“Unliquidated expenses” is a headache. Not only that it taints your credibility as an effective Accountant but it also attracts issuance of an Audit Observation Memorandum (AOM) by the Commission on Audit.
[READ: 10 Ways to Avoid Audit Observation Memorandum]
A cash advance is considered unliquidated if the required supporting documents are not submitted by the Accountable Officer (AO)/Employee on the prescribed period of liquidation.
While there are numerous ways to ensure that cash advances are liquidated on time, we give you these four (4) proven effective ways to ensure that your employees will liquidate their cash advances.
1. Educate
Educate your AO about the rules and regulations about utilization of government funds, particularly cash advances. It’s best if you conduct a dedicated training for them on this or send them to trainings conducted by the Commission on Audit (COA).
When employees know the rules and regulations, they will more likely follow and comply with them. So invest in educating them.
On that note, your AOs must know the basic rules and regulations in granting, utilizing, and liquidating the cash advances granted to them.
Pursuant to Section 14, Chapter 6 of the Government Accounting Manual, the granting and liquidation of cash advances shall be governed by the following existing COA rules and regulations and other pertinent issuances: (your AOs must know this)
a. No cash advance shall be given unless for a legally authorized specific purpose;
b. A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served; (emphasize this rule to them)
c. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him/her is first settled/liquidated or a proper accounting thereof is made; (take advantage of this rule as this is a control measure in order to obliged employees to liquidate their cash advances immediately)
d. Except for cash advance for official travel, no officer or employee shall be granted cash advance unless he/she is properly bonded in accordance with existing laws or regulations. The amount of cash advance which may be granted shall not exceed the maximum cash accountability covered by his/her bond;
e. Only permanently appointed officials shall be designated as disbursing officers;
f. Only duly appointed or designated disbursing officer may perform disbursing functions. Officers and employees who are given cash advances for official travel need not be designated as Disbursing Officers;
g. Transfer of cash advance from one accountable officer to another shall not be allowed; and
h. The cash advance shall be used solely for specific legal purpose for which it was granted. Under no circumstance shall it be used for encashment of checks or for liquidation of a previous cash advance.
To know more about the specific rules and regulations on the granting, utilization and liquidation of cash advances, please refer to COA Circular No. 97-002 dated February 10, 1997, as amended by COA Circular No. 2006-005 dated July 13, 2006.
2. Remind
Accept it. People nowadays are more forgetful than ever before.
People need constant reminders as to what they should do. That’s why employees appreciate if they are reminded from time to time, friendlily. (It’s a different story, of course, if their ‘forgetfulness’ becomes intentional)
Hence, it’s best if the AO knows when he/she is required to liquidate his/her cash advances.
Depending on the kind of cash advance, the AO should liquidate the same as follows:
For 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 the 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.
3. Report
An effective way to reinforce No. 2 above is to prepare a report on the status of cash advances and the status of liquidation thereof, signed by the Agency Head, and posted in a conspicuous place where every employee can read it. In this way, the AOs are constantly reminded of the liquidation of their cash advances.
4. Disallow
When Nos. 1, 2, and 3 do not work as intended, No. 4 may be resorted to.
Pursuant to COA Circular No. 97-002, 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 instruction of other sanctions as provided for under paragraphs 9.2 and 9.3 of the Circular, details as follows:
9.2 Cash Examination
9.2.1 The Auditor shall conduct an examination of the accountability of each AO at least once every semester or as existing regulations of the COA require.
9.2.2 The Auditor shall demand the presentation by the AO of his cashbook, cash and cash items for examination. Failure by the AO to have duly forthcoming any public funds with which he is chargeable, upon demand by the Auditor shall be prima facie evidence of misappropriation.
9.2.3 The Auditor shall exclude from among the cash items presented any accommodation checks, “vales”, IOUs, chits or other forms of promissory notes and should not accept them as credit to the account.
9.2.4 The Auditor shall at once demand in writing the production of the missing funds at the moment the shortage or loss is discovered and established. The granting of a grace period for the restitution is not allowed by law.
9.2.5 The Auditor shall submit the cash examination report, together with all the working papers/ evidences disclosing the shortage, to the Provincial/City Auditor (if the offense is committed in an LGU) or to the COA Director concerned for the filing of criminal proceedings in accordance with COA Memorandum No. 83-81B, COA Memorandum No. 90-660 and paragraphs 3.1 and 3.2 of COA Memorandum No. 95-112 dated December 26, 1995.
9.3 During periods where no cash examination is conducted.
9.3.1 Upon failure of the AO to liquidate his cash advance within two (2) months for AOs holding office within the station and three (3) months for AOs outside the station from date of grant of the cash advance, the Auditor shall issue a letter demanding liquidation or explanation for non-liquidation.
9.3.2 If thirty (30) days have elapsed after the demand letter is served and no liquidation or explanation is received, or the explanation received is not satisfactory, the Auditor shall advise the head of the agency to cause or order the withholding of the payment of any money due the AO.
9.3.3 The AO shall likewise be held criminally liable, for failure to settle his accounts.
For this purpose the Auditor shall:
9.3.3.1 Execute an affidavit stating the nature/purpose of the cash advance; the amount not liquidated/accounted for; the fact that no liquidation or explanation has been submitted despite demand or if explanation has been submitted, the same is not satisfactory; the date the letter of demand was served on or received by AO; and other information which may be pertinent to the case.
9.3.3.2 State in the affidavit the violation of the provisions of Section 89 of PD 1445 and the penal provisions under Section 128 of the same law, both of which are herein quoted in full to wit:
“Section 89. Limitations on Cash Advance. – 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.”
“Section 128. Penal Provision. – Any violation of the provisions of Sections xx 89, xx of this code or any regulation issued by the Commission implementing these sections, shall be punished by a fine not exceeding one thousand pesos or by imprisonment not exceeding six (6) months, or both such fine and imprisonment in the discretion of the court.” (Underscoring ours).
9.3.3.3 The affidavit shall be submitted to the COA Director concerned who shall refer the case to the appropriate Office of the Deputy Ombudsman, if the offense is committed in the regions or to the COA Legal Office for the filing of criminal proceedings, if the offense is committed within the Metropolitan Manila Area, in accordance with paragraphs 3.1.1 and 3.2, respectively, of COA Memorandum No. 95-112 dated December 26, 1995.
The tips provided here may only be applicable to cash advances granted to officials and employees of an agency and may not apply to funds transferred from a Source Agency to an Implementing Agency. The rules and regulations on the granting, utilization and liquidation of funds transferred from a Source Agency to an Implementing Agency are stated in COA Circular No. 94-013 dated December 13, 1994 or a newer Circular, if any.
