Findings No.1 COA Annual Audit Report 2006

July 28, 2008

1. Stale checks totaling P248,168.24 were not cancelled contrary to Joint Circular No. 8-85, thus understating the cash in bank, accounts payable and government equity accounts.

Joint Circular No. 8-85 issued on October 31, 1985 by the Commission on Audit, Department of Finance and Department of Budget and Management provides that a check is considered stale if it has been outstanding for over six months. This is also the implementing guideline of Section 97 of Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the Philippines, in the disposition of stale warrants or checks.

Section 59, Volume I of the Manual on the New Government Accounting System for local government units, provides that checks maybe cancelled when they become spoiled or stale. It is stale if it has been outstanding for over six months from date of issue or as prescribed by the depository bank. At least one month before a check becomes stale the Treasurer shall send a written notice to the payee of the existence of the check.

Verification revealed that total outstanding checks per bank reconciliation dated December 31, 2006 amounted to P248,168.24. (Annex 1a-c).

Apparently, due to non-encashment and or presentation of the checks by the payees to the bank within the prescribed period, the checks became stale. Moreover, the failure of the Cashier to inform the payees a month before the checks became stale added to the accumulation of stale checks.

As of this writing, the Cashier has been informed of the stale checks and the regulation governing the same, and having understood gave assurance to implement the rules and guidelines as provided under Joint Circular No. 8-85 dated October 31, 1985 and Presidential Decree No. 1445

In effect, Cash in Bank and Accounts Payable accounts were understated due to the presence of those stale checks.

Recommendation

Require the City Treasurer to send written notices to the payees of the existence of the stale checks. Advise him further, to send written notices to payees at least one month before a check becomes stale. Require the Accountant to debit Cash in Bank-Local Currency, Current Account and credit Accounts Payable Accounts for P248,168.24 to restore the liability to creditors. Instruct the Treasurer to replace the stale checks upon its presentation.

Written by admin · Filed Under Commission on Audit, Tangub City