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Findings No.4 COA Annual Audit Report 2005

July 28, 2008

4. Unserviceable properties, plant and equipment totaling P4,397,281.79 were not transferred to Other Assets account, instead were dropped from the books in violation of the provisions of Section 165 and 167 of COA Circular 92-386 and COA Circular No. 2004-008.

COA Circular No. 2004-008 dated September 20, 2004 provided the updated description of accounts under the New Government Accounting System. It described Other Assets as cost/appraised value of serviceable assets not used in operation and those waiting for disposal.

Sections 165 and 167 of COA Circular 92-386 prescribed that unserviceable properties with scrap values shall be sold in public auctions, whenever applicable.

During the year 2005, the city had reported 592 units unserviceable properties costing P4,532,390.26. Accounting records however, showed that these were not transferred to Other Assets account but were automatically dropped from the books.

In the 2004 Annual Audit Report, 128 unserviceable properties costing P1,057,407.64 were also recommended for transfer to Other Assets account, however, the same were also dropped from the books.

Verification and inspection disclosed that 37 of these assets costing P4,397,281.79 although were already reported as unserviceable, still have scrap values and were recommended for auction. (Annex 3)

Accounting Office personnel alleged that they inadvertently effected the dropping of the properties from the books using as basis the Inventory and Inspection Report of Unserviceable Properties (IIRUP) they received. They failed to consider the recommendation of the inspectorate team.

This practice resulted in the understatement of Other Assets in the financial statements and possible loss of income from sale of scrap.

The management however, promised to correct this transaction next year.

Recommendation

Require the City Accountant to prepare the necessary adjusting entry to restore to Other Assets account those properties previously dropped but have scrap values. Drop the account after the assets are sold or disposed.


Written by admin · Filed Under Commission on Audit, Oroquieta 

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