Independent Auditor’s Report on the Financial Statements
We rendered a qualified opinion on the fairness of the presentation of the financial
statements of the PGNO for the year then ended, taking exception to the effects of the
following:
1. The Local Road Networks account shows a balance of ₱373,712,461.98, which remains
unidentified due to the absence of the required inventory of local roads, hindering
reconciliation with the Registry of Public Infrastructure.
2. The depreciation expense of the Road Network, with an accumulated depreciation
balance of ₱471,365,166.38, was calculated using a uniform estimated useful life of ten
years and a ten per cent salvage value for the total cost rather than for each road
component, thus raising concerns about the reliability of the balance and resulting in an
undetermined amount of discrepancy.
3. The reliability of inventory, with a balance of ₱557,966,849.17 could not be ascertained
due to the absence of Supplies Ledger Cards, the inclusion of negative balances
amounting to ₱623,726.29, and the presence of dormant accounts totalling
₱22,200,675.08.
4. The breeding stocks, valued at ₱23,076,711.37, could not be relied upon due to
(a) incomplete inventory count, (b) non-maintenance of the Work, Other Animals and
Breeding Stocks Ledger Card, (c) dormant accounts exceeding ten years totalling
₱6,717,359.87, and (d) the non-recognition and measurement of stocks in accordance
with International Public Sector Accounting Standards (IPSAS) 27, thereby causing
misstatements in the breeding stocks and related accounts for an undetermined amount.
5. Service drop wires procured by the Provincial Government for distribution to various
barangays were erroneously recorded as Construction in Progress (CIP)- Buildings and
Other Structures instead of Construction Materials for Distribution, resulting in an
overstatement of CIP accounts by ₱11,495,167.80 and an understatement of the
Inventory and Expense accounts by an undetermined amount, pending submission of
the Inventory Transfer Report (ITR).
6. Interest of ₱5,035,754.82 incurred during the year on loans obtained to finance the
construction of qualifying assets were treated as outright expense contrary to paragraph
18 of IPSAS 5, which requires the capitalization of borrowing costs of qualifying assets,
thereby overstating expense and understating assets.
7. Unserviceable properties with an acquisition cost of ₱2,872,383.09, were not
derecognized from the Property, Plant and Equipment (PPE) account upon disposal, as
their net book value could not be determined due to incomplete subsidiary records.
Furthermore, certain other items could not be traced to the ledger card maintained by
the Provincial Accountant because of limited data and record deficiencies, potentially
resulting in an overstatement of the PPE accounts by an undetermined amount.
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