By: Gerome Dalipe
STATE auditors scored the Iloilo City Government over erroneous recording of various purchases amounting to P22 million in 2018.
The procurements for medicines, chemicals and other dental and laboratory supplies were recorded as “outright expenses,” instead of inventories, which could lead to overstatement and understatement of the expense and inventory accounts.
The practice is contrary to the provisions of the Manual on the New Government Accounting System for local government units that may cause inventory misuse or loss, the Commission on Audit (COA) said.
“Non-adherence to the perpetual inventory system of accounting for supplies may result in the overstatement of affected expense accounts and understatement of asset accounts due to the failure of recording the unused supplies as inventory,” read the COA report.
Sec. 114 of Manual on the New Government Accounting System states that purchase of supplies and materials for stock…shall be recorded as inventory following the perpetual inventory method.”
Under the perpetual inventory method, an inventory control account is maintained in General Ledger on a current basis. Likewise, detailed inventory records should be maintained for each inventory item.
The city accountant should also maintain the perpetual inventory records comprising of supplies ledger cards for each commodity or stock.
On the other hand, the General Services Office should also maintain stock cards and property cards for supplies.
The auditors reviewed the City Government’s disbursement vouchers and ledgers for all funds as of Dec. 31, 2018.
They discovered that purchases of various medicines, chemicals and medical, dental and laboratory supplies amounting of P22,087,603.84 were immediately charged to expense accounts instead of setting up the appropriate inventory accounts.
Likewise, records showed that liquidated damages amounting to P32,040.56 for late deliveries of the above supplies were not recorded in the books as miscellaneous income.
Instead, they are deducted in the total contract price, resulting in the understatement of miscellaneous income and the supplies expense.
“Non-observance of proper documentation and deficiencies in the existing controls and procedures in the handling of inventories may result in possible inventory loss or misuse,” read the COA report.
Adopting the perpetual inventory system can prevent theft, wasteful consumption or utilization and leakages of supplies, the auditors said.
“Proper monitoring and accounting of supplies from deliveries to issuances may result in the effective management of the City’s resources, as well as provide a more accurate balance of the inventory record,” the auditors said.
In the report, the auditors also urged the city accountant to take up purchases of supplies as inventories under the appropriate account.
The General Services Office should also maintain stock cards, and update and reconcile with the ledger cards of the accounting unit.
Likewise, the auditors asked the city accountant and all department heads to adhere to the rules and procedures in accounting for supplies pursuant to the existing audit rules.
