By Joseph Bernard A. Marzan
The Commission on Audit (COA) called out the Iloilo provincial government over its books of accounts for the year 2022 by questioning several items that were related to its properties.
In its Annual Audit Report, the COA pointed out inaccuracies in the provincial government’s Property, Plant, and Equipment (PPE) accounts and property and accounting records.
PPE under Section 208, Chapter 7 of the COA’s Government Accounting Manual for Local Government Units (GAM for LGUs) refers to the tangible assets that are:
- purchased, constructed, developed or otherwise acquired;
- held for use in the production or supply of goods or services or to produce program outputs, for rental to others (other than investment property), and for administrative purposes;
- expected to be used for more than one reporting period; and
- not intended for resale in the ordinary course of operations.
In other words, PPE refers to the physical assets of the provincial government that are used and held for its continued use and are not for the purpose of resale under normal circumstances.
Section 215 of the same chapter under the same manual includes the following classifications for PPE: Land, Land Improvements, Infrastructure Assets, Buildings and Other Structures, Machinery and Equipment, Transportation Equipment, Furniture, Fixtures and Books, Leased Assets, Leased Assets Improvement, Construction in Progress, Service Concession Assets, and Other PPE.
COA said Iloilo province’s PPE account balances were unreliable after finding that the existence, accuracy, and completeness of ₱8.381 billion in PPEs could not be ascertained.
It pointed to non-reconciliation of accounting and property records, and unreconciled variances of ₱1.737 billion between the Report on the Physical Count of PEE (RPCPPE) and the accounting records.
The RPCPPE indicated the PPE amount to be at ₱8.67 billion, while the FS indicated that this was valued only at ₱8.38 billion. The unreconciled ₱1.737 billion variance was based on the accumulated variances for each PPE account.
COA found these to be inconsistent with Paragraph 27 of the International Public Sector Accounting Standard (IPSAS) 1, which deals with presentation of financial statements.
The IPSAS provision requires the FS to be presented fairly on the financial position, financial performance, and cash flows of an entity.
In its reply to the COA’s Audit Observation Memorandum on the matter, the Provincial Accountant said that it would coordinate with the concerned offices for the reconciliation of the PPE accounts, and adjusting for the unrecorded and donated or missing PPE will be taken up once the necessary documents are available.
The accountant also assured the commission that it would furnish COA with copies of the reconciled PPE accounts.
The COA separately zeroed in on ₱319.299 million in semi-expendable properties which were recognized as PPE, contrary to COA Circular No. 2022-004.
COA classifies “semi-expendable properties” separately from PPEs, the former being those which may be classified as the latter based on its definition under the GAM for LGUs, but are valued below ₱50,000.
The commission noted that the provincial government logged semi-expendable properties under the RPCPPE, but the circular states that these must have been instead listed under the Report on the Physical Count of Semi-expendable Property (RPCSP) for supply and property units, or Report of Semi-expandable Property Issued (RSPI) for the general services office (GSO), if these were already issued to other offices.
This, in turn, caused the overstatement in the PPE, Accumulated Depreciation, Depreciation Expense, and Government Equity accounts in its financial statement, and ultimately affecting their overall fair presentation.
On this, the Provincial Accountant said that they would coordinate with the Provincial GSO for the adjustments in the books for the semi-expendable property.
The COA also pointed out that the provincial government had not reconciled its physical count of inventories and its property and accounting records.
This resulted in an unreconciled ₱549.15 million unreconciled variance in balances, based on ₱693.16 million indicated in the financial statement but only ₱144.01 million stated in the Report on the Physical Count of Inventories (RPCI).
The RPCI in the report notably put zero value on inventory that were being held for distribution, which included food supplies, welfare goods, drugs and medicines, medical, dental, and laboratory supplies, and agricultural and marine supplies, among others.
This, COA stated, was because a physical count on the said inventory accounts was not conducted.
The commission recommended to Iloilo Governor Arthur Defensor Jr., as local chief executive, to direct the provincial government’s Inventory Committee to properly plan the conduct of physical inventory taking, as well as the augmentation of additional personnel in the said committee to assist in the conduct.
These issues were just 3 out 4 citations in the June 22 letter issued by COA-Region 6 Director Marilou Rizzari to Defensor, stating that the province was given a ‘qualified opinion’ for the fairness of the presentation of its financial statements.
The province’s 2022 Annual Audit Report was uploaded to COA’s website on July 4.
