THE Commission on Audit (COA) has flagged several issues in the Municipality of Barili’s 2022 financial statements, such as the “doubtful” accounting for the town’s Property, Plant and Equipment (PPE), which make up the bulk of the town’s assets; “unreliable” records on its road networks; and the “inaccurate” computation of its real property tax (RPT) and special education tax (SET) receivables, causing loss of income to the government.
Inventory
In its 2022 audit, COA said the municipality in southwestern Cebu failed to conduct an inventory of its infrastructure assets, raising doubts on the existence, accuracy and completeness of items recorded in its PPE account.
PPE refers to government assets including land, land improvements; buildings and other structures; machinery and equipment; transportation equipment; furniture, fixtures and books; leasehold improvements; and other PPE including specialist military equipment, infrastructure assets, and heritage assets.
Barili indicated that it had P343.52 million in PPE, which represents 70 percent of its total declared assets of P489.01 million for the year 2022.
But the state auditor found deficiencies in the inventory process, including the non-updating of property and PPE ledger cards, and the non-issuance/renewal of acknowledgement receipts for equipment.
COA Circular 2020-006 mandates every local government unit (LGU) to properly account for all PPE items by conducting a physical count, as the PPE usually comprises the largest bulk of the municipality’s assets.
In its response, the municipality claimed that it conducted a physical count of infrastructure; however, the team was not able to complete the inventory.
COA recommended, and the municipality agreed, to comply with the COA Circular 2020-006 guidelines in cleaning up its PPE accounts.
The municipal mayor was also urged to form a new inventory committee to finish the physical inventory in less than three months.
Road networks
The COA added that the municipality’s road network account, totaling P148.24 million, was unreliable for several reasons. These include the failure to separate the cost components of the road network, the non-computation of separate depreciation for each road component, and the error in providing a residual value since no residual value should have been provided.
Road assets’ components with identified costs, such as the road lot, road pavement, drainage system and slope protection measures, are supposed to be segregated and recognized.
Additionally, the road lot component was not recognized and no inventory report was prepared, the local road network (LRN) property card was not maintained, and the LRN system was not disclosed in the Notes to Financial Statements.
The state auditor said COA Circular 2015-008 and International Public Sector Accounting Standards (IPSAS) 1 were violated, affecting the accuracy of the financial statements.
The circular states that road networks are part of public infrastructure and should have a separate ledger, with each component depreciated separately using the straight-line method. The circular also specifies the roles and duties of local officials and requires the preparation of a physical count report and disclosure in the Notes to Financial Statements.
COA found that town personnel did not follow these requirements due to the lack of awareness and training on the Local Road Asset Management Manual, developed by the Department of the Interior and Local Government ((DILG) to comply with the circular.
The agency advised, and the municipality agreed, on establishing a system to coordinate the recording of the road network and to contact DILG 7 for training schedules on the Local Road Asset Management System.
Receivables
In addition, the COA discovered that the recorded real property tax (RPT) and special education tax (SET) receivables in 2022, totaling P7.608 million each, did not match the treasurer’s certified list of taxpayers, violating Section 20 of the New Government Accounting System manual for LGUs.
This cast doubt on the reliability and accuracy of the balances, as the municipality treasurer failed to provide the certified list of taxpayers to the municipal accountant at the start of the year.
The agency recommended, and the municipality agreed, to have the municipal treasurer provide the duly certified list of all taxpayers to the municipal accountant with the amount due and collectible for the year in order to present reliable and accurate balances in the statements.
Non-reconciliation of assessed values
COA also found a discrepancy of P550.20 million in the assessed values on which the RPT and SET receivables were based after the assessed values did not reconcile with the Assessment Roll, a violation of Section 6 of the Manual on Real Property Appraisal and Assessment Operations which resulted in the “inaccurate and unreliable computation” of RPT and SET receivables.
As per the Assessment Roll, the total assessed value was P997.44 million, but the amount of assessed value based on the computed/paid RPT/SET was only P447.24 million.
The municipal assessor and treasurer offices had a huge difference in values despite using the same RPT system software.
The audit team found that the Treasury Office used only properties with unpaid balances to calculate the total assessed value, resulting in a shortfall compared to the Municipal Assessor’s records.
The computed RPT and SET receivables were found to be inaccurate and unreliable due to an incorrect system report that only included assessed value tax of real properties with delinquent balances.
To reconcile the assessed values, the agency suggested reconciling the total assessed value used as the basis for RPT and SET receivables with the assessment roll of the municipal assessor. It also recommended the training of Treasury Office staff members responsible for real property tax collection. The management agreed to COA suggestions. (AML, with CTL)