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Findings No.3 COA Annual Audit Report 2006

July 26, 2008

3. Management failed to complete physical inventory conducted of each plant, property and equipment totaling P1,286,480,885.03 in violation of Section 156, COA Circular No. 386 thus, valuation, validity and existence of the fixed assets could not be determined and ascertained.

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.

Verification disclosed that, the auditee failed to complete the physical count conducted in some departments hence. physical inventory reports were not submitted to the office of the auditor. Per interview, concerned officials informed us that they lack manpower to conduct the physical count of all their properties and has priority activities to attend to.

Had the agency officials conducted/reported the physical inventory of all fixed assets and submitted the same to the Provincial Auditor, the ownership, valuation, validity, existence and the effectiveness of the control over their assets could have been determined and ascertained. More so, any damage to and/or loss of property was not determined or identified for possible adjustments in the auditee’s books of accounts because of this deficiency.

This is a prior years finding but reiterated due to the materiality of the amount and to remind management to conduct the inventory taking to ascertain existence and valuation of the fixed assets account.

Management officials reasoned out that they have started the physical count of some departments but was not able to complete because of some priority activities to be accomplished. Furthermore, they explained that they lack manpower to do the physical count.

RECOMMENDATION

Prioritize physical inventory taking of all property, plant and equipment, in order to ascertain the validity, existence and accuracy of the recorded supplies and fixed assets accounts. Assign additional personnel to specifically focus on the conduct of physical inventory.

Remind the Supply Officer or the General Services Officer being the property custodian of the agency, to initiate the conduct of periodic physical inventory of all properties owned by the provincial government. She shall be assisted by the inventory/appraisal team to be created by the local chief executive.

Since this is a reiteration of prior year finding, withholding of salaries of the concerned officials will be recommended if they failed to submit the complete physical inventory report this year.

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

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