Findings No.8 COA Annual Audit Report 2005

July 25, 2008

The City Accountant did not maintain Special Accounts in the General Fund nor had a complete set of subsidiary ledgers for public utilities/economic enterprises, as required under Sections 105-110, Vol. I of the NGAS Manual, thus, results of its operations could not be appropriately determined.

Sec. 105 of the Manual on the New Government Accounting System (NGAS) Volume I, states:

“Local government units shall maintain special accounts in the General Fund for public utilities and other economic enterprises, loans, interests, bond issues, and other contributions for specific purposes; and development projects funded from the share of the local government concerned from the internal revenue collections and development of national wealth and such other special accounts which may be created by law or ordinance.”

The objectives for the maintenance of Special Accounts under Section 106 of the NGAS are as follows:

“1. Determine whether the income generated by the public utilities or economic enterprises are sufficient to meet their respective operating costs.

2. Provide adequate information as to the assets, liabilities and equity of each special account.”

Section 107 of the NGAS further states, thus:

“Special accounts shall be maintained through the use of complete subsidiary ledger. In case the local government unit maintains a number of the same economic enterprise, each shall have its own set of subsidiary ledger (e.g. 8 markets – 8 subsidiary ledgers for the market).”

Section 109 also provides for the provision of Profit from Operation.

“Profits or income derived from the operation of public utilities and other economic enterprises, after deduction of the cost of improvement, repair and other related expenses of the public utility or economic enterprises concerned, shall first be applied for the return of the advances or loans made therefore, any excess shall form part of the general fund of the local government unit concerned.”

The reporting of the said special accounts shall be in the following manner:

“Section 110. At the end of the year, post-closing trial balance shall be prepared for each special account. Also, the following financial statements shall be prepared:

Balance Sheet

Statement of Income and Expenses

Statement of Cash Flows

These reports shall form part of the schedules of the General Fund trial balance.”

The above-cited regulations were not observed by the City since no separate and complete set of subsidiary ledgers were provided for the following special accounts:

a) Carmen marketf) Slaughterhouseb) Agora marketg) East Bound Terminalc) Cogon marketh) West Bound Terminald) Puerto marketi) Cemeterye) JR Borja City Memorial Hospitalj) 20% Development Fund

Appropriations, allotments, obligations and income generated from these special accounts were treated as regular accounts of the General Fund. The 20% Development Fund, loans and interest which are categorized as special accounts were also recorded and reported in the same manner. As such, the objective of presenting the assets, liabilities, equity and results of the respective operations was defeated.

Recommendation

Require the City Accountant to maintain special accounts in the General Fund by setting up complete set of subsidiary ledgers to cover the operations of public utilities/economic enterprises, pursuant to Sections 105, 106, 107 and 110, Vol. I of the NGAS Manual.

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