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.: 2023-011

Date : April 24, 2023

AUDIT OBSERVATION MEMORANDUM

HON. MICHAEL DRAGON T. JAVIER

Municipal Mayor
Javier, Leyte

Attention: CHERYL L. ACALA

Municipal Accountant

We have audited the Due to NGAs account of the Municipality of Javier and
observed the following deficiencies/errors:

1. The Due to NGAs account balance in the Trust Fund is understated by

₱8,062,700.00 due to erroneous deductions made from the account even
without liquidation and submission of fund utilization report to the source
agency, contrary to Section 111 (2) of Presidential Decree No. 1445 and COA
Circular No. 94-013, affecting the fair presentation of the accounts in the
year-end financial statements.

1.1. Section 111 (2) of PD 1445 provides that the highest standards of honesty,
objectivity and consistency shall be observed in the keeping of accounts to
safeguard against inaccurate or misleading information.

1.2. COA Circular No. 94-013 dated December 13, 1994 provides that funds
transferred to LGUs from National Government Agencies (NGA) should be
properly taken up in the books of both agencies, used only for the purpose
intended, and properly accounted and reported.

1.1 COA Circular No. 2015-009 dated December 1, 2015 prescribed the Revised
Chart of Accounts for LGUs to conform with the adoption of the Phil. Public
Sector Accounting Standard (PPSAS).

AOM NO. 2023-006 Overstated Due to NGAs-Javier Leyte Page 1 of 3

 Due to National Government Agencies
2-02-01-050
Credit
This account is used to record the receipt of funds for delivery of
goods/services as authorized by law, fund transfers from NGAs for
implementation of specific programs or projects and other inter-agency
transactions. Debit this account for delivery of goods/services, liquidation of
funds received and settlement of liabilities.

1.3. The Due to NGAs account in the Statement of Financial Position – Trust Fund as
of December 31, 2022 reflected a balance of ₱27,145,739.28. However, review of
financial records revealed that the said account in the Trust Fund is understated
by ₱8,062,700.00 due to erroneous recognition of income on the following
procurement of equipment and deducting the said amount from Due to NGA,
despite being not liquidated yet, as shown in table 1:
Table 1. Procurements deducted from Due to NGAs and recognized as income as of December
2022
Check
Date Payee Particulars Fund Amount
#
12/29/2022 AP as New Five Star Logistics, LGSF - ₱ 106,200.00
of Dec Gadgets, etc. for COVID-19
2022 Improvement of FA
Health Service
Delivery and
Vaccination
Purposes
12/29/2022 AP as Brains Trading Ultrasound for Financial 3,475,000.00
of Dec JMI Assistance
2022 from Office
of the
President
12/29/2022 AP as KFB 1 unit 75KVA 2,360,000.00
of Dec Marketing Generator set
2022 FA for
12/29/2022 AP as KFB 12 units tent for Typhoon 222,000.00
of Dec Marketing use at various Odette
2022 offices Victims
12/29/2022 AP as HINO LEYTE 1 unit motor 1,899,500.00
of Dec Incorporated vehicle, truck
2022
Total ₱ 8,062,700.00

1.4. On December 29, 2022, an adjusting entry was made debiting Due to NGAs and
crediting Subsidy from National Government in the amount of ₱8,062,700.00 for
the procurement mentioned above. However, as of December 31, 2022, the LGU
has not yet liquidated the procurement, and no Fund Utilization Report has been
submitted to the source agency.

AOM NO. 2023-006 Overstated Due to NGAs-Javier Leyte Page 2 of 3

1.5. It should be noted that income is recognized only when the purpose for which the
fund was received has been completed or implemented and a corresponding
FUR for the same is submitted to the source agency. The aforementioned
procurement should still be included in the Due to NGAs account until liquidation
has been made and the corresponding FUR is submitted.

1.6. Due to the noted deficiency, the Due to NGAs account was understated by
₱8,062,700.00, thus adversely affecting the fair presentation of the year-end
financial statements.

1.7. We recommend that the Municipal Accountant make correcting entry to

revert the amount of ₱8,062,700.00 to the Due to NGAs account and
recognize income only upon liquidation.

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:

Name of Receiving
Officer Signature Date Received
Officer
Municipal Mayor
Municipal Accountant

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