Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. IV-A
Local Government Sector E – Province of Quezon I
Team R4A-01
Lucena City Government Complex
Lucena City

AUDIT OBSERVATION MEMORANDUM (AOM)

AOM No. : 2020-001 (13-19)

Date : October 23, 2020

For : Hon. Minda E. Caldera

Punong Barangay
Barangay Anawan
Polillo, Quezon

Attention: Ms. Lita P. Dionglay

Barangay Treasurer

We have validated the implementation of the previous year’s recommendations

relative to Property, Plant and Equipment accounts of the Barangay for CYs 2013- 2019
and observed the following deficiencies:

The balances of Property, Plant and Equipment (PPE) accounts of P1,119,270.01

(excluding Land, Infrastructure Assets and Buildings) are unreliable as to
existence and valuation due to non-preparation and non-maintenance of
Property/Equipment Card (PEC) by the Barangay Treasurer because she is still
familiarizing herself with the new forms introduced in the Manual on the Financial
Management of Barangays (MFMB) and Report on Inventory of Property and
Equipment (RIPE) by the Inventory Committee since the annual physical inventory
was not undertaken, contrary to the MFMB, thus affecting its fair presentation in
the financial statements pursuant to Paragraph 27 of International Public Sector
Accounting Standards (IPSAS) 1.

The Manual on the Financial Management of Barangays provides the following:

“Specific Policies on Property, Plant and Equipment/Infrastructure Assets

7.1.9 Property/Equipment Card (PEC), see Annex 26.1, shall be

maintained for all property and equipment of the barangay by the
BT.

7.1.18 The barangay shall conduct an annual physical inventory of all

supplies, property and equipment of the barangay.

Specific Procedures:

7.2.5 Inventory Taking and Reconciliation

a. The Inventory Committee headed by the PB or his

authorized representative and the BT as his member shall
conduct a physical count of all property and equipment of the
barangay at least once a year.
 b. The Inventory Committee, upon the completion of
the physical count, shall prepare three copies of Report on
Inventory of Property and Equipment (RIPE), as shown in Annex
30 and shall be approved by the PB.

c. The RIPE shall be the basis of the C/M Accountant

for reconciling the results of inventory with the PPE accounts.”

Moreover, Paragraph 27 of IPSAS 1 states that “Financial statements shall

present fairly the financial position, financial performance and cash flows of an entity.
Fair presentation requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for
assets, liabilities, revenue and expenses set out in IPSASs.”

Verification of the Statement of Financial Position of the Barangay as of

December 31, 2019 showed PPE with a net book value of P1,119,270.01, summarized
below:

Machinery and Equipment 30,300.00

Office Equipment 33,588.98
Information and Communication Technology Equipment 145,300.00
Communication Equipment 10,000.00
Disaster Response and Rescue Equipment 190,095.00
Furniture and Fixtures 107,046.28
Other Property, Plant and Equipment 602,939.75
Total 1,119,270.01

In the previous Barangay Audit Report, the recommendation to create an

Inventory Committee to conduct the physical inventory was complied with. However,
despite the creation of the said committee, no physical inventory was undertaken in the
years 2013-2019, consequently the RIPE was not prepared. It was also noted that the
Barangay Treasurer did not prepare and maintain the PEC because she is still
familiarizing herself with the new forms introduced to them during the seminar on the
MFMB conducted in November 2019.

Under the foregoing circumstances, the balances of the PPE accounts totalling
P1,119,270.01 are unreliable as to existence and valuation due to the absence of PEC
and RIPE, thus affecting its fair presentation in the financial statements pursuant to
Paragraph 27 of IPSAS 1.

We recommend that the Punong Barangay, as head of the Inventory Team,

conduct the physical count of PPE of the Barangay and submit the RIPE not later
than January 31, of each year. We further recommend that the Punong Barangay
instruct the Barangay Treasurer to prepare and maintain the PEC for all the PPE of
the Barangay for monitoring purposes.

May we have your comments on the foregoing audit observations within fifteen
(15) working days from receipt hereof.

VIVIAN N. CAVIDA
OIC-Audit Team Leader

REMIGIO A. ARZADON, JR.

Supervising Auditor
Proof of Receipt of AOM 2020-001 (13-19)
Hon. Minda E. Caldera
Punong Barangay
Date: _____________