REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines

Commission Proper Adjudication and Secretariat Support Services Sector

Office of the Commission Secretariat

MEMORANDUM

FOR Assistant Commissioner MANOLO C. SY

Systems and Technical Services Sector

Assistant Commissioner LUZVI PANGAN CHATTO

Administrative Sector

Assistant Commissioner ROLAND A. REY

Local Government Sector

All of this Commission

SUBJECT COA Resolution No. 2021-010 dated May 18,

2021 on the Updated Guidelines on the Appraisal,
Disposal and Derecognition of Obsolete, Damaged
and Junk Inventories and Unserviceable Property

DATE June 8, 2021

We furnish you with a copy of the COA Resolution No. 2021-010 dated May
18, 2021 on the above subject.

For reference and guidance, please.

Thank you.

ALDAN
IV
n Secretary

COMSEC
BRSIJAS/andrea
.• •. J.~.

REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City

RESOLUTION No. :
~2..I"OIO
Date: ]AY 1 8 ZtJl1

Subject: Updated Guidelines on the Appraisal, Disposal and Derecognition

of Obsolete, Damaged and Junk Inventories and Unserviceable
Property

WHEREAS, the International Public Sector Accounting Standards (IPSAS),

the Government Accounting Manual for National Government Agencies (GAM for
NGAs), the International Standards of Supreme Audit Institutions (ISSAls) and
other related issuances provide the Updated Guidelines on the Appraisal,
Disposal and Derecognition of Obsolete, Damaged and Junk Inventories and
Unserviceable Property;

WHEREAS, Constitutional Fiscal Autonomy Group (CFAG) Joint

Resolution (JR) No. 35, dated April 23, 1997, on the Policies, Guidelines and
Procedures in the disposition of unserviceable government properties, needs to
be updated due to the implementation of the IPSAS, GAM for NGAs and ISSAls;

WHEREAS, the Judiciary, the Constitutional Commissions, the Office of

the Ombudsman and the Commission on Human Rights, collectively known as
CFAG, formulated the Updated Guidelines on the Appraisal, Disposal and
Derecognition of Obsolete, Damaged and Junk Inventories and Unserviceable
Property;

WHEREAS, CFAG-member agencies adopted the Updated Guidelines on

the Appraisal, Disposal and Derecognition of Obsolete, Damaged and Junk
Inventories and Unserviceable Property under CFAG JR No. 107 dated October 7,
2019;

NOW THEREFORE, the Commission Proper RESOLVES, as it does

hereby RESOLVE, to adopt the Updated Guidelines on the Appraisal, Disposal
and Derecognition of Obsolete, Damaged and Junk Inventories and
Unserviceable Property under CFAG JR No. 107 dated October 7,2019, including
Annex A thereof, with additional provision to Item 4.4, as follows:

4.4.6. Barter - a modified form of transfer of property wherein an

agency transfers property to another government agency in
exchange for another piece of property. The value of the property
being transferred mayor may not be equivalent to that being
received. In effecting barter of property, the Property Transfer ..-1
Report shall be prepared by each party and transmitted together (./~
with the property to the other party.
 RESOLVED FURTHER, to adopt and rename Annex A of CFAG JR No.
107 as Annex A of this Resolution, with additional provision to Item 4.4.

This Resolution shall take effect immediately.

!III r 11111111111 rlllllllllll m ROLAN C. PONDOC

Commissioner
 Annex A

SUBJECT: Updated Guidelines on the Appraisal, Disposal and Derecognition of

Obsolete, Damaged and Junk Inventories and Unserviceable Property

I. PURPOSES

The purposes of these guidelines are:

1.1. To prescribe uniform procedures on appraisal, disposal and derecognition of

obsolete, damaged and junk inventories and unserviceable property of the
Constitutional Fiscal Autonomy Group (CF AG) member- agencies pursuant to
pertinent policies, principles, rules, regulations and other related issuances;
1.2. To ensure systematic and timely disposal of property to avoid further deterioration
of its value;
1.3. To generate greater benefits to the government in terms of higher appraisal value
for the property, lesser storage cost and better management of limited office
space; and
1.4. To relieve accountable officers of unnecessary accountability.

11. COVERAGE

These guidelines cover government assets classified as property, plant and equipment
except land, supplies and materials, semi-expendable property and other types of
inventories.

Ill. DEFINITION OF TERMS

3.1. Supplies - are expendable commodities which are normally consumed within a
year in connection with government operations.

3.2. Materials - are expendable commodities used in the process of manufacture or

construction including parts or remnants from destroyed or damaged fixed assets.

3.3. Semi-Expendable PPE - tangible items below the capitalization threshold of

PIS,OOO.OO.

3.4. Property, Plant and Equipment (PPE) - are tangible assets that are:

3.4.1. purchased, constructed, developed or otherwise acquired;

3.4.2. held for use in the production or supply of goods or services or to produce
program outputs;
3.4.3. for rental to others;
3.4.4. for administrative purposes;
3.4.5. expected to be used during more than one reporting period; and
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 3.4.6. not intended for resale in the ordinary course of operations.

3.5. Acquisition Cost (AC) - price of the property when it was new, at the year of
acquisition.

3.6. Current Market Value (CMV) - the prevailing market/advertised prices of

equipment; Price from second hand rebuilders and reconditioners of machinery,
cars or equipment; Price estimated which a property will bring if exposed for sale
in the open market, allowing a reasonable time to find a buyer who buys with
knowledge of the actual condition and utility of the property.

3.7. Appraised Value CAV) - an estimate or opinion of value of an adequately

described property as of a specific date transmitted in writing and supported by
presentation and analysis of relevant and factual data.

3.8. Depreciation - systematic allocation of the depreciable amount of an asset over its
useful life.

3.9. Depreciation Factor - adjustment factor used to account for the depreciation or
deterioration of the property assuming normal usage and reasonable maintenance
of the property using straight line depreciation; where Depreciation Factor is
computed at:

= (AC - Salvage Value of 5%) x Remaining Economic Life

Estimated Economic Life

3.10. Estimated Economic Life - the number of years of useful economic life as
determined by the Agency corresponding to the property type involved.

3.11. Remaining Economic Life - the difference between the estimated Economic
Life and the actual age or the number of years the property has been in use or in
operation.

3.12. Scrap/junk - fragments of discarded materials that have no value except for their
basic material contents and which cannot be reprocessed and reused in the
•
operations of other government agencies.

3.13. Unserviceable PPE - a PPE which is no longer capable of providing the entity
with future economic benefits or service potential no longer needed or has become
useless, or beyond repair and has no more utilization potential.

3.14. Economically Repairable - It is when a PPE can be rehabilitated and maintained

at a cost economical to the agency, considering factors such as:

3.14.1. Maintenance expenses;

3.14.2. Downtime;
3.14.3. Replacement cost of spare parts;
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 3.14.4. Frequency of breakdown; and
3.14.5. Alternative modes such as rental of equipment or outright replacement.
3.15. Beyond Economic Repair - is when the cost of repair and maintenance of a
PPE becomes prohibitive and disadvantageous to the government considering the
aforementioned five (5) factors.

3.16. Obsolete property - a property which has lost its efficiency either due to
technological advancement, change of procedures, reorganization of office,
completion of project, or other circumstances that result to obsolescence.

IV. GENERAL GUIDELINES

4.1. Supplies and Materials, Semi-Expendable Property and PPE shall be considered
disposable if any or all of the following conditions are met:

4.1.1. unused supplies and materials that have become dangerous to use because
the storage or use of which is determined to be hazardous;
4.1.2. obsolete and junk;
4.1.3. unserviceable; and
4.1.4. beyond economic repair.

4.2. There shall be established Disposal Committees in the Central Office and the
Regional Offices with the following officials as members:

4.2.1. Central Office Disposal Committee:

Chairman - at least Third Ranking Official of the Agency.
Members - Supply/Property Officer/Chief Accountant or his representative
Secretariat - Three (3) member staff of the Property Management Division
(PMD), Administrative Office

4.2.2. Regional Office Disposal Committee:

Chairman - Director or Assistant Director or the Head of the Regional
Office
Members - Supply/Property Officer/Chief Accountant or his representative
Secretariat - Three (3) member staff of the Property Management Unit
(PMU), Administrative Division

4.3. The Chief (PMD/PMU) or equivalent, shall submit to the Disposal Committee the
Waste Materials Report (WMR) and Inventory and Inspection Report of
Unserviceable Property (IIRUP), as appropriate, to evidence the surrendered
property.

4.4. Inventories and Property may be disposed in any of the following modes, as
appropriate and deemed most advantageous to the government:

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4.4.1. Public Bidding - As a general rule, sale or disposal of government
inventories and property shall be through public bidding. Public bidding
may be done through sealed public bidding or when circumstances
warrant, by viva voce.
4.4.1.1. Sealed public bidding is characterized by the submission of sealed
bids by prospective buyers, whereby the time, date and place of
opening of bids are indicated in the Invitation to Bid, the
evaluation of bid tenders by the Disposal Committee, and the
awarding to the highest complying bidder.
4.4.1.2. Viva Voce (Living Voice) - disposable property of insignificant
value or such nature that requires immediate disposal shall be sold
through public auction by viva voce whereby, bids are orally
offered during the public auction. Other situations for viva voce
are those involving the disposal of waste materials and/or spare
parts of insignificant value.

4.4.2. Sale thru negotiation is resorted to as a consequence of failure of public

bidding for two (2) consecutive times. There is failure of public auction in
any of the following instances:
4.4.2.1. If there is only one offeror. In this case, the bid, if sealed shall not
be opened.

4.4.2.2. If all the tenders are non-complying or unacceptable. A tender is

non-complying or unacceptable when it does not comply with the
legal, technical or financial requirements for pre-qualification.

4.4.3. Transfer to other government agencies - where the inventories or property

involved are no longer serviceable or needed by the Agency, they may be
transferred to other government entities/ agencies without cost or at an
appraised value upon authority of the Head, Administrative
Office/Regional Director and the head of the receiving agency, and upon
due accomplishment of a Property Transfer Report (PTR).

4~4.4. Condemnation or Destruction - shall be resorted to only when the

unserviceable property has no commercial value, is beyond economic
repair; there is no willing receiver; and/or the appraised value is less than
the administrative cost of sale. Valueless, unsalable or hazardous property
can be condemned or destroyed by burning, pounding, breaking,
shredding, throwing or any other method by which the property is disposed
beyond economic recovery.
4.4.5. Donation of property may be made to charitable, scientific, educational or
cultural associations or non-profit organizations (NGO's) on exceptional
and meritorious cases.

./"
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 4.4.6. Barter - a modified form of transfer of property wherein an agency transfers
property to another government agency in exchange for another piece
of property. The value of the property being transferred mayor may
not be equivalent to that being received. In effecting barter of property, the
Property Transfer Report shall be prepared by each party and transmitted
together with the property to the other party.

4.5. The auditor concerned or his representative shall be invited at all times to witness
the proceedings of the opening of the bids and actual disposal of the inventories
and property.

V. REPORTS

5.1. IIRUP - (Appendix 74 of GAM Vol. 11) shall be used as basis to record dropping
from the books the unserviceable properties carried in the PPE accounts.
5.2. WMR - (Appendix 65 of GAM Vol. 11) shall be used to report all waste materials
previously taken up in the books of accounts as assets so that they may be properly
disposed of and derecognized from the books.

5.3. PTR - (Appendix 76 of GAM Vol. 11) shall be used when there are transfers of
property from one Accountable Officer/Agency/Fund Cluster to another
Accountable Officer/Agency/Fund Cluster.

VI. DUTIES AND RESPONSIBILITIES

6.1. Accountable Officer/Employee (End user)

6.1.1. Returns unserviceable property together with the Property
Acknowledgement Receipt (PAR) to the PMD/PMU or equivalent for
cancellation.
6.2. Accountable Officer/Employee (PMD/PMU) or equivalent

6.2.1. Records items received and determines condition of equipment;

6.2.2. Prepares and issues receipt for returned items;
6~2.3. Transfers accountability of returned items from the end user to PMDIPMU
or equivalent;
6.2.4. Stores surrendered unserviceable items;
6.2.5. Conducts physical count of returned items, classifies and segregates each
item by condition of equipment;
6.2.6. Updates property accountability record upon disposal of property;
6.2.7. Forwards copies of IIRUP, Official Receipts and other documents related
to the disposal to the Chief, Accounting Division! Unit for the
derecognition of disposed asset and property;
6.2.8. Performs the following, in case disposal is thru:
'-,
/
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6.2.8.1. Public Auction:

6.2.8.1.1. Prepares Invitation to Bid and forwards invitation with

supporting documents to the Head, Administrative
Office or Regional Director concerned or Head of the
Regional Office, for approval;
6.2.8.1.2. Publicizes invitation in a newspaper of general
circulation or resorts to substitute publication such as
posting to at least three (3) conspicuous places;
6.2.8.1.3. Prepares Formal Invitation to Bid
6.2.8.1.4. Serves notice of award to winning bidder; and
6.2.8.1.5. Issues gate pass and releases disposed items to winning
bidder, once the office received a copy of Official
Receipt evidencing payment for the said items.

6.2.8.2. Transfer to another government agency:

6.2.8.2.1. Prepares and sends letter-offer to other government

agencies
6.2.8.2.2. Prepares and sends letter of approval to the recipient;
6.2.8.2.3. Prepares items to be transferred; and
6.2.8.2.4. Prepares PTR and gate pass and releases disposed items
to concerned government agency

6.2.8.3. Condemnation/Destruction:

6.2.8.3.1. Forwards the recommendation for condemnation of

unserviceable properties to the Head, Administrative
Office/Regional Director or Head of the Regional
Office for approval;
6.2.8.3.2. Prepares gate pass for release of items for
condemnation;
6.2.8.3.3. Releases items for condemnation; and
6.2.8.3.4. Brings items to be disposed to the place of
condemnati on.

6.2.8.4. Barter:

6.2.8.4.1. Inspects property to be disposed by another government

agency;
6.2.8.4.2. Prepares items to be exchanged, PTR and gate pass;
6.2.8.4.3. Transmits letter proposal for approval by both parties of
agencies, and copy furnished the COA Auditor;
6.2.8.4.4. Picks up item to be exchanged from government
agency; and
6.2.8.4.5. Signs PTR prepared by the government agency.
 6.2.8.5. Donation

6.2.8.5.1. Submits recommendation on donated property to the

Head, Administrative Office/Regional Director or Head
of the Regional Office for approval;
6.2.8.5.2. Forwards letter-offer with approval signed by the Head
of Agency to prospective donee (charitable, scientific,
educational or cultural association);
6.2.8.5.3. Prepares item to be donated;
6.2.8.5.4. Prepares Deed of Donation and gate pass.

6.2.8.6. Negotiated sale

6.2.8.6.1. Notifies prospective buyers thru email.

6.3. Disposal Committee

6.3.1. Conducts inspection of property.

6.3.1.1. Verifies serial number, motor number, property number and other
specifications needed for establishing correct identification of the
property;
6.3.1.2. Determines the physical condition/general appearance of the
property relative to;
6.3.1.3. The equipment being operational, economically repairable or
beyond economic repair;

6.3.1.3.1. The availability of spare parts and the general

obsolescence of the equipment; and
6.3.1.3.2. The quality, degree and extent of maintenance and
repair done on the equipment.

6.3.2. Check whether the corresponding report for disposal has been properly
accomplished (as enumerated in Part V)

6.3.3. In cases where the equipment is declared to be junked, determine the total
estimated weight per lot to form as basis of the appraised value. The cost
per unit of the property/supplies inspected will depend on the kind of
material appraised.

6.3.4. Computes for the appraised value of the property considering obsolescence,
market demand, physical condition and result of previous biddings to
similar property.

6.3.5. Performs the following, in case disposal is thru-

6.3.5.1. Public Bidding:

6.3.5.1.1. Approves Invitation to Bid;

6.3.5.1.2. Conducts opening of sealed bids;

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 6.3.5.1.3. Evaluates bids and determines the highest complying
bidder;
6.3.5.1.4. Prepares and forwards recommendation, notice of award
and supporting documents to Head, Administrative
Office/Regional Director
6.3.5.l.5. Fixes the period for the winning bidder to claim the
award but not more than 30 days after the awarding.

6.3.5.2. Negotiated sale:

6.3.5.2.1. Negotiates with bidders of the first and/or second failed

bidding and other prospective bidders. (Note: The price
to be agreed upon by the Disposal Committee shall not
be lower than the floor price or the highest offer
submitted at the failed public bidding whichever is
higher.)
6.3.5.2.2. Identifies the highest complying bidder.
6.3.5.2.3. Prepares and forwards recommendation, notice of award
and supporting documents to Head, Administrative
Office/Regional Director.

6.3.5.3. Transfer to another government agency:

6.3.5.3.1. Receives letter-request from interested government

agency;
6.3.5.3.2. Conducts selection of government agency-donee; and
6.3.5.3.3. Prepares recommendation for the selected government
agency-donee to be approved by the Head,
Administrative Office/Regional Director.

6.3.5.4. Barter:

6.3.5.4.l. Determines if the properties to be exchanged have

equivalent value;
6.3.5.4.2. Conducts selection of property to be accepted in
exchange for the agency's property, and
6.3.5.4.3. Prepares and forwards letter of recommendation for the
selected property to Head, Administrative Office/
Regional Director or Head of the Regional Office for
approval.

6.3.5.5. Condemnation/Destruction:

6.3.5.5.l. Schedules the date and time of outright condemnation

and informs COA Auditor about the disposal, and the
PMDIPMU or equivalent
6.3.5.5.2. Supervises the condemnation of property

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 6.3.5.5.3. Prepares report on condemnation/destruction and sends
report thereon with supporting documents to PMDIPMU
or equivalent.
6.3.5.5.4. Retrieves and sends documents on mode of disposal to
Head, Administrative Office/Regional Director or Head
of the Regional Office for review and approval, if
disposal is thru transfer to another
government office.

6.3.5.6. Donation

6.3.5.6.1. Prepares recommendation for the selected government

agency-donee to be approved by the Head,
Administrative Office / Regional Director or Head of the
Regional Office.

6.4. Head, Administration Office/Regional Director or Head of the Regional Office

6.4.1. ApproveslDisapproves the:

6.4.1.1. letter of recommendation of Disposal Committee on mode of

disposal and sends letter with supporting documents to the PMD/
PMU or equivalent;
6.4.1.2. Notice of Award to the highest qualified bidder, and sends
documents to the PMD/PMU or equivalent, if disposal IS thru
public bidding; .
6.4.1.3. Recommendation of Disposal Committee as to which government
agency-donee will be selected;
6.4.1.4. Notice of Award to the selected government agency-donee and
sends documents to the PMDIPMU, if disposal is thru transfer to
another government agency without cost; and
6.4.1.5. Recommendation of Disposal Committee as to which property will
be accepted in exchange for the agency's property, if disposal is thru
barter.

6.5. Chief, Treasury Services, General Services Office or Cash Section when appropriate
6.5.1. Accepts payment and issues Official Receipt

6.6. Chief, Accounting Office/Chief, Finance Division or equivalent

6.6.1. Prepares Journal Entry Voucher (JEV) for dropping of disposed assets
from books of accounts, using as basis the pertinent portions of IIRUP,
WMR or PTR, whichever is applicable, and other documents, and
6.6.2. Submits JEV and supporting documents to COA for post audit.

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•

VII. SPECIFIC GUIDELINES AND PROCEDURE

7.1. The appraiser of the unserviceable property for disposal shall gather the reference
price information to aid him in his appraisal computation.

7.2. The computation of the appraised value shall be in accordance with the revised
guidelines on appraisal of property other than real estate, antique property and
works of art under COA Memorandum 98-569-A dated August 5, 1998.