Republic of the Philippines

COMMISSION ON AUDIT
Audit Team R8-06, LGS-D – Province of Northern Samar
Provincial Satellite Auditing Office
Brgy. Dalakit, Catarman, Northern Samar

AUDIT OBSERVATION MEMORANDUM (AOM)

AOM No. 2019-01-(2012-2018)

October 22, 2019

For : Hon. NILDA R. LEBICO

Punong Barangay
Barangay Magsaysay
Mapanas, Northern Samar

Attention: Wenifreda Arnesto – The Barangay Treasurer

Niño L. Bandilla – Municipal Accountant

We have audited the accounts and operation of the barangay for CYs 2015-2018 and
observed the following deficiencies and/or errors:

1. Despite previous year’s audit observation, the barangay Financial Statements and
schedules for CYs 2015-2018 remained not submitted contrary to Accounting
Circular No. 2006-002 dated December 19, 2006 due to the non-submission of CY
2018 accounts, thus, depriving management of information on its financial position
and results of operations.

Accounting Circular No. 2006-002 dated December 19, 2006 prescribed the use
of the Systems and Procedures Manual on the Management of Barangay Funds and
Property and Accounting System Manual for Barangays under the New Government
Accounting System (NGAS).

Item No. 21. – General Accounting Policies, Volume 4 or the Accounting

Systems Manual for Barangays requires the city or Municipal Accountant to prepare the
financial statements and schedules for each barangay, as follows:

a. Detailed and Condensed Balance Sheet

b. Detailed and Condensed Statement of Income and Expenses
c. Statement of Cash Flows
d. Statement of Changes in Government Equity
e. Schedule of Infrastructure Projects and Reforestation Projects (if
applicable)
f. Schedule of Accounts Receivable
g. Schedule of Accounts Payable
h. Notes to Financial Statements
i. Statement of Management Responsibility for Financial Statements
 On the other hand, Item No. 22 thereof directs the accountant to submit
consolidated financial statements and schedules of all barangays within 60 days after
December 31 of each year.

The Municipal Accountant failed to prepare the Financial Statements and

schedules for CYs 2015-2018 due to the delayed submission by the former Barangay
Treasurer of the documents and records pertaining to the barangay financial transactions
for CYs 2015-2017 and non-submission of the January to December 2018 accounts.
Also, the barangay bookkeeper did not submit the registries/reports that would be the
basis of the Municipal Accountant in drawing the Journal Entry Voucher to come up with
accounts balances in the Financial Statements.

Consequently, the Barangay Record Keeper did not prepare the Journal Entry
Vouchers and the different registries to record the receipt of IRA and any obligation that
the barangay may have incurred in CYs 2015-2018. Thus, the Municipal Accountant did
not prepare the financial statements and schedules for CYs 2015-2018.

Absence of financial statements for CY 2015-2018 hindered the audit team to

render an opinion for the period. Likewise, management and stakeholders were deprived
of information on the financial position and the results of its operations for the period
ended.

We recommend that the Punong Barangay require the Barangay Treasurer

to submit the accounts for CY 2018 and observe the timely submission of documents
so that Municipal Accountant and the concerned barangay bookkeeper could
prepare and submit the financial statements and schedules as required in
Accounting Circular No. 2006-002 dated December 19, 2006.

2. The existence and valuation of Property, Plant and Equipment (PPE) recorded at
₱751,939.32 each for CYs 2015 and 2016, was not ascertained due to failure of the
LGU-Barangay to conduct inventory of PPE and to maintain PPE ledger cards,
contrary to pertinent provisions of Volume I of the Systems and Procedures Manual
on Management of Barangay Funds and Property.

Volume I of the Systems and Procedures Manual on the Management of Barangay

Funds and Property prescribed under Accounting Circular No. 2006-002 dated December
19, 2006 provides, among others the policies and procedures on Property, Plant and
Equipment:

3. Physical Count of PPE

a. A physical inventory of all Barangay property shall be conducted at least

once a year;
b. A committee headed by the Punong Barangay shall conduct the physical
count of PPE owned by the Barangay;
c. The result on the physical inventory shall be reported in the Report on the
Physical Count of PPE (RPCPPE);
d. The report, approved by the PB, shall be submitted to the BRK and the
City/Municipal Accountant for reconciliation with the recorded PPE;
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 e. Any unrecorded inventory shall be booked up at appraised cost; and
f. Any shortages shall be looked into and the AO shall be held accountable
for the loss.”

The balances of the Property, Plant and Equipment (PPE) accounts appearing in
the Statement of Financial Position of the barangay are as follows:

Account CY 2016 CY 2015

Land 0 0
Land Improvement 281,540.10 281,540.10
Office Buildings 110,000.00 110,000.00
Other Structures 30,654.24 30,654.24
Office Equipment 30,000.00 30,000.00
Furniture & Fixtures 90,000.00 90,000.00
Library Books 5,000.00 5,000.00
Road Networks 104,744.98 104,744.98
Artisans, Walls, Reservoirs, Pumping Station
100,000.00 100,000.00
& Conduits
Irrigation Canals and Laterals 0 0
Waterways, Aqueducts, Seawall River Walls 0 0
Total ₱0 ₱0

Evaluation of the PPE account disclosed that the barangay did not create and
Inventory Committee to conduct inventory of PPE. Furthermore, the barangay treasurer
did not maintain a property ledger card for each kind of property purchased by the
barangay which made it difficult to reconcile the recorded amount of the PPE for CYs
2015-2016.

It was also observed that the Municipal Accountant did not provide the required
depreciation for each assets since CY 2015, as seen in the Statement of Financial
Performance for the CYs 2015-2016.

Absence of information and records hindered the application of other procedures

to determine the value and existence of the property, plant and equipment accounts,
hence, correctness of the balance of the PPE accounts ₱751,939.32 each for CYs 2015-
2016, were not ascertained.

We recommend that the Punong Barangay:

a. Create an inventory committee to conduct a physical inventory of the

barangay properties, and to prepare a report thereon to be submitted to
the Barangay Record Keeper and to the Municipal Accountant for
reconciliation.

b. Require the Barangay Record Keeper to maintain Property, Plant and

Equipment Register for control and monitoring purposes.

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 Likewise, the Municipal Accountant should provide the required
depreciation expense for each PPE account for each year in accordance with
PPSAS.

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof.

JOCELYN L. MARCELINO
OIC-Audit Team Leader

Proof of Receipt of AOM No. 2019-01

dated October 22, 2019

Name Designation Date Received Signature

1. Nilda R. Lebico Punong Barangay

2. Wenifreda Arnesto Brgy. Treasurer

3. Niño L. Bandilla Mun. Accountant

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