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COMMISSION ON AUDIT CIRCULAR NO.

90-326 February 22, 1990

TO : All Heads of Departments, Bureaus and Offices, Self-Governing Boards and


Commissions, State Universities and Colleges, Schools and Hospitals,
Government Servicing Banks, Chiefs of Financial and Management Services,
Chief Accountants/Heads of Accounting Units, Cashiers/Disbursing Officers,
COA Auditors and Others Concerned.

SUBJECT: Accounting Guidelines and Procedures Relative to the Modified Disbursement


System (MDS) pursuant to Memorandum Order No. 276 dated January 12,
1990.

1.0 Purpose

This circular is issued to provide accounting guidelines and procedures in the


implementation of the Modified Disbursement System.

2.0 Coverage

This Circular shall cover all funds appropriated in the General Appropriations Act.
(GAA), Public Works Acts and other departments, bureaus and offices. It shall also
cover all other funds deposited with the National Treasury whether or not requiring
special budgets, including Special Accounts maintained by national government agencies
and government corporations.

3.0 Exemptions

This Circular shall not apply to the following:

3.1 Revolving Fund transactions for business-type activities and trust receipts
authorized to be deposited with the government depository banks.

3.2 Constructive cash requirement/disbursement scheme covering loan availments for


Foreign Assisted Projects (FAPs) for which Non-Cash Availment Authority (NCAA)
shall be issued DBM to the implementing agencies.

3.3 Utilization of foreign collections of the Department of Foreign Affairs, Bureau of


Internal Revenue, Department of Labor and Employment, and Department of
Trade and Industry.

3.4 Agency requirements directly drawn against the Special Account (Working Fund)
maintained by the Bureau of the Treasury (BTR) with the Central Bank of the
Philippines (CBP).

4.0 Guidelines

4.1 The operations of the New Disbursement System (NDS) prescribed under COA-
DBM-DOF Joint Circular No. 4-86 as amended, shall be discontinued effective
March 1, 1990.
4.2 The balance per books as of February 28, 1990 of all deposit accounts under the
NDS shall be withdrawn and remitted to the National Treasury. Such withdrawal
and remittance shall be covered by a duly approved Disbursement Voucher, and a
Remittance Advice, respectively.

4.3 Any balance per bank of the NDS accounts six months after the implementation
of the MDS shall be closed thru the issuance of a manager's check by CSB upon
request of the agency concerned. An Official Receipt shall be issued for the
amount of the manager's check which will be deposited with the National
Treasury.

4.4 The Notice of Allocation (NOA) issued by the Department of Budget and
Management (DBM) to the agency shall be recorded as memorandum entry in the
Allocation and Utilization Control Sheet (AUCS), form attached (Exhibit A-1 to A-
4), to be maintained by both the Accounting and Cashiering Divisions/Units.

4.5 The Accounting Division/Unit shall record utilization in the AUCS based on the
Report of Checks Issued received from the Cashier. This will be the basis in
preparing the Monthly Statement of Allocation and Utilization to be submitted to
DBM. The Cashiering Unit, on the other hand, shall record the utilization based on
the total of the Advice of Checks Issued and Cancelled which shall be entered
immediately in order to monitor the balance of allocation on a daily basis.

4.6 The cumulative totals of the allocations and utilization shall be indicated on the
last page of the Trial Balance immediately after the grand totals in the following
manner:

--------------------------------------
Grand Total :P xxx :P xxx :P xxx :P xxx
======================
Cumulative Total
of Allocation - P xxx
Less: Cumulative
Total of Utilization xxx
--------
Balance P xxx
=====

4.7 Government agencies previously issuing Treasury Warrants Type "A" for salaries
of their personnel shall draw an MDS check for deposit to a special checking
account of the agency with a government servicing bank (GSB) against which
commercial checks shall be drawn.

4.8 ROs shall release funds to Provincial Offices (POs)/Operating Units (OUs) not
receiving NOA directly from DBM, by issuing separate funding checks (MDS
checks) for each allotment class. The POs/OUs shall deposit the checks shall be
drawn.

4.9 COs receiving the A/A and NOA for projects/operations implemented by ROs shall
issue funding checks to the RO which shall deposit the amount to a separate
current account with the CSB against which commercial checks shall be drawn.
4.10 All MDS and commercial checks shall be covered by duly approved Disbursement
Vouchers. These checks except those issued to government employees shall be
crossed and for deposit only.

4.11 Refunds of cash advances and overpayments shall be remitted to the National
Treasury by Offices receiving the NOA directly from the DBM. Those receiving
funding checks shall deposit such refunds in the agency current account with
CSB.

4.12 Any balance of deposits per books of the POs/OUs corresponding to the
unobligated allotment at the end of the year, shall be withdrawn for remittance to
the National Treasury and covered by a remittance advice. In case the
unobligated allotment is not backed up by cash, no such withdrawal shall be
made.

4.13 Balance of the NOA at the end of the year shall automatically expire and shall no
longer be valid for use in the ensuing year.

4.14 Agencies shall prepare monthly Bank Reconciliation Statements using the forms
attached (Exhibit B for those receiving NOA and Exhibit C for those receiving
funding checks).

4.15 The BTR shall prepare the overall cash reconciliation of the TOP-MDS Accounts.

5.0 Accounts/Accounting Procedures/Journal Entries.

5.1 For purposes of implementing the Modified Disbursement System, the following
accounts are hereby prescribed/modified:

a. 8-70-370 - Cash - Others Banks

This account shall be used to record deposits of operating units and


provincial or other offices, of funding checks released by CO/RO under the
Modified Disbursement System.

Debit this account for:

Current account deposits with authorized depository banks

Adjustments (in parenthesis)

Credit this account for:

Withdrawals or reduction of deposits with the above accounts

Adjustments (in parenthesis)

b. 8-70-700 - Cash-Treasury/Agency Account Current Deposits

This account is used to record the deposits of government agencies


with the BTR, either directly or thru authorized government depository
banks. It also includes credit advices for proceeds of loans, sale of
Treasury Notes and other governments securities, and refund of excess
remittances; journal vouchers for transfers of collections made by one
agency for another; and inter-agency transfer of funds.

Books of Agency

Debit this account for:

Deposits with the National Treasury

Credit Advices for the agency

Dishonored deposits and adjustments (in parenthesis)

Credit this account for:

Immediate closing to 8-99-100 of deposits pertaining to budgetary


accounts

Year-end closing to 8-99-000

Year-end closing of disbursements by government owned and/or


controlled corporations and of special account in the
general fund.

Books of BTR

Debit this account for:

Year-end closing to National Clearing Account

Year-end closing of disbursements by government-owned and/or


controlled corporations and of special account in the
general fund.

Year-end closing of disbursements pertaining to trust receipts


deposited with the BTR (suffixed by codes "184" or "284" as
the case may be)

Credit this account for:

Agency deposits

Dishonored deposits and adjustments (in parenthesis)

Funds transferred to implementing agencies

c. 8-70-707 - Cash, Treasury Account-Check Disbursements


This account shall be used to record the withdrawals of national
government agencies from the account of the Treasurer of the Philippines
(TOP) maintained with different government depository banks.

Books of Agency

Debit this account for:

Year-end closing of check disbursements to the National Clearing


Account 8-99-100

Credit this account for:

Commercial checks issued chargeable against the TOP account


maintained with government depository bank.

Adjustments (in parenthesis)

Books of the Bureau of the Treasury

Debit this account for:

Year-end closing to the National Clearing Account.

d. 8-71-170 - Receivables, Sub-allotment Not Covered by Funding Check.

This account shall be used to record in the books of Regional


Offices/Operating Units the amount of sub-allotment received from the
Central Office/Regional Offices not covered by funding check.

Debit this account for:

Amount of sub-allotment received from CO/RO not covered by


funding check

Year-end reversion of unexpended allotment (in parenthesis)

Adjustments (in parenthesis)

Credit this account for:

Amount of funding check received

Adjustments (in parenthesis)

e. 8-81-170 - Payables, Sub-allotments Not Covered by Funding Check

This account shall be used by the CO and RO to record the amount


of sub-allotments without funding check released to Regional
Offices/Operating Units.
Debit this account for:

Release of funding check

Adjustments (in parenthesis)

Credit this account for:

Release of sub-allotment to RO/OU

Adjustments (in parenthesis)

Year-end transfer of unexpended allotment from the RO/OU

f. 8-99-100 - National Clearing Account - Appropriations Allotted

This account is used to record in the books of national government


agencies, the amount of released allotments.

Debit this account for:

Amount of allotment released

Balance of allotment after the cut-off date to cover overdraft

Release of sub-allotment to Regional Office (in parenthesis)

Immediate closing of 8-70-700 pertaining to budgetary accounts


such as closure of current accounts, refunds of cash
advance, overpayments, etc.

Adjustment - reduction (in parenthesis)

Credit this account for:

Year-end closing of 7-92-410

Year-end closing of 8-70-707

Year-end closing of 7-92-419, if budgetary

Adjustment - reduction (in parenthesis)

5.2 Illustrative Accounting Entries

The accounting entries to be followed by all concerned are provided under


the following Annexes:

Annex A1 Withdrawal of balance per books of all deposit accounts under


the NDS for remittance to BTR to be done be agencies
immediately before the adoption of the MDS
Annex A2 Closure of any balance per bank of the NDS accounts six
months after the implementation of the Modified Disbursement
System

Annex B Accounting entries for typical transactions under MDS - For


COs and ROs receiving NOA directly from DBM and OUs
receiving funding checks from RO

Annex C Accounting entries for typical transactions under MDS - For


COs, ROs, and OUs receiving NOA directly from DBM

Annex D Accounting entries applicable to agencies with centrally


managed projects, NOA of which is received by CO and funding
checks are issued to RO

Annex E Accounting entries for typical transactions under MDS for


Special Account in the General Fund

6.0 Repealing Clause

All Circulars, memoranda, or other issuance which are inconsistent with this Circular
are hereby rescinded, repealed and/or modified accordingly.

7.0 Saving Clause

Cases not covered by this Circular shall be referred to the Accountancy Office, this
Commission.

8.0 Effectivity

This Circular shall take effect on March 1, 1990.

(SGD.) ALBERTO P. CRUZ, Commissioner


(SGD.) BARTOLOME C. FERNANDEZ, JR., Commissioner
(SGD.) EUFEMIO C. DOMINGO, Chairman

Attachment:

Exhibit A : Allocation And Utilization Control


Exhibit B : Treasury Account Current - MDS checks Monthly Reconciliation Statement
Schedule 1 : Checks Not Taken up by Agency
Schedule 2 : Checks Overstated by Bank/Agency
Schedule 3 : Checks Understated by Bank/Agency
Schedule 4 : Cancelled Checks Not Taken up by Agency
Schedule 5 : Outstanding Checks
Exhibit C : Bank Reconciliation Statement