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General Santos City 2008 COA Audit 5

5. Procurement of Gasoline, Oil and Lubricants in the total amount of P52,616,025.92 were made thru direct purchase contrary to the provisions of the IRR of R.A. 9184 thus resulting in the possible incurrence of irregular, unnecessary or excessive expenditures of government funds.

Section 10 of the Implementing Rules and Regulations of Republic Act No. 9184 or the Government Procurement Reform Act requires that all procurement shall be done through competitive Bidding.  This is  in line with transparency in the procurement process and in the implementation of procurement contracts to ensure competitiveness through wide dissemination of bid opportunities.

Under Section 48 of said Rules, subject to prior approval of the Head of the Procuring Entity or his duly authorized representative, alternative modes of procurement may be resorted to as provided therein in order to promote economy and efficiency and to ensure that the most advantageous price for the government is obtained. Such modes of procurement include :
1.
2.
3.
4.
5.
Limited Source Bidding
Direct Contracting
Repeat Order
Shopping
Negotiated Procurement

In the course of the audit, we found that the local government unit procured gasoline, oil and lubricants direct from suppliers contrary to the above provisions of the implementing rules.  While the purchase order for such supplies indicate that procurement were made through “limited source bidding”, the purchase were actually made by direct purchase.

It was also found that, while the pump price for fuel were available at the service stations, the price charged to the city government were higher by an average of 6%.   Compared to the total expenses for the year for Gasoline, Oil and Lubricants amounting to P 52,616,025.92, this may translate to a savings of P3,156,961.55.

Further verification also revealed that the pump price of fuel in the locality was also higher by not less than P 5/liter compared to the price in Davao City.   For an estimated procurement of 1 M liters of fuel, this easily translate to a price difference of another P5 million.

When referred for comment, the Chairman of the Bids and Awards Committee informed us that they are now finalizing the plan to purchase the fuel requirements in bulk thru public bidding and withdrawal and payment thereof will be thru the use of digital or fleet cards.

Recommendation for General Santos City Government:
Comply with the pertinent provisions of the IRR-A of R.A. 9184.  As much as possible, adopt public bidding in the procurement of goods and services.  Alternative modes should be resorted to only if the conditions specifically provided in the rules are met.

Election Result for Sultan Kudarat – 1st Legdist

MEMBER, HOUSE OF REPRESENTATIVES of SULTAN KUDARAT – FIRST LEGDIST

Candidate Party Votes Percentage
MANGUDADATU, Pax Pakung S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 7474 52.42%
SAKALURAN, Raden C. INDEPENDENT 6784 47.58%
Statistics
Total number of Voters who actually voted 33991
PROVINCIAL GOVERNOR of SULTAN KUDARAT

Candidate Party Votes Percentage
VALDEZ, Carlos, Jr. D. NATIONALIST PEOPLES COALITION 21455 69.25%
MANGUDADATU, Suharto T. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 8997 29.04%
ESTORQUE, Rodolfo V. INDEPENDENT 276 0.89%
DEFIÑO, Ephraim B. INDEPENDENT 254 0.82%
Statistics
Total number of Voters who actually voted 33991
PROVINCIAL VICE-GOVERNOR of SULTAN KUDARAT

Candidate Party Votes Percentage
MATIAS, Ernesto F. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 13871 100.00%
Statistics
Total number of Voters who actually voted 33991
MEMBER, SANGGUNIANG PANLALAWIGAN of SULTAN KUDARAT – FIRST PROVDIST

Candidate Party Votes Percentage
SEGURA, Orfelina P. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 19755 23.46%
DUQUE, Eduardo M. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 15116 17.95%
PAGATPATAN, Generoso C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 14258 16.93%
RECINTO, Francis Eric E. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 12883 15.30%
GARCIA, Benigno N. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 11126 13.21%
QUEZON, Eduardo V. INDEPENDENT 11070 13.15%
Statistics
Total number of Voters who actually voted 33991

Election Result for General Santos City – Local

MEMBER, HOUSE OF REPRESENTATIVES of SOUTH COTABATO – FIRST LEGDIST

Candidate Party Votes Percentage
ACHARON, Pedro Jr B. NATIONALIST PEOPLES COALITION 96101 63.13%
MELLIZA, Ramon R. INDEPENDENT 40514 26.62%
GARCIA, Rogelio V. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 9770 6.42%
GACAL, Franklin Jr. M. INDEPENDENT 4901 3.22%
ANGANGAN, Aldwin B. INDEPENDENT 580 0.38%
PLAZA, Abelardo S. INDEPENDENT 352 0.23%
Statistics
Total number of Voters who actually voted 164471
MAYOR of SOUTH COTABATO – GENERAL SANTOS CITY (DADIANGAS)

Candidate Party Votes Percentage
ANTONINO-CUSTODIO, Darlene M R. NATIONALIST PEOPLES COALITION 82985 52.53%
CONGSON, Florentina L. PEOPLES CHAMP MOVEMENT 29068 18.40%
NUÑEZ, Rosalita T. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 25953 16.43%
ACHARON, Loreto B. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 19958 12.63%
Statistics
Total number of Voters who actually voted 164471
VICE-MAYOR of SOUTH COTABATO – GENERAL SANTOS CITY (DADIANGAS)

Candidate Party Votes Percentage
BAÑAS, Shirlyn L. PEOPLES CHAMP MOVEMENT 67655 47.43%
ACHARON, Jose Orlando R. ACHIEVEMENT WITH INTEGRITY MOVEMENT 66189 46.40%
MONGAO, Benhur S. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 8807 6.17%
Statistics
Total number of Voters who actually voted 164471
MEMBER, SANGGUNIANG PANLUNGSOD of SOUTH COTABATO – GENERAL SANTOS CITY (DADIANGAS) – LONE DIST

Candidate Party Votes Percentage
RIVERA, Ronnel C. INDEPENDENT 106617 6.95%
BAGONOC, Elizabeth B. LIBERAL PARTY 80325 5.24%
DINOPOL, Vivencio E. LIBERAL PARTY 80221 5.23%
ATENDIDO, Richard L. LIBERAL PARTY 77504 5.05%
NATIVIDAD, Nepthale P. LIBERAL PARTY 73002 4.76%
LEYSON, Eduardo Iv D. LIBERAL PARTY 68858 4.49%
VICENTE, Dante S. LIBERAL PARTY 68281 4.45%
LLIDO, Virginia T. LIBERAL PARTY 65999 4.30%
LAGARE III, Dominador S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 61668 4.02%
OCO, Marius Orlando A. LIBERAL PARTY 59322 3.87%
SANTOS, Margareth Rose N. LIBERAL PARTY 57137 3.73%
DE CLARO, Remus P. LIBERAL PARTY 55150 3.60%
HENARES, Peter Armand L. LIBERAL PARTY 54415 3.55%
DOSPUEBLOS, Marcelino E. LIBERAL PARTY 49226 3.21%
ACHARON, Honesto B. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 46870 3.06%
GACAL, Francisco M. PEOPLES CHAMP MOVEMENT 44649 2.91%
CONGSON, Danilo R. PEOPLES CHAMP MOVEMENT 42518 2.77%
CATAPANG, George R. PEOPLES CHAMP MOVEMENT 32815 2.14%
CLOMA, Arturo C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 28023 1.83%
SOMBRIO, Sannie P. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 27969 1.82%
MARIANO, Jay Mathew L. PEOPLES CHAMP MOVEMENT 22911 1.49%
MONTILLA, Rafael O. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 22621 1.48%
MARTINEZ, Francis C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 20767 1.35%
VALENCIA, Zenaida A. PEOPLES CHAMP MOVEMENT 18624 1.21%
CATOLICO, Rommel S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 17902 1.17%
ROYECA, Alvin S. INDEPENDENT 17861 1.16%
SUNGA, Eduardo S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 17436 1.14%
LORENZO, Carmen D. PEOPLES CHAMP MOVEMENT 15289 1.00%
CIOCON, Ma. Theresa A. PEOPLES CHAMP MOVEMENT 14739 0.96%
TOROCTOCON, Alfredo T. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 14716 0.96%
NILONG, Abraham M. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 13577 0.89%
GUARIN, Cristopher K. PEOPLES CHAMP MOVEMENT 13254 0.86%
CUNANAN, Juliet R. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 12816 0.84%
QUILBAN, Edwin C. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 11866 0.77%
ZOSA, Telesforo O. PEOPLES CHAMP MOVEMENT 11213 0.73%
SOGUILON, Waldemar G. INDEPENDENT 9885 0.64%
PASICOLAN, Francisco B. PEOPLES CHAMP MOVEMENT 9835 0.64%
TINOCO, Danilo C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 9334 0.61%
ESPINOSA, Jesus Q. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 9082 0.59%
ENERO, Rogelio T. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 8595 0.56%
PEREZ, Pedro C. INDEPENDENT 8219 0.54%
DE GUZMAN, Benito T. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 8203 0.53%
MALINAO, Manuel S. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 7867 0.51%
OSOP, Abedin L. INDEPENDENT 7254 0.47%
MOJADO, Salvador G. INDEPENDENT 7084 0.46%
SENTINA, Zaldy A. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 7067 0.46%
SERANIAS, Fermin P. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 6264 0.41%
DORIA, Bonifacio Jr. F. INDEPENDENT 5995 0.39%
ILUMBA, Conrado L. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 2482 0.16%
Statistics
Total number of Voters who actually voted 164471

General Santos City 2008 COA Audit 7

Value for Money Audit

1. The operation of the city’s economic enterprises cannot be properly evaluated due to its failure to maintain separate financial records and reports which may be used to ascertain whether the purpose for which the same were created were attained in an economic, efficient and effective manner.

Sec. 313 of R.A. 7160 provides-

“Local government units shall maintain special accounts in the general fund for the following:

a.  Public utilities and other economic   enterprises;

b. Loans, interest, bond issues and other contributions for specific purposes; and

c. 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.

Receipts, transfers, and expenditures involving the foregoing special accounts shall be properly taken up thereunder. “

Likewise, Sections 105 to 107 of the NGAS manual.  Vol. I provide, among others that:

1. Local government units shall maintain special accounts in the General Fund for public utilities and economic enterprises , and development projects funded from its share of internal revenue collections, etc.

2. The objectives are to determine whether the income generated by the public utilities or economic enterprises are sufficient to meet their respective operating costs and to provide adequate information as to assets, liabilities and equity for each special account.

3. Special accounts shall be maintained through the use of complete subsidiary ledgers.

Review of the city’s financial transactions disclosed that special accounts were not maintained as required in the aforementioned provisions of law and regulations.  While records and subsidiary ledgers are available to determine the income and expenses for the current year, these are not adequate to determine the status of the special accounts concerned.

The financial statements do not provide adequate information as to the assets, liability and equity of each special account.  These information are necessary to ascertain whether the purpose for which the same were created were attained in an economic, efficient and effective manner.

When informed of the audit observation, the City Administrator explained that the City Accountant and others concerned were instructed to initiate the maintenance of subject special accounts.  However, there is difficulty in the proper charging of costs to each account concerned, thus its implementation was delayed.  He assured us that appropriate measures will be taken in the ensuing year to properly implement our recommendation.

Recommendation for General Santos City Government:

Direct the City Accountant to establish and maintain the required special accounts in the General Fund and provide for necessary subsidiary ledgers.  Separate financial statements such as the Balance Sheet, Statement of Income and Expenses and Cash Flows should be prepared and submitted.

General Santos City 2008 COA Audit 6

6.  Cash in bank balance was understated by P 2,236,038.68 as a result of  non adjustment of the reconciling items indicated in the Statement of Bank Reconciliation  due to the failure of the City Treasurer and City Accountant to require the banks  to provide the necessary supporting documents to record the transactions as provided under Section 111 of PD 1445 and COA Circular No. 96-011 dated October 2, 1996.

Item No. 3.2 of COA Circular No. 96-011 provides that the accountant shall, within ten days from receipt of the Bank Statements, reconcile the same with the General Ledgers and prepare the Bank Reconciliation Statements.

Likewise, Section 111 of Presidential Decree no. 1445 states -
“Keeping of accounts – the accounts of an agency shall be kept  in such details as is necessary to meet the needs of the agency and at the same time be adequate to furnish the information needed by fiscal or control agencies of the government.”

The City of General Santos maintained 23 bank accounts with the different government depository banks in the City of which 5 were closed during the year 2008.     In the course of the verification of the Statement of Bank Reconciliation, it was disclosed that the reconciling items were not adjusted in the books of accounts due to non-availability of the credit memos, debit memos, and other documents to support the validity of the transactions.

These reconciling items were mostly dated  in prior years and remained unadjusted. There was no letter made by the City Accountant nor the City Treasurer requesting the banks to provide copies of the credit memos, debit memos and other supporting documents.  Without the supporting documents the reconciling items remained outstanding for quite a number of years.

The cash in bank  is a fund owned by the City Government, therefore, all  transactions related thereto are to be  validated and documented, of which the credit memos, debit memos are integral part of it. These documents should have been requested by the City Treasurer.

The very purpose for which a bank reconciliation statement is prepared is to determine those items affecting the cash in bank balance that need to be adjusted to correctly present the accounts in the financial statement.

The non preparation of the adjustments understated the Cash in Bank  balance by P2,236,038.68 computed as follows:

Unrecorded credit memos
P 2,231,844.16
Unrecorded Interest Income
122,931.98
Unrecorded deposits
117,833.84
Unrecorded debit memos
__(236,571.30)
Net understatement of Cash in Bank
P2,236,038.68

In the course of our discussion, the City Treasurer explained that he already requested documents from the bank but the bank was not able to provide the necessary documents.  He informed us that he will follow-up on his request as soon as possible.

Recommendation for General Santos City Government:

Direct the City Accountant and the City Treasurer to coordinate with each other and immediately secure copy of the debit and credit memos from the bank as soon as it is indicated in the bank statement and the bank reconciliation is prepared.

Require the City Accountant to determine the nature of the accounts and prepare the adjusting entries.

General Santos City 2008 COA Audit 4

4.  The balance of the account Due from Other Funds (144) in the amount of P14,221,131.13 did not reconcile with the balance of Due to Other Funds, P 46,554,506.28 resulting to a difference of  P 32,333,375.15, thus rendering the accounts doubtful.

Under normal circumstances, and in line with the generally accepted accounting principles, the receivable account Due from Other Funds should equal the liability account Due to Other Funds.  This should be so because these are reciprocal accounts, where a receivable from one fund should be a payable to another fund within the local government unit.
However, the balance sheet as of December 31, 2008 showed a debit balance of P14,221,131.13 under Due from Other Funds, and a credit balance of P 46,554,506.28.  This indicated a difference of P32,333,375.15.
Analysis of these accounts are shown below:
Due from    Other Funds

General Fund
S.E.F
Trust Fund
P
3,256,612.53
384,651.19
10,579,131.13

14,221,131.13

Due to Other Funds

General Fund
S.E.F
Trust Fund

28,792,175.87
385,521.74
17,376,808.67

46,554,506.28
D i f f e r e n c e                                                                P 32,333,375.15

This observation was discussed in the exit conference and the accountant assured us that he will verify  and inquire on the status of each account and reconcile the affected accounts in the financial statements.
Recommendation for General Santos City Government:
Require the immediate verification of the account from the subsidiary ledgers and source documents and effect the appropriate adjustment to reconcile the accounts

General Santos City 2008 COA Audit 3

3.   The balance of accounts payable as of year-end totaling P 40,008,724.23 included those payables which had been outstanding for more than two (2) years in the amount of P4,283,967.90  contrary to the generally accepted accounting principles and Section 98 of PD 1445.
Section 98 of PD 1445 provides –
“Past due accounts specifically those which had been outstanding for two (2) years or more are subject for reversion to the unappropriated surplus of the general fund   x x x x.”

Likewise, the generally accepted accounting principles define Current Liabilities, under which the accounts payable account belong, as those obligations that are reasonably expected to be liquidated through the use of existing current assets  or current liabilities within the normal operating cycle of the business or one year, whichever is longer.

The balance of the account reached P 40,008,724.23 at year-end, broken down according to the years they were incurred, as enumerated below.

Year Incurred
Amount
2005
-
1,667,091.06
2006
-
2,618,876.84
2007
-
7,794,396.67
2008
-
27,928,359.66
T o t a l                                            P  40,008,724.23

Analysis of the Status of Accounts Payable disclosed that there were payable accounts which had been outstanding for more than two years. It include those incurred in 2005 for P1,667,091.06 and in 2006 for P2,618,876.84 or a total of P4,283,967.90. (Annex “D”)

Likewise, some accounts had incomplete supporting documents, which may render them irregular and of doubtful validity.

The City Administrator instructed the accountant to review the individual accounts and their supporting documents to determine their validity and effect the necessary adjustments, including reversions of some accounts if necessary.

Recommendation for General Santos City Government:

Require the City Accountant and others concerned to review and examine the vouchers and supporting documents related to each payable account.  Determine the validity of the accounts and revert to the unappropriated surplus those which are found to be doubtful.

General Santos City 2008 COA Audit 2

2.  Cash advances under the accounts Due from Officers and Employees and Due from NGOs/Pos totaling P 35,712,214.57 remained unliquidated as of year-end contrary to COA Circular No. 97-002 and Section 89 of PD 1445.

In our review and verification of cash advances account we observed an increasing trend in the balances of unliquidated cash advances granted to Officials and Employees, P 13,647,395.74 and those given to NGOs / POs, P17,321,496.82, or a total of P35,712,214.57 as of December 31, 2008, a schedule of which is attached as Annex “B” hereof. The outstanding balances were taken from regular financial reports submitted to us by the City Accountant, the last of which was made as of December 31, 2008 and received by this Office on February 18, 2009.  Also attached is a comparative statement of balances for a five-year period from 2004 to 2008 (Annex “C”).

It was noted in the reports that some advances to officials and employees, though negligible, were granted as far back as 1977 and succeeding years.  Some were given despite non-liquidation of previous advances granted contrary to COA Circular No. 97-002 and Section 89 of PD 1445, as well as Executive No. 33 series of 1999 issued by the former City Mayor.  It was further noted that the officials concerned failed to implement the sanctions provided under Sections III and IV of said Executive Order.  Hence, several personnel incurred multiple unliquidated cash advances while some have retired or were allowed to leave the city government without settling their obligations.

Such are violations of pertinent provisions of COA Circular No. 97-002 dated February 7, 1997 and Section 89 of PD 1445 which states that –

“No cash advance shall be given unless for a legally atuthorized specific purpose.  A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served.  No additional cash advance shall be allowed to any official or employee unless the previous cash advance given him is first settled or a proper accounting thereof is made”

The City Accountant informed us during the exit conference that deductions from employees’ salaries are now being implemented and he assured us that subsequent cash advances will not be given to officials and employees with outstanding cash advances.

Recommendation for General Santos City Government:

Require the accountant and other officials concerned to strictly implement the policies on the grant, utilization and liquidation of cash advances.  Stop the practice of granting additional cash advances to those with outstanding accounts or unless proper accounting of the previous cash advance is made.

If necessary, resort to some remedies and sanctions available to enforce settlement thereof, such as enforcement of salary deductions pursuant to COA Circular No. 96-004 and Executive Order No. 33, series of 1999.

General Santos City 2008 COA Audit 1

DETAILED FINDINGS AND RECOMMENDATIONS

A. Favorable Observations
The local government unit of General Santos City has accomplished commendable programs and projects during the audit year, noteworthy of which are the following:

1.
The city government has completed 83 infrastructure projects with a contract cost of P 133,017,140.36 (Annex “A”) as of December 31, 2008.  Moreover, 26 other projects amounting to P 101,761,587.22 were still ongoing as of year-end.
2.
The city has been awarded as Most Competitive Mid-Sized City of the Philippines, along with the cities of Cabanatuan, Lucena, Olongapo, San Pablo, Tarlac and Tagum.
3.
The City’s Tuna Festival was also adjudged 2nd Best Tourism Event  – Chartered City Category by the Association of Tourism Officers of the Philippines (ATOP).

B. Financial and Compliance Audit

1.  Heavy Equipment purchased through letters of credit were  not recorded and adjustments thereon were not made contrary to  the generally accepted accounting principles and Section 111 of PD 1445,  thus Deposit on Letters of Credit account is overstated while Construction and Heavy Equipment account is understated by P14.1M as of year end.
One of the generally accepted accounting principle on asset is that Property Plant and Equipment shall be recorded at the time the cost was incurred. In this case, the cost was already incurred and the corresponding Property Plant and Equipment was already received and used in the operations of the City Government yet the same were not yet recorded and recognized as an asset.
Likewise Section 111 of Presidential Decree no. 1445 states:
“Keeping of accounts – the accounts of an agency shall be kept  in such details as is necessary to meet the needs of the agency and at the same time be adequate to furnish the information needed by fiscal or control agencies of the government.”

The financial statements as of December 31, 2008, showed among others the account Deposit on Letters of Credit  with a balance of  P14,116,495.03.The subsidiary ledgers showed  that the City of General Santos had opened Letters of Credits with Philippine National Bank and Land Bank of the Philippines with balances, as follows:
Philippine National Bank
P
4,669,063.36
Land Bank of the Philippines
9,447,431.67
T o t a l

14,116,495.03

Evaluation of the accounts established that the unrecorded Property Plant and Equipment are the following:

Particulars
Phil. National Bank Account
Date

Amount
1.
Equipment Acquired prior to 1991
P
4.669.063.36

2.
3.

Land Bank Account
Motor Grader, MG 330
Heavy equipment

Oct., 2007
Sept., 1998

8.318.000.00
6.871.915.20
Total unliquidated LCs and
unrecorded Heavy Equipment
P
16,858,978.56

The heavy equipment acquired in Sept 1998  with  the cost of P3.8M and those acquired prior to 1991 with a total cost of P4.6M cannot be identified by the City General Services Office.

Likewise, the latest letter of credit was opened in 2007 to purchase Mitsubishi Motor Grader Model MG330 with a net cost of P 8,318,700.00.  Inquiry from the Division Head of the Motorpool, City Engineer’s Office disclosed that the equipment was already received and being used by the City Government. However, the  Report on the Physical count of Property Plant and Equipment as of December 31, 2007 did not include the subject equipment.

On the other hand, verification of the transactions opened with the Land Bank of the Philippines,   disclosed  that the letter of credit opened on November 2003 was already liquidated, however,  there was an overstatement in recording of the heavy equipment, computed as follows :
Amount of Letter of Credit
Less: Return of Marginal Deposits
Net Amount of LC
P
33,440,000.00
2,274,925.53
31,165,074.47
Amount Recorded
33,908,258.00
Overstatement

2,743,183.53

Thus, there is a net overstatement in the Letter of Credit Account and   understatement of the PPE account by  P 14,116,495.03
In answer to our Audit Observations Memorandum, the General Services Officer assured us that they will submit the required documents for the eventual adjustment of the related accounts in the Financial Statements.

Recommendation for General Santos City Government:

Direct the City Engineer and the General Services Officer to identify the heavy equipment acquired through the opening of the letters of credit and to provide the City Accountant’s Office with the complete documentation of the importation/acquisition to facilitate the immediate recording of the transaction as follows:

Construction and Heavy Equipment (230)              P 16,858,978.56
Deposits on Letters of Credit (180)  P 16,858,978.56
To record acquisition of heavy equipment

Deposits on Letters of Credit  ( 180 )                       P 2,743,183.53
Construction and Heavy Equipment  (230)  P   2,743,183.53
To adjust the overstatement  (LC of  Nov. 2003)