Chapter 5: Disbursements
Introduction
DISBURSEMENTS constitute all payments in cash, in whatever manner ( through cash, check or other means).
Disbursements shall be supported by disbursement vouchers including petty cash vouchers or payroll.
Fundamental principles for disbursement of public funds
A. All government resources shall be used only in accordance with the law and for public purposes.
B. Trust fund shall be used only for their specific purpose.
C. Fiscal responsibility shall be strictly shared by all those exercising authority over a government agency
D. The use of government resources shall be approved by proper officials
E. Claims against government funds shall be supported with complete documentation
F. All laws and regulations applicable to financial transactions principles and practices of accounting,
management and fiscal administration, provided that they do not contravene existing laws and regulations.
Expenditures funded by borrowings are included in the expenditure program of the entity. The loan proceeds
shall not be used without the corresponding release of funds through a special budget ( GAM for NGAs,
chapter 2, section 35)
Authority to disburse/ pay
An entity can make Disbursements only after it has received a disbursement authority, based on the following:
A. Notice of cash allocation ( NCA)
B. Notice of transfer of allocation ( NTA )
C. Tax remittance advice ( TRA )
D. Non cash availment authority ( NCAA )
E. Cash disbursement ceiling ( CDC) – Authority issued by the DBM to agencies with foreign operations (
department of foreign affairs DFA and department of labor and employment DOLE ) Allowing them to use the
income collected by their foreign service posts ( FSPs ) to cover their operating requirements
The entries related to CDC are as follows
Books of DFA or DOLE
Books of BTr
Cash collecting officer 100
Passport and Visa fees 100
To recognize collection of revenue of FSPs
Cash in bank- foreign
Currency, current account 100
Cash- collecting officer
100
To recognize deposit of collections to authorized
serving bank of the FSPs
Cash- constructive income
Remittance 80
Subsidiary to NG 80
To recognize receipt of CDC to DBM
Subsidy to NGAs 80
Cash- constructive income remittance 80
To recognize constructive receipt of
remitted collections by FSPs and Disbursements
charged to the issued CDCs to FSPs
Rents- building and structures 80
Currency, current account
80
To recognize payment of expenses charged to
CDC.
BASIC REQUIREMENTS AND CERTIFICATIONS FOR DISBURSEMENTS
The following required when disbursing funds:
A. The budget officer ( or head of budget unit ) shall certify the availability of allotment
B. The chief accountant ( or head of accounting unit) shall charge obligations against available allotment
 The foregoing are to ensure that no overdraft shall be incurred. An overdraft is incurred if
obligations exceed the allotment. The incurrence of overdraft is prohibited.
C. The chief accountant ( or head of the accounting unit) shall certify the availability of funds/ cash and
the completeness of the supporting documents before the head of agency ( or his authorized
representative) can enter into any contract involving the expenditure of public funds
 All disbursement require the certification of the chief accountant ( or head accounting unit).
Certifications must be based on valid and properly authorized claims. Any certification for fictitious
obligation is void. The certifying official shall be dismissed from service and shall be held criminally
liable. Others who are involved in the fictitious transaction are also liable.
D. The requesting and approving officials shall ensure that the disbursements are legal and conform to
the applicable rules and regulations.
E. The head of the requesting unit shall certify the necessity and legality of the disbursement. Payments
shall be made through disbursement vouchers ( DVs ) or payroll and supported by the original copies of
supporting documents
F. The head of agency ( or his authorized representative) shall approved DVs or payrolls.
Mode of disbursements
The different modes of Disbursements are as follows
A. Check
B. Cash
C. Cashless payments
 Advice to debit account ADA
 Electronic modified disbursement systems e-MDS
 Cashless purchase card system ( credit card)
 Non- cash availment authority NCAA
 Tax remittance advice TRA
Disbursements through check
Checks are used whenever payments cannot conveniently, or are not authorized to, be made through cash or
ADA. The following are the two types of checks issued by government entities.
A. Modified disbursement system checks- checks chargeable against the account of the treasurer of the
Philippines, maintained with different modified disbursement system- government servicing banks (
MDS – GSBs )
B. Commercial checks- checks chargeable against the agency checking account with GSBs these are
covered by income/ receipts authorized to be deposited with authorized government depository banks
( AGDBs)
All checks drawn, whether released or unreleased to payees, including cancelled checks, are recorded
chronologically in the checks/ ADA disbursement record maintained by the cash/ treasury unit.
Illustration
Entity A disburses 10,000 for electricity expense. The entries are as follows
MDS check
Commercial check
Electricity expense 10,000
Cash- modified disbursement system (MDS),
Regular,
10,000
Electricity expense 10,000
Cash in bank- local currency current
account
10,000
Disbursement through cash
CASH DISBURSEMENTS constitute payments through cash advances, including payment out of the petty cash
fund. Cash advances are governed by the following rules:
A. Advances shall be made only for a legally authorized specific purpose ( payments for personnel
services, petty cash expenses, and MOOE for field operating requirements
B. Cash advances, other than advances for travel, shall be given only to duly appointed disbursing officers
who must be properly bonded. The amount of cash advance shall not exceed the maximum cash
accountability under the bond
C. Only designated disbursing officers are allowed to perform disbursing functions and only permanently
appointed officials shall be designated as disbursing officers
D. A cash advance must be liquidated as soon as the purpose for which it was given has been served.
 Cash advances for payroll shall be liquidated within 5 days after the end of the pay period.
Unclaimed salaries shall be refunded and issued official receipt to close the account
 Cash advances for travel shall be liquidated as follows
I.
Local travel – within 30 days upon return to the personnel’s workstation
II.
Foreign travel- within 60 days upon return to the Philippines. No official or employee is
allowed to go on an official foreign travel if he is due to retire within 1 year after the foreign
travel.
E. No additional cash advance shall be given to any official or employee unless the previous cash advance
given to him is first liquidated.
F. Transfer of cash advance from one officer to another is prohibited
G. A cash advance shall not be used to encash checks or to liquidate a previous cash advance
Illustration: entity a disburses 10,000 for certain expenses through cash advance. The entries are as follows
Date Advances for/ to ( appropriate account)
10,000
Cash- MDS, regular
10,000
To record the grant of cash advances
Expenses ( appropriate account)
Advances for/ to ( appropriate account)
To record the liquidation of cash advances
10,000
10,000
Disbursement through advice to debit account ( ADA )
The ADA, or more specifically the list of due and demandable accounts payable- advice to debit account (
LDDAP- ADA ), is an accountable form used as an authorization issued by a government agency to the MDS –
GSB instructing the bank to debit a specified amount from its available NCA to pay the creditors / payees listed
in the LDDAP – ADA
The ADA works like a check, except that one ADA can be drawn to pay various payees, as long as they all
maintain accounts in the same bank where the ADA is drawn. Separate ADAs shall be prepared for payees
using other MDS – GSBs. ADA payments are directly credited to the payees accounts.
Simply stated, an ADA is an authorization for a fraud transfer ( between accounts in same bank ) or a bank
transfer ( between accounts with different banks ) from the issuing agency’s NCA bank account to the banks
accounts of specified payees.
The following expenditures shall not be paid through ADA:
A. Payment of terminal leave and retirement gratuity benefits
B. Remittance of GSIS, Phil health, and PAG IBIG contribution
C. Payments to utility companies ( electricity, water, telephone, internet, petroleum)
D. 0 payables which cannot be conveniently nor practicably paid using the ADA
ILLUSTRATION
Entity A pays 100,000 accounts payable through ADA
Date
Accounts payable
Cash- MDS, regular
To recognize payment of payables to suppliers/
contractors through ADA
10,000
10,000
Disbursement through electronic modified disbursement system
The e- MDS is like the ADA except that disbursements are made directly from the accounts of BTr that are
maintained with the Land Bank of the Philippines ( LBP). Agencies subscribed under LBPs, e- MDS can make
online Disbursement for selected transactions.
Disbursement through cashless purchase card ( CPC ) system
Disbursement under the CPC system are made through the use of an electronic card ( credit card ). The
authorized credit card company is CITIBANK. Guidelines in the use of CPC system are as follows:
A. Cpc purchases shall be only for specific eligible items and only with specific merchants
 Merchants- refer to the sellers or suppliers authorized by Citibank
B. Only authorized individuals shall be allowed to use the CPC, subject to monthly credit limits.
Changes in credit limits or cardholders require the prior approval of the steering committee
C. Agency officials who approved the CPC are jointly accountable with the cardholders
D. The CPC system shall comply to, and shall not in any way change, the existing disbursement
policies and procedures prescribed under the law
E. The amount covered by the CPC shall form part of the cash advance levels of the participating
agencies. The CPC shall not be used to justify the increase in cash advance levels of participating
agencies.
F. The CPC shall initially be used for purchases of small value, non common use item which are not
available with the procurement service
G. Unauthorized items purchased using the CPC shall be the personal liability of the cardholders,
without prejudice to the revocation of the cardholders privileges and other penalties that the
participating agencies may impose
H. Participating agencies shall immediately inform the Citibank of any discrepancy regarding items
which they dispute as having been procured using CPC
I. Participating agencies shall ensure the timely payment of CPC billings. In case of delays, late
payment charges shall be the personal liability of the employee directly responsible for the
delay. The NCA shall never be used to pay late payment charges
J. The cardholder shall submit all receipts from use of the CPC to the accounting unit. These shall
be used in inspecting actual goods purchased and in paying credit card billings
K. The accounting unit shall check if the procured items are those allowed by law to be purchased
using the CPC and compare the charge slips with the amounts using in the billing system.
L. In case the CPC is lost or stolen, the cardholder shall immediately notify the program
administrator and the Citibank. The program administrator shall determine whether the
cardholder is negligent and whether the cardholders privileges shall be reinstated or
permanently suspended. The cardholder shall be liable for any charges during the period the
card was lost or stolen.
Illustration: Entity A purchases office supplies worth 10,000 through CPC
Date Office supplies inventory
Accounts payable
To recognize delivery of office supplies based on the
charge slip and inspection and acceptance report ( IAR )
Date Accounts payable
Cash- MDS, regular
To recognize settlement of CPC billing statement
10,000
10,000
10,000
10,000
Disbursement through non- cash availment authority ( NCAA )
NCAA is the authority issued by the DBM to agencies to cover the liquidation of their actual obligations
incurred against available allotments for availment of proceeds from loans/ grants through suppliers credit/
constructive cash
Disbursement through NCAA ( also called direct payment method or direct payment scheme of loan availment
) are made through the journal entry voucher ( JEV) issued by the BTr to the agency to record payment of
goods and services made directly by the lending institution to the supplier or contractor. The JEV is recorded in
the general journal.
Illustration: entity A acquires communication equipment for 1M, on account, and subsequently settles the
account through direct payment scheme.
Book of entity A
Books of BTr
Communication equipment 1M
Accounts payable
1M
To recognize receipt of PPE procured
through the direct payment scheme
Accounts payable 1M
Subsidy to NGAs 1M
Subsidiary from national govt 1m
Loans payable- foreign 1M
To recognize receipt of NCAA and
To recognize the replenishments made to
payment of payable
AGSB negotiated MDS- checks and payments on
account of the NGA
Notice that no cash is involved in the acquisition of the equipment, settlement of the accounts payable, and
recognition of the loans payable. The lending institution directly pays the supplier.
Disbursement through tax remittance advice ( TRA)
TRA is used for the constructive remittance of taxes or customs duties withheld to the BIR or BOC,
respectively.
Accounting for disallowances
Disallowances refer to expenditures made by an agency that are subsequently invalidated or disallowed by the
COA because they are found to be irregular, unnecessary, excessive, extra vagant or unconscionable.
Disallowances are recorded in the books of accounts only when they become final and executory.
Illustration: entity A acquired office supplies for 100,000. It was found out that the correct amount should
have been 90,000
Amount paid 100,000
Should be
90,000
Overstatement 10k
The disallowances pertains to
Current year
Receivable – disallowances / charges 10k
Office supplies expense
10k
To recognize overpayment of purchased
office supplies
Cash- collecting officer 10k
Receivable – disallowances / charges 10k
To recognize settlement of disallowance
Prior year
Receivable- disallowances/ charges 10k
Accumulated surplus ( deficit)
10k
To recognize overpayment of
purchased office supplies in prior year
Cash- collecting officer 10k
Receivable – disallowances / charges 10k
To recognize settlement of disallowance
Cash- treasury/ agency
Cash- treasury/ agency
Deposit, regular 10k
Deposit, regular 10k
Cash- collecting officer 10k
Cash- collecting officer 10k
To recognize the deposit of collection
To recognize the deposit of collection
Notice that the accounting for disallowances by a government entity is similar to the accounting for current
and prior period errors by a business entity
Accounting for overpayments
“ Sometimes overpayments or even double payment of expenditure do happen in agencies. These could be
avoided with the institution of proper controls but some could not be avoided because of built in procedures.
One example is type payment of payrolls. Payrolls are prepared in advance and some agencies pay their
employees through the banking system. All these are done before reports of attendance are submitted
making it impossible to know the exact amount to be paid in case there are absences without pay during the
pay periods. In case of overpayments, refunds shall be demanded of employees concerned. “
Correcting entries for overpayments are similar to the accounting for disallowances