Republic of the Philippines - Negros Occidental Provincial Web view · 2011-09-21We informed management that COA has prescribed reporting requirements for losses of documents under

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. 97-001 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, cross-footings 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) 398,095.30LBP (0422-1011-52) 3,000,000.00 P3,398,095.30

Reconciling Items Per Books

General Fund:DBP (0112-745-2) P 799,919.53PNB (0305-860003-1/

0305-511838-7) 488,783.82LBP (0422-1011-52) 2,286,591.70 P3,575,295.05

Special Education Fund:LBP (0422-1106-66) 487,332.69 487,332.69

Trust Fund:LBP (PRM & SDA Baras) 26,999.00 26,999.00

Grand Total 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 P 232,627.005/22/1998 1,610,972.009/22/1999 2,964.945/10/2000 800.008/23/2000 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 P 1,542,065.72 Savings 10,984,925.57 Total 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 non-governmental 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 year-end 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.”

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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 year-end 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

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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

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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.

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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 claimant. Record disbursement in Cashbook- Cash in Bank. Prepare Report of Checks Issued. Forward RCI with DV and supporting documents to Accounting Unit.

Treasurer

j. Prepare the JEV based on individual checks/voucher; sign “Prepared By” portion (approved by Chief Accountant) and record JEV in the Check Disbursements Journal. Post monthly to the General Ledger/Subsidiary Ledgers.

Accounting Unit

k. Forward RCI, DV, supporting documents and JEV to the Office of the Auditor.

Accountant

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

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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.

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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 year-end, 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

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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.

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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.

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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.

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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.

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PART III - STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

AuditObservation Recommendations

Ref. Management Action

Status of Implementation

Reason for Partial/ Non-

Implementation1. 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.

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.

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.

AAR CY

2009

Reconciliation ongoing.

Partially implemented.

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

Some of the vouchers had been submitted.

Partially complied.

Difficulty in completing documentation of distribution to beneficiaries.

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Implementationresulting in suspensions in post audit.

Audit to avoid suspensions in post 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. 2009-001 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.


Separate departments submit various supporting documents to procuremen t contracts.

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 dissemination of bids is practiced.


Some suppliers are reluctant to join biddings due to delays in processing of claims/

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Implementationinvolve 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:

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. 96-011.b. Unaccounted difference between Book and Bank balances of P3,000,000.00 for

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.

No adjustments had been made.

Not implemented, reiterated.

Difficulty in documenting reconciling items.

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ImplementationLBP 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.

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.

Not implemented.

No IMCS approval had been obtained to date.

7. A cash shortage of P815,516.86 was incurred by Ms. Katherine D. Yee

Appropriate charges against Ms. Katherine D. Yee for malversation of

Case is pending.

Implemented.

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Implementationas 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 re-applied 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

No collection.

Not implemented.

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Implementationpossible 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. Non-operational/defective 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.

c. Actual mileage or distance travelled had exceeded the allowable mileage which proved the procurement is uneconomical in violation of Section

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 fully-depreciated 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.

Amount of loss for failure to apply warranty is being made.


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Implementation4.1 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) 98-569A.

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.

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.

AAR CY

2008

The Provincial Accountant has started the clean up of accounts 227.


Only P2.1M was not identified, classified and reconciled in the Books.

2. Sixty (60) units of mechanical shredder acquired from RU Foundry

The OPA and PEMO should submit the Deeds of Donation together

AAR CY

2008

Distribution of shredders was already covered


Some recipients are still not located

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Implementationand 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.

with Deeds of Donation (DODs)

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.

AAR CY

2008

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


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Implementation

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.

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

AAR

CY 2007

The Province will enhance plan to account LAND, Clean-up is still on-going


Clean-up of accounts still ongoing

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Implementationeffected 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.

AAR

CY 2007

Reconciliation and cleaning up of accounts is still on-going..


Cleaning up of accounts is still on-going..

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Implementationthereby 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

AAR

CY 2007

The Provincial Treasurer’s Office has prepared Demand Letters were sent to the borrowers of the loan.


Reiterated in this year’s audit finding.

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Implementationresolution 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 non-completion 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

AAR CY

2006

Clean-up of accounts still

ongoing


Clean-up of accounts still ongoing

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Implementationtheir 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.

AAR CY

2006

Dormant accounts have been taken care of. Some accounts were closed, while others were transferred to time deposit

accounts.


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.

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

AAR CY

2006

The Provincial

Accountant is hesitant to remit the share to

LGU’s due to

Not implemented.

Still un-implemented due to lack of

supporting documents.

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ImplementationGovernment 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.

lack of supporting documents.

She promised to implement

the recommendation as soon as possible

by offsetting the Due from and Due to Accounts.

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.

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

AAR

CY 2005

Cleaning up of accounts is still on-going.

Partially implemented


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Implementationestablish 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.

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 above-cited regulation.

AAR

CY 2005

All stale checks found in the possession of the Cashier are forwarded immediately to the Accounting Office for cancellation and proper adjustment.


Substantial amounts of checks have already been cancelled.

3. Inadequate controls over the grant of donations to other Local Government Units (LGUs) and Non-Government Organizations (NGOs) were observed, thereby, overstating the Property, Plant, and Equipment account by P4,873,853.00.

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.

AAR

CY 2005

Booking up of accounts is still on process



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PART IV - ANNEXES

Balance SheetGeneral Fund Annex A.1Special Education Fund Annex A.1.1Trust Fund Annex A.1.2

Statement of Income and Expenses

General Fund Annex A.2Special Education Fund Annex A.2.1

Statement of Cash FlowsGeneral Fund Annex A.3Special Education Fund Annex A.3.1Trust Fund Annex A.3.2

Statement of Government EquityGeneral Fund Annex A.4Special Education Fund Annex A.4.1Trust Fund Annex A.4.2

SAAOBGF Annex B.1EEDD Annex B.2SEF Annex B.3

Other Annexes

Summary of Unreconciled Balances in theBook of Accounts Annex C-1

Summary of Unreconciled Balances in theGeneral Fund Proper Annex C-2

Summary of Unreconciled Balances in theGeneral Fund - EEDD Annex C-3

Summary of Unreconciled Balances in theSpecial Education Fund Annex C-4

Summary of Unreconciled Balances in theTrust Fund Annex C-5

Summary of Aging of Cash Advances in theBook of Accounts Annex D-1

Aging of Cash Advances in theGeneral Fund Proper Annex D-2

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Aging of Cash Advances in theGeneral Fund - EEDD Annex D-3

Aging of Cash Advances in theSpecial Education Fund Annex D-4

Aging of Cash Advances in theTrust Fund Annex D-5

List of Collecting Officers Annex E-1Schedule of Collections Receipted as of Dec. 31, 2010 But Recorded in 2011 Annex E-2Schedule of Collections Receipted as of Dec. 31, 2009 But Recorded in 2010 Annex E-3

Summary of Invalid/Incorrectly PresentedReconciling Items Annex F-1

Summary of Unadjusted Reconciling ItemsBalance Per Bank Annex F-2

Summary of Unadjusted Reconciling ItemsBalance Per Book Annex F-3

Schedule of Due from NGOs/POsSummary – All Funds Annex G-1

Schedule of Due from NGOs/POs- General Fund Annex G-2

Schedule of Due from NGOs/POs- Trust Fund Annex G-3

Analysis of Releases-Transfers of Funds Annex G-4

Summary of Unaccounted Deliveries andBalances Per Books –Due to NGAs Annex H-1

Analysis of Due to NGAs – NFA Account Annex H-2Listing of Unaccounted Deliveries Annex H-3

Listing of DV’s Not Submitted andDVs w/o Supporting Documents Annex I-1

Summary of DV’s Not Submitted/ W/oSupporting Documents Annex I-2

Details of Suspensions, DisallowancesAnd Charges – All Funds Annex J-1

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Summary of Project Costs – EstablishmentOf Agricultural Tramline Annex K-1

Summary of Administrative Expenses ChargedTo Tramline Projects Annex K-2

Details of Administrative Expenses ChargedTo Tramline Projects Annex K-3

Summary of Project Implementation –Establishment Of Agricultural Tramline Annex K-4

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