Panabo City 2007 COA Audit 4
July 4, 2010
4. The composition of Land account amounting to P 10,825,100.71 as of December 31, 2007 is unreliable causing overstatement or understatement in Land account (201), contrary to pertinent NGAS principles and policies.
“Financial reports shall be based on official records maintained under an adequate accounting system that produces information objectively and discloses the financial aspects of all events or transactions taking place. Where financial data or reports based on sources other than the accounting system are presented, their basis shall be clearly explained.”
To prove the accuracy in the recording of cost for the Land account appearing in the financial statements, analysis and verification were made from the available records on file at the General Services Office (GSO), such as copies of Transfer of Certificate of Title (TCT), Deed of Sale and the Inventory Report, and etc. The following findings were noted:
Analysis of Account Amount
Titles on process P 2,976,415.00 No proof of ownership 687,770.76 Recorded in books (acctg.); no record with GSO
4,085,914.95 Property already sold still in the books 3,075,000.00
______________
Total
P 10,825,100.71
Of the total P28,183,526.40 representing Land account (201) of the City’s assets, the recorded cost or appraised value or other appropriate value of land acquired by the government including property rights and interest with proof of ownership amounted to P17,358,455.69 or 62% of its total land assets, while those with deficiencies (either due to want of proof of ownership or inefficient recording) comprised the 38% with a total of P10,825,100.71. This deficiency is attributed to lack of reconciliation between the Inventory Report of the GSO and books of the Accounting Office, rendering the completeness and valuation of the record of the cost of assets for land account questionable.
Moreover, Real Property Ledger Cards (Sec. 15, Chapter 1, Vol. II, NGAS) are likewise not maintained by the accounting office. The correctness of the figure asserted as the value for land could not be established and is therefore, not a reliable basis for the accuracy of the declared value of the city’s real property as reported in the financial statement.
Personnel concerned justified that the problem on lack of proof of ownership was already existent even before they assumed office; and that some of these properties have been acquired by the city long before and the records concerning their ownership are still being traced. On the other hand, the problem on unreconciled GSO and Accounting records is due to failure of the Accounting Office to provide the GSO with the actual cost incurred in purchasing some real properties.
Recommendation is hereby acknowledged as to proper documentation and reconciliation of subject properties. Property cards on Land Account are maintained as far as the City General Services Office is concerned.
The City Accounting Office have already made the necessary adjustments pertaining to the Property Sold to the Municipality of Carmen amounting to Three Million Seventy Five Thousand Pesos (P3,075,000) and is currently reconciling records with the General Services Office.
The City, through the City Legal Office, has an on-going program for titling and registration of government properties. This year, the City incorporated an initial budget of P100,000 under the said program under the mayor’s office.
Recommendation for Panabo City Government:
We recommend that the City Accountant should coordinate with the City General Services Office, City Legal Office, and the City Assessor’s Office in the proper reconciliation and documentation of the subject properties. The city officials concerned should exert extra effort to locate the documents relative to the acquisition cost of the land owned by the City Government in order to correct the recorded figure in the financial statement and to establish ownership. Real Property Ledger Cards should also be maintained as a control record to support the land account.
Panabo City 2007 COA Audit 3
July 4, 2010
3. The reliability and accuracy of cash in bank account amounting to P161,273,280.88 cannot be ascertained due to non-preparation of bank reconciliation statement contrary to the provisions of Section 3.2 and 3.4 of COA Circular No. 96-011 dated October 12, 1996.
Sections 3.2 of COA Circular No. 96-011 dated October 2, 1996 is hereby quoted as follows, thus:
“3.2 The Local Accountants shall within ten (10) days from receipt of the Bank Statements, reconcile the same (BS) with the General Ledgers (GL) and prepare the BRS in five (5) copies, xxx”
3.4 The duplicate and quadruplicate copies of the BRS including the paid checks, original copies of debit/credit memos, shall be submitted to the Auditor concerned for verification within ten (10) days from receipt after the end of each month.”
Records show only the following bank reconciliation statements have been submitted to our office, to wit:
Fund Acct. No. Period Covered Date Submitted Total Reconciling Items Gen. Fund 1742-1006-90 May, 2007 Feb.08, 2008 P65,094.90 1742-1008-35 Sept., 2007 Jan. 08, 2008 19,425.43 Trust Fund 1742-1007-03 June, 2007 Oct. 17, 2007 3,378,988.78 1742-1035-59 None SEF 1742-1006-81 Sept., 2007 Jan. 11, 2008 2,114,458.87
Furthermore a comparison of Cash in Bank account per book against the bank balances as of December 31, 2007 revealed unreconciled balances as shown in Annex A.
The delay in the preparation of the bank reconciliation statements deprives this office, the LCE and other users of the financial statements the chance to check on the accuracy of the reported bank balances, thereby rendering the declared bank balances questionable. This practice likewise contravenes NGAS principle on timeliness of reporting which requires that all needed reports shall be produced promptly to be of maximum usefulness.
The Accounting Office appreciates the Recommendation for Panabo City Government:s of COA in creating a team to update the preparation of the Bank Reconciliation Statements for the bank accounts maintained by the LGU. The office experienced some setbacks on this area when the in-charge suffered stroke and the designated replacement was untimely assigned as E-NGASystem administrator making it hard for her to update the bank reconciliation. Added to this is the layoff of some accounting personnel in July. The City Accountant, however affirms her desire to update the reconciliation. Presently, she has assigned three (3) personnel to update the reconciliation. The City Accountant assures the submission of the updated bank reconciliation statements on or before March 31, 2008, subject to the time the copies of the bank statements are forwarded to them by Land Bank of the Philippines.
Recommendation for Panabo City Government:s
A team may be created to update the preparation of bank reconciliation statements. A system should be devised to properly monitor the bank reconciliation process, inclusive of the submission and/or retrieval of documents and the furnishing of information necessary in the preparation of journal vouchers and subsequent recording of the adjustments in the books of accounts.
The City Accountant is required to fast track the preparation and submission of the BRS and record necessary adjustments pertaining to the established and validated reconciling items to present the correct and updated balance of the Cash-In-Bank account and to reconcile with the treasury book.
Furthermore, provisions of Sections 3.8 and 3.9 of the same circular is crystal-clear on the matter, thus also state:
3.10 The auditor shall, after the lapse of five (5) days after receipt of the second memorandum without the desired report submitted, notify the Director concerned of the non-submission of the required financial reports with the necessary supporting documents.
3.11 Upon receipt of said notification from the auditor, the Director concerned shall after evaluation, recommend the filling of administrative charges against officials responsible for the delayed submission/non-submission, if warranted on the basis of the evidences/documents.
Panabo City 2007 COA Audit 2
July 4, 2010
2. The amount of Cash in Vault as of December 31, 2007 amounting to P1,423,330.00 could not be ascertained due to the discrepancy with the balance in the cashbook in the amount of P681,083.00 which contradicts NGAS principles and policies.
Pertinent NGAS principles and policies on financial statements-
Fairness of presentation – Thus refers to the overall propriety of disclosing financial information. Full disclosure in financial aspects requires observance of the following standards of reporting:
* X x x x . . .
* All financial data presented shall be accurate, reliable and truthful.
X x x x . . .
One of the control measures to ensure correctness of records that has to be performed by the accounting office and city treasury in relation to the exercise of their official accountability is the regular reconciliation of cash between two independent records. However, verifications showed otherwise. Accounting records does not match with the figure of the actual cash in vault. This renders doubtful the assertion of management that the recorded cash balances include all cash transactions that have occurred.
Comparative analysis of the balances of account Cash in Vault (101) per general ledger and cashbook maintained by the City Treasurer showed the following:
Fund Date Deposited
CASHBOOK GENERAL
LEDGER
Difference General Fund GF Jan. 03, 2007 268,569 287,150 (18,581) EEMO Jan, 03, 2007 307,869 246,879 60,990 Trust Fund 722,742 (722,742) SEF Jan. 03, 2007 165,808
____________ 166,558
___________ (750)
___________ Total 742,246
1,423,329
(681,083)
Analysis:
GF EEMO TF SEF Beg. Balance difference (44,463.56) 1,957.47 Under/Over recording of collection
63,045.00
(60,989.85)
( 78,357.79)
(1,207.34) Unrecorded Deposit
___________
___________ 801,100.00
____________
____________ Total 18,581.44
(60,989.85)
722,742.21
750.13
Further analysis also revealed that a deposit for collection of P801,100.00 per OR No. 1306051 dated November 26, 2007 was not recorded in the books of account under the Trust Fund Account and other collections not deposited and needed further verification.
The City Accountant justified that the balance of Cash in Vault was derived solely from the reports that were submitted by the Treasurer’s office which obviously was incomplete. According to the City Treasurer, there has not been any reconciliation between accounting and treasury books at the outset due to lack of personnel.
Nonetheless, they promised to have their records regularly reconciled if only to come up with accurate, reliable and truthful financial statements.
Recommendation for Panabo City Government:
Management should deter from coming up with incorrect balances and should put in place a control mechanism that would insure complete reconciliation of collections and deposits in the books. The concerned departments should reconcile their books on a regular basis, to avoid possible errors on the financial statements and to present information that is accurate and useful to report users.
Panabo City 2007 COA Audit 1
July 4, 2010
Detailed Findings and Recommendation for Panabo City Government:s
I. Financial and Compliance Audit
1. Real Property Tax / Special Education Fund Receivables were not set-up and recorded in the books of accounts of the City at the beginning of CY 2007 due to the failure of the City Treasurer to submit certified list of taxpayers, contrary to the provisions of the NGAS Manual, thus understating the asset and deferred income accounts of the LGU.
Section 20 Vol. 1 of Manual on the New Govt. Accounting System provides that:
“Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. – RPT Receivable/SEF Tax Receivable shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, Treasurer shall furnish the Accountant of a duly certified list showing the name of the taxpayers and the amount due and collectible for the year. Based on the list, the accountant shall draw a Journal Entry Voucher (JEV) to record the debit to Real Property Ta Receivable/Special Education Tax Receivable and crediting to Deferred Real Property Tax Income/Deferred Special Education Tax Income. xxxxxx ”
For calendar year 2007 the accounting department was not able to record the RPT/SEF Tax Receivable for the year due to non-submission of the certified list of taxpayers by the City Treasurer to the City Accountant on time. Interview disclosed that the City Accountant had reminded the concerned department several times for the submission of the certified list but no action on their end was made. This year, said list was submitted when the books were about to be closed and apparently could not be recorded anymore.
Non-recording of RPT/SEF Tax Receivable and Deferred RPT/SET Income affects the Financial Statements of the LGU thus understating the asset and deferred income accounts for the year.
The City Accountant admitted the above findings with an explanation that she sent several communications to the City Treasurer during the year regarding the list of RPT/SEF Receivable for recording this year, but these were not given preferential attention by the treasurer’s office. And it was only during the closing of the books that the required reports were submitted. The City Accountant, however, decided not to record the RTP/SEF Receivable with the apprehension that this just might create error in the system that will affect the closing of the books. Likewise, they were pressed for time and could not accommodate anymore any changes in the entries. Furthermore, the failure to submit certified list of taxpayers at the beginning of the year was because of the on-going installation of their RPTA computerization program with the Assessor’s Office. The City Treasurer’s Office, however gave assurance that it will submit accounts receivables and list of taxpayers on the prescribed period of submission to the Accounting Office in the succeeding years.
Recommendation for Panabo City Government:
The City Treasurer should coordinate with the City Accountant to solve this deficiency and to be able to record the RPT/SEF Tax Receivable in the books as required by existing regulation.
