Republic of the PhilippinesCOMMISSION ON AUDIT

Quezon City

NATIONAL BUDGET CIRCUALR NO. 342COMMISSION ON AUDIT CIRCULAR NO. 81-160

April 21, 1981

TO : The Minister of Finance, Presidential Executive Assistant, President & General Manager of Government Service Insurance System, Administrator of General Services Administration, Director of Building Services and Real Property Management Office, All Heads of Ministries, Bureaus, Offices and Agencies including State Colleges and Universities of the National Government Chief Accountants, Auditors and All Others Concerned

SUBJECT : Rules, Regulations and Accounting Procedures for the Receipt and Disposition of Insurance Proceeds on Damaged/Lost Government Property

1.0 Purpose

This Circular is issued to provide guidelines, rules, regulations and procedures in the disposition and accounting of insurance proceeds received on damaged/lost national government property pursuant to Letter of Instruction No. 999 dated March 13, 1980.

2.0 Coverage

Insurance proceeds referred to in this circular include all insurance proceeds received on damaged/lost national government property such as inventories, land improvements, buildings and structures, furniture, equipment and work animals of national government agencies.

3.0 General Policies and Guidelines

3.1 Government properties shall be insured against fire or other insurable risks with the General Insurance Fund (GIF) of the Government Service Insurance System (GSIS). Premiums shall be charged against the appropriate appropriations.

3.2 Proceeds from insurance of national government properties paid directly to the insured government office or beneficiary shall be deposited with the National Treasury and shall be considered as income of the General Fund.

3.3 The Ministry of the Budget shall release an amount equivalent to the insurance proceeds plus any additional funds needed to fully restore the damaged property chargeable against the Calamity Fund to be released either to the Ministry of Public Works (MPW) or the agency concerned.

3.4 Releases from the Calamity Fund shall be used solely for the restoration/reconstruction/rehabilitation of the damaged property covered by the insurance.

3.5 Allotments release and obligations incurred out of the Calamity Fund shall be identified in the books of accounts of agencies.

3.6 The Building Services and Real Property Management Office (BSRPMO) and other agencies shall close the balance of the trust liability account (8-84-000), insurance reserve account (8-87-200) and any other account appearing in their books representing the insurance proceeds prior to the issuance of LOI No. 999 to general fund income. However, in order not to disrupt on going construction, any balance of the above accounts pertaining to such construction shall continue to be used until such time that construction has been completed.

4.0 Responsibilities

4.1 Agency Head/Accountable Officer/Chief Accountant

4.1.1 In case of damaged/loss of the insured property, the head of the agency or the accountable officer having custody thereof shall immediately notify the GSIS and the unit auditor of the agency concerned.

4.1.2 Where the damage/loss involves buildings, the head of the agency shall notify the Director of the BSRPMO who shall determined the extent of the damage/loss.

4.1.3 The agency whose property is damaged by fire or other insured risks shall take the initiative for immediately filing the claim in coordination with the BSRPMO and for collecting the proceeds from the GIF of the GSIS.

4.1.4 The officer accountable for the damaged, lost property shall, within thirty (30) days from the date of loss or damage, request relief from accountability. Such request shall be submitted to the Commission on Audit (COA) supported by sufficient evidence to prove the validity of the loss such as affidavits containing statement of facts and circumstances surrounding the loss.

4.1.5 Where the relief from accountability is granted by the COA, the accountant of the agency concerned shall drop the property from the accounts

4.1.6 The agency chief accountant shall record claims against the GIF only after the GSIS exercises its option not to repair/replace the property damaged/lost.

4.1.7 The agency chief accountant shall record in the agency books the receipt of insurance proceeds as income of the General Fund. Such proceeds shall be deposited with the National Treasury.

4.1.8 The agency chief accountant shall record the allotment and obligation in a separate JAO sheet properly identified as release against the Calamity Fund.

4.1.9 The chief accountant of the agency concerned shall close the balanced of the trust liability account (8-84-000) insurance reserve account (8-87- 200) and any other account appearing in the books representing insurance proceeds prior to the issuance of LOI No. 999 to General Fund income, except for on-going construction, wherein any balance of the above accounts pertaining to such construction shall continue to be used until such time that construction has been completed.

4.1.10 The chief accountant of the agency concerned shall submit to the National Accounting Office of the Ministry of the Budget the list of on-going projects and the amount still available for its project. He shall also submit to the National Accounting Office a copy of the journal voucher closing the balance of the trust liability account, insurance reserve account and any other account representing insurance proceeds received prior to the issuance of LOI No. 999 to general fund income.

4.2 Government Service Insurance System (GSIS)

4.2.1 The GSIS, after approval of the claim, shall immediately effect payment directly to the agency concerned.

4.2.2 Where option to repair/replace the property damaged or lost is exercised by the GSIS, notice of such intention shall be given to the agency concerned within fifteen (15) days after receipt of proof of loss.

4.3 Ministry of Public Works (MPW)/Agency Concerned

4.3.1 The Minister of Public Works or Head of the agency concerned as the case may be, shall estimated the total cost requirements for the restoration of the damaged property and shall submit to the Ministry of the Budget the corresponding WFP together with the certification of the chief accountant that the insurance proceeds were deposited with the National Treasury.

4.4 Ministry of the Budget

4.4.1 The Ministry of the Budget shall effect the transfer of programmed appropriation from the Calamity Fund to the agency concerned for the rehabilitation/repair of damaged/lost properties.

4.4.2 The Ministry of the Budget shall release the Advice of Allotment (AA) and the corresponding Cash Disbursement Ceiling (CDC) to the agency concerned pertaining to par. 4.4.1.

5.0 Journal entries to record transactions arising from damaged lost property.

5.1 Fixed Assets -

5.1.1 To drop from the account the fixed assets lost:r. Dr. r. Cr.

Invested Surplus – losses, Destruction or Other Involuntary Disposition 0-94-240 xx

Fixed Assets - Land and Land Improvements 8-77-? xx

Fixed Assets – Buildings and Structures 8-78-? xx

Fixed Assets - Furniture, Equipment and Work Animals 8-79-? xx

5.1.2 To record the book value of fixed assets lost for which claims for insurance or request for relief has already been filed:

Contingent Assets – ClaimsUnrelieved Losses of FixedAssets 8-74-200 xx

Contingent Liabilities -Insurance Reserve/FixedAssets 8-87-200 xx

5.1.3 To record grant of relief:

Contingent Liabilities -Insurance Reserve/FixedAssets 8-87-200 xx

Contingent Assets – Claims forUnrelieved Losses of FixedAssets 8-74-200 xx

5.2 Inventories - Supplies & Materials, etc. without contra accounts.

5.2.1 To drop from the account the amount of inventories lost:

Inventories:

- Supplies and materials 8-72-100 (xx)- Work in process 8-72-200 (xx)- Finished products 8-72-300 (xx)- Items for sale 8-72-360 (xx)- In transit 8-72-400 (xx)- Miscellaneous Livestock 8-72-950 (xx)

Current Surplus Unappropriated -Surplus Adjustments – Losses of Current Assets 7-92-416 xx

5.2.2 To record book value of inventories lost pending final settlement:

Contingent Assets – Claims forUnrelieved losses of currentAssets 8-74-100 xx

Contingent surplus 8-96-000 xx

5.2.3 To record relief of accountability granted:

a) On the same year when damage/loss occurredAppropriations allotted/

Expenditures – Losses of Assets 8-90-013 xx

Current Surplus Unappropriated – Surplus Adjustments – Lossesof Current assets 7-92-416 (xx)

Contingent surplus 8-96-000 xx

Contingent Assets – Claims for Unrelieved Losses of Current assets 8-74-100 xx

b) On the ensuing year

Closing entry at year-end when damaged/loss of property occurred

National Clearing Account 8-99-000 xx

Current surplus Unappropriated – Surplus Adjustments – Losses of Current Assets 7-92-416 xx

Contingent surplus 8-96-000 xx

Contingent assets - Claims for unrelieved Losses of current Assets 8-74-100 xx

5.3 Inventories with contra accounts -

5.3.1 To drop from the account the amount of inventories lost:

Inventories:

- Goods/Merchandise confiscated 8-72-500 (xx)- Semi-expendable supplies,

Containers,Furniture &Equipment 8-72-600 (xx)

- Supplies & Materials Chargedto Appropriations 8-72-700 (xx)

- Supplies & Materials AcquiredFree of Charge 8-72-800 (xx)

- Miscellaneous 8-72-900 (xx)

Miscellaneous Liabilities & Deferred Credits:

- Goods/Merchandise confiscated 8-86-500 (xx)- Semi-Expendable Supplies,

Containers, Furniture &Equipment 8-86-600 (xx)

- Supplies & Materials Charged to Appropriations 8-86-700 (xx)

- Supplies & Materials Acquired Free of Charge 8-86-800 (xx)

- Miscellaneous 8-86-900 (xx)

5.3.2 To record book value of inventories lost pending final settlement:

Contingent Assets – Claims for Unrelieved Losses ofCurrent Assets 8-74-100 xx

Contingent Surplus 8-96-000 xx

5.3.3 To record grant of relief:

Contingent Surplus 8-96-000 xx

Contingent Assets – Claims forUnrelieved Losses of CurrentAssets 8-74-100 xx

5.4 Claims against the GIF, GSIS -

Receivables – Government Owned or Controlled Corporations 8-71-300 xx

Miscellaneous Liabilities and Deferred Credits - Miscellaneous-Insurance 8-86-920 xx

5.5 Receipt of Insurance Proceeds -

5.5.1 To record receipt of insurance proceeds:

Cash - Collecting Officers 8-70-400 xxReceivables – Government Owned

or Controlled Corporations 8-71-300 xx

5.5.2 To record income:

Miscellaneous Liabilities and Deferred Credits - Miscellaneous – Insurance 8-86-920 xx

Income (1-58-900) 0-91-000 xx

5.6 Deposit with the National Treasury -

Cash - Treasury/Agency AccountCurrent – Deposits 8-70-700 xx

Cash - Collecting Officers 8-70-400 xx

5.7 Acquisition/restoration of the damaged property

5.7.1 Where the MPW or agency concerned undertakes the repair/replacement, the usual accounting entries for the acquisition/restoration of the damaged property shall be followed.

5.7.2 Where the GSIS undertakes the repair/replacement, the entry shall be:

Fixed Assets - Furniture, Equipment & Work Animals 8-79-? xx

Invested Surplus – Adjustments(addition) - Insurance 0-94-172 xx

5.8 Closure of balances of trust liability account (8-84- 000), insurance reserve account (8-87-200) and other accounts appearing in the books of the BSRPMO and other agencies representing insurance proceeds.

Payables - 8-81-? xxTrust liabilities 8-84-? xxContingent liabilities -

Insurance reserve 8-87-? xxIncome (1-58-900) 0-91-00 xx

6.0 Repealing Clause

All provisions of circulars, guidelines and instructions which are inconsistent with this circular are hereby repealed, superseded or otherwise modified.

7.0 Saving Clause

Cases not covered by this Circular shall be referred to the National Accounting Office, Ministry of the Budget.

8.0 Effectivity

This Circular shall take effect immediately.

(SGD.) FRANCISCO S. TANTUICO, JR. (SGD.) MANUEL S. ALBAActing Chairman Acting Minister of the Budget