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Findings No.1 COA Annual Audit Report 2004

July 26, 2008

Deposit on Letters of Credit account of P 14,304,449.87 had remained outstanding despite its application/ utilization for the acquisition of the two (2) units of Garbage Compactors and one (1) unit of Backhoe.

Sec. 61 of Vol. III of NGAS requires that Deposit on Letters of Credit account shall be credited upon the utilization of the deposits on letters of credit.

The City Government opened two (2) deposits on Letters of Credits with the Land Bank of the Philippines for the importation of heavy equipments, to wit:

EQUIPMENTAMOUNTDATE OF LC2 units Garbage CompactorsP 9,826,436.87September 22, 20031 unit BackhoeP 4,481,013.00October 23, 2003

Despite the utilization of the deposits of letters of credit by the supplier and the delivery of the subject heavy equipment, the City Government failed to close the Deposits on Letters of Credit account and book up the heavy equipment in the proper account.

The failure of the LGU to book up the heavy equipment in the proper account understated the Agency’s depreciation expense account, as no depreciation was provided for the subject heavy equipment.

The concerned officials should confirm with the Land Bank of the Philippines the utilization of the Deposits on Letters of Credit to effect the proper booking up of the heavy equipment to the proper account.

The utilization of the Deposits of Letters of Credits operates as the payment made to the suppliers for the purchase of the heavy equipment, hence, a journal entry voucher shall be prepared to record such transaction, viz;

Dr Cr.

Construction and Heavy Eqp’t. (230) xx

Deposits on Letters of Credit (180) xx

The Management commented that this deficiency was brought about by the failure of the concerned officials to monitor the status of the Deposits on Letters of Credit account.

The Auditor had advised the management to effect the necessary adjustment of the account to book up the receipt of the heavy equipment.

RECOMMENDATION:

Require the BAC officials where the negotiated purchase originated to follow up the necessary documents on the importation to effect proper booking up at the said heavy equipment to proper account.

Written by admin · Filed Under Commission on Audit, Malaybalay 

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