Findings No.3 COA Annual Audit report 2006

July 25, 2008

3. Deliveries of supplies and property were recorded in the books after payment and at the end of the year, it was recorded based on approved Purchase Orders instead of basing it on the delivery receipt and/or inspection report contrary to the provisions of Section 4s of the New Government Accounting System, Volume I thereby understating the inventories and payables during the year while overstating the inventories and Accounts Payable at end of year by P2,730,303.08.

Section 4.s of the New Government Accounting System, Volume I states “Liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received. It is also provided under Sec. 120 of the same manual that “upon receipt of the Acceptance and Inspection Report (AIR) and other supporting documents, the Chief Accountant shall record the deliveries in the appropriate ledger cards.” Pro-forma accounting entries are also provided in Sec. 126 as follows:

Record delivery of items and charge invoice for procurement on credit

Office Supplies Inventory XX

Accounts Payable XX

Payment of Charge Invoice

Accounts Payable XX

Due to BIR XX

Cash in Bank – LCCA XX

During the post-audit of vouchers, the following was observed:

a.) The journal entries for the purchase of supplies were debited to their respective inventory accounts even if items were delivered in the prior months.

The Province did not purchase supplies for stocks rather most deliveries of supplies were automatically forwarded to requisitioning office.

In this instant case, it is possible that supplies delivered last month would be included in the Summary of Supplies and Materials Issued (SSMI) during that month of delivery thus, included in the expenses for that month. However, those particular supplies delivered last month whose payment was processed and issued check in the following month would be recorded as Inventory during the month of payment. Therefore, the supplies were first recorded as expenses and inventory or asset later.

On the other hand, review of the vouchers entered as Accounts Payable revealed that the liability was established based on the approved Purchase Orders instead of the suppliers/creditors bills or Acceptance and Inspection Report (AIR). The Provincial Accountant said many of the items were not yet delivered as of December 31, 2006 but they have included it as payables as was practiced in the prior years.

This happened because the Provincial Accountant failed to review the basic features and policies of the New Government Accounting System of which some are not consistent with the old system of government accounting.

As a result the Inventory and Accounts Payable reported in the Balance Sheet as of December 31, 2006 is overstated by P2,730,303.08. (Annex 2)

RECOMMENDATION

Remind the Provincial Accounting Office to abide with the provisions of Section 4s, 120 and 126 of the New Government Accounting System in recognizing the liabilities of the Province in the books.

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Written by admin · Filed Under Camiguin, Commission on Audit