THE Commission on Audit has raised questions on the validity of the Cebu provincial government’s revaluation of the price per square meter of 313 lots in 2022, saying it was contrary to Philippine Application Guidance (PAG) No. 2 of the International Public Sector Accounting Standard. (IPSAS) 17.
The provincial government’s move resulted in the increase of the Land Account by P17.029 billion and the Investment Property Account by P344.25 million.
Under Paragraph 42 of IPSAS 17, an audited agency may choose to use the cost model or the revaluation model as its accounting policy which it would have to apply to the Property, Plant, and Equipment (PPE).
The Philippine Application Guidance No. 2, on the other hand, requires that for consistency and uniformity, the cost model shall be adopted for all classes of PPE.
Auditors pointed out that the new valuation in 2022 was the second time that Cebu has raised the appraisal of lots registered in its name.
“In the year 2019, through the Cebu Provincial Appraisal Committee Resolution Nos. 42 and 43 series of 2019, the Provincial Government of Cebu appraised its 357 lots increasing the Land account by P166,106,887,522.32,” they noted.
From a listed value of P22.364 billion in 2018, Cebu’s 357 lots increased their combined values by more than 700 percent to P188.471 billion.
An official query was sent to the Cebu provincial government on June 14, 2022 seeking an explanation for the “departure from accounting policy” after the Land and Investment Property-Land accounts have been recognized in its books.
The office of Gov. Gwendolyn Garcia and the Provincial Accountant received the audit query on June 28 and the latter, upon order of the local chief executive, submitted a reply dated August 4, 2022.
According to the Provincial Accountant, Cebu’s adoption of the revaluation model is allowed by IPSAS 17.
It said being a highly urbanized province, it is fair and equitable for Cebu to “reflect the current and fair market valuation of its lots.
Likewise, the official contended that being an attractive investment destination, it is understandable why the value of lands in Cebu is “astronomically higher” than other nearby provinces like Siquijor.
The provincial accountant said PAG 2 is wrong in requiring all government agencies to conform to a single cost model, adding that for LGUs, the revaluation model is more consistent with their respective status.
While declining the audit recommendation to adjust the valuation to conform to the cost model, Cebu disclosed the revaluation in the Notes to Financial Statements.
The audit team forwarded the issue to the COA Government Accountancy Sector (GAS) to seek guidance as to what action to undertake to address the refusal of the province of Cebu to list parcels of land it owns based on the cost model.
For the 2022 revaluation, the audit team said the Cebu Provincial Appraisal Committee (CPAC) Resolution that was used as the basis for the new appraisal was not submitted to it.
