Gingoog City 2008 COA Audit 5
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
5. Construction in Progress (CIP) account under the General Fund is overstated by P19,700,303.19 due to failure to close/transfer the cost of the completed projects to agency assets and Public Infrastructure in violation of the provisions of Section 50, Volume I, of the Manual on the New Government Accounting System.
Provisions of Section 50, Volume I, of the Manual on the New Government Accounting System states that during the construction period, agency assets and public infrastructures shall be taken up in the books as “Construction in Progress” with the appropriate asset classification. As soon as the project is completed, the Construction in Progress for agency asset is closed to the appropriate asset accounts. For public infrastructure funded out of regular income, the Construction in Progress account is transferred to the Public Infrastructures account upon completion. At the end of the year, the latter account is closed to the Government Equity and the asset is recorded in the Registry of Public Infrastructures (RPI).
Verification of records disclosed that as of December 31, 2008 some projects recorded in the Construction in Progress (CIP) under the General Fund totaling P19,700,303.19 are already 100% completed but some of these projects were not closed to appropriate asset accounts and transferred to Public Infrastructures account. Annex A.
Interview with Accounting personnel revealed that the 100% completed projects listed in the Construction In Progress can not be closed/transferred to appropriate asset account and to public infrastructure account because the City Engineer’s Office did not yet confirm the status of these projects. They need a certification issued by the City Engineer’s Office that said projects were already 100% completed.
As a result, Construction in Progress (CIP) account under the General Fund was overstated by P19,700,303.19 due to failure to close/transfer the cost of the completed projects to agency assets and Public Infrastructure in violation of the provisions of Section 50, Volume I, of the Manual on the New Government Accounting System
Management Comments:
The City Engineer’s Office personnel justified that this matter was not given importance because they believed that their submission of the Monthly Status Report of Project Accomplishment to the City Mayor’s Office is enough basis for the Accounting Department to identify the projects which were 100% completed.
Recommendation to Gingoog City Government:
Require the City Engineer’s Office to submit monthly or quarterly to the Accounting Department a certification of all 100% completed projects. Likewise, require the Accounting Department to close/transfer the cost of 100% completed projects to agency assets and Public Infrastructure listed in the Construction in Progress, as soon as this certification is received from the City Engineer’s Office in accordance with the provisions of Section 50, Volume I, of the Manual on the New Government accounting System.
Gingoog City 2008 COA Audit 4
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
4. Complete physical inventory of Property, Plant and Equipment was not conducted for more than 3 years, thus, validity, existence and correctness of same totaling P33,180,456.62 could not be ascertained.
Provisions of Section 156 of COA Circular No. 92-386, Rules and Regulations on Supply and Property Management in the Local Government states that the local chief executive shall require an annual physical inventory of all supplies or property of the local government unit as of December 31 of each year, to be conducted by office or department by a committee of three (3) consisting of the representative of the local chief executive as chairman and the general services officer, municipal or barangay treasurer, as the case may be and the supply accountable officer of the department or office concerned, as members. The inventory report shall be submitted to the local chief executive and copy furnished the city auditor concerned.
Provisions of Section 124, Volume I, of the New Government Accounting System (NGAS) states that the local chief executive shall require periodic physical inventory of supplies or property. Physical count of property, plant, and equipment by type shall be made annually and reported on the Report of Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to the local chief executive and copy furnished the city auditor.
Provisions of Section 13, Volume II, of NGAS further states that the Chief Accountant shall maintain Property, Plant and Equipment Ledger Card (PPELC) for each class of property, plant and equipment which shall record the acquisition, description, custody, estimated life, rate of depreciation, disposal, and other information about the property, plant and equipment, based on the source documents of the transactions; and
Provisions of Section 119, Volume I, of NGAS further states that the General Services Officer or the Local Treasurer, as the case maybe, shall number each type of supplies and maintain Stock Cards per stock number. He/She likewise maintain Property Cards per category of property, plant and equipment.
As of December 31, 2008, the balances of Transportation Equipment and Other Property, Plant and Equipment under General Fund and Special Education Funds of the City showed the following:
Balance Per Balance Sheet as of Dec. 31,2008
General Fund
Special Education
Fund
Total
Transportation Equipment
Other Property, Plant and Equipment
P 27,267,817.70
4,659,904.97
P 1,057,332.30
195,401.65
P 28,325,150.00
4,855,306.62
Total
P 31,927,722.67
P 1,252,733.95
P 33,180,456.62
The total cost of Other Property, Plant and Equipment (PPE) accounts represents 3.05% of the assets for the General Fund and 3.13% of the assets for the special education fund or an overall 3.05% of total assets on both funds, as of December 31, 2008, as follows:
Balance Per Balance Sheet as of December 31, 2008
General Fund
Special Education
Fund
Total
Total Assets
P1,048,502,324.80
P 40,034,095.64
P 1,088,536,420.44
Total Transportation Equipment & Other Property, Plant & Equipment
31,927,722.67
1,252,733.95
33,180,456.62
Asset Ratio
3.05%
3.13%
3.05%
Verification of records revealed that the Physical Inventory Committee conducted the initial physical inventory of Property, Plant and Equipment witness by City Auditor personnel in September 2008 but this was not continued due to non-availability of transportation.
Interview with the newly appointed General Services Officer disclosed that initial reconciliation were already done by their office and the property and equipment cards are now prepared by them. A Report on the Physical Count of Property, Plant and Equipment as of June 30, 2008 was submitted to our Office on August 26, 2008 but this was based only on the previous reports and accounting records.
Alternative auditing procedures were made, such as checking the physical inventory report submitted against the general ledgers and subsidiary ledgers, conducted physical count on selective basis. The following were noted:
a. Acknowledgement Receipts for Equipment (ARE) were not renewed every three years of issue on some of the equipment. Issuances made were only on the new ones.
d. The Property, Plant and Equipment Ledger Card (PPELC) for each class of property, plant and equipment was not maintained by the City Accountant. They are dependent on the subsidiary ledger balances per record maintained in their office.
As a result, the validity, existence and correctness of the Property, Plant and Equipment accounts totaling P33,180,456.62 could not be ascertained.
Management Comments:
The General Services Department personnel assigned to reconcile the account of the Property, Plant and Equipment with the accounting records justified that they are on the process of identifying each of the accounts listed in the Report on the Physical Count of Property, Plant and Equipment at their actual location. Some of the problems encountered were that some of the items listed in the report and listed in the accounting records could not be easily traced in their location; some items listed in the General Services Department record were not found in the records of the accounting records; and some property description do not match on both records of the General Services Department and Accounting Department as compared with the Tax Declaration maintained with the Assessor’s Office.
Recommendations to Gingoog City Government:
Instruct the City Physical Inventory Committee to conduct fully the physical inventory of Property, Plant and Equipment. Identify the items recorded in the Report on the Physical Count of Property, Plant and Equipment and list down those that can not be identified from both records of the General Services Office and the Accounting Department. Explain the items recorded in the books but could not be physically located.
Instruct the City Accountant and the General Services Officer to reconcile their records.
Instruct the City Accountant to prepare the Property, Plant and Equipment Ledger Card (PPELC) for each class of property, plant and equipment listing therein the data as to its acquisition, description, custody, estimated life, rate of depreciation, disposal, and other information about the property, plant and equipment, based on the source documents of the transactions.
Make representation with the Honorable Mayor regarding the problem on the availability of transportation for the purpose of inventory taking of all property, plant and equipment of the government.
Renew all Acknowledgement Receipt for Equipment every three years as required.
Gingoog City 2008 COA Audit 3
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
3. Deposits on Letters of Credit for the purchase of imported heavy equipment amounting to P15,502,738.68 remained unadjusted after it served its purpose.
Deposits on Letters of Credit usually are adjusted after it served its purpose and have an expiry period of four (4) months from the time the letter of credit is opened.
Verification of records disclosed that as of October 31, 2008, the balance of Deposits on Letters of Credit per trial balance and subsidiary ledger is composed of the following:
Code
Description
Amount
180-999-9999
GF Beginning Balances
P 602,738.68
180-999-2122-1002-11
Land Bank of the Philippines CA# 2122-1002-11
14,900,000.00
T o t a l
P 15,502,738.68
Records further disclosed that on March 5, 2008, the City Government of Gingoog opened Letters of Credit amounting to P14,900,000.00 for payment of the purchase of imported heavy equipment in favor of the following:
a. Kobelco International (S) Co., Pte. Ltd., 60 Pandan Road, Jurong, Singapore 609294 for the purchase of 2 units Skid Steer Loader (Brand New) for US$100,000.00; and
b. Ohtake Trading Co., Ltd., 2nd Floor, Daimon-Urbanist, 2-3-6 Shiba Daimon, Minato-Hu, Tokyo 1-5 Japan for the purchase of 3 units 6 Wheeler Dump truck (Brand New) for US$240,000.00.
Per record of the City Accountant’s Department, this transaction was only taken up in the books of accounts on July 30, 2008 after they received the debit advice from the bank for payment of the Letters of Credit for the purchased of 3 units Dump truck and 2 units of skid steer loader. But Land Bank of the Philippines, Gingoog Branch, has debited the government account on March 5, 2008 yet.
Investigation conducted with the City Accountant revealed that they can not for the moment adjust the Deposits on Letters of Credit for the following reasons:
a. Records are no longer available for the General Fund beginning balance of P602,738.68. They can not trace origin of the transactions.
b. For the newly opened Letter of Credits, the General Services Office did not yet submit the documents to support the validity, propriety and legality of the transaction.
The General Services Officer justified that for the liquidation of the Letters of Credit amounting to P14,900,000.00, documents are not yet complete to support the transaction. A letter was already sent to JVF Commercial and Project Development Support Services, the supplier of this imported heavy equipment, to submit the official receipts because what was submitted were commercial invoice of Kobelco International (S) Co., PTE., Ltd. and invoice of Ohtake Trading Co., LTD. not with the supplier’s invoice.
Due to documentary requirements as stated above, the Deposits on Letters of Credit amounting to P15,502,738.68 remained unadjusted to date.
Recommendations to Gingoog City Government:
Require the General Services Officer to fast tract the submission of complete documents on the purchase of imported heavy equipment thru Letters of Credits amounting to P14,900,000.00 to the City Accounting Office. Likewise, instruct the City Accountant to make the necessary adjusting entries to revert the deposits guaranteeing payments on imported heavy equipments already paid.
Instruct the City Accountant to trace from the records the origin of transactions of the beginning balance of P602,738.68 on the Deposits on Letters of Credit and call the attention of concerned officials of these transactions to complete the required documents to facilitate the adjustments thereof.
Gingoog City 2008 COA Audit 2
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
2. Total collections of the Liquidating Officer in the amount of P86,610.89 on October 17, 2008 were not turned over to the Cashier on that same day in violation of provisions of Sections 29 and 31c of the Manual on the New Government Accounting System for Local Government Units particularly on the Accounting Policies, Volume I.
Section 29 of the Manual on the New Government Accounting System for Local Government Units particularly on the Accounting Policies, Volume I, provides among others that collectors/tellers shall issue a receipt to acknowledge collections made. The receipt maybe in the form of pre-numbered Official Receipts, or cash tickets and the like. At the close of each business day, these collectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four copies. The original and two copies, together with the duplicates of the official receipts issued, shall be submitted to the treasurer/cashier to whom the cash collected shall be turned over. The fourth copy of the RCD shall be retained by the collector/teller concerned. (Underscoring supplied).
Section 31c. of the same manual provides among others that the liquidating officer shall turn over intact the cash collections to the Treasurer/Cashier together with the originals and two copies of the Receipts of Collections and Deposits (RCD) of collectors/tellers and the duplicates of the official receipts issued. The Treasurer/Cashier shall acknowledge receipt of the cash and all accompanying documents by signing all copies of the Receipts of Collections and Deposits (RCD) of liquidating officer on the certification and receipt portion of the form. The fourth copy of the (RCD) of the liquidating officer and RCD’s of collectors/tellers shall be retained by the liquidating officer.
Further Section 32 of the said Manual provides in part that the Cashier shall deposit intact all his collections as well as collections turned over to him by the collectors/tellers with the authorized depository bank daily or not later than the next banking day.
Verification of records on the collections made on October 17, 2008 disclosed that Ms. Isidra A. Abogatal, Liquidating Officer, did not turn over the cash collection on that day totaling P86,610.89 to the Cashier. She kept the entire collections on that day in her vault.
Failure of the Liquidating Officer to turn over her collections to the Cashier violated the above-cited provisions of the Manual on New Government Accounting System and resulted to losses of government funds totaling P86,610.89.
In reply to our Audit Observation Memorandum, Ms. Isidra A. Abogatal justified and we partly quote:
“As liquidating officer, assign in the Cashier Division, I am in charge of receiving collections of payments of land tax and business taxes, received payments in various livelihood loans and etc. I prepare reports of collections and deposit (RCD) and bank deposits slips from various person entities due to the City Government of Gingoog from Monday to Friday.
The collection that was stolen by robbers which amount to P86,610.89 last October 20, 2008, was not negligence in my part because, I have done all the precautionary measures to prevent the collection not to be stolen. It is placed in my vault, which is always the usual practice of all the employees assigned in our division who are holding collections or money.
The P86,610.89 was my collection in the afternoon of October 17, 2008 that was Friday. I placed my collection in my own vault because it is my usual practice, to give the money to the cashier on the following day, after I finished making the RCD and after the internal audit has been thru with the auditing. Unfortunately, the following days were Saturday and Sunday. So the money is left inside the vault. We do not have any idea when the money was stolen. The only thing I know that on Monday October 20, 2008 the CTO was ransacked including our division.
I would also like to comment on the finding which follows:
“Thus the said collection would not be included in the robbery since the cashier vault cannot be easily ransacked”
First and Foremost, I would like to say, it is not my fault if the vault assigned to me is not as durable like the one used by the cashier. The CTO assigned that to me and I don’t have any reason to reject it, it is for my own welfare and I need it badly as a liquidating officer, for the money/collection I collected everyday. When I received the vault I don’t have in my mind to check it, if it is durable or not because I trust the people who are in charge of purchasing government materials especially vaults, and I firmly believe that they know.
What if the Cashier’s vault was ransacked and my vault was not? Does it follow that my vault was better than hers?
The incident that happened was neither my fault nor our faults. We place the money in its proper place, which we called it VAULTS for safekeeping. We closed our doors, we did not left it open. If only we know that receiving money will put as to shame, we rather have suggested that only one vault be assigned to this division. A vault for the Cashier only, so that we cannot commit violations.”
Auditor’s Rejoinder:
Ms. Isidra A. Abogatal failed to follow provisions of Sections 29 and 31c. of the Manual on the New Government Accounting System for Local Government Units particularly on the Accounting Policies, Volume I, which states among others that at the close of each business day, the liquidating officer shall turn over intact the cash collections to the Treasurer/Cashier together with the originals and two copies of the Receipts of Collections and Deposits (RCD) of collectors/tellers and the duplicates of the official receipts issued. Had this been done, the responsibility would have been turned-over to the proper accountable officer.
The Assistant City Treasurer, In-Charge of Office, forwarded to our office on November 14, 2008 the Request for Relief of Accountability of said accountable officer.
The City Mayor also forwarded to our office on November 19, 2008 the Request for Relief of Accountability of various accountable officers with following comments and we quote:
“Please consider this as my favorable endorsement without pre-empting or without prejudice to the outcome of the investigation conducted by the Philippine National Police (PNP) and the National Bureau of Investigation (NBI).”
This office can not take further actions on the Request for Relief of Accountability as of today due to lack of other documents submitted as required under Section 151 of Commission On Audit Circular No. 92-386 which prescribed the Rules and Regulations on Supply and Property Management in the Local Governments. A letter addressed to Ms. Sofronia M. Palarca, Assistant Treasurer, In-Charge of Office, was duly received on December 18, 2008 requiring the submission of the final police report on the theft or robbery case, sworn statements of affidavits of the guards respecting the incident and information as to whether security guard(s) is found to be negligent in the premises, or appropriate action has been instituted to enforce the civil liability of the security guard.
Recommendations for Gingoog City Government:
Institute appropriate charges against accountable officers found liable for losses occasioned by negligence in the keeping of government fund at the time in their actual custody pursuant to Section 105 of Presidential Decree No. 1445.
The Cash Examination Report was submitted to the Regional Legal and Adjudication Office.
Require the Liquidating Officer to turn over to the Cashier her collections pursuant to Sections 29 and 31c of the Manual on the New Government Accounting System for Local Government Units.
A financial and compliance audit and value-for-money audit were conducted on the accounts and operations of the City of Gingoog for calendar 2008. The audit was aimed at ascertaining whether financial statements of the City present fairly its financial position and results of operations and whether applicable laws and regulations were properly observed and to ascertain whether the City governed and managed its affairs efficiently, effectively and economically for the general welfare of the city.
Audit procedures included a review of operating procedures, inspection of the City’s programs and projects, interview of concerned government officials and employees, verification, reconciliation, analysis of accounts, inspections/validations of reported accomplishments, and such other procedures considered necessary in the circumstances.
Favorable Observations
The reorganization of personnel of the City was made effective in January 2008 as approved in the CY 2008 Annual Budget.
I. Financial and Compliance Audit
In the course of audit, we noted the following deficiencies:
1. Cash advances granted to regular disbursing officer for the newly appointed regular employees were in excess of the net amount required for a pay period in the total amount of P602,074.72 in violation of COA Circular No. 97-002, thus resulting to loss of cash thru robbery.
Section 4-2-1 and 4-2-2 of COA Circular No. 97-002 provide that cash advances granted to regular disbursing officer shall be equal to the net amount of the payroll for a pay period and must be supported by payroll or list of payees with net amount to be paid.
Cash examination conducted on October 21, 2008, on the accountability of Ms. Estela B. Cainglet, Cashier III of the Cashier’s Division of the City Treasurer’s Department, disclosed that out of the twenty three (23) partially paid payrolls presented as a liquidation for the cash advances granted to the disbursing officer for general fund, twelve (12) payrolls for the newly appointed regular employees salaries and wages were in excess of the net amount required for a pay period in the total amount of P602,074.72, to wit:
No.
Voucher No.
Particulars
Amount of Cash Advance
Payments
Made
Excess Amount
1
3762
C/P R. Aliguz et. Al.
P173,849.53
P86,947.53
P86,902.00
2
3762
C/P P. Abrenica et. al.
138,917.78
69,460.28
69,457.50
3
3735
C/P R. Aniscal et. Al.
57,800.00
28,900.00
28,900.00
4
3735
C/P R. Abutan et. Al.
111,926.90
55,948.00
55,978.90
5
3735
C/P F. Apal et. Al.
72,078.26
36,050.00
36,028.26
6
3735
C/P J. Bucag et. Al.
48,319.68
24,160.06
24,159.62
7
3735
C/P RG. Baguiz et. al.
155,424.65
77,700.00
77,724.65
8
3735
C/P R. Abio et. Al.
103,979.03
51,974.00
52,005.03
9
3735
C/P A. Apal et. Al.
86,469.95
43,235.00
43,234.95
10
3762
C/P J. Acibron et. Al.
89,599.04
45,800.00
43,799.04
11
3762
C/P V. Aranas et. Al.
164,788.92
82,394.42
82,394.50
12
3691
C/P Arnold Rodriguez et. al.
2,978.27
1,488.00
1,490.27
Total
P1,206,132.01==========
P604,057.29
=========
P602,074.72
=========
Verification further disclosed that it is their practice that before a payroll could be cash advanced it passes thru the usual accounting and auditing procedures. The process will start in the Cashier’s Division, wherein liaison personnel, Raoul Barro, segregates and identifies payrolls to be cash advance based on the weekly services rendered by the regular employees and quincina basis for casual/job orders employees. The basis for cash advance voucher will then be a Journal Entry Voucher for each payroll on casual/job orders employees and a summary for the amount to be paid on each payroll of the weekly pay of regular employees.
However, when the twelve (12) payrolls of the newly appointed regular/new employees from different offices were processed, these were all treated by the Cashier’s Division as a one time cash advance instead of cash advancing only the amount of services duly rendered by the employees on a per week basis. Per interview of the personnel concerned, they alleged that they were very busy at the time so they were not able to identify the amount to be cashed advance which should have been only for the services rendered per week by the newly appointed regular employees. It was passed in pre-audit by the personnel of the City Accountant’s Department, duly approved by the City Accountant. It was also released for payment by the City Treasurer’s Department, duly approved by the City Treasurer and the City Administrator/City Mayor. Then these cash advance disbursement vouchers were encashed in the bank and paid to the concerned employees. It was only at the end of office hour on October 17, 2008 that they know that their cash advance were in excess of the net amount required for a pay period.
It was noted that during the time of robbery, between October 17-19, 2008, the actual services rendered of all employees would have been only for two weeks or half month service rendered, but the cash advance made for the newly appointed regular employees were for the whole month. Of the total cash advance of P1,206,132.01 representing the whole month salaries, only P604,057.29 was actually disbursed, thus P602,074.72 remained in the hands of the accountable officer.
In effect, when robbery happened, the amount of P602,074.72 was part of the money that was carted away by the robbers as alleged.
Verification of records further disclosed that the amount of P739,070.00 allegedly carted away by robbers is composed of the following:
Payrolls due for payments
P 68,055.28
Excess Cash Advance
P 602,074.72
Petty Cash
P 68,940.00
—————-
Total
P 739,070.00
=========
The above-cited practice is not only a violation of the provisions of COA Circular 97-002 but also resulted to loss of cash thru robbery.
The Assistant City Treasurer, In-Charge of Office, in answer to our Audit Observation Memorandum, justified and we partly quote:
“With regards to the excess cash advances of Mrs. Cainglet in the amount of P602,074.72 , the undersigned is very much sorry for having approved and released the same for payment. Due to so many claims of the newly appointed regular employees, the undersigned had no time to scrutinize the total amount of payrolls and their corresponding cash advances.
It has been an internal agreement and a long-time practice of this office that cash advances for regular payrolls for the whole month be divided into four (4) equal weeks, but unknowingly, the 3rd & 4th – week salary was included in the 1st and 2nd week cash advance, especially that it was already approved by the City Accountant and the City Mayor’s Office representative. I presumed that the usual practice of making cash advances for only a week was still followed, until when the robbery happened.
The said excess cash advance was part of the monies robbed.”
The City Accountant, in answer to our Audit Observation Memorandum, justified and we partly quote:
“The City Accountant’s Office pass in audit cash advance totaling P1,206,132.01 for salaries of newly appointed regular employees because the attachment of such cash advances where copies of the Journal Entry Voucher (JEVs) for each payroll. It was long been agreed by this office and the City Treasurer’s Office that if a JEV will be attached then the whole amount in the JEV will be granted as cash advance like in the case of salaries of casual employees and wages of Job Order Workers. For the weekly pay of regular employees a summary for the amount to be paid should be attached in the cash advance voucher every week instead of its individual JEVs. In the above mentioned cash advances no summary for weekly pay attached. Our auditor presumed that such cash advances are like those for casual and job orders workers.”
Auditor’s Rejoinder:
The purpose of the Pre-audit Section of the Accountant’s Department is to counter-check that all payments of the City are in accordance with accounting and auditing procedures. In auditing the payments of cash advances, they should check all payrolls covered as to how much should be paid for a pay period and they should not be dependent only on what the Cashier’s Division provides as agreed that on weekly pay of regular employees only a summary for the amount to be paid should be attached in the cash advance voucher. No presumption should be made by the audit team of the Pre-audit Section of the Accountant’s Department, instead audit properly all cash advances to preclude losses.
In reply to our Audit Observation Memorandum No. 2005-08, Ms. Estela B. Cainglet justified and we partly quote:
“Please be informed it is the practice of our office that before a voucher or payroll for wages, salaries or honorarium could be cash advanced it passes thru the usual accounting and auditing procedures of city government. Mr. Raoul Barro, Clerk I of this office, is in-charge of preparing the Cash Advances of all Disbursing Officer, and he based the amount of Cash Advance in the Journal Entry Voucher (JEV) attached to all approved vouchers and payrolls.
However, when the payrolls of newly appointed regular employees were released, it was prepared as one time cash advance. The clerk as well as the undersigned, was not able to notice or scrutinize it properly. It was passed in pre-audit by the personnel of the accounting office and was approved by the City Accountant. It was also approved by the City Mayor/Administrator and was approved and released by the City Treasurer’s Office. Then it was encashed and paid to concerned employees. It’s only during that time that we knew that the cash advance was over.
Be informed further, that the remaining cash on hand after the closing hour, as it is the usual practice, was placed in the safety vault since I believe it is proper, safest and secured place to put government money. The vault was locked and the numerical combination was also in placed. Besides, I am very much confident that no untoward incident will happened since there are security guards assigned in the premises to secure the area especially the City Treasurer’s Office and to safeguard all government properties.
Likewise, the robbery incident that took place sometimes between October 17-18, 2008, was not my fault, but it was a fortuitous event beyond my control. It was not negligence on my part because I have done all the precautionary measures to ensure its safety.”
Auditor’s Rejoinder:
The fact still remained that there was a mistake in preparing the cash advances made by the disbursing officer which was in excess of the net amount required for a pay period in the total amount of P602,074.72 which causes a great lost on the part of the City Government. The Cashier IV should monitor closely the cash advances granted to Disbursing Officer. She should not only be dependent on the determination of a clerk on how much money should be cash advance, but closely counter-check work done by this clerk. The City Treasurer should initiate measures to prevent incurrence of the same to protect the interest of the City Government.
The Assistant City Treasurer, In-Charge of Office, forwarded to our office on November 14, 2008 the Request for Relief of Accountability of said accountable officer.
The City Mayor also forwarded to our office on November 19, 2008 the Requests for Relief of Accountability of various accountable officers with the following comments and we quote:
“Please consider this as my favorable endorsement without pre-empting or without prejudice to the outcome of the investigation conducted by the Philippine National Police (PNP) and the National Bureau of Investigation (NBI).”
This office can not take further actions on the Request for Relief of Accountability as of today due to lack of other documents submitted as required under Section 151 of Commission On Audit Circular No. 92-386 which prescribed the Rules and Regulations on Supply and Property Management in the Local Governments. A letter addressed to Ms. Sofronia M. Palarca, Assistant Treasurer, In-Charge of Office, duly received on December 18, 2008 required the submission of the final police report on the theft or robbery case, sworn statements of affidavits of the guards respecting the incident and information as to whether security guard(s) is found to be negligent in the premises, or appropriate action has been instituted to enforce the civil liability of the security guard.
During the exit conference, management welcomed to implement our recommended measures to be undertaken to protect the interest of the City Government.
Recommendations for Gingoog City Government:
Institute appropriate charges against accountable officers found liable for losses occasioned by negligence in the keeping of government fund at the time in their actual custody.
The Cash Examination Report was submitted to the Regional Legal and Adjudication Office.
Initiate measures to prevent incurrence of the same to protect the interest of the City Government as follows:
a. Instruct the City Accountant to draw a Journal Entry Voucher to set-up the accountabilities of Accountable Officers for the lost of cash due to the alleged robbery.
b. Instruct the Head of the Cashier Division to monitor closely the cash advances granted to disbursing officer and counter-check the work done by her clerk, who determines the cash advances to be granted to disbursing officer. Instruct Cashier that she should be the one who will determine the total cash advances to be encashed in the bank during the day. Establish a cut-off period when payrolls are received in their Office to be paid for the day. If possible, no encashing of check in the bank should be made in the afternoon for cash advance payment of payrolls;
c. Instruct the regular Disbursing Officer and the Accountant to limit the amount of cash advance to the net amount of payrolls/vouchers payable. To minimize the payments of salaries and wages through cash advances, it is recommended that the City will adopt the bank payroll system through Automated Teller Machine, which would save time on the part of the LGU;
d. Instruct the Disbursing Officer to immediately deposit excess cash advances to the Cashier; and
e. Instruct the Pre-audit Section of the Accountant’s Department that in auditing the payments of cash advances, they should check all payrolls covered as to how much should be paid for a pay period. They should not be dependent only on what the Cashier’s Division provides as agreed that on weekly pay of regular employees only a summary for the amount to be paid should be attached in the cash advance voucher. Instead all cash advances for a pay period should be supported by payrolls.
Gingoog City 2008 COA Audit 1
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
A financial and compliance audit and value-for-money audit were conducted on the accounts and operations of the City of Gingoog for calendar 2008. The audit was aimed at ascertaining whether financial statements of the City present fairly its financial position and results of operations and whether applicable laws and regulations were properly observed and to ascertain whether the City governed and managed its affairs efficiently, effectively and economically for the general welfare of the city.
Audit procedures included a review of operating procedures, inspection of the City’s programs and projects, interview of concerned government officials and employees, verification, reconciliation, analysis of accounts, inspections/validations of reported accomplishments, and such other procedures considered necessary in the circumstances.
Favorable Observations
The reorganization of personnel of the City was made effective in January 2008 as approved in the CY 2008 Annual Budget.
I. Financial and Compliance Audit
In the course of audit, we noted the following deficiencies:
1. Cash advances granted to regular disbursing officer for the newly appointed regular employees were in excess of the net amount required for a pay period in the total amount of P602,074.72 in violation of COA Circular No. 97-002, thus resulting to loss of cash thru robbery.
Section 4-2-1 and 4-2-2 of COA Circular No. 97-002 provide that cash advances granted to regular disbursing officer shall be equal to the net amount of the payroll for a pay period and must be supported by payroll or list of payees with net amount to be paid.
Cash examination conducted on October 21, 2008, on the accountability of Ms. Estela B. Cainglet, Cashier III of the Cashier’s Division of the City Treasurer’s Department, disclosed that out of the twenty three (23) partially paid payrolls presented as a liquidation for the cash advances granted to the disbursing officer for general fund, twelve (12) payrolls for the newly appointed regular employees salaries and wages were in excess of the net amount required for a pay period in the total amount of P602,074.72, to wit:
No.
Voucher No.
Particulars
Amount of Cash Advance
Payments
Made
Excess Amount
1
3762
C/P R. Aliguz et. Al.
P173,849.53
P86,947.53
P86,902.00
2
3762
C/P P. Abrenica et. al.
138,917.78
69,460.28
69,457.50
3
3735
C/P R. Aniscal et. Al.
57,800.00
28,900.00
28,900.00
4
3735
C/P R. Abutan et. Al.
111,926.90
55,948.00
55,978.90
5
3735
C/P F. Apal et. Al.
72,078.26
36,050.00
36,028.26
6
3735
C/P J. Bucag et. Al.
48,319.68
24,160.06
24,159.62
7
3735
C/P RG. Baguiz et. al.
155,424.65
77,700.00
77,724.65
8
3735
C/P R. Abio et. Al.
103,979.03
51,974.00
52,005.03
9
3735
C/P A. Apal et. Al.
86,469.95
43,235.00
43,234.95
10
3762
C/P J. Acibron et. Al.
89,599.04
45,800.00
43,799.04
11
3762
C/P V. Aranas et. Al.
164,788.92
82,394.42
82,394.50
12
3691
C/P Arnold Rodriguez et. al.
2,978.27
1,488.00
1,490.27
Total
P1,206,132.01==========
P604,057.29
=========
P602,074.72
=========
Verification further disclosed that it is their practice that before a payroll could be cash advanced it passes thru the usual accounting and auditing procedures. The process will start in the Cashier’s Division, wherein liaison personnel, Raoul Barro, segregates and identifies payrolls to be cash advance based on the weekly services rendered by the regular employees and quincina basis for casual/job orders employees. The basis for cash advance voucher will then be a Journal Entry Voucher for each payroll on casual/job orders employees and a summary for the amount to be paid on each payroll of the weekly pay of regular employees.
However, when the twelve (12) payrolls of the newly appointed regular/new employees from different offices were processed, these were all treated by the Cashier’s Division as a one time cash advance instead of cash advancing only the amount of services duly rendered by the employees on a per week basis. Per interview of the personnel concerned, they alleged that they were very busy at the time so they were not able to identify the amount to be cashed advance which should have been only for the services rendered per week by the newly appointed regular employees. It was passed in pre-audit by the personnel of the City Accountant’s Department, duly approved by the City Accountant. It was also released for payment by the City Treasurer’s Department, duly approved by the City Treasurer and the City Administrator/City Mayor. Then these cash advance disbursement vouchers were encashed in the bank and paid to the concerned employees. It was only at the end of office hour on October 17, 2008 that they know that their cash advance were in excess of the net amount required for a pay period.
It was noted that during the time of robbery, between October 17-19, 2008, the actual services rendered of all employees would have been only for two weeks or half month service rendered, but the cash advance made for the newly appointed regular employees were for the whole month. Of the total cash advance of P1,206,132.01 representing the whole month salaries, only P604,057.29 was actually disbursed, thus P602,074.72 remained in the hands of the accountable officer.
In effect, when robbery happened, the amount of P602,074.72 was part of the money that was carted away by the robbers as alleged.
Verification of records further disclosed that the amount of P739,070.00 allegedly carted away by robbers is composed of the following:
Payrolls due for payments
P 68,055.28
Excess Cash Advance
P 602,074.72
Petty Cash
P 68,940.00
—————-
Total
P 739,070.00
=========
The above-cited practice is not only a violation of the provisions of COA Circular 97-002 but also resulted to loss of cash thru robbery.
The Assistant City Treasurer, In-Charge of Office, in answer to our Audit Observation Memorandum, justified and we partly quote:
“With regards to the excess cash advances of Mrs. Cainglet in the amount of P602,074.72 , the undersigned is very much sorry for having approved and released the same for payment. Due to so many claims of the newly appointed regular employees, the undersigned had no time to scrutinize the total amount of payrolls and their corresponding cash advances.
It has been an internal agreement and a long-time practice of this office that cash advances for regular payrolls for the whole month be divided into four (4) equal weeks, but unknowingly, the 3rd & 4th – week salary was included in the 1st and 2nd week cash advance, especially that it was already approved by the City Accountant and the City Mayor’s Office representative. I presumed that the usual practice of making cash advances for only a week was still followed, until when the robbery happened.
The said excess cash advance was part of the monies robbed.”
The City Accountant, in answer to our Audit Observation Memorandum, justified and we partly quote:
“The City Accountant’s Office pass in audit cash advance totaling P1,206,132.01 for salaries of newly appointed regular employees because the attachment of such cash advances where copies of the Journal Entry Voucher (JEVs) for each payroll. It was long been agreed by this office and the City Treasurer’s Office that if a JEV will be attached then the whole amount in the JEV will be granted as cash advance like in the case of salaries of casual employees and wages of Job Order Workers. For the weekly pay of regular employees a summary for the amount to be paid should be attached in the cash advance voucher every week instead of its individual JEVs. In the above mentioned cash advances no summary for weekly pay attached. Our auditor presumed that such cash advances are like those for casual and job orders workers.”
Auditor’s Rejoinder:
The purpose of the Pre-audit Section of the Accountant’s Department is to counter-check that all payments of the City are in accordance with accounting and auditing procedures. In auditing the payments of cash advances, they should check all payrolls covered as to how much should be paid for a pay period and they should not be dependent only on what the Cashier’s Division provides as agreed that on weekly pay of regular employees only a summary for the amount to be paid should be attached in the cash advance voucher. No presumption should be made by the audit team of the Pre-audit Section of the Accountant’s Department, instead audit properly all cash advances to preclude losses.
In reply to our Audit Observation Memorandum No. 2005-08, Ms. Estela B. Cainglet justified and we partly quote:
“Please be informed it is the practice of our office that before a voucher or payroll for wages, salaries or honorarium could be cash advanced it passes thru the usual accounting and auditing procedures of city government. Mr. Raoul Barro, Clerk I of this office, is in-charge of preparing the Cash Advances of all Disbursing Officer, and he based the amount of Cash Advance in the Journal Entry Voucher (JEV) attached to all approved vouchers and payrolls.
However, when the payrolls of newly appointed regular employees were released, it was prepared as one time cash advance. The clerk as well as the undersigned, was not able to notice or scrutinize it properly. It was passed in pre-audit by the personnel of the accounting office and was approved by the City Accountant. It was also approved by the City Mayor/Administrator and was approved and released by the City Treasurer’s Office. Then it was encashed and paid to concerned employees. It’s only during that time that we knew that the cash advance was over.
Be informed further, that the remaining cash on hand after the closing hour, as it is the usual practice, was placed in the safety vault since I believe it is proper, safest and secured place to put government money. The vault was locked and the numerical combination was also in placed. Besides, I am very much confident that no untoward incident will happened since there are security guards assigned in the premises to secure the area especially the City Treasurer’s Office and to safeguard all government properties.
Likewise, the robbery incident that took place sometimes between October 17-18, 2008, was not my fault, but it was a fortuitous event beyond my control. It was not negligence on my part because I have done all the precautionary measures to ensure its safety.”
Auditor’s Rejoinder:
The fact still remained that there was a mistake in preparing the cash advances made by the disbursing officer which was in excess of the net amount required for a pay period in the total amount of P602,074.72 which causes a great lost on the part of the City Government. The Cashier IV should monitor closely the cash advances granted to Disbursing Officer. She should not only be dependent on the determination of a clerk on how much money should be cash advance, but closely counter-check work done by this clerk. The City Treasurer should initiate measures to prevent incurrence of the same to protect the interest of the City Government.
The Assistant City Treasurer, In-Charge of Office, forwarded to our office on November 14, 2008 the Request for Relief of Accountability of said accountable officer.
The City Mayor also forwarded to our office on November 19, 2008 the Requests for Relief of Accountability of various accountable officers with the following comments and we quote:
“Please consider this as my favorable endorsement without pre-empting or without prejudice to the outcome of the investigation conducted by the Philippine National Police (PNP) and the National Bureau of Investigation (NBI).”
This office can not take further actions on the Request for Relief of Accountability as of today due to lack of other documents submitted as required under Section 151 of Commission On Audit Circular No. 92-386 which prescribed the Rules and Regulations on Supply and Property Management in the Local Governments. A letter addressed to Ms. Sofronia M. Palarca, Assistant Treasurer, In-Charge of Office, duly received on December 18, 2008 required the submission of the final police report on the theft or robbery case, sworn statements of affidavits of the guards respecting the incident and information as to whether security guard(s) is found to be negligent in the premises, or appropriate action has been instituted to enforce the civil liability of the security guard.
During the exit conference, management welcomed to implement our recommended measures to be undertaken to protect the interest of the City Government.
Recommendations for Gingoog City Government:
Institute appropriate charges against accountable officers found liable for losses occasioned by negligence in the keeping of government fund at the time in their actual custody.
The Cash Examination Report was submitted to the Regional Legal and Adjudication Office.
Initiate measures to prevent incurrence of the same to protect the interest of the City Government as follows:
a. Instruct the City Accountant to draw a Journal Entry Voucher to set-up the accountabilities of Accountable Officers for the lost of cash due to the alleged robbery.
b. Instruct the Head of the Cashier Division to monitor closely the cash advances granted to disbursing officer and counter-check the work done by her clerk, who determines the cash advances to be granted to disbursing officer. Instruct Cashier that she should be the one who will determine the total cash advances to be encashed in the bank during the day. Establish a cut-off period when payrolls are received in their Office to be paid for the day. If possible, no encashing of check in the bank should be made in the afternoon for cash advance payment of payrolls;
c. Instruct the regular Disbursing Officer and the Accountant to limit the amount of cash advance to the net amount of payrolls/vouchers payable. To minimize the payments of salaries and wages through cash advances, it is recommended that the City will adopt the bank payroll system through Automated Teller Machine, which would save time on the part of the LGU;
d. Instruct the Disbursing Officer to immediately deposit excess cash advances to the Cashier; and
e. Instruct the Pre-audit Section of the Accountant’s Department that in auditing the payments of cash advances, they should check all payrolls covered as to how much should be paid for a pay period. They should not be dependent only on what the Cashier’s Division provides as agreed that on weekly pay of regular employees only a summary for the amount to be paid should be attached in the cash advance voucher. Instead all cash advances for a pay period should be supported by payrolls.
