COMMISSION ON AUDIT

MINISTRY OF FINANCE
OFFICE OF BUDGET AND MANAGEMENT

JOINT CIRCULAR NO. 3-82

January 18, 1982

TO : All Heads of Ministries; Managing Heads of Government-Owned and/or

Controlled Corporations; Chiefs of Bureaus and Offices of the National
Government; Heads of Local Government Offices; Chief Accountants/Heads of
Accounting Units; Provincial/City/Municipal Treasurers; COA Managers, Regional
Directors, Unit Auditors and Others Concerned.

SUBJECT : Guidelines and accounting procedures for the closing of books of accounts of
abolished / transferred / merged / consolidated / converted / sub- divided
agencies and the opening of books of accounts for agencies created by virtue of
said abolition/merger/consolidation/ conversion/ subdivision, pursuant to
provisions of law and to prescribe the accounting procedures to be followed by
district offices.

1.0 PROCEDURES

1.1 This circular is issued to prescribe the guidelines and accounting procedures to
be followed by government agencies which were either abolished, transferred,
merged, consolidated, converted, or sub-divided and by agencies which were
created either by abolition, transfer, merger, consolidation, conversion or sub-
division, pursuant to provisions of law.

1.2 To prescribe the accounting procedures to be followed by district offices of the

Ministry of Public Works and Highways.

2.0 DEFINITION OF TERMS

2.1 Agency is any ministry, bureau or office of the national government or any of its
branches and instrumentalities, or any political subdivision, such as provinces,
cities and municipalities as well as government-owned or controlled corporations
including its subsidiaries or other self-governing board or commission of the
government and state colleges and universities.

2.2 Abolished agencies are agencies which are dissolved.

2.3 Transferred agencies are agencies, the functions and supervision of which are
removed from one agency and transferred to another.

2.4 Merged agencies are agencies which have been acquired/absorbed by another,
the acquired agency is dissolved, and the acquiring agency continues to maintain
its identity.
 2.5 Consolidated agencies are agencies which have been dissolved and are
combined to form a new agency.
2.6 Converted agencies are agencies wherein their financial identity and organization
are changed from corporation to national, or vice-versa, from operating unit to
central office or from a municipality to city, etc.

2.7 Sub-divided agencies are agencies which are formed out of another agency and
whose identity is changed.

For purposes of easy reference in this circular, the term "old agency" shall refer
to the abolished, transferred, merged, dissolved, consolidated, sub-divided and/or
converted agencies while the term "new agency" shall refer to the agency which
absorbed or was formed in view of the transfer, merger, consolidation, sub-division
and/or conversion.

3.0 CUT-OFF DATE

The cut-off date to effect the transfer of balances of accounts from the old to the
new agency is the effective abolition, transfer, merger, consolidation or sub-division as
determined/implemented by the head of the new agency. However, for purposes of
reconciliation, consolidation, adjustment, closing of books of accounts of the old agency
and opening of books of accounts of the new agency, a maximum of six (6) months
transitory period from the cut-off date shall be allowed to effect such transfer.

4.0 GENERAL GUIDELINES

4.1 The new agency shall acquire a new personality separate and distinct from that
of the old agency.

4.2 The old agency shall close its books of accounts as of the cut-off date and
transfer the balances of all existing assets, liabilities, and surplus/capital to the
new agency/agencies.

4.3 The new agency shall open a new set of books of accounts and transfer the
balances as of the cut-off date all existing assets, liabilities, and surplus/capital
from the old agency.

4.4 In cases of abolition, transfer, merger, consolidation or conversion, all existing

assets, liabilities and surplus/capital of the old agencies shall be transferred to
the account of the new agency. In case of sub- divided agencies, however, the
distribution of assets and liabilities and surplus/capital existing at the time of the
subdivision shall be in accordance with law and shall be account of the new
agencies created. Likewise, in case of converted agencies, (specifically in the
case of district offices) the accounting procedures being followed at present shall
be discontinued. Rather, these district offices shall adopt the funding check
system being followed by operating units prescribed under Budget Circular No.
249, as amended. Hence, complete set of books shall be maintained.

4.5 The inter-agency committee herein created shall supervise the implementation of
this circular.
 4.5 Pending the final transfer, the new agency can already transact business and
such transactions shall be recorded in its new set of books including the
expenses incurred in connection with the winding up process.

5.0 INTER-AGENCY STANDING COMMITTEE

An inter-agency standing committee is hereby created to supervise the proper

implementation of the provisions of this circular. The Chairman of the committee shall
be the agency representative duly designated by the head of the New Agency. The
members shall be composed of representatives from each of the following agencies:

For National Government Agencies

- Commission on Audit (COA)

- Office of Budget and Management (OBM)
- Bureau of the Treasury (BTR)
- Office of the President (OP)

For Local Government Agencies

- Commission on Audit (COA)

- Office of Budget and Management (OBM)
- Ministry of Finance (MOF)
- Bureau of the Treasury (BTR)
- Office of the President (OP)

For Government-Owned and/or Controlled Corporations

- Commission on Audit (COA)

- Office of Budget and Management (OBM)
- Bureau of the Treasury (BTR)
- Office of the President (OP)

6.0 INTERIM PROVISIONS

In the meantime that the abolition/merger/transfer/consolidation/

conversion/subdivision has not been fully effected (during the 6-month transition period),
the old" and the "new" agency shall see that the following are complied with:

6.1 The head of the new agency may authorize existing personnel to continue
rendering services for them to analyze, reconcile and effect the transfer as
provided herein.

6.2 Clearances of all officials and employees of the old agency who may not be
retained shall not be issued until after they have fully satisfied or settled their
accountabilities/liabilities.
7.0 PROCEDURES FOR NATIONAL GOVERNMENT AGENCIES

7.1 For the Old Agency

7.1.1 The Head of the Central Office old agency shall:

a) Require inventory-taking of equipment, supplies and other tangible

assets and have the results of physical count reconciled with
property and/or inventory ledger cards and the books of accounts.
For this purpose, an ad hoc committee may be created to conduct
the inventory-taking and to summarize the reports to conform with
the account codes and to reconcile the reports with the property
records and the books of accounts by account codes. Any
shortage/overage shall be the responsibility of the accountable
officer.

b) Require all collecting officers to deposit immediately with the

proper treasury all undeposited collections, submit the Report of
Collections and the Report of Accountability for Accountable
Forms, and turn over all unused accountable forms as of the cut-
off date to the newly designated accountable officer under proper
invoice and receipt (Form No. 30A).

c) Require all disbursing officers to refund or liquidate immediately

the balance of any cash advance and submit Reports of
Disbursements,
Reports of Checks Issued by Deputized Disbursing Officers, Reports of Warrants Issued, and
the Monthly Reports of Accountability for Accountable Forms, and turn over blank checks and
other unused accountable forms as of the cut-off date to the newly designated disbursing
officer under proper invoice and receipt (Form No. 30A).

d) Secure from the depository bank and/or the Bureau of the

Treasury (BTR) bank/treasury statements as of the cut-off date.

e) Serve notice to bank and/or BTR for the cancellation of

deputation/designation of disbursing
officers/signing/countersigning authorities.

7.1.2 The Head of the Regional Office/Field Office of the old agency shall make
it a point that all the procedures enumerated in sub-paragraph 7.1.1
(letters a to e) have been complied with in the Regional Office/Field
Office.

7.1.3 The Chief Accountant/Head of Accounting Unit of the Central Office of the
old agency shall:

a) Reconcile the following accounts:

 - All subsidiary ledger balances with the general ledger
control accounts as well as reciprocal accounts (8-71-199-
1 to 3 and 8- 81-199-1 to 3) in the decentralized
accounting procedures.
- Bank/Treasury Statements

- Releases of allotment with the Budget Operations Office of

the Office of Budget and Management (OBM) and the
Accountancy Office (AO), of the COA.

- Balances of continuing appropriations, overdraft and

National Clearing Accounts with the AO, COA.

b) Bill all uncollected receivables and take them up in the books of

accounts.

c) Conduct an inventory of all accounting records and other

documents and turn over under proper invoice and receipt (GF No.
38A) to the new agency head/chief accountant which shall be
witnessed by the auditor of the new agency. Copy of the invoice
and receipt shall be retained by the auditor for record and audit
purposes.

d) After all the records have been updated and the necessary
adjustments made, prepare a preliminary trial balance (PTB)
supported by the required schedules of subsidiary ledger balances,
certify the same and submit to the unit auditor for verification.

e) On the basis of the PTB, prepare the usual adjusting and closing
entries as though it were the end of the year using the applicable
accounts in the Standard Government chart of Accounts.

f) Thereafter, prepare a final trial balance, certify it and have it verified

by the auditor, then submit to the AO of the COA and National
Accounting Office (NAO) of the OBM which shall be the basis for
the final transfer of balances of the
accounts.

g) Use account 8-81-082 as prescribed by BMC No. 131 to denote the

unliquidated obligations as of the cut-off date. The purpose is to
segregate the unliquidated obligations prior to the cut-off date from
the obligations that may be incurred after the transfer or merger of
the offices affected. Any unliquidated balance of these temporary
accounts at the end of the calendar year shall be closed to Account
8-81-400.

In addition, a one digit number to identify the old agency and a two
digit number to identify the year during which an agency was
abolished/transferred/merged/converted/sub- divided shall be
suffixed to Account 8-81-082 such that it will appear as 8-81-082
(181):
 181
represents the year of abolition or merger
represents the agency from which the liability
was transferred

Likewise, transactions during the period affecting the Accounts 0-

82-000, 0-83-000, 0- 99-200, 8-99-000 and 8-99-100 shall be
similarly suffixed.

h). Draw a journal voucher (JV) to effect the transfer of the balances
of the accounts as follows:

- Credit all assets

- Debit all liabilities
- Credit surplus accounts with debit balances and debit
those
with credit balances.

Said JV shall be certified by the accountant and verified by the

auditor.

i) See that clear copies of the preliminary trial balance, final trial
balance and JV are furnished the AO of the COA and NAO of the
OBM. The National Cash Accounting Division (NCAD), BTR shall
likewise be furnished with a copy of the JV transferring the current
account of the old agency to the new agency.

7.1.4 The Chief Accountant/Head of Accounting Unit of the Regional Office of

the old agency shall do all the procedures as prescribed under 7.1.3
(letters a to i) insofar as they may be applicable to the Regional Office
with some differences specifically mentioned as follows:

a) Accounts to be reconciled by the Regional Office are Accounts 8-71-

199-1, 8-71-199-2 and 8-71-199-3.

b) Prepare bank reconciliation statements.

c) Reconcile releases of allotments with the Central Office.

d) Reconcile balances of continuing appropriations and overdraft

accounts with the Central Office.

e) Submit trial balance to the Central Office for consolidation. The

consolidated final trial balance prepared by the latter shall be
 submitted to the new auditor for verification. This will finally be
forwarded to the AO of COA and NAO of OBM.

f) The same as in 7.1.3 (g) except that the accounts that should be
suffixed are 8-71-199- 1, 8-71-199-2 and 8-71-199-3 in addition to
0- 82-000 and 0-83-000.

7.2 For the New Agency

7.2.1 The new agency shall open a new set of books. It shall draw a journal
voucher to record all reconciled balances of accounts of the old agencies
as of the day following the cut-off date.

7.2.2 The journal entries to effect the transfer of balances of accounts in the
books of the new agency are as follows:

- Debit all assets

- Credit all liabilities
- Debit all surplus accounts with debit balances and credit those
with credit balances in the final trial balance of the old agency.

7.2.3 The OBM shall issue an Advice of Allotment and a Notice of Cash
Disbursement Ceiling (CDC) to the new agency releasing that portion of
the appropriation intended for use by new agency using its new agency
code. Said advice of allotment and CDC shall be recorded in the usual
manner, after which the transactions of the new agency can be recorded.

7.2.4 All collecting/disbursing officers shall be bonded/deputized by the BTR

upon their designation before they are allowed to discharge their duties
as such. All other accountable officers shall be likewise be bonded.

7.2.5 All inventories of current and fixed assets as well as accountable forms
and accounting records received from the old agency shall be receipted
for the proper accountable officer of the new agency.

8.0 PROCEDURES FOR LOCAL GOVERNMENT AGENCIES

8.1 For the Old Agency

8.1.1 The old agency shall close its books of accounts as of the cut-off date as
stated in paragraph 4.0.

8.1.2 The head of the old agency shall:

a) Require inventory-taking of equipment, supplies and other tangible

assets and liabilities and have the results of the physical count
reconciled with property and/or inventory ledger cards and
subsidiary ledgers. Any shortage/overage shall be the
responsibility of the accountable officer.
 b) Require all collecting officers to deposit immediately with the
proper treasury all undeposited collections, submit the Report of
Collections and the Monthly Report of Accountability for
Accountable Forms, and turn over to the newly designated
collecting officer all unused accountable forms as of the cut-off
date. (Form No. 30A).

c) Require all disbursing officers to refund or liquidate immediately

the balances of any cash advance and submit Reports of
Disbursements, Treasurer's Journal of Checks Issued and the
Monthly Report of Accountability for Accountable Forms and turn
over blank checks and other unused accountable forms to the
newly designated disbursing officer as of the cut-off date. (Form
No. 30A).

d) Secure from the depository bank and/or the Provincial Treasurer

(PT) a bank statement as of the cut-off date.

e) Serve notice to the bank and/or Provincial/District Treasurer for

the cancellation of deputation/delegation of disbursing
officers/signing authorities.

f) See that clear copies of the Preliminary Trial Balance, Final Trial
Balance and closing JV are furnished the Accountancy Division
(AD) of the Local Government Audit Office (LGAO) of theCOA, the
Ministry of Finance (MOF), and the NAO of the OBM.

8.1.3 The Chief Accountant/Head of Accounting Unit shall:

a) Reconcile all subsidiary ledger balances with the general ledger

control accounts.

b) Prepare Bank/Provincial Treasurer Reconciliation Statement and

effect the necessary adjustments.

c) Conduct an inventory of all accounting records and other

documents and turn over such records and documents to the new
agency head/chief accountant which shall be witnessed by the
new auditor.

d) Prepare a preliminary trial balance (PTB), have it verified by the

unit auditor and furnish copies thereof the LGAO of the COA, the
MOF and the NAO of the OBM. (This shall be done after all the
records have been updated and the necessary adjustments
made).

e) On the basis of the PTB, prepare the usual adjusting and closing
entries as though it were the end of the year using the applicable
accounts in the Standard Government Chart of Accounts.
 f) Thereafter, prepare the final trial balance, certify it, and have it
verified by the new auditor. This shall be the basis for the final
transfer of balances of the accounts.

g) Draw a JV to effect the transfer of the balances of the account as

follows:

- Credit all assets

- Debit all liabilities
- Credit surplus accounts with debit balances and debit
those with credit balances.

8.2 For the New Agency

8.2.1 The new agency shall open a new set of books. It shall draw a JV to
record all reconciled balances of accounts of the old agencies as of the
first day of the month following the cut-off date.

8.2.2 The journal entries to effect the transfer of balances of accounts in the
books of the new agency are as follows:

- Debit all assets

- Credit all liabilities
- Debit all surplus with debit balances and credit those with
credit balances in the final trial balance of the old agency.

8.2.3 All collecting/disbursing officers shall be duly bonded.

8.2.4 All inventories of current and fixed assets as well as accountable forms
and accounting records received from the accountable officers of the old
agency shall be receipted for by the accountable of the new agency.

8.2.5 The Sangguniang Panlalawigan/Panglungsod/Bayan of the new

province/city/municipality shall appropriate the funds necessary to defray
its operating expenses. The provincial/city/municipality shall issue the
necessary Allotment Advice for its expenditures. For abolition/separation
of one agency, however, the accounting and distribution of all funds and
property shall be effected based on the guidelines provided for in
Chapter XXXVII, Section 1135 of the Revised Manual of Instructions to
Treasurers which are quoted below:

"Sec. 1135. Accounting for the distributed funds and property by the entities. - Upon
receipt of the approved distribution of funds and property from the Auditor General (now
Chairman), the treasurers of the newly created entities or political subdivisions will open their
respective sets of books and account for their corresponding shares. A copy of the approved
distribution together with appended inventories and invoice receipts, shall support the special
journal voucher upon which the accounting of the shares of funds and property will be made.
An old province, city or municipality from which the territory has been separated to form another
political subdivision or entity shall close its set of books upon effecting the separation, and open
a new set would be opened for a newly created political entity"
9.0 PROCEDURES FOR GOVERNMENT-OWNED AND/OR CONTROLLED
CORPORATIONS

9.1 For the Old Agency

9.1.1 The old agency shall close its books of accounts as of the cut-off date as
stated in paragraph 2.3.

9.1.2 The head of the old agency shall:

a) Require inventory-taking of equipment, supplies and other tangible

assets and have the results of physical count reconciled with
property and/or inventory ledger cards. Any shortage/overage
shall be the responsibility of the accountable officer.

b) Require all collecting officers to deposit immediately with the

proper treasury all undeposited collections, submit the Report of
Collections and the Monthly Report of Accountability for
Accountable Forms and turn over to the newly designated
collecting officer all unused accountable forms as of the cut-off
date. (Form No. 30A)

c) Require all disbursing officers/cashiers to refund or liquidate the

balance of any cash advance and submit the Report of
Disbursements, Report of Checks Issued or their equivalents, and
the Monthly Report of Accountability for Accountable Forms and

d) Secure from the depository bank or Bureau of the Treasury (BTR)

a bank/treasury statement as of the cut-off date.

e) Serve notice to bank and/or BTR for the cancellation of

deputation/delegation of disbursing officers/signing/countersigning
authorities.

9.1.3 The Chief Accountant/Head of Accounting Unit shall:

a) Reconcile all subsidiary ledger balances with the general ledger

control accounts.

b) Prepare Bank/Treasury Reconciliation Statement and effect the

necessary adjustments.

c) Conduct an inventory of all accounting records and other

documents and turn over such records and documents to the new
agency head/chief accountant which shall be witnessed by the
new auditor.

d) Prepare a preliminary trial balance (PTB) and furnish copy to the

Corporate Audit Office (CAO)/AO of the COA and the NAO of the
 OBM. This shall be done after all records have been updated and
the necessary adjustments made.

e) On the basis of the preliminary trial balance thus prepared,

prepare the usual adjusting and closing entries as though it were
the end of the year using the Applicable accounts in the Standard
Government Chart of Accounts.

f) Thereafter, prepare a final trial balance, certify it and have it

verified by the new agency auditor. This shall be the basis for the
final transfer of the balances of the accounts.

g) Draw a JV to effect the transfer of the balances of the accounts as

follows:

- Credit all assets

- Debit all liabilities
- Credit surplus accounts with debit balances and debit those with
credit balances.

9.2 For the New Agency

9.2.1 The new agency shall open a new set of books. It shall draw a journal
voucher to record all reconciled balances of accounts of the old agencies
as of the first date of the month following the cut-off date.

9.2.2 The journal entries to effect the transfer of balances of accounts in the
books of the new agency are as follows:

- Debit all assets

- Credit all liabilities
- Debit all surplus accounts with debit balances and credit those with
credit balances in the final trial balance of the old agency.

9.2.3 The OBM shall issue an Advice of Allotment and a Notice of Cash
Disbursement Ceiling (CDC) to the BTR, copy furnished the new agency
releasing that portion of the appropriation intended for use by the new
agency. Said advice of allotment and CDC shall be recorded in the usual
manner after which the transactions of the new agency can be recorded.

9.2.4 All inventories of current and fixed assets as well as accountable forms
and accounting records received from the accountable officers of the old
agency shall be receipted for by the accountable officers of the new
agency.

9.2.5 A Board Resolution authorizing the incurrence of expenditures shall be

made by the new Board.
10.0 ACCOUNTING ENTRIES

The accounting treatment applicable in each case together with a listing of the
same is attached as Annex A and Annex A-1 to A-11.

11.0 REPEALING CLAUSE

All circulars and memoranda or parts thereof which are inconsistent with the
provisions of this circular are hereby rescinded/repealed/modified accordingly.

12.0 EFFECTIVITY

This circular shall take effect immediately.

(SGD.) MANUEL S. ALBA (SGD.) CESAR E. A. VIRATA

Minister of the Budget Minister of Finance

(SGD.) FRANCISCO S. TANTUICO, JR.

Acting Chairman
Commission on Audit

Concurred In:

____________________________ _________________________
Chairman, Presidential Committee Chairman, Board of Liquidators
or Reorganization