internal control -extent of compliance

7/27/2019 internal control -extent of compliance

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Undergraduate Thesis Presented by:

Mary Rose Antonis

Joanne Karla C. Consuelo

Maria Salome Garcia



• Topic Background

• Statement of the problem

•

Presentation of data gathered withincorporated findings and implications

• Conclusion

•Recommendation



Internal control is at the core of stategovernment fulfilling its mission andachieving its goals while providingsafeguards to protect governmentalresources.

It is not sufficient for an internalcontrol to exist in a government agency; it

should be also complying with all laws, policies and procedures promulgated by thegoverning body in-charge which is theCommission on Audit (COA).



In line with this issue of internal

control practices, the researchers aim to

evaluate and assess the extent of compliance

of Bicol University – Daraga Campus

internal control system over cash receipts

and cash disbursements to the New

Government Accounting System (NGAS).



1. What is the extent of compliance of BicolUniversity Daraga Campus’ internal control

practices to the requirements of National

Government Accounting System (NGAS) as

mandated by the Commission on Audit (COA)over cash receipts and cash disbursements?

2. What are the problems encountered by theorganization along internal control in terms of

cash receipts and cash disbursements?



3. What are the courses of actionsconducted by the management to resolvethe problems encountered along internal

control in terms of cash receipts andcash disbursements?

4. What recommendations can be offeredfor further improvement of the internalcontrol for cash receipts and cashdisbursements?



1. As to the extent of compliance

SEC 22 The collecting officer accomplishes the Report of Collections and Deposits (RCD) in

accordance with the instructions provided in Volume II of the NGAS Manual for theRCD but it is prepared weekly. Instead, a Daily Collection Report (DCR) is prepareddaily that will be the basis of the RCD preparation.

SEC 23 The three copies required by Section 23 of NGAS Manual for deposit slip (DS) are

followed, but there are additional copies produced and all are attached to Report of Collections and Deposits (RCD). These additional copies are the following: two copiesfor Commission on Audit (COA), a copy for Financial Management Office (FMO), and acopy for Accounting Unit.

The RCD is prepared in five copies, not only the two copies obligated by Section 23 of

NGAS Manual. The three (3) supplementary copies are, two original copies for COA,and a copy for FMO.

The Journal Entry Voucher (JEV) is prepared in three copies instead of the two copiesrequired by Section 3 of NGAS Manual. These copies are the following: a copy for COA,a copy for accounting unit file, and a copy for control accounting.



SEC 33

– The cashier prepares the Report of Checks Issued weekly instead of daily as required by Section 33. This shows that preparation of JEV for recording Check Disbursements Journal is also weekly since RCI is the

basis for preparing JEV.

SEC 34

– Check is prepared in two copies instead of three prescribed by Section34. An original copy prepared for the payee and a duplicate copy for RCI.

SEC 40

– Procedures for disbursements through petty cash fund of BicolUniversity Daraga Campus conform to Section 40. But the petty cash iskept only in a steel cabinet instead of a safety vault. This implies thatcash are subjected to high risk of loss due to low level of security.



f Rank

Cash receipts recorded but not received or deposited 4 1.5

Cash receipts stolen or lost before recording 3 4.0

Cash receipts recorded in wrong period 3 4.0

Cash discounts not properly taken 2 6.5

Cash receipts recorded at incorrect amount 4 1.5

Cash receipts recorded in wrong financial statement account 2 6.5

Cash receipts not properly posted to general ledger accounts 3 4.0

TABLE 2

Problems Encountered along Internal Control in terms of Cash Receipts



IMPLICATION OF FINDINGS

Cash receipts not deposited

it could be either caused by:

o huge amount of workloado undetermined proper accountability of cash

receipts as banking hours end

but if these instances are not the reason behind

such problem’s occurrence but instead due to the

location of the bank, then it would be a drawback

for the organization’s control for cash.




Cash receipts recorded but not yet

received

oDue to observance of the accrual basis

wherein transactions are recorded whether or

not there has been actual receipt of cash and

the organization has not reconcile thosetransactions configuring to the cash basis that

summarizes affected transactions as cash were

received.



TABLE 3

Problems Encountered along Internal Control in terms of Cash Disbursements

f Rank

Cash disbursement recorded but not made. 2 5.5

Cash disbursement made but not recorded. 3 1.5

Cash disbursement not authorized 2 5.5

Cash disbursement recorded at incorrect amount 3 1.5

Cash disbursement posted to the wrong vendor account 2 5.5

Cash disbursement recorded in wrong period 2 5.5

Original invoices totaling the amount of disbursement not properly

vouched2 5.5

No original receipt/vouchers that reflect the signature of payee to

support all disbursement from petty cash amounts.2 5.5




Implies that the main problem that the organization is

facing pertains to possible cause of all kinds of errors and

fraudulent activities.

Also implies the existence of discrepancies on cash

accountabilities.

It shows that the organization still has difficulty inhandling cash transactions.



PROBLEMS ENCOUNTERED COURSES OF ACTION

Cash receipts recorded but not

received or deposited

Collections for the day should be deposited on the

following day.

Surprise cash counts or examination are done.

The cashier is penalized or suspended.

Cash receipts stolen or lost before

recording

There are always corresponding Official Receipts forevery cash receipts that could be used to record such

transactions

There should be physical safeguards (e.g. vault/safe) to

ensure that lost will not occur repetitively.

Cashier is required to file a relief from cash

accountability within 30 days.

Cash receipts recorded in wrong

period

Collection reports are made every day should be

checked together with the Official Receipts’ date to

verify if such transaction is recorded properly in the

correct period

Proper cut-off should be observed.

An adjusting entry should be made.

TABLE 4

Courses of Action for Each Problem Encountered along Internal Control in terms of Cash

Receipts




Cash discount not properly taken. The superior should review the record.

Cash receipts recorded at incorrect

amount

Make necessary corrections.

A check and balance should be done before theend of the day.

The superior should review the record.


Cash receipts recorded in wrong

financial statement account. The superior should review the record.

Cash receipts not properly posted

to general ledger accounts



TABLE 4 Courses of Action for Each Problem Encountered along Internal Control in terms of

Cash Receipts (Cont’d)




Cash disbursement recorded but

not made.


There should be a review of approval.

Cash disbursement made but not

recorded.


Accounting for completeness should be observed

(i.e. check series).

JEV should be prepared in the following month.

Cash disbursement not

authorized

There should be a review of the approval.

Due to lack of authorization it should be

refunded.

Cash disbursement recorded at

incorrect amount

There should be either refund or reimbursement.


Cash disbursement posted to the

wrong vendor account

It is subject for adjustment.


TABLE 5

Courses of Action for each Problem encountered along InternalControl in terms of Cash Disbursements




Cash disbursement recorded in

wrong period

The superior should review the

record.


Original invoices totaling the amount

of disbursement not properly

vouched

Make necessary corrections and

adjustments.

The superior should review the

record.

No original receipt/vouchers thatreflect the signature of payee to

support all disbursement from petty

cash amounts.

Return voucher for claims with no ORsand ask claimant to provide/comply

with what is required.

A pre-audit should be conducted.

TABLE 5

Courses of Action for each Problem encountered along Internal Control in terms of Cash Disbursements



RECOMMENDATIONS TO ENHANCE FURTHER THE

INTERNAL CONTROL PRACTICES Cashier

Cash Receipts

o Permanent connection of the E-registration

o During offline transactions, payment for tuition fee must not be required by the accounting office as attachment to theReport of Collection and Deposits of the cashier in order tocheck that the collections reflected in the RCD actuallyinputted in the system.

o Always prepare the Cash Receipts Records along with RCD.

o Triplicate ORs must be filed monthly for future reference.



RECOMMENDATIONS TO ENHANCE FURTHER

THE INTERNAL CONTROL PRACTICES Cashier

Cash Disburements

o close monitoring of the cash advances of the

Accountable Officers

o Preparing cash Disbursements Record along with theReport of Disbursements



RECOMMENDATIONS TO ENHANCE

FURTHER THE INTERNAL CONTROL

PRACTICES COA Auditor

o Strict compliance with the COA rules andregulations

BU Chief Accountant

o there would be no possible recommendation thatcould be provided due to the fact that the internalcontrol structure of government agencies are very

strong considering that the incompatible functions(custody of funds, recording and approving) doesnot fall within a single office or individual.



RANK AND

PERCENTAGE DESCRIPTOR

Negligible No compliance anywhere in the organisation with any of the requirements set by the

standard.

Minimal A low degree of organisation-wide compliance with the requirements set by the standard.

Demonstrable evidence that a start has been made towards compliance in some or all parts

of the organisation.

Low percentage of compliance by professional people as part of the self-assessment

process.

Moderate A moderate degree of organisation-wide compliance with the requirements set by the

standard.

Demonstrable evidence that work is ongoing across most parts of the organisation to

achieve compliance, although some directorates or departments may be in the very early

stages of compliance.

Medium percentage of compliance by professional people as part of the self-assessment

process.

SubstantiveSubstantive organisation-wide compliance with all requirements set by the standard.Demonstrable evidence that most parts of the organisation are meeting most of the

requirements set by the standard.

Only minor non-compliance issues requiring, in the main, minor action(s).

High percentage of compliance by professional people as part of the self-assessment

process.

Full Full compliance across the whole organisation with all requirements set by the standard bythe standard.



1. As to the extent of compliance

o There is substantial compliance to all of the mandates of COA and

NGAS.

2. Problems encountered by the organization along

internal control in terms of cash receipts and cash

disbursements

CASH RECEIPTS o Cash receipts recorded but not received or deposited

o Cash receipts stolen or lost before recording

o Cash receipts recorded in wrong period

o Cash discounts not properly taken

o Cash receipts recorded at incorrect amount

o Cash receipts recorded in wrong financial statement account

o Cash receipts not properly posted to general ledger accounts



CASH DISBURSEMENTS

o Cash disbursement recorded but not made.

o Cash disbursement made but not recorded.

o Cash disbursement not authorized

o Cash disbursement recorded at incorrect amount

o Cash disbursement posted to the wrong vendor accounto Cash disbursement recorded in wrong period

o Original invoices totaling the amount of disbursement not properly

vouched

o No original receipt/vouchers that reflect the signature of payee to

support all disbursement from petty cash amounts



3. Courses of actions conducted by the management to resolve the problems encountered

CASH RECEIPTS

o Collections for the day should be deposited on the followingday.

o Surprise cash counts or examination are done.

o The cashier is penalized or suspended.o There are always corresponding Official Receipts for every

cash receipts that could be used to record such transactionso There should be physical safeguards (e.g. vault/safe) to ensure

that lost will not occur repetitively.

o

Cashier is required to file a relief from cash accountabilitywithin 30 days.o Collection reports are made every day should be checked

together with the Official Receipts’ date to verify if suchtransaction is recorded properly in the correct period



o Proper cut-off should be observed.o An adjusting entry should be made.o The superior should review the record.o Make necessary corrections.o A check and balance should be done before the end of

the day.o The superior should review the record.o An adjusting entry should be made.o The superior should review the record.o The superior should review the record.o An adjusting entry should be made.



CASH DISBURSEMENTS

o

An adjusting entry should be made.o There should be a review of approval.

o An adjusting entry should be made.

o Accounting for completeness should be observed (i.e. check

series).o JEV should be prepared in the following month.

o There should be a review of the approval.

o Due to lack of authorization it should be refunded.

o There should be either refund or reimbursement.

o The superior should review the record.



o It is subject for adjustment.



o An adjusting entry should be made.

o Make necessary corrections and adjustments.


o Return voucher for claims with no ORs and ask claimant to provide/comply with what is required.

o A pre-audit should be conducted.



4. Recommendations can be offered for further improvement of the internal control practices for cash receipts and cash disbursements

Cash Receipts

o Permanent connection of the E-registration

o During offline transactions, payment for tuition fee must not berequired by the accounting office as attachment to the Report of Collection and Deposits of the cashier in order to check that the

collections reflected in the RCD actually inputted in the system.o Always prepare the Cash Receipts Records along with RCD.

o Triplicate ORs must be filed monthly for future reference.

Cash Disburementso close monitoring of the cash advances of the Accountable

Officers and preparing cash Disbursements Record along withthe Report of Disbursements



4. Recommendations can be offered for further improvement of the internal control practices for cash receipts and cash

disbursements

o Strict compliance with the COA rules and regulations

o there would be no possible recommendation that could be provided due to the fact that the internal controlstructure of government agencies are very strongconsidering that the incompatible functions (custody of funds, recording and approving) does not fall within asingle office or individual.



I n light of the study’s findings and conclusions, the researcher

offers the following recommendations: o Identify the functions that are incompatible with

what the NGAS requires and provide specific

performance regarding this.

o Conduct a continuous education and training to the personnel for competent human resource.

oMake an analysis on its existing internal control

practices to improve any disparities.o The BU Daraga Campus must continually imposed

strict compliance with what the NGAS requires to

maintain its current status.



o That the strength of the findings of this study be

subject to further assessment.

o Future researches to be conducted along with the

following suggested titles: Factors affecting the extent of compliance of BU

Daraga Campus' Internal Control Practices on Cash

Receipts and Cash Disbursements to NGAS.

The level of compliance of Bicol University – DaragaCampus’ Internal Control practices over cash receipts

and cash disbursements.



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internal control -extent of compliance