Common COA Audit Findings on Government Property, Plant and Equipment (PPE) – Non-submission Of Complete And Accurate Inventory Records

One of the most common audit findings of the Commission on Audit (COA) on government property, plant and equipment (PPE) among government agencies is the non-submission of complete, accurate or reliable inventory records by the Accounting and/or Property Office of the agency.

Due to the absence of inventory records, the auditor cannot ascertain the validity, accuracy and existence of PPE accounts recorded in the books of accounts of the agency which results to non-reconciliation of Accounting and Property records for PPE accounts, contrary to Section 42, Chapter 10 of the Government Accounting Manual (GAM) for National Government Agencies (NGAs), Volume I; hence, the need for the issuance of an Audit Observation Memorandum (AOM).

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Briefly, an AOM is an audit document issued by COA to government agencies, usually called as auditees, to inform them of deficiencies noted in audit related to financial/operational matters which do not involve pecuniary or monetary loss.

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How to fix this?

The quick fix is to immediately submit or provide the auditor the documents he/she requires. However, to effectively fix this, the agency needs to review its existing procedures to see if they comply with the requirements and procedures prescribed by COA as written in the GAM for NGAs.

Section 42 of the GAM for NGAs provides that the Chief Accountant should maintain a Property, Plant and Equipment Ledger Card (PPELC) for each category of PPE including work and other animals, livestock etc.

The PPELC is Appendix No. 72 of GAM for NGAs Volume II. It shall be kept in the Accounting Division/Unit for each class of PPE. It is used to record acquisition, description, custody, estimated useful life, depreciation, impairment, issuance, transfer or disposal, repair history and other information about the PPE.

In some agencies, this is easily done through the Electronic National Government Accounting System (ENGAS). Once a journal entry is made for the procurement of PPE, the ENGAS automatically records the PPE in the PPELC. However, if the ENGAS is not available, the PPELC needs to be prepared manually by using Appendix No. 72.

For check and balance, the Property and Supply Office/Unit shall likewise maintain Property Card (PC) for PPE in their custody to account for the receipt and disposition of the same. The PC is Appendix No. 70 in the GAM for NGAs Volume II. Periodically, the balance per PC shall be reconciled with PPELC maintained by the Accounting Division/Unit. They shall also be reconciled with other property records like the Property Acknowledgement Receipt (PAR) – Appendix No. 73.

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In the course of the audit of PPEs, the following forms/reports may also be required by the Auditor to account for PPEs:

a. Purchase Request (Appendix 60) – this form shall be used by the requisitioner to request for the purchase of PPE items not available on stock. It shall be the basis of preparing the Purchase Order (PO).

b. Purchase Order (Appendix 61) – this form shall be prepared by the Supply and/or Property Division/Unit to support the purchase of PPE, supplies and materials, etc. It serves as the contract between the entity and the supplier for the delivery of specified items based on the stipulations stated which was agreed upon during the procurement process.

c. Inspection and Acceptance Report (Appendix 62) – this form shall be used to report the result of the inspection made by the Authorized Inspector on the deliveries and the status of the accepted items by the Supply and/or Property Custodian. This form shall also be used for the inspection of repairs, infrastructures and reforestation projects.

d. Property Card (Appendix 70) – this card shall be used by the Supply and/or Property Division/Unit to record the description, acquisition, transfer, disposal, and other information about the PPE. It shall be kept for each class of PPE.

e. Property, Plant and Equipment Ledger Card (Appendix 71) – this card shall be used for each class of PPE to record the acquisition, description, custody, estimated life, depreciation, impairment, disposal, transfer/adjustment, repair history and other information about the property. It shall be kept and maintained by the Accounting Office/Unit.

f. Property Acknowledgement Receipt (Appendix 72) –This form shall be used by the Supply and/or Property Division/Unit to report the issuance of PPE and the acknowledgement of the end-user.

g. Report on the Physical Count of Property, Plant and Equipment (Appendix 73) – this form shall be used to report the physical count and condition of PPE by type as at a given date, including those which are unrecorded and those which could not be accounted for. It shows the balance of PPE per property cards and per count and the

In order to fully comply with the requirements of the audit of PPEs, ensure that all these documents are available once the auditor ask for them.

Source: GAM for NGAs, FY 2017 Annual Audit Report on the Financial Statement of the Philippine High School for the Arts, Commission on Audit