CHAPTER 5: DISBURSEMENTS

PREPARED BY: DELA CRUZ, MEDALLE, NASSER, PANTAO

DISBURSEMENTS
Disbursements constitute all payments in cash, in
whatever manner (i.e., 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 purpose.
b. Trust funds shall be used only for their specific purpose.
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 adhered to, including
generally accepted principles and practices of accounting, management and fiscal administration,
provided that they do not contravene existing laws and regulations.
AUTHORITY TO DISBURSE/PAY
 An entity can make disbursements only after it has received a disbursement authority, based on the
following:
a. Notice of Cash Allocation (NCA)
b. Notice of Transfer of Allocation (NTA)
c. Tax Remittance Advice (TRA)
d. Non-Cash Availment Authority (NCAA)
e. Cash Disbursement Ceiling (CDC) – authority issued by the DBM to agencies with foreign operations
allowing them to use the income collected by their Foreign Service Posts to cover their operating
requirements.
ENTRIES RELATED TO CDC:
Books of DFA or DOLE Books of BTr
Cash – Collecting Officer 100  
Passport and Visa Fees 100
To recognize collection of revenue of FSPs
Cash in Bank – Foreign  
Currency, Current Account 100
Cash – Collecting Officer 100
To recognize deposit of collections to authorized servicing bank
of the FSPs
Cash – Constructive Income Subsidy to NGAs 80
Remittance 80 Cash – Constructive Income
Subsidy from NG 80 Remittance 80
To recognize receipt of CDC from DBM To recognize constructive receipt of remitted collections by FSPs
and disbursement charges to the issued CDCs to FSPs
Rents – Buildings and Structures 80  
Cash in Bank – Foreign
Currency, Current Account 80
To recognize payment of expenses charges to CDC
BASIC REQUIREMENTS & CERTIFICATIONS FOR
DISBURSEMENTS

a. The Budget Officer (or Head of 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 Agency (or his authorized representative) can enter into any contract involving the
expenditure of public funds;
d. The requesting and 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) or Payroll and supported by the original copies of supporting documents; and
f. The Head of Agency (or his authorized representative) shall approve all DVs or Payrolls
MODES OF DISBURSEMENTS
a. Check
b. Cash
c. Cashless Payments
I. Advice to Debit Account (ADA)
II. Electronic Modified Disbursement System (eMDS)
III.Cashless Purchase Card System (Credit Card)
IV. Non-Cash Availment Authority (NCAA)
V. Tax Remittance Advice (TRA)
DISBURSEMENT THROUGH CHECK
 Checks are used whenever payments cannot conveniently, or are not authorized to,
be made through cash 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)
ILLUSTRATION:

Entity A disburses P10,000 for electricity expense.

Entry: MDS Check Commercial Check

Electricity Expense 10,000 Electricity Expense 10,000

Cash – MDS, Regular 10,000 Cash in Bank – Local
Currency, Current Accounts 10,000
DISBURSEMENTS THROUGH CASH
Cash Disbursements constitute payments through cash advances, including payments
out of the petty cash fund. Cash advances are governed by the following rules:
 Cash advances shall be made only for a legally authorized specific purpose (i.e.,
payments for personnel services, petty expenses, and MOOE for field operating
requirements).
 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
 Only designated Disbursing Officers are allowed to perform disbursing functions and only
permanently appointed officials shall be designated as disbursing officers
DISBURSEMENTS THROUGH CASH
 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:
o Local travel – within 30 days upon return to the personnel’s workstation
o Foreign travel – within 60 days upon return to the Philippines. No official or employee is allowed to go on an
official foreign travel if he is due to retire within 1 year after the foreign travel.
 No additional cash advance shall be given to any official or employee unless the previous cash advance given to
him is first liquidated.
 Transfer of cash advance form one officer to another is prohibited.
 A cash advance shall not be used to encash checks or to liquidate a previous cash advance.
ILLUSTRATION:

 Entity A disburses P 10,000 for certain expenses through cash advance.

The entries are as follows:
Date Advances for/ to 10,000  
Cash MDS, Regular 10,000

Date Expenses 10,000  

Advances for/ to 10,000
DISBURSEMENT THROUGH ADVICE TO DEBIT ACCOUNT (ADA)

The ADA, or more specifically the List of Due and Demandable Accounts
Payable – Advice to Debit Account (LDDAP-ADA), is an accountable form
used as an authorization issued by a government agency to the MDS-GSB
instructing the bank to debit a specified amount from its available NCA to
pay the creditors/ payees listed in the LDDAP-ADA.
 Simply stated, an ADA is an authorization for a fund transfer (between
accounts in 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.
DISBURSEMENT THROUGH ADVICE TO DEBIT ACCOUNT
(ADA)

The following expenditures shall not be paid through ADA:

a. Payment of Terminal Leave and Retirement Gratuity Benefits;
b. Remittance 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
DISBURSEMENTS THROUGH ELECTRONIC MODIFIED
DISBURSEMENT SYSTEM

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

Disbursements under the CPC System are made through the use of an electronic card (i.e., credit
card). The authorized credit card company is the Citibank. Guidelines int e use of CPC System are as
follows:
 CPC purchases shall be only for specific eligible items and only with specific merchants.
 Merchants – refer to the sellers or supplier authorized by Citibank.
 Only authorized individuals shall be allowed to use the CPC, subject to monthly credit limits. Changes
in credit limits or cardholders require the prior approval of the Steering Committee.
 Agency officials who approved the CPC are jointly accountable with the cardholders.
 The CPC System shall comply to, and shall not in any way change, the existing disbursement policies
and procedures prescribed under the law.
DISBURSEMENTS THROUGH CASHLESS PURCHASE CARD (CPC)
SYSTEM

a. The amount covered by the CPC shall form part of the cash advance levels of the participating agencies The
CPC shall not be used to justify the increase in cash advance levels of participating agencies.
b. The CPC shall initially be used for purchases of small value, non-common use items which are not available
with the Procurement Service,
c. Unauthorized items purchases using the CPC shall be the personal liability of the cardholder; without
prejudice to the revocation of the cardholder’s privileges and other penalties that the participating agencies
may impose.
d. Participating agencies shall immediately inform the Citibank of any discrepancy regarding items which they
dispute as having been procured using the CPC.
 Participating agencies shall ensure the timely payment of CPC billings. In case of delays, late payment charges
shall be the personal liability of the employee directly responsible for the delay. The NCA shall never be used
to pay late payment charges.
DISBURSEMENTS THROUGH CASHLESS PURCHASE CARD (CPC)
SYSTEM

 The cardholder shall submit all receipts from use of the CPC to the accounting unit. These
shall be used in inspecting actual goods purchased and in paying credit card billings.
 The accounting unit shall check if the procured items are those allowed by law to be
purchased using the CPC and compare the charge slips with the amounts in the billing
statement.
 In case the CPC is lost or stolen, the cardholder shall immediately notify the Program
Administrator and the Citibank. The Program Administrator shall determine whether the
cardholder was negligent and whether the cardholder’s privileges shall be reinstated or
permanently suspended. The cardholder shall be liable for any CPC charges during the
period the card was lost or stolen
DISBURSEMENT THROUGH NON-CASH AVAILMENT AUTHORITY
(NCAA)

 Non-Cash Availment Authority (NCAA) is the authority issued by the

DBM to agencies to cover the liquidation of their actual obligations
incurred against available allotments for availment of proceeds from
loans/grants through supplier’s credit/constructive cash.
 Disbursements through NCAA (also called “Direct Payment Method”
pr “Direct Payment Scheme of Loan Availment”) are made through the
Journal Entry Voucher (JEV) issued by the BTr to the agency to record
payment of goods and services made directly by the lending institution
to the supplier or contractor. The JEV is recorded in the General Journal.
ILLUSTRATION:

 Entity A acquires communication equipment for P1M, on account, and subsequently

settles the account through direct payment scheme.
Books of Entity A Books of BTr
Communication Equipment 1M  
Accounts Payable 1M
Accounts Payable 1M Subsidy to NGAs 1M
Subsidy from NG 1M Loans Payable – Foreign 1M
DISBURSEMENTS THROUGH TAX REMITTANCE ADVICE (TRA)

TRA is used for the constructive remittance of taxes or customs

duties withheld to the BIR or BOC, respectively.
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
Overstatement 10,000
JOURNAL ENTRIES
Current Year Prior Period
Receivables – Disallowances 10k Receivables – Disallowances 10k
Office Supplies Expense 10k Accumulated Surplus 10k

Cash – Collecting Officers 10k Cash – Collecting Officers 10k

Receivables – Disallowances 10k Receivables – Disallowances 10k

Cash – Treasury 10k Cash – Treasury 10k

Cash – Collecting Officers 10k Cash – Collecting Officers 10k
ACCOUNTING FOR OVERPAYMENTS

Sometimes, overpayments or even double payment of

expenditures do happen in agencies. These could be avoided
with the institution of proper controls but some could not be
avoided because of built-in procedures. One example is the
payment of payrolls. Correcting entries for overpayments are
similar to the accounting for disallowances.
PREPARED BY:

Nathaniel Dela Cruz Jr.

Emily Rose Medalle
Nasmerah Nasser
Shahanie Pantao