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Valencia City Value for Money Audit

VALUE FOR MONEY AUDIT
A Value for Money (VFM) audit was also conducted on the operation of Integrated Bus Terminal Complex wherein construction of the same was funded out of the proceeds of the loan acquired on December 13, 2004 from Land Bank of the Philippines in the amount of P83,578,000.00 payable for eight (8) years.
The city government’s purpose to acquire the project was materialized. It was open to serve the public. During CY 2008, the City Government realized an income of P6,571,326.25 as Parking/Terminal Fees.

Valencia City 2008 COA Audit 4

4. Reports of the collections, deposits and the accountability for accountable forms were submitted beyond the reglementary period contrary to the provisions of Section 8 of COA Circular No. 94-001, thus resulting in the delay of the audit of the cash accountabilities of accountable officers.
Provisions of Section 8 of COA Circular No. 94-001 dated January 20, 1994, states:
“The Chief Accountant, Bookkeeper or other authorized official performing accounting and/or bookkeeping function of the audited agency shall ensure that (a) the reports as submitted by the accounting officers are immediately recorded in the books of accounts and submitted to the auditor within ten (10) days from such receipt, xxx”
Records of this office disclosed that Reports of Collections and Deposits and Reports of Accountability for Accountable Forms of  accountable officers of the City were not submitted to the office of the Auditor on time. As of December 31, 2008 the reports received were until the month of May 2008.
The delayed or non submission of said reports prevented the Auditor’s Office from conducting timely audit, hence deficiencies, if any, could not be detected immediately and reported to management for remedial measures.
Management Comment:
The management comment and hereby quoted as follows:
“The recommendation is well taken and will be implemented soon.”
RECOMMENDATION:
Instruct the City Accountant to observe strictly the provisions stated in COA Circular No. 94-001 particularly on the Submission of Reports of Collections and Deposits and Reports of Accountability for Accountable Forms.

Valencia City 2008 COA Audit 3

3.  One of the members of the Local Finance Committee of the City is a Sangguniang Panlungsod member which is contrary to the provisions of Sections 316 and 458 of RA 7160, hence sound internal control of check and balance was undermined.
Sound internal control pertaining to fiscal administration establishes a separation of powers between the two (2) bodies, the executive and legislative, to establish check and balance in the operations of the Government. Relative to this, RA 7160 provides the following provisions:
“ Section 316. Local Finance Committee. There is hereby created in every province, city, or municipality a local finance committee (LFC) to be composed of the Local Planning and Development Office, the Local Budget Officer and the Local Treasurer.”
“Section 458. Powers, duties, functions and compensation. (a) The Sangguniang Panlungsod, as the legislative body of the City, shall enact ordinances, approve resolutions and appropriate fund for the general welfare of the city and its inhabitants pursuant to Sec. 16 of this code and the proper exercise of the corporate powers of the City as provided for under section 22 of these code”.
Records of this Office show that the City Local Finance Committee has a regular member coming from the Sangguniang Panlungsod who actively participated in the execution of some activities and programs of the office of the City Mayor.
Section 316 of RA 7160 does not include an elective official as one of member of the LFC, but all the three (3) members must come from the Executive Department. Further, the Executive and legislative are separate and distinct bodies which should be separated from each other.
Management Comment:
The management commented and hereby quoted as follows:
“The Sangguniang Panlungsod members can be tasked to perform other functions if there is an ordinance or resolution authorizing them to do so.”
Auditor’s Rejoinder:
This office is of the view that a resolution contrary to existing provisions of a law would have no force and effect of such law. A resolution or ordinance cannot amend a law.

RECOMMENDATION:
Designate members of the Local Finance Committee coming from Executive Department in consonance with the provisions of RA 7160, in order to strengthen the check and balance mechanism in the Local Government Unit.

Valencia City 2008 COA Audit 2

2.  The accuracy and reliability of the Cash in Bank-Local Currency, Current/Saving Accounts amounting to P135,338,135.52 at year-end could not be established due to the inability of the City Accountant to update the preparation of bank reconciliation statements, ascertain the validity of reconciling items identified in the previous years and effect the necessary adjustment and corrections in the accounting records required under the provisions of Sections 3.2 and 3.3 of COA Circular No. 96-011 dated October 2, 1996.
Pursuant to Section 3.2 and 3.3 of COA Circular No. 96-011 dated October 2, 1996, the Local Accountants are required to conduct reconciliation between the bank statement and general ledger and prepare the bank reconciliation statements (BRS) within ten (10) days from receipt of bank statement. Journal vouchers shall be drawn to record all valid reconciling items that require adjustment and correction in the general ledger.
Verification disclosed that the City Accountant was unable to update the preparation of bank reconciliation statements for the following depository accounts of the City.

Records revealed that for CY 2008, the Bank Reconciliation Statements (BRS) received by the office on June 22, 2008 were as of March, 2008. To date, BRS from April 2008-December 2008 were not yet submitted to the Office of the Auditor for review and verification.
Hence, the accuracy and reliability of the Cash in Bank- Local Currency, Current/Saving Accounts amounting to P135,338,135.52 could not be established.
Management Comment:
The management commented and hereby quoted as follows:
“Management commented that the City Accountant’s Office, was still in the process of reconciling the accounts.”
RECOMMENDATION:
We remind the City Accountant to update the preparation of bank reconciliation statements and examine the validity of reconciling items identified in the previous years. Necessary adjustments should, likewise, be made in the accounting records to present the correct balance of Cash in Bank-Local Currency, Current and Saving Accounts in the financial statements.

Valencia City 2008 COA Audit 1

1.  The balances of Property, Plant and Equipment  (PPE) account             totaling P329,439,276.32 remained doubtful due to the continued inability of management to complete the physical inventory, reconcile the property ledger cards of the General Services Office and City Accountant’s Office, contrary to the provisions of Sections 119, 120 and 124 of the NGAS Manual, Volume I.
The pertinent provisions of the NGAS Manual, Volume I, relating to the accountability and responsibility of the government officials/employees over Property, Plant and Equipment(PPE) state the following:
“Section 120 Recording of Deliveries of Supplies or Property in the Books of   Accounts – The Chief Accountant shall maintain Supplies Ledger Cards per stocks number.  Property, Plant and Equipment (PPE) Ledger Cards for each category of assets; and Real Property Ledger Cards for land. Xxx
Section 124.  Inventory of Supplies or Property. – 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 on the Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to the Auditor concerned not later than January 31 of each year.”
Verification disclosed that the City Government owned the following Property, Plant and Equipment costing P 329,439,276.32:

Amount
Land
78, 525, 901.73
Buildings
Office equipment, Furniture and fixtures
Machineries and equipment
Transportation equipment
Public Infrastructures
Construction in progress
TOTAL
107, 206, 846.29
62, 327, 782.17
34, 936, 859.21
34, 095, 647.58
571, 491.04
11, 774, 748.30
P              329, 439, 276.32
However, the City General Services Office did not complete the inventory taking of the above properties. Since the inventory taking was incomplete, the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) was not prepared. It was also noted that the General Services Office property cards are not reconciled with the City Accountant’s Office property ledger cards.
In effect the existence, whereabouts and conditions of said properties were not ascertained thus rendering the  Property, Plant and Equipment account doubtful as to their reliability.
Management Comment:
The management commented and hereby quoted as follows:
“Management commented that the conduct of inventory taking would be completed and property records would be reconciled with the ledger cards soon.”
RECOMMENDATION:
We reiterate our prior year’s recommendation to require the City General Services Office to conduct a complete physical inventory of PPE and submit the corresponding report. We also advise the City Accountant’s Office to reconcile PPE subsidiary records with that of the GSO’s property cards soon.