REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
REGIONAL OFFICE NO. VIII
LGAS C –Leyte II and Biliran Province
New Ormoc City Hall
Ormoc City, Leyte

Team R8-03, Abuyog, Leyte

AOM No.: 2023-003

Date: April 11, 2023

AUDIT OBSERVATION MEMORANDUM

HON. MICHAEL DRAGON T. JAVIER

Municipal Mayor
Javier, Leyte

Attention: CHERYL L. ALCALA

Municipal Accountant

KRISCA KIZZA ANDRADE

LGSO

We have audited the Property, Plant and Equipment account of the Municipality
of Javier and observed the following deficiencies/errors:

1. The accuracy and existence of the Property, Plant, and Equipment (PPE)
account, which amounts to ₱729,892,332.20 as of December 31, 2022, cannot
be confirmed due to several issues such as: failure to conduct a physical
count of properties under the Special Education Fund and Trust Fund, an
unreconciled difference of ₱22,704,051.47 between the accounting records
and the Report on Physical Count of Property, Plant, and Equipment for
properties under the General Fund, and the non-maintenance of PPE Ledger
Cards by the Municipal Accountant and incomplete maintenance of property
cards by the LGSO, contrary to the manual on New Government Accounting
System (NGAS) and COA Circular 2020-006, thus the reliability of the PPE
amounting to ₱729,892,332.20 as of December 31, 2022, is unreliable.

1.1. One of the basic features of government accounting for Local Government Units
is the maintenance of Supplies and Property, Plant and Equipment Ledger Cards.
The Accounting Unit shall maintain Supplies Ledger Cards by stock number and
Property, Plant and Equipment Ledger Cards by category of assets.

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1.2. This is provided in Sections 119 and 120 of the manual on New Government
Accounting System (NGAS), viz:

Sec. 119. Property Records to be Maintained. – The General Services

Officer or the Local Treasurer, as the case maybe, shall number each type
of supplies and maintain Stock Cards per stock number. He shall likewise
maintain Property Cards per category of property, plant and equipment.

Deliveries of supplies or property shall be immediately recorded in the

property records on the basis of the AIR and other supporting documents.
xxx

Sec. 120. Recording of Deliveries of Supplies or Property in the Books

of Accounts. – The Chief Accountant shall maintain Supplies Ledger
Cards per stock number; Property, Plant and Equipment Ledger Cards for
each category of assets; and Real Property Ledger Cards for land.

1.3. To confirm the existence of the items carried in the Property Cards of the General
Services Officer or the Municipal Treasurer and the Property, Plant and
Equipment Ledger Cards and Real Property Ledger Cards, a periodic physical
count is to be conducted. Section 124 of the Manual states:

Sec. 124. Inventory of Supplies or Property. – The local chief

executive shall require periodic physical inventory of supplies or property.
xxx

Physical count of property, plant, and equipment by type shall be made

annually and reported on the Report on the Physical Count of Property,
Plant and Equipment (RPCPPE). This shall be submitted to the Auditor
concerned not later than January 31 of each year.

1.4. Moreover, COA Circular 2020-006 dated January 31, 2020, which was issued to
provide guidelines and procedures in the conduct of physical count of Property,
Plant and Equipment (PPE), recognition of PPE items found at station, and
disposition for non-existing/ missing PPE items, for the one-time cleansing of
PPE account balances of Government Agencies, reiterates:

5.12. Property records shall be updated based on the results of the physical
inventory and reconciled with accounting records to come up with the
reconciled balances of PPE accounts to be considered as the correct
balance of the agency's PPEs.

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1.5. In CY 2022, the Property, Plant and Equipment of LGU Javier showed a total
cost of ₱729,892,332.20 in its Financial Statements as follows:

Table 1. Property, Plant and Equipment

PPE GL SEF TF Total
Land and Land Improvements
Land 4,515,313.43 4,515,313.43
Land Improvements 505,394.60 15,500.00 520,894.60
Infrastructure Assets -
Road Networks 275,417,612.93 275,417,612.9
3
Flood Control Systems 5,943,810.47 5,943,810.47
Water Supply Systems 83,680,174.98 76,110.00 83,756,284.98
Power Supply Systems 4,945,466.19 4,945,466.19
Other Infrastructure Assets 76,004,296.61 76,004,296.61
Buildings and Other Structures
Buildings 115,962,317.94 115,962,317.9
4
School Buildings 10,620,324.57 755,858.26 11,376,182.83
Hospitals and Health Centers 6,255,403.90 6,255,403.90
Slaughterhouses 199,593.50 199,593.50
Other Structures 30,956,071.00 453,325.00 31,409,396.00
Machinery and Equipment
Office Equipment 1,638,113.00 494,316.92 2,132,429.92
Information and Communication 15,752,468.44 711,024.00 16,463,492.44
Technology Equipment
Agricultural and Forestry 4,203,620.00 4,203,620.00
Equipment
Marine and Fishery Equipment 160,476.50 160,476.50
Communication Equipment 554,879.45 554,879.45
Disaster Response and Rescue 20,117,336.18 20,117,336.18
Equipment
Medical Equipment 2,585,185.00 2,585,185.00
Other Machinery and Equipment 1,963,091.00 55,430.00 2,018,521.00
Transportation Equipment
Motor Vehicles 25,258,786.56 25,258,786.56
Furniture, Fixtures and Books
Furniture and Fixtures 14,266,011.98 602,709.00 14,868,720.98
Construction in Progress
Construction in Progress - 3,356,671.89 9,990,002.55 13,346,674.44
Infrastructure Assets
Construction in Progress - Buildings 3,294,245.82 3,294,245.82
and Other Structures
Other Property, Plant and Equipment
Other Property, Plant and Equipment 8,473,643.53 107,747.00 8,581,390.53
Total 716,630,309.47 3,272,020.18 9,990,002.55 729,892,332.2
0

1.6. The LGSO of the LGU provided the Audit Team with the hardcopies of the report
on the physical count conducted for PPEs under General Fund, however, there
was no report submitted for properties under the SEF and TF as the LGSO and

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 Municipal Accountant admitted that physical count were not conducted on the
said funds.

1.7. Per review of the submitted RPCPPE, a net variance of ₱22,704,051.47 was
disclosed from PPEs amounting to ₱229,768,567.29 as compared with the
accounting records. Details shown in table 2.

Table 2. Comparison of Accounting Records and RPCPPE

PPE FS Balance Balance per Variance

RPCPPE
General Fund
Land Improvements 505,394.60 387,000.00 118,394.60
Buildings 115,962,317.94 99,694,035.54 16,268,282.40
Hospitals and Health Centers 6,255,403.90 6,196,826.40 58,577.50
Other Structures 30,956,071.00 28,340,646.91 2,615,424.09
Office Equipment 1,638,113.00 862,683.00 775,430.00
Information and Communication
Technology Equipment 15,752,468.44 14,864,340.85 888,127.59
Agricultural and Forestry
Equipment 4,203,620.00 4,130,500.00 73,120.00
Communication Equipment 554,879.45 361,987.45 192,892.00
Medical Equipment 2,585,185.00 2,563,810.00 21,375.00
Motor Vehicles 25,258,786.56 25,080,286.56 178,500.00
Furniture and Fixtures 14,266,011.98 13,484,166.12 781,845.86
Construction in Progress -
Infrastructure Assets 3,356,671.89 2,506,611.74 850,060.15
Other Property, Plant and
Equipment 8,473,643.53 8,591,621.25 (117,977.72)
Total 229,768,567.29 207,064,515.82 22,704,051.47

1.8. In addition, interview with the Municipal Accountant revealed that they have not
yet maintained PPE Ledger Cards for the LGUs properties while interview with
the LGSO disclosed that she has been maintaining property cards since her
assumption as LGSO but were still incomplete specially for properties acquired
prior to her assumption, such that the amounts in the General Ledger were not
adequately supported.

1.9. Due to the noted variances, the said properties are exposed to the risk of possible
undetected losses, while the physical existence of the said properties was not
ascertained, resulting to unreliable balances of PPEs totaling ₱729,892,332.20.

1.10. We recommend that the LGSO together with the Inventory Committee,
conduct the Physical Count of properties under SEF and TF and submit the
RCPPE to the Audit Team on or before June 30, 2023.

1.11. We also recommend that the Municipal Accountant and the LGSO:

a.) locate the variances noted. Adjustments/corrections shall be made in the

books and/or in the property records to put the accounts in order.

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 b.) Maintain a complete and detailed PPE Ledger Cards and Property Cards
for all properties of the LGU.

May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.

ARNE S. CABIGAS
State Auditor I
OIC Audit Team Leader

SANTIAGO P. SEÑASE
State Auditor IV
OIC Supervising Auditor

Proof of Receipt of AOM:

Date
Officer Name of Receiving Officer Signature
Received

Municipal Mayor

Municipal Accountant

LGSO

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