AUDIT OBSERVATION MEMORANDUM (AOM)

We have audited the liquidation report of the cash advances of XXXX for Calendar
Year (CY) 2022 and observed the following deficiencies:

Unliquidated Cash Advances at Year End

1. Cash advances in the aggregate amount of ₱XXXX remained unliquidated as of

December XXXXX, thus resulting in the overstatements of the Assets and
Government Equity and the understatement in the related expenses accounts

1.1 COA Circular No. 97-002 dated February 10, 1997 provides the following:

“4.1.8 The Accountant shall obligate all cash advances granted. He shall see
that cash advances for a particular year are not used to pay expenses of
other years.

5.8 All cash advances shall be fully liquidated at the end of each year.
Except for petty cash fund, the AO shall refund any unexpended balance to the
Cashier/Collecting Officer who will issue the necessary official receipt.”
Emphasis supplied”

1.2 Section 5.0 of COA Circular No. 2012-004 dated November 28, 2012, on the
legal presumption against non-liquidation of CA under Article 217 of the Revised
Penal Code states in unequivocal terms that: “The failure of a public officer to have
duly forthcoming any public funds or property with which he is chargeable, upon
demand by any duly authorized officer, shall be prima facie evidence that he has put
such missing funds or property to personal use.”

1.3 Review of the agency’s Statement of Financial Operation (SFPo) as of

December XXXX, disclosed that the unliquidated cash advances of XXXX as of the
year end aggregated to ₱XXXX consisting of Advances to Officers and Employees.
Table 1 summarized the cash advances granted to four (4) personnel of XXXX which
remained unliquidated as of December XXXX

1.4 Item 1 pertains to the cash advance for XXXXXX, which was cancelled. An
inquiry with the accounting staff responsible for monitoring the unliquidated cash
advance revealed that it was only in January XXX when she discovered that the
attendance of the traveling employee was cancelled. Instead of issuance of demand
letter, the accounting staff made constant reminders to the said employee thru text
messages to liquidate her cash advance, but to no avail. This practice exposed the
unutilized fund in the hands of the employee to possible loss, misappropriation, or for
personal use, taking into account the significant period that it was
outstanding. Moreover, instead of requiring the return/ refund of the unused traveling
allowance of the concerned employee, XXXX allowed the settlement of the said CA
of the concerned employee thru salary deduction in January XXXX. As a result, no
Official Receipt was issued by the Cashier/Collecting Officer since no collection
transaction transpired.

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1.5 Item 2 pertains to travel expense XXXXXX, but remained unliquidated as of
December XXXX even though the purpose of the cash advance has been served.

1.6 For items 3 and 4, cash advances were drawn during CY 2022 for expenses
that include those for the following year thus it was imminent that the same will
remain unliquidated at year end, contrary to item 5.8 of COA Circular 97-002 which
requires that all cash advances shall be fully liquidated at the end of each year and
item 4.1.8 of the same Circular which states that cash advances for a particular year
should not be used to pay expenses of other years.

1.7 Management has not been adhering strictly the rendering of full
accounting/liquidation of the AOs cash advances in pursuant to existing rules and
regulations before granting additional cash advances. As a result, Advances to
Officers and Employees and the Accumulated Surplus accounts were misstated as a
result of the unliquidated cash advances as at year end.

1.8 We recommend that the Chief of the XXXX undertake the following courses
of action:

a. Instruct the Accountant to refrain from granting cash advances at a

later period of the year, unless the same can be liquidated on or
before December 31 of the year to avoid accumulation of
unliquidated cash advances at the end of the year;

b. enforce the immediate liquidation of cash advances which remained

unsettled after the prescribed period and to submit Liquidation
Reports and/ or to return the unexpended balances, if any; and

c. cause the withholding of the salary of an Accountable Officer or

agency employee who, despite series of demands, refuse to liquidate
his/her cash advances which remained outstanding for a
considerable length of time.