4.5 However, a review of the Journal Entry Vouchers (JEVs) revealed that the
Municipal Accountant did not record the corresponding expenses when payments
were disbursed. Instead, a debit was made to the 'Due to NGAs' account, directly
reducing the liability. Furthermore, no revenue was recorded for the subsidies
received. As a result, both the net financial subsidy and the current operating
expenses were understated by ₱50,286,760.00 each.
4.6 The foregoing practice is not in accordance with the financial reporting
requirements of IPSAS 23, which stipulate that both the revenue derived from
non-exchange transactions and the related expenses must be recognized in the
period when the Municipality is entitled to the subsidy and incurs the
corresponding obligations. Failure to adhere to these requirements leads to the
misrepresentation of subsidy income and expenses, diminishes transparency, and
may compromise the reliability of financial reports used by oversight bodies,
funding agencies, and the public
4.7 We recommended and the Municipal Accountant agreed to:
a. Recognize all subsidies from the National Government as revenue in
the books of accounts upon satisfaction of any conditions attached to
the funds, in accordance with Paragraphs 12, 48, and 49 of IPSAS 23;
b. Record the corresponding expenses when the funds are utilized, as
required by Paragraph 13, to reflect the true cost of delivering services
funded by these subsidies; and
c. Avoid offsetting liabilities (Due to NGAs) directly against
disbursements without recognizing the related revenue and expenses.
Transfer of cash for the unexpended balance of LDRRMF-QRF and MF-MOOE not completed
- ₱17,559,915.03
5. Transfer of cash for the unexpended balances of the LDRRMF- Quick Response
Fund (QRF) and the Maintenance and Other Operating Expenses (MOOE) of the
Mitigation Fund (MF) from CYs 2020 to 2024 totaling ₱17,559,915.03 had not been
completed as of December 31, 2024, contrary to Item No. 5.1.10 of COA Circular
No. 2012-02 dated September 12, 2012, resulting in a negative balance of
₱1,163,479.09 in the Cash in Bank account in the Subsidiary Ledger (SL) of the
Trust Fund (TF) books.
5.1 COA Circular No. 2012-02 dated September 12, 2012, provides guidelines on the
accounting and reporting of the LDRRMF of Local Government Units (LGUs).
Item 5.1.10 thereof states that all unexpended/unobligated balance of the QRF
and the DRRMF-MOOE shall be transferred to the Special Trust Fund under the
account “Trust Liability- DRRMF”. Annex C of the circular provides the
illustrative accounting entries for the transfer of the unexpended QRF and MOOE
of the MF.
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