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4. Witnessing of the contract by the Chief Accountant

The certification of the Chief Accountant that funds have been appropriated and are available for the purpose is a requisite part of a government contract. In national government agencies, the Chief Accountant is required to sign every government contract as a witness. His signature on the contract shall be considered as constituting a certification that funds are available to support the contract.

In local government units, every requisition must be accompanied by a certificate signed by the local budget officer, the local accountant, and the local treasurer showing that an appropriation therefor exists, the estimated amount of expenditure has been obligated, and the funds are available for the purpose, respectively.

Applicable Laws, Rules and Regulations

Section 46, PD 1177 - Certification of Availability of Funds

No funds shall be disbursed, and no expenditures or obligations chargeable against any authorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged.

No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received.

COA Circular No. 79-122 dated December 18, 1979; LOI 968, dated December 7, 1979

All contracts for capital projects and for the supply of commodities and services, including equipment, maintenance contracts, and other agreements requiring payment which are chargeable to agency current operating or capital expenditure funds, shall be signed by agency heads or other duly authorized official only when there are available funds. The Chief Accountant of the contracting agency shall sign such contracts as witness and contracts without such witness shall be considered as null and void.

It shall be the responsibility of the Chief Accountant to verify the availability of funds, as duly evidenced by programmed appropriations released by the Ministry of Budget and received by the agency, from which such contract shall be ultimately payable. His signature shall be considered as constituting a certification to that effect.

COA Circular No. 80-122A dated January 15, 1980

In view of the issuance of Letter of Instructions No. 968 by the President on December 17, 1979 (subject of COA Circular No. 79-122) ensuring that contracts are signed only when supported by available funds, Change Orders, Extra Work Orders & Supplementary or Amendatory Agreements issued for any additional work involving additional expenditures shall henceforth be subject to the same procedural requirements as for contracts called for by Letter of Instructions No. 968.

Specifically, the Chief Accountant of the contracting agency, or the responsible accounting official in the case of regional or district offices, shall sign such Change Orders, Extra Work Orders, & Supplemental or Amendatory Agreements. It shall be the responsibility of the chief accountant or the responsible accounting official to verify the availability of funds, as duly evidenced by programmed appropriations released by the Budget Ministry and received by the agency, from which such additional expenditures shall be ultimately payable. His signature shall be considered as constituting a certification to that effect.

COA Circular No. 82-122-B, NBC No. 359 dated January 18, 1992

Subject to the existing exceptions enumerated in item 3.2 of this Circular, an Agency Head or his duly authorized representative before entering into any contract which involves the expenditure of public funds must first secure the Certificate as to Availability of Funds (CAF) from the accounting official that:

  1. funds have been duly appropriated/allotted for the purpose;
  2. the allotment necessary to cover the proposed contract for the current fiscal year has been released and is available for expenditure on account thereof, subject to verification by the Auditor concerned (Sec. 86, PD 1445);
  3. the sum certified as having been appropriated/allotted shall be sufficient to cover the total cost of the contract.
In addition to accomplishing the CAF, the accounting official shall also sign the contract as witness. contracts not so witnessed or not supported by a CAF shall be considered null and void. (LOI 968 and Sec. 87, PD 1445).

Illustrative Decisions

COA Decision No. 255 dated August 18, 1981 - Absence of certificate of availability of funds renders the contract void

Anent the claim for payment of the balance on the contract for the construction of the La Carlota City Hall Annex which was entered into between the said City and the Contractor, the required certificate as to availability of funds was lacking, thereby rendering the said Contract null and void. Ultimately, therefore, the satisfaction of within claim(s) of Engineer x x x has become the personal liability of the public officer(s) who entered into said contracts.

COA Decision No. 942 dated July 13, 1989 - Existence of appropriation and the certification as to availability of funds necessary to the validity of a contract

A negotiated contract for the construction of the Rio Chico River Central Project at La Paz, Tarlac and Zaragoza, Nueva Ecija was entered into by and between then Ministry of Public Works and Highways and JECCA Builders, Inc., with a total consideration of P4,342,444.20. Upon post- audit, payments thereunder were disallowed as there was no certificate as to availability of funds (CAF) nor a document showing that funds for said project were available when the contract was signed and approved on May 23, 1982. The supposed CAF was issued only on June 20, 1983, or more than a year from the time the contract was consummated.

The existence of appropriation and the CAF at the time of the execution of the contract are conditions sine qua non to the validity of a contract and that the absence thereof inevitably results in the nullity of the contract. While COA Resolution No. 86-58 dated November 15, 1986, allows claims on the basis of quantum meruit even if the contract was entered into without a CAF as long as there is an existing budgetary allocation, the fact remains that there is no document nor evidence showing that funds for the project in question were available or existing when the contract was formalized on May 23, 1982. The promise or assurance of a release of appropriation is not adequate and cannot be considered as a valid substitute for the required actual budgetary allocation. The Supreme Court Resolution in the case of Royal Trust Corporation cannot be a sufficient justification for allowing the subject claim in the face of a patent violation of the law on the matter. A contrary proposition would exacerbate the said violation.

COA Decision No. 1438 dated August 7, 1990 - Claim without complete documentation considered null and void

The absence of the Accountant's signature and the agency head's approval on the purchase orders in question serves to nullify the transactions covered thereby in the light of the explicit provision of LOI 968, as implemented by COA Circular No. 79-122 dated December 18, 1989. The claim is not also supported with complete documentation in violation of Section 4(6) of P.D. 1445.

Melchor vs. COA, GR. 95398, August 16, 1991 - Failure of the Chief Accountant to affix his signature to the contract rectified by his certification

Where the Chief Accountant issued a Certificate of Availability of Funds but failed to sign the contract as a witness in violation of LOI 968, the contract is nevertheless enforceable. Since Sec. 86 of PD 1445 states that the certificate shall be attached to and become an integral part of the proposed contract, then the failure of the Chief Accountant to affix his signature to the contract was somehow made up by his own certification which is the basis and more important validating document. The rationale of LOI 968 which is to ensure that there are available funds to finance the project, was already served by the Chief Accountant's issuance of a certificate of availability of funds.