QUALIFIED OPINION By GRACE M. PULIDO TAN With the spate of media reports on COA findings of excessive allowances, purchase prices of goods and services, and other items of expenditures, it may be well to write about the fundamentals of disallowances, for the information and guidance of all concerned. A disallowance is a disapproval by the COA, in whole or in part, of a disbursement by a government agency. It is made after an audit of the transaction through the issuance of a Notice of Disallowance. An expenditure may be disallowed when it is found to be irregular, unnecessary, excessive, extravagant, or unconscionable – hence, the acronym “IUEEU” that every COA auditor knows by heart. Irregular expenditures are those incurred contrary to relevant laws, rules and regulations, as well as established guidelines, policies, principles, or practices that have gained recognition in law. Honoraria paid to members of Bidding and Award Committees that exceed the rates prescribed by the Department of Budget and Management is a good example. Unnecessary expenses are those that are not essential to the nature of the agency’s operations or exigencies of the service. Hiring of consultants whose functions are redundant with those of organic personnel, or overtime for non-urgent work fall in this category. Excessive expenses are unreasonable or immoderate in price and/or quantity. Overpriced goods and services are prime examples. Extravagant expenses, on the other hand, are lavish and grossly excessive, such as trainings and seminars in posh and luxurious venues. Unconscionable expenses are those incurred in violation of ethical and moral standards, that no one in his “right sense” would make. The power and authority of the COA to disallow such expenses arise from its constitutional mandates “to examine, audit, and settle” all accounts and property of government, and to promulgate rules and regulations for the prevention of such expenses. These usually partake of substantiation requirements (like documentary evidence that must be attached to vouchers), the manner by which disbursements are to be processed and released, etc. It is not the COA itself that prescribes the kind of expenditures to be made or the limits or parameters thereof, but law and implementing regulations issued by the concerned agencies. For expenditures common to all agencies – e.g., procurement, salaries, wages, and travel allowances – it is usually the Department of Budget and Management. The job of the COA is to determine compliance with such laws and regulations. Note that disallowable expenses could actually fall into two or more of the categories described earlier. As held in one case, determination of a disallowable expense is “relative, situational,” and depends on a multitude of factors like time and place, urgency of need, behavioral, ecological, political, social, and economic conditions. COA auditors thus have a wide latitude of discretion in this sense, and it is up to the agency or officials and employees concerned to justify the expense. If the auditor is unconvinced, the disallowance may be appealed to the director concerned. If the disallowance is upheld, appeal can be made to the COA en banc, whose decision can be brought to the Supreme Court for review.