A STUDY OF THE PERFORMANCE AND FINANCIAL REPORTING PRACTICES OF THE LIGHT RAIL TRANSIT AUTHORITY

By: Jerelleen Rodriguez

The evaluation of the financial condition and performance of Government Owned and Controlled Corporations (GOCCs) is based on the fair presentation of its financial statements. This research aims to evaluate the quality of the financial statements of the Light Rail Transportation Authority (LRTA), a Philippine GOCC, based on the requirements of Generally Accepted Accounting Principles (GAAP) for the periods covered from years 2009 to 2013. Moreover, this study provides an overall assessment of the financial condition and performance of the LRTA based on relevant financial ratios as compared to a benchmark.

As a not for profit organization, the LRTA does not fully comply with the Philippine Financial Reporting Standards (PFRS) which is the GAAP in the Philippines. Instead, management evaluates the accounting policies which will lead to more reliable financial statements. This allows for more flexible recognition criteria for assets, liabilities, income and expenses, which results to figures that are not fully comparable with benchmarks. The Commission on Audit (COA) has identified deviations from GAAP during the periods covered due to the inadequate maintenance of accounting information, and inappropriate asset and expense recognition. Moreover, the LRTA has insufficient policies on collection and control of funds appropriated from the National Government. The LRTA has experienced operating losses consistently for the period of study. This loss is compensated to arrive at a net income due to realized and unrealized foreign exchange gains. The LRTA should review and implement more suitable operational and financial policies in line with its government mandate. It should ensure safekeeping of accounting records to be able to provide a more accurate report of its financial condition and performance.