1.6. We further recommended that once created, the Inventory Committee:
1.6.1. Strictly follow the guidelines and procedures for conducting the physical
count of PPE. This includes recognizing PPE items found at the station
and disposing of items that are non-existent or missing. The Accountant
and Property Officer should reconcile their records based on the results
of the actual physical count and make any necessary adjustments;
1.6.2. Adopt a uniform numbering system for PPE property numbers and
require the Property Unit to update the property stickers according to
the prescribed format and include all the necessary information as
specified in Sections 5.6 and 5.7 of COA Circular No. 2020-006 dated
January 31, 2020; and
1.6.3. Prepare the PIP for approval by the Municipal Mayor and submit the
same to COA at least 10 calendar days before the scheduled start of
inventory activities.
2. The valuation and accuracy of depreciable PPE with a net book value of
₱295,064,476.35 could not be relied upon due to: (a) discrepancy between the PPE
Lapsing Schedule and the Financial Statements; (b) non- application of the required
five percent residual value on some items; and (c) non-recognition of depreciation
expense on some PPE accounts, inconsistent with PAG 4 and 6 of IPSAS 17, thereby
misstating the depreciation expense and PPE balances by an undetermined amount
in the financial statements.
2.1. One of the qualitative characteristics embodied in Chapter 2 of the Conceptual
Framework for General Purpose Financial Reporting by Public Sector Entities is
faithful representation, which asserts that “To be useful in financial reporting,
information must be a faithful representation of the economic phenomena that it
purports to represent. Faithful representation is attained when the depiction of the
phenomena is complete, neutral, and free from material error.”
2.2. Moreover, Philippine Accounting Guidelines (PAG) on the International Public
Sector Accounting Standards (IPSAS) 17 state the following specific policies on
depreciation and residual value, to wit:
“PAG 4 The straight line method of depreciation shall be adopted unless
another method is more appropriate for the agency operation. The
depreciation method shall be applied consistently from period to
period unless there is a change in the expected pattern of
consumption of those future economic benefits or service potential.
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