Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. IV-B (MIMAROPA)
Local Government Sector-B Oriental Mindoro
Audit Team No. R4B-02
2F Confil Building, Lumangbayan, Calapan City

AOM No. Victoria-17-001 (16)

Date: May 8, 2017

AUDIT OBSERVATION MEMORANDUM (AOM)

For: Hon. JOSELITO C. MALABANAN

Municipal Mayor
Municipal Government of Victoria
Victoria, Oriental Mindoro

Attention: The Municipal Accountant

We have audited the accounts of the Municipal Government of Victoria for Calendar Year
(CY) 2016, and observed the following deficiency/error:

The Municipality of Victoria has no Subsidiary Ledger (SL) maintained to account

the breakdown or details of the transactions and the special accounts of the Municipality,
thus resulting in difficulty in monitoring and detecting unrecorded and erroneous
recording of the transactions of the Municipality of Victoria, contrary to Section 114(2) of
Presidential Decree (PD) No. 1445 and Sections 10 and 107 of Manual on New Government
Accounting System (MNGAS), Volume I.

Section 114 (2) of PD No. 1445 states that subsidiary records shall be kept where
necessary.

Moreover, Section 10 of MNGAS, Volume I provides that:

Subsidiary Ledger (SL). The Subsidiary Ledger is a book of final entry

containing the details or breakdown of the balances of the controlling account
appearing in the General ledger. Postings to the subsidiary ledgers generally
come from the source documents. Examples of general ledger accounts which
has subsidiary ledgers are Cash Disbursing Officers, Cash in Bank Local
Currency Current Accounts, Accounts Receivable, Accounts Payable, Special
Accounts in the General Fund, etc. The totals of the subsidiary ledger balances
shall be reconciled to their respective control account at the end of every month.
(Emphasis Ours)
 Section 107 of MNGAS, Volume I further requires that each special account shall be
maintained through the use of complete subsidiary ledgers to record the assets, liabilities and
equity. (Underscoring Provided)

Records of the Accounting Office show that as of December 31, 2016, the Municipality
of Victoria has no SL maintained to account the breakdown or details of the transactions and the
special accounts of the Municipality, contrary on the above-mentioned provisions.

Interview with the Municipal Accountant disclosed that schedules for breakdown of
payable accounts were attached to the submitted financial statements to support the balances of
accounts in the General Ledger. However, such schedule does not provide details of the
transactions of each creditors such as grant and payment, thus resulting in difficulty in
monitoring and detecting unrecorded and erroneous recording of the transactions.

She further commented that SLs were not prepared and maintained due to lack of
manpower in the Accounting Office. Consequently, the Audit Team could not monitor nor detect
unrecorded and erroneous recording of the transactions of the Municipality. It also added to the
difficulty in determining the correct balance of the accounts. Thus, casted doubt on the
correctness, accuracy, completeness, and reliability of the accounts stated in the financial
statement.

We recommend that the Municipal Accountant assign one personnel to maintain SL

for special accounts to determine the correctness of the balances appearing in the general
ledger and facilitate monitoring and detection of unrecorded and erroneous recording of
the transactions of the Municipality pursuant to prescribed rules and regulations.

May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.

MA. VANESSA ROSSAN I. MADAYAG

State Auditor III/OIC-Audit Team Leader

MARISSA ORCULLO BAYOT

Supervising Auditor