Findings No.1 COA Annual Audit Report 2005

July 26, 2008

The City Accountant recorded the Real Property Tax and Special Education Tax Receivables based on the estimates provided by the City Treasurer’s Office in violation of Section 20, Volume I of the Manual for the New Government Accounting System, hence the validity of the accounts becomes doubtful.

The Manual for the New Government Accounting System (COA Circular No. 2002-003) provides for that basis of recording of Basic Real Property/Special Education Tax Receivable, to wit:

“ Sec. 20 – Basis for Recording Real Property Tax/Special Education Tax. – Real Property Tax Receivables / Special Education Tax Receivables shall be established at the beginning of the year based on Real Property Tax Account Register / Taxpayer’s Index Card. At the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certified list showing the name of taxpayers and the amount due and collectible for the year. Based on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the debit to Real Property Tax / Special Education Tax Receivable and crediting to Deferred Real Property Tax Income / Deferred Real Property Tax Income / Deferred Special Education Tax Income.”

The audit noted that the agency recorded estimates on Real Property Tax Receivables based on estimates made by the City Treasurer’s Office at P 10,400,000.00, instead of P 15,937,474.26 based from the Real Property Tax Account Register/ Taxpayers’ Index Card.

This is not in consonance of Section 20, Volume I of the Manual of the New Government Accounting System, hence, the validity of the accounts becomes doubtful.

The concerned officials commented that the recording was based on the estimated collections of the City Treasurer for CY 2005, as practiced prior to the effectivity of the said COA Circular. They further explained that in the event that the actual collections exceeds the estimated amount, the Accounting Office will set-up the receivables account, before recognizing the income, to illustrate:

Upon Payment of the Taxpayer

RPT/SEF Tax Receivable xx

Deferred RPT/SEF Tax Income xx

Cash-in-Treasury xx

RPT/SEF Tax Receivable xx

Then the regular procedure/entries are followed for the recognition and distribution of income is followed as prescribed in the NGAS.

The erroneous recording of the RPT/SEF Receivables consequently understated the asset (receivables) account of the Agency. Although the periodic adjustments made during actual collections have corrected the deficiency, albeit miniminally, however, the total understatement of P 2,987,796.78 was still noted, computed as follows:

Basic RPT Receivable, January 1, 2005 P 7,968,737.13Add: Increase in assessment for CY 2005 1,338,700.86Total Receivables for CY 20059,307,438.03Less: Recorded Receivable, beginning P 5,200,000.00Adjusted during the year P 2,613,539.647,813,539.64Understatement/Basic RPT Receivable P 1,493,898.39Understatement / SEF Tax Receivable 1,493,898.39Total Understatement P 2,987,796.78

The concerned officials had already informed the Auditor that they will effect the necessary adjustments and comply with provisions of the NGAS to correct and prevent the recurrence of the error noted.

Recommendation:

We have required the City Accountant and the City Treasurer to faithfully comply with Sec. 20 of CoA Circular No. 2002-003.

Cash advances of officials and employees for the current and previous years amounting to P 5,988,052.77 and P 1,077,809.33, respectively, remained unliquidated as of December 31, 2005, contrary to the requirement of Sec. 4.1.3 of CoA Circular No. 97-002, which mandates that all cash advances shall be liquidated at the end of each year.

Sec. 4.1.3 of CoA Circular No. 97-002 provides, among others, that “All cash advances shall be fully liquidated at the end of each year.”

In addition thereto, CoA Circular No. 96-004 prescribes for the period in which cash advances shall be liquidated by the concerned officials and employees;

Salaries and Wages – within 5 days after each pay period

Official Travel – within 30 days after return to its official station, in case of local travel and 60 days after return to Philippines in case of foreign travel.

Verification conducted disclosed that the abovecited provisions were not strictly enforced by the concerned officials of the City Government. The said condition resultantly overstated the asset account of the agency and the understatement of the expenses in the financial statement of the Agency.

By way of their explanation, the concerned City Officials stated that they have already exerted efforts to compel liquidation of these cash advances, including payroll deductions and issuance of demand letters, however, some officials and employees have reasoned out that they are still in the process of completing the documentary requirements to submit their liquidation papers.

We have instructed the City Accounting Office to strictly monitor the cash advances of the Agency Officials and employees with outstanding/unliquidated cash advance and to strictly enforce the provisions of the aforementioned COA Circulars.

Recommendation:

We have directed the concerned LGU Officials to strictly enforce the provisions of COA Circular No. 97-002 and to issue demand letters to officials and employees with outstanding cash advances.

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Written by admin · Filed Under Commission on Audit, Malaybalay