BY GEROME DALIPE IV
ILOILO – The Commission on Audit (COA) flagged the Lemery municipal government for failing to ensure the physical existence, accuracy, and completeness of its property, plant, and Equipment (PPE) account, which was valued at P326.37 million.
It said the municipal government did not conduct a physical count of PPE assets or maintain the required property cards and property ledger cards, according to COA’s annual report as of Dec. 31, 2023.
These actions are required by the Training Handbook on Property and Supply Management System and the New Government Accounting System (NGAS) Manual for Local Government Units (LGUs).
During the entrance conference held on December 19, 2023, for the audit of the Lemery municipal government’s financial accounts covering January 1 to December 31, 2023, the state auditors discussed the requirement to submit the Report on the Physical Count of Property, Plant, and Equipment (RPCPPE) for the calendar year 2023.
Additionally, they requested the Property Cards (PCs) and Property Ledger Cards (PLCs) to serve as supporting schedules. Despite this discussion, these documents were not submitted by the municipality.
Upon review of the 2022 and 2023 financial statements, COA’s year-end comparison revealed that the total value of the municipality’s Property, Plant, and Equipment (PPE) increased from P290.191 million in 2022 to P326.372 million in 2023.
However, due to the lack of physical count verification and supporting documentation, as well as the absence of property records, the accuracy and completeness of this P326.372 million figure remain unverified.
Consequently, the municipality’s PPE account balance in the financial statements is deemed unreliable by COA, affecting the transparency and accountability of Lemery’s asset management practices.
The audit findings indicate that the Lemery municipal government’s total Property, Plant, and Equipment (PPE) account rose by P36.181 million, reflecting a 12.5% increase from 2022 to 2023.
However, auditors said this increase is not verifiable due to the municipality’s failure to submit the report on the physical count, as well as the required property cards and property ledger cards. Without these supporting documents, the physical existence, accuracy, and completeness of the PPE assets cannot be confirmed.
Additionally, the absence of subsidiary ledgers leaves the specific reasons behind the change in PPE unvalidated, according to COA.
This lack of documentation and ledger support limits the COA’s ability to confirm the nature of transactions affecting the PPE accounts and compromises the reliability of the financial statements, raising concerns over the municipality’s asset management and financial reporting practices.
The audit findings further reveal that the General Services Office (GSO) of the Lemery municipal government relies solely on the acknowledgment receipt for equipment (ARE) as its record for Property, Plant, and Equipment (PPE). However, no Property Cards (PCs) are maintained for each PPE item by the GSO, and the Accounting Office has not prepared the necessary Property Ledger Cards (PLCs).
These PLCs are crucial, as they contain detailed information on cost, depreciation, and other relevant data essential for accurately monitoring and reconciling PPE assets.
This lack of proper documentation and record-keeping has been a recurring audit issue, highlighted in previous years with corresponding recommendations for improvement. Yet, the municipality has not taken corrective action to comply with these recommendations.
The absence of PCs and PLCs hinders effective monitoring, accountability, and reconciliation of municipal assets, leading COA to reiterate this observation for compliance. Persistent neglect of these audit recommendations raises concerns about asset management practices and the integrity of financial reporting within the municipality.
The audit findings further indicate that while the General Services Office (GSO)-Designate has prepared lists of equipment, the actual physical count of these assets was not conducted.
Additionally, the GSO was unable to reconcile these equipment lists with the records of the municipal accountant, reportedly due to the Accountant’s heavy workload, according to COA. This lack of verification and reconciliation raises questions about the reliability of the PPE account.
Regarding the unserviceable properties, the municipality plans to dispose of these items through a public auction scheduled for this year.
However, without a physical count or the required report on the physical count of property, plant, and equipment, along with the supporting property cards and property ledger cards, there is a risk that some PPE items might either be nonexistent but still recorded in the books or exist but remain unrecorded, according to state auditors.
The auditors noted that this situation is particularly concerning as the PPE, valued at P326.372 million, represents 56.6% of the municipality’s total assets of P576.932 million.
Given this significant proportion, the absence of reliable documentation and physical verification undermines the accuracy and integrity of the municipality’s financial statements, they stressed.
This lack of accountability could lead to asset mismanagement and loss, underscoring the need for immediate corrective actions to address these deficiencies, COA warned.
According to the Handbook on Property and Supply Management System (PSMS), agency heads are required to conduct a physical inventory of all equipment and supplies in their offices at least annually. Additionally, at the end of each quarter, the Accounting and Supply/Property Units are expected to reconcile their records.
Any discrepancies between the physical and book inventories should be promptly investigated, addressed, and reconciled. If needed, written explanations must be obtained from the accountable individuals.
The PSMS Handbook also mandates that the report on the physical count of property, plant, and equipment must be prepared annually by the Inventory Committee and submitted to the relevant auditor by January 31 of each year.
Moreover, the inventory listing of equipment must be cross-checked with the property cards maintained by the property or supply officer, as well as with the equipment ledger cards held by the accounting office, to ensure that these records align with the control accounts in the general ledger.
In the case of the Lemery municipal government, the failure to conduct a physical count, reconcile records quarterly, and submit the RPCPPE along with the required documentation violates these standards, according to COA.
This lack of compliance hinders accurate asset tracking, potentially allowing for discrepancies or unrecorded assets to remain undetected.
The COA advised to instruct the inventory committee to prioritize conducting a physical count of all PPE assets and ensure the preparation and submission of the Report on Physical Count of Property, Plant, and Equipment (RPCPPE) to the Auditor no later than January 31 of the subsequent year.
The COA also recommended to direct the General Services Office (GSO)-Designate and the Municipal Accountant to establish, maintain, and regularly update the Property Cards (PCs) and PPE Ledger Cards for all PPE items, ensuring that detailed records are kept current.
The auditors also require the municipal accountant to submit complete subsidiary ledgers for all PPE accounts to support the balances reported in the financial statements./PN
