Financial

Management
System
DURING SUB-PROJECT IMPLEMENTATION (SPI)
 Financial Management System Guidelines

01 Legal Basis JARGON ALERT!

3TheTYPES
sub-projectOF FUNDS
fund, DEPOSITED
whether from the Grant, LCC, orINother
THEcashTRUST FUND
receipts shall be administered in
accordance with the program guidelines observing government laws, specifically the
ACCOUNT:
Section 4 of P.D. No. 1445, the Government Auditing Code of the Philippines.
• Grant – Fund received from DSWD to be used for the sub-
02 project
Trust Fund Account Signatories
•TheLCC
Barangay– Local Counterpart
and Tribal Council through aContribution from the
Resolution shall authorize the Barangay Treasurer
and Punong Barangay to open a Barangay Trust Fund account with the nearest LBP branch bank
municipality, barangay, or the community to be used for the
in the locality with the two of them as signatories
sub-project
03 • Other Cash Receipts – refundable cash deposits (e.g. Bid
Fund Release by Tranche
Security, Performance Security, etc.). This does not form
The DSWD shall release the Grant component to the Barangay’s Trust Fund Account in two
part(90%
tranches of theand cost
10%) inof the sub-project
accordance with the existing guidelines and RFR checklist.
 Financial Management System Guidelines
JARGON ALERT!
04
2 Entity
TYPES OF SURPLUS FUNDS:
Concept
• Ifproject’s
the Sub-Project generates income, the Barangay shall open a separate bank account for the sub-
Savings– fund is already in the trust fund account
income and shall not mix it with the Grant received;
• Excess – fund is in the final tranche, not yet downloaded to
the Liquidation
trust fund account
05 Fund
Fund replenishment, liquidation and audit shall be in accordance with the existing guidelines as
embodied in the Manual of Financial Management of Barangays,
Example:
COA circular 2019-001 dated January 30, 2019, other applicable COA circulars and other governing
• government
Total Grant – 1,000,000
laws, rules and regulations
• First Tranche – 900,000
06 Utilization of Savings / Excess Fund
• TheContract Cost
Grant component – 700,000
of Sub-Project budget duly approved by the MDRRMC is not subject to change. If there are

• savings/excess
SAVINGS
savings
fund realized during the implementation, the Barangay shall draw a plan on the utilization of the
– by
to be approved 200,000
the BDRRMC in a meeting held for that purpose. Savings can be used for enhancement
• EXCESS – 100,000
of the same sub-project.
 Financial Management System Guidelines

07
Cost Overrun
JARGON ALERT!
Cost overruns shall be covered through augmentation of local counterpart contributions.

Cost Overrun – unexpected incurred costs

08 Closing of Trust Fund Account
Example:
After the subproject was completed and funds have been fully utilized, close the Barangay Trust
• Fund
Total Grant
Account, – bank
secure 900,000
certification from LBP and submit the same to DSWD RPMO.

• Contract Cost – 895,000

09 • Booking
ActualofCostAssets due to price escalation, etc – 905,000
• Recognize
Cost Overrun – 10,000
the cost of completed to beincovered
sub-project by the
the BLGU books uponLCC
turnover thru the Municipal
Accountant, all relevant documents necessary for the recognition of the sub-project shall be
provided by the BLGU thru the Barangay Treasurer to the Municipal Accountant
 6 Financial-related Activities under KALAHI CIDSS during SPI
5. Closing Activities
Completed sub-projects are 1. Request for Fund Release (RFR)
recognized in the books of the LGU Preparation of documentary requirements in
(Booking of Assets). Trust fund order for the funds to be released.
account balance becomes zero and
is either closed or used in the
succeeding cycle if applicable.

4. Physical and Financial Assessment 2. Fund Disbursement

Evaluation of both Municipal Financial Analyst Once fund is downloaded in
and Technical Facilitator if available funds can the trust fund account, fund is
complete the sub-project. If yes, proceed to disbursed as payment for
closing activities, else, request for additional services received.
funds.

3. Fund Liquidation
Records of disbursement are forwarded to
COA for auditing purposes. This is to ensure
that funds were used in accordance with the
guidelines.
 6 Financial-related Activities under KALAHI CIDSS during SPI
5. Closing Activities
Completed sub-projects are 1. Request for Fund Release (RFR)
recognized in the books of the LGU Preparation of documentary requirements in
(Booking of Assets). Trust fund order for the funds to be released.
account balance becomes zero and
is either closed or used in the
succeeding cycle if applicable.

2. Fund Disbursement
4. Physical and Financial Assessment
Once fund is downloaded in
Evaluation of both Municipal Financial Analyst the trust fund account, fund is
and Technical Facilitator if available funds can disbursed as payment for
complete the sub-project. If yes, proceed to services received.
closing activities, else, request for additional
funds.

6. Bookkeeping 3. Fund Liquidation

It is the recording of all financial transactions as Records of disbursement are forwarded to
basis for financial reporting. This encompasses all COA for auditing purposes. This is to ensure
activities as everything needs to be recorded. that funds were used in accordance with the
guidelines.
6 Financial-related Activities under KALAHI CIDSS during SPI

01 Request for Fund

06
Release

02 Fund Disbursement

Bookkeeping
03 Fund Liquidation

Physical and Financial

04 Assessment

05
05 Closing Activities
 Guide for Fund Disbursement
NE S S
ETE
Besides the 3Cs of Accounting, particularly
MPL
• Check whether goods & services are billed by the creditor to the sub-project CO
• Check whether billed goods and services are received
• Check whether payee is in the name of the establishment or of the
E SS
proprietor
E CTN
• Verify whether the person who signed in the “Received by” portion of the
ORR
Disbursement Voucher and who received the check is the right payee. If
not, check whether he/she is authorized C
• Check whether Sales Invoice and Collection Receipt or Official Receipt, as
applicable, is attached to paid DVs and the amounts are consistent
NCY
• For payroll payment, check whether recipient of cash is the worker. If not,
I S TE
S
CON
check whether person who received is authorized.
• For payroll payment, check whether cash is fully disbursed. If not, checked
whether unreleased cash is deposited back to the account.
 Fund Disbursement
For the list of attachments and forms, click here.

Payment to Contractors Petty Cash Fund

Payment to contractors for the accomplishment of
sub-projects that involve infrastructure
Payment of Goods
Payment to suppliers for goods/ equipment/
supplies delivered
Establishment of petty cash fund to pay for minor
expenses such as travel allowance and office supplies
Tax Remittance
Remittance to BIR for taxes withheld from
contractors, service providers, and suppliers

Payment of Professional Fees Refunds

Payment to professionals for services rendered Refunds of the cash kept in the account for deposit
purposes (e.g. account opening, bid security, etc.)

Supplies for Distribution Cash-for-Work

Purchase of PPEs, Hygiene Kits, Cleaning, and Payment to community members in exchange for
Medical Supplies services rendered
 Payment to Contractors

Recoupment of Deduction of Deduction of

Mobilization Fee Withholding Tax Retention Fee

Retention fee refers to the 10%

The contractor may be The corresponding amount retained from all
allowed to collect Withholding Taxes shall progress billings to cover
Mobilization Fee of up be deducted from the total uncorrected discovered defects
to 15% of the total billing using these rates: and third-party liabilities. The
retention fee shall be refunded
contract cost. In such EWT–2% and VAT–5%. to the contractor upon
case, the amount must be Payment for mobilization completion of the sub-project
recouped from the first fee is not subject to provided that bank guarantee
progress billing. Withholding Tax. or surety bond is given. The
refund shall not be subjected to
Withholding Tax.
 Payment to Contractors
Example: ABC Builders sent a Letter of Intent addressed to the Barangay Chairperson
requesting for payment on the progress accomplished. Statement of Work Accomplished (SWA)
indicates 30% accomplishment. The total contract cost is 1,000,000.00. Upon review of the
documents supporting the claim, the Treasurer found it complete and compliant with the policies
and guidelines.

Question 1: How much should the Treasurer pay assuming ABC Builders previously requested
for 15% mobilization fee?

Question 2: How much should the Treasurer pay assuming ABC Builders did not request for
mobilization?
 Payment to Contractors
With Recoupment of Mobilization Without Mobilization Fee Requested

1st Progress Billing 1st Progress Billing

Contract Cost 1,000,000.00 Contract Cost 1,000,000.00

Mobilization Fee (15%) 150,000.00 Gross Billing (Contract x 300,000.00
Gross Billing (Contract x 300,000.00 30%)
30%) Deductions: 30,000.00
Deductions: 150,000.00 Retention Fee (Gross x 10%) 5,357.14
Full Recoupment of Mob. Fee 30,000.00 EWT (Gross/1.12 x 2%) 13,392.86
Retention Fee (Gross x 10%) 5,357.14 VAT (Gross/1.12 x 5%) 48,750.00
EWT (Gross/1.12 x 2%) 13,392.86 Total Deductions 251,250.00
VAT (Gross/1.12 x 5%) 198,750.00 Net Billing
Total Deductions 101,250.00
Net Billing
 Payment to Contractors
Example: After a few weeks, same contractor sent another Letter of Intent requesting for another
payment. SWA indicates 80% of accomplishment. Upon review of the documents supporting the
claim, the Treasurer found it complete and compliant with the policies and guidelines.

Question: How much should the Treasurer pay to ABC Builders for the 2nd billing?

2nd Progress Billing

Contract Cost 1,000,000.00

Accomplishment to Date (Contract x 80%) 800,000.00
Less: Previous Gross Billing (300,000.00)
Gross Billing 500,000.00
Deductions:
Retention Fee (Gross x 10%) 50,000.00
EWT (Gross/1.12 x 2%) 8,928.57
VAT (Gross/1.12 x 5%) 22,321.43
Total Deductions 81,250.00
Net Billing 418,750.00
 Payment to Contractors
Example: Sub-project has been completed, contractor now sent attachments for the final billing.
Upon review of the documents supporting the claim, the Treasurer found it complete and
compliant with the policies and guidelines.

Question: How much should the Treasurer pay to ABC Builders for the final billing?

3rd Progress Billing

Contract Cost 1,000,000.00

Accomplishment to Date (Contract x 100%) 1,000,000.00
Less: Previous Gross Billing (800,000.00)
Gross Billing 200,000.00
Deductions:
Retention Fee (Gross x 10%) 20,000.00
EWT (Gross/1.12 x 2%) 3,571.43
VAT (Gross/1.12 x 5%) 8,928.57
Total Deductions 32,500.00
Net Billing 167,500.00
 Sample
DV for
1st Billing
 Payment of Goods
Example: An invoice in the amount of 100,000.00 was presented to the Treasurer for payment for
equipment delivered by ABC Company. Upon review of the documents supporting the claim, the
Treasurer found it complete and compliant with the policies and guidelines.

Question 1: How much should the Treasurer pay assuming ABC Company is VAT-registered?
Question 2: How much should the Treasurer pay assuming ABC Company is NonVAT-registered?
 Payment of Goods
VAT Supplier NonVAT Supplier
1. Compute the tax base. 1. Compute the tax base.
100,000 = 89,285.71
1.12 100,000. Tax base is the invoice amount.

2. Computer for the withholding tax. 2. Computer for the withholding tax.

Expanded Withholding Tax: 89,285.71 x 1% = 892.86 Expanded Withholding Tax: 100,000 x 1% = 1,000
Value Added Tax: 89,285.71 x 5% = 4,464.29 Value Added Tax: 100,000 x 3% = 3,000
Total Withholding Taxes: 5,357.14 Total Withholding Taxes: 4,000
3. Compute for net payment. 3. Compute for net payment.

Total Amount of Invoice: 100,000.00 Total Amount of Invoice: 100,000.00

Withholding Taxes (5,357.14) Withholding Taxes (4,000.00)
Net Payment 94,642.86 Net Payment 96,000.00
Sample
DV for
Payment
of Goods
 Payment of Goods
RETENTION FEE FOR GOODS

According to GPPB 2016 Revised Implementing Rules and Regulations of RA 9184, the
obligation for the warranty of goods shall be covered by either retention money in an amount
equivalent to at least one percent (1%) but not to exceed five percent (5%) of every progress
payment, or a special bank guarantee equivalent to at least one percent (1%) but not to exceed
five percent (5%) of the total contract price.

It is highly recommended that the supplier must provide a bank guarantee or surety bond upon
delivery of the item so that no more retention money will be deducted upon payment.
 Petty Cash Fund
A fund established by the community to cover small expenses that may be incurred during sub-
project implementation. Includes:

Direct purchases amounting to not more than 3,000 at any one time for the
immediate and essential needs CSPMC/BLGU (e.g. office supplies, meals during
procurement activities, photocopying, etc.), where issuance of check is impractical.

Transportation Expenses for official authorized travel, such as delivery of invitation to

bid and other communications, as well as in connection with attendance to activities
such as MDRRMC meetings, submission of reports, etc.
 Petty Cash Fund
Once fund balance reaches 25% or less, replenishment is permitted by liquidating the funds used.
As the sub-project nears its end or once the Petty Cash Fund is no longer needed, the Treasurer
must close out and liquidate the fund.

As experienced in some municipalities, the Municipal Accountant does not

allow the establishing of a petty cash fund due to low liquidation rates.
Instead, they use reimbursement.
 Tax Remittance
Legal Basis:
Section 4.114-2(a) of RR 16-05, as amended: "The government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall,
before making payment on account of each purchase of goods and/or of services taxed at twelve
percent (12%) VAT deduct and withhold a final CREDITABLE VAT due at the rate of five percent (5%)
of the gross payment thereof."

Taxes withheld must be remitted on or before the 10th day of the following month in which
withholding was made. Failure to remit taxes withheld, shall held the treasure be personally
accountable and be subject to criminal prosecution. Upon conviction, he/she shall pay (i) the amount of
tax not withheld or remitted to BIR, or (ii) the amount not refunded to the supplier/
contractor/consultant in case of excessive withholding.
 Tax Remittance
Payment for Goods:
Expanded Withholding Tax - 1%
If VAT-registered - 5%
If NonVAT - 3%
Total to be withheld - 6% (if VAT) or 4% (if NonVAT)

Payment to Contractor:
Expanded Withholding Tax - 2%
VAT - 5% (all contractors are VAT-registered)
Total to be withheld - 7%

For Payment to Professional, refer to slide 20

 Process of Tax Remittance
Tax Certificate
Upon computation of taxes to be
withheld, treasurer must prepare a
Withholding Tax Certificate (2307)
to be given to the supplier/
contractor for taxes withheld.
Tax Forms
Once the total amount to be
remitted is identified, it shall be
encoded in the following tax forms
depending on the month:
0619E – Jan, Feb, Apr, May, Jul,
Aug, Oct, and Nov
1601E – Mar, Jun, Sept, and Dec
Alphalist of Payees
B Every month-end, the treasurer shall
A summarize all taxes withheld to be
encoded in the Alphalist of Payees
C
Payment to Bank
D Prepare the Disbursement Voucher and
Check based on the total amount in the
tax form. It is highly recommended to pay
in the bank for a real-time debit from the
account.
 Refunds of Other Cash Receipt
There are cash deposited in the bank account that are not to be used for the sub-project implementation.
This includes:

Cash used for the opening of trust fund account

Bid Security
Performance Security
Funds borrowed from BLGU as payment for amounts due (BIR Remittance) while waiting for the
download of final tranche
Retention Fee
 Cash-for-Work
Cash-for-Work (CFW) is a short-term intervention to provide temporary employment to
distressed / displaced individuals by participating in or undertaking preparedness, mitigation,
relief, rehabilitation or risk reduction projects and activities in their communities or in
evacuation centers.

The daily rate of Cash-for-Work shall be the prevailing daily wage rate set by the National
Wages and Productivity Commission.
6 Financial-related Activities under KALAHI CIDSS during SPI

01 Request for Fund

06
Release

02 Fund Disbursement

Bookkeeping
03 Fund Liquidation

Physical and Financial

04 Assessment

05 Closing Activities

Booking of Assets
 Financial Management System Guidelines

Legal Basis: According to the Philippine Public Sector Accounting Standards (PPSAS 17),
Property, Plant, and Equipment are recognized as assets if:

• Probable that the future economic benefits or service potential associated with the item
will flow to the entity
• Cost or fair value of the item can be measured reliable

09 Booking of Assets
Recognize the cost of completed sub-project in the BLGU books upon turnover thru the Municipal
Accountant, all relevant documents necessary for the recognition of the sub-project shall be
provided by the BLGU thru the Barangay Treasurer to the Municipal Accountant
 Booking of Assets

Once sub-projects have been completed, a copy of a Journal Entry Voucher is submitted to the
regional office as proof that the asset is book. Amount of the sub-project should equal to the total
actual cost.

If the sub-project is determined by the Municipal Accountant as an expense (e.g. supplies, cash-for-
work, etc), JEV will still be submitted but not recorded as an asset but an expense, with attached
certification by the Municipal Accountant certifying that such sub-project cannot be booked as an
asset.

Once booked, this should then be updated in the Geotagging Webapp.

Sample
JEV
 r i g h t ?
Ea sy,

Open your SP, scroll down, select

“Has Booking”, input the date of
booking, and click Save.
 Questions?
Clarifications?
Dorie Jane B. Palacio, MBA
Financial Analyst III