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Findings No.10 COA Annual Audit Report 2006

July 26, 2008

10. Failure of management to provide depreciation expenses on depreciable properties affected the fair presentation of financial statements and the results of operations during the year ended.

The New Government Accounting System prescribed for Local Government Units used the modified accrual basis of accounting. Under this method, all expenses shall be recognized when incurred. It also provides Section 4 (o) that: “Depreciation. The straight –line method of depreciation shall be used. A residual value equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start on the second month after purchase/completion of the property, plant and equipment”.


In our review, we noted the failure of the City Accounting Office to compute and/or set-up depreciation expenses on depreciable properties to allow for a fair valuation of the property. Such omission may not speak well in the discharge of official functions.

Recommendation:

Direct the City Accounting Office to set-up schedules of depreciation expenses on depreciable properties with their computations thereof for CY 2006, so that depreciation expenses can be recorded. Thus, proper valuation and fair presentation of value of properties can be effected. This is one way of safeguarding the assets of the management from improper interpretation.

Direct the Head, City Accounting Office to ensure compliance of prescribed accounting principles, rules and regulations in accounting financial transactions

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

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