Findings No.5 COA Annual Audit Report 2006

July 26, 2008

5. The Provincial Government failed to maintain special accounts in the general fund for the operation of various hospitals and other economic enterprise contrary to Section 313 of Republic Act 7160 and Section 105, Chapter 6, Volume I of the New Government Accounting System (NGAS) Manual.

Section 313 of Republic Act 7160 states that:

“The local government units shall maintain special accounts in the general fund for the following: a) public utilities and other economic enterprise . . . . . Receipts, transfers and expenditures involving the foregoing special accounts shall be properly taken up there under . . . . .”

Likewise, Section 105, Chapter 6 of the New Government Accounting System (NGAS) provides that:

“Local government units shall maintain special accounts in the General Fund for public utilities and other economic enterprise, loans, interests, bond issues, and other contributions for specific purpose. . . ..”

Verification on the Consolidated Statement of Cash Flows disclosed that the auditee failed to maintain separate special accounts despite the above cited provisions.

Cash in flows from economic enterprise will form part of income of the provincial government. Separate journals, ledgers and depository accounts are required to be maintained to facilitate the preparation of financial reports like, trial balance, financial statements and cash flows.

Had the Provincial Government complied with the above mentioned provisions it will allow management officials to determine whether proceeds/income generated from the economic enterprise and public utilities is sufficient to meet the respective operating cost and provide information as to the assets, liabilities and equity of such special accounts.

The inability of the auditee to maintain special account would eventually affect the presentation of the Financial Statements because other income were not presented in details which entail the occurrence of inaccurate information that disagree with the provisions of Section 111 and 112 of Presidential Decree 1445 to wit:

The accounts of an agency shall be kept in such detail as is necessary to meet the needs of the agency and at the same time be adequate to furnish information needed by fiscal or control agencies of the government.

The highest standards of honesty, objectivity and consistency shall be observed in the keeping of accounts to safeguard against inaccurate or misleading information.

Management concerned accepted the deficiencies and promised to comply with the regulations in the ensuing year.

Recommendation

Require concerned officials to maintain separate special accounts in the General Fund for economic enterprise as provided under Section 313 of Republic Act 7160 and Section 5, Chapter 6, of the New Government Accounting System (NGAS) Manual, Volume I.

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