2.3.2. Non-segregation of the costs of road components of local roads in the books
of accounts
2.3.2.1. Items V.3 and V.4 of the Circular provide that Management shall
segregate and recognize the cost of each component of the local
roads with identified cost, determine the components of local roads
identified in the inventory without corresponding cost, and
recognize the cost of each component at its fair value.
2.3.2.2. Further, Item VII.c.1 of the same circular requires the Municipal
Engineer to provide the local accountant and general services officer
with complete and cost segregation of the road components for road
projects.
2.3.2.3. As defined under Item III.4 of the Circular, road asset components
“are the sub-components of a road which, having different useful
life spans, need to be booked and depreciated separately. They
include: road lot, road pavement, drainage and slope protection
structures and other miscellaneous structures.”
2.3.2.4. Our review of the PPE Schedule submitted by the Municipal
Accountant showed only the total cost of each road network. The
road asset components' breakdown and corresponding costs were
neither identified nor reflected in the books.
2.3.2.5. A phone inquiry with the Municipal Accountant revealed that the
road asset components could not be identified because the
Municipal Engineer had not provided them with the breakdown of
the cost segregation of the road components.
2.3.2.6. On the other hand, a representative from the Municipal Engineering
Office disclosed that they were not aware of the requirement to
provide the cost segregation of the road network to the Municipal
Accountant’s Office.
2.3.2.7. The non-segregation of costs for each road component affects the
computation of depreciation, considering that the depreciable
components have different useful life spans and, therefore, should
have been depreciated separately following the straight-line method.
2.3.3. Incomplete disclosure of the total road network system in the Notes to
Financial Statements
2.3.3.1. Item IV.2 of the Circular states that the total road network system
shall be disclosed in the agency’s Notes to Financial Statements.
The standard format is provided in Annex B thereof:
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