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Findings No.4 COA Annual Audit Report 2006

July 25, 2008

4. In view of the complexity of some transactions, erroneous entries were prepared for the transfer of Drugs, Medicines, Medical and Laboratory Supplies from the stock room to the hospital pharmacy which is not in accordance with Section 4j of the New Government Accounting System, volume I. In addition, there was no effective internal control system installed in the operation which expose the assets to risk of possible loss .

Under the Generally Accepted Accounting Principles, items or stocks which are intended for sale shall be recorded as Merchandise Inventory in the books. While, one the basic features and policies of the New Government Accounting System, Volume I stipulated under Section 4j is the use of Perpetual Inventory System in recording supplies and materials. Regular purchases shall be coursed thru the inventory account and issuance thereof shall be recorded as they take place.


Review of the journal entries to record the transfer of drugs, medicines, medical and laboratory supplies from the stock room to the Camiguin General Hospital Pharmacy showed the following Entries:

1. Charged to Current Appropriations

Drugs & Medicines Expenses XX

Drugs & Medicines Inventory XX

2. Charged to Trust Account in GF

Other Payables XX

Drugs& Medicines, Inventory XX

The Merchandise Inventory account was recorded in the books based on the Received portion of the Monthly Inventory Report submitted by the Pharmacist at the end of the month and credited to Other Payables.

The Provincial Accountant has reasoned out that the items were included in issued Requisition and Issue Slips and reported in the Statement of Supplies and Materials Issued (SSMI) submitted by PGSO. So, they recorded it as expense in the books.

With the entries made, the items were taken out from the inventory account which should not be the case because it actually existed as Merchandise inventory at Camiguin General Hospital Pharmacy. There are no expenses yet because the items were not yet actually issued. Meanwhile, the recording of Merchandise Inventory should be based on source document which is the Requisition and Issue Slips prepared by the Supply Office and received by the pharmacist and not the Monthly Inventory Report of the Pharmacist. How do we know that all drugs, medicines, medical and laboratory supplies were duly reported by the pharmacist as received? With the present practice, there was no proper monitoring of the pharmacy stock received and issued.

On the Other hand, the revolving fund which is recorded as Other Payables was not reduced by the transfer in inventory caption so there is no need to debit the account. Since, the drugs, medicines, medical and laboratory supplies was only transferred to stocks for sale, the items should have been recorded under

Merchandise Inventory account instead of its corresponding expense account. It should remain as such until sold or issued.

Under such condition, the assets were exposed to the risk of possible loss.


RECOMMENDATION

Require the Provincial Accountant to prepare necessary adjusting entries per suggested journal entries hereto attached. Further, adherence to Section 4j of New Government Accounting System, Volume I is also requested.

Written by admin · Filed Under Camiguin, Commission on Audit 

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