Question & AnswerQ&A (COA CIRCULAR NO. 2007-001)
Article II, Section 23 of the Philippine Constitution encourages the State to promote the welfare of the nation through non-governmental, community-based, or sectoral organizations.
The partnership between NGOs/POs and LGUs is institutionalized under Section 34 of Republic Act No. 7160, the Local Government Code.
National government agencies (NGAs), local government units (LGUs), and government-owned or controlled corporations (GOCCs) may extend funds to NGOs/POs.
'Funds' refer to government funds entrusted to the NGO/PO to cover the implementation of a project included in the Work and Financial Plan (WFP) and Budget of the GO.
The NGO/PO must submit a proposal/application with: valid registration (SEC, CDA, or DOLE), authenticated Articles of Incorporation, financial reports audited by a CPA for the past three years or proof of similar projects, disclosure of other related business, WFP and equity participation details, complete project proposal, list/photographs of similar projects, and an affidavit of non-relatives in GO officials involved.
Fundable projects include livelihood development, manpower development, sports development, cooperative development, basic services delivery, environmental protection, agricultural and fisheries diversity, rural industrialization, local enterprises development, social services in underserved areas, and construction or maintenance of infrastructure projects like housing for the poor and school buildings.
The NGO/PO shall have an equity equivalent to 20% of the total project cost, which may be in forms like labor, land, facilities, or equipment used in the project.
Funds shall not be used for money market placements or other investments, cash advances unrelated to project implementation, salaries or allowances of personnel not connected to the project, purchase of GO supplies/equipment/vehicles, or acquisition of NGO/PO assets unless necessary and stipulated in the MOA.
The NGO/PO must maintain financial and accounting records per Philippine Accounting Standards, submit periodic fund utilization reports certified by its Accountant and approved by its President/Chairman, allow COA auditors access to records, and submit a final Fund Utilization Report with supporting documents within 60 days after project completion.
The GO can institute legal action against defaulting NGOs/POs for failure to complete projects or material violations; such NGOs/POs may be disqualified from applying for other projects. Additionally, performance security bonds for infrastructure projects may be forfeited if the NGO/PO fails to complete the project within the prescribed time.