copy 2 of the list of dishonored checks, originals of
dishonored checks, AGDB’s Debit Memo and Copy 2 of
NDC from the Cash/Treasury Unit and records the same in
the logbook maintained for the purpose.

8 Based on the list of dishonored checks, prepares the JEV in

two copies. Signs the “Prepared by” portion of the JEV and
forwards the same to the Head of Accounting Division/Unit
for review and signature.

Head of 9 Reviews and signs the “Certified Correct by” portion of the
Accounting JEV. Forwards the JEV supported by Copy 2 of the list of
Division/Unit dishonored checks, originals of dishonored checks, AGDB’s
Debit Memo and Copy 2 of NDC to the Bookkeeper for
recording in the CRJ.

Note 3 – For the succeeding activities, refer to Chapter 19 of

this Manual for the Preparation and Submission of
Trial Balances, Financial Statements and Other
Reports.

Sec. 34. Illustrative Accounting Entries for Dishonored Checks

a. Collections remitted to BTr

Account Title Account Code Debit Credit

1. Cancellation of OR due to Dishonored Checks
Other Receivables 10305990 xxx
Cash-Treasury/Agency Deposit,
Regular 10104010 xxx
To recognize the cancellation of current year’s deposited collections due to
dishonored checks

Other Receivables 10305990 xxx

Accumulated Surplus/(Deficit) 30101010 xxx
To recognize the cancellation of prior year’s deposited collections due to
dishonored checks

49
 Account Title Account Code Debit Credit
2. Redemption of Dishonored Check
Cash-Collecting Officers 10101010 xxx
Other Receivables 10305990 xxx
To recognize replacement of dishonored check

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officers 10101010 xxx
To recognize the remittance of the replacement of dishonored check

b. Collections deposited to AGDB

Account Title Account Code Debit Credit

1. Cancellation of OR due to Dishonored Checks
Other Receivables 10305990 xxx
Cash in Bank-Local Currency, Current
Account 10102020 xxx
To recognize the cancellation of deposited collections due to dishonored
checks

2. Redemption of Dishonored Check

Cash-Collecting Officers 10101010 xxx
Other Receivables 10305990 xxx
To recognize replacement of dishonored check

Cash in Bank-Local Currency, Current

Account 10102020 xxx
Cash-Collecting Officers 10101010 xxx
To recognize the deposit of the replacement of dishonored check

Sec. 35. Accounting for Cash Overage/Shortage of Collecting Officer. Cash overage
discovered by the Auditor that cannot be satisfactorily explained by the Collecting Officer shall
be forfeited in favor of the government and an official receipt shall be issued by the Collecting
Officer/Cashier. The cash overage shall be taken up as Miscellaneous Income.

Cash shortage which is not restituted by the Collecting Officer despite demand in writing
by the Auditor shall be taken up as receivable from the Collecting Officer.

Sec. 36. Illustrative Accounting Entries for Cash Overage/Shortage of Collecting

Officer

a. Cash Overage

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 xxx
Miscellaneous Income 40609990 xxx
To recognize forfeiture of cash overage of the Collecting Officer

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officers 10101010 xxx
To recognize the remittance of forfeited cash overage to the BTr

50
 b. Cash Shortage

Account Title Account Code Debit Credit

Due from Officers and Employees 10305020 xxx
Cash-Collecting Officers 10101010 xxx
To recognize cash shortage of Collecting Officer

Cash-Collecting Officers 10101010 xxx

Due from Officers and Employees 10305020 xxx
To recognize restitution of cash shortage

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officers 10101010 xxx
To recognize the remittance of restituted cash shortage to the BTr

Sec. 37. Disclosures. An entity shall disclose pertinent revenue transactions as follows:
either on the face of, or in the notes to, the GPFS:

a. Disclosure on the face of, or in the notes to, the GPFS (Par. 106, IPSAS 26)

1. The amount of revenue from non-exchange transactions recognized during the

period:

i. Taxes, showing separately major classes of taxes; and

ii. Transfers, showing separately major classes of transfer revenue.

2. The amount of receivables recognized in respect of non-exchange revenue;

3. The amount of liabilities recognized in respect of transferred assets subject to

conditions;

4. The amount of liabilities recognized in respect of concessionary loans that are

subject to conditions on transferred assets;

5. The amount of assets recognized that are subject to restrictions and the nature of
those restrictions;

6. The existence and amounts of any advance receipts in respect of non-exchange

transactions; and

7. The amount of any liabilities forgiven.

b. Disclosure in the notes to the GPFS (Par. 107, IPSAS 26)

1. The accounting policies adopted for the recognition of revenue from non-
exchange transactions;

2. For major classes of revenue from non-exchange transactions, the basis on which
the fair value of inflowing resources was measured;

3. For major classes of taxation revenue that the entity cannot measure reliably
during the period in which the taxable event occurs, information about the nature
of the tax; and

51
 4. The nature and type of major classes of bequests, gifts, and donations, showing
separately major classes of goods in-kind received.

c. Entities are encouraged to disclose the nature and type of major classes of services in-
kind received, including those not recognized. Such disclosures may assist users to
make informed judgment about:

1. the contribution made by such services to the achievement of the entity’s

objectives during the reporting period; and

2. the entity’s dependence on such services for the achievement of its objectives in
the future.

Sec. 38. Other Receipts. Other receipts of NGAs shall be composed of, but not limited
to, the following:

a. Receipt of NCA. The NCA specifies the maximum amount of withdrawal that an
entity can make from a government bank for the period indicated. The Collecting
Officer shall not issue an OR for the receipt of NCA. The accounting entries to
recognize receipt of NCA are as follows:

Account Title Account Code Debit Credit

Regular
Cash-Modified Disbursement
System (MDS), Regular 10104040 P100,000
Subsidy from National
Government 40301010 P100,000
To recognize receipt of NCA for Regular Agency Fund

Special Account
Cash-Modified Disbursement
System (MDS), Special Account 10104050 P100,000
Cash-Treasury/Agency Deposit,
Special Account 10104020 P100,000
To recognize receipt of NCA for Special Account in the General Fund

Cash-Modified Disbursement
System (MDS), Trust 10104060 P100,000
Cash-Treasury/Agency Deposit,
Trust 10104030 P100,000
To recognize the receipt of NCA for Trust Receipts Fund

b. Non-Cash Availment Authority. The accounting entry to recognize the receipt of

NCAA is as follows:

Account Title Account Code Debit Credit

Accounts Payable 20101010 P950,000
Subsidy from National
Government 40301010 P950,000
To recognize the receipt of NCAA

52
c. Cash Disbursement Ceiling. The accounting entries for the collection of revenue of,
and the constructive receipt of disbursement authority to, Foreign Service Posts
(FSPs) of DFA and DOLE are as follows:

1. DFA and DOLE’s Books

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P100,000
Passport and Visa Fees 40201120 P100,000
To recognize collection of revenue of FSPs

Cash in Bank-Foreign Currency,

Current Account 10103020 P100,000
Cash-Collecting Officers 10101010 P100,000
To recognize deposit of collections to authorized servicing bank of the
FSPs

Cash-Constructive Income
Remittance 10104080 P80,000
Subsidy from National
Government 40301010 P80,000
To recognize receipt of CDC from DBM

Quarters Allowance-Civilian 50102070 P50,000

Rents-Buildings and Structures 50299050 30,000
Cash in Bank-Foreign
Currency, Current Account 10103020 P80,000
To recognize payment of expenses charged to CDC

2. BTr Books:

Account Title Account Code Debit Credit

Subsidy to NGAs 50214010 P80,000
Cash-Constructive Income
Remittance 10104080 P80,000
To recognize constructive receipt of remitted collections by FSPs and
disbursements charged to the issued CDCs to FSPs

d. Tax Remittance Advice. This shall be used to recognize: (1) in the books of national
government agencies, the constructive remittance to BIR and BOC of taxes and
customs’ duties withheld, and the constructive receipt of NCA for those taxes and
customs duties; (2) in the books of the BIR and BOC, the constructive receipt of tax
revenue and customs duties; and (3) in the books of the BTr, the constructive receipt
of the taxes and customs duties remitted.

1. Tax Withheld by NGAs

Account Title Account Code Debit Credit

NGAs’ (withholding agency) Books
Cash-Tax Remittance Advice 10104070 P100,000
Subsidy from National
Government 40301010 P100,000
To recognize constructive receipt of NCA for TRA

53
 Account Title Account Code Debit Credit

Due to BIR 20201010 P100,000

Cash-Tax Remittance
Advice 10104070 P100,000
To recognize constructive remittance to BIR of taxes withheld through
TRA

BIR Books
Cash-Tax Remittance Advice 10104070 P100,000
Income Tax 40101010 P100,000
To recognize constructive receipt of taxes remitted by NGAs through TRA

BTr Books
Subsidy to NGAs 50214010 P100,000
Cash-Tax Remittance
Advice 10104070 P100,000
To recognize constructive receipt of remittance of taxes by NGAs through
TRA

2. BOC Customs Duties charged to TEF

Account Title Account Code Debit Credit

NGAs’ (withholding agency) Books
Military, Police and Security
Equipment 10605100 P1,000,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P990,000
Due to NGAs 20201050 10,000
To recognize the purchase of patrol boat by Philippine Navy
(Cost=P990,000; Customs Duties = P10,000)

Cash-Tax Remittance Advice 10104070 P10,000

Subsidy from National
Government 40301010 P10,000
To recognize constructive receipt of NCA for customs duties charged against
TEF

Due to NGAs 20201050 P10,000

Cash-Tax Remittance Advice 10104070 P10,000
To recognize constructive remittance to BOC of custom duties through TRA

BOC Books
Cash-Tax Remittance Advice 10104070 P10,000
Import Duties 40103010 P10,000
To recognize constructive receipt of import duties remitted by NGAs through
TRA

BTr Books
Subsidy to NGAs 50214010 P10,000
Cash-Tax Remittance Advice 10104070 P10,000
To recognize constructive receipt of the remittance of import duties by
NGAs through TRA

54
e. Receipt of Subsidy/Assistance from other NGAs, LGUs, GOCCs and Other Funds.
The Collecting Officer shall issue OR upon receipt of cash subsidy/assistance.

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P100,000
Subsidy from Other NGAs 40301020 P50,000
Assistance from LGUs 40301030 25,000
Assistance from GOCCs 40301040 25,000
To recognize receipt of subsidy/assistance from other government agencies

Cash-Treasury/Agency Deposit,
Trust 10104030 P100,000
Cash-Collecting Officers 10101010 P100,000
To recognize remittance of collections to BTr

f. Refund of excess cash advances granted to officers and employees. Cash advances
may be classified into:

1. Advances to Officers and Employees – for official travels;

2. Advances for Operating Expenses – granted to regular disbursing officer for

operating expenses of operating/field units and foreign post not maintaining
complete set of books;

3. Advances for Payroll – for payment of salaries, wages and other personnel
benefits; and

4. Advances to Special Disbursing Officer (SDO) – for special purpose/time-bound

undertakings.

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P100,000
Advances for Operating Expenses 19901010 P50,000
Advances for Payroll 19901020 25,000
Advances to Special Disbursing
Officer 19901030
or 25,000
Advances to Officers and
19901040
Employees
To recognize collection of refund of excess cash advances

Cash-Treasury/Agency Deposit,
10104010
Regular
or
Cash-Treasury/Agency Deposit,
10104020 P100,000
Special Account
or
Cash-Treasury/Agency Deposit,
10104030
Trust
Cash-Collecting Officers 10101010 P100,000
To recognize remittance of collections to BTr

55
g. Performance bond/security deposits. Receipts of performance bond posted by
contractor or supplier to guaranty full and faithful performance of their contract. It
may be in the form of cash or certified checks.

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P10,000
Guaranty/Security Deposits
Payable 19901010 P10,000
To recognize collection of performance bond/security deposits

Cash-Treasury/Agency Deposit, Trust 10104010 P10,000

Cash-Collecting Officers 10101010 P10,000
To recognize remittance of collections to BTr

h. Refund of overpayment of expenses. Receipts of refunds from officers, employees

and suppliers/creditors resulting from overpayment of expenses.

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P10,000
Specific Expense account P10,000
To recognize collection of refund of overpayment of expenses.

Cash-Treasury/Agency Deposit,
Regular 10104010
or
Cash-Treasury/Agency Deposit, 10104020
P10,000
Special Account
or
Cash-Treasury/Agency Deposit, 10104030
Trust
Cash-Collecting Officers 10101010 P10,000
To recognize remittance of collections of refund of overpayment of expenses
to BTr

i. Collections made on behalf of another entity or non-government/private

organizations. Receipts of income, receivables or trust funds for the account of other
NGAs, LGUs, GOCCs or non-government/private organizations. These collections
are later remitted to the government agencies or non-government/private
organizations concerned.

1. NGAs (other than University of the Philippines-Legal Research Fund (UP-LRF))

Books

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P5,000
Due to NGAs 20201050 P5,000
To recognize collection of fees accruing to the UP-LRF

Due to NGAs 20201050 P5,000

Cash-Collecting Officers 10101010 P5,000
To recognize remittance of collections to BTr for the account of UP-LRF

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 2. BTr Books

Account Title Account Code Debit Credit

Cash in Bank-Local Currency,
10102030 P5,000
Savings Account
Cash-Treasury/Agency Deposit,
Trust 10104030 P5,000
To recognize receipt of remitted collections for UP-LRF

3. UP-LRF Books

Account Title Account Code Debit Credit

Cash-Treasury/Agency Deposit,
Trust 10104030 P5,000
Trust Liabilities 20401010 P5,000
To recognize remitted collections for UP-LRF by other NGAs

j. Intra-agency and inter-agency fund transfers. Cash received from central

office/regional office/operating units of an entity and from another entity for the
purpose of implementing specific projects.

1. Intra-entity Fund Transfer

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P5,000
Due to Central Office 20301010
or
Due to Bureaus 20301020
or
Due to Regional Offices 20301030 P5,000
or
Due to Operating Units 20301040
or
Due to Other Funds 20301050
To recognize receipt of intra-entity fund transfer

Cash-Treasury/Agency Deposit,
Trust 10104030 P5,000
Cash-Collecting Officers 10101010 P5,000
To recognize remittance of collections to BTr

2. Inter-agency Fund Transfer

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P5,000
Due to NGAs 20201050
or
Due to LGUs 20201070 P5,000
or
Due to GOCCs 20201060
To recognize receipt of inter-entity fund transfer

57
 Account Title Account Code Debit Credit
Cash-Treasury/Agency Deposit,
Trust 10104030 P5,000
Cash-Collecting Officers 10101010 P5,000
To recognize remittance of collections to BTr

Sec. 39. Reporting of Collections and Deposits. Receipts and deposits shall be reported
as follows:

a. At the close of the business day, the Collecting Officers shall prepare the Report of
Collections and Deposits (RCD) (Appendix 26) for submission to Accounting
Office/Unit. The report lists all the ORs issued in numerical sequence including
cancelled ones.

b. The RCD shall be supported by documentary evidence such as duplicate copies of

ORs and validated deposit slips.

c. The Collecting government entity issuing electronic Official Receipt (eOR) should
generate and submit daily to the Auditor a copy of the RCD. In case the collection
system is not integrated with the accounting system, the Accounting Division/Unit
shall recognize the collections and deposits based on the generated reports duly
certified by the Collecting Officer/Cashier/Head of Cash/Treasury Unit.

d. Field Offices (FOs)/Operating Units (OUs) without complete set of books shall
record their collections of income chronologically in the Cash Receipts Register
(CRReg) (Appendix 27). The certified copy of the CRReg together with the required
supporting documents, duplicate copies of ORs and Deposit Slip (DSs) shall be
submitted within five (5) days after the end of each month to the concerned mother
unit (central/regional/division office) by the FOs (a unit under the central/regional/
division office) for review and recording of the transactions in the CRJ by the Chief
Accountant.

Sec. 40. Detailed Procedures for Collections and Deposits through the Collecting
Officer

Area of Seq.
Activity
Responsibility No.
Cash/Treasury Unit Daily
Collecting 1 Receives cash/check from payor representing collection based
Officer on the Order of Payment (OP) (Appendix 28) prepared by the
Accounting Division/Unit.

2 Issues OR to acknowledge receipt of cash/check.

Note 1 – The OR shall be prepared in three copies and

distributed as follows:

Original – Payor
Copy 2 – To be attached to the RCD/CRReg
Copy 3 – Cash/Treasury Unit file

3 Records collections in the Cash Receipts Record (CRRec)

(Appendix 29).

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 Area of Seq.
Activity
Responsibility No.
4 Prepares DSs in three copies.

Note 2 – The DSs shall be distributed as follows:

Original – AGDB
Copy 2 – To be attached to RCD/CRRec
Copy 3 – Cash/Treasury Unit file

5 Deposits collections through AGDB for the account of the

National Treasurer.

Note 3 – As prescribed in Treasury Circular No. 03-2014 dated

June 16, 2014, amended by Treasury Circular No. 05-
2014 dated September 26, 2014, a List of Deposited
Collections (LDC) shall accompany the validated
deposit slips upon deposit. Refer to the aforesaid
Treasury Circulars for the format of LDC.

6 Based on the duplicate copies of ORs on file and validated DSs

from the AGDB, prepares the RCD in four copies. Initials on
the RCD and forwards the same together with Copy 2 of the
ORs and validated DSs to the Head of the Cash/Treasury Unit
for review and signature.

Head of 7 Reviews and signs the RCD. Forwards original of RCD, Copy
Cash/Treasury 2 of the ORs and validated DSs to the Collecting
Unit Officer/Designated Staff for submission to the Accounting
Division/Unit.

Designated Staff 8 Records the RCD in the logbook maintained by the

Cash/Treasury Unit and forwards the same with the copy 2 of
the ORs and validated DSs to the Accounting Division/Unit for
recording in the books of accounts.

Accounting
Division/Unit
Accounting Staff 9 Receives original of RCD with Copy 2 of the ORs and
validated DSs from the Cash/Treasury Unit. Records receipt in
the logbook maintained for the purpose and forwards the same
to the Bookkeeper for review and preparation of the JEV.

Bookkeeper 10 Based on the RCD, prepares JEV in two copies and signs
"Prepared by" portion of the JEV. Forwards the JEV and
documents to the Head of the Accounting Unit for review and
signature.

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 Area of Seq.
Activity
Responsibility No.
Head/Chief 11 Reviews and signs “Certified Correct by” portion of the JEV.
Accountant Forwards the JEV and documents to the Bookkeeper for
recording in the CRJ.

Note 4 – For the succeeding activities, refer to the Chapter on

Financial Reporting for the preparation and
submission of Trial Balances, Financial Statements
and Other Reports.

Sec. 41. Procedures for Collections through AAB/AGDB

Area of Seq.
Activity
Responsibility No.
Accounting
Division/Unit
Receiving/ 1 Receives the Consolidated Report of Daily Collections
Releasing (CRDC) from the AAB/AGDB. Records receipt in the
Staff logbook maintained for the purpose. Forwards the same
to the Bookkeeper for preparation of the JEV.

Bookkeeper 2 Based on the CRDC, prepares JEV in two copies to

recognize the collections and deposits, and signs
"Prepared by" portion of the JEV. Forwards the JEV and
supporting documents to the Accounting Division/Unit
Head/Chief Accountant for review and signature.

Head/Chief 3 Reviews and signs "Certified Correct by" portion of the

Accountant JEV. Forwards the JEV and supporting documents to the
Bookkeeper for recording in the GJ.

Note – For the succeeding activities, refer to the Chapter

on Financial Reporting for the preparation and
submission of Trial Balances, Financial
Statements and Other Reports.

Sec. 42. Submission of the Quarterly Report of Revenue and Other Receipts. The
Chief Accountant shall prepare the Quarterly Report of Revenue and Other Receipts (QRROR)
(Appendix 24) and submit the report to the GAS, COA, the DBM and the BTr within 30 days after
the end of each quarter. A separate report shall be prepared and submitted for income of the GF
and for income and receipts for Special Account and Trust Fund.

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 Chapter 6

DISBURSEMENTS

Sec. 1. Scope. This Chapter covers the rules and regulations to be followed in the
disbursement of public funds, the monitoring of receipt and utilization of NCA/NTA, preparation
and processing of DV/Payroll; preparation and issue of checks; payment by cash; granting,
utilization and liquidation/replenishment of cash advances; payment through ADA; remittance of
taxes withheld through TRA; availment of foreign loans through suppliers credit/constructive
cash; and payment of operating requirements on FSPs through CDC.

Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used shall be
construed to mean as follows:

a. Accounts Payable – refers to valid and legal obligations of NGAs/OUs, for which,
goods/services/projects have been delivered/rendered/completed and accepted,
regardless of the year when these obligations were incurred.

b. Advice to Debit Account – refers to an authorization issued by the NGA/OU

appearing in the lower portion of the List of Due and Demandable Accounts Payable-
Advice to Debit Account (LDDAP-ADA). It serves as instruction to the Modified
Disbursement System, Government Servicing Banks (MDS-GSBs) to debit a
specified amount from its available NCA balance under regular MDS sub-account for
payment of creditors/payees through the Expanded Modified Direct Payment Scheme
(ExMDPS).

c. Agency – refers to any department, bureau or office of the national government, or

any of its branches and instrumentalities, or any political subdivision, as well as any
GOCCs, including its subsidiaries, or other self-governing board or commission of
the government.

d. Authorized Card Holder – refers to a responsible official to whom a Purchase Card is

issued for purposes of making official purchases within specific categories
enumerated in Annex A of Joint Memorandum No. 2014-01 dated May 15, 2014.

e. Billing Entity – refers to the accounting unit of the concerned participating agency
responsible in the consolidation of the billing statement from the Credit Card
Company (CCC) and payment of the said billing agency.

f. Credit Card Company – refers to Citibank as the authorized credit card service
provider for the Cashless Purchase Card (CPC) System.

g. Commercial Check – refers to a check issued by government agencies chargeable

against the agency’s checking account with AGDBs. These are covered by
income/receipts authorized to be deposited with AGDBs; and funding checks
received by Operating Units from Central/Regional/Division Offices, respectively.

h. Direct Payment System – refers to the payment procedure whereby the MDS-GSB
shall, upon receipt of NCA an LDDAP-ADA from DBM pay the CCC not earlier
than 24 hours but not later than 48 hours, through direct credit to the CCC current
account.

61
i. Disbursements – constitute all cash paid out during a given period in currency (cash)
or by check/ADA. It may also mean the settlement of government
payables/obligations by cash, check or ADA. It shall be covered by DV/Petty Cash
Voucher (PCV)/Payroll.

j. Expanded Modified Direct Payment Scheme – refers to the payment procedures

whereby the MDS-GSB shall pay the creditors/payees listed in the LDDAP-ADA not
later than 48 hours but not earlier than 24 hours upon receipt of the said document
from the NGA/OU:

1. Direct credit to the creditor’s current/savings/ATM account (CA/SA/ATM)

maintained with MDS-GSB; or

2. Bank transfer, if creditor’s account is maintained outside the agency’s MDS-

GSB, where corresponding bank charges shall be borne/paid by the
creditor/payee concerned.

k. Implementing Agency – refers to the agency to which the funds are transferred for the
purpose of prosecuting/implementing the project.

l. Inter-Agency Transferred Fund – refers to cash or money transferred to an

Implementing Agency (IA) for the undertaking of a project by a Source Agency (SA)
in which the allotment was released.

m. Letter of Introduction – refers to a letter addressed to the MDS-GSB, issued by the

NGA/OU to its creditors/payees for the purpose of opening an account or validation
of an existing account.

n. List of Due and Demandable Accounts Payable-Advice to Debit Account – refers to

an accountable form integrating the Advice to Debit Account (ADA) with the
LDDAP, which is a list reflecting the names of creditors/payees to be paid by the
NGA/OU and the corresponding amounts of the unpaid claims.

o. Merchants – refers to those authorized by the CCC to be the sellers/suppliers under

the CPC System.

p. Modified Disbursement System (MDS) Check – refers to a check issued by

government agencies chargeable against the account of the Treasurer of the
Philippines, which are maintained with different MDS AGDBs. MDS checks are
covered by NCA.

q. Modified Disbursement System, Government Servicing Banks – refers to the

authorized government servicing banks, such as Land Bank of the Philippines (LBP),
Development Bank of the Philippines (DBP), and Philippine Veterans Bank (PVB),
to which DBM issues the NCAs for crediting to the MDS sub-accounts of NGAs.

r. Petty Cash Fund – refers to the amount granted to duly designated Petty Cash Fund
Custodian for payment of authorized petty or miscellaneous expenses which cannot
be conveniently paid through checks/LDDAP-ADA.

s. Program Administrator – refers to the designated by the head of the agency who are
tasked to implement and administer the Cashless Purchase Card System.

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 t. Project – refers to the undertaking, whether construction work, research or training
program, computer engagement or other authorized activities which an agency shall
prosecute or implement in favor or in behalf of another agency.

u. Purchase Limit:

1. Cardholder Monthly Purchase Limit – refers to the limit established by the

Program Administrator and approved by the Steering Committee for the total
value of purchases that a cardholder can make in one month.

2. Cardholder Single Purchase Limit – refers to the maximum amount allowed

the cardholder for each transaction.

3. Maximum Purchase Card Limit – refers to the maximum amount that the
unit/office is authorized to utilize as stated in the Purchase Card application

v. Regular Cash Advance – refers to the amount granted to cashiers, disbursing officers,
paymasters, and/or other accountable officers for the payment of expenses such as
salaries and wages, commutable allowances, honoraria and other similar payments to
officials and employees.

w. Steering Committee – refers to the advisory committee composed of representatives

from DND and the DBM which shall provide the guidance on key issues such as
policy and objectives, control, procedures, individual card limits, individuals
authorized to use the cards, amendments, and decisions involving large expenditures.

x. Special Cash Advance – refers to the amount granted on the explicit authority of the
Head of the Agency only to duly designated disbursing officers or employees for
other legally authorized purposes, such as payment of current operating expenditures,
including salaries, wages and allowances, travel expenditures, and maintenance and
other operating expenses, of the agency field office or for special purpose/time-bound
undertaking of the agency when it is impractical to pay the same by check.

y. Source Agency – refers to the agency to which the allotment has been originally
released and in whose behalf or benefit the project will be prosecuted/implemented.

z. Tax Remittance Advice – refers to a serially-numbered document prescribed by the

DBM that should be used by the NGAs in the remittance of withheld taxes on funds
coming from DBM. This form is being distributed by the BIR to be accomplished by
the NGAs. The same shall be duly certified by the Chief Accountant and approved by
the Head of the concerned NGA or his duly authorized representative, and attached to
every withholding tax return filed as payment for taxes withheld. This shall be the
basis for the BIR and the Bureau of the Treasury (BTr) to record the tax collection in
their respective books of accounts. (BIR RR No. 1-2013).

aa. Withdrawal Application – is a written request from the borrower to the development
partner to pay funds against to borrower’s loan account.

Sec. 3. Notice of Cash Allocation. The NCA shall be the authority of an agency to pay
operating expenses, purchases of supplies and materials, acquisition of PPE, accounts payable,
and other authorized disbursements through the issue of MDS checks, ADA or other modes of
disbursements.

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 a. No MDS check/ADA shall be issued without the covering NCA. Hence, the total
MDS checks/ADA issued shall not exceed the total NCA received. To maximize the
available NCAs of the agency, the Common Fund System policy shall be adopted
whereby cash allocation balances of agencies under the Regular MDS Account may
be used to cover payment of current year’s accounts payable i.e., goods and services
which have been delivered and accepted during the year charged against
appropriations of prior year/s, after satisfying their regular operating requirements as
reflected in their Monthly Cash Program.

b. NCA issued and credited to the Special MDS Accounts of agencies for payment of
retirement gratuity/terminal leave benefits as well as prior years’ accounts payable
shall be valid within the period prescribed under existing rules and regulations. The
NCA shall be monitored through the maintenance of the Registry of Allotments and
Notice of Cash Allocation (RANCA) (Appendix 30) by the Accounting Division/Unit.

c. NCA issued and credited to the Special MDS Accounts for Trust to cover payments
of authorized claims shall be valid within the period prescribed under existing
regulations.

d. For NCA issued for foreign assisted projects such as grants from foreign country with
a separate MDS account maintained by the spending agency with Government
Servicing Banks (GSBs), MDS check/ADA shall be issued only for specific purpose
until full implementation of the project, subject to pertinent DBM issuances
prescribing the validity of the NCA.

Sec. 4. Notice of Transfer of Allocation. The NTA shall be the authority of the
regional and operating units to pay their operating expenses, purchases of supplies and materials,
acquisition of PPE, accounts payable, and other authorized disbursements through the issue of
MDS checks, ADA or other modes of disbursements.

a. No MDS check/ADA shall be issued by the ROs/OUs without the covering NTA.
Hence, the total MDS checks issued shall not exceed the total NTA received. NTA
issued and credited to the Regular MDS Accounts of ROs/OUs for their regular
operations which are programmed for a specific month shall be valid within the
period prescribed under existing rules and regulations. To maximize the available
NTAs of the agency, the Common Fund System policy shall be adopted whereby
cash allocation balances of agencies under the Regular MDS Account may be used to
cover payment of current year’s accounts payable i.e., goods and services which have
been delivered and accepted during the year charged against appropriations of prior
year/s, after satisfying their regular operating requirements as reflected in their
Monthly Cash Program.

b. NTA issued by the Central Office and credited to the Special MDS Accounts of
ROs/OUs for payment of retirement gratuity/terminal leave benefits as well as prior
years’ accounts payable shall be valid within the period prescribed under existing
rules and regulations. The NTA shall be monitored through the maintenance of the
Registry of Allotment and Notice of Transfer of Allocation (RANTA) (Appendix 31)
by the ROs/OUs.

Sec. 5. Recording of the Receipt of NCA/NTA. The CO/ROs/OUs shall record in the
RANCA/RANTA all NCAs/NTAs received and the amount disbursed to control and monitor
unfunded allotments and the balance of disbursement authorities.

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 Sec. 6. Procedures for Recording of Receipt and Utilization of NCAs/NTAs

Area of Seq.
Activity
Responsibility No.

CO/RO/OU
Accounting
Division/Unit
Designated Staff 1 Receives copy of the GAARD, SARO, and GARO, and
posts the allotment in the ‘Allotment Received’ column
of the RANCA/RANTA.

Receiving/ 2 Receives copy of NCA/NTA from DBM/Agency’s

Releasing Staff Central Office and records in the logbook. Forwards
NCA/NTA to the Designated Staff for recording in the
RANCA/RANTA.

Designated 3 Records the receipt of NCA/NTA in the RANCA/

Personnel RANTA.

4 Records the amount disbursed/utilized in the RANCA/

RANTA based on processed DVs/Payroll.

5 Indicates the balance of the Unutilized NCA/NTA and

Unfunded Allotment.

Sec. 7. Modes of Disbursements. The different modes of disbursements are as

follows: (a) checks (MDS or commercial checks), (b) cash (out of cash advance granted to
authorized Disbursing Officer), (c) advice to debit the account, (d) tax remittance advice, (e)
working Fund/CDC, and (f) direct payment method.

Sec. 8. Disbursements by Check. Checks shall be drawn only on duly approved

Disbursement Voucher (DV) (Appendix 32) or Payroll (Appendix 33). These shall be used for
payment of regular expenses which cannot be conveniently nor practically paid using the ADA or
not authorized to be paid using the Petty Cash Fund or advances for operating expenses. Checks
issued shall be reported and recorded in the books of accounts whether released or unreleased to
the respective payees. There are two types of checks being issued by government agencies as
follows:

a. Modified Disbursement System Checks – are checks issued by government agencies

chargeable against the account of the Treasurer of the Philippines, which are
maintained with different MDS-GSBs.

b. Commercial Checks – are checks issued by NGAs chargeable against the Agency
Checking Account with GSBs. These shall be covered by income/receipts authorized
to be deposited with AGDBs.

Sec. 9. Documentary Requirements. The documentary requirements for common

government transactions depending on the nature of expenses to be paid by checks shall be
complied with as prescribed in COA Circular No. 2012-001 dated June 14, 2012, amended by
COA Circular No. 2013-001 dated January 10, 2013.

Sec. 10. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. All checks drawn during the day, whether released or unreleased including

65
cancelled checks shall be recorded chronologically in the Checks and ADA Disbursements
Record (CkADADRec) (Appendix 34) maintained by the Cash/Treasury Unit. The dates the
checks were actually released shall be indicated in the appropriate column provided for in the
CkADADRec. All checks/ADA drawn whether released or unreleased shall be included in the
Report of Checks Issued (RCI) (Appendix 35) or Report of ADA Issued (RADAI) (Appendix 13),
which shall be prepared daily by the Cashier. The RCI/RADAI together with the original copies
of the supporting documents (SDs) shall be submitted to the Accounting Division/Unit for the
preparation of JEV (Appendix 36). At the end of the year, a Schedule of Unreleased Commercial
Checks shall be prepared by the Cashier for submission to the Accounting Division/Unit. The
adjusting accounting entries for unreleased commercial checks are presented in Sec. 56 of
Chapter 19-Financial Reporting of this Manual.

Sec. 11. Recording of Check Disbursements by Field Offices without Complete Set
of Books. Field Offices (FOs) without complete set of books shall record chronologically in the
Cash in Bank Register (CBReg) (Appendix 37) all checks issued/charged to deposits with the
AGDB. The certified copy of the CBReg together with the required SDs shall be submitted
within five days after the end of each month to the concerned mother unit
(central/regional/division office) by the FOs (a unit under the central/regional/ division office) for
review and recording of the transactions in the books of accounts.

Sec. 12. Procedures for Disbursements by Checks

Area of Seq.
Activity
Responsibility No.
Preparation of DV
Requesting
Office/Unit
Designated 1 Prepares the DV in four copies in accordance with the
Staff instructions on the preparation of the DV (Appendix 32) to
initiate the payment of claims. Forwards the DVs, SDs
and ORS to the Budget Division/Unit for processing.

Note 1 – The procedures on processing/approval of ORS

are discussed in Sec. 15, Chapter 3 of this
Manual.

Processing of DV
Accounting
Division/Unit
Receiving/ 2 Receives Copies 1-4 of DV, SDs and Copies 2-3 of ORS
Releasing Staff from the Budget Division/Unit. Checks completeness of
SDs based on the checklist. If incomplete, returns to the
party concerned for compliance.

If complete, stamps “Received” and indicates date of

receipt and initials on the stamped “Received” portion of
the DV.

Note 2 – Copy 1 of the ORS shall be retained by the

Budget Unit which shall serve as the subsidiary
ledger of obligations.

3 Assigns DV number and records in the logbook the DV

number and date, creditor/payee, particular and amount.

66
 Area of Seq.
Activity
Responsibility No.
Forwards Copies 1-4 of DV, SDs and Copies 2-3 of ORS
to the designated Staff for processing.

Note 3 – The numbering structure for DV shall be as

follows:
00 - 0000 - 00 - 000000

Serial Number
(One Series per Fund
Cluster for each year)

Month of Issue

Year of Issue

Fund Cluster Code

Note 4 – DV number shall also be indicated on every sheet

of the SDs.

Designated 4 Receives Copies 1-4 of DV, SDs and Copies 2-3 of ORS
Staff/ from the Receiving/Releasing Staff. Reviews DV for
Processing completeness and propriety of SDs.
Staff

5 Retrieves Index of Payments (IoP) (Appendix 38) from file

and determines if claim is in order. If with prior payment
on the same claim, returns the DV, SDs and ORS
informing the requesting office/party of prior payment
made. If in order, verifies ORS against DV. If the
amounts in the ORS and DV are the same, records the
following in the IP: DV date and number, particulars and
amount and proceeds to Activity No. 9. For first-time
claimant, prepares IP and records the name, address,
employee number and/or TIN, DV date, particulars and
amount. If the amounts in the ORS and DV differ,
prepares NORSA in three copies and signs the “Prepared
by” portion. Forwards Copies 1-3 of NORSA, Copies 1-4
of DV, Copies 2-3 of ORS and SDs to the Head of
Accounting Division/Unit for approval of the NORSA.

Head of 6 Signs the “Approved by” portion of the NORSA.

Accounting
Division/Unit/
Authorized
Officer

Receiving/ 7 Records in the logbook the return of Copies 1-3 of

Releasing Staff NORSA, Copies 1-4 of DV, Copies 2-3 of ORS and SDs
to the Budget Unit for correction of obligation.

67
 Area of Seq.
Activity
Responsibility No.
Budget
Division/Unit
Designated 8 Posts the NORSA in the ‘Obligation’ column of Section C
Staff of the ORS. If the original amount is lesser than the actual
obligation, a positive entry corresponding to additional
obligation shall be recorded in the RAOD based on the
NORSA. If the original obligation is greater, a negative
entry representing the excess shall be recorded in the
RAOD. Returns Copies 2-3 of NORSA, Copies 1-4 of
DV, Copies 2-3 of ORS and SDs to the Accounting
Division/Unit for processing. Files Copy 2 of NORSA
together with the original copy of the ORS.

Accounting
Division/Unit
Designated 9 Initials in Box B of DV and forwards Copies 1-4 of DV
Staff and SDs, Copies 2-3 of ORS to the Head of Accounting
Division/Unit/Authorized Officer for review.

Note 5 – In case there is NORSA attached to the DV, it

shall be included among the SDs of the DV.

Head of the 10 Retrieves the RANCA/RANTA from file and determines

Accounting availability of NCA. If NCA is sufficient to cover the
Division/Unit/ disbursement, records in the RANCA/RANTA the DV
Authorized date and number, and amount under the ‘Utilized’ column
Officer and indicates NCA balance. Otherwise, notes that cash is
not yet available and returns the DV and SDs to the
Designated Staff for safekeeping.

11 Checks the “Cash available” portion in Box B of the DV.

12 Reviews DV and SDs. Signs Box B of DV. Forwards the

documents to the Receiving/Releasing Staff.

Receiving/ 13 Records in the logbook the release of Copies 1-4 of DV

Releasing Staff and SDs and Copies 2-3 of ORS to the Head of Agency or
Authorized Representative for approval of the DV.

Office of the
Agency
Head/Authorized
Representative
Receiving/ 14 Receives Copies 1-4 of DV, SDs and Copies 2-3 of ORS
Releasing Staff and records in the logbook the date of receipt. Forwards
the set of documents to the Approving Officer for review
and approval.

Approving 15 Reviews DV and signs in Box C “Approved for Payment”

Officer portion. Forwards Copies 1-4 of DV, Copies 2-3 of the
ORS and SDs.

68
 Area of Seq.
Activity
Responsibility No.
Note 6 – Depending on the set up/procedures of agencies,
review of the claims may be done by authorized
personnel/staff prior to the approval of the Head
of the Agency or his/her Authorized
Representative.

Receiving/ 16 Records in logbook the approved DV and all SDs and

Releasing Staff forwards the documents to the Cash/Treasury Unit.

Preparation and Approval of Checks

Cash/Treasury
Unit
Receiving/ 17 Receives Copies 1-4 of approved DV, Copies 2-3 of ORS
Releasing Staff and SDs. Records in the logbook the date of receipt, DV
number, payee, particulars and amount.

Designated 18 Checks completeness of signatories on the DV. Prepares

Staff check in three copies.

19 Retrieves from file the CkADADRec maintained per bank

account and records the date, check number, name of
payee, nature of payment and amount of the DV and
indicates the new balance of the NCA/bank account.
Forwards Copies 1-3 of check, Copies 1-4 of DV, Copies
2-3 of ORS and SDs to the Cashier/Head of
Cash/Treasury Unit for review and signature.

Note 7 – For field offices without complete set of books,

the CBReg shall be maintained.

Cashier or 20 Verifies completeness of signature on the DV. Reviews

Head of Cash/ the amount of the check against the DV and SDs. Signs
Treasury Unit the check.

Receiving/ 21 Records in the logbook the date of submission to the

Releasing Staff approving authority of Copies 1-3 of check, Copies 1-4 of
DV, Copies 2-3 of ORS and SDs.

Office of the
Agency
Head/Authorized
Representative
Receiving/ 22 Records in the logbook the date of receipt of Copies 1-3 of
Releasing Staff check, Copies 1-4 of DV, Copies 2-3 of ORS and SDs.
Forwards the set of documents to the Authorized
Countersigning Official.

Authorized 23 Countersigns the check. Forwards Copies 1-3 of check,

Official Copies 1-4 of DV, Copies 2-3 of ORS and SDs to the
Receiving/Releasing Staff for return to the Cashier/Head
of Cash/Treasury Unit.

69
 Area of Seq.
Activity
Responsibility No.
Cash/Treasury
Unit
Cashier 25 Receives Copies 1-3 of check, Copies 1-4 of DV, Copy 2-
3 of ORS and SDs and checks completeness of signatures
in the check. Retrieves the CkADADRec and notes the
return of the signed and countersigned check.

Cashier 26 Releases the original of check and Copy 4 of DV to the

payee. Attaches OR/Invoice issued by payee/claimant, if
any on Copy 1 of DV and requires payee/claimant to sign
on Box D of the DV and the Check Registry/Logbook.
Files temporarily Copies 2-3 of check, Copies 1-3 of DV,
Copies 2-3 of ORS and SDs for preparation of reports.
Posts in the ‘Date Released’ column of the CkADADRec
the date of release of the check to the claimant.

Preparation of Reports
Daily
Cashier/ 27 Prepares Advice of Checks Issued and Cancelled (ACIC)
Designated (Appendix 39) in accordance with existing rules and
Staff regulations and forwards to the GSB.

28 Retrieves Copies 2-3 of checks, Copies 1-3 of DV, Copies

2-3 of ORS and SDs and prepares the RCI in four copies.

Note 8 – The RCI shall include all checks drawn during

the day whether released or unreleased to the
payees including cancelled ones.

Note 9 – For field offices without complete set of books of

accounts, the Disbursing Officer submits the
certified true copies of the CBReg together with
the SDs to the Accounting Division/Units of
their respective CO/RO/Division Office (DO)
for recording in the books of accounts.

29 Initials in “Certification” portion of the RCI.

Cashier/Head 30 Reviews RCI and signs in “Certification” portion.

of the Cash/
Treasury Unit

Designated 31 Distributes the RCI as follows:

Staff
Original – COA Auditor, through the
Accounting Division/Unit, together
with the original copy of the paid
DVs/payroll, copy of the check and
SDs

Copy 2 – Accounting Division/Unit

70
 Area of Seq.
Activity
Responsibility No.
Copy 3 – Budget Unit
Copy 4 – Cash/Treasury Unit

Preparation of JEV
Accounting
Daily
Division/Unit
Receiving/ 32 Receives Copies 1-2 of RCI with Copy 2 of the Check,
Releasing Staff Copies 1 and 3 of DVs, Copies 2-3 of ORS and other SDs
from Cash/Treasury Unit. Forwards the documents to the
Designated Staff for JEV preparation.

Designated 33 Examines DVs and checks against RCI. Verifies if the

Staff serial number of all checks drawn whether released or
unreleased, including spoiled and cancelled ones, are all
accounted for.

34 Prepares JEV in two copies and signs in the “Prepared by”

portion. Forwards Copies 1-2 of JEV supported with
Copies 1-2 of RCI, Copy 2 of the Check, Copies 1 and 3
of DVs, Copies 2-3 of ORS and other SDs to the Chief
Accountant/Head of Accounting Division/Unit.

Note 10 – For Regional Offices with field offices without

complete set of books, the Designated Staff
shall prepare the JEV based on the certified
copy of CBReg submitted by the Disbursing
Officer concerned. The said JEV shall be
recorded in the CkDJ.

Head of the 35 Reviews correctness of the journal entries and signs on

Accounting “Certified Correct by” portion of the JEV. Forwards
Division/Unit/ Copies 1-2 of JEV supported with Copies 1-2 of RCI,
Authorized Copy 2 of the Check, Copies 1 and 3 of DVs, Copies 2-3
Signatory of ORS and other SDs to Designated Staff for recording in
the CkDJ.

Recording in the CkDJ

Designated 36 Receives Copies 1-2 of JEV with Copies 1-2 of RCI,
Staff Copy 2 of the Check, Copies 1 and 3 of DVs, Copies 2-3
of ORS and other SDs. Records the JEV in the CkDJ.

Note 11 – For Central Office with field offices without

complete set of books, the JEV shall be
recorded in the GJ.

Receiving/ 37 Records in the logbook submission of documents to COA

Releasing Staff and Budget Division/Unit. Retains Copy 2 of JEV and
RCI and Copy 3 of ORS for file.

Note 12
To COA – Copy 1 of JEV, RCI, DV and
NORSA (if there is any), Copy 2 of

71
 Area of Seq.
Activity
Responsibility No.
checks, Copy 2 of ORS and SDs to
the Receiving/ Releasing Staff
To – Copy 3 RCI with Copy 3 of DV for
Budget posting of payments in Box C of
Division/ ORS
Unit

Note 13 – For the succeeding activities, refer to Chapter

on Financial Reporting for the preparation and
submission of Trial Balances, Financial
Statements and Other Reports.

Sec. 13. Illustrative Accounting Entries for Disbursements By Check

Account Title Account Code Debit Credit

1. Payment of the following utility bills:
Meralco Bill P 1,200
PLDT Bill 500
Maynilad Bill 200
Total P 1,900

Water Expenses 50204010 P 200

Electricity Expenses 50204020 1,200
Telephone Expenses 50205020 500
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 1,900
To recognize payment of bills from utility companies based on individual
checks issued

2. Grant of cash advance for travel

Advances to Officers and 19901040 P 1,000
Employees
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 1,000
To recognize granting of travel allowance to employees

3. Advance payment to Procurement Service

Due from NGAs 10303010 P 2,500
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 2,500
To recognize advance payment to Procurement Service for the purchase
of Office Equipment

4. Establishment of Petty Cash Fund (PCF) – P 20,000

Petty Cash Fund 10101020 P 20,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 20,000
To recognize establishment of PCF to cover petty expenses

72
 Account Title Account Code Debit Credit
5. Replenishment of PCF
Expenses charged to the PCF:

Bond paper P 14,000

Postage stamps 2,000
Total P 16,000

Office Supplies Expenses 50203010 P 14,000

Postage and Courier Expenses 50205010 2,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 16,000
To recognize replenishment of PCF based on the Report on Paid Petty
Cash Vouchers (RPPCV) and SDs

6. Remittance of Government’s share

Retirement and Life Insurance
Premium P 3,300
Pag-IBIG Contributions 500
PhilHealth Contributions 300
Total P 4,100

Retirement and Life Insurance 50103010 P 3,300

Premiums
Pag-IBIG Contributions 50103020 500
PhilHealth Contributions 50103030 300
Cash-Modified
Disbursement System
(MDS), Regular 10104040 P 4,100
To recognize remittance of government’s share based on individual
checks issued to GSIS, HDMF and PHIC

7. Remittance of salary deductions

Retirement and Life Insurance

Premium P 3,300
Pag-IBIG Contributions 500
PhilHealth Contributions 300
GSIS-Salary Loan 200
Employees' Association 100
Total P 4,400

Due to GSIS 20201020 P 3,500

Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 300
Other Payables 29999990 100
Cash-Modified
Disbursement System
(MDS), Regular 10104040 P 4,400
To recognize remittance of salary deductions based on individual checks
issued to Government Service Insurance System (GSIS), Philippine Health
Insurance Corporation (PHIC), Home Development Mutual Fund (HDMF) and
Employees’ Association

73
 Sec. 14. Disbursements by Cash. Cash disbursements constitute payments out of cash
advances granted to the regular and special disbursing officers for personal services, petty
expenses and MOOE for field operating requirements. All cash payments shall be covered by
duly approved DVs/payrolls/petty cash vouchers (PCVs). The cash advances may be granted to
the cashiers/disbursing officers/officials and employees to cover the following: salaries and
wages, travels, special time-bound undertakings and petty operating expenses. The granting and
liquidation of cash advances shall be governed by the following existing COA rules and
regulations and other pertinent issuances:

a. No cash advance shall be given unless for a legally authorized specific purpose;

b. A cash advance shall be reported on and liquidated as soon as the purpose for which
it was given has been served;

c. No additional cash advance shall be allowed to any official or employee unless the
previous cash advance given to him/her is first settled/liquidated or a proper
accounting thereof is made;

d. Except for cash advance for official travel, no officer or employee shall be granted
cash advance unless he/she is properly bonded in accordance with existing laws or
regulations. The amount of cash advance which may be granted shall not exceed the
maximum cash accountability covered by his/her bond;

e. Only permanently appointed officials shall be designated as disbursing officers;

f. Only duly appointed or designated disbursing officer may perform disbursing

functions. Officers and employees who are given cash advances for official travel
need not be designated as Disbursing Officers;

g. Transfer of cash advance from one accountable officer to another shall not be
allowed; and

h. The cash advance shall be used solely for 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.

The specific rules and regulations on the granting, utilization and liquidation of cash
advances are provided for under COA Circular No. 97-002 dated February 10, 1997, as amended
by COA Circular No. 2006-005 dated July 13, 2006.

Sec. 15. Cash Advance for Payroll. Advances for Payroll shall be granted to Regular
Disbursing Officers for payment of salaries, wages, honoraria, allowances and other personnel
benefits of officials and employees. The Advances for Payroll shall not be used for encashment
of checks or for liquidation of previous or other types of cash advances. It shall be equal to the
net amount of the processed payroll corresponding to the pay period. Liquidation of the advances
shall be made within five (5) days after the end of the pay period. Any unclaimed
salaries/allowances shall be refunded and issued official receipt to close the account.

Sec. 16. Documentary Requirements. The documentary requirements for Payroll

Fund for salaries, wages, allowances, honoraria and other similar expenses are provided under
COA Circular No. 2012-001 dated June 14, 2012, amended by COA Circular No. 2013-001 dated
January 10, 2013.

74
 Sec. 17. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. The Disbursing Officer shall maintain the Cash Disbursements Record (CDRec)
(Appendix 40) to monitor the cash advances/payroll, current operating expenses, and special
purpose/time-bound undertakings and prepare the Report of Cash Disbursements (RCDisb)
(Appendix 41) to report its utilization. Payments shall be based on duly approved Payroll and
shall be posted by the Designated Staff to the IP. The JEV shall be prepared based on the RD and
shall be recorded in the CDJ.

Sec. 18. Procedures for Disbursements out of Advances for Payroll

Area of Seq.
Activity
Responsibility No.
Granting of Advances for Payroll through ADA
Cash/Treasury Unit
Disbursing 1 Receives the validated List of Due and Demandable
Officer/ Accounts Payable-Advice to Debit Account (LDDAP-
Cashier ADA) (Appendix 42) from the authorized Accountable
Officer. Records in the CDRec the date, reference, name
of payee, particulars and the amount of ADA in the ‘Cash
Advance Received’ column.

Disbursing 2 Withdraws the amount of cash advance from the GSB and
Officer/ keeps cash in a safety vault.
Cashier

Note 1 – Agencies are enjoined to institute adequate

internal control to safeguard government funds
against possible losses/misappropriations.

Utilization of Advances for Payroll

3 Pays officials and employees/other payees.

Note 2 – Employees/Payees shall sign on the ‘Signature of

Recipient’ column of the Payroll to acknowledge
receipt of payment.

Note 3 – If there are unclaimed salaries, the Disbursing

Officer should refund the same within the time
prescribed by law/regulations. OR representing
the refund shall be issued by the
Cashier/Designated Collecting Officer.

4 Records the refund for unclaimed salary in the ‘Cash

Advance Received/(Refunded)’ column of the CDRec in
parenthesis.

Liquidation of Advances for Payroll

5 Based on the paid payroll and SDs, prepares RCDisb in
three copies. Signs the “Certification” portion of the
RCDisb and submits to the Accounting Division/Unit.

Note 4 – The RCDisb shall serve as the liquidation report

of the Payroll Fund granted to the Disbursing
Officer.

75
 Area of Seq.
Activity
Responsibility No.

Note 5 - The RCDisb shall be distributed as follows:

Original – COA Auditor, through the

Accounting Division/Unit
together with the paid Payrolls
and SDs for JEV preparation
Copy 2 – Accounting Division/Unit
Copy 3 – Disbursing Officer’s file

Recording of Liquidation
Accounting
Division/Unit
Releasing/ 6 Records the receipt of the RCDisb in the logbook,
Receiving indicates “Received” and signs on all copies, forwards the
Clerk RCDisb to the Designated Staff for JEV preparation, and
returns Copy 2 to the Cash/Treasury Unit.

Designated 7 Verifies completeness of data in the RCDisb as against the

Staff SDs received. Prepares JEV and signs in the “Prepared
by” portion.

Head of the 8 Reviews correctness of the journal entries and signs on

Accounting “Certified Correct by” portion of the JEV.
Division/Unit/
Authorized
Signatory

Designated Staff 9 Records the JEV in the CDJ.

Note 6 – For the succeeding activities, refer to Chapter on

Financial Reporting for the preparation and
submission of Trial Balances, Financial
Statements and Other Reports.

10 Records in the individual IP of officials and employees the

date of payment based on paid payroll. Reconciles and
adjusts, if necessary, the amount of payment posted in the
IP after the processing of claim with the actual amount
paid based on paid payroll. Posts any refund of cash
advances made by the Disbursing Officer for unclaimed
salaries, wages, allowances, etc. based on the RCDisb.

76
 Sec. 19. Illustrative Accounting Entries for Granting and Liquidation of Advances
for Payroll and the Set-up of Salary Deductions and Due to Officers and Employees

Account Title Account Code Debit Credit

1. Set-up of Due to Officers and Employees and Salary Deductions
Assumptions:
Salaries and Wages P35,000
PERA 15,000
Total 50,000
Less: Salary Deductions
Withholding Tax 5,000
Life and Retirement
Premiums 3,000
Pag-IBIG premiums 500
PhilHealth premiums 600
GSIS Salary loan 200
Employees' Association 100 9,400
Net Amount P 40,600

Salaries and Wages-Regular 50101010 P 35,000

PERA 50102010 15,000
Due to BIR 20201010 P 5,000
Due to GSIS 20201020 3,200
01 Life and Retirement
Premiums 3,000
02 Salary Loan 200
Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 600
Other Payables 29999990 100
Due to Officers and
Employees 20101020 40,600
To recognize payable to Officers and employees and to set up salary
deductions

2. Granting of Advances for Payroll

Advances for Payroll 19901020 P 40,600
Cash-Modified
Disbursement System
(MDS), Regular 10104040 P 40,600
To record grant of advances to cover payment of salaries and wages of
employees

3. Liquidation of Payroll Fund

Due to Officers and 20101020 P 40,600
Employees
Advances for Payroll 19901020 P 40,600
To recognize liquidation of Advances for Payroll based on the RCDisb and
SDs

Sec. 20. Cash Advances for Operating Expenses of Government Units without
Complete Set of Books of Accounts. Field/Extension/Satellite Offices are some of the
government units under the central/regional/district offices without complete set of books of
accounts. Those offices may be granted cash advances covering two months requirements for

77
MOOE/authorized expenses to finance their operations. The cash advance shall be granted to the
duly designated or appointed Disbursing Officers.

Sec. 21. Documentary Requirements. The documentary requirements for the granting
and liquidation of Cash Advances for Operating Expenses of Government Units without
Complete Set of Books of Accounts are provided under COA Circular No. 2012-001 dated June
14, 2012, amended by COA Circular No. 2013-001 dated January 10, 2013.

Sec. 22. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. A Cash Disbursements Register (CDReg) (Appendix 43) shall be maintained to
record, monitor and report transactions involving the grant, utilization and liquidation of the cash
advance. The Disbursing Officer shall submit within five days after month-end the certified
copies of the CDReg with supporting paid DVs and other documents to the accounting units of
their respective Central/Regional/Division Offices and Operating Units for JEV preparation or
whenever a request for replenishment is made. The JEV shall be recorded in the books of
accounts.
Sec. 23. Procedures for Disbursements of Cash Advance for Operating Expenses of
Government Units without Complete Set of Books of Accounts

Area of Seq.
Activity
Responsibility No.
Granting of Cash Advance for Operating Expenses of
Field/Extension/Satellite Offices/Operating Units
Cash/Treasury Unit
Disbursing 1 Receives the approved check from the Cashier of the
Officer/Cashier Central/Regional/Division Office or Operating Unit.
Accomplishes the CDReg (Appendix 43) in accordance
with the instructions at the back of the form.

Disbursing 2 Encashes check in GSB and keeps cash in a safety

Officer/Cashier vault.

Note 1 – Agencies are enjoined to institute adequate

internal control to safeguard government
funds against possible losses/
misappropriations.

Utilization of Cash Advances for Operating Expenses

3 Pays the MOOE/authorized expenses requirements of

the field/extension/ satellite offices/operating units
based on duly approved DVs with the required SDs.

Note 2 – Refer to the instructions at the back of DV

(Appendix 32) on how to prepare the DV and
Seq. No. 1-16, Sec. 12 of this Chapter for the
procedures in processing and approval of
DV.

4 Records in the CDReg the date, reference, name of

payee, particulars and the amount disbursed under the
‘Payments’ column. Enters the nature of payments
made under the appropriate columns under the
‘Breakdown of Payments’.

78
 Area of Seq.
Activity
Responsibility No.

Note 3 – The total of the ‘Advances for Operating

Expenses-Payments’ column must always
be equal to the sum of the totals of the
‘Breakdown of Payments’ columns.

5 Indicates the running balance of the cash advance in

the ‘Balance’ column after posting each transaction.

Liquidation of Cash Advances for Operating

Expenses
Disbursing 6 Submits to the Accounting Division/Unit of
Officer/Cashier Central/Regional/Division Office or Operating Unit
concerned a certified photocopy of the CDReg with
complete SDs every time the cash advance is
liquidated.

Note 4 – Refer to Seq. No. 5-10, Section 18 of this

Chapter for the procedures in recording the
liquidation of cash advance. Instead of paid
payroll, paid DVs shall be used as basis of
liquidation. Instead of officials and
employees, use creditors/payee in
maintaining the IP.

Sec. 24. Illustrative Accounting Entries to be recorded in the Central/

Regional/Division Office or OU Books for Advances for MOOE/Authorized Expenses
Granted to Government Units without Complete Set of Books of Account

Account Title Account Code Debit Credit

Central/Regional/Division Office or OU Books

Assumptions:

Estimated Expenses for 2 months requirements:

Office Supplies Expenses P 10,000

Traveling Expenses 15,000
Water Expenses 8,000
Telephone Expenses 5,000
Electricity Expenses 12,000
Total P 50,000

Advances for Operating Expenses 19901010 P50,000

Cash-Modified Disbursement 10104040 P50,000
System (MDS), Regular
To recognize granting of cash advance to field units without books of accounts

Office Supplies Expenses 50203010 P 10,000

Traveling Expenses-Local 50201010 15,000

79
 Account Title Account Code Debit Credit

Water Expenses 50204010 8,000

Electricity Expenses 50204020 5,000
Telephone Expenses 50205020 12,000
Advances for Operating
Expenses 19901010 P 50,000
To recognize liquidation of cash advance upon receipt of the certified copies
of CDReg with paid DVs and other supporting documents from field/extension/satellite
offices/operating units

Sec. 25. Cash Advances for Travel. Section 2 of Executive Order (EO) No. 248 dated
May 29, 1995, as amended by EO No. 248A and EO No. 298 dated August 14, 1995 and March
23, 2004, respectively, provide that travels shall cover only those that are urgent and extremely
necessary, will involve the minimum expenditure and are beneficial to the agency concerned
and/or the country.

a. No government fund shall be utilized to defray foreign travel expenses of any

government official or employee, except in the case of training, seminar or
conference abroad when the officials or other personnel of the foreign mission
cannot effectively represent the country therein, and travels necessitated by
international commitments; provided that no official or employee, including
uniformed personnel of the Department of the Interior and Local Government
(DILG) and Department of National Defense (DND) will be sent to foreign training,
conferences or attend international commitments when they are due to retire within
one year after the said foreign travel [Section 16(c) of Fiscal Year (FY) 2012 GAA
or pertinent provisions of the GAA for the Year]. Under Memorandum Circular No.
52 dated October 2, 2003 of the Office of the President, the grant of clothing
allowance in all categories of trips is suspended indefinitely.

b. Officials and employees authorized to travel shall be granted cash advance to cover
traveling expenses. The amount to be granted shall be accounted as “Advances to
Officers and Employees”. No additional cash advance shall be granted to any
official or employee unless the previous cash advance given to him/her for travel is
first liquidated and accounted for in the books. For local travel, liquidation shall be
done within a period of 30 days upon return to the personnel’s workstation. On the
other hand, cash advance for foreign travel shall be liquidated within 60 days upon
return to the Philippines. The Liquidation Report (LR) (Appendix 44) shall be
prepared by the officers/employees concerned and submitted to the Accounting
Division/Unit with appropriate SDs as basis for JEV preparation. The excess cash
advance shall be refunded and an OR shall be issued to acknowledge receipt thereof.
In case the amount of cash advance is less than the travel expenses incurred, the LR
shall be submitted to liquidate the cash advance previously granted and a DV shall
be prepared to claim reimbursement of the deficiency in amount.

Sec. 26. Documentary Requirements. The documentary requirements for cash

advance for travel as provided under 1.1.4 of COA Circular No. 2012-001 dated June 14, 2012,
amended by COA Circular No. 2013-001 dated January 10, 2013, are as follows:

a. Granting of Cash Advance

1. Local Travel

i. Office Order/Travel Order approved in accordance with Section 3 of EO No.

298;

80
 ii. Duly approved Itinerary of Travel (IoT) (Appendix 45) and
iii. Certification from the accountant that the previous cash advance has been
liquidated and accounted for in the books.

2. Foreign Travel

i. Office Order/Travel Order approved in accordance with the provisions of

Sections 1 and 2 of EO 459 dated September 1, 2005;

o As approved by the Office of the President in the case of the following

officials:

 Members of the cabinet and officials of equivalent rank

 Heads of agencies under or attached to the Office of the President

The Chief Justice and Associate Justices of the Supreme Court were
exempted under Memorandum Order No. 26 dated July 31, 1986. Under E.O.
No. 477 dated August 21, 1991, the Chairmen and Commissioners of the
Constitutional Commissions, Chairman and Members of the Commission on
Human Rights, Ombudsman and Deputy Ombudsmen were also exempted
from securing prior approval from the OP in connection with travels abroad.

o As approved by the respective heads of agencies in the case of other

government officials and employees regardless of the length of travel:

 NGAs – Department Secretaries or their equivalent

 State Universities and Colleges (SUCs) – Chairman of Commission
on Higher Education (CHED) in the case of heads of the SUCs and
respective heads in the case of all other officials and employees
 Technical and Vocational Schools – Chairman of Technical
Education and Skills Development Authority (TESDA) in the case of
technical and vocational schools and respective heads in the case of
all other officials and employees

ii.Duly approved IT;

iii.Letter of invitation of host/sponsoring country/agency/organization;
iv. For plane fare, quotations of three travel agencies or its equivalent;
v. Flight itinerary issued by the airline/ticketing office/travel agency;
vi. 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;
vii. Document to show the dollar to peso exchange rate at the date of grant of
cash advance;
viii. Where applicable, authority from the OP to claim representation expenses;
and
ix. In case of seminars/trainings:

o Invitation addressed to the agency inviting participants (issued by the

foreign country)
o Acceptance of the nominee as participants (issued by the foreign country)
o Programme Agenda and Logistics Information

x. Certification from the accountant that the previous cash advance has been
liquidated and accounted for in the books.

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 b. Liquidation of Cash Advance

1. For Local Travel

i. Paper/Electronic plane, boat or bus tickets, boarding pass, terminal fee;

ii. Certificate of Appearance/Attendance;
iii. Copy of previously approved IT;
iv. Revised or supplemental Office Order or any proof supporting the change of
schedule;
v. Revised IT, if the previous approved itinerary was not followed;
vi. Certification by the Head of Agency as to the absolute necessity of the
expenses together with the corresponding bills 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. LR (Appendix 44);
viii. Reimbursement Expense Receipt (RER) (Appendix 46);
ix. OR in case of refund of excess cash advance;
x. Certificate of Travel Completed (CTC) (Appendix 47); and
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 in the case of those outside the Metro Manila Area,
if the travel allowances being claimed include the hotel room/lodging rate.

2. For Foreign Travel

i. Paper/Electronic plane, boarding pass, boat or bus ticket, terminal fee;

ii. Certificate of Appearance/Attendance for training/seminar participation;
iii. Bill/Receipts for non-commutable representation expenses approved by the
President under Section 13 of EO No. 248;

iv. For reimbursement of actual travel expenses in excess of the prescribed rate
(EO No. 298):

o Approval of the President

o Certification from the Head of Agency that it is absolutely necessary
o 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 IT, if applicable;

vi. Narrative report on trip undertaken/Report on Participation;
vii. OR in case of refund of excess cash advance;
viii. CTC; and
ix. LR.

Sec. 27. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. The officers/employees who made the travel shall prepare the LR which shall be the
basis for the preparation of the JEV. The Accounting Division/Unit shall record the JEV in the GJ
and maintain SL/IP for officers and employees where the granting and liquidation of travel
allowances shall be posted for monitoring purposes.

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Sec. 28. Procedures for Disbursements of Advances to Officers and Employees

Area of Seq.
Activity
Responsibility No.
Receipt and Liquidation of Cash Advance for
Travel
Various Units
Officers/Employees 1 Receives the approved check and Copy 4 of DV
Concerned from Cash/Treasury Unit.

Note 1 – Officers/Employees shall sign on the

received portion of the original copy of
the DV to acknowledge receipt of
traveling allowance.

2 Upon return to the official station, prepares the LR

in two copies and signs in Box A or “Certification”
portion. Attaches appropriate SDs such as IT,
CTC, Certificate of Appearance, Travel Report,
Plane/Boat Ticket, and RER.

Note 2 – The LR together with the

appropriate SDs shall be submitted
to the Accounting Division/Unit
upon return to the official station as
follows:
 Local travel – within 30 days
 Foreign travel – within 60 days

Note 3 – If there is unused/excess traveling

allowance, the amount shall be
refunded to the Cashier/ Collecting
Officer who shall in turn issue the
OR to acknowledge receipt of
amount refunded.

Note 4 – The DV and ORS shall be prepared

by the official/ employee concerned
for the reimbursement of allowable
traveling expenses incurred in
excess of the cash advance.

Supervisor of 3 Signs in Box B “Certified: Purpose of travel/cash

Official/Employee advance duly accomplished” portion of the LR.
Concerned

Official/Employee 4 Submits Copies 1-2 of the LR, SDs to Accounting

Concerned Division/Unit for processing and certification of
Box C “Certified: SDs complete and proper” and
recording of the actual traveling expenses.

Accounting Division/Unit
Releasing/Receiving 5 Checks completeness of SDs. If complete,
Clerk acknowledges receipt of the LR, returns Copy 2 to
the claimant and records the same in the logbook.

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 Area of Seq.
Activity
Responsibility No.
Otherwise, returns the documents to the claimant
for appropriate action.

Chief 6 Verifies completeness and propriety of the SDs. If

Accountant/Head of complete and proper, signs in Box C, “Certified:
Accounting SDs complete and proper” portion of the LR.
Division/Unit Otherwise, prepares letter informing the claimant of
the deficiencies.

Note 5 – Upon compliance of the deficiencies, refer to

Sequence No. 4.

Recording of Liquidation of Advances to Officers

and Employees
Designated Staff 7 Prepares JEV based on the LR and SDs received.
Signs in the “Prepared by” portion of the JEV.

Chief 8 Reviews the JEV and signs in the “Certified

Accountant/Head of Correct” portion.
Accounting
Division/Unit

Designated Staff 9 Records the JEV in the GJ. Files the documents
temporarily.

10 Submits to the COA Auditor Copy 1 of JEVs, LRs

and SDs at the end of the month.

Note 6 – For the succeeding activities, refer to the

Chapter in Financial Reporting for the
preparation and submission of Trial
Balances, Financial Statements and Other
Reports.

Sec. 29. Illustrative Accounting Entries for the Granting and Liquidation of
Advances to Officers and Employees covering Official Travel

Account Title Account Code Debit Credit

Advances to Officers and Employees 19901040 P2,000
Cash-Modified Disbursement System
(MDS), Regular 10104040 P2,000
To recognize granting of cash advance for local travel to officers and employees
based on duly approved and paid DV, Authority to Travel and IT

Traveling Expenses-Local 50201010 P 2,000

Advances to Officers and Employees 19901040 P 2,000
To recognize liquidation of cash advance for local travel upon receipt of LR and
supporting documents

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 Account Title Account Code Debit Credit
Advances to Officers and Employees 19901040 P 200,000
Training Expenses 50202010 80,000
Cash-Modified Disbursement System
(MDS), Regular 10104040 P 280,000
To recognize granting of cash advance for training abroad

Traveling Expenses-Foreign 50201020 P 200,000

Advances to Officers and Employees 19901040 P 200,000
To recognize liquidation of cash advance for training abroad upon receipt of LR
and supporting documents.

Sec. 30. Cash Advance for Specific Purpose/Time-Bound Undertaking. Cash

advance for special purpose/time-bound undertaking shall be granted only to duly authorized
accountable officer/special disbursing officer. It shall be accounted for in the books of accounts
as “Advances to Special Disbursing Officer.” It shall be liquidated by the accountable officer
within a specified period. Any unutilized cash advance shall be refunded and an OR shall be
issued to acknowledge collection thereof.

Sec. 31. Documentary Requirements. The documentary requirements for cash

advance for specific purpose/time-bound undertaking are provided under COA Circular No. 2012-
001 dated June 14, 2012, amended by COA Circular No. 2013-001 dated January 10, 2013.

Sec. 32. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. The accountable officer/special disbursing officer shall prepare the RCDisb and
maintain the CDRec to monitor and control the granting and utilization of cash advance. The
RCDisb shall be the basis in the preparation of the JEV which shall be recorded by the designated
staff in the CDJ. The SL and IP shall also be maintained by the Accounting Division/Unit.

Sec. 33. Procedures for Disbursements of Advances to Special Disbursing Officers

Area of Seq.
Activity
Responsibility No.
Granting of Cash Advance for Specific Purpose/Time-Bound
Undertaking
Cash/Treasury Unit
Accountable 1 Receives the approved check and Copy 4 of DV from
Officer/Special Cash/Treasury Unit. Records in the CDRec the date, reference,
Disbursing Officer name of payee, particulars and the amount of check in the
‘Cash Advance Received’ column.

Designated 2 Encashes check in GSB and keeps cash in a safety vault.

Accountable
Officer/Special
Disbursing Officer

Note 1 – Agencies are enjoined to institute adequate internal

control to safeguard government funds against
possible losses/misappropriations.

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 Area of Seq.
Activity
Responsibility No.
Utilization of Cash Advance for Specific Purpose/Time-
Bound Undertaking
3 Pays the authorized expenses based on duly approved DV and
SDs.

4 Records payments made in the ‘Disbursements’ column of the

CDRec.

Liquidation of Cash Advance for Special Purpose/Time-

Bound Undertaking
5 Prepares RCDisb in three copies based on the CDRec. Signs
the “Certification” portion of the RCDisb. Forwards the
RCDisb and SDs to the Accounting Division/Unit.

Note 2 – The RCDisb shall be distributed as follows:

Original – COA Auditor, through the
Accounting Division/Unit
together with the paid
Payrolls and SDs for JEV
preparation
Copy 2 – Accounting Division/Unit
Copy 3 – Disbursing Officer’s file

Note 3 – If there are unused cash advances, refund the amount to

the Cashier who shall in turn issue the OR to
acknowledge receipt of the refund. The OR shall be
attached to the RCDisb.

Recording of Liquidation of Cash Advance for Special

Purpose/Time-Bound Undertaking
Accounting
Division/Unit
Receiving/ 6 Checks completeness of SDs. If complete, acknowledges
Releasing Clerk receipt of the RCDisb, returns Copy 2 to the Accountable/
Special Disbursing Officer and records the same in the
logbook. Otherwise, returns the documents to the
Accountable/Special Disbursing Officer for appropriate
action.

Designated Staff 7 Verifies completeness and propriety of the RCDisb and SDs.
If complete and proper, prepares JEV in two copies and signs
in the “Prepared by” portion. Otherwise, prepares letter
informing the Accountable/Special Disbursing Officer of the
deficiencies.

Chief 8 Reviews the JEV and signs in the “Certified Correct” portion.
Accountant/Head
of Accounting
Division/ Unit

Designated Staff 9 Records the JEV in the CDJ.

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 Area of Seq.
Activity
Responsibility No.
Note 4 – For the succeeding activities, refer to Chapter on
Financial Reporting for the preparation and
submission of Trial Balances, Financial Statements
and Other Reports.

Sec. 34. Illustrative Accounting Entries for Advances to Special Disbursing

Officers

Account Title Account Code Debit Credit

Assumptions:
Estimated Expenses for the celebration of agency
anniversary:
Office Supplies Expenses P 10,000
Traveling Expenses 15,000
Printing and Publication Expenses 5,000
Total P 30,000

Advances to Special Disbursing

Officer 19901030 P 30,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 30,000
To recognize the granting of cash advance for the anniversary celebration

Traveling Expenses-Local 50201010 P 15,000

Office Supplies Expenses 50203010 10,000
Printing and Publication Expenses 50299020 5,000
Advances to Special Disbursing
Officer 19901030 P 30,000
To recognize the liquidation of cash advance after the anniversary celebration based on
the RCDisb and supporting documents submitted by the Special Disbursing Officer

Sec. 35. Cash Advance for Petty Operating Expenses. The Petty Cash Fund (PCF) to
be set up shall be sufficient for the recurring petty operating expenses of the agency for one
month. It shall be maintained using the Imprest System. All replenishments shall be directly
charged to the expense account and at all times, the PCF shall be equal to the total cash on hand
and the unreplenished expenses. The PCF shall be replenished as soon as disbursements reach at
least 75% or as needed. The following are the accounting policies regarding cash advance for
PCF:

a. The fund shall be kept separately from the regular cash advances/collections and shall
not be used for payment of regular expenses such as rentals, subscriptions, light and
water bills, purchase of supplies and materials for stock purposes, and the like.
Payments out of PCF, which shall be made through a Petty Cash Voucher (PCV)
(Appendix 48), should 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 COA. Splitting of transactions to avoid exceeding the ceiling shall not be
allowed. All disbursements out of PCF shall be covered by duly accomplished and
approved PCV supported by cash invoices, ORs or other evidence of disbursements;

87
 b. The unused balance of the PCF shall not be closed/refunded at the end of the year.
The fund shall be closed only upon termination, separation, retirement or dismissal of
the Petty Cash Fund Custodian (PCFC), who in turn shall refund any balance to close
his/her cash accountability; and

c. At the end of the year, the PCFC shall submit to the Accounting Division/Unit all
unreplenished Petty Cash Vouchers (PCVs) for recording in the books of accounts.

Sec. 36. Documentary Requirements. The documentary requirements for PCF as

provided under COA Circular No. 2012-001 dated June 14, 2012, amended by COA Circular No.
2013-001 dated January 10, 2013, and under this Chapter, are as follows:

a. Granting of Petty Cash Advance

1. Authority of an accountable officer issued by the Head of the Agency or his/her

duly authorized representatives 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; and

3. Approved application for bond and/or Fidelity Bond for the year for cash
accountability of P5,001 or more as provided under Treasury Circular No. 02-
2009 dated August 6, 2009.

b. Additional Documentary Requirements for initial cash advances

1. Approved estimates of petty expenses for one month; and

2. Copy of policy for maintaining PCF under the imprest system

c. Liquidation of PCF

1. Report on Paid Petty Cash Vouchers (RPPCV) (Appendix 49);

2. Approved purchase request with certificate of Emergency Purchase if necessary;

3. Bill, receipts, sales invoices

4. Inspection and Acceptance Report (IAR) (Appendix 62);

5. Waste Materials Report (WMR) (Appendix 65) in case of replacement/repair;

6. Approved Trip Ticket, for gasoline/fuel expenses;

7. Canvass from at least three suppliers for purchases involving P1,000 and above,
except for purchases made while on official travel;

8. Summary/Abstract of Canvass;

9. PCVs duly accomplished and signed;

10. OR in case of refund;

88
 11. For reimbursement of toll receipts; and

i. Toll Receipts
ii. Trip Tickets

12. Such other supporting document that may be required.

Sec. 37. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. The PCFC shall prepare the RPPCV and maintain the Petty Cash Fund Record
(PCFR) (Appendix 50) to monitor and control the granting and utilization of the fund.
The RPPCVs shall be the basis in the preparation of the DV to replenish the PCF. The Accounting
Division/Unit shall record the replenishment of PCF in the CkDJ through a JEV and shall
maintain SL to monitor and control accountability.

Sec. 38. Procedures for Disbursements through Petty Cash

Area of Seq.
Activity
Responsibility No.
Establishment of PCF
Various Units
Petty Cash Fund 1 Receives the approved check from the Cashier for the
Custodian establishment of PCF. Records in the PCFR the date, particulars,
reference and the amount of check in the ‘Cash Advance’
column.

2 Encashes check in GSB and keeps cash in a safety vault.

Note 1 – Agencies are enjoined to institute adequate internal

control to safeguard government funds against
possible losses/ misappropriations.

Utilization of Cash Advance from PCF

Requesting 3 Accomplishes Box I columns ‘Particulars’ and ‘Amount’ and Box
Personnel A “Requested by” portion of the PCV.

Immediate 4 Signs Box A “Approved by” portion of the PCV and returns to
Supervisor Requesting Personnel.

Requesting 5 Submits the required documents to the PCFC for the release of
Personnel fund.

Petty Cash 6 Receives from the Requesting Personnel the PCV duly approved
Custodian by the Immediate Supervisor of the Requestor.

7 Upon release of the petty cash, signs in Box B “Paid by” portion
of the PCV.

Requesting 8 Receives petty cash and signs in Box B “Cash Received by”
Personnel portion of the PCV.

Petty Cash 9 Issues Copy 2 of the PCV to the Requesting Personnel.

Custodian
10 Files the original of PCV awaiting liquidation.

89
 Area of Seq.
Activity
Responsibility No.
Liquidation of Cash Advance from PCF
11 Receives from Requesting Personnel Copy 2 of the PCV together
with SDs. Checks and reviews completeness of documents such
as the date, amount and nature of expenses paid as shown in the
SDs.

If incomplete, returns to Requesting Personnel for completion of

needed SDs.

12 If complete, retrieves the original of PCV from file and fills up

Box II “Total Amount Granted”, “Total Amount Paid per
OR/Invoice No.”, and “Amount Refunded/ Reimbursed” portion
of the original and Copy 2 of PCVs.

13 Checks the appropriate boxes for “Received Refund” or

“Reimbursement Paid” portion and signs Box C of the PCV.

Requesting 14 Checks and fills up the appropriate boxes for “Liquidation

Personnel Submitted by” and “Reimbursement Received by” upon
submission of necessary SDs and receipt or reimbursement of
cash, if any, and signs Box D of the PCV.

Petty Cash Fund 15 Returns Copy 2 of the PCV to the Requesting Personnel.
Custodian

16 Retrieves PCFR from file and records paid PCVs. Fills up the
following columns: date, PCV No., name of payee, nature of
payment and the amount in the ‘Disbursements’ and ‘Cash
Advance Balance’ columns.

17 Files the original PCV together with the SDs.

Replenishment of PCF
18 Retrieves from file the original of the PCV together with the SDs.
Checks the completeness of all PCVs for replenishment.

19 Based on the paid PCVs and SDs, prepares the RPPCVs in two
copies. Signs the “Certification” portion of the RPPCV.

Note 1 – The RPPCVs shall serve as the basis in the

preparation of the DV to replenish the PCF.
Note 2 – In case of retirement, separation, termination or
dismissal of the PCFC, any unused balance shall
be refunded to close the accountability. The
incoming Custodian shall be granted a new PCF.

21 Based on the RPPCVs, prepares DV in four copies and ORS in

three copies. Forwards Copies 1-4 of the DV, original of the
RPPCVs and PCV, and SDs to Authorized Official for review
and signature.

90
 Area of Seq.
Activity
Responsibility No.
Authorized 22 Signs in Box A portion of the ORS and DV.
Official

Petty Cash Fund 23 Forwards Copies 1-4 of the DV, Copies 1-3 of ORS, originals of
Custodian RPPCVs and PCVs and SDs to Budget Division for recording of
obligation.

Note 3 – For the processing of ORS and check, refer to Sec. 15 of

Chapter 3 and Sec. 12 of this Chapter, respectively.

Note 4 – For the recording of replenishment of PCF, refer to Seq.

32 to 37 of Sec. 12 of this Chapter.

Note 5 – The RPPCVs shall be distributed as follows:

Original – COA Auditor, through the Accounting

Division/Unit, together with the
original copies of the paid PCVs and SDs
Copy 2 – Treasury/Cash Unit

Sec. 39. Illustrative Accounting Entries for Disbursements Out of Petty Cash

Account Title Account Code Debit Credit

Assumptions:
Estimated Expenses:
Traveling Expenses P10,000
Office Supplies Expenses 8,000
Postage and Courier Expenses 5,000
Fuel, Oil and Lubricants Expenses 2,000
Other MOOE 5,000
Total P 30,000

Petty Cash 10101020 P 30,000

Cash-Modified Disbursement
System (MDS), Regular 10104040 P 30,000
To record the establishment of PCF

Traveling Expense-Local 50201010 P 10,000

Office Supplies Expenses 50203010 8,000
Fuel, Oil and Lubricants 50203090 2,000
Postage and Courier Expenses 50205010 5,000
Other Maintenance and Operating
Expenses 50299990 4,800
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 29,800
To record the replenishment of Petty Cash based on the DV, RPPCVs and SDs

Cash-Collecting Officer 10101010 P 200

Petty Cash 10101020 P 200
To record return of unused PCF upon retirement, resignation, separation and
termination of the Petty Cash Custodian based on the OR

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 Account Title Account Code Debit Credit
Assume the following are the unreplenished
PCVs as at December 31:
Office Supplies P 300
Traveling Expenses-Local 400
P 700

Traveling Expenses-Local 50201010 P 300

Office Supplies Expenses 50203010 400
Petty Cash 10101020 P 700
To record the unreplenished petty cash at the end of the year

Sec. 40. Cash Advances for Petty Cash Fund of Government Units without
Complete Set of Books of Accounts. Government Units without complete set of books of
accounts may be granted cash advance covering two months operating requirements for
authorized petty and other miscellaneous expenses to finance their operations. The cash advance
shall be granted to the duly designated or appointed Disbursing Officer.

Sec. 41. Accounting Records, Forms and Reports to be Prepared and Maintained.
The PCFC shall maintain the Petty Cash Fund Register (PCFReg) (Appendix 51) to
monitor/summarize the PCF established/replenished and the disbursements charged thereto. A
photocopy of this Register together with original PCV and its SDs shall be submitted to the
Accounting Division/Unit of the agency’s respective Central/Regional/Division Office to serve as
basis in the preparation of the DV to replenish the payments made or the JEV, at year-end, if no
replenishment is made.

Sec. 42. Accounting for Cash Shortage/Overage of Disbursing Officer. Cash

overage discovered by the Auditor that cannot be satisfactorily explained by the Disbursing
Officer shall be forfeited in favor of the government and an official receipt shall be issued by the
Collecting Officer/Cashier. The cash overage shall be taken up as Miscellaneous Income. Cash
shortage which is not restituted by the Disbursing Officer despite demand in writing by the
Auditor shall be taken up as receivable from the Disbursing Officer.

Sec. 43. Illustrative Accounting Entries for Cash Overage/Shortage of Disbursing

Officer

a. Cash Overage

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 xxx
Miscellaneous Income 40609990 xxx
To recognize forfeiture of cash overage of the Disbursing Officer

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx
To recognize the remittance of forfeited cash overage to the BTr

b. Cash Shortage

Account Title Account Code Debit Credit

Due from Officers and Employees 10305020 xxx
Advances for Operating Expenses/ 19901010/
Advances for Payroll/ 19901020/
Advances to Special Disbursing Officer 19901030 xxx
To recognize cash shortage of Disbursing Officer

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 Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 xxx

Due from Officers and Employees 10305020 xxx
To recognize restitution of cash shortage.

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx
To recognize the remittance of restituted cash shortage to the BTr

Sec. 44. Accounting for Cancelled Checks. Checks may be cancelled when they
become stale, voided or spoiled. The depository bank considers a check stale, if it has been
outstanding for over six months from date of issue or as prescribed.

A stale, voided or spoiled check shall be marked cancelled on its face and reported as
follows:

a. Voided, spoiled or unclaimed stale checks with the Cashier shall be reported as
cancelled in the List of Unreleased Checks that will be attached to the RCI.

b. New checks may be issued for the replacement of stale/spoiled checks in the hands of
the payees or holders in due course, upon submission of the stale/spoiled checks to
the Accounting Division/Unit. A certified copy of the previously paid DVs shall be
attached to the request for replacement. A JEV shall be prepared to take up the
cancellation. The replacement check shall be reported in the RCI.

Sec. 45. Illustrative Accounting Entries for Cancelled Checks

a. Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in the
current year
Account Title Account Code Debit Credit
Cash-Modified Disbursement System
(MDS), Regular 10104040 xxx
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled MDS checks

Accounts Payable 20101010 xxx

Cash-Modified Disbursement System
(MDS), Regular 10104040 xxx
To recognize the replacement of stale/voided/spoiled MDS checks.

Cash-Modified Disbursement System

(MDS), Regular 10104040 xxx
Appropriate Account xxxxxxxx xxx
To recognize the cancellation of stale/voided/spoiled MDS checks without
replacement

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 b. Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in the
prior year

Account Title Account Code Debit Credit

Accumulated Surplus/(Deficit) 30101010 xxx
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled MDS checks
Accounts Payable 20101010 xxx
Cash-Modified Disbursement System xxx
(MDS), Regular 10104040
To recognize the replacement of stale/voided/spoiled MDS checks
Accumulated Surplus/(Deficit) 30101010 xxx
Appropriate Account xxxxxxxx xxx
To recognize the cancellation of stale/voided/spoiled MDS checks without
replacement

c. Cancellation and Replacement of Stale/Voided/Spoiled commercial check issued in

the current and prior year

Account Title Account Code Debit Credit

Cash in Bank-Local Currency, Current xxx
Account 10102020
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled commercial checks
Accounts Payable 20101010 xxx
Cash in Bank-Local Currency, Current xxx
Account 10102020
To recognize the replacement of stale/voided/spoiled commercial checks

Accumulated Surplus/(Deficit) 30101010 xxx

Appropriate Account xxxxxxxx xxx
To recognize the cancellation of stale/voided/spoiled commercial checks
without replacement.

Sec. 46. Accounting for Disallowances. Disallowances shall be taken up in the books
of accounts only when they become final and executory. The Accountant shall prepare the JEV to
take up the Receivable-Disallowances/Charges and credit the appropriate account for the current
year or Accumulated Surplus/(Deficit) account if pertaining to expenses of previous years.

Cash settlement of disallowances shall be acknowledged through the issue of an official

receipt and reported by the Cashier in the RCD.

Sec. 47. Illustrative Accounting Entries for Disallowances

a. Recording of disallowances for current year’s transaction

Assume that the entity incurred overpayment of Office Supplies:

Amount paid P 100,000

Should be 90,000
Difference P 10,000

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 Account Title Account Code Debit Credit
Receivables-Disallowances/Charges 10305010 P10,000
Office Supplies Expense 50203010 P10,000
To recognize the overpayment of purchased office supplies directly issued to
end-user
Cash-Collecting Officers 10101010 P10,000
Receivables-Disallowances/Charges 10305010 P10,000
To recognize the settlement of disallowance
Cash-Treasury/Agency Deposit, Regular 10104010 P10,000
Cash-Collecting Officers 10101010 P10,000
To recognize the deposit of collection

b. Recording of disallowance for prior year’s transaction

Account Title Account Code Debit Credit

Receivables-Disallowances/Charges 10305010 P 10,000
Accumulated Surplus/(Deficit) 30101010 P 10,000
To recognize the overpayment of office supplies purchased during the prior year
Cash-Collecting Officers 10101010 P 10,000
Receivables-Disallowances/Charges 10305010 P 10,000
To recognize the settlement of disallowance

Cash-Treasury/Agency Deposit, Regular 10104010 P 10

Cash-Collecting Officers 10101010 P 10
To recognize the deposit of collection

Sec. 48. Accounting for Overpayments. Sometimes overpayments or even double

payment of expenditures do happen in agencies. These could be avoided with the institution of
proper controls but some could not be avoided because of built-in procedures. One example is the
payment of payrolls. Payrolls are prepared in advance and some agencies pay their employees
through the banking system. All these are done before reports of attendance are submitted,
making it impossible to know the exact amount to be paid in case there are absences without pay
during the pay periods. In case of overpayments, refunds shall be demanded of the employees
concerned.

Sec. 49. Illustrative Accounting Entries for Overpayments

a. Overpayment taken up as receivable

Account Title Account Code Debit Credit

Due from Officers and Employees 10305020 xxx
Salaries and Wages-Regular 50101010 xxx
To recognize overpayment of salaries and wages (When overpayment is
ascertained)

Cash-Collecting Officers 10101010 xxx

Due from Officers and Employees 10305020 xxx
To recognize receipt of refund
Cash-Treasury/Agency Deposit, Regular 10104010 xxx
Cash-Collecting Officers 10101010 xxx
To recognize the deposit of collection

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 b. Refund of overpayment not taken up as receivable
Account Title Account Code Debit Credit
Cash-Collecting Officers 10101010 xxx
Salaries and Wages-Regular 50101010 xxx
To recognize receipt of refund of Salaries and Wages-Regular during the
current year
Cash-Treasury/Agency Deposit, Regular 10104010 xxx
Cash-Collecting Officers 10101010 xxx
To recognize the deposit of collection

Cash-Collecting Officers 10101010 xxx

Accumulated Surplus/(Deficit) 30101010 xxx
To recognize receipt of refund of overpayment in the ensuing year

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx
To recognize the deposit of collection

Sec. 50. Disbursements through List of Due and Demandable Accounts Payable-
Advice to Debit Account. The use of LDDAP-ADA as a mode of settlement of accounts payable
due the creditors/payees of all NGAs and their OUs was prescribed under DBM Circular Letter
No. 2013-16 dated December 23, 2013 which implemented the ExMDPS, amended by DBM
Circular Letter Nos. 2013-16A and 2013-16B dated February 6, 2014 and February 25, 2014,
respectively. The following are excluded from the implementation of ExMDPS:

a. Payment of Terminal Leave and Retirement Gratuity (TL/RG) benefits which is

governed by Republic Act No. 10154 as implemented by CSC Resolution
No.1300237 and Budget Circular No. 2013-1;

b. Remittance of social insurance premium contributions to government corporations,

such as GSIS, PHILHEALTH, and HDMF;

c. Payment of Accounts Payable to utility companies, such as: supplier of petroleum, oil
and lubricants, water, illumination and power services, telephone, internet and other
communication services; and

d. Other payables which cannot be conveniently nor practicably paid using the ADA.

Sec. 51. Signatories in the List of Due and Demandable Accounts Payable-Advice
to Debit Account. The LDDAP (Box I) shall be certified correct by the Chief Accountant/Head
of Accounting Division/Unit and approved by the Head of Agency/Authorized Official. The
ADA (Box II) shall be signed by the Cash/Treasury Unit Authorized Signatory and countersigned
by the Head of Agency/Authorized Signatory. The signatories in Box II shall be bonded.

Sec. 52. Accounting Books, Records, Forms and Reports to be Prepared and
Maintained. All LDDAP-ADA prepared/issued during the day shall be recorded chronologically
in the CkADADRec (Appendix 34) maintained by the Cash/Treasury Unit. The dates the LDDAP-
ADAs were actually delivered to the MDS-GSB shall be indicated in the appropriate column
provided for in the CkADADRec. The RADAI shall be prepared by the Cash/Treasury Unit daily.
All approved LDDAP-ADA including those not yet delivered to the MDS-GSB shall be included
in the RADAI. The RADAI together with the original copies of the DVs and other SDs shall be
submitted to the Accounting Division/Unit for the preparation of JEV.

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 Sec. 53. Monitoring of Receipt of Validated LDDAP-ADA and Official Receipt or
other Acceptable Evidence of Receipt of Payment. The Cash/Treasury Unit shall monitor the
receipt of the validated LDDAP-ADA from the MDS-GSB and the issue of Official Receipt (OR)
or other acceptable evidence of receipt of payments by the creditors/payees.

Sec. 54. Recording of LDDAP-ADA Issued/Invalidated. The Head of the Accounting

Division/Unit shall prepare a JEV and credit the “Cash-Modified Disbursement System (MDS),
Regular” account upon receipt from the Cash/Treasury Unit of the RADAI supported with DV
and SDs. The JEV shall be recorded in the ADA Disbursements Journal (ADADJ)
(Appendix 52).

LLDAP-ADA may be invalidated due to any inconsistency of information (i.e., bank

branch, account name/number) between the bank records and LDDAP-ADA or errors stated in
item 8.0 of DBM Circular Letter 2013-16 dated December 23, 2014. An invalidated ADA shall be
reported as follows:

a. New LDDAP-ADA may be issued for the replacement of invalidated LDDAP-ADA,

upon submission of the validated LDDAP-ADA indicating non-payment to
creditors/payees due to any inconsistency of information (i.e., bank branch, account
name/number) to the Accounting Division/Unit by the Cash/Treasury Unit. A
certified copy of the previously paid DVs shall be attached to the request for
replacement.

b. A JEV shall be prepared to take up the cancellation of the invalidated LDDAP-ADA.

The replacement LDDAP-ADA shall be reported in the RADAI.

Sec. 55. Documentary Requirements. The documentary requirements for common

government transactions depending on the nature of expenses shall be complied with as
prescribed under COA Circular No. 2012-001 dated June 14, 2012, amended by COA Circular
No. 2013-001 dated January 10, 2013.

Sec. 56. Procedures for Disbursements through LDDAP-ADA

Area of Seq.
Activity
Responsibility No.
Preparation of LDDAP-ADA
Accounting
Division/Unit
Bookkeeper 1 Prepares in 5 copies the LDDAP-ADA for approved DVs
pertaining to the current and prior years’ accounts payable.

Note 1 – Prepare separate LDDAP-ADA for creditors/ payees

with Current/Savings/ATM Account maintained with
other banks outside the MDS-GSB of the NGAs and
OUs (receiving NCAs directly from DBM).

Example: The MDS-GSB of the NGAs and OUs

(receiving NCAs directly from DBM) is LBP, but some
of the creditors are maintaining accounts with DBP,
PVB and private banks. One LDDAP-ADA shall be
prepared for creditors with LBP accounts, while
separate LDDAP-ADA shall be prepared for those with
accounts outside LBP.

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 Area of Seq.
Activity
Responsibility No.
Note 2 – The numbering structure for LDDAP-ADA shall be as
follows:

01101101 - 10 - 001 - 2014

Year

Serial Number
(One Series per year)

Month
Funding Source Code

Chief 2 Reviews and signs in Box I “Certified Correct” portion of

Accountant/ LDDAP-ADA and forwards the documents to the
Head of Receiving/Releasing Staff.
Accounting
Division/Unit

Receiving/ 3 Records in the logbook the release of Copies 1-5 of LDDAP-

Releasing Staff ADA, Copies 1-4 of DVs and SDs to the Head of Agency or
Authorized Representative for approval of the LDDAP-ADA.

Approval of the “LDDAP” Portion

Office of the
Agency Head/
Authorized
Representative
Receiving/ 4 Receives Copies 1-5 of LDDAP-ADA, Copies 1-4 of DVs and
Releasing Staff SDs and records in the logbook the date of receipt thereof.

Head of the 5 Reviews LDDAP-ADA and signs in Box I “Approved” portion of

Agency/ the LLDAP. Forwards Copies 1-5 of LDDAP-ADA, Copies 1-4
Authorized of DVs, and SDs.
Representative/
Approving
Officer

Receiving/ 6 Records in logbook the release of Copies 1-5 of LDDAP-ADA,

Releasing Staff Copies 1-4 of DVs and all SDs and forwards the documents to the
Cash/Treasury Unit.

Approval of “ADA” Portion

Cash/Treasury Unit
Receiving/ 7 Receives Copies 1-5 of approved LDDAP-ADA, Copies 1-4 of
Releasing Staff DVs, and SDs. Records in the logbook the date of receipt of
LDDAP-ADA, covering DV numbers, payees, particulars and
amounts.

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 Area of Seq.
Activity
Responsibility No.

Designated Staff 8 Checks completeness of signatories on the LDDAP-ADA and in

the DVs and amount.

9 Retrieves from file the CkADADRec maintained per bank account

and records the date and number, name of payee, nature of
payment and amount of the covering DVs, date and number of
LDDAP-ADA, and indicates the new balance of the NCA/bank
account. Forwards Copies 1-5 of LDDAP-ADA, Copies 1-4 of
DVs and SDs to Cashier for review and signature.

Cashier 10 Verifies completeness of signature on the LDDAP-ADA and

DVs. Reviews the amount of the LDDAP-ADA against the total
amount of the DVs and SDs. Signs the “ADA” portion.

Receiving/ 11 Records in the logbook the release of Copies 1-5 of LDDAP-

Releasing Staff ADA, Copies 1-4 of DVs and SDs.

Office of the Agency

Head/Authorized
Representative
Receiving/ 12 Records in the logbook the receipt of Copies 1-5 of LDDAP-
Releasing Staff ADA, Copies 1-4 of DV and SDs.

Head of Agency/ 13 Countersigns the “ADA” portion. Forwards Copies 1-5 of

Authorized LDDAP-ADA, Copies 1-4 of DVs, and SDs to the
Representative/ Receiving/Releasing Staff for return to the Cashier.
Approving
Officer

Receiving/ 14 Records in the logbook the release of Copies 1-5 of approved

Releasing Staff LDDAP-ADA, Copies 1-4 of DVs and SDs.

Cash/Treasury Unit
Designated Staff 15 Receives Copies 1-5 of LDDAP-ADA, Copies 1-4 of DV, and
SDs. Retrieves the CkADADRec and checks completeness of
documents. Files documents temporarily for the preparation of the
Summary of LDDAP-ADAs Issued and Invalidated ADA Entries
(SLIIAE) (Appendix 53).

16 Stamps “PAID” on all LDDAP-ADA, DVs, and SDs.

Preparation of Summary of LDDAP-ADAs Issued and

Invalidated ADA Entries
Cash/Treasury Unit
Designated Staff 17 Retrieves Copies 1-5 of all LDDAP-ADA for delivery to the
MDS-GSB together with Copies 1-4 of DV and SDs and prepares
the SLIIAE in four copies. Assigns control number in the
SLIIAE. Records in the logbook the SLIIAE number and date,
covering LDDAP-ADA number, date and amount and total
amount of the SLIIAE and forwards the document to the
Cashier/Head of Cash/ Treasury Unit.

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 Area of Seq.
Activity
Responsibility No.

Cahier/Head of 18 Verifies completeness of signature on the LDDAP-ADA. Checks

Cash Treasury the correctness of the amounts. Signs the “Certified Correct by”
Unit portion of the SLIIAE and endorses to the Head of
Agency/Authorized Official. Files temporarily the covering DVs
and SDs.

Receiving/ 19 Records in the logbook the release of Copies 1-4 of SLIIAE and
Releasing Staff copies of the LDDAP-ADA issued to the Head of Agency/
Authorized Official.

Receiving/ 20 Receives Copies 1-4 of SLIIAE and copies of LDDAP-ADA

Releasing Staff issued and records in the logbook the date of receipt.

Head of Agency/ 21 Signs the “Approved by” portion of the SLIIAE. Forwards Copies
Authorized 1-4 of SLIIAE and copies of LDDAP-ADA issued to the
Official Receiving/ Releasing Staff for return to the Cashier/Head of
Cash/Treasury Unit.

Cash/Treasury Unit
Receiving/ 22 Receives Copies 1-4 of SLIIAE and copies of LDDAP-ADA
Releasing Clerk issued. Records in the logbook the date of receipt and forwards to
the Cashier/Head of Cash/Treasury Unit.

Cashier/Head of 23 Checks completeness of the SLIIAE and LDDAP-ADA and SDs.

Cash/ Treasury Forwards Copies 1-3 of the SLIIAE and Copies 1-4 of the
Unit LDDAP-ADA to the Designated Staff. Files Copy 4 of SLIIAE
and Copy 5 of LDDAP-ADA temporarily.

Note 3 – The MDS-GSB shall retain the original SLIIAE together

with the Copy 1 of LDDAP-ADA issued as well as the
Copy 2 of the SLIIAE and LDDAP-ADA for
submission to the BTr on the same day of receipt of
said document from the agency. This will serve as the
advisory to the BTr on the magnitude of expected
disbursements through LDDAP-ADA and
replenishment of the MDS Seed Fund. The remaining
copies of the SLIIAE and LDDAP-ADA shall be
distributed as follows:

Copy 3 of SLIIAE – Receiving Copy

and Copy 4 of
LDDAP-ADA
Copy 4 of SLIIAE – COA (attached to the
RADAI)
Copy 5 of – To the designated staff of
LDDAP-ADA Cash/Treasury Unit for the
preparation of RADAI.

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 Area of Seq.
Activity
Responsibility No.
Designated Staff 24 Releases Copies 1-2 of SLIIAE and Copies 1-3 of LDDAP-ADA
immediately to MDS-GSB which shall pay the creditors/payees
listed in the LDDAP-ADA not later than 48 hours but not earlier
than 24 hours upon receipt of the said document from the NGA
and OUs (receiving NCAs directly from DBM).

Note 4 – Copy 3 of SLIIAE and Copy 4 of LDDAP-ADA which

shall be the copy of the Cash/Treasury Unit shall be
stamped “Received” by the MDS-GSB upon receipt of
Copies 1-2 of SLIIAE and Copies 1-3 of the LDDAP-
ADA. Copy 5 of LDDAP-ADA shall be given to the
Designated Staff of the Cash/Treasury Unit for the
preparation of the RADAI.

Designated Staff 25 Furnishes creditors/payees with copy of the LDDAP-ADA or

informs them of the LDDAP-ADA number for the purpose of
updating them on the status of their claims and for the issue of
provisional receipt once they are included in the LDDAP-ADA,
subject to replacement of provisional receipt with an OR other
acceptable evidence of receipt of payment of disbursements
consistent with COA Circular No. 2004-006 dated September 9,
2004, immediately after actual receipt of payment.

Note 5 – Copy 4 of the DV shall be given to the payee upon issue

of OR.

Daily
Designated Staff 26 Obtains validated Copy 3 of the LDDAP-ADA and submits to the
Cashier.

Cashier/ 27 Receives the validated Copy 3 of LDDAP-ADA and reproduces

Designated Staff three copies thereof to be attached to Copies 2-4 of the DVs.
Retrieves Copies 1-4 of DVs and SDs and attaches the validated
Copy 3 of the LDDAP-ADA to the original DV and SDs and the
photocopies of the validated Copy 3 of LDDAP-ADA to Copies
2-4 of the DVs. Files the documents temporarily.

28 Monitors return and completeness of submission of the duly

validated LDDAP-ADA from the MDS-GSB and receipt of OR
other acceptable evidence of receipt of payment.

Preparation of Report of Advice to Debit Account Issued

Daily
Cash/Treasury Unit
Designated Staff 29 Retrieves Copies 3-4 of SLIIAE, copies of LDDAP-ADA and
Copies 1-4 of DVs and SDs and prepares the RADAI in four
copies.

30 Initials in “Certification” portion of the RADAI.

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 Area of Seq.
Activity
Responsibility No.
Disbursing 31 Reviews RADAI and signs in “Certification” portion.
Officer/Cashier/
Head of
Cash/Treasury
Unit

Designated Staff 32 Distributes the RADAI as follows:

Copies 1-3 – Accounting Division/Unit for submission to
the following:

Copy 1 – COA Auditor (with Copy 3 of

LDDAP-ADA, originals of DVs
and SDs and Copy 4 of SLIIAE)
Copy 2 – Accounting Division/Unit file
Copy 3 – Budget Division/Unit
Copy 4 – Cash/Treasury Unit file copy (with Copy 3
of SLIIAE and Copy 4 of LDDAP-ADA,
Copy 2 of DV and SDs)

Designated 33 Furnishes assigned Unit/Office with copy of RADAI for posting in

Personnel the agency’s website.

Preparation of JEV
Accounting Daily
Division/Unit
Receiving/ 34 Receives Copies 1-3 of RADAI supported with Copy 4 of
Releasing Staff SLIIAE, copies of the validated LDDAP-ADA and Copy 1 and 3
of DVs and SDs.

Designated Staff 35 Examines DVs and copies of validated LDDAP-ADA against

RADAI. Verifies if the serial number of all the LDDAP-ADA
issued are all accounted for.

36 Prepares JEV in two copies and signs in the “Prepared” portion.

Head of the 37 Reviews and signs the JEV. Forwards Copies 1-2 of JEV and
Accounting Copies 1-3 of RADAI supported with Copy 4 of SLIIAE, copies
Division/Unit/ of LDDAP-ADA, Copy 1 and 3 of DVs and SDs to the
Authorized bookkeeper for recording in the ADADJ.
Signatory

Recording in ADADJ
Designated Staff 38 Receives Copies 1-2 of JEV, Copies 1-3 of RADAI, Copy 4 of
SLIIAE, copies of LDDAP-ADA, Copies 1 and 3 of DVs and
SDs. Records the JEV in the ADADJ.
39 Records in the logbook submission of documents to COA and
Budget Unit. Retains Copy 2 of JEV and RADAI, copy of
LDDAP-ADA, Copy 3 of DVs and SDSs for file.

Note 6 – The distribution shall be as follows:

To COA – Copy 1 of JEV and RADAI, Copy 4 of
SLIIAE, validated Copy 3 of LDDAP-

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 Area of Seq.
Activity
Responsibility No.
ADA and Copy 1 of DV and SDs
To Budget Unit – Copy 3 of RADAI for posting of
payments in Box C of ORS

Sec. 57. Illustrative Accounting Entries for Disbursements through LDDAP-ADA

Particulars Account Code Debit Credit
1. Upon set up of payables to Suppliers and Contractors
Buildings 10604010 P 80,000
Accounts Payable 20101010 P 80,000
To set up payables to contractors and suppliers based on approved DVs

2. Payment through ADA

Accounts Payable 20101010 P 80,000
Cash-Modified Disbursement System
(MDS), Regular 10104040 P 80,000
To recognize payment of payables to suppliers or contractors through ADA

3. Payment of salaries through ATM

a. Salaries and Wages 50101010 P 35,000
PERA 50102010 15,000
Due to BIR 20201010 P 5,000
Due to GSIS 20201020 3,200
Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 600
Other Payables 29999990 100
Due to Officers and Employees 20101020 40,600
To recognize expenses for salaries and wages to be paid through ATM

b. Cash in Bank-Local Currency, Current

Account 10102020 P 40,600
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 40,600
To recognize deposit for salaries and wages to be paid through ATM

c. Due to Officers and Employees 20101020 P 40,600

Cash in Bank-Local Currency,
Current Account 10102020 P 40,600
To recognize payment of salaries and wages through ATM

4. Granting of Payroll Fund

Assumptions:
Salaries and Wages P 35,000
PERA 15,000
Total P 50,000
Less: Salary Deductions
Withholding Tax 5,000
Life and Retirement
Premiums 3,000
Pag-IBIG premiums 500
PhilHealth premiums 600
GSIS Salary loan 200

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 Particulars Account Code Debit Credit
Employees'
Association 100
Net Amount P 40,600

Advances for Payroll 19901020 P 40,600

Cash-Modified Disbursement System
(MDS), Regular 10104040 P 40,600
To recognize granting of cash advance for payroll based on duly approved
payroll through ADA

5. Payment for delivery of supplies and materials for consumption

Office Supplies Inventory 10404010 P 2,500
Cash-Modified Disbursement System
(MDS), Regular 10104040 P 2,500
To recognize payment for the delivery of supplies and materials based on
Delivery Receipt No. 12451

6. Payment of rent
Prepaid Rent 19902020 P 1,300
Cash-Modified Disbursement System
(MDS), Regular 10104040 P 1,300
To recognize payment of one year rent of photocopying machine (July, 2015–
June, 2016)
7. Advances to Contractors
Advances to Contractors 19902010 P 8,000
Cash-Modified Disbursement System
(MDS), Regular 10104040 P 8,000
To recognize 15% mobilization fees to contractors to be recouped from
progress billings

8. Payment of Accounts Payable

Gross P 40,000
Less: Withholding Tax
(VAT) 3,600
Net P 36,400

Accounts Payable 20101010 P40,000

Due to BIR 20201010 P 3,600
Cash-Modified Disbursement System
(MDS), Regular 10104040 36,400
To recognize payment of payables based on duly approved DV and SDs

Sec. 58. Disbursements Through electronic Modified Disbursement System as part

of the Modified Disbursement Scheme. As part of the implementation of the Treasury Single
Account (TSA) system for government disbursement, the electronic Modified Disbursement
System (eMDS) has been adopted as one of the modes of disbursement under Joint Administrative
Order (JAO) No. 2015-1 dated March 12, 2015 of the DBM and DOF. This is to facilitate an
efficient and prompt reconciliation of spending agencies’ disbursements vis-à-vis the accounts of
the BTr maintained at the LBP as Authorized Government Servicing Bank (AGSB).

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 This JAO shall apply to all spending agencies, offices and instrumentalities under the
Executive Branch, including SUCs, together with other Executive Offices using LBP as GSB. The
Judicial Branch, the Legislative Branch, Constitutional Offices, and all other Agencies, Offices
and Instrumentalities banking with LBP and therefore maintaining MDS sub-accounts with said
bank are likewise covered by the JAO for NG to have a holistic view of the budgetary
transactions of all spending agencies.

The policy guidelines are as follows:

a. Heads of Departments, Bureaus, Offices and other instrumentalities under the

Executive Branch, maintaining MDS sub-accounts with LBP, including SUCs,
together with other Executive Offices, are enjoined to enroll and subscribe to the
eMDS to perform selected MDS transactions online; and to monitor disbursements
and generate MDS reports under the Government’s MDS;

b. Enrolment in the eMDS shall be free of charge; and

c. All other spending agencies, offices, and instrumentalities of government maintaining

MDS sub-accounts with GSBs other than LBP shall continue to observe the current
procedure of the MDS System, unless they voluntarily transfer their accounts with
LBP to avail of the latter’s eMDS facility or until after enrolment and subscription to
the eMDS upon amendment or repeal of Memorandum Order Nos. 276 (s. 1990)
and/or (s. 1994).

Sec. 59. Disbursements through Cashless Purchase Card System. The CPC System
was prescribed as an alternative mode of payment for goods and services under Joint
Memorandum Circular (JMC) No. 2014-1 dated May 15, 2014 of the Department of National
Defense (DND), Armed Forces of the Philippines (AFP) and the DBM.

The general guidelines on the implementation of the CPC System are as follows:

a. The CPC System to be implemented by participating agencies is a mode to procure

specific eligible items through the use of an electronic card. The CPC functions
similarly to a credit card and shall only be used for pre-identified items within body
limits mutually agreed upon by members of the Steering Committee. It shall also be
used only with specific merchant groups already enumerated under agreement with
the credit card company.

b. Only individuals recommended by the Program Administrator and authorized by the

Steering Committee shall be allowed to use the CPC and pre-identified items within
monthly limits set at levels mutually agreed upon by members of the Steering
Committee. The CPC shall likewise be used only with specific merchant groups
already enumerated under agreement with the credit card company.

c. Only individuals recommended by the Program Administrator and authorized by the

Steering Committee shall be allowed to use the CPC at predetermined monthly
purchase limits. Authorized individuals shall be permanent employees of the
participating agencies and shall, as much as possible be involved in the procurement
of goods and services of their unit/office.

1. Individual credit limits which have been approved by the Steering Committee
may only be increased and/or amended by the Steering Committee.

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 2. Approvals or increased individual credit limits as well as additional personnel of
participating agencies to be entitled to the CPC shall only be granted after three
(3) months pilot testing of implementation of the CPCS.

3. In the event the participating agencies determine that additional personnel should
be entitled to the CPC or in case its existing cardholders need to be replaced, the
Program Administrator shall inform the Steering Committee in the writing about
the changes proposed. The Program Administrator must support these changes
with a written explanation on why the changes are being sought.

d. Chief of Offices of the Participating Agencies who approved CPC are jointly
accountable with their Special Disbursing Officers.

e. The CPC System shall not, in any way, supplant, replace or revise the procurement
policies and procedures prescribed under RA No. 9184 otherwise known as the
Procurement Law.

f. The total amount authorized to be covered by the CPC shall form part of the cash
advance levels of the participating agencies. The CPC shall not be used nor intended
to allow or justify the increase in cash advance levels for the participating agencies.

g. The CPC shall initially be used for purchase of small value non-common use items
which are not available with the Procurement Service.

h. The cost of purchasing unauthorized items using the CPC shall be for the personal
account of the individual who undertook the transaction. This is without prejudice to
the suspension of the cardholder’s privilege to use the issued CPC and other penalties
which the participating agencies may impose.

i. In case the participating agencies find specific items which it disputes as having been
procured (based on the receipts the individual CPC holder has), they shall
immediately inform CCC of this discrepancy.

j. The participating agencies shall ensure the timely payment of the CPC billing
received from the CCC. In the event that delays in payment of the CPC billings
occur, any additional charges such as late payment charges/penalties shall be charged
against the personal account of the employee directly responsible for the cause of
such delays. In no case shall the NCA issued be used to settle late payment charges.

k. The existing disbursement policies and procedures on the use of NCA and the
Common Fund System shall continue to apply where the CPC System is concerned.

l. Payment to the CCC for legitimate purchases made out of the CPC shall be consistent
with the existing MDS disbursement procedures pursuant to DMB Circular Letter No.
2013-16.

The specific guidelines on the implementation of the CPC System are provided under
Item 5.0 of DND-AFP-DBM JMC No. 2014-1 dated May 15, 2014, are as follows:

a. Once the allotment is made available to the participating agencies, the latter shall
obligate an amount under supplies, materials and other services corresponding to the
amount allocated for the CPC system.

b. The CPC holder shall be entitled to purchase goods from accredited merchants once
the obligation for the CPC has been made.

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 c. The CPC holder shall secure the charge slips/receipts issued by the accredited
merchant and file the same for the purposes of submission to the agency accounting
units. These documents shall also be used for inspection of actual goods purchased
and payments to the CCC.

d. Inspection and acceptance of the procured items shall comply with the existing
procedures adopted by the agency for the purpose.

e. The accounting offices/units shall ensure that procured items are within the items
enumerated in Annex A of the above-mentioned JMC and consistent with the
limitations under Annex B of the same JMC.

f. Upon receipt of the CCC billing statement, the agency accounting units shall compare
the totals of the charge slips against the amounts reflected in the billing statement and
confirm the correctness of the same.

g. The Finance Service Unit of the agency concerned shall ensure that payments are
made on or before the dates specified in the CCC billing statement.

h. The cost of items being disputed shall likewise be included in the payment to be made.
Adjustments in payments, if required, shall be made in the subsequent billing cycle.

i. In the event the CPC is lost or stolen the cardholder must immediately notify the
Program Administrator. He must likewise be responsible in reporting to the CCC via
phone or electronic modes, the loss of the card to prevent unauthorized utilization of
the same.

1. The privilege of the CPC holder to procure goods through a CPC shall temporarily
be suspended in case his card is stolen or lost.

2. The Program Administrator shall determine whether the CPC holder was negligent
and/or culpable in the loss of his CPC. He shall recommend remedial steps in case
of notes procedural gaps; permanent suspension of the privilege or restoration of
the same. In all instances, the Program Administrator shall inform the Steering
Committee on the measures taken.

3. The CPC person shall be held accountable in terms of payment for the purchases
made against the card during the period it was lost or stolen.

Sec. 60. Disbursements through Tax Remittance Advice. The Tax Remittance
Advice (TRA) refers to a serially-numbered document prescribed by the DBM that should be used
by the NGAs in the remittance of withheld taxes on funds coming from DBM. With the inclusion
of all NGAs among the taxpayers who are mandated to use the Electronic Filing and Payment
System (eFPS) under the Bureau of Internal Revenue Regulations No. 1-2013 dated
January 23, 2013, the TRA is accomplished on-line which is called the Electronic TRA (eTRA).
The eTRA is certified correct by the Chief Accountant/Head of Accounting Division/Unit and
approved by the Head of Agency/Authorized Official, and used to record the remittance of taxes
withheld to the BIR. The same document shall be the basis for the BIR and the BTr to draw a JEV
to record the tax collection and deposit in their respective books of accounts. The JEV shall be
recorded in the GJ.

The eTRA shall be supported with the Summary of Taxes Withheld (STW) certified by
the Chief Accountant. The STW is the document which summarizes the type and amount of taxes
withheld. The Accounting Division/Unit shall maintain SL to monitor remittances of taxes
withheld from individual employees, suppliers and contractors.

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 Sec. 61. Procedures for Disbursements through TRA

Area of Seq.
Activity
Responsibility No.
Accounting Division/Unit
Chief Accountant/ 1 Complies with the registration requirements of the BIR as
Head of Accounting withholding agent pursuant to Sec. 26 of the National
Division/Unit/ Internal Revenue Code.
Bookkeeper

Cash/Treasury Unit
Disbursing Officer/ 2 Pays employees/suppliers/contractor for services rendered/
Cashier goods delivered net of withholding taxes.

Note 1 – Refer to Sec.13 for the procedures for disbursement by

checks and Sec. 19 for the procedures on the
disbursements through Payroll Fund.

Accounting Division/Unit
Bookkeeper 3 Prepares STW which will serve as basis for the remittance to
the BIR.

Note 2 – STW is prescribed in Annex A of DOF-DBM-COA

Joint Circular No. 1-2000 dated January 3, 2000.

4 Forwards the STW to the Chief Accountant for signature.

Chief 5 Reviews the STW and prepares the TRA and forwards to the
Accountant/Head of Agency Head for approval.
Accounting
Division/Unit

Office of the Head of

Agency/Authorized
Official
Receiving/Releasing 6 Records in the logbook the receipt of the STW. Forwards
Clerk the same to the Head of Agency/Authorized Official for
approval.

Head of Agency/ 7 Reviews the STW and approves.

Authorized Official

Receiving/Releasing 8 Upon receipt from the Head of Agency/Authorized Official

Clerk of the approved STW, forwards the same to the designated
personnel of Accounting Division/Unit.

Accounting Division/Unit
Designated Personnel 9 Receives from the Receiving/Releasing Clerk the STW.
Based on the STW, files tax returns and submits through the
eFPS, then proceed to payment menu, selecting TRA as type
of payment and fills out the amount intended for TRA.

10 Prints the validated eTRA and the required tax returns for all
taxes withheld for compensation, expanded, final and
government money payments (BIR Form 1601-C, 1601-E,

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 Area of Seq.
Activity
Responsibility No.
1601-F and 1600, respectively) and forwards the documents
with the STW to the Chief Accountant/Head of Accounting
Division/Unit.

Chief Accountant/ 11 Reviews the eTRA and signs on the “Certified by” portion.
Head of Accounting Forwards the eTRA, STW and required tax returns to the
Division/Unit Head of Agency/Authorized Official for approval.

Office of the Head of

Agency/Authorized
Official
Receiving/Releasing 12 Records in the logbook the receipt of the eTRA, STW and
Clerk required tax returns. Forwards the same to the Head of
Agency/Authorized Official.

Head of Agency/ 13 Reviews and approves the eTRA.

Authorized Official

Accounting Division/Unit
Receiving/Releasing 14 Upon receipt from the Head of Agency /Authorized Official
Clerk of the approved eTRA, STW and required tax returns,
forwards the same to the designated personnel of
Accounting Division/Unit for the preparation of the JEV.

Designated Personnel 15 Prepares the JEV and records in the GJ the constructive
receipt of NCA for TRA and remittance of all taxes withheld
thru TRA.

Designated Personnel 16 Reproduces four copies of eTRA, STW and required tax
returns and submits three copies to the concerned BIR
Office. Files the received copy.

Note 3 – Under DOF-DBM Joint Circular No. 1-2000A

dated July 31, 2001 which prescribes the
procedure for the remittance of all taxes withheld
by NGAs to the BIR, an NGA shall file before
the BIR a TRA supported by withholding tax
returns on or before the 10th day of the following
month after the said taxes had been withheld.

Note 4 – For the succeeding activities, refer to Chapter on

Financial Reporting for the preparation and
submission of Trial Balances, Financial
Statements and Other Reports.

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 Sec. 62. Illustrative Accounting Entries for Remittance of Taxes Withheld
through TRA

Particulars Account Code Debit Credit

a. Agency Books
1. Constructive Receipt of NCA for TRA
Cash-Tax Remittance Advice 10104070 P 5,000
Subsidy from National Government 40301010 P 5,000
To recognize constructive receipt of NCA for TRA

2. Remittance of taxes withheld through TRA

Due to BIR 20201010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
To recognize remittance of taxes withheld through TRA

b. BIR Books
1. Constructive Receipt of Tax Revenue through TRA from the NGAs
Cash-Tax Remittance Advice 10104070 P 5,000
Income Tax 40101010 P 5,000
To recognize constructive receipt of tax revenue based on the TRA received
from the agency

c. BTr Books
1. Constructive Utilization of NCA for TRA by the remitting NGAs
Subsidy to NGAs 50214010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
To recognize remittance of taxes withheld by the agency based on the TRA
Received

Sec. 63. Disbursement for Inter-Agency Transferred Funds (IATF). The following
are the accounting policies for the transfer of funds:

a. A Memorandum of Agreement (MOA) shall be entered into by the SA and the IA for
the undertaking by the latter of the project of the former. The MOA shall provide for
the requirements for project implementation and reporting.

b. The fund to be transferred or sub-allotted to the IA shall be a) in an amount sufficient

for three months operation subject to replenishment upon submission of the reports of
disbursements by the IA, or b) the total project cost, as may be determined by the
Heads of the two agencies in either case.

c. The check shall be issued in the name of the IA for deposit to its trust account in its
authorized government depository bank. The IA shall issue its official receipt in
acknowledgment.

d. Depending on the MOA, the fund transfers may be treated as a) If the MOA provides
a condition that the fund shall be spent as specified and any excess shall be returned
to the SA, the IA shall recognize the receipt of the fund as asset at its fair value with a
corresponding liability, while the SA shall recognize a receivable corresponding to
the fund transfer; or b) If the MOA provides stipulations or no condition, the IA
shall recognize the receipt of the fund as asset at its fair value with a corresponding
revenue, while the SA shall recognize an expense corresponding to the fund transfer.

110
 e. A separate subsidiary record for each account shall be maintained by the IA whether
or not a separate bank account is opened.

f. Within ten (10) days after the end of each month/end of the agreed period for the
Project, the IA shall submit the RCI and the RCDisb to report the utilization of the
funds. Only actual project expenses shall be reported. The reports shall be approved
by the Head of the IA.

g. The IA shall return to the SA any unused balance upon completion of the project, if
stipulated in the MOA.

h. The SA shall draw a JEV to take up the reports. The amount to take up the
liquidation in the RCI shall be net of the cash advances granted by the IA to its
accountable officers.

i. The IA Auditor shall audit the disbursements out of the trust accounts in accordance
with existing COA Regulations

j. The Chief Accountant/Head of the Accounting Division/Unit of the IA shall, on the

basis of the Notice of Finality of Decision (NFD), record in the books of accounts any
audit disallowance as receivable.

k. When the IA is a Bureau/Regional Office of the SA, the procedures for centrally
managed projects shall be followed in accordance with entries herein provided.

l. The illustrative accounting entries are presented in Annex E.

Sec. 64. Disbursements by Foreign-based Government Agencies. CDC is an

authorization issued by the DBM to DFA and other agencies with foreign posts to utilize their
collections retained by their Foreign Service Posts (FSPs) to cover operating requirements, but not
to exceed the released allotment to the said post. (National Budget Circular No. 535 dated
December 29, 2011). The following are the accounting policies regarding disbursements by
Foreign-based Government Agencies (FBGAs):

a. Based on the proposed budget of FSP/Foreign Attaché, a Working Fund shall be

established to cover payment of PS and MOOE. The Finance Officer shall be
required to maintain CBReg and CDReg to monitor and control the Working Fund.

b. All disbursements from the Working Fund shall be covered by duly approved
DV/Payroll with the required SDs. At the end of the month, the Finance Officer of
FSPs/Foreign Attachés shall prepare and submit RCDisb together with the SDs to the
Central Office concerned for preparation of JEV to record the liquidation made by the
accountable officer. The JEV shall be recorded in the CkDJ and CDJ based on the
CBReg and CDReg, respectively.

Sec. 65. Illustrative Accounting Entries for Disbursements of FBGAs. The

illustrative accounting entries for disbursements of FGBAs charged to CDC are shown in
Sec. 38 (c), Chapter 5 of this Manual.

Sec. 66. Disbursements through Direct Payment Method. This type of disbursement
should be covered by an NCAA. This mode of disbursement is made through the JEV issued by
the BTr to the availing/implementing agency to record payment of goods and services made
directly by the lending institution to the supplier or contractor. The JEV shall be recorded in
the GJ.

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 Sec. 67. Procedures for Disbursements through Direct Payment Scheme of Foreign
Loans Availment

Area of Seq.
Activity
Responsibility No.
Recording of Goods/Property/Services Procured abroad
through Direct Payment Method by NGA Concerned
NGA
Accounting Division/Unit
Designated Personnel 1 Receives Inspection and Acceptance Report (IAR) from
Property Officer/Supply Officer/Official Concerned,
shipping documents and certified copy of the approved
billing from supplier/contractor and prepares JEV to
record goods/property in the books of accounts. The cost
shall be based on the certified copy of the duly approved
billing.

Head of Accounting 2 Reviews correctness of the journal entries and signs on

Division/Unit/ “Certified Correct by” portion of the JEV.
Authorized Signatory

Designated Personnel 3 Records the JEV in the GJ.

4 Prepares the Withdrawal Application (WA) from the loan

account to pay for the goods and services and submits to
the head of the agency for approval.

Head of Agency 5 Approves the WA and submits to the foreign lending

institution (FLI)/development partner (DP).

Recording of Foreign Loans Payable in the BTr’s Books

of Accounts
Bureau of the Treasury
Accounting Division/Unit
Designated Personnel 6 Receives the WA/advice of payment or any proof of
disbursement from the FLI/DP and prepares the JEV in
three copies to record the amount paid by the
supplier/contractor/consultant as proceeds from
borrowings.

Head of Accounting 7 Reviews correctness of the journal entries and signs on

Division/Unit/ “Certified Correct by” portion of the JEV. Forwards
Authorized Signatory Copies 1 of JEV and WA/advice of payment or any proof
of disbursement from the FLI/DP to Designated Staff for
recording in the GJ and Copies 2-3 to the NGA concerned
together with the WA/advice of payment or any proof of
disbursement received from the FLI/DP.

Designated Personnel 8 Records the JEV in the GJ.

NGA
Accounting Division/Unit
Designated Personnel 9 Receives from the BTr Copy 2-3 of JEV together with
copy of WA/advice of payment or any proof of

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 Area of Seq.
Activity
Responsibility No.
disbursement from the FLI/DP and records in the logbook.

10 Submits to the DBM Copy 2 of JEV together with copy of

WA/advice of payment or any proof of disbursement, list
of suppliers/contractors/consultants directly paid by the
FLI/DP for the issuance of NCAA.

11 Receives NCAA from the DBM, records in the logbook.

12 Reconciles NCAA with the JEV to record receipt of

goods/property paid by FLI/DP.

13 Prepares JEV to record receipt of NCAA and settlement of

accounts payable.

Head of Accounting 14 Reviews correctness of the journal entries and signs on

Unit/Authorized “Certified Correct by” portion of the JEV.
Signatory

Designated Personnel 15 Records the JEV in the GJ.

Note – For the succeeding activities, refer to the Chapter

on Financial Reporting for the preparation and
submission of Trial Balances, Financial
Statements and Other Reports.

Sec. 68. Illustrative Accounting Entries for Disbursements through Direct Payment
Scheme of Loan Availment

Particulars Account Code Debit Credit

Agency Books

Communication Equipment 10605070 P500,000

Accounts Payable 20101010 P 500,000
To recognize receipt of PPE procured through the direct payment scheme

Accounts Payable 20101010 P 500,000

Subsidy from National Government 40301010 P 500,000
To recognize receipt of NCAA and payment of payables based on the WA/advice of
payment or any proof of disbursement received from the FLI/DP

BTR Books

Subsidy to NGAs 50214010 P 500,000

Loans Payable-Foreign 20102050 P 500,000
To recognize the replenishments made to AGSB negotiated MDS- checks and
payments on account of the NGA

Sec. 69. Financial Statements Presentation. The Financial Statement presentation of

the accounts related to disbursements shall be in accordance with Chapter 19-Financial Reporting
of this ManuaL

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 BUDGETING PROCESS
FOUR PHASES:
1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Budget Accountability

A. BUDGET PREPARATION
 This starts with the Budget Call and ends with the President’s submission of the proposed budget to congress.

DBCC sets Stakeholder

Budget Call
parameters s
Consultatio
n

Executive Technical Agency

Review Budget Budget
Hearings Proposal

Consolidation, Presentation
Validation & to President The
Confirmation & Cabinet President’s
Budget

1. The Budget Call

 At the beginning of the budget preparation year, the Department of Budget and Management (DBM) issues the
National Budget Call to all agencies (including state universities and colleges) and a separate Corporate
Budget Call to all GOCCs and GFIs.
 The budget call contains budget parameters (including macroeconomic and fiscal and agency budget ceilings)
as set beforehand by the Development Budget Coordination Committee (DBCC); and policy guidelines and
procedures in the preparation and submission of agency budget proposals.

114
2. Stakeholder Engagement
 A new feature in budget preparation which seeks to increase citizen participation in the budget process,
departments and agencies are tasked to partner with civil society organizations (CSOs) and other citizen-
stakeholders as they prepare their agency budget proposals.
 This new process, which was piloted in the preparations of the 2012 National Budget, is now being expanded
towards institutionalization.

3. Technical Budget Hearing

 These are conducted after departments and agencies submit their Agency Budget Proposal to the DBM. Here,
agencies defend their proposal budget before a technical panel of DBM, based on performance indicators on
output targets and absorptive capacity. DBM bureaus then review the agency proposals and prepare
recommendations.
4. Executive Review
 The recommendations are presented before an Executive Review Board which is composed of the DBM
Secretary and senior officials.
 Deliberations here entails a careful prioritization of programs and corresponding support, vis-a vis the priority
agenda of the national government.
 Implementation issues are also discussed and resolved.

5. Consolidation, Validation and Confirmation

 DBM then consolidate the recommended agency budgets and recommendations into a National Expenditure
Program and a Budget of Expenditures and Sources of Financing (BESF).
 As part of the consolidating process, the deliberations by the DBCC determine the agency and sectoral
allocation of the approved total expenditure ceiling, in line with the macroeconomic and fiscal program. Heads
of major departments are invited to this meeting.

6. Presentation to President and Cabinet

 The proposed budget is presented by DBM, together with the DBCC, to the President and Cabinet for further
refinements of prioritization. After the President and Cabinet approved the proposed National Expenditure
Plan, the DBM prepares and finalizes the budget documents to be submitted to Congress.

7. The President’s Budget

 The budget preparations phase ends with the submission of the proposed national budget-- the “President’s
Budget”- to Congress.
 The President’s Budget consist of the following documents, which help legislators analyze the contents of the
proposed budget:
 The President’s Budget
 President’s Budget Message (PBM)
-This is the President explains the policy framework and priorities in the budget
 Budget of Expenditures and Sources of Financing (BESF)
-mandated by the Constitution, this contains the macroeconomic assumptions, public sector context (including
overviews of LGU and GOCC financial positions), breakdown of the expenditures and funding sources for fiscal
year and the two previous year.
 National Expenditure Program (NEP)
-this contain the details of spending for each department and agency by program, activity or project and is
submitted in the form of a proposed General Appropriations Act.
 Details of Selected Programs and Projects
-this contains a more detailed disaggregation of key programs, projects and activities in the NEP, especially
those in line with the national government’s development plan.
 Staffing Summary
-this contains a summary of the staffing complement of each department and agency, including number of
positions and amounts allocated for the same.

115
B. BUDGET LEGISLATION
- also called the “Budget Authorization phase”, this starts upon the House speaker’s Receipt of the
President’s Budget and ends with the President’s enactment of the General Appropriations Act (GAA).

President’s House Senate

Budget Deliberations Deliberations
Before: Aug Before: Sept-Nov Before: Oct-Dec
Now: after SONA Now: Aug-Oct Now: Sept-Nov

Enactment of the Ratification &

Enrollment Bicameral
GAA
Before: Jan-Feb Deliberations
Before: March
Now: December Before: Dec-Jan
Now: December
Now: Nov-Dec
- the House of Representative, in plenary, assigns the President’s Budget to the House Appropriations Committee.
The Committee and its Sub-Committee then schedule and conduct hearing on the budgets of the departments and
agencies and scrutinize their respective programs and projects. It then crafts the General Appropriations Bill
(GAB).

- in plenary session, the GAB is sponsored, presented and defended by the Appropriations Committee and Sub-
Committee Chairmen. As in all other laws, the GAB is approved on Second and Third Reading before transmission
to the Senate. (note: In the First Reading, the President’s Budget is assigned to the Appropriations Committee).

1. House Deliberations - As in the House process, the Senate conducts its own committee hearing and plenary
deliberations on the GAB. Budget deliberations in the Senate formally start after the House of Representatives
transmits the GAB. For expediency, however, the Senate Financing Committee and Sub-Committees usually start
hearings on the GAB even House deliberations are ongoing.
- The Committee submits its proposed amendments to the GAB to plenary only after it has been formally
transmitted by the House.

2. Senate Deliberations - As in the House process the senate conducts its own committee hearing and plenary
deliberations on the GAB. Budget deliberations in the Senate formally start after the House of Representatives
transmits the GAB. For expediency, however, the Senate Finance Committee and usually start hearings on the
GAB even as House deliberations are ongoing.
- The Committee Submits its proposed amendments to the GAB to plenary only after it had been formally
transmitted by the House.

3. Bicameral Deliberations - Once both House of Congress have finished their deliberations, they will each
constitute a panel to the Bicameral Conference Committee. This committee will then discuss and harmonize the
conflicting provisions of the House and Senate Versions of the GAB. A Harmonized Version of the GAB is thus
produced.

4. Ratification and Enrollment - The Harmonized or “Bicam” Version is then submitted to both Houses, which
will the vote to ratify the final GAB for submission to the President. Once submitted to the President for his
approval, the GAB is considered enrolled.

5. The Veto Message - The President and DBM then review the GAB and prepare a Veto Message, where budget
items subjected to direct veto or conditional implementation are identified, and where general observations are
made. Under the Constitution, the GAB is the only legislative measure where the President can impose a line-veto
(in all other cases, a law is either approved or vetoed in full).

6. Reenactment - When the GAA is not enacted before fiscal year starts, the previous year’s GAA is
automatically reenacted. This means that agency budgets for programs, activities and projects remain the same.
-Funding for programs or projects that have already been terminated is realigned for other expenditures.
Because reenactments are tedious and prone to abuse.

116
C. BUDGET EXECUTION

117