Findings No.1 COA Annual Audit Report 2006

July 26, 2008

1. Deliveries/procurement of properties worth P 5,023,014.66 did not follow strictly the provision of Section 120 of COA Circular No. 2002-003, thus resulting to understatement of Agency’s assets in the financial statements.

Section 120 of COA Circular No. 2002-003 prescribed the recording of the deliveries of Supplies or Property in the books of accounts. The Chief Accountant shall maintain Equipment Ledger Cards per stock number, Property, Plant and Equipment Ledger Cards for each category of assets; and Real Property Ledger Cards for land.

Upon receipt of the Acceptance and Inspection Report (AIR) and other supporting documents, the Chief Accountant shall record the deliveries in the appropriate ledger cards. Upon completion of the disbursement process pertaining thereto, the Chief Accountant shall prepare the Journal Entry Voucher (JEV) taking up in the books the procurement made. Thereafter, the Chief Accountant shall reconcile the JEV with the appropriate ledger cards.

Review of the accounting processes for procurement of properties disclosed the following:

Property, Plant and Equipment (PPE) Ledger Cards for each category of assets and Real Property Ledger Cards for land were not maintained by the Accounting Office.

Based on the Obligation Request (OBR), JEV was made taking up in the books the property, plant and equipment procured.

Properties procured by the province charged to the local budget appropriated for donation were not recorded as asset. The entry made was just a debit to donation of P592,413.00 and a credit to cash account. (Annex 1 )

Most of the properties acquired which were charged against prior year’s obligated appropriation were likewise not recognized or accounted for as asset, same is true with those acquired out of the Priority Development and Assistance Program (PDAP) fund. The entry made was just a debit to liability accounts, “accounts payable” for those charged to the obligated prior year’s appropriations and “other liabilities” for those charged to PDAP fund totaling P4,430,601.66 and a credit to cash account. (Annex 1)

The maintenance of the PPE Ledger Card was dispensed with due to the encoding of the Acquired PPE to the computer, which is the basis for the computation/provision of depreciation.

Also, because of the contention or the assertion of the Accounting Office that those properties procured charged from appropriation for donation and from PDAF are intended for transfer to other government agencies, recording of those properties are no longer necessary.

The non-recording of the delivered properties based on the AIR, to the PPE Ledger Cards as prescribed, produces a risk of incompleteness and incorrectness of accounting records for there could be no reconciliation to be made as a way of check and balance.

Likewise, the non-taking up as an asset account of the PPE procured out of the appropriation for donation and those charged to liability accounts understates the agency’s assets and the corresponding depreciation expense.

The management agreed with our audit observations and assured to effect the implementation of our recommendation in the ensuing year.

Recommendation:

Require the Provincial Accountant to maintain Property, Plant and Equipment Ledger Cards for each category of assets; and Real Property Ledger Cards for land.

Also, require the Provincial Accountant to record or take up in the books as asset accounts the procured properties charged to donation and liability accounts to fairly present the PPE accounts in the Financial Statements. Drop the assets from the books upon transfer to other government agencies.

In succeeding transactions, release the amount budgeted as donation to the intended beneficiary government agencies. Classify the budget as capital outlay, if the intention is to buy property, plant and equipment.

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Written by admin · Filed Under Commission on Audit, Misamis Occidental