CIRCULAR
No .
: 20 20 1 6 -0 0 5
Date Date : Decem Decembe berr 19, 2016
TO
:
SUBJECT :
1.0
All Heads of Departments, Bureaus, Offices, Agencies Agen cies and Instrumentalities of the National Government; Provincial Governors, Govern ors, City/Municipal Mayors; Managing Heads of Government Owned and Controlled Corporations; Heads of Finance/Comptrollership/ Financial Management Services; COA Assistant Commissioners, Directors and Auditors; and All Others Concerned Guidelines and Procedures on the Write-off of Dormant Receivable Accounts, Ac counts, Unliquidated Ca sh Advances, Advance s, and Fund Transfers of National Government Agencies (NGAs), Local Government Units (LGUs) and G overnment-Owned overnment-Owned and Controlled Controlled Corporations Corporations (GO CCs)
BACKGROUND
As a rule, cash advances must be liquidated within the prescribed periods depending upon the nature and purpose o f the particular cash advance, as provided under COA Circular No. 97-002 dated February 10, 1997, restating with amendments, amendments, the rules and regulations on the granting, utilization utilization and liquidation of cash advances. Likewise, liquidation of fund transfers to implementing entities is required under COA Circular No. 94-013 dated December 13, 1994 and those to Non-Governmental Organizations (NGOs)/People’s Organizations (POs) under COA Circular Circular No. 2007-001 dated October 25, 2007. COA Circular No. 2012-004 dated November 28, 2012 was issued as a final notice and demand to all concerned accountable officers to settle and liquidate all cash advances outstanding as of December December 31, 2011, on or before January 31, 2013. In spite of the abo ve issuances, material material amounts of cash advances and fund transfers remained unliquidated. The Annual Financial Reports (AFRs) invariably show the consolidated common audit observations on unreliable receivable account balances, significant amounts of unliquidated cash advances, and fund transfers of a number of entities due to unsupported/undocumented dormant accounts which have long been outstanding/remained outstanding/remained past due/dormant, thus, depriving the government of funds for its operations and affecting the fair presentation of accounts in the Financial Statements (FSs).
2.0
PURPOSE
This Circular Circular is issued to prescribe the guidelines and procedures in reconciling and cleaning the books of accounts of NGAs, LGUs, and GOCCs of dormant receivable accounts, unliquidated cash advances, and fund transfers for fair presentation of accounts in the FSs.
3.0
LEGAL BASIS
The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties [Section 2 (2), Article IX-D, 1987 Philippine Philippine Constitution]. Constitution]. The Government Accountancy Sector (GAS) of this Commission is mandated to formulate/recommend policies, rules and regulations on government accounting for consideration of the Public Sector Accounting Standards Board (PSAcSB)/Chairman/Commission Proper (CP). The GAS is also mandated to provide technical assistance to entities’ finance officials, accountants, and auditors on matters pertaining to accounting and financial management (COA Resolution No. 2013-021 dated November 20, 2013).
4.0
COVERAGE
This Circular Circular covers dormant receivables arising from regular trade and business transactions, claims from entities’ officers and employees and other dormant receivable accounts; dormant unliquidated cash advances for operating expenses, payroll, special purpose/time-bound activities or undertakings and travel as well as advances granted to Civil Society Organiza tions (CSOs)/NGOs/PO (CSOs)/NGOs/POs; s; and dormant un liquida ted fun d trans fers to/ from NGAs, NGAs, LGU LGUs, s, and GOCCs. GOCCs.
Specifically, the following are the accounts used relative to receivables, cash advances and fund transfers as defined/described in the revised chart of accounts: Accounts Receivable Due from Officers and Employees Other Receivables Advances for Operating Expenses Advances for Payroll Advances to Special Disbursing Officer Advances to Officers and Employees Due from National Government Agencies Due from Government-Owned and Controlled Corporations Due from Local Government Units Due from Non-Government Organizations/People’s Organizations Due from Central Office Due from Bureaus Due from Regional Offices Due from Operating Units Due from Other Funds Due to National Government Agencies Due to Government-Owned and Controlled Corporations Due to Local Government Units Due to Central Office Due to Bureaus Due to Regional Offices Due to Operating Units Due to Other Funds
This Circular shall not cover the write-off of loans and advances of Government Financial Institutions which are governed by pertinent provisions of the General Banking Act. Likewise, it shall not cover the following: a. b. c.
5.0
Receivables arising from disallowances and charges; Receivables arising from cash shortages; and Claims from entities’ officers and employees and other parties for transactions which are the subject of a pending case in court or before investigative authorities.
DEFINITION OF TERMS
The following terms when used in this Circular shall be construed to mean as follows: 5.1 Account – refers to Accounts Receiva ble, Due from Officers and Employee s, Other Receivables, and other accounts, as enumerated in Section 4 of this Circular. 5.2 Condonation of Receivables – amnesty of debt where the creditor is blocked or estopped from attempting to collect the debt later. 5.3 Debtor – a person or organization whether public or private that owes money to the government. 5.4 Dormant Receivable Accounts – accounts which balances remained inactive or non-moving in the books of accounts for ten (10) years o r more and where settlement/collectability could no longer be ascertained. 5.5 Dormant Unliquidated Cash Advances – advances granted to disbursing officers, agency officers and employees which remained non-moving for ten (10) years or more and where settlement/collectability could no longer be ascertained. 5.6 Dormant Unliquidated Fund Transfers – advances granted by the source entity to implementing entity for the implementation of programs/projects which remained non-moving for ten (10) years or more and where settlement could no longer be ascertained. 5.7 Government Entity – a national government agency, a government-owned and controlled corporation or a local government unit. 5.8 Impairment – a loss in the future economic benefits due to uncertainty of collectability of the receivables or the amount in respect of which recovery has ceased to be probable. 5.9 Write-off of Dormant Accounts – the process of derecognizing the asset account and the corresponding allowance for impairment from the books of accounts and transferring the same to the Registry of Accounts Written off (RAWO).
This does not mean condoning/extinguishing the obligation of the accoun table officer/debtor.
6.0
GENERAL GUIDELINES
6.1 All government entities shall conduct regular monitoring and analysis of receivable accounts to ensure that these are collected when these become due and demandable and that cash advances and fund transfers are liquidated within the prescribed period depending upon their nature and purpose; and 6.2 All government entities shall prepare the schedule of all receivables, unliquidated cash advances, and fund transfers as of December 31, 2015 and quarterly thereafter.(see Appendix 55 of Vol. II, GAM).
7.0
SPECIFIC GUIDELINES
The Accountant shall: 7.1
Conduct regular and periodic verification, analysis, and validation of the existence of the receivables, unliquidated cash advances, and fund transfers, and determine the concerned debtors, accountable officers (Regular and Special Disbursing Officers, Collecting Officers, Cashiers) and the source and implementing government entities concerned;
7.2 Reconcile the unliquidated fund transfers between the source and implementing government entities, prepare the adjusting entries for the reconciling items noted, and require liquidation of the balances; 7.3 Prepare the necessary adjusting entry/ies for the following: a. Recognition of the computed/determined impairment in accordance with the Philippine Public Sector Accounting Standards or Philippine Financial Reporting Standards b. Correction of inadvertent errors, or inaccurate calculation or computation c. Reclassification of accounts d. Recovery/settlement of previously written off accounts
Adjustments made pursuant to 7.2 and 7.3 need not be submitted to the COA for approval but are subject to the usual audit. However, the accountant or the auditor may seek assistance from the GAS for proper accounting treatment; and 7.4
8.0
Prepare aging of dormant receivables, unliquidated cash advances, and fund transfers on a quarterly basis (Annexes 1-3) to support the request for write-off, and indicate in the remarks column the existence of the applicable conditions, as follows: a. Absence of records or documents to validate/support the claim and/or unreconciled reciprocal accounts b. Death of the accountable officer/employee/debtor c. Unknown whereabouts of the accountable officer/employee/debtor, and that he/she could not be located despite diligent efforts to find him/her d. Incapacity to pay or insolvency e. Exhaustion of all possible remedies by the Management to collect the receivables and to demand liquidation of cash advances and fund transfers f. No pending case in court involving the subject dormant accounts.
PROCEDURES IN THE WRITE-OFF OF DORMANT ACCOUNTS
8.1 As a general rule, pleadings, mode of filing, docketing of cases, and filing fee shall be governed by the 2009 Revised Rules of Procedure of the COA (RRPC), unless specifi ed in this Circular; 8.2 The Head of the government entity shall file the request for authority to write-off dormant receivable accounts, unliquidated cash advances, and fund transfers to the COA Audit Team Leader (ATL) and/or Supervising Auditor (SA). No filing fee is required; 8.3 The request shall be supported by the following documents: a.
Schedule of dormant accounts by accountable officer/debtor/government entity and by account, certified by the accountant and approved by the Head of the government entity;
b. Certified relevant documents validating the existence of the conditions, as applicable, such as: b.1 Death Certificate issued by Philippine Statistics Authority (formerly National Statistics Office) b.2 Proof of Insolvency b.3 Certification from the Department of Trade and Industry that the debtor has no registered business b.4 Certification from the Securities and Exchange Commission that the Corpora tion is no longer active b.5 Certificate of no residence in the barangay of the municipality/city of last known address b.6 Proof of exhaustion of all remedies to collect the receivables and demand to liquidate the cash advances and fund transfers, such as but not limited to copies of served or returned demand letters b.7 Certification by Legal Officer of the entity of no pending case relative to the account
b.8 Certification by the responsible officials of the entity to the effect that there are no records/documents available to validate claim b.9 Other justifications, like in the case of request for write-off due to loss of documents, the circumstances of the loss should be stated in the letter-request b.10 In case of fund transfer, the unliquidated amount after reconciliation shall be supported by certification by the Chief Accountants and app roved by the Heads of the source and implementing entities that the fund was utilized for the purpose, and certification from the recipient that the project was partially or fully implemented, supported by pictures of the implemented projects. 8.4 The ATL and SA, upon rec eipt of the reque st, shall assign a refere nce number, verify and validate th e above doc uments and decide on the requests for authority to write off for amounts not exceeding P100,000.00 per accountable officer/debtor/government entity and by account within 15 working days from receipt thereof; 8.5 In case the basis for denial of the requ est for write-off by the ATL and SA is failure to comply with the condit ions and requirements under paragraphs 7.4 and 8.3, the aggrieved party may refile the request for write-off before the ATL and SA provided that the basis for denial has been satisfactorily complied with/met. The ATL and SA shall decide on the request within 15 working days from receipt thereof; 8.6 The aggrieve d party may app eal from the decis ion of the ATL and SA to the COA Cluster Director (CD)/Regiona l Director (RD) who has jurisdiction over the government entity under audit within 15 working days from receipt of the decision. The CD/RD shall decide on the appeal within 15 working days from receipt thereof. The decision of the CD/RD on appealed request is final and non-appealable; 8.7 For amounts exceedin g P100,000.00 per accounta ble officer/deb tor/ government entity and by accou nt, the ATL and SA shall forward the entire records of the requests to the CD/RD, together with their comments and recommendations, within 15 working days from receipt thereof; 8.8
The CD/RD shall review the entire records of the requests and shall decide on amounts involving more than P100,000.00 but not exceeding P1,000,000.00 per accountable officer/debtor/government entity and by account within 15 working days from receipt thereof;
8.9
In case the basis for denial of the request for write-off by the CD/RD is failure to comply with the conditions and requirements under paragraphs 7.4 and 8.3, the aggrieved party may refile the request for write-off before the CD/RD provided that the basis for denial has been satisfactorily complied with/met;
8.10 The aggrieved party may appeal from the decision of the CD/RD to the Assistant Commissioner (AC) concerned within 15 working days from receipt of the decision. The AC shall decide on the appeal within 15 working days from receipt thereof. The decision of the AC on appealed request is final and non-appealable; 8.11 For amounts exceeding P1,000,000.00 per accountable officer/debtor/ government entity and by account, the CD/RD shall forward the entire records of the requests together with his/her recommendation to the AC of the Sector within 15 working days from receipt thereof; 8.12 The AC of the Sector shall review the entire records of the requests and shall decide on amounts exceeding P1,000,000.00 per accountable officer/debtor/ government entity and by account within 15 working days from receipt thereof; 8.13 In case the b asis for denial of the request for write-off by the AC of the Sector is failure to comply with the conditions and requirements under paragraphs 7.4 and 8.3, the aggrieved party may refile the request for write-off before the AC of the Sector provided that the basis for denial has been satisfactorily complied with/met; and 8.14 The aggrieved party may appeal from the decision of the AC of the Sector to the CP within 15 working days from receipt of the decision. Filing fee is required at a rate prescribed in the 2009 RRPC. The decision of the CP is final and non-appealable. 8.15 The Accountant shall: a. Prepare the JEV within 15 working days upon receipt of the decision granting the authority to write-off, for approval of the Head of the government entity, effect the adjusting entries in the books, and enter the gross amount of the re ceivabl es in the RAWO. A sample form of the RAWO is attached as Annex 4 (Appendix 56, Vol. II, GAM); b. Submit the JEV to the COA ATL; c. Maintain a RAWO to record the accounts written-off and keep a copy of the approved request for write-off including the records and documents pertaining thereto; and d. At the end of the year, foot entries in the RAWO and make the appropriate disclosures in the Notes to FS.
9.0
MONITORING AND REPORTING
9.1 Quarterly Report on Reques ts for Write-off (QRRWO) shall be prepared and submitted by the: a. SA/ATL to CD/RD b. CD/RD to AC concerned c. AC to CP Secretariat
d.
CP Secretar iat for CP Decision
A sample form of QRRWO is attached as Annex 5 . 9.2 The CD/RD shall co nsolida te the QRRWOs submitted by the SA/ATL and the AC of the Sector shall c onsolid ate the QRRWOs submitted by the CD/RD. 9.3 The consolidat ed QRRWOs of the Sectors shall be submitted to the CP Secretariat.
10.0
ILLUSTRATIVE ACCOUNTING ENTRIES
The illustrative accounting entries to record the adjustment for the writing off of dormant receivable accounts, unliquidated cash advances, and fund transfers are shown below:
10.1
Writing Off of Receivable Accounts Account Title
Debit
Accumulated Surplus/(Deficit)
xxx
Allowance for Impairment – Accounts Receivable
xxx
Allowance for Impairment – Other Receivables
xxx
Credit
Accounts Receivable
xxx
Due from Officers and Employees
xxx
Other Receivables
xxx
To recognize writing off of dormant Receivable Accounts
10.2
Writing Off of Unliquidated Cash Advances Account Title Accumulated Surplus/(Deficit)
Debit
Credit
xxx
Advances for O perating Expenses
xxx
Advances for Payroll
xxx
Advances to Special Disbursing Officer
xxx
Advances to O fficers and Employees
xxx
To recognize writing off of dormant unliquidated cash advances
10.3 A.
Writing Off of Fund Transfers (Intra/Inter-Agency Receivables/Payables) Source Agency’s Books
Account Title
Debit
Accumulated Surplus/(Deficit)
Credit
xxx
Due from N ational Government Agencies
xxx
Due from Government-Owned or Controlled Corporations
xxx
Due from Local Government Units
xxx
Due from Non-Government Organizations
Organizations/People’s
xxx
Due from Central Office
xxx
Due from Bureaus
xxx
Due from Regional Offices
xxx
Due from Operating Units
xxx
Due from Other Funds
xxx
To recognize writing off of intra/inter-agency receivables
Note: Furnish copy of the JEV to the Implementing Agency
B.
Implementing Agency’s Books
Account Title
Debit
Due to NGAs
xxx
Due to GOCCs
xxx
Due to LGUs
xxx
Due to Central Office
xxx
Due to Bureaus
xxx
Due to Regional Offices
xxx
Due to Operating Units
xxx
Due to Other Funds
xxx
Accumulated Surplus/(Deficit)
Credit
xxx
To recognize writing off of intra/inter-agency payables
10.4 Recovery of Accounts Written-Off A.
Receivable Accounts
Account Title
Debit
Accounts Receivable
xxx
Due from Officers and Employees
xxx
Other Receivables
xxx
Miscellaneous Income
Credit
xxx
To recognize the restoration of recoverable Receivable accounts written off
Cash – Collecting Officers
xxx
Accounts Receivable
xxx
Due from Officers and Employees
xxx
Other Receivables
xxx
To recognize collection of recovered dormant Receivable accounts
B.
Unliquidated Cash A dvances
Account Title
Debit
Advances for Operating Expenses
xxx
Advances for Payroll
xxx
Advances to Special Disbursing Officer
xxx
Advances to Officers and Employees
xxx
Accumulated Surplus/(Deficit)
Credit
xxx
To recognize the restoration of recoverable unliquidated cash advances written off
Account Title
Debit
Cash – Collecting Officers
Credit
xxx
Advances for Operating Expenses
xxx
Advances for Payroll
xxx
Advances to Special Disbursing Officer
xxx
Advances to Officers and Employees
xxx
To recognize collection unliquidated cash advances
of
recovered
dormant
11.0
SAVING CLAUSE
This Circular shall not be interpreted to neither condone the written off accounts nor to extinguish the obligations. The Management shall continue to exert effort to collect the accounts appearing in the RAWO when circumstances would warrant. Further, this shall not be construed as a ground to exonerate the liability of the officers/employees for infidelity in the custody of do cuments.
12.0
REPEALING CLAUSE
All circulars, memoranda, and other issuances or parts thereof which are inconsistent with the provisions of this Circular are hereby repealed/modified accordingly.
13.0 EFFECTIVITY
This Circular shall take effect immediately.
(SGD.) MICHAEL G. AGUINALDO Chairperson
(SGD.) JOSE A. FABIA Commissioner ANNEXES:
Annexes 1 - 5
(SGD.) ISABEL D. AGITO Commissioner
