FINANCIAL AUDIT
No depreciation for some PPE items - ₱133,995,806.25
1. Items of Property, Plant, and Equipment (PPE) with a total cost of
₱133,995,806.25 were not provided with depreciation contrary to Paragraph 26
of the International Public Sector Accounting Standard (IPSAS) 45, hence, the
asset and equity accounts were overstated by the amount of depreciation that
should have been applied to these assets.
1.1 The subsequent measurement of property, plant, and equipment is provided in
IPSAS 45. Paragraph 26 thereof states that after recognition, an item of property,
plant, and equipment shall be carried at its historical cost, less any accumulated
depreciation and any accumulated impairment losses. Moreover, paragraph 41 of
the same IPSAS requires that each part of an item of PPE with a cost or value that
is significant in relation to the total cost or value of the item shall be depreciated
separately.
1.2 However, contrary to the foregoing provisions, our examination of the PPE
Schedule as of December 31, 2024, disclosed that the following PPE items were
not provided with depreciation.
PPE Amount
Road Networks ₱ 57,192,222.97
Flood Control Systems 1,075,686.53
Water Supply Systems 50,333,983.75
Power Supply Systems 5,368,726.36
Seaport Systems 1,619,706.31
Other Infrastructure Assets 18,222,664.68
Marine and Fishery Equipment 17,356.00
Technical and Scientific Equipment 5,517.30
Books 159,942.35
Total ₱ 133,995,806.25
1.3 Our interview with the Accounting Staff disclosed that they were adhering to the
table of estimated useful life of PPE as prescribed in COA Circular No. 2003-007
dated December 11, 2003. Since the Circular does not specify the useful life for
infrastructure assets, no depreciation was recorded for these PPEs. As for the PPE
items that are not under infrastructure assets, the Office of the Accountant
neglected to provide for the appropriate depreciation.
1.4 However, it should be noted that it is the responsibility of the Office of the
Accountant to ensure that accounts are reported fairly in the financial statements.
In order to achieve the fair representation of accounts on the financial statements,
the Office of the Accountant shall follow appropriate accounting standards, which
include the IPSAS, along with other accounting-related issuances of COA. It is
clear that the IPSAS requires all accounts under PPE, except for Land, to be
recorded in their historical cost, less any depreciation. Also, Item IV (12) of COA
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