Is a Certificate of Availability of Funds (CAF) Prior to Entering Contract in LGUs Mandatory?

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Is a Certificate of Availability of Funds (CAF) Prior to Entering Contract in LGUs Mandatory?

Post by engrjhez® on Mon Feb 28, 2011 8:58 pm

A reading of G.R.141616 (2001) QC vs. Lexber Inc. revealed that CAF may not totally be mandatory for LGUs. Section 86 of PD 1445 provides:

Section 86. Certificate showing appropriation to meet contract. - Except in a case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official or the agency concerned shall have certified to the officer entering into obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certification signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished.


Is the certification under the Local Government Code (RA 7160) specifically Section 344 as follows:
Section 344. Certification, and Approval of, Vouchers. - No money shall be disbursed unless the local budget officer certifies to the existence of appropriation that has been legally made for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds for the purpose. x x x

and that the certification in the face of Obligation Request (ObR) and Disbursement Voucher (DV) covers the LGU pre-requisite?


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Re: Is a Certificate of Availability of Funds (CAF) Prior to Entering Contract in LGUs Mandatory?

Post by jcolas on Tue Mar 01, 2011 11:06 am

"sir engrjhez wrote"
CAF may not totally be mandatory for LGUs

Sir Engrjhez, I am sorry but I can not find any any word or phrase that CAF may not be totally mandatory as you have posted in your heading. Section 86 of PD 1445 and Section 344 of RA 7160 which you have posted strongly came out with the requirement that CAF should first be secured before entering in any contract or before money is disbursed> Please elaborate your claim that CAF may not totally be mandatory for LGUs.
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Re: Is a Certificate of Availability of Funds (CAF) Prior to Entering Contract in LGUs Mandatory?

Post by engrjhez® on Tue Mar 01, 2011 8:06 pm

jcolas wrote:"sir engrjhez wrote"
CAF may not totally be mandatory for LGUs

Sir Engrjhez, I am sorry but I can not find any any word or phrase that CAF may not be totally mandatory as you have posted in your heading. Section 86 of PD 1445 and Section 344 of RA 7160 which you have posted strongly came out with the requirement that CAF should first be secured before entering in any contract or before money is disbursed> Please elaborate your claim that CAF may not totally be mandatory for LGUs.

One legal basis for CAF is LOI No.968. A reading in the supreme court decision will reveal the following paragraphs:
LOI No. 968, signed by then President Marcos on December 17, 1979, also provides in part that all contracts for capital projects and for supply of commodities and services, including equipment, maintenance contracts, and other agreements requiring payment which are chargeable to agency current operating on 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.

However, this requirement does not apply to contracts executed by local chief executives since the said LOI No. 968 was directed only to Ministries and Heads/Chief Accountants of Ministry, Bureau, Office, Agency of the National Government, including State Universities and Colleges, and the Chairman, Commission on Audit. Quezon City, or any urbanized city for that matter, cannot be considered a ministry, bureau, office or agency of the national government; neither is the city mayor a minister or head of a ministry, bureau, office or agency of the national government. x x x

CAF is a requisite to those covered by LOI 968 but not necessarily on LGUs. My statement that "CAF may not be totally mandatory for LGUs" is really intended to be questioned. To clarify further my point, Section 344 of RA 7160 provides the pre-requisite prior to disbursement of funds, and that Section 84 of PD 1445 may be inclined to this section as "statutory authority"
However, the very same Presidential Decree No. 1445, which is the cornerstone of petitioners arguments, does not provide that the absence of an appropriation law ipso facto makes a contract entered into by a local government unit null and void. Section 84 of the statute specifically provides:

Revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. (Underscoring ours)

Consequently, public funds may be disbursed not only pursuant to an appropriation law, but also in pursuance of other specific statutory authority, i.e., Section 84 of PD 1445. Thus, when a contract is entered into by a city mayor pursuant to specific statutory authority, the law, i.e., PD 1445 allows the disbursement of funds from any public treasury or depository therefor. It can thus be plainly seen that the law invoked by petitioner Quezon City itself provides that an appropriation law is not the only authority upon which public funds shall be disbursed.

Which was also quoted from the same jurisprudence. Smile

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