SOP Exhibits

Title:

Description of Irregular, Unnecessary, Excessive and Extravagant Expenditures

SOP Number :

ANNEX C

DESCRIPTION OF IRREGULAR, UNNECESSARY, EXCESSIVE
AND EXTRAVAGANT EXPENDITURES

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1. IRREGULAR EXPENDITURES

1.1

Definition

These signify expenditures incurred without adherring to established rules, regulations, procedural guidelines, policies, principles, or practices that have gained recognition in law. Irregular expenditures are incurred without conforming with prescribed usages

and rules of discipline.

There is no observance of an established pattern,

course, mode of action, behaviour, or conduct in the

incurrence of an irregular expenditure. A transaction

conducted in a manner that deviates or departs from or

which does not comply with standards set is deemed

irregular. An anomalous transaction which fails to

follow or violates appropriate rules of procedure is

likewise irregular.

Irregular expenditures are different from illegal

expenditures since the latter would pertain to expenses incurred in violation of the law whereas, the former is incurred in violation of applicable rules and

regulations other than the law.

1.2

Situational Cases

a. Payment of claims under a contract awarded not

strictly in accordance with the prescribed modes of

procurement of supplies, materials and equipment.

b. Purchase of item from jobbers or middlemen in

violation of a government policy to acquire the

same directly from reputable manufacturers or their

duly licensed distributors.

c. Payment of allowances and other forms of additional

compensation without proper authority.

d. Payment for repair of government property and

equipment undertaken by shops,mechanics or

contractors not duly accredited in accordance with

an existing government policy except in places

where there is no accredited shop in the locality

or where the accredited shop does not have

sufficient facilities or where the cost of services

of the accredited shop is relatively high or completion of repairs will suffer delay as

certified to by Agency Head or his duly authorized

representative.

e. Payment for emergency purchase where there is no

emergency as herein defined.

f. Reimbursement of expenses incurred by persons other

than authorized representatives of a government

agency for attending conferences, meetings and

other official functions.

g. Payment of salaries or wages of laborers under a

labor payroll to persons other than the payees

unless properly authorized by the payees.

h. Payments made on the basis of split requisitions,

purchase orders, vouchers or checks, unless

approved by proper authority of the agency.

2. UNNECESSARY EXPENDITURES

2.1

Definition

These expenditures could not pass the test of prudence

or the diligence of a good father of a family, thereby

denoting non-responsiveness to the exigencies of the

service. They are those not supportive of the

implementation of the objectives and mission of the

agency relative to the nature of its operation. This

would also include incurrence of expenditure not

dictated by the demands of good government, and those

the utility of which cannot be ascertained at a

specific time.

An expenditure that is not essential or that which can

be dispensed with or without loss or damage to property

is considered unnecessary. The mission and thrusts of

the agency incurring the expenditures must be

considered in determining whether or not an expenditure

is necessary.

2.2

Standards

Time of Need

i. The volume of purchases must be enough to fill

the three (3) months' requirements of the

agency except when circumstances or the

exigencies of the service would demand

otherwise. Purchases made in excess of 3

months' requirements should not, however,

exceed the current year's needs, except as

herein provided.

ii. November/December purchases shall be limited to

3 months' supply only.

iii. Three (3) months' supply is determined by

computing the average monthly consumption of

the agency for the last six (6) months plus 10%

allowance for contingencies multiplied by

three. However, the 10% allowance for increase

may be exceeded when the circumstances call for

additional procurement, such as but not limited

to seminars, conferences and the like or in

case where the activities cannot be delayed

without causing detriment to the public

service.

iv. Supplies bought or services rendered should be

used or availed of before the utility of said

items or services expires.

Frequency/Nature of Use

An expenditure is unnecessary if the item/object is

not used according to normal usage/practice.

Example: A warehouse is used as a pelota court.

Location

Item bought or service rendered is unnecessary when

it is not needed or useful in the place where it is

intended to be used.

Ex. When an air-conditioner is bought in Baguio

City or in a municipality where there is no

electricity.

2.3

Situational Cases

a. Grant of overtime pay for work that is not of urgent nature as to require completion within a specified time or that can be undertaken during regular office hours.

b. Expenses for advertisements of anniversaries, etc.

in newspapers, TV or radio merely for publicity or

propoganda purposes except when the nature of the

agency's mission would require such expenses as in

the case of promotion of trade and business.

3. EXCESSIVE EXPENDITURES

3.1

Definition

These signify unreasonable expenses incurred at immoderate quantities and exorbitant prices. They also include expenses which exceed what are usual or proper as well as expenses which are unreasonably high, and beyond just measure or amount. They also include expenses in excess of reasonable limits.

3.2

Standards

Price

The price is excessive if it is more than the 10% allowable price variance between the price paid for the item bought and the price of the item per canvass of the accounting personnel.

Volume Discounts

The price is deemed excessive if the discounts allowed in bulk purchases are not reflected in the priceoffered or in the award or in the purchase/payment document.

Factors to be Considered

In determining whether or not the price is

excessive, the following factors may be considered.

i. Supply and demand forces in the market

Ex. Where there is a supply shortage of a

particular product, such as cement or GI

sheets, prices of these products may vary

within a day.

ii. GovernmentPrice Quotations

iii. Warranty of Products or Special Features

The price is not necessarily excessive when the

service/item is offered with warranty or special feature which are relevant to the needs of the agency and are reflected in the offer of award.

iv. Brand of Products

Products of recognized brand coming from

countries known for producing such quality

products are relatively expensive.

3.3

Situational Cases

a. Overpricing of purchases, characterized by grossly exaggerated or inflated quotations, in excess of the current and prevailing market price by a 10% variance from the purchased item are considered excessive expenditures.

b. Payment for repair of government equipment at a cost exceeding 30% of the current market price of the same or similar equipment is also an excessive expenditure.

c. Expenditures for supplies and materials in quantities beyond that required herein and that needed by the agency for a determinable period resulting in over-stocking is excessive.

4. EXTRAVAGANT EXPENDITURES

4.1

Definition

These signify those incurred without restraint,

judiciousness and economy. They exceed the bounds of

propriety. These expenditures are immoderate,

prodigal, lavish, luxurious, wasteful, grossly and

injudicious.

4.2

tandards

Factors such as the nature of the agency's operations/

missions, profitability of past operational performance and availability of financial resources derived from

income or retained earnings must be taken into account

in the matter of determining whether or not an

expenditure is extravagant. Extravagant expenditure

pertains to the variables of quality relative to the

level or rank of the user and the purpose for such

expenditure.

4.3

Situational Cases

a. Purchase of luxurious and expensive office

furnishings for office buildings (e.g. rugs,

carpets, draperies, wall decors, utensils, desks,

chairs, lamps) is extravagant, except for the

Offices of the President of the Philippines, Prime

Minister, Justices of the Supreme Court,

Intermediate Appelate Court and other courts of

equivalent rank; Speaker of the Batasang Pambansa

and Members of Parliament, Heads and Members of the

Constitutional Commissions, Ministers, Governors,

Mayors, Bureau Directors and their equivalents in

government corporations and other agencies, as

warranted by their resources.

b. Luxurious furnishings for government buildings are

extravagant except those intended for showcase,

trade and commerce, promotion of arts and culture

and use of dignitaries.

c. Purchase of expensive cars is extravagant except

for the following level of users:

1) The President of the Philippines, Prime

Minister, Speaker of Batasang Pambansa,

Justices of the Supreme Court, and Heads of

Constitutional Commissions - Mercedes Benz or

its equivalent kind.

2) The Members of Parliament, Members of the

Constitutional Commissions, Ministers, Heads of Agencies, Governors of Class A provinces,

Mayors of Class A cities and municipalities,

Justices and Judges of Lower Courts - Heavy and Medium Cars.

d. Installation of highly sophisticated outdoor signs, billboards and noon signs advertising the office is extravagant, except for banks, trading corporations, hotels or buildings used for culture and arts.

e. Purchase of wines, liquors, cigars and cigarettes

is extravagant, except when served to foreign

dignitaries during state functions and government