bpsc audit report v12doc

7/28/2019 BPSC Audit Report v12doc

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04 July 2012

FOR : ABETO A. UYChairman

FROM : INTERNAL AUDIT DEPARTMENT

SUBJECT : UPDATE ON BPSC AUDIT OF CASH

CC : BMY, ECC, JCC

We submit the result of our audit of cash conducted last June 19, 2012 to July 7, 2012 at BicolPremium Steel Corporation Legaspi City.

Initial objective was to determine the accountability of the Legaspi Office Cashier in view of thereported discrepancy by the Treasury Manager.

1. CASH MANAGEMENT AND CONTROL

1.1. Petty Cash Fund and Revolving Fund

1.1.1. Cashiers Accountability

o As of the audit date June 19, 2012; we have accounted the cashiers

accountability as summarized below:

Accountability:

*Petty Cash Fund (Per Record)

Petty Cash Fund 20,000.00

Borrowed from Employees. See Annex A 21,047.50Total 41,047.50

**Petty Cash Fund (Per Count)

Bills and Coins -

Checks (For Replenishment) Schedule 1 15,294.41Unreplenished Expenses Schedule 2 19,506.15

PER

RECORD

PER

COUNTDIFFERENCE

Petty Cash Fund/Revolving Fund 41,047.50* 35,215.56** (5,831.94)


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Advances Schedule 3 415.00

Total Cash & Non-Cash Items 35,215.56

1.1.2. Practice Standard Procedure

o Based on the memorandum issued by Mr. EC Castro to BPSC personnel, the

following standard procedures are as follows:

BPSC maintains Petty Cash Fund and Revolving Fund in both Legaspiand Naga at P10,000.00 each or a total of P40,000.00. These are underthe custody of treasury staffs.

Petty Cash Fund is used to pay expenses of up to P1,000.00 perpayment.

Revolving Fund is used to pay expenses of up to P1,999.00 per individualpayment.

All Hardware and supplies are paid via check even when the amount isless than P2,000.00

Expenses of P2,000.00 and above are paid via check.

1.1.3. Procedural Deviation

o There were fourteen (14) instances that Payment Request Form of

employees without approval by the General Manager but the employeeswas able to claim their advances and reimbursements amounting toPhp2,602. See Schedule 4

o Expenses more than PHP 1,999 are withdrawn from PCF, instead of paying

through check. See Schedule 5

1.1.4. Physical Control

o There is no cash box to secure Petty Cash Fund and undeposited

collections, Collections and personal money of the Cashier are co-mingled.

1.1.5. Internal Control

o The Cashier also performs the following:

- Encode Provisional Receipt in the Peachtree AccountingSystem.

- Prepare the Accounts Receivable schedule.

The other two functions defeat the internal control of check and balance.

o We were not able to find any cash count conducted by the previous Finance

Head to check the Cashier. Although two (2) instances of cash countdocumentation was found dated June 13, 2012 and June 14, 2012. It mustbe noted that the cash count was conducted only after the visit of theTreasury Manager.


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Recommendation:

Recommended Internal Control and action plans are as follows:

a. Finance department BPSC must strictly observe the Policy on PettyCash Fund and Cash Advances especially the requireddocumentation.

b. Adequate segregation of duties reduces the likelihood that errors(intentional or unintentional) will remain undetected by providing forseparate processing by different individuals at various stages of atransaction and for independent reviews of the work performed. The

basic idea underlying segregation of duties is that the personrecording the receipt should not be the same as that making thedeposit. Additionally, a person independent of recorder and depositorresponsibilities should reconcile the deposit to the general ledger.

c. Make timely deposits. The sooner you deposit cash/checks the lessexposure to theft or loss of funds. Ideally deposits should be madewithin 24 hours or the next banking day.

d. Daily cash count by the Finance Head of the cashiers accountabilitiesfor the day. Safekeeping of fund and collection at the end of the daymust be assigned to the Finance Head. The Finance Head will also

act as the alternate cashier.

Another matter of concern is the management and control with regards to

extension office in Naga. No senior employee to monitor and implement

controls for the cashier.

1.2. Collections

1.2.1. Undeposited Collections

o As of the audit date June 19, 2012; we have accounted the total undepositedcollections as summarized below:

See Schedule 6 and 7 for Undeposited Collection per Record and per Count.

PERRECORD

PERCOUNT

DIFFERENCE

Collections. 658,805.47 657,330.94 (1,474.53)


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Recommendation:

Cash receipts should be deposited intact on the next banking day. Passbookshould always be updated.

1.2.2. Unauthorized Use of Collection

o Collection was short by Php1,474.53 because the temporary cashier

(Marivic Sabater) used the Cash Collections for Cash Advances &Reimbursements on June 18, 2012 without the approval of GM. However,the said amount was returned on June 20, 2012.

Recommendation:

Policy on Receipts and Collections states that Collections must not be co-mingled with other Treasury Funds such as petty cash fund and revolvingfund. Collections must be intact for deposit. Therefore, Collections must notbe used for any other purpose such as payment for cash advance orreimbursement of employees.

1.2.3. Daily Collection Report

o Nine (9) Instances of DCR non-preparation. There are instances of delay of

deposit and unreflected collections in the daily collection report. However,these items reflect on the other business day.

Recommendation:

Prepare the Daily Collection Report with the attached the Provisional Receiptsand validated Bank Deposit Slip.

1.2.4. Internal Control

o Same as control in Fund

1.2.5. Accounting of Provisional Receipt

Series

Audit RemarksFrom To5001 5600 missing

5601 5750 complete

5751 5800 missing

5801 6250 complete

6251 6300 6284 Missing

6301 6350 6334 6335 Missing

6351 6400 6368 6371, 6386 Missing

6401 6450 complete


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6451 6500 6479 Missing

6501 6550 6523, 6531, 6541, 6550 Missing

6551 6600 6565, 6568, 6569 Missing

6601 6650 6635, 6647 Missing

6651 6700 6673 6674, 6676, 6682, 6683, 6699 Missing

6701 6750 6716, 6718 Missing

6751 6800 6752, 6756, 6761, 6762, 6765, 6766, 6770, 6774, 6778,6785, 6786, 6799, 6800 Missing

6801 6850 6824, 6825, 6829, 6830, 6831, 6847, 6848 Missing

6851 69006857, 6858, 6861, 6872, 6877, 6890, 6894, 6897, 6984

Missing

6901 6950 missing

6951 7000 6984 - Missing

7001 7050 complete

7051 7100 7054, 7062, 7072-7079 Missing

7101 7150 complete

7151 7200 7176 last used

7201 7500 Unused and intact

o Fifty Eight (58) Provisional Receipts are still unaccounted as of audit date.

Recommendation:

Maintain a log of all Provisional receipts used and issued. The log can be inmanual or electronic format and should contain the amount received, the name ofthe payer, purpose of the payment and its form (cash or check). The Pink Copyof the Provisional Receipt must not be detached and maintained in the bookletand acknowledged by the Sales Engineers.

1.2.6. Practice for Hold and Bounced Check

o Six (6) instances of bounced check. No clear cut guidelines or

documentation with bounced checks. Only the cashier knows the bouncedchecks.

Customers' Name Bank/Check no. Date Amount

Mapland Holdings and Real EstateDevelopment, Inc.

LSBI 5295808 01-Oct-11 27,000.00


LSBI 5517263 17-Mar-12 25,640.00


LSBI 5517264 21-Mar-12 25,160.00

Monbil Construction BDO 0096500 30-Apr-12 30,703.69

Electro Dynamic Const. & Devt Inc BDO 0239734 17-Jun-11 54,600.00

Steven Construction LBP 004690 25-Apr-12 297,899.30

o Eight (8) checks amounting to Php 203,901.05 are still undeposited even

though it is already matured and ready for deposit.

Recommendation:


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a. To ensure proper cash projection, utilization, and collection, theFinance Head and the GM must be informed of any bounced check andfor deferment of deposit.

b. Customers request for any deferment in deposit must be documentedand evaluated by Finance Head and GM.

1.2.7. Multiple Application of Payment

o Twenty (20) instances of customers payments equivalent to Sales Contract

amount was divided into multiple partial deposits. These instances affect theAccounts Receivables Account. See Schedule 8

o Sixteen (16) instances of bank deposits were divided into multiple customers

whose payments are either full or partial. Three of the sixteen deposits are

for check clearing but still managed to divide it into multiple customers.These instances affect the Accounts Receivables Account. See Schedule9

Recommendations:

The practice of multiple application of collection to various customers should bestopped immediately.

The above practice is a possible indication to cover-up fraudulent activities. Wewere not able to question the Cashier the motive of her actions.

2. ACCOUNTS RECEIVABLE

In view of the findings in collections, we opted to conduct a limited random checking ofAccounts Receivable with the following results:

1. Three (3) instances of documented collection not reflected in Cash ReceiptsJournal and Accounts Receivable.

2. One (1) instance of bounced check but no adjustments made in the AccountsReceivable.

3. Six (6) instances of check collection (one check) wherein the application ofpayment was made to various customers accounts.

See Schedule 10

Therefore, we have reservation on the correctness of the presented AccountsReceivable listing and balances as of audit date. Furthermore, inquiry with the GeneralManager indicates that no updated listing was provided to him since February of 2012.

Recommendation:


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a. The new Finance Head should facilitate the preparation of Financial Statements andbank reconciliation.

b. Conduct actual confirmation of the Accounts Receivable with the customers includingthose recently closed in year 2012.

3. OTHER CONCERN

3.1. Cash advances treated as outright expense

o Thirty-seven (37) cash advances through Check Voucher verified for the period of

April 27, 2012 to June 16, 2012 have no liquidation statement submitted andtreated as outright expenses instead of advances to officers and employees. SeeSchedule 2

Recommendation:

Strictly observe the requirements stated in the Policy on Petty Cash Fund and CashAdvances.

3.2. Special Transactions

3.2.1. No documented approval from management was found regarding thefollowing:

a. House Account Commission. See Annex C

b. 2011 Christmas Party Budget. See Annex D

3.2.2 Branch Managers Cash Advance as of July 4, 2012 amounted toPhp46,937.48. We checked 36 documentations of Managers cashadvances, reimbursements and liquidations and noted the following:

a. Nine (9) Cash advances have no approval of Alan S. Yu.b. Five (5) Liquidations of expenses have no approval of Alan S. Yu.c. Three (3) Reimbursements of expenses have no approval of Alan S.

Yu.d. One (1) Cash advance intended for General Managers Plane Ticket

have no approval of Alan S. Yu.

e. One (1) Cash advance intended for Emergency Purchase of Batteryhave no approval of Alan S. Yu.

See Schedule 11

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