Findings No.1 COA Annual Audit Report 2005

July 25, 2008

1. Property Plant and Equipment Account Balance totaling P2,306,054,952.59 cannot be ascertained as to propriety and validity due to non-availability of subsidiary ledgers/real property cards.

Section 13, of the New Government Accounting System,(NGAS) Volume II, provides that Property, Plant and Equipment Ledger Card (PPELC) (Annex 9), is a subsidiary ledger to be kept for each class of property, plant and equipment which shall record the acquisition , description, custody, estimated life, rate of depreciation, disposal, and other information about the property, plant and equipment, based on the source documents of the transactions.

Moreover, Section 15, and Section 16, of the New Government Accounting System, also provides that Real Property Ledger Card (RPLC) (Annex 11), a subsidiary ledger card to be kept for each property (land) which record the property description, location, acquisition cost, additions, and disposition and Construction in Progress Ledger Card (CIPLC) (Annex 12), a subsidiary ledger card to be kept for each construction in progress which records the amount per billing of the contractor in case of construction by straight contract and the amount paid for materials, labor and overhead in case of construction by administration .

These records shall be maintained by the Accounting Office and transactions shall be posted promptly from source documents. It is mentioned herein that we recommend in our Annual Audit Report for CY 2004, that the City Accountant shall supervise the reconciliation between the master list of property, plant and equipment and that is shown in the general ledger account. It is understood that at this time final reconciliation of these account balances are already effected and is ready for our audit verification.

Verification of trial Balance and consolidated Balance Sheet disclosed that the total Property , Plant and Equipment Account during the year totaled P2,306,054,952.59, although the management conducted an inventory taking of fixed assets-Office Equipment, Furniture and Fixtures, Machineries and Transportation Equipment verification of accounting and CGSO records disclosed that subsidiary ledgers relative thereto were not complete, hence, records of such account in the accounting section as of December 31, 2005 could not be validated as to its propriety and accuracy. This adversely affected the fairness of presentation of the financial statements as of year end.

In its reply to the management letter sent, the City Accountant has been instructed to speed up the preparation of the final Plant, Property and equipment Ledger Cards, so as the computation of monthly depreciation are taken up during the end of the year. Moreover, the Accountant disclosed that considering the magnitude of the account, the portion so far completed was the drawing up of the Master List of Office Equipments, Furniture and Fixtures, It Equipments and Software, Motor Vehicles, Library Books and Medical & Dental Laboratory Equipments. The Other accounts are yet to be finalized. So far, the acquisition made in CY 2002, 2003, 2004 and 2005 of the aforementioned accounts are already separated and recorded in the subsidiary ledger. Those acquired before CY 2002 are still recorded in lump sum amount and subject to the ongoing reconciliation between the City general Services office and the Accounting Office Efforts will be exerted this year to have the Master List of other fixed assets drawn and reconciled with the records of the City General Service Office and that of the City Accounting Office.

Recommendation

Require the General Services Officer to conduct physical inventory on all Property Plant and equipment to include Land and Land Improvements, Buildings and Structures, and reconcile them with the records from the accounting per subsidiary ledger to the general ledger so that total valuation of properties appearing in the Trial Balance could be validated as to its correctness and accuracy. Real property cards should be maintained by the General Service Office Department on each of the Property Plant and Equipment account in order to come up with realistic data of property inventory account

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Written by admin · Filed Under Cagayan de Oro, Commission on Audit