2.7 Due to the lack of evaluation of the ₱428,893.60, which has remained outstanding for
over two years, we cannot ascertain the validity of the accounts. These accounts are
also doubtful because it is unlikely that the suppliers or claimants would wait such a
long time to be paid or to claim what is supposedly owed to them. Consequently, the
financial statements may not have been presented fairly because a substantial amount
may no longer represent valid claims.
2.8 We recommended and the Municipal Accountant agreed to coordinate with the
Municipal Budget Officer and the Municipal Treasurer to determine whether
the Accounts Payable totaling ₱428,893.60, aged from over two to 10 years, are
still valid claims and to ensure the accuracy of the liability account presented in
the financial statements.
PPE recorded in Inventories
3. Property, Plant and Equipment (PPE) acquired in CY 2024 totaling ₱408,532.00
was erroneously recognized in the books of accounts as Other Supplies and
Materials Inventory instead of the appropriate PPE accounts, hence, both the asset
accounts and the related depreciation expense accounts were overstated and
understated, respectively, as of December 31, 2024.
3.1 COA Circular No. 2024-006 dated March 14, 2024, provides implementing
guidelines for the increase in the capitalization threshold from ₱15,000.00 to
₱50,000.00. Specifically, Section 3 thereof mandates that tangible items costing
₱50,000.00 and above that meet the following criteria shall be recognized as PPE:
3.1.1 It is probable that the future economic benefits or service potential
associated with the item will flow to the entity;
3.1.2 The cost or fair value of the item can be measured reliably;
3.1.3 Beneficial ownership and control clearly rest with the government; and
3.1.4 The asset is used to achieve government objectives.
3.2 In relation thereto, COA Circular No. 2015-009 dated December 1, 2015, prescribes
the Revised Chart of Accounts for Local Government Units to record and report the
financial transactions of LGUs. Annex B thereof contains the description of accounts
and the instructions.
3.3 Our review of the transactions during the year revealed that the acquisitions of
tangible items, which exceeded the PPE threshold of ₱50,000.00, were recorded
under Other Supplies and Materials Inventory instead of their appropriate PPE
accounts. A portion of the composition of the Other Supplies and Materials Inventory
for the year is shown in the table on the next page.
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