as PPE (Sec. 3.7, COA Circular No. 2024-006). However, an interview with the
Accounting Staff revealed that because these items had already been issued with
AREs, they were not subsequently replaced with ICS upon their reclassification.
As a result, the carrying amounts of these semi-expendable properties were not
charged to the Prior Period Adjustment.
1.4 The incorrect treatment in the reclassification of semi-expendable properties led to
an overstatement of the Other Supplies and Materials Inventory, Other Supplies
Inventory, and Other Property Equipment amounting to ₱25,654,129.33,
20,014,411.95, and ₱1,113,365.39, respectively, and an understatement of the PPA
totaling ₱46,781,906.67. The PPA will be closed to Equity at the end of the year,
hence, due to the understatement of the PPA, Equity is overstated by the same
amount. These discrepancies affect the fairness and reliability of the financial
statements, potentially influencing stakeholder decision-making and resulting in a
misrepresentation of financial information presented to users.
1.5 We recommended that the City Accountant make the following correcting
entry to properly close the carrying amount of properties classified as semi-
expendable items to Prior Period Adjustment and remove the recorded
inventories:
Account Debit Credit
Prior Period Adjustment 46,781,906.67
Other Supplies and Materials Inventory 25,654,129.33
Office Supplies Inventory 20,014,411.95
Other Property Equipment 1,113,365.39
1.6 We further recommended that the City Accountant conduct a comprehensive
evaluation of its recorded properties and retrospectively adjust them to
accurately classify semi-expendable items. This entails restating the amounts
for prior periods in the comparative financial statements to reflect the change
in accounting policy, in accordance with COA Circular No. 2022-004, as
supplemented by COA Circular No. 2024-006.
1.7 Lastly, we recommended that the City Accountant henceforth adhere to the
guidelines prescribed in COA Circular No. 2024-006 and make the
appropriate entries for semi-expendable items.
1.8 The City Accountant assured the Audit Team that his office would make the
necessary correcting or adjusting entries in CY 2025. His office also confirmed
that they would conduct a thorough review and evaluation of its semi-expendable
properties, following COA guidelines.
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