CHAPTER 5 | 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

1. All government resources shall be used only in accordance with the law and only for public purposes.

2. Trust funds shall be used only for their specific purpose.

3. Fiscal responsibility shall be strictly shared by all those exercising authority over a government agency.

4. The use of government resources shall be approved by proper officials.

5. Claims against government funds shall be supported with complete documentation.

6. 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. (GAM for NGAS, Chapter 2, Sec. 35)

Authority to Disburse/Pay

An entity can make disbursements only after it has received a disbursement authority, based on the following:

• Notice of Cash Allocation (NCA)

• Notice of Transfer of Allocation (NTA)

• Tax Remittance Advice (TRA) (Items 'a' to 'c' above are discussed in Chapters 2 and 3)

• Non-Cash Availment Authority (NCAA)

• Cash Disbursement Ceiling (CDC) - authority issued by the 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.

Basic Requirements & Certifications for Disbursements

• The following are required when disbursing funds:

• The Budget Officer (or Head of Budget Unit) shall certify the availability of allotment;

• 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.

• 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 disbursements 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.

• The requesting and approving officials shall ensure that the disbursements are legal and conform to applicable rules and regulations;

• 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

• 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:

• Check

• Cash

• Cashless payments:

  • Advice to Debit Account (ADA)

  • Electronic Modified Disbursement System (eMDS)

  • Cashless Purchase Card System (Credit Card)

  • Non-Cash Availment Authority (NCAA)

  • Tax Remittance Advice (TRA)

Disbursements 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:

• 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).

• 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).

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

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.

• 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:

    • Local travel - within 30 days upon return to the personnel's workstation.

    • 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 from one officer to another is prohibited.

• A cash advance shall not be used to encash checks or to liquidate a previous cash advance.

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 the bank to debit a specified 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 payees using other MDS-GSBS. ADA payments are directly credited to the payees' accounts.

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.

The following expenditures shall not be paid through ADA:

• Payment of Terminal Leave and Retirement Gratuity benefits;

• Remittance of GSIS, PhilHealth, and Pag-IBIG contributions;

• Payments to utility companies (e.g., electricity, water, telephone, internet, petroleum, and the like).

• 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 (ie., credit card). The authorized credit card company is the Citibank. Guidelines in the 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 suppliers 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.

• 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.

• The CPC shall initially be used for purchases of small value, non-common use items which are not available with the Procurement Service.

• 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.

• 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.

• 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.

Disbursements 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' 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.

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 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.

Notice that the accounting for disallowances by a government entity is similar to the accounting for current and prior period errors by a business entity. '

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. Payrolls are prepared in advance and some agencies pay their employees through the banking system. All these are done before reports of attendance are submitted, making it impossible to know the exact amount to be paid in case there are absences without pay during the pay periods. In case of overpayments. refunds shall be demanded of the employees concerned."

Correcting entries for overpayments are similar to the accounting for disallowances.