COA_M2013-004 CASH EXAM MANUAL.pdf

8/14/2019 COA_M2013-004 CASH EXAM MANUAL.pdf

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UL 9 2 13COMMISSION ON AUDIT MEMORANDUM NO. 2013 004

TO All Assistant Commissioners, Directors, Supervising Auditors,Audit Team Leaders and ll Others ConcernedSUBJECT : Prescribing the use of he Revised Cash Examination Manual

A. RATIONALEOver the past two decades, significant changes have emerged in accounting andauditing arena that saw the adoption of new international standards and best practices,and the introduction of new audit approaches. These developments necessitated theupdating of the Commission s policies, standards and rules to keep abreast with thecurrent nonn. An activity that continues to be so vital in ensuring that cash is

d e q u t c protected and controls are in place is the examination of the cash andaccounts of all accountable officers of the government. With almost three decadesgoing after its last r e v i s i o ~ the old manual on cash examination deserves a freshr e f i n e m ~ n t to keep it relevant and more responsive to the changing times. TheRevised Cash Examination Manual embodies the much needed enhancement to

f f t i v carry out the e sh examination across all sectors of he government.B. COVERAGE

The manual shall be used by all audit teams in the national, local and corporategovernment agencies. It shall also be used by special audit teams from other officesof the Commission duly co:nstituted to conduct cash examinations or are required toperform the same in relation to the conduct of a special audit. Cognizant of thepeculiarity of operations among government agencies, theaudit teams are encOuragedto devise and supplement the manual with other appropriate p ~ o c e d u r e s andtechniques designed to fully achieve the objectives ofcash examination.

C AUTHORITY TO CONDUCT CASH EXAMINATIONThe authority to conduct regular cash examination shall be inherent to the auditteam having jurisdiction over the audited agencies. The audit team leader shall beresponsible in identifying the audit team member(s) who will conduct or assist him inconducting the cash examination.


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RevisedCASHEXAMINATION

Manual


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TABLE OF CONTENTS

Page

Chapter I

INTRODUCTION

Rationale 1Legal Bases 1

Scope 2

Definition and Objectives of Cash Examination 2

Chapter II

LAWS AND RULES RELEVANT IN CASH EXAMINATION

Responsibility 4

Accountability 5Liability 6

Collections 7

Remittances/Deposits 9Dishonored Checks 10

Disbursements 11

Cash Advances 12

Seizure of Office by Auditor 13Retention of Money for Satisfaction of Indebtedness to Government 13

Constructive Distraint of Property of Accountable Officer 13

Chapter III

GUIDELINES

Authority 15

Planning 15Preparation 15

Auditors Conduct and Behaviour 16

Timing the Examination 16

Frequency of Cash Examination 16Simultaneous Cash Count 17

Accountable Officers Presence During the Count 17

Sealing of Vault, Safe or Other Cash Receptacles 17

Accountable Officers Cashbook/CRR/CDRCkDR or its equivalent 18Auditors Review of Transactions 19

Auditors Certificate on the Cashbook/CRR/CDR or its equivalent 19Prohibition of Incomplete Examination 20

Audit Work Papers 20

Cash Examination Report 20


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TABLE OF CONTENTS

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Chapter IV

PROCEDURES AND TECHNIQUES

Common Procedures and Techniques22

Specific Procedures and Techniques 24

A. Collecting Officer 24

B. Bank Cashier/Teller/ATM Teller 26C. Disbursing Officer 27

Reconciliation Statement of Depository Accounts 28

Cash Shortage 29Seizure of Office by Auditor 29

Constructive Distraint 30

Prosecution of the AO 32

Cash Overage 33Indemnity From Fidelity Fund 33

Appendix

1. Illustrative Accounting Entries

Annexes

A. Treasury Circular No. 02-2009 Revised Omnibus Regulations Governing theFidelity Bonding of Accountable Public Officers

B.Notice of DishonorC. COA Circular No. 97-002 dated February 10, 1997 Restatement with

amendments of the rules and regulations on the granting, utilization and

liquidation of cash advances provided for under COA Circular No. 90-331 datedMay 3, 1990

D. COA Circular No. 2006-005 dated July 13, 2006 Amendment to Item 7.1 ofCOA Circular No. 72-002 dated February 10, 1997 on the granting, utilizationand liquidation of cash advances.

E. Report of Cash Examination [General Form No. 74(A)]F. Internal Control QuestionnaireG. Reconciliation Statement of AccountabilityH. Statement of Accountability for Accountable Forms With Money ValueI. Statement of Accountability for Accountable Forms Without Money ValueJ. ATM Cash Count SheetK. Bank Reconciliation StatementL. Letter of DemandM.Withholding OrderN. Warrant of Constructive Distraint of Personal PropertyO. Receipt for Goods, Articles and Things Seized under Authority of Section 47,

P.D. 1445, otherwise known as the Government Auditing Code of the Philippines

P. Request for Issuance of Hold Departure OrderQ. Joint Affidavit


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Chapter I

INTRODUCTION

RATIONALE

Cash is the most liquid asset of an agency. Because of its liquidity, it is so attractive, that it

is most susceptible to theft and misappropriation.1To guard against the loss of cash through theft

or fraud, adequate cash management mechanisms and controls must be in place.

Equally important in ensuring effective cash management and protection is the timely

exercise of oversight functions through periodic cash examination. Indispensable in carrying outan efficient and methodical examination of the cash accounts of an agency is a handy reference

or guide that charts in simple and sufficient detail the procedures required therefor.

This revised Cash Examination Manual provides an updated guide that steers the auditors

through a sequential and step-by-step cash examination process commencing from planningstage, leading to execution, reporting, and monitoring. It also defines the scope and objectives of

the examination.

As in its precursor manual, the revised procedures and techniques outlined herein are

designed to sufficiently cover each area or activity to be cash examined. Nonetheless, the auditoris not precluded from employing such other procedures and techniques as the circumstances may

dictate. In such a case, the auditor is cautioned to exercise sound professional judgment in

adopting any additional or alternative cash examination procedures or techniques.

LEGAL BASES

The Commission on Audit (COA) is constitutionally mandated with the power, authority,and duty to examine, audit, and settle all accounts pertaining to the revenues and receipts of, and

expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the

Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations (GOCCs) with original charters, and on a post-audit basis: (a)

constitutional bodies, commissions and offices that have been granted fiscal autonomy under the

Constitution; (b) autonomous state colleges and universities; (c) other GOCCs and theirsubsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or

indirectly, from or through the Government, which are required by law or the granting institution

to submit to such audit as a condition of subsidy or equity. It shall also keep the general accounts

of the Government and, for such period asmay be provided by law, preserve the vouchers andother supporting papers pertaining thereto.2

1Intermediate Accounting, Vol. 1, 2007 Edition; Robles and Empleo2Section 2(1), Article IX-D, 1987 Constitution


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The Constitution further vests on the Commission the exclusive authority to define the

scope of its audit and examination, establish the techniques and methods required therefor, and

promulgate accounting and auditing rules and regulations.3

SCOPE

This revised manual shall be followed and applied in the examination of the cash and

accounts of all accountable officers (AOs) of all government agencies.

DEFINITION AND OBJECTIVES OF CASH EXAMINATION

Cash Examination Defined

Cash examination is an audit technique whereby an authorized examiner of cash and

accounts inquires into the correctness and physical existence of the balance of cash in the

custody of an AO, the validity of his/her cash transactions, the reliability of the cash records and

his/her conformance with prescribed procedures.

4

Objectives of Cash Examination

The entire cash examination process involves a comprehensive review that aims to provide

an overall determination of whether -

1. all government funds in the hands of an AO are actually existing and properlyaccounted for;

2. the agency and its AOs are adhering strictly to prescribed rules and regulations on cashtransactions; and

3. the agencys practices and procedures provide adequate safeguards against fraud andlosses of government funds.

Moreover, cash examination seeks to establish what the AO has and what he should haveat the time of the examination. It specifically aims to -

1. establish the actual existence of cash in the custody of the AO as well as the validity ofthe cash items presented;

2. determine whether all monies received had been correctly recorded and fullyaccounted for in accordance with laws, rules and regulations;

3. ascertain whether disbursements are valid, duly authorized, actually paid and properlyrecorded;

3Section 2(2), Ibid4 Handbook on Cash Examination, November 2002, Professional Development Center, Commission on Audit


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4. prove the accuracy of the cash balance reflected in the ledger, cashbook5, cash receiptsrecord (CRR)

6, check disbursements record (CkDR)

7, cash disbursements record

(CDR)8,or their equivalents, such as cash receipts register (CRR)

9, petty cash register

(PCR)10

, cash disbursements register (CDR)11

, and individual daily proof sheet and

transaction sheet, daily cash in vault summary report, cash flow report for cash on

hand-in vault and automated teller machine (ATM) and detail transaction requestreport for banks; and

5. verify if accountable forms are duly accounted for.

5 Cashbook for Cash in Treasury shall be used to record collections (Debit column) and deposits to the bank (Credit column)

based on the RCD. The cashbook shall be maintained by the Treasurer by fund and shall be updated and balanced daily. The

accountable officer shall, at the end of the month or when required to do so by proper competent authority, rule and foot the

cashbook (Section 26, MNGAS for LGUs, Vol. II).

Cashbook for Cash in Bank shall be used to record deposits of collections (Debit column) and withdrawals from the bank thru

the issuance of checks (Credit column). The cashbook shall be maintained by bank account and by fund and shall be updated

and balanced daily. The accountable officer shall, at the end of the month or when required to do so by proper competent

authority, rule and foot the cashbook (Section 27, Ibid).

The accountable officer shall maintain a cashbook for cash advances to record the cash advances received (Debit column) and

payments, refunds and adjustments (Credit column) and the balance (balance column). The accountable officer shall, at the

end of the month or when required to do so by proper competent authority, rule and foot the cashbook (Section 28, Ibid).

6 The Cash Receipts Record (CRR) shall be used by the designated collecting officer to record his/her collections and deposits

(Section 38, MNGAS for NGAs, Vol. II).

7 The Check Disbursements Record (CkDR) shall be used by the disbursing officer to record checks released charged against

NCAs/funding checks received/deposits in a bank current account of government agencies. A separate record shall be

maintained for each source of fund (Section 39, Ibid).

8 The Cash Disbursements Record (CDR) shall be used by the disbursing officer to record the cash advance received and

disbursements made out of the cash advance (Section 40, Ibid).

9 The Cash Receipts Register (CRR) shall be used to record as well as monitor collections and deposits of government units

(COA Circular No. 2003-006, December 2, 2003; Use of Simplified Accounting Forms for Financial Transactions of

Government Units Without Complete Set of Books of Accounts).10The Petty Cash Register (PCR) shall be used to record cash advances/replenishments/disbursements for authorized petty and

other miscellaneous expenses (COA Circular No. 2003-006, Ibid).

11The Cash Disbursements Register(CDR) shall be used to record, monitor and report transactions involving the grant of cash

advances/payments charged thereto, and liquidation thereof by disbursing accountable officer (COA Circular No. 2004-003,

June 24, 2004; Supplemental Form Prescribed Under COA Circular No. 2003-006 dated December 2, 2003 Re: Use of

Simplified Accounting Forms for Financial Transactions of Government Units Without Complete Set of Books of Accounts).


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Chapter II

LAWS AND RULES RELEVANT IN CASH EXAMINATIONS

Responsibility

1. It is the declared policy of the State that all resources of the government shall bemanaged, expended or utilized in accordance with laws and regulations, and safeguarded

against loss or wastage through illegal or improper disposition, with a view to ensuringefficiency, economy and effectiveness in the operations of government. The

responsibility to take care that such policy is faithfully adhered to rests directly with the

chief or head of the government agency concerned.12

2. Fiscal responsibility shall, to the greatest extent, be shared by all those exercisingauthority over the financial affairs, transactions, and operations of the government

agency.13

3. The head of any agency of the government is immediately and primarily responsible forall government funds and property pertaining to his agency. Persons entrusted with thepossession or custody of the funds or property under the agency head shall be

immediately responsible to him, without prejudice to the liability of either party to the

government.14

4. The head of an agency may designate such number of collecting officers (COs) or agentsas may be deemed necessary. They shall render reports of their collections, under the

regulations of the Commission, to be submitted promptly to the auditor concerned whoshall conduct the necessary examination and audit within 30 days from receipt thereof.

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5. When an officer accountable for government funds or property absconds with them, dies,or becomes incapacitated in the performance of his duties, the proper agency head shall

designate a custodian to take charge of the funds or property until a successor shall have

been appointed and qualified. The agency head may appoint a committee to count thecash and take an inventory of the property for which the officer was accountable and to

determine the responsibility for any shortage therein. One copy of the inventory and of

the report of the committee duly certified shall be filed with the Commission but thefindings of the committee shall not be conclusive until approved by the Commission or

its duly authorized representative16

.

When a local treasurer or officer accountable for government funds or property abscondswith them, dies, or becomes incapacitated in the performance of his duties, the Secretary

of Finance, in the case of funds and property of the province, city and municipality, shall

12Section 2, Presidential Decree No. 144513Section 4(4), Ibid14Section 102, Ibid15Section 64, Ibid16Section 78(1), Ibid


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designate a custodian to take charge of the funds or property until a successor shall have

been appointed and qualified. In the case of barangays, the barangay chairman shall

designate the custodian. The local chief executive may appoint a committee to count thecash and take an inventory of the property for which the officer was accountable and to

determine the responsibility for any shortage therein. One copy of the inventory duly

certified shall be filed with the COA or its duly authorized representative but the findingsof the committee shall not be conclusive until approved by the latter.17

If the absconding, deceased, incapacitated, or superseded officer is responsible to another

who is accountable, the latter may himself designate the committee or take other lawfulmeasures for the protection of his interest.

18

6. At the close of each month, depositories shall report to the agency head, in such form ashe may direct, the condition of the agency account standing on their books. The head of

the agency shall see to it that reconciliation is made between the balance shown in the

reports and the balance found in the books of the agency.19

7. An AO shall maintain his cashbook/CRR/CDR/CkDR20and such other records or theirequivalents as may be prescribed by the agencys operating procedures, and reconcile

with the accounting records at least quarterly21

, unless the agency requires a morefrequent reconciliation.

8. An AO, upon ceasing to act in his official capacity as such, shall submit to the auditor ofthe agency concerned a report of his accountability. Any remaining balance of suchaccountability shall be deposited in the proper treasury without unnecessary delay.

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9. Government cashiers are prohibited from holding positions as cashiers or treasurers ofsavings and loan associations or any other association or organization.

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Accountability

10.Every officer of any government agency whose duties permit or require the possession orcustody of government funds or property shall be accountable therefor and for thesafekeeping thereof in conformity with law. Every AO shall be properly bonded in

accordance with law.24

The fidelity bonds covering government accountability and responsibility of AOs shall be

in accordance with the regulations issued by the Bureau of the Treasury (BTr) (Annex

17Section 122, Local Treasury Operations Manual18Section 78(3), Presidential Decree No. 144519Section 74, Ibid20Sections 38-40, MNGAS for NGAs, Vol. II; Sections 26-28, MNGAS for LGUs, Vol. II; COA Circular No. 2003-00621Section 181, Government Accounting and Auditing Manual (GAAM), Vol. I22Section 80, Presidential Decree No. 144523Section 67, GAAM, Vol. I24Section 101, Presidential Decree No. 1445; Section 305(f) R.A. No. 7160; Section 50, Chapter 9, Subtitle B, Book V, EO No.

292


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A)25

. Copies of the approved fidelity bonds as well as documents subsequently issued for

their cancellation shall be furnished to the Auditor.

11.Transfer of government funds from one officer to another shall, except as allowed by lawor regulation, be made only upon prior direction or authorization of the Commission or

its representative.

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12.When government funds or property are transferred from one AO to another, or from anoutgoing officer to his successor, it shall be done upon properly itemized invoice and

receipt which shall invariably support the clearance to be issued to the relieved or out-going officer, subject to regulations of the Commission.

27

Liability

13.Expenditures of government funds or uses of government property in violation of law orregulations shall be a personal liability of the official or employee found to be directly

responsible therefor.

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14.Every officer accountable for government funds shall be liable for all losses resultingfrom the unlawful deposit, use, or application thereof and for all losses attributable to

negligence in the keeping of the funds.29

15.No AO shall be relieved from liability by reason of his having acted under the directionof a superior officer in paying out, applying, or disposing of the funds or property withwhich he is chargeable, unless prior to that act, he notified the superior officer in writing

of the illegality of the payment, application, or disposition. The officer directing any

illegal payment or disposition of the funds or property shall be primarily liable for theloss, while the AO who fails to serve the required notice shall be secondarily liable.

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16.Unless he registers his objection in writing, the local treasurer, accountant, budget officer,or other AO shall not be relieved of liability for illegal or improper use or application ordeposit of government funds or property by reason of his having acted upon the direction

of a superior officer, elective or appointive, or upon participation of other department

heads or officers of equivalent rank. The superior officer directing, or the departmenthead participating in such illegal or improper use or application or deposit of government

funds or property, shall be jointly and severally liable with the local treasurer, accountant,

budget officer, or other AO for the sum or property so illegally or improperly used,applied or deposited.

31

25Treasury Circular 02-2009 dated 06 August 200926Section 75, Presidential Decree No. 144527Section 77, Ibid28Section 103, Ibid29Section 105(2), Ibid30Section 106, Ibid31Section 342, Republic Act No. 7160


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17.Any public officer who commits any of the acts defined and penalized under Articles213, 217, 218, 219 and 220 of the Revised Penal Code shall suffer the penalty provided

therefor.

18.In any criminal or civil proceeding against an officer for the embezzlement ormisappropriation of government funds or property, or to recover an amount due thegovernment from an AO, it shall be sufficient, for the purpose of showing a balance

against him, to produce the working papers of the auditor concerned. A showing in this

manner of any balance against the officer shall be prima facie evidence of the

misappropriation of the funds or property unaccounted for or of civil liability of theofficer as the case may be. The existence or contents of bonds, contracts, or other papers

relating to or connected with the settlement of any account may be proved by the

production of certified copies thereof but the court may require the production of theoriginal when this appears to be necessary for the attainment of justice.

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19.When a loss of government funds or property occurs while they are in transit or the lossis caused by fire, theft, or other casualty or force majeure, the officer accountable thereforor having custody thereof shall immediately notify the Commission or the auditor

concerned and, within 30 days or such longer period as the Commission or auditor may in

the particular case allow, shall present his application for relief, with the availablesupporting evidence. Whenever warranted by the evidence, credit for the loss shall be

allowed. An officer who fails to comply with this requirement shall not be relieved of

liability or allowed credit for any loss in the settlement of his accounts.33

Collections

20.Except as may otherwise be specifically provided by law or competent authority, allmoneys and property officially received by a public officer in any capacity orupon any

occasion must be accounted for as government funds and government property.34

21.No payment of any nature shall be received by a CO without immediately issuing anofficial receipt (OR) in acknowledgment thereof. The receipt may be in the form of

postage, internal revenue or documentary stamps and the like, or officially numberedreceipts

35, or electronically generated document acknowledging receipt of payment

36,

subject to proper custody, accountability, and audit.

22.Where mechanical or electronic devices are used to acknowledge cash receipts, theCommission may approve, upon request, exemption from the use of accountable forms.

37

32Section 83, Presidential Decree No. 144533Section 73, Ibid34Section 42, Chapter 7, Title I(B), Book V, Executive Order No. 29235Section 68(1), Presidential Decree No. 144536Section 27(c), Part IV, Republic Act 8792 otherwise known as the Electronic Commerce Act37Section 68(2), Presidential Decree No. 1445


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23.At no instance shall temporary receipts be issued to acknowledge the receipt of publicfunds.

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24.Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each receiptshall be exact copies or carbon reproduction in all respects of the original.

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25.An officer charged with the collection of revenue or the receiving of moneys payable tothe government shall accept payment for taxes, dues or other indebtedness to the

government in the form of checks and warrants issued in payment of government

obligations, upon proper indorsement and identification of the payee or indorsee. Checksdrawn in favor of the government in payment of any such indebtedness shall likewise be

accepted by the officer concerned.

At no instance should money in the hands of the CO be utilized for the purpose of

cashing private checks.40

26.Checks presented for payment must be drawn by the payor himself and made payable tothe agency or head of agency. In the latter case, only the official title or designation of the

agency head concerned shall be stated as the payee.41

Under no circumstance shall the following checks be accepted as payment:

- checks drawn payable to the name of the agency head or any of its officers- indorsed private checks- post-dated checks- stale checks.

27.When a check drawn in favor of the government is not accepted by the drawee for anyreason, the drawer shall continue to be liable for the sum due and all penalties resultingfrom delayed payments. Where the reason for non-acceptance by the drawee bank is

insufficiency of funds, the drawer shall be criminally liable therefor.42

28.Whenever a payor has a record of a previously dishonored private check drawn by him inpayment of taxes and dues, even if such check has already been settled, any private check

presented by him shall no longer be accepted. In such case, the payor shall be required to

pay only in cash or by certified check.43

Each agency head, or treasurer, in the case of local government units, shall make a list of

payors whose checks have been dishonored and shall circularize the list to all COs underhis jurisdiction.

38Section 72, GAAM, Vol. I39Section 73, Ibid40Section 67(1) and (3), Presidential Decree No. 144541Section 77, GAAM, Vol. II42Section 67(2), Presidential Decree No. 144543Section 80, GAAM, Vol. I


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c. Collections of field collectors shall be remitted to the Cashier/designated LiquidatingOfficer of the field office of the local government unit. When travel distance from the

field office to the local treasury may expose government funds to risk such as loss intransit, the Cashier/designated Liquidating Officer, upon authorization by the Local

Treasurer, may deposit the collections in the authorized depository bank near the field

office of the local government unit.

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34.Under such rules and regulations as the Commission and the Department of Finance(DOF) may prescribe, the Treasurer of the Philippines and all authorized depository

banks shall acknowledge receipt of all funds received by them, the acknowledgmentbearing the date of actualremittance or deposit and indicating from whom and on what

account it was received.52

For purposes of reporting deposits of national collections, the

National Collecting Officers/Local Treasurers shall report deposits of national collectionsfollowing the guidelines provided for in Treasury Circular No. 5-2003 dated 08 October

2003 or any subsequent revision or amendment thereto.

Dishonored Checks

35.A check is dishonored either by non-payment or non-acceptance. Dishonor by non-payment occurs when (a) the check is duly presented for payment and payment is refusedor cannot be obtained; or (b) presentment is excused and the check is overdue and

unpaid.53

Dishonor by non-acceptance happens when (a) the check is duly presented for

acceptance, and such an acceptance as is prescribed by law is refused or cannot beobtained; or (b) presentment for acceptance is excused and the check is not accepted.

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36.In the case of dishonored government checks received purely for accommodation orencashment, the same shall be disallowed and the amount thereof shall be made good by

the AO who allowed their encashment.

37.When a check is dishonored by non-payment or non-acceptance, notice of dishonor(Annex B) must be given to the drawer and to each endorser, andany drawer or endorser

to whom such notice is not given is discharged from liability.55

The notice of dishonor

shall be furnished to the Agency Head, Accountant, Auditor and a copy thereof retainedby the CO. The CO shall cancel the OR covering the dishonored check. If necessary, the

head of the agency shall promptly institute the corresponding action for the collection of

the amount involved.

38.The CO neglecting or failing to give the required notice of dishonor to the drawer (or tothe endorser-payor of the government check), who, as a result thereof, is discharged from

liability, shall be personally answerable for the resulting loss suffered by the government.

51Section 62(D), Local Treasury Operations Manual52Section 70, Presidential Decree No. 144553Section 83, Negotiable Instruments Law54Section 149, Ibid55Section 89, Negotiable Instruments Law; Section 85, GAAM, Vol. I


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39.The making, drawing and issuance of a check payment of which is refused by the draweebecause of insufficient funds in or credit with such bank, when presented within ninety

(90) days from the date of the check, shall beprima facieevidence of knowledge of suchinsufficiency of funds or credit unless such maker or drawer pays the holder thereof the

amount due thereon, or makes arrangements for payment in full by the drawee of such

check within five (5)banking days after receiving notice that such check has not beenpaid by the drawee.56

40.A dishonored check shall be settled by tendering payment in cash or by certified check tothe CO concerned. No other mode of payment shall be accepted.

41.Upon settlement of the dishonored check in the manner herein prescribed, the CO shallnot return the check to the payor concerned unless the latter first surrenders the previous

OR therefor. If the previous receipt is no longer available, sworn statement to the effectthat it has been lost or misplaced should be submitted by the payor.

42.Dishonored checks shall remain in the custody of the CO, pending their redemption,unless the agency head or the court shall direct otherwise, in which case appropriatereceipts should be secured from the officer authorized to take custody of the checks. The

CO shall immediately advise the transfer of custody of the check.57

Disbursements

43.Financial transactions and operations of any government agency shall be governed by thefundamental principles set forth hereunder, to wit:

43.1 No money shall be paid out of any public treasury of depository except inpursuance of an appropriation law or other specific statutory authority.

43.2 Government funds or property shall be spent or used solely for public purposes.43.3 Trust funds shall be available and may be spent only for the specific purpose for

which the trust was created or the funds received.

43.4 Fiscal responsibility shall, to the greatest extent, be shared by all those exercisingauthority over the financial affairs, transactions, and operations of the government

agency.

43.5 Disbursements or disposition of government funds or property shall invariablybear the approval of the proper officials.

43.6 Claims against government funds shall be supported with completedocumentation.

56Section 2, Batas Pambansa Blg. 22, amending Article 315 of the Revised Penal Code57Section 90, GAAM, Vol. I


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43.7 All laws and regulations applicable to financial transactions shall be faithfullyadhered to.

43.8 Generally accepted principles and practices of accounting as well as of soundmanagement and fiscal administration shall be observed, provided that they do not

contravene existing laws and regulations.

58

44.Except with the prior approval of the President, and for procurement transactions whereadvance payment is allowed pursuant to Sections 4.3

59, 4.4

60 and 4.5

61 of Annex D,

Section 4.162

of Annex E and Section 163

of Annex F of the Revised Implementing Rulesand Regulations of Republic Act (RA) No. 9184, the government shall not be obliged to

make an advance payment for services not yet rendered or for supplies and materials not

yet delivered under any contract therefor. No payment, partial or final, shall be made onany such contract except upon a certification by the head of the agency concerned to the

effect that the services or supplies and materials have been rendered or delivered in

accordance with the terms of the contract and have been duly inspected and accepted.64

45.Payments to creditors shall be made only upon the specific approval of the head of theagency concerned or his duly authorized representative, or if there be no such officer,

upon the approval of the department head endorsed upon the warrant or check or vouchereffecting the payment.

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Cash Advances

46.No cash advance shall be given unless for a legally authorized specific purpose. A cashadvance shall be reported on and liquidated as soon as the purpose for which it was given

58

Section 4, Presidential Decree No. 144559A single advance payment not to exceed fifty percent (50%) of the contract amount shall be allowed for contracts entered into

by a procuring entity for the following services where requirement of down payment is a standard industry practice:

a. Hotel and restaurant service;

b. Use of conference/seminar and exhibit areas; and

c. Lease of office space.60Advance payment not to exceed fifteen percent (15%) of the contract amount, unless otherwise directed by the President, shall

also be allowed for procurement of goods required to address contingencies arising from natural or man-made calamities in

areas where a State of Calamity has been declared by appropriate authorities.61Upon submission of an irrevocable letter of credit or bank guarantee issued by a Universal or Commercial Bank, advance

payment not to exceed fifteen percent (15%) of the contract amount shall be allowed and paid within sixty (60) calendar days

from signing of the contract. The irrevocable letter of credit or bank guarantee must be for an equivalent amount, shall remain

valid until the goods are delivered, and accompanied by a claim for advance payment.62The procuring entity shall, upon a written request of the contractor which shall be submitted as a contract document, make an

advance payment to the contractor in an amount not exceeding fifteen percent (15%) of the total contract price, to be made inlump sum or, at the most, two instalments according to a schedule specified in the instructions to bidders and other relevant

Tender Documents.63The Government, as it considers fair and reasonable, may allow advance payment to the Consultant in the amount which shall

not exceed fifteen percent (15%) of the contract amount to cover the cost of mobilization, subject to the posting of an

irrevocable standby letter of credit issued by an entity acceptable to the agency and of an amount equal to the advance

payment. The advance payment shall be repaid by the Consultant deducting from his progress payments such sum as agreed

upon during the contract negotiations until fully liquidated within the duration of the contract.64Section 88(1), Presidential Decree No. 144565Section 91, Ibid


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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.66

47.The specific rules and regulations on the granting, utilization and liquidation of cashadvances are provided for under COA Circular No. 97-002 dated February 10, 1997(Annex C), as amended by COA Circular No. 2006-005 dated July 13, 2006 (Annex D).

Seizure of Office by Auditor

48.The books, accounts, papers and cash of any local treasurer or other AO shall at alltimesbe open to the inspection of the Commission or its duly authorized representative.

67

49.In case an examination of the accounts of a local treasurer discloses a shortage in cashwhich should be on hand, it shall be the duty of the examining officer to seize the office

and its contents, notify the Commission, the local chief executive concerned, and the

local accountant. Thereupon, the examining officer shall immediately turnover to the AOnext-in-rank in the local treasury service, unless the said officer is likewise under

investigation, the office of the treasurer and its contents, close and render his account on

the date of the turnover. In case the AO next-in-rank is under investigation, the auditorshall take full possession of the office and its contents, close and render his accounts on

the date of taking possession, and temporarily continue the public business of such office

until such time that the local treasurer is restored or a successor has been duly designated.The local treasurer or AO found with such shortage shall be automatically suspended

from office.68

Retention of Money for Satisfaction of Indebtedness to Government

50.When any person is indebted to any government agency, the Commission may direct theproper officer to withhold the payment of any money due such person or his estate to be

applied in satisfaction of the indebtedness.69

Constructive Distraint of Property of Accountable Officers

51.Upon the discovery in audit of a shortage in the accounts of any AO and upon a findingof aprima faciecase of malversation of public funds or property against him, in order tosafeguard the interest of the Government, the Commission may place under constructive

distraint the personal property of the AO concerned where there is reasonable ground to

believe that the said officer is retiring from the government service or intends to leave thePhilippines or remove his property therefrom or hide or conceal his property.

66Section 89, Presidential Decree No. 144567Section 46, Ibid68Section 348, Republic Act No. 716069Section 37, Presidential Decree No. 1445


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The constructive distraint shall be effected by requiring the AO concerned or any other

person having possession or control of the property to accomplish a receipt in the form

prescribed by the Commission, covering the property distrained and to obligate himself topreserve the same intact and unaltered and not to dispose of it in any manner whatever

without the express authority of the Commission.

In case the said AO or other person having the possession and control of the property

sought to be placed under constructive distraint refuses or fails to accomplish the receipt

herein referred to, the representative of the Commission effecting the constructive

distraint shall proceed to prepare a list of such property and in the presence of twowitnesses leave a copy thereof in the premises where the property distrained is located

after which the said property shall be deemed to have been placed under constructive

distraint.70

70Section 47, Presidential Decree No. 1445


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Chapter III

GUIDELINES

A. Authority

1. The authority to conduct regular cash examination shall be inherent to the audit teamhaving jurisdiction over the audited agencies. The audit team leader shall be responsible

in identifying the audit team member/s who will conduct or assist him in the cash

examination.

2. Whenever the circumstances warrant, the Chairperson or the Cluster/Regional Directormay constitute special audit teams to conduct cash examination.

B. Planning

1.

Develop an overall plan/audit program, taking into consideration the objectives to beaccomplished, the scope, the manpower requirement and estimated man-hours.

2. Schedule the examination properly to avoid inconvenience to the agencys clientele andthe AOs and disruption of operations.

3. Brief the audit team of the work to be done, how it will be done, the distribution of tasksand timetable for the examination, proper conduct and behaviour, among others.

C. Preparation

1. Understand the procedures and techniques on cash examination and be familiar with thecash examination form [General Form No. 74(A), Annex E], and Section 181,Government Accounting and Auditing Manual (GAAM), Vol. 1 on the handling, custody

and disposition of the cashbook.

2. Evaluate/validate the agencys internal control structure on cash management wheneverdeemed necessary, using the Internal Control Questionnaire marked as Annex F to this

manual.

3. Know the agencys functions, organizational units, funds, official depositories, volume ofbusiness and names of all cash AOs, including the location of their offices, vaults, safes,

ATMs and other receptacles.

4. Secure copies of Report of Accountability for Accountable Forms with and withoutmoney value, if any.

5. Secure copies of invoice receipts for accountable forms from the AO.


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6. Refer to the latest cash examination and other audit reports including those of the internalaudit unit to be acquainted with significant findings, if any, and to follow up the agencys

compliance with the corresponding recommendations.

7. Review the latest Statement of Audit Suspensions, Disallowances and Charges (SASDC),Audit Observation Memorandum (AOM) and Credit Notice issued to the AOs to beexamined for guidance in audit.

8. Gather all the necessary data and prepare audit work papers regarding the officersaccountability from last cash examination to facilitate the preparation of the Statement ofAccountability under Section D of General Form No. 74(A).

9. Bring copies of the authority to conduct the cash examination, whenever applicable, COAidentification card, office equipment and the necessary supplies.

10.See to it that Section A (Cash Production Notice) of General Form No. 74(A) is dulyaccomplished before the cash count.

D. Auditors Conduct and Behaviour

1. The auditor shall conduct himself in such a manner as to earn the respect of the AO andother agency officials.

2. Although a friendly relationship shall be maintained, a relationship bordering on toomuch familiarity and intimacy shall be avoided.

3. In no case, shall he solicit or accept personal favors in order to preserve his impartialityand independence.

4. Limit to the minimum his presence in the AOs booth/office.E. Timing the Examination

1. Maintain the element of surprise in every examination.2. Schedule the cash examination to enable the completion of at least the count of cash and

cash equivalents at the close of office hours. As far as practicable, start the examination

in the morning. For banks, however, conduct the count before or after banking hours so

as not to disrupt the operations.

F. Frequency of Cash Examination

1. Conduct the examination of the cash and accounts of all AOs at least once a year.


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2. Perform mandatory cash examination under the following circumstances:a. Before the AO retires or is separated from the service;b. Before he is transferred to another station or office;c. When he goes on extended leave of absence and another AO is designated in his

place; andd. When loss of government fund by an AO is reported.G. Simultaneous Cash Count

1. Examine simultaneously all funds in the custody of the AO.2. Conduct cash count of all cash AOs in the office and its immediate vicinity. If this is not

practicable, adopt such measures to control the movement of cash between or among

AOs.

H. Accountable Officers Presence During the Count

1. Ensure the presence of the AO at all times during the cash count. If, at any time duringthe cash count, the AO has to leave the premises, stop the count immediately, segregatethe cash counted and cause the return of all cash to the safe, have it properly secured and

resume the count only upon his return.

I. Sealing of Vault, Safe or Other Cash Receptacles

1. Seal the vault, safe or other cash receptacles only in exceptional cases, such as:a. Absence or non-appearance of the AO on the date of the count specially when the

intention of the auditor to examine the former has become obvious or made known toother employees;

b. Refusal of the AO to submit himself to cash examination;c. Interruption or non-completion of the count during the day or the necessity of

controlling cash, cash items and records; and

d. Death, incapacity, or absconding of the AO.2. Require at least two agency personnel to witness the sealing and sign the sealing paper or

its equivalent.

3. Seal by pasting a sheet(s) of paper or equivalent on the appropriate place(s) of the vault,safe or receptacle. Make sure that the vault, safe or receptacle could not be openedwithout breaking the seal.


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4. Use the properly worded sealing paper form as shown below:___________ 20__

DO NOT BREAK THE SEAL

UNDER PENALTY OF LAW

__________________________(Signature over printed name)

__________________________(Position/Designation)

Witnesses to the sealing:

_________________________(Name and Signature/Position)

_________________________(Name and Signature/Position)

5. Retain a duplicate copy of each properly accomplished sealing paper.6. The public officer charged with the custody of the vault, safe or receptacle, who, shall

break the seals placed by the auditor or permit them to be broken, shall be liable for thepenalties prescribed under Article 227 of the Revised Penal Code.

71

J. Accountable Officers Cashbook/CRR/CDR/CkDR or its equivalent

1. Require the AO to enter in his Cashbook/CRR/CDR/CkDR or its equivalent all validtransactions and adjustments up to the time of the count. He shall then foot, balance and

rule it. For banks or agencies with computerized systems, print the certification on the

cut-off reports generated and duly signed by the AO.

2. Cause the AO to certify immediately below the last entry in his Cashbook/CRR/CDR orits equivalent, as follows:

I hereby certify on my official oath that all cash and depository

transactions had by me in my capacity as (Designation)

of (Name of Agency) at the time of examination, showing

a balance of _____________________________ (P_________)

have been correctly and completely recorded in the

Cashbook/CRR/CDR (or its equivalent).

________________ _________________________(Date) (Signature over printed name)

71Art. 227. Officer breaking seal.- Any public officer charged with the custody of papers or property sealed by proper authority,

who shall break the seals or permit them to be broken, shall suffer the penalties of prision correccional in its minimum and

medium periods, temporary special disqualification and a fine not exceeding 2,000 pesos.


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3. Direct the AO to effect adjusting entries in the Cashbook/CRR/CDR/CkDR or its

equivalent when errors or omissions are found after verification of the entries, and to

execute the certification in No. 2 above after the last entry.

K. Auditors Review of Transactions

1. Verify the transactions from the date of last cash examination to the date of currentexamination. Limit the verification to the determination and establishment that all cash

receipts, remittances/deposits, cash advances/disbursements and adjusting entries are

properly and correctly recorded in the Cashbook/CRR/CDR/CkDR or equivalent; thatdisbursement vouchers, as entered in the CDR/CkDR are properly approved and

payments duly acknowledged; and that all cash balances as of the date of examination are

reconciled with accounting and related records.

2. Recheck all figures and computations if the examination discloses a discrepancy andperform other audit procedures necessary under the circumstances before declaring a cash

shortage or overage.

3. Require in writing from the AO a written explanation of how the discrepancy occurredwithin seventy-two (72) hours from his receipt of the letter requiring the same.

L. Auditors Certificate on the Cashbook/CRR/CDR or equivalent

1. Accomplish the auditors certification after the completion of the cash examinationimmediately below the certification of the AO, as follows:

Examined and verified the cash accountability of (Accountable Officer),

(Designation), covering the period _______ to ______ and arrived at abalance of P_______, of which the amount of P_______ was actually found

on hand, consisting of P_______ in currency and P_______ in cash items,

thereby showing (no difference/cash shortage/overage of P ).

________________________

(Signature over printed name)

________________________

(Designation)

_________________________(Date)

2. At no instance shall the auditors certification be qualified.3. Ensure that all prescribed cash examination procedures in Chapter IV of this manual have

been completed and the accountability of the officer has been duly established before

accomplishing the said certificate.


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M. Prohibition of Incomplete Examinations

1. Conduct examinations thoroughly and completely in every case to the last detail,including verification/reconciliation of accountable forms received and issued and thevarious records of collections and disbursements, as well as entries in the

Cashbook/CRR/CDR/CkDR or its equivalent. Just as government treasurers are held to

strict accountability as regards funds entrusted to them in a fiduciary capacity, so shouldexamining auditors act with greater care and caution in the audit of the accounts of suchAOs to avoid the perpetration of any injustice. Accounts should be examined carefully

and thoroughly to the last detail, with absolute certainty.72

2. Where an examination fails to disclose an existing shortage and there is proof that saidexamination was incomplete or the steps prescribed herein were not followed, the same

shall be considered a prima facieground for the initiation of administrative or criminalaction against the auditor(s).

N. Audit Work Papers

1. Systematically gather and accumulate sufficient evidence necessary for drawing logicaland verifiable conclusions. This is accomplished through the audit work papers, which

record the evidence gathered to support the conclusions reached by the auditor.

2. Prepare complete, accurate, clear, neat and relevant work papers.O. Cash Examination Report

1. Issue an AOM to communicate the deficiencies noted during the cash examination.2. Conduct an exit conference to discuss with management the results of the examination.3. Prepare a final narrative report on the results of examination consisting of three parts,

namely: the introduction, the findings and recommendations, and the annexes. Presentthe findings with the corresponding recommendations in the order of their significance.

Incorporate in the report the management comments and audit teams rejoinder, if any.

4. Submit the report to the Supervising Auditor (SA) or Cluster/Regional Director withintwenty (20) days from completion of field work.

5. Distribute final copies of the report as follows:a. AOb. Head of the Agencyc. SAd. Auditors file

72Office of the Ombudsman v. Rodolfo Zaldarriaga, G.R. No. 175349, June 22, 2010 citing Tinga v. People, L-57650, April 15,

1988, 160 SCRA 483, 491


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6. Auditors before conducting cash examinations in the regions/field with no books ofaccounts should coordinate with the SAs/Audit Team Leaders (ATLs) of Head

Office/Regional Office auditees, where books of accounts are kept, to obtain data on theaccountabilities of the AO such as accountable forms issued/latest Monthly Statement of

Accountability on Accountable Forms submitted, audited or booked remittances, cash

advances granted and liquidated from the latest cash examination or outstandingunliquidated cash advances, among others. They should furnish a copy of their Cash

Examination Reports (CERs) to the SAs/ATLs of Head Office/Regional Office auditees

where the cash advances and liquidations/collections and remittances being cash

examined are booked. The CER furnished shall be utilized by these SAs/ATLs toreconcile the Statement of Accountability of the AO in the CER against the

ledgers/books of accounts of their auditees where the transactions of the AO are booked.

7. When a significant shortage is discovered after the cash count, inform theCluster/Regional Director thru the SA, within three (3) working days from discovery, for

any further appropriate action. This shall be without prejudice to the continuation and

completion of the examination and submission of the final narrative report.

8. Where the shortage necessitates the filing of an administrative and/or criminal action,submit the final report together with the letter-complaint, sworn statements of witnessesand other supporting documents to the Cluster/Regional Director thru the SA for review

and evaluation.

9. The Cluster/Regional Director shall transmit the report together with the documentsmentioned in paragraph 7 above to the Office of the Ombudsman for the filing of

administrative and/or criminal action against the defaulting AO, furnishing the auditorconcerned a copy of the transmittal letter. A copy of the report as well as information of

its referral to the Office of the Ombudsman shall be furnished the head and the chief

accountant of the agency concerned, the COA Legal Services Sector, and if thedefaulting officer is a treasurer of a local government unit, to the Bureau of Local

Government Finance. If the shortage is material, the Cluster/Regional Director

concerned shall recommend to the Chairperson, thru the Assistant Commissioner

concerned to request the issuance of a hold departure order against the erring AO by theappropriate government agency.

10.In case of cash examination conducted by a special audit team coming from other officesof the Commission, the team shall submit the report on the examination to the Director

having supervision of the special audit team, with final copies thereof duly furnished to

the AO, the Head of the Agency, the Auditor, and the SA of the agency concerned.Where the report indicates a shortage which necessitates the initiation of appropriate

action against the AO, the Director shall transmit a copy of the report together with the

supporting documents to the Office of the Ombudsman following the procedures

outlined in the preceding paragraph.


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Chapter IV

PROCEDURES AND TECHNIQUES

A. Common Procedures and Techniques1. Introduce yourself properly to the AO to be examined. In the case of special audit teams,

present the Office Order authorizing the conduct of cash examination.

2. Require the AO to temporarily suspend all transactions. In the case of cashiers of theBangko Sentral ng Pilipinas (BSP) and other government banks, the count may be

suspended every time there is a need to render service to their clients or bank tellers. Ifthe cash count cannot be finished at the close of office hours, seal or double lock their

safe, vault or other cash receptacles at the end of the day and continue the count on the

succeeding business day(s) until completed.

3. Cause the production of all cash, cash items, etc., by signing and serving the cashproduction notice in General Form No. 74(A). Require the AO to acknowledge the noticeby signing the Noted and Complied With box. For ATMs, the ATM Teller as well asthe other personnel exercising dual control over the ATM shall jointly sign the said box.

4. Require the AO to post all the transactions (such as collections, remittances, deposits,cash advances and disbursements) in his cashbook/CRR/CDR or equivalent up to the

time of examination, foot balance, rule in ink and write the certification shown on page

18of this manual. If the unrecorded transactions are voluminous, consider them as cash

items during the count.

5.

Establish proper cut-off by taking note of the last number of OR/check issued, controlpaid voucher/payroll and, determine last entry or terminal readings of validating/meteredpostage machines/cash registers/ATMs, if any. Affix full signature and indicate cut-off

date at the back of the 2nd

copy of the OR.

6. See to it that all cash, checks, money orders, paid vouchers, other cash items, and unusedaccountable forms are presented. Inspect the safe, vault or other cash receptacles where

the cash and cash items are usually kept.

7. Require the AO to segregate private and/or personal funds, if any, count them and havethem placed in an envelope properly labelled as private/personal funds.

8. Require the AO to segregate by currency and denomination, the notes and coinspresented. Have the notes arranged in bundles and the loose coins in groups.

9. Segregate the cash items by group, such as: cash in pay envelopes, checks, money orders,paid vouchers, partially paid payrolls, etc. Proceed with the listing of the cash items

using the space provided in the form. In the case of checks, and money orders, indicatethe serial number, date, drawer, drawee and amount. In the case of paid


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vouchers/partially paid payrolls, indicate voucher number, date, payee/payroll head and

amount.

10.Proceed with the piece-by-piece count in the presence of the AO, starting from thehighest to the lowest denomination, listing them in the appropriate space in General Form

No. 74(A). Use additional sheet if necessary.

11.See to it that no note or coin presented has been demonetized. Mutilated notes must beexamined for acceptability. It is the common practice of banks not to accept mutilated

notes unless the serial numbers at both ends are intact.

12.After the count of cash, cash items and accountable forms, require the AO to accomplishand sign the certification in General Form No. 74(A) in the presence of two responsiblepersons, whose signatures shall likewise be affixed on the appropriate spaces therein. For

the ATM, the bank personnel present under the joint custody/dual control shall affix their

signatures in the space provided for with the ATM Teller as main AO.

13.Check the footings of the cashbook/CRR/CDR or equivalent to ascertain the correctnessof its total and balances. Take note of errors and require the AO to adjust/correct the

cashbook/CRR/CDR or equivalent. Disclose in the cashbook/CRR/CDR or equivalentthat the adjustment, if any, was made at the instance of the examining auditor with the

AO and the former affixing their initials and indicating the date of adjustment.

14.Accomplish the Statement of Accountability in General Form No. 74(A) starting from thedate of last examination to current on the basis of verified amounts of debits and credits

to accountability of the AO. Ensure that the beginning balance of the statement shallreflect the amount of accountability determined during the last examination.

15.Prepare the Reconciliation Statement of Accountability using the format shown in AnnexG to reconcile the established accountability with the accounting records.

16. In case of cash shortage or overage, follow the procedures on pages 29 to 34 of thismanual.

17.Prepare the Statement of Accountability for Accountable Forms in the format shown inAnnexes H and I.

17.1 Obtain the balance of accountability for accountable forms per last examination tobe considered as beginning balance of the current examination. Add allaccountable forms received during the period under examination to the inventory

of accountable forms as of date of last examination. Ascertain that all accountable

forms requisitioned or procured from all sources are included.

17.2 Determine the total number of accountable forms issued and/or transferred asshown in the cashbook/CDR/CRR or equivalent, Report of Accountability for

Accountable Forms and other records.


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17.3 Deduct total issues/transfers determined in 17.2 from total inventories establishedin 17.1 to establish the balance of accountability as of the date of count.

18.Compare the balance of accountability arrived at with the inventory of unusedaccountable forms. Require the AO to explain discrepancies in writing, if any. Shortages

of accountable forms with money value shall, like a cash shortage, be covered by a letterof demand.

19.Require the AO to accomplish and sign the certificate of accountability provided inGeneral Form No. 74(A).

20.Accomplish the required auditors certification provided in General Form No. 74(A).21.Determine the adequacy of the bond using the BTr guidelines on bonds.22.Determine the adequacy of the precautionary measures adopted by the agency to

safeguard cash and whether the existing facilities of the AO provide adequate protectionagainst loss.

23.Review all necessary work papers and the supporting documents. Prepare the narrativereport.

B. Specific Procedures and TechniquesIn addition to the above-mentioned procedures and techniques, the auditor shall perform the

following:

1. Collecting Officer

1.1 Check all entries in the cashbook/CRR or equivalent from the date of lastexamination up to the date of current examination. Use tick marks to indicate

review made.

1.1.1 Check individually the entries in the cashbook/CRR or equivalent during theperiod under review against source documents, such as: ORs, Daily

Statements, Cash Transfer Slips (CTS), Deposit Slips, Remittance Advice,etc. In case the entries are based on daily statements or abstracts of

collection, check all statements/abstracts against the source documents.

1.1.2 Pay particular attention to the nature of collection/transaction made,erasures, alterations, etc., to ascertain that the amount actually

collected/transacted is the amount recorded. If necessary, confirm

collections/transactions with selected payors.

1.1.3 Check the numerical sequence of ORs and other accountable forms receivedand issued. Ascertain that the original and duplicate copies of cancelled ORs


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or accountable forms are submitted with the corresponding Report/Abstract

of Collections or equivalent. Take note of frequent cancellations of ORs

which may be an indication of irregularity.

1.1.4 Scrutinize the remittance advices or deposit slips or CTS for signs oftampering. Confirm with the BTr or depository banks allremittances/deposits made during the period under examination. Obtain

copies of debit advices issued by the depository banks during the period

under examination. Ensure that these are taken up in the cashbook/CRR or

its equivalent.

1.1.5 Examine adjustments made by accounting office/unit during the periodunder examination. Determine propriety and correctness of all adjustingentries.

1.1.6 Consider all discrepancies affecting the AOs accountability in thepreparation of the Statement of Accountability.

1.2 Examine all checks and money orders for regularity. Verify if private checks werereceived in payment of taxes, dues, fees and other government obligations bytracing them to the corresponding ORs.

1.3 Ascertain that private checks are made payable to the agency or the official title ordesignation of the agency head. Disallow accommodated private checks, including

post-dated checks, stale checks/money orders, chits and promissory notes.

1.4 Require the AO to explain the existence of obsolete checks and other accountableforms, if any.

1.5 Count and list all unused accountable forms on hand, using the appropriate space inGeneral Form No. 74(A). Inspect unused booklets to make sure that each set of

serial number is complete. In case of missing copies, require the AO to explain the

loss in writing. See to it that the notice of loss is immediately disseminated.Recommend the immediate destruction of obsolete checks and other accountable

forms.

1.6 Prepare the Statement of Accountability starting from the balance of the lastexamination to the date of the current cash examination, on the basis of verified

amounts of collections and remittances/deposits, using the appropriate spaces inGeneral Form No. 74(A).

1.7 Analyze collections and remittances/deposits to determine if amounts collected areremitted/deposited in the manner and frequency prescribed on pages 9 and 10 ofthis manual.


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1.8 Inquire into major steps, obtain flow chart, if any, or narrative procedures on thereceiving, keeping, disposing and accounting for collections. Identify deviations

from prescribed regulations and sound internal control structures. On the basis ofthe duties of the CO and his staff, ascertain whether the daily collections of the staff

are turned over to the CO at the end of the day.

2. Bank Cashier/Teller/ATM Teller

2.1 Count currency notes of Cashiers/Tellers/ATM Tellers of BSP and governmentbanks as follows:

2.1.1 per box for unopened original boxes with BSP seal;2.1.2 by bundle for opened original boxes with plastic seal intact;2.1.3 by bundle for original shrink-wrapped bundles (original shrink-wrapped

bundles are from the original boxes of notes which are machine counted,bundled and shrink-wrapped). Select bundles for 100% wrapper count using

COA sampling methodology.

2.1.4 by piece for not originally shrink-wrapped bundles. Using COA samplingmethodology, select wrappers from bundles not originally shrink-wrapped

for piece count.

2.2 Count unfit notes for retirement which are verified/counted and perforated bymoney counters of BSP by bundle. Select sample bundles for 100% wrapper count.Then select sample wrappers for piece-by-piece count.

2.3 Count coins in original bags by bag; repacked coins by pack, then select samplerepacked coins for piece count. Count loose coins piece by piece.

2.4 Count by piece all commemorative notes and coins especially printed and minted tocommemorate special occasions which are booked at face value but may be sold ata premium approved by the BSP Monetary Board, except those in unopened

original boxes and bags which shall be counted by box and by bag,

2.5 Disclose on General Form No. 74(A) and on the cash examination report whenevera sampling prescribed by the Commission was used in the cash count.

2.6 Conduct a complete piece count in case of discrepancy noted in the cash countespecially with the comparison between the denominations per count and per AOs

breakdown of his accountability. Document the subsequent 100% cash count in a

separate General Form No. 74(A) and prepare the corresponding cash examinationreport bearing the actual date when the new or subsequent cash count was

conducted.


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2.7 In the case of ATMs, count the notes by piece by cassette. Use the ATM CashCount Sheet (Annex J) or similar form to list the money retrieved. Ensure that these

forms and Section A of General Form No. 74(A) are signed by the AO and all thosedesignated under the joint custody/dual control.

2.8

For cash in receptacles which are marked Subject to Verification (SV), reflect inthe count sheet the amount indicated in the tag.

2.9 Determine whether the cash identified as SV are verified in the manner andfrequency prescribed. Age the cash SV and obtain explanation from the AO for theexistence of long staying cash SV. Request the BSP Cashier to make representation

with banks which made the deposit to schedule the opening of long staying cash SV

in the presence of the bank representatives and the auditor.

3. Disbursing Officer (DO)

3.1

Examine all cash items for regularity. Ascertain that they are all current and dulyapproved.

3.1.1 Unposted paid vouchers/payrolls3.1.1.1 Determine why the paid vouchers/payrolls are not posted in the

cashbook/CDR. If they are duly approved and acknowledged in allrespects, consider them as valid cash items.

3.1.2 Partially paid payrolls3.1.2.1 Verify contents of pay envelopes, if any. Treat cash in pay

envelopes as cash items. Add payments already made in thepayroll. Consider the total of cash found inside the pay envelopes

and total payments already made as cash items. Disallow chits and

promissory notes inside the pay envelopes.

3.1.3 Checks and money orders3.1.3.1 Disallow checks and money orders paid by the DO out of his cash

advance. Allow checks drawn as cash advances in favor of the DO

as cash items.

3.1.4 Paid invoices, reimbursement expense receipts (RER), promissory notes,etc.

3.1.4.1 If the fund being examined is a cash advance for petty expenses,consider paid invoices/receipts covering authorized petty expenses

for goods and services, like telegram, tolls, freight, cartage, etc., as

valid cash items. Allow sales invoices and/or charge invoices as


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cash items only when supported with ORs. Disallow chits and

promissory notes under any circumstance.

3.2 Count and list all unused checks on hand using the appropriate space in GeneralForm No. 74(A). Inspect unused booklets for missing checks. In case of missing

checks, require the DO to explain the loss in writing. See to it that the DOimmediately disseminated the notice of loss and notified the bank for stoppage of

payment.

3.3 Check all entries in the cashbook/CDR/CkDR or equivalent from the date of lastexamination to the date of current examination. Use tick marks to indicate review

made.

3.3.1 Based on accounting records, determine whether all cashadvances/withdrawals have been entered in the cashbook/CDR/CkDR or

equivalent on the dates they were received. List all unposted cash

advances/withdrawals.

3.3.2 Check all cash disbursements against the corresponding vouchers.Determine whether the vouchers were duly approved and paymentsacknowledged. Pay particular attention to erasures/alterations on the

voucher and the cashbook. Make sure that the amount entered in the

cashbook/CDR or equivalent was the approved amount of the voucher.Where the vouchers could no longer be made available to the auditor, such

as in the case of agencies with centralized accounting systems, secure

confirmation of the aforesaid disbursements from the auditor of the agencywhere the books are kept.

3.3.3 Trace refunds of cash advances to the original receipts issued therefor.3.3.4 Determine propriety and correctness of adjusting entries.3.3.5 Consider all discrepancies affecting the DOs accountability in the

preparation of the Statement of Accountability.

3.4 Prepare the Statement of Accountability starting from the last date of examinationto the date of current examination, on the basis of verified cash advances,

disbursements and refunds using the appropriate spaces in General Form No. 74(A).

Require the DO to accomplish and sign the certificate of accountability providedtherein.

C. Reconciliation Statement of Depository Accounts1. Require the Chief Accountant/head of the accounting unit to prepare and submit bank

reconciliation statements for the latest bank statements received covering all bank

depository accounts.


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2. Obtain directly from the bank a cut-off statement for all bank depository accounts as ofthe date of the examination and prepare the corresponding bank reconciliation statements

as of cut-off date (Annex K).

D. Cash Shortage1. Recheck all figures and computations if the examination discloses a cash shortage, before

declaring the AO short of his funds.

2. Demand at once from the AO the immediate production of the missing fund(s) themoment the amount of shortage is definitely established. Execute the demand in writing

and have the AO acknowledge receipt thereof on the duplicate copy. A sample of the

letter of demand is shown in Annex L. Obtain from the AO a written explanation of howthe shortage occurred within seventy-two (72) hours from his receipt of the letter of

demand.

3.

Recommend to the agency head the immediate relief of the defaulting officer from hisduties as AO. The recommendation shall be in writing, duly acknowledged by the agency

head or his duly authorized representative on the duplicate copy which is to form part of

the auditors work papers. Institute such measures necessary to safeguard adequately thecash and records.

Seizure of Office by Auditor

4. If a shortage is discovered on the accounts of a local treasurer, seize the office and itscontents and notify the COA Director concerned, the local chief executive, and the localaccountant.

5. Turnover immediately to the AO next-in-rank in the local treasury service the office ofthe treasurer and its contents, close, and render his account on the date of the turnover.

6. In case the AO next-in-rank is likewise under investigation, take full possession of theoffice and its contents, close and render his accounts on the date of taking possession, andtemporarily continue the public business of such office until such time that the local

treasurer is restored or a successor has been duly designated.

7. Direct the proper officer to withhold the payment of salary and other emoluments exceptretirement pay, terminal leave benefits or gratuities, due the defaulting AO once his cash

shortage is ascertained. Sign the withholding order in the following manner:

By Authority of the Chairperson,

Commission on Audit

___________________________ (Audit Team Leader)


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A sample of such withholding order is shown as Annex M of this manual. Report such

withholding order promptly to the COA Chairperson.

The salaries and emoluments to be withheld shall correspond to the amount of the alleged

shortage. Said amount shall be considered merely withheld and shall not be applied to the

shortage until final resolution by a competent court of the AOs indebtedness, if such isinitiated. In the event that the AO is found liable for the cash shortage, the withheld

salary and other emoluments shall be applied in payment of the indebtedness; otherwise,

it shall be released to the AO.73

Constructive Distraint

8. The constructive distraint contemplated under Section 47 of Presidential Decree No.1445, may be effected under the following circumstances:

a. A shortage in the accounts of an AO is discovered in audit;b. The amount of the shortage has not been restituted despite demand;c. Aprima faciecase of malversation of public funds or property is found against him;d. There is reasonable ground to believe that he is retiring from the government service;

or intends to leave the Philippines; or intends to remove his personal property from

the Philippines; or intends to hide or conceal such property; and

e. The interest of the government has to be safeguarded.9. The following are the procedures in effecting constructive distraint:

a. The auditor who discovered the shortage shall immediately submit a report to theChairperson, thru the SA and the Cluster/Regional Director concerned, embodying

his findings and recommendation to place the personal property of the defalcating AOunder constructive distraint.

b. Upon evaluation of such report and finding a need for the constructive distraint asrecommended therein, the Commission shall forthwith prepare a warrant directing the

auditor to place under constructive distraint (sample form attached as Annex N), the

goods, chattels or effects and other personal property of whatever character of the

AO. The warrant shall be signed by the Chairperson and shall show clearly the nameand address of the defalcating AO, the amount of shortage incurred, and the fact of

prior demand made for the restitution thereof.

73See Santiago v. Commission on Audit, G.R. No. 146824, June 15, 2006 and Supreme Court Resolution dated November 21,

2007


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c. The auditor directed to serve the warrant of constructive distraint shall serve the samepersonally on the defalcating AO himself. In case, however, where the said AO

refuses to receive the warrant or is absent from his given address, the warrant shall beserved upon someone of suitable age and discretion in the premises or upon the

person in possession or occupancy of the personal property of the AO, who shall

acknowledge all the copies of the warrant. In case actual service of the warrant uponthe AO or upon either of the two other persons just mentioned cannot be made, a

copy thereof shall be left in the premises or in the office of the AO or in the place of

the person in possession or occupancy of the said property of the AO which fact shall

be attested to in said copy and in all the other copies of the warrant by the distrainingofficer in the presence of at least two credible witnesses, whereupon the warrant is

deemed properly served. A copy of the warrant thus served shall be furnished to the

AO with a notation that a copy of the same was left with the person who is inpossession or occupancy of his personal property.

d. Upon service of the warrant, the distraining officer shall require the defalcating AO orany other person having possession or control of the personal property in question toaccomplish a receipt (sample form attached as Annex O) covering the property

distrained and to obligate himself to preserve the same intact and unaltered and not to

dispose of it in any manner whatsoever without the express authority of the COA.

e. In case the said AO or other person having the possession and/or control of theproperty sought to be placed under constructive distraint refuses or fails toaccomplish the receipt herein referred to or lists only a number of such personal

property not sufficient to cover the amount of the shortage, the distraining officer

shall proceed to prepare a list of the property choosing such quantity as is sufficient tosatisfy the shortage, and in the presence of two witnesses leave a copy thereof in the

premises where the property distrained is located, after which the said property shall

be deemed to have been placed under constructive distraint.

f. Where some of the property distrained consists of stocks and other securities, a copyeach of the warrant of constructive distraint and the receipt or list mentioned above

shall be served upon the president, manager, treasurer, or other responsible officer ofthe corporation, company, or association which issued the said stocks or securities. In

case of debts and credits, copies of such documents shall be left with the person

owing the debts, or having in his possession or under his control such credits, or withhis agent. The warrant of constructive distraint and the receipt or list shall be

sufficient authority to the person owing the debts, or having in his possession or

under his control any credits belonging to the AO, to desist from the settlementthereof without the written authority of the COA. In case of bank accounts, the copies

of the warrant and receipt or list shall be served upon the president, manager,

treasurer, or other responsible officer of the bank concerned, whereupon the bank

shall desist from allowing withdrawals therefrom or so much thereof, as may besufficient to satisfy the shortage of the AO without the written authority of the COA.


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g. If the property distrained are registered with any government office, the distrainingofficer shall notify in writing the government official concerned of the fact of the

constructive distraint, furnishing him with a copy each of the warrant and the receiptor list mentioned above. The notification shall contain the following data:

i.

nature and description of the property distrained;ii. date of the distraint;iii.name of the owner and/or actual possessor thereof; and

iv. nature and amount of shortage for which the distraint was effected.h. A copy of such notice shall be sent to the last known address of the AO through

registered mail with return card or served upon the AO or his agent or to the occupant

or possessor of the property in question. Receiving copies of the return card or the

notice shall be kept secured together with the audit work papers of the examiningauditor.

10.The summary remedy by constructive distraint of personal property may be repeated untilthe full amount of the shortage of the defaulting AO, including the expenses of the

distraint, is satisfied.

11.A report on any constructive distraint effected pursuant to Section 47 of P.D. No. 1445,shall be submitted by the distraining officer to the COA Chairperson, thru the SA and the

Cluster/Regional Director concerned, furnishing a copy thereof to the Legal Services

Sector of the Commission. Such report shall form part of the supporting documents of thecomplaint for malversation to be initiated against the defalcating AO. It shall provide the

Ombudsman or other government prosecutors with basis to apply with the proper court

for the attachment of the property distrained in accordance with the Rules of Court.

12.If at any time after the constructive distraint has been effected the AO restitutes the fullamount of the shortage, his personal property placed under such distraint, shall be

released therefrom.

Prosecution of the AO

13.Where a cash shortage is firmed up, submit the final narrative report together with theaffidavits, sworn statements and other supporting documents to the Cluster/Regional

Director thru the SA for review and evaluation.

14.If the facts and circumstances of the case warrant the filing of a criminal action, theCluster/Regional Director shall initiate such action by forwarding the report accompaniedby a letter-complaint (Annex P) to the Deputy Ombudsman (for Luzon, Visayas,

Mindanao or Military) concerned, recommending the initiation of criminal proceedingsagainst the defaulting AO. Where the shortage is discovered by special audit teams of

other offices of the Commission, the responsibility to initiate the criminal action shall fallupon the director or head of such office.


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15.For the purpose of prosecuting the defaulting AO, make the following documentsavailable to the prosecuting officials:

a. Certified true copies of AOs appointment, oath of office, official designation andapproved application for bond;

b. A copy of the Report of Cash Examination [General Form No. 74(A)], narrativereport and its supporting exhibits and schedules, letter of demand, and the written

explanation of the AO on how the shortage occurred, if any; and

c. Affidavit or sworn statements of the auditors and other witnesses (Annex Q).17.If the shortage is material and a case has already been filed, request, thru the COA

Chairperson, the Department of Foreign Affairs (DFA), the National Bureau of

Investigation (NBI), and the Bureau of Immigration and Deportation (BID) to deny the

AO any clearance for purposes of travel abroad unless cleared by the COA.

E. Cash Overage1. In case a cash overage is determined, extend the examination as may be necessary to

establish the cause of the overage and uncover any attendant irregularity, if any.

2. Obtain explanation from the AO. If the overage cannot be satisfactorily explained by theAO, forfeit the amount in favor of the government and request the CO to issue an OR

therefor.

3. Record the overage as Miscellaneous Income.F. Indemnity From Fidelity Fund

1. The Fidelity Fund shall be available for the purpose of replacing defalcations, shortages,unrelieved losses in the accounts of bonded public officers, for the payment of fees and

costs incident to civil proceedings brought against them to recover sums paid on theiraccount from said Fund.

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2. The relief from accountability of the accountable public offic

COA_M2013-004 CASH EXAM MANUAL.pdf

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