5. Six completed projects under the Trust Fund (TF) totaling ₱9,782,580.09 were not
transferred to the General Fund (GF) due to insufficient monitoring, contrary to
Section 104(1.i) of the NGAS Manual, Volume I and IPSAS No. 17, thus, overstating
the Construction in Progress account in the TF while understating the related PPE
accounts in the GF by the same amount, as well as understating depreciation
expense by an estimated amount totaling ₱7,794,223.89, which affected the fair
presentation of these accounts in the financial statements.
5.1. During the construction period, Property, Plant, and Equipment (PPE) shall be
classified as “Construction in Progress” (CIP) with the appropriate asset
classification. As soon as 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.
5.2. Section 104(1.i) of the Manual on the New Government Accounting System
(NGAS) for Local Government Units (LGUs), Volume I, requires that completed
projects under the Trust Fund (TF) be transferred to the General Fund (GF) upon
their completion.
5.3. 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.
5.4. 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.”
5.5. 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.”
5.6. Our verification of the CIP accounts under the TF as of December 31, 2024,
revealed that six completed projects totaling ₱9,782,580.09 remained recorded in
the CIP – Infrastructure Assets and CIP – Buildings and Other Structures accounts
despite their completion. The details are as follows:
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