SOP Library
SOP NO:
FS-FA13
(List of Exhibits/Attachments)
Mission
:
Corporate Administration
Title:
Implementing Guidelines in Writing-off of Dormant/Uncollectible Accounts
Date Approved/Issued:
05/13/2008
Date Effective:
05/13/2008
Digest:
I. TERMS OF REFERENCE
A. Rationale
B. Objective
C. Scope
D. Basis
II. IMPLEMENTING GUIDELINES
A.
Determination of Receivables for Writing-off
1. The following receivables may be recommended for writing-off:
a. Unliquidated Cash Advances of Employees (separated from service)
i. Death of respondent employee; or
ii. Unknown whereabouts of the respondent employee, and that he/she cannot be located despite extra-diligent efforts to find him; or
iii. Incapacity to pay or insolvency of the respondent employee; and
iv. The account has remained unpaid and outstanding for more than 10 years despite diligent efforts to collect exerted by the NFA; and
v. The account unpaid and outstanding does not exceed Php10,000
b. Uncollected Receivables due to:
i. Reported insolvency/bankcruptcy of the customer/debtor/client; or
ii. Death or unknown whereabouts of a debtor; and
iii. Account is more than
4
years uncollected, and is considered as bad debts under Accounting and Auditing Rules.
c. Dormant Accounts (except shortages of Accountable Officers) which have been inactive for more than 5 years due to non-availability of records and documents.
2. Prior to recommending a receivable for write-off, the NFA-Department for Accounting Services (DAS-Central Office) and Finance Unit (for Field Offices) shall ensure that recording of receivable in the books are properly done and that due diligence in collecting these receivables have been exerted.
a. It shall examine the documents pertaining to the receivable to:
i. ascertain that the uncollectible accounts are properly recorded and charged to the right debtor/person liable to pay;
ii. establish the validity and legality of NFA claims against the debtor/person liable to pay.
iii. In case the account is erroneously recorded, necessary adjustments to proper account shall be immediately effected.
b. In the absence of pertinent documents, DAS/F.O. Finance Unit shall exert extra effort to obtain/seek a written confirmation from the debtor/person liable to pay.
i. If confirmation is obtained, immediate collection of account shall be undertaken,
ii. If confirmation of debtor is not obtained and the account is validated as a receivable, the subject uncollectible accounts shall be requested for write-off and/or adjustment of account balances from the COA,
c. The NFA-DAS/F.O. Finance Units shall also establish that best collection effort had been exerted. Collection efforts may be through issuance of collection/demand letters (at least 3), billing statements, or proof that legal action if any, has been undertaken such as court judgment.
Documentation of collection efforts is necessary to prove that adequate actions have been undertaken to recover the receivables before they are recommended for writing-off.
3. When all indications that the receivable is considered worthless and collection is very nil, the said account may be recommended for write-off.
B.
Recommendation
to Write - off
1. If the DAS - CO/Finance Unit-FO finds a sound/valid reason for recommending an account to be written-off, a Requests for Write-off shall be prepared for endorsement to COA.
Endorsement of Requests for Write-off (regardless of amount) shall be as follows:
a.
Provincial Office Accounts
:
1
st
endorsement Provincial Manager
2
nd
endorsement Regional Manager
3
rd
endorsement COA Provincial Audit Team Leader
4
th
endorsement COA Regional Legal Adjudication Director
5
th
endorsement COA-Central Office Director, Legal and
Adjudication Office Corporate
b.
Regional Office Accounts
1
st
endorsement Regional Manager
2
nd
endorsement COA Regional Audit Team Leader
3
rd
endorsement COA Regional Legal Adjudication Director
4
th
endorsement COA-Central Office Director, Legal and
Adjudication Office Corporate
c.
Central Office Accounts
1
st
endorsement NFA Administrator
2
nd
endorsement COA Supervising Auditor, NFA-CO
3
rd
endorsement COA-CO Cluster Director, Corporate Sector
4th endorsement COA-CO Director, Legal and
Adjudication Office , Corporate
2. Approval of Requests for Write-off shall be as follows:
Php1M and below - Adjudication and Settlement Board (ASB) of
COA, Central Office
Above Php1M - Commission Proper
3. Requests for write-off shall be supported by the following :
a. Unliquidated Cash Advances of Employees (separated from the service)
i. Death Certificate
(in case of death of respondent employee)
ii. Returned collection/demand letters and/or Billing Statements
(in case of unknown whereabouts of the respondent employee)
iii. Proof of employee’s incapacity to pay such as Barangay Certificate stating that respondent employee has no business operation in the area and the debtor has no property in the area
(in case of employee’s incapacity to pay/insolvency)
iv. Proof that the account has remained unpaid and outstanding for more than 10 years, such as Certification from Department Manager (DAS-CO)/Accountants (FO) that accounts has been past due as supported by a copy of the Aging of Receivable.
b. Uncollected Receivables:
i. Death Certificate
(in case of death of the debtor
)
ii. Returned collection/demand letters and/or Billing Statements
(in case of unknown whereabouts of the debtor),
iii. Proof of debtors’ insolvency such as:
Ÿ
Barangay Certification that the debtor has no estate/property in the area and that business has ceased operation,
Ÿ
Certification from Security & Exchange Commission and ITR/BIR Clearance (for Corporation)/Income Tax Return (ITR) (for sole proprietor) due to bankcruptcy & insolvency of the debtor
iv. Proof that the account has remained unpaid and outstanding for more than 4 years, such as Certification from Department Manager (DAS-CO)/Accountants (FO) that accounts has been past due as supported by a copy of the Aging of Receivable.
c. Dormant Accounts (except shortages of Accountable Officers) due to non- availability of documents/records
i. List of available records and extent of validation made on the accounts
ii. Certification by the Head of Office indicating reasons why the books of accounts/records, financial statements/schedule and supporting documents cannot be located ( i.e. Records damaged due to fire, typhoon, termites, etc.)
iii. Copy of Aging of Receivable
C
.
Documentation/Recording of Accounts Written-off
1. If the request for write-off has been approved by COA, DAS/Field Office Finance Unit shall transfer the receivable account from the books to the Registry of Accounts Written-Off (RAWO-
Annex A
- below).
a. The RAWO shall be accomplished as follows:
i. Agency - name of the agency
ii. Account Title - title of account based on the Chart of Accounts
iii. Account Code - code of account based on the Chart of Accounts
iv. Sheet No. - sheet/page number
v. Reference Date - date of the JEV used as basis in transferring the accounts written off to the Registry
vi. Reference No.- JEV used as basis of entry in the Registry
vii. Particulars - description of the account or specific item written off
viii. Authority - the number and date of COA decision authorizing the write-off of the account/s and its transfer to the Registry
ix. No. of Years Outstanding - number of years the accounts remained uncollected/unsettled/dormant
x. Amount - amount of dormant accounts written-off based on JEV/authority
b. The RAWO shall be maintained by the DAS-C.O./Field Office Finance Unit by account and kept in a perpetual manner. New sheet shall be prepared only when the preceding one is used up.
c. At the end of each year, the total amount of accounts written off shall be disclosed in the Notes to the Financial Statements.
2. The DAS/Field Office Finance Unit shall prepare accounting entries necessary to record the accounts written off.
D.
Settlement/Recovery of Accounts Written -Off
1. Accounts written-off are not condoned but remains legally collectible in the event a possibility warrants a collection thereof. Thus, collection efforts should still be pursued to settle/recover said accounts.
2.
Accounting Entries
:
DR
:
301
Allowance for Doubtful Accounts xxx
CR: Approp. SL Code Appropriate Receivable Account xxx
#
DR: 102 Cash-Collecting Officer xxx
CR: 684 Prior Years Adjustment-Expenses xxx
3. The Central Office Accounting Division (COAD) -DAS and Field Offices’ Finance Unit shall prepare a Monthly Status Report on Uncollectible Accounts Written-off and Recovered to be submitted to the National Accounting Division (NAD) -DAS together with their Monthly Trial Balance.
This implementing guidelines shall take effect immediately upon approval. All rulings/issuances inconsistent with the provisions of this guidelines shall be deemed superseded.
Date Approved:
May 13, 2008
.
Annex A
III. RESPONSIBILITIES
IV. FLOW CHART
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