Republic of the Philippines

COMMISSION ON AUDIT
Local Government Sector – Region III
Audit Group LGS-C-Province of Bulacan
Team R3 – 17

AOM No. 2019-06 (2018)

Date: February 26, 2019

AUDIT OBSERVATION MEMORANDUM

HON. RONALDO T. FLORES

Municipal Mayor
Municipality of Doña Remedios Trinidad

Attention: Marissa S. Castro

Municipal Treasurer/General Services Officer

Ma. Gemma M. Sumaway

Municipal Accountant

We have audited the accounts of the Municipality in connection to the acquisition

and disposal of Property, Plant and Equipment of the Municipality during CY 2018 and
have taken note of the following:

Current-year PPE Transactions

1. During CY 2018, the Municipality: (a) acquired Property, Plant and Equipment
(PPE) worth ₱ 107,274,350.50 which were properly procured under Republic Act No.
9184, recorded and classified in the ledger cards and books of accounts as suggested in
COA Revised Chart of Accounts for Local Governments and reported in the Report on
the Physical Count of Property, Plant and Equipment (RCPPE); and (b) properly
disposed ₱ 2,942,560.00 worth of unserviceable PPEs in accordance with the DBM
Manual on Disposal of Government Property.

1.1 Disbursements for the procurement of properties and equipment during 2018
amounted to ₱ 107,274,350.50, broken down as follows:
Acquired properties and equipment See 1.3 98,370,197.37
Construction in Progress (net) 1.4 8,904,153.13
Total procurement for 2018 107,274,350.50

1.2 All the procurements during the current year were done through competitive
bidding supported by the appropriate documentations, pursuant to Section 10, Article IV
of Republic Act No. 9184, otherwise known as the Government Procurement Reform Act
of 2002 as amended in 2016, which states that:
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 “SEC. 10. Competitive Bidding. – All Procurement shall be done through
Competitive Bidding, except as provided for in Article XVI of this Act.”

1.3 Properties and equipment added to the books during 2018 were either purchased or
constructed (transferred from Construction in Progress). Infrastructure Assets constituted
the largest fraction at 65.26% of purchases, mainly from the construction of new roads
throughout the Municipality. Examination of accounting records showed that acquired
PPEs were properly recorded in the ledger cards and appropriately classified as under the
COA Revised Chart of Accounts for Local Governments. The Report on the Physical
Count of Property, Plant and Equipment (RCPPE) confirmed the completeness and
existence of these procurements. Transactions for the current year are summarized as
follows:
Debits – Credits –
PPE Net Change
Purchase or fr. CIP Disposal
Infrastructure Assets 70,012,313.05 - 70,012,313.05
Buildings and Other Structures 16,825,129.89 - 16,825,129.89
Machinery and Equipment 1,967,789.00 - 1,967,789.00
Transport Equipment 6,315,426.32 2,942,560.00 3,372,866.32
Furniture, Fixtures and Books 284,638.50 - 284,638.50
Other Property, Plant and Equipment 2,964,900.61 - 2,964,900.61
Total 98,370,197.37 2,942,560.00 95,427,637.37

1.4 The Construction in Progress (CIP) is a suspense or temporary account of costs

directly associated with constructing an asset. The balance of a particular project is
transferred to the appropriate permanent PPE account upon completion. Adding the gross
amount of procurement for construction projects to the gross increase in other PPEs to get
the year’s total PPE procurement would’ve double-counted completed projects, hence,
only the net change of CIP was considered in arriving at the overall PPE procurements.
Debits – Credits –
Construction In Progress Net Change
Procurement To other PPEs
(CIP) 95,496,626.07 86,592,472.94 8,904,153.13

1.5 The entire Transport Equipment credit of ₱ 2,942,560.00 was the original cost of
the unserviceable motor vehicles disposed of, with proceeds worth the carrying amount;
therefore, no gain or loss on disposal was recognized. These were carried out according to
the procedures stated in the DBM Manual on Disposal of Government Property, namely:

A. Creation of the Disposal Committee F. Setting of Minimum Value

B. Determination of Disposable Property G. Disposal (Modes of)
C. Submission of Disposal Documents H. Dropping from the Books of
D. Inspection Accounts
E. Appraisal

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1.6 We recommend that the Management maintain the status quo in the proper
procurement, recording and acquisition of property, plant and equipment, as under
Republic Act No. 9184 and COA Revised Chart of Accounts for Local Governments;
and the appropriate disposal thereof as under DBM Manual on Disposal of
Government Property.

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

ROSARIO B. IBAÑEZ
State Auditor IV
Audit Team Leader

REMEDIOS P. SOTO
OIC - Supervising Auditor
Province of Bulacan

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