7.11 This deficiency makes it difficult to ascertain the proper account in which these
assets are recorded and their corresponding carrying value. As a result, these
assets could not be properly derecognized from the books, leading to the
overstatement of the PPE accounts. The inaccurate representation could affect
the fair presentation of the financial statements, as assets that have already been
disposed of may still appear on the books.
7.12 Thus, it is imperative for management to avail itself of the one-time cleansing
initiative provided under COA Circular 2020-006 dated January 31, 2020,
which offers guidelines and procedures to accurately establish reliable PPE
balances, enabling proper asset management and disposal. Furthermore, when
future disposals occur, the difficulties currently encountered will no longer be
an issue, as comprehensive and accurate records will be in place.
7.13 We recommended and the Provincial Accountant agreed to assign
personnel to focus on completing and maintaining the PPELC. This
includes ensuring that each PPE item is recorded with the necessary details,
such as acquisition cost, description, property numbers, and estimated
useful life, and that the total balances are reconciled with the balances in
the General Ledger.
7.14 We further recommended and the Provincial Accountant agreed to
immediately reconcile all disposed unserviceable properties with the
corresponding records in the PPELC and derecognize all assets that have
been disposed of and are no longer providing future economic benefits,
ensuring proper adjustments to the PPE accounts.
7.15 Lastly, we recommended and Management agreed to avail of the one-time
cleansing initiative provided under COA Circular 2020-006.
7.16 The Provincial Accountant, in his letter dated February 28, 2025, commented
that the Provincial Government already has an Inventory and Procurement
System integrated into the current FMIS. End-users, particularly the Provincial
General Services Office, Provincial Engineering Office, and the Provincial
Accountant’s Office, are scheduled to begin their training on database buildup
for the real-time recording of inventories, both movable and immovable,
tentatively in the second week of March 2025.
Erroneous Recording of Derecognized Assets
8. The derecognition of items of Property, Plant, and Equipment (PPE) due to
disposal was incorrectly reported as Other Business Income, while the carrying
value of the PPE was closed to Prior Year’s Adjustment, which is not consistent
with paragraph 83 of IPSAS 17, resulting in the overstatement of the Other
Business Income account by ₱2,080,073.96 and an undetermined misstatement of
the Gain/Loss on sale of PPE.
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