Findings No.5 COA Annual Audit Report 2006

July 25, 2008

5. The non-completion of the physical inventory taking of Property, Plant and Equipment account that rose to P1.791 Billion as of December 31, 2006 poses difficult problem in ascertaining the validity and reliability of the accounts involved.

This is a reiteration of prior years’ audit findings. There has been no physical inventory report on file for Plant, Property and Equipment account for the past several years. The absence of adequate records prior to the adoption of the New Government Accounting System (NGAS) did not permit us the application of alternative procedures to ascertain the reliability and validity of the accounts involved.

The Physical Inventory Task Force created to establish the validity, existence, condition and serviceability of accounts comprising Plant, Property and Equipment has not yet submitted its final report, As of December 31, 2006, total city properties carried under Plant, Property and Equipment account amounted to P1,791,883,326.86 as against last year’s P1,604,486.399.31:

December 31 Property, Plant and Equipment 20052006PPE – General Fund1,426,695,855.491,603,403,914.78PPE – Special Education Fund150,815,227.48160,576,565.34PPE – Trust Fund26,975,316.3427,902,846.34Total – All FundsP1,604,486,399.31P1,791,883,326.86

During the exit conference, we reiterated the necessity of completing, as soon as possible, the inventory taking. The undertaking will establish and check the accuracy, correctness, existence, condition and serviceability of properties. We also quoted the following pertinent prescribed rules and regulations under Volume 1 of the Manual on the New Government Accounting System (NGAS) for Local Government Units, namely:

Section 114. Perpetual Inventory Method. This provision requires the Chief Accountant and the General Services Officer to maintain perpetual inventory records comprising of stock cards and property cards for supplies, property, plant and equipment in their custody to account for the receipts and dispositions of the same. The balance per stock/property cards should always reconcile with the ledger cards of the accounting unit.

Section 124. Inventory of Supplies or Property. This provision requires the local chief executive to require, among others, periodic physical count of property, plant and equipment by type shall be made annually and reported on the

Report on the Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to the Auditor concerned not later than January 31 of each year.

Such gesture, for the non-completion of the Physical Inventory of Property, Plant and Equipment for the past two (2) years, might be misinterpreted for inefficiency.

The City Accountant reasoned out that the non-completion of the inventory taking at the end of the calendar year could be attributed to the fact that all members of the Task Force are having their respective regular functions to perform, which they gave preference. He, however, promised to exert efforts to complete the project in due time.

Recommendation:

Direct the members of the Task Force to ensure the early submission of physical inventory report of plant, property and equipment for the eventual reconciliation of the balance per count and balance per book.

Likewise, institute measures to ensure a regular and periodic annual physical inventory as provided under the pertinent provisions of the NGAS.

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