Guidelines on the Proper Disposition (Write-off) of Dormant Accounts: A Closer Look at COA Circular No. 2023-008

Introduction:

Managing and disposing of dormant accounts is an essential task for any government entity. In line with this, the Commission on Audit (COA) has issued a circular providing comprehensive guidelines on the proper disposition of dormant accounts of national government agencies, local government units (LGUs), as well as government corporations.

In this blog post, we will explore the key points outlined in COA Circular No. 2023-008 and shed light on the importance of adhering to these guidelines.

Background:

The Commission has been issuing Circulars over the years to address the issue of dormant accounts in government agencies. These circulars aimed to clean the books of accounts of the government by prescribing guidelines for the proper handling and closure of dormant funds and accounts. However, despite these efforts, the magnitude of existing dormant accounts remains significant. This prompted COA to release COA Circular No. 2023-008, amending previous ones and providing enhanced guidelines and procedures for the disposition of dormant accounts.

Purpose:

The main objective of COA Circular No. 2023-008 is to establish guidelines and procedures for the proper disposition of dormant accounts of government entities concerned, not covered by specific laws, rules, and regulations, amending COA Circular No. 2016-005. The primary goal is to ensure the fair presentation of accounts in financial statements and enhance financial reporting in the Philippine public sector.

Legal Basis:

The Commission on Audit, in accordance with the 1987 Philippine Constitution, has exclusive authority to define the scope of its audit and examination, establish techniques and methods, and issue accounting and auditing rules and regulations to prevent irregular, unnecessary, excessive, extravagant, and unconscionable expenditures of government funds and properties.

Coverage:

The Circular covers a wide range of dormant accounts such as receivables, unliquidated cash advances, and fund transfers of government entities. It also includes specific types of accounts like investments, inventories, and intangible assets. However, the Circular excludes accounts covered by specific laws, rules, and regulations for their proper disposition.

Procedures for Disposition of Dormant Accounts:

The Circular provides a step-by-step process for addressing dormant accounts. The head of the accounting unit is responsible for conducting regular verification and validation of dormant accounts and securing all relevant documents. If there is a lack of records or documentation, a certificate of justification explaining the situation must be prepared. An investigation committee shall be created to determine the cause of lost documents and identify the official(s) responsible. Once the investigation is complete, the head of the accounting unit files a request for COA’s approval to write off or derecognize the dormant accounts. COA reviews the request and grants specific authority for derecognition through a decision-making process.

Monitoring and Reporting:

Government entities are required to prepare schedules of dormant accounts regularly and submit them to their respective resident audit team leaders or supervising auditors. The COA performs audits and issues observation memoranda, if necessary. The head of the accounting unit ensures proper documentation of current transactions to avoid further dormant accounts and discloses comparative information in financial statements.

Conclusion:

COA Circular No. 2023-008 on the proper disposition of dormant accounts provides detailed guidelines and procedures for government entities to follow. Adhering to these guidelines is crucial for maintaining accurate financial records and enhancing transparency in the Philippine public sector. By conducting regular verifications, securing documents, and obtaining COA’s approval for derecognition, government entities can effectively address dormant accounts and present a fair and accurate picture of their financial statements.

Reference:

[Reference: COA Circular No. 2023-008 —Guidelines on the Proper Disposition of Dormant Accounts of National Government Agencies (NGAs) and Instrumentalities, Local Government Units (LGUs) and Government Corporations (GCs), Amending COA Circular No. 2016-005 dated December 19, 2016 re: Guidelines and Procedures on the Write-off of Dormant Receivable Accounts, Unliquidated Cash Advances, and Fund Transfers of NGAs,
LGUs and GCs]