Grants and Donations by Local Chief Executives: COA Rules and Anti-Graft Red Flags (Philippines)

Executive summary

Local chief executives (LCEs)—governors, city/municipal mayors, and punong barangays—may extend grants, donations, and financial assistance only when (1) there is lawful authority and an appropriation, (2) the purpose is unequivocally public, (3) procurement, disbursement, and liquidation rules are observed, and (4) conflicts of interest and election-related bans are avoided. Failure on any of these fronts exposes officials and recipients to disallowances and liability under the Anti-Graft and Corrupt Practices Act (RA 3019), the Revised Penal Code on malversation, and administrative sanctions.

I. Legal framework

Constitutional anchors

Appropriation & public purpose: No public money leaves the treasury without an appropriation, and funds must serve a public purpose.
Sectarian bar: Public money or property cannot be used “for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion,” directly or indirectly.
Accountability: Public office is a public trust—officials must be transparent and accountable.

Local Government Code (RA 7160)

Fundamental principles (Sec. 305): Disbursements require lawful appropriation, availability of funds, and conformity with law/ordinance.
Authority to enter into contracts: The LCE may sign MOAs/agreements with prior Sangguniang authorization when required, and always within the scope of the appropriation ordinance/Annual Investment Program (AIP).
Discretionary funds (Sec. 325[h]): Capped (not to exceed a small percentage of prior-year property tax receipts), for public purposes only, and always supported by receipts—never for personal, political, or religious purposes.
Assistance to NGOs/POs (Sec. 35): LGUs may partner with and provide assistance to NGOs/POs/CSOs pursuing public welfare, subject to eligibility, transparency, and audit safeguards.
Inter-LGU/NGA assistance: Permissible via MOA and proper appropriation.
Disbursement controls: Vouchers, certifications of availability of funds, and supporting documents are mandatory.

COA rules and standards

Public purpose & necessity: Expenses must be regular, necessary, and in pursuit of lawful functions—otherwise irregular, unnecessary, excessive, extravagant or unconscionable (IUEEU) and disallowable.
Documentary requirements: COA consolidates Guidelines and Documentary Requirements for Common Government Transactions; these specify proofs of authority (ordinance/resolution), MOAs, beneficiary lists, distribution reports, inventory, and liquidation.
Fund transfers to NGOs/POs: Require due diligence (eligibility/track record), MOA with clear outputs, schedules, deliverables, bank account in the NGO’s name, and timely liquidation/return of unused funds.
Cash advances: Restricted to accountable officers for specific lawful purposes, with strict timelines for liquidation.
Asset transfers/donations: Require property identification, valuation, inspection, Sangguniang authority (where applicable), deed of donation, and acknowledgment by the donee; inventory and PPE books must be updated.

Special purpose funds (typical constraints)

5% LDRRMF (calamity fund): For disaster risk reduction/response; relief aid must be need-based, documented, and distributed with beneficiary lists—not for generic giveaways.
SEF (local school board): For basic education needs (e.g., classrooms, learning materials), not general donations unrelated to education.
20% development fund: For socio-economic development/infrastructure, not for ad hoc dole-outs.
GAD fund: For gender-responsive PPAs; grants must directly advance GAD outcomes and be documented accordingly.

Election laws

Pre-election ban: During the statutory election period, releases for public works, social services, and similar activities are restricted; relief for calamities may be excepted but must be compliant and documented. Gifts/assistance tied to candidacy invite vote-buying and graft exposure.

Anti-graft, ethics, and penal statutes

RA 3019 (Sec. 3[e], 3[g], 3[h], 3[k]): Criminalizes giving unwarranted benefits, contracts with conflicts of interest, and grossly disadvantageous transactions.
RA 6713: Bans solicitation/acceptance of gifts; mandates transparency.
Revised Penal Code (Arts. 217–222): Malversation for misuse/failure to account; technical malversation (application of funds to an unauthorized purpose).

II. What counts as a “grant,” “donation,” or “financial assistance”?

Grant/financial assistance (cash): Transfer of public funds to individuals, groups, NGOs, other LGUs, or NGAs to achieve a defined public purpose, with deliverables and liquidation.
Donation (in-kind): Transfer of property (e.g., vehicles, equipment, supplies) to qualified public entities—or, in exceptional cases, private entities where the public purpose is primary and the Constitution/LGC allow it (never sectarian).
AICS-style aid: Assistance to individuals in crisis (medical, burial, transportation) administered under welfare programs with case documentation.

Key differences: cash requires liquidation; in-kind requires property acceptance and inventory exit. Both require clear authority and public purpose.

III. Permissible recipients and purposes (with cautions)

Public sector recipients (NGAs, LGUs, public schools, public hospitals, PNP/AFP units)
- Generally allowed with Sangguniang authority and MOA; observe property transfer rules, acceptance, and end-user accountability.
NGOs/POs/CSOs & cooperatives
- Allowed if eligible, reputable, and project-fit; must pass due diligence (track record, board, registration, audited financials, bank account under entity’s name). MOA must set outputs/milestones, allow inspection, and require liquidation and return of unspent funds.
Individuals/families (AICS)
- Allowable under social welfare mandates. Require social case study/means test, identity/eligibility verification, official receipts/medical bills, and distribution logs; prioritize non-cash modalities when possible (e.g., hospital billing arrangements).
Private schools/hospitals/enterprises
- High-risk unless clearly anchored in public purpose (e.g., indigent patients under MOA with private hospital at government rates). Avoid subsidies that primarily confer private benefit.
Religious/sectarian institutions
- Prohibited when the benefit is religious/sectarian (e.g., church repairs). Neutral, secular purposes that benefit the general public (e.g., evacuation facility on church land with proper legal safeguards) require exceptional caution and legal vetting.

IV. Authority and process: a practical roadmap

Program design & legal basis
- Anchor in the LGU’s mandate and development plans (CDP/AIP).
- Determine the funding source (General Fund item; LDRRMF; SEF; GAD; trust funds) and confirm that the fund may legally support the grant/donation.
Appropriation & Sangguniang authority
- Ensure a specific appropriation in the budget ordinance or a supplemental ordinance.
- Obtain Sangguniang authorization for the LCE to enter into the MOA/Deed (particularly for inter-governmental or property transfers).
Procurement (if buying items to give away)
- Purchases of goods/services for distribution follow RA 9184 (no split purchasing to avoid thresholds).
- Use the appropriate method (public bidding, SVP, framework agreements, or emergency procurement in calamities), with market price reasonableness.
Due diligence on recipients
- For NGOs/POs: SEC/CDA/DOLE registration, TIN, audited FS, board resolution, list of officers, bank certification, project proposal and budget, and no default on prior grants.
- For individuals: identity, eligibility rules, social case study, and data privacy safeguards.
MOA/Deed essentials
- Parties, legal bases, public purpose, itemized deliverables, indicators of success, budget and cost details, fund release schedule (tranches), liquidation timeline, monitoring/reporting, inspection/audit rights, IP/branding neutrality (no political ads), return of unutilized funds, default/termination, and dispute clauses.
Disbursement controls
- Disbursement Voucher with complete supporting docs, Certification of Availability of Funds, checks/e-payments to the entity’s official bank account (never to individuals for NGO grants), and withholding taxes where applicable.
Distribution & documentation
- For in-kind: inspection and acceptance reports, beneficiary masterlists, signed stubs/acknowledgments (with ID references), photo logs with timestamps/locations when feasible, and no campaign paraphernalia.
Liquidation & closure
- Require timely liquidation (e.g., within 30 days from completion or as stipulated).
- Validate supporting ORs/bills, certify outputs, recover unspent/unsupported amounts, update books (inventory disposal/transfer), and publish summary results (transparency portal/bulletin).

V. COA audit hotspots & common grounds for disallowance

No lawful appropriation/SB authority or the grant is outside the purpose of the fund used.
Lack of public purpose or predominant private/sectarian benefit.
Missing/insufficient documentation: absent MOA, beneficiary list, distribution reports, receipts, or acceptance.
Failure to liquidate fund transfers/cash advances; non-return of unused balances.
Procurement violations: price unreasonableness, poor specs, single-sourced without basis, or split purchasing.
IUEEU spending: lavish giveaways, gift certificates, or items unrelated to the LGU’s mandate.
Election-period violations and political branding on relief goods.
Conflict of interest: grants to entities owned/controlled by the LCE/relatives.
Donations to private/sectarian schools or religious buildings.
Unsupported scholarships/allowances outside a valid program with criteria and agreements.

VI. Anti-graft red flags (screening checklist)

Timing: Releases spiking near the election ban; last-minute supplemental budgets.
Beneficiary risk: Newly formed NGOs with no track record; related-party links; adverse COA history.
Design risk: Vague public purpose; deliverables not measurable; no independent verification.
Funding risk: Using restricted funds (SEF/20% DF/GAD/LDRRMF) for unrelated dole-outs.
Process risk: No MOA/SB authorization; bypassed procurement; split transactions.
Documentation risk: No masterlist; identical signatures; recycled photos; missing IDs.
Pricing risk: Unit prices above prevailing market; branded items with political names/photos.
Liquidation risk: Repeated extensions; liquidation supported by unofficial receipts or photocopies without validation.
Asset transfer risk: Donating vehicles/equipment without valuation, acceptance, and end-user accountability.
Communications risk: “Sponsorships” of private events masquerading as welfare programs.

VII. Special scenarios

1) Donations to PNP/AFP or public schools/hospitals Allowed with SB authority, deed of donation, acceptance by the national agency/board, and property books updated. Ensure the items are standard-compliant (e.g., vehicle specs) and insured where required.

2) Assistance to private hospitals for indigent patients Structure as service-level agreements (MOA) with government-rate ceilings, named beneficiaries, billing verified by the LGU/DSWD office, and no direct cash to intermediaries.

3) Disaster relief Calamity declaration, DRRM plans, need assessment, family cards/masterlists, goods priced reasonably (no branded political packaging), and post-distribution reporting. Observe the election ban exceptions strictly.

4) Scholarships Adopt an ordinance and scholarship manual: eligibility criteria, quota, selection committee, MOA with scholars, data privacy consent, direct payment to schools when possible, GPA and renewal rules, and liquidation of stipends.

5) Sponsorships and festivals Use procurement for event services; avoid “donations” to private organizers unless clearly within mandate and with measurable outcomes. No VIP junkets or non-work travel.

VIII. Liability & defenses

COA disallowance: Approving and certifying officers may be held solidarily liable; payees may be required to return amounts if in bad faith or if they still possess the funds/asset. Good-faith recipients who no longer have the benefit may be excused depending on circumstances; however, approving officers rarely escape without showing robust diligence.
Criminal: RA 3019 (e.g., Sec. 3[e]) for undue injury/unwarranted benefits; malversation for missing funds; falsification if documents are fabricated.
Administrative: Grave misconduct, dishonesty, and conduct prejudicial to the service.
Arias doctrine (limited): LCEs may rely on subordinates but not in the face of red flags (e.g., dubious NGO, inflated prices, or missing basics like MOA/beneficiary list).

IX. Compliance toolkit (ready-to-use checklists)

A. Pre-release checklist

Appropriation in the budget/supplemental budget and in AIP
SB/Sanggunian authority for the LCE (MOA/Deed)
Legal review confirming public purpose and fund eligibility
Recipient due diligence (registration, track record, bank cert, board resolution)
MOA with outputs, indicators, timeline, liquidation, audit rights
Procurement completed (if applicable) with price reasonableness
Disbursement Voucher with complete supporting docs and CAF

B. Distribution/implementation

Masterlist and eligibility proof; ID-based acknowledgments
Photo/time/location logs; delivery/inspection reports
Neutral packaging (no political branding)

C. Post-release

Liquidation within agreed period; validate ORs/bills
Monitoring report against indicators; acceptance of outputs
Return/recover unutilized or unsupported amounts; closeout memo
Update books/inventory; publish summary for transparency

X. Model clauses to include in MOAs/Deeds (short form)

Public purpose: “Funds/property shall be used solely to [specific, measurable public purpose] benefiting [target group/area].”
Deliverables & timeline: “The Grantee shall deliver [outputs] by [dates], per Annex A Workplan.”
Liquidation: “The Grantee shall submit liquidation within [X days] from completion, supported by official receipts/billings; unexpended funds shall be returned within [Y days].”
Audit & inspection: “The Grantor and COA may inspect and audit at any time, review records, and interview beneficiaries.”
Anti-conflict: “The Grantee warrants no director/officer is related within the fourth civil degree to the LCE or key officials.”
Branding/politics ban: “No partisan/political or sectarian branding shall appear on outputs or distributions.”
Default/termination: “Non-compliance empowers the Grantor to suspend/terminate and recover funds with interest and pursue legal remedies.”

XI. Do’s and don’ts

Tie grants to plans/mandates and measurable outcomes.
Use tranching with performance/milestone gates.
Pay institutions directly when feasible; minimize cash handling.
Publish beneficiary and project summaries for transparency (with privacy safeguards).

Don’t

Donate to sectarian purposes or primarily private ventures.
Use restricted funds for unrelated giveaways.
Split purchases to avoid procurement thresholds.
Release funds near elections without clearing legal and COMELEC rules.
Accept “liquidations” supported by informal receipts or generic certificates.

Conclusion

Properly structured grants and donations can be powerful local governance tools—if they observe the Constitution’s public-purpose mandate, the Local Government Code’s authority and spending limits, COA’s documentation/liquidation disciplines, and the anti-graft regime’s conflict-of-interest and fairness rules. Treat every peso and every in-kind item like an auditable asset, design programs with measurable outcomes, and build a complete paper trail. That approach not only survives audit; it also delivers real, defensible public value.