Findings No.4 COA Annual Audit Report 2006

July 28, 2008

4. No special account was maintained in the General Fund for the economic enterprises contrary to Section 313 of R.A. 7160 and Sections 105 and 110, Volume I of the New Government Accounting System Manual thus the operational viability of the projects cannot be ascertained.

Sec. 313. Special Accounts to be maintained in the General Fund-Local government units shall maintain special accounts in the general fund for the following:

Public utilities and other economic enterprises;

Loans, interests, bond issues, and other contributions for specific purposes and

Development projects funded from the share of the local government unit concerned in the internal revenue allotment and such other special accounts which may be created by law or ordinance. xxx”

Sec. 105 of COA Circular No. 2002-003 of the New Government Accounting System dated June 20, 2002 provides that Local Government Unit shall maintain special accounts in the General Fund for public utilities and other economic enterprises, loans and other contributions for specific purpose and such other special accounts, which maybe created by law or ordinance.

Sec. 110 of said circular also provides that at the end of the year, post closing trial balance shall be prepared for each special account. Also, the following statements shall be prepared which shall form part of the schedules of the general fund trial balance:

Balance Sheet

Statements of Income and Expenses; and

Statements of Cash Flows

During the year under audit, it was revealed that the City Accountant failed to maintain the required financial statements for the operations in the market and bus terminal and other economic enterprise operations of the City. Operating costs and expenses were not charged against their respective appropriations, but were charged against the regular funds of the City. Further, no separate financial statements were prepared for each economic enterprise.

As a result the LGU could not determine whether the income generated by these economic enterprises are sufficient to meet their respective operating costs and the information as to correct status of assets, liabilities and equity for such special accounts are immediately determined.

RECOMMENDATION:

Require the City Accountant to maintain/prepare the required financial statements for the city economic enterprise pursuant to Sec. 313 of R.A. 7160.

Expenses of each economic enterprise should be charged against its respective appropriations. Separate financial statements should be prepared for each economic enterprise pursuant to Sections 105 and 110 of the New Government Accounting System Manual, Volume I to reflect their actual financial condition and results of operation.

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