BY GEROME DALIPE IV
ILOILO City – The Commission on Audit (COA) has flagged the Iloilo Provincial Government for improperly recording disaster-related in-kind donations as inventories, resulting in an overstatement of P9.165 million in its financial accounts.
In its annual audit report, COA emphasized that this practice violates Paragraph 27 of the International Public Sector Accounting Standard (IPSAS) 1, which requires accurate classification and recognition of transactions, ensuring a fair presentation of an entity’s financial position.
The overstated amount pertains to disaster-related goods recorded under the Medical, Dental, and Laboratory Supplies Inventory account, despite these items being ineligible for inclusion in the books under existing rules.
COA Circular No. 2014-002 mandates that disaster-related in-kind donations, except for Personal Protective Equipment (PPE), should not be recorded as inventory.
Instead, they must be listed in the Registry of Donated Relief Goods for Disaster Risk Reduction and Management (DRRM), which the General Services Office (GSO) failed to maintain.
This lapse led to the absence of proper monitoring and transparency in the issuance and utilization of donated goods, further diminishing the accuracy of the financial records.
COA also pointed out that although donations amounting to P82,846.40 were issued in 2023, the corresponding entries were not recorded, contributing to discrepancies in the books.
COA emphasized that this misclassification affects the fair presentation of the financial statements, potentially leading to misleading information regarding the province’s actual resources and assets.
Paragraph 27 of IPSAS requires financial statements (FS) to present fairly the financial position, financial performance, and cash flows of an entity.
Fair presentation demands faithful representation of transactions and conditions in line with the definitions and recognition criteria for assets, liabilities, revenues, and expenses under IPSAS standards.
Likewise, COA Circular No. 2014-002 (Section IV.C.7) specifies that in-kind donations (except property, plant, and equipment or PPE) should not be recognized in the books of accounts.
Instead, they must be recorded in the Registry of Donated Relief Goods for Disaster Risk Reduction and Management (DRRM), to be maintained by the Property and Supply Unit for proper monitoring.
A review of the Capitol’s General Ledger (GL) for inventory accounts showed that donated goods amounting to P22.178 million, of which P9.165 million (recorded under Medical, Dental, and Laboratory Supplies Inventory) pertains to disaster-related in-kind donations after the quarantine period.
These donations were incorrectly credited to the Prior Period Adjustment account, contrary to prescribed accounting guidelines.
COA also reported the General Services Office (GSO) of the Iloilo Provincial Government failed to comply with COA Circular No. 2014-002, specifically its requirement to prepare and maintain the Registry of Donated Relief Goods for Disaster Risk Reduction and Management (DRRM).
Non-maintenance of registry
The GSO did not establish the required Registry, which should have recorded all disaster-related donations, including their receipts and issuances.
This omission led to insufficient monitoring and documentation of in-kind disaster-related donations.
Monthly reports submitted to COA were derived solely from the Provincial Health Office (PHO) without independent verification or a centralized system of recording. This approach compromised the accuracy and reliability of records.
The GSO focal person revealed that they were unaware of the requirement to prepare and maintain the Registry of Donated Relief Goods for DRRM, as mandated by COA Circular No. 2014-002.
Issuance reporting and discrepancies
The Provincial Health Office (PHO) reported total issuances of disaster-related donations amounting to P82,846.40 for CY 2023, leaving a balance of P9.082 million as of December 31, 2023.
However, no corresponding entries were made in the books for these issuances, creating a gap in accounting records.
The recording of P9.165 million disaster-related in-kind donations in the inventory account overstated both the inventory and prior period adjustment accounts, contrary to accounting guidelines.
The absence of the Registry and proper records resulted in diminished transparency and hindered effective monitoring and control of disaster-related donations.
The GSO focal person stated that once the job order support service is hired, the assigned personnel will be responsible for preparing and maintaining the required registries, including the registry of donated relief goods for DRRM.
Recommendations
During the exit conference, COA auditors advised the provincial government to direct the GSO to prepare and maintain the required Registry of Donated Relief Goods for DRRM.
The auditors asked the provincial government to rectify erroneous entries in the books to reflect accurate data and to strictly adhere to IPSAS guidelines to ensure transparent and accurate financial reporting.
The GSO assured COA that once the Job Order Support Service personnel are hired, they will assign someone to handle the registry and address compliance gaps.
COA emphasized that these measures are crucial for improving financial accountability and maintaining public trust in the provincial government’s disaster relief efforts./PN
