COMMISSION ON AUDIT CIRCULAR NO.

81-156 January 19, 1981

TO : All Heads of Ministries, Agencies, Offices, Sub-division and Instrumentalities of the

Government, Including Government-Owned or Controlled Corporations and Local
Government Units; COA Managers/General Counsel COA Regional Directors; All
Auditors/Heads of Auditing Units; Provincial and City Treasurers; Cash and Property
Accountable Officers; Chief Accountants and Others Concerned.

SUBJECT : Restating the Requirements for the Use of the Certificate of Settlement and Balances and
Providing Guidelines on Its Issuance Including the Accounting Treatment Thereof.

I. PURPOSE AND SCOPE:

1. Auditors of all government agencies shall certify the balances arising in the accounts settled
by them. The auditor concerned shall send a written notice under a Certificate of Settlement and
Balances (referred to hereafter as the certificate) to each officer whose accounts have been audited and
settled in whole or in part by him, stating the balances found due thereon and certified, and the charges or
differences arising from the settlement by reason of disallowances, charges or suspensions. (Sec.81 and
82, P.D. 1445)

2. The Certificate has been devised to apprise the accountable officer and the head of the
agency concerned of any deficiency or differences found in the audit and settlement of the formers
account, and of giving him an opportunity to explain or adjust such deficiencies or differences as promptly
as possible. It also enables the Commission on Audit and its representatives to determine the
disallowances found in the audit of the accounts as well as the official or officials who are liable therefore.

3. This circular is designed to restate the requirements for the use of the Certificate and to
provide guidelines on its issuance. It also prescribes the accounting entries for the disallowances and
settlement of the accounts involved. For the purpose of identifying the accountable officer to whom the
Certificate shall be addressed in the case of payments by treasury warrants are also treated of in this
circular.

II. STATEMENT OF POLICIES:

A. Money/Cash Accounts

1. Auditors of all national government agencies, local government units and

government-owned or controlled corporations shall audit the money/cash accounts
and thereafter certify the balances arising in the accounts settled by them within sixty
(60) days from the date of receipt of those accounts from the treasurer, collecting
officer or disbursing officer concerned (Sec. 81, PD 1445). For this purpose, the
Chief Accountant/Treasurer shall turn over the reports of collections/disbursements,
journal and supporting documents to the Auditor for audit and final custody within ten
(10) days after the same had been submitted by the Accountable Officer to the Chief
Accountant/Treasurer for recording in the books of accounts in accordance with the
existing regulations.

2. For better internal control and for expediency in determining accountability for
payments made thru treasury warrants, Type "B", the custody of said blank treasury
warrants is hereby transferred from the Chief Accountant to the Cashier/Disbursing
Officer of the agency.
 3. The responsibility for the preparation of treasury warrants and the related required
reports(e.g. Statement of Accountability for Accountable Forms, etc.), including the
keeping of the Warrant Register, shall be lodged with the Cashier/Disbursing Officer.
A "Report of Treasury Warrant (Type B) Issue", shall be prepared by the
Cashier/Disbursing Officer and submitted to the Chief Accountant in the same format
and frequency as in the case of the "Report of Checks Issued by Deputized
Disbursing Officer"(COA Circular No. 79-107 and BC No. 235, dated June 22, 1973).

B. Property/Supply Accounts

1. The audit and certification of property/supply accounts shall be done at least once a year
and whenever there is a change or property/supply officer and/or agency head.

C. Liability of Head of Agency, Accountable Officer and Other Officials and Employees

1. The liability of an official or employee for disallowances or discrepancies in accounts

audited shall depend upon his participation in the transaction involved. The accountability
and responsibility of officials and employees for government funds and property as
provided in Sections 101 and 102 of P.D.1445 do not necessarily give rise to liability for
loss or government funds or damage to property.

2. The head of any agency or instrumentality of the national government or any

government-owned or controlled corporation and other self-governing board or
commission of the government shall exercise the diligence of a good father of a family in
supervising accountable officers under his control to prevent the incurrence of loss of
government funds or property, otherwise, he shall be jointly and solidarity liable with the
person primarily accountable therefore. The treasurer of the local government unit shall
likewise exercise the same degree of supervision over accountable officers under his
supervision; otherwise, he shall be jointly and solidarity liable with them for the loss of
government funds or property under their control. (Sec. 104, P.D. 1445.)

3. Every officer accountable for government property shall be liable for its money value in
case of improper or unauthorized use or misapplication thereof, by himself or any person
for whose acts he may be responsible. He shall likewise be liable for all losses,
damages, or deterioration occasioned by negligence in the keeping or use of the
property, whether or not it be at the time in his actual custody. (Sec. 1057, P.D. 1445.)

4. Every officer accountable for government funds shall be liable for all losses resulting from
the unlawful deposit, use, or application thereof and for all losses attributable to
negligence in the keeping of the funds. (Sec. 2 P.D. 1445.)

5. No accountable officer shall be relieved from liability by reason of his having acted under
the direction of superior officer in paying out, applying, or disposing of the funds or
property with which he is chargeable, unless prior to that act, he notified the superior
officer in writing of the illegality of the payment, application, or disposition of the funds or
property shall be primarily liable for the loss, while the accountable officer who fails to
serve the required notice shall be secondarily liable.

6. In case of a disallowance in post-audit due principally to the failure of the payee to submit
or accomplish documents after the payment has been made(e.g. failure to submit
Appendix "B" and Certificate of Appearance or equivalent to support payment of travel
expense), the payee shall be personally liable for such disallowance.

7. Expenditures of government funds or uses of government property in violation of law or

regulation shall be a personal liability of the official or employee found to be directly
responsible therefore (Sec. 103, P.D. 1445). To this end, within thirty (30) days from the
 date the charge or suspension has become a disallowance in accordance with paragraph
III – 6 of this Circular, the auditor shall determine the person or persons liable for items
disallowed in audit on the basis of the facts and circumstances of each case, as well as
the provisions of Presidential Decree No. 1445 and other applicable laws. He shall submit
his findings and recommendations to the COA Managers/Regional Director concerned
who, within ten(10) days from receipt of the findings and recommendations of the unit
auditor shall act or decide on the matter and, wherever proper, order the withholding of
the payment of any money due the person or persons determined to be so liable
pursuant to Section 37 of Presidential Decree No. 1445.

III. GENERAL INSTRUCTIONS:

1. For the money/cash accounts, the Certificate shall be issued bi-monthly by the Auditor to
cover two months transactions. For the property account, the certificate shall be issued at
least once a year as of December 31, and whenever there is a change or property officer.

2. The Certificate shall be addressed to the agency head and the appropriate accountable
officer thus:

Accountability Accountable Officer

Collection accounts Collecting Officer,

Treasurer

Cash Disbursements Disbursing Officer,

Treasurer

Disbursements by
TCAA checks Chief Accountant

Disbursements by
Treasury Warrants Chief Accountant

Disbursement by check Chief Accountant

drawn against agency's Treasurer
own checking account

Property/Supply accounts Property/Supply Officer

Individual notification shall be sent to officials and employees who may be found liable for
disallowance in accordance with paragraph II above.

3. In the case the accountable officer being audited is both a collecting and a disbursing
officer, the auditor shall prepare separate certificate for each accountability.

4. The Certificate shall be prepared in five (5) copies for distribution as follows:

1st copy - Head of Agency

2nd copy - Accountable Officer

3rd copy - Chief Accountant/Treasurer for entry in the books of

accounts.

4th copy - COA Manager/Regional Director concerned.

 5th copy - Auditor's file copy

5. The Head of Agency, who is immediately and primarily responsible for all government funds
and property pertaining to his agency, shall see that the audit suspensions/disallowances
are immediately settled.

6. A charge or suspension which is not satisfactorily explained within (90) days after receipt of
the certificate or notice by the accountable officer concerned shall become a disallowance,
unless the Commission on Audit or the Auditor shall, in writing and for good cause shown,
extend the time for answer beyond (90) days (Sec. 82, P.D. 1445). For this purpose, the
date or receipt by the accountable officer of the certificate including certificate sent thru the
mails (should be registered), shall be indicated on the Auditor's file copy, together with the
initials of the accountable officer-addresses or his authorized representative, if delivered
personally.

7. Request for reconsideration on audit suspension/disallowances, as well as submission of

required documents shall be made to the Auditor concerned. In the case of disallowances
where personal liability of the person or persons concerned has been determine in
accordance with the procedure prescribe in paragraph II-C(7) above, the request for
reconsideration or appeal shall be forwarded by the Auditor within ten(10) days from date
receipt thereof, with his recommendation, to the Chairman, Commission on Audit, thru the
COA Regional Director concerned.

8. Accounts which have been settled by the unit auditor in accordance with the procedures
prescribed in this Circular and other auditing regulations shall in no case be opened,
reviewed or revised except as provided in Section 52 of Presidential Decree No. 1445.

9. Official receipts evidencing refunds in settlement of suspensions or disallowances shall be

presented by the accountable officers concerned to the Auditor so that such can be
included in the Certificate.

10. The Certificate, specifically Section A thereof, shall be in lieu of the Tentative Suspension
Sheet which had heretofore been used to inform the accountable officer of differences
found in the audit of his account.

11. The detailed instructions on the accomplishment of the Certificate are printed at the back of
the Certificate which is attached to the Circular as Appendix A.

12. The provisions of the National Accounting and Auditing Manual (Sections 65 to 71) and the
Revised Manual of Instructions to Treasurers (Sections 605, 606, and 1109 to 1113) on the
issuance contents and enforcement of the Certificate, insofar as they are not in conflict
herewith, shall be suppletory to the provisions of this Circular.

IV. ACCOUNTING INSTRUCTIONS

1. In order to insure proper control, all disallowances and settlements thereof shall be
recorded in the books of accounts in the manner prescribed in Appendix "B". For this
purpose, the following sub- accounts shall be used:

8-74-710 - Contingent Assets - Claims for Disallowed payments -

Disallowances

8-74-720 - Contingent Assets - Claims for Disallowed Payments

Decided cases
 2. The third copy of the certificate shall be the basis of the Chief Accountant in drawing up the
journal entries illustrated in Appendix "B".

3. Subsidiary ledgers shall be maintained to support the sub-accounts "Contingent Assets -

Claims for Disallowed Payments - Disallowances" and "Contingent Assets - Claims for
Disallowed Payments - Decided Cases".

4. Suspensions shall not be recorded in the books of accounts; refunds in settlement thereof
shall, however, be so recorded.

5. The Auditor shall keep a separate file of Certificate issued to each accountable officer. The
total of each type of unsettled disallowances of all accountable officers shall tally with the
balances of the following general ledger accounts:

8 - 74 – 100 = Total shortages of current assets

8 - 74 – 200 = Total shortages of fixed assets

8 - 74 - 400 = Total shortages of cash

8 - 74 – 710 = Total disallowed payments

8 - 74 - 720

V. REPEALING CLAUSE:

1. All circulars, memoranda, orders, rules and regulations previously issued by this
Commission which are inconsistent or in conflict with this Circular shall be deemed
repealed or modified accordingly.

VI. EFFECTIVITY CLAUSE:

1. This Circular shall take effect immediately.

(SGD.) SILVESTRE D. SARMIENTO, Commissioner

(SGD.) FRANCISCO S. TANTUICO, JR., Acting Chairman
COMMISSION ON AUDIT CIRCULAR NO. 80-124 January 18, 1980

TO : All Managing Heads, Resident Auditors of Government- Owned or Controlled

Corporations and Subsidiaries including Self-Governing Boards, Commissions,
Agencies and State Colleges and Universities and Others Concerned.

SUBJECT : Inventory of Fixed Assets of Government-Owned and/or Controlled Corporations

and Subsidiaries, including self-governing boards, commissions, agencies and
state colleges and universities.

I. PURPOSE:

Physical inventory-taking being an indispensable procedure for checking the integrity

of property custodianship has to be regularly enforced. In line with this and to
operationalize the provisions of Section 102 of the Government Auditing Code of the
Philippines (P.D. 1445), this circular is issued.

II. SCOPE

This circular prescribes the rules and regulations for the inventory of fixed assets of
all government-owned and/or controlled corporations and subsidiaries, including self-
governing boards, commissions, agencies and state colleges and universities.

III. RESPONSIBILITY AND ACCOUNTABILITY:

The head of government-owned and/or controlled corporations and subsidiaries

including self-governing boards, commissions, agencies and state colleges and
universities shall exercise the diligence of a good father of a family in supervising
accountable officers under his control to prevent the incurrence of loss of government
property, otherwise he shall be jointly and solidarily liable with persons primarily
accountable therefor.

Fixing of primary responsibility and accountability of government property to the head

of the agency is in line with keeping the discharge of fiscal responsibility with the head of
the government agency. Basic responsibility cannot and must not be shifted from the
government agency concerned

to any official and/or personnel of the Commission on Audit.

Persons entrusted with the possession or custody of the property under the agency
head shall be immediately responsible to him without prejudice to the liability of either
party to the government.

Every officer accountable for government property shall be liable for its money value
in case of improper or unauthorized use or misapplication thereof, by himself or any
person for whose acts he may be responsible as provided for under Sec. 105 of PD 1445.
He shall likewise, be liable for all losses, damages, or deterioration envisioned by
negligence in the keeping or use of the property whether or not it be at the time in his
actual custody.
 Every officer of any government agency whose duties permit or require the
possession or custody of government funds or property shall be accountable therefor and
for the safekeeping thereof shall be properly bonded in accordance with law.

Failure on the part of the officials concerned to submit the inventory reports
mentioned herein shall automatically cause the suspension of payment of their salaries
until they shall have complied with the requirements pursuant to Sec. 122 of PD 1445.

IV. PERIOD OF INVENTORY:

Physical inventory of fixed assets shall be made at least once a year as of December
31 in accordance with the guidelines enumerated herein.

Inventory reports of regional/branch offices, shall be submitted to the head of the

agency not later than January 20 for consolidation and the consolidated inventory shall be
submitted to the Auditor not later than January 31 of each year, unless extended by the
Chairman upon prior request of the head of agency concerned.

V. GUIDELINES FOR INVENTORY-TAKING:

1. Creation of Inventory Committee

A committee shall be formed to take charge of the physical inventory-taking,

consisting of two or more employees designated by the head of the agency including the
property/administrative officer or custodian depending on the extent of his accountability.
A representative of the Auditor shall witness the inventory-taking.

2. Property Identification and Coding

Government property shall be properly labelled and identified by the Inventory

Committee. Inventory labels of special materials shall contain among others the individual
property number to be provided by the corporation concerned. These numbers shall be
uniformly printed in India Ink, to achieve permanence and best results, and shall be posted
on a prominent but secure portion of the property for easy identification.

3. Memorandum Receipt

An officer or employee who receives and is in actual possession or physical control

of the property shall sign a Memorandum Receipts (Gen. Form No. 32) for such property
and shall be accountable therefor. Such Memorandum Receipts for property in the
custody of an officer or employee shall be renewed every three years.

4. Inventory Reports

All inventory reports shall be prepared on the prescribed form (Gen. Form No. 41-A)
and certified correct by the committee in charge thereof, noted by the Auditor and
approved by the head of the agency. The reports shall be properly reconciled with
accounting and inventory records.

VI. REPEALING CLAUSE AND EFFECTIVITY:

 All circulars, orders, memoranda and existing rules and regulations inconsistent
herewith are hereby repealed or amended accordingly.

This circular shall take effect immediately.

(SGD.) FRANCISCO S. TANTUICO, JR., Acting Chairman

CHAPTER 9
Accountability and Responsibility for Government Funds and Property
SECTION 50. Accountable Officers; Board Requirements.—(1) Every officer of any
government agency whose duties permit or require the possession or custody
government funds shall be accountable therefor and for safekeeping thereof in
conformity with law; and
(2) Every accountable officer shall be properly bonded in accordance with law.
SECTION 51. Primary and Secondary Responsibility.—(1) The head of any agency of
the Government is immediately and primarily responsible for all government funds and
property pertaining to his agency;
(2) Persons entrusted with the possession or custody of the funds or property under the
agency head shall be immediately responsible to him, without prejudice to the liability of
either party to the Government.
SECTION 52. General Liability for Unlawful Expenditures.—Expenditures of
government funds or uses of government property in violation of law or regulations shall
be a personal liability of the official or employee found to be directly responsible
therefor.
SECTION 53. Prohibition Against Pecuniary Interest.—No accountable or responsible
officer shall be pecuniarily interested, directly or indirectly, in any contract or transaction
of the agency in which he is such an officer.
Executive Order No. 292
ADMINISTRATIVE CODE OF 1987
AC 518 HAND-OUTSGOVERNMENT
ACCOUNTINGA N D
A U D I
T I N G
T N C R
The National Government of the Philippines
The government is the largest financial organization in terms of assets, liabilities, capital,
sources of income anditems of expenditures. It is also the largest entity in terms of
number and quality of personnel, facilities andinstrumentalities, which are used to serve the
social, political and economic needs of the nation. The governmenthas as many departments,
commissions or offices as necessary to be able to carry out its functions, like promotion of social welfare,
development of national wealth, defense of the state from internal and external aggression, promotionof
justice, promotion of trade and industry, general government and protection of private rights of the
people.
Government Accounting Defined(Section 109 of PD 1445)
Government Accounting
encompasses the processes of analyzing, recording, classifying, summarizing
andcommunicating all transactions involving
the receipt and disposition of government funds and property andinterpreting the results
thereof. Government accounting is a service activity.Three (3) types of governmental organizational units:
•
National Government Unit(LGU) – are agencies that includes
all departments, bureaus, offices,boards, commissions, councils state colleges and universities.
•
Local Government Unit(NGAs)- political subdivisions of the Philippines having substantial controlover
local affairs, consisting of provinces, cities, municipalities and barangays.
•
Government Owned or Controlled Corp(GOCC)- are agencies organized by law or pursuant to
law,vested with functions relating to public needs whether government or propriety in nature, owned
bythe government directly or through its instrumentalities either wholly or, where applicable as in caseof
stock corporation, to the extent of at least fifty one % of its capital stock.
FUNCTIONS OF GOVERNMENT ACCOUNTING
To provide quantitative information primarily financial in nature about the operations of the
government, bothnational and local, to be used by the administration in making decisions
for a more effective and efficient public service.
OBJECTIVES
1.To provide quantitative information concerning past operations and present conditions.2.To provide a
basis for guidance for future operations.3.To provide for control of the account of public entities and
officers in the receipt, dispositionand utilization funds and properties, and4.To report on the financial
position and the result of the operations of the government agenciesfor the information of all persons
concerned.Users of Government Accounting Information:1. The General public or citizenry
2.
The Governing and oversight bodies: The President, Cabinet, COA, Legislative Body.3. The
managers/administrators who are in-charge of carrying out the policy and daily conduct of
governmentaffairs.4. The students of public finance5. The resource providers of the
government such as:
•
Donors or grantors
•
Lenders, suppliers and employees whose main concern is to know whether the government canpay its
obligations to them.
DISTINCTIONS BETWEEN GOVERNMENT AND COMMERCIAL ENTERPRISES
1. Ownership - Private enterprises are owned by a relatively few stockholde rs, partners, or
owners. Thegovernment represent the entire people in a given community.2. Purpose - Private
enterprises are organized primarily to make profits. The government is set up mainly torender service at
lowest possible cost to its constituents.