Findings No.6 COA Annual Audit Report 2004

July 25, 2008

6. Purchases of supplies and materials were directly recorded as expenses instead of inventories contrary to Section 114, Volume I of the New Government Accounting System (NGAS). Likewise, the Auditor was notified of the deliveries made preventing him to verify the existence of the items.

Section 114 (Vol. I, NGAS), provides that regular purchases shall be coursed thru the Inventory account and issuances thereof shall be recorded as they take place, except those purchased out of the petty cash fund which shall be for the immediate use and for stock in which case shall be charged immediately to the appropriate expense account. The Chief Accountant and the General Services Officer shall each maintain perpetual inventory records comprising of stock cards and property cards for supplies, property, plant and equipment in their custody to account for the receipt and disposition of the same. The balance per stock/property cards should always reconcile with the ledger cards of the accounting unit.

The perpetual inventory method and the moving average method shall likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and reports for the holding of inventory shall also be followed. However, separate perpetual inventory records and the Accounting Unit and the General Services Officer or the Treasurer, as the case maybe shall maintain stock cards. Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the fund shall be prepared. (Section 103, Vol I, NGAS).

Our review discloses that purchases of supplies and materials, including construction materials were not coursed thru the Inventory account, in manifest violation of standard accounting procedures provided under Section 114 of the New Government Accounting System. Instead, purchases were recorded in the books direct to expense or construction in progress, the latter in the case of project undertaken by administration. The practice is devoid of control and prone to abuse.

Likewise, the Auditor was not notified whenever deliveries were made on the items purchased preventing him to conduct timely inspection on the items. The practice is in violation with paragraph 6.06 of COA Circular No. 95-006 dated May 18, 1995, which provides that “The officials responsible for or in charge of accepting deliveries of procured items shall within twenty-four (24) hours from such acceptance, shall notify the auditor of the time and date of the scheduled deliveries.” The information shall serve as notice to the auditor to enable him to cause spot/ocular inspection at most opportune and appropriate time.

Management commented that with the lifting of the pre-audit function, inspection by COA representative is no longer necessary. However, they would comply the regulation.

In reply, we explained that COA inspection/evaluation report shall be for reference in post-audit of the transactions involved, which are not for submission to management for attachment to the claims.

Recommendation

Direct the Accountant to record all supplies and materials purchased initially in the Inventory Account. Upon issuance, the Inventory account shall be credited while the expense account shall be debited.

The Accountant is further advised to read the accounting procedures prescribed under Sections 113, 114 and 121 of the New Government Accounting System.

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