AUDIT OBSERVATIONS AND RECOMMENDATIONS
A) FINANCIAL AND COMPLIANCE AUDIT
Unreliable Local Road Network (LRN) balance - ₱286,016,299.73
1. The accuracy and reliability of the LRN account balance totaling ₱286,016,299.73
could not be ascertained due to the: (a) non-submission of a complete Report on the
Physical Count of LRN (RPCLRN) and Report on LRN (RLRN); (b) non-
maintenance of the LRN Ledger Card (LRNLC) and LRN Property Card (LRNPC)
showing a complete description and cost segregation of LRN components; and (c) lack
of full disclosure of the total road networks in the Notes to the Financial Statements,
contrary to COA Circular No. 2015-008, thereby affecting the fair presentation of the
account in the financial statements.
1.1. The contribution of infrastructure development to the economic advancement of any
entity cannot be denied. As the number of constructed roads and developed road
networks increases, there arises a need for efficient management systems given the
growing complexities of infrastructure development and the challenges that
characterize a growing economy. These challenges include aging infrastructure,
limited budgets for capital outlays, reduced staff resources amid increasing public
expectations, and demand for good governance. Thus, COA Circular No. 2015-008
dated November 23, 2015 was issued prescribing the “Accounting and Reporting
Guidelines on the Local Roads Asset Management System” for the fair presentation
of the Infrastructure Assets account in the financial statements.
1.2. The Circular covers the accounting guidelines for local roads and road network
systems on initial recognition, subsequent measurement and de-recognition to ensure
that all roads are properly valued and recorded. It also includes the transitory
provisions for the transfer of the local roads account from the Registry of Public
Infrastructure to the books of accounts of the Local Government Unit (LGU)
responsible for the management of these roads.
1.3. In our review of the financial statements as of December 31, 2024, we noted that the
Road Networks account (1-07-03-010), all recorded under the General Fund (GF),
costing ₱286,016,299.73 and comprising 78.83 per cent of the total Infrastructure
Assets, showed the following deficiencies contrary to the aforementioned Circular,
to wit:
Non-submission of the complete RPCLRN and RLRN
1.4. Item V(1) of the above-mentioned Circular requires the conduct of an inventory of
local roads under the LGU’s jurisdiction while Item VI(3) thereof requires the
Inventory Committee to prepare the RPCLRN to be submitted to the Auditor
concerned and Accounting Division/Unit not later than January 31 of each year. As
of February 18, 2025, none has been submitted.
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