Chapter 5.

SPECIAL FUNDS

A. ACCOUNTING FOR SPECIAL EDUCATION FUND

Sec. 81. Special Education Fund. – The Special Education

Fund (SEF) consist of the proceeds of one percent (1%) tax on the
assessed value of real property in addition to the basic real property
tax, which a province or city, or a municipality within the
Metropolitan Manila Area, may levy and collect.

Sec. 82. Application of Proceeds of the Additional One

Percent (1%) Special Education Fund Tax. – (a) The proceeds of
the additional one percent (1%) real property tax accruing to special
education fund shall be automatically released to the local school
boards.

(b) In case of provinces, the proceeds of the special

education fund shall be divided equally between the provincial and
municipal school boards.

(c) Said proceeds shall be allocated as determined and

approved by the local school boards concerned only for the following
purposes:

1. Operation and maintenance of public schools;

2. Construction and repair of school buildings,
facilities and equipment;
3. Educational research;
4. Purchase of books and periodicals; and
5. Sports development.
(Article 363 of the IRR of the Local Government Code)

Sec. 83. Special Education Fund Budget. – The Local

School Board shall determine in accordance with the criteria set by
DECS, the annual supplementary budgetary needs for the operation
and maintenance of public schools within the province, city, or
municipality as the case maybe, and the supplementary local cost of
meeting such needs, which shall be reflected in the form of an annual
school board budget corresponding to its share of the proceeds of the
special levy on real property constituting the special education fund

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and such other sources of revenue as the Local Government Code
and other laws or ordinances may provide. (Article 184(b)(1) of the
IRR of the Local Government Code)

The division superintendent, city superintendent, or district

supervisor, as the case maybe, shall prepare the budget of the school
board concerned. Such budget shall be supported by programs,
projects and activities of the school board for the ensuing fiscal year.
A majority of all the members shall be necessary to approve the
budget. (Article 184(f) of the IRR of the Local Government Code)

The annual school board shall give priority to the following:

1. Construction, repair and maintenance of school

buildings and other facilities of public elementary
and secondary schools;
2. Establishment and maintenance of extension
classes when necessary; and
3. Holding of sports activities at the division, district,
municipal, and barangay levels.

Sec. 84. Basis of Recording Special Education Tax –

Special Education Tax Receivables shall be established at the
beginning of the year based on Real Property Tax Account
Register/Taxpayer’s index card. At the beginning of the year, the
Treasurer shall furnish the Chief Accountant with a duly certified list
of the name of taxpayers and the amount due and collectible for the
year. Based on the list, the Chief Accountant shall draw a Journal
Entry Voucher (JEV) to record the Special Education Tax
Receivables.

Sec. 85. Delinquencies for Special Education Tax prior to

CY 2002. – Payment of delinquencies for special education taxes
prior to CY 2002 shall be recognized as a direct credit to Special
Education Tax Income account.

Sec. 86. Collection Procedures for the Special Education

Tax. – The additional one percent (1%) tax on real property shall be
collected simultaneously with the basic real property tax. A single
official receipt shall be issued for both taxes, indicating therein the
amount paid for the basic tax and the additional one percent tax.
However, the collecting officer shall prepare separate reports of

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collections for the two taxes. Further, the proceeds of the additional
one per cent tax shall be deposited in a separate depository account.

Procedures for the turn over of collections, frequency of

deposit of collection with the bank, preparation of report of
collections, verification of collections and accountable forms,
preparation of report of accountability for accountable forms as well
as consolidation of reports of accountable forms shall be the same as
that prescribed for collections in the General Fund.

Sec. 87. Separate Cashbooks for Special Education Fund.

– The Treasurer and/or the concerned accountable officers shall
maintain separate cashbooks for the SEF which shall be in
accordance with the prescribed format.

Sec. 88. Separate Registries, Books of Accounts, and

Financial Reports for Special Education Fund. – The Chief
Accountant shall maintain separate registries for appropriation,
allotment and obligations and books of accounts for SEF. He shall
likewise prepare separate financial reports such as the Trial Balance,
Balance Sheet, Statement of Income and Expenses, Statement of
Cash Flows and supporting schedules, to be submitted within the
prescribed timeframe.

For disbursements, separate set of JEVs shall also be

prepared which shall be numbered in accordance with the prescribed
codes.

Sec. 89. Preparation and Control of ALOBS for Special

Education Fund. – The Allotment and Obligation Slips (ALOBS)
pertaining to the fund shall be prepared and signed by authorized
official of the requesting department or office. This shall be
forwarded to the Budget Officer who, based on the approved school
board budget, shall verify the existence of appropriation for the
proposed expenditure. He shall certify the ALOBS to that effect and
number the same in accordance with the prescribed codes. This shall
then be forwarded to the Chief Accountant who shall certify as to
obligations of allotments and shall record the same in the appropriate
Registry of Appropriations, Allotments and Obligations (RAAO).
The ALOBS shall form an integral part of the disbursement
voucher/payroll and the certifications of the local budget officer and
the accountant thereon shall serve as their certification of the
disbursement as required by law.

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 Sec. 90. Certification as to Cash Availability. – The
Treasurer shall certify as to cash availability for the fund in the
Disbursement Voucher and Purchase Request. For infrastructure
projects undertaken by contract, the Treasurer shall also certify as to
cash availability in the contract. This certification shall serve as the
required certification under the law.

Sec. 91. Disbursement Procedures. – Disbursement

procedures including the reports to be submitted by the accountable
officer concerned are the same as those for the General Fund.
However, disbursements shall be approved by the Local Chief
Executive concerned as co-chairman of the local school board. The
division/city superintendent of schools or the district supervisor
concerned, as the case maybe, shall certify vouchers or payrolls as to
validity, propriety, and legality of the claim involved.

Sec. 92. Inventory Process. – The perpetual inventory

method and the moving average method shall likewise be adopted in
the accounting and costing of inventory. The general procedures, the
forms and reports for the holding of inventory shall also be followed.
However, separate perpetual inventory records and stock cards shall
be maintained by the Accounting Unit and the General Services
Officer or the Treasurer, as the case maybe. Likewise, separate
weekly Summary for Supplies and Materials Issued pertaining to the
fund shall be prepared.

Sec. 93. Pro-forma Accounting Entries. – Pro-forma

accounting entries for the fund, follows:

SPECIAL EDUCATION FUND (SEF)

Acct.
Particulars Account Title Code Debit Credit

1. Set-up Special Special Education Tax

education Tax Receivable 125 500,000
Receivable Deferred Special
Total Receivables – Education Tax
P500,000 Income 449 500,000
Provincial Share –
P250,000

2. Collection of Special Cash in Treasury 101 200,000

Education Tax – Special Education
P200,000. Tax Receivable 125 200,000

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 Acct.
Particulars Account Title Code Debit Credit

Computation of Shares Deferred Special

of LGUs in RPT – Education Tax
50% of Income 449 200,000
P200,000 for Special Education Tax
Provincial 713 100,000
Share Due to LGUs 431 100,000

3. Deposit of collections Cash in Bank – LCCA 110 200,000

with authorized Cash in Treasury 101 200,000
depository bank

4. Remittance of share to Due to LGUs 431 100,000

Province ( Special (Province)
Education Tax) Cash in Bank – LCCA 110 100,000
– P100,000

5. Receipt of allotment for Memo entry in

– Allotment Class: Registry of
Personal Services - Appropriations ,
P50,000 Allotments and
MOOE - Obligations (Personal
20,000 Services– (RAAOPS,
Capital Outlay - MOOE – RAAOMO,
30,000 Capital Outlay –
Total P100,000 RAAOCO)

6. Obligation for PS – Memo entry in

Salaries of teachers for RAAOPS
extension class –
P30,000

7. Grant of cash advance Cash Disbursing

for payroll Officers 107 25,000
Cash in Bank – LCCA 110 25,000

8. Payment of Salaries Salaries and Wages –

Salaries per Payroll Regular Pay 801 30,000
P 30,000 Cash – Disbursing
Less: Deductions – Officers 107 25,000
(Personal Share) Withholding Taxes
Life & Ret. P 2,850 Payable 410 1,050
Pag-ibig 600

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 Acct.
Particulars Account Title Code Debit Credit

PhilHealth 500 GSIS Payable 411 2,850

W/holding Tax 1,050 PAG-IBIG Payable 412 600
5,000 PHILHEALTH
Net Pay per Payroll Payable 413 500
P25,000

9. Remittance of salary Withholding Taxes

deductions Payable 410 1,050
GSIS Payable 411 2,850
PAG-IBIG Payable 412 600
PHILHEALTH
Payable 413 500
Cash in Bank – LCCA 110 5,000

10. Obligation for Memo entry in

Government Share: RAAOPS
Life & Ret. Ins.
Contributions
P2,850
Pag-ibig
Contributions
600
PhilHealth
Contributions
500
Total P3,950

11. Payment of Life & Retirement

Government Share Insurance
Contributions 817 2,850
PAG-IBIG
Contributions 818 500
PHILHEALTH
Contributions 819 600
Cash in Bank – LCCA 110 3,950

12. Obligation of Memo entry in

Traveling Expenses – RAAOMO
P500

13. Grant of cash advance Due from Officers &

Employees 128 500
Cash in Bank – LCCA 110 500

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 Acct.
Particulars Account Title Code Debit Credit

14. Liquidation of cash Traveling Expenses –

advance Local 831 480
Due from Officers &
Employees 128 480

15. Adjustment of Memo entry in

obligation of travel. RAAOMO

16. Refund of cash Cash in Treasury 101 20

advance Due from Officers &
Employees 128 20

17. Deposit of cash refund Cash in Bank – LCCA 110 20

Cash in Treasury 101 20

18. Obligation of bill Memo entry in

received from RAAOMO
MERALCO

19. Payment of Electricity 835 800

MERALCO bill – Cash in Bank – LCCA 110 800
P800

20. Obligation for the Memo entry in

purchase of Office RAAOMO
Supplies – P500

21. Payment of office Office Supplies

supplies Inventory 149 500
Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 480

22. Obligation of Memo entry in

Equipment per RAAOCO
Purchase Order –
P30,000

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 Acct.
Particulars Account Title Code Debit Credit

23. Payment of equipment Office Equipment 222 30,000

with Invoice/Delivery Withholding Taxes
Receipt Payable 410 3,000
Cash in Bank – LCCA 110 27,000

24. Receipt of fund Cash in Bank – LCCA 110 5,000

transfer from General Subsidy from Other
Fund thru bank Funds 605 5,000

Adjusting Entries:

1. Depreciation of Depreciation–Office
Equipment using the Equipment 922 6,000
Straight Line Method: Accumulated
Equipment : Depreciation –
Life Amount Office Equipment 322 6,000
5 yrs. P6,000

Closing Entries :

1. Closing of Income Special Education Tax 713 100,00

0
Accounts Subsidy from Other
Funds 605 5,000
Income and Expense
Summary 532 105,000

2. Closing of Expense Income and Expense

Accounts Summary 532 41,230
Salaries & Wages –
Regular Pay 801 30,000
Life & Retirement
Insurance
Contributions 817 2,850
PAG-IBIG
Contributions 818 600
PHILHEALTH
Contributions 819 500
Traveling Expenses –
Local 831 480
Electricity 835 800
Depreciation–Office
Equipment 922 6,000

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 Acct.
Particulars Account Title Code Debit Credit

3. Closing of Income and Income and Expense 532 63,770

Expense Summary Summary
Retained Operating
Surplus 534 63,770

4. Closing of Retained Retained Operating

Operating Surplus Surplus 534 63,770
Government Equity 501 63,770

B. TRUST FUND

Sec. 94. Definition of Trust Fund. – Trust Fund shall

consist of private and public monies which have officially come into
the possession of the local government or of a local government
official as trustee, agent or administrator, or which have been
received as a guaranty for the fulfillment of some obligation. A trust
fund shall only be used for the specific purpose for which it was
created or for which it came into the possession of the local
government unit.

Sec. 95. Receipts Accruing to the Trust Fund. – Grants

and donations coming from foreign funding institutions, other levels
of government and private institutions/individuals for specific
projects/purpose shall accrue to the Trust Fund. Equity of the LGU
on projects under a trust agreement shall also accrue to the Trust
Fund. These receipts shall be credited to the Project Equity account.

Loans of LGUs for income generating projects from the

Municipal Development Fund Office (MDFO) requiring counterpart
funding from LGUs shall not be recorded in the Trust Fund but as a
Special Account in the General Fund.

Sec. 96. Collection Procedures for the Trust Fund. – Cash

collections for the Trust Fund shall be acknowledged through the
issuance of an official receipt. Procedures for the turn over of
collections, frequency of deposit of collection with the bank,
preparation of report of collections, verification of collections and
accountable forms, preparation of report of accountability for
accountable forms as well as consolidation of reports of accountable

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forms shall be the same as that prescribed for collections in the
General Fund.

In case of receipt of funds through the bank, the Accountant

shall draw a JEV based on the bank credit memo.

Sec. 97. Project Expenditures. – The construction period

theory shall apply for expenditures on infrastructure projects of the
Trust Fund. For other projects, expenditures shall be debited to the
appropriate expenditure account. Expenditures shall be closed to
Project Equity account at year-end or upon project completion,
whichever comes first.

Sec. 98. Separate Cashbooks for Trust Fund. – The

Treasurer and/or the concerned accountable officers shall maintain
separate cashbooks for the Trust Fund which shall be in accordance
with the prescribed format.

Sec. 99. Separate Books of Accounts and Financial

Reports for Trust Fund. – The Chief Accountant shall maintain
separate books of accounts for Trust Fund. He shall likewise prepare
separate financial reports such as the Trial Balance, Balance Sheet,
Statement of Cash Flows and supporting schedules, to be submitted
within the prescribed timeframe.

Sec. 100. Disbursements within Trust

Agreement/Approved Budget. – Disbursements from trust funds
shall be in accordance with the specific purpose stated in the trust
agreement/approved budget between the trustor and trustee (LGU) as
certified by the Chief Accountant. The certification on the DV as to
existence of funds held in trust shall serve this purpose.

Sec. 101. Certification and Approval of Disbursements

from Trust Funds. – Disbursements from the Trust Fund shall
require:

a. Certification and approval of vouchers and

payrolls as to validity, propriety and legality of the
claim involved by the department/ office head
concerned;
b. Certification as to existence of funds held in
trust and completeness and propriety of supporting
documents by the Accountant;

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 c. Certification as to cash availability by the
Treasurer; and
d. Approval by the Administrator of the fund.

Sec. 102. Disbursement Process. – Disbursements from the

Trust Fund shall be as follows:

a. Disbursement by check

PROCESS PERSON / UNIT

RESPONSIBLE

1. Gather supporting documents, Concerned Office

prepare DV/payroll and forward
to Head of Department.

2. Sign Box A of DV and submit to Supervisor/Head of

the Accounting Unit. Department

3. Check completeness of Accounting Unit

documents and verify existence
of funds held in trust, assign
number to DV/Payroll, sign Box
B and forward to Treasurer.

4. Verify claim, certify cash Treasurer

availability (Box C) and forward
to approving officer.

5. Approve transaction (Box D) Local Chief

and forward DV to Cashier. Executive/
Administrator of the
Fund

6. Prepare and sign check and Treasurer

forward check with DV to
countersigning officer.

7. Countersign check and forward Administrator

to Accountant for preparation of
the Accountant’s Advice.

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 PROCESS PERSON / UNIT
RESPONSIBLE

8. Prepare Accountant’s Advice of Accountant

Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.

9. Issue check to claimant. Record Treasurer

disbursement in Cashbook –
Cash in Bank. Prepare Report of
Checks Issued (RCI), forward
RCI with DV and supporting
documents to Accounting Unit.

10. Prepare the JEV based on Accounting Unit

individual checks/voucher; sign
“Prepared By” portion (approved
by Chief Accountant), and
record JEV in the Check
Disbursements Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers

11. Forward RCI, DV, supporting Accountant

documents and JEV to the Office
of the Auditor for final custody
and post audit.

b. Payments through cash advances

For payments through cash advances, procedures 1 to 5 for

check disbursement shall be followed. The rest of the procedures
shall be the same as that of the General Fund.

Sec. 103. Inventory Process. – The perpetual inventory

method and the moving average method shall likewise be adopted in
the accounting and costing of inventory. The general procedures, the
forms and reports for the holding of inventory shall also be followed.
However, separate perpetual inventory records and stock cards shall
be maintained by the Accounting Unit and the General Services
Officer or the Treasurer as the case maybe. Likewise, separate

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 weekly Summary for Supplies and Materials Issued pertaining to the
fund shall be prepared.

Sec. 104. Pro-forma Accounting Entries for Trust Funds.

– Accounting entries for typical transactions under the trust funds are
as follows:

Acct.
Particulars Account Title Code Debit Credit

1. Receipt of grant from NGA

a. Receipt of grant
direct to bank from
NGA for:
a. Construction of Cash in Bank – LCCA 110 2,500,000
road – P2M Project Equity
b. Purcha 502-01 P2,500,000 502 2,500,000
se of
construction
Equipment –
P500,000

b. Issuance of check Construction in

with approved DV Progress –
for payment to Roads, Highways &
contractor upon Bridges 232 1,000,000
receipt of first Withholding Taxes
billing – 50% Payable 410 100,000
accomplished Cash in Bank – LCCA 110 900,000

c. Submission of No entry
statement of
disbursements to
grantor

d. Issuance of check Construction in

with approved DV Progress – Roads,
for payment to Highways &
contractor upon Bridges 232 1,000,000
receipt of second Withholding Taxes
billing – 100% Payable 410 100,000
accomplished Cash in Bank – LCCA 110 900,000

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 Acct.
Particulars Account Title Code Debit Credit

e. Transfer of Public Infrastructures 243 1,000,000

completed Construction in
construction to Progress –
Public Roads, Highways
Infrastructure & Bridges 232 1,000,000

f. Remittance of taxes Withholding Taxes

w/held Payable 410 200,000
Cash in Bank – LCCA 110 200,000

g. Purchase of Construction and

equipment Heavy Equipment 212 500,000
Withholding Taxes
Payable 410 50,000
Cash in Bank – LCCA 110 450,000

h. Payment of Withholding Taxes

withholding tax Payable 410 50,000
Cash in Bank – LCCA 110 50,000

i. Submission of full Project Equity 502 2,500,000

liquidation to Public Infrastructures 243 2,000,000
grantor and transfer Construction and
of completed road Heavy Equipment 212 500,000
and equipment to
GF for LGU use

Note: Under the GF books, completed infrastructure project shall be

recorded in the Registry of Public Infrastructures with the TF JEV No. as
basis. The transferred equipment shall be recorded as follows:
General Fund Books: Public Infrastructures 243 2,000,000
Construction and
Heavy Equipment 212 500,000
Invested Equity 537 2,500,000

At the end of the year:

a. Closing of Invested Invested Equity 537 2,500,000

Equity to Government Equity 502 2,500,000
Government Equity

b. Transfer of Public Government Equity 502 2,000,000

Infra- structure to Public Infrastructures 243 2,000,000
RPI

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 Acct.
Particulars Account Title Code Debit Credit

2. Receipt of grant with counterpart fund from LGU

a. Project budget as
agreed upon
between grantor
and LGU for
project:

Grantor
Building - 1.2M
Equipment - .3M
LGU Funded
Office supplies -1M
Salaries of project
Personnel - .4M
Total 2M

b. Receipt of funds Cash in Bank – LCCA 110 2,000,000

from foreign Project Equity 502 2,000,000
funding institution 502-01 - 1,500,000
thru national 502-02 - 500,000
government agency

Note: Entry in LGU General Fund books shall be –

Grants and Donations 889 500,000

Cash in Bank – LCCA 110 500,000

c. Issuance of check Construction in

with approved DV Progress –
for payment to Agency Assets 230 500,000
contractor for Withholding Taxes
Construction of Payable 410 50,000
Building, 50% Cash in Bank – LCCA 110 450,000
accomplished.

d. Remittance of Withholding Taxes

withholding tax Payable 410 50,000
Cash in Bank – LCCA 110 50,000

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 Acct.
Particulars Account Title Code Debit Credit

e. Issuance of check Cash – Disbursing

with approved DV Officers 107 170,000
for cash advance on Cash in Bank – LCCA 110 170,000
salaries and wages
of project
administrative
personnel

f. Liquidation of Cash Salaries and Wages –

Advances Casual/
Contractual 803 200,000
Withholding Taxes
Payable 410 30,000
Cash – Disbursing
Officers 107 170,000

g. Remittance of tax Withholding Taxes

withheld Payable 410 30,000
Cash in Bank – LCCA 110 30,000

h. Issuance of check Office Supplies

with approved DV Inventory 149 100,000
for purchase of Cash in Bank – LCCA 110 100,000
supplies and
materials

i. Issuance of office Office Supplies

supplies Expenses 849 60,000
Office Supplies
Inventory 149 60,000

j. Purchase of IT IT Equipment and

equipment Software 215 250,000
Withholding Taxes
Payable 410 25,000
Cash in Bank – LCCA 110 225,000

k. Remittance of Withholding Taxes

withholding tax Payable 410 25,000
Cash in Bank – LCCA 110 25,000

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 Acct.
Particulars Account Title Code Debit Credit

l. Issuance of check IT Equipment and

for installation of Software 215 50,000
equipment Cash in Bank – LCCA 110 50,000

End of Year
m.Closing. of expenses Project Equity 502 260,000
to Project Equity 502-02 - P260,000
Salaries and Wages –
Casual/ Contractual 803 200,000
Office Supplies
Expenses 849 60,000

Succeeding year
n. Issuance of check Construction in
with approved DV Progress –
for payment to Agency Assets 230 700,000
contractor for Withholding Taxes
Construction of Payable 410 70,000
Building – 100% Cash in Bank – LCCA 110 630,000
accomplished.

o. Remittance of Withholding Taxes

withholding tax Payable 410 70,000
Cash in Bank – LCCA 110 70,000

p. Transfer of Property Plant and

construction in Equipment –
progress to property, Building 204 1,200,000
plant and equipment Construction in
account Progress – Agency
Assets 230 1,200,000

q. Issuance of check Cash – Disbursing

for cash advance on Officers 107 170,000
salaries and wages Cash in Bank – LCCA 110 170,000

r. Liquidation of Salaries and Wages –

salaries and wages Casual/Contractual 803 200,000
Withholding Taxes
Payable 410 30,000
Cash – Disbursing
Officers 107 170,000

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 Acct.
Particulars Account Title Code Debit Credit

s. Remittance of Withholding Taxes

withholding tax Payable 410 30,000
Cash in Bank – LCCA 110 30,000

t. Issuance of office Office Supplies

supplies Expenses 849 40,000
Office Supplies
Inventory 149 40,000

End of Year
u. Closing of Project Equity 502 240,000
expenses to Salaries and Wages –
Project Equity Casual/
Contractual 803 200,000
Office Supplies
Expenses 849 40,000

Project Completion
v. Transfer of building Project Equity 502 1,500,000
and equipment to Building 204 1,200,000
the General Fund IT Equipment and
as follows: Software 215 300,000

General Fund Books: Building 204 1,200,000

IT Equipment and
Software 215 300,000
Invested Equity 537 1,500,000

At end of year: Invested Equity 537 1,500,000

Government Equity 501 1,500,000

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