AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. FINANCIAL AND COMPLIANCE AUDIT
Completed Projects remain in the CIP Account
1. At least six completed projects under the General Fund, totaling ₱15,620,256.97,
were incorrectly recorded in the Construction in Progress account instead of being
transferred to the appropriate asset account, due to insufficient monitoring and
improper documentation, contrary to Section 50 of the NGAS Manual for Local
Government Units (LGUs), Volume I and IPSAS No. 17, resulting in an
overstatement of the Construction in Progress account and an understatement of
related PPE and depreciation expense accounts.
1.1 Section 50 of the NGAS Manual for LGUs, Volume I, requires that during the
construction period, Property, Plant, and Equipment (PPE) shall be classified as
“Construction in Progress” (CIP) with the appropriate asset classification. Once these
are completed, the CIP accounts shall then be transferred to their appropriate asset
accounts. The CIP account is used to record the value of work performed in
accordance with the terms of the applicable construction contracts.
1.2 Moreover, with the adoption of the International Public Sector Accounting Standards
(IPSAS), infrastructure assets shall be taken up as PPE, and the annual consumption
of their service potential, along with any loss of value due to depreciation and
impairment, shall also be recognized.
1.3 Depreciation is defined under IPSAS 17 as the systematic allocation of the
depreciable amount of an asset over its useful life. Paragraph 71 of IPSAS No. 17
provides that “depreciation of an asset begins when it is available for use i.e., when it
is in the location and condition necessary for it to be capable of operating in the
manner intended by management.”
1.4 Item 4.1 of the Philippine Application Guideline (PAG) for IPSAS 17 states that “xxx
for simplicity and to avoid proportionate computation, depreciation shall be for one
month if the PPE is available for use on or before the 15th of the month. However, if
the PPE is available for use after the 15th of the month, depreciation shall be for the
succeeding month.”
1.5 As of December 31, 2024, accounts CIP-Infrastructure Assets and CIP-Buildings and
Other Structures had a balance of ₱124,012,318.4 and ₱220,074,563.58, respectively.
However, our verification of these accounts revealed that at least six projects totaling
₱15,620,256.97 were incorrectly recorded in the Construction in Progress account
instead of being transferred to the appropriate asset account despite their
completion. The details are as follows:
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