Philippine Coast Guard audit flags inventory gap, accounting misstatements

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Coast Guard audit flagged

Highlights

Commission on Audit flags P323.67-million gap between Philippine Coast Guard inventory balances and physical count, plus P316.37 million in financial misstatements for 2025.
Auditors find P97.36 million in fuel expenses in the wrong period, P91.21 million in understated operating expenses, and P80.13 million in property, plant, and equipment misstatements.
P37.89 million in contractor advances remain unrecovered and P273.41 million in audit disallowances are outstanding as of Dec. 31, 2025; PCG agrees to management reforms.

Audit findings on inventories and expenses

As reported by BusinessWorld Online, the Commission on Audit flags a P323.67-million unreconciled difference between the Philippine Coast Guard’s inventory balances in its financial statements and its physical count reports, alongside P37.89 million in unrecovered contractor advances and other spending irregularities.

In its 2025 audit report, CoA questions the PCG’s P2.53-billion inventory balance after finding negative inventory amounts and weak internal controls over the issuance of supplies. State auditors say the accuracy and existence of the year-end inventories balance cannot be ascertained because of the gap between the financial statements and the reports on the physical count of inventories and semi-expendable properties.

Auditors also identify P316.37 million in financial misstatements, including P97.36 million in fuel, oil and lubricants expenses recorded in the wrong accounting period and P91.21 million in understated operating expenses tied to late claims submissions. Property, plant and equipment accounts worth P16.13 billion are misstated by P80.13 million due to unrecorded asset transfers, uncalculated depreciation, and unprovided impairment losses.

The PCG’s total property and equipment balance of P35.06 billion is also affected by a P119.92-million difference found during physical counts, while auditors note undocumented donated assets. CoA further cites irregularities in foreign travel expenses, including duplicate daily subsistence allowances for meals already provided by host entities and airfare payments without proof of payment or proper authorization.

Financial control risks and management response

In procurement, auditors cite noncompliance with bidding requirements, including P11.33 million in building repair contracts in North Western Luzon and P7.40 million in venue and catering expenses in Bicol that lack sufficient supporting documents. CoA also raises concerns over the absence of a standardized system for issuing and monitoring fuel slips, saying inconsistent practices across PCG units weaken controls and increase the risk of fuel misuse.

Contractor advances totaling P37.89 million remain unrecouped even after projects were terminated, were in the process of termination, or had already been completely delivered and paid in full. Auditors warn that the outstanding balance creates a risk of loss or wastage of government funds.

As of Dec. 31, 2025, the PCG has P273.41 million in unsettled audit disallowances and P2.16 million in audit charges. CoA renders a qualified opinion on the agency’s 2025 financial statements because of the P316.37 million in misstatements, while PCG management agrees to implement recommendations that include reconciling records, setting up a centralized fuel tracking system, preventing duplicate travel allowances, and pursuing recovery of contractor advances.

Our earlier article on planned Philippine sovereign bond reforms explained how a new pricing convention for peso government bonds and prospective inclusion in a major emerging-market bond index could improve liquidity and broaden the investor base. It also stressed that any market benefits ultimately hinge on fiscal credibility and governance—how well public resources are managed and deployed—rather than on financial-market modernization alone.

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