COMMISSION ON AUDIT CIRCULAR NO.

81-156 January 19, 1981

TO : All Heads of Ministries, Agencies, Offices, Sub-division and Instrumentalities of

the Government, Including Government-Owned or Controlled Corporations and
Local Government Units; COA Managers/General Counsel COA Regional
Directors; All Auditors/Heads of Auditing Units; Provincial and City Treasurers;
Cash and Property Accountable Officers; Chief Accountants and Others
Concerned.

SUBJECT : Restating the Requirements for the Use of the Certificate of Settlement and
Balances and Providing Guidelines on Its Issuance Including the Accounting
Treatment Thereof.

I. PURPOSE AND SCOPE:

1. Auditors of all government agencies shall certify the balances arising in the accounts
settled by them. The auditor concerned shall send a written notice under a Certificate of
Settlement and Balances (referred to hereafter as the certificate) to each officer whose accounts
have been audited and settled in whole or in part by him, stating the balances found due
thereon and certified, and the charges or differences arising from the settlement by reason of
disallowances, charges or suspensions. (Sec.81 and 82, P.D. 1445)

2. The Certificate has been devised to apprise the accountable officer and the head of
the agency concerned of any deficiency or differences found in the audit and settlement of the
formers account, and of giving him an opportunity to explain or adjust such deficiencies or
differences as promptly as possible. It also enables the Commission on Audit and its
representatives to determine the disallowances found in the audit of the accounts as well as the
official or officials who are liable therefore.

3. This circular is designed to restate the requirements for the use of the Certificate and
to provide guidelines on its issuance. It also prescribes the accounting entries for the
disallowances and settlement of the accounts involved. For the purpose of identifying the
accountable officer to whom the Certificate shall be addressed in the case of payments by
treasury warrants are also treated of in this circular.

II. STATEMENT OF POLICIES:

A. Money/Cash Accounts

1. Auditors of all national government agencies, local government units and

government-owned or controlled corporations shall audit the money/cash
accounts and thereafter certify the balances arising in the accounts settled by
them within sixty (60) days from the date of receipt of those accounts from
the treasurer, collecting officer or disbursing officer concerned (Sec. 81, PD
1445). For this purpose, the Chief Accountant/Treasurer shall turn over the
reports of collections/disbursements, journal and supporting documents to the
Auditor for audit and final custody within ten (10) days after the same had
 been submitted by the Accountable Officer to the Chief Accountant/Treasurer
for recording in the books of accounts in accordance with the existing
regulations.

2. For better internal control and for expediency in determining accountability for
payments made thru treasury warrants, Type "B", the custody of said blank
treasury warrants is hereby transferred from the Chief Accountant to the
Cashier/Disbursing Officer of the agency.

3. The responsibility for the preparation of treasury warrants and the related
required reports(e.g. Statement of Accountability for Accountable Forms,
etc.), including the keeping of the Warrant Register, shall be lodged with the
Cashier/Disbursing Officer. A "Report of Treasury Warrant (Type B) Issue",
shall be prepared by the Cashier/Disbursing Officer and submitted to the
Chief Accountant in the same format and frequency as in the case of the
"Report of Checks Issued by Deputized Disbursing Officer"(COA Circular No.
79-107 and BC No. 235, dated June 22, 1973).

B. Property/Supply Accounts

1. The audit and certification of property/supply accounts shall be done at least

once a year and whenever there is a change or property/supply officer and/or
agency head.

C. Liability of Head of Agency, Accountable Officer and Other Officials and

Employees

1. The liability of an official or employee for disallowances or discrepancies in

accounts audited shall depend upon his participation in the transaction involved.
The accountability and responsibility of officials and employees for government
funds and property as provided in Sections 101 and 102 of P.D.1445 do not
necessarily give rise to liability for loss or government funds or damage to
property.

2. The head of any agency or instrumentality of the national government or any

government-owned or controlled corporation and other self-governing board or
commission of the government shall exercise the diligence of a good father of a
family in supervising accountable officers under his control to prevent the
incurrence of loss of government funds or property, otherwise, he shall be jointly
and solidarity liable with the person primarily accountable therefore. The
treasurer of the local government unit shall likewise exercise the same degree of
supervision over accountable officers under his supervision; otherwise, he shall
be jointly and solidarity liable with them for the loss of government funds or
property under their control. (Sec. 104, P.D. 1445.)

3. Every officer accountable for government property shall be liable for its money
value in case of improper or unauthorized use or misapplication thereof, by
himself or any person for whose acts he may be responsible. He shall likewise
be liable for all losses, damages, or deterioration occasioned by negligence in
the keeping or use of the property, whether or not it be at the time in his actual
custody. (Sec. 1057, P.D. 1445.)
 4. 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. 2 P.D. 1445.)

5. No accountable officer shall be relieved from liability by reason of his having

acted under the direction of 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 of the funds or property shall be primarily liable for the loss, while
the accountable officer who fails to serve the required notice shall be secondarily
liable.

6. In case of a disallowance in post-audit due principally to the failure of the payee

to submit or accomplish documents after the payment has been made(e.g. failure
to submit Appendix "B" and Certificate of Appearance or equivalent to support
payment of travel expense), the payee shall be personally liable for such
disallowance.

7. Expenditures of government funds or uses of government property in violation of

law or regulation shall be a personal liability of the official or employee found to
be directly responsible therefore (Sec. 103, P.D. 1445). To this end, within thirty
(30) days from the date the charge or suspension has become a disallowance in
accordance with paragraph III – 6 of this Circular, the auditor shall determine the
person or persons liable for items disallowed in audit on the basis of the facts
and circumstances of each case, as well as the provisions of Presidential Decree
No. 1445 and other applicable laws. He shall submit his findings and
recommendations to the COA Managers/Regional Director concerned who,
within ten(10) days from receipt of the findings and recommendations of the unit
auditor shall act or decide on the matter and, wherever proper, order the
withholding of the payment of any money due the person or persons determined
to be so liable pursuant to Section 37 of Presidential Decree No. 1445.

III. GENERAL INSTRUCTIONS:

1. For the money/cash accounts, the Certificate shall be issued bi-monthly by the
Auditor to cover two months transactions. For the property account, the certificate
shall be issued at least once a year as of December 31, and whenever there is a
change or property officer.

2. The Certificate shall be addressed to the agency head and the appropriate
accountable officer thus:

Accountability Accountable Officer

Collection accounts Collecting Officer,

Treasurer

Cash Disbursements Disbursing Officer,

Treasurer
 Disbursements by
TCAA checks Chief Accountant

Disbursements by
Treasury Warrants Chief Accountant

Disbursement by check Chief Accountant

drawn against agency's Treasurer
own checking account

Property/Supply accounts Property/Supply Officer

Individual notification shall be sent to officials and employees who may be found
liable for disallowance in accordance with paragraph II above.

3. In the case the accountable officer being audited is both a collecting and a
disbursing officer, the auditor shall prepare separate certificate for each
accountability.

4. The Certificate shall be prepared in five (5) copies for distribution as follows:

1st copy - Head of Agency

2nd copy - Accountable Officer

3rd copy - Chief Accountant/Treasurer for entry in the books of

accounts.

4th copy - COA Manager/Regional Director concerned.

5th copy - Auditor's file copy

5. The Head of Agency, who is immediately and primarily responsible for all
government funds and property pertaining to his agency, shall see that the audit
suspensions/disallowances are immediately settled.

6. A charge or suspension which is not satisfactorily explained within (90) days after
receipt of the certificate or notice by the accountable officer concerned shall
become a disallowance, unless the Commission on Audit or the Auditor shall, in
writing and for good cause shown, extend the time for answer beyond (90) days
(Sec. 82, P.D. 1445). For this purpose, the date or receipt by the accountable
officer of the certificate including certificate sent thru the mails (should be
registered), shall be indicated on the Auditor's file copy, together with the initials of
the accountable officer-addresses or his authorized representative, if delivered
personally.

7. Request for reconsideration on audit suspension/disallowances, as well as

submission of required documents shall be made to the Auditor concerned. In the
case of disallowances where personal liability of the person or persons concerned
has been determine in accordance with the procedure prescribe in paragraph II-
 C(7) above, the request for reconsideration or appeal shall be forwarded by the
Auditor within ten(10) days from date receipt thereof, with his recommendation, to
the Chairman, Commission on Audit, thru the COA Regional Director concerned.

8. Accounts which have been settled by the unit auditor in accordance with the
procedures prescribed in this Circular and other auditing regulations shall in no
case be opened, reviewed or revised except as provided in Section 52 of
Presidential Decree No. 1445.

9. Official receipts evidencing refunds in settlement of suspensions or disallowances

shall be presented by the accountable officers concerned to the Auditor so that
such can be included in the Certificate.

10. The Certificate, specifically Section A thereof, shall be in lieu of the Tentative
Suspension Sheet which had heretofore been used to inform the accountable
officer of differences found in the audit of his account.

11. The detailed instructions on the accomplishment of the Certificate are printed at the
back of the Certificate which is attached to the Circular as Appendix A.

12. The provisions of the National Accounting and Auditing Manual (Sections 65 to 71)
and the Revised Manual of Instructions to Treasurers (Sections 605, 606, and
1109 to 1113) on the issuance contents and enforcement of the Certificate, insofar
as they are not in conflict herewith, shall be suppletory to the provisions of this
Circular.

IV. ACCOUNTING INSTRUCTIONS

1. In order to insure proper control, all disallowances and settlements thereof shall be
recorded in the books of accounts in the manner prescribed in Appendix "B". For
this purpose, the following sub- accounts shall be used:

8-74-710 - Contingent Assets - Claims for Disallowed payments -

Disallowances

8-74-720 - Contingent Assets - Claims for Disallowed Payments

Decided cases

2. The third copy of the certificate shall be the basis of the Chief Accountant in
drawing up the journal entries illustrated in Appendix "B".

3. Subsidiary ledgers shall be maintained to support the sub-accounts "Contingent

Assets - Claims for Disallowed Payments - Disallowances" and "Contingent Assets
- Claims for Disallowed Payments - Decided Cases".

4. Suspensions shall not be recorded in the books of accounts; refunds in settlement

thereof shall, however, be so recorded.
 5. The Auditor shall keep a separate file of Certificate issued to each accountable
officer. The total of each type of unsettled disallowances of all accountable officers
shall tally with the balances of the following general ledger accounts:

8 - 74 – 100 = Total shortages of current assets

8 - 74 – 200 = Total shortages of fixed assets

8 - 74 - 400 = Total shortages of cash

8 - 74 – 710 = Total disallowed payments

8 - 74 - 720

V. REPEALING CLAUSE:

1. All circulars, memoranda, orders, rules and regulations previously issued by this
Commission which are inconsistent or in conflict with this Circular shall be
deemed repealed or modified accordingly.

VI. EFFECTIVITY CLAUSE:

1. This Circular shall take effect immediately.

(SGD.) SILVESTRE D. SARMIENTO, Commissioner

(SGD.) FRANCISCO S. TANTUICO, JR., Acting Chairman