Basic Competency

on Local Treasury
Examination

Fund Management Practices,

Expenditures and
Disbursements
Book 3 Updated LTOM

Session 3
 DEFINITION OF TERMS
Accountable Officer
the officer of any
government agency whose
duties permit or require the
possession or custody of
government funds or
property, (such as the Local
Treasurer, Collecting Officer,
Disbursing Officer, Cashier,
Paymaster, Property Officer
and the like) who is required
by law to render account to
the Commission on Audit
Allotment –An allotment is an
authorization issued by the
Local Chief Executive to a
department office of the local
government unit, which allows
it to incur obligations for
specified amounts within the
appropriations ordinance.
 The authorization is called
the Allotment Release Order
(ARO), which is a specific
authority to incur obligations
not exceeding the amount
for the specific purpose
indicated
Appropriation

refers to an authorization DEFINITION OF TERMS

made by ordinance,
directing the payment of
goods and services from Cash Flow Forecasting
local government funds
under specified conditions
or for specific purposes Estimate of the timing and
amounts of cash inflows
and outflows over a specific
period, usually one year.
DEFINITION OF TERMS

Disallowance
the disapproval in audit
of a transaction, either in Disbursement
whole or in part.
Disbursements constitute all
payments made during a given
period either in currency, by
check, through bank and
electronic transfers, telegraphic
transfers, letters of credit,
credit/debit cards and other non-
conventional modes of payment
DEFINITION OF TERMS Persons Liable
the persons determined by the
auditor to be answerable for an
audit disallowance or charge
Obligations
arising from the post-audit of
refers to an amount committed
transaction or examination of the
to be paid by the local
cash and accounts of an
government unit for any lawful
accountable officer.
act made by an accountable
officer for and in behalf of the
local unit concerned.
Persons Responsible
the persons determined by the
auditor to be answerable for
compliance with the audit
requirements as called for in the
notice of suspension.
Suspension
the deferment of action to
allow or disallow in audit a
transaction pending compliance
with certain requirements
DEFINITION OF TERMS
Reconsideration
the process whereby an aggrieved
party requests the very officer or
body who made the decision,
order, or ruling to review the same
with the view of its modification or
reversal.
This should be distinguished from
"appeal" which is the process of
elevating to the next higher authority
a decision, order, or ruling.
CONCEPT OF FUNDS Good governance is about efficiency
in the management of public funds,
demanding high standards of integrity,
Good governance is viewed as transparency and accountability.
the exercise of economic,
political
Thus, Local Treasurers need to
and administrative authority to continuously update their knowledge
manage a country's/local and skills on their specific area of good
government's affairs at all levels.
governance, which is fund or cash
management
It comprises mechanisms,
processes, and institutions through
which citizens and groups
articulate their interests, exercise
their legal rights, meet their
obligations, and mediate
their differences.
 Annual Appropriation CONCEPT OF
An Annual Appropriation is an APPROPRIATION,
appropriation consisting of ALLOTMENT AND
specified amounts for salaries,
wages, and sundry expenses, etc., OBLIGATION
authorized by the sanggunian as
necessary for the regular
operations of the local Form and Content of Local
government unit during any Government Budget
given year

This is also the "Annual Budget" 1. Estimates of income; and

of alocal government unit which
refers to a financial plan 2. Total appropriations
embodying the estimates of covering the current
income and expenditures for one
(1) fiscal year. operating expenditures and
capital outlays
Submission of Budget Proposals by
Heads or Departments or Offices CONCEPT OF
APPROPRIATION,
ALLOTMENT AND
Each head of department or office
shall submit a budget proposal for
OBLIGATION
his/her department or office to the
local chief executive on or before the Continuing Appropriation
fifteenth (15th) of July of each year:

A Continuing Appropriation refers to

Provided, That the budget proposal of
each department of office shall be
categorized under either economic,
social or general services:
Provided, further, That each service
shall be covered by the budget of at
least one (1) department or office of
the local government unit concerned
an appropriation available to support
obligations for a specified purpose or
project, such as those for the
construction of physical structures or
for the acquisition of real property or
equipment, even when these
obligations are incurred beyond
the budget year.
CONCEPT OF APPROPRIATION, ALLOTMENT AND
OBLIGATION

The Continuing Appropriation includes the

unexpended balance of 20% development fund;
unexpended balance of capital outlay from the
Local Disaster Risk Reduction Management Fund
(LDRRMF); and unexpended balance of capital
outlay of the different departments of the local
government.

Local Budget Cycle
Budget Preparation
Budget preparation is the first phase
of the local budget process.
It involves cost estimation per PPA,
preparation of budget proposals,
executive review of budget
proposals, and preparation of the
LEP and the Budget Message.
This phase starts with the issuance of
the Budget Call, and ends with
submission of the Executive Budget
to the Sanggunian on or before
October 16 of each year.
Budget Authorization
Budget Authorization is the second
phase in the local budget process.
This phase starts from the time the
Sanggunian receives the Local
Expenditure Program (LEP) submitted
by the LCE, and ends with the
enactment of the Appropriation
Ordinance and approval thereof by
the LCE. Authorization of the budget is
done through an Appropriation
Ordinance enacted by the Local
Sanggunian in accordance with the
fundamental principle that, ―No
money shall be paid out of the local
treasury except in pursuance of an
Appropriation Ordinance or law‖

Budget Review
Budget Review is the third phase in
the local budget process.
Its primary purpose is to determine
whether the Appropriation
Ordinance has complied with the
budgetary requirements and
general limitations set forth in the
Local Government Code of 1991,
as well as provisions of other
applicable laws.
It starts from the time the reviewing
authority receives the Appropriation
Ordinance for review and ends with
the issuance of the review action.
Local Budget Cycle
Budget Execution
The execution of the budget in
accordance with existing rules, laws
and regulations is the fourth phase
of the budget process in local
governments. After the usual
recording of appropriations in the
proper registries, the execution of
the budget involves the release of
allotments, the certification of
available appropriations and cash,
the recording of actual obligations
and disbursements of funds for
approved PPAs and the delivery of
goods and services to target clients
in the most efficient, effective,
economical and ethical way.

Local Budget Cycle
Budget Accountability
is the last and final phase of
the budget process.
Budget Accountability, in
simple terms, is accounting
for the budget. It involves
the use of a management
control techniques to assist
in tracking receipts of
income/revenues and
controlling expenditures
Use of Appropriated Funds and
Savings.
Funds shall be available exclusively
for the specific purposes for which
they have been appropriated.
No ordinance shall be passed
authorizing any transfer of
appropriations from one item to
another. However, the Local Chief
Executive or the presiding officer of
the sanggunian concerned may, by
ordinance, be authorized to
augment any item in the approved
annual budget for their respective
offices" from savings in other items
within the same expense class of
their respective appropriations.
The local budget is The Allotments System
based on estimated
in Local Government
income and program of
expenditures for a given Units
year.
Hence, we use one system of
budget control which is the
It specifies annual Allotment System to ensure that
expenditure ceilings. obligations incurred will not
However, actual releases exceed appropriations or
authorizations made by
of funds and
appropriation ordinance,
disbursements depend directing the payment of goods
on the collection and and services from local
receipt of funds by the government funds under
local government unit specified conditions or purposes
The Allotments
The Local Budget Matrix is the
System in Local yearly overall financial plan of the
Government Units. local government unit equivalent to its
approved appropriation
disaggregated into components or
Under the Allotment System, categories.
obligations may be incurred
as long as it is within the
The category of the expense item as
allotment ceiling even if the
reflected in the Local Budget Matrix
total amount of the obligation
determines the timing and magnitude
is not supported by cash in the
of the release of Allotment
bank at the time it is incurred.

The Local Budget Matrix classifies

This provides flexibility in the
budgetary items under Not-Needing
implementation of programs
Clearance (NNC), Needing
and projects.
Clearance (NC), Reserve, Later
Release, and Un-programmed
Appropriation.
The Allotments System in
Local Government Units
Cash Program
The Cash Program must be able to
facilitate the management of cash
such that it is available when it is
needed for payment of obligations and
at the same time optimizes its utilization;
ensures that released allotment are
adequately covered by available cash
and/or future collections; and provides
information for control of expenditures
and future planning of activities.
The tools used in cash programming are
the Cash Flow Forecast and the
Cash Flow Analysis.
The Physical Performance
Targets
Reflect the targeted units of work
under each
Program/Activity/Project (PAP) for
each department/office based
on the historical data of peaks
and slumps of activities/tasks and
the peculiar requirements of
certain PAPs.
The plan is prepared for the entire
calendar year with quarterly/semi-
annual targets for the
departments/offices to achieve
 Types of Unlawful Expenditures
Irregular Expenditures
The term "Irregular Expenditure" signifies that the  Payment of salaries and
expenditure incurred without adhering to wages wherein the signature
established rules, regulations, procedural in the logbook vary with the
guidelines, policies, principles or practices that
have gained recognition in law. signatures of the workers in
the payroll
Irregular expenditures are incurred if funds are
disbursed without conforming to prescribed
usages and rules of discipline.  Honoraria to private
individuals sitting as
There is no observance of an established members of special
pattern, course, mode of action, behavior, or
conduct in the incurrence of an irregular committees (e.g., Ethic
expenditure. Committee) of a government
agency, without authority of
A transaction conducted in a manner that approval from the DBM
deviates or departs from, or which does not
comply with standards set is deemed irregular.

A transaction which fails to follow or violates

appropriate rules of procedure is likewise
irregular
 Unnecessary Expenditures
Types of Unlawful
The term pertains to expenditures which
could not pass the test of prudence or the
Expenditures
diligence of a good father of a family,
thereby denoting non-responsiveness to  Professional service contract for
the exigencies of the service. the design of a building with
already existing design/plan,
 Unnecessary expenditures are and subject services of the
those not supportive of the Architect was superfluous and
implementation of the objectives unnecessary
and mission of the agency relative
to the nature of its operation.
 This would also include incurrence  Hiring of consultants whose
of expenditure not dictated by the functions are redundant to the
demands of good government, respective functions of
and those the utility of which concerned officials, for example
cannot be ascertained at a hiring of procurement
specific time consultant, financial consultant
or media consultant.
 Types of Unlawful
Excessive Expenditures Expenditures
The term "excessive expenditures"
signifies unreasonable expense or Payment for repair of
expenses incurred at an government equipment at a cost
immoderate quantity and exceeding 30 percent of the
current market price of the same
exorbitant price.
or similar equipment.

It also includes expenses which

exceed what is usual or proper, as
well as expenses which are
unreasonably high and beyond just
measure or amount. They also
include expenses in excess of
reasonable limits.
Procurement of materials/items
in excess of the requirements
which
eventually expires such as
vaccines, medicines, seeds,
fertilizer, pesticides, among
others.
 Types of Unlawful
Expenditures
Extravagant Expenditures
 Purchase of wines, liquors,
cigars and cigarettes, except
The term "extravagant
when served during state
expenditure" signifies those
functions and government-
incurred without restraint, sponsore international
judiciousness and economy. conferences and conventions.

Extravagant expenditures exceed  Payment for rent of expensive

the bounds of propriety. halls or rooms in luxury hotels or
restaurants used for
These expenditures are meetings/seminars and other
official functions except when
immoderate, prodigal, lavish,
such hotels or restaurants are
luxurious, grossly excessive, and used for government sponsored
injudicious. international conventions,
meetings and the like.
 Types of Unlawful
Unconscionable
Expenditures
Expenditures
 Live-in seminars in five-
star hotels with significant
The term "unconscionable
numbers of participants
expenditures" pertains to
and unreasonable
expenditures which are
period of time
unreasonable and immoderate,
and which no man in his/her
right sense would make, nor a  Extension of loans in
fair and honest man would significant and
accept as reasonable, and unreasonable amount to
those incurred in violation of unqualified borrowers
ethical and moral standards. whereby recovery of the
loans granted is remote.
 DISBURSEMENT OF LOCAL FUNDS
The Official Fiscal Year
The official fiscal year of local
government units is the period
beginning with the first (1st)
day of January of a given
year and ending with the
thirty-first (31st) day of
December of the same year
Restriction Upon Limit of Disbursements
1. Disbursements in accordance with
appropriations in the approved annual
budget may be made from any local
fund in the custody of the Local
Treasurer, but the disbursement from
any local fund shall in no case exceed
fifty percent (50%) of the uncollected
estimated revenue accruing to such
local fund in addition to the actual
collections.
Provided, however, that no cash
overdraft in any local fund shall be
incurred at the end of the fiscal year
2. In case of emergency arising
from typhoon, earthquake, or
any other calamity, the
sanggunian concerned may
DISBURSEMENT OF
authorize the Local Treasurer to LOCAL FUNDS
continue making disbursements
from any local fund in his/her 3. Any overdraft which may
possession in excess of the
be incurred at the end of the
limitations herein provided, but
year in any local fund by virtue
only for such purposes and
of the provisions hereof, shall
amounts included in the
be covered with the first
approved annual budgets
collections of the immediately
succeeding fiscal year
accruing to such local fund.
 DISBURSEMENT OF LOCAL FUNDS
Prohibitions on Disbursements
1. Advance Payments
No money shall be paid on account of any
contract under which no services have been
rendered or goods delivered. (Sec. 338, LGC)
2. Expenditures for Religious or Private
Purposes No public money or property shall
be appropriated or applied for religious or
private purposes. (Sec. 335, LGC)
3. Expenses for Reception and Entertainment
No money shall be appropriated, used, or
paid for entertainment or reception except
to the extent of the representation
allowances authorized by law or for the
reception of visiting dignitaries of foreign
governments or foreign missions, or when
expressly authorized by the President in
specific cases.
Modes of Disbursement
Disbursements covered by
Disbursement Vouchers and/or
Payrolls are usually paid either by
check or in cash.
Other modes of disbursements
include direct payments and/or
bank transfers. Ideally, cash
should be handled under the
general principles of the Imprest
System where all payments must
be made by check and only
payments in small amounts may
be made in cash through the
petty cash fund.
 DISBURSEMENT OF LOCAL
FUNDS
d) Checks shall always be made
Preparation and Signing of Checks
payable to a specific person or
a) Checks shall be prepared and signed
entity and never to "Cash“ or
by the Local Treasurer and "Bearer".
countersigned by the Local
Administrator (NGAs for LGUs, Sec. 40).
All checks shall be crossed for
b) In case of temporary absence or deposit to the payee's account,
incapacity of the aforesaid officials these except checks
duties shall devolve upon their immediate
assistants. which are payable to government
employees, financial assistance,
c) In the case of municipalities where no Assistance for Individual Crisis
Administrator has been appointed, checks Situation (AICS), not exceeding
shall be countersigned by the Municipal
Mayor. ₱15,000.00.

In case, however, of expenditures for the
operation of the sanggunian, checks drawn
thereon shall be countersigned by the
provincial Vice Governor, the City Vice
Mayor, or the municipal Vice Mayor, as the
case may be.
Unused checks shall be kept in the
vault, which shall be accessible
only to the Local Treasurer.
The signing or countersigning of
blank checks shall not be allowed.
 DISBURSEMENT OF LOCAL FUNDS
Reporting of Checks Issued
The checks released to
claimants shall be reported in
the Report of Checks Issued
(RCI) which shall be prepared
daily by the Local Treasurer
for each fund.
It shall be submitted to the
Accountant for preparation of
Journal Entry Voucher based
on individual checks issued
and recording in the Check
Disbursement Journal
Spoiled and Stale Checks
Checks may be cancelled when
they become spoiled or stale.
A check is considered spoiled when it
is torn, mutilated, defaced, or
contains erasures/errors affecting the
genuineness of material information.
On the other hand, a check is
considered stale when it is
outstanding for over six months from
date of issue, or as prescribed by the
government authorized depository
bank.
A spoiled or stale check shall be
marked "CANCELLED" on its face and
reported
DISBURSEMENT OF LOCAL FUNDS
Disbursements Through Cash
Advances
Cash advances are of two types, as
follows:
a) Regular Cash Advances
Regular Cash Advances are those
granted to Cashiers, Disbursing
Officers, Paymasters and/or
Property/Supply Officers separately
for any of the following purposes:
1. Salaries and Wages;
2. Commutable Allowances
3. Honoraria and other similar
payments to officials and employees;
and
4. Petty operating expenses
b) Special Cash Advances
Special Cash Advances are
those granted on the explicit
authority of the Local Chief
Executive only to duly
designated disbursing officers
or employees for other legally
authorized purposes such as:
1. Confidential expenses;
and/or
2. Expenditures for activities of
the agency undertaken in the
field when it is impractical to
pay by check
 Liquidation of Cash
Advances
The cash advance for petty
operating expenses shall be sufficient
for the recurring expenses of the
agency for one month.
The accountable officer may request
replenishment of the cash advance
when the disbursements reach at
least 75%, or as needed, by
submitting a replenishment voucher
with all supporting documents duly
summarized in a report of
disbursements.
The cash advance for petty
operating expenses shall not be used
for payment of regular expenses,
such as rentals, subscriptions, light
and water and the like.
The cash advances shall be
liquidated as follows:
1. Salaries, wages, etc. - within 5
days after each 15 days/end of
the month pay period.
2. Petty operating expenses -
during the year; subject to
replenishment during the year.
3. Foreign Travel - within 60 days
after return to the Philippines.
All cash advances shall be fully
liquidated at the end of each
year. The accountable officer
shall refund any unexpected
balance to the cashier/collecting
officer who shall issue the
 DISBURSEMENT OF LOCAL FUNDS

a) General Guidelines.–The Accountable Officer shall liquidate each

cash advance within the following periods:

1. Salaries, Wages, Allowances, Honoraria and other similar payments –

within 5 calendar days after the end of the pay period.
2. Field Operating Expenses–within 20 calendar days after the end of the year
subject to replenishment as frequently as necessary during the year.
3. Petty Cash Fund (PCF)–as soon as the disbursement reaches 75% or as
needed, the PCF shall be replenished which shall be equal to the total amount of
expenditures made therefrom. In case of termination, resignation, retirement or
dismissal of the PCF custodian, the remaining balance shall be liquidated
thereafter.
4. Travelling Expenses–within 30 days after the return of the official/employee
concerned to his/her official station for local travel and within 60 days after the
return of the official/employee concerned to the Philippines in the case of foreign
travel.
5. Special Purpose–as soon as the purpose of the cash advance has been
served.
 FUND MANAGEMENT PRACTICES
The BLGF Revenue Forecasting Model – Summary Overview
The BLGF revenue forecasting model arrives at LGU-level projections
via a three step forecasting process.

Step 1: The annual growth rates for each revenue category in the
Statement of Receipts and Expenditures (SRE), e.g., real property tax,
business tax, other taxes, fees and charges, etc., and for each LGU
type — province, city, and municipality, excluding Inter-Local
Transfers, are forecasted

Step 2: The annual growth rates for each revenue category by

individual LGU are forecasted. The calculation utilizes individual LGU
revenue elasticity's, by revenue category, with respect to the LGU
type to which they belong

Step 3: The annual growth rates for each revenue category, by

individual LGU, are applied on the actual base year (time = t) LGU
revenue estimates as stored in the SRE to come up with the forecast
FUND MANAGEMENT PRACTICES

The Local Treasurer uses the Cash Flow Forecast as a tool in estimating
projected cash flows based on certain assumptions.

The Cash Flow Forecast is a monthly schedule of anticipated receipts and

disbursements of the local government unit for the fiscal year showing
the beginning and ending cash balances of each month.

The forecast is prepared at the beginning of the year and revised

periodically depending upon the need of the local government unit and
when circumstances require its revision.

The Cash Flow Forecast enables the Local Chief Executive and the Local
Treasurer to plan for an effective management and utilization of cash of
the local government unit
 FUND
MANAGEMENT
PRACTICES
Cash Flow from Operating
Activities
pertains to the receipts from, and
disbursements of cash out of, the
regular and primary operations of
the local government unit such as
from collection of taxes, share
from IRA, payment to creditors
and employees, etc.
This also includes payment of
interest on bank loans and other
loan-related charges.
Cash Flow from Financing
Activities
includes receipt of cash from bank
loans, proceeds from the flotation
of bonds and receipts from other
types of borrowings.
This also includes payment of
principal on loans and other
borrowings.
Cash Flow from Investing
Activities –
pertains to receipts from the sale,
acquisition or purchase of long
term investments such as real
estate, machinery and other Plant,

FUND MANAGEMENT
PRACTICES
a) The Cash Flow Analysis
is a cash flow monitoring tool
used to guide the Local Chief
Executive, the Local Treasurer,
and the Local Budget Officer to
control the releases of
allotment depending on the
collection/expenditure
performance during the period.
It provides information on the
cash overage/surplus or cash
shortage/deficit on a monthly or
periodic basis, so that, timely
decisions can be made for wise
Large Amount of Idle Cash that may
be Invested
Idle cash is indicated by the monthly
ending cash balances. If the amount is
more than next month‘s estimated
disbursement, the excess is expected to be
idle for at least the succeeding month and
may be invested in short-term investments.
The most common investment of idle funds
is the time deposit placement with LGU
depository banks. Depending upon the
length of time that the LGU funds are
expected to be idle, that is, if funds are not
expected to be disbursed in the short term,
such funds should be invested in a risk-free
investment with a higher interest yield. To
obtain maximum benefit, the Local
Treasurer should select the government
depository bank with the best interest
offering.
FUND MANAGEMENT
PRACTICES
Payback Period
a) The payback period refers to
the length of time or number of
years it will take to recover the
initial outlay for a project. The
formula for this is as follows:
Investment Payback Period =
Annual Cash Inflow from Operations
Payback Period is Shorter than the
Economic Life of the Asset.
If the payback period is shorter than
the economic life of the asset, the
LGU is expected to realize profit or
investment return between the
payback period and the economic
life.
Payback Period is Equal to the Economic
Life of the Asset.
If the economic life is just equal to the
payback period, the investment would
not be bringing in any income and
may even be considered a losing
proposition since the time value of
money is disregarded.
e) Annual Cash Inflows is Uneven.
If the annual cash inflows are uneven,
the payback period is computing by
adding the annual cash inflows from
year to year until the accumulated
amount becomes equal to the
investment cost. If the asset has a
scrap value, the payback period may
be computed by dividing the
investment (less scrap value) by the
annual cash inflow from operation.
RESPONSIBILITY, ACCOUNTABILITY AND LIABILITY OF LOCAL
TREASURERS FOR FUNDS
 Accountability refers to the
answerability for government
funds of every public officer
whose duties permit or
require the possession or
custody of such government
funds in conformity with laws
and regulations.
Other public officers, although
not accountable for
government funds by the nature
of their duties, may likewise be
similarly held accountable and
responsible therefor through
their participation in the use or
applications of such
government funds
 Liability is a personal
obligation arising from an
audit disallowance or charge
which may be satisfied
through payment or restitution
as determined by competent
authority or by other modes of
extinguishment of obligation
as provided by law.
 Accountable Officer is the
officer of any government
agency who by the nature of
his/ her duties and
responsibilities or participation
in the collection/receipt and
expenditure/ use of
government funds, is required
EXAMINATION OF ACCOUNTS BY THE COMMISSION ON AUDIT

The books, accounts, papers,

and cash of Local Treasurers Service of Demand Upon the
and other accountable officers Accountable Officer to Produce
shall at all times be open to the His/hers Cash and Other
inspection and examination of Accountabilities.
the Commission on Audit or its
duly authorized representatives. All Local Treasurers and accountable
officers shall produce all cash, cash
items and accountable forms in his/her
possession upon service of demand or
cash production notice by the Auditor
as incorporated in General Form No.
74 (A).

Failure on the part of the Local

Treasurer and other accountable
officers to produce all the funds and
property in his/her charge, on demand
of any officer authorized to examine
such person or treasury, shall be
deemed to be prima facie evidence
 EXAMINATION OF ACCOUNTS BY THE
COMMISSION ON AUDIT
Certificate of Settlement and
Balances. –
a) The Certificate of Settlement
and Balances shall be issued by
the auditor to the agency head
and the concerned accountable
officers of the audited agencies
for all transactions duly post-
audited. The certificate
summarizes all suspensions,
disallowances and charges
found in audit, including the
settlements thereof as of a
given date.
Audit Observation Memorandum
The Audit Observation
Memorandum shall be issued to the
agency head and/or other officials
concerned relative to the
findings/observations/other
deficiencies noted in the audit of
accounts/transactions and requiring
comment/reply thereto within the
period specified therein.
 EXAMINATION OF ACCOUNTS BY THE
Notice of Disallowance (ND)
Notice of Suspension (NS)
COMMISSION ON AUDIT
a) The Auditor shall issue an ND - Form 3 -
a) The Auditor shall issue an NS - for transactions which are
irregular/unnecessary/excessive and
Form 2 - for transactions of extravagant as defined in COA Circular
doubtful No. 85-55A as well as other COA
issuances, and those which are illegal
legality/propriety/regularity and unconscionable.
which may result in pecuniary
loss of the government, and 1. Illegal expenditures are expenditures
which are contrary to law.
which will be disallowed in audit
if not satisfactorily explained or 2. Unconscionable expenditures are
validly justified by the parties expenditures which are unreasonable
and
concerned. immoderate, and which no man in
his/her right sense would make, nor a fair
and
honest man would accept as
reasonable, and those incurred in
violation of ethical and moral standards.
 EXAMINATION OF ACCOUNTS BY THE COMMISSION ON AUDIT

Notice of Settlement of Suspension/Disallowance/Charge (NSSDC). –

a) The Auditor shall issue the NSSDC - Form 5 - whenever a

suspension/disallowance or charge is settled.
1. A suspension shall be settled by the submission of the
justification/explanation and/or documentation required under an NS
and after the Auditor becomes satisfied
that the transaction is regular/legal/proper and that no loss was suffered
by the
government. If the Auditor is not satisfied with the
justification/explanation and/or
documentation submitted, he shall issue the corresponding ND/NC.

2. A disallowance or charge shall be settled by payment of the amount

disallowed or by such other applicable modes of extinguishment of
obligation as provided by law.
In the case of the latter modes, the Auditor may refer to the General
Counsel, for
evaluation and advice, the propriety of the settlement.
 EXAMINATION OF ACCOUNTS BY THE
COMMISSION ON AUDIT
Statement of Audit Suspensions, Disallowance and Charges (SASDC). –

The Auditor shall prepare the SASDC - Form 6 - summarizing the total
suspensions,
disallowances and charges of the audited transactions of an agency
at the end of each quarter.

The SASDC shall indicate the balance at the beginning of each

quarter of the
suspension/disallowances/charges, as well as the
suspension/disallowances/charges,
and settlements during the quarter. It shall be signed by the Audit
Team Leader and the Supervising Auditor