EXPLAINER: What is a Notice of Disallowance?

The Commission on Audit (COA) has upheld its notice of disallowance (ND) on the Office of the Vice President’s (OVP) P73 million in confidential funds from December 21 to 31, 2022. 

This means that state auditors found flaws in the OVP's disbursement of confidential funds.

What is a disallowance? 

According to COA Circular No. 2009-006, a disallowance “is the disapproval in audit of a transaction, either in whole or in part.” 

The circular said that auditors shall issue an ND “for transactions which are irregular/unnecessary/excessive and extravagant.” 

An ND is also issued for illegal expenditures, or those that are contrary to law. Unconscionable expenditures, or expenditures which are unreasonable and immoderate, also warrants an ND, COA added. 

The ND shall be addressed to the head of the agency concerned and the accountant. 

“The ND shall be issued as often as disallowances are made by the Auditor in order to notify the agency head, the accountant, and the persons liable for the amount disallowed in audit,” the COA circular read. 

“The disallowance shall be settled within six (6) months from receipt of the ND by the persons liable.” 

COA noted that a disallowance is “a solidary liability” of all the individuals responsible as specified in the ND. 

“COA can collect from any of the persons responsible without prejudice to the latter’s claims against the rest of the persons liable,” the commission said. 

Settlement

State auditors said that NDs can be settled either through refund or by submission of the required documents and information. 

“When the persons liable immediately pay or refund the disallowed amount in full before the lapse of the 180- day period, they do not have to file their appeal. Once the official receipt and deposit slip are validated and found in order the auditor in charge will issue a Notice of Settlement of Disallowance (NSSDC),” COA explained. 

But to those who want to submit the lacking documents and information instead, COA said that they still need to file an appeal with the office of the COA Regional Director and pay the corresponding appeal fee. 

“Their submitted documents and information will be verified by the audit team upon the Order of the COA Regional Director and will issue an Answer to the Appeal,” said COA. “The Office of the COA Regional Director will evaluate the Answer to the Appeal and will render its decision on the appeal filed.”

"If the decision is affirming the ND, the ND subsists. But the persons liable may still elevate their appeal to the Commission Proper. On the other hand, if the appeal is granted, the auditor in charge issues the NSSDC," it said.

Can you pay in installments? Yes.

“But only disallowed salaries, personnel benefits, allowances, or emoluments classified under the expenditure item of Personal Services shall be allowed to be settled by installment payment under the schedule provided under COA Resolution No. 2017-021 dated November 3, 2017,” COA said. 

Is an ND final and executory? COA said it’s not. 

“[A] Notice of Disallowance will become final and executory if not appealed within six (6) months from receipt by the accountable officers,” the state auditors said. 

An ND can also be challenged before the Supreme Court, which has the authority to uphold or overturn COA's ruling. —VBL, GMA News