pd 1445, government auditing code

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MALACAÑANGM a n i l a

PRESIDENTIAL DECREE No. 1445

ORDAINING AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES

WHEREAS, the creation and establishment of the Commission on Audit under the new Constitution and itsrecent reorganization and restructuring by virtue of residential !ecree "o# $%$ have rendered more &ressingthe long'felt need to codify in revised and u&dated form, in (ee&ing with modern trends of government auditingand &rogressive legislation on the sub)ect, various scattered auditing laws, rules and regulations, and toincor&orate therein &residential decrees, orders, &roclamations, and instructions germane and relevant theretofor integrated effect*

"+W, HERE-+RE, ., -ER!."A"! E# MARC+S, resident of the hili&&ines, by virtue of the &owers vestedin me by the Constitution, do hereby order and decree/

PRELIMINARY TITLE

GENERAL PROVISIONS

Section 1. Title. his law shall be (nown and cited as the 01overnment Auditing Code of the hili&&ines#0

Section . Declaration of Policy. .t is the declared &olicy of the State that all resources of the government shallbe managed, e2&ended or utilized in accordance with law and regulations, and safeguard against loss orwastage through illegal or im&ro&er dis&osition, with a view to ensuring efficiency, economy and effectivenessin the o&erations of government# he res&onsibility to ta(e care that such &olicy is faithfully adhered to restsdirectly with the chief or head of the government agency concerned#

Section !. Definition of terms. Wherever used in this Code, the following terms shall be ta(en and understoodin the sense indicated hereunder, unless the conte2t otherwise re3uires/

4# 0-und0 is a sum of money or other resources set aside for the &ur&ose of carrying out s&ecificactivities or attaining certain ob)ectives in accordance with s&ecial regulations, restrictions, orlimitations, and constitutes an inde&endent fiscal and accounting entity#

5# 01overnment funds0 includes &ublic moneys of every sort and other resources &ertaining to anyagency of the government#

6# 0Revenue -unds0 com&rises all funds derived from the income of any agency of the governmentand available for a&&ro&riation or e2&enditure in accordance with law#

7# 0rust funds0 refers to funds which have come officially into the &ossession of any agency of thegovernment or of a &ublic officer as trustee, agent, or administrator, or which have been received forthe fulfillment of some obligation#

8# 0!e&ository funds0 com&rises funds over which the officer accountable therefore may retain controlfor the lawful &ur&oses for which they came into his &ossession# .t embraces moneys in any and allde&ositories#

9# 0!e&ository0 means any financial institution lawfully authorized to receive government moneys u&onde&osit#



:# 0Resources0 refers to the actual assets of any agency of the government such as cash, instrumentsre&resenting or convertible to money, receivables, lands, buildings, as well as contingent assets suchas estimated revenues a&&lying to the current fiscal &eriod not accrued or collected and bondsauthorized and unissued#

$# 01overnment agency0 or 0agency of the government,0 or 0agency refers to any de&artment, bureauor office of the national government, or any of its branches and instrumentalities, or any &oliticalsubdivision, as well as any government'owned or controlled cor&oration, including its subsidiaries, orother self'governing board or commission of the government#

Section 4. Fundamental principles. -inancial transactions and o&erations of any government agency shall begoverned by the fundamental &rinci&les set forth hereunder, to wit/

4# "o money shall be &aid out of any &ublic treasury of de&ository e2ce&t in &ursuance of ana&&ro&riation law or other s&ecific statutory authority#

5# 1overnment funds or &ro&erty shall be s&ent or used solely for &ublic &ur&oses#

6# rust funds shall be available and may be s&ent only for the s&ecific &ur&ose for which the trust wascreated or the funds received#

7# -iscal res&onsibility shall, to the greatest e2tent, be shared by all those e2ercising authority over thefinancial affairs, transactions, and o&erations of the government agency#

8# !isbursements or dis&osition of government funds or &ro&erty shall invariably bear the a&&roval ofthe &ro&er officials#

9# Claims against government funds shall be su&&orted with com&lete documentation#

:# All laws and regulations a&&licable to financial transactions shall be faithfully adhered to#

$# 1enerally acce&ted &rinci&les and &ractices of accounting as well as of sound management and

fiscal administration shall be observed, &rovided that they do not contravene e2isting laws andregulations#

TITLE ITHE COMMISSION ON AUDIT

CHAPTER 1ORGANI"ATION

Section 5. Composition of the Commission on Audit qualifications, term, and salary of members.

4# he Commission on Audit, hereinafter referred to as the Commission, shall be com&osed of aChairman and two Commissioners, who shall be natural'born citizens of the hili&&ines and, at the

time of their a&&ointment, at least forty years of age and certified &ublic accountants or members ofthe hili&&ine ;ar for at least ten years#

5# he Chairman and the Commissioners shall be a&&ointed by the rime Minister for a term of sevenyears without rea&&ointment# +f the Commissioners first a&&ointed, one shall hold office for sevenyears, another for five years, and the third for three years# A&&ointment to any vacancy shall only befor the une2&ired &ortion of the term of the &redecessor#



6# he Chairman and each Commissioner shall receive as annual salary of si2ty thousand &esos andfifty thousand &esos, res&ectively, which shall not be decreased during their continuance in office#

Section #. The Commission Proper.

4# -or &ur&oses of this Code and as a com&onent of the organizational structure of the Commission,

the Chairman and the two Commissioners shall together be (nown as the Commission ro&er and assuch shall be distinguished from the other com&onents of the Commission consisting of the centraland regional offices which are hereinafter created#

5# he Commission ro&er shall sit as a body to determine &olicies, &romulgate rules and regulations,and &rescribe standards governing the &erformance by the Commission of its &owers and functions#

6# he Chairman shall act as the &residing officer of the Commission ro&er and the chief e2ecutiveofficer of the Commission# As such chief e2ecutive officer, he shall be res&onsible for the generaladministration of the Commission#

7# he Chairman and each Commissioner shall have such technical and clerical &ersonnel in theirres&ective offices as may be re3uired by the e2igencies of the service#

Section $. Central and regional offices.

4# he Commission shall have the following central offices/

<a= Administrative +ffice

<b= lanning, -inancial, and Management +ffice

<c= >egal +ffice

<d= Accountancy +ffice

<e= "ational 1overnment Audit +ffice

<f= >ocal 1overnment Audit +ffice

<g= Cor&orate Audit +ffice

<h= erformance Audit +ffice

<i= Man&ower !evelo&ment +ffice

<)= echnical Service +ffice

hese offices shall &erform &rimarily staff functions, e2ercise technical su&ervision over theregional offices in matters &ertaining to their res&ective functional areas, and &erform suchother functions as may be assigned by the Chairman#

5# he Commission shall (ee& and maintain such regional offices as may be re3uired by thee2igencies of the service in accordance with the .ntegrated Reorganization lan for the nationalgovernment, or as may be &rovided by law, which shall serve as the immediate re&resentatives of theCommission in the regions under the direct control and su&ervision of the Chairman#



6# he central and regional offices shall each be headed by a Manager and a Regional !irector,res&ectively# he Manager of the >egal +ffice shall also be (nown and shall act as the 1eneralCounsel of the Commission#

Section %. Commission Secretariat. here shall be a Commission Secretariat to be headed by the Secretary tothe Commission who shall have the ran( and &rivileges of central office manager#

Section &. The Administrative ffice. he Administrative +ffice shall &erform the following functions/

4# !evelo& and maintain a &ersonnel &rogram which shall include recruitment, selection, a&&ointment,&erformance evaluation, em&loyee relations, and welfare services* and

5# rovide the Commission with services related to &ersonnel, records, su&&lies, e3ui&ment, medical,collections and disbursements, security, general and other related services#

Section 1'. The Planning, Financial, and !anagement ffice. he lanning, -inancial, and Management+ffice shall have the following functions/

4# -ormulate long'range and annual &lans and &rograms for the Commission*

5# -ormulate basic &olicies and guidelines for the &re&aration of the budget of the Commission,coordinate with the ;udget Commission and the +ffice of the resident <rime Minister= in the&re&aration of the said budget*

6# Maintain and administer the accounting system &ertaining to the accounts of the Commission*

7# !evelo& and administer a system for monitoring the &rices of materials su&&lies, and e3ui&ment&urchased by the government*

8# !evelo& and maintain the management information system of the Commission* and

9# !evelo& and administer a management im&rovement &rogram, including a system for measurement

of &erformance of auditing units on which an annual re&ort shall be submitted to the Chairman not laterthan the thirty'first day of ?anuary each year#

Section 11. The "egal ffice. he >egal +ffice shall be charged with the following res&onsibilities/

4# erform advisory and consultative functions and render legal services with res&ect to the&erformance of the functions of the Commission and the inter&retation of &ertinent laws and auditingrules and regulations*

5# Handle the investigation of administrative cases filed against the &ersonnel of the Commission,evaluate and act on all re&orts of involvement of the said &ersonnel in anomalies or irregularities ingovernment transactions, and &erform any other investigative wor( re3uired by the Commission u&onassignment by the Chairman*

6# Re&resent the Commission in &reliminary investigations of malversation cases discovered in audit,assist and collaborate with the Solicitor 1eneral and the anod ;ayan in handling cases involving theChairman or any of the Commissioners, and other officials and em&loyees of the Commission in theirofficial ca&acity* and

7# Coordinate, for the Commission and with the a&&ro&riate legal bodies of government, with res&ect tolegal &roceedings towards the collection and enforcement of debts and claims, and the restitution of



funds and &ro&erty, found to be due any government agency in the settlement and ad)ustment of itsaccounts by the commission#

Section 1. The Accountancy ffice. he Accountancy +ffice shall have the following functions/

4# re&are, for the Commission, the annual financial re&ort of the 1overnment, its subdivisions,

agencies and instrumentalities, including government'owned or controlled cor&orations, and suchother financial or statistical re&orts as may be re3uired by the Commission*

5# @erify a&&ro&riations of national government agencies and control fund releases thereto* and

6# re&are statements on revenues and e2&enditures of local government units, and on their legalborrowing and net &aying ca&acities for reclassification and other &ur&oses#

Section 1!. The #ational $overnment Audit ffice. he "ational 1overnment Audit +ffice shall &erform thefollowing functions*

4# -ormulate and develo& &lans, &rograms, o&erating standards, and administrative techni3ues for theim&lementation of auditing rules and regulations in de&artments, regions, bureau, and offices of the

"ational 1overnment*

5# -ormulate accounting rules and regulations for de&artments, regions, bureaus, and offices of the"ational 1overnment* and

6# Advise and assist the Chairman on matters &ertaining to the audit of the de&artments, regions,bureaus, and offices of the "ational 1overnment#

Section 14. The "ocal $overnment Audit ffice. he >ocal 1overnment Audit +ffice shall have the followingfunctions*

4# -ormulate and develo& &lans, &rograms, o&erating standards, and administrative techni3ues for theim&lementation of auditing rules and regulations for local government units*

5# -ormulate accounting rules and regulations for local government units* and

6# Advise and assist the Chairman on matters &ertaining to the audit of local government units#

Section 15. The Corporate Audit ffice. he Cor&orate Audit +ffice shall &erform the following functions/

4# -ormulate and develo& &lans, &rograms, o&erating standards, and administrative techni3ues for theim&lementation of auditing rules and regulations in government'owned or controlled cor&orations andself'governing boards, commissions, or agencies of the government, as well as for the conduct of auditof financial o&erations of &ublic utilities and franchises*

5# -ormulate accounting rules and regulations for government'owned or controlled cor&orations andself'governing boards, commissions, or agencies of the government*

6# Advise and assist the Chairman on matters &ertaining to the audit of government'owned orcontrolled cor&orations and self'governing boards, commissions, or agencies of the government* and

7# Consolidate the cor&orate audit re&orts from all the regions for inclusion in the annual re&ort of theCommission#

Section 1#. The Performance Audit ffice. he erformance Audit +ffice shall have the following functions/



4# Conduct, consistently with the e2ercise by the Commission of its visitorial &owers as hereinafterconferred, variable sco&e audit of non'governmental firms subsidized by the government orgovernment authority, or those re3uired to &ay levies or government share those funded by donationsthrough the government, and those for which the government has &ut u& a counter&art fund/ rovided,hat such audits shall be limited to the funds or subsidies coming from the government* and

5# nderta(e audits of the legality of government e2&enditures, with &articular em&hasis on thestatutory authority governing the usage of a&&ro&riated funds#

Section 1$. The !anpo%er Development ffice. he Man&ower !evelo&ment +ffice shall &erform thefollowing functions/

4# -ormulate long'range &lans for a com&rehensive training &rogram for all &ersonnel of theCommission and &ersonnel of the agencies of government, with res&ect to Commission rules andregulations and audit matters*

5# re&are and im&lement annual training &rograms, consistent with its long'range &lans*

6# !evelo& its ca&ability to im&lement training &rograms*

7# Set u& and maintain a library for the Commission* and

8# ublish the &rofessional )ournal of the Commission#

Section 1%. The Technical Service ffice. he echnical Service +ffice shall &erform the following functions*

4# !evelo& and &ro&ose auditing systems for im&lementation in the government*

5# Render consultancy services related to the discharge of government auditing functions*

6# Assist in the formulation of accounting rules and regulations and in seeing to it that these areobserved by agencies of government, in coordination with the Accountancy +ffice*

7# Review and evaluate contracts, and ins&ect and a&&raise infrastructure &ro)ects* and

8# .nitiate s&ecial studies on auditing matters#

Section 1&. The &egional ffices. Each regional office shall &erform the following functions/

4# E2ercise su&ervision and control over the im&lementation of auditing rules and regulations in anyagency of the government with &rinci&al offices or &lace of o&erations within the region, including the"ational Assembly*

5# Review, analyze and consolidate local, national and cor&orate audit re&orts &ertaining to the region*

6# &on delegation by the Commission ro&er, e2ercise authority on internal Commissionadministration on &ersonnel, &lanning, financial <budgetary and accounting=, and legal matter&ertaining to the region* and

7#erform such other related functions as may be assigned by the Chairman#

Section '. Auditing units' qualifications and assignment of heads.



4# here shall be in each agency of the government an auditing unit which shall be &rovided by theaudited agency with a suitable and sufficient office s&ace together with su&&lies, e3ui&ment, furniture,and other necessary o&erating e2&enses for its &ro&er maintenance, including e2&enses for travel andtrans&ortation#

5# he auditing unit shall be headed by an auditor assigned by the Commission who shall be a certified&ublic accountant or a member of the ;ar or a holder of a college degree in commerce or businessadministration* ma)or in accounting#

6# he corres&onding assignment orders issued by the Commission to such auditors and their su&&ort&ersonnel holding core auditing &ositions shall be su&&lementary to their a&&ointments which arewithout s&ecifications of station#

7# he Commission shall have the authority to ma(e changes in such assignments and to effect a&eriodic reshuffle of heads of auditing units as well as their su&&ort &ersonnel whenever the e2igenciesof the service so re3uire# However, such changes and reshuffle shall not affect the tenure of office ofthe incumbents of the &ositions involved and shall not constitute a demotion or reduction in ran( orsalary, nor result in a change in status#

Section 1. Auditing units for ne%ly(created agencies. he creation of every new agency shall be construed to

include the establishment of an auditing unit therein, and the a&&ro&riation or allotment therefor is deemed toinclude the amounts necessary to &rovide such agency with ade3uate auditing services as determined by theCommission#

Section . #umber and compensation of auditing personnel.

4# he assignment of Commission re&resentatives and su&&ort &ersonnel to agencies of thegovernment shall be determined solely by the Commission#

5# he salaries and other forms of com&ensation of the &ersonnel of the Commission shall follow acommon &osition classification and com&ensation &lan regardless of agency of assignment, and shallbe sub)ect to #!# "o# %$8#

6# All officials and em&loyees of the Commission, including its re&resentatives and su&&ort &ersonnelshall be &aid their salaries, emoluments, and allowances directly by the Commission out of itsa&&ro&riations and contributions, as &rovided in this Code#

Section !. Professionali)ation of audit service. he Commission shall develo& and ado&t for its officials andem&loyees a com&rehensive and continuing man&ower and develo&ment &rogram#

Section 4. Appropriations and funding.

4# he amount of a&&ro&riations for the annual o&erating e2&enses of the Commission, including thesalaries, allowances and other emoluments of all its officials and em&loyees and its central andregional offices as well as in the auditing units in the various national and local government agencies,including government'owned or controlled cor&oration, shall be included in the annual general

a&&ro&riations law# he usage of these funds shall be government by the general a&&ro&riations andother budget laws*

5# All government'owned or controlled cor&orations, including their subsidiaries, and self'governingboards, commissions, or agencies of the government shall a&&ro&riate in their res&ective budgets andremit to the "ational reasury an amount at least e3uivalent to the a&&ro&riation for the salaries andallowances of the re&resentative and staff of the Commission during the &receding fiscal year*



6# A ma2imum of one'half of one &er'centum <4B5 of 4= of the collections from national internalrevenue ta2es not otherwise accruing to S&ecial -unds or S&ecial Accounts in the 1eneral -und of the"ational 1overnment, u&on authority from the Minister <Secretary= of -inance, shall be deducted fromsuch collections and shall be remitted to the "ational reasury to cover the cost of auditing servicesrendered to local government units*

7# he amount estimated to be earned as a result for the assessments on government'owned orcontrolled cor&orations, local government units, and other agencies as &rovided for in this Section shallbe ta(en into consideration in the &re&aration of the annual budget of the Commission, in accordancewith &ertinent budget laws# he 1eneral A&&ro&riations law shall &rovide each year for the cost ofCommission o&erations as may be su&&orted by available funds, in order to meet the auditre3uirements of national and local government units and of government'owned or controlledcor&orations and other agencies covered by this Code#

CHAPTER (URISDICTION) PO*ERS AND FUNCTIONS OF THE COMMISSION

Section 5. Statement of ob*ectives. .n (ee&ing with its Constitutional mandate, the Commission adheres tothe following &rimary ob)ectives/

4# o determine whether or not the fiscal res&onsibility that rests directly with the head of thegovernment agency has been &ro&erly and effectively discharged*

5# o develo& and im&lement a com&rehensive audit &rogram that shall encom&ass an e2amination offinancial transactions, accounts, and re&orts, including evaluation of com&liance with a&&licable lawsand regulations*

6# o institute control measures through the &romulgation of rules and regulations governing therecei&ts, disbursements, and uses of funds and &ro&erty, consistent with the total economicdevelo&ment effort of the government*

7# o &romulgate auditing and accounting rules and regulations so as to facilitate the (ee&ing, andenhance the information value, of the accounts of the government*

8# o ado&t measures calculated to hasten the full &rofessionalization of its services*

9# o institute measures designed to &reserve and ensure the inde&endence of its re&resentatives*and

:# o endeavor to bring its o&erations closer to the &eo&le by the delegation of authority throughdecentralization, consistent with the &rovisions of the new Constitution and the laws#

Section #. $eneral *urisdiction. he authority and &owers of the Commission shall e2tend to and com&rehendall matters relating to auditing &rocedures, systems and controls, the (ee&ing of the general accounts of the1overnment, the &reservation of vouchers &ertaining thereto for a &eriod of ten years, the e2amination andins&ection of the boo(s, records, and &a&ers relating to those accounts* and the audit and settlement of the

accounts of all &ersons res&ecting funds or &ro&erty received or held by them in an accountable ca&acity, aswell as the e2amination, audit, and settlement of all debts and claims of any sort due from or owing to the1overnment or any of its subdivisions, agencies and instrumentalities# he said )urisdiction e2tends to allgovernment'owned or controlled cor&orations, including their subsidiaries, and other self'governing boards,commissions, or agencies of the 1overnment, and as herein &rescribed, including non'governmental entitiessubsidized by the government, those funded by donations through the government, those re3uired to &ay leviesor government share, and those for which the government has &ut u& a counter&art fund or those &artly fundedby the government#



Section $. Appointing po%er. he Commission ro&er shall a&&oint, sub)ect to Civil Service >aw the officialsand em&loyees of the Commission whenever they are stationed or assigned#

Section %. +amining authority. he Commission shall have authority to e2amine boo(s, &a&ers, anddocuments filed by individuals and cor&orations with, and which are in the custody of, government offices inconnection with government revenue collection o&erations, for the sole &ur&ose of ascertaining that all fundsdetermined by the a&&ro&riate agencies as collectible and due the government have actually been collected,e2ce&t as otherwise &rovided in the .nternal Revenue Code of 4%::#

Section &. -isitorial Authority.

4# he Commission shall have visitorial authority over non'government entities subsidized by thegovernment, those re3uired to &ay levies or government share, those which have received counter&artfunds from the government or are &artly funded by donations through the government, the saidauthority however &ertaining only to the audit of those funds or subsidiaries coming from or throughthe government#

5# &on direction of the resident <rime Minister=, the Commission shall li(ewise e2ercise visitorialauthority over non'governmental entities whose loans are guaranteed by the 1overnment, &rovidedthat such authority shall &ertain only to the audit of the governmentDs contingent liability#

Section !'. Fees for audit and other services.

4# he Commission shall fi2 and collect reasonable fees for the different services rendered to non'government entities that shall be audited in connection with their dealings with the government arisingfrom subsidies, counter&art funding by government, or where audited records become the basis for agovernment levy or share# -ees of this nature shall accrue to the 1eneral -und and shall be remittedto the reasurer of the hili&&ines within 4 days following com&letion of the audit#

5# Whenever the Commission contracts with any government entity, to render audit and relatedservices beyond the normal sco&e of such services, the Commission is em&owered to fi2 and collectreasonable fees# Such fees shall either be a&&ro&riated in the agencyDs current budget, chargedagainst its savings, or a&&ro&riated in its succeeding yearDs budget# Remittance shall accrue to the

1eneral -und and shall be made to the reasurer of the hili&&ines within the time &rovided for in thecontract of service, or in the billing rendered by the Commission#

Section !1. Deputi)ation of private licensed professionals to assist government auditors.

4# he Commission may, when the e2igencies of the service so re3uire, de&utize and retain in thename of the Commission such certified &ublic accountants and other licensed &rofessionals not in the&ublic service as it may deem necessary to assist government auditors in underta(ing s&ecializedaudit engagements#

5# he de&utized &rofessionals shall be entitled to such com&ensation and allowances as may besti&ulated, sub)ect to &ertinent rules and regulations on com&ensation and fees#

Section !. $overnment contracts for auditing, accounting, and related services.

4# "o government agency shall enter into any contract with any &rivate &erson or firm for services tounderta(e studies and services relating to government auditing, including services to conduct, for afee, seminars or wor(sho&s for government &ersonnel on these to&ics, unless the &ro&osed contract isfirst submitted to the Commission to enable it to determine if it has the resources to underta(e suchstudies or services# he Commission may engage the services of e2&erts from the &ublic or &rivatesector in the conduct of these studies#



5# Should the Commission decide not to underta(e the study or service, it shall nonetheless have the&ower to review the contract in order to determine the reasonableness of its costs#

Section !!. Prevention of irregular, unnecessary, ecessive, or etravagant ependitures of funds or uses of property' po%er to disallo% such ependitures. he Commission shall &romulgate such auditing and accountingrules and regulations as shall &revent irregular, unnecessary, e2cessive, or e2travagant e2&enditures or usesof government funds or &ro&erty#

Section !4. Settlement of accounts bet%een agencies. he Commission shall have the &ower, under suchregulations as it may &rescribe, to authorize and enforce the settlement of accounts subsisting betweenagencies of the government#

Section !5. Collection of indebtedness due the government. he Commission shall, through &ro&er channels,assist in the collection and enforcement of all debts and claims, and the restitution of all funds or there&lacement or &ayment at a reasonable &rice of &ro&erty, found to be due the 1overnment, or any of itssubdivisions, agencies or instrumentalities, or any government' owned or controlled cor&oration or self'governing board, commission or agency of the government, in the settlement and ad)ustment of its accounts# .fany legal &roceeding is necessary to that end, the Commission shall refer the case to the Solicitor 1eneral, the1overnment Cor&orate Counsel, or the legal staff of the creditor government office or agency concerned toinstitute such legal &roceeding# he Commission shall e2tend full su&&ort in the litigation# All such moneys due

and &ayable shall bear interest at the legal rate from the date of written demand by the Commission#

Section !#. Po%er to compromise claims.

4# When the interest of the government so re3uires, the Commission may com&romise or release inwhole or in &art, any claim or settled liability to any government agency not e2ceeding ten thousand&esos and with the written a&&roval of the rime Minister, it may li(ewise com&romise or release anysimilar claim or liability not e2ceeding one hundred thousand &esos, the a&&lication for relief therefromshall be submitted, through the Commission and the rime Minister, with their recommendations, tothe "ational Assembly#

5# he res&ective governing bodies of government'owned or controlled cor&orations, and self'governing boards, commissions or agencies of the government shall have the e2clusive &ower to

com&romise or release any similar claim or liability when e2&ressly authorized by their charters and ifin their )udgment, the interest of their res&ective cor&orations or agencies so re3uires# When thecharters do not so &rovide, the &ower to com&romise shall be e2ercised by the Commission inaccordance with the &receding &aragra&h#

6# he Commission may, in the interest of the government, authorize the charging or crediting to ana&&ro&riate account in the "ational reasury, small discre&ancies <average or shortage= in theremittances to and disbursements of the "ational reasury, sub)ect to the rules and regulations as itmay &rescribe#

Section !$. &etention of money for satisfaction of indebtedness to government. When any &erson is indebtedto any government agency, the Commission may direct the &ro&er officer to withhold the &ayment of anymoney due such &erson or his estate to be a&&lied in satisfaction of the indebtedness#

Section !%. Authority to eamine accounts of public utilities.

4# he Commission shall e2amine and audit the boo(s, records, and accounts of &ublic utilities inconnection with the fi2ing of rates of every nature, or in relation to the &roceedings of the &ro&erregulatory agencies, for &ur&oses of determining franchise ta2es#

5# !uring the e2amination and audit, the &ublic utility concerned shall &roduce all the re&orts, records,boo(s of accounts and such other &a&ers as may be re3uired# he Commission shall have the &owerto e2amine under oath any official or em&loyee of the said &ublic utility#



6# Any &ublic utility refusing to allow an e2amination and audit of its boo(s of accounts and &ertinentrecords, or offering unnecessary obstruction to the e2amination and audit, or found guilty of concealingany material information concerning its financial status shall be sub)ect to the &enalties &rovided bylaw#

Section !&. Submission of papers relative to government obligations.

4# he Commission shall have the &ower, for &ur&oses of ins&ection, to re3uire the submission of theoriginal of any order, deed, contract, or other document under which any collection of, or &aymentfrom, government funds may be made, together with any certificate, recei&t, or other evidence inconnection therewith# .f an authenticated co&y is needed for record &ur&oses, the co&y shall u&ondemand be furnished#

5# .n the case of deeds to &ro&erty &urchased by any government agency, the Commission shallre3uire a certificate of title entered in favor of the government or other evidence satisfactory to it thatthe title is in the government#

6# .t shall be the duty of the officials or em&loyees concerned including those in non'governmententities under audit, or affected in the audit of government and non'government entities, to com&ly&rom&tly with these re3uirements# -ailure or refusal to do so without )ustifiable cause shall constitute a

ground for administrative disci&linary action as well as for disallowing &ermanently a claim undere2amination, assessing additional levy or government share, or withholding or withdrawinggovernment funding or donations through the government#

Section 4'. nvestigatory and inquisitorial po%ers' po%er to punish for contempt.

4# he Chairman or any Commissioner of the Commission, the central office managers, the regionaldirectors, the auditors of any government agency, and any other official or em&loyee of theCommission s&ecially de&uted in writing for the &ur&ose by the Chairman shall, in com&liance with there3uirement of due &rocess, have the &ower to summon the &arties to a case brought before theCommission for resolution, issue sub&oena and sub&oena duces tecum, administer oaths, andotherwise ta(e testimony in any investigation or in3uiry on any matter within the )urisdiction of theCommission#

5# he Commission shall have the &ower to &unish contem&ts &rovided for in the Rules of Court, underthe same &rocedure and with the same &enalties &rovided therein# Any violation of any final ande2ecutory decision, order or ruling of the Commission shall constitute contem&t of the Commission#

Section 41. Annual report of the Commission.

4# he Commission shall submit to the resident, the rime Minister, and the "ational Assembly notlater than the last day of Se&tember of each year an annual re&ort on the financial condition andresults of o&eration of all agencies of the government which shall include recommendations ofmeasures necessary to im&rove the efficiency and effectiveness of these agencies#

5# o carry out the &ur&oses of this section, the chief accountant or the official in charge or (ee&ing the

accounts of a government agency shall submit to the Commission year'end trial balances and suchother su&&orting or subsidiary statements as may be re3uired by the Commission not later than thefourteenth day of -ebruary# rial balances returned by the Commission for revision due to non'com&liance with accounting rules and regulations, shall be resubmitted within three days after the dateof recei&t by the official concerned#

6# -ailure on the &art of any official or em&loyee to com&ly with the &rovisions of the immediately&receding &aragra&h shall cause the automatic sus&ension of the &ayment of his salary and otheremoluments until he shall have com&lied therewith# he violation of these &rovisions for at least threetimes shall sub)ect the offender to administrative disci&linary action#



6# he auditor who ta(es &ossession of the office of the local treasurer under this section shall i&sofacto su&ersede the local treasurer until the officer involved is restored, or other &rovision has beenlawfully made for filling the office#

Section 4$. Constructive distraint of property of accountable ffice.

4# &on the discovery in audit of a shortage in the accounts of any accountable officer and u&on afinding of a &rima facie case of malversation of &ublic funds or &ro&erty against him, in order tosafeguard the interest of the 1overnment, the Commission may &lace under constructive distraint&ersonal &ro&erty of the accountable officer concerned where there is reasonable ground to believethat the said officer is retiring from the government service or intends to leave the hili&&ines orremove his &ro&erty therefrom or hide or conceal his &ro&erty#

he constructive distraint shall be effected by re3uiring the accountable officer concerned or any other&erson having &ossession or control of the &ro&erty to accom&lish a recei&t in the form &rescribed bythe Commission, covering the &ro&erty distrained and obligate himself to &reserve the same intact andunaltered and not to dis&ose of it in any manner whatever without the e2&ress authority of theCommission#

5# .n case the said accountable officer or other &erson having the &ossession and control of the

&ro&erty sought to be &laced under constructive distraint refuses or fails to accom&lish the recei&therein referred to, the re&resentative of the Commission, effecting the constructive distraint shall&roceed to &re&are a list of such &ro&erty and in the &resence of two witnesses leave a co&y thereof inthe &remises where the &ro&erty distrained is located after which the said &ro&erty shall be deemed tohave been &laced under the constructive distraint#

CHAPTER !DECISIONS OF THE COMMISSION

Section 4%. Appeal from decision of auditors. Any &erson aggrieved by the decision of an auditor of anygovernment agency in the settlement of an account or claim may within si2 months from recei&t of a co&y of thedecision a&&eal in writing to the Commission#

Section 4&. Period for rendering decisions of the Commission. he Commission shall decide any case broughtbefore it within si2ty days from the date of its submission for resolution# .f the account or claim involved in thecase needs reference to other &ersons or offices, or to a &arty interested, the &eriod shall be counted from thetime the last comment necessary to a &ro&er decision is received by it#

Section 5'. Appeal from decisions of the Commission. he &arty aggrieved by any decision, order or ruling ofthe Commission may within thirty days from his recei&t of a co&y thereof a&&eal on certiorari to the Su&remeCourt in the manner &rovided by law and the Rules of Court# When the decision, order, or ruling adverselyaffects the interest of any government agency, the a&&eal may be ta(en by the &ro&er head of that agency#

Section 51. Finality of decisions of the Commission or any auditor. A decision of the Commission or of anyauditor u&on any matter within its or his )urisdiction, if not a&&ealed as herein &rovided, shall be final ande2ecutory#

Section 5. pening and revision of settled accounts.

4# At any time before the e2&iration of three years after the settlement of any account by an auditor,the Commission may motu &ro&io review and revise the account or settlement and certify a newbalance# -or that &ur&ose, it may re3uire any account, vouchers, or other &a&ers connected with thematter to be forwarded to it#

5# When any settled account a&&ears to be tainted with fraud, collusion, or error calculation, or whennew and material evidence is discovered, the Commission may, within three years after the original



settlement, o&en the account, and after a reasonable time for re&ly or a&&earance of the &artyconcerned, may certify thereon a new balance# An auditor may e2ercise the same &ower with res&ectto settled accounts &ertaining to the agencies under his audit )urisdiction#

6# Accounts once finally settled shall in no case be o&ened or reviewed e2ce&t as herein &rovided#

TITLE IIGOVERNMENT AUDITING

CHAPTER 1+ASIC POLICIES AND STANDARDS

Section 5!. Definition of government auditing. government Auditing is the analytical and systematice2amination and verification of financial transactions, o&erations, accounts, and re&orts of any governmentagency for the &ur&ose of determining their accuracy, integrity, and authenticity, and satisfying there3uirements of law, rules and regulations#

he conduct of government audit shall conform with the auditing standards set forth in the following threesections#

Section 54. $eneral standards.

4# he audit shall be &erformed by a &erson &ossessed with ade3uate technical training and&roficiency as auditor#

5# .n all matters relating to the audit wor(, the auditor shall maintain com&lete inde&endence,im&artiality and ob)ectivity shall avoid any &ossible com&romise of his inde&endence or any act whichmay create a &resum&tion of lac( of inde&endence or the &ossibility of undue influence in the&erformance of his duties#

6# he auditor shall e2ercise due &rofessional care and be guided by a&&licable laws, regulations andthe generally acce&ted &rinci&les of accounting in the &erformance of the audit wor( as well as in the

&re&aration of audit and financial re&orts#

Section 55. +amination and evaluation standards.

4# he audit wor( shall be ade3uately &lanned and assistants shall be &ro&erly su&ervised#

5# A review shall be made of com&liance with legal and regulatory re3uirements#

6# An evaluation shall be made of the system of internal control and related administrative &ractices todetermine the e2tent they can be relied u&on to ensure com&liance with laws and regulations and to&rovide for efficient, economical and effective o&erations#

7# he auditor shall obtain through ins&ections, observation, in3uiries, confirmation and other

techni3ues, sufficient com&etent evidential matter to afford himself a reasonable basis for his o&inions, )udgments, conclusions, and recommendations#

Section 5#. &eporting standards. 4# Audit re&orts shall be dated, signed manually and shall be issued anddistributed in the manner &rovided by regulations of the Commission#

5# Audit re&orts shall contain basically the transmittal statement, sco&e and ob)ectives of the audit andtime &eriod e2amined highlights, financial information, findings, recommendations and conclusions aswell as other data that may &rovide the management of the audited agency with the necessary in&ut



for the decision'ma(ing &rocess# ables, charts, gra&hs and other data to detail the conditions andfacts shall be used in &ro&er cases#

6# Audit re&orts shall meet the following re&orting criteria/

<a= -actual matter must be accurately, com&letely and fairly &resented#

<b= -indings must be &resented ob)ectively and in language as clear and sim&le as the sub)ectmatter &ermits#

<c= -indings must be ade3uately su&&orted by evidence in the audit wor(ing &a&ers#

<d= Re&orts must be concise yet com&lete enough to be readily understood by the users#

<e= .nformation on underlying causes of &roblems must be included so as to assist inim&lementing or devising corrective actions#

7# Audit re&orts shall/

<a= ut &rimary em&hasis on im&rovement* critical comments shall be &resented in balanced&ers&ective, recognizing unusual difficulties or circumstances faced by officials concerned#

<b= .dentify and e2&lain issued and 3uestions needing further study and consideration by theauditor, the agency or others#

<c= .nclude recognition or noteworthy accom&lishments &articularly when managementim&rovements in one area or activity may be a&&lied elsewhere#

<d= .nclude recognition of the views of res&onsible officials of the agency audited on theauditors findings, conclusions and recommendations# E2ce&t where the &ossibility of fraud orother com&elling reason may re3uire different treatment, the auditorDs tentative findings andconclusions should be reviewed with officials# When &ossible, without undue delay, their view

should be obtained in writing and ob)ectively considered and &resented in the final re&ort#

<e= State whether any significant &ertinent information has been omitted because it is deemedconfidential# he nature of such information should be described and the law or other basisunder which it is withheld should be stated#

8# Audit re&orts accom&anying financial re&orts shall/

<a= State whether the audit was made in accordance with generally acce&ted auditingstandards, and shall disclose the omission of any auditing &rocedure generally recognized asnormal or deemed necessary by him under the circumstances of a &articular case, as well asthe reasons for the omission# "othing in this section, however, shall be construed to im&lyauthority for the omission of any &rocedure which auditors would ordinarily em&loy in the

course of audit#

<b= E2&ress the auditorDs o&inion with res&ect to

i# whether the financial re&ort have been &resented fairly in accordance witha&&licable laws and regulations and the generally acce&ted accounting &rinci&lesa&&lied on a consistent basis#



ii# material changes in accounting &rinci&les and &ractices and their effect on thefinancial re&orts#

<c= .dentity any matter to which he ta(es e2ce&tion and shall s&ecifically and clearly state hise2ce&tions together with a statement on the effect thereof, to the e2tent &racticable, on therelated financial re&ort#

<d= Contain a&&ro&riate su&&lementary e2&lanatory information about the contents of thefinancial re&ort as may be necessary for full and informative disclosure about the financialo&erations of the agency audited#

<e= E2&lain violations of legal or other regulatory re3uirements, including instances of non'com&liance#

CHAPTER AUDIT O+(ECTIVES

Section 5$. Determination of audit procedures. .n the determination of auditing &rocedures and techni3ues tobe followed and the e2tent of e2amination of vouchers and other documents by government auditors, theCommission shall give due regard to generally acce&ted &rinci&les of auditing and accounting organizationsand systems, including consideration of the effectiveness of internal control and related administrative &racticesof the audited agencies#

Section 5%. Audit of assets. he e2amination and audit of assets shall be &erformed with a view to ascertainingtheir e2istence ownershi&, valuation and encumbrances as well as the &ro&riety of items com&osing theres&ective asset accounts, determining their agreement with records, &roving the accuracy of such records*ascertaining if the assets were utilized economically, efficiently and effectively* and evaluating the ade3uacy ofcontrols over the accounts#

Section 5&. Audit of "iabilities. .n his audit of liabilities the auditor shall see( to establish that all obligations ofthe agency have been accurately recorded* only bonafide obligations of the agency have been included* theobligations incurred are &ro&erly authorized* all &rovisions of trust indentures or mortgages are com&lied with*and mortgages and other encumbrances are fully disclosed#

Section #'. Audit of revenue accounts. he e2amination and audit of revenue accounts shall be &erformedwith a view to ascertaining that earned revenues have been duly recorded* and all recorded revenues havebeen earned and a&&ro&riate classifications of revenues have been consistently followed#

Section #1. Audit of epense accounts. he e2amination of e2&ense accounts shall be underta(en to ascertainthat all e2&enses incurred have been duly authorized* ade3uately funded and documented* &ro&erly recorded*all recorded e2&enses have been actually incurred* and the classifications of e2&enses are a&&ro&riate andhave been consistently followed#

Section #. Audit of surplus or net%orth. he audit of sur&lus or networth shall see( to determine the nature ofthe sur&lus, whether current or invested sur&lus* the amount of current sur&lus available to covera&&ro&riations for the o&erational e2&enses of the government, the &ro&riety of the ledger accounts and

balance sheet &resentation account* and the &ro&er authority and recording of changes in the ca&ital structuremade during the &eriod under audit#

CHAPTER !RECEIPT AND DISPOSITION OF FUNDS AND PROPERTY

Section #!. Accounting for moneys and property received by public officials. E2ce&t as may otherwise bes&ecifically &rovided by law or com&etent authority all moneys and &ro&erty officially received by a &ublic officerin any ca&acity or u&on any occasion must be accounted for as government funds and government &ro&erty#



1overnment &ro&erty shall be ta(en u& in the boo(s of the agency concerned at ac3uisition cost or ana&&raised value#

Section #4. Designation of collecting officers for government agencies. he head of an agency may designatesuch number of collecting officers or agents may be deemed necessary# hey shall render re&orts of theircollections, under the regulations of the Commission, to be submitted &rom&tly to the auditor concerned whoshall conduct the necessary e2amination land audit within thirty days from recei&t thereof#

Section #5. Accrual of income to unappropriated surplus of the $eneral Fund. <4= nless otherwise s&ecifically&rovided by law, income accruing to the agencies by virtue of the &rovisions of law, orders and regulations shallbe de&osited in the "ational reasury or in any duly authorized government de&ository, and shall accrue to theuna&&ro&riated sur&lus of the 1eneral -und of the 1overnment#

<5= Amounts received in trust and from business'ty&e activities of government may be se&aratelyrecorded and disbursed in accordance with such rules and regulations as may be determined by aermanent Committee com&osed of the Secretary <Minister= of -inance as Chairman, and theCommissioner of the ;udget and the Chairman, Commission of Audit, as members#

Section ##. Special, Fiduciary and Trust Funds. Recei&ts shall be recorded as income of S&ecial -iduciary ofrust -unds or -unds other than the 1eneral -und only when authorized by law as im&lemented by rules and

regulations issued by the ermanent Committee created in the &receding section#

Section #$. 0arrants and chec/s receivables in payment for taes or other indebtedness to the government.

4# An office charged with the collection of revenue or the receiving of moneys &ayable to thegovernment shall acce&t &ayment for ta2es, dues or other indebtedness to the government in the formof chec(s and warrants issued in &ayment of government obligations, u&on &ro&er indorsement andidentification of the &ayee or indorsee# Chec(s drawn in favor of the government in &ayment of anysuch indebtedness shall li(ewise be acce&ted by the officer concerned#

5# When a chec( drawn in favor of the government is not acce&ted by the drawee ban( for any reason,the drawer shall continue to be liable for the sum due and all &enalties resulting from delayed&ayment# Where the reason for non'acce&tance by the drawee ban( is insufficiency of funds, the

drawer shall be criminally liable therefore#

6# At no instance should money in the hands of the collecting officer be utilized for the &ur&ose ofencashing &rivate chec(s#

Section #%. ssuance of fficial receipt..

4# "o &ayment of any nature shall be received by a collecting officer without immediately issuing anofficial recei&t in ac(nowledgment thereof he recei&t may be in the form of &ostage, internal revenueor documentary stam&s and the li(e, or officially numbered recei&ts, sub)ect to &ro&er custody,accountability, and audit#

5# Where mechanical devices are used to ac(nowledge cash recei&ts, the Commission may a&&rove,

u&on re3uest, e2em&tion from the use of accountable forms#

Section #&. Deposit of moneys in the treasury.

4# ublic officers authorized to receive and collect moneys arising from ta2es, revenues, or recei&ts ofany (ind shall remit or de&osit intact the full amounts so received and collected by them to the treasuryof the agency concerned and credited to the &articular accounts to which the said moneys belong# heamount of the collections ultimately &ayable to other agencies of the government shall thereafter be



remitted to the res&ective treasuries of these agencies, under regulations which the Commission andthe !e&artment <Ministry= of -inance shall &rescribe#

5# When e2igencies of the service so re3uire, under such rules and regulations as the Commission andthe !e&artment <Ministry= of -inance may &rescribe, &ostmasters may be authorized to use theircollections to &ay money orders, telegra&hic transfer and withdrawals from the &ro&er de&ository ban(whenever their cash advance funds for the &ur&ose have been e2hausted# he amount of collectionsso used shall be restored u&on recei&t by the &ostmaster of the re&lenishment of his cash advance#

6# ending remittance to the &ro&er treasury, collecting officers may tem&orarily de&osit collectionsreceived by them with any treasury, sub)ect to regulations of the Commission#

7# he res&ective treasuries of those agencies shall in turn de&osit with the &ro&er governmentde&ository the full amount of the collections not later than the following ban(ing day#

Section $'. Ac/no%ledgment of receipt for funds. nder such rules and regulations as the Commission andthe !e&artment <Ministry= of -inance may &rescribe, the reasurer of the hili&&ines and all authorizedde&ository ban(s shall ac(nowledge recei&t of all funds received by them, the ac(nowledgment bearing thedate of actual remittance or de&osit and indicating from whom and on what account it was received#

Section $1. Creditors1 unclaimed balances.

4# here shall be maintained in the boo(s of the Commission an account designated 0CreditorsDnclaimed ;alances0 to the credit of which shall be de&osited all moneys for which there is no &resentrightful claimant# Money accruing to this account shall be held e2clusively for the &ayment of &ertinentobligations against it, when certified by the Commission, not in e2cess of the res&ective amountswhich accrued to that account by reason of these obligations#

5# After remaining unclaimed for a &eriod of ten years, money in this account shall revert as treasuryfunds, to the agency that made the de&osit, or, in the absence thereof to the national government#

Section $. Shipment of government funds or property by carrier' notation of evidence of loss. Whengovernment funds or &ro&erty are trans&orted from one &lace to another by carrier, it shall be u&on &ro&er billof lading or recei&t from the carrier, it shall be the duty of the consignee or his re&resentative to ma(e fullnotation of any evidence of loss, shortage, or damage, u&on the bill of lading or recei&t before accom&lishing it#

Section $!. Credit for loss occurring in transit or due to casualty or forces ma*eure.

4# When a loss of government funds or &ro&erty occurs while they are in transit or the loss is causedby fire, theft, or other casualty or force ma)eure, the officer accountable therefore or having custodythereof shall immediately notify the Commission or the auditor concerned and, within thirty days orsuch longer &eriod as the Commission or auditor may in the &articular case allow, shall &resent hisa&&licable for relief, with the available su&&orting evidence# Whenever warranted by the evidencecredit for the loss shall be allowed# An officer who fails to com&ly with this re3uirement shall not berelieved of liability or allowed credit for any loss in the settlement of his accounts#

5# he Commission shall &romulgate rules and regulations to im&lement the &rovisions of this section#

Section $4. !onthly reports of depositories to agency head. At the close of each month, de&ositories shallre&ort to the agency head, in such from as he may direct, the condition of the agency account standing on theirboo(s# he head of the agency shall see to it that a reconciliation is made between the balance shown in there&orts and the balance found in the boo(s of the agency#



Section $5. Transfer of funds from one officer to another. ransfer of government funds from one officer toanother shall, e2ce&t as allowed by law or regulation, be made only u&on &rior direction or authorization, of theCommission or its re&resentative#

Section $#. Transfer of property bet%een government agencies. Any government &ro&erty that is no longerserviceable or needed by the agency to which it belongs may be transferred without cost, or at an a&&raisedvalue, to other agencies of the government u&on authority of the res&ective heads of agencies in the nationalgovernment, or of the governing bodies of government'owned or controlled cor&orations, other self'governingboards or commissions or the government, or of the local legislative bodies for local government unitsconcerned#

Section $$. nvoice and receipt upon transfer of funds or property. When government funds or &ro&erty aretransferred from one accountable officer to another, or from an outgoing officer to his successor, it shall bedone u&on &ro&erly itemized invoice and recei&t which shall invariably su&&ort the clearance to be issued to therelieved or out'going officer, sub)ect to regulations of the Commission#

Section $%. Disposition of funds or property held by deceased, incapacitated, absconding, or supersededaccountable officer.

4# When an officer, accountable for government funds or &ro&erty absconds with them dies, or

becomes inca&acitated in the &erformance of his duties, the &ro&er agency head shall designate acustodian to ta(e charge of the funds or &ro&erty until a successor shall have been a&&ointed and3ualified# he agency head may a&&oint a committee to count the cash and ta(e an inventory of the&ro&erty for which the officer was accountable and to determine the res&onsibility for any shortagetherein# +ne co&y of the inventory and of the re&ort of the Committee duly certified shall be filed withthe Commission but the findings of the committee shall not be conclusive until a&&roved by theCommission or its duly authorized re&resentative#

5# .f the absconding, deceased, inca&acitated, or su&erseded officer is accountable for funds or&ro&erty of a &rovince or city, the custodian and committee shall be designated by the Minister<Secretary= of -inance, and if accountable for munici&al or barrio <barangay= funds or &ro&erty, by the&rovincial treasurer# .n all other res&ects, the above'&rescribed &roceedings shall be observed#

6# .f the absconding, deceased, inca&acitated, or su&erseded officer is res&onsible to another who isaccountable, the latter may himself designate the committee or ta(e other lawful measures for the&rotection of his interest#

Section $&. Destruction or sale of unserviceable property. When government &ro&erty has becomeunserviceable for any cause, or is no longer needed, it shall, u&on a&&lication of the officer accountabletherefor, be ins&ected by the head of the agency or his duly authorized re&resentative in the &resence of theauditor concerned and, if found to be valueless or unsalable, it may be destroyed in their &resence# .f found tobe valuable, it may be sold at &ublic auction to the highest bidder under the su&ervision of the &ro&ercommittee an award or similar body in the &resence of the auditor concerned or other duly authorizedre&resentative of the Commission, after advertising by &rinted notice in the +fficial 1azette, or for not less thanthree consecutive days in any news&a&er of general circulation, or where the value of the &ro&erty does notwarrant the e2&ense of &ublication, by notices &osted for a li(e &eriod in at least three &ublic &laces in thelocality where the &ro&erty is to be sold# .n the event that the &ublic auction fails, the &ro&erty may be sold at a

&rivate sale at such &rice as may be fi2ed by the same committee or body concerned and a&&roved by theCommission#

Section %'. Final report of accountable officers.

4# An accountable officer, u&on ceasing to act in his official ca&acity as such, shall submit to theauditor of the agency concerned a re&ort of his accountability#



5# Any remaining balance of such accountability shall be de&osited in the &ro&er treasury withoutunnecessary delay#

Section %1. Auditor1s certificate of balance. Auditors of all government agencies, shall certify the balancesarising in the accounts settled by them to the Commission and to the &ro&er treasurer, collecting officer, ordisbursing officer, in such form as the Commission may &rescribe, within si2ty days from the date of recei&t ofthose accounts from the treasurer, collecting officer, or disbursing officer concerned#

Section %. Auditor1s notice to accountable officer of balance sho%n upon settlement. he auditor concernedshall, at convenient intervals, send a written notice under a certificate of settlement to each officer whoseaccounts have been audited and settled in whole or in &art by him, stating the balances found due thereon andcertified, and the charges or differences arising from the settlement by reason of disallowances, charges, orsus&ensions# he certificate shall be &ro&erly itemized and shall state the reasons for disallowance, charge, orsus&ension of credit# A charge of sus&ension which is not satisfactorily e2&lained within ninety days afterrecei&t of the certificate or notice by the accountable officer concerned shall become a disallowance, unless theCommission or auditor concerned shall, in writing and for good cause shown, e2tend the time for answerbeyond ninety days#

Section %!. Transcript of auditor1s record as evidence of liability. .n any criminal or civil &roceeding against anofficer for the embezzlement or misa&&ro&riation of government funds or &ro&erty, or to recover an amount due

the government from an accountable officer it shall be sufficient, for the &ur&ose of showing a balance againsthim, to &roduce the wor(ing &a&ers of the auditor concerned# A showing in this manner of any balance againstthe officer shall be &rima facie evidence of the misa&&ro&riation of the funds or &ro&erty unaccounted for or ofcivil liability of the officer as the case may be# he e2istence or contents of bonds, contracts, or other &a&ersrelating to or connected with the settlement of any account may be &roved by the &roduction of certified co&iesthereof but the court may re3uire the &roduction of the original when this a&&ears to be necessary for theattainment of )ustice#

CHAPTER 4APPLICATION OF APPROPRIATED FUNDS

Section %4. Disbursement of government funds.

4# Revenue funds shall not be &aid out of any &ublic treasury or de&ository e2ce&t in &ursuance of ana&&ro&riation law or other s&ecific statutory authority#

5# rust funds shall not be &aid out of any &ublic treasury or de&ository e2ce&t in fulfillment of the&ur&ose for which the trust was created or funds received, and u&on authorization of the legislativebody, or head of any other agency of the government having control thereof, and sub)ect to &ertinentbudget law, rules and regulations#

6# "ational revenue and trust funds shall not be withdrawn from the "ational reasury e2ce&t u&onwarrant or other instruments of withdrawal a&&roved by the Minister <Secretary= of -inance asrecommended by the reasurer of the hili&&ines#

7# em&orary investment of investible cash in the "ational reasury in any securities issued by the

"ational 1overnment and its &olitical subdivisions and instrumentalities including government'ownedor controlled cor&orations as authorized by the Secretary <Minister= of -inance, shall not be construedas disbursements of funds#

Section %5. Appropriation before entering into contract.

4# "o contract involving the e2&enditure of &ublic funds shall be entered into unless there is ana&&ro&riation therefor, the une2&ended balance of which, free of other obligations, is sufficient to coverthe &ro&osed e2&enditure#



5# "otwithstanding this &rovision, contracts for the &rocurement of su&&lies and materials to be carriedin stoc( may be entered into under regulations of the Commission &rovided that when issued, thesu&&lies and materials shall be charged to the &ro&er a&&ro&riation account#

Section %#. Certificate sho%ing appropriation to meet contract. E2ce&t in the case of a contract for &ersonalservice, for su&&lies for current consum&tion or to be carried in stoc( not e2ceeding the estimated consum&tionfor three months, or ban(ing transactions of government'owned or controlled ban(s no contract involving thee2&enditure of &ublic funds by any government agency shall be entered into or authorized unless the &ro&eraccounting official of the agency concerned shall have certified to the officer entering into the obligation thatfunds have been duly a&&ro&riated for the &ur&ose and that the amount necessary to cover the &ro&osedcontract for the current fiscal year is available for e2&enditure on account thereof, sub)ect to verification by theauditor concerned# he certificate signed by the &ro&er accounting official and the auditor who verified it, shallbe attached to and become an integral &art of the &ro&osed contract, and the sum so certified shall notthereafter be available for e2&enditure for any other &ur&ose until the obligation of the government agencyconcerned under the contract is fully e2tinguished#

Section %$. -oid contract and liability of officer. Any contract entered into contrary to the re3uirements of thetwo immediately &receding sections shall be void, and the officer or officers entering into the contract shall beliable to the government or other contracting &arty for any conse3uent damage to the same e2tent as if thetransaction had been wholly between &rivate &arties#

Section %%. Prohibition against advance payment on government contracts.

4# E2ce&t with the &rior a&&roval of the resident <rime Minister= the government shall not be obligedto ma(e an advance &ayment for services not yet rendered or for su&&lies and materials not yetdelivered under any contract therefor# "o &ayment, &artial or final, shall be made on any such contracte2ce&t u&on a certification by the head of the agency concerned to the effect that the services orsu&&lies and materials have been rendered or delivered in accordance with the terms of the contractand have been duly ins&ected and acce&ted#

5# "otwithstanding the foregoing &aragra&h, any government agency, with the a&&roval of the &ro&erde&artment head, may furnish su&&lies and materials to any &arty who has a contract with that agencyif the su&&lies and materials are needed in the &erformance of the services being contracted for andthe value thereof does not e2ceed in any one month ten &ercent of the value of the services alreadyrendered due and unsettled as com&uted by the agency concerned#

Section %&. "imitations on cash advance. "o cash advance shall be given unless for a legally authorizeds&ecific &ur&ose# A cash advance shall be re&orted on and li3uidated as soon as the &ur&ose for which it wasgiven has been served# "o additional cash advance shall be allowed to any official or em&loyee unless the&revious cash advance given to him is first settled or a &ro&er accounting thereof is made#

Section &'. Payment of re%ards. When a reward becomes &ayable by authority of law for information givenrelative to any offense or for any act done in connection with the a&&rehension of the offender, the reward shall,in the absence of s&ecial &rovisions, be &aid in such manner as shall be &rescribed by e2ecutive order# hefinal determination by the &ro&er administrative authority &ursuant to law or any such order, as to whether ornot the &ersons concerned are entitled to any reward and the amount thereof, shall be conclusive u&on thee2ecutive agencies concerned as regards the liability of the government#

Section &1. Payments to creditors. ayments to creditors shall be made only u&on the s&ecific a&&roval of thehead of the agency concerned or his duly authorized re&resentative, or if there be no such officer, u&on thea&&roval of the de&artment head endorsed u&on the warrant or chec( or voucher effecting the &ayment#

Section &. Persons authori)ed to dra% %arrants or chec/s for payment out of government funds.

4# Warrants u&on the "ational reasury or chec(s draw against duly authorized ban( accounts shallbe drawn by the agency head having control of the a&&ro&riation or fund against which the warrants or



chec(s are chargeable, or by such subordinate officer as shall be designated for that duty by the saidagency head, who shall all be duly de&utized for the &ur&ose by the reasurer of the hili&&ines#Co&ies of the designation shall be furnished the reasurer of the hili&&ines and the re&resentative ofthe Commission# "otice shall li(ewise be given to the reasurer of the hili&&ines and the Commissionwhen the designation is revo(ed# "o member of the accounting unit or the internal control unit of theagency may be designated to &erform the duty#

5# Warrants chargeable to national a&&ro&riations or funds not under the control of an agency shall bedrawn by such officer as shall be s&ecified by law, or, in the absence of that officer, by an officerdesignated by the resident <rime Minister=#

Section &!. To %hom %arrants or chec/s payable. Warrants chargeable to revenue or trust funds of thenational government or chec(s drawn against the reasury Chec(ing Account for Agencies maintained withany government de&ository shall be made &ayable either directly to the creditor to whom the money is due or toa disbursing officer for official disbursement#

Section &4. Countersigning of %arrants or chec/s by auditors. "o warrant or chec( shall be &aid by thereasurer of the hili&&ines, local treasurer, or any government de&ository unless it is countersigned by a dulyauthorized official of the Commission# When in the o&inion of the Commission, the interest of the service sore3uires the warrant or chec( may be &aid without the countersignature under such rules and regulations as it

may &rescribe from time to time#

Section &5. Treasurer1s responsibility for indorsements. he reasurer of the hili&&ines shall, within threeyears from the date of &ayment by him, be res&onsible for the indorsements on all warrants and chec(s andshall retain them in his custody, after which they shall be dis&osed of under &ertinent regulations/ rovided, thatthey are not needed for &ending civil, criminal or administrative &roceedings#

Section &#. Payment of lost or fraudulently encashed treasury %arrants or chec/s. When any chec( or warrantis lost, stolen or destroyed, the issuing officer may issue a du&licate chec( or warrant which shall be &aid underregulations of the Commission in regard to issuance and &ayment and u&on the e2ecution of a bond toindemnify the issuing agency in such amount and with such security as the Commission may re3uire#

reasury Warrant or chec( encashed under forged or fraudulent indorsement shall be re&laced by the

reasurer of the hili&&ines even before the recovery of the e3uivalent amount under rules and regulations thatthe Commission and the !e&artment <Ministry= of -inance shall &rescribe#

he Clearing or ayment of reasury warrant and chec( &aid by ban( or other holder in due course andsubse3uently lost may be allowed under regulations of the Commission and the !e&artment <Ministry= of-inance#

Section &$. Disposition of stale %arrants or chec/s.

4# A reasury warrant or chec( which remains outstanding after two years from date of its issue shallnot be &aid by the reasurer of the hili&&ines or by any duly authorized de&ository# he issuingagency shall ta(e u& in its boo(s of accounts the amount of this warrant or chec( as sur&lusad)ustment of the fund against which it was &reviously charged# &on &resentation of a stale warrant

or chec(, the issuing agency shall cancel it and issue to the &ayee a substitute warrant or chec( in lieuthereof#

5# Such sum as may be necessary to meet the obligation arising out of the issuance of substitutewarrants or chec(s chargeable against the general fund shall be charged to the current yearDs 1eneral A&&ro&riations law, sub)ect to &ertinent budget rules and regulations# Substitute warrants or chec(s&ayable from funds other than the general fund shall be &aid from the a&&ro&riate funds#

Section &%. &eversion of unliquidated balances of accounts payable. he Commission u&on notice to the headof agency concerned may revert to the una&&ro&riated sur&lus of the general fund of the national government,



any unli3uidated balance of accounts &ayable in the boo(s of the national government, which has beenoutstanding for two years or more and against which no actual claim, administrative or )udicial, has been filedor which is not covered by &erfected contracts on record# his section shall not a&&ly to unli3uidated balancesof accounts &ayable in trust funds as long as the &ur&oses for which the funds were created have not beenaccom&lished#

Section &&. Transfer of unepended balances to the general fund. he Commission may transfer at any time,from moneys a&&ro&riated for a s&ecific &ur&ose, to the una&&ro&riated general fund any sur&lus balancestanding to the credit of any a&&ro&riation or fund when the officer having administrative control thereof certifiesto the Commission that there is a sur&lus in e2cess of the re3uirements, or that the wor( or &ur&ose for whichthe a&&ro&riation was made has been com&leted, indefinitely &ost&oned or abandoned, and that there is nooutstanding obligation to be &aid therefrom#

Section 1''. &eports of disbursing officers in a government agency. !isbursing officers in any governmentagency shall render monthly re&orts of their transactions &ursuant to regulations of the Commission to besubmitted not later than the fifth day of the ensuing month to the auditor concerned who shall conduct thenecessary e2amination and audit within thirty days from recei&t thereof#

CHAPTER 5ACCOUNTA+ILITY AND RESPONSI+ILITY FOR GOVERNMENT FUNDS AND PROPERTY.

Section 1'1. Accountable officers' bond requirement.

4# Every officer of any government agency whose duties &ermit or re3uire the &ossession or custody ofgovernment funds or &ro&erty shall be accountable therefor and for the safe(ee&ing thereof inconformity with law#

5# Every accountable officer shall be &ro&erly bonded in accordance with law#

Section 1'. Primary and secondary responsibility.

4# he head of any agency of the government is immediately and &rimarily res&onsible for allgovernment funds and &ro&erty &ertaining to his agency#

5# ersons entrusted with the &ossession or custody of the funds or &ro&erty under the agency headshall be immediately res&onsible to him, without &re)udice to the liability of either &arty to thegovernment#

Section 1'!. $eneral liability for unla%ful ependitures. E2&enditures of government funds or uses ofgovernment &ro&erty in violation of law or regulations shall be a &ersonal liability of the official or em&loyeefound to be directly res&onsible therefor#

Section 1'4. &ecords and reports required by primarily responsible officers. he head of any agency orinstrumentality of the national government or any government'owned or controlled cor&oration and any otherself'governing board or commission of the government shall e2ercise the diligence of a good father of a familyin su&ervising accountable officers under his control to &revent the incurrence of loss of government funds or

&ro&erty, otherwise he shall be )ointly and solidarily liable with the &erson &rimarily accountable therefore# hetreasurer of the local government unit shall li(ewise e2ercise the same degree of su&ervision over accountableofficers under his su&ervision otherwise, he shall be )ointly and solidarily liable with them for the loss ofgovernment funds or &ro&erty under their control#

Section 1'5. !easure of liability of accountable officers.

4# Every officer accountable for government &ro&erty shall be liable for its money value in case ofim&ro&er or unauthorized used or misa&&lication thereof, by himself or any &erson for whose acts he



may be res&onsible# He shall li(ewise be liable for all losses, damages, or deterioration occasioned bynegligence in the (ee&ing or use of the &ro&erty whether or not it be at the time in his actual custody#

5# Every officer accountable for government funds shall be liable for all losses resulting from theunlawful de&osit, use, or a&&lication thereof and for all losses attributable to negligence in the (ee&ingof the funds#

Section 1'#. "iability for acts done by direction of superior officer. "o accountable officer shall be relieved fromliability by reason of his having acted under the direction of a su&erior officer in &aying out, a&&lying, ordis&osing of the funds or &ro&erty with which he is chargeable, unless &rior to that act, he notified the su&eriorofficer in writing of the illegality of the &ayment, a&&lication, or dis&osition# he officer directing any illegal&ayment or dis&osition of the funds or &ro&erty shall be &rimarily liable for the loss, while the accountableofficer who fails to serve the re3uired notice shall be secondarily liable#

Section 1'$. Time and mode of rendering account. .n the absence of s&ecific &rovision of law, all accountableofficers shall render their accounts, submit their vouchers, and ma(e de&osits of money collected or held bythem at such times and in such manner as shall be &rescribed in the regulations of the Commission#

Section 1'%. Prohibition against pecuniary interest. "o accountable or res&onsible officer shall be &ecuniaryinterested, directly or indirectly, in any contract or transaction of the agency in which he is such an officer#

TITLE IIIGOVERNMENT ACCOUNTING

CHAPTER 1+ASIC PRINCIPLES AND O+(ECTIVES

Section 1'&. Definition. 1overnment accounting encom&asses the &rocesses of analyzing, recording,classifying, summarizing and communicating all transactions involving the recei&t and dis&osition ofgovernment funds and &ro&erty, and inter&reting the results thereof#

Section 11'. b*ectives of government accounting. 1overnment accounting shall aim to

4# &roduce information concerning &ast o&erations and &resent conditions*

5# &rovide a basis for guidance for future o&erations*

6# &rovide for control of the acts of &ublic bodies and officers in the recei&t, dis&osition and utilizationof funds and &ro&erty* and

7# re&ort on the financial &osition and the results of o&erations of government agencies for theinformation of all &ersons concerned#

CHAPTER ACCOUNTS AND ACCOUNTING

Section 111. 2eeping of accounts.

4# he accounts of an agency shall be (e&t in such detail as is necessary to meet the needs of theagency and at the same time be ade3uate to furnish the information needed by fiscal or controlagencies of the government#

5# he highest standards of honesty, ob)ectivity and consistency shall be observed in the (ee&ing ofaccounts to safeguard against inaccurate or misleading information#



Section 11. &ecording of financial transaction. Each government agency shall record its financial transactionsand o&erations conformity with generally acce&ted accounting &rinci&les and in accordance with &ertinent lawsand regulations#

Section 11!. Chart of accounts. he chart of accounts for government agencies shall be &rescribed by theCommission and shall be so designed as to &ermit agency heads to review their activities according to selectedareas of res&onsibility* allow for a clearer definition of obligation accounting leading to more &recise budgetarycontrol* &rovide for a wider range of analytical information designed for use in management audit or legislativereview* furnish information regarding the &roduction of income and the investment in ca&ital items which is ofvalue in fiscal and economic &lanning* enable tighter accounting control to be e2ercised over agenciesDfinancial relationshi& with the reasury* &ermit a more sim&lified &re&aration of trial balances and a sim&ler andmore orderly &re&aration of trial balances and a sim&ler and more orderly &rocess of national consolidation andfacilitate the a&&lication of mechanized accounting &rocedures for more effective &rotection against error andirregularity and yielding economies in o&eration#

Section 114. The general ledger.

4# he government accounting system shall be on a double entry basis with a general ledger in whichall financial transactions are recorded#

5# Subsidiary records shall be (e&t where necessary#

Section 115. Terminology and classification. A common terminology and classification shall be usedconsistently throughout the budget, the accounts and the financial re&orts#

Section 11#. Accounts classification. o &ermit effective budgetary control and to establish uniformity infinancial re&orts, accounts shall be classified in balanced fund grou&s# he grou& for each fund shall include allaccounts necessary to set forth its o&erations and condition# All financial statements shall follow thisclassification#

Section 11$. 3udgetary control accounts. he general accounting system shall include budgetary controlaccounts for revenues, e2&enditures and debt, as &rovided by #!# "o# 44::#

Section 11%. Accounting for unreali)ed revenues. Estimated revenues which remain unrealized at the close ofthe fiscal year shall not be boo(ed or credited to the una&&ro&riated sur&lus or any other account#

Section 11&. Accounting for obligations and ependitures. All lawful e2&enditures and obligations incurredduring the year shall be ta(en u& in the accounts of that year#

CHAPTER !ACCOUNTING REPORTS

Section 1'. &eporting requirements. he Commission shall issue the &ertinent accounting rules andregulations whenever the re&orting re3uirements to be &rescribed by the ;udgetary Commission &ursuant tothe budget law affect accounting functions of the various agencies of the government#

Section 11. Financial reports and statements.

4# he financial re&orts &re&ared by the agencies shall com&ly with the s&ecific re3uirements ofa&&licable laws and regulations as to nature, accounting basic, content, fre3uency, and distribution aswell as with all a&&licable restrictions &ertaining to information that is classified for national security&ur&oses#

5# he financial statements shall be based on official accounting records (e&t in accordance with lawand the generally acce&ted accounting &rinci&les and standards#



Section 1. Submission of reports. Whenever deemed necessary in the e2igencies of the service, theCommission may under regulations issued by it re3uire the agency heads, chief accountants, budget officers,cashiers, disbursing officers, administrative or &ersonnel officers, and other res&onsible officials of the variousagencies to submit trial balances, &hysical inventory re&orts, current &lantilla of &ersonnel, and such otherre&orts as may be necessary for the e2ercise of its functions#

<5= -ailure on the &art of the officials concerned to submit the documents and re&orts mentionedherein shall automatically cause the sus&ension of &ayment of their salaries until they shall havecom&lied with the re3uirements of the Commission#

<6= "o a&&ro&riation authorized in the 1eneral A&&ro&riations Act shall be available to &ay the salaryor any official or em&loyee who violates the &rovisions of this section, without &re)udice to anydisci&linary action that may be instituted against such official or em&loyee#

CHAPTER 4INTERNAL CONTROL SYSTEMS

Section 1!. Definition of internal control. .nternal control is the &lan of organization and all the coordinatemethods and measures ado&ted within an organization or agency to safeguard its assets, chec( the accuracyany reliability of its accounting data, and encourage adherence to &rescribed managerial &olicies#

Section 14. nstallation. .t shall be the direct res&onsibility of the agency head to install, im&lement, andmonitor a sound system of internal control#

TITLE IVFINAL PROVISIONS

Section 15. Transitory provisions.

4# ntil such time as the Commission shall have been fully constituted, the incumbent Chairman or hissuccessor shall continue to e2ercise all the &ower and functions &ro&erly a&&ertaining to theCommission#

5# ending im&lementation of the &rovisions of Section 57, &aragra&h 5 of this Code, the agenciesconcerned shall continue to &rovide the necessary amounts for the salaries, allowances and otherbenefits for the re&resentative and staff of the Commission#

Section 1#. Duty to respect the Commission1s independence. .t shall be the duty of every &erson to res&ect,&rotect and &reserve the inde&endence of the Commission#

Section 1$. Administrative disciplinary action. Sub)ect to rules and regulations as may be a&&roved by theresident <rime Minister=, any un)ustified failure by the &ublic officer concerned to com&ly with anyre3uirement im&osed in this Code shall constitute neglect of duty and shall be a ground for administrativedisci&linary action against the said &ublic officer who, u&on being found guilty thereof after hearing, shall bemeted out such &enalty as is commensurate with the degree of his guilt in accordance with the Civil Service>aw# Re&eated un)ustified failure to com&ly with the re3uirements im&osed in this Code shall be conclusive

&roof that the &ublic officer concerned is notoriously undesirable#

Section 1%. Penal provision. Any violation of the &rovisions of Sections 9:, 9$, $%, 49, and 4$ of this Codeor any regulation issued by the Commission im&lementing these sections, shall be &unished by a fine note2ceeding one thousand &esos or by im&risonment not e2ceeding si2 <9= months, or both such fine andim&risonment in the discretion of the court#

Section 1&. Separately clause. Should any &rovision of this Code or any &art thereof be declared invalid, theother &rovisions, so far as they are se&arable from the invalid one, shall remain in force and effect#



Section 1!'. &epealing clause. Cha&ter 59 <Accounting >aw= of Act 5:44 is hereby re&ealed# All other laws,e2ecutive orders, &roclamations, decrees, instructions, rules and regulations, or &arts thereof which areinconsistent or in conflict with any &rovision of this Code shall be deemed re&ealed or modified accordingly#

Section 1!1. +ffectivity clause. his Code shall ta(e effect three months after the com&letion of its &ublicationin the +fficial 1azette#

!one in the City of Manila, this 44th day of ?une, in the year of +ur >ord, nineteen hundred and seventy'eight#

pd 1445, government auditing code

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