Findings No.4 COA Annual Audit Report 2005

July 25, 2008

4. Updating of bank reconciliation is still a problem. Non-compliance of COA Circular No. 96-011 placed the correctness of the balance per book of three current/demand deposits of P33,764,527.46 doubtful.

Section 3.2 of COA Circular No. 96-011 dated October 2, 1996 requires the local accountants to prepare the monthly Bank Reconciliation Statements within ten (10) days from receipt of the bank statements.

Reconciliation of accounts is necessary to check the correctness of both the book and bank balances. It is a process of bringing into agreement two separate but related sets of books. It explains the causes of variance between the balances shown per bank statement and those in the books. This activity will ensure that all items, particularly bank reconciling items are taken up in the agency’s books of accounts and vice versa.

For calendar year 2005, the City Government of Iligan maintained twenty six (26) deposits accounts in various local banks situated in the city. Summary of the depository accounts are shown below:

Type ofCurrent AccountsTime DepositsTotal (Over-all)FundNo.BalancesNo.BalancesNo.BalancesGF553,477,443.244280,156,443.859333,633,887.09SEF115,582,115.35118,466,288.73234,048,404.08TF1414,451,552.31113,443,074.121527,894,626.43Total20P83,511,110.906P312,065,806.7026P395,576,917.60

Our examination showed material discrepancies between the book and bank balances of the following accounts:

Depository BankCurrent Account NumberBal. Per Book 12-31-05Bal. Per Bank 12-31-05Variances DBP – Iligan 0-00009-820-2 (GF)12,745,103.8925,613,626.14(12,868,522.25LBP- Iligan0322-1063-43 (GF)5,437,308.221,431,010.36P4,006,297.86LBP – Iligan0322-1048 (SEF)15,582,115.3511,764,694.70P3,817,420.65TotalP33,764,527.46P38,809,331.20

Review of the latest monthly bank reconciliation reports disclosed the following time lag:

One (1) year behind for LBP account No. 0322-1048 – SEF;

Eleven (11) months behind for LBP account 0322-1063 – GF, and;

Seven (7) months behind for DBP account 0-00009-320-2 – GF.

This was the subject of our memorandum dated July 1, 2005 (See Annex D). These deficiencies rendered the verification of the above accounts balances tedious and difficult.

The City Accountant opined, during the exit conference, that preparation and updating of the required bank reconciliation statements assigned to some of his staff is currently in progress.

Recommendations

Take rigid steps to update reconciliation of the bank and book balances so that long outstanding reconciling items can be properly taken up in the books. Henceforth, ensure compliance to Sec. 3.2 of COA Cir. No. 96-011.

Moreover, for the General Fund, reduce the number of current deposits accounts from five (5) into two (2); one depository current account for the Land Bank of the Philippines and another for the Development Bank of the Philippines.

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