Philippine National Railways faces adverse audit opinion over P187 billion surplus misstatement

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PNR audit surplus misstatement

Highlights

Commission on Audit found PNR's revaluation surplus account overstated by P186.98 billion as of Dec. 31, 2025, due to misclassification of land values.
Auditors identified discrepancies totaling 10.61 million square meters of land worth P64.76 billion, missing P13.13 billion in property, plant and equipment, and unsupported construction-in-progress balances of P329.72 million.
CoA issued an adverse opinion on PNR's 2024 and 2025 financial statements and cited unresolved audit disallowances of P73.5 million and audit charges of P139.26 million as of Dec. 31, 2025.

Audit findings on land, equipment and surplus

As reported by BusinessWorld, citing the Commission on Audit, PNR recorded its appraised land values as revaluation surplus instead of deemed costs, leading auditors to conclude that the revaluation surplus account was overstated by P186.98 billion as of Dec. 31, 2025, while accumulated surplus or deficit was understated by the same amount. CoA said the balance stood at P43.38 billion in 2024.

Auditors also found discrepancies involving 10.61 million square meters of land valued at P64.76 billion between PNR's books and its summary of real estate properties. CoA said it could not verify the land's existence, completeness and valuation through alternative audit procedures.

PNR also failed to remove P544.34 million worth of sold or donated land from its books. In addition, 133 land titles covering 9.78 million square meters were not in PNR's custody, while another 1.99 million square meters of titled land with undetermined value was not recorded.

The audit further identified P13.13 billion worth of missing, nonexistent or unserviceable property, plant and equipment, excluding land and construction in progress. CoA also cited PPE items with negative balances totaling P4.387 billion because of excessive accumulated depreciation, adding that correcting the depreciation would have increased the PPE balance by P3.496 billion.

Financial and compliance impact on PNR

Beyond land and equipment issues, auditors questioned P329.72 million in construction-in-progress balances because PNR lacked supporting documents for the expenditures. The CIP account totaled P3.44 billion as of Dec. 31, 2025, and CoA said it was unable to determine the appropriate adjustments at the reporting dates because of the missing records.

PNR also had another P175.49 million worth of assets at its stations that were not recorded in its books. CoA recommended that the railway operator establish an updated central registry of land assets, reconcile property records, investigate missing equipment and secure documentation for questionable construction expenses.

Auditors also directed PNR to prepare a PPE policy in line with International Public Sector Accounting Standards 17 and to reclassify the P187 billion revaluation surplus balance to accumulated surplus or deficit. CoA issued an adverse opinion on PNR's financial statements for the years ended Dec. 31, 2025 and 2024.

As of Dec. 31, 2025, PNR still had P73.5 million in audit disallowances, P139.26 million in audit charges and P58,727 in audit suspensions that remained unsettled. The findings add to financial control concerns around the state-run rail operator's asset management and reporting practices in the Philippines' transport sector.

Earlier, we reported on Philippine bond reforms aimed at modernizing the market and supporting index inclusion as part of wider investment constraints.

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