COMMISSION ON AUDIT CIRCULAR NO.

77-55 TO

March 29, 1977

: All Heads of Departments; Chief of Bureaus and Offices; Provincial Governors and City Mayors; Managing Heads of Government-Owned or Controlled Corporations and Self- Governing Boards, Agencies and Commissions; Corporation, Provincial, City and National Auditors; and Others Concerned.

SUBJECT : Rules and regulations on the prevention of irregular, unnecessary, excessive or extravagant expenditures or uses of funds and property. 1. PURPOSE: This Circular is issued in order to enable the Commission on Audit to effectively discharge its mandated responsibility to prevent irregular, unnecessary, excessive, or extravagant expenditures of funds or uses of property by virtue of Section 2, Article XII-D of the Constitution which empowers it to "promulgate accounting and auditing rules and regulations including those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or uses of funds and property." 2. DECLARATION OF POLICY: In the exercise of the regulatory power vested upon it under the aforequoted provision of Section 2, Article XII-D of the Constitution, and conformably to the injunction embodied in Presidential Decree No. III dated January 26, 1973, the Commission on Audit adheres to the policy that government funds and property should be fully protected and conserved and that irregular unnecessary, excessive, or extravagant expenditures or uses of such funds and property should be prevented. On the proposition that improper or wasteful spending of public funds or immoral use of government property, for being highly irregular or unnecessary, or scandalously excessive or extravagant, offends the sovereign people's will, it behooves the Commission on Audit to put a stop thereto. In undertaking this assigned task, the Commission on Audit shall consider and attach equal importance to the goals and objectives of the audited agency, entity or instrumentality in terms of economy, effectiveness and efficiency. 3. DEFINITIONS, CONCEPTS AND STANDARDS: An essential feature of auditing rules and regulations designed "for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or uses of funds and property" would comprise the definitions of these terms within the context of the enabling constitutional provision. It is desirable that the distinguishing characteristics of each of these types of fund expenditures or property uses be clearly outlined or spelled out. The terms "irregular", "unnecessary", "excessive" and "extravagant", when used in reference to expenditures of funds or uses of property, are relative. The determination of which expenditure of funds or use of property belong to this or that type is situational. Circumstances of time and place, behavioral and ecological factors, let alone political, social and economic conditions, would certainly interplay to influence any such determination. Viewed from this

An expenditure or use of funds or property would offend this standard if it is "extravagant". A transaction conducted in a manner that deviates or departs from. profuse. c) Reasonableness denotes inexpensiveness. rules or discipline. financiers. or absence of excess. policies. determinable or ascertainable utility at the moment. An expenditure for something that is not essential. Thus a) Regularity signifies adherence to established rules. A variety of other similar situations may arise and the determination of the type or category to which they may belong shall be guided by the particulars of each case on the basis of the standards set therefor. Thus. It is the established policy of the government to effect economy in the procurement of government supplies. distributors. or one that fails or omits to follow. or moderation in price. superfluous. or is beyond the just measure or amount. or is greater than the usual amount." and that "all government offices shall henceforth no longer deal with middlemen-dealers. materials. or is unreasonably high. or is immoderate. or not responsive to the exigencies of the service. luxurious wasteful. necessity. judiciousness. behavior. grossly excessive. commission agents. or can be dispensed with without loss or damage. or is useless. jobbers. conformity with prescribed usages. or unrestrained. indispensableness of an act as dictated by the demands of good government. transactions under audit are to be judged on the basis of not only the standard of legality but also those of regularity. reasonableness and moderation. course or mode of action. This exemplification is by no means exclusive. principles or practice that have gained recognition in law. equipment and the like. materials. essentiality to a desirable or projected end. observance of established pattern. illegality which denotes a radical defect that taints the transaction with nullity. is likewise "irregular".perspective. directed that "in order to preclude overpricing. or not needed or required by the circumstances of the case is "unnecessary". . regulations. it exceeds the bounds of propriety. procedural guidelines. equipment and the like. requirement or need under the circumstances of the case. lavish. 1967 and September 15. An anomalous transaction. that is." d) Moderation signifies restraint. An "excessive" expenditure would be a breach of this standard since the amount involved is exorbitant or exceeds what is usual or proper. or is in excess of reasonable limits. injudicious. economy. Pertinent indices of reasonableness of expenditure are the costliness of operation of the agency in the attainment of a particular objective. all government offices shall deal directly and solely with reputable manufacturers in all procurement of government supplies. Irregularity should be distinguished from. EXEMPLIFICATION: Hereunder enumerated are typical cases and situations illustrating the four (4) types of transactions as hereinabove defined and conceptualized. b) Necessity connotes responsiveness to the exigencies of the service. 4. or does not accord with such standard is deemed as "irregular". 1967. and economy in the use of resources. or violates appropriate and necessary rules of procedure. to the members of the Cabinet. or conduct. the President in two (2) memoranda dated August 24. not being synonymous with. prodigal.

was authorized to and did collect the said allowances. Collecting allowances from different agencies covering and corresponding to the same period. Grant of reimbursable representation or transportation allowance to an employee whose duties do not involve entertainment of visitors or undertaking any official travel. Payment of claims not approved by the proper approving official. Grant of subsistence allowance to a member of the board of a government corporation covering the day before. mechanics or contractors not duly accredited in accordance with an existing government policy. 3. Payment for repair of government property or equipment undertaken by shops. 5. Accommodation of private persons in the purchase of gasoline out of government funds for stock and subsequent use by a government agency. 7. 11. 4. Payment of claims under a contract awarded not strictly in accordance with the prescribed modes of procurement of supplies. 6. or on official trip abroad with benefit of travel allowances.I. 2. "Irregular" 1. . Claim for commutable allowances while on extended leave. Drawing by the agency head of any replenishment treasury warrant or check without the previous cash advance having been liquidated or the covering disbursement vouchers being submitted for accounting purposes. Claim for reimbursable allowances while on leave of absence. 9. during and the day after each board meeting attended although such board member resides in the city or place where the principal office of the corporation is situated. in a substitute capacity. or on official trip abroad especially where during such period another official who was designated to the position of the incumbent of such leave or trip. or approved by an official upon an undue delegation of authority by the proper approving official. Purchase of items from jobbers or middlemen in violation of a presidential directive to acquire the same directly from reputable manufacturers or their duly registered and licensed distributors. 10. materials and equipment. Expenditures of funds A. 8.

Payments for ghost travels of officials and employees sanctioned by the administrative officials concerned who approve their itineraries. 13. 15. Commutation of money value of leave credits by officials or employees still in the service without actually going on leave. or in case of significant amounts. 17. not covered by Request for Obligation of Allotments (ROA). or of approval of program of work. 23. 18. Payment of wages of laborers under a labor payroll to only one . Payment of claims under Section 699 of the Revised Administrative Code. with principal office in the Metro Manila area. as amended. Payment of labor payrolls without proof of on-the-spot inspection of the laborers in the project sites. meetings and other official functions. 19. 21. 16. Reimbursement of traveling expenses of directors of a government corporation. who reside outside of said area and are already receiving commutable transportation allowance. Reimbursement of expenses incurred by persons other than authorized representatives of a government agency for attending conferences. 24. 14. Payments of claims under contracts upon blind certifications of availability of funds by the Chief Accountant of the agencies concerned. person. Payment for emergency purchases where there is no emergency. 22. Payment for purchases of private lands with a mortgage encumbrance but without the consent or conformity of the mortgagee. where no canvass was conducted of at least three (3) dealers certified as bona fide by the Bureau of Domestic Trade or Bureau of Domestic Trade or Bureau of Supply Coordination.12. Payment of overtime pay to employees who have not rendered the minimum number of working hours in a week. or unsupported by a statement showing the balances of leave credits certified to by the proper official. without the report of the proper Committee on Physical Examination. Repair of private motor vehicles of officials in the motor pool of the 20. Payments made on the basis of certification of funds in excess of authorized allotments and actual releases of funds. agency. or of actual work done for the period of the claims. or of proper identification of the laborers.

or that can very well be undertaken during regular office hours.. "Excessive"1. 50% of the current market price of the same or similar equipment. Payments for telegram or long distance telephone calls where the business transacted thereby is not exceptionally urgent or absolutely necessary. TV. and ordinary means of communication would be as effective.25. or not required by exigencies of the service. . newspapers. or beyond tolerable mark-ups. Purchase of supplies and materials in quantities beyond that needed by the agency for a determinable period. Purchase of an item priced as brand new although it is actually second hand. 7. Purchase of air-conditioners where these are not needed and can be dispensed with (e. Overpricing of purchases. Expenses for program. characterized by grossly exaggerated or inflated quotations. or can be dispensed with. in Baguio and other naturally cool places of work). Payments on the basis of split requisitions. 5. 8. "Unnecessary"1. purchase orders. excursions. 3. or that officially certified by the proper government agency. 2. exceeding a certain percentage.g. 4. Payments in connection with overemployment of laborers and employees. B. etc. in day-to-day 6. Claims for travel expenses where the travel is not for a very urgent official business. Expenses for advertisements of anniversaries. Payments for similar publicity accomplishments or activities of an agency. in excess of the current and prevailing market price. say. 2. Payment for repair of government equipment at an exorbitant cost. resulting in overstocking thereof. or radio merely for publicity or propaganda purposes. of ordinary.. 9. 3. or vouchers. and similar social affairs especially those which do not promote public interest. Grant of overtime pay for work that is not of such an urgent nature as to require completion within a specified time. C.

billboards. expensive planes. utensils. limousines. wall decors. 6.g. draperies. Purchase of expensive drinks (e. or aircraft for official use (e. II. carpets. Uses of property A. 3. 2. Payment of travel expenses for an unusually large entourage of traveling officials. Purchase of luxurious and expensive office furnishings for ordinary office buildings (e. helicopters) to be maintained at tremendous cost. high-priced cars with luxurious accessories.. first-class liquor).g.. "Extravagant"1. Purchase and installation of expensive construction materials for ordinary office buildings (e. or without the marking "For Official Use Only" (with name of office). or for an unusually protracted travel time. imported. 8. supra. lamps). Installation of highly-sophisticated outdoor signs. "Irregular" 1.. desks. Bringing home government vehicles after office hours by officials to whom these are assigned. 3. .g.town places like Baguio. neon signs advertising the office. 5.g. The use of government motor vehicles by an official already enjoying commutable transportation allowance. marble).4. 7. The use of government motor vehicle with an improperly accomplished trip ticket. Purchase of luxury. imported rugs. or for billeting of foreign guests. or for entertainment purposes. 4. 9. 2. Payment of extra emoluments in amounts beyond the ceiling fixed under existing COA circulars. Payment for rent of expensive halls or rooms in luxury hotels or restaurants used for meetings and other official functions. chandeliers. Items under "unnecessary" expenditures. Reimbursement of transportation expenses including taxi fare where ordinary means of transportation (like jeepney or bus) would have been more economical. especially to expensive out-of.. may at the same time be considered extravagant. and expensive food to be served during meetings and other official functions. D. cigarettes or cigars. chairs.

paper clips. necessity or reasonableness of the transactions involved. may at the same time be considered "excessive"/"extravagant". Use of government vehicles for unnecessary trips. RESPONSIBILITIES: It shall be the direct responsibility of the heads of national government agencies. Office typists using expensive paper only for drafts of official communications. using expensive paper for the purpose.. etc. injudicious. xerox copies. an auditor is convinced and has satisfied himself that the transaction in question is irregular. B. they shall submit within thirty (30) days from the date of issuance of this Circular to this Commission. Government drivers operating government vehicles at top speed or in any other manner wasteful of gas consumption. especially in view of the energy crisis. government vehicles with broken or tampered-with 5. Using speedometers. in the course of audit and guided by the set of standards aforementioned. mimeographed copies. thru their respective resident auditors. 2. This set of standards. and local government units to prevent or minimize wasteful expenditures of funds or uses of property. or as duplicates/carbon copies thereof in excessive number. 6. 3.g. may be the basis of audit from the viewpoint of regularity. government-owned or controlled corporations. uneconomical use of office paraphernalia (e. 2. supra. Use of air-conditioners when not needed. ball pens. Use of table lamps while working in the office even though the room is adequately illuminated from ceiling lights. Wasteful. AUDITORIAL ACTION: Whenever. etc. Copying machine operators' extravagance in turning out excessive quantities of copies of official documents (e.g. 4. pencils. Use of office equipment and property without proper identification or inventory markings.4. or extravagant.). once approved and adopted by this Commission. Concomitant thereto. "Unnecessary" 1. excessive. Items under "unnecessary".. record blotters. 5. 3. their recommended standards for the determination of whether or not an expenditure of fund or use of property is irregular. "Excessive"/"Extravagant" 1. C. . unnecessary.) 5. or even during the absence of the official in whose office the air-conditioners are installed. bond paper.

475. 8. entity or instrumentality is not satisfied with the decision of this Commission. or extravagant. After the lapse of said period without the requirements having been complied with. Thereafter. 2 for pre-audit. he may pursue any of the following alternative courses of action: In-pre-audit a) The auditor may tentatively suspend payment on the proposed expenditure and require compliance with certain auditing requirements within the period prescribed by existing regulations.. if said audited agency.unnecessary. 9. likewise elevate the matter to the Commission on Audit. entity or instrumentality may take exception to the adverse findings of the auditor within a period of thirty (30) days from date of notice of the suspension or disallowance made by the latter. such tentative suspension shall become a final disallowance. REPEALING CLAUSE: Any provision of existing rules and regulations inconsistent herewith is hereby amended or repealed accordingly. On its part. he may elevate the matter to the Commission on Audit. excessive. 1973. JR. EFFECTIVITY: This Circular shall take effect immediately.) FRANCISCO S. for final decision. or the case is a borderline or controversial one or of first impression. the audited agency. entity or instrumentality may. or b) If the auditor is unsure of his position. on its own accord. TANTUICO. Should the auditor insist on the position he has taken. supra. dated November 27. AGENCY ACTION: The audited agency. Acting Chairman . he may elevate the matter to the Commission on Audit. thru proper channels. 7. it may further avail itself of the appropriate legal remedies by way of seeking relief against such decision. for final decision in accordance with COA Office Memorandum No. In post-audit The auditor may outright disallow payment or follow alternative step no. thru proper channels. (SGD.

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