2.6.3. Paragraph 21 of IPSAS No. 17 partly provides that “xxx. Infrastructure assets
meet the definition of PPE and should be accounted for in accordance with
this Standard. Examples of infrastructure assets include road networks, sewer
systems, water and power supply systems, and communication networks.”
Thus, the LRN shall be subject to depreciation in accordance with Item IV.13
of the aforementioned Circular.
2.6.4. As a result of the foregoing, the City’s asset and equity accounts were
overstated by an undetermined amount due to the depreciation that should
have been provided for each depreciable component of the road network.
2.7. Lack of full disclosure of the total road network system in the Notes to the
Financial Statements
2.7.1. Item IV.2 of the Circular states that the total road network system shall be
disclosed in the Agency’s Notes to the Financial Statements. The standard
format is provided in Annex B thereof and presented as follows:
The LGU has a total of _____ kilometers of roads with a total cost of
Php ________. For the year ended, the agency spent a total of Php
______ for major repairs and Php _____ for the regular maintenance.
Reductions in the amount of Php_______ were recorded due to
derecognition, Php ______ for impairment and Php_______
impairment were reversed.”
2.7.2. Contrary to the aforementioned requirement, the City Accountant did not
make a separate disclosure of the Road Networks account in the Notes to the
Financial Statements. Instead, it was included as part of Infrastructure Assets
under PPE, thereby, not informing the users of the financial statements about
the nature of the account.
2.8. The aforementioned deficiencies made the Road Networks account questionable and
unreliable, thereby, affecting the fairness of presentation of the Infrastructure Assets
account in the City’s financial statements.
2.9. We recommended that the City Accounting, Engineering, and General Services
Offices strictly comply with the accounting and reporting guidelines on the local
roads asset management system and properly coordinate with one another in
fulfilling their duties and responsibilities as outlined in COA Circular No. 2015-
008 dated November 23, 2015.
2.10. We also recommended that henceforth, the Inventory Committee conduct the
annual physical count of all its LRN in accordance with regulations, ensuring
that all necessary details are reported separately in the RPCLRN for submission
to the Auditor and Accounting Office not later than January 31 of each year.
The RPCLRN shall be reconciled with the accounting records, and the necessary
adjusting entries shall be prepared before the statement date.
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