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FUNDAMENTAL PRINCIPLES IN FINANCIAL TRANSACTIONS

SECTION 4 OF P. D. 1445 (1) No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. SECTION 305 OF R. A. 7160 (a) No money shall be paid out of the local treasury except in pursuance of an appropriation ordinance or law. SECTION 4 OF P. D. 1445 (2) Government funds or property shall be spent or used solely for public purposes. SECTION 305 OF R. A. 7160 (b) Local government funds and moneys shall be spent solely for public purposes. SECTION 4 OF P. D. 1445 (3) Trust funds shall be available and may be spent only for the purpose for which the trust was created or the funds received. SECTION 305 OF R. A. 7160 (e) Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received. SECTION 4 OF P. D. 1445 (4) Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency. SECTION 305 OF R. A. 7160 (l) Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units. SECTION 4 OF P. D. 1445 (5) Disbursements or disposition of government funds or property shall invariably bear the approval of the proper officials. SECTION 4 OF P. D. 1445 (6) Claims against government funds shall be supported with complete documentation. SECTION 4 OF P. D. 1445 (7) All laws and regulations applicable to financial transactions shall be faithfully adhered to. SECTION 4 OF P. D. 1445 (8) Generally accepted principles and practices of accounting as well as of sound management & fiscal administration shall be observed, provided that they do not contravene existing laws & regulations. PUBLIC PURPOSE Every expenditure or use of public funds and property has for its ultimate objective the promotion of the public health, safety, morals, security, contentment and the general welfare of all the inhabitants, or at least a majority of the inhabitants.

2 TEST OF PUBLIC PURPOSE COA Decision No. 97-073, 1/23/97 The test requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although such advantage to individual might incidentally serve the public. SELECTED PROVISIONS OF THE LOCAL GOVERNMENT CODE OF 1991 SECTION 335 No public money or property shall be appropriated or applied for religious or private purposes. SECTION 336 Funds shall be available exclusively for the specific purpose for which they have been appropriated. No ordinance shall be passed authorizing any transfer of appropriation from one item to another. SECTION 336 However, the local chief executive or the presiding officer of the sanggunian concerned may, by ordinance, be authorized to augment any item in the approved annual budget for their respective offices from savings in other items within the same expense class of their respective appropriations. SECTION 338 No money shall be paid on account of any contract under which no services have been rendered or goods delivered. IRREGULAR EXPENDITURES Expenditures incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law. SITUATIONAL CASES OF IRREGULAR EXPENDITURES Payment of claims under a contract awarded not strictly in accordance with the prescribed modes of procurement of supplies, materials and equipment. Payment of allowances and other forms of additional compensation without proper authority. Payment of salaries or wages of laborers under a labor payroll to persons other than the payees properly authorized by the payees. Reimbursement of expenses incurred by persons other than authorized representatives. UNNECESSARY EXPENDITURES Expenditures not supportive of the implementation of the objectives & mission of the agency relative to the nature of its operation. Expenditures which are not essential or which can be dispensed with without loss or damage to property. SITUATIONAL CASES OF UNNECESSARY EXPENDITURES Grant of overtime pay for work that is not of urgent time or that can be undertaken during regular office hours.

3 Expenses for advertisements of anniversaries, etc. in newspapers, TV, or radio merely for publicity or propaganda purposes except when the nature of the agencys mission would require such expenses as in the case of promotion of trade and business. EXCESSIVE EXPENDITURES Unreasonable expenses or expenses incurred at an immoderate quantity and exorbitant price. SITUATIONAL CASES OF EXCESSIVE EXPENDITURES Overpricing of purchases, characterized by grossly exaggerated or inflated quotations, in excess of the current and prevailing market price by a 10% variance from the purchased item. Expenditures for supplies and materials in quantities beyond that required herein and that needed by the agency for a determinable period resulting in overstocking.

EXTRAVAGANT EXPENDITURES Those incurred without restraint, judiciousness and economy Expenditures which are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive, and injudicious. SITUATIONAL CASES OF EXTRAVAGANT EXPENDITURES Purchase of luxurious and expensive office furnishings for office buildings. Purchase of expensive cars. Installation of highly sophisticated outdoor signs, billboards and neon signs advertising the office, except for banks, trading corps., hotels, or buildings used for culture & arts. Payment of rent of expensive halls or rooms in luxury hotels or restaurants used for meetings and other official functions, except when such hotels or restaurants are used for government-sponsored international conventions, meetings and the like.