Findings No.3 COA Annual Audit Report 2004

July 26, 2008

3. Cash advances for travel worth P4,421,316.44 remained unliquidated and were treated as Accounts Payable at the end of the year in violation of COA Circular No. 2002-003 dated June 20, 2002, thus resulting to existence of receivable and payable accounts to the same employee.

Cash advances for travel which remain unliquidated at the end of the year shall be closed to Traveling Expenses account pursuant to the modified accrual method of accounting and Section 4(a) of the NGAS Volume 1 as prescribed under COA Circular No. 2002-003 dated June 20, 2002. It shall be re-established at the beginning of the year with a credit to Prior Years’ Adjustments.

The year-end post closing trial balances of the General Fund and Special Education Fund showed that cash advances for travel worth P4,421,316.44 were not closed at the end of the year as called for under the modified accrual method of accounting (Annex 3). Instead Traveling Expenses account was debited and Accounts Payable was credited.

In effect the books showed both receivable and payable accounts to the same employee which should be eliminated being reciprocal accounts.

Management confirmed the audit observation.

Management is reminded that accrual of traveling expenses incurred during the year is made not through a debit to Traveling Expense and a credit to Accounts Payable, but rather through a debit to Traveling Expense and a credit to Due from Officers and Employees. In the ensuing year, Due from Officers and Employees account shall be reestablished by debiting Due from Officers and Employees and crediting the Prior Years’ Adjustments account. In the event that liquidation is made, the Prior Years’ Adjustments account shall be debited and the corresponding Due from Officers and Employees account shall be credited.

The Accounts Payable account shall be used only in recording valid obligations to creditors.

Recommendation:

Require the Provincial Accountant to observe the provisions of the NGAS in accruing expenses so that proper presentation of the financial statements can be effected.

Written by admin · Filed Under Commission on Audit, Misamis Occidental