Coa Ammended Rules and Regulations

April 1, 2018 Commerce

?Reporters: (GROUP 5) DAYAO, FloravelMACUSI, MelvaPAQUITOL, Marcelyn JUGANAS, RemediosFAINZAN, Rose AnneBALWEG, Dia Felice BUDIKEY, Lilian COMMISSION ON AUDIT CIRCULAR NO. 85-55A September 8, 1985 AMMENDED RULES AND REGULATIONS ON THE PREVENTION OF IRREGULAR, UNNECESSARY, EXCESSIVE OR EXTRAVAGANT EXPENDITURES OR USES OF FUNDS AND PROPERTY AIM: a)To amplify the existing rules and regulations governing the prevention of IUEE expenditures or uses of government funds and property; b)To update fiscal controls to attain higher government efficiency and productivity; c)To set realistic limits and parameters for government spending.

Guidelines for the proper and effective implementation of “THE RULES”: 1. The operational definition of IUEE expenditures or uses of government funds and property shall not be exclusively used as basis for disallowing expenditure or uses of this nature. 2. The determination of IUEE expenditures or uses of government funds00r property as basis for disallowance shall be made by making reference to both the operational definitions and standards or both operational definitions and the list of situational cases as precedents of such expenditures or uses. . Should the case in point not fall under the standards or list of situational cases, the auditor shall elevate the matter to the Commission Proper in accordance with the procedures prescribed in ‘THERULES”. 4. Decisions of the Commission Proper and those promulgated by courts of law on IUEE expenditures or uses of government funds and property shall form part of the list of situational cases upon which audit action shall be based. DECLARATION OF POLICIES: 1.

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The COA adheres to the policy that government fund and property should be fully protected and conserved, and that irregular, unnecessary, excessive or extravagant expenditures or uses of such funds and property should be prevented. 2. The service mission, size, systems, structure, strategy; skills, style, spirit and financial performance of a government agency are the primary considerations in determining whether or not their expenditures are irregular, incisor, excessive, or extravagant. 3.

The rules and regulations that will be applicable to government corporations exercising proprietary functions and local government, in the exercise of their extravagant expenditures or uses of government funds and property shall take into consideration factors such as profitability of its operations, availability of resources – financial or otherwise to sustain their operations, their ability to operate on their own without appropriation or subsidy from the government, the industrial setting, the nature of their business operations, and other appropriate performance standards. 4.

In line With COA’s effort to be constantly responsive to the changing needs of government, an, updated list of situational cases of IUEE expenditures or uses of government funds and property in the three (3) government sectors- national, local and corporate- shall be drawn up from time to time to serve as reference for auditors and management in the performance of their official duties. 5. The formulation of these rules and regulations recognizes the interplay of certain factors, such as but not limited to urgency of need, capacity to pay, time of purchase, place of purchase, and availability of needed goods and services in the market. . It is recognized that the regulations for extravagant expenditures are largely determined by the level/rank of user, the nature of agency operations, agency missions, profitability of past operational performance and financial resources. As regards excessive expenditures, they shall be determined by place and origin of’ goods, volume or quantity of purchase, service warranties, quality, special features of units purchased and the like. 7.

It is recognized that generally accepted industry practices may be considered in the procurement of goods and services. 8. The Commission on Audit as an independent constitutional body is endowed with special rule-making powers encompassing the broad spectrum of government operations. In the exercise of such rule-making powers, it can enforce sanctions in case of violation of auditing rules and regulations which can serve as basis’ for administrative, civil, or criminal action as maybe warranted under existing law.

DEFINITION OF TERMS: “Irregular expenditure” -signifies expenditure incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law. Irregular expenditures are incurred without conforming to prescribed usages and rules of discipline. “Unnecessary expenditures” -pertains to expenditures, which could not pass the test of prudence or the diligence of a good father of a family, thereby denoting non-responsiveness to the exigencies of the service.

Unnecessary expenditures are those not supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation. An expenditure that is not essential or that which can be dispensed without loss or damage to property is considered unnecessary. “Excessive expenditures” -signifies unreasonable expense or expenses incurred at an immoderate quantity and exorbitant price. It also includes expenses, which exceed what is usual or proper as well as expenses, which are unreasonably high, and beyond just measure or amount.

They also include expenses in excess of reasonable limits. “Extravagant expenditure” –signifies those incurred without restraints, judiciousness and economy. Extravagant expenditures exceed the bounds of propriety: These expenditures are immoderate, prodigal, lavish, luxurious, waste grossly excessive and injudicious. IRREGULAR EXPENDITURES Situational cases: 1. Funds: (applicable to all national, local and corporate sectors) a)Payment of claims under a contract awarded not strictly in accordance with the prescribed modes of procurement of supplies, materials and equipment. )Purchase of Items from jobbers or middlemen in violation of a government policy to acquire the same directly from reputable manufacturers or their duly licensed distributions. c)Payment of allowances and other forms of additional compensation without proper authority. d)Payment for repair of government property or equipment undertaken by shops, mechanics or contractors not duly accredited in accordance with an existing government policy 2. Property )The use of government motor vehicles with an improperly accomplished trip ticket, or without the marking “For Official Use Only” and the name of the office except when, appropriate exemption is secured in accordance with existing regulations b)Bringing home government motor vehicles after office hours by officials to whom these are assigned, except when the agency does not have a garage that could ensure the safety of the vehicle or when in terms of mileage/time it is more economical for the official to park the vehicle(s) at his residence. )Office equipment and property without proper identification or inventory markings. UNNECESSARY EXPENDITURES 3 standards for unnecessary expenditures: 1. Time of Need a. The volume of purchases must be enough to fill the three (3) month’s requirements of the agency except when circumstances or the exigencies of the service would demand otherwise. Purchases made in excess of three (3) month’s requirements should not, however, exceed the current year’s needs, except as herein provided. b.

Three (3) months’ supply is determined by computing the average monthly consumption of the agency for the last six (6) months plus 10% allowance’ for contingencies multiplied by three. However, the 10% allowance for increase may be exceeded when the circumstances call for additional procurement, such as but not limited to seminars, conferences and the like, or in case where the activities cannot be delayed without causing detriment to the public service. c. Supplies bought or services rendered should be used or availed of before the utility of said items or services expires. . Frequency/Nature of Use Expenditure is unnecessary if the item/object is not used according to normal usage/practice. 3. Location Item bought or service rendered is unnecessary when it is not needed or useful in the place were it is intended to be used. Situational cases: 1. Funds: (applicable to all national, local and corporate sectors) a)Grant of overtime pay for work that is not of urgent nature as to require completion within a specified time or that can be 1. 1l1dertaken during regular office hours. b)Expenses for advertisements of anniversaries, etc. n newspapers, TV, or radio merely for publicity or propaganda purposes except when the nature of the agency’s mission would require such expenses as in the case of promotion of trade and business. 2. Property a)Use of air-conditioners when not needed, or even during the absence of the official in whose room the air conditioner is installed b)Use of table lamps while working in the office where the room is adequately illuminated from the ceiling lights. Office equipment and property without proper identification or inventory markings. EXCESSIVE EXPENDITURES 2 Variables: . Price -The price is excessive if it is more than the 10% allowable price variance between the price paid for the item bought and the price of the same item per canvass of the auditor. 2. Volume Discounts – The price is deemed excessive if the discounts allowed in bulk purchases are, not reflected in t price offered or in the award or in the purchases or payment document. Factors to be considered: A- Supply and Demand forces in the market. B- Government Price Quotations C- Warranty of Products or Special Features D- Brand of products Situational Cases: 1.

Overpricing, of purchases, characterized by grossly exaggerate inflated quotations, in excess of the current and prevailing me price by a 10% variance from the purchased item considered excessive expenditures. 2. Payment for repair of government equipment at a cost exceeding 30% of the current market price of the same or similar equipment is also an excessive expenditure. 3. Expenditures for supplies and materials in quantities beyond that required herein and that needed by the agency for determinable period resulting in overstocking is excessive. EXTRAVAGANT EXPENDITURES Standards:

Nature of the agencies’ operations Agency missions Profitability of their past operational performance Availability of financial resources derived from income Situational Cases: 1. Purchase of luxurious and expensive office furnishings for office buildings (e. g. rugs, carpets, draperies, etc. ) is extravagant except for the Offices of the Supreme Court, Intermediate Appellate Court, and other Courts of equivalent rank 2. Luxurious furnishings for government buildings are extravagant except those intended for showcase, trade and commerce, promotion of arts and culture and use of dignitaries. . Purchase of expensive cars is extravagant, except for the following level of users: a)The President of the Philippines, Prime Minister, Speaker of Batasang Pambansa, Justice of the Supreme Court, and Heads of Constitutional Commissions – Mercedes Benz or its equivalent kind b)The Members of Parliament, Members of the Constitutional Commissions, Ministers, Heads of Agencies, Governors of Class A provinces, Mayors of Class A cities and municipalities, Justices and Judges of lower Courts – Heavy and Medium cars. . Installation of highly sophisticated outdoor signs, billboards and neon signs advertising the office is extravagant, except for banks, trading corporations, hotels, or buildings used for culture and arts. REVISED RULES AND REGULATIONS ON PROCUREMENT, STOCKING, LEASE PURCHASE, LEASE DEPOSITS, TRAVEL EXPENSES/RATES, OVERTIME, EXTRAORDINARY AND MISCELLANEOUS EXPENSE PROCUREMENT Modes: 1. Public Bidding Public bidding shall be required on purchases of supplies, materials- and equipment in excess of P50, 000. 0 unless the law or the agency charter provides otherwise. 2. Emergency Purchase 1. Unless otherwise provided by law or the charter, agencies are authorized to make emergency purchase of supplies, materials and spare parts to meet an emergency which may involve the loss of or danger to life and/or property, or are to be used in connection with a project or activity which cannot be delayed causing detriment to the public service. (Applicable to NlC sectors) 2. An emergency purchase shall be allowed only upon a proper showing of the nature of the purchase.

For this purpose, a certification shall be made by the agency head or his duly authorized representative particularly stating the actual conditions obtaining at the time of purchase, the quantity of items needed and the time or period when such items are to be used. 3. In an emergency purchase, canvass of prices of items from at least three (3) bonafide reputable suppliers shall be required, except when the amount involved is less the P1000. 00 or in case of repeat orders where the price is the same or less than the original price. A supplier may be deemed a bonafjde and reputable if it satisfies the following criteria. It should be duly licensed and registered with appropriate bodies; -It is not “blacklisted” by any government agency at the time of canvass; and -It should be in business for at least six (6) months. 3. Negotiated Purchase Negotiated purchase, recognized as another mode of procurement shall be allowed under the following grounds: 1. Failure of the required public bidding 2. If purchase is made from reputable manufacturers or exclusive distributors provided they offer the lowest or most advantageous price. 3. Any purchase made from the Procurement Service 4. On emergency purchase as herein defined 4.

Repeat Order A repeat order is a mode of procurement whereby an agency buys from the same suppliers the same items at the same prices as or lower prices than those covered by the original contract between the parties. A repeat order maybe allowed subject to the following conditions: 1)The price must be the same as or lower than the original price paid for the same items; 2)The repeat order, if resorted to, will not result to splitting of requisitions, purchase orders, contracts and payments that is prohibited in these “RULES”; 3)The total price of items covered by the repeat order should not exceed P50,000. 0 except when the previous purchase was done through public bidding; 4)The use of repeat orders may be availed of only within the six (6) months period from the date of original purchase order. STOCKING Subject to availability of funds, agencies may be allowed to enter into contracts for the purchase of supplies and materials for one year subject to the condition that deliveries shall be made on a staggered basis, and the agencies three (3) months’ supply requirements are not exceeded and payments shall be made after each delivery only. LEASE PURCHASE

The national government may enter into agreement for the-‘ease purchase of equipment subject to public bidding the approval of the Office of the Budget and Management, and to other pertinent accounting and auditing regulations. Details of the payments shall be indicated in the lease purchase agreement and accompanied with a certification of availability of equipment outlay authorized for the agency to cover the full contract cost. The lease purchase agreement may be entered into only for specialized equipment such typewriters, adding machines and automobiles, the purchase price of which is at least P50, 000. 0. All lease purchase agreement of equipment the total value of which exceeds P200, 000. 00 shall be subject to the approval of the President. Corporations/local governments may adopt the mechanisms of these lease purchase agreement subject to the approval of their legislative or governing boards. {Applicable to NLC sectors) LEASE DEPOSITS A deposit made under a lease contract shall not be considered as an advance payment. The deposit, however, may be applied to the payment of rentals in anticipation of or negotiation for the termination of the contract. Applicable to NlC sectors) TRAVEL EXPENSES/RATES Expenses for the official travel of officials and employees of government shall be paid in accordance with the rates prescribed under RA 3847 as amended by P. O. 344 and implemented by COA General Circular No. 127 dated November 27, 1973. However, profit earning corporations exercising proprietary functions may fix their own travel rates subject to approval by the President. (Sec. 79 P. O. 1177) OVERTIME

An employee has not rendered the required minimum number of working hours for the week may be allowed to claim overtime pay provided he has sufficient, leave credits and upon proper showing that his rendition of overtime service is extremely necessary and cannot be dispensed with, without causing unnecessary delay in any government activity. If the overtime service covers only three (3) hours or les, continuous work is allowed without break time; but if it exceeds three (3) hours, a breaktime for one hour shall be maintained. EXTRAORDINARY AND MISCELLANEOUS EXPENSE A. For National Government

Extraordinary and miscellaneous expenses shall include but not limited to, expenses incurred for or during meetings, seminars and conferences, official entertainment of the official or through his authorized representative, public relations, educational, athletic and cultural activities, contributions to civic or charitable institutions, membership fees in government associations, informative magazines, library books and materials, office equipment arid supplies and other similar expenses that are riot supported by the regular budget allocations, PROVIDED, that no portion of the amounts authorized thereon shall be used for the creation of position, nor for salaries, wages, allowances; intelligence or confidential expenses. B. Local Government and Corporate Sectors The above provision contained above shall also apply to the local government and corporate sectors. INCLUSION OF SITUATIONS DEEMED IUEE IN THE UPDATED LIST 1. Need/Justification As these COA rules and regulations on IUEE expenditures cannot exhaust the situations which are deemed such, there is need to set up a system by which a list of disallowed expenditures peculiar to an agency or a class category shall be made a self-propelling or time-adjusting mechanism such that a case declared IUEE in a particular situation/sector is likewise deemed IUEE in other cases/sectors similarly situated. 2.

Criteria for Appraising Whether an IUEE Situation is Ripe For Inclusion in the Updated List or not (As situation is included in the updated list if it corresponds positively to at least one of the following criteria) (A) Is there no established judicial precedence relative to the case/problem? (B) Is there a high number of recurrences of a particular problem within a very limited time? (C) Would it result to losses on non-operation of the agency? (D) Is the case an accurate exemplification of the substantive area of the IUEE definition? 3. Procedure for inclusion In case an IUEE Situation corresponds to any, several or all of the criteria set and discussed above, the following steps should be observed in drafting the IUEE Situation into the Updated list: A) The Unit Auditor recommends to the Commission Proper IUEE situations deemed ripe for Indusion in the Updated List. (B) The IUEE Situation, if deserving will be taken up in the Commission Proper meeting. All the merits and demerits of the inclusion will be deliberated and decided upon taking special attention as to whether or not the situation will apply only to the agency classification involved or to the three sectors of government. (C) As soon as a decision shall have been arrived at, the Commission Proper issues a Resolution effecting the inclusion of the IUEE Situation in the Updated list. (D) Finally, for the information of all sectors concerned, the Resolution shall be published and circularized.

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