PART II - DETAILED FINDINGS AND RECOMMENDATIONS
A. Financial and Compliance Audit
1. The Province of Negros Occidental failed to reconcile, identify, and properly
classify balances of asset accounts totalling P1,748,822,120.09, which renders
doubtful the validity of 38% of the total assets recorded in the books of accounts
of the LGU as at year-end.
The Philippine Government Accounting Standards as promulgated by the
Commission on Audit under COA Resolution No. 2006-006 dated January 31, 2006
provides, among others, that:
1.3 The books of accounts shall consist of :
(a) National Government (NG) books…
(b) Regular Agency (RA) books for recording funds pertaining to agency’s regular
operations; and
(c) Subsidiary ledgers, which reconcile with general ledger control accounts such as
cash, receivables, inventories, property plant and equipment and payables.
It likewise included reliability among the qualitative characteristics of financial
reporting which shall be used as guides in the recording of transactions and preparation of
financial statements, and provided that “financial information is reliable when the quality
of information assures users that such is free from bias and error and faithfully
represents what it purports to represent.
A cursory analysis of the subsidiary ledger balances comprising the asset accounts
of the various funds maintained by the Province of Negros Occidental shows
unreconciled balances of assets that have not been identified and properly classified,
amounting to P1,748,822,120.09 (refer to Annexes C-1 to C-5). These balances have been
tentatively recorded at the inception of the implementation of N-GAS and constitute 38%
of total assets recorded in the books of accounts of the Province. The same renders
difficult the verification of accounts considering that records of transactions in the past
years and administrations are not readily available, and the material amounts involved
cast doubts on the validity of the balances of recorded transactions.
Management averred that reconciliation of balances is an ongoing activity and
that a total of P176,721,692.18 unreconciled balances have been cleaned up during the
current year. They undertook to give priority to accounts cited in the finding, except for
dormant accounts for which relevant records cannot be located despite diligent efforts.
They also admitted that the amount of Property, Plant & Equipment accounts as recorded
in the books of accounts cannot be reconciled with existing assets in view of balances
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which had long been carried in the books for several years with no adequate breakdown
or corresponding analysis of the composition of said balances.
We informed management that COA has prescribed reporting requirements for
losses of documents under COA Circular No. 93-404 dated October 18, 1993. Moreover,
in the case of the national government, COA had prescribed guidelines in the proper
disposition and closure of dormant funds and/or accounts under COA Circular No. 97001 dated February 5, 1997, which may likewise serve as a guide for the local
government similarly situated.
We recommend that the Provincial Accountant should continue to effect
reconciliation of the balances of the asset accounts against relevant records, and to record
the appropriate adjustments to reflect the correct balances.
A comprehensive inventory of all LGU assets should also be conducted to
determine the actual existence and proper valuation of the same. Such inventory could
ascertain and validate discrepancies between the recorded amounts and the actual existing
assets, which in turn could form the basis for requesting from the Commission Proper
authority to write-off dormant accounts, the existence of which can no longer be
confirmed or verified. A list of available records and extent of validation made on the
accounts proposed for write-off and/or adjustment should be made, consistent with
provisions of COA Circular 97-001, and in case reconciliation against relevant records is
no longer possible since the same can no longer be located, an investigation report
narrating the cause(s) of loss of the documents or records and pinpointing the official/s
and employee/s liable therefor should be submitted for evaluation, pursuant to COA
Circular No. 93-404.
2. The Province failed to implement existing rules and regulations pertaining to the
granting, utilization and liquidation of cash advances of officials and employees
of the LGU, resulting in the unliquidated cash advances amounting to
P43,235,285.20 as at year-end.
COA Circular No. 97-002 dated February 10, 1997 contains the following
provisions concerning cash advances:
4.0 Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.2 No additional cash advances shall be allowed to any official or employee unless
the previous cash advance given to him is first settled or a proper accounting
thereof is made .
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4.1.3 A cash advance shall be reported on as soon as the purpose for which it was given
has been served.
4.1.8 The Accountant shall obligate all cash advances granted. He shall see that cash
advances for a particular year are not used to pay expenses of other years.
5.0 Liquidation of Cash Advances
5.1 The AO shall liquidate his cash advance as follows:
5.1.1 Salaries, Wages, etc. – within 5 days after each fifteen (15) day/end of the month
period.
5.1.2 Petty Operating Expenses and Field Operating Expenses – within twenty (20) days
after the end of the year; subject to replenishment as necessary during the year.
5.1.3 Official Travel – within sixty (60) days after return to the Philippines in case of
foreign travel or within thirty (30) days after return to his permanent official
station in the case of local travel…
Failure of the AO to liquidate his cash advance within the prescribed period shall
constitute valid cause for the withholding of his salary and the instruction of other
sanctions as provided for under paragraphs 902.and 90.3 hereof.
5.7
When a cash advance is no longer needed or has not been used for a period of
two months, it must be returned to or refunded immediately to the collecting
officer.
5.8
All cash advances shall be fully liquidated at the end of each year. Except for
petty cash fund, the AO shall refund any unexpended balance to the
Cashier/Collecting Officer who will issue the necessary official receipt.
5.9
At the start of the ensuing year, a new cash advance may be granted, provided
that a list of expenses against the previous cash advance is submitted. However,
when no liquidation of the previous cash advance is received on or before
January 20, the Accountant shall cause the withholding of the AO’s salary.
COA Circular No. 2009-002 dated May 18, 2009 likewise provided for the
following:
4.1.3(ix) Cash advance for special time-bound undertaking shall be liquidated by the
accountable officer concerned within one month from the date the purpose of the
cash advance was accomplished.
A review of existing balances of cash advances to officers and employees as of
December 31, 2010 reveal that 49.8% of the outstanding balance of P43,235,285.20
pertain to advances granted in 2009 and earlier years, a clear indicator that rules and
regulations governing liquidation have not been properly implemented (refer to Annexes
D-1 to D-5).
We likewise noted that additional cash advances were granted despite failure on
the part of the official and/or employee concerned to liquidate previous advances, which
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likewise resulted in the undue accumulation of unliquidated balances. Several disbursing
officers have unliquidated balances of petty cash funds since 2006, particularly those
pertaining to subsistence and meals of prisoners.
We also noted indicators of errors in recording of transactions, such as
liquidations which do not pertain to any previously recorded cash advances in the
subsidiary ledgers, resulting in negative or unusual balances. Inaccurate records weaken
accounting controls over these transactions. We observed that 32.2% of the outstanding
balances pertain to transactions recorded in 2007 and earlier years, the bulk of which
pertain to reclassified balances on January 2007. The failure to liquidate cash advances in
accordance with the prescribed rules and regulations results the misstatement of expenses
in the period they were actually incurred, as well as in the overstatement of assets and
retained earnings accounts.
The Provincial Accountant indicated that an annual joint year-end memo always
includes reminders on liquidation of cash advances. Nonetheless, all offices should once
more be informed of provisions of COA Circualr 2009-002 pertaining to cash advances,
along with notification to all employees to liquidate within 60 days all pending cash
advances, or withholding of salaries of concerned employees will be effected. Clean up
of negative balances will be prioritized.
To enhance efforts to effect liquidation, we advised management to furnish as
well the department heads and division chiefs a listing of long-outstanding unliquidated
cash advances of employees under their charge.
We recommend that the Province should comply with the provisions of COA
Circular 97-002 and ensure proper granting, utilization and liquidation of cash advances.
The Provincial Accountant should rectify errors in the recording of accounts to
ensure proper monitoring of liquidation of cash advances and implementation of existing
rules and regulations on cash advances, including the withholding of salaries of
accountable officers who fail to effect prompt liquidation in accordance with existing
rules and regulations.
3. Extant practices and procedures of the Province pertaining to receipts and
collections resulted in delayed remittances and deposits and delayed recording of
receipts and collections, thereby weakening accounting controls over the cash
transactions and ultimately resulting in the understatement of the balances of
cash, income and related accounts in the periodic and year-end financial
statements amounting to P7,351,392.09 in 2009 and P9,375,194.62 in 2010,
contrary to the accounting policies set forth in the Manual on the New
Government Accounting System.
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The Manual on the New Government Accounting System (NGAS) for LGU’s,
Volume I set forth the accounting plan and policies on collections and deposits.
We conducted a review of the Reports of Collections and Deposits (RCD’s) for a
test period from January to February 2010 to determine compliance with said policies and
procedures and noted the following:
Reporting of collections
Sec. 29 of the Manual on NGAS provides for the following:
Reporting for Collections and Deposits…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…
In case of collectors assigned to the field, where travel time from their places of
assignment to the Treasurer’s Office is more than one day, turnover of collections shall
be made at least once a week or as soon as the collections reach P5,000.00.
Contrary to said procedures, the Provincial Treasurer’s Office failed to establish
proper cut-off in the reporting of collections, particularly the preparation of the Report of
Collections and Deposit. We noted that many collectors do not regularly prepare RCD’s
at the close of each business day since several of these RCD’s cover collections spanning
a period of several days.
Since RCD’s are not prepared by all collectors at the close of each business day,
the corresponding regular daily turn-over of collections have likewise not been effected
by collectors, even when the amount held by office collectors exceed the threshold for
field collectors of P5,000.00. As a result, the amounts turned-over to the liquidating
officer, and eventually to the cashier, consist of a mixture of partial collections spanning
over several days instead of the collections for a particular business day, as originally laid
out in the accounting plan per NGAS.
Verification of reports and deposit of collections
The Manual on NGAS provides for the following:
Sec. 30. Verification of Collections and Accountable Forms. – The Treasurer/Cashier
shall verify the Report of Collections and Deposits; check the statement of accountable
forms as to initial balances on hand, receipts, issues and the ending balances on hand;
make a physical count of the accountable forms remaining in the custody of the
collector/teller and check the same against new balances on hand column. He shall
indicate his verification by affixing his signature at the back of the triplicate copy of the
last official receipt issued. He shall count the money turned over to him and sign the
certification and receipt portion of all copies of RCD.
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Sec. 31. Designation of Liquidating Officers. – The Treasurer may designate liquidating
officers from among the collectors/tellers whenever necessary.
a. Collectors/tellers shall turn over their collections to their designated liquidating
officer. The RCD shall however be prepared in five copies…
b. The liquidating officer shall perform the procedures for the receipt and
verification of collections turned over to him. He shall also accomplish the RCD
in four copies to summarize the collections turned over to him by the
collectors/tellers as well as his own collections.
c. The liquidating officer shall turn over intact the cash collections to the
Treasurer/Cashier together with the originals and two copies of the RCDs of
collectors/tellers and the duplicates of the official receipts issued…
Sec. 32. Deposit of Collections. – The Treasurer/Cashier shall deposit intact all his
collections as well as all collections turned over to him by the collectors/tellers with the
authorized depository bank daily or not later than the next banking day. He shall record
all deposits made in the cashbook and prepare the RCD…
The foregoing provisions set forth the policy of effecting deposit of all collections
intact daily (on the same day or at the very least not later than the next banking day) and
vesting the responsibility for the verification of the RCD’s prepared by the collectors on
the Treasurer, Cashier and/or the liquidating officer/s. Moreover, in order to ensure that
correct balances are reflected in the financial statements, the daily verification should be
implemented concurrently with the policy of preparing daily reports of all collections for
a particular day at the close of said business day.
We noted that the Provincial Treasurer delegated the verification functions on a
separate unit rather than on the liquidating officer as outlined in the NGAS. While not
discounting the value of creating such a unit, our review of RCD’s reveal that this had
resulted in further delaying the remittance and recording of collections in the books of
accounts, instead of facilitating these functions as was originally intended.
We also noted that only a single liquidating officer is made to handle remittances
of all collections (General Fund, GF-EEDD, Trust Funds and Special Education Fund)
although the regulation allows designation of more than one to facilitate the prompt
remittance of collections.
We likewise observed that the validation do not assure correctness of the abstract
of collections. In some of the abstracts of collections reviewed during the period, crossfootings of the columns do not tally with the total collections per RCD. We also noted
errors in RCD’s of the liquidating officer consolidating and reporting the collections
remitted by the collecting officers.
EEDD and Field Collections
The Manual on NGAS further provides:
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Sec. 33. Deposit of Field Collections. – Collections by field collectors shall be remitted
to the Cashier or designated liquidating officer of the field office of the LGU. When travel
distance of the field office to the local treasury may expose government funds to the risk
of loss while in transit, the Cashier or designated liquidating officer,upon authorization
by the Treasurer, may deposit the collections in the authorized depository bank near
the field office of the LGU. The procedures in reporting collections and deposits
prescribed in this Chapter shall be observed.
EEDD – Hospitals
For hospitals operated by the Province, collections and deposits are handled by
duly appointed cashiers holding plantilla positions, except for two hospitals with
personnel detailed by the Provincial Treasurer’s Office and two with designated
cashiers/collecting officers. In most hospitals, RCD’s are not prepared on a daily basis.
The aforenoted threshold of P5,000.00 is also not observed.
Some hospitals directly deposit collections in authorized depository banks either
in Bacolod City or near their locality. Others effect deposits to the Land Bank Bacolod
account of the Province through inter-bank transfers, while others still remitted their
collections to the liquidating officer and Cashier based here in Bacolod City.
Regardless of the manner of remittance or deposit, all cashiers nonetheless still
submit the RCD to the liquidating officer, validating office and the Cashier for eventual
consolidation and inclusion in the RCD’s prepared by the liquidating Officer and Cashier.
The RCD’s are thus recorded in the books of account as of the date of such consolidation
(regardless of when the collection or deposit is actually made). The procedure invariably
resulted in very much delayed recording of collections - we noted instances when
collections are only recognized in the books three weeks after the same had been
deposited.
EEDD – Mambukal and other field collectors
No regular cashier is assigned to Mambukal. Field collectors are instead sent to
Mambukal to effect collections of fees and revenues earned by the resort which easily top
the total annual collections of even the Provincial Hospital in Silay City (which has a
regular cashier in its plantilla).
We noted that OR’s are not issued in strict numerical sequence, contrary to Sec.
73 of the Government Accounting and Auditing Manual which provides:
“Preparation of official receipts. – Pre-numbered official receipts shall be issued in
strict numerical sequence…
RCD’s are also not prepared by the collectors on a daily basis, but only to support
remittances when they report back to Bacolod Office. We noted that the thresholds of
P5,000.00 as well as that on the collector’s travel time are not implemented. Except for
Mambukal, the assignments do not exceed 15 kilometers from the Bacolod Office. None
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of the assigned areas targeted for collection involve travel time of more than one day
(thresholds set under the GAAM and the Manual on NGAS). Remittances by collectors
thus vary from one day to one month after the collection is made and acknowledged by
issuance of an official receipt.
Partial Deposit of Reported Collections – Mambukal
We observed that collectors deployed to Mambukal are presently allowed to
deposit collections directly to the bank. We noted however that partial deposits of
collections were being made without establishing proper cut-off of transactions,
particularly since a single RCD and abstract is prepared covering collections spanning
several days and the partial deposits/remittances.
Direct remittances by clients
We also noted instances when clients are allowed to deposit money directly to the
account of the Province. Said collections are receipted only at a much later date and
included in RCD’s subsequently prepared, resulting in delayed recording of income and
collections although the transactions are already reflected in the bank statements.
Distortions in reported cash balances
The Manual on NGAS likewise provides:
Sec. 34. Accounting for Collections and Deposits. The Accountant shall determine the
account classification of the collections covered by the RCD and the supporting papers
submitted by the Treasurer/Cashier and shall accomplish the Journal Entry Voucher…
Under Sec. 19 of the Manual on NGAS, the prescribed method of accounting for
taxes, fees, charges and revenues, other than real property taxes and Share from Internal
Revenue Collections, is cash basis; that is, when cash or its equivalent is received.
Current practices in contrast excludes income earned for which cash is already in the
hands of collectors, and worse, in the case of EEDD, is in fact already deposited to the
account of the Province.
The delay in remittance of collections and deficiencies in the reporting practices
and procedures ultimately results in material distortions in the cash balances and related
accounts as reflected in the Treasurer’s Office reports and in the financial statements
prepared by the Accounting Office. Cash balances as of December 31, 2009 were
understated by P7,351,392.09 while the balances as of December 31, 2010 were
understated by P9,375,194.62 (refer to Annexes E-1 to E-3).
Weakening of Internal Control
Delays in reporting as well as inappropriate cut-off of transactions and reporting
likewise weaken internal control. One of the oft-repeated common rules on internal
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control over cash receipts states that “control over cash, including remittances through
the mails, should be established immediately after it has been received; collections
should be acknowledged with pre-numbered official receipts and recorded promptly and
properly.” (COA Circular No. 77-48 dated January 31, 1977).
The presence in the bank statements of yet to be accounted receipts and
collections either due to delayed reporting of direct deposits made by hospitals as well a
delayed acknowledgement of direct deposits by clients likewise rendered difficult the
reconciliation of bank accounts.
Accounting explained that preparation of abstract of collections is dependent on
the Report of Collections and Deposits to determine proper account code classification.
Matters like timely submission of reports, supporting documents to collection deposit and
recording of revenues and other related concerns were aptly discussed in a joint meeting
of Accounting and Treasurer’s Office personnel, and similar discussions will be further
conducted to address the deficiencies.
We recommend that management should implement measures to ensure prompt
reporting, remittances and deposit of collections in order to reflect the correct cash
balances in the financial statements:
a. Collecting officers should be required to prepare RCD’s at the close of each
business day and effect remittance of their collections daily, particularly when
collections exceed P5,000.00;
b. The Province should consider the designation of additional liquidating officers
and merging their functions with the verification unit, in order to facilitate the
verification and remittance process. Procedures for verification of receipts should
be streamlined to ensure prompt recording and remittance of collections.;
c. The Province should likewise consider the designation of a regular cashier and/or
collecting officers for Mambukal resort, considering the substantial volume of
cash handled by said enterprise;
d. Enterprises with assigned cashiers (regular or designated) should be required to
deposit collections in authorized depository banks (directly or through inter-bank
transfers) to reduce risk of loss in transit as well as to ensure prompt deposit of
collections. The verified RCD’s should be submitted to accounting for recording,
and the transactions of the cashiers as accountable officers of said enterprises
should be recorded in their respective cashbooks.
e. The Provincial Accountant and the Provincial Treasurer should conduct jointly a
review of the accounting and reporting policies of the Province with regard to
collection, deposit and recording of revenues, in order to ensure correctness and
accuracy of cash balances in Treasury reports and in the financial statements and
to preclude any duplication of procedures and functions.
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4. A fund transfer from the General Fund to the EEDD on December 30, 2010 was
not immediately acknowledged as collection of the EEDD on the same date,
resulting in the understatement of consolidated Cash accounts of the Province as
at year-end by P 35,518,781.50.
LBP Check No. 2531117 covered by Disbursement Voucher No. 10-22677
amounting to P35,518,781.50 was issued on December 30, 2010 and promptly recorded
in the books of the General Fund as Subsidy to Other Funds (EEDD). The corresponding
Official Receipt was issued and recorded in the EEDD books only on January 4, 2011
while the check was deposited only on January 5, 2011.
The transactions between funds maintained by the Province should not have
affected the actual over-all cash balance, but since the related transactions are recorded in
different accounting periods, the same resulted in the inadvertent understatement of Cash
accounts of the Province as at year-end as per consolidated financial statements.
To avoid recurrence of a timing difference between the recording of the inter-fund
transfer and the issuance of the corresponding receipt, the Accounting Office undertakes
to have a close coordination with the PTO regarding transactions of this nature.
We recommend that the appropriate adjustments be recorded in the books as at
year-end to correct the understatement of the Cash accounts, and that henceforth,
transactions involving fund transfers should be simultaneously recognized in the books of
accounts maintained for the funds involved in said transactions.
5. The lack of proper review of the validity of reconciling items in the bank
reconciliation statements and monitoring of their disposition by the Accounting
Office despite indicators of possible fraudulent transactions amounting to
P14,378,355.23 cast doubts on the validity of the reconciliation process and the
accuracy of the valuation of the cash accounts in the financial statements, in view
of unrecorded adjustments in the books of accounts for reconciling items
requiring debit to cash amounting to P52,242,205.91 and adjustments for credits
to cash totalling P49,463,904.33.
The National Guidelines on Internal Control Systems, as circularized in DBM
Circular Letter No. 2008-8 dated October 23, 2008 and COA Memorandum 2009-004
dated February 16, 2009, identified two elements of internal control: plan of organization
and coordinated measures and procedures. The guidelines likewise specifically listed
reconciliation of financial and non-financial data among the most common control
policies and procedures that are part of the coordinated measures and procedures that
every office should have:
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“Operating procedures of every office require that the cash records of the Accounting
and the Cash units should be regularly reconciled. The records of the depository banks
pertaining to the cash accounts of an agency should be reconciled with the records of the
Accounting and Cash units. This process will detect errors or fraud either by the bank,
the Accounting unit or the Cash unit…”
COA Circular No. 96-011 dated October 2, 1996 provides for the following
general/policy guidelines on the preparation of bank reconciliation statements (BRS):
3.1 The depository/servicing banks shall furnish the Local Accountant with the
Bank Statements (BS) including debit/credit memos (DM/CM), paid checks, etc., within
five (5) days after the end of each month which shall be the basis for the preparation of
the monthly Bank Reconciliation Statements.
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…
3.3 The accountant shall draw journal vouchers to record all valid reconciling
items that require correction in the GL.
We reviewed several bank reconciliation statements submitted by the Accounting
Office and noted deficiencies in the preparation of the same:
1. Inclusion of several invalid reconciling items, inaccurate and inappropriate
labeling, and lack of proper details necessary to book adjusting entries (refer to
Annex F-1);
2. Failure to effect correction by the banks of errors and the adjustment of balances
for unauthorized/illegitimate bank debits and credits to the account(refer to Annex
F-2);
3. Failure to adjust long outstanding reconciling items to date(refer to Annex F-3).
Invalid Reconciliation Items
We noted several instances of erroneous listing of outstanding checks which were
carried over several bank reconciliation statements. The same often had corresponding
reconciling items per books that were incorrectly presented as unrecorded disbursements,
although verification showed proper recording of the same. There are also instances when
details of the actual outstanding check differed from that listed in the bank reconciliation
statements, indicating lack of proper matching of entries in the books of accounts as
against that in the bank statements.
Mislabeling of reconciling items also hindered prompt and correct adjustments.
We observed instances when interest and the corresponding withholding tax are reported
as unrecorded deposits and withdrawals, which also indicate failure to investigate the true
nature of the recorded transactions in the bank statements.
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Several long-outstanding items lack appropriate details to facilitate review and to
effect adjustments, and include these items indicating lack of proper reconciliation
labeled as unaccounted differences:
Reconciling Items Per Bank
General Fund:
PNB (0305-860003-1/
0305-511838-7)
LBP (0422-1011-52)
398,095.30
3,000,000.00
P3,398,095.30
Reconciling Items Per Books
General Fund:
DBP (0112-745-2)
P 799,919.53
PNB (0305-860003-1/
0305-511838-7)
488,783.82
LBP (0422-1011-52)
2,286,591.70
Special Education Fund:
LBP (0422-1106-66)
487,332.69
Trust Fund:
LBP (PRM & SDA Baras)
26,999.00
Grand Total
P3,575,295.05
487,332.69
26,999.00
P4,089,626.74
Failure to Effect Correction of Bank Statements
We noted that numerous reconciling items consisting of alleged bank errors
(which were not merely due to timing of the recording of transactions) had not been
corrected to date. The lack of proper monitoring of items reflected in the BRS had
resulted in the accumulation of these alleged bank errors amounting to additions of
P25,314,997.65 as against deductions of only P11,200,075.73. This means a potential
loss of P14,114,921.92, and the probability of still effecting rectification of errors are
remote considering the lapse of the period set by Bangko Sentral ng Pilipinas regulations
for notification to Banks for any errors in bank statements.
No proper determination of the nature of bank charges is made, resulting in the
accumulation of charges on the bank account of the Province at DBP Kabankalan for
being dormant over at least 12 months. Moreover, the Accounting had been using only
faxed copies of the bank statements and failed to obtain any copy since February 10,
2010, thus failing to monitor any additional charges.
We likewise noted that the PNB had been charging the Province bank charges for
allegedly failing to maintain the required balance, but upon verification, the account is
actually exempt. The charges were reversed pursuant to representations made in the
course of audit.
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Failure to Effect Adjustments Per Books
Contrary to procedures prescribed under COA Circular No. 96-011, journal
vouchers to record valid reconciling items requiring adjustments per books as reflected in
the BRS are not promptly prepared. This had resulted in the accumulation of reconciling
items requiring debit to cash amounting to P52,242,205.91 while adjustments for credits
to cash amounted to P49,463,904.33, resulting in material misstatements in accounts
affected by said adjustments.
The personnel charged with preparing the BRS indicated that while he determines
the reconciling items, he is not charged with the preparation of the consequent
adjustments resulting from his reconciliation.
Indicators of Possible Fraud
The BRS showed “deposits in transit” recorded in the books but not
acknowledged by the Land Bank of the Philippines (General Fund - LBP 0422-1011-52),
indicating possible misappropriation of the same:
7/8/1997
5/22/1998
9/22/1999
5/10/2000
8/23/2000
P 232,627.00
1,610,972.00
2,964.94
800.00
4,000.00
P1,851,363.94
Likewise, the BRS prepared for the account maintained at Philippine National
Bank (General Fund- PNB 0305-8600031) included various “deposits per book not
taken up per bank”:
Current
Savings
Total
P 1,542,065.72
10,984,925.57
P 12,526,991.29
The Accounting Office cited delays in submission of bank statements and failure
to attach debit and credit advices by the banks despite numerous requests for the same.
Faxed copies of bank statements were accepted to facilitate timely preparation of bank
statements. Non-availability of supporting documents also hindered prompt preparation
of Journal Entry Vouchers for adjustments.
We recommend that the Provincial Accountant should implement the provisions
of COA Circular No. 96-011 and record adjustments for valid reconciling items as
reflected in the BRS prepared by the Accounting Office. The Province should likewise
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make representations to the respective banks for correction of bank errors noted in the
BRS.
Henceforth, the BRS submitted to the COA Auditor should be supported by
copies of the JEV recording reconciling items that require correction in the books of
accounts, as well as a copy of the letter to the respective bank informing them of errors
noted in the BRS (other than those resulting from the timing of recording of transactions).
Upon receipt of the bank statements and prior to actual reconciliation, verification of
supporting paid checks, debit memos and credit memos should be made to ensure that
debits and credits made in the bank statements are properly documented by the Bank.
The Accounting Office should require banks to submit original copies of the bank
statements, aside from the faxed advanced copies. Cash balances and transactions should
be monitored regularly to determine proper use of the accounts and prevent charges per
BSP regulations for dormant accounts.
6. The Province failed to effect prompt liquidations of funds released to nongovernmental organizations/private organizations (NGO/PO’s) pursuant to the
provisions of COA Circular 2007-001 dated October 25, 2007, resulting in the
accumulation of unliquidated releases amounting to P180,415,866.08 as at yearend along with the consequent understatement of expenses and overstatement of
assets and retained earnings.
COA Circular 2007-001 dated October 25, 2007 contains the revised guidelines in
the granting, utilization, accounting and auditing of funds released to Non-Governmental
Organizations/People’s Organizations (NGOs/POs).
Section 5.4 thereof provides that “within sixty (60) days after the completion of
the project, the NGO/PO shall submit the final Fund Utilization Report certified by its
Accountant and approved by its President/Chairman to the GO, together with the
inspection report and certificate of project completion rendered/issued by the GO
authorized representative, list of beneficiaries with their acceptance/acknowledgment of
the project/funds/goods/services received. The validity of these documents shall be
verified by the internal auditor or equivalent official of the GO in recording the fund
utilization in its books of accounts. These documents shall support the liquidation of
funds granted to the NGO/PO.”
Sec. 4.5.5 likewise provided that “in case of staggered fund releases or new fund
release covered by another MOA, no NGO/PO shall receive additional releases unless an
interim Fund Utilization Report of the previous release certified by its Accountant and
approved by its President/Chairman is first complied showing a summary of expenses
and a status report of the accomplishment evidenced by pictures. The validity of this
document shall be verified by the internal auditor or equivalent official of the GO.”
31
Sec. 4.5.6 further provided that “no NGO/PO shall be a recipient of funds where
any of the provisions of this Circular and the MOA entered into with the GO has not been
complied with, in any previous undertaking with funds allocated from the GO.”
An analysis of unliquidated balances of cash transfers to NGO/PO’s as at yearend reveals that 94.39% of the outstanding balance of P147,726,023.80 pertain to
releases made in 2009 and earlier years, a clear indication that the aforementioned rules
and regulations governing granting and liquidation of these accounts have not been
properly implemented (refer to Annexes G-1 to G-3).
In 2010, the Province released fund transfers to NGO/PO’s amounting to
P9,935,500.00 (net of adjustments for transfers charged to expenses representing
donations to government organizations and agencies), of which only P1,650,000.00 have
been liquidated as at year-end. We likewise noted that releases in the total amount of
P7,770,000.00 were granted to NGO/PO’s with outstanding balances to their accounts as
of date of release, a practice which account in part to the accumulation of unliquidated
balances (refer to Annex G-4).
The Accounting Office indicated that it coordinates closely with PPDO in order to
determine the status of those NGOs/POs with pending unliquidated cash advances and
their respective terminal reports in order to effect prompt liquidation.
We recommend that the Province should implement the provisions of COA
Circular 2007-001 and ensure proper granting, utilization and liquidation of cash fund
transfers.
The Provincial Accountant should review all outstanding accounts and record
adjustments for transfers that actually partake of the nature of donations rather than that
of project implementation as contemplated in the regulations.
The Province should institute action against NGO/PO’s and their
officers/organizers that failed to implement the programs and projects funded by the
Provincial government pursuant to the provisions of the Memorandum of Agreement
covering these transactions.
7. Lack of monitoring and proper accounting for deliveries of rice procured
through negotiated procurement from the National Food Administration had
resulted in the misstatement of the Due from NGAs account, related expense
accounts and retained earnings, as well as in unaccounted deliveries of rice
mostly pertaining to previous periods which amounted to P35,676,443.26 as at
year-end.
Procurement of most of the rice requirements of the Province had been coursed
through negotiated procurement with the NFA in accordance with existing government
32
policy. A purchase order is issued covering each transaction, invariably with only the
following terms and conditions:



Place of Delivery – Pick-up
Delivery Term – Upon Receipt of payment
Payment Term – C.O.D.
As in the case of most PO’s issued by the Province, delivery dates or schedules of
deliveries are not specified. Project proposals attached to disbursement vouchers are of
the generic type, without specifying time-tables and identifying beneficiaries.
Although the above terms and conditions do not call for any advances, the amount
of payment to the NFA is charged to the account Due from NGAs – NFA instead of the
proper expense or asset accounts, as the case may be. Moreover, said accounting
treatment appears to make NFA accountable for the payments made to it, when its sole
responsibility under the P.O. is to make available the rice stocks for pick-up by the
Province. The P.O. does not specify any other responsibility such as making liquidation
of funds, and rightly so, since NFA in effect received payment for its rice stocks and not
advances subject to liquidation. Moreover, we noted in our review of documents relative
to some of charges to the NFA account that while there are many cases of considerable
delay in the release of checks to the NFA, deliveries are usually made within a period of
one week from issuance of acknowledgement official receipt by NFA. Clearly, once rice
stocks are picked up by the Province from the NFA warehouse, the contractual
obligations of NFA is fully fulfilled, which do not at all warrant charges to the Due From
NGAs- NFA account.
The accounting procedures employed by the Province, in the absence of proper
monitoring of deliveries made, had resulted in the accumulation of the balances to a total
of P35,676,443.26 still carried in the books of accounts as at year-end, 83.94% of which
pertain to previous years (refer to Annexes H-1 to H-2). Moreover, inasmuch as C.O.D.
terms means payment is made only upon delivery, all payments thus far should already
have corresponding deliveries of rice obtained from the NFA, considering that a
reasonable period of time to make these deliveries had transpired. Hence, the total
amount can be deemed unaccounted deliveries of rice stocks, and these translates into the
equivalent of 23, 428 bags (based on the price of P1,500.00 per bag) recorded in the
books as still due from NFA over the years.
Although all charges are lumped in the NFA account, the same thus actually
represent the accountabilities of various requisitioning LGU personnel charged with
project implementation who are supposed to utilize the procured rice as payment for
services but thus far had failed to present payrolls/distribution sheets duly acknowledged
by recipients/beneficiaries to account for the rice deliveries.
Another cause for concern are discrepancies between quantities withdrawn as
indicated in NFA warehouse stock issue forms as against the volume of rice procured per
Purchase Order. We noted that out of the total quantities procured during the test period
33
totaling 10,663 bags, only 8,907 were withdrawn, leaving a balance of 1,756 bags which
had not been accounted for. It would thus appear that the Province through its
requisitioning officers/project implementers failed to fully withdraw stocks from the NFA
per P.O. Yet, the Province continued over the years to procure from the NFA rice stocks
for the very same programs and projects, without first determining any outstanding
balances from previous purchase orders. (refer to Annex H-3)
Deficiencies in accounting likewise resulted in distortions in the expense accounts
and consequently the retained earnings. We noted that while the accounts obligated and
set up as payables are directly charged to expenses, those debited to the Due from NGAs
account are charged to the proper accounts only when Requests for Booking is made by
the Project implementors. We also observed that some payments to NFA were directly
charged to expense, but the subsequent deliveries of rice from these purchase orders were
recorded again, this time as credits to the Due from NGAs account and again as charges
to the expense accounts.
The Accounting Office committed to the adoption of a revised procedure in
recording transactions related to procurement of rice from NFA and its utilization. In a
joint conference with NFA and LGU officials, it was likewise agreed that revisions in the
procurement procedures will be undertaken based on NFA marketing policies in order to
ensure proper accounting of deliveries of rice as well as proper implementation of
projects under the Food for Work Program.
We recommend that the Provincial Accountant should analyze the Due from
NGAs account and reclassify charges and credits to the appropriate accounts. NFA
warehouse stock issue forms should be compared against quantities procured per P.O.,
and if indeed incomplete deliveries had been made, discrepancies should be reported to
NFA along with a demand to make good the shortfall/unserved purchase orders, if any.
Requisitioning Project implementers should in turn be made to account for all rice
withdrawn per verified NFA warehouse stock issue slips by presenting
payrolls/distribution sheets duly acknowledged by recipients. Unaccounted deliveries
should be charged to the accountability of Project implementors.
Henceforth, purchase orders should be supported by schedules of deliveries, and
project proposals should incorporate time-tables for project implementation and identify
beneficiaries, to facilitate monitoring of accountabilities as well as accomplishment of
project objectives.
8. The Office of the Provincial Accountant failed to effect prompt submission to the
Office of the Provincial Auditor of all vouchers issued by the Province, contrary
to the provisions of Section 107 of PD 1445 and the Rules and Regulations on the
Settlement of Accounts.
34
Section 107 of P. D. 1445 provides that “… all accountable officers shall render
their accounts, submit their vouchers, and make deposits of money collected or held by
them at such times and in such manner as shall be prescribed in the regulations of the
Commission.”
Section 7.2.1 of the Rules and Regulations on the Settlement of Accounts (RRSA)
as prescribed for use under COA Circular 2009-006 dated September 15, 2009 placed the
following responsibility, among others, on the Agency Accountant:
The Chief Accountant, bookkeeper and/or other authorized official performing
accounting and/or bookkeeping functions of the audited agency shall ensure that:
a. The reports and supporting documents by the accountable officers are
immediately recorded in the books of accounts and submitted to the Auditor
within the first ten (10) days of the ensuing month; ….
Section 40 of the Manual on the New Government Accounting System (NGAS)
for LGU’s, Volume I provides that “checks shall be drawn only on duly approved
disbursement voucher”, while Section 42 provides that “the Treasurer shall release the
check only to the payee or his duly authorized representative.” Moreover, Section 44
prescribed the following procedures for the recording of check disbursements and
submission of vouchers for audit:
PROCESS
PERSON/UNIT
RESPONSIBLE
i.
Record check in the Check Register and release check to Treasurer
claimant. Record disbursement in Cashbook- Cash in Bank. Prepare
Report of Checks Issued. Forward RCI with DV and supporting
documents to Accounting Unit.
j. Prepare the JEV based on individual checks/voucher; sign Accounting Unit
“Prepared By” portion (approved by Chief Accountant) and record
JEV in the Check Disbursements Journal. Post monthly to the General
Ledger/Subsidiary Ledgers.
k. Forward RCI, DV, supporting documents and JEV to the Office of Accountant
the Auditor.
The process as described in the Manual thus places the responsibility on the Treasurer for
the release of checks to claimants and the submission of vouchers and supporting
documents to the Accountant, who is in turn required to record the individual checks in
the books of accounts and ultimately forward all the documents to the Auditor for audit.
Our review of vouchers submitted by the Province for the period from January to
August 2010 disclosed that the Office of the Provincial Accountant have consistently
failed to effect the submission of all vouchers issued and recorded in the books of
accounts of the Province along with the supporting documents. Two hundred thirty
vouchers for disbursements in the total amount of P11,677,874.17 have not been
35
submitted. We likewise noted that for 835 checks issued as listed in the RCI for the
period, only duplicate vouchers with no supporting documents amounting to
P18,421,329.01 were submitted instead of the original (refer to Annexes I-1 to I-2).
It also appears that some of the unaccounted vouchers and documents were
released by the Treasurer’s Office to the end-users instead of claimants and have not
forwarded the same to the Office of the Provincial Accountant, who in turn may have in
effect tolerated the practice by recording transactions without reference to the original
vouchers, both contrary to the procedures described above.
The Accounting Office explained that to facilitate prompt recording of all
disbursements and easy retrieval of supporting documents, it “records and prepares the
JEV for all disbursement transactions after the Certification of Fund Availability and
signature of the Provincial Treasurer in the corresponding check issued but prior to
issuance of the Accountant’s Advice, approval of the Disbursement voucher and
signature of the Governor or his authorized signatories in the check.” The Office,
however, committed to review its work flows and performance standards to effect prompt
submission of all paid vouchers to COA.
We recommend that the Accounting Office should submit all the unaccounted
original vouchers and supporting documents to the Office of the Auditor. We likewise
recommend that the Provincial Treasurer release checks only to claimants and forward
the vouchers and supporting documents to the Office of the Provincial Accountant in
accordance with procedures laid out in the Manual on NGAS.
9. The Province of Negros Occidental had effected only partial settlement of all
disallowances and suspensions issued upon the effectivity of the COA Rules and
Regulations on the Settlement of Accounts, reducing unsettled balances to
P1,724.00 and P65,552,184.57, respectively, as at December 31, 2010.
During the year, additional disallowances and suspensions amounted to P1,724.00
and to P2,520.00 resulting from the audit of liquidation of cash advances. The bulk of
settlements amounting to P45,140,445.85 pertains to suspensions and disallowances
arising from the audit of 2009 transactions, which represent only 40.78% of the total
amount despite ample time granted to comply with requirements (refer to Annex J-1).
Management informed us that officers held responsible for the suspensions were
duly warned to effect settlement and comply with the requirements.
We recommend that management effect full settlement of suspensions by
submitting the required documentation and explanations/justifications listed in the notices
of suspension, in order to avoid unnecessary complications arising from suspensions
lapsing into disallowances.
36
B. Value For Money Audit
10. A review of transactions pertaining to trust funds granted by the Bureau of
Postharvest Research and Extension (BPRE) for the establishment of
agricultural tramline in the province of Negros Occidental reveals deficiencies in
the implementation of the project as well as in the handling, accounting and
utilization of funds, resulting in the overcharging of administrative costs
amounting to P1,004,480.50 and the failure to fully implement the project within
the period of effectivity of the covering Memorandum of Agreement (MOA) as
well as to liquidate the funds received for the purpose to date:
10.1 The Province through the Office of the Provincial Agriculturist (OPA)
had charged project funds with excessive administrative costs totalling
P1,140,740.76, most of which are not relevant to the Project, although the
MOA provided for administrative and non-direct cost of only 1% of total
project cost amounting to P136,260.26;
10.2 Only one project thus far had been completed and accepted as at yearend, well beyond the one-year period of effectivity of the MOA; Four
projects were all awarded to only one contractor, while three projects,
including two projects supposed to have been implemented under Phase I,
have not been awarded to any contractor as of date of expiry of the MOA;
10.3 The amounts released by BPRE as trust fund were not deposited in a
separate trust liability account in an authorized government depository
bank, contrary to the provisions of the MOA;
10.4 The Accounting Office failed to properly monitor utilization of funds to
ensure that disbursements are made only for the specific purpose
provided in the MOA.
Section 94 of the Manual on the New Government Accounting System (NGAS)
for LGU’s, Volume I, provides that “Trust Fund shall consist of private and public
monies which have officially come into the possession of the local government or of a
local government official as trustee, agent or administrator, or which have been received
as a guaranty for the fulfillment of some obligation. A trust fund shall only be used for the
specific purpose for which it came into the possession of the local government unit.”
Excessive/Unnecessary Administrative Costs
Annex A of the MOA set the administration cost chargeable to the project at 1%
of total project cost. This was also confirmed by a signatory to the MOA, Ricardo L.
Cachuela, Director IV, Philippine Center for Post-harvest Development and
37
Mechanization (formerly BPRE), in his letter dated December 28, 2010. He wrote that
“the maximum allowable expense for non-direct costs under the MOA is only
P136,260.27, or one percent (1%) of the total direct cost. Any non-direct project expense
in excess thereof but relevant to project objectives would require the mutual agreement of
the parties.”
To date, the Province through the OPA had charged against Project Funds
administrative and non-direct costs amounting to P1,140,740.76, the bulk of which are
irrelevant to the project and therefore not necessary (refer to Annexes K-1 to K-3).
Of the total travelling expenses of P20,102.12, only P12,378.96 was directly
related to the Project as the same was incurred in attending the “Technical Symposium on
Implementation of Tramline Program” held by BPRE. The other trip charged against the
project funds were undertaken after the expiration of the MOA.
Article V provides that the “Memorandum of Agreement takes effect on the date
of the first release of the project funds and will be in full force and effect for the period of
one (1) year until sooner terminated or extended by mutual agreement, in writing, by
parties.” Since the BPRE released the project funds on June 24, 2009, the MOA expired
on June 24, 2010 in the absence of amendments to the same.
Catering expenses of P94,525.00 was incurred by OPA in the conduct of
Institutional Capability Building Seminars, but we noted that the participants are not
beneficiaries or groups that avail of the services provided by the Tramline projects as
their baranggays and municipality (Calatrava) were not among the chosen sites.
Gasoline expenses amounting to P96,650.00 represent fuel consumption of the
OPA for the month of July 2009. The examination of supporting trip tickets fail to show
visits to proposed project sites or any relevance of the expenses incurred to the
implementation of the projects.
Repairs of several OPA vehicles amounted to P469,425.00. We noted that the
repairs pertain to damage or wear and tear on the vehicles sustained prior to
implementation of the project, and charging the same against project funds simply has no
basis.
We also noted that OPA contracted for services of staff personnel through
CAPGEM at a total amount of P460,038.64, ostensibly for the implementation of the
Tramline projects. However, a perusal of the accomplishment reports attached to the
claims showed that the work actually accomplished by these personnel pertained to
irrigation projects. Moreover, the personnel were hired for the period July to December
2009, when the project is at best on the mere survey and planning phase which may
explain in part the hiring of engineering aide. This is clearly not the case with the
foremen and project development officers, particularly since the projects were bidded out
only in February of the succeeding year and actually implemented starting June 2010.
38
Delayed Implementation
Article III created a Project Management Committee to oversee the
implementation of the Project, which shall be responsible, among others, for approving
policies relevant to the implementation of the project. Article IV further provides that
“any amendments to this Agreement shall be in writing duly agreed to and signed by all
the parties hereto”.
No project was implemented as of the expiry date of the MOA, or one year after it
took effect (refer to Annex K-4).
Only two out of the four projects under Phase I had been implemented, although
only the project at Barangay Cabatangan had been completed, accepted and paid as at
year-end. The purchase requisitions for three projects (Minoyan, Cabatangan and
Kapaklan Projects) were obligated only in October 2009, four months after the release of
funds and the effectivity of the MOA, although the sites and the project costs have
already been determined as of the signing to the MOA. Biddings for the three projects
were conducted only on February 2010 (also four months later) and awarded in March,
but notices to proceed were issued in July 2010 (another four months) only for the
Minoyan and Cabatangan. The Kapaklan Project at Silay City has yet to be implemented.
The Program of Work for the Codcod Project at Don Salvador Benedicto was
revised, and was signed only during the term of the new governor, indicating that these
were signed after June 2010 when the MOA expired. While bidding was conducted in
January 6, 2010, no award and notice to proceed had been issued for the Project.
Two projects under Phase II had been implemented. The PR for the Tagukon
Project was obligated in October 2009, but the bidding was also done only in February
2010 and awarded in March. Ironically, this was the first project issued a notice to
proceed in June 2010, even ahead of Phase I projects. The Nailab Project was obligated
in March 2010, bidded in June (3 months later) but the notice to proceed was issued only
in October (4 months later). The Yubo Project was obligated and bidded in March 2010,
but no award and notice to proceed had been issued for the Project.
The program of work as prepared by the OPA to implement the Project set aside a
large amount of the funds to administrative and non-direct costs beyond limits set in the
MOA. Moreover, the Nailab Project at Barangay Ara-al, La Carlota City exceeded
original estimates per MOA. The deviations and revisions were not submitted to the
Project Management Committee for approval and to the BPRE for their concurrence. No
extension of the MOA has been proposed or concurred to by BPRE prior to its expiration
on June 24, 2010.
39
Handling, Accounting and Utilization
Article II.B.3 provides that the Province shall “deposit the amount deposited by
BPRE as a separate trust liability account in an authorized government depository
bank.”
The BPRE issued on June 24, 2009 LBP Check No. 90007 for P8,611,287.00 and
LBP Check No. 374339 for P5,151,000.00 representing the full release of amounts it
committed to the Projects under the MOA. The checks were not deposited in a separate
account but in LBP account no. 0421-9259-92 maintained by the Province for various
trust funds under its custody, contrary to the said provision of the MOA.
Section 100 of the Manual on NGAS, Volume I, provides that “disbursements
from trust funds shall be in accordance with the specific purpose stated in the trust
agreement/approved budget between the trustor and trustee (LGU) as certified by the
Chief Accountant. The certification on the DV as to existence of funds held in trust shall
serve this purpose.”
The Accounting Office failed to enforce limitations provided in the MOA,
particularly since its copy of the agreement did not include Annex A (a copy of which
was provided by the COA Audit Team assigned at Philmech). It allowed the virtual
unilateral amendment of the MOA through its reliance solely in the programs of works
prepared by OPA even if their premises were contrary to the provisions of the MOA. It
likewise condoned the diversion of funds for other functions of the OPA not related to the
Project by certifying vouchers for repairs, gasoline consumption, catering, and other
expenses which comprise the bulk of initial disbursements out of the trust funds.
Article II.B.11 provides that the Province shall “liquidate and return/refund to the
BPRE any amount which remains unused or disallowed in audit upon the completion of
audit.” To date, six months after the expiration of the MOA, no liquidation of the funds
transferred by BPRE has been made. In fact, travel expenses were charged to the account
even if these pertain to trips undertaken after the MOA had expired.
The Accounting Office admitted that it based its monitoring of utilization of funds
only on the approved program of works and MOA without reference to the supporting
Annex I. The OPA requested for the extension of the period of implementation of
projects under the MOA, as well as for the formal approval of increases in administrative
cost and confirmation of authority to use the cost savings in project implementation to
help defray other administrative costs of the Office, which they claim had been verbally
allowed by BPRE officials. They also gave assurances that in the future, proper
accounting procedures will be observed and trust will be utilized strictly in accordance
with the provisions of the MOA.
We recommend that the Province should endeavor to complete the
implementation of the projects and liquidate the funds due BPRE.
40
Program of works prepared by the Project implementing office should indicate
specific time-table for the projects; amendments,deviations and extensions should bear
concurrence of the funding agency and/or the project management committee, particular
when these extend beyond the effectivity of the MOA/trust agreement.
The Provincial Accountant should ensure that the program of works prepared for
Projects, particularly its financial component, are in conformity with provisions of the
budget/trust agreement (a file of which should be maintained in the Accounting Office
for guidance and reference).
The Offices of the Provincial Agriculturist and the Provincial Accountant should
properly review charges and ensure that only costs and expenses relevant to the specific
purpose of the Project are charged against trust funds, while relevant administrative
expenses should never exceed limits set under the MOA.
Other unnecessary and irrelevant costs and charges which can not be funded
under the regular budget of the OPA should be charged to the account of persons
responsible therefor.
41
PART III - STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT
RECOMMENDATIONS
Audit
Observation
1. The Province of
Negros
Occidental
failed to establish the
correctness of Other
Investment
and
Marketable Securities
(Account 197), Loans
Receivable – LGUs
(Account 125) and
Loans Receivable –
Others (Account 126)
with an aggregate
amount
P100,121,389.64.
Ref.
Management
Action
Status of
Implementation
AAR
CY
2009
Reconciliation
ongoing.
Partially
implemented.
Some of the
vouchers had
been
submitted.
Partially
complied.
Recommendations
The
Provincial
Accountant
should
endeavor to clean up
the unreconciled 197
account to ensure that
the investment account
is fairly presented in
the Balance Sheet and
to make certain that
subsidiary ledgers are
correctly
provided
under the specific
account
tagging
created
for
the
purpose.
Reason for
Partial/ NonImplementation
The
Provincial
Accountant
should
conduct
thorough
identification of loan
grantees and ensure
that
uncollectible
accounts
are
recommended
for
write
off,
after
submission of proof
that these accounts are
indeed uncollectible
and needed to be
written off.
2.
Disbursement
Vouchers
(DVs)
submitted by the
Province to the
Commission
on
Audit amounting to
P34,623,764.29
were not supported
with
complete
documentation in
violation of Section
4(6) of Presidential
Decree (P.D.) No.
1445,
thereby
The
Provincial
Treasurer
should
submit as soon as
possible
original
copies of DVs and
ORs
and
other
supporting
documents to the
Office
of
the
Provincial
Accountant
who
shall forward the
same
to
the
Commission
on
42
Difficulty in
completing
documentation
of distribution
to
beneficiaries.
Audit
Observation
Ref.
Recommendations
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
Partially
implemented.
Separate
departments
submit various
supporting
documents to
procuremen t
contracts.
resulting
in Audit
to
avoid
suspensions in post suspensions in post
audit.
audit
and
for
safekeeping
in
accordance
with
Section 4(6) of P.D.
1445.
3. The Province of
Negros Occidental
failed to submit
within five working
days copies of
government
contracts/Purchase
Orders (POs) and
other
supporting
documents in the
aggregate amount
of P23,200,651.50
contrary to COA
Circular No. 2009001 dated February
12, 2009, thus,
completeness
of
documentary
requirements,
defects
and
deficiencies noted
in the audit review
and
evaluation
could
not
be
properly
and
promptly pointed
out to management
for
corrective
measures.
The Provincial
Government should
comply with the
provisions of COA
Circular 2009-001
so that timely and
efficient review and
evaluation can be
done and any defects
and/or deficiencies
noted are
immediately brought
to the attention of
the management for
correction and
remedy.
Management
had been
submitting
copies of
PO’s/contract
.
4. Public biddings
held
by
the
Province in 127
instances for the
procurement
of
goods, services and
infrastructure
projects in the
aggregate
of
P77,896,572.90
The Province should
ensure transparency
and competitiveness
in
all
its
procurement
processes by widely
disseminating
information about
procurement
contracts so that
Wide
Partially
dissemination implemented.
of bids is
practiced.
43
Some suppliers
are reluctant to
join biddings
due to delays in
processing of
claims/
Audit
Observation
Ref.
Recommendations
involve
the
participation of a
lone
bidder,
contrary to the
general principles
on
government
procurement
set
forth under Section
3(a) and (b) of the
Revised
Implementing
Rules
and
Regulations (IRR)
of Republic Act
(R.A.) No. 9184
regarding
transparency
and
competitiveness.
qualified
and
eligible bidders may
participate,
in
accordance with the
above-cited
provisions
of
Revised
Implementing Rules
and
Regulations
(IRR) of Republic
Act (R.A.) No.
9184.
5. A review of
Bank
Reconciliation
Statements
on
various
accounts
and
funds
maintained by the
Province disclosed
the
following
deficiencies:
The
Provincial
Accountant and the
Provincial Treasurer
should
reconcile
their records, locate
and
identify
documents
pertaining
to
discrepancies
between book and
bank balances, and
record appropriate
adjusting entries in
the
books
of
accounts
the
province and thus
ensure the accuracy
and reliability of
cash account as
presented in the
Balance Sheet.
a.
Deposits
in
Transit amounting
to P1,851,363.94 in
the General Fund
remained
unadjusted in the
books
of
the
Province for more
than ten (10) years
in
violation of
Section 3.3 of COA
Circular No. 96011.
b.
Unaccounted
difference between
Book and Bank
balances
of
P3,000,000.00 for
44
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
No
adjustments
had been
made.
Not
implemented,
reiterated.
Difficulty in
documenting
reconciling
items.
Audit
Observation
Ref.
Recommendations
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
Not
implemented.
No IMCS
approval had
been obtained
to date.
LBP
and
P398,095.30
for
PNB in the total
amount
of
P3,398,095.30.
c. Items requiring
adjustments in the
Books
in
the
amount
of
P4,089,626.74 are
significant amounts
described
as
unaccounted
adjustments in the
BRS.
6.
Instructional
Materials
/Workbooks printed
and paid by the
Province in the total
amount
of
P2,499,550.00 were
not
properly
evaluated and duly
approved by the
Department
of
Education (DepEd)
Instructional
Materials Council
Secretariat (IMCS)
in violation of
Chapter 4 - Section
2.2 and 4 of the
DECS
Service
Manual.
7. A cash shortage
of P815,516.86 was
incurred by Ms.
Katherine D. Yee
The Provincial
Government thru the
Department of
Education (DepEd)
should submit to the
Instructional
Materials Council
Secretariat (IMCS)
the said Instructional
Materials for
review/evaluation
and approval before
it will be reproduced
for distribution and
use. A list of
recipient-schools
duly certified by
Principal or
authorized
representative
should likewise be
submitted by the
project proponents
/implementors to
account for the
distribution of the
books to intended
beneficiaries.
Appropriate charges
against
Ms.
Katherine D. Yee
for malversation of
Case is
pending.
45
Implemented.
Audit
Observation
Ref.
Recommendations
as revealed in the
conduct of cash
examination
on
February 11, 2009,
in violation of
Section 105(2) of
Presidential Decree
No.
1445
and
Article 217 of the
Revised
Penal
Code,
thereby
resulting in the loss
of assets that could
have been utilized
for the programs
and projects of the
Province.
public funds should
be filed. Ms. Yee
should be required
to restitute the full
amount
of
P815,516.86,
and
the
Provincial
Governor
should
cause
the
withholding of her
salaries and benefits
pending
full
restitution of the
amount.
8. The Province of
Negros Occidental
failed to collect the
amount
of
P89,239,154.55 in
loans granted to
LGUs, NGOs/POs
and Private Entities
that could have
been used for other
priority
development
projects
and
programs beneficial
to its constituents.
The
Provincial
Treasurer
shall
install effective and
efficient
control
procedures in the
identification of the
active borrowers of
these loans granted
to MPCs and LGUs.
Likewise,
ensure
that past-due loans
are
collected
immediately so that
they will revert back
to the coffers of the
Province to be reapplied to priority
projects
and
programs for the
benefit
of
its
constituents.
The Province shall
cease
to
make
additional
investments or grant
additional loans to
MPCs,
Private
Entities and LGUs
in order to preclude
46
Management
Action
Status of
Implementation
No
collection.
Not
implemented.
Reason for
Partial/ NonImplementation
Audit
Observation
Ref.
Recommendations
Management
Action
Status of
Implementation
Amount of
loss for
failure to
apply
warranty is
being made.
Partially
implemented.
possible misuse of
government funds
and utilize it instead
for more viable
programs
and
projects beneficial to
the greater majority
of its constituents.
9. The May 19,
2009 inspection and
evaluation by the
Technical
Audit
Specialist (TAS) of
the Commission on
Audit
on
the
procurement of one
(1) unit 2nd hand
Isuzu Pickup 4x4
by the Office of the
Provincial
Agriculturist (OPA)
revealed
the
following
deficiencies:
a. Nonoperational/defectiv
e air conditioning
system and engine
oil leakage
b. The 6-months
warranty given to
the Province was in
violation to Section
62.1 of Republic
Act (R.A.) 9184.
The
Provincial
Agriculturist
and
other
concerned
officials involved in
the selection and
appraisal of the
vehicle should be
held accountable for
failure to implement
standard
requirements in the
acquisition
of
second-hand motor
vehicles,
which
omissions rendered
disadvantageous to
the Province the
uneconomical
purchase of fullydepreciated
Isuzu
Pickup, and to effect
the
refund
of
P550,000.00 if the
said amount cannot
be recovered from
the supplier of the
defective vehicle.
c. Actual mileage
or
distance
travelled
had
exceeded
the
allowable mileage
which proved the
procurement
is
uneconomical
in
violation of Section
47
Reason for
Partial/ NonImplementation
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AAR
CY
2008
The
Provincial
Accountant
has started
the clean up
of accounts
227.
Partially
implemented.
Only P2.1M
was not
identified,
classified and
reconciled in
the Books.
AAR
CY
2008
Distribution
of shredders
was already
covered
Partially
implemented.
Some
recipients are
still not
located
Recommendations
4.1 of National
Budget
Circular
(NBC) No. 446A
dated January 30,
1998.
d. The price amount
of P550,000.00 had
exceeded
the
Appraised Useful
Values(AUV)
or
the
Remaining
Useful
Value
(RUV) based on
National
Budget
Circular
(NBC)
Department
of
Budget
and
Management
(DBM) and the
Commission
on
Audit (COA) 98569A.
1. P12,749,781.49
or 30.78% of
Agricultural,
Fishery and
Forestry Equipment
(Account 227) out
of the total amount
of P41,420,553.69
remained
unidentified,
unclassified and
unreconciled per
books rendering the
existence of the
account doubtful.
2. Sixty (60) units
of mechanical
shredder acquired
from RU Foundry
The Provincial
Accountant should
expedite cleanup of
accounts 227 as well
as other PPE
accounts with
unreconciled items.
Also, the
Accounting Office
and General
Services Office
should reconcile
their records to
ensure proper
identification and
classification of
PPE.
The OPA and
PEMO should
submit the Deeds of
Donation together
48
Audit
Observation
Ref.
Recommendations
and Machine Shop
in the aggregate
amount of
P11,150,000.00
remained in the
books after they
were distributed to
various recipients;
thus, overstating the
asset and
understating the
expenses.
with other
supporting
documents to the
Office of the
Accountant for
proper treatment of
donations and
dropping of assets in
the books, and to the
GSO for dropping in
the property cards.
The
Accounting
Office and GSO
should
reconcile
their records to
account for the four
(4) units that were
not recorded.
3. Cash advances
of various
accountable
officers for petty
operating expenses
with an aggregate
amount of
P406,419.15
remained
unliquidated in
violation of
Section 48 of the
Manual on New
Government
Accounting
|System (NGAS)
and COA Circular
No. 97-002 dated
February 10, 1997,
thereby
understating the
expenses and
overstating the
asset account of
the Province.
We recommend that
the accountable
officers liquidate
their cash advances,
otherwise, sanctions
provided under
Sections 5.1.3 of
COA Circular shall
be imposed for
failure to liquidate
said cash advances
within the
prescribed period
that shall constitute
a valid cause for
withholding their
salary.
Management
Action
Status of
Implementation
with Deeds
of Donation
(DODs)
AAR
CY
2008
49
Only Merle
Garcia was
able to
liquidate her
cash
advances of
P20,000 for
CY 2009.
The rest were
not able to
make their
liquidations
Partially
implemented.
Reason for
Partial/ NonImplementation
Audit
Observation
1.The existence
and fairmess of the
presentatation of
Land account is
doubtful due to
unreconciled
balances and
unrecorded real
properties of
P92,092,957.28 and
at least
P188,687,020.08,
respectively.
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AA
R
CY
2007
The Province
will enhance
plan to
account
LAND,
Clean-up is
still on-going
Partially
implemented.
Clean-up of
accounts still
ongoing
Recommendations
We recommend that
the Provincial
Accountant expedite
cleanup of account
227 as well as other
PPE accounts with
unreconciled items.
We also
recommenend the
Provincial
Accounting Office
and General
Services Office
reconcile their
records to ensure
proper identification
and classification of
PPE.
We recommend that
the Provincial
Accountant match
its records with
GAM to ensure that
inventory of titles
are properly
reflected in the
books. The
difference of
P188,687,020.08
shall likewise be
taken up in the
books.
Further, we
recommend that the
Provincial
Accountant expedite
the clean up of the
Land-Others account
(201-999), and
reconcile this with
the records of GAM
so that any
unrecorded
difference will be
50
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AA
R
CY
2007
Reconciliatio
n and
cleaning up
of accounts is
still ongoing..
Partially
implemented.
Cleaning up of
accounts is
still on-going..
Recommendations
effected in the
books.
Also, we
recommend that the
Provincial
Accountant
discontinue the
practice of lumping
together the
transactions
affecting land to
Land – Other
Accounts (201-999)
without proper
identification,
classification and
documentation.
Likewise, we
recommend that the
105 titled land/lots
without proper
valuation be referred
to the Assessor’s
Office for appraisal.
The Office of the
Provincial
Accountant shall
then record the value
of these properties
based on the result
of the appraisal
2. Failure of the
Provincial
Accountant and
Provincial
Treasurer/Cashier
to reconcile the
cash accounts
regularly, resulted
in the
overstatement of
Cash in Bank-Local
Currency, Current
Account (LCCA) of
P6,254,265.60,
We recommend that
the Provincial
Accountant and the
Cashier reconcile
the cash accounts to
reflect the correct
figure in the
financial statements
in order to provide
management with
accurate information
needed for sound
decision making.
51
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AA
R
CY
2007
The
Provincial
Treasurer’s
Office has
prepared
Demand
Letters were
sent to the
borrowers of
the loan.
Partially
implemented.
Reiterated in
this year’s
audit finding.
Recommendations
thereby misstating
the Financial
Statement contrary
to Sections 74 and
111 of Presidential
Decree No. 1445.
3. Collection
efficiency for loans
granted amounting
to about P87M for
livelihood and
electrification
projects was only
about P20M or
22.96% due to
failure of the
grantees to observe
the repayment
scheme as
stipulated in the
contract of
agreement and
strict supervision
and monitoring of
concerned officials,
thus, preventing the
Province to
continue extending
more credit
facilities and
servicing programs
to its constituents.
We recommend that
the Provincial
Offices concerned
strictly supervise
and monitor the
implementation of
the program. The
systems and
procedures in
granting the
financial assistance
to the less fortunate
constituents in the
depressed areas
should be improved.
More efforts should
be exerted or
remedial measures
devised to facilitate
collection of the
loans. Legal
sanctions may also
be imposed.
We recommend that
the Provincial
Treasurer’s Office
(PTO) identify the
cooperatives and
associations which
no longer exist.
Farmer-beneficiaries
that were already
dead should also be
determined so that a
request for
condonation on their
loans be indorsed
to the Sangguniang
Panlalawigan for
52
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AAR
CY
2006
Clean-up of
accounts still
ongoing
Partially
implemented.
Clean-up of
accounts still
ongoing
Recommendations
resolution and will
be forwarded to the
Commission on
audit for approval
and subsequent
write-off of the
accounts from the
books of the agency.
We recommend that
periodic
reconciliation be
done between the
records of the PTO
and the Accounting
so that recording of
repayments and
interest income is
updated. The
Investment account
should be cleared of
unreconciled items
to reflect is correct
balance.
1.
The noncompletion
of
physical count of
inventories
and
depreciable assets
under
Property,
Plant
and
Equipment (PPE)
and inadequacy of
related supplies and
property
ledger
cards resulted to the
difficulty
in
establishing
the
fairness
of
presentation
of
affected accounts
totaling
P25,563,731.09 and
P599,710,497.70,
respectively.
Instruct
the
Inventory
Committee
to
conduct
periodic
physical count of all
inventories and PPE
as well as to ensure
timely submission of
the required Report
of Physical Count of
Inventories (RPCI)
and
Report
of
Physical Count of
Properties,
Plant,
and
Equipment
(RPCPPE)
as
scheduled.
Require
the
Provincial
Accountant and the
GSO to reconcile
53
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
AAR
CY
2006
Dormant
accounts
have been
taken care
of.
Some
accounts
were closed,
while others
were
transferred
to
time
deposit
accounts.
Partially
implemented.
Current
reconciling
items were
booked up
immediately.
Still, prior
years’
reconciling
items in the
bank were not
effected,
hence,
reiterated in
this year 2009
audit findings.
AAR
CY
2006
The
Provincial
Accountant is
hesitant to
remit the
share to
LGU’s due to
Not
implemented.
Still unimplemented
due to lack of
supporting
documents.
Recommendations
their records and
properly identify the
inventories
and
depreciable assets
under PPE in order
to establish the
fairness
to
presentation of the
affected accounts in
the Balance Sheet.
2. Non-recording
of reconciling items
for the Cash in
Bank
–
Local
Currency, Current
Account resulted to
an
unreconciled
difference between
the bank and books
in the amount of
P27,486,346.15.
Direct the Provincial
Accountant
to
record immediately
the reconciling items
found in the Bank
Reconciliation
Statement. Further,
secure the lacking
supporting
documents from the
Provincial Treasurer
in order to effect the
necessary
adjustments in the
books.
Instruct
the
Provincial Treasurer
to
furnish
the
Accounting
Department
with
details relative to
dormant
accounts
and other related
transactions so that
they are recorded
and accounted for
properly.
3. Non-remittance
of various LGU’s
share aggregating
P15,714,292.00 as
required
under
Section 286(a) of
the 1991 Local
Direct the Provincial
Treasurer to comply
with the provision of
Section 286 (a) of
the 1991 Local
Government Code in
order for the other
54
Audit
Observation
Recommendations
Ref.
Government Code
deprived
the
concerned
beneficiaries of the
use of said funds
for their projects.
LGUs to maximize
the use of their
funds
in
the
implementation of
various
programs
and projects.
1. The Province of
Negros Occidental
failed to establish
the validity and
existence of the
Property, Plant and
Equipment
and
Inventories in the
amount
of
P2,148,132,117.78
and
P109,637,975.25,
respectively,
resulting
in
overstatement
in
violation of Section
124 of the Manual
on
the
New
Government
Accounting System
for
Local
Government Unit.
1.a)
The Local
Chief
Executive
ensures
periodic
inventory
of all
inventories and PPE
as well as prompt
submission of the
required Report of
Physical Count of
Inventories (RPCI)
and
Report
of
Physical Count of
Properties, Plant and
Equipment
(RPCPPE)
as
scheduled.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
Partially
implemented
Cleaning up of
accounts is still
on-going.
lack of
supporting
documents.
She promised
to implement
the
recommendat
ion as soon
as possible
by offsetting
the Due from
and Due to
Accounts.
AA
R
CY
2005
b) The Provincial
Accountant effects
the
necessary
transfer of Public
Infrastructure to its
respective registries
to reflect the correct
amount of PPE
account
in
the
Balance Sheet.
c) The Provincial
Accountant
reconciles
and
properly identifies
the properties in
Annex “A” to
55
Cleaning up
of accounts is
still
ongoing.
Audit
Observation
Ref.
Management
Action
Status of
Implementation
Reason for
Partial/ NonImplementation
reconciling items,
specifically
the
outstanding checks
for more than six (6)
months be cancelled
and reverted to Cash
and/or credited to
Accounts Payable to
ensure correctness
of
Cash
and
Accounts Payable
balances in the
Balance
Sheet
pursuant to abovecited regulation.
AA
R
CY
2005
All stale
checks
found in the
possession
of the
Cashier are
forwarded
immediately
to the
Accounting
Office for
cancellation
and proper
adjustment.
Partially
implemented
Substantial
amounts
of
checks have
already been
cancelled.
We recommend that
the General Services
and the Accounting
Officers
should
periodically
reconcile
the
donated
assets
accounts to ensure
its correctness based
on the ARE, Deed of
Donation, or MOA.
It is also suggested
that
physical
inventory shall be
regularly done for
all donated assets.
AA
R
CY
2005
Booking up
of accounts
is still on
process
Partially
implemented
Cleaning up of
accounts is still
on-going.
Recommendations
establish
the
propriety, validity
and existence of
Inventories and PPE
accounts
as
presented in the
Balance Sheet.
2. The Province of
Negros Occidental
failed to cancel
various
stale
checks
in
the
General and Special
Education Fund in
the
aggregate
amount
of
P6,640,035.91
which resulted in
understatement in
Cash and Accounts
Payable in violation
of Section 59 of the
Manual on NGAS,
Volume I.
3.
Inadequate
controls over the
grant of donations
to other Local
Government Units
(LGUs) and NonGovernment
Organizations
(NGOs)
were
observed, thereby,
overstating
the
Property, Plant, and
Equipment account
by P4,873,853.00.
56
PART IV - ANNEXES
Balance Sheet
General Fund
Special Education Fund
Trust Fund
Annex A.1
Annex A.1.1
Annex A.1.2
Statement of Income and Expenses
General Fund
Special Education Fund
Annex A.2
Annex A.2.1
Statement of Cash Flows
General Fund
Special Education Fund
Trust Fund
Annex A.3
Annex A.3.1
Annex A.3.2
Statement of Government Equity
General Fund
Special Education Fund
Trust Fund
Annex A.4
Annex A.4.1
Annex A.4.2
SAAOB
GF
EEDD
SEF
Annex B.1
Annex B.2
Annex B.3
Other Annexes
Summary of Unreconciled Balances in the
Book of Accounts
Summary of Unreconciled Balances in the
General Fund Proper
Summary of Unreconciled Balances in the
General Fund - EEDD
Summary of Unreconciled Balances in the
Special Education Fund
Summary of Unreconciled Balances in the
Trust Fund
Summary of Aging of Cash Advances in the
Book of Accounts
Aging of Cash Advances in the
General Fund Proper
57
Annex C-1
Annex C-2
Annex C-3
Annex C-4
Annex C-5
Annex D-1
Annex D-2
Aging of Cash Advances in the
General Fund - EEDD
Aging of Cash Advances in the
Special Education Fund
Aging of Cash Advances in the
Trust Fund
Annex D-3
Annex D-4
Annex D-5
List of Collecting Officers
Schedule of Collections Receipted as of
Dec. 31, 2010 But Recorded in 2011
Schedule of Collections Receipted as of
Dec. 31, 2009 But Recorded in 2010
Summary of Invalid/Incorrectly Presented
Reconciling Items
Summary of Unadjusted Reconciling Items
Balance Per Bank
Summary of Unadjusted Reconciling Items
Balance Per Book
Schedule of Due from NGOs/POs
Summary – All Funds
Schedule of Due from NGOs/POs
- General Fund
Schedule of Due from NGOs/POs
- Trust Fund
Analysis of Releases-Transfers of Funds
Summary of Unaccounted Deliveries and
Balances Per Books –Due to NGAs
Analysis of Due to NGAs – NFA Account
Listing of Unaccounted Deliveries
Listing of DV’s Not Submitted and
DVs w/o Supporting Documents
Summary of DV’s Not Submitted/ W/o
Supporting Documents
Details of Suspensions, Disallowances
And Charges – All Funds
58
Annex E-1
Annex E-2
Annex E-3
Annex F-1
Annex F-2
Annex F-3
Annex G-1
Annex G-2
Annex G-3
Annex G-4
Annex H-1
Annex H-2
Annex H-3
Annex I-1
Annex I-2
Annex J-1
Summary of Project Costs – Establishment
Of Agricultural Tramline
Summary of Administrative Expenses Charged
To Tramline Projects
Details of Administrative Expenses Charged
To Tramline Projects
Summary of Project Implementation –
Establishment Of Agricultural Tramline
59
Annex K-1
Annex K-2
Annex K-3
Annex K-4