LAND TRANSPORTATION OFFICE NCR STATUS REPORT ON THE COA CONSOLIDATED FINDINGS FOR CY-2007 ANNUAL AUDIT REPORT

T (RA FUND-101)

SEPTEMBER 03, 2008 COA OBSERVATIONS Unreliable Property, Plant and Equipment 1. At least twenty three per cent of P132.2 million of the total consolidated Property, Plant and Equipment (PPE) balance of P573.20 million as of December 31, 2007, was doubtful due to absence of reconciliation of various PPE accounts of LTO Regional Office Nos. II, VI, VIII and NCR caused by the absence of physical inventory and updated property cards and property and equipment ledger cards. 1.3 In LTO-NCR, recording of transactions in the Property Equipment Ledger Cards is not updated. As at year-end, the agency has total PPE Account balance of P66.97 million. 1.4 Likewise, the above LTO Regional Offices did not conduct Physical inventory of their properties during the year to determine the existence and condition of the asset. RECOMMENDATIONS/ MANAGEMENT COMMENTS We recommended that the management instruct/direct the Property/supply Officers and Accountants of LTO Regional Office Nos. II, VI, VIII and NCR maintain and update their property cards and PPE ledger cards for all items of property and equipment, conduct physical inventory once a year and reconcile their records. STATUS/ACTION TAKEN Reconcilation of the balances of PPE accounts with the Property Section is now on-going. The PPE inventory for CY-2007 was only received by the Accounting Section on July 10, 2008. Recording, adjustments and updating the SL for this account will be made prior to the closing of books (101) for CY-2008

COA OBSERVATIONS Inaccurate balances of inventory accounts 4. Several internal control measures prescribed in the NGAS manual to facilitate accurate reporting of inventory accounts through check and balance and reconciliation procedures, were not fully implemented by LTO Regional Office Nos. II, V, VI, VII, X and NCR resulting in inaccurate balances of inventories accounts as at year-end. 4.2 The inventory accounts of LTO Regional Offices No. I,, II, VII, VIII and the National Capital Region also have inaccurate balances at year-end 4.8 NCR issuances of accountable forms, plates, tags and stickers were not yet recorded in the books due to the delay in the preparation and submission of the Consolidated Monthly Report on Accountability for Accountable Forms, Plates, Tags and Stickers (CMRAAFPTS) by the Property Officer. The basis of recording issuances of inventory items was still the Report of Accountability for Accountable Forms, Plates, Tags and Stickers RAAFPTS) prepared by the Supply Officer, While the RAAFPTS shows the various issuances made by the Supply Officer to various LTO-NCR offices, the CMRAAFPTS shows the issuances made by the various district/extension/licensing and renewal centers which is the important information to record as expense the actual quantity and cost of several accountable forms, plates, tags and stickers issued to motor vehicle registrants and driver license applicants. 4.13 The quantity of accountable forms, plates, tags and stickers received by the Accounting Section of LTO-NCR did not tally with the Property records. The quantity appearing in the Report of Accountable and Non-Accountable Forms Issued (RAAFI) and Report of Supplies and Materials Issued (RSMI) did not reconcile with the Invoice Receipt of Accountable Forms, Plates, Tags and Stickers (IRAF) which shows the actual quantity received by the LTO-NCR. The difference could not be determined because the supporting documents from LTO- Main did not indicate the inclusive serial numbers of the accountable

RECOMMENDATIONS/MANAGEMENT COMMENTS

STATUS/ACTION TAKEN

The report submitted by the Property Section will be evaluated to determine if it comply with the NGAs requirement and can be use to substantiate any recording or Management Comment: adjustments of inventories in The supply Officer said that the personnel In-charge of the the books of accounts. supplies inventory in the Property Section was on leave. The Supply Officer, this Region 4.12 We recommended that management require the was directed to submit the Supply Officers of LTO Regions V, VI, VII, X, XII and NCR to required reports on time to the prepare the RSMIs and JEVs for issued, returned, damaged Regional Accountant for proper inventory items and submit them on time to the agencys recording in the books of Accountant for recording in the books of accounts. accounts.

4.17 We recommended that management instruct the collecting and other accountable officers of LTO Region V and NCR to prepare a complete and accurate Report of Accountability for Accountable Forms (RAAF) in a form prescribed in the NGAS Manual and submit the same on time to the Supply Officer for consolidation and submission to the Accounting Office.

The supporting documents for JEV transferred by the LTO Main Office contain the serial numbers of accountable forms, plates, tags and stickers, issued to this region. In addition, our Office had already coordinated with the LTO Sectoral Office

forms to facilitate reconciliation with Property records. 4.20 LTO Regional Office No. X and NCR did not conduct physical inventory of their inventory items with a balance of P83,529,346.80 as of December 31, 2007 ( P80,571,257.42 for NCR). As provided in Section 490, Volume I, of the Government Accounting and Auditing Manual (GAAM), physical stock taking is an indispensable procedure to ascertain the existence of reported assets and check the integrity of property custodian. Management Comments: The supply Officer said that the personnel-in-charge of recording the receipt and issuance of supplies in the Property Section was on leave, thus the updating and reconciliation of property records with the accounting records could not be performed. Also , the Accounting Section alleged that the office lacks manpower and sufficient time to update and reconcile their records.

relative to this matter per letter dated 28 February 2005. We have taken note of this recommendation. Reports from Property Section some reports were already submitted to the Accounting Section for review prior to recording of any adjustments to be made before the closing of CY-2008 books of 4.23 We recommended that the management instruct the accounts. Supply Officers of LTO Region X and NCR to perform periodic physical count of inventories in accordance with Section 490, Volume I of GAAM; require Inventory Team to submit the Physical Inventory Report on the Inventories of the region; and instruct the Accountant and Property Officer to reconcile their SLCs and SCs in accordance with Section 4(I), Volume I of the NGAS Manual to identify and correct the discrepancies in the property and accounting records. Physical count of inventories were conducted and already submitted to your Office on April 21, 2008. Updating and reconciliation of SLC and SC is now ongoing.

4.25 Audit of the inventory accounts of the following LTO regional offices revealed that the above regulations are not strictly implemented, thus, the correctness and accuracy of the reported balances of such accounts as at yearend could not be established:

4.28 We recommended that management require the Property Officers and Accountants of LTO Regions II, V, VI, VII, X and NCR to maintain updated stock card and subsidiary ledger cards for various inventory items/ accounts of the agency as prescribed in Section 43, Volume In LTO-NCR, the regional audit team noted that the Accounting Offices SLCs I of the NGAS Manual, and reconcile them regularly as and Property Offices SCs were not updated and reconciled. provided in Section 4(I), volume I of the same manual to identify and adjust the discrepancies in the property and account records.

COA OBSERVATIONS Non-deposit/delayed deposit of collections 7. Collections of LTO Regional Offices Nos. III, IV, X, XII and NCR were not deposited promptly and intact to the authorized government depository bank in violation of Sections 21 and 22 of the NGAS Manual and COA-MOF Joint Circular No. 1-81.

RECOMMENDATION/ MANAGEMENT COMMENTS Management Comments: The management assured the team that actions shall be taken on the collecting officer of Makati DO regarding the discrepancies in his collections.

STATUS/ACTION TAKEN The Collecting Officer of LTO Makati District Office was immediately relieved last February 22, 2008 and reassigned in the Finance and Management Division after the result of the spot monitoring report by the Finance Officer on the shortages. This matter has been forwarded to the Legal Officer, this Region for appropriate legal action.

7.2 Our audit showed that in NCR, Regions III, IV, VII and X collections were not We recommended that management advise the collecting deposited intact and at the required schedule ( NRC- Makati District Office 1-15 officers of LTO Regions III, IV, VII, X, XII and NCR to deposit days). their collections promptly and regularly especially during Fridays or days prior to holidays, to avoid the risk of loss/theft and misappropriation

COA OBSERVATIONS Inaccurate recording of collections and deposits 8. Discrepancies in the Reports of Collections and Deposits submitted by the collecting officers of Manila West, San Juan and Makati District Offices, all of LTO National Region, were not detected due to lack of reconciliation and review by the Accountant of the LTO National Capital Region and the certifying officials of the concerned district offices, in violation of Section 23, Chapter 3, Volume I of NGAS Manual and LTO Memorandum Circular No. 89-101. 8.1 Section 23, Chapter 3, Volume I of NGAS Manual requires the Head of the Cash Unit to review the Reports of Collections and Deposits prepared by the collecting officers before recording in the books of accounts. The reports shall be the basis in preparing the JEV for recording in the Cash Receipt Journal/Cash Journal as the case may be (Section 57, Chapter I, Volume II of the NGAS manual). 8.3 Comparison of the amounts posted to the subsidiary ledgers and the Reports of Collections and Deposits of the Manila West and San Juan District Offices on selected months in 2007, showed differences in amounts ranging from negative P169.06 to positive 117,000.00. 8.4 Likewise, comparison of the Report of Collections and Deposits against the computer-generated Abstract of Collections/Deposits for the month of January to December 2007 of the Makati District Office, also revealed discrepancies ranging from P.25 to P550,000.00 . 8.5 We also noted that the ending balance of September 2007 which should be the beginning balance of the Report of Deposits for the month of October 2007 was taken up as P1,342,276.50 in the books of the Makati DO instead of P1,442,276.50 or a difference of P100,000.00. 8.6 Discrepancies in the reported amounts of collections and deposits in prior

RECOMMENDATIONS/MANAGEMENT COMMENTS

STATUS/ACTION TAKEN Analysis of financial reports and spot monitoring of collecting officers are regularly done by the Finance and Mgt Division. The Finance Chief is conducting a detailed financial audit of the Collecting Officer at Manila West. A memorandum to the Collecting Officer of San Juan District Office has been issued to deposit the mentioned shortages and a detailed financial audit for San Juan District Office will be done accordingly.

The discrepancies in the financial reports of the Collecting Officer of Makati District Office has been incorporated in the report submitted by the Finance Officer and the internal auditor of this region.

years could still occur pending the result of the audit/cash examination of the accountabilities of the collecting officers. 8.7 While LTO Memorandum circular No. 89-101 requires the Regional Finance and Management Division Chiefs to conduct monthly reconciliation of the accounts of all accountable officers, reconciliation of the differences in the collections and deposits of the above three LTO-NCR District Office and other LTO regional offices that may have unreconciled balances, could not be facilitated because of the following: Bank Statements on the accounts are not regularly submitted by the Land Bank of the Philippines (LBP) to the agency. Likewise, confirmation letters are not sent by the agencys accounting Unit to the LBP. Lack of review of the Reports of Collections and Deposits by the certifying official and the head of Accounting Unit against the actual amounts in the abstract of Collections/Deposits generated by the computerized revenue Collection System resulting in the nondetection of erroneous postings to the subsidiary ledger and consequently to the general ledger. Subsidiary ledgers (SL are not updated thus reconciliation of the collecting officers cash records with the SL is not conducted regularly Validated deposit slips are not traced to the RCD by the Accounting Unit The computerization of LTOs Revenue Collection Systems covers only up to the preparation of the Summary of Collections for Registration and Licensing Transactions (SCRLT). Succeeding processes such as the preparation of the monthly Report of Collections and Deposits (RCD) are prepared manually by the collecting officers of the district and extension offices, licensing and renewal centers and certified correct by the concerned head of offices or the duly designated head of office. Erroneous transfer of amounts from the SCRLT to the RCD may therefore occur, as in the case of the Makati District Office, especially of the prepared RCDs are not compared against the computergenerated SCRLT by the certifying officials and accountants.

8.8 a. Require the Accountant of LTO-NCR and the certifying officials on the SCRLT in the district/extension offices and licensing and renewal centers, to review and determine the correctness and accuracy of reported amounts in the RCDs by comparing the balances in the computer-generated Abstract of Collections/Deposits with the RCDs manually prepared by the collecting officers to detect attempts of the collecting officers to understate collections and overstate deposits and manipulate records; b. Compel Land Bank of the Philippines to submit regularly bank statements and confirmation letter s to LTO accountants; and require the accountants to reconcile regularly the accountabilities of the collecting offices by comparing banks statements issued by LBP against the reported SL balances; and assign additional personnel at the Accounting Section to assist in the review of Abstract of Collections and deposit slips and RCD before recording collections and deposits in the books of accounts; and

This matter has been discussed with the Accountant to verify the accuracy of financial reports submitted by the Collecting Officers.

This Office has been in constant communication with the Land Bank of the Phils. regarding the regular submission of bank statement/s and confirmation.

Additional personnel will be assigned in the Finance and Management Division as soon c. Take appropriate disciplinary actions against the as the ban on the hiring of new collecting officers of Manila West, Sa Juan and Makati employees has been lifted. District Offices for misstating their collections and deposits.