Findings No.1 COA Annual Audit Report 2006

July 25, 2008

1. Various goods purchased totaling P33.432 Million were not coursed through the Inventory account, instead such procurement were directly charged to current operational expenses, contrary to prescribed generally accepted state accounting procedures (Sec. 114, Vol. I, NGAS)

The new government accounting system used the modified accrual basis of accounting. Under this method, all expenses shall be recognized when incurred. Regular purchases shall be coursed thru the Inventory account and issuances thereof shall be recorded as they take place, except those purchased out of the petty cash fund which shall be for the immediate use and for stock in which case shall be charged immediately to the appropriate expense account. The Chief Accountant and the General Services Officer shall each maintain perpetual inventory records comprising of stock cards and property cards for supplies, property, plant and equipment in their custody to account for the receipt and disposition of the same. The balance per stock/property cards should always reconcile with the ledger cards of the accounting unit. (Sec. 114, Vol. I, NGAS)

The perpetual inventory method and the moving average method shall likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and reports for the holding of inventory shall also be followed. However, separate perpetual inventory records shall be maintained by the Accounting Unit, while the General Services Officer or the Treasurer, as the case maybe shall maintain stock cards. Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the fund shall be prepared. (Section 103, Vol I, New Government Accounting System).

Our review of goods purchased worth more than P50,000.00 per purchase order totaling P33,432,644.37 which should have been initially recorded to the Inventory account were instead directly charged to operating expenses, as follows:

Office Supplies Expenses (Annex A – Table I)P 2,539,531.74Drugs and Medicines Expenses (Annex A – Table II)5,896,495.48Medical, Dental & Lab. Expenses (Annex A -Table I1I)6,204,925.80Other Office Supplies Expenses (Annex A – Table IV)11,102,849.65Textbooks & Instructional Expenses (Annex A – Table V)2,933,375.00Spare Parts Expenses (Annex A – Table VI) 4,755,466.70TotalP =SUM(ABOVE) 33,432,644.37

Certainly, this is a deviation or departure from the above mentioned generally accepted prescribed accounting principles, rules and procedures.

During the exit conference, the Head, Bookkeeping Section, City Accounting Office explained that subject supplies and materials purchased were, almost immediately, issued and put into use by the end-users, thus were recorded to the appropriate expense accounts.

We further opined that the rationale behind such a regulation requiring regular purchases shall be coursed thru the inventory account and issuances thereof shall be recorded as they take place is not hard to perceive. The evident purpose of the different scattered laws, rules and regulations are designed as effective control measures in the use of government funds and properties.

Recommendation

Direct the City Accounting Office to record all supplies and materials purchased worth more than P50,000.00 per transaction initially in the Inventory Account. Upon issuance thereof, the Inventory account shall be credited while the expense account shall be debited.

The City Accounting Office is further advised to ensure compliance to the accounting procedures prescribed in Sections 113, 114 and 121 of the New Government Accounting System.

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Written by admin · Filed Under Commission on Audit, Iligan City