DISPOSAL in government refers to:

• The sale or destruction of:

– Unserviceable property no longer

needed by the government agency
– Property confiscated/forfeited by law
enforcement agencies, as well as
– Records which are already
unnecessary and valueless.
• Privatization/divestment of
government assets owned by
government-Owned or
controlled Corporation and
Financial instructions
Authority and Responsibility
for Divestment or Disposal
is lodged in the agency
head or governing bodies.

COA Cir. 89-296;

EO No. 888
GAAM 501
 Destruction or Sale of
Unserviceable Property
 has become unserviceable
for any cause
 is no longer needed

Sec. 79 of PD 1445
GAAM 502
 COA Circular 95-006
Section 9.06

A copy of the Inspection

Report of unserviceable
property and equipment
shall be submitted to the
Head of the Auditing
Unit immediately after
inspection conducted by
management.
 Objectives of Disposal

• to avoid continuing
carrying/inventory costs
• to prevent further deterioration
thereby obtaining the fair return in
case of sale
• to relieve accountable officers of
unnecessary accountability
• to make available space for the
agency
Determination of Disposable Property
• Unserviceable or can no longer be repaired
or reconditioned
• Maintenance/repair costs more than
outweighs the benefits and services
• Has become obsolete or outmoded
• Has been rendered unnecessary due to
change in the Agency’s functions/mandate
• In excess of requirements
• Has become dangerous or hazardous to use
 UNSERVICEABLE
PROPERTY:
• Refers to unserviceable and/or no
longer needed supplies, materials and
equipment owned by National,
Corporate and Local sectors of the
government.
• That which is beyond repair and has no
more utilization potential.
 Beyond economic repair:
• When cost of repair/maintenance
becomes prohibitive/disadvantageous
to the government considering such
factors as:
– Maintenance expenses
– Downtime
– Replacement cost of spare parts
– Frequency of breakdown
– Alternative modes such as rental of
equipment or outright replacement
 Obsolete Property

• That which has lost its

efficacy either due to
technological advancement,
change of procedures,
reorganization of office, or
completion of project.
CONFISCATED/SEIZED PROPERTY:

• Refers to property which came into the

ownership and possession of the
government as a result of its
implementation and enforcement of laws
and regulations on the protection of forest
lands, smuggling or failure to pay customs
duties, confiscation of prohibited drugs and
contrabands and other similar
prohibited/regulated operations.
 VALUELESS
RECORDS/DOCUMENTS:

• Include all record materials

that have reached their
prescribed retention periods
and usefulness to agency or
the government as whole.
 VALUELESS
RECORDS/DOCUMENTS:

• Exclude library and museum

materials, documents
submitted for copyright,
models, copies of documents
preserved for reference, and
stocks of publications and
processed documents.
 Guidelines on the Divestment or Disposal
of Assets (COA Circular 86-264)
1. Constitute the Disposal Committee
- require the submission the list of assets to be disposed
of: program for disposal, IIR/RWM, appraisal
documents, disposal procedures to be adopted
- inspect assets
-establish the floor price

2. Furnish the COA Auditor at least five days

before the scheduled bidding with a copy of
program for disposal, IIR/RMW, appraisal
documents & disposal procedures
3. Advertise by printed notice
for not less than three
consecutive days in any
newspaper or by notices posted
for a like period in at least three
prominent public places in the
locality.
4. Pre-qualify bidders -10% bond,
latest FS, ITR.
5. Constitute the BAC on Disposal
to conduct the public bidding.
 Creation of Disposal
Committees and
Secretariat (EO 309)
For National and
Corporate Agencies

Chairman -- not lower than Assistant Secretary for

a department and Assistant Director for a bureau.

Members
• Head of Administrative Unit;
• Head of Property Unit
P.D.1445 (Gov’t Auditing Code of the Phil)

• Section 79. Destruction or sale of unserviceable

property. – When government property has
become unserviceable for any cause, or is no
longer needed, it shall, upon application of
the officer accountable therefore, be
inspected by the head of the agency or his
duly authorized representative in the
presence of the auditor concerned and, if
found to be valueless or cannot be sold, it may
be destroyed in their presence.
P.D.1445 (Gov’t Auditing Code of the Phil)
• Section 79. Destruction or sale of unserviceable
property. – (con’t)
If found to be valuable, it may be sold at
public auction to the highest bidder under
the supervision of the proper committee on
award or similar body in the presence of the
auditor concerned or other duly authorized
representative of the COA, after advertising
by printed notice in the Official Gazette, or
for not less than three consecutive days in
any newspaper of general circulation,
 Section 79, P.D.1445 (Con’t.)
Section 79. Destruction or sale of unserviceable
property. – (con’t)

When the value of the property does not

warrant the expense of publication, by notice
posted for a like period in at least three public
places in the locality where the property is to
be sold. In the event that the public auction
fails, the property may be sold at a private
sale at such price as may be fixed by the
same committee or body concerned and
approved by the Commission.
 Membership of Disposal
Committee
• Chairman – a senior official with a rank not lower
than the level of an Assistant Secretary for a
department or Assistant Director for a
bureau/agency or department manager for a
GOCC
• Member – Head of the department’s administrative
service/head of agency’s administrative
division/head of GOCCs equivalent organizational
unit
• Member – Head of property unit
Duties of Disposal Committee

• Inspect/authorize the Department’s/

Agency’s field offices to inspect the
unserviceable property and verify
justification for disposal;
• Set the final appraised value of all
disposable property considering
obsolescence, market demand, physical
condition and results of previous
biddings for similar property;
Duties of Disposal Committee
(Con’t)

• Recommend to the head of agency

for approval, the manner of
disposal taking into account
pertinent pro- visions of Revised
Adm. Code and Gov’t. Auditing
Code;
• Conduct public bidding; and
• Recommend corresponding award.
 Inspection
• The means of verifying physical
existence and of being appraised of
the article’s appearance,
configuration and condition. As an
auditing tool it confirms the
possession and control of tangible
objects which are necessary for the
attainment of a government
agency’s mission of public service.
Objective of Inspection

• To supplement
theoretical computations
of value with first hand
observation of the
condition of the property.
 Appraisal
• The process of computing the
value of the property to be
disposed of, in order to be able
to set the government’s
minimum selling price.
• Its objective is to set the
minimum selling price to obtain
fair compensation for items to
be disposed.
 Appraised Value
• An estimate or opinion of the value of
an adequately described property as of
a specific date transmitted in writing
and supported by presentation and
analysis of relevant and factual data.
• Unserviceable property which can no
longer be repaired or reconditioned
shall be appraised at scrap or junk
value.
• Unserviceable property which can still
be repaired or reconditioned shall be
appraised at sound value.
Modes of Disposal
1. Sale
- Public bidding
- Negotiated sale
2.Condemnation/
Destruction
3. Transfer
4. Barter
5. Donation
 1.Sale
Public Bidding
– As general rule, the disposal of
government property shall be through
sale by public bidding. Public bidding
may be done through sealed public
bidding or when circumstances warrant,
by viva voce
Negotiated Sale
– Mode of property disposal resorted to
due to failed public bidding.
 Sale thru Negotiation
• There was failure of public auction.
• The negotiation may be conducted
singly provided that government gets
the best price.
• A record of proceedings must be
maintained.
• The negotiated price shall not be lower
than the highest offer submitted at
the failed public auction.
 2. DESTRUCTION OR
CONDEMNATION:
• Shall be resorted to only under
any of the following instances:
– When the unserviceable
property
- has no commercial value,
- cannot be sold (no buyers),
- is hazardous, or
- is beyond economic repair;
 Destruction (Con’t)

b. When there is no willing

receiver; or
c. When the appraised value is
less than the administrative
cost of sale.
Valueless property shall be
condemned either by:
• Burning
• Pounding
• Breaking
• Shredding
• Throwing beyond recovery
Destruction shall be made in the
presence of the disposal
Committee.
 3. Transfer

Upon the initiative of the

owning agency or upon
submission of request to the
owning agency, property
recommended for disposal
may be transferred to another
government agency/entity.
 4. BARTER:
• Is a modified form of ‘Transfer
wherein an agency transfers
property to another government
agency in exchange for another
piece of property. The value of
the property being transferred
may or may not be equivalent to
that being received.
If the consideration of the contract
consist partly in money, and partly in
another thing (kind), the transaction
shall be characterized by the
manifest intention of the parties. If
such intention does not clearly
appear, it shall be considered a
barter if the value of the thing given
as a part of the consideration
exceeds the amount of the money or
its equivalent; otherwise, it is a sale.
(Art. 1468, New Civil Code)
 Barter (Con’t)

• Shall be resorted to where

there is an offer that would
redound to the interest of and
is advantageous to the
government
 5. Donation

• May be made to
charitable, scientific,
educational or cultural
institutions.
Accounting Features
 SALIENT PROVISIONS

Derecognition

The carrying amount of an item of property,

plant, and equipment shall be derecognized:
(a) On disposal; or
(b) When no future economic benefits or
service potential is expected from its
use or disposal.
 SALIENT PROVISIONS

Derecognition
The gain or loss arising from the
derecognition of a PPE shall be
included in surplus or deficit . Gains shall
not be classified as revenue.
the difference between the net disposal
proceeds, if any, and the carrying amount of
the PPE, with the interest income treated
separately.
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