BY GEROME DALIPE IV
ILOILO City – The Commission on Audit (COA) has called out the Iloilo State University of Fisheries and Technology (ISUFST) for erroneously recording income accounts totaling P6.201 million.
In its annual audit report, COA noted that these errors violated COA Circular No. 2020-001 issued on January 8, 2020, as well as Paragraph 27 of the International Public Sector Accounting Standards (IPSAS) 1, which prescribes the proper classification and recording of income.
State auditors reported that the inaccuracies resulted in the overstatement of other gains, income from other sources, and other business income accounts, as well as understatement of miscellaneous income, rental income, and trust liability accounts.
COA Circular No. 2020-001 and Paragraph 27 of the International Public Sector Accounting Standards (IPSAS) 1 mandates the accurate use of revised income classifications for proper recording and reporting.
ISUFST’s misclassification led to overstated and understated accounts, compromising the integrity of its financial reports, according to COA.
Likewise, Paragraph 27 of IPSAS 1 requires financial statements to present a fair representation of an entity’s financial position, performance, and cash flows.
Fair presentation necessitates the faithful representation of transactions and compliance with IPSAS standards on asset, liability, revenue, and expense recognition criteria.
In its audit findings, the COA identified discrepancies in the ISUFST financial statements, specifically in the improper classification of income accounts.
Upon verifying pertinent documents and analyzing the balances of income accounts, COA noted that proper accounts were not used to record various collections.
One key issue highlighted was the improper recording of liquidated damages related to delays in infrastructure projects.
The sum of P0.567 million was inaccurately classified under the “other gains” account. COA emphasized that the receipt of liquidated damages should instead be credited to the Miscellaneous Income account, in accordance with the prescribed accounting standards.
The liquidated damages were classified as “other gains,” which led to the distortion of the financial records.
The correct classification for liquidated damages is under miscellaneous income, as it is considered a non-recurring income from penalties related to project delays.
In the audit findings, COA also pointed out that collections under the account “income from other sources” were not properly classified.
These collections should instead be allocated to miscellaneous Income and Trust Liability accounts as per the prescribed guidelines.
The audit findings also revealed misclassification of other business income amounting to P4.855 million.
The auditors noted that the Income from various income-generating projects (IGP) was wrongly included under the “other business income” account.
Income from these IGPs should be classified under accounts specific to the type of income, such as rent/lease income, income from hostels/dormitories, and other business income, among others.
Fees for issuance of clearances and certifications, requested by students amounting to P13,440 were inaccurately recorded under an inappropriate account.
These fees should be credited to other school fees, under the school fees account.
In addition, auditors also discovered that income from services such as gym rental, function hall and hometel rentals, as well as garment production and toga rental by graduating students totaling to P372,232 was wrongly recorded under other service income.
This income should be credited to rent/lease income, income from hostels/dormitories and other like facilities, and other related accounts.
The errors occurred due to insufficient diligence from the accountants in properly verifying the classification of the collections before posting them to the books.
COA advised ISUFST to immediately rectify the erroneous entries to ensure the integrity of its financial reports.
Proper classification and adherence to established accounting standards are crucial to avoid misrepresentation of the institution’s financial position and performance.
The auditors asked the university to require accountants to use the proper account codes and titles provided in the Revised Chart of Accounts (COA Circular No. 2020-001) when recording income accounts.
COA said such measures will help ensure that the classifications of various income accounts are consistent with the prescribed standards, preventing misclassification and ensuring compliance with accounting regulations.
This will also ensure that all income transactions are accurately recorded to avoid overstatements and understatements in the financial accounts.
The auditors also directed ISUFST to conduct accurate transaction recording to ensure that the financial statements accurately reflect the university’s financial performance, minimizing the risk of misrepresentation.
The audit emphasized the importance of compliance with accounting standards to uphold the integrity of ISUFST’s financial statements.
Corrective measures will ensure accurate representation of the university’s financial performance and compliance with regulatory requirements.
By addressing these issues, COA noted that ISUFST can enhance transparency and accountability in its financial reporting processes./PN
