COMMISSION ON AUDIT CIRCULAR NO.

89-294 February 1, 1989

TO : The Secretaries, Regional Directors, Chief Accountants/Heads of Accounting

Units - Department of Budget and Management and Department of Local
Government; Provincial Governors; City/Municipal Mayors; Provincial/City
Engineers; Provincial, City/Municipal Development Officers; COA Auditors and
All Other Concerned.

SUBJECT: Accounting and procedural guidelines relative to the final release of fund
balances under the National Assistance to Local Government Units (NALGU) for
the construction of school buildings with local government participation covered
under memorandum of agreement among the Ministry of Local Government and
Community Development (MLGCD), Ministry Of Public Works (MPW), Ministry of
Budget (MB) and Ministry of Education and Culture (MEC) dated July 24, 1980.

1.0 PURPOSE : This Circular is issued to provide guidelines on the release of funding
warrants for the completion/rehabilitation/improvement/ repair of school
buildings either as reimbursement for funds advanced by the local
government units or final release of the remaining 50% balance.

2.0 RATIONALE : The recent calamity brought about considerable damage on public
properties particularly school buildings. To construct/ reconstruct/
rehabilitate/improve/repair damaged school buildings, funding warrants
corresponding to the unreleased balance of Cash Disbursement
Ceiling (CDC) in 1981 up to first semester of 1986 and the unfunded
balances of Advice of Allotments (AAs) released in the second
semesters of 1986 and 1987 for the School Building Program shall
now be released in accordance with the procedures prescribed herein.

3.0 GENERAL GUIDELINES

3.1 The Department of Local Government, in coordination with the Department of

Budget and Management shall establish the remaining unfunded balances of
released AAs for provinces, cities and municipalities involved.

3.2 Funding warrants shall be issued and deposited by DBM in an authorized

depository bank for credit to the accounts of the local government units concerned.

3.3 Funding warrants of municipalities without servicing banks shall be deposited by

DBM for credit to the account of the provincial treasurer who shall notify the
municipality of the credit made to the depository account of the municipality with the
province.

3.4 Withdrawals from the account with the servicing banks shall solely be on the basis
of duly approved Disbursement Vouchers, and shall solely be by check of the
Province/City/Municipality signed by the Provincial/City/Municipal Treasurer and
Countersigned by the Provincial Governor or City/Municipal Mayor.

3.5 Project funds shall be recorded by LGUs under the Trust Fund books.
 3.6 Provincial Governors, City/Municipal Mayors shall ensure submission of liquidation
reports to DLG, DBM and COA on the total project funds received.

4.0 RESPONSIBILITIES

4.1 The DLG shall:

4.1.1 Prepare a list of the unfunded 50% balance of school buildings under the
Program for submission/reconciliation with DBM.

4.1.2 Record the constructive receipt of funding warrant based on the copy of
Notice of Funding Warrant Issued (NFWI) and bank credit advice.

4.1.3 Record the constructive disbursement of funds using, as basis, the same
documents under 4.1.2 to support the entry.

4.1.4 Require participating LGUs to submit the following:

a. Report of Disbursement covering total cost (50% received from DLG

as seed capital and the 50% balance remitted by DBM through the
banking system) as basis of DLG-RO to liquidate the cash advance
granted to LGUs.

b. Certificates of Completion, Turnover and Acceptance duly

accomplished and signed by the proper authorities as prescribed
under Memorandum of Agreement dated July 24, 1980.

c. Copies of the servicing bank credit advice to support the constructive

receipt and disbursement of funds.

4.2 The DBM shall:

4.2.1 Identify and reconcile with DLG fund balances pertaining to the respective
provinces, cities and municipalities.

4.2.2 Issue funding warrants for credit to the Local government units concerned.

4.2.3 Furnish DLG and the COA auditor of the local government concerned a
copy of the NFWI.

4.3 The Provinces/Cities/Municipalities shall:

4.3.1 Record as trust liability in the Trust Fund books the receipt of the 50%
balance for the school building projects based on the NFWI and bank
credit advice.

4.3.2 Utilized the fund to complete/rehabilitate/ improve or repair school

buildings strictly in accordance with existing accounting and auditing rules
and regulations.

4.3.3 Furnish the DLG a copy of the bank credit advice.

 4.3.4 Submit to DLG, copy furnished DBM:

a. the Certificates of Completion, Turnover and Acceptance.

b. Liquidation/Disbursement Report for total project fund received.

4.3.5 Submit to the Auditor, within five days from the end of each month, a
monthly report of disbursements together with the paid vouchers and
supporting documents, in accordance with existing auditing rules and
regulations.

4.4 The Provincial/City/CMAU Auditor shall:

4.4.1 Ensure that project funds are utilized for the specific purpose for which
they were released.

4.4.2 Ensure that all funding warrants issued by DBM are duly acknowledged
and accounted for by recipient local government units.

4.4.3 Ensure that existing accounting and auditing rules and regulations are
complied with.

5.0 ACCOUNTING ENTRIES

Accounting entries shall be in accordance with "Annex A".

6.0 REPEALING CLAUSE

Provisions of other existing rules and regulations inconsistent with this Circular are
hereby repealed or amended accordingly.

7.0 EFFECTIVITY

This Circular shall take effect immediately.

(SGD.) EUFEMIO C. DOMINGO, Chairman

(SGD.) ALBERTO P. CRUZ, Commissioner
(SGD.) BARTOLOME C. FERNANDEZ, JR., Commissioner