Findings No.2 COA Annual Audit Report 2004

July 26, 2008

2. The management did not conduct physical inventory of each plant, property and equipment totaling P1.2 Million in violation of Section 156, COA Circular No. 386.

Section 156 of COA Circular No. 386, provides that the local chief executive shall require an annual physical inventory of all supplies or property of the local government unit as of December 31 of each year, to be conducted by office or department by a committee of three (3) consisting of the representative of the local chief executive as the chairman and general services officer, municipal or barangay treasurer, as the case may be, and the supply accountable officer of the department or office concerned, as members. The inventory report shall be submitted to the local chief executive and copy furnished the provincial, city or municipal auditor concerned.

Likewise, Section 124 of the New Government Accounting System Manual, Volume I, provides that the local chief executive shall require periodic physical inventory of supplies or property. Physical count of inventory items by type shall be conducted semestrally and reported in the Report of the Physical Count of Inventories (RPCI). This shall be submitted to the Auditor concerned not later than July 31 and January 31 of each year for the first and second semesters, respectively.

With the cited provisions, the local chief executive is mandated by law, to require a periodic physical inventory of supplies and property every semester/year. The purpose of conducting physical count of inventory items, is to ascertain the validity, existence and accuracy of the properties owned by the agency.

Verifications disclosed that the agency had not conducted physical inventory of the Property, Plant and Equipment of the local government unit.

Failure of the agency to conduct a physical inventory of each property item, casts doubts on the existence, validity and accuracy of the recorded account balance of P1,202,382,676.55 for Property, Plant and Equipment (PPE). Annex B

During the exit conference, the management officials admitted the deficiency and they promised/committed to create a team who shall conduct the inventory of all properties acquired, and to furnish a copy of inventory reports with the audit team by 2005.

Recommendation:

Conduct physical inventory of supplies and of property, plant and equipment, in order to ascertain the validity, existence and accuracy of the recorded supplies and fixed assets accounts.

The Supply Officer or a General Services Officer being the property custodian of the agency, shall be responsible for conducting periodic physical inventory of all properties owned by the agency. He shall be assisted by the inventory/appraisal team to be created by the local chief executive.

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Written by admin · Filed Under Commission on Audit, Lanao del Norte