Republika ng Pilipinas

(Pambansang Pangasiwaan ng Patu Lungsod ng Quezon

Office Address; National Government Center EDSA, Diliman, Quezon City, Philippines

Telephone Nos.: (02) 929-6071 to 78 Website: www.nia.gQV.| Telefex No. (632) 928-9343 TIN No. 000-916-415

MC N o . ^ . Series of 2018

MEMORANDUM CIRCULAR

TO : THE SR. DEPUTY ADMINISTRATOR, DEPUTY ADMINISTRATORS, DEPARTMENT/ REGIONAU PROJECT MANAGERS, DIVISION MANAGERS AND ALL OTHERS CONCERNED

SUBJECT : GUIDELINES AND PROCEDURES ON THE ADOPTION OF HIGHER CAPITALIZATION THRESHOLD OF Php15,000.00

1.0 PURPOSE

Consistent with DBM Circular Letter dated July 20, 2016 and Commission on Audit Circular No. 2015-007 dated October 22, 2015; and to have an accurate Property, Plant and Equipment (PPE) accounts in achieving a reliable financial data of this Agency, the following guidelines in setting a uniform capitalization threshold of Phpl5,000.00 for items classified as Fixed Assets under PPE accounts are hereby prescribed.

2.0 GENERAL GUIDELINES

2.1 Inventories

Semi-expendable Property. Tangible items below the capitalization threshold of Php15,000.00 shall be accounted as semi-expendable property. The following policies shall apply:

2.1.1 Semi-expendable property which were recognized as Property, Plant and Equipment (PPE) shall be reclassified to the affected accounts.

Account Title Debit Credit Semi-Expendable Other Machinery and Equipment xxx Semi-Expendable Office Equipment xxx Semi-Expendable Information and Communication Technology Equipment xxx Semi-Expendable Agricultural and Forestry Equipment xxx

Page 1 of 4

Sfiini-ExperKteMe Mame and Fishery Equnpnient xxx SemhExpendabte Communicatk)n Equipment xxx Semi-E^ndat)le Disaster Response and Rescue Equipment xxx SemV-Expendabie Military. Police and Security Equipment xxx Semi-Expendable Medical Equipment xxx Semi-Expendable Printing Equipment xxx Semi-Expendat>le Sports Equipment xxx Semi-Experxlable Technical and Scientific Equipment xxx Semi-Expendat)le Furniture and Fixtures xxx Semi-Expendat)le Books i xxx Other Semi-Exper>dal>te Account xxx

Other Machinery and Equipfnent ^ xxx Office Equipment xxx Irifbrmation arxi Comrnunication TechrK>lo9y Equipment xxx Agricuttural and Forestiy Equipment xxx Marine and Fishery Equipment xxx Communication Equipmerrt xxx Disaster Response and Rescue Equipment xxx Military. Police and Security Equipment xxx Medical Equipmerrt xxx Printing Equipment xxx Sports Equipment xxx Technical and Scientific Equipment xxx Fumiture and Fixtures xxx Books xxx Other Property, Plant & Equipment Account xxx

To reclassify Property, Plant & Equipment recognized as Semi-Expendable Inventory.

2.1.2 These tangit)le items shall be recognized as expenses upon its issuance to the end-user thru Inventory Custodian Slip (ICS).

Account Title Debit Credit Expense Account xxx

Semi-Expefidable Other Machineiy and Equipment xxx Semi-Expendable Office Equipment xxx Semi-ExperKlabte Infbrnrialion and Communication Technok)^ Equipment xxx Semi-Expendable AgricultuFai and Forestry Equipment xxx Semi-Expendable Marine and Fishery Equipment xxx Semi-Expendable Communication Equipment xxx Semi-Expendable Disaster Response and Rescue Equipment xxx Semf-Expeodat)le Military, Police and Security Equipment xxx Semi-Expendabie Medical Equipment xxx Semi-Expendal)te Printing Equipmerrt xxx

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Semi-Expendable Sports Equipment xxx Semi-Expendable Technical and Scientific Equipment xxx Semi-Expendable Fumiture and Fixtures xxx Semi-Expendable Books xxx Other Semi-Expendable Account

To recognize expense for the issuance of Semi-Expendable Inventory

2.2 Property, Plant and Equipment

Criteria for Recognition. The cost of an item of PPE shall be recognized as assets if and only if:

2.2.1 it is probable that the future economic benefits or service potential associated with the item will flow to the entity;

2.2.2 the cost or fair value of the item can be measured reliably; 2.2.3 beneficial ownership and control clearly rest with the government; 2.2.4 the asset is used to achieve government objectives; and 2.2.5 It meets the capitalization threshold of Php15,000.00.

Applying the Capitalization Threshold of Php15,000.00. The capitalization threshold of Php15,000.00 represents the minimum cost of an individual asset recognized as PPE on the Statement of Financial Position.

Items with Individual values below the threshold but which work together in the form of a group of network asset whose total value exceeds the threshold shall be recognized as part of the primary PPE, e.g., computer network, PABX system, sewerage system.

Expenditures incurred on purchasing, developing and operating hardware, like web servers, staging servers, production servers and internet connections of a website is accounted for as PPE if the total value of the primary asset (communications network) and these items is within the threshold of Php15,000 and above.

3.0 MONITORING AND REPORTING

3.1 The Bookkeeping Units/Sections shall adjust its Books of Accounts and Registries, to effect the reclassification of the affected items, i.e., those still classified as capital outlays (CO) but which are now to be considered as Maintenance and Other Operating Expenses (MOOE), per the higher capitalization threshold.

3.2 The Property Units/Sections shall remove from the Annual Inventory Report of PPE all items below Php15,000.00 acquired from the very start which are reclassified as semi-expendable property Issued to end-user

Page 3 of4

thru Inventory Custodian Slip (ICS) and shall prepare a separate report of the sanie using the form Report on the Physical Count on Inventories (Annex'A"). u

3.3 The Bookkeeping and Property Units/SectkxYS shaH submit to DBM and COA the list of all items redassified pursuant to the FY 2016 GAM's PI 5,000 threshokJ, for purposes of ensuring data consrsterxiy anrxxig the agency records, the DBM's and the COA's electronk: data systems.

4.0 REPEAUNG CLAUSE

AH circulars, menxxanda, and other issuances or parts ttiereof whk:h are irxxxisisterrt with the proviskxis of this Circular are hereby repealed/nxxlffied.

5.0 EFFECTIVITY

This Circular shall take effiect immediately.

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REPORT ON THE PHYSICAL COUNT OF INVENTORIES (Equipment below Php 15,000.00)

ANNEX "A'*

(Agencj') (Name of Accountable Officer) (Designation)

PROPERTY ACCOUNT NUMBER

UNIT VALUE

BALANCE PER ON HAND Date

Acquired

REMARKS CHARGING /FUNDING ARTICLE DESCRIPTION PROPERTY

ACCOUNT NUMBER UNIT UNIT

VALUE STOCK CARD P ER COUNT Date

Acquired P.O. Number •TATE, WHEREABOUTS, CHARGING

/FUNDING PROPERTY

ACCOUNT NUMBER UNIT

VALUE QTY VALUE QTY VALUE

Date Acquired

CONDITIONS, ETC.

CHARGING /FUNDING

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

TOTAL AMOUNT

AJNNEX "A' REPORT ON THE PHYSICAL COUNT OF INVENTORIES

(Equipment below Php 15,000.00)

(Agency) (Name of Accountable OfiQcer) (Oetignation)

1 PROPERTY ACCOUNT NUMBER

UNIT VALUE

BALANCiPIR ONHAWP— Data Aequind

niixxiiRr CHAROINO /FUNKMNO ARTICLE DESCRIPTION

PROPERTY ACCOUNT NUMBER

UNIT UNIT VALUE

STOCK CARD PER COUNT Data Aequind P.O. Number trmuMMfMvra. CHAROINO /FUNKMNO

PROPERTY ACCOUNT NUMBER

UNIT VALUE

I VALUE QTY VALUE

Data Aequind

ooNOfnom, wn.

CHAROINO /FUNKMNO

u (2) (3) (5) (7) (9) (10) (11) (12) (13)

TOTAL AMOUNT

Page 1 of 1

REPUBLIC OF THE PHILIPPINES ^^^^^^^ DEPARTMENT OF BUDGET AND MANAGEMENT

GENERAL SOLANO ST., SAN MIGUEL, MANILA

CIRCULAR LETTER • No. 2016- 7 ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ m July 20. 2016

TO : Ail Heads of Departments/Agencies/State Universities and Colleges and Other Offices of the National Government, Constitutional Offices and Government-Owned or Controlled Corporations

SUBJECT : Advisory for All National Government Agencies (NGAs) to Comply with Commission on Audit (COA) Circular No. 2015-007 [Prescribing the Adoption of FY 2016 Govemment Accounting Manual (GAM)] for Budgetary Documents and Transactions

1.0 COA Circular No. 2015-007 dated October 22, 2015 Chapter 2 (General Provisions, Basic Standards and Policies) prescribed the use of the FY 2016 GAM for National Government Agencies (NGAs) (Volume III) for all NGAs including SUCs. Observance of the FY 2016 GAM's provisions, including the adoption of the higher capitalization threshold of PI5,000, is required considering that any non-compliance with the Philippine Public Sector Accounting Standards (PPSAS) cannot be rectified either by disclosure of accounting policies used or by notes or explanatory materials.

2.0 In particular, the following Chapters/Sections of the FY 2016 GAM are to be observed:

2.1 Chapters Inventories:

Section 10. Semi-expendable Property. Tangible items below the capitalizajjion threshold of P15,000 shall be accounted as semi-expendable property. The following policies shall apply:

2.1.1 Semi-expendable property which were recognized as Property, Plant and Equipment (PPE) shall be reclassified to the affected accounts.

2.1.2 These tangible items shall be recognized as expenses upon issue to the end-user.

2.2 Chapter 10 Property, Plant and Equipment:

Section 3. Criteria for Recognition. The cost of an item of PPE shall be recognized as assets if and only if:

2.2.1 it is probable that the future economic benefits or service potential associated with the item will flow to the entity;

2.2.2 the cost or fair value of the item can be measured reliably;

2.2.3 beneficial ownership and control clearly rest with the government; 2.2.4 the asset is used to achieve govemment objectives; and

2.2.5 it meets the capitalization thri^hold of PI5.000.

Section 4. Afipiying the CsqpHalization Threshold of P15,000. The capitalization thieshold of P15,000 repiBsents the miT^mum cost of an individijal asset recognized as PPE on the Statement of Financial Position.

Items with indhodual values l>elow the threshold bnA which work together in the ftxm of a group of networic asset wtiose total value exceeds the threshold shaR be recognized as part of ttie primary PPE, e.g.. computer network, PABX system, sewerage system.

Expenditures incurred on purchasing, developing and operating hardware, like web servers, staging servers, production servers and internet connections of a website Is accounted for as PPE ff the total value of the primary asset (communications networl^) and lhe«e ftems is within the threshold of P15.000 and above. '

In tfits connection, the following guidelines are hereby issued:

3.1 All NGAs are advised to ot)serve ttie COA-prescrft)ed*e(itusted capitaKzation threslK>ld for a l fixed assets, rs^sed to P15,0(M) from the prervfous P1Q.000 cut-off-

3.1.1 AR budget release documerits (iriciudirig tliose Merns reieaeed tfwough the General AppropriaBons Act (GAA) as the f^elease f>ocument or GAARD) received by the NGA shall be reviewed to identfy and come up with a list of programs/actrvities/prDJects (PAA/Ps) affected by the adoption of the higiier capitalization benchmark, i.e., tt>ose costing PIO.OOO up to less tfian P15,000 initially classified as capital outlays (CX>) t»9ed on the lower t)enchmarf(. to ensure compRanoe vvith the COA's higher threshold.

3.1.2 Ttie adfustments oontempiated Involve mere reclassification anrK)ng allotment dasses wiMT tfie same P/A/P and cannot be considered as realignment. Henoe, no additional Spectai Allotment Release Order (SARO) shall lie requindd tor the purpose.

3.1.3 The agency shaH adjust its Boolcs of Accounts and Registries, to effect tfie reclassification of tfie affected Items, I.e.. tfwse still dassffied as CO but wfiich are now to be consWered as Maintenance and Ottier Operating Expenses (MOOE), per tfie fiigfier capitaNzation tfiresfiold.

3.1.4 All NGAs shall submit to DBM and COA the Bst of all items redassified pursuant to the FY 2016 GAWs P15,000 ttweshoW, for purposes of ensuring data consistency among tfie agency records, tfie DBM*s and tfie COA*s electronic data systems.

3.2 Clarification relative to tfie accounts reclassification shaH be referred to COA for resolution.

This Circular shall take effect immediately.

BENJAMIN E. DfOK Secretary^j^

•KNb

COMMISSION ON AUDIT Conuaonwealth Avenue, Quezon City

CmOJLAH No. : 2 0 1 5 ' 0 0 7 Date : 0(̂ 1 ? ?

"Fo : AM Heads of Departments, Bureaus, Offices, Agencies and IiTstrnmentalities of tfie National Govemment, Heads of Financial Maji^gement Services/CqniptroUersliip Departments, Heads of Accounting Units; Heads of Budget Units; COA Assistant Commissioners, COA Directors, COA Auditors, and All Others Concerned

Siib|ect : describing the Govemment Accounting Manual for Use of All National Government Agencies

FiiFpQse/Coyerage This Circular is issued tp prescribe th^ Government Accounting Manual (CjAM) for use of all National Govemment Agencies (NGAs) consisting of

departmentj bureaus, offices and instrumentalities, including state universities and colleger, in accordance with pertinent accoimting an4 budgeting rules and regutations^ including the followiag:

a. eommission on Audit (COA) Circular No. 2013-002 dated January 30, 2013 prescribing the Adoption of the Revised Chart of Accounts for National Government Agencies (NGAs);

b. COA Resolution No. 2014-0{)3 dated January 24, 2014 prescribing the adoption of the? Philippine Pujbiie Sector Accounting Standards (PPSAS);

c. COA Circular No. 2014-003 dated April 15, 2014 providing the implementing ry l^ and guidelines on the Conversion from the Philippine Government Chart of Accounts under the New Government Accounting System per COA Circular No. 2004-008 dated September 20, 2004, as amended, to the Revised Chart of Accounts for NGAs;

d. COA Circulan Np. 2015-002 dated March 9, 2015 prescribing supplementai^^Abpelines on thes preparation of financial statements and Qthe?r finajicial repbrts, the transitional provisions of die implementation of ft^ PPSAS and the ccKling stniGtiire;

e. CQA-DMKitdidilirHo.»>1^1 ditod the w^fkslsi giiî î jjgiiiig UQ srimisakiii 0^ QMifLity AiScnponlibiKcy Repotts on A|>|> AlfoCments, OUigiBtiaas and DcAmMionts;

f. COA-DBM l o a l Onnbr No. ^014-1 doled Jgly 2, 2014 prescnbsig the guiddiiio 00 fbc modified fonmrts of Hie Bwlgct aad Financial Accoonl^iity Rcplxis (BF ARs);

g. COA43»(if-DOÎ loiHt Orciiiar No. 2013-1 dMed Aa«BSl 6, 2013 presoflliiDg tR I h i i M AcGouols Cod^

k. COA-OeM-DOF loBit Circular No. 2014-1 dflkxl Novemljer 7, 2014 p i O f i d i ^ die euhMCcmeiH of UACS prescribed onder C0A-0BM4X)F Joint Otcaltf No. 2013-1.

2.t T l w M m i d

The GAM (Annex A) is composed of diree Tolmiies, namely: Voluine I - Accounting Policies, OrrideKnes m l ftocMkires, and

lUnsfrative Accounfiiig firtries It Gonteins the generri piifVlsiilHIli iMsib standards

and policies, the specific gnMtBara mid pfocedmes fbir CNKii sttodard, and 4be MuBliatihv enfries for typical ttmisacfioils of mtioMd gM^wiieHt

Vohmell - AoooontiiiK Books, Regisble^ RaconiB^ Fonns and Rqimts

It contains the varions fbnnals of books of iiocoii«ts» tegistiies, records^ fonns and reports, and ftc nslnic^ioiis on dieir use.

V o i n m e i n - TteRciv i^Chai to fAoGXIMs(Updated2015) H contains the List and Dttciiptiun of Accoents

per COA Circtilar No. m%4M 6med tenmy 30, 2013, amendments p6r COA Orcnlar No 20(4-003 dated April 13, 2014, and additionBl/niodified accounts.

3.1

Cases not covered in the Government Accountancy'

'AM ^ 1 1 be leforred to this Connntssion, through or, for resolution.

1'

4.0 Repealing Clause The GAM replaces theNewQoveniment Accounting System (NGAS) Manual,

Volumes I, H and III, prescribed under COA Circular No, 2002-002 dated J imel3,20(a

Further, all other circulars, orders, memoranda and existing rules and regulations inconsistent witli the provisions of the GAM are hereby amended/modified/revoked accordingly.

5.0 EDfectivity Thi^ Circular shall take eifect on January 1,2016.