Information Sheet 2.

1-1

LAWS AND RULES ON GOVERNMENT EXPENDITURES

Learning Objectives:

After reading this information sheet, you will be able to:

1. Enumerate the basic principles and limitations on expenditures and

disbursements; and
2. Identify expenditures which may be considered IIUUEE.

This section covers the general provisions from existing laws, rules and
regulations; and the basic standards/fundamental accounting principles for financial
reporting by national government agencies.

What is COA’s Mandate?

COA shall have exclusive authority, to:

define the scope of its audit and examination

establish the techniques and methods required therefor
promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures or uses of government funds and
properties. [Sec. 2(2), Art. IX-D, 1987 Constitution]

What are the Fundamental Principles for Disbursement of Public Funds?

Section 4 of P.D. No. 1445, the Government Auditing Code of the Philippines, provides
that all financial transactions and operations of any government entity shall be
governed by the following fundamental
principles:

a. No money shall be paid out of any public

treasury or depository except in
pursuance of an appropriation law or
other specific statutory authority.

b. Government funds or property shall be

spent or used solely for public purposes.

c. Trust funds shall be available and may be

spent only for the specific purpose for
which the trust was created or the funds
received.

Date Compiled: Document No. LARGES2-0001

LARGE May 2012 Issued by:
Session 2 Compiled by: COA-RTU Page 0 of 6
Region XI Andy Jayson T. Nahine Revision No. 0
d. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency.

e. Disbursement or disposition of government funds or property shall invariably bear

the approval of the proper officials.

f. Claims against government funds shall be supported with complete documentation.

g. All laws and regulations applicable to financial transactions shall be faithfully

adhered to.

h. Generally accepted
principles and practices of
accounting as well as of
sound management and
fiscal administration shall
be faithfully adhered to.

i. Generally accepted
principles and practices of
accounting as well as of
sound management and
fiscal administration shall
be observed, provided that
they do not contravene
existing laws and
regulations.

Date Compiled: Document No. LARGES2-0001

LARGE May 2019 Issued by:
Session 2 Compiled by: COA-RTU Page 1 of 6
Region XI Andy Jayson T. Nahine Revision No. 0
 Relevant Issuances:

 GAA General Provisions

setting limitations on
expenditures;
 AO & EO from the
President of the Republic,
issuances from DBM, CSC and
other related national government
agencies; and
 Applicable COA rules and
regulations (i.e.-COA Circular 97-
002 re: Cash Advances, Section
89 of PD 1445; COA Circular No.
2017-001 re: Reimbursement of expenses of P300.00 or less NEED not be
supported by ORs)

e.g. Adherence to RA 9184 for procurements, Purchase of Motor Vehicle,

Allowances, Incentives and Other benefits covered by the Salary
Standardization Law, GAA and other Laws, Rules & Regulations.
Date Compiled: Document No. LARGES2-0001
LARGE May 2019 Issued by:
Session 2 Compiled by: COA-RTU Page 2 of 6
Region XI Andy Jayson T. Nahine Revision No. 0
*a copy of this Circular can be downloaded at www.coa.gov.ph under Issuances tab

Date Compiled: Document No. LARGES2-0001

LARGE May 2019 Issued by:
Session 2 Compiled by: COA-RTU Page 3 of 6
Region XI Andy Jayson T. Nahine Revision No. 0
What is COA’s authority in the Prevention of irregular, unnecessary,
excessive, or extravagant expenditures of funds or uses of property?

Under Section 2 (2), Article IX-D of the 1987 Constitution, the Commission
on Audit (COA) shall have exclusive authority, subject to the limitation in this
Article, to “xxx promulgate accounting and auditing rules and regulations,
including those for the prevention of irregular, unnecessary, excessive,
extravagant, or unconscionable (IUEEU) expenditures or uses of government
funds and properties “.This authority was reiterate under Section 33 of
Presidential Decree (P.D.) No. 1445, which states:

Section 33. Prevention of irregular, unnecessary, excessive, or

extravagant expenditures of funds or uses of property; power to
disallow such expenditures. - The Commissions shall promulgate such
auditing and accounting rules and regulations as shall prevent
irregular, unnecessary, excessive, or extravagant expenditures or
uses of government funds or property.

In line with these provisions and the Commission's efforts to be

constantly responsive to the changing needs of the government, the list of
situational cases enumerated under COA Circular No. 85-55A dated September
8, 1985 is hereunder restate with updated additional cases established for the
guidance of both agency officials and employees, and COA auditors.

What is an Irregular Expenditure?

The term “irregular expenditure” signifies an expenditure incurred

without adhering to established rules, regulations, procedural guidelines,
policies, principles or practices that have gained recognition in laws. Irregular
expenditures are incurred if funds are disbursed without conforming with
prescribe usages and rules of discipline. There is no observance of an
established pattern, course, and mode of action, behavior, or conduct in the
incurrence of an irregular expenditure. A transaction conducted in a manner
that deviates or departs from, or which does not comply with standards set is
deemed irregular. A transaction which fails to follow or violets appropriate rules
of procedure is, likewise, irregular.

What is an Illegal Expenditure?

An illegal expenditure is an expenditure incurred in violation of the law

and its Implementing Rules and Regulations.

What is an Unnecessary Expenditure?

Date Compiled: Document No. LARGES2-0001

LARGE May 2019 Issued by:
Session 2 Compiled by: COA-RTU Page 4 of 6
Region XI Andy Jayson T. Nahine Revision No. 0
 The term 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 missions of
the agency relative to the nature of its operation. This would also include
incurrence of expenditure not dictated by the demands of good government,
and those the utility of which cannot be ascertained at a specific time. An
expenditure that is not essential or that which can be dispensed with without
loss or damage to property is considered unnecessary. The mission and thrust
of the agency incurring the expenditures must be considered in determining
whether or not an expenditure is necessary.

What is an Excessive Expenditure?

The term “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.

What is an Extravagant Expenditure?

The term “extravagant expenditure” signifies those incurred without

restraint, judiciousness and economy. Extravagant expenditures exceed the
bounds of property. These expenditures are immoderate, prodigal, lavish,
luxurious, grossly excessive, and injudicious.

What is an Unconscionable Expenditure?

The term “unconscionable expenditures” pertains to expenditures which

are unreasonable and immoderate, and which no man in his right sense would
make, nor a fair honest man would accept as reasonable, and those incurred in
violation of ethical and moral standards.

The level/rank of user and mission, size, system, structure, strategy,

skills, style, and nature of operation of a government agency shall be
considered in determining whether expenditures are IUEEU.

Cases that are considered irregular, unnecessary, excessive, extravagant,

or unconscionable (IUEEU) are presented in the Annexes A-F of COA
CIRCULAR - No.:2012-003 dated October 29, 2012 re: Updated Guidelines for
the Prevention and Disallowance of Irregular, Unnecessary, Excessive,
Extravagant and Unconscionable Expenditures and can be downloaded at
www.coa.gov.ph under issuances tab.

Date Compiled: Document No. LARGES2-0001

LARGE May 2019 Issued by:
Session 2 Compiled by: COA-RTU Page 5 of 6
Region XI Andy Jayson T. Nahine Revision No. 0