LAWS AND RULES ON

GOVERNMENT
EXPENDITURES
Ms. ANTONETTE T. GULIMAN, CPA
State Auditor IV
LGS D-Isabela Province I
Commission on Audit

28-29 May 2019

COA PSAO
Ilagan City
Expenditures defined
 The incurring of a liability, the payment of
cash, or the transfer of property for the
purpose of acquiring an asset or service or
settling a loss, when unqualified, the accrual
basis of accounting is assumed.

 The amount of cash or property paid or to be

paid for a service rendered, or an asset
purchased.

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Expenditures defined

• Any cost the benefits of which may extend

beyond the current accounting period.

• Under accrual accounting, expenditures include

all charges incurred whether paid or unpaid.

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Expense defined
• A term for a financial transaction or event resulting in
a decrease in assets (such as cash) or an increase in
liabilities (such as accounts payable) with a
corresponding decrease in owner’s equity.

• Items of expenditure incurred in operating a

business, outgo for all items that enter into costs of
manufacture or merchandising; offsets against
earnings and income.

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APPROPRIATION, ALLOTMENT,
OBLIGATION AND
DISBURSEMENT PROCESS

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 APPROPRIATION

- The authorization made by a legislative body to

allocate funds for purposes specified by the legislative
or similar authority (Sec 2, Chapter 3, GAM)

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 APPROPRIATION

Legal Provisions:

Sec. 29 (1) of the 1987 Constitution

“No money shall be paid out of the Treasury except in

pursuance of an appropriation made by law.”

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 APPROPRIATION

Legal Provisions:

Sec. 4 (1) of P.D. 1445

“No money shall be paid out of any public treasury or

depository except in pursuance of an appropriation
law or other specific statutory authority.”

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 APPROPRIATION

Legal Provisions:

Sec. 85 (1) of P.D. 1445

“No contract involving the expenditure of public

funds shall be entered into unless there is an
appropriation therefor, the unexpended balance of
which, free of other obligations, is sufficient to cover
the proposed expenditure.”

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 ALLOTMENT

• is an authorization issued by the DBM to NGAs to

incur obligations up to a specified amount that is
within a legislative appropriation as reflected in the
advice of allotment. Also called obligational
authority.

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 OBLIGATION

- refers to commitment by a government agency arising

from an act of a duly authorized official which binds
the government to the immediate or eventual payment
of a sum of money.

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 Appropriations, Allotments and
Obligations

- Under the GAM, journal entry shall no longer be

prepared to record the receipt of allotments and
incurrence of obligations. In lieu of this, separate
registries shall be maintained by the Budget Division
to record the allotments received for the year,
obligations incurred against the corresponding
allotment and the actual disbursements made for each
of the four classes of expenditures, namely:

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 Appropriations, Allotments and
Obligations
• Registry of Allotments, Obligations and Disbursements
– Personnel Services (RAOD-PS)
• Registry of Allotments, Obligations and Disbursements
– Maintenance and Other Operating Expenses
(RAOD-MOOE)
• Registry of Allotments, Obligations and Disbursements
– Financial Expenses (RAOD-FE).
• Registry of Allotments, Obligations and Disbursements
– Capital Outlay (RAOD-CO)

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 Appropriations, Allotments and
Obligations

- Three major expense accounts:

1. Personnel Services (PS)
2. Maintenance and Other Operating Expenses
(MOOE)
3. Financial Expenses (FE)

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 Appropriations, Allotments and
Obligations

Personnel Services (PS)

This account classification includes basic

pay, allowances, bonus, cash gifts,
incentives and benefits and other personnel
benefits of officers and employees of the
government.

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 Appropriations, Allotments and
Obligations

Maintenance and Other Operating Expenses

(MOOE)

This account classification includes expenses

necessary for the regular operation of an
agency like traveling expenses, repairs and
maintenance, subsidies, etc.

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 Appropriations, Allotments and
Obligations

Financial Expenses (FE)

This account classification includes bank

charges, interest expenses, commitment
charges and other financial charges. It also
includes losses incurred relative to foreign
exchange transactions.

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 DISBURSEMENTS

 refer to all cash paid out during a given period.

 settlement of government expenditures/

payables either by cash or by check.

 represent the movement of cash from an AGDB

or from the National/Local Treasurer or
authorized disbursing officer to the final
recipient.

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 APPROPRIATION, ALLOTMENT, OBLIGATION AND
DISBURSEMENT PROCESS (NATIONAL)

1. PREPARATION OF ESTIMATES, BUDGET

FORMS AND INSTRUCTIONS
8. APPROVAL BY CONGRESS

2. PREPARATION OF REVENUE AND

EXPENDITURE ESTIMATES 9. SIGNING OF THE GENERAL APPROPRIATIONS
ACT (GAA)
3. REVIEW AND CONSOLIDATION OF AGENCY
REQUEST BY DEPARTMENT 10. SUBMISSION OF AGENCY BUDGET MATRIX
(ABM) BY AGENCY TO DBM
4. TRANSMISSION OF DEPARTMENT REQUEST
TO DBM 11. ISSUANCE OF ALLOTMENT RELEASE
ORDER (ARO) BY DBM TO AGENCIES (with
corresponding NCA)
5. NEGOTIATION BETWEEN DEPARTMENT AND
DBM PREPARATION OF DRAFT BUDGET
12. INCUR OBLIGATIONS
(Expenditures)
6. CABINET REVIEW OF DRAFT BUDGET FOR
PRESIDENT’S APPROVAL
13. PAY OBLIGATIONS
(Disbursements)
7. FINAL BUDGET SUBMITTED TO CONGRESS
FOR APPROVAL (WITHIN 30 DAYS)

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FUNDAMENTAL PRINCIPLES
(P.D. No. 1445)
 No money shall be paid out of any public
treasury of depository except in pursuance of an
appropriation law or other specific statutory
authority.

 Government funds or property shall be spent or

used solely for public purposes.
FUNDAMENTAL PRINCIPLES
(P.D. No. 1445)
 Trust funds shall be available and may be spent
only for the specific purpose for which the trust
was created or the funds received.

 Fiscal responsibility shall, to the greatest extent,

be shared by all those exercising authority over
the financial affairs, transactions, and operations
of the government agency.
FUNDAMENTAL PRINCIPLES
(P.D. No. 1445)

 Disbursements or disposition of government funds

or property shall invariably bear the approval of
the proper officials.

 Claims against government funds shall be

supported with complete documentation.
FUNDAMENTAL PRINCIPLES
(P.D. No. 1445)

 All laws and regulations applicable to financial

transactions shall be faithfully adhered to.

 Generally accepted principles and practices of

accounting as well as of sound management and
fiscal administration shall be observed, provided
that they do not contravene existing laws and
regulations.
 Certificate of Availability of Fund (CAF)

 Approval of claim or expenditure by head of office or

his duly authorized representative

 Documents to establish validity of claim

 Legality of transactions and conformity of the

expenditure to existing laws and regulations

 Proper accounting treatment

 PREVENTION OF I I E E U U

Illegal Expenditures (COA Cir. No. 2009-006)

- Expenditures which are contrary to law

 PREVENTION OF I I E E U U

Illegal Expenditures (COA Cir. No. 2009-006)

• Expenditures made without legal basis

Situational cases (COA Cir. 2012-003 dated Oct. 29, 2012), such
as:
1. Payment of claims under a contract awarded not strictly in
accordance with the procedures prescribed under R.A. 9184;
2. Use of public funds for private purposes (Section 4(2) of PD
1445.
 PREVENTION OF I I E E U U

Irregular Expenditures (COA Cir. No. 85-55-A)

- signifies an expenditure incurred without adhering to

established rules, regulations, procedural guidelines,
policies, principles or practices that have gained
recognition in law.

- without conforming with prescribed usages and

rules of discipline.
 PREVENTION OF I I E E U U

Irregular Expenditures (COA Cir. No. 85-55-A)

- Non-observance of an established pattern, course,

mode of action, behavior, or conduct in the
incurrence thereof.

- A transaction conducted in a manner that deviates

or departs from, or which does not comply with
standards set is deemed irregular.
 PREVENTION OF I I E E U U

Irregular Expenditures (COA Cir. No. 85-55-A)

- An anomalous transaction which fails to follow or violates

appropriate rules of procedure, is likewise irregular.

- Irregular expenditures are different from illegal

expenditures since the latter would pertain to expenses
incurred in violation of the law whereas, the former is
incurred in violation of applicable rules and regulations
other than the law.
 PREVENTION OF I I E E U U

Excessive Expenditures (COA Cir. No. 85-55-A)

- signifies unreasonable expense or expenses incurred at

an immoderate quantity and exorbitant price.

- 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.
 PREVENTION OF I I E E U U

Extravagant Expenditures (COA Cir. No. 85-55-A)

- those incurred without restraints, judiciousness and

economy.

- extravagant expenditures exceed the bounds of

propriety.

- These expenditures are immoderate, prodigal, lavish,

luxurious, wasteful, grossly excessive, and injudicious.
 PREVENTION OF I I E E U U

Unnecessary Expenditures (COA Cir. No. 85-55-A)

The term pertains to expenditures which could not pass the

test of prudence or the diligence of a good father of a family,
thereby denoting non-responsiveness to the exigencies of
the service.

Unnecessary expenditures are those not supportive of the

implementation of the objectives and mission of the agency
relative to the nature of its operation.
 PREVENTION OF I I E E U U

Unnecessary Expenditures (COA Cir. No. 85-55-A)

This would also include incurrence of expenditure not

dictated by the demands of good government, and those the
utility of which can not be ascertained at a specific time.
An expenditure that is not essential or that which can be
dispensed with without loss or damage to property is
considered unnecessary. The mission and thrusts of the
agency incurring the expenditures must be considered in
determining in whether or not an expenditure is necessary.
 PREVENTION OF I I E E U U

Unconscionable Expenditures (COA Cir. No. 2009-006)

Those which are unreasonable and immoderate, and

which no man in his right sense would make, nor a
fair and honest man would accept as reasonable, and
those incurred in violation of ethical and moral
standards.
 MODES OF DISBURSEMENTS

1. By Check

Commercial checks for disbursements

covered by deposit with Authorized
Government Depository Bank (AGDB).
 MODES OF DISBURSEMENTS

2. By Cash thru the accountable officer (AO)

 disbursements out of cash

advances given to AO for
specific purpose and for
personal services.
 disbursements made by Petty
Cash Custodian out of his
Petty Cash Fund.
 CASH GRANTED TO ACCOUNTABLE
OFFICERS

Ideally, cash should be handled under the principles of petty

cash imprest system, to wit:

1. Daily receipts on collections must be deposited intact with

the proper bank.

2. All payments must be made by check.

3. Only payments in small amounts may be made through the

petty cash fund (PCF). Replenishment of the PCF shall equal
to the total amount of expenditures made therefrom.
 CASH GRANTED TO ACCOUNTABLE
OFFICERS

In practice, however, there are instances when it may

be very difficult, impractical or impossible to make
payments by check. In such cases, payments may be
made by the disbursing officer in the form of cash
through his/her cash advance.
 CASH GRANTED TO ACCOUNTABLE
OFFICERS

Cash Advance shall be of two types:

1. Regular cash advances

2. Special cash advances
 GRANTING AND UTILIZATION OF
CASH ADVANCES
General Guidelines:
• No Cash advance shall be given unless for a legally specific
purpose.

• A cash advance shall be reported on as soon as the purpose for

which it was given has been served.

• No additional cash advances shall be allowed to any official or

employee unless the previous cash advance given to him is first
settled or a proper accounting thereof is made. (Sec. 89, PD
No. 1445)
 GRANTING AND UTILIZATION OF
CASH ADVANCES

Penalty for violation of Sec. 89, PD No. 1445:

Section 128. Penal provision. Any violation of the

provisions of Sections xxx, 89, xxx of this Code or any
regulation issued by the Commission implementing
these sections, shall be punished by a fine not exceeding
P1,000.00 or by imprisonment not exceeding 6 months,
or both such fine and imprisonment in the discretion of
the court.
 GRANTING AND UTILIZATION OF
CASH ADVANCES
General Guidelines:
• Only permanently appointed officials shall be designated as
disbursing officers. Elected officials may be granted a cash
advance only for their official traveling expenses.

• Only duly appointed or designated disbursing officers may

perform disbursing functions. Officers and employees who
are given cash advances for official travel need not be
designated as Disbursing Officers.

• Transfer of cash advance from one Accountable Officer (AO)

to another shall not be allowed.
 GRANTING AND UTILIZATION OF
CASH ADVANCES
General Guidelines:

• The cash advance shall be used solely for the specific legal
purpose for which it was granted. Under no circumstance shall
it be used for encashment of checks or for liquidation of a
previous cash advance.

• The Accountant shall obligate all cash advances granted. He

shall see that cash advances for a particular year are not used
to pay expenses of other years.

• No cash advance shall be granted for payments on account of

infrastructure projects or other undertaking on a project basis.
LIQUIDATION OF CASH ADVANCES

The AO shall liquidate his cash advance as follows:

• Salaries, Wages, etc. – within 5 days after each 15 day/end of

the month pay period.

• Petty Operating Expenses and Field Operating Expenses –

within 20 days after the end of the year; subject to
replenishment as frequently as necessary during the year.
LIQUIDATION OF CASH ADVANCES

The AO shall liquidate his cash advance as follows:

• Official Travel – within 60 days after return to the Philippines in

the case of foreign travel or within 30 days after return to his
permanent official station in the case of local travel, as
provided for in EO 298 dated March 23, 2004.
LIQUIDATION OF CASH ADVANCES
The AO shall prepare the Report of Disbursements in 3 copies
and submit the same with duly accomplished vouchers/payrolls
and supporting documents to the Accountant.

For payments based on receipts and invoices only, he shall also

prepare a liquidation voucher which shall be submitted with the
report and supporting documents to the Accountant. He shall
ensure that receipt of the report is properly acknowledged by
the Accountant.

The AO shall be deemed to have complied with the requirement

of proper accounting for the cash advance upon the receipt by
the Accountant of the liquidation documents referred to above.
LIQUIDATION OF CASH ADVANCES

Within 10 days after receipt of the report and

supporting documents from the AO, the Accountant
shall verify the report, record it in the books and submit
the same with all the vouchers/payrolls and supporting
documents to the Auditor.

The cash advance shall be considered liquidated upon

the recording thereof by the Accountant in the books of
accounts although not yet audited by the COA auditor.
LIQUIDATION OF CASH ADVANCES

When a cash advance is no longer needed or has not

been used for a period of 2 months, it must be
returned to or refunded immediately to the collecting
officer.
LIQUIDATION OF CASH ADVANCES

All cash advances shall be fully liquidated at the end

of each year. Except for petty cash fund, the AO shall
refund any unexpended balance to the
Cashier/Collecting Officer who will issue the
necessary official receipt.
LIQUIDATION OF CASH ADVANCES
At the start of an ensuing year, a new cash advance
may be granted, provided that a list of expenses
against the previous cash advance is submitted.
However, when no liquidation of the previous cash
advance is received on or before January 20, the
Accountant shall cause the withholding of the AO’s
salary.
THANK
Y U!!!
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