FINANCIAL AUDIT
Semi-expendable properties remained as inventories instead of being expensed –
₱46,781,906.67
1. Semi-expendable properties valued at ₱138,891,148.82, which were acquired and
issued before CY 2024, were recorded as inventories, most of which remained in
these accounts instead of having their carrying amounts closed to Prior Period
Adjustment (PPA) during the audited year, inconsistent with COA Circular No.
2024-006, dated March 14, 2024, resulting in the overstatement of the Other
Supplies and Materials Inventory, Other Supplies Inventory, and Other Property
Equipment accounts by ₱25,654,129.33, 20,014,411.95, and ₱1,113,365.39,
respectively, and the overstatement of Equity in the total amount of
₱46,781,906.67.
1.1 Prior to CY 2024, this Commission issued COA Circular No. 2022-004 dated May
31, 2022, which provides the guidelines for the implementation of the increase in
the capitalization threshold from ₱15,000.00 to ₱50,000.00. Specifically, Section
4 thereof requires that tangible items which meet the definition and recognition
criteria of Property, Plant, and Equipment (PPE) but costing below ₱50,000.00
shall be accounted in the books of accounts of the agencies as semi-expendable
property.
1.2 The adjustment of the capitalization threshold from ₱15,000.00 to ₱50,000.00 is
classified as a change in accounting policy and shall be applied retrospectively.
Consequently, the revised threshold of ₱50,000.00 shall be applied to all tangible
assets acquired in CY 2022 and prior years (Sec. 4.2, COA Circular No. 2022-004).
Moreover, Section 4.6 thereof emphasizes that the change in accounting policy
requires retrospective application and restating the amounts for the prior period/s
in the comparative financial statements to reflect the change. The entity shall adjust
the opening balance of each affected component of net assets/ equity for the earliest
period presented, and the other comparative amounts disclosed for each prior
period presented as if the new accounting policy had always been applied.
1.3 Since there were no available guidelines or issued circulars from the Commission
regarding the appropriate accounts for semi-expendable properties to be added to
the Revised Chart of Accounts, local government units (LGUs) were allowed to
record properties valued under ₱50,000.00 that still meet the definition of PPE in
the inventory accounts for the time being.
1.4 Relative thereto, in CY 2024, the Commission issued COA Circular No. 2024-006,
dated March 14, 2024, which serves as a supplemental guideline for the
implementation of COA Circular No. 2022-004, wherein accounting for tangible
items was provided, as follows:
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