Findings No.4 COA Annual Audit Report 2005

July 25, 2008

4. The agency failed to completely reconcile the unadjusted prior year’s reconciling items for Cash in Bank-Local Currency, Current Account reconciling items totaling P73,165,004.73 in the agency’s books of accounts affecting the accuracy, validity and reliability of cash in bank balances for the current year.

Section 58 of PD 1445, provides among others that the examination and audit of assets shall be performed with a view of ascertaining their existence; determining their agreements with records; and proving the accuracy of such records.

COA Circular No. 92-125A requires the Accountant to submit to the COA Auditor Bank Reconciliation Statements (BRS) within 15 days after the end of each month for the purpose of ensuring accuracy, reliability and/or validity of the depository account balances in the accounting records and in the monthly trial balances and year end financial statements. The BRS also serves as basis in determining whether the balance per accounting subsidiary ledger are in agreement with the balances in the bank cashbook of the cashier and in the bank statement.

Adequate accounting control ensure that systems are in place to safeguard its resources. Internal control principles provides that available proofs of accuracy shall be utilized in order to assure correctness of operation and accounting. The reconciliation of accounts is one way of proving the reliability and accuracy of accounting records. The controlling accounts when properly reconciled with subsidiary records served as a proof of accuracy between account balances.

On the other hand, one of techniques in the audit of assets, particularly cash accounts, is the Auditor’s verification of the monthly bank reconciliation statement submitted by the agency management with a view to determine that book balances per cash book, general ledger and the depository accounts agree and as a basis for comparison of the recorded cash accountability with existing and/or actual cash.

Verification of the cash accounts as of December 31, 2005 disclosed deviations and/or deficiencies as follows:

Comparative balances Per Cashbook, Per Bank and per Book of Accounts do not reconcile, viz:

EMBED Excel.Sheet.8

b. Bank Reconciliation Statements for Prior and Current Year were submitted by the Accounting Office, however prior years reconciling items disclosed in the prior years audit recommendations remained not reconciled totaling P73,165,004.73 as shown hereto:

BankAccount No.Balance 12/31/05Adjusted Balance as of 12/31/05Reconciling Amount Made1DBP0-01007-810-521,900,276.534,132,681.6817,767,595.152LBP152-0010-451,964,045.421,964,045.42-0-3LBP2412-1015-134,883,399.636,762,657.93(1,879,258.30)4LBP0152-0460-141,998,690.991,998,690.99-0-5LBP2412-1038-260.006,650,471.69(6,650,471.69)6PPSB100010-70007-25,390,867.655,390.867.65-0-7PCIB1128-00239-85,923,182.855,923,182.85-0-8PAB8357,826,504.247,826,504.24-0-9PNB345-8600731,452,263.081,452,263.08-0-10PVB02301-000280-93,312,570.893,312,570.89-0-11DBP0-0108-810-13,705,496.473,705,496.47-0-12PPSB1-00010-70026-95,077,965.485,077,965.48-0-13DBP0-00240-810-89,398,516.419,398,516.41-0-14CDF0152-0429-140.000.00-0-15LBP345-8600065402,893.76402,893.76-0-16LBP0152-0049-749,534,318.048,763,320.41770,997.6317LBP0152-0429-06245,345.26245,345.26-0-18LBP0152-0386-5819,207.5119,207.51-0-19LBP0152-0363-70138,322.91138,322.91-0-P83,173,867.1273,165,004.7310,008,862.79

In spite of the assurances of the City Accountant that given more time these deficiencies will be corrected, cash in bank balances for all funds could not be validated in audit because these deficiencies remained uncorrected. This condition adversely affected the reliability and accuracy of the financial statements.

Management commented that the City Accounting Department has been required to fast track and include in their priority activities for CY 2005 and CY 2006, the preparation of Bank Reconciliation Statement for Prior Years and accordingly update the current year’s Bank Reconciliation Statement and onwards.

Recommendations

Initiate reconciliation of cashbook with accounting records to assure accuracy of Cash account in the trial balance.

Assign additional manpower/personnel to handle the preparation of BRS to up-date its submission in compliance with COA Circular 92-125A;

Assign a responsible official, supervise the personnel assigned to prepare and reconcile discrepancies in the BRS. Set up time frames in the completion of assigned task.

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