CHAPTER IX: BUDGETING,

ACCOUNTING and AUDITING RULES

and REGULATIONS
Terms, Notations and Important
Concepts
1. Budget Preparation

This covers estimation of government’s revenues, the determination of budget

priorities and activities within the constraints imposed by available revenues and
by borrowing limits, and the translation of approved priorities and activities into
expenditure levels for a budget year.

2. Budget Legislation Authorization

This refers to the enactment of the General Appropriation Bill into Appropriations
Act based on the budget of “receipts and expenditures”.

3. Budget Execution

This third phase of the budget process covers the various operational aspect of
budgeting.

4. Simplified Fund Release System (SFRS)

It is a standardized system releasing allotments based on a predetermined

categorization or disaggregation of agency budgets.

It was implemented under the National Budget Circular No. 440, dated January
30, 1995.

5. General Allotment Release Order (GARO)

It is a comprehensive authority issued to all agencies in general, to incur
obligations not exceeding authorized amount during the specified period for the
purpose indicated.

6. Special Allotment Release Order (SARO)

It is a specific authority issued to one (1) or more identified agencies to incur

obligations not exceeding a given amount during a specified period for the
purpose indicated.

7. Notes on Expense Account and Others

 Extraordinary And Miscellaneous Expenses (3-18-000)- This account

includes, but shall not be limited to, expenses incurred for or during
meetings , seminars and conference, official entertainment by the
official or through his authorized representative, public relations,
educational, athletic and cultural activities, contributions to civic or
charitable institutions, membership fees in government associations,
membership fees in national professional organizations duly
accredited by the Professional Regulation Commission and/or
membership fees in the Integrated Bar of the Philippines,
subscription to professional technical journals and informative
magazines. This account also includes library books and materials,
office equipment and supplies and other similar expenses that are
not supported by the regular budget allocations, provided that no
portion of the amounts authorized thereon shall be used for the
creation of positions, nor for salaries, wages, allowances, intelligence
or confidential expenses.
 Confidential and intelligence Expenses (3-19-000) – This account
includes the cost of services which are confidential in nature,
rendered by persons who are temporarily employed by authorized
administrative or executive officers to carry on successfully
administrative activities; compensation of informers employed to
detect the whereabouts of criminals or the existence of prohibited
games, which compensation shall not exceed ten per cent (10%) of
the fines imposed upon the convicts; and other expressly authorized
 confidential expenses for which appropriations have been approved
specifically for the purpose.
 Advertising and Publication Expenses (3-23-000)- This account
includes the cost of advertising and publication of notices in
newspapers and magazines of genereal circulation.
 Personal Services (3-01-000) – This account includes the pay proper,
accrued, terminal leave pay, salary adjustment and standardization;
allowances for subsistence, quarters, laundry, cost of living, per diem
compensation and longevity pay; premiums for social security
insurance; overtime pay.
 The provision for Personal Economic Relief Allowance (PERA) shall be
in accordance with Budget Circular No. 4, dated June 28,1992, as
amended by Budget Circular No. 4-A, and shall be based only on the
number of filled itemized positions entitled thereto.
 The grant of P500 additional compensation shall be in accordance
with the provisions of Administrative Order N0. 53 dated May 17,
1993, and shall be based only on the number of filled itemized
positions entitled thereto.
 Fifty per cent (50%) of the Year-End Bonus is given not earlier than
May 15 but not later than May 31 of each year subject to the
implementing rules and regulations issued by the DBM in
accordance with R.A. 6686 as implemented by NCC 66.
 The rate of honoraria for resource persons and experts shall not
exceed P250 but shall not be lower than P100 per hour. The total
honoraria shall be computed based on the said rate multiplied by
the projected total number of hours.
 The government’s counterpart to the Medicare premium
contribution of regular employees shall be computed at P1,200 each
member per annum.
 The government’s counterpart to the contribution of regular
member employees to the Pag-ibig Fund shall be computed P1,200
each member per annum.
 The government’s contribution to Employees Compensation
Insurance Premium (ECIP) for each regular employee shall be
computed at P450 per annum.
 The amount of contribution to GSIS Retirement and Life Insurance
Premiums for the purpose shall be equal to 13% of total salaries of
filled itemized positions.
 Travelling Expenses (3-02-000) – This account includes expenses
incurred in the movement of persons whether employed in the
government or not, such as transportation, subsistence, lodging and
travel per diems, hire and guides or patrol; transportation of
personnel baggage or household effects; bus, railroad, airline and
steamship fares, tips, transfers, etc., of persons while travelling
abroad; charter of boats, launches, automobiles, etc., non-
commutable transportation allowances, road tolls; parking fees and
all other similar expenses.
 Communication Services (3-03-000) – This account includes
expenses for communication of message such as telephone,
telegraph, wireless and cable charges and tolls, postage charges, rent
of post office boxes; and telegraph messenger services.
 Repair and Maintenance of Government Facilities (3-04-000) – This
account includes cost of repairing and maintaining government
facilities such as public buildings, road, bridges, irrigation systems,
river control and sea protection works, artesian wells, water supply
systems, telegraph lines, radio stations, wharves and other public
structures.
 Repair and maintenance of Government Vehicles (3-05-000) – This
account includes the cost of repairing and maintaining government
vehicles. Not include herein are spare parts, gasoline and oil which
shall be under Supplies and Materials.
 Transportation Services (3-06-000) – This account includes the cost
of transportation of things such as commercial transportation of
mail, hauling charges and insurance of items sold by government
equipment of materials from one (1) place to another, including
porterage and storage, if any. Not include in this account is the cost
of transportation of equipment, supplies and materials purchased for
operation which shall be considered as part of the cost of item.
 Supplies and Materials (3-07-000) – this account includes the cost of
all expendable commodities acquired or ordered for immediate use
in connection with government operations. It also includes, but is
not restricted to items 1) normally consume within (1) year after
 being put into use , or 2) converted in the process of manufacture or
construction, having a life expectancy of more than (1) year but
which shall have decrease substantially in value after being put into
use in only one (1) year.
 Rents (3-08-000)- this account includes charges for the use of
facilities or equipment belonging to others.
 Interests (3-09-000) – this account includes charges for the use of
funds belonging to others, such as interest on bonds, loans,
provisional advances, treasury bills, treasury notes, certificates of
indebtedness, and other interest-bearing obligations.
 Grants, Subsidies and Contributions (3-10-000) – This account
includes all aids and contributions in the form of cash or property
granted to persons, entities or organizations for the purpose of
furthering programs or policies adjudged to be in the interest of the
government.
 Awards and Indemnities (3-11-000)- This account includes
indemnities for destruction of property or injury to persons, awards
by courts or by administrative bodies.
 Loan Repayment and Sinking Fund Contributions (3-12-000)- This
account includes payment made either directly or into a sinking fund
established for the retirement of public debt and other long- term
obligations.
 Losses/ Depreciation/depletion (3-13-000)- This account includes
losses of current assets due to deterioration of supplies and sales
stock, uncollectible debts and losses of government funds or
property for which relief is granted under Section 73 of P.D. No. 1445
and/or depreciation of fixed assets due to fair wear and tear in
accordance with approved schedule.
 Water, illumination and power Services(3-14-000) – This account
includes the cost of water and electricity or gas illumination,
consume in government facilities such as office buildings , shops and
grounds, streets, plazas, parks and monuments. Etc., in connection
with government operations and projects.
 Social Security Benefits, Rewards and other Claims (3-15-000)- this
account includes all claims for social security benefits , rewards,
compensations and others claims for past services, other than
pensions.
 Auditing Services (3-16-000)- this account includes the amount
remitted to the Commission on audit for auditing services rendered
to the agency.
 Training and Seminar Expenses (3-17-000) – This account include
expenses incurred for participation/attendance of personnel to
training and seminars/ workshops.
 Fidelity Bond and Insurance Premiums (3- 24-000)- This account
includes expenses for premiums on fidelity bond of accountable
officials and insurance premiums of government properties such as,
government buildings, equipments, motor, vehicles, etc.
 Other Services (3-29-000)- This account includes the cost of all other
services which are not otherwise classified under other accounts.
 Investment Outlay (4-31-000)- This account includes cost
investments in stock, bonds or other securities of government and
private corporations, associations, or political sub-divisions.
 Loans Outlay (4-32-000)- This accounts includes loans and capital
advances made to persons, government and private corporations
revolving funds, associations and political sub-divisions.
 Livestock and Crops Outlay(4-33-000)- this accounts includes the
costs of investments in breeding animals including their offspring,
animal dispersal program, and fruit or non-fruit bearing perennial
crops.
 Land and Land Improvements Outlay(4-34-000)- This account
includes the cost of rights to lands ownership and the permanent
improvements to land such as filling, grading, draining, surveying,
and planting trees.
 Buildings and Structures Outlay (4-35-000)- This account includes
the cost of building structures, purchased or constructed and
permanent improvements thereto.
 Furniture, Fixture, Equipment and books Outlay (4-36-000)- This
accounts includes furniture, fixtures and equipments and books, the
cost of which shall not be higher than the minimum amount
prescribed by COA, whose serviceable life is more than one year and
which adds to the assets of the government.
 Works animals Outlay (4-37-000)- This accounts includes the
appraised value or other appropriate value of work animal which add
to the assets of the government.
 Receipts- Refers to all cash inflow whether actual or constructive
regardless of source or purpose and whether pertaining to the
agency or not. It includes not only income or revenue actually
collected but also trust receipts, fund deposits, anter-fund and inter-
agency transfers and equity contributions received by corporate
agencies(COA Memo 84-411, supra)
 Revenue(or its synonym, “income”) – Covers tax and non-tax items
such as those earned or realized from regular operations and
services rendered, government business or proprietory operations,
sales of assets, and grants/aids, whether actually collected in cash or
accrued, resulting in additions to or increases in the net assets of an
entity (COA Memo 84-411, July 26,1984).
 Government Funds – Includes public money of every sort and other
resources pertaining to any agency of the government (Sec. 3(2), PD
1445).
 Revenue Funds-Comprises all funds derived from the income of any
agency of the government and available for appropriation or
expenditure in accordance with the law (Sec . 3(3), PD 1445).
 Trust Funds- refers to funds which have come officially into the
possession of any agency of the government or of public officer as
trustee, agent, or administrator , or which have been received for the
fulfillment of some obligations.
 Depository Funds- comprises funds over which the officer
accountable therefore may retain control for the lawful purposes for
which they come into possession. It embraces moneys in and any
and all depositories (Sec. 3(5), PD 1445).
 General Fund- is available for any purpose to which the legislative
body may choose to apply it. It is composed of all receipts or
revenues which are not by the law or by contractual agreement
applicable to specific purposes. It is used to finance the ordinary
operations of a government unit.
 Special Fund – is one which by legislative actions, segregates
specified revenues for limited purposes, often called a “special
revenue fund”.
 Trust Fund- refers to funds which have come officially into the
possession of any agency of the government or of a public officer as
trustee, agent, orv administrator, or which have been received for the
 fulfillment of some obligation (Sec. 2(4). BK V(B), 1987 Adm. Code;
Sec 3(4), PD 1445).
 Annual Appropriation- consists of specified amounts of salaries,
wages, and sundry expenses, etc. authorized by Congress or other
appropriate authorities as necessary for the regular operations of all
the departments, bureaus and offices of the Government during any
given year.
 Continuing Appropriation- refers to funds available to support
obligations for 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 years (Sec. 2(6), BK VI, 1987 Adm. Code; Sec. 306
c, RA 7160).
 Contingent Appropriation – is one provided by law out of which the
executive branch of the government may supplement regular
appropriations or meet emergency expenditures.
 Supplemental Appropriation- is one prepared to adjust the
equilibrium of the first approved budget which has been disturbed
or current economic, political, or social conditions, or to provide an
additional amount to the original appropriations which proved to be
inadequate or insufficient for to the particular purpose intended.
 Current Operating Expenditures- refer to appropriations for the
purchase of goods and services for current consumption or for
benefits expected to terminate within the fiscal year (Sec. 2(4), BK VI,
1987, Adm. Code; Sec. 306 (f) RA 7160).
 Capital Outlays- refer to the appropriations for the purchase of
goods and services, the benefits of which extend beyond the fiscal
year and which add to the assets of government.
 Unnecessary Expenditures- pertain to expenses which could not pass
the test of prudence or the obligation of a good father of a family,
thereby non- responsiveness to the exigencies of the service (COA
Cir. 85-55A, Supra).
 Excessive Expenditures –signify expenses incurred at an immoderate
quantity or exorbitant price. It includes expenses which exceed what
is usual or proper as well as expenses which are unreasonably high,
and just beyond measure and amount.
 Extravagant Expenditures – refer to those expenses which are
unreasonable, immoderate and incurred in violation and ethics and
morality.
 Disbursement – constitute all cash paid out during a given period in
currency or by check.