01 AAR2011 San Ildefonso,Isur
Transcript of 01 AAR2011 San Ildefonso,Isur
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Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
ON THE
MUNICIPALITY OF SAN ILDEFONSO
Province of Ilocos Sur
For the Year Ended December 31, 2011
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Republic of the Philippines
COMMISSION ON AUDIT
Office of the Supervising AuditorAudit Group G- Ilocos Sur Province
Provincial Capitol, Vigan City
March 30, 2012
HONORABLE MARK ANTHONY A. PURISIMA
Municipal MayorMunicipality of San Ildefonso, Ilocos Sur
Sir:
We transmit herewith the report on the comprehensive audit of the accounts and
operations of the Municipality of San Ildefonso, Ilocos Sur for the year ended December31, 2011, in compliance with Section 2 Article IX - D of the Philippine Constitution and
pertinent section of Presidential Decree No. 1445. The report was prepared by Ramon B.Festejo, Audit Team Leader, Team IX.
The audit was conducted to ascertain the propriety of financial transactions and
compliance with prescribed rules and regulations. It was also made to ascertain theaccuracy of financial records and reports, as well as the fairness of the presentation of the
financial statements. The audit also aimed to assess or determine whether the resources of
the municipality were disbursed economically, effectively and efficiently.
The report consists of four parts: Part I - Audited Financial Statements, Part II
Detailed Findings and Recommendations, Part III Status of Implementation of Prior
Years Audit Recommendations and Part IV - Annexes. The Detailed Findings and
Recommendations were discussed with the concerned management officials and staff inan exit conference held on February 21, 2012. Managements comments were included in
the report, where appropriate.
We request that the findings and recommendations contained in the said report be
fully addressed and we would appreciate being informed of the action taken in this regard
within sixty (60) days from receipt hereof, pursuant to Section 94 of the GeneralProvisions of Republic Act No. 10147, otherwise known as the General Appropriations
Act of 2011.
We acknowledge the cooperation extended to the audit team by the officials andstaff of that agency.
Thank you.
Very truly yours,
ELVIRA M. JIMENEZSupervising Auditor
cc: The Director, DILG, Regional Office No. I, San Fernando City, La Union
The Director, BLGF, Regional Office No. I, San Fernando City, La UnionThe Director, DBM, Regional Office No. I, San Fernando City, La Union
The Presiding Officer, Sangguniang Bayan, San Ildefonso, Ilocos Sur
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The Assistant Commissioner, LGS, COA, Quezon City
Republic of the Philippines
COMMISSION ON AUDIT
Audit Group G- Ilocos Sur ProvinceTeam IX
Municipal Hall, Bantay, Ilocos Sur
February 29, 2012
ELVIRA M. JIMENEZ
Supervising AuditorCommission on Audit
Audit Group G- Ilocos Sur Province
Provincial Capitol, Vigan City
Madam:
In compliance with Section 2, Article IX-D of the Philippine Constitution and
pertinent sections of Presidential Decree No. 1445, we conducted a comprehensive auditon the accounts and operations of the Municipality of San Ildefonso, Ilocos Sur for the
year ended December 31, 2011.
The audit was conducted to ascertain the propriety of financial transactions and
compliance of the agency to prescribed rules and regulations. It was also made toascertain the accuracy of financial records and reports as well as the fairness of the
presentation of the financial statements. The audit also aimed to assess or determine
whether the resources of the municipality were disbursed economically, effectively andefficiently.
The results of our audit are embodied in our attached report consisting of fourparts: Part I - Audited Financial Statements, Part II Detailed Findings andRecommendations, Part III Status of Implementation of Prior Years Audit
Recommendations and Part IV - Annexes. The Detailed Findings and Recommendations
were discussed with concerned Management Officials and staff during an exit conferenceheld on February 21, 2012.
An unqualified opinion was rendered as to the fairness of the presentation of the
financial statements of the Municipality of San Ildefonso, Ilocos Sur as of December 31,2011 because these were free of material misstatements.
Our audit was conducted in accordance with generally accepted state auditing
standards and we believe that it provides reasonable bases for the results of the audit.
We acknowledge the cooperation extended to the Audit Team by the officials andstaff of the agency.
Very truly yours,
RAMON B. FESTEJO
State Auditor III
Audit Team Leader
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EXECUTIVE SUMMARY
A. Highlights of Financial Operation
The municipalitys assets, liabilities and government equity as of December 31,
2011 registered at P100,297,508.93, P17,195,373.95 and P83,102,134.98 respectively.
This years income totaled P45,701,683.81 compared to that of last years income
of P38,338,766.03 registering an increase of 19.20%.
Total appropriations for the year amounted to P47,773,680.05 broken down into
Current Appropriations and Continuing Appropriations of P47,729,180.08 and P44,500.00
respectively.
Total expenditures during the year amounted to P23,082,862.26 broken down into
Personal Services, Maintenance and Other Operating Expenses, Financial Expenses andSubsidies and Donations in the total amounts of P17,084,349.04, P5,752,513.22, P100.00
and P245,900.00 respectively.
B. Operational Highlights
Below are the major plans and targets vis--vis accomplishments of the
Municipality for the year 2011:
Programs/Projects/Activities Targets AccomplishmentsPercentage of
Accomplishments
Repayment of Loan to World Bank P 636,004.00 P 636,003.48 100%
Solid Waste Management 448,626.64 400,997.84 89.38%
Outreach Program 364,851.76 363,051.00 99.51%
Day Care Services 303,600.00 303,600.00 100%
Kinder Education 180,000.00 180,000.00 100%
Aid in Financial Crisis Situation 161,000.00 161,000.00 100%
CBMS Formulation 125,000.00 125,000.00 100%
Support to Agriculture Program 100,000.00 72,564.40 72.56%
Textbooks 75,000.00 74,902.50 99.87%
Supplemental Feeding 75,000.00 75,000.00 100%
Improvement of BNHS 70,000.00 70,000.00 100%
Sports Development Program 58,500.00 53,000.00 90.60%TOTAL P 2,597,582.40 P 2,515,119.22 96.83%
C. Scope of Audit
A comprehensive audit was conducted on the accounts and operations of theMunicipality of San Ildefonso, Ilocos Sur. The audit consisted of review of operating
procedures, inspection of the municipalitys programs and projects, interview of concerned
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government officials and employees, verification, reconciliation and analysis of accounts
and such other procedures considered necessary.
D. Auditors Opinion on the Financial Statements
The auditor rendered an unqualified opinion on the fairness of presentation of the
financial statements of the Municipality of San Ildefonso, Ilocos Sur as of December 31,
2011 because these were free of material misstatements.
E. Significant Findings and Recommendations
The following are the significant findings and their corresponding
recommendations which were discussed with management during the exit conference.Management comments are included in the report, where appropriate.
1. The Other Receivables account balance of P3,084,000.00 representing claims
against various debtors was still carried in the books although the account has
remained dormant for more than ten (10) years and whose collectability has beenrendered improbable due to the lack of source documents to support the account.
We recommend that the Municipal Mayor should instruct the Municipal
Accountant to request in writing to the Commission Proper thru the Audit Team Leader
for the writing-off of the dormant and uncollectible accounts amounting toP3,084,000.00.
2. The observers were not invited by the Bids and Awards Committee (BAC) in all
stages in the procurement of goods and infrastructure projects through public
bidding valued at P1,176,781.50 and P10,035,550.71, respectively, as required
under pertinent provisions of the Implementing Rules and Regulations (IRR) ofR.A. No. 9184 thereby defeating the principle of transparency in the procurement
process because the observers were unable to assess the extent of the BACs
compliance with the provisions of the IRR and areas of improvement in the BACs
proceedings.
We recommend that the Bids and Awards Committee should invite in writing
the required observers in all stages in the procurement of goods and infrastructureprojects through public bidding as required under pertinent provisions of the
Implementing Rules and Regulations of R.A. No. 9184 to enhance transparency in the
procurement process and to enable the observers to assess the extent of the BACs
compliance with the provisions of the IRR and areas of improvement in the BACsproceedings.
3. The Bids and Awards Committee did not adopt the required conditions and
procedures in the conduct of post-qualification on the bidders who tendered the
Lowest Calculated Bid in the procurement of goods and infrastructure projects
through public bidding in the amount of P1,176,781.50 and P10,035,550.71,
respectively, as prescribed under pertinent provisions of Section 34 of the Revised
Implementing Rules and Regulations of R.A. No. 9184. Thus the veracity of the
statements made and authenticity of documents submitted by the concerned
bidders was not properly established.
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We recommend that the Bid and Awards Committee should strictly observe theconditions and procedures in the conduct of post-qualification as provided under
pertinent provisions of Section 34 of Implementing Rules and Regulations of R.A. No.
9184 to ensure the authenticity of documents submitted, and the veracity of statementsmade, by bidders who tendered the Lowest Calculated Bid in the procurement of goods
and infrastructure projects through public bidding.
The other significant findings and recommendations are discussed fully in PartII of this report.
F. Status of Implementation of Prior Years Audit Recommendations
Out of the seven (7) recommendations embodied in the 2010 Annual AuditReport, five (5) were implemented and two (2) remained unimplemented by the
Municipality.
TABLE OF CONTENTS
Part I Audited Financial Statements
Audit Certificate 1
Statement of Management Responsibility for Financial Statements 2
Consolidated Balance Sheet 3As of December 31, 2011
(With Comparative Figures for 2010)
Consolidated Statement of Income and Expenses 4
For the Year Ended December 31, 2011
(With Comparative Figures for 2010)
Consolidated Statement of Cash Flows 5
For the Year Ended December 31, 2011
(With Comparative Figures for 2010)
Notes to Consolidated Financial Statements 6
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Part II Detailed Findings and Recommendations
I. Financial and Compliance Audit 17II. Value for Money Audit 27
III. Revenue Audit 31
IV. Compliance with Tax Laws 33
Part III Status of Implementation of Prior Years Audit
Recommendations 35
Part IV Annexes
Financial Statement by Fund A
Status of Appropriations, Allotments, Obligations and Balances BSchedule of Contracts for the Procurement of Goods and
Infrastructure Projects C
Schedule of Suppliers/Contractors Who Tendered the LowestThe Lowest Calculated Bid D
Schedule of Contracts for the Procurement of Goods and
Infrastructure Projects EProjects Covered under the 20% Development Fund F
Schedule of Taxes Withheld and Remittances G
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PART I AUDITED FINANCIAL STATEMENTS
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
AUDIT CERTIFICATE
HONORABLE MARK ANTHONY A. PURISIMA
Municipal MayorMunicipality of San Ildefonso, Ilocos Sur
We have audited the accompanying Balance Sheets of the Municipality of San
Ildefonso as of December 31, 2011 and the related Statements of Income and Expenses and
Statements of Cash Flows for the year then ended. These financial statements are theresponsibility of the Municipalitys management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with laws, COA and INTOSAI standardsand applicable generally accepted auditing standards. These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. Our audit included examining on a test basis, evidencesupporting the amounts and disclosures in the financial statements. It also included
assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our auditprovides reasonable basis for our opinion.
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In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of the Municipality of San Ildefonso as of
December 31, 2011 and the results of its operations and cash flows for the year then ended
in conformity with applicable generally accepted accounting principles.
COMMISSION ON AUDIT
By: RAMON B. FESTEJOState Auditor III
Audit Team Leader
February 28, 2012
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Notes to Consolidated Financial Statements
1. Agency Profile
San Ildefonso was established during the Spanish era in the year 1625. Duringthe Spanish era, a small community in Northern Luzon was found. Arguing on how
and what to name it some dwellers who were living near the Bantaoay River saw a
big wooden box that contained an engraved statue of San Ildefonso and decided tocall that community San Ildefonso. The people decided to make him the patron
saint of the place and an annual town fiesta celebration is held every 23 rd of January,
the day when the image was found. By virtue of an Executive Order in 1901,
providing smaller towns to be annexed to adjacent bigger ones, San Ildefonso wasannexed as a barrio to Sto. Domingo. Through the help of the late Pres. Elpidio
Quirino, then an assemblyman, San Ildefonso was again made a separate town in
1920.
The Municipalitys operations are focused mainly on the provision of basic
services through enhancement of tourism industry to increase local source revenue.The municipality is geared towards the attainment of higher and sustainable level of
Socio-economic Growth and Development through the following:
Vision:
A green community of educated and empowerment citizenry, determined
to overcome challenges in attainment of progress thru the enhancement oftrade, industry and culture to be actualized by effective governance.
Mission:
To act as partner of the community guiding the citizenry, to achieve a
sustainable social, economic and environmental condition trough theenhancement and promotion of its trade, industry and culture to generate the
necessary revenue for the delivery of effective and efficient basic services.
To achieve these, the municipality had set the ALISTO flagship programsstated hereunder:
People Empowerment with participative NGOs and
Renewed Dynamism and Transparency of
-Bids and Awards Committee
-Gender and Development
Overwhelming Commitment and Dedication thru
-Agricultural Productivity
-Seed and Fertilizer Subsidy-Livelihood Projects
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Good Governance towards
-Human Resource Development
Rural Development attaining
-Improved infrastructure facilities-Technology Transfer
-Communication and Transportation
Economic and Ecological Balance under
-Solid Waste Management-Investment Promotion/Tourism Industry
Service Oriented
-Social Services (health and sanitation, education, social welfare,
peace and order and public safety)
Organizational Management Systembased on-Executive-Legislative Agenda
2. Basis of Financial Statement Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles and reflect amounts that are based on best estimatesand informed judgment of management with an appropriate consideration of
materiality. The management maintains a system of accounting and reporting which
provides for the necessary internal control to ensure that transactions are properlyauthorized and recorded and that assets are safeguarded against unauthorized use or
disposition and liabilities recognized.
3. Summary of Significant Accounting Policies
The following are the significant accounting policies that the agency follows:
A. Revenue and Expense Recognition
The agency uses accrual basis of accounting in the recognition of expenses
and revenues. All expenses are recognized when incurred and reported in
the financial statements in the period to which they relate. Real propertytaxes are accounted following the modified accrual basis. Collections of
delinquent accounts for Real Property Tax/ Special Education Tax prior
CY 2002 shall be recognized as direct credit to Real Property Tax/ SETaccounts. Other revenues and taxes are recognized under the cash basis.
The Modified Obligation System is used to record allotments received and
obligations incurred. Separate registries are maintained to controlallotments and obligations for each class of allotments.
B. Petty Cash Fund
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Petty Cash Fund account is maintained under the Imprest fund System. Allreplenishments are directly charged to the expense accounts. The petty
cash fund is not used to purchase regular inventory items for stock.
C. Office Supplies and Materials
Office Supplies and Materials not consumed within the accounting
period shall be recorded as assets using the inventory account followingthe Perpetual Inventory Method. The inventories on hand are stated at cost
and are determined using the Moving Average Method, the balances are
checked by means of physical counts.
D. Property, Plant and Equipment (PPE)
Property, Plant and Equipment are carried at cost less accumulated
depreciation.
The straight-line method of depreciation is used in depreciating the
property, plant and equipment purchased/constructed; estimated economiclives ranging from five to fifty years. A residual value, computed at ten
percent (10%) of the cost of the asset is set and depreciation starts on thesecond month after purchase or completion of the PPE.
Properties of the government constructed during the current year whichare used by the general public are accounted and reported under the
Registry of Public Infrastructures. Those properties constructed in the
prior years are still carried under the Property, Plant and Equipmentaccount due to the inability of the agency to maintain subsidiary ledgers.
E. Payables
Payable accounts are recognized and recorded in the books of
accounts only upon acceptance of the goods and /or rendition of the
services to the agency and upon receipt of billings from the supplier.
F. Financial Expenses
Financial expenses such as bank charges and interest expense are
separately classified from maintenance and other operating expenses.
G. New Government Accounting System
Accounts were reclassified to conform to the new chart of accounts
prescribed under the New Government Accounting System, which wasimplemented effective January 1, 2002.
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Pursuant to Accounting Circular No. 2006-01 dated
November 9, 2006, two accounts such as Cash-Disbursing Officer (103)
and Due from Officers and Employees (123) were reclassified to PayrollFund (106) and Advances to Officers and Employees (148), respectively.
4. Correction of Fundamental Errors
Fundamental errors of prior years are corrected by using the Prior Years
Adjustment Account while errors affecting current year operations are charged to thecurrent years accounts.
5. Cash and Other Cash Accounts
2011 2010
Cash in Vault P 138,718.78 P 37,913.21Payroll Fund 38,000.00 0.00
Petty Cash Fund 2,851.00 1.29Cash in Bank-LCCA 18,950,009.80 3,044,350.42
Cash in Bank-LCTD 7,576,931.33 7,387,438.00
TOTAL P 26,706,510.91 P 10,469,702.92
The time deposit account comprises only of the municipal share from RA7171 Tobacco Excise Tax in the Land Bank of the Philippines.
6. Receivables
This is composed of the following accounts:
2011 2010
Real Property Tax Receivable P 976,836.70 P 437,754.05
Special Education Tax Receivable 976,836.70 437,754.05
Due from NGAs 4,321.58 4,237.09Due from GOCCs 270,618.02 270,618.02
Due from LGUs 266,726.59 266,726.59Due from Other Funds 3,492,311.08 394,239.41Receivables-Disallowances/Charges 3,645,933.98 3,645,933.98
Advances to Officers and Employees 548.01 548.01
Other Receivables 4,103,592.07 4,103,592.07
TOTAL P 13,737,724.73 P 9,561,403.27
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The account Real Property Tax Receivable represents uncollected realproperty taxes in CYs 2002 to 2011.
Due from GOCCs represents the debit balance of the accounts GSIS Payable,Due to PHILHEALTH and Due to PAG-IBIG in prior years.
Due from LGUs represent the assessment made to the provincial government
in the amount of P 11,966.84 and the balance of the account is Cash in Other LocalGovernment Treasury in the amount of P113,314.32.
Due from Other Funds account includes funds transferred from General Fundto Trust Fund account for the implementation of various projects such as Community
Based Management System (CBMS) of P91,162.50, Supplemental Feeding of
P31,943.50, Improvement of Farmers Park and Plaza of P3,342,942.10 and thebalance consists of interest earned in trust fund account in the amount of P21,262.98
and walk for a cause contribution due to General Fund amounting to P1,000.00.
The account Receivables-Disallowances/Charges represents the amount due to
suppliers, contractors, and/or employees resulting from audit disallowances whichhave became final and executory. In 2010, there were disallowances in audit on the
salaries of some employees for the period January 1 to June 25, 2010 amounting toP178,590.20 in violation of Local Budget Circular No. 2009-92 dated September 3,
2009, of which P4,281.00 was settled.
Advances to Officers and Employees account includes employees share on
premium contributions amounting to P48.01 and the remaining balance represents
unliquidated cash advance for travel.
Other Receivables account includes debit balance of liability accounts in the
Trust Fund account amounting to P492.21 and the balance of P4,103,099.86 consistsof Livelihood Projects distributed to residents of San Ildefonso.
7. Inventories
This account consists of unused and unissued drugs and medicines and othersupplies intended for the Community Outreach Program.
8. Prepayments
2011 2010
2011 2010
Drugs and Medicines Inventory P 90,631.39 P 32,278.93
Other Supplies Inventory 510,489.95 160,038.95
TOTAL P 601,121.34 P 192,317.88
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Advances to Contractors P 950,620.30 P 0.00
This account consist of fifteen (15) percent mobilization fee paid tocontractors for the Improvement and Renovation of Municipal Hall Phase I and Phase
II in the General Fund and for the Improvement of Farmers Plaza and Park
implemented under the Trust Fund account.
9. Other Current Assets
2011 2010
Other Current Assets P 18,708.50 P 18,708.50
This amount was due to a disbursement erroneously charged to the RA 7171
account. It should have been charged to Trust Fund.
10. Property, Plant and Equipment
This account includes the following:
Land Improvements account still include cost of public infrastructures forgeneral public use such as roads, plazas and other fixed assets that were constructed
during the prior years. Other Property, Plant and Equipment acquired prior to the
implementation of NGAs were not subjected to depreciation. The significant increasein Land and Land Improvements was due to a two (2) parcels of lot acquired during
the year located in Poblacion West and Sagsagat in this Municipality.
Balance
Dec. 31, 2010
Net Addition/
(Reduction)
Balance
Dec. 31, 2011
Land and Land Improvements P 14,658,351.74 3,231,300.00 P 17,889,651.74Buildings 13,661,039.28 179,682.32 13,840,721.60
Office Equipment, Furniture
and Fixtures 1,295,846.75 146,740.00 1,442,586.75Machineries and Equipment 628,180.00 2,000.00 630,180.00
Transportation Equipment 325,000.00 738,828.00 1,063,828.00
Other Property, Plant andEquipment 45,000.00 45,000.00
Construction in Progress-
River Walls Equipment 19,955,177.87 3,449,082.72 23,404,260.59
Total 50,568,595.64 7,747,633.04 58,316,228.68
Accumulated Depreciation (789,111.97) (297,673.31) (1,086,785.28)
Net Book Value P 49,779,483.67 7,449,959.73 57,229,443.40
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The addition to the Building account comprises solely of the pavementconstructed in the Public Market.
Various equipment such as desktop computers, laptop, filing cabinet, digitalcamera, electric fans etc. were purchased during the year.
Increase in Machineries and Equipment account includes purchase of
agricultural equipment.
One (1) Farmers vehicle (van) was added in the Motor Vehicle account.
Other Property, Plant and Equipment account consists of trash bins intended
for the waste segregation program of the LGU.
The Construction in Progress account consists of Improvement and
Renovation of Municipal Building Phase I and II in the amount of P2,329,534.44 and
P1,119,548.28, respectively. The remaining balance of which is for the Constructionof River Protection Project in the amount of P19,955,177.87 which was supported by
Municipal Development Fund Office (MDFO). With regard to the said project, theLGU-San Ildefonso, Ilocos Sur has applied financial assistance from Department of
Finance (DOF) in the year 2007 through the MDFO for the LOGOFIND (LocalGovernment Finance and Development) Project which aimed to assist local
government units in expanding and upgrading basic infrastructure, services and
facilities and in strengthening their capacities in governance, investment planning,revenue generation and project development with the utmost consideration of
environmental and social concerns.
The LGUs subproject, Construction of River Protection in Bungro, San
Ildefonso, Ilocos Sur, costs P19,955,177.87 with the following L-G-E (Loan, Grant
and Equity) allocation:
70% Grant P 13,968,624.51
20% Loan 3,991,035.57
10% Equity 1,995,517.79Total Subproject Cost P 19,955,177.87
The grant and loan portion was made available through MDFO and the equityportion was the counterpart of the LGU for the subproject as stipulated in the
Subproject Sub loan Agreement.
The LOGOFIND sub-project was 100% completed last July 2007 but it will
only be transferred to Registry of Public Infrastructure until the loan, which partlyfinanced the project, is fully paid/settled.
11. Other Assets
2011 2010
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Due to Other Funds account includes funds received for the implementation of
various projects in the amount of P1,800,000 in the General Fund which consists of
Priority Development Assistance Fund (PDAF) of P1,500,000.00 and DILG fund forMedical Assistance of P300,000.00. In the Trust Fund, this account includes on-going
projects such as Supplemental Feeding of P6,943.50, CBMS of P84,876.39,
Improvement of Farmers Park and Plaza of P3,342,942.10 and the remaining balance
represents interest earned in this funds bank account and receipt of contribution forthe Walk for a Cause amounting to P21,262.98 and P1,000.00, respectively.
Performance/Bidders/Bail Bonds Payable represents claims of biddersresulted from receipt of cash to guarantee performance of terms of contract/
participation of bidding.
Other payables account includes unpaid retention fee of P50,447.01 to Firefox
Construction and the balance represents unpaid loans.
13. Long-term Liabilities
The loan is the 20% component of the total subprojects cost extended by the
government through MDFO to the LGU to finance part of the subproject,
Construction of River Protection. It shall be payable in 15 years (from CY 2007- CY2021) at an interest rate of 12 % per annum. The amortization of the principal
amount started in 2010 which reduces the balance of this account.
14. Deferred Credits
This account is composed of the following:
2011 2010
Deferred Real Property Tax Income P 976,836.70 P 437,754.05
Deferred Special Education Tax Income 976,836.70 437,754.05
TOTAL P 1,953,673.40 P 875,508.10
15. Government Equity
2011 2010
Loans Payable Domestic P 3,647,454.93 P 3,829,243.97
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This account is broken down as follows:
2011 2010
Portions Pertaining to PPE:Total PPE P 58,316,228.68 P 50,568,595.64
Accumulated Depreciation (1,086,785.28) (789,111.97)
Loans Payable-Domestic (3,647,454.93) (3,829,243.97)
53,581,988.47 45,950,239.70Contingent Assets 3,645,933.98 3,645,933.98
Prepayments 950,620.30 0.00
Inventories:
Drugs and Medicines Inventory 90,631.39 32,278.93
Other Supplies Inventory 510,489.95 160,038.95
601,121.34 192,317.88
Continuing Appropriations 10,783,447.71 0.00
Available for Operations 13,539,023.18 10,917,893.84
TOTAL P 83,102,134.98 P 60,706,385.40
Contingent Assets represents receivables from suppliers or entities resulting
from audit disallowances/charges which have become final and executory.
Prepayments includes include advances to contractors for various projects.
Continuing Appropriations consists of Calamity Fund amounting to
P1,171,710.00 and RA 7171 Tobacco Excise Tax in the amount of P9,611,737.71.
A portion of the Available for Operations amount for CY 2011 includes 20%
Development Fund savings of P1,081,396.30, Special Education Fund savings of
P63,762.32 and the remaining balance accrues to the General Fund.
16. Income Accounts
2011 2010
Local Taxes P 757,263.90 P 1,012,106.67
Permits and Licenses 320,902.59 258,950.92Service Income 213,217.15 272,639.90
Business Income 302,506.17 244,129.85Other Income 44,107,794.00 36,550,938.69
TOTAL P 45,701,683.81 P 38,338,766.03
17. Expenditures Accounts
2011 2010
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Personal Services P 17,084,349.04 P 15,903,751.79
Maintenance and Other Operating
ExpensesFinancial Expenses
5,752,513.22100.00
6,428,843.500.00
Subsidies and Donations 245,900.00 4,148,928.50
TOTAL P 23,082,862.26 P 26,481,523.81
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PART II DETAILED FINDINGS AND RECOMMENDATIONS
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Detailed Findings and Recommendations
I. Financial and Compliance Audit
1. The Other Receivables account balance of P3,084,000.00 representing claimsagainst various debtors was still carried in the books although the account has
remained dormant for more than ten (10) years and whose collectability has
been rendered improbable due to the lack of source documents to support the
account.
Review and verification of Trial Balance, Balance Sheet and supportingschedules under the General Fund showed Other Receivables account balance of
P3,084,000.00 as of December 31, 2011. The account represents the claim of the
municipality against five (5) debtor organizations for the implementation of
livelihood projects. The details are as follows:
No. Name of Debtor Address Particulars Amount
1Kabisig
OrganizationsSan Ildefonso, I. Sur
Kabisig
LivelihoodP 2,804,000.00
2 RIC Organizations San Ildefonso, I. Sur RIC Livelihood 100,000.00
3Dancers
OrganizationsSan Ildefonso, I. Sur
Dancers
Livelihood30,000.00
4Farmers
OrganizationsSan Ildefonso, I. Sur
Farmers
Livelihood120,000.00
5RIC San Ildefonso
ChapterSan Ildefonso, I. Sur RIC Livelihood 30,000.00
TOTAL P 3,084,000.00
Considering that the transaction occurred sometime in June 1997 or more
than ten (10) years ago and that the account were not supported with sourcedocuments such as subsidiary ledgers, names and addresses of individual debtors and
specific amounts released to them, management believes that the collection or
recovery of the same is improbable.
Hence, the existence of the dormant and uncollectible accounts in the books of
the municipality continue to affect its true financial condition which requires thewriting-off of the account as enunciated in COA Resolution No. 2003-002 dated
January 30, 2003 as follows:
WHEREAS, this Commission, in the exercise of this authority has
authorized the writing-off of unliquidated cash advances, dormant and
uncollectible accounts of government agencies the existence of which in the books
continue to affect the true financial condition of the government;
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WHEREAS, the New Civil Code provides that the right of action upon a
written contract, upon an obligation created by law, or upon a judgment prescribes
in ten (10) years (Article 1144).
Management concurred with our observation during the exit conference and
assured us to comply with our recommendation.
We recommend that the Municipal Mayor should instruct the Municipal Accountant
to request in writing to the Commission Proper thru the Audit Team Leader for the writing-
off of the dormant and uncollectible accounts amounting to P3,084,000.00.
2. The observers were not invited by the Bids and Awards Committee (BAC) in all
stages in the procurement of goods and infrastructure projects through public
bidding valued at P1,176,781.50 and P10,035,550.71, respectively, as required
under pertinent provisions of the Implementing Rules and Regulations (IRR) of
R.A. No. 9184 thereby defeating the principle of transparency in the
procurement process because the observers were unable to assess the extent ofthe BACs compliance with the provisions of the IRR and areas of improvement
in the BACs proceedings.
The procurement process includes the following: (a) Invitation to Bid
particularly the conduct of pre-procurement and pre-bid conferences, if applicable;(b) Receipt and Opening of Bids; (c) Evaluation of Bids; (d) Conduct of Post-
Qualification; e) Award of Contracts.
Review of invitation letters to observers prepared by the BAC and observation
of its activities revealed that the required observers were only invited during the
receipt and opening of bids stage in the procurement of goods and infrastructureprojects through public bidding valued at P1,176,781.50 and P10,035,550.71,
respectively. The details are shown in Annex C. The observers were not invited by
the BAC to sit in its proceedings in the pre-bid conference, where applicable,
evaluation of bids, conduct of post-qualification and award of contract stages asopposed to the pertinent provisions of the Implementing Rules and Regulations (IRR)
of R.A. No. 9184, as amended on September 2, 2009 regarding the invitation of
observers in all stages in the procurement process as follows:
13.1. To enhance the transparency of the process, the BAC shall, in all
stages of the procurement process, invite, in addition to the representative of the
COA, at least two (2) observers, who shall not have the right to vote, to sit in itsproceedings, where:
At least one (1) shall come from a duly recognized private group in a
sector or discipline relevant to the procurement at hand, for example:
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a) For infrastructure projects, national associations of constructors duly
recognized by the Construction Industry Authority of the Philippines (CIAP), such
as, but not limited to the following:
(1) Philippine Constructors Association, Inc.;
(2) National Constructors Association of the Philippines, Inc.; and(3) Philippine Institute of Civil Engineers (PICE).
b) For goods, a specific relevant chamber-member of the Philippine
Chamber of Commerce and Industry. xxx
The other observer shall come from a non-government organization
(NGO).
13.4. The observers shall have the following responsibilities: a) To prepare
the report either jointly or separately indicating their observations made on the
procurement activities conducted by the BAC for submission to the Head of theProcuring Entity, copy furnished the BAC Chairman. The report shall assess the
extent of the BACs compliance with the provisions of this IRR and areas of
improvement in the BACs proceedings.
Since the observers were not invited in other stages of the procurement ofgoods and infrastructure projects as shown in Annex C, they were unable to assess the
extent of the BACs compliance with the provisions of the IRR and areas of
improvement in the BACs proceedings.
During the exit conference, the Vice-Chairman of the Bids and Awards
Committee claimed that observers were only invited during the receipt and opening ofbids. However, he informed us that all officials and employees concerned in otherstages of the procurement process were invited to sit in its proceedings.
We recommend that the Bids and Awards Committee should invite in writingthe required observers in all stages in the procurement of goods and infrastructure
projects through public bidding as required under pertinent provisions of the
Implementing Rules and Regulations of R.A. No. 9184 to enhance transparency in theprocurement process and to enable the observers to assess the extent of the BACs
compliance with the provisions of the IRR and areas of improvement in the BACs
proceedings.
3. The Bids and Awards Committee did not adopt the required conditions and
procedures in the conduct of post-qualification on the bidders who tendered the
Lowest Calculated Bid in the procurement of goods and infrastructure projects
through public bidding in the amount of P1,176,781.50 and P10,035,550.71,
respectively, as prescribed under pertinent provisions of Section 34 of the
Revised Implementing Rules and Regulations of R.A. No. 9184. Thus the
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veracity of the statements made and authenticity of documents submitted by the
concerned bidders was not properly established.
Review of post-qualification reports made by the Bids and Awards Committee
(BAC) disclosed that they did not adopt the required conditions and procedures in the
conduct of post-qualification on the bidder who tendered the Lowest Calculated Bid(LCB) in the procurement of goods and infrastructure projects through public bidding
in the amount of P1,176,781.50 and P10,035.550.71 (Annex D).
Moreover, the post-qualification reports were not supported with documents
or reports substantiating the Technical Working Groups (TWG) validation of the
authenticity of documents submitted and veracity of statements made by the
concerned bidders as to the following:
a. Validation of the authenticity of the documents submitted and veracity
of information thereon;
b. Validation of compliance of the goods offered with the requirementsspecified in the Bidding Documents, duly supported with inspection
reports on the goods offered and test results;c. Validation of the sufficiency of the bid security as to type, amount,
form and wording, validity period;
d. Validation of compliance with the financial requirements; ande. Minutes of the post-qualification activities.
The conduct of post-qualification of bidders who tendered the Lowest
Calculated Bid in the procurement of goods and infrastructure projects through publicbidding is prescribed under pertinent provisions of Section 34 of the Revised
Implementing Rules and Regulations of R.A. No. 9184 as follows:
Section 34.1. The Lowest Calculated Bid/Highest Rated Bid shall undergo
post-qualification in order to determine whether the bidder concerned complies
with and is responsive to all the requirements and conditions as specified in the
Bidding Documents.
Section 34.3. The post-qualification shall verify, validate, and ascertain all
statements made and documents submitted by the bidder with the Lowest
Calculated Bid/Highest Rated Bid, using non-discretionary criteria, as stated in the
Bidding Documents. These criteria shall consider, but shall not be limited to, the
following:
a) Legal Requirements. To verify, validate, and ascertain licenses,
certificates, permits, and agreements submitted by the bidder, x x x x.
b) Technical Requirements. To determine compliance of the goods,
infrastructure projects, or consulting services offered with the requirements
specified in the Bidding Documents, including, where applicable:
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i) Verification and validation of the bidders stated competence and
experience, and the competence and experience of the bidders key personnel
to be assigned to the project, for the procurement of infrastructure projects
and consulting services;
ii) Verification of availability and commitment, and/or inspection andtesting for the required capacities and operating conditions, of equipment
units to be owned/leased/under purchase by the bidder for use in the contract
under bidding, as well as checking the performance of the bidder in its
ongoing government and private contracts (if any of these on-going contracts
shows a reported negative slippage of at least fifteen percent (15%), or
substandard quality of work as per contract plans and specifications, or
unsatisfactory performance of the contractors obligations as per contract
terms and conditions, at the time of inspection, and if the BAC verifies any of
these deficiencies to be due to the contractors fault or negligence, the agency
shall disqualify the contractor from the award, for the procurement of
infrastructure projects;
iii) Verification and/or inspection and testing of the goods/product,
after sales and/or maintenance capabilities, in applicable cases, for the
procurement of goods; and
iv) Ascertainment of the sufficiency of the bid security as to type,
amount, form and wording, and validity period.
c) Financial Requirements. To verify, validate and ascertain the bid price
proposal of the bidder and, whenever applicable, the required CLC in the amount
specified and over the period stipulated in the Bidding Documents, or the bidders
NFCC to ensure that the bidder can sustain the operating cash flow of the
transaction.
As stated in the foregoing, the intent of post-qualification is to determinewhether the concerned bidder with the LCB had complied with and responsive to all
the requirements and conditions as specified in the bidding documents. If such
process is not properly observed by the BAC, prospective bidders who have
submitted unauthentic documents and made false statements may be post-qualifiedand ultimately awarded the contracts to the detriment of eligible and qualified
bidders.
During the exit conference, the Municipal Accountant who is a member of the
Technical Working Group recalled that she was able to verify the Income Tax
Returns (ITR) and Bid Security of some bidders who tendered the Lowest CalculatedBid. On the other hand, The Vice-Chairman of the BAC explained that some
documents submitted were not verified due to financial constraints. However, they
agreed to abide by our recommendation.
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We recommend that the Bid and Awards Committee should strictly observe
the conditions and procedures in the conduct of post-qualification as provided under
pertinent provisions of Section 34 of Implementing Rules and Regulations of R.A.No. 9184 to ensure the authenticity of documents submitted, and the veracity of
statements made, by bidders who tendered the Lowest Calculated Bid in the
procurement of goods and infrastructure projects through public bidding.
4. Management did not furnish the Auditor with copies of perfected contracts
and its supporting documents for the procurement of goods and infrastructure
projects within five (5) working days from its execution and issuance costing
P1,176,781.50 and P10,035,550.71, respectively, for review purposes, as required
under pertinent provisions of COA Circular No. 2009-001. Thus defects and/or
deficiencies in the purchase orders and contracts as well as corrective measures
to be undertaken, if any, were not informed to management at once.
Review of 2011 transactions of the municipality from January 2011 toDecember 31, 2011 disclosed that copies of eight (8) perfected contracts pertaining to
the procurement of goods and infrastructure projects costing P1,176,781.50 andP10,035,550.71, respectively, (Annex E) were not furnished by management to the
Auditor within the prescribed period as required under the pertinent provisions of
COA Circular No. 2009-001 dated February 12, 2009 as follows:
Section 2.1 This Circular shall cover all contracts, purchase orders, and the
like, entered into by any government agency irrespective of amount involved.
Section 3.1.1- Within five (5) working days from the execution of contract
by the government or any of its subdivisions, agencies, instrumentalities including
government-owned or controlled corporations and its subsidiaries, a copy of said
contract and each of all documents forming part thereof by reference or
incorporation shall be furnished to the Auditor of the agency concerned.
Section 3.1.4- The Auditor shall review the contract within a period ranging
from five (5) to twenty (20) working days from receipt of the contract. X x x.
Without waiting for the period herein established, the Auditor concerned shall call
the immediate attention of management of regarding defects and deficiencies noted
in the contract and suggest corrective measures as appropriate and warranted.
Xxx.
Section 3.2.1- A copy of the purchase order irrespective of amount and each
and every supporting document shall within five (5) working days from issuance
thereof, be submitted to the Auditor concerned. Within the same period, the
Auditor shall review and point out to management the defects and deficiencies, if
any.
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In view of the inability of management to comply with the submission of
copies of purchase orders and contracts to our office within five (5) working days
upon approval together with its supporting documents for review, we could notimplement a systematic and effective review process directed towards immediately
informing them of relevant audit results especially defects and/or deficiencies noted
in the purchase orders and contracts, if any.
Under the circumstances, we could not also suggest or offer to management
specific corrective measures on the defects and/or deficiencies noted, if any.
During the exit conference, the Municipal Accountant explained that the
required documents were only submitted to the Auditor concerned during the conduct
of inspection on the completed projects and delivered items of the municipality. TheBAC Secretariat however agreed to comply with our recommendation.
We recommend that the Municipal Mayor should require the BAC Secretariat
to comply with the pertinent provisions of COA Circular No. 2009-001 regarding thesubmission of copies of purchase orders and perfected contracts together with its
supporting documents to the Auditor within five (5) working days from execution forreview and evaluation so that management will be immediately informed of defects
and deficiencies noted, if any.
5. The procurement monitoring report which shall be approved and submitted
by the Head of the Procuring Entity to the Government Procurement Policy
Board (GPPB) in printed and electronic format within fourteen (14) calendar
days after the end of each semester was not prepared by the Bids and Awards
Committee as prescribed under Section 12.2 of the Revised Implementing Rules
and Regulations of R.A. No. 9184
Section 12.2 of the Revised Implementing Rules and Regulations of Republic
Act (R.A.) No. 9184 otherwise known as the Government Procurement Reform Actprovides that The BAC shall be responsible for ensuring that the procuring entityabides by the standards set forth by the Act and this IRR, and it shall prepare a
procurement monitoring report in the form prescribed by the GPPB. The
procurement monitoring report shall cover all procurement activities specified in
the APP, whether ongoing and completed, from the holding of the pre-procurement
conference to the issuance of notice of award and approval of the contract,
including the standard and actual time for each major procurement activity. The
procurement monitoring report shall be approved and submitted by The Head of
the Procuring Entity to the GPPB in printed and electronic format within fourteen
(14) calendar days after the end of each semester.
Our inquiry with the Bids and Awards Committee (BAC) Chairman of the
municipality including our communications to his office on the preparation, approval
and submission by the Municipal Mayor of the procurement monitoring report to the
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Government Procurement Policy Board (GPPB) in the prescribed form and period
produced no positive outcomes. The said report was not prepared by the BAC. Such
report shall cover all procurement activities specified in the APP, whether ongoingand completed, from the holding of the pre-procurement conference to the issuance of
notice of award and approval of the contract, including the standard and actual time
for each major procurement activity.
Since we failed to obtain a copy of the procurement monitoring report from
the BAC in the prescribed form which is downloadable from the GPPB website, wewere unable to entirely verify whether or not the procurement activities of the
municipality was undertaken in accordance with their approved Annual Procurement
Plan (APP) and consistent with its duly approved yearly budget.
Furthermore, the inability of the municipality to submit the procurement
monitoring report to the GPPB in the prescribed format and period may unfavorably
affect the GPPBs performance of their duties and responsibilities to ensure proper
implementation by procuring entities of the Implementing Rules and Regulations(IRR) of R.A. No. 9184 to conduct an annual review of its effectiveness and to
recommend any amendments thereto, as may be necessary.
During the exit conference, the members of the BAC mentioned that they are
not aware on the aforesaid procurement law. However, they expressed theirwillingness to comply with our recommendation.
We recommend that the Municipal Mayor should require the members of the
Bids and Awards Committee to prepare the Procurement Monitoring Report for hisapproval and submission to the Government Procurement Policy Board in printed and
electronic format within fourteen (14) calendar days after the end of each semester as
prescribed under Section 12.2 of the Revised Implementing Rules and Regulations ofRepublic Act (R.A.) No. 9184.
We also recommend that the Municipal Mayor should direct the members ofthe Bids and Awards Committee to download the prescribed form of the procurement
monitoring report from the Government Procurement Policy Board website for
reference as to coverage and contents thereto.
6. The 2011 Annual Procurement Plan for Common-Use Supplies and
Equipment was not submitted by management to the Department of Budget and
Management Regional Office No. 1, City of San Fernando, La Union within the
time prescribed under Budget Circular Letter No. 2011-6 dated August 25, 2011.
Thus the required information therein was not included in the consolidation of
required data to be forwarded to the Procurement Service as basis in its
projection of inventory requirements, scheduling of procurement activities and
overall management of the central procurement of common-use goods.
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Inquiry with the Chairman, Bids and Awards Committee (BAC) of the
municipality on February 3, 2012 disclosed that the 2011 Annual Procurement Plan
for Common-Use Supplies and Equipment (APP-CSE) was not submitted within theprescribed time to the Department of Budget and Management Regional Office No. 1,
City of San Fernando as required under pertinent provisions of Budget Circular Letter
No. 2011-6 dated August 25, 2011.
The pertinent provisions of Budget Circular Letter No. 2011-6 dated August
25, 2011 with respect to the use of the Procurement Service in procurement activitiesare as follows:
Section 4.1.All National Government Agencies, including Military and
Police Units; GOCCs, GFIs and LGUs are required to submit their Annual
Procurement Plan for Common-Use Supplies and Equipment (APP-CSE), using
the prescribed format shown as Annex A. The same may be downloaded thru the
Procurement Service website at http://www.procuremen t service.org. Downloads
tab and the PhilGEPS website at http://www.philgeps.net-AboutPhilGEPS tab-Useful Downloads. The submission of the APP-CSE, nonetheless, shall not affect
the responsibility of the procuring entity to submit their Annual Procurement Plan
pursuant to Section 7 of R.A. 9184 and its IRR.
Section 4.2. The accomplished APP-CSEs are due for submission to the
DBM on the following dates:
FY 2011 APP-CSE on or before September 15, 2011
FY2012 APP-CSE on or before November 15, 2012; and
Henceforth, the APP-CSE shall be submitted on or before
November 15 of each year.
Section.4.2.2SUCs and LGUs are likewise required to submit their APP-
CSE to the DBM Regional Office.
Since the APP-CSE was not submitted as required by the foregoing budget
regulation, the necessary information that is supposed to be contained in the APP-
CSE, was not included in the consolidation of required data to be forwarded to theProcurement Service to serve as basis in its projection of inventory requirements,
scheduling of procurement activities and overall management of the central
procurement of common-use goods.
During the exit conference, we were informed that the municipality did not
receive the aforesaid letter. However, the personnel concerned told us that the 2011
APP-CSE as required by the DBM was already submitted.
We recommend that the Municipal Mayor should require the Bids and Awards
Committee to strictly comply with the submission of the 2011 Annual ProcurementPlan for Common-Use Supplies and Equipment in consonance with Budget Circular
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Letter No. 2011-6 dated August 25, 2011 to ensure the inclusion of useful
information required by the DBM-Regional Office for consolidation purposes and to
provide data to the Procurement Service relative to the projection of inventoryrequirements, scheduling of procurement activities and overall management of the
central procurement of common-use goods.
7. The Procurement of Common-Use Supplies from the Procurement Service-
Department of Budget and Management (PS-DBM) for the year 2011 was not
observed by management as provided under Administrative Order 17 dated July
28, 2011 thereby affecting the comprehensive reforms undertaken by the
national government to modernize and standardize government procurement
systems.
Review of 2011 transactions of the municipality pertaining to the procurement
of goods disclosed that it did not procure common-use supplies and equipment from
the PS-DBM contrary to pertinent provisions of Administrative Order No. 17 datedJuly 28, 2011 issued by His Excellency President Benigno C. Aquino III directing the
use of the Procurement Service and the Philippine Government ElectronicProcurement System in procurement activities in accordance with R.A. No. 9184, and
improving the operation of the Procurement Service as follows:
Section 1. Reiteration of Policy. The national government hereby reiteratesthe policy that procurement of government supplies, materials, and equipment shall
be done in the most transparent and competitive manner by purchasing from
legally, technically, and financially capable sources in economic lot sizes, by
observing cost-efficient specifications, and by making prompt payment. In line with
this, all government agencies shall procure their common-use supplies from the PS
and use the PhilGEPS in all their procurement activities, including publishing all
their bid opportunities and posting all their awards and contracts in it, in
accordance with R.A. No. 9184.
Section 2. Coverage.This Administrative Order shall apply to all NationalGovernment Agencies, including Military and Police Units; Government-Owned
and/or Controlled Corporations (GOCCs); Government Financial Institutions
(GFIs); State Universities and Colleges (SUCs); and Local Government Units
(LGUs).
Section 4. Procurement of Common-Use Supplies.Common-use supplies
shall be procured directly from the PS or its depots without need of public bidding
as provided in Section 53.5 of the Implementing Rules and Regulations (IRRs) of
R.A. No. 9184.
If the municipality will not fully and consistently abide with the foregoing, it
would contribute to the inability of the national government to achieve the
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comprehensive reforms it has undertaken to modernize and standardize government
procurement systems.
Management noted our observation during the exit conference and agreed to
abide by our recommendation.
We recommend that management should procure Common-Use Supplieswhich are necessary in the transactions of its official business from the Procurement
Service-Department of Budget and Management as provided under Administrative
Order No. 17 to contribute to the attainment of a modernized and standardizedgovernment procurement system.
II. Value for Money Audit
8. Government funds totaling P10,035,550.71 representing the share of the
municipality from the fifteen percent (15%) of excise taxes on locally
manufactured Virginia-type cigarettes was utilized for projects other than thoseprescribed under pertinent provisions of Memorandum Circular No. 61-A dated
January 9, 1992 thereby defeating the policy of the government to extend special
support to local farmers as well as depriving them of projects that will increase
their income and productivity.
As a component of a Virginia tobacco-producing province, the municipality
received from the Department of Budget and Management the total amount of
P19,812,461.00 representing its 2011 share fromthe fifteen percent (15%) of excisetaxes on locally manufactured Virginia-type cigarettes pursuant to R.A. No. 7171.
Out of this, the total amount of P10,617,934.12 was appropriated for differentinfrastructure projects. However, audit and review of transactions pertaining to theutilization of the fund disclosed that the total amount of P10,035,550.71 was used for
the implementation of five (5) projects other than those prescribed under pertinent
provisions of Memorandum Circular No. 61-A thereby defeating the policy of thegovernment to extend special support to local farmers as well as depriving them of
projects that will increase their income and productivity. The details are as follows:
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The pertinent provisions of Memorandum Circular 61-A prescribing the
guidelines for the implementation of R.A. No 7171 dated January 9, 1992 are as
follows:
The respective shares of the LGUs of beneficiary provinces shall be treated
as a special account under the general fund of the LGUs of provinces to be utilized
for the following projects:
Cooperative projects that will enhance better quality of products,
increase productivity, guarantee the market and as a whole increase
farmers' income;
Livelihood projects particularly the development of alternative farming
system to enhance farmers' income;
Agro-industrial projects that will enable tobacco farmers in the Virginia
tobacco-producing provinces to be involved in the management and
subsequent ownership of these projects such as post-harvest and
secondary processing like cigarette manufacturing and by-product
utilization; and
Infrastructure projects such as farm-to-market roads.
During the exit conference, the Municipal Mayor explained that the aforesaid
projects were envisioned to be used by the farmers of the municipality.
We recommend that management should strictly comply with the provisions
of Memorandum Circular 61-A dated January 9, 1992 relative to the utilization of its
share from the fifteen percent (15%) of the excise taxes on locally manufacturedVirginia-type ofcigarettes to conform with the policy of the government to extendspecial support to local farmers as well as to provide them with projects that will
increase their income and productivity.
28
No. Name of Project Appropriation Contract Amount
1Improvement and Renovation of
Municipal Building, Phase I P 5,000,000.00 P 4,434,118.43
2Improvement and Renovation of
Municipal Building, Phase II 2,019,737.66 2,009,706.86
3 Concreting of Pavement at the PublicMarket 180,000.00 179,682.32
4Repair and Improvement of Stairs
Leading to Bungro Elementary School 70,000.00 69,099.00
5Improvement of Farmers Plaza and In
front of the Municipal Hall 3,348,16.46 3,342,42.10
TOTAL P 10,617,934.46 P 10,035,550.71
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9. Out of the 20% Development Fund appropriation of P4,733,756.40 the
amount of P723,250.55 or 15.28% was used for programs, projects and activities
other than those specified in Section 3.0, DILG-DBM Joint Memorandum
Circular No. 1, Series of 2005, dated September 20, 2005. Thus the use of thefund did not fully contribute to the attainment of desirable socio-economic and
environmental outcomes for the municipality to the detriment of intended
beneficiaries.
Review of the 2011 annual budget of the municipality disclosed that the
amount of P4,733,756.40 was appropriated for the 20% Development Fund. Of this,
the amount of P723,250.55 or 15.28% was used for programs, projects and activitiesother than those specified in the joint circular prescribing the guidelines on the
appropriation and utilization of the 20% of the Annual Internal Revenue Allotments
for development projects. The details are as follows:
Name of Program/Project Obligation
Christmas Decor and Lights P 22,910.00
Support to Bureau of Fire Protection 41,140.55
Philhealth Membership 648,400.00
Honorarium of Physical Fitness Instructor 10,800.00
TOTAL P 723,250.55
Section 3.0 of the Department of Interior and Local Government andDepartment of Budget and Management (DILG-DBM) Joint Memorandum Circular
enumerates the projects covered to be funded out of at least 20% of the annual
internal revenue allotment. The projects therein cover social and economicdevelopment and environmental management. (Annex F)
As a result, the use of the 20% development fund for projects did not fully
contribute to the attainment of desirable socio-economic and environmental outcomesfor the municipality to the detriment of intended beneficiaries.
During the exit conference, management noted our observation and agreed toabide by our recommendation.
We recommend that management should utilize the 20% Development Fund
for projects, programs and activities as specified under Section 3.0, DILG-DBM JointMemorandum Circular No. 1, Series of 2005, dated September 20, 2005 to attain
desirable socio-economic and environmental outcomes for the municipality and
intended beneficiaries.
10. The Municipality did not formulate its 2010 Gender and Development
(GAD) Plan as set forth in Section 31 of the General Provisions of the 2011
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General Appropriations Act and Section 4.4 DBM, NEDA and NCRFW Joint
Circular No. 2004-1. Thus, no appropriations were allocated for the
implementation of GAD related projects, programs and activities to the
detriment of the intended beneficiaries.
Gender and Development (GAD) mainstreaming is the main strategy forensuring that the government pursues gender equality in all development projects to
achieve the vision of gender responsive society where men and women contribute to
and benefit from development projects.
Review and examination of the 2011 of the approved annual budget of the
municipality showed that no appropriation was set aside to support GAD relatedprojects, programs and activities.
Furthermore, inquiry with the GAD focal person disclosed that no GAD Planwas formulated for 2011 contrary to the following:
Section 31 of the General Provisions of the 2011 General Appropriations Actstates:
Programs/Projects related to Gender and Development. All departments,
bureaus, agencies, SUCs, GOCCs, and LGUs shall formulate a Gender and
Development Plan designed to address gender issues within their respective sectors
or mandate x x x x. The GAD Plan shall be integrated in the regular activities of
the agencies, which shall be at least five percent (5%) of their respective budgets.
The formulation of the GAD Plan shall proceed from the conduct of gender
analysis, the generation and review of sex-disaggregated data, and consultation
with gender advocates and women clientele. Its implementation shall contribute tothe economic empowerment especially of marginalized women, the protection,
promotion, fulfillment of womens rights and the practice of gender-responsive
governance. Utilization of the GAD budget shall be evaluated based on the GAD
performance indicators identified by said agencies.
Section 4.4 of DBM, NEDA and National Commission on the Role of Filipino
Women (NCRFW) Joint Circular No. 2004-01 provides:
GAD planning and budgeting shall be observed annually and
incorporated in all programming and budgeting exercises of agencies. The GAD
activities in the GAD plan and budget must be included in the agency budgetproposal in accordance with the budget call. Agencies shall ensure that the cost
of implementing activities is part of their budget. x x x x. Agency heads shall be
responsible for ensuring that GAD activities are provided with adequate
resources.
As a result, no GAD related projects, programs and projects were
implemented for the year 2011 to the detriment of intended beneficiaries.
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During the exit conference, the Budget Officer claimed that no GAD Plan was
formulated for 2011. However, she informed us that there were GAD relatedprograms, projects and activities implemented under the 20% Development Fund of
the municipality.
We recommend that the Municipal Mayor should require the GAD Focal
Person to formulate a GAD Plan designed to address womens issues and concerns
which implementation is funded with at least 5% of the annual local budget toguarantee that women especially those from the marginalized sectors benefit from
GAD projects and programs.
III.Revenue Audit
11. The thirty five percent (35%) and twenty five percent (25%) share of theProvince of Ilocos Sur and concerned barangays from the proceeds of real
property tax collections for the year ended December 31, 2011 totaling
P267,025.88 was not distributed as required under pertinent provisions of
Section 271 of R.A. No. 7160. Hence, the intended recipients were denied of
additional funds to finance the delivery of basic services and the implementation
of development projects and programs for their constituents.
Examination of the books of accounts of the municipality covering the year
ended December 31, 2011 disclosed that Due to Local Government Units accountunder the General Fund has a balance of P267,025.88. These represented the thirty
five percent (35%) and twenty five percent (25%) share of the Province of Ilocos Surand concerned barangays from the proceeds of real property tax collections in theamount of P155,765.15 and P111,260.73, respectively, but were not distributed to the
intended recipients as provided under pertinent provisions of R.A. No. 7160, to wit:
Section 271. Distribution of Proceeds. - The proceeds of the basic real
property tax, including interest thereon, and xxx shall be distributed as follows:
(a) In the case of provinces:
(1) province - Thirty-five percent (35%) shall accrue to the general
fund;
(2) municipality - Forty percent (40%) to the general fund of the
municipality where the property is located; and
(3) Barangay - Twenty-five percent (25%) shall accrue to the Barangay
where the property is located.
(d) The share of each Barangay shall be released, without need of any
further action, directly to the Barangay Treasurer on a quarterly basis within five
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(5) days after the end of each quarter and shall not be subject to any lien or
holdback for whatever purpose.
Hence, the intended recipients were denied of additional funds to finance the
delivery of basic services and the implementation of development projects and
programs for their constituents.
During the exit conference, the OIC-Municipal Treasurer claimed that the
provincial and barangay shares were distributed on a yearly basis. She agreedhowever to comply with our recommendation.
We recommend that the Municipal Mayor should require the OIC-Municipal
Treasurer in coordination with the Municipal Accountant to distribute the provincialand barangay shares derived from the proceeds of real property tax collections to
provide intended recipients with additional funds to finance the delivery of basic
services and the implementation of projects and programs for their constituents.
12. The municipality has updated its Revenue Code thereby imposing and
adjustingthe rates of taxes, fees and chargesand consistent with the exercise of
its revenue-raising power but there were deficiencies noted therein contrary to
pertinent provisions of the Local Government Code of 1991.
The municipality through the Sanggunian Bayan has updated its 2006
Revenue Code by the enactment of the 2011 Revenue Code thus consistent with the
exercise of its revenue-raising power and the adjustment of rates of taxes, fees andcharges as well, pursuant to the following:
The power to create sources of revenue by the municipality is provided underSection 129 of the Local Government Code which states Each local governmentunit shall exercise its power to create its own sources of revenue and to levy taxes,
fees, and charges subject to the provisions herein, consistent with the basic policy
of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the
local government units.
Whereas the authority of Local Government Units to adjust rates of taxordinances is provided under Section 191 of the same Code which states that Local
units shall have the authority to adjust the tax rates as prescribed herein not
oftener than once every five (5) years, but in no case shall such adjustment exceed
ten percent (10%) of the rates fixed under this Code.
Conversely, review of tax ordinances and 2011 Revenue Code disclosed thefollowing deficiencies, to wit:
The ordinances levying such taxes, fees or charges were enactedwithout prior public hearing conducted for the purpose as required under
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Section 187 of the Local Government Code which provides that The
procedure for approval of local tax ordinances and revenue measures
shall be in accordance with the provisions of this Code: Provided, That
public hearings shall be conducted for the purpose prior to the
enactment.
The publishing and the posting of the tax ordinances was not
observed as provided underSection 188 of the Local Government Code
which states that Within ten (10) days after their approval, certified true
copies of all provincial, city, and municipal tax ordinances or revenue
shall be published in full for three (3) consecutive days in a newspaper
of local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the
same may be posted in at least two (2) conspicuous and publicly
accessible places.
During the exit conference, the personnel concerned noted our observationand assured us to comply with our recommendation.
We recommend that the Municipal Mayor should advise the Sanggunian
Bayan to abide with the provisions of the Local Government Code as to the conduct
of public hearing, publishing and posting of tax ordinances or revenue measures priorto its enactments.
IV. Compliance with Tax Laws
13. Out of the taxes withheld by the municipality during the year from varioussources totaling P809,525.04, the amount of P808,733.29 was remitted by
management to the Bureau of Internal Revenue. The remaining balance of
P791.75 as of December 31, 2010 was also remitted on January 2012 pursuant to
pertinent and applicable Revenue Regulations.
Audit of Due to BIR account in all funds disclosed that the municipality
withheld taxes from various sources totaling P809,525.04 as of December 31, 2011.Out of this, the total amount of P808,733.29 was regularly remitted by the OIC-
Municipal Treasurer to the Bureau of Internal Revenue (BIR). The year-end balance
of P791.75 (Annex G) was remitted to the BIR on January of 2012 in compliance
with pertinent and applicable revenue regulations as follows:
Section 2.81 of BIR Revenue Regulations 2-98 provides that Every person
required to deduct and withhold the tax and compensation shall make a return and
pay such tax on or before the 10th day of the month following the month on which
withholdings were made to any authorized agent bank with the Revenue District
Office.
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Section 2 (a) of BIR, Revenue Regulations No. 1-87 provides that The
Provincial Treasurer and Governor in provinces; the City Treasurer and Mayor in
cities; the Municipal Treasurer and Mayor in municipalities; the Head of Office in
departments, bureaus, agencies, instrumentalities, government-owned and
controlled corporations, and other government offices are personally charged with
the duty to withhold and remit taxes on compensation, expanded and finalwithholding taxes, as well as government money payments on value added taxes
and other percentage taxes including franchise taxes.
Management was pleased with our observation and assured us to continue to
comply with BIR regulations regarding the remittance of withheld taxes to the BIR to
ensure that the municipality is doing its share in the contribution of revenues to the
national government.
We recommend that management should faithful carry on with the prompt
remittance of taxes withheld from various sources as required by BIR Regulations to
generate funds for the national government.
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PART III STATUS OF IMPLEMENTATION OF PRIOR YEARS
AUDIT RECOMMENDATIONS
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Status of Implementation of Prior Years Audit Recommendations
Out of the seven (7) recommendations embodied in the 2010 Annual Audit
Report, five (5) were implemented and two (2) remained unimplemented, as detailed
below:
Audit Observation &
RecommendationRef
Management
Action
Status of
Implementation
Reason for
Partial/Non
Implementation
1. Procured, delivered andaccepted items worth
P823,122.63 were not
inspected because the
Supply Officer did notnotify the Auditor of the
time and date of
deliveries or furnish himcopies of delivery
documents within twenty
four (24) hours after suchacceptance as provided in
Section A.2 and Section
6.9 of COA Circular No.
96-010 and 2009-002,respectively.
We recommendthat the Supply Officer
should notify the Auditor
or to furnish him copiesof delivery documents
within twenty four (24)
hours from acceptance ofdelivered items for
inspection purposes to
ensure that procured,
delivered and accepted
items are those orderedby the municipality as to
quantity, quality andspecifications.
2010AAR
Complied FullyImplemented
2. Notices of Award for theprocurement of goods
obtained through
Shopping amounting to
2010AAR
Complied FullyImplemented
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P741,044.33 were not
posted in the PhilippineGovernment Electronic
Procurement System
(PhilGEPS) website and
at any conspicuous placein the premises of the
municipality as providedin Section 54.3, Rule
XVI of the Revised
Implementing Rules and
Regulations (RIRR) ofR.A. No. 9184.
We recommendthat the Bids and Awards
Committee (BAC),through its Secretariat,should strictly observe
the posting of the Notices
of Award for procurement of goods
obtained through
Shopping in the
PhilGEPS website, and atany conspicuous place in
the premises of the
procuring entity to ensureinterested users ready
access to information and
to promote transparencyand competition in the
procurement process.
3. Several disbursementvouchers for claims
subject to pre-audit
totaling P297,956.00were not submitted to
Auditors Office. These
were paid even withouthis audit action as
prescribed under
pertinent provisions ofCOA Circular No. 2009-
002. Thus we were
unable to determine the
2010AAR
Complied FullyImplemented
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validity and propriety of
the transactions.
We recommend
that management should
strictly comply with thepertinent provisions of
COA Circular No. 2009-002 governing
government transactions
subject to pre-audit to
ensure validity andpropriety of the same and
to avoid possible audit
suspensions anddisallowances.
4. The establishment ofP212,500.00 as Real
Property Tax Receivable
and Special EducationTax Receivable at the
beginning of the year was
not observed by
responsible local officialsas prescribed in Section
20 of the Manual on the
New Government
Accounting System forLocal Government Units
(MNGAS for LGUs),Volume I thereby
affected the correctness
and reliability of these
receivable accounts andthe related Deferred Real
Property Tax Income.
We recommend
that the OIC-Municipal
Treasurer should furnishthe Municipal
Accountant at the
beginning of the yearwith a complete and
accurate list of taxpayers
with the corresponding
2010AAR Complied FullyImplemented
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amount of taxes due and
collectible for the year toserve as basis in
recording in the books of
accounts the Real
Property Tax (RPT) andSpecial Education Tax
(SEF) Receivablesaccounts and related
Deferred Real Property
Tax Income/Deferred
Special Education TaxIncome.
5. The twenty percent(20%) component of the
Annual Internal Revenue
Allotment (IRA)amounting to
P4,375,082.40 and
P4,054,665.27 wasappropriated and utilized
respectively, for
development projects or
93% budget utilizationpursuant to pertinent
provisions of DBM-
DILG Joint
Memorandum CircularNo. 1. Thus it contributed
to the realization ofdesirable social,
economic development
and environmental
outcomes essential in theattainment of its goals for
a better quality of life of
the constituency.
We recommend
that management shouldclosely monitor the
impact of implemented
development projects onidentified beneficiaries to
ensure efficient and
effective utilization of
2010AAR
Complied FullyImplemented
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funds in terms of the
achievement of theobjectives of each
projects and programs.
6. The Municipality did not
formulate its 2010Gender and Development(GAD) Plan as set forth
in Section 32 of the
General Provisions of the
2010 GeneralAppropriations Act and
Section 4.4 DBM, NEDA
and NCRFW JointCircular No. 2004-1.
Thus the lack of
appropriation and non-implementation of related
programs deprived
recipients of the benefitsto be derived thereto.
We recommend
that management shouldformulate a GAD Plan
designed to address
womens issues and
concerns whichimplementation is funded
with at least 5% of theannual local budget to
guarantee that women
especially those from the
marginalized sectorsbenefit from GAD
projects and programs.
2010
AAR
No GAD
Plan wasformulatedfor 2011.
Not
Implemented
Reiterated In
Finding No. 10.
7. Had the municipality
enforced the remedies for
the collection of delinquent real property
taxes aged (two) to nine
(9) years totalingP437,754.05 as of
December 31, 2010,
concerned taxpayers
could have been
2010
AAR
No action
taken
Not
Implemented
Management
explained that
posting ofnotices of
delinquency to
the mainentrance of the
Municipal Hall
is not possible
because of the
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persuaded to pay their
obligations thusproviding additional
funds to finance other
local projects, programs
and activities.
We recommendto the Municipal Mayor
the following:
Require the OIC-
Municipal Treasurer to
cause the posting ofnotices of delinquency
to the main entrance of
the municipal hall andin a publiclyaccessible and
conspicuous place in
each Barangay of themunicipality. Such
notice should specify
the date upon whichthe tax became
delinquent and shall
state that personal
property may bedistrained to effect
payment.
Require the OIC-
Municipal Treasurer to
deputize the BarangayTreasurers of each
Barangay under the
jurisdiction of the
municipality to collect
all taxes on realproperty provided that
the latter is properlybonded for the purpose
and that the premium
on the bond should bepaid by municipality.
on-going
renovation ofsaid building.
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Require the OIC-Municipal Treasurer to