Findings No.2 COA Annual Audit Report 2006

July 28, 2008

Direct the City Accountant to refrain from processing cash advances to all officials and employees if their previous cash advance is not settled. Advise her to monitor/follow up the liquidation of cash advances.

Do not approve/allow elected officials from drawing cash advance for whatever purpose aside from their official traveling expenses.

Instruct all Disbursing Officers to use their cash advance solely for the specific purpose for which the cash advance was granted to avoid disallowance in audit.

Instruct the City Accountant to strictly require the Disbursing Officers to submit detailed estimate of expenses to support their cash advance. For initial cash advances, require the submission of authority to draw cash advance and the approved bond application as special disbursing officer.

Enjoin all Special Disbursing Officers to adhere all the rules and regulations on the utilization and liquidation of cash advances:

7.1 Special Disbursing Officer shall not act as procurement officer.

7.2 Special Disbursing Officer shall pay only for duly approved vouchers/payrolls. Being custodian of government funds out of their cash advance for specific activity, all disbursements/procurements shall pass through proper procedures and that corresponding disbursement vouchers together with all supporting documents must be properly accomplished and approved by authorized officials.

7.3 Special Disbursing Officer shall prepare Report of Disbursements incorporating thereon all paid vouchers and payrolls for submission to the City Accountant together with the approved Disbursement Vouchers, payrolls and supporting documents as liquidation of their cash advance.

Require the City Accountant to observe the segregation of cash custody from recording function as an internal control measure.

Various disbursements amounting to P3,555,443.92 were erroneously classified under Other Maintenance & Operating Expense account which resulted to overstatement of said expense and understatement of various asset accounts by P 587,790.80 and other specific expense accounts by P2,967,653.12, thus the financial statements did not present the true financial position of the city.

Financial statements are representation of management’s financial position and results of operations. It should provide information that is reliable, accurate and complete as these serve as tools for management and other financial statements’ users in arriving at a decision. Hence, accounting information shall be analyzed, summarized and reported in accordance with prescribed state accounting standards to ensure reliability of financial information.

In line with the afore-cited principles, COA Circular No. 2004-008 dated September 20, 2004 prescribed the updated description of accounts under the New Government Accounting System to facilitate identification of transactions to ensure proper account classification and presentation in the financial statements.

Verification of transactions disclosed that various disbursements with specific account amounting to P 3,555,443.92 were erroneously classified under Other Maintenance and Operating Expense account (969). These expenses were incurred during the 250th Anniversary Celebration of the city and were paid out of the cash advances of the Special Disbursing Officers. Most of these transactions were for the purchase of uniforms, costumes, t-shirts, trophies, souvenirs, medicines, plastic chairs, office supplies, cell cards, gasoline, construction materials, furniture & fixtures, equipment and payment of rentals. (Annex 6)

The celebration was funded out of the 20% Development Fund. However, it was also learned that no detailed budget proposal was submitted by the City Planning and Development Officer for incorporation in the Annual Budget of the city. Otherwise, public biddings might have been conducted for the procurement of items for each activity long way before the big celebration. But the granting of cash advances to various designated disbursing officers was resorted as facilitative tool. On the contrary, audit revealed that appropriations of the appropriate accounts were exhausted and since expenses were paid out of the cash advance, these expenses were accounted as direct expense under Other Maintenance & Operating Expense account (969). It was further noted that almost all expenses for the 250th Anniversary Celebration were erroneously accounted as direct expense and without capitalizing some of the expenditures that are necessary for proper accounting thereof.

The deficiency resulted to overstatement of Other Maintenance and Operating Expense account in the amount of P 3,555,443.92 with corresponding understatement of asset accounts by P 587,790.80 and other specific expense accounts of P2,967,653.12. (Annex 6)

Recommendation

Record expenditures to appropriate asset and expense accounts as they occur.

Require the City Accountant to effect the necessary adjustments for the erroneous classification of items/supplies used during the 250th Anniversary Celebration using the following entry:

Other Supplies Inventory487,610.80Furniture & Fixtures59,180.00Communication Equipment14,000.00Military Police Equipment8,500.00Other Machinery & Equipment18,500.00 Prior Years’ Adjustments587,790.80

To record the cost of costumes, gowns, plastic chairs, tables, radio antenna, siren patrol, camera and construction materials erroneously charged under Other Maintenance & Operating Expense (969).

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