04-PPC06 Comments and Observations

8/12/2019 04-PPC06 Comments and Observations

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COMMENTS AND OBSERVATIONS

FINANCIAL ISSUES

1. CASH IN BANKIn the audit of Cash in bank account, the following deciencies werenoted:

Discrepancy be!een ban" an# b$$" ba%ances & '()*+1,-+**

The audit disclosed discrepancies between the balances of thedepository banks and the book balances of the Cash in Bank accountsof several regional post oces. Total discrepancies aounted to!"#$,%&',($$ as shown below:

In )C* the discrepancy of !%,((',%+$ pertains to the dierence in thetransfer of fund fro general fund to -oestic oney /rder 0undand vice versa, understateent of deposit, unrecorded bank servicecharge, interest incoe, bank error and closed accounts which stille1ist in the books.

In *egions I and II the aterial discrepancies between the bank andbook balances pertain to unrecorded bank service charges,unrecorded closure of 2B! accounts, prior years3 unidentied reconciling ites which werecarried forward in the books fro year to year.

/f the total discrepancy of !%"$,4+',%4# in *egion III, 5$6 or!%(4,%$$,+"+.&4 represent closed accounts at the !hil. )ational Bankand 2and Bank of the !hilippines.

The aterial dierence in the 2and Bank account for *egion I7pertains to unreconciled accounts in ($$# and prior years while thedierence in 89uitable !CI bank pertains to erroneous take up ofcorporate funds deposits in the oney /rder 0und /0; account.

The negative balance of !CI Bank


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In *egion 7I prevalent discrepancies between the balance of thedepository bank and book balance are shown below:

In *egion 7II the reconciliation between the total of the general ledgerand bank balances was not ade periodically, thereby causingdiculty in deterining the causes of the discrepancy of !",&"4,"4$

The prevalence of this discrepancy>dierence had been previouslyand consistently brought to the attention of anageent but thesae had reained unreconciled to date.

In *egion 7III as a result of the delayed>noncreditsade by the bank. In the absence of the credit eo after diligent

eort, the unidentied deposit shall be treated as /ther Incoe.

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(. 2ong outstanding deposit in transit in the bankreconciliation stateent, supporting docuents of the deposit intransit validated deposit slip; together with the counicationsto the bank concerned, if any shall be sent to the =!


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The nondelayed preparation of Bank *econciliation?tateents resulted in the accuulation of reconciling ites in theCash in Bank account.

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0urtherore, interested parties will be deprived of their opportunity todeterine the irregularities or discrepancies that ay arise fro thetransactions involving deposits.

This nding had been included in previous years3 annual audit reports.

*8C/8)-=TI/)?

*e9uire responsible ocials to send periodic reinders to depositorybanks to ensure that the bank furnishes the !!C Eead /ceincluding the *egional /ces with the re9uired bank stateentswithin the prescribed period observed in the banking industry.

anageent should strictly re9uire all concerned accountants toprepare bank reconciliation stateents pursuant to ?ec. 4" of !-%""'.

=)=88)T C/8)T?

1. The accountants were instructed to coordinate and ociallyre9uest fro each depository bank branch for the bankstateents to be sent directly to the in the regional oce.

2. Bank reconciliation of current transactions is being doneiediately to avoid occurrence of untoward incidents andpilling up again of reconciling ites.

S/bsi#iary Le#6ers n$ /p#ae#2n$ 3ainaine#.

!aragraph (a; of ?ection "++ of == 7olue I states thattotals of ?ubsidiary ledger balances are reconciled with theirrespective control account =t the end of each onth. = stateentthereon is prepared 9uarterly to support the corresponding account inthe trial balance.

= subsidiary ledger will facilitate the recording and tracing oftransactions in details which is necessary in coing up withinforation concerning past operations and present condition andused as basis for proper decision aking.

Two (; regional oces do not aintain subsidiary ledgers and two (;regions are not updated in posting in the subsidiary ledger.

*8C/8)-=TI/)

aintain and update ?ubsidiary 2edgers for all bank accounts tofacilitate the early detection of errors, e1pedite adAustents and to

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deterine if total individual accounts reconcile with the eneral2edger.

=)=88)T C/8)T

The accountants are being re9uired to update the subsidiary ledgersfor all bank accounts.

N$n&c%$s/re $0 e a6ency7s #$r3an ban" acc$/ns $a%in6' 1+889+99, n$ $n%y #epri:es e c$rp$rai$n e /se $0i#%e 0/n#s b/ a%s$ a%%$!s e /nnecessary %$ss $0 0/n#s#/e $ e ban"7s i3p$sii$n $0 #$r3ancy 0ees an# ep$ssib%e c%assi;cai$n $0 e acc$/n in$ Unc%ai3e#Ba%ances Acc$/n as per Seci$n ,( $0 e Cenra% Ban"Man/a%.

These bank accounts are as follows:

In )C* 2B! and 8!CIB accounts aounting to !#+",((4 havereained dorant since %55+.

In*egion I the balance of !%4,5$$ of dorant accounts was lost dueto the bank3s iposition of dorancy fees.

In *egion 7I as of /ctober #%, ($$& balances of twenty ($; accountswere charged with dorancy fees aounting to !($,$$% which led tothe closure of si1teen %&; accounts.

In *egion 7III based on the conration letters sent to the bank, thereaining balance is only !%%,++( which had been dorant since

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%55+ and yet no action was taken to close the accounts and transferthe reaining balances to their respective active accounts.

In C=* the agency failed to cause the closure and transfer of its 2andBank of the !hilippines and 89uitable !CI Bank and !hil. )ational Bankdorant accounts in the aount of !%,##+,%'( to !!C


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proposed adAusting entries prepared by the =udit Tea were alreadytaken up in the books for the Calendar Hear ($$&, however, soe ofthe bank reconciling ites as early as %554 were left unadAusted bythe =ccounting ?ection. They do not e1ert utost eort to

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analye and prepare the necessary adAusting entries in order toeliinate those long outstanding reconciling ites, despite thesupport given to the by the audit tea. This is a reiteration of aprevious year3s audit observation.

Included as reconciling ites are balancing gures which were

presented as s9ueee gures in the Bank *econciliation ?tateentsfor 2and Bank of the !hilippines: !#5,'&%,$"+ for Corporate 0und and!%%+,54&,5+% for oney /rder 0und while reconciling ites in theBank ?tateents for 89uitable !CIBank 8!CIB; are erroneous take up of general fund deposits in theoney order funds books and vice versa.

In *egion 7 opportunities lost due to non restoration of the aount ofbank errors since %55+ totaled !"&",&"" which includes interestearned fro the tie the bank errors occurred until -ec. #%, ($$& inthe aount of !4&,%&'.

In *egion 7II the balance aounting to !(,$&',%%+ was not backed upby cash in the depository bank. The non


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anageent Austied that the delay was ainly due to the tracing ofbig reconciling ites, and ost of the credit book adAustents wereerroneous entries on disburseents at the tie of conversion to)=?.

*8C/8)-=TI/)

?trictly re9uire the head oce and regional accountants toiediately eect the necessary adAustents for the reconcilingites in the bank reconciliation stateents to establish the accuracyof cash in bank balances.

=)=88)T C/8)T

0or copliance>ipleentation.

N$n&rans0er $0 #ep$sis in e=cess $0 3ainainin6 ba%ances

In C=* deposits received by the 2and Bank of the !hilippines


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account fell below !('$,$$$. The bank accounts aintained byMalinga cluster have the highest untransferred deposits to the 2B!Central /ce =ccount.

The year end balances of the eneral 0und and oney /rder 0und

bank accounts are as follows:Cluster en.

0undoney/rder

Total

Malinga %54,444 &%$,'+' +$+,#&(

t.!rov.

4+,%5" %#(,5&5 (%%,%

Ifugao %$4,"#5 %%&,$## ((#,"4#

=payao '&,(#% %#,$$$ &5,(#%

Total "#5,&"% +4(,'+4 %,#%(,((5

)on


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89uitable !CIBank ($$% "5%,$#$ ($$( %$5,#'$

($$# 4#+,(## ($$" 4$+,'4$ ($$' 4%(,"$$ ($$& #"',%$$!)B ($$"=)o. #"'outstanding forappro1iately fteen %'; years now.

These debit charges have reained as reconciling ites in the books,without any action taken fro anageent. anageent Austiedthat the letter re9uests were sent to the bank for the recovery of debiterroneous charges, but replied that these were not acted upon by thebank up to the present.

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Ke recoended that anageent retrieve copies of paid checks asstated in the !)B Bank *econciliation ?tateents and deand

replaceent of aount erroneously debited under the account of !!C./therwise, establish for the proper write


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supported with evidences such as deand letters>tracers to !)B andcertications that copies of paid checks owned by other agenciescould no longer be retrieved fro the oce les, as basis for droppingof the accounts, fro the books prior to approval of the coission.

=)=88)T C/8)T

0or review>reconciliation prior to the re9uest to the C/= for thedropping of the accounts fro the books.

Fai%/re $ #isc%$se a# over payent of ! ($$,$$$ per dulyapproved disburseent voucher.

The accounting corrected the e1cess by an erroneous adAusting entryby a debit to Cash


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Ke will review>reconcile the account and eect proper adAustents inthe books.

. CASH COLLECTIN@ OFFICERS

@enera% Le#6er an# S/bsi#iary Le#6er ba%ances $0 Cas

C$%%ecin6 Ocers $0 se:era% ''C re6i$na% $ces s$!e# a$a% #iscrepancy $0' 9+*8+-) as s$!n be%$!

*egional

/ce

= o u n teneral

0und

oney/rder

T o t a l

I ("",$ %$',+

#'$,(&+

II "'',5%$ %(",&$(

'+$,'%%

7I #,+'4,4"+

#,+'4,4"+

7II (,'"#,&"$

< (,'"#,&"$

@I %(%,(4# &%5,$5% 4"$,#Total 4,((#,($

%+"5,##% +,$4(,'#

(

?ubsidiary ledgers were not updated in *egion I while in *egion III, tobeat the deadline in the subission of reports, no postings wereade by the regional accountant in the general and subsidiaryledgers.

In *egion II, the discrepancy was due to fact that during the clusteringof post oces, ?2 started ero while the 2 retained the previousbalance before clustering.

=s provided in ?ection "++ of the == 7ol. II subsidiary ledgers arenecessary to support the balances of controlling accounts appearingin the general ledger

*8C/8)-=TI/)

anageent should strictly re9uire regional accountants to reconcile?ubsidiary and eneral 2edger balances of Cash Collecting /ceraccounts as well as the andatory aintenance of updatedsubsidiary ledgers in copliance with ?ection "++, == 7ol. II.

Cas c$%%ecin6 $cer&p$s $ces acc$/n+ 6enera% an#3$ney $r#er 0/n# per b$$" s$!s an $:ersae3en $0

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'(9+**)+(-c$3pare# $ e ba%ances in e p$s3asers7 ;nancia% rep$r.!ostasters3 nancial reports>account current supposedly reLectsactual undeposited cash collections in the hands of postasters asof -eceber #%, ($$&. Copared to what is recorded in the books,cash collecting ocerdiscrepancy of !"+,$$#,"(' as shown below:

*egion eneral2edger>?2

!ostasters3*eport

-iscrepancy

I "$#,$&( #+#,44# %5,(+5

II 45&,%(4 "4",%$# #((,$("

III #',5'&,&5# ",$&4,%'( #%,++5,'"$

I7 (,'#+,$$% %,5'+,+5' '45,%$&

7II '45,(55 '&$,#$4 %+,55(

I@ %(5,'4& %$#,$+5 (&,"+&

@ (,#+(,44' &(#,+55 %,4'+,+4&

@I ",5%",%'( (,+(%,&54 (,$5(,"''

@II %,+5&,$%$ 4'4,$5$ %,%#+,5($

C=* '+$,4&' ##$,$ ('$,4$(

)C* %+,"#+,'## +,'#%,"55 5,5$4,$#"

T/T=2 &+,&%",55" ($,&%%,'&+ "+,$$#,"('

In *egion III which registered the biggest discrepancy, the sae wasbrought about by the unrecorded cash shortages due to theunavailability of records pertaining thereto and unadAusted losses ofcash on hand fro robbery because of non


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The !"+ illion overstateents is nonCashiers.

". *egional /ces should also consider re9uesting authority to writeo accountabilities, where the recovery of which is deeedreote.

=)=88)T C/8)T

*e9uire *egional =ccountants to continuously reconcile prior yearsbalances and to identify>separate fro the books of accounts goodDand bad accountsD eective CH ($$4.

C$%%eci$ns in ''C Re6i$n an# C$r#i%%era A/$n$3$/s Re6i$naren$ bein6 #ep$sie# inac+ an# #ai%y $r e ne= ban"in6 #ay

c$nrary $ Seci$n 111 an# 1)( $0 e @$:ern3enAcc$/nin6 an# A/#iin6 Man/a%.

The audit of the accounts of s. *osa Bello, regional cashier of !!C*egion ( disclosed she has undeposited collections alost every endof the onth ranging fro !%#,$$$ to !(',$$$. There were alsoinstances when s. Bello does not deposit all the cash on hand andretains a portion of her cash accountability.

?iilarly, review of the *ecord of Collections and -eposits of theCluster Eead !ostasters and Cluster Cashiers showed thatcollections are not being -eposited intact and daily. Collections fro

!'$$ to !%($,$$$ are being

accuulated and held for a period of (


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that the accuulated collection is !'$$ or ore, deposit should bedone daily.

The practice of accuulating collections and delaying deposits couldlead to possible loss, isuse, or isappropriations.

*8C/8)-=TI/)?

1. ?trictly follow -B


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1. anageent should investigate as to why these dorantaccounts arestill in the books when the purpose>s or progras for theirestablishent have ended or have long been copleted.

2. anageent should also hold the concerned accountableocers for the issing cash balances.

). CASH DISBURSIN@ OFFICER

Unrec$nci%e# #ierences be!een e @enera% Le#6er an#S/bsi#iary Le#6er ba%ances in e a3$/n $0 '1+?(-+,8

The balances per book of Cash -isbursing /cers N eneral0und and -oestic oney /rder 0und fro " *egional oces do notreconcile in the aggregate aount of !%,5"',(&4 as shown below:

The total discrepancy of ! %,%#',5#% in C=* region or '+6 of the totaldiscrepancy pertains to various errors coitted by the accountingsection such as double or over recorded li9uidation, unrecordedrefund and erroneous entry and footings.

In *egion @, the unreconciled balances are due to the substantial

discrepancies in the beginning balance and failure to aintainindividual subsidiary ledger of several post oces aking it dicultto reconcile the accounts.

There was no reason given in *egion ' e1cept after verication of theaccount, the subsidiary ledger balances did not reconcile with thegeneral ledger

0urther, discrepancies can be the result of late subission of nancialreport by !ostasters as well as unsupported report of payents,collections and deposits.

*8C/8)-=TI/)?Considering the ateriality of the aount of discrepancy, thefollowing are recoended:

%. anageent should re9uire the *egional =ccountant to e1erteort to iediately identify the variances.

(. *eind *egional =ccountant to carefully analye and reviewtransactions before drawing accounting entries to iniieerrors.

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#. *ules and regulations on the grant, utiliation and li9uidation ofcash advance should be strictly enforced.

Cas a#:ances in re6i$na% $ces $a%in6 '9*+9(8+11?

re3aine# /n%i/i#ae# c$nrary $ Seci$n 9? $0 '.D. 1((-.

?ection +5 of !.-. %""' on the liitations on cash advances providesthat:

)o cash advance shall be given unless for a legally authoriedspecicpurpose. = cash advance shall be reported on and li9uidated as soonas the purpose for which it was given has been served. )o additionalcash advance shall be allowed to any ocial or eployee unless theprevious cash advance given to hi is rst settled or a properaccounting thereof is ade.D

=t the Eead /ce, 5'6 or ! ',5&',##$ of the total unli9uidatedaount pertains to personnel who are still in service and '6 or!(+(,"'+ pertains to personnel who are either retired, resigned ortransferred. -eand letter were already issued to ocials>eployees,out of +& deand letters, "& had already responded and li9uidatedtheir respective cash advances.

In the case of the )C*, the outstanding balance per book aountedto !"#,#4&,545 as of -eceber #%, ($$& while subsidiary ledger ?2;balance aounted to !"#,+#5,(%" for the sae period showing adierence of !"&(,(#'. /f the !"#,+#5,(%" cash advances,!",(%',"$( or %$6 have been outstanding for %($ days to (( years.

These cash advances were for payent of salaries and other personalbenets dating back as far as %5+# up to ($$". =ppro1iately #5percent or !%,&%#,+#5 of these nonpostasters who have either died, retired,resigned or been disissed. =s to the reaining &%6 or !(,&$%,'thereof, responses to our conrations as well as telephone in9uiriesto postasters showed that the said aount were not actuallyunli9uidated but only unrecorded since soe of the have alreadysubitted their li9uidations, however the =ccounting -ivision haslost>isplaced the corresponding paid payrolls and li9uidationvouchers. The postasters concerned have also claied thatsince the cash advances were for payent of salaries, wages and

other personal benets, post oce eployees would havecoplained had they not received their salaries and wages.

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In *egion I7, verication of accounting records disclosed thatcarelessness in the recording of cash advances and their li9uidationthereof is the cause of li9uidated cash advances still recorded in thebooks. 8rroneous entry by the person in charge also caused dicultyin onitoring the sae.

In *egion 7II, verication disclosed that the total aount of!',$4%,"55 was granted to ocials and eployees who were notdesignated disbursing ocers. =ging also disclosed that ! "",&%4reained unli9uidated for ( years and ore. 81tant records alsoshowed that four "; accountable ocers were even grantedadditional cash advances despite their outstanding>unli9uidatedbalances.

In *egion I@, analysis of the account and the aging schedulesdisclosed that (+6 or ! %,#(5,5+$ of the total balance reainedunli9uidated for ore than two onths and of which were cashadvances granted between the year ($$%


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receivable account shows a debit balance while -ue to C/, a payable,shows a credit balance.

Eowever, e1aination of the CTB as of -eceber #%, ($$& discloseda debit balance of !"++,''+,$5% for the -ue fro */ account while-ue to C/ had an abnoral debit balance of !(,5&$,"($,5(&, anaount dierent fro the total of all balances reported in the*egional /ces Trial Balances.

!art of the dierence between the two accounts could be attributed tothe erroneous booking of closing entries for Incoe, 81penses and!rior Hears3 =dAustents at the Eead /ce E/;. =nalysis of the TrialBalance fro the regional oce at C=* disclosed a booking dierenceof !&,55',"$$ coputed as follows:

-iscrepancies and errors in the booking up of fund transfers fro C/by soe regional oces also contributed to the dierence betweenthe -ue to>-ue fro accounts. ?i1 regions, as listed below, haveerroneously recorded fund transfers totaling !44',%(&,'+" coveringbudgetary re9uireents for Current /perating 81penses !?, //8,and 08; as -ue to C/ account instead of ?ubsidy fro C/ &'#; as

re9uired under C/= =ccounting Circular 2etter )o. ($$4


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(. Iprove the internal control easures and procedures regardingreittances of collections and transfers of supplies andaterials, staps and oney orders to regional oces toensure coplete and accurate recording of all transactions inthe books.

#. /bserve close coordination of the concerned oces involved inthe inter< oce transfer transactions.

=)=88)T C/8)T?

%. 0or the rst seester of CH ($$4, F873s per *egion were alreadysent for their reconciliation to adAust any discrepancies.

(. *econciliation of the account is on going. 0or CH ($$& cashtransactions, */s were furnished with the F873s for theirreference and reconciliation of the account. CH ($$' and prioryears will follow.

#. 8ective CH ($$4, as a standard procedure, */s are furnishedwith F87s and docuents to support the transactions aectingthe due fro account.

S/bsi#y $ Re6i$na% Oce 2 S/bsi#y 0r$3 Cenra% Oce

Discrepancy in e b$$"in6 /p $0 0/n# rans0er $ e Re6i$na%Oces in e a3$/n by '-9(+9(8+?((.

7erication of the Consolidated Trial Balance and the *egional /cesTrial Balance disclosed that fund transfers covering budgetaryre9uireents for Current /perating 81penses !?, //8, and 08; to

the *egional /ces showed a discrepancy of !'+",+"4,5"" as shownbelow:

=nalysis of the *egional /ce Trial Balances revealed that soe*egions have recorded fund transfer to account -ue to Central /ce"(%; instead of account ?ubsidy fro Central /ce &'#; incopliance with C/= =ccounting Circular 2etter )o. ($$4Branches Code +4(;shall be used to record fund transfer while account ?ubsidy froC/>E/ Code &'#; shall be used by the *egional /ces. -etailsbelow are breakdown of fund transfers recorded under the account-ue to Central /ce:

44

Total funds transferred to */s perC/ Books

(,$&+,'45,(55

Total fund transfer recorded in */s%,"+#,4#%,#

'"-ierence '+",+"4,5""

*egion

-ue to Central/ce Code

"(%; */ II +$,554,4+$

*/ I7 ((5,#((,44'*/ 7II %#',#5%,+54*/ @ %($,#%&,%$%*/ @I %#5,("",%$'*/ @II &5,+'#,5(&

Total 44',%(&,'+"


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=lthough ipleented by soe *egional /ces there arediscrepancies in the booking up of fund transfers details are as

follows:

?ubsidy froC/ ?ubsidy to */ -ierence

Code &'#; Code +4(;)C* "+4,#"',$+( "(4,45$,44' '5,''",#$4C=* &$,'4%,#(" '(,$'+,$(# +,'%#,#$%*/ I %'5,+$%,(%+ %#5,++",$5# %5,5%4,%(&*/ III (%#,55",+55 %+",5#",$"( (5,$&$,+'4*/ 7 %"',("5,4"& %(#,4#$,%+5 (%,'%5,''4*/ 7III %"(,%##,#"% %(',+&&,$%# %&,(&4,#(+

*/ I@ %(5,$(","4& %%",(4(,&$+ %",4'%,+&4

Totals %,"+#,4#%,#'"%,(5#,"'(,4%

' %5$,(4+,&"$

*8C/8)-=TI/)

Coply strictly with C/= =ccounting Circular 2etter )o. ($$4


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2ikewise, *egion I7, booked #( lots with a total arket value of!%',%,4$$ are still in the nae of the donors without cadastralsurvey. These properties were not yet segregated fro their othertitle and though were covered by -eed of -onations, soe of whichwere conditional in nature. 0ive of those lots with conditional -eed of-onations with a book value of !#5#,$$$ were already reverted to theowners. Eowever, these are still in the books of !!C. Eence,the account 2and O 2and Iproveents is overstated by!%',%,4$$.

=lso, *egion 7III has in its books donated lots without titles aountingto !%",5$+,#"$ and with a total area of %+,#%4 s9uare eters.

In *egion @II, real estate in the aount of !%",""',$+5 were notsupported with legal docuents. 0urther verications reveals that realestate properties with total value of !%+,$"4,#%+ were not booked up.

*8C/8)-=TI/)?

%. 81ert eort to secure TCTs of the real estate properties donatedwhich are not yet in the nae of !!C to prevent the possibilitythat these assets be titled in the nae of private persons orentities and the possibility that the -onor 2G? ill recall the-eed of -onations.

(. Fournal entries should be ade to record purchased lotscopletely and accurately.

#. 0or properties that were already reverted to the donors,adAusting entries should be ade to drop the fro the books.

=)=88)T C/8)T

anageent of *egion @II coented that =dittedly, real estateproperties of !!C *egion @II were not supported with legal docuentsspecically Certicate of Title, -eed of -onation, thus resulting tonon


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cases, the physical inventory taking which is re9uired annually orsei < annually should be regarded with iportance.

The annual inventory e1ercise has for its principal obAective theverication of whether property ac9uisitions ade through the yearsof its operations still e1ist. Thus, the physical count is not an end by

itself but rather an input to a ore iportant activity of reconcilingwhat was counted against the recorded property ac9uisitions to beprovided by the =ccounting ?ection. In the process of reconciliation,issing ites are identied and their accountability e1acted fropersons accountable and responsible. /n the nancial aspect, thecount provides an assurance that the property balances as presentedin the nancial stateents are accurately stated.

?ection "5% also states that discrepancies between physical and bookinventories ust be investigated and cleared iediately. Ifnecessary, written e1planations shall be re9uired fro persons liable.

The anual on the )ew overnent =ccounting ?yste )=?;re9uires that *eport on the !hysical Count of !roperty, !lant and89uipent *!CC!8; shall be used to report the physical count ofproperty, plant and e9uipent by type as of a given date. It showsthe balance of property and e9uipent per card and per count andshortage>overage, if any. oreover, it provides that 0or check andbalance, the !roperty and ?upply /ce Gnit shall aintain !ropertyCards !C; for property, plant and e9uipent, and ?tock Cards ?C;for inventories. The balance in 9uantity per ?C and !C should alwaysreconcile with the ledger cards of the =ccounting GnitD

In addition, the anual provides the basic procedures in the

anageent of inventories and prescribed various accounting andinventory fors to be used to establish eective controls, and ensureproper accounting to present the true nancial condition of theaccounts in the nancial stateents. oreover, it

provides that the ?upply Gnit shall issue supplies and aterials based onthe approved *e9uisition and Issue ?lip *I?; and prepare the *eportof ?upplies and aterials Issued *?I; daily for subission to the=ccounting Gnit. 0or check and balance, the !roperty and ?upply Gnitshall aintain stock cards for inventories which should always

reconcile with the ledger cards of the =ccounting Gnit. *eport on!hysical Count of the Inventories *!CI; should be used to reportphysical count of ?upplies by type of inventory as of a given date.

*elatively, ?ections ""$ and ""% of the overnent =ccounting and=uditing anual 7olue II provide that ?upplies 2edger Card ?2C;shall be kept for each type of supplies to record all ac9uisitions,issues and disposals. Transactions shall be posted proptly fro sourcedocuents, such as delivery receipts, re9uisition and issue vouchers, etc.

89uipent 2edger Card 82C; shall be kept for each class ofe9uipent to record the ac9uisition, description, custody, estiatedlife, depreciation, disposal and other inforation about the e9uipent,based on the source docuents of the transactions. *esults of physical

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inventory shall be reconciled with these ledger cards and the controlaccounts.

?ection III of !- %""' provides that The accounts of an agency shallbe kept in such detail as is necessary to eet the needs of the agencyand at the sae tie be ade9uate to furnish the inforation needed

by scal or control agencies of the governent. The highest standards ofhonesty, obAectivity and consistency shall be observed in the keeping ofaccounts to safeguard against inaccurate or isleading inforation.

In addition, ?tateent of 0inancial ?tandards ?0=?; )o. & states,0acilities which had been idle for an e1tended period or any propertywhich has been abandoned but not physically retired or facilities stillowned but no longer adopted for use in business should not be includedunder !roperty, !lant O 89uipent. ?uch assets should be shown under/ther =ssets at their estiated net realiable values or net carryingvalue whichever is lower.D

In CH ($$&, !!C *egions I7, 7I, 7II, I@, @I, and @II did not conduct physicalinventory taking for the calendar year ($$& thus the accuracy andvalidity of the recorded balances as well as the physical status ande1istence of ites recorded under the !roperty, !lant and 89uipentaccounts can not be ascertained.

In the case of *egion @I, anageent conducted physical inventory inthe !ost /ces within the *egion such as -avao del )orte, -avao/riental, -avao del ?ur, ?arangani, eneral ?antos City, ?outhCotabato and etro -avao. Eowever no physical count was done in !ost/ces in ?urigao del ?ur and the *egional /ce. -uring the count,C/= noted that various ites of no value and ites that should be

reported as waste aterial in CH ($$' were still in the list and reainedunadAusted in CH ($$'. =lso, there was no inventory report subitted byanageent.

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*egion 7I also noted the following:

%. 89uipent ledger cards were not aintained

(. eorandu *eceipt for !roperty *; or !roperty

=cknowledgeent *eceipt is not renewed every three years

#. ?oe properties have no property tag nuber

". ?oe unserviceable e9uipent still appears in the books

In *egion 7II the auditor observed that:

%. Increase in the aount of properties were not posted in the!roperty Card !C; since update last ade in -eceber #%,($$'

(. *eference docuents used as basis in the recording of

data>transactions was the eneral 2edger 2; instead of-elivery *eceipts, re9uisitions and Issue 7oucher

#. Gnit cost of the ites was based on actual cost using the 0irst In0irst /ut 0I0/; aintained and updated ethod instead of there9uired oving average ethod

". ?ubsidiary ledger cards ?2C; were not properly

In *egion I@, the last physical count was ade in the year ($$#. Itwas further noted that 89uipent 2edger Card were notaintained>updated.

*8C/8)-=TI/)?

Ke recoend anageent to:

%. Conduct physical inventory annually to deterine the actuale1istence and condition of the assets.

(. aintain>update e9uipent ledger card

#. Issue !roperty =cknowledgeent *eceipt !=*; and renew everythree years after date of issue.

". Identify every property>e9uipent with tag nuber.

'. Conduct periodic onthly>9uarterly; reconciliation of propertyrecords with the accounting records.

&. *e9uire *egional =ccountants to aintain subsidiary ledgers ?2;for all !!8s and reconcile ?2 balances with the controllingaccounts in the general ledger 2;. The procedure will helpdetect discrepancies and will ensure the preparation of accurateschedule of properties and to reconcile the sae with the!roperty>?tock Cards.

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4. Investigate and clear all discrepancies between physical and bookinventories. If necessary, re9uire written e1planations fropersons liable.

+. -ispose unserviceable properties following the provisions of the

law particularly C/= Circular )o. 5'


32/103

=udit showed the following deciencies of the !!8 account at the !!CCentral /ce:

%. 7erication ade on the inventory report subitted by theotor Transport -ept. T-; disclosed that otor 7ehicle=ccount was understated by !+5,#45,%4&. The aount wasderived based on the

actual suary of otor vehicles per oce>region coparedagainst the recorded aount in the eneral 2edger, to wit:

Telephone in9uiry with the =cting anager of T- disclosed thatone of the possible causes of the discrepancy was failure on the

part of the *egional /cer to infor and update his>herdepartent on the current status and dispositions ade on otorvehicles, adAustents were ade directly in the 2 such ascapitalied cost of repair and aintenance,*egional =ccountants *=s; have no unifor treatent ofrecording.?oe *=s recorded only those ac9uired by the agency withoperationalstatus while other *=s even recorded those vehicles that wereleased fro !hilippine 2easing and 0inancing Corporation.

(. otor 7ehicles which are non


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In *egion I7, records show that no depreciation is provided for0urniture, 0i1tures and 89uipent even during the previousyears. Eence, the net book value of the 1ed assets could not beascertained. =lso, the generally accepted accounting principle onproper atching of cost against revenue is not observed.

*egion I7 also failed to book up ## units otor vehicles received frothe Central /ce worth !%","$5,%+#. 2ikewise the relateddepreciation totaling !%(,&'+,(+5 was not booked up. 0i1ed =ssetsand -ue to Central /ce were also understated.

2ikewise, otor vehicles ac9uired by !!C Central /ce *egion7III for the total cost of !+,"'$,$4' were not shown in the books atit carrying aount because annual depreciation were not recognied.

The estiated accuulated depreciation should be !&,$+&,++%coputed as follows:

In addition, based on the inventory listings per =sian =ppraisal in%55' and the additional vehicles received fro the Central /cefro %55' to ($$&, the cost of otor vehicles in *egion 7IIIshould be !+,"'$,$4'. Copared with the balance per book of!%,5$',4$" as of -eceber #%, ($$&, the balance of the otorvehicles is understated by !&,'"",#4%.

81aination revealed that fro Fanuary to =ugust, ($$&, *egion%$ did not provide depreciation for the accounts /ce Building,/ce 89uipent, 0urniture and 0i1tures and otor 7ehicles.

!!C prepares its nancial reports onthly but depreciation wasnot recognied onthly.

In !!C NC=* the net book value of the Transportation 89uipentaccount was overstated by !#,%$(,&44 due to erroneous aging ofassets and failure to provide depreciation for newly ac9uiredvehicles.

!aragraph 5& of the 0raework for the !reparation and!resentation of 0inancial ?tateents provides that when econoicbenets are e1pected to arise over several accounting periods and

the association with incoe can only be broadly or indirectlydeterined, e1penses are recognied in the incoe stateent on

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the basis of systeatic and rational allocation procedures. Theseallocation procedures are intended to recognie e1penses in theaccounting period in which the econoic benets associated withthese ites are consued or e1pired.

In the analysis of depreciation schedule, it was noted that the

accuulated depreciation for the si1 units of otor vehiclesreceived fro Central oce started only in ($$# when the assetswere transferred to !!C


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89uipent account. In eect, these ites were twicedepreciated.

*8C/8)-=TI/)?

Ke recoend that anageent should:

%. *estate its !!8 =ccounts. *eclassify unserviceable assets to /ther=ssets =ccount subAect for disposal.

2. -ispose all unserviceable assets in accordance with theprovisions of ?ection 45 of !- %""'.

#. !repare a lapsing schedule regularly using the estiated lifeprescribed in C/= Circular )o. ($$#


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1. !!C Central /ce aditted said deciencies and coented thatdue to tie constraint the necessary adAustents cannot be ade.

2. In addition, as per agreed guidelines on Fune %', ($$4, for theinventories account, available physical inventories as of -eceber#%, ($$& shall be considered beginning balances for Fanuary %,($$4. The dierence then fro the book value as of -eceber #%,($$& shall be considered bad accountsD subAect to reconciliationand shall be captioned as ($$& and prior years3 account balances.

3. 0or /ther !!8s 0urniture, 0i1tures, 89uipent, etc; N /n the basisof an established inventory a eorandu *eceipt shall beissued on Fuly %, ($$4 to the eployees>accountable ocers havingcustody of such inventory>ies. Thereafter, a new * shall be issuedat least once a year.

". = lapsing schedule should be prepared.

5. In the absence of cost of any inventory ite, the noinal value of!%.$$ shall be used for purposes of control, only after diligenteort has been ade to nd the cost.

6. /verstateent>understateent of depreciation will be adAustedaccordingly in the books of accounts.

7. The inventory report as of -eceber #%, ($$&shall be subitted on Fuly #$, ($$4.

Unacc$/ne# 3$$r :eic%es inc%/#in6 %$ss $0 en6ine an#pars a3$/nin6 $ '((9+)(1 is si%% rec$r#e# in e b$$"sres/%in6 in e $:ersae3en $0 e M$$r Veic%e acc$/n.

-ue to the failure of !!CN *egion & anageent to deterine thepersons liable and>or responsible for the loss of engine and parts offour "; ?uuki vans, the cost of the lost ites cannot be recovered andtherefore no charges can be led against the.

The result of the preliinary investigation conducted by !!C N *egion &

was referred to the 2egal /ce, !!C N ain for further investigation.Eowever up to now the 2egal /ce of !!C N ain has not released anynal report on the atter.

*8C/8)-=TI/)

The -irector of !!CN*egion & should follow up with the 2egal /ce of!!C N ain as to the results of its nal investigation in order to identifyand>or pinpoint the persons liable and the necessary recovery could beade.

I3pair3en %$ss n$ pr$per%y 3eas/re#

Ipairent is a fall in the arket value of an asset so that itsrecoverable aount is now less than its carrying value in the balance

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=)=88)T C/8)T

anageent averred that they were not aware of the )=? provisionon the deterination of the recoverable aount in order to arrive atipairent loss. anageent assured the =uditor they will adAust

the books upon the report of the technical engineer re9uested toassist the in deterining recoverable aount of the depreciableassets that were ipaired during the onslaught of the threedevastating typhoons.

Te ba%ances $0 Lan#+ b/i%#in6 an# M$$r Veic%es acc$/ns ine b$$"s $0 ''C Hea# Oce an# ''C Re6i$n IV !ere n$rec$nci%e# as $0 Dece3ber )1+ **,.

7erication of accounting records disclosed that the following 1edassets accounts were transferred by Central /ce to *egion I7 per F7#'%4, #'%+, and #'## dated -eceber #%, ($$#, however the

following discrepancies were notedJ

*8C/8)-=TI/)

To reiterate last year3s recoendation, re9uire the accountant toreconcile the above


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accuulated through the years because errors coitted reaineduncorrected.

The International =ccounts -ivision I=-; of the !hilippine !ostalCorporation !!C; is tasked with the keeping and consolidating ofrecords>data pertaining to transactions on International =ccounts

*eceivable and International =ccounts !ayable originating froCentral ail 81change Center C8C;, 0oreign ?urface ail-istribution Center 0?-C; and the various 0oreign !ostal=dinistrations 0!=?; and airline copanies. I=- also onitors theaccounts receivable due to !!C and accounts payable due to each ofthe 0!=s and airline copanies. I=- prepares billing stateent to thevarious 0!=s.

I=- also prepares reports and supplies the =ccounting -ivision on thedetails of =ccounts *eceivable>!ayable International for recording inthe books of account of the !!C.

Based fro the data, inforation and reports fro C8C, 0?-C,airline copanies and the 0!=s, I=- consolidates the data coingfro the originating departents and prepares reports and suppliesthe =ccounting -epartent gures for recording in the books ofaccounts.

/n the other hand, the =ccounting -epartent receives the reportfro I=- as basis for recording the =ccounts *eceivable>!ayableInternational.

?ection '' of the overnent =ccounting and =uditing anual,7olue III states:

?ection ''. !resence of appraisal activity.< *eviews oftransactions and internal control shall be perfored on anon


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a. !eriodic reconciliation of accounts which involvesverifying the accuracy of one set of records against anindependent set of docuents, andP..D

In addition, ?ection &" of the overnent =ccounting and=uditing anual, 7olue I states:

8ach accounting unit with accounts receivable shall keepone or ore subsidiary ledgers showing, for custoers orother types of debtors, the aounts due and received frothe and the balances of their accounts. The subsidiaryledgers shall support the general ledger control account.

The =ccounting -ivision up to now does not aintain subsidiaryledgers of 0!=s and airline copanies for =ccounts *eceivable and=ccounts !ayable International. Instead, all transactions of thevarious 0!=s and airline copanies are lodged in the =ccounts*eceivable and =ccounts !ayable International akingreconciliation of accounts hard and tedious.

The discrepancy is also caused by unidentied credit eosrepresenting dollar reittances fro various 0!=s credited solelyto =ccounts *eceivable as a result of the practice of the G!Gregulation of osettingof accounts payable and accounts receivable.

=rticle *8 %#$', )uber # of the Gniversal !ostal Gnion=greeent provides that 0!=? ay settle postal debts e1pressedin ?pecial -rawing *ights ?-*s; by osetting credits and debits inits relations with another adinistration.

!!C presents bill !!C3s =ccounts *eceivable; to other 0!=s bypreparing a stateent of account due on a 9uarterly basis. /n theother hand, other 0!=s send their stateent of accounts !!C3saccounts !ayable; to !!C. 89uitable !CIBank, the depository bankof !!C directly receivesreittances fro various 0!=s. These aounts are credited to!!C3s account with 89uitable !CIBank thru Credit eos C;.89uitable Bank noties !!C and provides records of C.

Eowever, it has been observed that not all credit eos areprovided with pertinent details of the transactions such asthe reitting 0!=s,

coputation of the aount reitted and what transactions arebeing settled.

!!C records the transactions by debiting Cash in Bank and crediting=ccounts *eceivable. The aount of the =ccounts *eceivablecredited pertains to the net aount collected resulting fro

osetting of the receivable and payable of the sae 0!=s.*8C/8)-=TI/)?

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1. anageent should conduct thorough reconciliation of=ccounting and I=- records of the =ccounts *eceivable and=ccounts !ayable International and ake necessary adAustingentries to reLect the correct aount of the accounts in the books.

2. anageent should prepare subsidiary ledgers for the various 0!=sand airline copanies to facilitate reconciliation of records betweenthe I=-and the =ccounting -ivision. This will correct the e1istingdiscrepanciesand avoid the occurrence of new ones.

3. !eriodic reconciliation should be ade between =ccounting and I=-.2ikewise, conration of balances should also be ade between!!C and the various 0!=? and airline copanies in order to arrive atthe correct balance of the =ccounts *eceivable>!ayableInternational.

=)=88)T C/8)T?

1. 8ective CH ($$4, accounting ipleented the onthly valuationof outstanding =ccounts !ayable and =ccounts *eceivable basedon 8/ B?! reference rate to ensure proper presentation of thebalances in the 0inancial ?tateents.

2. *econciliation of the prior year3s balances is ongoing incoordination w> I=C ?ubsidiary ledger updates.

O:er#/e Acc$/ns $0 'i%p$s USA

7erication of records shows that as of -eceber #%, ($$& !hilpost G?=has atotal of !((',5+#,+$& or G? Q",&$(,'(( past due accounts with the!hilippine !ostal Corporation !!C;

=nalysis of =ccounts *eceivable International showed that the pastdue accounts of !hilpost G?= increased by %$.&46, reaching toQ",&$(,'(( thisyear copared to the G?Q",%'+,$ past due of CH ($$'.

*ecords showed that bulk of the past due aount are transactions of

previous years ranging fro year ($$$ to ($$'.

/n =pri l (#, ($$#, the !hilippine !ostal Corporation, the licensor and!hilpost G?=, the licensee, e1ecuted a contract for the ac9uisition of!hilpost G?= fro !!C the e1clusive right to establish ?ites, and use!hilippine postage indicia, anifests, ailbags and support inforation inconnection with the operation

of its business of providing international re ail services within theGnited?tates of =erica.

=ong the iportant provisions of the contract are the following:

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" a. =ll re ail and ancillary service revenues received frocustoers of the 2IC8)?88 will be paid directly to the 2IC8)?88 or itsaliates. !ayent for all !ostages will be paid by the 2IC8)?88 tothe 2IC8)?/* on ters of net /ne Eundred 0ifty %'$; days fro thedate of invoice. =ll such payents shall be in Gnited ?tates dollars in

the for of either a bank certied or cashiers check ade payable tothe order of the 2IC8)?/* and ailed to Central !ost /ce, 2iwasangBonifacio, %$$$ anila, or by wire transfer in iediately availablefunds to licensor3s account in accordance with account inforation tobe provided by 2IC8)?/* to 2IC8)?88J

d. 2IC8)?88 shall pay postage and undertakes to further pay2IC8)?/*, within si1ty &$; days fro date of invoice, the aountof TwentyG?Q$.($; cents per pound over and above the fees and>orconsideration indicated in the iediately preceding paragraph for

all ails of 2IC8)?88 transiting anila and processed thru theCentral ail 81change Center C8C; for worldwide destinations.111111D

2IC8)?88 further agrees and undertakes to pay for any and allpenaltiesand fees, including internal conveyance charges that ay beiposed by 0oreign !ostal =dinistrations in accordance withGniversal !ostal Gnion regulations on all ail of 2IC8)?88 transitinganila and processed thru C8C for worldwide destinations.2IC8)?88 likewise undertakes to pay for the additional airline ratecharges in accordance with the ?chedule of =irline *ates attached

hereto as =nne1 =D and ade an integral part hereof for all its ailfro point of origin to anila to worldwide destinations thru C8Cwithin forty ve "'; days fro date of invoice. 11111111D

)uber %% of the contract also enuerates the following as anevent of default:

a. !ayents. 2IC8)?88 shall fail to pay within #$; days fro duedate any aount payable to hereunderJ or

b. 0alse *ecords. 2IC8)?88 aintains false records, or subits anyaterially false reports or inforation to 2IC8)?/*J or

c. /ther Covenants. 2IC8)?/* or 2IC8)?88 shall fail to perfor orobserve any of the ters and conditions set forth in this=greeentand such failure shall reain unreedied for forty Nve "';daysfro date of receipt of written notice fro the innocent partyspecifying such failure.

!hilpost G?= pays only G?Q%$,$$$ as annual fee as specied in)uber (.b of the =greeent and yet its past due accounts totalsto G?Q",&$(,'(( or !((',5+#,+$& which is "&$ ties its annual fee.

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*ecord of last payent ade by !hilpost was in Fuly, ($$& which isalost one year as of this writing.

Ead the aount of !((',5+#,+$& been deposited in the bank orinvested either in tie deposits or in governent securities, it

could have earnedfor !!C illions of pesos as interest incoe. 0or a conservative rateof &6 interest incoe per annu in tie deposits, the aountcould have earned !%$,+"4,((( net of ($6 withholding ta1.

*8C/8)-=TI/)

This issue was aong the audit ndings in last year3s audit report. Kereiterate that anageent e1erts e1tra eort to collect fro !hilpostG?= the aountdue to !!C in the aount of !((',5+#,+$' using the provisions of the=greeent to assert its right. If necessary, anageent shall take

legal actionto enforce collection considering the huge aount involved.

anageent Coent

The =! for 0inance will be conducting a study based on historicaldata to establish proper valuation of the Corporation3s Trade *eceivableby providingfor Bad -ebts allowance periodically.

D/e Fr$3 Ocers an# E3p%$yees an# Recei:ab%es >Disa%%$!ances acc$/ns

The e1istence, validity and accuracy of the balances of the accounts-ue fro /cers and 8ployees which includes cash advancesgranted to ocers and eployees and shortages of accountableocers and clais fro disallowances>charges aounting to!4$,$%%,'$' and !+%,5((,(+4respectively, are not reliable.

%. The possibility of collecting the accounts in the following seven

4; regional oces aounting to !"(,&(+,"$% is reote, as

follows:

*egion =ount)C* %,+(%,&%

"C/ (,$(+,5$

4*egion I 5,5$#,

+*egion7II

5',+""

*egionI@

",$+(,('"

*egion

@I

%+,"'4,#

+4*egion &,(#+,4'

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@II +Total "(,&(+,"

$(

The balances of the accounts consist of shortages of accountableocers which reained dorant>unsettled due to pending and>orarchived cases. Chances of recovery of these aounts are reoteconsidering that the accountable ocers are no longer connectedwith !!C coupled with the unreasonable long period of tie theseshortages reained unsettled.

anageent e1plained that the atter was already reported to!!C Eead /ce classied under the Bad accountsD and awaitingfurtherinstruction as to the proper treatent in the books. The =cting

Chief2egal ?ection of the regional oce suggested that the saidaount be written o fro the records, otherwise, these willbecoe dorantforever or wait until the law enforcers will be able to nd thesepersons.

The write o of these accounts represents a big loss to thegovernent which could have been avoided. The Corporationshould e1haust all available reedies including legal eans tosettle the accounts.

(. The -ue to /cers and 8ployees accounts in three #; regionaloces is understated by !($,+$',$5( as follows:

*egion =ount)C* %+,"'4,#+4*egion I !%,##4,""(*egion @ %,$%$,(&"

Total ($,+$',$5(

In *egion I !%,##4,""( or %.5% percent of the total balance of theaccount of !4$,$%%,'$' representing shortages of accountableocers which were previously recorded under the Contingent

=sset account N ?hortages were closed to -ue to Central /ceaccount instead of the-ue fro /cers and 8ployees account.

?iilarly, verication of the account in *egion @ revealed that theunderstateent of !%,$%$,(&" representing %+.#4 percent of thebalance of the account aounting to !',"5+,5+( were shortagesof accountable ocers which were not taken up in the books ofaccounts.

The =cting Chief =ccountant coented that the shortages werenot taken up in the books since they have no basis for recording

the sae in view of lack of notice or any counication report

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fro the 2egal?ection.

=t )C*, the shortages of accountable ocers were inadvertentlyrecorded in the books of accounts as -ue fro -isallowances>Charges thereby resulting to understateent of the account -ue

fro /cers and 8ployees account by !"&%,%#+.

The accountant infored C/= that proper adAustents will beeected in the succeeding year.

#. =t )C*, the balance of the account in the general ledger doesnot reconcile with the schedule aounting to ! !"&%,%#+, asshown below:

Balance !er 2 %+,"'4,#+4Balance !er ?chedule %4,55&,("5-ierence "&%,%#+

The failure of the concerned eployee to prepare the onthlyreconciliation stateents and eect necessary adAustentsthereof, had caused the balance of the account unreliable.

*8C/8)-=TI/)?

1. 81ert e1tra eort to onitor and ensure the settleent of theoutstanding dorant accounts to protect the interest of theCorporation. Close coordination between the nancial divisionand 2egal -epartent would e1pedite the resolution of unsettledaccounts and>or those with pending cases.

2. ?trictly and closely supervise !ostasters>=ccountable /cers intheir accountabilities and enforce e1isting rules and regulationsgoverning the proper handling of cash.

ALLOJANCE FOR DOUBTFUL ACCOUNTS

The )ew overnent =ccounting ?yste )=?; anual provides forthe following:

Trade receivables shall be valued at their face aount inus, wheneverappropriate, allowance for doubtful accounts. Bad debts e1pense and>orany anticipated adAustents which in the noral course of events willreduce the aount of receivables fro the debtors to estiatedrealiable values shall beset up at the end of the accounting period. *eceivables frogovernentagencies and personnel shall not be subAect to Bad -ebts.D

The allowance for doubtful accounts shall be provided in an aountbased onthe collectibility of receivable balances and evaluation of such factors asagingof the accounts, collection e1periences of the agency, loss e1periences,

and identied doubtful accountsD.

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=de9uacy of allowance for doubtful accounts cannot be ascertained dueto lack of approved written policy N !++,$&',%4%.

The validity and reasonableness of the allowance for doubtful accountsin the aount of !++,$&',%4% cannot be ascertained due to lack ofapproved written policy of the corporation.

=nalysis of the account disclosed that allowance for doubtful accountsin the total aount !++,$&',%4% was recognied by the !!C Central/ce, )C*, *egion 7, and *egion 7lll. -etails follow:

0urther verication disclosed the following observations:

Hea# Oce

0or the calendar years ($$" to ($$&, no =llowance was set


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8. INVENTORIES

S'ARE 'ARTS AND OFFICE SU''LIES INVENTOR

Spare 'ars In:en$ry in e Hea# Oce an# in Re6i$n Va3$/nin6 $ '1+1?+9*9 an# '9*+,,, respeci:e%y !ere n$s/pp$re# by in:en$ry rep$r.

Inventories in the books cannot be relied upon because of theabsence of inventory reports specically ?pare parts inventoryaounting to !%,%(5,+$+ in the Eead /ce and (+$,&&& in *egion 7.

*8C/8)-=TI/)

*e9uire the subission of inventory reports to validate the balancesrecorded in the books.

Un#ersae# Oce S/pp%ies In:en$ry in CAR by ')??+9)94ne5.

The )ew overnent =ccounting ?yste states that !urchases ofsupplies and aterials for stock, regardless of whether or not theyare consued within the accounting period, shall be recorded underthe appropriate inventory accounts following the perpetual inventoryethod.

It was noted that the =ccountant recorded as outright e1pensessupplies and aterials procured on account and carried in stock. Theinventory account was credited when the ?upply /ce subits the

onthly report of supplies issued notwithstanding the non


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the physical e1istence and condition of supplies inventory couldneither be established nor accuracy of accounting recordsascertained.

In partial copliance with the prior year3s recoendations, thecorporation aintained ?upplies 2edger Cards for oce suppliesinventory account. Eowever, review of the entries posted in these cardsdisclosed the following:

a. *eference docuent used as basis in the recording ofdata>transactions was the eneral 2edger 2; instead of -elivery*eceipts -*; and>or *e9uisition and Issue 7ouchers, aong othersJ

b. Gnit cost of the ites was based on actual cost using the 0irst In 0irst/ut 0I0/; ethod instead of the re9uired oving average ethodJ

c. ?ubsidiary 2edger Cards ?2C; were not properly aintained andupdated.

*8C/8)-=TI/)?

1. Conduct periodic physical inventory of all suppliesinventories to ascertain their e1istence, whereabouts and actualconditionJ

2. -irect the !roperty Custodian to aintain subsidiaryledgers or ledger cards for all supplies>aterials to support theaccuracy of the balance of the controlling accounts in the general

ledgerJ

%. *e9uire the ?upplies /cer to update ?tock Card for each iteunder his custodyJ

(. *e9uire the =cting Chief =ccountant to properly aintain subsidiaryledgers ?2; for all supplies inventory accounts and to reconcile the?2 balances with the controlling accounts in the general ledgerJ

#. 0ollow strictly the guidelines prescribed in the )=? anual toensureproper accounting and reporting nancial transactions.

Ba%ances $0 e 0$%%$!in6 in:en$ry acc$/ns per b$$"s an# per3$n%y acc$/nabi%iy rep$rs $0 re6i$na% c/s$#ians as $0Dece3ber)1+ **, s$! a $a% #iscrepancy $0 ',-+*88+(*(.

ItesBalance

!er Books

Balance !eronthly*eport

-ierence?hort /ver;

*egion % !hilatelic Ites %,(5#,+#& '5#,$&5 4$$,4&4; !hilpost !roducts "+,#"% "(,"+$ ',+&%; ued Tapes ',''$ ',''$ unit cost is not indicated in the docuents

of transfer of supplies>accountable fors fro head oce, thepersonnel concerned should iediately in9uire fro head ocethe 9uantity>unitcost of the inventories received for proper recording of the inventoryaccounts.

'. *egional accountant should ake the necessary accounting entries torecord the transfer of accountable fors fro cluster head custodiantothe post oces down to the custoers for proper presentation of theCost of ?ales and Inventory accounts and in copliance with !=? )o.(

which re9uires that when inventories are sold, the carrying aount ofthose inventories shall be recognied as an e1pense in the period in

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whichthe related revenue is recognied.

&. ?trictly adhere to review process by Cluster Eead Bookkeeper andaccountant to avoid errors in recording.

4. *e9uire the Cluster Custodians to iediately subit the lackinginventory reports and thereafter prepare and subit the sae on orbefore the %$thday of the onth to the =ccounting ?ection. Clustered!ostasters should also be re9uired to subit to the concernedCE!their respective ?tock =ccount *eports onthly.

78


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=)=88)T C/8)T?

1. =t *egion I, the accountant coented that /?? is aintainingInventory ?tock Card and subitting onthly *eport of=ccountability. =ll transactions aecting erchandiseinventory>accountable fors including the 9uantity and costproduction cost and face value; are indicated in the onthly reportand the basis of entries ade by the =ccounting ?ection. Eowever,there were instances in prior years when issuances of stapsfro Central /ce had no production cost thus, entries in the bookswere based on the production cost of siilar ites or on theaverage production cost of staps. This condition, according to the=ccountant e1plains the discrepancy between the accounting and/?? records. Ee assured that the =ccounting ?ection willaintain inventory ledger cards which will show aong others,the over


63/103

9. ACCOUNTS 'AABLE

Inc$3p%ee an# Unrec$nci%e# S/bsi#iary Le#6ers

?ubsidiary ledgers on liabilities are incoplete and unreconciled withthe control accounts, thus rendering e1istence of liabilities and theirbalances at balance sheet date doubtful.

The )ew overnent =ccounting ?yste re9uires that subsidiaryledgers shall be aintained for each control account in the eneral2edger. =t the end of each onth, the totals of the subsidiary ledgerbalances shall be reconciled with the corresponding controllingaccountsD.

7erication of entries in the subsidiary ledger cards on payables

disclosed that the entries are incoplete. 2ikewise, there is adetailed working paper on the onitoring of retention and payentson Inter =gency !ayables and other liabilities, however, these werenot posted in the subsidiary ledger especially for other liabilities.=lso, these are not updated at the close of the calendar year.

Based on saples of recorded transactions tested, it appears thatwhile these transactions were regularly entered during the year, therewere no beginning balances forwarded and not all transactions at theclose of the calendar year were posted. =s a result, balances at theend of each onth cannot be established. Conse9uently, endingbalances of control accounts at the end of the year cannot be

ascertained.

It was gathered that there were no beginning balances forwardedbecause there were no ?2s aintained in prior years, thus aking itdicult to deterine how uch balance for each creditor reainsoutstanding and payable. =ttepts ade to work back on prior yearsproved dicult as well considering that there were no breakdown ordetails of payables attached to support previous entries ade torecognie liabilities. It was only in ($$# that details were attached.=lso, ?2s were only aintained in ($$' where liabilities incurred andsettled during the period were recorded.

*8C/8)-=TI/)

The =ccounting ?ection should reconcile subsidiary ledgers onliabilities with their control account and ensure that only the e1istingunpaid obligations are reLected in the books.

In C$r#i%%era A#3inisrai:e Re6i$n Acc$/ns 'ayab%e >$:ersae# by '-8,+819

The =ccounts !ayable was overstated by !'4&,4%+ due to iproperrecognition of liabilities and erroneous accounting entries, details are:

!articulars Gnderstateent /verstateent )et Gnder>over;stateentGnreleased check not (,5+'

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64/103

reverted to cash8rroneous recordingof checkdisburseent

'%(,"""

Gnrecorded checkdisburseent

(+,&4+

Cancelledobligation slips +%,5%&

-eliveredcoputer partsnot recognied aspayables

#4,5$5

GnadAustedrevisions of obligated aount

',(+%

8rroneousclassication

&,%%"

Total "5,#$" &(&,$(( '4&,4%+;

The fraework for the preparation and presentation of nancialstateents, particularly paragraph 5%, I=? % revised ($$$; statesthat = liability is recognied in the balance sheet when it is probablethat an outLow of resources ebodying econoic benets will resultfro the settleent of a present obligation and the aount at whichthe settleent will take place can be easured reliably.D

The )ew overnent =ccounting ?yste likewise states = liabilityshall be set up as =ccounts !ayable or the appropriate liabilityaccount only upon receipt of goods and>or rendition of the services.Gnder the atching principle, the payable accounts for all e1penses

shall be recognied at the end of the period when e1penses arealready incurred although not yet paid.D

It was noted that the causes of under>overstateent of the accountare:

%. !ayables are based on obligation slips and control book of thebudget ocer and not on the inspection and acceptance reports.

(. =ccounts payable is charged when there is no liability initially setup to recognie obligationsJ

#. 8rroneous classication of accountsJ

". -ouble recognition of e1penses by recording e1penditures thathave been previously accrued as liability

'. =ount e1pended is either ore or less than the aount ofaccounts payable set upJ

&. Check disburseents were not included in the Aournal due todelay or non


65/103

82


66/103

*8C/8)-=TI$)?

%. *eports and docuents should be reviewed to ensure accuracyof data being recorded.

(. 2iability should be recognied only upon receipt of goods and>or

services and stop the practice of setting liabilities based onobligation slips.

Re6i$n IV+ Acc$/ns 'ayab%e&Un%i/i#ae# Ob%i6ai$ns $a%in6'-,+8,-+1 is /nre%iab%e.

The =ccounts payable


67/103

The absence of subsidiary ledgers or inade9uate aintenance of itrenders the above liability accounts unveriable thus its validity andaccuracy could not be ascertained.

*8C/8)-=TI/)?

%. *egional -irectors should strictly re9uire the *egional=ccountants to aintain subsidiary ledgers for easy onitoringand accounting purposes.

(. Conduct periodic reconciliation of the balances of the subsidiaryledgers with their respective control account.

DUE TO OFFICERS EM'LOEES

Re6i$n I > L$n6 $/san#in6 acc$/ns+ '*)+*?

The year


68/103

CAR & D/e $ Ocers an# E3p%$yees /n#ersae# by&'1+*)8+?,8

The understateent of -ue to /cers and 8ployees accountconsists of:

!articularsGnder

stateent/ver

stateent

)et Gnder>

/ver;stateent

isclassication of liabilities forsalaries

54+,'(#

8rroneous recording of checkdisburseent

(,#$&

Iproper recognition of payables #",$""Gnder posting of payents in theC-F

&5,5"%

Totals %,%#&,5'( 5+,5+' %,$#4,5&4

The causes of over>understateents of the account are:

%. ?et up of liabilities for salaries of Benguet Cluster in Fuly and

-eceber, ($$& were erroneously credited to /ther !ayablesinstead of -ue to /cers and 8ployees.

(. /ver recording of li9uidation of BCC!/ personnel3s year


69/103


70/103

staps.

(. Gse of %$6 7=T rate instead of %(6 incoputingthe output ta1 for the period 0ebruary N /ctober,($$&

5$(,$''

#. 8rrors in recording various ($$& checkdisburseents. %#(,&5%

",++#,'+#

)et /verstateent '44,&$$

*8C/8)-=TI/)?

The *egional =ccountant should:%. *eview reports and docuents to ensure accuracy of data being

recorded.

(. *ecognie liability only upon receipt of goods and>or servicesand stop the practice of setting up liabilities based on obligationslips.

#. anageent ay consider redistribution of accountingwork>tasks to provide ade9uate review over outputs ofsubordinates.

". anageent ay augent personnel or to iediately ll upthe vacant positions of Chief


71/103

*8C/8)-=TI/)

It is recoended that the Chief =ccountant should prepare9uarterly schedule to facilitate reconciliation of the account.

OTHER 'AABLES

Re6i$n I+ $:ersae3en $0 Oer 'ayab%es&DMOF #/e $/nrec$r#e# c%eare# M$ney Or#ers 0$r e 3$n $0 Marc**, & '(+888+,?8. N$n&a:ai%abi%iy $0 e %is $0 c%eare#M$ney Or#ers 0r$3 Cenra% Oce 0r$3 /ne **, $Dece3ber **,.

!rior to the ipleentation of )=? in ay ($$', all issuances ofoney /rders by the dierent !ostasters are being credited to Trust2iabilities < -/0 account +


72/103

of !#,++4,+(5.54 corresponding to =pril ($$& and ay ($$&;. Thecleared oney /rders of !",444,&5&.5# pertaining to the onth ofarch ($$& was forwarded late by Central /ce hence not taken upas of -eceber #%, ($$&. This resulted in the overstateent of the-ue to Central /ce account by the sae aount. oreover, thereis no basis to record cleared oney /rders for the onth of Fune to-eceber ($$& because according to anageent, the list ofcleared oney /rders was not yet received fro !!C Central /ce.

*8C/8)-=TI/)

Ke recoend that the =ccountant should record the cleared oney/rders of !",444,&5&.5# to correct the overstateent of the /ther!ayables


73/103


74/103

aecting the fairness>accuracy and reliability of the recorded yearend balances.

*8C/8)-=TI/)?

1. Investigate analye all abnoral balances under the /ther

!ayable account in order that proper and appropriateadAustents thereof can be aected.

(. *econcile reittances for inter and intra agency payables of theconcerned agencies and oces.

=)=88)T C/8)T?

The subsidies received fro the )ational governent were properlytaken up in the Books as follows:

%. The ta1 ?ubsidy of %.#B was presented separately in The0>? for the purpose of presenting the Corporation3s actual resultsof operations fro regular business transactions.

(. The (( ?ubsidy was actually the reiburseent for /fees deposited w> the )at3l Treasury of the then Bureau of !ostswhere encashent of which was paid by the now !hil. !ostalCorporation. *e9uest will be sent to -B to reclassify at theirend the nature of the subsidy.

?. CA'ITAL ACCOUNTS

A##ii$na% nai$na% 6$:ern3en e/iy $0 '+8-?+9(? !aserr$ne$/s%y a"en /p as s/bsi#y inc$3e !i%e e a= s/bsi#y$0 '1+)))+8?-+99) !as n$ pr$per%y presene# in eSae3en $0 Inc$3e an# E=penses.

In the letter dated Fune %, ($$& fro the -epartent of Budget andanageent, ?ecretary *olando . =ndaya infored !!C !ostastereneral the issuance of )C= )o. ('((&5


75/103

Cash Collecting /cer %$(; ((,4'5,+"5.$$overnent 89uity ((,4'5,+"5.

$$

anageent considered the )C= as subsidy incoe and waspresented as such in the ?tateent of Incoe and 81penses instead

of an addition to the ($$' balance of governent e9uity thusunderstating the sae by !((,4'5,+"5.

?ince the purpose of the nancial stateents is to provideinforation concerning past operations and present condition of theagency as well as to report the results of its operations, it is iportantthat accounts are correctly presented.

*8C/8)-=TI/)?

%. *e9uire the accounting personnel to ake the followingadAusting entry:

?ubsidy fro other ) =gencies&'(;

((,4'5,+"5

overnent 89uity '$%; ((,4'5,+"5

Decrease $0 Capia% S$c" Acc$/n by '(+--9+(1,.

In the process of consolidating !!C3s 0inancial ?tateents as of-eceber #%, ($$& we noted that the account Capital ?tock

decreased by !",''+,"%&. !er schedule subitted to us by the=ccounting ?ection, the said account is coposed of the following:

($$& ($$'Increase

-ecrease;

!ostal *egion + ($$,$$$ < ($$,$$$

!ostal *egion %%4,+(",("

&4,+(",("

&

Documents

04-PPC06 Comments and Observations