AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. FINANCIAL AND COMPLIANCE AUDIT
Loans Payable
1. The entire Loans Payable – Domestic account amounting to ₱385,608,730.24 was
incorrectly classified as a non-current liability despite including amortizations due
for 2026, which does not align with Section 80 of IPSAS 1 – Presentation of
Financial Statements, thereby understating current liabilities by ₱40,132,228.49,
overstating the non-current liabilities by the same amount and affecting the fair
presentation and reliability of the financial statements as of year-end.
1.1. Section 80 of the International Public Sector Accounting Standard (IPSAS) 1-
Presentation of Financial Statements states that:
“A liability shall be classified as current when it satisfies any of the
following criteria:
(a) It is expected to be settled in the entity’s normal operating cycle;
(b) It is held primarily for the purpose of being traded;
(c) It is due to be settled within twelve months after the reporting date;
or
(d) The entity does not have an unconditional right to defer settlement of
the liability for at least twelve months after the reporting date.
All other liabilities shall be classified as non-current.”
1.2. Our verification of the Municipality’s year-end financial statements revealed that,
as of December 31, 2024, the account Loans Payable – Domestic, classified under
Current Liabilities, reflected a balance of ₱0.00, and Loans Payable – Domestic
classified under Non-Current Liabilities, had a balance of ₱385,608,730.24.
1.3. This amount represents loans obtained by the Local Government Unit (LGU) from
the Land Bank of the Philippines to finance the purchase, construction or
rehabilitation of the following projects:
1.3.1. Mabinay Spring Resort
1.3.2. Construction of 2-Storey Commercial Building
1.3.3. Construction of People’s Park with Commercial Stalls
1.3.4. Improvement and Expansion of Wet Market and Vegetable Building
1.3.5. Government Center
1.3.6. Construction and Rehabilitation of Farm to Market Road
1.3.7. Water Works System
1.3.8. Heavy Equipments
1.3.9. Government Center Site Development
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