The agency charged everyday operating costs such as utilities, security, supplies, training, travel and legal fees to construction project costs, which is not allowed. This made construction-in-progress balances too high and operating expenses too low.

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Original Audit Finding Excerpt

"129 Region Office Amount (In PhP) Accounts Affected Understatement (Overstatement) (In PhP) • Office Supplies Expenses • Other Supplies and Materials Expenses (1,242,504.22) Sub-total 35,519,899.59 • IX Zamboanga City DEO 28,305,266.93 • Fuel, Oil and Lubricants Inventory • Office Supplies Inventory • Other Supplies and Materials Inventory • Accumulated Surplus/(Deficit) 9,874,235.21 9,001,302.98 9,429,728.74 28,305,266.93 Total Total 63,825,166.52 1.38 The outright recognition of expenses is not in keeping with GAM for NGAS which resulted in the overstatement of the Expenses accounts by P35,519,899.59 and understatement of Accumulated Surplus/(Deficit) and Inventories accounts by P28,305,266.93 and P63,825,166.52, respectively, for the balance of inventories that were not yet utilized, distributed or consumed as at year end. 1.39 We recommended and Management of Isabela 1st District Engineering Office (DEO) in Region II and Zamboanga City DEO"

Source Document