Republic of the Philippines

COMMISSION ON AUDIT
National Government Sector
Cluster 5 – Education and Employment
Audit Group A, Team R2-14A, DepEd Division of Isabela
Ilagan City, Isabela

ADDALAM REGION HIGH SCHOOL

SUMMARY OF AUDIT OBSERVATIONS AND RECOMMENDATIONS
For Calendar Year December 31, 2018

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1 AOM No. 18- Deficiency noted during the conduct of cash

001 (17-18) examination on August 8, 2018 is:
Date: August
10, 2018 The Bookkeeper did not prepare and submit We recommended that The Principal The Audit
monthly Bank Reconciliation Statement to the Management make directed the Team
Office of the Auditor for the months of December representation with the designated appreciated the
2017 to July 2018 for PS and December 2017 for immediate
depository bank for the bookkeeper to
MOOE contrary to Section 74 of PD 1445 and action of the
early transmission of the request bank Principal in
Sections 5 and 7, Chapter 21 of Government
Accounting Manual (GAM) Volume I, thus the monthly bank statements statements every designating the
accuracy of the balances of Cash in Bank –Modified or request for snapshots to first week of the bookkeeper to
Disbursement System, Regular Account could not facilitate the timely ensuing month so request bank
be ascertained as of the date of the cash preparation and that they could statements
examination. submission of monthly prepare and from the bank.
However, as
Section 74 of PD 1445 states that: Reconciliation Statements submit to the
per record of
so that errors/omissions office of the our office, no
“At the close of each month, depositories and/or reconciling items, auditor. copies of bank
shall report to the agency head, in such

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form as he may direct, the condition of the if any, would be reconciliation

agency account standing on their books. immediately detected for statements or
The head of the agency shall see to it that a correction and adjustment even bank
reconciliation is made between the balance statements
in the books of accounts
shown in reports and the balance found in were
the books of the agency.” by the agency and the submitted.
bank, thus, ensuring the Hence, the
Furthermore, Sections 5 and 7, Chapter 21 accuracy and reliability of Principal
of GAM Volume I set the general policy/guidelines the Cash-MDS, Regular should strictly
on the preparation and reporting of the bank and Cash in Bank-Local monitor the
reconciliation statements, to wit: Currency, Current compliance of
the
Account as provided under
Sec. 5. Preparation of the Bank Bookkeeper.
Reconciliation Statement. Sections 5 and 7, Chapter
21 of the Government
“The Chief Accountant/Designated Staff Accounting Manual
shall within ten days from receipt of the (GAM), Volume I. Please
monthly Bank Statement (BS) together submit the Bank
with the paid checks, original copies of
Reconciliation Statements
Debit Memoranda (DM)/Credit
Memoranda (CM) from the GSB, to the Office of the
reconcile the BS with the GL and prepare Auditor immediately.
the BRS in four copies.”

Sec. 7. Reporting.

The Chief Accountant shall submit the

BRS within twenty days after receipt of the
monthly BS to the following:
Original – COA Auditor (with all the

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supporting documents and JEVs)

Copy 2 – Head of Agency/Entity
Copy 3 – Accounting Division/Unit file
Copy 4 – Bank, if necessary

It was noted that the Bookkeeper did not

prepare and submit bank reconciliation statements
for the months of December 2017 to July 2018 for
PS and December 2017 for MOOE. The
Accountable Officer reasoned out that the non-
preparation of bank reconciliation was due to the
failure of LBP to send bank statements.

The Accountant is reminded to prepare

monthly Bank Reconciliation Statement (BRS) in
order to:
a. check correctness of both the bank and
school record,
b. serve as deterrent to fraud, and
c. enable the agency/entity or bank to take up
charges or credits recognized by the bank or
agency/ entity but not yet known to the
agency/ entity or bank.”

The non-preparation/non-submission of the

BRS precluded the audit team from ascertaining the
accuracy of the balance of the Cash-MDS account –
Regular- account as reflected in the books. Errors
and discrepancies requiring corrections/adjustments
either by the bank or in the books could not be

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reflected in the books at once.

2 AOM No. The School did not exercise its authority to withhold We recommended that Management
2019-001(18) taxes from payments of goods and services subject Management: agreed to
Date: January to creditable and final withholding tax contrary to withhold taxes
8, 2019 Republic Act 10963 otherwise known as Tax a) Direct the Designated for all payments
Reform for Acceleration and Inclusion (TRAIN) Bookkeeper to attend of goods and
Act of 2017 and Revenue Memorandum Circular seminars/trainings services starting
No. 56-2009 dated August 10, 2009, thus depriving offered by BIR and this January,
the government of income that may have been revisit guidelines on 2018.
generated from taxes to be withheld. withholding of taxes,
and
Section 37.C of the TRAIN states that:
b) Instruct the
“The Government or any of Designated
its political subdivisions, Bookkeeper to
instrumentalities or agencies, withhold taxes for
including government-owned or – payments of goods
controlled corporations (GOCCs) and services and remit
shall, before making payment on the same to BIR as
account of each purchase of goods required under TRAIN
and services which are subject to the Act and National
value-added tax imposed in Section Internal Revenue Code
106 and 108 of this Code, deduct starting CY 2019
and withhold the value-added tax transactions.
imposed in Section 106 and 108 of
this Code, deduct and withhold a
final value-added tax at the rate of
five percent (5%) of the gross
payment thereof xxx

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xxx For the purposes of this

Section, the payor or person in
control of the payment shall be
considered as the withholding
agent.”

Furthermore, Revenue Memorandum

Circular No. 56-2009 dated August 10, 2009
prescribes the use of the updated Government
Money Payment Chart. (Annex A was attached to
the issued AOM re:withholding tax rates to be used
in the computation of taxes to be withheld
(creditable or final) on the sale of goods and
services to the government or any of its political
subdivisions, instrumentalities or agencies,
including government-owned or –controlled
corporations (GOCCs))

Audit of payments for goods and services

subject to withholding taxes covering the period
from January to June, 2018 totaling to ₱124,684.57
revealed that no amount of taxes were withheld by
the school. (Annex B was attached to the issued
AOM)

In an interview, the Disbursing Officer said

that she just assumed on October 23, 2017 and was
not fully equipped with the rules on withholding
taxes for each payment on the purchases of goods

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and services subject to creditable and final taxes.

Failure to observe the above mentioned law

and circular deprives the government of income that
may have been generated from the taxes to be
withheld.

3 AOM No. Various expenses totalling to ₱174,339.73 were We recommended that Management will The Audit team
2019-002(18) paid without supporting documents due to weak Management: exert effort to stressed that
Date: January internal control system over the disbursement coordinate with the they should
10, 2019 process of the school contrary to Presidential Decree a. Coordinate with the previous submit the
(PD) 1445 and COA Circular No. 2012-001 dated previous Bookkeeper bookkeeper. lacking
June 14, 2012, thus legality, propriety and validity and submit the documents until
of the transactions cannot be ascertained. supporting documents The newly February 15,
of the above claims as designated 2018, otherwise
Section 4 (6) of Presidential Decree No.1445 required under COA bookkeeper was audit
provides that: Circular No. 2012- instructed that suspension/disal
001, otherwise the
before effecting lowance will be
“Claims against government funds amount claimed shall
payment, it should issued.
shall be supported with complete be suspended or
documentation.” disallowed in audit, be sufficiently and
and properly
Moreover, COA Circular No. 2012-001 documented.
dated June 14, 2012 prescribes the revised b. Instruct the newly
documentary requirements for common government designated
transactions. Review of the transactions paid by the Bookkeeper to ensure
School disclosed that several disbursements were that all disbursement
not adequately supported with the minimum vouchers should be
required documents, such as: adequately supported
with the required

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1. Salary Differential documents before

a. Certified true copy of approved effecting payments as
appointment in case of promotion or required under COA
Notice of Salary Adjustment in case of Circular No. 2012-001
step increment/salary increase dated June 14, 2012.
b. Certificate of Assumption
c. Approved DTR or certification that the
employee has not incurred leave without
pay

2. Monetization
a. Approved leave application (ten days) with
leave credit balance certified by the
Human Resource Office
b. Request for leave covering more than ten
days duly approved by the Head of
Agency
c. For monetization of 50 percent or more:
c.1. Clinical abstract/medical procedures
to be undertaken in case of health, medical
and hospital needs
c.2. Barangay Certification in case of need
for financial assistance brought about by
calamities, typhoons, fire, etc.

Under Section 23 of the Omnibus Rules on

Leave, monetization of 50 percent or more of
accumulated leave credits may be allowed for
valid and justifiable reasons, such as:
 Health, medical and hospital needs of the

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employee and the immediate members of

his family

 Financial aid and assistance brought about

by force majeure events such as
calamities, typhoons, fire, earthquake and
accidents that affect the life, limb and
property of the employee and his/her
immediate family
 Educational needs of the employee and the
immediate members of his/her family
 Payment of mortgages and loans which
were entered into for the benefit of which
inured to the benefit of the employee and
his/her immediate family
 In cases of extreme financial needs of the
employee or his/her immediate family
where the present sources of income are
not enough to fulfil basic needs such as
food, shelter and clothing
 Other analogous cases as may be
determined by the CSC.

Audit of disbursement vouchers covering the

period from January to June, 2018 disclosed that
various expenses totalling to ₱174,339.73 were
paid. The details of which are as follows:

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ADA/
DV DV
Check Date Payee Particulars Amount
No. Date
No.
Salary
2018- 06- Vilma
6/25/ 6/26/ Differential
06- 2018- Clement ₱24,753.00
2018 2018 from 2008-2017
156 020 e
(Step 3-Step 8)
Clariza
2018- 06- Basco
6/21/ 6/26/ 64,795.13
06- 2018- Brenda Monetization
2018 2018 21,051.78
157 021 Buenvia
je
Salary
2018- Differential
6/25/ 6/26/ Ilyn
06- 67685 from January- 63,739.82
2018 2018 Flores
158 June ( T3 -
MT1)
TOTAL ₱174,339.73

Verification of the leave card maintained by

the Human Resource office of Division of Isabela
revealed that monetization claimed was 50% of their
total leave credits. However, the team could not
ascertain if valid and justifiable as required under
the Omnibus Rules on Leave because supporting
documents were not attached. Also, no documents
were attached to support the payment for Salary
Differential.

The above transactions were incurred during

the term of the previous bookkeeper; Ms. Brenda
Buenviaje who resigned on August 1,2018, however
these three disbursement vouchers were submitted
to our office only on August 13, 2018 without
supporting documents attached.

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The School’s practice of not complying with

the minimum documentary requirements affects the
legality, propriety and validity of disbursements
contrary to the afore-cited provisions of PD 1445
and COA Circular No. 2012-001.
4 AOM No. Various purchases of supplies and materials We recommended that The management
2019-003(18) totalling to ₱90,522.78 were recorded as management: agreed to comply
Date: January outright expense instead of recognizing the with the
10, 2019 appropriate inventory account and being a. Instruct the recommendation
accounted as expense only upon issuance to end- Bookkeeper to observe and committed to
users contrary to the perpetual inventory system the perpetual implement it this
required under Chapter 8 of the Government inventory system in CY 2019.
Accounting Manual (GAM), Volume I, thus recording and
increasing the risk of possible misstatement of accounting for
the financial statements and loss of inventory. supplies and materials;
b. Require the Property
Chapter 8 of GAM for NGAs, Volume I Custodian to
provides the following specific guidelines and implement a sound
procedures on acquisition, recognition and issuance internal control in the
of inventory: issuance of supplies
and materials by
Section 9. “Supplies and materials preparing RIS and
purchased for inventory purpose shall be RSMI and forward the
recorded using the perpetual inventory same to the
system, resulting in a more accurate Bookkeeper for proper
inventory records and a running total for the recording;
cost of goods sold in each period. The c. Direct the Bookkeeper
system requires accounting records to show and the Property
the amount of inventory on hand at all times Custodian to conduct
through the maintenance of the Supplies periodic reconciliation

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Ledger Cards (SLC) (Appendix 57) by the between the Supply

Accounting Division/Unit and Stock Card Ledger Cards and
(SC) (Appendix 58) by the Supply and/or Stock Cards to present
Property Division/Unit for each item in more accurate and
stock. Regular purchases shall be coursed reliable balance of
through the inventory account and issues Inventory and Expense
thereof shall be recorded as they take place account.
except for supplies and materials purchased
out of PCF for immediate use or on
emergency cases which shall be charged
directly to the appropriate expense
accounts.”

Section 16. Procedures in the Requisition

and Issue of Inventory Items, Sequence No.
11 and 12. “Stock Card Keeper in the
Supply Division shall receive signed RSMI
and forwards to the Accounting
Division/Unit the original copy of RSMI
together with original RIS and files Copy 2
of RSMI. The Accounting Division then
receives the original copy of RSMI and
original RIS, checks and verifies the
completeness of information, retrieves SLC
from file and fills up the “To be filled up in
the Accounting Division/Unit” portion of
RSMI, records the RSMI in the SLC, signs in
the “Posted by/date” portion and prepares
JEV in two (2) copies based on the RSMI to
record the issue of stock.

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It was noted during the audit that the agency

failed to adopt the perpetual inventory system in
recording supplies and materials. Examination of
the accounts disclosed that purchases of office
supplies and other supplies and materials for the
period January 1, 2018 to November 30, 2018
totalling to ₱90,522.78 were immediately recorded
as office supplies expense and other supplies and
materials expenses instead of recognizing the
appropriate inventory account and being accounted
as expense only upon issuance to end-users contrary
to the perpetual inventory system required under
Chapter 8 of the Government Accounting Manual
(GAM), Volume I.

The new bookkeeper was designated on

August 3, 2018 and it was already the practice of the
agency to record purchases of supplies and materials
as expense outright. Moreover, the Property
Custodian did not prepare and submit to the
bookkeeper the required RIS and RSMI which
should be the basis in recording the expense.

In view of the foregoing deficiencies, there is

a risk of possible misstatement of the financial
statements due to inaccuracy, and risk of possible
loss of inventory due to weak internal control.

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5 AOM No. Ordinary or regular office supplies totalling to We recommended that Management The Audit Team
2019-004(18) ₱90,552.78 procured by the agency were not done Management direct the settled to will monitor the
Date: January through PS-DBM but instead adopted the shopping concerned officials to implement the compliance of
10, 2019 mode of procurement contrary to the provision of procure regular or recommendation the school.
Sections 8.1.2, 8.2.3 (b), and 52.1 (b) of the IRR-A ordinary office supplies starting this
of R.A 9184, and GPPB Resolution No. 012-006. through PS-DBM before January, 2019.
The non-compliance with subject requirement of resorting to the other
law negates the basic principle of transparency, alternative mode or
efficiency, and economy in government shopping. In case of
procurement process. availability of stocks,
attach to the Disbursement
The 2016 revised IRR of RA No. 9184 as Vouchers the Agency
contained under the Government Procurement Procurement Request duly
Policy Board (GPPB) Resolution No. 13-2016 acted by the PS-DBM and
presents the pertinent provision: Price Quotation and
Stocks Availability
8.1.2 To take advantage of the significant built- Certification on the items
in efficiencies of the PhilGEPS and the volume which are available on
discounts in bulk purchasing, all Procuring stocks. In case of non-
Entities shall utilize the PhilGEPS for the availability of stocks,
procurement of Common–Use Supplies in check for the notation on
accordance with the rules and procedures to be the Agency Procurement
established by the GPPB. Request on the
information whether out-
8.2.3 (b) Procuring Entities shall procure of-stocks, or non-common
common-use goods, supplies, materials and office supplies as basis in
equipment from the Electronic Catalogue in the resorting to the other
PhilGEPS. To be able to use the PhilGEPS, alternative mode or
Procuring Entities shall be required to register shopping.
and designate the officials or personnel

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authorized to transact with and operate the

PhilGEPS from such Procuring Entities
terminals.

GPPB Resolution No. 012-006 entitled

“Providing for the Definition and Scope of
“Ordinary or Regular Office Supplies” for the
Procurement Through Shopping under Section
52(b) of the IRR-A of RA 9184 also prescribes
that the alternative mode of shopping could be
resorted to but shall be subjected to the rule that
the supplies or equipment must not be available
in the Procurement Service of DBM (PS-DMB).

During our audit, it was observed that all

purchases of common-use supplies totaling to
₱90,552.78 was made by the school from various
outside suppliers other than the PS-DBM.

Verification of the disbursement vouchers

from January 1, 2018 to November 30, 2018
disclosed that no certification of non-availability of
stocks issued by the PS-DBM was attached. This is
a requirement under the above-mentioned
provisions before resorting to the alternative mode
of shopping in the purchase of office supplies.

The non-submission of the required

certification from PS-DBM as to non-availability of
supplies and non-attachment to the disbursement

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vouchers for purchases done through shopping

method is contrary to RA 9184 and GPPB Res. No.
012-006. Further, the non- compliance with subject
requirement of law negates the basic principle of
transparency, efficiency, and economy in
government procurement process.

PREPARED BY: REVIEWED BY:

ROWENA C. CAGURANGAN RITA R. PABLO

OIC-Audit Team Leader OIC-Regional Supervising Auditor

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