5.4 As a result of the foregoing, the stock balance could not be readily determined,
while the inventory account balances could not be established, which could result
in the misstatement of inventory and expense accounts at year-end.
5.5 We recommended and Management agreed to install internal control
mechanisms by using the RIS to request supplies and materials from stock
and to consolidate them in the SSMI, which shall be submitted to the
Municipal Accountant for recording in the appropriate expense accounts for
the supplies consumed.
5.6 We recommended and the Municipal Accountant stop the practice of
recording purchases of supplies and materials directly to expense accounts
and henceforth, record purchases and utilization of supplies and materials in
accordance with Section 114 of the NGAS Manual for LGUs, Volume I and
Section IV of COA Circular No. 2014-002 dated April 15, 2014, to fairly
present the expense and inventory accounts in the financial statements.
Meals and snacks incorrectly recorded to Other Maintenance and Operating Expenses -
₱9,806,881.38
6. Expenditures totaling ₱9,806,881.38 incurred for serving meals and snacks,
honoraria, equipment and inventories were incorrectly classified as Other
Maintenance and Operating Expenses (5-02-99-990), which is inconsistent with
COA Circular No. 2015-009, dated December 1, 2015, and negatively impacts the
effectiveness of financial information available for Management’s decision-
making.
6.1 Paragraph 15 of the International Public Sector Accounting Standards (IPSAS) 1
clarifies that the objectives of a general-purpose financial statement are to provide
information about an entity’s financial position, financial performance, and cash
flows that is useful to users in making and evaluating decisions about resource
allocation. In the public sector, more specifically, the purpose of financial reporting
is mainly to provide information useful for decision making and to demonstrate the
accountability of government agency.
6.2 In this regard, the Commission on Audit is responsible for designing the Chart of
Accounts for government agencies, enabling agency heads to review their activities
according to selected areas of responsibility and allowing for a clearer definition
of obligation accounting, which leads to more precise budgetary controls. Thus, it
issued COA Circular No. 2015-009, dated December 1, 2015, to prescribe a
uniform chart of accounts for local government units. Annex A of the Circular
defines the following accounts:
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