Coa-mof-obm_jc8-85.doc

COMMISSION ON AUDIT MINISTRY OF FINANCE OFFICE OF BUDGET AND MANAGEMENT JOINT CIRCULAR NO. 8-85 October 31, 1985 TO

: All Heads of Ministries, Bureaus and Offices, Self-Governing Boards and Commissions, State Colleges and Universities, General Hospitals; Presidents and Clearing Officers of Philippine Clearing House Corporation Member Banks; COA Managers and Regional Directors; Vault Auditor; COA Unit Auditors; Comptrollers; Chiefs of Financial and Management Services; Chief Accountants/Heads of Accounting Units; Deputized Disbursing Officers and All Others Concerned.

SUBJECT : Guidelines, Procedures and Accounting Treatment in the Replacement of Lost, Destroyed, Stale, Obsolete and Fraudulently Encashed Treasury Warrants and Treasury Checking Account for Agencies Checks. 1.0

PURPOSE This Circular is issued pursuant to the provisions of Sections 96 and 97 of the Government Auditing Code of the Philippines (PD 1445) and to prescribe the guidelines, procedures and accounting treatment in the replacement by the issuing agency of lost, destroyed, stale and obsolete Treasury Warrant (TW) and Treasury Checking Accounts for Agencies (TCAA) check and by the Treasurer of the Philippines of (a) TW/TCAA check fraudulently encashed even before the recovery of the equivalent amount and (b) TW/TCAA check paid by bank but subsequently lost before such TW/TCAA check is cleared.

2.0

DEFINITION OF TERMS For purposes of this Circular, the following terms hereby defined: 2.1

Lost TW/TCAA check A TW/TCAA check is considered lost under the following circumstances: 2.1.1

When it is misplaced, waylaid or left behind inadvertently/negligently by the payee or holder in due course, or by the custodian/carrier thereof, and after diligent search cannot be found or located.

2.1.2

When it is lost due to fortuitous events such as fire, perils of travel, flood or typhoon or other causes due to force majeure and after diligent search cannot be found or recovered.

2.1.3

When it is lost by theft or robbery.

3.0

2.2

Destroyed TW/TCAA check A TW/TCAA check is considered destroyed when it is torn, mutilated, defaced or with erasures affecting the genuineness of any material information contained therein.

2.3

Stale TW/TCAA check - A TW/TCAA check is considered stale when it is outstanding for over two years from date of issuance.

2.4

Obsolete TW/TCAA check - A TW/TCAA check is considered obsolete when its use/issuance is no longer authorized.

2.5

Fraudulently encashed TW/TCAA check - A TW/TCAA check is fraudulently encashed when payment is made by a bank to a person other than the payee or holder in due course.

2.6

Payee - refers to the person, natural or juridical, in whose name the TW/TCAA check was issued.

2.7

Holder in due course - refers to the holder of a TW/TCAA check who has taken the instrument under the following conditions: 2.7.1

that it is complete and regular on its face.

2.7.2

that he became the holder of the instrument before it was overdue, and without notice that it has been previously dishonored, if such was the fact.

2.7.3

that he took it in good faith and for value.

2.7.4

that at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

RESPONSIBILITIES 3.1

Issuing Agency The Issuing Agency shall: (a) process the request for replacement of lost, destroyed, stale or obsolete TW/TCAA check; (b) approve or deny the request depending upon the validity of the claim; (c) approve the indemnity bond thereof (d) issue the replacement TW/TCAA check With respect to lost TW/TCAA check, replacement shall be limited to those verified as still outstanding (e) issue the required certification that the TW/TCAA check lost in transit by bank before clearing was validly issued and that the same has not been replaced.

3.2

Bureau of the Treasury (BTR)

The BTR shall:

3.3

(a)

provide in its appropriation the sum necessary to establish a revolving fund for the replacement of fraudulently encashed TW/TCAA check;

(b)

issue TW "B" to replace TW/TCAA check that was fraudulently encashed; and

(c)

install effective controls to prevent double payment of TW/TCAA check and see to it that any TW/TCAA check reported lost shall not be honored.

Office of Budget and Management (OBM) The OBM shall be responsible for the release of allotment and CDC to cover claims on reverted stale/fraudulently encashed TW/TCAA check as well as CDC for lost, destroyed or obsolete TW/TCAA check issued in prior years.

3.4

Commission on Audit (COA) The COA shall be responsible for the post-audit of the replacement of TW/TCAA check.

4.0

GENERAL GUIDELINES 4.1

If a TW/TCAA check is lost, destroyed, or become stale or obsolete, the issuing agency may issue a replacement TW/TCAA check which shall be made under such regulations in regard to issuance and payment and upon compliance with the requirements as provided in this circular.

4.2

Specific procedures shall be followed for obtaining the replacement of the TW/TCAA check under each of the given cases/and for reasons enumerated in 4.1. These specific procedures are laid down in 5.0, 6.0, 7.0, 8.0 and 9.0 hereof.

4.3

A stale and/or obsolete TW/TCAA check shall be replaced with a new one provided the original TW/TCAA check is presented/surrendered for cancellation.

4.4

If the original TW/TCAA check cannot be presented due to loss, destruction or theft, the procedures for lost TW/TCAA check shall apply (refer to Specific Procedures, 5.0 for Lost TW/TCAA Check).

4.5

TW/TCAA check found to have been fraudulently encashed shall be dishonored and charged back (photocopy only) to the negotiating bank by the BTR.

4.6

Allotment and CDC for replacement of Stale TW/TCAA check shall be released only upon showing proof (Journal Voucher, JV) that the amount of stale TW/TCAA check has been adjusted to Surplus Adjustment (Accounts 7-92-411/7-92-412).

4.7

CDC for replacement of lost, destroyed and obsolete TW/TCAA check shall be released only if the cancellation entry is made after the books have already been

closed. The request for the release of CDC shall be supported by the JV taking up the amount and cancellation of the TW/TCAA check adjusted to Surplus Adjustment (Accounts 7-92-411/7-92-412). The JV shall be duly certified by the Accountant.

5.0

4.8

If the cancellation is made in the current year, the year of issue, when the books are still open, there is no need to request for CDC as an exception to the provision of Joint Circular No. 2-84, as amended. The TW/TCAA check drawn to replace the TW/TCAA check issued in previous quarters (same year) shall be charged against the CDC previously utilized for the cancelled TW/TCAA check. The cancelled TW/TCAA check shall not be included in the list of cancelled TW/TCAA check supporting the request for CDC.

4.9

Only TW/TCAA check issued beginning January 1, 1980 which was paid by bank and subsequently lost before it is cleared shall be the subject of clearing under this circular.

SPECIFIC PROCEDURES FOR LOST TW/TCAA CHECK 5.1

The payee or holder in due course shall file immediately, upon knowledge of loss, a notice/request for stoppage of payment with the BTR addressed to the Treasurer of the Philippines (Attention: The National Cashier), copy furnished the Chief Accountant of the issuing agency in case of TW; in case of TCAA check, it shall be addressed to the depository bank indicated on the check, copy furnished the Deputized Disbursing Officer (DDO) of the issuing agency and the BTR-CDD. The request shall indicate the following pertinent information: a)

Complete serial number of TW/TCAA check as illustrated below: Treasury Warrant Z-04,123,456 B-05,345,678 TCAA Check SN8-1234567-1

b)

Issuing agency;

c)

Name of payee; (In case the party requesting for stop payment could not give the name of the payee, this information may be omitted)

d)

Date of issue;

e)

Amount

f)

Cause for the request of the stop payment; and

g) Date when the cause came to the knowledge of the party concerned. When the above information (except C) can not be supplied by the party, the Chief Accountant/DDO of the issuing agency, shall furnished the desired data for transmission to the Treasury, upon request of the interested party. In case the TW/TCAA check was lost by the issuing agency or lost while in transit before the receipt by the payee, the office concerned shall file the request for the stoppage of payment. Indemnity/surety bond as required under 5.3 b & c hereof is not necessary. The notice/request for stoppage of payment shall be supported by an affidavit of loss. The affidavit of loss is a requirement by the bank before a TW/TCAA check found paid can be charged back. 5.2

5.3

The BTR - CDD shall immediately verify the subject TW/TCAA check against the Monthly List of Paid TW/TCAA checks from the date TW/TCAA check was issued up to at least two (2) months after the date the stoppage request was received, to determine whether the same has already been paid or not. a)

If still unpaid, the BTR-CDD shall inform the issuing agency, copy furnished the requesting party that the TW/TCAA check is not yet paid and was therefore placed under stoppage of payment. Thereafter, procedures defined under 5.3 to 5.6 shall apply.

b)

If the subject TW/TCAA check is already paid, the BTR-CDD shall accordingly notify the issuing agency, attaching thereto xerox copies (front and back) of the TW/TCAA check, copy furnished the requesting party. The original TW/TCAA check shall be forwarded to the BTR-Legal, Intelligence and Security Division (LISD) for investigation. Hence, procedures defined under 8.0 for fraudulently encashed TW/TCAA check shall apply.

The payee or holder in due course shall request the issuing agency for replacement of lost TW/TCAA check if the subject TW/TCAA check is not yet paid, attaching thereto the following documents: a)

copy of the affidavit of loss or police report.

b)

indemnity bond for double the amount of the lost TW/TCAA check if the amount of the last TW/TCAA check does not exceed P3,000. General Form No. 18(A) which can be purchased from the Government Printing Office shall be used.

c)

surety bond for double the amount of the lost TW/TCAA check if the amount of the lost TW/TCAA check exceeds P3,000. The surety bond shall be secured from any surety company duly authorized to do business in the Philippines and shall cover the remaining life of the said TW/TCAA check.

d)

copy of the letter from the BTR-CDD regarding the status of the lost TW/TCAA check.

6.0

5.4

The Chief Accountant or any responsible official designated by the head of the agency/office shall evaluate the request for replacement, and approve or deny the request depending upon the validity of the claim. If the claim for replacement is meritorious/valid, the issuing agency shall issue the replacement TW/TCAA check.

5.5

The Accounting Division of the issuing agency shall record in its books of accounts the cancellation and replacement of lost TW/TCAA check.

5.6

If the cancellation entry is made after the books of the issuing agency are already closed, request for CDC shall be supported by the JV adjusting the amount of lost TW/TCAA check to Surplus Adjustment account.

5.7

The payee/holder in due course shall file the claim for replacement, if the subject TW/TCAA check is found to be fraudulently encashed, with the Bureau of the Treasury as required under paragraph 8.0 of this circular.

SPECIFIC PROCEDURES FOR STALE TW/TCAA CHECK 6.1

The payee/holder in due course/Finance Officer (in case of Offices under the Ministry of National Defense) shall file the request for replacement of stale TW/TCAA check attaching thereto the original of said TW/TCAA with the agency concerned thru its chief accountant.

6.2

The Chief Accountant or any responsible official designated by the head of the agency/office shall evaluate the request for replacement to determine its validity. He shall adjust thru JV the amount of stale TW/TCAA check to Surplus Adjustment (Accounts 7-92-411/7-92-412). Copy of said JV shall be attached to the request for release of allotment and CDC. At the end of each month, he shall report to the OBM all claims received and found to be meritorious with a request for the release of allotment (for those that have been previously reverted) and CDC for the amount of the replacement TW/TCAA check to be issued.

6.3

The OBM shall issue the Advice of Allotment (AA) and Notice of Cash Disbursement Ceiling (NCDC) as requested by the agency.

6.4

The Accounting Division of the agency concerned shall record in its books of accounts the receipt of AA and NCDC to cover payment of stale TW/TCAA check. No replacement TW/TCAA check shall be issued unless the corresponding AA and NCDC has been received from OBM, and that the amount of the stale TW/TCAA check had been reverted to unappropriated surplus.

6.5

The replacement TW/TCAA check shall be issued by the agencies Central Offices in Metro Manila. Those payable to provincial claimants shall be forwarded to them thru the field units of the agency concerned.

6.6

The Disbursement Voucher covering replacement TW/TCAA check shall be supported by the stale TW/TCAA check duly cancelled and shall show the Journal Voucher number covering the reversion of the said TW/TCAA check.

7.0

8.0

SPECIFIC PROCEDURES FOR OBSOLETE AND/OR DESTROYED TW/TCAA CHECK 7.1

The payee or holder in due course shall surrender the original obsolete and/or destroyed TW/TCAA check to the issuing agency for cancellation and replacement.

7.2

The issuing agency shall verify the validity of the surrendered TW/TCAA check. If validly issued, a replacement TW/TCAA check shall be issued in the name of the payee or holder in due course by the same office/unit of the agency that issued the TW/TCAA check.

7.3

The Accounting Division of the issuing agency shall record in the books of accounts the cancellation and replacement of the obsolete and/or destroyed TW/TCAA check.

7.4

In the replacement of the obsolete and/or destroyed TW/TCAA check, the applicable procedures prescribed under COA-OBM-MOF Joint Circular Nos. 2-81 and 7-81 dated February 16, 1981 and August 31, 1981,respectively, shall be followed. However, if the obsolete and/or destroyed TW/TCAA check was issued during the current year, there is no need to request for CDC as an exception to the provision of Joint Circular No. 2-84, as amended. The TW/TCAA check drawn to replace the TW/TCAA check issued in previous quarters (same year) shall be charged against the CDC previously utilized for the cancelled TW/TCAA check. The cancelled TW/TCAA shall not be included in the list of cancelled TW/TCAA check supporting the request for CDC.

7.5

If a TW/TCAA check becomes stale and obsolete at the same time, the procedures for replacement of stale TW/TCAA check shall apply.

7.6

Allotment and CDC for replacement of obsolete and/or destroyed TW/TCAA check shall be released only upon showing proof (JV) that the amount of obsolete and/or destroyed TW/TCAA check has been adjusted to surplus adjustment account.

7.7

CDC for the replacement of obsolete and/or destroyed TW/TCAA check shall be released only if the cancellation entry is made after the books have already been closed.

SPECIFIC PROCEDURES FOR FRAUDULENTLY ENCASHED TW/TCAA CHECK 8.1

The payee or holder in due course shall file a claim with the BTR for the replacement of the fraudulently encashed TW/TCAA check supported by: a)

sworn statement that he has not received nor indorsed/encashed subject TW/TCAA check which shall contain, among others, the following information: 1.

TW/TCAA check serial number which shall include the alpha prefix in case of TW types "A" and "B"; or the alpha numeric prefix and the numeric suffix in case of TCAA check.

2.

date of issue (day, month, year)

9.0

3.

name of payee

4.

amount

5.

Bureau/Office that issued the TW/TCAA check (in case of TW "A" issued by MECS, the division/station code shall be indicated.

6.

name of drawee bank, in case of TCAA check

7.

circumstances of loss

b)

Certification by the Chief Accountant of the issuing agency that the TW/TCAA check was validly issued and has not been replaced indicating therein the serial number, date of issue, payee and amount.

c)

In case of those paid by commercial banks, proof of payment of the microfilm copy of paid TW/TCAA check and that it has not been debited to the account of the depositor.

8.2

The BTR-CDD shall retrieve the original TW/TCAA check and refer it to the BTRLISD for investigation to determine whether the indorsement/signature of the payee or holder in due course on the TW/TCAA check is genuine or forged and whether the circumstances surrounding the alleged fraudulent encashment is true or not.

8.3

In case of fraudulently encashed TCAA check, the BTR-CDD shall dishonor it but will return to the Head Office of the depository bank only the xerox copy of the check (two copies, front and back) and a copy of the sworn statement, the original check to be retained by BTR to be used in the investigation of the case.

8.4

The BTR-General Services Division (BTR-GSD) shall, upon the recommendation of the BTR-LISD duly approved by the Treasurer of the Philippines, issue the replacement TW (Type B) in favor of the claimant even before the recovery of the equivalent amount from the malefactor and advise the BTR- CDD/BTR-CD accordingly.

SPECIFIC PROCEDURES FOR TW/TCAA CHECK SUBSEQUENTLY LOST BEFORE THEY ARE CLEARED. 9.1

PAID

BY

BANK

AND

The authorized officer of the Head Office of the negotiating bank shall file a claim with the BTR for the reimbursement of the amount involved in a sworn statement stating the following: a)

The loss of the TW/TCAA check described in an affidavit of loss;

b)

TW/TCAA check serial number which shall include the alpha prefix in case of TW TYPES "A" and "B" or the alpha-numeric prefix and numeric suffix in case of TCAA check;

c)

Date of issue;

d)

Name of payee;

e)

Amount and expense code; and

f)

Issuing agency. In case the claim covers several TWs/TCAA checks, they shall be listed according to their issuing agency. (Annex B for TW and Annex C for TCAA).

The sworn statement shall be supported by the following documents: 1)

9.2

Affidavit of Loss (Annex D) executed by the head of the department that lost the TW/TCAA check or Branch Manager of the bank concerned stating among others: a)

That the bank is a holder in due course;

b)

The circumstances surrounding the loss of the TW/TCAA check; and

c)

That despite diligent effort, the same is beyond recovery.

2)

Certification by the head of the carrier representative manifesting proof of loss.

or its authorized

3)

Evidence of the request for stoppage of TW/TCAA check.

4)

Legible microfilm copy of lost TW/TCAA check or photo copy of the file copy of the issuing agency of the lost TW "B"/TCAA check (front and back) cut to the same size as the original. In case the microfilm copy of lost TW "A" is not available, a list thereof indicating therein the complete serial number, date of issue, payee and amount grouped by issuing agency will suffice.

5)

Certification by the Chief Accountant of the issuing agency that the TW/TCAA check is validly issued and had not been replaced and indicating therein the serial number, date of issue, payee and amount.

6)

Indemnity agreement between the authorized officers of the bank and the BTR.

payment on the lost

The BTR-CDD shall see to it that the subject TW/TCAA check is under stoppage of payment.

9.3

The BTR-LISD shall conduct an investigation to determine whether or not the circumstances surrounding the alleged loss of the TW/TCAA check is true, and whether the claim should be acted favorably or not.

9.4

The BTR-CDD shall verify from the Monthly List of Paid TWs/TCAA checks or record of charge back whether the subject TW/TCAA check is still outstanding or has not been charged back.

9.5

The Treasurer of the Philippines or his duly authorized representative shall approve for acceptance the microfilm copy/xerox copy/dummy of the paid TW/TCAA check in lieu of the lost original for clearing purposes only a cause the same to be transmitted to the Head Office of the negotiating bank for special clearing.

9.6

The BTR-Special Clearing Division (BTR-SCD) shall accept from the negotiating bank thru special clearing operation the microfilm/copy/dummy of the paid TW "A", approved for acceptance. The BTR-CD shall accept from the negotiating bank thru special clearing operation the microfilm copy/xerox copy of the paid TW "B", approved for acceptance. The BTR shall authorize the Head Office of the depository bank concerned to charge the amount covered by the microfilm copy/xerox copy of the TCAA check, approved for acceptance against the TCAA Account of the Treasurer of the Philippines.

9.7

10.0

The BTR-CD/BTR-CDD shall dishonor the original TW/TCAA check which may be received subsequently through bank clearing operations or paid either by the depository bank or by the Treasury paying tellers, or deposited by collecting officers as part of their collections.

ACCOUNTING TREATMENT Pertinent accounting entries for transactions covered by this Circular are illustrated in Annex A.

11.0

REPEALING CLAUSE All circulars, memoranda and other issuance inconsistent herewith are hereby repealed and/or modified accordingly.

12.0

EFFECTIVITY This Circular shall take effect immediately. (SGD.) CESAR E.A. VIRATA Minister of Finance

(SGD.) FRANCISCO S. TANTUICO, JR Chairman Commission on Audit

(SGD.) MANUEL S. ALBA Minister of the Budget