CHAPTER 5: DISBURSEMENTS
The foregoing are to ensure that no
Learning Objective
1. State the main concepts in the disbursement of
government funds
2. Account the different modes of 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 Funds
a. All government resources shall be used only in
accordance with the law and only for public
purposes
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 prepared
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
Expenditures funded by borrowings are included in the
expenditure program of the entity. The loan proceeds shall
not be used without the corresponding release of funds
through a Special Budget.
Authority to Disburse/Pay
An entity can make disbursement only after it has received a
disbursement authority, based on the following:
a. Notice of Cash Allocation (NCA)
b. Notice of Transfer of Allocation (NCA)
c. Tax Remittance Advice (TRA)
d. Non-Cash Availment Authority (NCAA)
e. Cash Disbursement Ceiling (CDC) – authority issued
by DBM to agencies with foreign operations (i.e.,
Department of Foreign Affairs ‘DFA’ and Department
of Labor and Employment ‘DOLE’ allowing them to
use the income collected by their Foreign Service
Posts (FSPS) to cover their operating requirements.
The entries related to CDC are as follows:
Basic Requirements & Certification for Disbursement
The following are required when disbursing funds:
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
a.
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
- all disbursement require the certification of the
Chief Accountant (or Head of Accounting Unit).
Certifications must be based on valid and properly
authorized claims. Any certification for fictitious
obligation is void. The certifying official shall be dismissed
from service and shall be held criminally liable. Others
who are involved in the fictitious transaction are also
liable.
d. The requesting and approving official shall ensure
that the disbursement 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
f. The Head of Agency (or his authorized
representative) shall approve all DVs or Payrolls
Modes of Disbursements
The different modes of disbursements are as follows:
a. Check
b. Cash
c. Cashless payments:
a. Advice to Debit Account (ADA)
b. Electronic Modified Disbursement System
(eMDS)
c. Cashless Purchase Card System (Credit
Card)
d. Non-Cash Availment Authority (NCAA)
e. 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. There are
covered by income/receipts authorized to be
deposited with Authorized Government Depository
Bank (AGDBs)
All checks drawn, whether released or unreleased to payees,
including cancelled checks, are recorded chronologically in
the Checks/ADA Disbursement Record maintained by the
Cash/Treasury Unit.
Illustration:
Entity A disburse P10,000 for electricity expense. The entries
are as follows:
Disbursement 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:
a. 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)
b. 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.
c. Only designated Disbursing Officers are allowed to
perform disbursing functions and only permanently
appointed officials shall be designated as disbursing
officers
d. A cash advance must be liquidated as soon as the
purpose for which it was given has been served.
a. 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
b. cash advances for travel shall be liquidated
as follows:
c. local travel – within 30 days upon return to
the personnel’s workstation
d. 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.
e. No additional cash advance shall be given to any
official or employee unless the previous cash
advance given to him is first liquidated.
f. Transfer of cash advance from one officer to another
is prohibited
g. A cash advance shall not be used to encash checks or
to liquidate a previous cash advance.
Illustration:
Entity A disburse P10,000 for certain expenses through cash
advance. The entries are as follows:
Disbursements 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 that bank to
debit a specific amount from its available NCA to pay the
creditors/payees listed in the LDDAP-ADA.
- The ADA works like a check, except that one ADA can
be drawn to pay various payees, as long as they all
maintain accounts in the same bank where the ADA
is drawn. Separate ADAs shall be prepared for the
payees using other MDS-GSBs. ADA payments are
directly credited to the payee’s accounts.
- 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.
The following expenditures shall not be paid through ADA:
a. Payment of Terminal Leave and Retirement Gratuity
benefits
b. Remittance of GSIS, Phil-Health, and Pag-IBIG
contributions
c. Payment 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.
Illustration:
Entity A pays P10,000 accounts payable through ADA. The
entries are as follows:
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
Disbursement 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 in the use of
CPC System are as follows:
a. CPC purchases shall be only for specific eligible items
and only with specific merchants.
a. Merchants – refer to the sellers or suppliers
authorized by Citibank
b. 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
c. Agency officials who approved the CPC are jointly
accountable with the cardholders.
d. The CPC System shall comply to, and shall not in any
way change, the existing disbursement policies and
procedures prescribed under the law
e. 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.
f. The CPC shall initially be used for purchases of small
value; non-common use items which are not
available with the Procurement Service.
g. Unauthorized items purchased 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.
h. Participating agencies shall immediately inform the
Cititbank of any discrepancy regarding items which
they dispute as having been procured using the CPC
i. 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.
j. The cardholder shall submit all receipts from used of
the CPC to the accounting unit. These shall be used
in inspecting actual goods purchased and in paying
credit card billings
k. The accounting unit shall check if the procured items
are those allowed by the law to be purchased using
 the CPC and compare the charge slips with the Overstatement 10,000
amounts in the billing statement.
l. 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. Notice that the accounting for disallowances by a government
entity is similar to the accounting for current and prior period
errors by the a business entity.
Illustration:
Entity A purchases office supplies worth P10,000 through Accounting for Overpayments
CPC. The entries are as follows: 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.

Examples: Payment of Payrolls. Payrolls are prepared in

advance and some agencies pay their employees through the
banking system. All these are done before reports of
Disbursements through Non-Cash Availment Authority attendance are submitted, making it impossible to know the
(NCAA) exact amount to be paid in case there are absences without
Non-Cash Availment Authority (NCAA) is the authority issued pay during the pay periods.
by the DBM to agencies to cover the liquidation of their
actual obligations incurred against available allotments for Correcting entries for overpayment are similar to the
availment of proceeds from loans/grants through supplier’s accounting for disallowances.
credit/constructive cash.
- Disbursement through NCAA (also called ‘Direct Payment
Method1’ or ‘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.

Notice that no cash is involved in the acquisition of the

equipment, settlement of the accounts payable, and
recognition of the loans payable. The lending institution
directly pays the supplier.

Disbursements through Tax Remittance Advice (TRA)

TRA is used for the constructive remittance of taxes or
customes 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