A Case Study on the Proper Grant and Liquidation of Cash

Advances with Its Current Issues in the Philippines

PRESENTED TO

CENTRAL MINDANAO UNIVERSITY

COLLEGE OF COMMERCE AND ACCOUNTANCY

IN PARTIAL FULFILLMENT OF THE COURSE

ACCOUNTING SYNTHESIS

RECAMARA, CEADE MAVERICK R.

BS ACCOUNTANCY
 Abstract

This paper seeks to determine the proper grant and liquidation of cash

advances to employees and officers of the Local Government Units, offices or

Government-Owned Corporations. It also examines whether the proper grant and

liquidation of these advances are obeyed and followed by the Local Government

Units specifically in the Philippines. The documents required for granting and

liquidating cash advances are also studied. The studies are done through

researching on the internet for the policy and regulation of cash advances,

government sites, reading journals, newspapers, and the official gazette. Case

issues on cash advances are also studied for this is the main topic of this study.

There are three issues involve in this study; COA files malversation charges

against about 100 government officials for unliquidated cash advances that

reached 5 billion pesos, DSWD unliquidated cash advances in the amount of 175

million pesos, the Philippine Postal Corporation 5 billion pesos unliquidated cash

advance from the conditional cash transfer (CCT).

The alternative actions are strict compliance with the COA Circular No. 92-

002, require the concerned personnel to settle/liquidate their cash advances

immediately upon serving the purpose and submit valid documents to support the

liquidation, stop granting cash advances to officers and employees with

unliquidated outstanding cash advances, and regurlarly monitor and strictly

enforce controls in the submission, settlement and liquidation of cash advances.

 Introduction

Cash advance is a common transaction in all businesses, government

organizations, and even private organizations. Cash advances are funds

advanced to an employee to pay for expenses as he or she incur so that the use

of personal funds is not necessary. All employees receiving cash advances are

responsible for completing the transaction. They are also required to liquidate

their cash advances.

In the government parlance, cash advance has been recognized as a

facilitative tool in the financial operations. It facilitates and leads the operations of

the organization. Example is when there are seminars. Employees and officers

can request for cash advances which can be used in their expenses. As a

general rule, all payments for cash advances must be paid by check but in cases

when it may be impractical or impossible to make payments by check, payments

may be made by a disbursing officer in the form of cash through his cash

advance. The disbursing officer or the employee himself, if there is no disbursing

officer assigned, must know all about the rules and regulations on granting and

liquidating cash advances which are prescribed and written one by one in the

Commission on Audit Circular No. 97-002 dated February 10, 1997 and

reiterated in Commission on Audit Circular No. 2009-002 dated May 18, 2009

and Section 89 of PD No. 1445. This is because COA may sue those persons or

organizations who violate the rules and regulations imposed by the law.
 This study focuses only on the rules and regulations on cash advances

promulgated by law, the proper grant and liquidation of cash advances, and the

issues pertaining to the unliquidated cash advances which give warning to the

Commission on Audit.
 Methodology

Secondary data are used by the study. Secondary data can be gathered

through browsing in the internet, reading articles, journals, newspapers, and

even television news and radios. Choosing this type of data fits the topic under

study.

Upon choosing what cases are to be studied, the most recent issues are

chosen and are also under current investigation by the Commission on Audit.

These cases are; The filing of malversation charges by the Commission on Audit

against about 100 government officials for unliquidated cash advances that

reached 5 billion pesos, DSWD unliquidated cash advances in the amount of 175

million pesos, the Philippine Postal Corporation 5 billion pesos unliquidated cash

advance from the conditional cash transfer (CCT). Reading the articles and

journals of the cases stated recently rise questions on how could these cases

happen that there are unliquidated cash advances for how many months and

even years, where do these amounts go and are there any imposed punishment

established by the authorities.

After reading the articles and journals, thorough analyses on the data

gathered are done. It is observed that the cases have common and they only

cover unliquidated cash advances. Thus, granting cash advances have no

problem as of now.

The student also gathers data on the rules and regulation of cash

advances from the COA Circular 90-002 dated February 10 1997 which
composes all the guidelines needed to be followed by the government units in

the Philippines and the documents required in granting and liquidating cash

advances.

The data researched, gathered and analyzed are expected to be sufficient

and can contribute a great impact in the study in which these data are the basis

of the findings and conclusions.

 Review of Related Literature

According to Commission on Audit Circular No. 97-002 dated February 10,

1997, there are rules and regulations on the grant and liquidation of cash

advances and reiterated in Commission on Audit Circular No. 2009-002 dated

May 18, 2009 and Section 89 of PD No. 1445.

Granting Cash Advances

A. General Guidelines

 No cash advance shall be given unless for a legally authorized specific

purpose.

 No additional cash advances shall be allowed to any official or employee

unless the previous cash advance given to him is first liquidated and

accounted for in the books.

 No cash advance shall be granted for payments on account of

infrastructure projects or other undertaking on a project basis.

 A cash advance shall be reported as soon as the purpose for which it was

given has been served.

 Only permanently appointed officials shall be designated as disbursing

officers. Elected officials may be granted a cash advance only for their

official traveling expenses.

 Transfer of cash advances from one accountable officer to another shall

not be allowed.
B. Salaries, Wages, Allowances, Honoraria and Other Similar Payments

 The cash advance shall be equal to the net amount of the payroll for a pay

period.

 The cash advance shall be supported by the following documents:

o Copy of designation by the Agency Head in case the AO is not a

disbursing officer by appointment (attachment to initial cash

advance)

o Copy of approved application for bond (attachment to initial cash

advance)

o Payroll or list of payees with their net payments

C. Official Travel

 Travels shall cover only those that are urgent and extremely necessary

and are beneficial to the agency concerned or the country.

 No government fund shall be utilized to defray foreign travel expenses of

any government official or employee, except in the case of training,

seminar or conference abroad.

 Clothing allowance in all categories of trips is suspended indefinitely.

 The cash advance shall be supported by the following documents:

o Travel order

o Duly approved itinerary of travel

o Certification from the accountant that the previous cash advance

has been liquidated and accounted for in the books

Liquidating Cash Advances

A. General Guidelines

 The AO shall liquidate his cash advance as follows:

o Salaries, Wages, etc. - within five (5) days after each fifteen (15)

day/end of the month pay period.

o Petty Operating Expenses and Field Operating Expenses - within

twenty (20) days after the end of the year; subject to replenishment

as frequently as necessary during the year.

o Official Travel - within sixty (60) days after return to the Philippines

in the case of foreign travel or within thirty (30) days after return to

his permanent official station in the case of local travel, as provided

for in EO 248 and COA Circular No. 96-004.

Failure of the AO to liquidate his cash advance within the prescribed

period shall constitute a valid cause for the withholding of his salary and the

instruction of other sanctions.

 The AO shall prepare the Report of Disbursements in three (3) copies and

submit the same with duly accomplished vouchers/payrolls and supporting

documents to the Accountant. For payments based on receipts and

invoices only.

 Within ten (10) days after receipt of the report and supporting documents

from the AO, the Accountant shall verify the report, record it in the books

and submit the same with all the vouchers/payrolls and supporting

documents to the Auditor.

  When a cash advance is no longer needed or has not been used for a

period of two (2) months, it must be returned to or refunded immediately to

the collecting officer.

 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.

 At the start of an ensuing year, a new cash advance may be granted,

provided that a list of expenses against the previous cash advance is

submitted.

Failure to liquidate cash advance within one month, the Auditor shall issue a

letter demanding liquidation or explanation for non-liquidation. If 30 days have

elapsed after the demand letteris served and no liquidation or explanation is

received, or the explanation is not satisfactory, the Auditor shall advise the head

of the agency to cause or order the withholding payment of any money due the

Accountable Officer (AO). The amount withheld shall be applied to his (AO’s)

accountability. The AO shall likewise be held criminally liable for failure to settle

his accounts.
 CASH ADVANCE CASES AND ISSUES

A. COA files malversation charges against 100 government officials for

unliquidated cash advances that reached P5 billion in 2011.

COA sues 100 government officials for the unliquidated cash advances in

the amount of 5 billion pesos which were cumulated for 20 to 40 years. COA

chairperson Grace Pulido-Tan said that the amount is on top of the funds

involved in the multi-billion peso pork barrel scam but likely covers

similartransactions. Due to the vast number of people who did not liquidated their

cash advances, COA and the Ombudsman doubted if they will be able to trace

everyone, and decided to focus on the amounts worth P1 million and above.

They set the P1 million-threshold to ensure they go after people with hopes of

recovery of the money. For the government officials with cash advances less

than P1 million, the COA will work it out with the Civil Service Commission

(CSC).

According to the report, there is a mechanism that the COA can do. They

planned to liquidate the cash advances less than P1 million through salary

deduction of the employees involved with the issue but to think that government

employees have small salaries it takes time for them to pay for the unliquidated

cash advances. The COA now is finding solutions to these problems.

B. DSWD unliquidated cash advances in the amount of 175 million

pesos

The Department of Social Welfare and Development (DSWD) clarified that

P222 million or 49% of the P452.55 million reported as unliquidated cash

advances to officers and employees based on the 2013 Annual Financial Report

submitted by Commission on Audit to Congress has already been liquidated as

October 31, 2014.

This came after a news report mentioned that DSWD was among the

agenceis which owed the government some P10.14 billion in unliquidated cash

advances. Of the remaining balance of P230 million, P54 million is already in the

process of liquidation and is expected to be completed baefore the year ends.

However, the liquidation of the remaining P175 million which is attributed to

DSWD-Field Office VIII has been a challenge for the Field Office.

It can be recalled that in 2013, typhoon Yolanda heavily damaged DSWD-

Field Office VIII in Tacloban City destroying various records, including financial

documents. Concerned Field Office officials and employees assured that though

they are having difficulties in reconstructing the liquidation documents, they are

exerting all efforts to settle the accounts.

They are assisting the Field Office by providing them technical assistance

to expedite the liquidation process of the amount. Bulk of the advances to officers

and employees pertain to cash advances granted for the implementation of

DSWD programs and projects perticularly the Cash-for-Work and Social Pension

for indigent senior citizens wherein payout/peyment to beneficiaries is made

directly by the DSWD Special Disbursing Officers. Pending submission of

liquidation documents, DSWD affirms that none of this amount was pocketed, but

were distributed to the intended beneficiaries of their programs.

 C. Philippine Postal Corporation 5 billion pesos unliquidated cash

advance from the conditional cash transfer (CCT).

The Philippine Postal Corp. (Phlpost) has allegedly made a P5 billion cash

advance from the conditional cash tranfer (CCT) program being administered by

the Department Of Social Welfare and Development (DSWD).

Phlpost is one of the DSWD’s monetary conduits for the distribution of

cash subsidies to indigent families under the Pantawid Pamilyang Pilipino

Program. The COA discovered the huge amount in unliquidated funds in the

account of the Phlpost.Records from the Department of Social Welfare and

Development (DSWD) show that the Philippine Postal Corp. (PhlPost) only has

P1.6 billion in unliquidated cash advances from the conditional cash transfer

(CCT) program as of Dec. 31 last year and it is based on a report from the Land

Bank of the Philippines. The amount reported by the DSWD does not match with

the amount reported by the COA.The latest annual audit report of the

Commission on Audit (COA) showed PhlPost had accumulated P5 billion in

unliquidated advances.

It is now unclear with DSWD if the P5 billion is all CCT funds or it also

covers other activities of the postal agency. Based on the records of LBP, it is

only P1.6 billion. And they are continuing to liquidate this amount. Until now they

are debating and clarifying on what is the correct amount of unliquidated cash

advances.
 CASE ANALYSIS

Based on the cases showed above, each of them has unliquidated cash

advances amounting to millions and even billions. The Commission on Audit

(COA) issued an ultimatum to government agencies that have not yet liquidated

their cash advances. There is a provision of criminal law that when somebody is

given a cash advance and he was not able to liquidate it within the prescribed

period and within demand, there is already a presumption in law that money was

malversed.

According to COA Circular No. 97-002 dated February 10, 1997 governing

cash advances, the accountable officer of the agency shall liquidated cash

advance as follows : for salaries and wages, it must be liquidated within five

days/end of the month pay period; for petty operating expenses and field

operating expenses, must be liquidated within 20 days after the end of the year

subject to replenishment as frequently as necessary during the year for official

travel, must be liquidated within 60 days after return to the Philippines in case of

foreign travel, and 30 days after return to his permanent official station in the

case of local travel, provided for in EO 248 and COA Circular No. 96-004. Failure

to liquidate cash advance within the prescribed period shall constitute a valid

cause.

The government agencies should follow these rules and regulations for

the liquidation of cash advances. There are consequences when these rules and

regulations are not followed like they are forced to submit liquidation documents,

their unliquidated cash advances are deducted to their salaries, demand for the
officials to liquidate their cash advances, and others. Failure to timely liquidate

cash advance is the gravamen of the offense against Sections 89 and 128 of

P.D. No. 1445.

Sections 89 and 128 of P.D. No. 1445 provide-

Section 89. Limitations on Cash Advance – No cash advance shall be given

unless for a legally authorized specific purpose. A cash advance shall be

reported on and liquidated as soon as the purpose for which it was given has

been served. No additional cash advance shall be allowed to any official or

employee unless the previous cash advance given to him is first settled or a

proper accounting thereof is made.

Section 128. Penal Provision – any violation of the provision of Section 89 of this

Code or any regulation issued by the Commission on Audit implementing these

sections, shall be punished by a fine not exceeding one thousand pesos or by

imprisonment not exceeding six (6) months, or both such fine and imprisonment

in the discretion of the court.

 ALTERNATIVE COURSES OF ACTION

Violation of the rules and regulations governing cash advances results to

different punishments and consequences. The following are the alternative

courses of action that can be done to avoid, prevent or minimize unliquidated

cash advances:

 Strictly comply with the provisions of COA Circular No. 97-002 and require

the concerned personnel to settle/liquidate their cash advances

immediately upon serving the purpose and submit valid documents to

support the liquidation.

 Stop granting cash advances to officers and employees with unliquidated

outstanding cash advances.

 Regurlarly monitor and strictly enforce controls in the submission,

settlement and liquidation of cash advances.

 CONCLUSIONS AND RECOMMENDATIONS

As a conclusion, all of the alternative courses of action to be taken must

be followed and be done to avoid, and settle this unliquidated cash advance.

Strict compliance with the COA Circular No. 92-002, stop granting cash

advances to officers and employees with unliquidated outstanding cash

advances, regurlarly monitor and strictly enforce controls in the submission,

settlement and liquidation of cash advances are the alternative courses

enumerated in the study. Through these actions the government agencies and

other agencies can now minimize their unliquidated cash advance or even

liquidate it on the time required by the COA Circular No. 92-002. Unliquidated

cash advance is a great anomaly happening now. Settling and suing the officials

and employees who have unliquidated cash advance is the best way to stop this

anomaly.
 REFERENCES

https://www.google.com.ph/search?sclient=psy-

ab&site=&source=hp&btnG=Search&q=DSWD+continues+accounting+of+cash+

advances%3B+clarifies+issues

http://www.rappler.com/nation/53197-coa-100-officials-cash-advances-5-billion

http://www.philstar.com/headlines/2014/09/04/1365203/coa-uncovers-phlposts-

unliquidated-cash-advances

https://bataspinoy.wordpress.com/tag/the-mere-failure-to-timely-liquidate-the-

cash-advance-is-the-gravamen-of-the-offense-against-sections-89-and-128-of-p-

d-no-1445/

http://newsinfo.inquirer.net/571507/coa-warns-govt-agencies-with-unliquidated-

cash-advances

COA_C97-002.pdf

P.D._1445.pdf

Urco_cashadvance.pdf

2011 AOM.pdf