Findings No.2 COA Annual Audit Report 2005

July 26, 2008

2. An accumulated amount of cash advances totaling to P25,587,238.15 remained unliquidated at year end in violation of Section 89 of PD 1445 and COA Circular No. 97-002 resulting to understatement of expenses and overstatement of income.

Section 89 of Presidential Decree No. 1445 specifically provides for the limitations on cash advances and states that:

“No cash advance shall be given unless for a legally authorized specific purpose. A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”

Likewise, Section 5 of COA Circular 97-002 dated February 10, 1997 provides for the guidelines in the liquidation of cash advances. These are:

a. The Accountable Officer shall liquidate his cash advance as follows:

1. Salaries, wages, etc. – within five (5) days after each fifteen (15) day/end of the month pay period.

Petty Operating Expenses and Field Operating Expenses – within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.

Official Travel – within sixty (60) days after return to the Philippines in case of foreign travel or within thirty (30) days after return to his permanent official station in the case of local travel, as provided for in EO 248 and COA Circular No. 96-004.

b. Failure of the AO to liquidate his cash advance within the prescribed period shall constitute a valid cause for the withholding of his salary and the institution of other sanctions as provided for under paragraphs 9.2 and 9.3 hereof.

c. When a cash advance is no longer needed or has not been used for a period of two (2) months, it must be returned to or refunded immediately to the collecting officer.

d. All cash advances shall be fully liquidated at the end of each year. Except for petty cash fund, the AO shall refund the unexpended balance to the Cashier/Collecting Officer who will issue the necessary official receipt.”

Moreover, COA Circular No. 96-004 dated April 19, 1996, states that domestic traveling expenses shall also be taken up in the book of accounts as cash advances and the same shall be liquidated by the official or employee concerned strictly within thirty (30) days after his return to his permanent official station as required under Section 16 of Executive Order 248. Otherwise, payment of his salary shall be suspended until he complies therewith.

Verification from the records showed that the unliquidated cash advances of P25,587,238.15 as of December 31, 2005, were the accumulated cash advances of officials and employees for the three (3) funds.

The amount of P23,011,030.60 is under the General Fund remained unliquidated at year end see schedule attached as Annex A.

The amount of P4,788,537.98 were due from other officials and employees and which remained outstanding for over 120 – 360 days while the amount of P18,222,492.69 were outstanding for over 361 days.

The unliquidated cash advances of P1,912,472.63 under the Trust Fund were also the accumulated cash advances of various officials and employees intended for some programs/projects/ activities of the provincial government but remained outstanding for over 361 days (see Annex B).

Furthermore the amount of P663,734.85 under the Special Education Fund remained unsettled for over 361 days (see Annex C), but the purposes of the said cash advances had been served.

Had these cash advances been liquidated immediately, proper accounting of expenses and accurate determination of income could have been undertaken.

Shown next page is the graphical presentation of the unliquidated cash advances as of December 31, 2005, for all funds.

Compared to last year’s unliquidated cash advance of P20,025,809.32 it has materially increased by P5,561,428.83 or 28%. Below is the graphical presentation.

This is a previous year audit finding but is hereby reiterated due to the material increase as compared to last year’s cash advances.

The OIC-Provincial Accountant informed us that Due from Officers and Employees are cash advances for traveling expenses and for implementation of programs and projects of the provincial government as well as program of the Department of Education.

She explained further that some of the unliquidated cash advances which have been long outstanding were the cash advances from the defunct Lanao and carried in the books of accounts of the province. However, she promised to request the writing off of the dormant amount and make some necessary adjustments. She also assured the team to send demand letters to those employees who have long outstanding cash advances.

RECOMMENDATION

Instruct the OIC Provincial Accountant to monitor the immediate and prompt liquidations of the outstanding cash advances granted pursuant to the existing regulations to avoid mis-presentation of the income and expenses accounts.

Make request for the writing off, the amount which have been long outstanding and make the necessary adjustment.

Withhold the salaries of the officials and employees who has long outstanding cash advances.

Comply strictly with the laws, rules and regulations pertaining to cash advances in order to lessen the accumulation of the same. Limit cash advances to the minimum or actual needs of the province or individual employee.

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Written by admin · Filed Under Commission on Audit, Lanao del Norte