Contract Signing Requires Available Funds

President Ferdinand E. Marcos issues and instructs all covered agencies through Letter of Instructions No. 968.
Ministries and the Heads/Chief Accountants of Ministry, Bureau, Office, Agency of the National Government are required to implement the contract-signing conditions.
The Chairman, Commission on Audit is included as a recipient of the instructions governing audit examination of compliance.
Contract signing roles are allocated to agency heads or other duly authorized officials, and to the Chief Accountant as witness and certifier.

The Letter of Instructions requires that government contracts be signed only when available funds support payment.
The Letter of Instructions ensures proper recording of government contract agreements in the books of account of government.
The Letter of Instructions implements an existing regulatory requirement that availability of funds is a precondition for entering into government contracts.
The Letter of Instructions connects funding availability to the reliability of contract recording and to audit verification.

The Letter of Instructions applies to all contracts for capital projects.
It also applies to contracts for the supply of commodities and services, including equipment, maintenance contracts, and other agreements requiring payment.
The coverage includes contracts chargeable to agency current operating or capital expenditure funds.
The rules apply to contracts signed by agency heads and by other duly authorized officials.
The rules apply to contracts involving payment obligations ultimately chargeable to the contracting agency’s funds and evidenced by an appropriation release.
Contracts signed by Regional or District officials under formally delegated authority fall under the same witness and certification requirements through the responsible accounting officials.

Agency heads or other duly authorized officials must sign covered contracts only when there are available funds.
The Chief Accountant of the contracting agency must sign the covered contracts as witness.
A contract without the required Chief Accountant witness signature is treated as null and void.
The Chief Accountant must verify the availability of funds using evidence of funds availability through programmed appropriation released by the Ministry of the Budget and received by the agency.
The verification must cover the funds from which the contract will be ultimately payable.
The Chief Accountant’s signature constitutes a certification that funds availability has been verified.

Letter-contracts requiring conformity of the Head of the agency or other duly authorized official must be reviewed and signed or initialed by the Chief Accountant.
The review and signing/initialing of letter-contracts by the Chief Accountant must be done in the manner provided for the Chief Accountant’s witness and certification roles under the Letter.
When Regional or District officials sign contracts under formally delegated authority, those contracts must be witnessed under the same terms and conditions.
For Regional or District contracts, the witness must be given by the responsible accounting official of the region or district as the case may be.
The witness and certification requirements must apply even when contracts are signed outside the central agency level under delegated authority.

The Accounting Division of each agency must maintain a file of copies of contracts.
The contract file obligation supports ongoing compliance review and audit examination of covered contract agreements.
The filing requirement applies to contracts within the scope of the Letter’s contract-signing and funding conditions.

Accountants who sign contracts without availability of funds are subject to penalties provided by accounting and budget law pertaining to such payments and certifications.
The Letter of Instructions treats improper signing by the responsible accounting officials as a basis for disciplinary consequences under the applicable accounting and budget legal framework.

During its agency audits, the Commission on Audit must examine agency contracts and verify compliance with Letter of Instructions No. 968.
The Commission on Audit verification is required in addition to observing Section 86 of P.D. No. 1445, known as the Auditing Code of the Philippines.

Compliance is tied to Section 86 of P.D. No. 1445 (Auditing Code of the Philippines) as part of the Commission on Audit’s audit observance during contract examination.