Government Auditing Code of the Philippines

State policy and fundamental principles

Section 2 declares the State policy that all resources of the government shall be managed, expended, or utilized in accordance with law and regulations and safeguarded against loss or wastage through illegal or improper disposition, to ensure efficiency, economy and effectiveness.
The responsibility to faithfully adhere to this policy rests directly with the chief or head of the government agency concerned under Section 2.
Section 4 requires the following fundamental principles for any government agency’s financial transactions and operations:
- No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority.
- Government funds or property shall be spent or used solely for public purposes.
- Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the funds received.
- Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the agency’s financial affairs and transactions.
- Disbursements or disposition of government funds or property must invariably bear the approval of the proper officials.
- Claims against government funds must be supported with complete documentation.
- All applicable laws and regulations on financial transactions must be faithfully adhered to.
- Generally accepted accounting principles and sound management and fiscal administration must be observed, provided they do not contravene existing laws and regulations.

Definitions used throughout the Code

Section 3(1) defines “Fund” as a sum of money or other resources set aside for specified activities or objectives in accordance with special regulations, restrictions, or limitations, constituting an independent fiscal and accounting entity.
Section 3(2) defines “Government funds” as public moneys of every sort and other resources pertaining to any government agency.
Section 3(3) defines “Revenue funds” as all funds derived from the income of any agency and available for appropriation or expenditure according to law.
Section 3(4) defines “Trust funds” as funds officially received or coming into possession of any agency or public officer as trustee, agent, or administrator, or received to fulfill an obligation.
Section 3(5) defines “Depository funds” as funds over which the accountable officer retains control for lawful purposes for which they came into possession, including moneys in any depositories.
Section 3(6) defines “Depository” as any financial institution lawfully authorized to receive government moneys upon deposit.
Section 3(7) defines “Resources” to include actual assets (cash, instruments representing or convertible to money, receivables, lands, buildings) and contingent assets such as estimated revenues applying to the current fiscal period not accrued or collected, and bonds authorized and unissued.
Section 3(8) defines “Government agency” as any department, bureau, or office of the national government and branches/instrumentalities, any political subdivision, any government-owned or controlled corporation including its subsidiaries, and other self-governing boards or commissions of government.

Commission on Audit: structure and funding

Section 5 provides the Commission on Audit (Commission) has a Chairman and two Commissioners, who must be natural-born citizens and at appointment be at least forty years of age and either certified public accountants or members of the Philippine Bar for at least ten years.
Under Section 5(2), the Prime Minister appoints the Chairman and Commissioners for a term of seven years without re-appointment; among the first appointees, one serves seven years, another five years, and the third three years, and filling a vacancy is only for the unexpired portion of the term.
Under Section 5(3), the Chairman’s annual salary is sixty thousand pesos and each Commissioner’s is fifty thousand pesos, and these salaries shall not be decreased during continuance in office.
Section 6 creates the Commission Proper consisting of the Chairman and the two Commissioners, which:
- sits as a body to determine policies, promulgate rules and regulations, and prescribe standards governing the Commission’s powers and functions;
- designates the Chairman as presiding officer and chief executive officer responsible for general administration.
Section 7 directs the Commission to maintain specified central offices (Administrative Office; Planning, Financial, and Management Office; Legal Office; Accountancy Office; National Government Audit Office; Local Government Audit Office; Corporate Audit Office; Performance Audit Office; Manpower Development Office; Technical Service Office) and regional offices required by service exigencies, under direct control and supervision of the Chairman.
Section 8 establishes a Commission Secretariat headed by a Secretary to the Commission with the rank and privileges of a central office manager.
Sections 9–19 assign functional duties to Commission offices, including personnel and administrative services (Administrative Office), budget and accounting-system planning (Planning, Financial, and Management Office), legal advisory/investigation and representation (Legal Office), financial reporting and verification of appropriations (Accountancy Office), and auditing functions for different government sectors (National Government Audit Office, Local Government Audit Office, Corporate Audit Office, Performance Audit Office), plus training and professional publication (Manpower Development Office) and technical auditing systems and project review (Technical Service Office).
Section 24 governs Commission funding and appropriations:
- Annual operating expenses of the Commission, including salaries and emoluments for central and regional offices and auditing units, are included in the annual general appropriations law and used under general appropriations and budget laws.
- Government-owned or controlled corporations, including subsidiaries, and self-governing boards-commissions-or agencies must appropriate in their budgets and remit to the National Treasury an amount at least equivalent to the prior fiscal year’s appropriation for Commission representatives and staff salaries and allowances.
- A maximum of one-half of one per centum (1/2 of 1%) of collections from national internal revenue taxes not otherwise accruing to special funds or special accounts in the General Fund of the National Government may be deducted from such collections, subject to authority from the Minister (Secretary) of Finance, and remitted to the National Treasury to cover the cost of auditing services rendered to local government units.
- Estimated assessments on government-owned or controlled corporations, local government units, and other agencies are taken into account in the Commission budget, and the General Appropriations law provides each year for the cost of Commission operations supported by available funds.

Commission jurisdiction, powers, and audit authority

Section 25 states the Commission’s primary objectives:
- verify whether the head of agency has properly and effectively discharged fiscal responsibility;
- develop and implement a comprehensive audit program examining financial transactions, accounts, reports, and compliance;
- institute control measures through rules governing receipts, disbursements, and uses of funds and property;
- promulgate auditing and accounting rules to improve keeping and information value of accounts;
- professionalize its services;
- preserve and ensure independence of representatives;
- bring operations closer to the people by delegation through decentralization.
Section 26 extends the Commission’s authority to matters relating to auditing procedures, systems and controls, preservation of vouchers for ten years, examination of accounts records and papers, audit and settlement of accounts of persons accountable for government funds or property, and examination/audit/settlement of debts and claims due to the Government.
Section 26 includes government-owned or controlled corporations and their subsidiaries, and self-governing boards, commissions, or agencies; it also covers non-governmental entities subsidized by the government, funded by donations through the government, required to pay levies or government share, or for which the government put up a counterpart fund.
Section 28 gives the Commission examining authority to examine books and documents filed with and in the custody of government offices in government revenue collection operations to ascertain collectible and due funds have actually been collected, except as otherwise provided in the Internal Revenue Code of 1977.
Section 29 provides visitorial authority over covered non-government entities only for audit of the government funds or subsidies coming from or through the government; the President may direct visitorial authority over non-government entities whose loans are guaranteed by the Government for audit of the government’s contingent liability.
Section 30 authorizes the Commission to fix and collect reasonable fees for services to non-government entities audited in connection with subsidies, counterpart funding, or where audited records become the basis for a government levy or share; these fees accrue to the General Fund and must be remitted to the Treasurer of the Philippines within 10 days after completion of audit.
Section 30(2) further authorizes reasonable fees when the Commission contracts to render audit and related services beyond normal scope; remittance to the General Fund is made within the contract time or billing time.
Section 31 allows deputization of certified public accountants and other licensed professionals not in public service to assist government auditors in specialized audit engagements, with compensation subject to pertinent rules on fees and compensation.
Section 32 prohibits any government agency from contracting with a private person or firm for services related to government auditing, including fee-based seminars or workshops for government personnel on these topics, unless the proposed contract is first submitted to the Commission to determine resources to undertake such studies or services; if the Commission does not undertake, it may review the contract to determine cost reasonableness.
Section 33 requires the Commission to promulgate rules to prevent irregular, unnecessary, excessive, or extravagant expenditures or uses of government funds or property.
Sections 34–37 grant authority to authorize and enforce settlement between agencies, assist collection and enforcement of debts/claims and restitution/payment/ replacement of property due, support litigation by referring cases to the Solicitor General, Government Corporate Counsel, or creditor agency legal staff, extend full support in litigation, impose interest at the legal rate from date of written demand, and allow compromise or release of settled claims/liabilities with monetary thresholds under Section 36 (including approval rules involving the Prime Minister and submission to the National Assembly when exceeding one hundred thousand pesos).
Section 37 allows the Commission to direct withholding of money due a person (or his estate) indebted to a government agency for application to indebtedness satisfaction.
Section 38 directs examination/audit of public utilities for franchise tax-fixing and regulatory proceedings, requires production of reports and records, empowers examination under oath of utility officials/employees, and subjects refusal, obstruction, or concealment of material information to penalties provided by law.
Section 39 empowers the Commission for inspection to require submission of original orders, deeds, contracts, or other documents under which collections/payment from government funds are made, with related certification/receipts/evidence; requires evidence that title is in government for deeds of property purchased by agencies; makes compliance of officials/employees including non-government entities under audit a duty, and failure/refusal without justifiable cause becomes grounds for administrative disciplinary action and for consequences including permanent disallowance of claims under examination, additional levy/government share assessment, or withholding/withdrawing funding or donations through the government.
Section 40 provides investigatory powers: Commissioners, central managers, regional directors, auditors, and properly deputized officials may summon parties, issue subpoenas and subpoenas duces tecum, administer oaths, and take testimony consistent with due process; the Commission may punish contempts under the Rules of Court; violations of final and executory Commission decisions/orders/rulings constitute contempt of the Commission.
Section 41 mandates an annual report of financial condition and results of operations submitted not later than the last day of September of each year to the President, Prime Minister, and National Assembly, and establishes year-end trial balance submission by the chief accountant not later than fourteenth day of February, with resubmission within three days after receipt of returned trial balances for revision due to non-compliance.
Section 41(3) imposes automatic suspension of salary and emoluments for failure to comply until compliance, and repeated violation at least three times subjects the offender to administrative disciplinary action.
Section 42 requires a monthly statement of receipts and disbursements forwarded to the Minister (Secretary) of Finance within sixty days after expiration of each month.
Sections 43–47 define auditors’ representative powers and duties, annual reporting by auditing-unit heads (last working day of February following close of year), custody of vouchers and similar documents, check and audit of property/supplies with ocular verification, development of annual work programs, and seizure of office/contents for cash shortages including ipso facto supersession until restoration or lawful filling.
Section 47 authorizes constructive distraint of personal property upon discovery of shortage and a prima facie case of malversation, with reasonable grounds to believe the accountable officer intends to retire, leave the Philippines, remove or hide/conceal property, implemented by requiring a prescribed receipt and preservation obligation; if the officer or person having control refuses/fails to accomplish the receipt, Commission representatives prepare a list in the presence of two witnesses and leave a copy on premises, after which the property is deemed under constructive distraint.

Commission decisions and judicial review

Section 48 allows any person aggrieved by an auditor’s decision in settlement of an account or claim to appeal in writing to the Commission within six months from receipt of the decision copy.
Section 49 requires the Commission to decide cases within sixty days from date of submission for resolution, counting from receipt of the last comment necessary for proper decision if external reference to other persons/offices/party interests is required.
Section 50 permits a party aggrieved by any decision, order, or ruling of the Commission to appeal on certiorari to the Supreme Court within thirty days from receipt of the copy, following the manner provided by law and the Rules of Court; if the decision adversely affects a government agency, the proper head of that agency may appeal.
Section 51 makes Commission or auditor decisions final and executory if not appealed as provided.
Section 52 allows opening and revision of settled accounts:
- the Commission may review and revise and certify a new balance at any time before expiration of three years after settlement by an auditor;
- it may open and certify a new balance within three years when settled accounts are tainted with fraud, collusion, or error of calculation, or when new and material evidence is discovered, after a reasonable time for reply/appearance;
- an auditor may exercise the same power for settled accounts within his jurisdiction;
- once finally settled, accounts cannot be opened or reviewed except as provided in this section.

Core government auditing standards and objectives

Section 53 defines government auditing as analytical and systematic examination and verification of financial transactions, operations, accounts, and reports of a government agency to determine accuracy, integrity, and authenticity, and to satisfy legal and regulatory requirements.
Section 54 requires the audit to be performed by persons with adequate technical training and proficiency, with complete independence, impartiality, and objectivity, avoiding any act or presumption of lack of independence or undue influence, and exercising due professional care guided by applicable laws, regulations, and generally accepted accounting principles.
Section 55 requires adequate planning of audit work and proper supervision of assistants; requires review of compliance with legal and regulatory requirements; requires evaluation of internal control and related administrative practices to determine reliance for compliance and for efficient, economical, and effective operations; requires sufficient competent evidential matter through inspections, observation, inquiries, confirmation, and other techniques.
Section 56 sets reporting standards:
- audit reports must be dated, signed manually, and issued/distributed as the Commission regulations provide;
- reports must include transmittal statement, scope/objectives, time period examined, highlights, financial information, findings, recommendations, and conclusions, using tables/charts/graphs where proper;
- factual matters must be accurately, completely, and fairly presented; findings must be objectively presented in clear language; findings must be supported by evidence in working papers; reports must be concise yet complete; underlying causes must be included to assist corrective actions;
- reports must emphasize improvements, present critical comments in balanced perspective, identify issues needing further study, recognize noteworthy accomplishments, and include responsible officials’ views subject to fraud/compelling reason exceptions and objective consideration;
- reports must state if confidential information is omitted, its nature, and the law or basis withheld;
- audit reports accompanying financial reports must state whether audit was in accordance with generally accepted auditing standards, disclose omission of any generally recognized normal or necessary procedure and reasons, express an opinion on fair presentation under applicable laws/regulations and generally accepted accounting principles applied consistently, disclose material changes in accounting principles and effect, state any exceptions and their effects, provide supplementary explanatory information, and explain legal or regulatory violations including non-compliance.

Audit procedures and examination areas

Section 57 provides that the Commission determines auditing procedures and techniques and the extent of examination of vouchers and documents, giving due regard to generally accepted auditing principles and accounting organizations/systems, including effectiveness of internal control and related administrative practices.
Section 58 requires audit of assets to ascertain existence, ownership, valuation and encumbrances; propriety of items; agreement with records; accuracy of records; whether utilized economically, efficiently, and effectively; and adequacy of controls.
Section 59 requires audit of liabilities to ensure all obligations are accurately recorded, only bona fide obligations included, proper authorization of incurred obligations, compliance with trust indentures or mortgages provisions, and full disclosure of mortgages and other encumbrances.
Section 60 requires audit of revenue accounts to ensure all earned revenues recorded, recorded revenues actually earned, and consistent classification of revenues.
Section 61 requires audit of expense accounts to ascertain authorized expenses, adequate funding and documentation, proper recording, actual incurrence of recorded expenses, and consistent classification.
Section 62 requires audit of surplus or net worth to determine nature (current or invested), amount of current surplus available to cover operational appropriations, propriety of ledger/accounts and balance sheet presentation, and proper authority and recording of changes in capital structure.

Receipt, deposit, and custody of government funds/property

Section 63 requires that except as otherwise provided by law or competent authority, all moneys and property officially received by a public officer in any capacity or upon any occasion must be accounted for as government funds and government property, with government property taken up at acquisition cost or appraised value.
Section 64 allows the head of an agency to designate collecting officers or agents; they must render collection reports to the auditor concerned, and the auditor must examine/audit within thirty days from receipt.
Section 65 requires accrual of income accruing by virtue of law, orders, and regulations (unless otherwise specifically provided) to the National Treasury or a duly authorized government depository, accruing to the unappropriated surplus of the General Fund, while trust amounts and business-type activities of government may be separately recorded and disbursed under rules determined by a Permanent Committee composed of the Secretary (Minister) of Finance as Chairman, the Commissioner of the Budget, and the Chairman, Commission on Audit as members.
Section 66 requires receipts to be recorded as income of Special, Fiduciary, or Trust Funds or funds other than the General Fund only when authorized by law and implemented by Permanent Committee rules.
Section 67 governs payment forms for taxes and indebtedness: collecting officers must accept properly indorsed and identified checks and warrants issued in payment of government obligations; if a government-favor check is not accepted by the drawee bank, the drawer remains liable and penalties resulting from delayed payment apply, and if non-acceptance is due to insufficiency of funds, the drawer is criminally liable; collecting officers must not use money in their hands to encash private checks.
Section 68 requires collecting officers to issue an official receipt immediately upon receipt of any payment; receipts may be via postage, internal revenue/documentary stamps, or officially numbered receipts under proper custody/accountability/audit; the Commission may approve exemption from accountable forms when mechanical devices are used for cash receipt acknowledgment.
Section 69 mandates intact remittance/deposit by public officers authorized to receive and collect money arising from taxes/revenues/receipts of any kind to the treasury of the agency and credited to proper accounts; further remittance to other agencies’ treasuries must follow Commission and Department of Finance regulations; it authorizes postmasters under conditions to use collections for money orders/telegraphic transfers/withdrawals from the depository bank upon exhaustion of cash advance funds and requires restoration upon replenishment; it permits temporary deposit with any treasury pending remittance under Commission regulations; and it requires agency treasuries to deposit with proper government depository the full amount no later than the following banking day.
Section 70 requires the Treasurer of the Philippines and authorized depository banks to acknowledge receipt of funds received, with date of actual remittance/deposit and indicate from whom and on what account received, under Commission and Department of Finance rules and regulations.
Section 71 establishes an account titled “Creditors’ Unclaimed Balances” credited with unclaimed moneys; funds are held exclusively for payment of obligations certified by the Commission not exceeding accrued amounts, and after ten years unclaimed, funds revert as treasury funds to the depositor agency or, if absent, to the national government.
Section 72 requires shipment of government funds/property by carrier on proper bill of lading/receipt, with the consignee or representative making full notation of evidence of loss/shortage/damage before accomplishing the carrier receipt/bill of lading.
Section 73 provides for relief/credit for losses in transit or due to casualty/force majeure: the accountable officer must immediately notify the Commission or auditor and within thirty days (or longer period allowed in the particular case) submit an application for relief with supporting evidence; credit is allowed when warranted; failure to comply prevents relief/credit for loss in settlement of accounts; the Commission must issue implementing rules.
Section 74 requires depositories to report monthly condition of agency accounts to the agency head at month-end and requires reconciliation between depository reports and agency books balances.
Section 75 prohibits transfer of government funds from one officer to another except as allowed by law or regulation and only upon prior Commission direction/authorization or its representative.
Section 76 allows transfer of government property no longer serviceable or needed to other government agencies at no cost or at appraised value, authorized by heads of agencies for national government, governing bodies for government-owned or controlled corporations and self-governing boards/commissions, or local legislative bodies for local government units concerned.
Section 77 requires itemized invoice and receipt to support clearance when transferring government funds or property between accountable officers or from an outgoing officer to a successor, subject to Commission regulations.
Section 78 governs disposition of funds or property held by a deceased, incapacitated, absconding, or superseded accountable officer, with rules beginning with the operative requirement that such situations are handled through the Code’s disposition framework.