Republic of the Philippines COMMISSION ON AUDIT AUDIT OBSERVATION MEMORANDUM (AOM)

We have audited the transactions of the Barangay and observed the following: Inactive payroll fund account amounting to P183,841.93 remained unliquidated not in accordance with Section 89 of PD 1445 thereby raising a doubt on its accuracy and completeness which may affect the fairness of the financial statement of the barangay.

Section 89 of PD 1445 provides for limitations on cash advance; X x x 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. Review of the financial statements revealed that the Payroll Fund (Account Code 106) had been inactive since 2008 up to CY 2010. Further verification of the records showed that it was from the Cash Disbursing Officer account in 2004, 2005 and 2006 with balances of P116,804.00, P246,223,40 and P144,262.25 respectively. It was then, reclassified upon the inception of the Payroll Fund account. With reference from the previous audit findings xxx that it was xxx under the accountability of previous Barangay Treasurer, Crisologo Olinding. The accumulation of the balances was due to the cash advances of the previous Barangay Treasurer (Crisologo Olinding) without duly approved disbursement voucher and the recording thereof was based on the paid checks returned by the bank. Such practice would result in the doubtful validity and violates the fundamental principle governing disbursement of government funds which states that disbursements of government funds shall invariably bear the approval of the proper officials. Recommendation Immediate liquidation of the unliquidated cash advance is required in order to prevent government funds from losses or wastage. Continued failure to liquidate or explain nonliquidation of cash advance is punishable under article 218 of the Revised Penal Code.

May we have your comment/s on the following audit observation within fifteen (15) calendar days from receipt hereof.

Audit Team Leader

Supervising Auditor

Proof of receipt of AOM: ____________________ Date: _______________