One Secret: How to Avoid COA Disallowance?

When it comes to avoiding audit disallowance from the Commission on Audit (COA), there’s only one thing that government officials and employees need to keep in mind. We will discuss that one obvious secret in this article.

What is COA Disallowance?

COA disallowance means the disapproval by the Commission on Audit of a financial transaction (i.e., disbursement) made by a government office using government funds. The disallowance is made through a Notice of Disallowance addressed to the Head of Office.

What is a Notice of Disallowance?

A Notice of Disallowance is a written notice issued by COA to a government office informing that a financial transaction (i.e., disbursement) made by the office is disallowed or disapproved in audit.

The Notice of Disallowance contains the specific financial transaction being disallowed, the ground/s (i.e., legal basis, rationale, reasons, etc.) why it is disallowed, the amount being disallowed, and the government officials and/or employees liable.

What are the grounds for audit disallowance?

There are six (6) grounds which may cause the issuance of a Notice of Disallowance and they are collectively called the IIUEEU Expenditures.

What are IIUEEU Expenditures?

IIUEEU stands for illegal, irregular, unnecessary, excessive, extravagant and unconscionable expenditures. One or any combination of these expenditures can be used by COA as ground/s to disallow a disbursement.

In the succeeding sections, we will discuss these expenditures one by one.

What are illegal expenditures?

Any disbursement made by a government office in violation of an existing law is an illegal expenditure and shall be disallowed in audit.

For instance, disbursements made contrary to the procurement law are illegal expenditures. For example, procurement of goods or services that did not follow the prescribed procurement process and the requirements thereof is illegal.

[See Annex B of COA Circular No. 2012-003 to see concrete examples of illegal expenditures]

What are irregular expenditures?

In contrast with illegal expenditures, irregular expenditures are disbursements which were made contrary to rules and regulations, procedures, standards, policies, etc. issued by competent authorities such as the Department of Budget and Management, Department of Finance, Commission on Audit, etc.

Irregular expenditures may also come from violation of internal policies issued by government agencies themselves.

[See Annex A of COA Circular No. 2012-003 to see concrete examples of irregular expenditures]

What are unnecessary expenditures?

Unncessary expenditures are simply the use of government funds to things that are not needed by the government.

These expenditures are not essential to the mandate of the government or that which can be dispensed with without loss or damage to the government.

For instance, replacing an office equipment which is still serviceable or purchasing high-end gadgets or equipments which cannot be supported by acceptable justification is unnecesarry.

[See Annex C of COA Circular No. 2012-003 to see concrete examples of unnecessary expenditures]

What are excessive expenditures?

A disbursement is considered excessive when the same is unreasonable such that the quantity is immoderate and/or the price is unreasonably high. In other words, spending governments funds in excess of what is needed by the government agency.

For example, granting of cash advance in excess of the estimated budget is considered excessive. Spending lavishly (too much) on Christmas gathering, anniversary celebration, and similar event is also excessive.

[See Annex D of COA Circular No. 2012-003 to see concrete examples of excessive expenditures]

What are extravagant expenditures?

Extravagant expenditures are lavish, grossly excessive, unreasonably immoderate disbursement of government funds.

For instance, luxurious furnishing of buildings, procurement of or hiring of highly expensive cars, or payment of very expensive halls or rooms to conduct meetings, unless justified, are considered extravagant expenditures.

[See Annex E of COA Circular No. 2012-003 to see concrete examples of rxtravagant expenditures]

What are unconscionable expenditures?

Unconscionable expenditures pertains to expenditures which are grossly unreasonable, immoderate and highly unacceptable use of government funds.

For example, granting of exorbitant and unreasonable bonuses to government officials and employees is unconsionable. Also, conducting meetings in highly expensive, five-star hotels, for an unreasonable period of time is not only extravagant but also unconscionable.

[See Annex F of COA Circular No. 2012-003 to see concrete examples of unconsionable expenditures]

One Secret to avoid Audit Disallowance

If you have read the article up to this point, unless you jumped over here through the Table of Contents, you must have already realized that one secret to avoid COA disallowance.

It’s no secret up to this point anymore — to avoid COA disallowance you must avoid IIUEEU expenditures. You must ensure that you do not commit any of these expenditures in order to prevent having audit disallowances.

While there are remedies to lift COA disallowance, it’s still better to not receive a Notice of Disallowance at all.

As the old saying goes — prevention is better than cure.