Part II - OBSERVATIONS & RECOMMENDATIONS

• The accountable officer failed to establish and maintain Official Cashbooks as Collecting
and Cash Disbursing Officer (Gen. Form No. 103) required under the Revised
Manual of Cash Examination hence, cash transactions were not recorded and the
balance of accountability could not be established and reconciled with the accounting
records.

Section 7 of COA Circular 2013-004 states that an Accountable Officer (AO) shall
maintain his cashbook/CRR/CDR/CkDR and such other records or their equivalents as may be
prescribed by the agency’s operating procedures, and reconcile with the accounting records at least
quarterly, unless the agency requires a more frequent reconciliation.

A cash examination was conducted on the cash and accounts of the accountable officer and we
observed the following:

• The accountable Officer failed to establish and maintain an Official Cashbook as Collecting and
Disbursing Officer (General Form No. 103) required in Chapter II, Items 19 (a) and (b) of
the Revised Manual on Cash Examination; and

• Monthly Report of accountability for accountable forms was not submitted to the Auditor
contrary to existing regulations.

The above-noted deficiencies resulted to the non-recording of cash transactions and the delay in
the determination of the accountable officer’s accountability as of the cash examination period.

During our interview with the accountable officer, she admitted her lapses for not maintaining a
cash book since according to her, the cash book form that they bought was not the correct form.
She however maintained a recording of her transactions but not the official format. She was also
unaware on the required submission of the report of accountability for accountable forms to the
Auditor on a monthly basis.

In view of the deficiencies noted, we recommended and management agreed on the following:

• Require the Accountable Officer to secure the correct cash book form and establish the
Cashbooks as Collecting and Cash Disbursing Officer to commence from last examination
conducted on August 14, 2012. Certify as to the balance thereon as of April 24, 2013;

• Keep an updated cashbook which shall be made available to management and COA in the
conduct of audit of cash and accounts of the accountable officer; and

• Submit the required monthly report of accountability for accountable forms in accordance with
existing regulations.
• Disbursement Vouchers were not supported with the Budget Utilization Request (BUR),
hence, disbursement process lacked the mandatory certification that
Expenses/Advances are necessary, lawful and incurred under his/her direct
supervision contrary to COA Circular 2006-004.

The Manual on New Government Accounting System (NGAS) provides the use of
disbursement voucher, the important parts of which are enumerated below:

Box A - Certification that expenses/cash advances are necessary, lawful and

incurred under the direct supervision of the authorized official.

Box B - Certification of the Head of Accounting/authorized official that the

supporting documents are complete and proper

Box C - Approval for Payment by the Head of Agency

Box D - Received payment by the payee

On April 1, 2005, COA Cir. 2005-001 was issued revising the Disbursement Voucher (DV)
form but with additional requirement which is the Budget Utilization Slip (BUS). In this
amendment/revision, the Box A certification mentioned above was transferred to the BUS. It was
observed that the District revised and complied with the DV form but WITHOUT the Budget
utilization slip. In effect, the responsibility of the authorized official in Box A was set aside.

On January 31, 2006, COA Circular no. 2006-004 was issued restating the amendments
made in COA Cir 2005-001. This Circular applies only to GOCCs and provides as follows:

Section 1.0 Rationale/Objectives:

x xxxx In line with NGAS implementation, this circular delineates the responsibilities of
the Head of the Requesting Unit, Budget Unit, Accounting Unit, and the Treasury
Department in processing claims chargeable against corporate funds. It also prescribes
the revised forms to be used in recording budget utilization and disbursements.

Section 2.0 Policies:

The responsibilities of the heads of Requesting Unit, Budget Unit, Accounting Unit, and
Treasury Department are hereby set forth as follows:

2.1 The Head of the Requesting Unit shall prepare the Budget Utilization Report (BUR)-
please see ANNEX A and the Disbursement Voucher – please see ANNEX B and certify
on the necessity and legality of charges to budget under his supervision. He shall also
certify the validity, propriety and legality of supporting documents

2.2 The Head of the Budget Unit shall certify the availability of budget and maintain the
Registry of Budget and Utilization Report (RBU) – please see ANNEX C
 2.3 For contract or purchase order, the Head of the Accounting Unit shall certify the
availability of funds based on the BUR certified by the Head of the Budget Unit
2.4 The Head of the Accounting shall certify the completeness of the supporting documents
in the DV
2.5 The Head of the Treasury shall prepare the Daily Cash Position Report –please see
ANNEX D

The District retained the old DV form as provided under COA Circular no. 2005-001. However,
in the absence of the Budget Utilization Request, the disbursement process lacked one important
element which determined the responsible official who should have certified the legality and
necessity of the expense.

Management reasoned out that they were not aware on the absence of the certification of the head
of the requesting unit on the legality and necessity of the expense as required by existing
regulations.

We recommended and management agreed to abide with the use of the BUR as part of the
supporting documents of the disbursement voucher in accordance with COA Circular 2006-004 in
order to pinpoint responsibility in the financial transactions.

• Remittances to Home Development Mutual Fund (HDMF) representing government share

was more than what was provided under RA 9679, thus, incurring expenses in the
amount of P20,700.00

Section 2 of RA 9679 otherwise known as the PAG-IBIG Fund law provides that“ it is the
declared policy of the State to establish, develop, promote and integrate a nationwide sound
and viable tax exempt mutual provident saving system suitable to the needs of the employed
and other earning group and to motivate them to better plan and provide for their housing
needs, by membership in the HDMF, with mandatory contributory support of the employer in
the spirit of social justice and the pursuit of national development.”

Implementing Rules and Regulations of Republic Act 9679, Rule VI, Section 1 states:

Section 1. Rate of Contributions. Covered employees and employers shall contribute to the
Fund based on the monthly compensation of covered employees as follows:

a. Employees earning not more than One thousand five hundred pesos (P1,500.00)
per month – one percent (1 %).

b. Employees earning more than One thousand five hundred pesos (P1,500.00) per
month -two percent (2%).

c. All employers – two percent (2%) of the monthly compensation of all covered
employees.
 The maximum monthly compensation to be used in computing employee and employer
contributions shall not be more than Five thousand pesos (P5,000.00); Provided, that this
maximum and the contribution rates may be fixed from time to time by the Board through
rules and regulations adopted by it, taking into consideration actuarial calculations and
rates of benefits. Provided further, that the foregoing rates shall likewise be the same for
the self-employed and voluntary members.

A member may, however, be allowed to contribute more than what is required herein
should he or she so desires. The employer, however, shall only be mandated to contribute
what is required under these Rules unless the employer agrees to match the member’s
increased contribution.

Notwithstanding any contract to the contrary, an employer shall not deduct, directly or
indirectly, from the compensation of its employees covered by the Fund, or otherwise
recover from them, the employer’s contribution with respect to such employees.

Section 36 of the General Appropriations Act (GAA) of 2013 states:

Sec. 36. Remittance of Compulsory Contributions. Notwithstanding the
provisions of LOI No. 1102 dated January 13, 1981, the government and
employee share in the compulsory contributions to the Employees
Compensation Commission, PHILHEALTH, GSIS and HDMF pursuant to P.D.
No. 626, as amended, R.A. No. 6111, R.A. No. 7875, R.A. No. 8291, R.A. No.
9679, respectively, shall be remitted directly by departments, bureaus and
offices, including SUCs to the respective recipient agencies unless a different
arrangement is agreed upon in writing among the DBM, the remitting agency,
and the recipient agency: PROVIDED, That any proposed increase in
government and employee compulsory contributions may only be made after
consultation by the agency concerned with the DBM in order that the budgetary
implications of such proposal be duly considered: PROVIDED, FURTHER,
That any increase in government and employee compulsory contributions, after
said consultation, shall be made effective only upon inclusion thereof in the
General Appropriations Act.
It has been observed that the monthly membership contribution of eleven (11) employees
to the HDMF or PagIBIG Fund is 2% of the basic salary and the government share is also 2%
based on their basic salary instead of using maximum compensation of P5,000.00 as provided
under RA 9679 of the HDMF Law of 2009. This resulted to overstatement of employer share
amounting to P20,700.00 broken down as follows:

HDMF PREMIUM
CONTRIBUTION
(GOV’T. SHARE)
CY 2012 CY 2013
TOTAL
January-December January-July
Actual P26,400.00 P15,000.00 P41,400.00
Allowable Amount 13,200.00 7,500.00 20,700.00
Excess P13,200.00 P7,500.00 P20,700.00

Initial interview with the concerned officials disclosed that they had been practicing the
monthly contribution of 2% of employee and employer’s share since the effectivityof Republic
Act 1752 as amended by RA 7742 dated July 18, 1994. In addition, management said that one of
the reasons why the Board of Directors approved the P200.00 government share per employee was
because almost all of its employees were receiving low salaries.

The provisions of RA 7742 and RA 9679 as to the rate of contribution are similar.

We believe that the employer share should have been P100 per employee per month which is
based on the maximum compensation of P 5,000.00 instead of the actual basic pay.

We recommended and management agreed that the District use the maximum monthly
compensation of P 5,000.00 per month as basis in computing the employer share as provided
in RA 9679 or a maximum of P100 per month regardless of the amount that the employee
contributes for the personal share.

• Various disbursements of the District were short of the mandatory documentary

requirements contrary to Section 4 of PD 1445 and pertinent provisions of COA
Circular 2012-001; hence affecting the effectiveness of the internal control system of
the Agency.
Section 4 of PD 1445 provides among others, that :

• Claims against government funds shall be supported with complete documentation

• All laws and regulations applicable to financial transactions shall be faithfully adhered to

Post audit of financial transactions for the calendar years 2012-2013 showed the
following observations:
• Payments amounting to P 444,600.63 for January 2012 to August 2013 were found short of
documentary requirements as required in COA Circular 2012-001. Summary of noted
deficiencies are shown below:

Nature of Expense Deficiencies Noted

• All disbursement vouchers • No attached Budget Utilization Report

• Lacks request for quotations from suppliers.
• Lacks abstract of canvass.
• Purchases
• Lacks inspection and acceptance report.
• Lacks Purchase Order.
 • Proof of travel i.e. certificate of appearance not
attached.
• Travelling Expense
• Official receipts for lodging and meals not
attached.
• Trip tickets were not attached for gasoline
purchased; hence, tank balances cannot be
determined in audit.
• Gas and oil • Purchase Order for bulk procurement not
attached.
• Inspection of bulk purchase of diesel not
performed.
• Remittances to Government Agencies i.e. PHIC, • Schedule of remittances/employees tax withheld
GSIS, HDMF,BIR not attached.
• Monetization • ALA did not reflect balances of leave credits
• Name of accountable officers not specified,
application for bond not attached for us to
• Payment of Fidelity Fund determine the adequacy of the bond
applied for and correctness of the premium
paid.
• Legal basis in including job orders in the
• Provident Fund
provident fund not attached.
• Xerox of official receipt of meter deposit not
• Refunds
attached
• Printing of Accountable Forms (OR) • Purchase Request not attached.
• Date of public hearing not specified, no attached
• Representation expense during public hearing attendance sheet and minutes of the public
hearing.

• Various expenses charged against Petty Cash Fund were not properly supported with documents
and Petty Cash Vouchers (PCVs) (please see Annex E) were not properly accomplished
and signed.
COA Circular 2012-001 provides the following documentary requirements for the
disbursement of petty cash fund (PCF):
• Summary of petty cash vouchers
• Petty cash replenishment report
• Certificate of inspection and acceptance
• Report of waste materials report in case of replacement/repair
• Approved and properly accomplished trip ticket, for gasoline expenses
• Petty Cash Vouchers (PCV) duly accomplished and signed
• OR in case of refund
• Such other supporting documents that may be required under the company policy depending on
the nature of expenses.

In addition, samples taken from the post audit of petty cash transactions also disclosed
the following observations:

• All samples of the Petty Cash Vouchers (PCV) were lacking in information particularly the
liquidation portion or Part II of the form;

• Trip tickets attached to gasoline expense were not filled up as to the balance in tank and the
 odometer reading of the vehicle were not reflected;

• Inspection and Acceptance Reports were not attached or the possibility that the items purchased
were not inspected as we found no evidence of inspection in the documents supported;

• Most of the itinerary of travels (IT) of traveling employees were not properly accomplished such
that the time of arrival and departure of the employee at place of destination were not
indicated.

According to the petty cash custodian and the accounting processor, the reasons why the
petty cash vouchers were not properly filled out was because of the urgency of the
transaction.

The deficiencies and inadequacy of documents to support the disbursements affects the
effectiveness of the internal control system of the Agency.

We recommended and management agreed on the following:

• Re-orient concerned employees, including drivers, on the proper documentation of different

types of expenses and the proper accomplishment of the trip tickets to include, among
others, the complete information on the beginning balance of fuel, purchases, odometer
reading, if any and balance in tank at end of trip, all in reference to COA Circular 2012-
001;

• Reflect the leave credits of concerned employees in their application for leave attached to
monetization claims and make available at all times the Employees Leave Card for
verification in audit; and

• Accomplish properly the Petty Cash Voucher (PCV) in compliance to existing regulations.

• Granting and utilization of cash advances were not in accordance with Section 89 of
Presidential Decree 1445 and pertinent provisions of COA Circular 97-002 dated
February 10, 1997 resulting to unliquidated amounts totaling P124,051.96 as of year-
end.

Section 89 of PD 1445 states that:

“No cash advances 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”.

COA Circular 97-002, dated February 10, 1997 provides the following pertinent rules and
regulations on the granting, utilization and liquidation of cash advances:
Section 4- Granting and Utilization of cash advances-

4.1 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;
4.2 A cash advance shall be reported on as soon as the purpose for which it was given
has been served.

Section 5- Liquidation of Cash Advances

• All cash advances shall be fully liquidated at the end of each year. Except for Petty Cash
Fund, the accountable officer shall refund any unexpended balance to the
Collecting Officer who will issue the necessary Official Receipt.

As of December 31, 2013, Due from Officers and Employees account showed a balance of P
124,051.96. (please see Annex F). Verification disclosed that the outstanding amount pertained
to the cash advances of the General Manager, such as local travels of P4,730.35 and advances for
operations for Margus Branch of P119,321.61.

Interview with the accounting processor revealed that the concerned official was already
demanded to liquidate the unsettled cash advances but failed to do so.

We recommended that management strictly enforce pertinent rules and regulations in cash
advances. Make sure that cash advances were fully liquidated at the end of the year with complete
supporting attachments and duly accounted for in the books of accounts.

During the exit conference, the General Manager explained that one of the reasons why
cash advances were not yet liquidated was that required signatories in the supporting documents
(i.e., payroll for labor) were not obtained since the responsible person were not connected with
the District anymore.

Auditor’s Rejoinder:

We recognize management’s justification. However, we believe that the same cannot be

considered as settled until the payrolls had complete signatures of the laborers who actually
received their wages. The responsible officer who was granted the cash advance had the
responsibility of liquidating the same pursuant to existing regulations.