Findings No.10 COA Annual Audit Report 2006

July 26, 2008

10. Failure of management to provide depreciation expenses on depreciable properties affected the fair presentation of financial statements and the results of operations during the year ended.

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.9 COA Annual Audit Report 2006

July 26, 2008

9. Library books purchased totaling P1,053,765.00 were directly charged to expense account which is not in conformity to COA Circular No. 98-001. This omission caused the overstatement of total expenses incurred by P1,053,765.00, and understatement of Plant, Property & Equipment account by same amount. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.8 COA Annual Audit Report 2006

July 26, 2008

8. Failure of management to comply with COA Circular No. 87-278 dated November 12, 1987 deprived the early or timely review of the loans involving P223.638 Million of the City Government from the Development Bank of the Philippines. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.7 COA Annual Audit Report 2006

July 26, 2008

7. The bidding conducted on October 25, 2006 for the Iligan City Central Material Recovery Project (ABC P61.765 Million) was declared a failure, there being provisions embodied in its Bidding Documents inconsistent with the IRR-A of Republic Act 9184. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.6 COA Annual Audit Report 2006

July 25, 2008

6. Due to the failure of management to implement in CY 2006 City Ordinance No. 06-4682, an Ordinance adopting the direct subsidy scheme to subsidize cost of power in accordance with Section 2.1.1 of DILG-DOE Joint Circular No. 95-01, the city constituents were deprived of the benefits that could have been derived there from.

Section 294, Book II of the Local Government Code, provides that: “x-x-x- at least 80% of the proceeds derived from the development and utilization of hydrothermal, geothermal and other source of energy shall be applied solely to lower the cost of electricity in the LGU where such source of energy is located.”

To implement the above-quoted provision, Section 2.1.1 of DILG-DOE Joint Circular No. 95-01, dated October 31, 1995, which prescribes the “Guidelines and Procedures on the Utilization of the Share of National Wealth Taxes, Royalties, Fees or Charges”, provides, that “either one or a combination of two basics approaches can be employed in the implementation of reduction in cost of electricity, namely, subsidy and non-subsidy schemes.”

The utilization of the 80% share derived from national wealth taxes has been dormant since CYs 2004 to 2005. City Ordinance No. 05-4682 dated January 11, 2005 was not implemented in CY 2005 due to serious administrative problems in preparing the billings for the household consumers who have different and individual billing periods. It was difficult to apply the direct subsidy provision of the Ordinance, which classifies the household consumers on KWH consumption but each with different billing periods; which would entail so much man-hours and computers data base or programming activities on the part of the Iligan Light and Power, Incorporated. Thus, at the end of CY 2005, balance per book of the 80% share from National Wealth accumulated to about P61 Million.

Again, the Sangguniang Panlungsod enacted SP Resolution No.06-193, embodying City Ordinance No. 06-4925 dated February 28, 2006, amending City Ordinance No. 05-4682. The Ordinance provides that the delivery of the subsidy to the individual household consumers be made semi-annually, but each group of household consumers, namely; 1 to 100 KWH consumption, 101 to 300 KWH consumption, and 301 and above KWH Consumption to be credited with a P28.00; P24.00 and P20.00 per month, respectively of direct subsidy.

For the initial implementation of the ordinance, the average monthly consumption for a duration of nine (9) months (divided by 9) from April 2005 to December 2005, shall serve as basis of determining the category under which the household consumer shall qualify. The delivery of the direct subsidy to the household consumers shall be computed in accordance with the following schedule:

For the direct subsidy benefits which accumulated from April 2005 (when the Ordinance took effect) to December 2005, to be applied for the next billing period of each household consumer upon the implementation of the ordinance;

For the direct subsidy benefits which accumulated from January 2006 to June 2006; to be applied to the billing period of each household consumer after June 2006;

For the direct subsidy benefits which accumulated from July to December 2006; to be applied to the billing period of each household consumer after December 2006; and

The billing period for each household consumer, after every six (6) months after/from December 2006 and infinitum or until the ordinance remains in force and effect.”

Worthy of notice, Section 2 of City Ordinance No. 06-4925 states that: “The collections or receipts of remittances and those to be collected and/or received in the future, from the National Power Corporation, and other government or privately owned entities, which may hereafter be legally bound to remit the share to the City of Iligan, hereafter constituted as a Trust Fund with Special Account Code under this Ordinance, shall be appropriated and correspondingly disbursed to subsidize to and pay a portion of the electric bills for the residents of Iligan City x-x-”. However, it may not prosper to consider collections from National Wealth as “Trust Fund”. National Wealth is classified as Special Accounts of the General Fund; the use thereof requires legislative appropriations.

The project, however, was not implemented in CY 2006 depriving the people of Iligan City the timely benefits that could have been derived from the 80% proceeds of the utilization and development of the national wealth.

Management reasoned out that the non-implementation of the program could be attributed to some administrative problem that has to be ironed out on the part of the Iligan Light and Power Incorporated. The implementation of the Ordinance will take-off during the first quarter of CY 2007.

Recommendation:

Cause the amendment of Section 2 of City Ordinance No. 06-4682 reclassifying proceeds from National Wealth to Special Accounts of the General Fund before implementation. There being no stated amount appropriated under City Ordinance No. 06-4682, an Appropriation Ordinance stating the amount appropriated has to be enacted for the program to prosper.

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.5 COA Annual Audit Report 2006

July 25, 2008

5. The non-completion of the physical inventory taking of Property, Plant and Equipment account that rose to P1.791 Billion as of December 31, 2006 poses difficult problem in ascertaining the validity and reliability of the accounts involved. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.4 COA Annual Audit Report 2006

July 25, 2008

4. Non-compliance of the procedures contemplated in COA Circular No. 94- 013 dated December 13, 1994 in the release of P1.1 Million financial assistance to the Iligan City-MSU-Farmers Academy stalled the settlement and/or liquidation thereof. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.3 COA Annual Audit Report 2006

July 25, 2008

3. The cost of mayor repair of various Heavy Equipment which increased their economic benefits or service potential totaling P3.287 Million were recorded as direct charged to expense account, contrary to generally accepted state accounting standards, thereby overstating total expense incurred by same amount. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.2 COA Annual Audit Report 2006

July 25, 2008

2. The Suspension of the implementation of Executive Order No. 395, amending or revoking Executive Order No. 196-A caused the non-recording of various purchases totaling P11.574 Million in the Office of the City General Services, in violation of Section 118. Vol. I, NGAS. Read more

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment

Findings No.1 COA Annual Audit Report 2006

July 25, 2008

1. Various goods purchased totaling P33.432 Million were not coursed through the Inventory account, instead such procurement were directly charged to current operational expenses, contrary to prescribed generally accepted state accounting procedures (Sec. 114, Vol. I, NGAS)

The new government accounting system used the modified accrual basis of accounting. Under this method, all expenses shall be recognized when incurred. Regular purchases shall be coursed thru the Inventory account and issuances thereof shall be recorded as they take place, except those purchased out of the petty cash fund which shall be for the immediate use and for stock in which case shall be charged immediately to the appropriate expense account. The Chief Accountant and the General Services Officer shall each maintain perpetual inventory records comprising of stock cards and property cards for supplies, property, plant and equipment in their custody to account for the receipt and disposition of the same. The balance per stock/property cards should always reconcile with the ledger cards of the accounting unit. (Sec. 114, Vol. I, NGAS)

The perpetual inventory method and the moving average method shall likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and reports for the holding of inventory shall also be followed. However, separate perpetual inventory records shall be maintained by the Accounting Unit, while the General Services Officer or the Treasurer, as the case maybe shall maintain stock cards. Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the fund shall be prepared. (Section 103, Vol I, New Government Accounting System).

Our review of goods purchased worth more than P50,000.00 per purchase order totaling P33,432,644.37 which should have been initially recorded to the Inventory account were instead directly charged to operating expenses, as follows:

Office Supplies Expenses (Annex A – Table I)P 2,539,531.74Drugs and Medicines Expenses (Annex A – Table II)5,896,495.48Medical, Dental & Lab. Expenses (Annex A -Table I1I)6,204,925.80Other Office Supplies Expenses (Annex A – Table IV)11,102,849.65Textbooks & Instructional Expenses (Annex A – Table V)2,933,375.00Spare Parts Expenses (Annex A – Table VI) 4,755,466.70TotalP =SUM(ABOVE) 33,432,644.37

Certainly, this is a deviation or departure from the above mentioned generally accepted prescribed accounting principles, rules and procedures.

During the exit conference, the Head, Bookkeeping Section, City Accounting Office explained that subject supplies and materials purchased were, almost immediately, issued and put into use by the end-users, thus were recorded to the appropriate expense accounts.

We further opined that the rationale behind such a regulation requiring regular purchases shall be coursed thru the inventory account and issuances thereof shall be recorded as they take place is not hard to perceive. The evident purpose of the different scattered laws, rules and regulations are designed as effective control measures in the use of government funds and properties.

Recommendation

Direct the City Accounting Office to record all supplies and materials purchased worth more than P50,000.00 per transaction initially in the Inventory Account. Upon issuance thereof, the Inventory account shall be credited while the expense account shall be debited.

The City Accounting Office is further advised to ensure compliance to the accounting procedures prescribed in Sections 113, 114 and 121 of the New Government Accounting System.

Written by admin · Filed Under Commission on Audit, Iligan City | Leave a Comment