DISBURSEMENTS

Disbursement constitute all payments in cash, in whatever manner (i.g. through cash, check, or other
means). Disbursements shall be supported by Disbursement Vouchers (including Petty Cash Vouchers)
or Payroll.

Fundamental Principles for Disbursement of Public Funds

a. All government resources shall be used only in accordance with the law and only for public
purposes
b. Trust funds shall be used only for their specific purposes.
c. Fiscal responsibility shall be strictly shared by all those exercising authority over a government
agency.
d. The use of government resources shall be approved by proper officials.
e. Claims against government funds shall be supported with complete documentation.
f. All laws and regulations applicable to financial transactions shall be faithfully adherered to,
including generally accepted principles and practices of accounting, management and fiscal
administration, provided that they do not contravene existing laws and regulations.

Expenditures funded by borrowings are included in the expenditure program of the entity. The
loan proceeds shall not be used without the corresponding release of funds through a Special
Budget.

Authority to Disburse/Pay

An entity can make disbursement only after it has received a disbursemenr authority, based on the
following:

a. Notice of Cash Allocation (NCA)

b. Notice of Transfer of Allocation (NTA)
c. Tax Remittance Advice
d. Non-Cash Availment Authority (NCAA)
e. Cash Disbursement Ceiling (CDC) – authority issued to agencies with foreign operation e,g, DFA.
(see book for CDC journal entries)

Basic requirements and Certfications for Disbursements

The ff. are required in disbursing funds:

a. The Budget Officer (or Head of the Budget Unit) shall certify the availability of allotment;
b. The Chief Accountant (or Head of Accounting Unit) shall charge obligations against available
allotment;
  The foregoing are to ensure that no overdraft shall be incurred. An overdraft is incurred if
obligations exceed the allotment. The incurrence of overdraft is prohibited.

c. The Chief Accountant (or Head of the Accounting Unit) shall certify the availability of funds/cash
and the completeness of the supporting documents before the head of the agency (or his
authorized representative) can enter into any contract involving the expenditure of public funds;

 All disbursements require the certification of the Chief Accountant (or Head of Accounting
Unit). Certifications must be based on valid and properly authorized claims. Any certification
for fictitious obligation Is void. The certifying official shall be dismissed from service and shall
be held criminally liable. Others who are involved in the fictious transaction are also liable.
d. The requesting and the approving officials shall ensure that the disbursements are legal and
conform to applicable rules and regulations;
e. The Head of the Requesting Unit shall certify the necessity and legality of disbursements,
Payments shall be made through Disbursement Vouchers (DVs) and supported by the original
copies of supporting documents, and
f. The Head of Agency (or his authorized representatives) shall approve all DVs or Payrolls.

Modes of Disbursements

Different modes of disbursements are as follows:

1. Check
2. Cash
3. Cashless payments
a. Advice to Debit Account (ADA)
b. Electronic Modified Disbursement System (eMDS)
c. Cashless Purchase Card System (Credit Card)
d. Non-Cash Availment Authority (NCAA)
e. Tax Remittance Advice (TRA)

Disbursement through Checks

Checks are used whenever paymemts cannot be conveniently , or are not authorized to, be made
through xash or ADA. The following are the two types of checks issued by government entities:

a. Modified Disbursement System Checks – Checks chargeable against the account of the Treasurer
of the Philippines maintained with different Modified Disbursement System- Government
Servicing Banks (MDS-GSBs)
b. Commercial Checks – checks chargeable against the Agency Checking Account with GSBs. These
are covered by income/receipts authorized to be deposited with Authorized Government
Depository Banks (AGDBs).
 All checks drawn wether released or unreleased, inclusing cancelled checks, are recorded
chronologically in the Checks/ADA Disbursment Record maintained by the Cash/Treasury Unit.

Illustration:
Entity A disburses P10,000 for electricity expense. The entries are as follows:

MDS Check Commercial Check

Electricity Expense P10,000 Electricity Expense P10,000
Cash-MDS, Regular 10,000 Cash in Bank- Local Currency, P10,000
Current Account

Disbursement through Cash

Cash disbursement constitute payments through cash advances, including payments out of petty cash
fund. Cash advances are governed by the following rules:

a. Cash advances shall be made only for legally authorized specific purpose (i.e., payments for
personnel services, petty expenses, and MOEE for field operating requirements).
b. Cash advances, other than advances for travel, shall be given only to duly appointed Disbursing
Officers who must be properly bonded. The amount of cash advance shall not exceed the
maximum cash accountability under the bond.
c. Only designated Disbursing Officers are allowed to perform disbursing functions and only
permanently appointed officials shall be designated as disbursing officers.
d. A cash advance must be liquidated as soon as the purpose for which it was given has been
served.
 Cash advances for payroll shall be liquidated within 5 days after the end of the pay period.
Unclaimed salaries shall be refunded and issued official receipt to close the account.
 Cash advances for travel shall be liquidated as follows:
a. Local Travel – within 30 days upon return to the personnel’s workstation.
b. Foreign Travel – within 60 days upon return to the Philippines. No official foreign travel
if he is due to retire worth 1 year after the foreign travel.
e. No additional cash advance shall be given to any official employee unless the previous cash
advance fgobe tp him is frst liquidated.
f. Transfer of one cash advice from one officer to another officer is prohibited.
g. A cash advance shall not be used to enchas checks or to liquidate a previous cash advance.

Illustration:

Entity A disburses P10,000 for certain expenses through cash advance:

Advances for/to…. P10,000

Cash- MDS, regular 10,000
To record the grant of cash advances
 Expenses (appropriate accounts) 10,000
Advances for/to…. 10,000
To record the liquidation of cash advances

Disbursement through Advice to Debit Account (ADA)

The ADA, or more specifically the List of Due and Demandable Accounts Payable – Advice to Debit
Account (LLDAP-ADA), is an accountable form used as an authorization issued by a government agency
to the MDS-GDB instructing the bank to debit a specified amount from its available NCA to pay the
creditors/payees listed in the LDDAP-ADA.

The ADA works like a check, except that one ADA can be drawn to pay various payees, as long as
they all maintain accounts in the same bank where the ADA is drawn. Separate ADAs shall be prepared
for payees using other MDS-GSBs, ADA payments are directly credited to the payee’s accounts.

Simply stated, an ADA is an authorization for a fund transfer (between accounts in the same
bank) or a bank transfer ( between accounts with different banks) from the issuing agency’s NCA bank
account to the bank accounts of specified payees.

The following expenditures shall not be paid through ADA:

a. Payment of Terminal Leave and Retirement Gratuity benefits;

b. Remittances of GSIS, Philhealth and Pag-ibig contributions
c. Payments to utility companies (e.g. electricity, water, telephone, internet, petroleum, and the
like,)
d. Other payables which cannot be conveniently nor practicably paid using the ADA.

Illustrations:

Entity A pays P100,000 account payable through ADA.

Date Accounts Payable 100,000

Cash-MDS, Regular 100,000
To recognize payment of payables to suppliers/contractors through ADA

Disbursements through Electronic Modified Disbursement Systems

The eMDS is like the ADA except that disbursements are made directly from the accounts of the BTr that
are maintained with the Land Bank of the Philippines (LBP). Agencies subscribed under LBP’s eMDS can
make online disbursements for selected transactions.

Disbursements through Cashless Purchase Card (CPC) System

See Books
Disbursement through Non-Cash Availment Authority (NCAA)

See Book

Disbursemet through Tax Remittance Advice (TRA)

See Book

Accounting for Disallowances

Disallowances refer to expenditures made by an agency that are subsequently invalidated or disallowed
by the COA because they are found to be irregular, unnecessary, excessive, extravagant or
unconscionable. Disallowances are recorded in the books of accounts only when they become final and
executory.

Illustration:

Entity A acquired office supplies for P100,000. It was found out that the correct amount should have
been P90,000.

Amount Paid (‘Entry made’) 100,000

Should be 90,000

Overstatemet 10,000

The disallowance pertains to:

Current Year Prior Period
Receivables-Disallowances/Charges 10,000 Receivables – Disallowances/Charges 10,000
Office Supplies Expense 10,000 Accumulated Surplus/(Deficit) 10,000
To record the overpayment of purchased office To record the overpayment of purchased office
supplies supplies

Cash-Collecting Officers 10,000 Cash-Collecting Officers 10,000

Receivables-Disallowances/Charges 10,000 Receivables- Disallowances/Charges 10,000
To record the settlemt of disallowances To record the settlement of disallowances

Cash-Treasury/Agency Deposit, Regular 10,000 Cash-Treasury/Agency Deposit, Regular 10,000

Cash-Collecting Officers 10,000 Cash-Collecting Officers 10,000
To record the remittance of settlemet of To record the remittance of settlemet of
disallowances disallowances
Accounting for Overpayments

“Sometimes overpayment or even double payment of expenditures do happen in agencies. These could
be avoided with institution with proper controls but some could not avoid because of built-in
procedures. One example is the payment of payrolls. Payrolls are prepared in advance and some
agencies pay their employees through the banking system. All these are done before reports of
attendance are submitted, making it impossible to know the exact amount to be paid in case there are
absences without pay during the pay periods. In case of overpayments, refunds shall be demanded of
the employees concerned.”

Correcting entries for overpayments are similar to accounting for disallowances.