OFFICE OF BUDGET AND MANAGEMENT

COMMISSION ON AUDIT
MINISTRY OF FINANCE

JOINT CIRCULAR NO. 3-84

May 31, 1984

TO

: Heads of Ministries, Bureaus, Offices and Local Government Units; the Governor of
Central Bank, Managing Heads of Government Owned and/or Controlled
Corporations, Boards and Commissions; Project Steering Committees and Central
Project Offices; Provincial/City/Municipal Treasurers; Chief Accountants/Heads of
Accounting Units; Budget Officers; COA Unit Auditors; and Others Concerned.

SUBJECT : Guidelines Implementing Presidential Decree No. 1914 Entitled Creating a Special
Revolving Fund for Purposes of Foreign-Assisted Projects Applicable to Local
Government.

1.0

Rationale
The Municipal Development Fund (MDF), established under P.D. 1914, shall be
capitalized and funded by proceeds of foreign loans, assistance or grants which are to be
made available to the Local Government in the form of project loans, technical/commodity
assistance and grants, performance payments and other incentives as set forth in
international agreements, entered or to be entered into by the Government of the
Philippines with foreign governments and international institutions (IBRD, ADB, USAID,
etc.). It shall be the principal mechanism for long- term financing available for urban/rural
services to all eligible local governments. To make the Fund self- sustaining, loan
repayments shall accrue to the Fund for reinvestment/relending to finance similar approved
projects of local governments.
Pursuant to Section 4 of P.D. No. 1914, "The Ministry of Finance shall administer
the MDF provided that the Land Bank, Development Bank of the Philippines or the Bureau
of Treasury may be designated by the Minister of Finance as the Depository, disbursing
and collecting agent of the MDF subject to the terms, conditions and guidelines as the
Minister of Finance may prescribe and in accordance with the provisions of international
and other implementing agreements."

2.0

Purposes
This Circular is issued principally to:
2.1

Operationalize the provisions of Presidential Decree No. 1914 and other issuances
as well as agreements that may fail within the scope and coverage of the Municipal
Development Fund.

3.0

2.2

Prescribe accounting, auditing and budgeting procedures governing the

implementation/execution/operation/maintenance of local government projects
funded by the Municipal Development Fund.

2.3

Provide necessary information and guidance on fund releases, withdrawal,

repayments, etc.

Definition of Terms
The following terms as used in this Circular, shall be construed to mean as follows:

4.0

3.1

Project City - refers to a province, municipality or city to which the borrower

proposes to make or has made a Sub-loan. Project City also refers to a Local
Government Unit (LGU) where a Project component or activity is to be undertaken
whether such LGU is a borrower or a beneficiary of foreign loan proceeds or both.

3.2

Implementing agency - refers to any government agency (National, Local or

Government Corporation) authorized to undertake the construction/development of
a project funded by the MDF.

3.3

Lead Agency - refers to the agency primarily responsible for the over-all planning,
management and coordination of project components and activities, and the
organization and administration of the CPO, as well as project-related operations of
implementing agencies.

3.4

Central Project Office - refers to the executive and management arm of a Lead
Agency responsible for project preparation, execution. completion and evaluation
rendering both line and staff functions whenever necessary.

3.5

Project Steering Committee - refers to the inter- agency policy and advisory body of
any foreign- assisted project primarily responsible for the proper execution and
implementation of international loan/project agreements, and other International
commitments in line with existing laws and national policies.

Scope/Coverage
4.1

4.2

This Circular shall apply to all projects funded by the Municipal Development Fund
which may be herein categorized as follows:
4.1.1

Foreign-assisted projects implemented by the national government agencies

or government corporations where local government units are the
beneficiaries.

4.1.2

Foreign-assisted projects implemented by national government agencies

and/or government corporations jointly with local government units as
beneficiaries, or borrowers with On- Lending Agreements with the Ministry
of Finance.

Local Government Units shall include cities, provinces and municipalities.

4.3

5.0

Projects shall include physical and social infrastructure, economic enterprises, land
acquisition, training programs, commodity support, performance payments for
poverty-focused and beneficiary initiated activities or project components and such
other expenditure items that the Project Steering Committees may authorize in
accordance with the corresponding Loan and Project Agreement.

Project Organization Structure

5.1

Project Steering Committee (PSC)

As provided for in Section 3 of P.D. 1914, the Steering Committee of any
foreign-assisted project shall be composed of representatives of lead and
implementing agencies but in all cases the Ministry of Finance (MOF), Office of
Budget and Management (OBM), Ministry of Local Government (MLG), Ministry of
Public Work and Highways (MPWH), and the National Economic and Development
Authority (NEDA) shall be represented therein. The representative of the lead
agency shall act as Chairman of the Project Steering Committee.

5.2

Central Projects Office

The Central Project Office shall be created and located within the lead
agency. Personnel from the implementing and other agencies, including local
government units, may be seconded upon approval of the Project Steering
Committee, the CPO may maintain extension units at the regional and/or Project
City/LGU level.

6.0

Statement of Responsibilities
6.1

Ministry of Finance (MOF)

6.1.1

The MOF, thru the Office of Local Government Finance (OLGF), shall
administer the MDF.

6.1.2

The OLGF shall be responsible for nationwide coordination and

implementation of approved financial arrangement/operations of projects
funded from the MDF. For the purpose, the MOF shall exercise a dual role:
(a) the administration of the MDF; and (b) the execution of policies thru
direct executive supervision over the local treasurers and assessors.

6.1.3

The OLGF shall render technical and consultative services to Project

Steering Committee, Central Project Offices and Project Cities/LGUs
whenever necessary.

6.1.4

The OLGF shall be responsible for the review and evaluation of local
government financial operations related to the implementation/execution of
project components and activities.

6.1.5

In coordination with or upon due consultations with the proper CPO, the
OLGF shall call for periodic financial and physical reports from implementing
Agencies/Project Cities/LGUs to determine if project commitments are met
and accomplishments are matched by funds released.

6.1.6

6.2

For the purpose of administering the MDF, there shall be created within the
OLGF a Central Fund Management Unit (CFMU).

Central Fund Management Unit (CFMU)

The CFMU shall:

6.3

6.2.1

be responsible for maintaining budget proposals and financial and work

plans submitted by the PSCs/CPOs within the limitation of available
balances within the MDF;

6.2.2

prepare cash flow requirements for the MDF and monitor flow of funds
including availments and utilization;

6.2.3

maintain general and subsidiary accounts/records by Project City/LGU and

Implementing Agency/Government Corporation for each foreign-assisted
project;

6.2.4

have its on support services and keep the accounts of the CFMU and
Municipal Development Fund (MDF) as separate accounting entities distinct
from the accounts of the MOF-proper;

6.2.5

request for separate agency and fund codes for the MOF/OLGF-CFMU and
MDF from the OBM;

6.2.6

coordinate with the Bureau of Treasury, the Development Bank of the

Philippines (DBP) or the Land Bank of the Philippines (LBP) when acting as
depository bank of the MDF; and

6.2.7

evaluate the impact of programs on local government finances.

Project Steering Committee

The Project Steering Committee shall:
6.3.1

formulate and prescribe implementing policies and instructions for the

execution of foreign- assisted projects in accordance with Loan/Project
Agreements and national laws and policies;

6.3.2

provide policy direction and guidance to the CPO Director and assistance on
matters requiring high level intervention;

6.3.3

review and approve the selection of projects proposed for inclusion in the
program;

6.3.4

review CPO appraisals, sign sub-project agreements with the Project

Cities/LGUs, and approve sub-loan agreements between MOF and Project
Cities/LGUs;

6.4

6.3.5

endorse the consolidated annual program budget to Government for

inclusion of the Project Cities/LGUs national components in the MPWH
Infrastructure Program; and

6.3.6

approve and transmit accordingly final Project Evaluation, and other terminal
reports.

Central Project Office (CPO)

The CPO shall:

6.5

6.4.1

pre-qualify Project Cities/LGUs to receive funds and/or assistance under the

program;

6.4.2

6.4.2 assist Implementing Agencies and Project Cities/LGUs in the

preparation of their over- all plans and physical programs and the fiscal
measures required to meet their development proposals;

6.4.3

appraise/evaluate projects and project revisions or reprogramming proposed

by Implementing Agencies and Project Cities/LGUs for funding purposes
and submit corresponding recommendations to the Project Steering
Committee for Approval;

6.4.4

prepare/review annual budgetary proposals and cash flow requirements of

Implementing Agencies and Project Cities/LGUs and prepare appropriate
recommendations or actions thereon;

6.4.5

advise Project Cities/LGUs on problems of Implementation and establish

linkages with other local and national government agencies;

6.4.6

organize training programs for Project City/LGU staff; and

6.4.7

review/evaluate impact of projects and, with the assistance of Implementing

Agencies and Project Cities/LGUs, prepare evaluation and other terminal
reports for submission to the Project Steering Committee.

Office of Budget and Management (OBM)

The OBM shall release the appropriate Advice of Allotment (AA), Notice of
Cash Disbursement Ceiling and (NCDC)/Non-Cash Availment Authority (NCAA)
pertaining to the MDF direct to MOF/OLGF-CFMU based on the approved Work
and Financial Plan. It shall issue agency and fund codes for the MOF/OLGF-CFMU
and MDF.

6.6

Bureau of the Treasury (BTR)

6.6.1

The BTR shall be responsible for recording the proceeds of foreign loans as
well as repayments thereof. It shall notify the Office of Budget and
Management and the MOF/OLGF-CFMU of the availability of funds from
loan proceeds.

6.6.2

6.7

It shall act as the principal depository of the MDF without prejudice to the
designation of other depositories by the Minister of Finance in accordance
with P.D. 1914.

Ministry of Local Government (MLG)

The MLG shall exercise supervisory and administrative control over the
Project Cities/LGUs and when necessary may provide technical support and
assistance to Project Steering Committee and Central Project Offices in the
implementation of foreign- assisted projects

6.8

Ministry of Public Works and Highways (MPWH)

The MPWH shall be responsible for physical planning, construction,
expansion and improvement of infrastructure in accordance with approved Loan
and Project Agreements.
It shall, likewise, provide technical support and
assistance to PSCs and CPOs in relation to the implementation of foreign-assisted
projects whenever necessary.

6.9

National Economic and Development Authority (NEDA)

The NEDA is the central agency for national development planning and
coordination of program implementation. As such, it shall provide the necessary
planning/programming/monitoring/evaluation and such other advisory services as
required for project preparation, implementation and evaluation.

6.10

Project Cities/LGUs
The Project Cities/LGUs shall carry out programs and activities covered by
Project/On-Lending Agreements with due diligence and efficiency and in conformity
with appropriate administrative, financial and engineering practices, and shall
provide promptly as needed, the funds facilities, services and other resources
required for the purpose. The Project Cities/LGUs shall prepare and submit the
physical, financial and other reports required by proper authorities in accordance
with international and project agreements.

6.11

Commission on Audit (COA)

The COA shall audit the accounts and operations of the MDF including all
projects undertaken by the lead and implementing agencies in accordance with
existing auditing rules and regulations, and prepare/furnish reports of audit in the
manner and frequency as may be required by the foreign lending institutions/banks
as indicated or expressly provided in the Loan/Project/On-Lending Agreements.

7.0

General Guidelines
7.1

The key financial policies which will guide the operations of the MDF and the
evaluation and control of local government transactions with the Fund shall be as
follows:

7.1.1

On-lending terms for local governments or government corporations shall be

in accordance with the terms and conditions of the international agreements
with foreign financial institutions.

7.1.2

Loan repayments shall be in conformity with the terms and conditions of the
corresponding Loan and Project Agreements.

7.1.3

Local governments shall limit their borrowings from all sources during the
project period so that total net yearly revenues from all sources after
operating costs will be at least 1.2 times the yearly debt service liabilities to
all creditors, unless otherwise provided in a mutual agreement among all
parties concerned.

7.1.4

Repayments to the MDF shall take precedence over all borrowings incurred
subsequent to signing the loan agreement with the MOF.

7.1.5

The Minister of Finance, in consultation or agreement with foreign lending

institutions and Project Cities/LGUs may require the payment of additional
interest, charges and fees on amount to be relent to local governments to
cover the costs of foreign exchange risks, commitment charges and frontend fees applied on foreign borrowings by lending institutions.

7.1.6

In case of default or arrearages for more than three (3) months, the MOF
may withhold internal revenue/specific tax allotments in such amounts and
duration necessary to repay in full the outstanding loan amortizations,
unless in conflict with Loan/Project Agreements.

7.2

Project Cities/LGUs shall include in their annual and supplemental budgets both the
necessary allocations for proceeds of the loan from the MDF and for the required
local counterpart fund contributions, the utilization thereof as well as amortizations
(interest and principal) therefor.

7.3

The peso counterpart and the proceeds of foreign loan/borrowings accruing to the
Municipal Development Fund shall be appropriated in the General Appropriations
Act (GAA) with separate P/P/A/ and KBI the MOF.

7.4

All appropriations programmed under the MDF for foreign- assisted projects as
specified under project components of the loan agreements shall be released to the
MOF/OLGF-CFMU by the OBM, thru the issuance of comprehensive advice of
Allotment (AA), Notice of Cash Disbursement Ceiling (NCDC) and Non- Cash
Availment Authority (NCAA) based on the Work and Financial Plan submitted by
the Central Project Offices to CFMU. Such AA, NCDC, and NCAA shall be issued
immediately upon receipt of the certification of the BTR that the proceeds of the
loan/grant have been deposited with the Central Bank/BTR

7.5

The funds authorized in the GAA for the project implementation shall be released
directly by the OBM to the MOF/OLGF-CFMU. Such funds shall in turn be suballotted to project implementing agencies and other entities based on budgets and
work programs approved by the Project Steering Committee concerned. Suballotments may be made through funding checks/warrants or Journal Vouchers.

7.6

The MOF shall use separate agency and fund codes for OLGF-CFMU and MDF
assigned by the National Accounting Office (NAO) - OBM.

7.7

Allotments/CDC corresponding to the proceeds of the foreign loans/grants and the

peso counterpart of the government shall be booked up by the MOF/OLGF-CFMU
under Fund 102 on the basis of the Advice of Allotments/NCDC received from the
OBM. Amount transferred/accruing to the MDF (Revolving Fund) as well as all
transactions pertaining thereto shall be booked up separately under Fund 161
(Annex A).

7.8

Funds released for projects shall be accounted for as trust liability in separate sets
of books to be maintained by the Availing/Implementing Agencies/Project Cities.

7.9

Under the MDF separate ledger accounts shall be maintained for the trust liability
account for each project category, i.e., LRM, CVRP, etc.

7.10

PNB shall open separate deposit/checking accounts for each participating Project
City/LGU based on the deposit made by the BTR.

7.11

All liquidation reports for capital outlay expenditures shall be certified by the
Provincial/City/Municipal Treasurers; approved by the Provincial Governor,
City/Municipal Mayor; and verified by the Provincial/City Auditor concerned. The
vouchers and supporting papers shall be retained by the Provincial/City Auditor for
post-audit and final custody.

7.12

Availment of foreign loans shall be in accordance with OBM-COA-MOF Joint

Circular Nos. 5-82 and 5-82A dated July 1, 1982 and October 26, 1983,
respectively, and the provisions of this Joint Circular.

7.13

Funds earmarked for specific projects or activities shall not be utilized by the
implementing agencies and Project Cities/LGUs for other purposes unless
approved by the appropriate Project Steering Committee and the Minister of
Finance in his capacity as Borrower, subject to further approval by the Minister of
the Budget as may be required under existing OBM circulars and regulations.

7.14

Project cost revisions/adjustments and allocation of contingency reserves or

unallocated portions of approved foreign loans as may be necessitated by price
escalation of goods and services, changes in fuel and other maintenance costs of
heavy equipment and project vehicles, changes in foreign exchanged rates and
other similar circumstances and conditions, or other unforeseen events, shall be
prepared by the CPOs in consultation with implementing agencies and Project
Cities/LGUs for approval of the appropriate Project Steering Committee. Such
project cost revisions or adjustments and utilizations of contingency reserves or
unallocated portion of approved foreign loans, shall, before actual implementations
or application, be subject to further approval of the Minister of Finance in his
capacity as Borrower without prejudice to further consent by the lending institution
as may be required under the approved Loan and Project Agreements.

7.15

The CFMU (MOF-OLGF) shall be responsible for the review and verification of such
changes and adjustments in project cost estimates as well as the proposals to use
contingency reserves and unallocated portions of approved foreign loans before

submittal to the Minister of Finance for approval and for this purpose it may initiate,
whenever necessary, the preparation of the aforesaid changes/adjustments in
project costings and utilization of contingency and unallocated funds by the CPOs.

8.0

7.16

The heads of implementing agencies shall see that all required reports (financial
and physical) are submitted in accordance with existing accounting and auditing
rules and administrative regulations. The Chief Accountants/heads of accounting
units of the agencies concerned shall reconcile all accounts related to the projects.

7.17

The implementing agency concerned shall submit quarterly to MOF/OLGF-CFMU a

list of Provincial/City/Municipal/Treasurers or designated Project Management
Officers who fail to submit their liquidation reports on time.

7.18

The MOF, particularly the OLGF, which has direct supervision over
Provincial/City/Municipal Treasurers shall take the necessary steps to ensure
prompt submission of the required reports by the treasurers, thru the Regional
Directors for Local Government Finance, MOF.

7.19

Allotments for subsequent yeas and the estimated unobligated allotments for the
current year shall be incorporated by the MOF in its program for the immediate
ensuing calendar year that will be submitted to NEDA/OBM for consideration and
integration in the program for the year.

Procedural Guidelines
8.1

Procedural Guidelines for MDF Projects where the National Government is the
Borrower; the beneficiary/grantees are Project Cities/LGUs (Case I- Annex B).
8.1.1

Fund Release
a)

The project Cities/LGUS shall submit their budget and work

programs to the Project Steering Committee thru the CPO for
approval.

b)

The MOF/OLGP-CFMU shall consolidate the approved budgets and

Work and Financial Plans of Project Cities/LGUs to be submitted to
the OBM for approval.

c)

Based on the approved Work and Financial Plan, the OBM shall
release the AA and the corresponding CDC to the MOF/OLGFCFMU, copy furnished the BTR.

d)

Based on the Memorandum of Agreements, and the AA and NCDC,

the MOF/OLGF-CFMU, shall release funds to the LGUs/Project
Cities thru the BTR in the form of Cash Advance by means of JV.
The JV shall be prepared in three (3) copies to be distributed as
follows:
Original
Copy

BTR-NCAD
BTR-TMAD

Copy

MOF-OLGF-CFMU file

Replenishment for Cash Advance/further releases shall be made

quarterly, or upon proper liquidation of at least 50% of the amount
released, or as prescribed in prevailing Project/Loan On-lending
Agreements, or upon the satisfaction of Project completion
requirements.
e)

The MOF/OLGF-CFMU shall advise/notify the Central Project

Offices (COPs) concerned of the funds released. It shall likewise
notify the participating Project Cities/LGUs of the funds released.

f)

The BTR shall issue a treasury warrant covering such fund releases
payable to PNB Main Office for the accounts of the LGUs/Project
Cities concerned.

g)

Based on the deposit made by BTR-TMAD, PNB shall open a

separate checking account for each LGU/project City and prepare
and serve notice of the corresponding credit advice to the
LGU/Project City concerned, particularly the local treasurer.

h)

Upon receipt of the credit advice from the bank, the local treasurer
shall record the cash credited by the PNB branch in separate books
of accounts.
In case of money deposited for the account of a municipality, the
Provincial Treasurer shall advise the Municipal Treasurer that
amounts have been deposited to his account. The Municipal
Treasurer shall record the amounts accordingly.

8.1.2

Fund Utilization/Disbursement
a)

8.1.3

The local government unit shall make disbursement through PNB

checks signed by the local treasurer and countersigned by the
Governor/City Mayor or his duly authorized representative.
Disbursements by the Municipal Treasurer shall be made by PNB
checks issued by the Provincial Treasurer in accordance with
existing procedures on withdrawal of municipal deposits.

Fund Reporting
a)

The local government unit shall prepare and submit thru the CPO to
the MOF/OLGF- CFMU Chief Accountant a monthly report of
payments "Certificate of Status of Funds" (Annex F) certified correct
by the local treasurer, approved by the local chief executive and
verified by the local chief executive and verified by the provincial/city
auditor concerned, copy furnished BTR-TMAD.

b)

On the basis of the Certificate of Status of Funds submitted by the

local treasurer, the chief accountant of the MOF/OLGF-CFMU shall
credit the cash advance account of the local government unit by

journal voucher which shall be prepared in three (3) copies to be

distributed as follows:
Original
Duplicate
Copy

Chief Accountant, CFMU

COA Auditor, MOF
Local Treasurer

Replenishment of cash advances shall be made on a quarterly basis,

or upon proper liquidation of at least 50% of the amount released, or
as prescribed in prevailing Project Agreements, or upon the
satisfaction of Project completion requirements.
c)

Upon completion of the project, any unexpended balance of the

funds transferred shall be refunded by the Implementing
Agency/LGU. The accountable officer/local treasurer shall draw a
PNB check to be deposited with the BTR thru the PNB check to be
deposited with the BTR thru the PNB Branch using a Remittance
Advice (RA) for credit to the account of the MOF/OLGF-CFMU under
Fund Code 161 (MDF). The RA shall be prepared in six (6) copies
to be distributed as follows:
Original

PNB branch for submission to the

BTR-NCAD thru the PNB Head
Office

Copy

PNB branch for file

Copy

Copy

PNB branch for submission to the

the Provincial Treasury Fiscal
Examiner assigned to the province where the PNB branch is
located
OLGF-CFMU chief accountant

Copy

PNB branch for submission to

the Local Auditor concerned
thru the bank Auditor, who shall
first confirm the same

Copy

Provincial Treasurer's file

The amount shall be indicated opposite the caption "return of cash

advance/repayment" in the RA.
d)

8.2

On the basis of the RA, the MOF/OLGF-CFMU shall adjust the

cash/receivable account of the LGU/Project City. The RA shall be
verified by the Provincial or City Auditor concerned.

Procedural Guidelines for MDF Projects where the Project Cities/LGUs are the
borrowers thru On-Lending Agreements with the MOF (Case I-Annex C).

8.2.1

Fund Release
a)

The Project Cities/LGUS shall submit their budgets and work

programs to the Project Steering Committee thru the CPO for
approval.

b)

MOF/OLGF-CFMU shall consolidate the approved budgets and

Work and Financial Plans to be submitted to the OBM for approval.

c)

The OBM shall review/evaluate and approve the WFP submitted by

MOF/OLGF-CFMU. Based on the approved WFP, the OBM shall
release the AA and the corresponding NCDC to MOF/OLGF-CFMU,
copy furnished the BTR.

d)

Based on the AA and NCDC, MOF/OLGF-CFMU shall obligate and

liquidate the funds for transfer to the Municipal Development Fund.

e)

Subsidiary ledgers shall be maintained for account 8-64-100 by the

availing LGUs/Project Cities.

f)

Based on the On-Lending Agreements, funds shall be released to

the LGU/Project City thru the BTR as loans by drawing a JV. The JV
shall be prepared in four (4) copies to be distributed as follows:
Original and Copy

MOF/OLGF-CFMU Auditor thru

Chief Accountant

Duplicate

BTR-NCAD

Copy

BTR-TMAD

Further releases of loans shall be made quarterly, or upon proper

liquidation of at least 50% of the amount released, or as prescribed
in prevailing Project/Loan/On-Lending Agreements, or upon
satisfaction of Project completion requirements.
g)

The MOF/OLGF-CFMU shall advise/notify the CPOs concerned of

the funds released. It shall, likewise, notify the participating
LGUs/Project Cities of the fund released.

h)

Based on the MOF/OLGF-CFMU JV, the BTR- NCAD shall draw a

JV to record the transfer of funds to the LGU, copy furnished the
BTR-TMAD.

i)

Based on the NCAD JV TMAD shall draw a corresponding JV to

record the receipt of funds.

j)

BTR-TMAD shall then issue a treasury warrant payable to PNB to

the credit of the account of the local government unit per list given by
BTR.

k)

Based on the deposit made by BTR-TMAD, PNB shall open a

separate checking account for each LGU/Project City and prepare
and serve notice of the corresponding credit advice to the
LGU/Project City concerned, particularly the local treasurer.

l)

Upon receipt of the credit advice from PNB, the Provincial/City

Treasurer shall record the cash credited by the PNB to the account
of the Province/City/Municipality by means of a SJV in five (5) copies
to be distributed as follows:

m)

8.2.2

8.2.3

Original
Duplicate
Copy
Copy

Copy

Provincial/City Auditor
Provincial/City Treasurer
Municipal Treasurer
MOF/OLGF-CFMU Chief
Accountant
MOF Auditor

In case of money deposited for the account of a municipality, the

Provincial Treasurer shall notify the Municipal Treasurer that such
amount has been deposited to his account. The Municipal Treasurer
shall, upon receipt of the SJV and notice from the Provincial
Treasurer, record the amount accordingly.

Fund Utilization/Disbursement
a)

Disbursement by the Provincial/City Treasurer shall be made

through PNB checks signed by him and countersigned by the
Governor/City Mayor or his duly authorized representative.

b)

Disbursement by the Municipal Treasurer shall be made through

PNB checks issued by the Provincial Treasurer in accordance with
existing procedures covering withdrawal of municipal deposits.

Fund Reporting
a)

The Project City/LGU shall submit thru the CPO to the MOF/OLGFCFMU a monthly report of payments "Certificate of Status of Funds"
(Annex F) certified correct by the local treasurer, approved by the
local chief executive and verified by the COA Unit Auditor
concerned. The report shall be prepared in five (5) copies to be
distributed as follows:
Original
Duplicate
Copy
Copy
Copy

b)

MOF/OLGF-CFMU Chief Accountant

MOF Auditor
Provincial City Auditor
Provincial City Treasurer
Municipal Treasurer

Upon completion of the project, any unexpended balance of the

funds transferred shall be refunded by the Project City/LGU. The
procedures prescribed under 8.1.3 (c) and (d) shall apply.

8.2.4

8.3

Loan Repayment
a)

Repayment of loan granted to an LGU/Project City shall be made in

accordance with the schedule of payments and other terms provided
in the On- Lending Agreement.

b)

Under a proper resolution, the LGU/Project City shall also provide

that the income generated by the project under the On-Lending
Agreement shall first be applied to the repayment of loans (principal
and interest) before it is made available for any purpose.

c)

The Provincial/City Treasurer shall draw a check to be deposited

with the BTR thru the PNB Branch using a Remittance Advice (RA)
for credit to the account of the MOF/OLGF-CFMU under Fund Code
161 (MDF) to cover repayment of loans. This RA shall be prepared
in five (5) copies to be distributed as follows:
Original

PNB Branch for submission to the

BTR-NCAD thru the PNB Head Office

Duplicate

PNB branch file

Copy

Copy

PNB branch for submission to the

Provincial Treasury Fiscal Examiner
Assigned to the province where the
PNB branch is located.
MOF/OLGF-CFMU Chief Accountant

Copy

PNB branch for submission to the

Local Auditor concerned thru the Bank
Auditor who shall confirm it first

d)

Upon receipt of the remittance advice, BTR-NCAD shall record the

receipt thereof.

e)

MOF/OLGF-CFMU shall draw a JV to record the loan repayments

which shall form part of the revolving fund. It shall be taken up as
trust liability in the books of accounts of MDF

Procedural Guidelines where the Fund is released to a National Government

Agency as Implementing Agency (LA) to carry out the specific project components
(Case III - Annex D).
8.3.1

Where the implementor of specific project components (such as but not

limited to tax mapping, training, technical assistance, design, feasibility
study, etc.) is a National Government Agency (NGA), the NGA concerned
shall submit the budget and work financial plan to the Project Steering
Committee thru the CPO for approval.

8.3.2

The CFMU shall submit the budget and Work and Financial Plan approved
by the Project Steering Committee to the OBM for approval.

8.3.3

OBM shall release the AA and the corresponding Notice of Cash

Disbursement Ceiling to MOF/OLGF-CFMU, copy furnished the
Implementing Agency.

8.3.4

MOF/OLGF-CFMU shall request the BTR-NCAD to effect the transfer of

funds by means of JV.
Replenishment or further releases shall be made in accordance with the last
paragraph of Items 8.1.1 (d) and 8.2.1 (f) hereof.

8.4

8.3.5

The MOF/OLGF-CFMU shall treat the amount transferred as deduction from

Account 9-84-100 while the Implementing Agency shall treat it as trust
liability.

8.3.6

Upon completion of the project, any unexpended balance of the trust fund
shall be refunded by the Implementing Agency Central Office to the
MOF/OLGF-CFMU by drawing a JV.

Procedural Guidelines where the Fund is released to a Government Corporation as

Implementing Agency (IA) to carry out specific project components (Case IV Annex E).
8.4.1

Where the implementor of specific project components (such as but not

limited to shelter programs, training, technical assistance, design, feasibility
study, etc.) is a government corporation maintaining depository accounts
with the BTR, the procedures prescribed under paragraph 8.3 shall be
followed.

8.4.2

Where the implementor of specific project components (enumerated under

8.4.1 above) is a government corporation not maintaining depository
accounts with the BTR:
1.

the Government Corporation shall submit its budget and work

program to the Project Steering Committee thru the CPO for
approval.

2.

the approved budget and work program shall be forwarded by the

CPO to MOF/OLGF-CFMU) which shall in turn submit it to the OBM
after proper recording in its books.

3.

OBM shall release the AA and the corresponding NCDC to

MOF/OLGF-CFMU, copy furnished the BTR.

4.

MOF/OLGF-CFMU shall effect the transfer of funds by the issuance

of a treasury warrant or treasury check.

5.

the MOF/OLGF-CFMU shall treat the amount transferred as a

deduction from 8-84-100 account while the Government Corporation
shall treat it as a trust liability.
Replenishment or further releases shall be made in accordance with
8.1.1 (d) and 8.2.1 (f) hereof.

8.4.3

9.0

Upon completion of the project, any unexpended balance of the trust fund
shall be refunded by the Government Corporation to the MOF/OLGF- CFMU
by issuing a check for the purpose.

Financial Reporting Requirements

9.1

The MOF/OLGF-CFMU shall submit to the NAO of the OBM, two (2) legible copies
of BF 301, Financial Report of Operations (Breakdown of Obligation of Activity) and
BF 302, Physical Report of Operation and all other accountability reports as
required under existing Budget/Joint Circulars.

9.2

A monthly trial balance for all projects funded by the MDF shall be submitted by the
MOF/OLGF-CFMU to the Accountancy Office, COA, copy furnished the NOA-OBM
ten days after the end of the month, showing separate 0-90-000 accounts for each
release of loan proceeds and the GOP counterpart. It shall be distributed as
follows:
Original
Duplicate
Triplicate

9.3

9.4

Accountancy Office-COA
NAO, OBM
MOF/OLGF-CFMU

FAPS and Other Foreign Borrowing Monitoring Forms prescribed under Budget
Circular No. 278 dated June 30, 1978 shall be submitted by MOF/OLGF-CFMU to
the Budget Technical Service (BTS) of the OBM, COA and the BTR.
9.3.1

Base Data Forms 400 and 401, upon approval of the loan/agreement
thereafter BDF 401 at the start of every calendar year.

9.3.2

Base Data Form 404, upon completion of the project.

A Certificate of the Status of Funds (Annex F) shall be prepared by the

Provincial/City/Municipal Treasurer on a monthly basis to be submitted not later
than the 10th day of the succeeding month. The Certificate shall be prepared in
four (4) copies to be distributed as follows:
Original
Duplicate

Copy
Copy

MOF/OLGF-CFMU
Implementing Agency
Chief Accountant
Provincial/City Auditor
Provincial/City/Municipal
Treasurer

10.0

11.0

Physical Reporting Requirement

10.1

There shall be a periodic and timely feedback on the progress of the

projects/programs to be made for each of the project components to provide the
CPOs and Project Steering Committees the information for effective project
management and decision making.

10.2

For this purpose, a Supervision, Monitoring and Evaluation Unit (SMEU) shall be
created and organized in each CPO to monitor the progress of all program/project
components related to MDF policies, management, performance and the project
support components.

Accounting Treatment
Illustrative accounting entries to record the above-mentioned transactions are
prescribed in Annexes A to D of this Joint Circular.

12.0

Repealing Clause
All circulars/issuance inconsistent with the above instruction/guidelines are hereby
repealed/modified/amended accordingly.

13.0

Effectivity
This Joint Circular shall take effect July 1, 1984.

(SGD.) CESAR E.A. VIRATA,

Prime Minister
and
Minister of Finance

(SGD.) FRANCISCO S. TANTUICO, JR.,

Chairman,
Commission on Audit

(SGD.) MANUEL S. ALBA,

Minister of Budget