Policy purpose and intent
- The circular provides guidelines to implement the Modified Disbursement System to facilitate effective management of the cash resources of the National Government.
- The circular provides procedures to facilitate reconciliation of disbursements of government agencies with the accounts of the Bureau of the Treasury (BTR) with Government Servicing Banks (GSBs), namely PNB, LBP, and DBP.
Coverage, key system mechanics
- The MDS uses deposit accounts maintained by the BTR with the Head Office of each GSB, and agency sub-accounts and related accounts by fund codes.
- Government agencies use a specially designed commercial check (MDS check) to withdraw funds from the MDS deposit account established by the BTR with GSBs.
- Notice of Cash Allocation (NCA) drives releases of funds under the system, and NCAs are used as control bases by GSBs for withdrawals.
- All NCAs issued during the year are valid only up to the end of the calendar year, and unpaid obligations at year-end are charged against the NCAs of the subsequent year.
Defined roles and system responsibilities
- The Bureau of the Treasury must open and maintain the MDS account with the Head Office of each GSB, deposit operating amounts with GSBs, and design the MDS check.
- The Department of Budget and Management (DBM) must issue Advice of Allotment (AA) and monthly NCAs, notify GSBs of authorized signatories and signatures, evaluate NCA requests, and evaluate monthly reports submitted by agencies.
- Government agencies must withdraw NDS balances, use MDS checks, control spending not exceeding NCAs, maintain proper sub-accounts and reconciliations, and submit required monthly allocation/utilization and bank reconciliation reports.
- Government Servicing Banks must maintain separate accounts/ledgers by agency and fund codes, issue blank checks based on signed purchase orders, honor only checks listed in the ACIC, and submit monthly and daily banking reports to the BTR and copies to DBM.
Mandatory policy rules and timelines
- Balances per agency books as of February 28, 1990 of all deposit accounts under the NDS and other deposit accounts opened before and during NDS implementation must be withdrawn immediately from servicing banks and deposited to the account of the Treasurer of the Philippines (TOP) through authorized government depository banks or directly to the Cash Division, BTR, covered by a remittance advice.
- Deposits exempted from immediate withdrawal include deposits authorized by law creating trust receipts or revolving funds, and deposits of GOCCs and LGUs.
- After outstanding checks are negotiated and balances are reconciled, or after six (6) months after MDS implementation (whichever comes first), servicing bank accounts with remaining balances must be closed, and the agency must withdraw the balances for remittance to the BTR as indicated in the circular’s withdrawal process.
- Government agencies must no longer use Treasury Warrants Type A and B to withdraw funds from the National Treasury; DECS, with a prior arrangement with the BTR, may continue using Type A warrants for salary payments of certain DECS personnel up to June, 1990.
- Government agencies must use MDS checks to withdraw from the MDS account, with separate series for each fund code, and must ensure proper completion and coding of checks using the specified allotment/object class codes and area codes.
- Government agencies must charge unpaid obligations at the end of the year against the NCA of the subsequent year and submit required reports within the prescribed deadlines.
NCA validity, accounting, and reconciliation controls
- DBM NCAs issued during the year are valid up to the end of the calendar year only.
- GSBs must maintain separate accounts or ledgers for each agency and for each fund code (e.g., Fund Codes a 101, 102, 151, etc.) using the NCA as the control basis for withdrawals.
- GSBs must submit a Monthly Statement of Account together with negotiated checks for each fund to the agency’s Chief Accountant/Head of Accounting Unit within five (5) days after the end of each month for reconciliation.
- Agencies authorized to maintain sub-accounts must reconcile their accounts monthly directly with the GSBs.
- Agencies must submit to DBM: a Statement of Monthly Allocation and Utilization and a copy of the Bank Reconciliation Statement within ten (10) days and fifteen (15) days, respectively, after the end of the month.
- Agencies must submit on or before the 15th day of the following month their bank reconciliation statements to the COA Resident Auditor, furnishing the GSB concerned, the BTR, and the DBM-AFB concerned.
- NCAs must be recorded by agencies according to accounting procedures to be prescribed by the COA.
Operational disbursement documents and reporting
- GSBs must honor only MDS checks that are listed in the Advice of Checks Issued and Cancelled (ACIC).
- Agencies must prepare and submit ACIC at least daily to the GSBs, certified correct by the Disbursing Officer (DO) and approved by the Head of Office/Unit, in five (5) copies distributed as follows: Original and Duplicate to the GSB, Triplicate to COA Auditor, Quadruplicate to Chief Accountant, and Quintuplicate to the agency file.
- Agencies must ensure ACIC submission is prompt so that payees can encash/negotiate issued checks.
- Agencies must perforate directly cancelled or spoiled checks, write “CANCELLED” in bold letters on the check face, and forward cancelled/spoiled checks to the COA auditor for custody.
- Government agencies must submit a monthly Statement of Monthly Allocation and Utilization to DBM within ten (10) days after the end of the month.
- GSBs must debit the MDS account in the Head Office for the total amount of negotiated MDS checks indicated in the Daily Summary of Negotiated Checks and must furnish the BTR daily reports supported by bank statements and adding machine tapes.
- GSBs must submit to the ETR the month-end balances of deposit accounts maintained by ROs/POs/OUs receiving funding checks.
Special procedures for COs/ROs/POs/OUs and foreign-assisted projects
- For agencies not receiving NCAs directly from DBM (except for agencies with specific arrangements), COs/ROs must release funds to POs/OUs by issuing funding checks (MDS checks) covering two (2) weeks requirement of POs/OUs, deposited with a GSB.
- Separate funding checks (MDS checks) must be issued for each allotment class for these releases.
- Agencies using continuous form checks for salaries must draw an MDS check corresponding to their bi-monthly/monthly salary requirement and deposit the check into a separate checking account with a GSB, with accounting per COA procedures.
- For Notice of Transfer of Allocation (NTA) procedures: COs must request issuance of NTA to ROs/POs/OUs upon receipt of the NCA from DBM by immediately submitting a written request to the GSB Head Office, copy-furnished to RO/PO/OU concerned, DBM-AFB concerned, and TARD, BTR.
- For NTA distribution, the GSB must distribute NTA to branches based on the CO’s letter request, and must refuse distribution if bank records show the CO is using/withdrawing more than the cumulative total of the NCA.
- Agencies receiving NCAs for fund codes 102 or 151 for NCAs for foreign assisted projects funded by foreign loans/foreign grants must maintain specific ledger sheets per project to monitor expenditures of such projects by foreign lending institutions.
- Continuing appropriations under COA Circular 89-302 dated December 29, 1988 remains in force for fund codes 102 or 151 even though the NCAs issued by DBM for those fund codes are valid only up to the end of the year.
Penalty and liability for excess withdrawals
- Disbursements must never exceed the NCA.
- Any officer who directly allows withdrawals in excess of the NCA must be held personally liable therefor pursuant to Section 47 of PD 1177.
Implementing guidance and referenced issuances
- The COA must issue accounting guidelines and procedures to implement the provisions of the circular.
- Disposition rules for unused blank commercial checks (under NDS)/Treasury Warrants A and B follow COA, MOF, MOB Joint Circular No. 7-81 dated August 31, 1981 and Treasury Memorandum Circular No. 8-73 dated June 27, 1973.
- Remittance procedures for certain agency withdrawals follow DOF Circular No. 20-73 dated June 14, 1973.
- The circular’s MDS implementation is tied to Memorandum Order No. 276 dated January 12, 1990 that prescribes the modification of the Government’s disbursement system.
- Coverage of continuing appropriations for foreign-assisted projects relies on COA Circular 89-302 dated December 29, 1988.