basis for the transfer. In contrast, most projects carried out by the administration
remained untransferred to their respective asset accounts due to the absence of
COCs. Nevertheless, the audit team confirmed through the Municipal Engineer
that COCs were available, as mentioned earlier. Collaborating with the Municipal
Engineer is essential for determining completed projects and transferring them
from the CIP accounts to the corresponding asset accounts.
6.5 The failure to reclassify completed infrastructure projects totaling
₱12,111,182.21 from the CIP account to the appropriate PPE accounts resulted in
an overstatement of the CIP account and an understatement of related asset
accounts. Additionally, the non-recognition of depreciation expense and
accumulated depreciation on these completed projects led to a misstatement of
both asset and equity by the amount of depreciation that should have been
recognized had the cost of completed depreciable projects been transferred to the
appropriate asset accounts. Consequently, the accuracy of the presentation of the
financial statements was affected.
6.6 We recommended and the Municipal Accountant agreed to reconcile and
update the Schedule of CIP by identifying completed projects that remain
recorded under CIP, particularly those that have been certified as completed
by the Municipal Engineer but are not yet transferred to the appropriate
PPE accounts.
6.7 We further recommended and the Municipal Engineer and Municipal
Accountant agreed to assign personnel to verify the items included in the CIP
account that already have Certificates of Completion and to make the
necessary adjustments for reclassifying these projects into their appropriate
PPE accounts while recognizing the corresponding depreciation and
accumulated depreciation for each completed project.
RPT and SET Receivables not established at the beginning of the year
7. The Real Property Tax (RPT) and Special Education Tax (SET) Receivables were
not established at the beginning of the year, contrary to Sections 19(b), 20 and 83 of
the New Government Accounting System (NGAS) Manual for Local Government
Units (LGUs), Volume I, thus, understating the RPT and SET Receivables by
₱4,940,371.90.
7.1 Section 19 of the NGAS Manual for LGUSs, Volume I, requires the Modified
accrual method of accounting to be used for real property taxes. At the beginning
of the year, Real Property Tax Receivable and Special Education Tax Receivable
must be established. This approach acknowledges the need to record in the books
not just income estimates from real property taxes but also actual receivables from
those taxes. However, to avoid appropriating uncollected revenues, which could
lead to a significant cash overdraft, these amounts shall be credited to Deferred
Real Property Taxes Income/Deferred Special Education Tax Income. Real
Property Tax Income/Special Education Tax Income will be recognized upon
receipt of collection.
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