PART II

FINDINGS AND RECOMMENDATIONS

1. The validity, existence and correctness of the balances of the Property, Plant and
Equipment (PPE) accounts valued at P2,185,338.88 in the financial statements as
of December 31, 2012 could not be ascertained due to failure to (a) conduct
physical inventory of the barangay’s property, plant and equipment and prepare
and submit the corresponding inventory report thereof for the past three years,
contrary to Section 07.04 of the Barangay Accounting Manual and (b) prepare
and maintain Equipment and Property Ledger Cards by the Municipal Accountant
for PPEs owned by the barangay, not in keeping with Section 07.02 of the same
Manual..

a. The barangay failed to conduct actual physical count of its PPE and no Report on
the Physical Count of PPE (RPCPPE) was submitted for the past three (3) years
contrary to Section 07.04 of the Barangay Accounting Manual

The conduct of physical inventory taking is an indispensable procedure

undertaken to check the integrity of property custodianship and in all cases, should be
regarded with importance to ensure effective control of government property.

Section 07.04 of the Barangay Accounting Manual provides that “ Every fiscal
year-end or oftener as needed, the punong barangay shall require a physical inventory of
the property of the barangay as of the year-end, or the cut-off date, as the case may be.
The inventory shall be conducted by a committee of two (2) consisting of the
representative of the punong barangay as chairman, and the barangay treasurer as a
member. The local auditor concerned or his representative shall witness the inventory
taking. The barangay treasurer shall prepare a report on the Property Inventory, General
Form No. 41 (a) in triplicate. The original shall be submitted to the punong barangay;
the duplicate, to the auditor concerned; and the triplicate, retained by the barangay
treasurer for his file.”

Likewise, under paragraph 3.a of the Policies and Procedures on the requisition,
procurement, issuance, physical inventory and loss of supplies and materials and PPE of
the Systems and Procedures Manual on the Management of Barangay Funds and
Property, Volume I (page 41), a physical inventory of all barangay properties shall be
conducted at least once a year and the result shall be reported in the Report on the
Physical Count of Property, Plant and Equipment (RPCPPE).

For calendar years 2010 to 2012, the concerned barangay officials failed to
conduct physical inventory of its Property, Plant and Equipment and prepare and submit a

12
corresponding Report on the Physical Count of Property, Plant and Equipment to the
audit team.

The conduct of physical count is one way of safeguarding the assets of the
barangay and also a tool in decision-making when it comes to procurement of property,
plant and equipment.

The absence of the inventory report precluded the audit team from determining
the accuracy, validity and actual existence of the fixed assets recorded in the books of the
barangay.

We recommend that the Barangay Captain should initiate the yearly conduct
of physical count of all barangay properties and the Barangay Treasurer should
prepare and submit a report thereon to determine their actual existence and to
safeguard the same against loss or misuse.

b) the Municipal Accountant failed to prepare and maintain Equipment and Property
Ledger Cards for PPEs owned by the barangay, not in keeping with Section 07.02 of
the same Manual..

Section 07.02 of the Barangay Accounting Manual provides that the

City/Municipal Accountant shall maintain subsidy records for every item or piece of
property in an Equipment Ledger Card, General Form No. 46(A) or in a Real Property
Card, General Form No. 61(A), as the case maybe. The method of keeping these subsidy
records shall be in accordance with the present procedures in maintaining the municipal
accounts.

Verification of records in the accounting division disclosed that the Equipment

and/or Real Property Cards were not prepared and maintained to support the various
office equipment and other tangible properties owned by the barangay as shown in the
financial statements.

These subsidiary records, if properly maintained and kept updated would ensure
reliable and effective internal control on the actual existence of the recorded barangay
properties and would also facilitate reconciliation of the recorded/reported assets in the
physical inventory reports.

We recommend that the Municipal Accountant thru the Barangay

Bookkeeper concerned maintain and keep an updated subsidiary records for all
the properties acquired by the barangay for proper accounting control and to
facilitate the reconciliation of the reported fixed assets with the Physical Inventory
Report thereof.

13
 The Barangay Treasurer commented that they had conducted a periodic inventory
of PPEs of their barangay. He likewise had submitted to this Office the required
Inventory report for CYs 2010 to 2012 for verification by the audit team.

2. Disbursements totaling P169,803.58 were paid by the Barangay Treasurer despite

the absence of complete documentation, inconsistent with Section 4.6 of PD 1445,
thereby casting doubts on the validity of the claims.

Section 4(6) of PD 1445, otherwise known as The Government Auditing Code of

the Philippines, provides that “Claims against government funds shall be supported with
complete documentation.”

Our review of the transactions of the barangay for CYs 2010-2012 disclosed that
paid disbursement vouchers amounting to P169,803.58 were not supported with
complete documentary requirements, thereby casting doubts on the validity the claims.
These are summarized as follows:

Nature of Expenses Deficiencies Noted Amount

Traveling expenses No Cert. of Appearance/ ORs for Registration
(Annex “1”) Fees/fare tickets P3,300.00
Purchases of goods No PAR, Philgeps Reg., Recipients of claim of 72,858.52
(Annex “2”) Additional cellcards
Projects implemented Pictures before, during & after 93,645.06
by administration
(Annex “3”)
TOTAL P169,803.58

We recommend that the Barangay Treasurer submit the required

documentation for the aforecited paid transactions to establish the validity and
propriety of the paid claims. Henceforth, conduct a thorough review of the
completeness of supporting documents before effecting payment on any claims
against the funds of the barangay to avoid suspension and/or disallowances in
audit.

The Municipal Treasurer acknowledged the Audit Team’s observation and made an
assurance to comply with the aforecited regulation in the ensuing year and onward.

3. The Municipal Accountant failed to implement the conversion of the Chart of

Accounts from the Old Government Accounting System (OGAS) to the New
Government Accounting System (NGAS) as prescribed under COA Government
Accounting and Financial Management Information System (GAFMIS) Letter
dated October 4, 2002, contrary to Section 1, Chapter 1, Vol. 1 of the New
Government Accounting System for Local Government Units and COA
Accounting Circular No. 2006-02 dated December 19, 2006, thus, uniformity in

14
 the application of accounting and reporting facility in consolidating financial
statements data and other related barangay transactions and its adaptability to
computerization is not achieved.

Section 1, Chapter 1, Volume I of the New Government Accounting System

Manual for Local Government Units provides the basic policies and procedures; the new
coding system and chart of accounts; the accounting books, reports/forms and financial
statements, and illustrative accounting entries to be adopted by all local government units
effective January 1, 2002. The objectives of the Manual are to prescribe the following:

a. Uniform guidelines and procedures in accounting for government funds and

property;
b. New coding structure and new chart of accounts; and
c. New accounting books, reports/forms, financial statements and accounting
entries.

The New Coding System is designed to achieve uniformity in accounting and

reporting facility in consolidating financial data and adaptability to computerization.

GAFMIS Letter dated October 4, 2002 provides that the adoption of the NGAS by
all national government agencies and local government units effective January 1, 2002
requires the conversion of old accounts to the NGAS accounts. To facilitate such
conversion, the Chart of Accounts per OGAS with the equivalent accounts in the NGAS
Chart of Accounts and also equivalent from the NGAS to OGAS Chart of Accounts was
provided.

As stated in Item 4.0 - Transitory Provision of COA Accounting Circular No.

2006-02 dated December 19, 2006, the City/Municipal Accountant shall convert the
accounts of the barangays as of December 31, 2006 to the accounts under the new
NGAS.

In our audit of the barangay transactions, we noted that the Municipal Accountant
and the Barangay Bookkeeper failed to convert the accounts of Barangay Ilawod as of
December 31, 2006 to the accounts under the new NGAS. Perusal of the submitted
Journal Entry Vouchers (JEVs) for CYs 2010 to 2012 showed that the barangay still
used the accounting codes and account titles based on the OGAS and not the NGAS, not
in keeping with the transitory provision of COA Circular No. 2006-02.

The failure of the Municipal Accountant to convert the old government

accounting system to the New Government Accounting System resulted in the non-
achievement of the required uniformity in the validation and application of accounting
codes and account titles, and the reporting and consolidation of the financial statements,
as well as its adaptability to computerization.

15
 We recommend that the Municipal Accountant and the Barangay
Bookkeeper cause the immediate conversion of the old accounts of the barangay as
of December 31, 2012 to the accounts under the new NGAS by adopting the Chart
of Accounts under the old Government Accounting System (OGAS) to the New
Government Accounting System (NGAS)to achieve uniformity in the application,
validation and examination of the accounts used for the financial transactions of the
barangay.

The Municipal Accountant and Brgy. Bookeeper explained that they are now
converting the old Chart of Accounts to the accounts under the new NGAS.

4. The Municipal Accountant failed to submit the Statement of Cash Flows and
Statement of Changes in Government Equity for CYs 2010, 2011 and 2012 to the
Auditor for verification, contrary to COA Circular No. 99-005 dated November 11,
1999, due to failure of the barangay to submit the same to their office for review
and verification, thus, we were unable to ascertain the sources and utilization of
cash of the said barangay for the period under audit.

COA Circular No. 99-005 dated November 11, 1999 requires the submission by
the City/Municipal Accountant of Consolidated Year-end Financial Statements of
Barangays to COA not later than the end of May of each year. These financial statements
shall be consolidated by COA Central Office and to be submitted to the President and
Congress not later than the last day of September of each year.

The Accounting System Manual for Barangay (ASMB) which provides for the
General Accounting Policies in the preparation and submission of the Monthly Trial
Balance and Year-end Consolidated Financial Statements of Barangays also requires the
submission of the following:

“19) The two-money column Trial Balance (TB) shall be used.

20) The following Financial Statements (FS) and Schedules for each barangay
shall be prepared by the City/Municipal Accountant:

a) Detailed and Condensed Balance Sheet;

b) Detailed and Condensed Statement of
Income and Expenses;
c) Statement of Cash Flows (Direct Method);

d) Statement of Changes in Government

Equity;
e) Schedule of Infrastructure Projects and
Reforestation Projects (if applicable);
f) Schedule of Accounts Receivable;

16
 g) Schedule of Accounts Payable.

22) Consolidated FS and schedules of all barangays under the city/municipality

and the accompanying Statement of Management’s Responsibility for
Financial Statements shall be submitted in printed and digital (diskette or
compact disk) copy by the City/Municipal Accountant to the Government
Accountancy and Financial Management Information System (GAFMIS)
Sector, Commission on Audit (COA) within sixty (60) days after 31 st of
December of each year, copy furnished the Auditor/Audit Team Leader,
together with the FS of the City/Municipality (to facilitate data capture and
AFR consolidation by GAFMIS).”

In our audit of the accounts and operations of the Barangay, we noted that the
Municipal Accountant was only able to submit the Balance Sheet and the Statement of
Income and Expenses for CYs 2010, 2011 and 2012. The Cash Flow Statement and
Statement of Changes in Government Equity for the said periods, however, were not
prepared and submitted to the Auditor for review and consolidation.

The failure to submit the Statements of Cash Flows and Changes in Government
Equity for CYs 2010, 2011 and 2012 by the Municipal Accountant precluded the Audit
Team from ascertaining the sources and utilization of cash of the Barangay and will cause
unnecessary delay in the consolidation of the year-end barangay financial statements for
submission by COA to the President and Congress.

We recommend that the Municipal Accountant expedite the preparation of

the Cash Flow Statement and Statement of Changes in Government Equity for CYs
2010, 2011 and 2012 and thereafter, submit copies thereof to the Auditor for
verification. Henceforth, cause the timely preparation and submission of the
required financial statements and all other financial reports of the barangay to
ensure judicious audit/verification thereof.

The Municipal Accountant assured compliance with the audit recommendation of

the Audit Team.

5. The Barangay Treasurer failed to remit/deposit intact and regularly the full
amount of collections to the authorized Government Depository Bank (AGDB),
contrary to Section 108 of GAAM Vol. I, Section 32 of NGAS for LGUs Vol. I and
DBM-DOF Joint Circular 1-81 dated January 1, 1981.

Section 108 of GAAM Vol. I states that:

“Public officers authorized to receive and collect moneys arising from taxes,
revenues, or receipts of any kind shall remit or deposit intact the full amounts so
received and collected by them to the treasury of the agency concerned and
credited to the particular accounts to which the said moneys belong.”

17
 Section 32 of the Manual on the NGAS for LGUs Vol. I also states that:

“The Treasurer/Cashiers 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.”

Likewise, DBM-DOF Joint Circular 1-81dated January 1, 1981 provides that:

“Collecting Officers shall deposit their national collections intact as prescribed

below:

Distance Travel Time

Office to (BTR/Dep (To and From Office Accumulated Frequency of Deposits
Bank To BTR/Dep Bank Collections
Less than 15 km a. Less than 1 day a. ₱500 or a. Daily

b. Less than ₱500 b. Weekly or as soon

as collections
reach P500

In the audit of the cash in vault accounts of the Barangay Treasurer (BT), we noted
from the Reports of Collections and Deposits submitted that collections were not remitted
and deposited intact and regularly. The number of days delay of deposits/remittances
ranged from one (1) to 21 days. Barangay Inarado is more or less 10 kms away from the
AGDB, hence, all collections should be deposited to the AGDB daily or weekly, as the
case may be, in accordance with the aforementioned regulations.

The practice of keeping collections in the custody of the accountable officer for a
long period of time may result in the misuse and/or possible loss of government funds.

We recommend that the Barangay Treasurer remit/deposit intact and

regularly the full amount of collections to the AGDB and strictly observe the rules
and regulations on the frequency of deposits.

The Barangay Treasurer explained that collections were not deposited on the
prescribed period due to the minimal amount of daily collections of the Barangay and the
additional costs it will incur if deposit is made on a daily basis. He opted instead to
deposit to the AGDB as soon as the collections have accumulated or reached to a
substantial amount. They promised that the audit recommendation shall be observed and
complied with henceforth.

18
6. The Report of Accountability for Accountable Forms (PF 224-A) was not prepared
and submitted monthly by the Barangay Treasurer, contrary to Section 05.07 of the
Barangay Audit Manual and Paragraph 3. a of the Systems and Procedures
Manual on the Management of Barangay Funds and Property, Volume III, thus,
movements of accountable forms under his custody could not be readily verified
and monitored without delay .

Section 05.07 of the Barangay Audit Manual provides that the Barangay
Treasurer shall report on his accountability for accountable forms using Provincial Form
No. 224 (A), the Monthly Report of Accountability of Accountable Forms, with
appropriate modifications. The report shall be prepared at the end of each month, and
upon transfer of accountability of the barangay treasurer. All accountable forms handled
by the barangay treasurer shall be reported in the form, including under a separate caption
accountable forms issued to him for his use as a deputized treasurer. The report shall be
prepared in four (4) copies and distributed as follows:

Original - Local Auditor

Duplicate - Municipal Accountant
Triplicate - Local Treasurer if deputized
Quadruplicate - Barangay Treasurer file
Likewise,
paragraph 3.a of the Systems and Procedures Manual on the Management of Barangay
Funds and Property, Volume III requires that the Barangay Treasurer shall prepare the
Report of Accountability for Accountable Forms (RAAF) to report the receipts and
issuances of accountable forms and the outstanding balance under his custody.

The instructions for the preparation of this report in the same manual states that,
“This shall be prepared monthly by the Barangay Treasurer having custody of any
Accountable Form”. (underscoring ours)

We observed in our audit of the barangay transactions of Brgy. Inarado that the
Barangay Treasurer did not prepare the required monthly report of accountability for
accountable forms. The absence of this vital report precluded the determination of the
actual receipt, issuance, loss, if any, and the correct balance of accountable forms in the
custody of the Barangay Treasurer.

We recommend that the Barangay Treasurer should prepare monthly a

Report of Accountability for Accountable Forms to ensure the correctness of the
periodic movements and facilitate the validation and monitoring of any accountable
forms in her custody.

The Barangay Treasurer when conferred explained that he had already prepared
the Report on the Accountability for Accountable Forms (RAAF) for CY 2012, but it was
not submitted to this Office. The reports for CYs 2010 and 2011 were prepared and
submitted after receipt of the AOMs.

19
7. The Barangay Treasurer (BT) failed to prepare and submit the Summary of
Collections and Deposits (SCD), in contravention with Paragraphs 1.k and 2.g of
the Systems and Procedures Manual on the Management of Barangay Funds and
Property, Volume I and Paragraphs 1.a. (1) and 1.a.(10), Volume II of the same
Manual, thus, collections and deposits could not be readily monitored and
validated at any given period of time.

The Systems and Procedures Manual on the Management of Barangay Funds and
Property, Volume I provides the basic policies for receipts and deposits of collections
while Volume II of the same Manual provides the basic policies and procedures in
recording receipts and remittances of collections by the Barangay Treasurer (BT) as well
as the recording of BT’s collections and deposits to establish accountability and pinpoint
responsibility. The receipts and deposits/remittances should be properly documented to
provide enough information in identifying the person responsible for any specific
activity.

Paragraph 1.k of the Systems and Procedures Manual on the Management of

Barangay Funds and Property, Volume I states that “All collections by the BT for the
barangay shall be reported in the Summary of Collections and Deposits (SCD).”

Paragraph 2.g of the same Manual, Volume I, likewise provides that “All
deposits by the BT for the barangay shall re reported in the SCD.”

In Volume II of the same Manual, the following recording procedures are

provided, among others, viz:

“1.a. (1) Collections and deposits by the BT as treasurer of the barangay shall be
recorded in the Summary of Collections and Deposits (xxx) daily or as
transaction occurs; and

1.a.(10) The SCD shall serve as basis of the Barangay Record Keeper (BRK) in
recording the weekly collections and deposits in the Cash Receipts and
Deposit Register (CRDReg).”

In the post audit of collections and deposits of Brgy. Inarado, we noted that the
Barangay Treasurer failed to prepare the required Summary of Collections and Deposits
for CYs 2010 and 2011 to record the issued Official Receipts (ORs) in numerical
sequence and the corresponding deposits made thereon. The duplicate copies of ORs
together with the validated Deposit Slips should be attached to said report which shall
serve as basis in the recording of the transactions in the journals by the Barangay
Bookkeeper.

The Barangay Treasurer upon issuance of official receipts, deposits the cash
collected in the authorized depository bank without recording his cash transactions in the
cashbook or in the Summary of Collections and Deposits. Only the duplicate copies of
the official receipts, together with the disbursement vouchers, are transmitted to the

20
Barangay Bookkeeper. On the basis of these documents, the Barangay Bookkeeper
prepares the necessary journal entry voucher and records the same in the books of
accounts of the barangay.

The above practice contravenes with the aforecited rules and regulations, thus, the
accuracy and correctness of collections and deposits could not be monitored and
validated readily at any given period of time.

We recommend that the Barangay Treasurer prepare, completely

accomplish/fill-out and submit the Summary of Collections and Deposits (SCD) for
all collections and deposits of the barangay as required by the abovementioned
regulations. Likewise, the Municipal Accountant thru the Barangay Bookkeeper
should ensure that SCDs are prepared and submitted by the Barangay Treasurer
before the collections and deposits are recorded in the appropriate accounting
journals.

The Barangay Treasurer explained that the Summary of Collections and Deposits
were prepared and submitted to the Accounting Office but a copy thereof was not furnished
to the Office of the Audit Team. Assurance was made that said report shall be submitted
to the Auditor on the prescribed period in the ensuing years.

8. Disbursement Vouchers and their supporting documents were not stamped “PAID”
upon payment, contrary to COA Circular No. 92-389 dated November 3, 1992, thus
making the said supporting documents susceptible to possible re-use for future
claims.

Paragraph Q, Section 2 of COA Circular 92-389, provides and we quote:

“Paid vouchers, including its supporting documents, shall be

perforated and conspicuously stamped Paid by the Cashier. The
stamp shall provide space for the number of the check issued and date
of actual payment.”

In our review and evaluation of the disbursements system of the barangay, we

noted that the Disbursement Vouchers were not stamped “PAID” including its supporting
documents.

The failure to stamp “PAID” the disbursement vouchers and its supporting
documents could result to payment of future claim using the same supporting documents.

21
 We recommend that the Barangay Treasurer shall stamp “PAID” all
disbursement vouchers and its supporting documents immediately upon payment
thereof to avert any attempt to use the same supporting documents in payment of
future claims thereby safeguarding government resources against loss of wastage.

The barangay treasurer agreed with our recommendations and explained that they
had already secured a “PAID” rubber stamp pad and assured us that Disbursement
Vouchers and its supporting documents shall be stamped paid in the ensuing year. They
further explained that they were not advised by the Accounting Office before, hence, the
non-compliance of the said regulation in the previous transactions.

III – STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES

Under Section 6.1 of Revised Rules and Regulations on the Settlement of

Accounts (COA Circular No. 2009-006) the total unsettled audit suspensions,
disallowances and charges at the end of the calendar year as reflected in the Statement of
Audit Suspensions, Disallowances and Charges (SASDC) for the last quarter shall be
reported in the Annual Audit Report of the same year.
Barangay Inarado, Daraga, Albay had no unsettled audit suspensions,
disallowances and charges as of December 31, 2012.

22