The Commission on Audit (COA) has flagged Tagbilaran City Government for keeping over P3.7 million pesos in dormant receivable accounts for more than a decade, potentially overstating its financial position.
In its audit report, COA said cash advances and other receivables amounting to P3,775,670.45 pesos remained dormant in the city’s books for over 10 years.
COA auditors noted this violated International Public Sector Accounting Standards (IPSAS) and affected “the fairness of the presentation of the account in the financial statements.”
The report cited IPSAS 21, which requires entities to assess at each reporting date whether there is any indication an asset may be impaired. If such indication exists, the entity should estimate the recoverable amount of the asset.
COA auditors found the city’s receivable accounts “comprise mostly of beginning balances which remained inactive or non-moving in the books of accounts for a considerable length of time.”
The dormant accounts included P930,000 pesos due from NGOs/POs under the General Fund, P1,360,597.95 pesos in other General Fund receivables, and P1,485,072.50 pesos in Special Education Fund receivables. All were over 10 years old.
“Because of the non-provision of Impairment Loss and the corresponding Allowance for Impairment, the surplus for the year as well as the balance of the various Receivable accounts were overstated,” the COA report stated.
The auditors noted that COA Circular No. 2016-005 provides guidelines for writing off dormant receivable accounts, defining them as “those accounts with balances which remained inactive or non-moving in the books of accounts for ten years or more and the settlement/collectability could no longer be ascertained.”
COA said that the circular’s provisions for dormant receivables indicate “significant long-term changes with an adverse effect on the entity have taken place in the government policy environment in which the entity operates.”
COA recommended that the city government recognize and measure the impairment loss in accordance with IPSAS 21. The agency also advised making a request to write off the dormant accounts, except those under litigation, following procedures under COA Circular No. 2016-005.