Findings No.2 COA Annual Audit Report 2005

July 26, 2008

2. Disbursement and replenishment process of Petty Cash Fund were not in accordance with the procedures prescribed under Section 48 of COA Circular No. 2002-003 thus, the agency’s asset particularly cash account is overstated. Likewise, the purpose of maintaining petty cash fund was not realized.

Section 48 of COA Circular 2002-003 dated June 20, 2002 provides that Petty cash fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the LGU for one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amount received. The official receipt shall be attached to the PCV.

A Disbursement Voucher shall be prepared for replenishment of the petty cash fund during the year duly supported by a list/summary of PCVs, the PCVs and its supporting documents. Obligation Slip (OS), formerly ALOBS shall be prepared for each replenishment and recorded in the appropriate registry based on actual expenses incurred.

Further, it provides that at the end of year, the petty cash fund shall be fully liquidated by preparing a Report of Disbursement supported by the list/summary of PCVs, the PCVs and its supporting documents.


Review of the disbursements of the petty cash fund maintained for general administration purposes showed that they were made through the Disbursement Voucher (DV) with complete documentation such as Obligation Slip (OS), Purchase Request (PR), Purchase Order (PO), etc. instead of using Petty Cash Voucher (PCV). Like regular disbursement, it passed through the regular disbursement process. It is certified by the Accountant and approved by the Local Chief Executive.

As operationalized, replenishment of petty cash fund handled by the accountable officers assigned in the hospitals, Misamis Occidental Economic Development and Research Center (MOEDRC) and other accountable officers not assigned in the provincial treasury usually exceeded one (1) month and some of the disbursements exceeded One Thousand Pesos (P1,000.00). Also, PCF Voucher is not used for the disbursement instead, a single DV is prepared upon replenishment supported with complete documentation.

The Balance Sheet of the General Fund as of year-end registered a Petty Cash Fund balance of P 1,435,378.78 of which P471,620.75 pertains to prior years’ . (Annex 4)

In its pursuit of observing the disbursement procedures, the management failed to capture the significance of maintaining PCF and distinguish its difference from ordinary cash advance. It failed to consider the time element or the manpower loss and the supplies expense that could have been saved had the proper processing of disbursements of the PCF been observed.

Also, the management failed to foresee how the non-liquidation of PCF affected the presentation of the financial statements.

The purpose of establishing petty cash fund was therefore not realized as the disbursement of the same required a lengthy process thus, so much time is involved before payment could be made.

The non-liquidation of petty cash fund as at year-end overstated the agency’s current asset specifically cash account hence, the readers of the financial statement are misled.

The management assented and promised to strictly observe the rules and regulations on the grant and liquidation of cash advance as recommended.

Recommendation:

Require the Provincial Accountant and the Accountable Officers concerned to follow the prescribed procedure provided under Section 48 of COA Circular 2002-003 in processing the PCF disbursement and replenishment thereof.

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