account. Expenditures shall be closed to Project Equity account at year-
end or upon project completion, whichever comes first.”
4.2. Moreover, Section 104.1.i of the Manual on the New Government Accounting
System for LGUs requires that completed projects under the Trust Fund must be
transferred to the General Fund upon submission of full liquidation to the grantor.
The completed projects charged to the funds held in trust by the Municipality are
then recorded in their respective Property, Plant, and Equipment (PPE) accounts.
4.3. Regarding the depreciation of PPE, paragraph 71 of the International Public Sector
Accounting Standard (IPSAS) 17 states:
“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. Depreciation of an asset ceases
when the asset is derecognized. Therefore, depreciation does not cease
when the asset becomes idle or is retired from active use and held for
disposal unless the asset is fully depreciated. However, under usage
methods of depreciation the depreciation charge can be zero while there
is no production.”
4.4. Moreover, Items IV and V of COA Circular 2015-008, dated November 23, 2015,
provide accounting and reporting guidelines for Road Networks, including the
provision of depreciation expenses.
4.5. A review of the Trust Fund trial balance as of December 31, 2024, revealed that
PPE accounts totaling ₱3,521,153.86 had not been transferred to the General Fund
(Appendix 2). Our records show that these PPE accounts have remained in the
Trust Fund since CY 2021 and prior years.
4.6. The Municipal Accountant explained that they could not transfer the completed
PPE accounts from the Trust Fund to the General Fund because they were unable
to monitor the status of completed projects. Due to the numerous transactions in
the Accounting Office, the bookkeeper could hardly manage the daily workload,
let alone scrutinize specific transactions, such as when projects are deemed
completed, despite the fact that the Municipal Engineer was submitting regular
project status reports to their office.
4.7. The Municipal Engineer, however, acknowledged that although he was
submitting quarterly project status reports to the Accounting Office, these reports
were not solely focused on completed projects but included all implemented
projects. Thus, the bookkeeper may find it difficult to quickly identify completed
projects from the report.
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