COMMISSION ON AUDIT CIRCULAR NO. 97-001

COMMISSION ON AUDIT CIRCULAR NO. 97-001
February 5, 1997

TO	:	Heads of Departments, Agencies, Bureaus and Offices of the National Government; Heads of Self-Governing Boards and Commission, State Universities and Colleges; heads of Financial management Services, Chief Accountants/heads of Accounting Units; COA Assistant Commissioners, COA Directors, Heads of Auditing Units; and All Others Concerned.

SUBJECT	:	Guidelines on the Proper Disposition/Closure of Dormant Funds and/or Accounts of National Government Agencies.

RATIONALE AND PURPOSE

The Annual Financial Report (AFR) of the National Government (NG) includes funds and accounts (Assets, Liabilities and Residual Equity) of agencies that have long been abolished, or agencies whose functions have been merged with or transferred to other agencies and accounts of projects/programs which have been completed, discontinued or abandoned. Some of these funds/accounts have remained dormant for more than five (5) years now.

To date, the details and validity of these funds/accounts cannot be fully ascertained due to lack/unavailability of supporting records/documents and that the present accounting personnel has no knowledge thereof.

This circular therefore is issued to prescribe the guidelines and procedures on cleaning the books of accounts of the NG with dormant funds/accounts pertaining to the abolished and/or merged/transferred agencies and projects/programs of which implementation have already been completed, discontinued or abandoned.

II.

DEFINITION OF TERMS

For the purpose of this Circular, the following terms shall be construed to mean as follows:

Dormant Accounts - refer to individual or group of accounts which balances remained non-moving for more than five years.
Dormant Funds - refer to funds with their own assets, liabilities and residual equity created for specific projects/programs, the implementation of which have been completed and the account balances remained non-moving for more than five (5) years.
Abolished Agency - refers to the agency which was dissolved pursuant to low or other authority or which functions were transferred/merged or consolidated with another agency or absorbed by a new agency.
Receiving Agency - refers to the agency which absorbed the functions, funds and accounts of the abolished agency.

III.

GUIDELINES

Dormant Funds

When the accounts in the trial balance of a fund or funds are non-moving for five consecutive years, the Chief Accountant or other Officials concerned shall:

Initiate/cause the verification of the nature or purpose of the fund.
If upon verification the purpose of the fund is found fully completed, discontinued and/or abandoned and no financial transactions are expected, conduct review, analysis, and reconciliation of the subject funds accounts, and determine their existence and validity.
Effect the adjusting journal entries and prepare the preliminary trial balance.
Determine proper disposition of reconciled and validated accounts as follows:

	4.1	Remittance of all cash balances on hand and in other banks to the National Treasury.
	4.2	Enforcement of collection of receivables and liquidation of outstanding cash advances.
	4.3	Settlement of all liabilities and/or reversion/adjustment of same to the CRO account.
	4.4	Conduct of physical count of inventories and fixed assets, and reconciliation of the same with those recorded in the books of accounts.

Upon completion of steps 4.1 to 4.4 above, prepare the adjusting and closing entries and the final trial balance.
Transfer to the General Fund (GF) books, accounts with remaining balances. Accounts not yet reconciled/validated should also be transferred to the GF books with suffix "Fund ____". This notation will remain until the accounts are fully reconciled/validated and closed.
Submit to the Accountancy Office, COA and the COA Resident Auditor the following:

	7.1	Preliminary trial balance, copies of journal vouchers required under No. III.A.3 of this circular, and other pertinent documents such as project completion, discontinuance, etc.
	7.2	Final Trial Balance, with notation "Balances taken up per JV No.___dated___ were transferred to___". This shall be indicated immediately after the Grand Totals. A copy of the JV shall be attached to the final trial balance.

Furnish the Department of Budget and Management (DBM) with copy of the final trial balance, and inform both the DBM and BTR regarding the closing/transfer of all account balances.
If there are cash accounts which will affect the books of the National Treasury, furnish the Bureau of the Treasury (BTr) with the JV pertaining thereto.
If the analysis/review of the accounts/funds is not possible due to absence of records and documents, the agency head concerned should request for write-off and/or adjustment of account balances from the COA, supported by:

	10.1	List of available records and extent of validation made on the accounts; and
	10.2	Certification and reasons why the books of accounts/records, financial statements/schedules and supporting vouchers/ documents cannot be located.

B.	Dormant Accounts Dormant accounts in on active fund shall be reviewed, analyzed and reconciled together with the other related accounts in the trial balance. After the review and validation of accounts, the procedures prescribed in Nos. III.A.3 to .4 and III.A.9 to .10 of this circular shall be followed.
C.	Accounts of Abolished Agencies The guidelines and procedures prescribed in COA Circular No. 92-375 dated March 9, 1992 Re: Accounting guidelines and procedures for the closing of the books of accounts of abolished/transferred/merged/ consolidated/converted/subdivided agencies and the opening of the book of accounts for agencies affected by such abolition/transfer/merger/ consolidation/conversion/subdivision pursuant to the provisions of law, should be followed. For agencies which have long been abolished and whose accounts are still reflected in the consolidated financial report of the National Government, the Accountancy Office shall:
		2.1	Determine: the law or other authority abolishing/merging or transferring the functions of the agency, the disposition of the assets and liabilities of the abolished/merged/transferred agency, the receiving agency, action taken by the receiving agency on the accounts of the abolished/merged/transferred agencies,
		2.2	Reconcile the account balances per agency records with the balances maintained in the Accountancy Office.
		2.3	Communicate with the agency concerned relative to the un reconciled balances and actions to take on those accounts.
	If the books of accounts, schedules and supporting documents are available, the receiving agency shall:
		3.1	Analyze, validate and reconcile the account balances and determine proper disposition of accounts following the procedures under No. III.A.4 of this circular.
		3.2	Effect the transfer of reconciled balances to the proper funds as provided for in the law/authority abolishing the agency.
		3.3	Prepare the adjusting and closing entries and the final trial balance.
		3.4	Cause the transfer/consolidation of accounts in accordance with the provisions under the law abolishing/transferring/merging the agency.
		3.5	Submit to the Accountancy Office, COA and the COA Resident Auditor the following: Preliminary trial balance, copies of journal vouchers required under No. III.A.3 of this circular and other pertinent documents such as project completion, discontinuance, etc. Final Trial Balance with notation "Balances taken up per JV No.____dated___ were transferred to___". This shall be indicated immediately after the Grand Totals. A copy of the JV shall be attached to the final trial balance.
		3.6	Furnish the Department of Budget and Management (DBM) with copy of the final trial balance and inform both the DBM and BTr regarding the closing/transfer of account balances.
	If no action has been done to clear the accounts of abolished agencies because the books of accounts, financial statements/schedules and documents needed to validate the accounts are no longer available, the agency head of the receiving agency should request for write-off or adjustment of these accounts. The request should be supported by documents as mentioned in No.III.A.10 of this circular.

IV.	ADMINISTRATIVE SANCTION Failure of the officials/employees concerned to comply with the requirements of this circular shall subject them to administrative disciplinary action in accordance with the provisions of Section 122 (2), Chapter 3, Title III, P.D. No.1445 and Section 55, Chapter 10, Sub-title I-B, Book V of Executive Order No. 292, series of 1987, of the Revised Administrative Code of the Philippines.
V.	SAVING CLAUSE Cases not covered in this Circular shall be referred to the Accountancy office, COA for resolution.
VI.	REPEALING CLAUSE All circulars, memoranda and other issuances or parts thereof which are inconsistent with the provisions of this Circular are hereby rescinded/repealed/modified accordingly.
VII.	EFFECTIVITY This Circular shall take effect immediately.