to receive the goods. If goods in-kind are received without conditions attached,
revenue is recognized immediately. If conditions are attached, a liability is
recognized, which is reduced and revenue recognized as the conditions are
satisfied.”(Underscoring ours)
4.4. The City’s accounting records showed that it had a substantial balance of
₱101,865,746.82 in the Due to NGAs account as of December 31, 2024. A detailed
review and verification of the account schedule, however, revealed that 52.08 per
cent or ₱53,057,138.75 of the total balance pertains to 57 projects that have already
been completed, as early as CY 2007 (17 years ago) (see Appendix G).
4.5. Based on the foregoing, a liquidation report (LR) for each of the completed projects
was already prepared by the CAO, hence, it should also have prepared the
corresponding JEVs reducing the Due to NGAs account and recognizing the
corresponding revenue account as provided under COA Circular No. 2015-009,
which states that the Due to NGAs account is debited for the delivery of goods
/services, liquidation of funds received, and settlement of liabilities and IPSAS 23
which requires the recognition of the corresponding revenue.
4.6. The CAO personnel in-charge explained that they did not prepare the JEVs closing
the Due to NGAs account since they assumed that the same should be made as a
corollary entry to the recognition of the related PPE account upon its transfer from
the Construction in Progress (CIP) account. They were not able to undertake the latter
since they are still waiting for the SSMI for the related construction materials from
the CGSO.
4.7. The Audit Team had previously noted the concern regarding unrecorded issuances of
construction materials inventory for the City’s various completed projects, which
delayed the transfer of the cost of these projects from the CIP accounts to the
appropriate PPE accounts. A separate audit observation has been issued for this
particular matter. However, the closing of a trust liability account is a separate
accounting entry, the recording of which is made upon the liquidation of the funds
held in trust by the implementing agency. This non-closure can lead to the
misrepresentation of financial statements, as the outstanding trust liability can inflate
the reported liability on the Statement of Financial Position.
4.8. We further noted that, as presented in Annex G, a total of ₱1,824,096.95 represents
the balances that the City still needs to return to the Source Agencies (SAs). If left
unreturned after such an extended period, the funds are exposed to the risk of being
used for purposes other than the original project, potentially violating existing rules
and regulations.
4.9. Moreover, six projects were noted to have discrepancies in the recording of
transactions since the amounts for return to the SA exceeded the balances in the
subsidiary ledgers, as shown on the next page:
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