8.8 As a result of the inappropriate accounting treatment, the Other Business
Income account was overstated by ₱2,080,073.96, while the Prior Year
Adjustments account was understated. Furthermore, the Gain/Loss on Sale of
PPE accounts were misstated by an undetermined amount due to incomplete
records of the derecognized assets.
8.9 We recommended that the Provincial Accountant ensure that all future
disposals of Property, Plant, and Equipment (PPE) comply with the
provisions of IPSAS 17 and COA Circular No. 2015-009. Specifically, gains
or losses arising from the derecognition of PPE be recognized in the surplus
or deficit for the period and recorded under the appropriate accounts,
using the following pro-forma accounting entry:
Cash – Local Treasury xxx
Accumulated Depreciation xxx
Specific PPE account xxx
Gain/(Loss) on Sale of PPE xxx
8.10 In response, the Provincial Accountant in his letter dated February 28, 2025,
stated that an adjusting entry had been made to correct the record of the sale of
disposed PPE for the period January to April 2024, as reflected under JEV No.
100(01)2024120354
8.11 The Audit Team acknowledges Management’s effort in recording an adjusting
entry to recognize the sale of disposed PPE. However, this was done by closing
the “Other Business Income” account and crediting the “Gain on Sale of PPE”
account, net of the carrying value of the derecognized asset. As noted in the
previous audit finding, various unserviceable properties included in the disposal
were not derecognized. Consequently, the accuracy of the reported “Gain on
Sale of PPE” amounting to ₱1,445,031.25 cannot be fully relied upon, and the
exact amounts that should have been recognized as gains or losses remain
undetermined.
B. OTHER FINACIAL RELATED ISSUES
Lack of Feasibility Studies for Loan-Funded Infrastructure Projects
9. Feasibility studies for seven infrastructure projects amounting to ₱5.850 billion,
which were funded through loans, were neither prepared nor submitted to the
Audit Team, contrary to Section 2 of Presidential Decree (PD) No. 1445 and
Section 17.6 of the Revised Implementing Rules and Regulations (IRR) of
Republic Act (RA) No. 9184, thereby raising concerns about whether the projects’
viability and the optimal utilization of resources were assessed prior to their
implementation.
9.1 Section 2 of PD 1445 states that it is the declared policy of the State that all
government resources must be managed, expended, or utilized in accordance
with law and regulations. These resources must be safeguarded against loss or
wastage through illegal or improper disposition to ensure efficiency, economy,
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