MUNICIPALITY OF ROSARIO Northern Samar · 2017. 8. 8. · EXECUTIVE SUMMARY Introduction The...

Republic of the Philippines COMMISSION ON AUDIT Regional Office No. VIII

Candahug, Palo, Leyte

ANNUAL AUDIT REPORT

on the

MUNICIPALITY OF ROSARIO Northern Samar

For the Year Ended December 31, 2016

EXECUTIVE SUMMARY

Introduction

The Municipality of Rosario, Northern Samar, was created by virtue of R.A. No.

5869 which was enacted on June 21, 1969. It is a fifth (5th) class municipality composed

of eleven (11) barangays. Farming, fishing, trade and industry are the main sources of

livelihood.

The municipality is headed by Municipal Mayor Gerardo P. Miranda. He is

assisted by Vice Mayor Ronald M. Turla; Ms. Marilee A. Cinco, Municipal Treasurer;

Mr. Bobby Joel A. Acildo, as the Municipal Accountant; and Ms. Nelia D. Miranda,

Municipal Budget Officer.

A financial and compliance audit was conducted on the accounts and operations

of the Municipality of Rosario, Northern Samar, for the calendar year 2016. The audit

was aimed to ascertain the propriety and validity of disbursements and receipts as well as

the reliability of the accounts as presented in the financial statements. The audit

consisted of review of operating procedures, interview with concerned municipal officials

and employees, verification and analysis of accounts, and such other procedures

considered necessary under the circumstances. The audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management; as well as evaluating the overall presentation of the

financial statements.

Financial Highlights

The financial position and financial performance of the municipality for the

current and previous year are presented below:

Account 2016 2015 Increase/Decrease

Amount %

Assets 83,958,689.71 44,087,082.89 39,871,606.82 90.44%

Liabilities 47,296,680.99 14,509,049.46 32,787,631.53 225.98%

Equity 36,662,008.72 29,578,033.43 7,083,975.28 23.95%

Income 43,275,668.21 39,478,293.03 3,797,375.18 9.62%

Expenses 42,742,538.50 35,091,904.52 7,650,633.98 21.80%

The total appropriations for calendar year 2016 amounted to ₱43,494,899.00

representing an increase of ₱3,496,113.00 or 8.74% over last year’s appropriations. The

table below shows its breakdown with comparative figures for 2015, as follows:

Allotment Class 2016 2015 Increase/Decrease

Amount %

Personal Services 22,030,951.72 20,168,001.56 1,862,950.16 9.24%

Maintenance and

Operating Expenses 21,463,947.28 19,117,284.44 2,346,662.84 12.28%

Capital Outlay - 713,500.00 (713,500.00) (100%)

Total 43,494,899.00 39,998,786.00 3,496,113.00 8.74%

While, the total obligations from current appropriations amounted to

₱37,106,523.66. There was an increase of ₱66,795.90 or 0.18% compared to that of last

year as shown below:

Allotment Class 2016 2015 Increase/Decrease

Amount %

Personal Services 22,024,059.52 20,135,689.57 1,888,369.95 9.38%

Maintenance and

Operating Expenses 15,082,464.14 16,190,538.19 (1,108,074.05) (6.84%)

Capital Outlay - 713,500.00 (713,500.00) (100%)

Total 37,106,523.66 37,039,727.76 66,795.90 (0.18%)

Independent Auditor’s Report

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements because the management’s failure to submit the payrolls and other

liquidation reports totaling ₱9,574,481.44 under the General Fund as well as the revenue

accounts and 30 check disbursement vouchers in the Trust Fund created doubt on the

propriety and legality of the transaction which might affect the balances of the accounts

in the financial statements. In addition, the wages amounting to ₱504,150.00 was

improperly charged against the LDRRMF, thus understating the balance of the fund.

Summary of Significant Observations and Recommendations other than the bases

for qualified opinion

1. Out of the total appropriation of ₱8,458,979.80 for 20% Development Fund, only ₱4,658,761.21 or 55.07% was utilized during the year and portion of it amounting

to ₱1,310,667.16 was improperly utilized, thus continuously defeating the

purpose for which the fund was established and failed to attain the socio-

economic development and environmental management outcomes. Moreover,

disbursements lacked the required supporting documents.

In view of the foregoing, we recommend that management :

Give priority to the development projects and programs that partake the nature of investment or capital expenditures.

Utilize the fund in conformity with the guidelines set forth by the DILG-DBM Joint Memorandum Circular No. 2011-1;

Copies of approved contracts and purchase orders of infrastructure projects and procured goods and services should be submitted within five

(5) days from their execution/issuance;

Paid vouchers should be supported with the necessary documentary requirements to ensure the legality and propriety of the transactions.

2. The accounting and reporting guidelines on the planning and utilization of CY 2016 LDRRMF were not complied with, while payments totaling ₱518,889.05

lacked the required supporting documents, thus, casted doubts on the regularity of

such expenditures. Moreover, ineligible expenses were charged to the LDRRMF

and the utilization report contained inaccurate data.

We recommend that management adhere with the pertinent provisions of

COA Circulars No. 2012-002 and 2014-002 on the accounting and reporting

of LDRRMF and COA Circular No. 2012-001 on the proper documentation

of transactions. Likewise, the Accountant should rectify the deficiencies

noted on the variance per LDRRMF utilization report and per audit and to

submit the disbursement vouchers/liquidation reports and the lacking

supporting documents.

3. Publication of procurements in the PhilGEPS website was not undertaken by the LGU while, procurements thru reimbursements, shopping and negotiated

procurement amounting to ₱497,785.98, ₱1,444,862.39 and ₱2,325,708.75,

respectively, were made notwithstanding the failure to comply with the conditions

for resorting to alternative modes of procurement.

We recommend that management publish all their procurements in the

PhilGEPS website. Generally, public bidding should be used for all

procurement and all alternative modes of procurement be resorted to only if

the conditions which allows the use of such alternative method were met

pursuant to the Implementing Rules and Regulations of Republic Act 9184.

Moreover, stop the practice of procurement thru reimbursements.

4. Copies of contracts/purchase orders were not submitted within five (5) working days while, delivery documents were not furnished within 24-hours from

acceptance. Moreover, payment for the purchase of lot for road right-of-way and

evacuation center was not supported with proper documentations, casting doubt

on the propriety and legality of the procurement.

We recommend that management strictly observe the submission of

contracts/purchase orders within five (5) working days from

execution/issuance and furnish delivery documents within twenty-four (24)

hours from acceptance of deliveries of goods and services, in line with COA

Circulars No. 2009-001 and 002. Likewise, payment of various purchases

should be supported with complete documentation as mandated in COA

Circular 2012-001 dated June 14, 2012 for propriety and legality.

5. Systematic and comprehensive solid waste management program was not yet implemented in spite of the existence of an approved Ten-Year Municipal Solid

Waste Management Plan (MSWMP), depriving the constituents and the

environment of ample protection against health and environmental hazards

brought about by improper solid waste management.

We recommend that the Municipal Solid Waste Management Board actively

participate in the gradual implementation of the approved 10-year Municipal

Solid Waste Management Plan to protect the constituents and the

environment against health and environmental hazards brought about by

improper solid waste disposal.

6. Payment of wages to job order personnel in the total amount of ₱4,661,660.00 lacked the necessary supporting documents, thus casted doubt on the propriety

and legality of the transaction. In addition, a total amount of ₱504,150.00 was

improperly charged against the 5% LDRRMF and 20% Development Fund, thus

defeating the purpose for which the funds were established.

We recommend that management submit the basic documentary

requirements to support the payment of wages to job order personnel. The

Accountant should see to it that all claims should be supported with complete

supporting documents before payments are made. We further recommend

that management stop the charging of wages for garbage collectors, office

staffs/aides and street sweepers to 5% LDRRMF and 20% Development

Fund.

7. The submission of accounts was generally delayed, while, revenue accounts for Trust Fund, 161 cancelled checks and 30 check disbursement vouchers totaling

₱9,639,589.63 were not submitted for audit, thus, the legality of the transactions

was not determined. Moreover, the year-end financial statements were likewise

submitted beyond the legal deadline.

We recommend that the Municipal Mayor require the Municipal Accountant

and Treasurer to observe strictly Section 347 of RA 7160 and COA Circular

No. 2009-006 on the submission of financial accounts and reports including

the liquidation/payrolls for salaries and wages and traveling expenses.

Moreover, require the Municipal Accountant to submit the financial

statements on or before February 14 of each year.

8. Overtime services in the total amount of ₱64,235.61 were granted to employees and job order personnel in excess of appropriation and without the required

supporting documents, thereby making it irregular.

We recommend that management limit the grant of overtime services only

when extremely necessary, within its appropriations, and supported with

proper documents in accordance with CSC-DBM Joint Circular No. 1 s 2015

on the policies and guidelines on overtime services of government personnel,

Section 4(1) of PD 1445 and Section 5.10 of COA Circular No. 2012-001 for

its basic documentary requirements.

This recommendation is without prejudice to the issuance of Notices of

Suspension and/or Notices of Disallowance as the case may be.

Statement of Audit Suspensions, Disallowances and Charges as of December 31,

2016

The total audit suspensions, disallowances and charges found in the audit of

various transactions of the Municipality of Rosario, Northern Samar is ₱221,538.52

based on the Notice of Suspensions/Notice of Disallowances/Notice of Charge issued by

this Commission.

Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the thirty-four (34) audit recommendations embodied in the CY 2015 Annual

Audit Report, one (1) was implemented, seven (7) were partially implemented, while

twenty-six (26) were still not acted upon by management.

TABLE OF CONTENTS

Page

Part I Independent Auditor’s Report and Audited Financial Statements

Independent Auditor’s Report 1

Statement of Management’s Responsibility for Financial Statements 3

Combined Statement of Financial Position 4

Combined Statement of Financial Performance 5

Combined Statement of Changes in Net Assets/Equity 6

Combined Statement of Cash Flows 7

Statement of Comparison of Budget and Actual Amounts 9

Notes to Financial Statements

12

Part II Audit Observations and Recommendations

Financial and Compliance Audit 21

Part III Status of Implementation of Prior Years’ Unimplemented

Audit Recommendations

44

Part IV Appendices

1

Republic of the Philippines

COMMISSION ON AUDIT

Regional Office No. VIII

Candahug, Palo, Leyte

INDEPENDENT AUDITOR’S REPORT

Hon. GERARDO P. MIRANDA

Municipal Mayor

Rosario, Northern Samar

We have audited the consolidated financial statements of the Municipality of Rosario, Province of Northern Samar, which comprise the Statement of Financial

Position as of December 31, 2016, and the Statement of Financial Performance,

Statement of Changes in Net Assets/Equity, Statement of Comparative Budget and

Actual and Statement of Cash Flows for the year then ended, and a summary of

significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Philippine Public Sector Accounting

Standards and for such internal as management determines is necessary to enable the

preparation of financial statements that are free from material misstatements, whether due

to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on

our audit. We conducted our audit in accordance with Philippine Public Sector Standards

on Auditing. Those standards require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance about whether the financial

statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the

amounts and disclosures in the financial statements. The procedures selected depend on

the auditor’s judgment, including the assessment of the risks of material misstatement of

the financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s preparation and fair

presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall presentation of the

financial statements.

4

MUNICIPALITY OF ROSARIO

Province of Northern Samar

COMBINED STATEMENT OF FINANCIAL POSITION

As of December 31, 2016

(With Comparative Figures for CY 2015)

Note 2016 2015

ASSETS

Current Assets

Cash and Cash Equivalents 4 31,686,360.29 9,664,493.69

Investments -

Receivables 5 7,636,471.24 3,156,176.23

Inventories 6 170,971.80 170,971.80

Prepayments and Deferred Charges - -

Total Current Assets 39,493,803.33 12,991,641.72

Non-Current Assets

Investments - -

Receivables - -

Investment Property - -

Property, Plant and Equipment 7 44,464,886.38 31,095,441.17

Biological Assets - -

Intangible Assets - -

Total Non-Current Assets 44,464,886.38 31,095,441.17

TOTAL ASSETS

83,958,689.71 44,087,082.89

LIABILITIES

Current Liabilities

Financial Liabilities

630,683.22 1,134,991.53

Inter-Agency Payables

33,176,220.28 10,152,509.16

Intra-Agency Payables

794,254.15 64,254.15

Deferred Credits/Unearned Income

- -

Trust Liabilities 9,497,553.25 1,308,501.21

Total Current Liabilities 8 44,098,710.89 12,660,256.05

Non-Current Liabilities


- -


3,197,970.10 1,848,793.41

Provisions

- -

Other Payables

- -

Total Non-Current Liabilities

3,197,970.10 1,848,793.41

Total Liabilities 47,296,680.99 14,509,049.46

NET ASSETS/EQUITY

Government Equity 9 36,662,008.72 29,578,033.43

TOTAL LIABILITIES AND NET ASSETS/EQUITY 83,958,689.71 44,087,082.89

(See Accompanying Notes to Financial Statements)

5



COMBINED STATEMENT OF FINANCIAL PERFORMANCE



Revenues Note 2016 2015

Tax Revenue

543,577.82 571,627.03

Share from National Taxes

42,371,100.00 38,498,786.00

Service and Business Income

360,990.39 327,677.06

Shares, Grants and Donations - -

Gains - -

Total Revenue 10 43,275,668.21 39,478,293.03

Less: Current Operating Expenses

Personal Services 25,030,948.18 21,921,368.65

Maintenance and Other Operating Expenses 17,048,015.84 12,506,961.39

Non-cash Expenses 663,574.48 663,574.48

Financial Expenses - -

Total Current Operating Expenses 11 42,742,538.50 35,091,904.52

Surplus (Deficit) from Current Operation 533,129.71 4,386,388.51

Add (Deduct)

Transfers, Assistance and Subsidy From 7,539,416.90 1,552,127.14

Transfers, Assistance and Subsidy To (730,000.00) (338,500.00)

Other Non-Operating Income/(Losses) 81,175.13 -

Surplus (Deficit) for the Period 7,423,721.74 5,600,015.65


6



COMBINED STATEMENT OF CHANGES IN NET ASSETS/EQUITY As of December 31, 2016


2016 2015

Balance, Jan. 1 29,578,033.43 24,777,953.04

Add/(Deduct)

Changes in Accounting Policy - -

Prior Period Errors (339,746.45) (799,935.26)

Restated Balance 29,238,286.98 23,978,017.78

Add/(Deduct)

Changes in Net Assets/Equity during the year - -

Adjustment of net revenue recognized

directly in Net Assets/Equity - -

Surplus/(Deficit) for the period 7,423,721.74 5,600,015.65

Total Recognized Revenue and Expenses for the period 7,423,721.74 5,600,015.65

NET ASSETS/EQUITY, Dec. 31 36,662,008.72 29,578,033.43


7



COMBINED STATEMENT OF CASH FLOWS

For the Period December 31, 2016


2016 2015

Cash Flow From Operating Activities

Cash Inflows

Collection from Taxpayers 832,529.07 575,733.39

Share from Internal Revenue Allotment 42,371,100.00 38,498,786.00

Receipts from business/service income 362,952.09 397,697.86

Interest Income 15,204.71 6,075.78

Other Receipts 40,077,767.75 12,860,755.00

Total Cash Inflows 83,659,553.62 52,339,048.03

Cash Outflows

Payment of expenses 5,502,044.26 -

Payments to suppliers/creditors 27,960,523.18 21,284,692.81

Payments to employees 26,556,097.23 21,245,667.55

Interest Expense 37,142.50

Other Expenses 11,481,879.86 3,390,224.29

Total Cash Outflows 71,537,687.03 45,920,584.65

Net Cash Flows from Operating Activities 12,121,866.59 6,418,463.38

Cash Flow From Investing Activities

Cash Inflows

Proceeds from Sale of Investment Property - -

Proceeds from Sale of PPE 9,900,000.00 -

Proceeds from Sale of Investments - -

Collection of Principal on Loans to other entities - -

Collection of Long-term Loan - -

Total Cash Inflows 9,900,000.00 -

Cash Outflows

Purchase/Construction of Investment Property - -

Purchase/Construction of PPEs - -

Purchase of Bearer Biological Assets - -

Purchase of Intangible Assets - -

Grant of Loans - -

Total Cash Outflows - -

Net Cash Flows from Investing Activities 9,900,000.00 -

8

2016 2015

Cash Flows From Financing Activities

Cash Inflows

Proceeds from Issuance of Bills and Bonds - -

Proceeds from Domestic and Foreign Loans - -

Total Cash Inflows - -

Cash Outflows

Payment of Long-term Liabilities - -

Retirement/Redemption of debt securities - -

Payment of loan amortization - -

Total Cash Outflows - -

Net Cash Flows from Financing Activities - -

Net Cash Provided by Operating, Investing and

Financing Activities 22,021,866.60 6,418,463.38

Add: Cash at the Beginning of the year 9,664,493.69 3,246,030.31

Cash Balance Ending December 31, 2016 31,686,360.29 9,664,493.69


9

Municipality of Rosario

Northern Samar

Statement of Comparison of Budget and Actual Amounts


Particulars

Budgeted Amounts

Original Final

Difference

Original and

Final Budget

Actual

Amounts

Difference

Final Budget

and Actual

General Fund

REVENUE

A. Local Sources

1. Tax Revenue

a. Tax Revenue - Property 738,000.00 369,000.00 369,000.00 151,879.99 217,120.01

b. Tax Revenue - Goods and Services - - - 176,779.99 (176,779.99)

c. Other Local Taxes 72,000.00 72,000.00 - 85,619.50 (13,619.50)

Total Tax Revenue 810,000.00 441,000.00 369,000.00 414,279.48 26,720.52

2. Non-Tax Revenue

a. Service Income 270,000.00 270,000.00 - 301,309.50 (31,309.50)

b. Business Income 105,000.00 105,000.00 - 59,650.89 45,349.11

c. Other Income and Receipts 15,000.00 15,000.00 - 11,910.02 3,089.98

Total Non-Tax Revenue 390,000.00 390,000.00 - 372,870.41 17,129.59

B. External Sources

1. Share from the National Internal Revenue Taxes (IRA) 42,294,899.00 42,294,899.00 - 42,371,100.00 (76,201.00)

2. Share from GOCCs - - - - -

3. Other Shares from National Tax Collections

a. Share from Ecozone - - - - -

b. Share from EVAT - - - - -

c. Share from National Wealth - - - - -

d. Share from Tobacco Excise Tax - - - - -

4. Other Receipts

a. Grants and Donations - - - - -

b. Other Subsidy Income - - - - -

5. Inter-local Transfer - - - - -

6. Capital /Investment Receipts - - - - -

a. Sale of Capital Assets - - - - -

b. Sale of Investments - - - - -

10

Particulars

Budgeted Amounts

Original Final

Difference

Original and

Final Budget

Actual

Amounts

Difference

Final Budget

and Actual

c. Proceeds from Collections of Loan Receivable - - - - -

C. Receipts from Borrowings - - - - -

Total Revenue and Receipts 43,494,899.00 43,125,899.00

369,000.00 43,158,249.89 (32,350.89)

EXPENDITURES

Current Appropriations

General Public Services

Personnel Services 16,799,211.12 16,799,211.12 - 16,792,968.30 6,242.82

Maintenance and Other Operating Expenses 4,836,900.00 4,836,900.00 - 4,422,532.95 414,367.05

Capital Outlay - - - - -

Education

Personnel Services - - - - -

Maintenance and Other Operating Expenses - - - - -


Health, Nutrition and Population Control




Labor and Employment




Housing and Community Development




Social Services and Social Welfare

Personnel Services 3,608,853.52 3,608,853.52 - 3,608,466.64 386.88

Maintenance and Other Operating Expenses 1,055,200.00 1,055,200.00 - 937,123.77 118,076.23


Economic Services

Personnel Services 1,622,887.08 1,622,887.08 - 1,622,624.58 262.50

Maintenance and Other Operating Expenses 411,000.00 411,000.00 - 372,007.64 38,992.36


11

Particulars

Budgeted Amounts

Original Final

Difference

Original and

Final Budget

Actual

Amounts

Difference

Final Budget

and Actual

Other Purposes:

Debt Service

Financial Expense - - - - -

Amortization - - - - -

5% LDRRMF

Maintenance and Other Operating Expenses 2,174,744.95 2,174,744.95 - 1,032,390.70 1,142,354.25

Capital Outlay - - - -

20% Development Fund

Maintenance and Other Operating Expenses 8,458,979.80 8,458,979.80 - 4,658,761.21 3,800,218.59


Gender and Development

Maintenance and Other Operating Expenses 455,000.00 455,000.00 341,140.00 113,860.00


Share from National Wealth



Allocation for Senior Citizens and PWD

Maintenance and Other Operating Expenses 422,948.99 422,948.99 - 74,550.00 348,398.99


Others (Statutory and Contractual)


Maintenance and Other Operating Expenses 3,649,173.54 3,649,173.54 - 3,243,957.87 405,215.67


Total Current Appropriations 43,494,899.00 43,494,899.00 - 37,106,523.66 6,388,375.34

12



Notes to Financial Statements

Note 1 - Agency Profile

The Local Government Unit of Rosario, Northern Samar is a Fifth (5th) class

municipality and is composed of eleven (11) barangays. It was created on June 21, 1969

under Republic Act No. 5869. It serves primarily as a general purpose government which

delivers basic services, social, health services and effective governance of the inhabitants.

The major fields of livelihood are farming, fishing and trade and industry in the locality.

Note 2 – Basis of Financial Presentations

The Financial Statements have been prepared in accordance with Philippine

Public Sector Accounting Standards, as well as the regulations issued by the Commission

on Audit in pursuance with its constitutional mandate “to promulgate accounting and

auditing rules and regulations”. It consists of the consolidated statements of transactions

of three (3) funds – General Fund, Special Education Fund and Trust Fund.

Note 3 – Summary of Significant Accounting Policies

3.1 The Local Government Unit uses a modified accrual basis of accounting. All expenses are recognized when incurred and reported in the financial

statements in the period to which it relates. Income is on accrual basis

except in transactions where accrual basis is impractical or when other

methods are required by law.

3.2 The Real Property Taxes due to the LGU shall be recorded in the books of accounts as “Real Property Tax Receivable and Special Education Tax

Receivable” at the beginning of the year.

3.3 Inventories in the books are carried at cost. It is the practice of the LGU not to maintain inventory for office supplies and materials due to limited

fund allocation and the lack of personnel to control inventory items. The

inventory account shown in the Trial Balance represents the amount

forwarded from prior years.

3.4 Property, Plant and Equipment are carried at historical cost. Infrastructures under Construction in Progress are valued following the Construction

Period Theory. The cost of Public Infrastructure such as roads, bridges,

and other infrastructures for general public use are not carried in the books

of our agency, it is transferred to Registry of Public Infrastructure upon

completion of the project.

13

3.5 Depreciation charges were provided the Straight-line Method.

3.6 Liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received.

3.7 Fundamental errors of prior years are corrected using the Prior Year’s Adjustment account, while errors are affecting the current years’

operations are charged to the current year’s account.

Note 4 - Cash and Cash Equivalents

Account Title 2016 2015

Cash–Local Treasury (24.05) (24.05)

Petty Cash 20,000.00 0.00

Cash in Bank–LCCA 31,666,384.34 9,664,517.74

Total 31,686,360.29 9,664,493.69

4.1 Fundamental errors of the prior years are corrected using Prior Year’s

Adjustment account while errors affecting the current year’s operation are

reflected the current accounts.

4.2 General Fund Cash and Cash Equivalents account is composed of:

General Fund (Acct. No. 0011921012-19 6,585,742.98

20% Development Fund 00119-1424-11 499,640.00

5% LDRRMF 1192-1296-52 60,749.06

Petty Cash Fund 15,000.00

Cash-local Treasury (24.05)

Total 7,161,107.99

Note 5 – Receivable


RPT Receivables 1,813,721.27 1,043,728.89

SET Receivables 1,016,886.54 324,950.87

Due from LGUs 40,549.15 100,000.00

Due from Other Funds 19,731.96 40,549.15

Advances for Payroll 2,802,645.80 0.00

Advances to Special DO 0.00 120,000.00

Advances to Officers & Employees 1,495,072.81 1,158,935.72

Due from Officers & Employees 431,863.11 332,279.04

Other Receivables 16,000.60 16,000.60

Total 7,636,471.24 3,156,176.23

5.1 Real Property Tax Receivable and Special Education Tax Receivable are the amount which has been set up at the beginning of the year.

14

5.2 Due from NGAs of Trust Fund account was carried forward from January 2004 financial statements.

5.3 Due from LGUs was carried forward from December 2010 financial statements.

5.4 Advances to Officers and Employees account consists of cash advances granted for traveling expenses.

Note 6 - Inventories


Medical, Dental & Laboratory Supplies 102,971.80 102,971.80

Textbooks & Instructional Materials 68,000.00 68,000.00

Total 170,971.80 170,971.80

Note 7 - Property, Plant and Equipment

Account Title (General Fund) 2016 2015

Land 3,951,116.50 2,541,082.00

Land Improvements 368,320.70 368,320.70

Infrastructure Projects

Road Networks 898,121.04 599,023.03

Flood Control Systems 265,441.67 265,441.67

Water Supply Systems 1,120,178.14 1,120,178.14

Power Supply Systems 224,479.95 126,669.95

Seaport Systems 407,750.00 407,750.00

Parks, Plazas, Monuments 152,732.15 152,732.15

Other Infrastructure Assets 133,775.00 133,775.00

Buildings and Other Structures

Buildings 9,815,443.47 9,815,443.47

Hospitals & Health Centers 568,926.88 568,926.88

Other Structures 2,942,500.69 2,942,500.69

Machinery and Equipment

Machinery 124,000.00 124,000.00

Office Equipment 1,329,563.77 1,234,747.18

IT Equipment & Software 2,879,770.01 2,645,965.60

Agricultural & Forestry Equipment 67,000.00 67,000.00

Medical, Dental & Lab. Equipment 103,346.00 95,846.00

Technical & Scientific Equipment 16,850.00 16,850.00

Other Machinery & Equipment 124,196.00 28,196.00

Transportation Equipment

Motor Vehicles 2,724,100.31 2,724,100.31

Watercrafts 130,000.00 130,000.00

Other Transportation Equip. 90,920.00 90,920.00

15

Furniture, Fixtures & Books

Furniture & Fixtures 1,694,330.37 1,690,430.37

Books 172,672.00 172,672.00

Construction in Progress

CIP-Infrastructure Assets 5,284,535.01 5,284,535.01

Other Property, Plant & Equipment 19,480.00 19,480.00

Total Book Value 35,609,549.66 33,978,981.83

Less: Depreciation 6,372,653.70 5,709,079.22

Net Book Value 29,236,895.96 27,657,506.93

Account Title (SEF)


Other Structures 54,061.00 54,061.00


Technical & Scientific Equip. 11,500.00 11,500.00


CIP-Buildings & Other Structures 91,110.38 91,110.38

Total 156,671.38 156,671.38

Account Title (Trust Fund)

Land - -

Land Improvement - -


Office Buildings - -

Other Structures - -


Office Equipment - -

IT Equipment and Software 49,028.00 -

Med., Dental and Lab. Equip. - -

Furniture, Fixtures and Books

Furniture and Fixtures - -

Transportation Equipment

Watercrafts - -


CIP-Infrastructure Assets 14,090,843.77 3,281,262.86

CIP-Buildings and Other Structures 931,447.27 0.00

Total 15,071,319.04 3,281,262.86

Grand Total (All Funds) 44,464,886.38 31,095,441.17

7.1 Land

Lot 441,082.00

Covered Court/Evacuation Center 1,950,000.00

Transferred from Trust Fund 150,000.00

Balance as of CY 2015 2,541,082.00

Additions in CY 2016 (Evacuation Center) 1,410,034.50

Total 3,951,116.50

16

7.2 Office Buildings

Municipal Building 8,069,552.99

Post Office 50,000.00

Legislative Building Improvements 181,269.30

MPL Building (Multipurpose Hall) 672,988.00

8,973,810.29

Transferred from Trust Fund 649,416.78

Legislative Building 192,216.40

Accumulated Depreciation (360,818.09)

Net Book Value 9,454,625.38

7.3 Construction in Progress

Covered Court 3,737,704.34

Multipurpose Building 1,068,482.70

Transferred from Trust Fund CY 2015 478,347.97

Total 5,284,535.01

Note 8 - Liabilities



Accounts Payable 132,137.01 1,013,894.00

Due to Officers and Employees 498,546.20 121,097.53

Inter-Agency Payable

Due to BIR 873,535.74 314,291.69

Due to GSIS 284,780.31 279,447.00

Due to Pag-IBIG 119,955.66 117,929.58

Due to Philhealth 55,052.08 56,552.08

Due to Other NGAs 30,489,456.08 9,020,661.79

Due to Other GOCCs 27,662.64 28,383.73

Due to LGUs 1,325,777.77 335,243.29

Intra-Agency Payables

Due to Other Funds 794,254.15 64,254.15

Trust Liabilities -

Trust Liabilities 9,497,553.25 1,308,501.21

Trust Liabilities-DRRMF - -

Total Current Liabilities 44,098,710.89 12,660,256.05


Deferred RPT 1,905,513.87 1,248,272.85

Deferred SET 1,105,150.10 413,214.43

Other Deferred Credits 187,306.13 187,306.13

Total Non-Current Liabilities 3,197,970.10 1,848,793.41

Total Liabilities 47,296,680.99 14,509,049.46

17

Note 9 - Net Assets/Equity

NET ASSETS/EQUITY 2016 2015

Balance at January 1 29,578,033.43 24,777,953.04

Add (Deduct)

Change in Accounting Policy - -

Prior Period Errors (339,746.45) (799,935.26)

Restated Balance 29,238,286.98 23,978,017.78

Add (Deduct) Changes in net

assets/equity during the Year

Adjustment of net revenue recognized

directly in net assets/equity - -

Unrealized Gain/(Loss) from

Changes in the Fair Value of

Financial Assets

- -

Surplus (Deficit) for the period 7,423,721.74 5,600,015.65

Total recognized revenue and

expenses for the period 7,423,721.74 5,600,015.65

Balance at December 31 36,662,008.72 29,578,033.43

Note 10 - Income Accounts


Tax Revenue-Individual & Corporation

Community Tax 85,619.50 78,264.00

Tax Revenue-Property

Real Property Tax 151,879.99 182,956.27

Special Education Tax 129,298.34 240,364.66

Tax Revenue-Good and Services

Business Tax 176,779.99 70,042.10

Share from Internal Revenue Allotment 42,371,100.00 38,498,786.00

Service Income

Permit fees 92,663.75 55,881.56

Registration Fees 51,823.50 65,957.00

Clearance & Certification Fees 63,537.00 82,300.00

Inspection Fees 20,220.00 7,475.00

Occupation Fees 10,900.00 4,050.00

Fees for Sealing & Licensing of Weights 3,005.25 1,000.00

Other Service Income 59,160.00 42,431.36

Business Income

Receipt from Market Operations 29,845.00 28,265.00

Receipt from Slaughterhouse Operations 9,800.00 4,100.00

Hospital Fees 4,800.00 30,085.00

18


Interest Income 9,435.89 6,132.14

Lease Revenues 5,800.00 -

Assistance and Subsidy

Transfers, Assistance and Subsidy From 7,539,416.90 1,552,127.14

Miscellaneous Income 81,175.13 8,202.94

Total Income 50,896,260.24 40,619,920.17

Note 11 - Expenditure Accounts


Personal Service

Salaries & Wages-Regular 12,669,852.53 11,642,585.11

Salaries & Wages-Casual/Contractual 333,834.33 229,451.50

Other Compensation

Personal Economic Relief Allowance 1,066,000.00 1,100,000.00

Representation Allowance (RA) 1,293,750.00 1,341,000.00

Transportation Allowance (TA) 1,293,750.00 1,341,000.00

Clothing/Uniform Allowance 225,000.00 230,000.00

Subsistence Allowance 117,000.00 117,000.00

Honoraria 1,491,700.02

Productivity Incentive Allowance

313,791.00

Hazard Pay 337,971.12 339,171.12

Overtime & Night Pay 64,235.61 29,505.77

Other Personnel Benefits

675,701.10

Year-end Bonus 2,261,065.34 975,901.50

Cash Gift 112,500.00 230,000.00

Other Bonuses and Allowances

Personnel Benefit Contributions

Retirement and Life Insurance Premium 1,506,092.82 1,383,119.76

Pag-IBIG Contributions 52,800.00 230,519.96

Philhealth Contributions 144,550.00 139,300.00

Employees Economic Insurance Premiums 51,213.60 51,181.66

Other Personnel Benefits

668,069.32

Terminal Leave Benefits 2,009,632.81 884,070.85

Total Personal Services 25,030,948.18 21,921,368.65

Maintenance & Other Operating Expenses

Traveling Expenses

Traveling Expenses - Local 1,445,268.40 1,870,568.54

Training and Scholarship Expenses

Training Expenses 69,326.00 220,421.31

Scholarship Grants/Expenses 22,500.00 60,000.00

19


Supplies and Materials Expense

Office Supplies Expense 251,051.29 477,899.43

Accountable Forms Expenses 5,367.15 10,752.00

Food Supplies Expenses - 1,193,541.88

Drugs and Medicines Expenses 482,609.22 419,951.34

Medical, Dental & Lab. Supply Exp. 777,302.60 89,600.00

Fuel, Oil and Lubrication Expenses 278,798.84 185,280.35

Agricultural & Marine Supplies Exp. 55,158.82 43,310.00

Other Supplies and Materials Exp. 200,000.03 -

Utility Expenses

Electricity Expenses 430,353.47 311,747.39

Telephone Expenses 7,200.00 79,949.00

Communication Expenses

Internet Expenses 49,543.42 13,100.00

Cable, Satellite, Telegraph & Radio Exp. 38,187.78 3,600.00

Generation, Transmission & Distribution 33,854.00 -

Intelligence Expenses 12,350.00 13,899.80

Professional Services - -

Legal Services 6,650.00 5,000.00

General Services

Environmental/Sanitary Exp. 130,000.00 -

Janitorial Services 2,632,516.16 -

Other General Services 2,951,540.00 4,399,770.00

Repairs and Maintenance

Rep. & Maint –Infrastructure Assets - 34,600.00

Rep. & Maint –Buildings. & Other Structures 434,553.00 231,281.00

Repairs & Maint. - Machinery & Equipment 20,195.00 12,420.00

Repairs & Maint. – Transportation Equip. 437,947.62 142,040.00

Taxes, Insurance Premiums & Other Fees

Fidelity Bond Premiums 39,633.75 39,633.75

Other Maintenance & Operating Expenses

Advertising Expense 67,200.00 248,640.00

Representation Expenses 1,500.00 6,000.00

Donations 5,032,600.00

Membership Dues 3,000.00

Rent Expenses 4,700.00

Other Maintenance & Operating Expenses 1,127,109.29 2,393,955.60

Total MOOE 17,048,015.84 12,506,961.39

Financial Expenses -

Non-Cash Expenses

Depreciation-Infrastructure Assets 21,483.52 21,483.52

Depreciation-Buildings & Other Structures 95,222.66 95,222.66

20


Depreciation-Machinery & Equipment 75,598.29 292,753.31

Depreciation-Transportation Equipment 101,080.00 101,080.00

Depreciation-Furniture, Fixtures & Books 370,190.01 153,034.99

Non-Cash Expenses 663,574.48 663,574.48

Total Current Operating Expenses

Transfers, Assistance and Subsidy

Transfers, Assistance and Subsidy To (730,000.00) (338,500.00)

Total Transfers, Assistance & Subsidy To (730,000.00) (338,500.00)

Total Operating Expenses 42,012,538.50 34,753,404.52

Note 12 - Local Disaster Risk Reduction and Management Fund (LDRRMF)

Particulars

LDRRMF

Quick Response

Fund (QRF)

Mitigation

Fund Total

30% 70%

A. Sources of Funds:

Current Operations 652,423.49 1,522,321.46 2,174,744.95

Continuing Appropriations - 262,435.97 262,435.97

Previous Year’s Appropriation

Transferred to the Special Trust Fund

Transfers/Grants

Total Funds Available 652,423.49 1,784,757.43 2,437,180.92

B. Utilization

Provision of trainings 13,038.00 13,038.00

Counterpart-Evacuation Center 350,000.00 350,000.00

Office supplies 34,529.73 34,529.73

Traveling exp.-MDRRMC 29,801.00 29,801.00

Communication expenses 8,823.92 8,823.92

Maintenance of garbage trucks 12,844.80 12,844.80

Formulation of 10-yr. SWM Plan 60,000.00 60,000.00

Stockpile essentials 96,448.27 200,542.54 296,990.81

IT/communication equipment 37,108.90 37,108.90

MRRMO maintenance 189,253.54 189,253.54

Total Utilization 96,448.27 935,942.43 1,032,390.70

Unutilized Balance 555,975.22 848,815.00 1,404,790.22

21

PART II

AUDIT OBSERVATIONS AND RECOMMENDATIONS

The LGU has substantially complied DILG Memorandum Circular No. 2011-134

dated September 19, 2011 which amended DILG Memorandum Circular No. 2010-83,

series of 2010 on Full Disclosure of Local Budget and Finances and Bids and Public

Offering as amended. However, our financial and compliance audit for CY 2016 revealed

the following deficiencies.

Cash Advances –

1. Advances for Payroll and Advances to Officers and Employees accounts totaling ₱2,802,645.80 and ₱1,495,072.81, respectively, remained outstanding as of

December 31, 2016, contrary to the pertinent provisions of COA Circular No.

97-002 dated February 10, 1997, thus exposing government funds to the risk of

possible loss or misuse. In addition, payrolls and other liquidation reports in the

total amount of ₱9,574,481.44 were not submitted for audit, rendering the

untimely review of said reports.

COA Circular No. 97-002 dated February 10, 1997 restated with

amendments the rules and regulation/s on the granting, utilization and liquidation of

cash advances. The relevant provisions of the Circular are as follows:

a. Item 4.1.2 - No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled

or a proper accounting thereof is made.

b. Item 5.1 - The AO shall liquidate his cash advance as follows:

5.1.1 Salaries, Wages, etc. – within five (5) working days after each

fifteen (15) day/end of the month pay period.

5.1.2 Petty Operating Expenses and Field Operating Expenses – within

twenty (20) days after the end of the year, subject to

replenishment as frequently as necessary during the year.

5.1.3 Official travel – within sixty (60) days after return to the

Philippines in the case of foreign travel or within thirty (30) days

after return to the permanent official station in the case of local

travel, as provided for in EO 248 and COA Circular No. 96-004.

Failure of the AO to liquidate his cash advance within the prescribed period

shall constitute a valid cause for the withholding of his salary and the instruction of

other sanctions as provided for under paragraph 9.2 and 9.3 hereof.”

In addition, Section 7.2.1(a) of COA Circular No. 2009-006 dated

September 15, 2009 states that: “The Chief Accountant, Bookkeeper, or other

authorized official performing accounting and/or bookkeeping functions of the

22

audited agency shall ensure that the reports and supporting documents submitted by

the accountable officers are immediately recorded in the books of accounts and

submitted to the Auditor within the first ten (10) days of the ensuing month.”

The Statement of Financial Position showed balances of Advances for Payroll

and Advances to Officers and Employees accounts under General Fund and Trust

Fund amounting to ₱2,802,645.80 and ₱1,495,072.81 respectively or a total of

₱4,297,718.61 which remained outstanding as of December 31, 2016. The ages of

Advances to Officers and Employees accounts based on the schedule of cash

advances are shown below.

Age Amount Percent

General Fund

31-90 days 34,180.00 2.29%

91-365 days 636,665.27 42.58%

Over 1 year 60,020.00 4.01%

Over 2 years 23,654.94 1.58%

Over 3 years 454,193.85 30.38%

Subtotal 1,208,714.06

Special Education Fund

Over 3 years 5,997.00 0.40%

Subtotal 5,997.00

Trust Fund

Over 1 year 26,279.72 1.76%

Over 3 years 254,082.03 16.99%

Subtotal 280,361.75

Grand Total 1,495,072.81 100%

Examination of pertinent records disclosed that additional cash advances were

granted to officers and employees despite the non-liquidation of previous ones. We

also noted that several cash advances were liquidated beyond the prescribed period of

liquidation. Also, several officers and employees had outstanding cash advances in

aggregate amount of ₱50,000.00 as follows:

Name 31-90

days

91-365

days

Over 1

year

Over 3

years Total

Cinco, Marilee A. 5,600.00 326,518.55 332,118.55

Ereño, Francisco M. Jr. 80,092.09 80,092.09

Miranda, Gerardo P. 9,370.00 51,295.00 15,400.00 76,065.00

Rebadulla, Evelyn M 83,269.00 83,269.00

Turla, Allan T. 24,187.00 54,500.00 78,687.00

Turla, Alfonso L. 22,370.00 58,423.00 80,793.00

Total 14,970.00 424,370.55 15,400.00 276,284.09 731,024.64

In addition, several copies of liquidation reports for payrolls and traveling

expenses and other necessary supporting documents during the year in the total

amount of ₱9,574,481.44 were not submitted for audit. (Appendix F)

23

The delay in the liquidation of cash advances is not only contrary to the above

cited provisions, but may also result in possible loss or misuse of government funds.

During the exit conference, the Municipal Treasurer explained that the

unliquidated advances for payroll was already liquidated in the 1st quarter of 2017.

The management also averred that it will take appropriate action to ensure that

concerned officials and employees will liquidate their outstanding cash advances.

We recommend that management stop the grant of additional cash

advances to officials and employees with previous balances and demand for the

immediate liquidation/settlement of their unliquidated cash advances through

the issuance of demand letters copy furnished the Audit Team. In case of non-

compliance, instruct the Accounting Office to withhold the salaries or any money

due them as provided in Item 5.9 of COA Circular No. 97-002. In addition,

require the Municipal Accountant the immediate submission of payrolls and

liquidation of travels.

20% Development Fund -

2. Out of the total appropriation of ₱8,458,979.80 for 20% Development Fund, only ₱4,658,761.21 or 55.07% was utilized during the year and portion of it

amounting to ₱1,310,667.16 was improperly utilized, in disregard to DILG-DBM

Joint Memorandum Circular No. 2011-1, thus continuously defeating the

purpose for which the fund was established and failed to attain the socio-

economic development and environmental management outcomes. Moreover,

disbursements lacked the required supporting documents contrary to Section

4(6) of PD 1445.

Section 287 of the Local Government Code of 1991 (RA 7160) provides

that every LGU shall appropriate its annual budget no less than 20% of its internal

revenue allotment (IRA) for development projects.

DILG-DBM Joint Memorandum Circular No. 2011-1 dated April 13, 2011

which provides the guidelines on the appropriation and utilization of the 20%

development fund states that: It is the responsibility of every Provincial Governor,

City and Municipal Mayor and Punong Barangay to ensure that the 20% of the

Internal Revenue Allotment (IRA) is optimally utilized to help achieve desirable

socio-economic development and environmental outcomes.

Section 3 thereof, provides that the 20% of the IRA intended for development

projects may be utilized for the following priority programs and projects:

Social Development - construction or rehabilitation of health centers, rural health

units or hospitals, and purchase of medical equipment; construction or rehabilitation

of local government-owned potable water supply system; establishment or

rehabilitation of Manpower Development Centers; construction or rehabilitation of

24

evacuation centers; purchase or repair of area-wide calamity related alarm or warning

system; rehabilitation of cultural/historical sites; purchase or repair of appropriate

calamity-related rescue operations equipment such as inflatable boats, breathing

apparatus, extraction tools, safe line rescue ropes, fire extinguishers, chainsaws, two

(2) way handheld radios and the like; purchase and development of land for the

relocation of informal settlers and relocation of victims of calamities; construction or

rehabilitation of facilities such as multi-purpose hall intended to cater out-of-school

youths, women, senior citizens, minors, displaced families, indigenous people and

differently-abled persons; and installation and maintenance of street lighting system

except payment of electric bills.

Economic Development - construction or rehabilitation of communal irrigation or

water impounding system and purchase of post-harvest facilities such as farm or hand

tractor with trailer, thresher and mechanical driers; construction or rehabilitation of

local roads or bridges and purchase of appropriate engineering equipment such as

dump trucks, graders and pay loaders; capital expenditures related to the

implementation of livelihood or entrepreneurship/local economic development

projects; and amortization of loans used to finance development projects cited in this

Joint Circular, subject to the 20% debt service cap.

Environmental Management – reforestation and urban greening; construction or

rehabilitation of sanitary landfills, material recovery facilities and purchase of

garbage trucks and related equipment; implementation of flood and erosion control

projects such as rehabilitation and construction of drainage systems, de-silting of

rivers, de-clogging of canals; and other environmental management projects that

promote air and water quality, as well as productivity of the coastal or freshwater

habitat, agricultural land and forest land.

The same circular further enumerates the following items that are not related

to and/or connected with the implementation of development projects, programs and

activities shall not be paid out of the 20% development fund:

Administrative expenses such as cash gifts, bonuses, food allowance, medical assistance, uniforms, supplies, meetings, communication, water

and light, petroleum products and the like;

Salaries, wages or overtime pay; Travelling expenses, whether domestic or foreign; Registration or participation fees in training, seminars, conferences or

conventions;

Construction, repair or refinishing of administrative offices; Purchase of administrative offices furniture, fixtures, equipment or

appliances;

Purchase, maintenance or repair of motor vehicles or motorcycles.

Section 4(6) of PD 1445 states that claims against government funds shall be

supported with complete documentation.

25

During the year, the LGU received its share of Internal Revenue Allotment

(IRA) from the national government in the amount of ₱42,371,000.00. The Annual

Budget for the calendar year showed a total appropriation of ₱8,458,979.80 for

priority development projects under the 20% development fund. However, the Annual

Investment Plan (AIP) contained thirty-eight (38) development priority programs and

projects which were programmed for implementation for the current year totaling

only to ₱8,051,987.78 or 19% of its IRA.

While there were several programs and projects that were in line with the

policies and guidelines set forth by the said circular during the year, we still noted

some deficiencies such as:

a. Projects/programs/activities funded out of the 20% development fund in the total amount of ₱1,766,089.80 did not conform to the development

priority projects and programs for social development, economic

development and environmental management nor did it partake the nature

of investment or capital expenditures. (Appendix G)

b. The municipality implemented only ten (10) eligible programs and projects in the total amount of ₱3,348,094.05 or 53.26% out of the total

appropriations of ₱6,285,897.98 for 16 projects.

c. Copies of approved contracts and purchase orders of infrastructure projects and procured goods and services were not submitted within five

(5) days from their execution/issuance which precluded the audit team

from conducting the timely review of contracts and POs and actual

inspection on deliveries. (COA Circular No. 2009-001)

d. Some paid disbursement vouchers lacked the necessary supporting documents such as but not limited to Program of Works, Detailed

Engineering Estimates, Plans/Specifications, Pre-Post Inspection Reports

and documentary photos for construction/repair of projects/buildings;

Approved Activity Budget for sports fest activities and bloodletting

program; and list of recipients for the distribution of vegetable seeds and

boxing uniforms.

As a result, it defeated the purpose for which the fund was created and failed

to attain the desired socio-economic development and management outcome.

In our exit conference, management informed the audit team that those

programs/projects/activities that were not implemented in CY 2016 were

implemented in the ensuing year as continuing appropriations. They further explained

that those programs that were not in conformity with the guidelines set forth under the

above-mentioned DILG-DBM Joint Circular were charged to 20% development fund

due to insufficient funds of the MOOE.

26

In view of the foregoing, we recommend that management :

a. Give priority to the development projects and programs that partake the nature of investment or capital expenditures.

b. Utilize the fund in conformity with the guidelines set forth by the DILG-DBM Joint Memorandum Circular No. 2011-1;

c. Copies of approved contracts and purchase orders of infrastructure projects and procured goods and services should be submitted within five (5) days

from their execution/issuance;

d. Paid vouchers should be supported with the necessary documentary requirements to ensure the legality and propriety of the transactions.

Local Disaster Risk Reduction and Management Fund –

3. The accounting and reporting guidelines on the planning and utilization of CY 2016 LDRRMF were not complied with, contrary to pertinent provisions of

COA Circulars No. 2012-002 and 2014-002, while payments totaling ₱518,889.05

lacked the required supporting documents as mandated in COA Circular No.

2012-001 dated June 14, 2012, thus, casted doubts on the regularity of such

expenditures. Moreover, ineligible expenses were charged to the LDRRMF and

the utilization report contained inaccurate data.

Item 5.1.2 of COA Circular 2012-002 dated September 12, 2012 provides

that a Local Disaster Risk Reduction and Management Fund Investment Plan

(LDRRMFIP) for the DRRM program shall be prepared annually. It shall present the

30% allocation for QRF in lump sum and the 70% allocation for disaster mitigation,

prevention and preparedness with details as to projects and activities to be funded.

The LDRRMFIP shall also include under separate caption, the list of projects and

activities charged to the unexpended LDRRMF of previous years.

Item 5.1.5 of the same Circular provides that a Report on Sources and

Utilization of DRRMF shall be prepared and certified correct by the Local

Accountant. The Local Disaster Risk Reduction and Management Officer

(LDRRMO) shall submit the report on or before the 15th day of the end of each month

through the LDRRMC and Local Development Council (LDC) to the COA auditor of

the LGU.

Item V (B) of COA Circular No. 2014-002 dated April 15, 2014 provides

the reporting guidelines on in-kind donations which states that: The Donee-Agency

shall prepare monthly reports on the receipt and distribution/utilization/issuance of in-

kind donations. Separate reports shall be prepared for relief goods and PPE based on

the Registry of Donated Relief Goods for DRRM and Property Cards, respectively.

The reports shall be submitted to the Office of the Civil Defense (OCD), copy

furnished the COA Auditor, on or before the 10th day of the ensuing month until all

donations are fully consumed/utilized.

27

COA Circular No. 2012-001 dated June 14, 2012 prescribed the

documentary requirements for common government transactions, to wit:

1.2.1 Liquidation of Payroll Fund for salaries, wages, allowances, honoraria and other similar expenses

Report of Disbursements certified correct by the accountable officer

Approved payroll/vouchers duly acknowledged/signed by the payee/s

Approved Daily Time Record (DTR) or Certificate of Service In case of payment of personnel under the “job order” status,

duly verified/accepted accomplishment report

Approved contracts

1.1.4.1 Traveling allowances (Local Travel)

Office Order/Travel Order approved in accordance with Section 3 of EO No. 298

Duly Approved itinerary of travel Certification from the accountant that the previous cash

advance has been liquidated and accounted for in the books

1.2.3 Field/Activity Current Operating Expenses

Report of Disbursements Approved purchase request Bills, receipts, sales invoices Canvass from at least three suppliers for purchases involving

₱1,000 and above

Summary/Abstract of canvass Such other supporting documents that may be required

depending on the nature of expenses

2.2 Implementation and liquidation of funds (goods) released List of beneficiaries with their signatures signifying their

acceptance/acknowledgment of the

project/funds/goods/services received

6.2 Telephone/Communication Services

Statement of Account/Bill Invoice/Official Receipt or machine validated statement of

account

Certification by the Agency Head or his authorized representative that all calls are official calls

In the review and evaluation of the agency’s compliance with COA Circulars

No. 2012-002 and 2014-002 on the accounting and reporting guidelines of Local

Disaster Risk Reduction and Management Fund (LDRRMF), we noted that:

1. The prepared LDRRMFIP did not indicate the functional classification, funding source under 30% allocation for QRF and the 70% mitigating

28

fund. It did not also include the list of projects and activities charged to the

unexpended LDRRMF of previous years.

2. The LDRRMO failed to submit the Monthly Report on Sources and Utilization of DRRMF on or before the 15th day after the end of each

month.

3. In-kind donations/relief goods received from other agencies, for the victims of Typhoon Nona in the Municipality could not be verified due to

failure to submit reports on receipt and issuance by the MSWDO and

Property Supply Unit, such as but not limited to the following documents:

Registry of Donated Relief Goods for DRRM for each kind of relief goods

Issuance Form for in-kind donations Reports on the receipt and distributions/utilization/issuance of in-kind

donations

Pictures/documents on warehousing/storage and distribution of donated relief goods

4. Post audit of disbursement vouchers and other documents pertaining to the expenditures charged to the LDRRMF for CY 2016 also showed the

following observations:

a. The LDRRMFIP showed a total appropriation of ₱2,174,744.95 for seventeen (17) identified projects/programs/activities. However, only

eleven (11) projects/programs/activities were implemented during the

year (Appendix H). These included expenditures that were ineligible in

the total amount of ₱99,124.47 as summarized below:

Particulars Amount

Diesel and fuel 26,584.47

Job Order wages 67,100.00

Registration fee (NORSAMBOL) 2,400.00

Curtains 3,040.00

Total 99,124.47

b. Disbursements for payment of relief goods, hauling costs, job order wages, communication expenses and traveling expenses in the total

amount of ₱518,889.05 lacked the necessary supporting documents as

presented in the table:

Particulars Amount Lacking supporting documents

Relief goods 296,990.81 Declaration of State of Calamity, distribution

list; DV and SDs of ck. no. 1368801

IT Equipment 37,108.90 No Acknowledgment Receipt of Equipment

CA for hauling of housing

materials 80,000.00 Liquidation reports not submitted

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Job Order wages 67,100.00 Job Contracts, DTRs, Accomplishment

Reports

Communication expenses 15,269.34

Certification by the Agency Head/authorized

representative that all calls made are official

calls

Cash advances for travels 22,420.00 Liquidation reports not submitted per ck.

nos. 1367867 and 1368018

Total 518,889.05

c. Variance was noted in the review of the submitted Fund Utilization Report against the post audit of disbursement vouchers. (Appendix I)

This observation was also discussed in the previous years’ audit reports which

apparently signify that management did not comply with our recommendation and an

indication of blatant disregard of existing regulations pertaining to the accounting and

utilization of the LDRRM Fund.

In the exit conference, management stated that the in-kind

donations/assistance received from other national agencies were properly accounted

for but were not reported. With regards to the improper charging of ineligible

expenditures, the Municipal Budget Officer explained that she only used the

LDRRMF Investment Plan as her guide, unaware that it contained ineligible

programs and activities.

We recommend that management adhere with the pertinent provisions of

COA Circulars No. 2012-002 and 2014-002 on the accounting and reporting of

LDRRMF and COA Circular No. 2012-001 on the proper documentation of

transactions. Likewise, the Accountant should rectify the deficiencies noted on

the variance per LDRRMF utilization report and per audit and to submit the

disbursement vouchers/liquidation reports and the lacking supporting

documents.

Procurement –

4. Publication of procurements in the PhilGEPS website was not undertaken by the LGU while, procurements thru reimbursements, shopping and negotiated

procurement amounting to ₱497,785.98, ₱1,444,862.39 and ₱2,325,708.75,

respectively, were made notwithstanding the failure to comply with the

conditions for resorting to alternative modes of procurement contrary to the

provisions of the Implementing Rules and Regulations of RA 9184.

Section 8.3 of the IRR of RA 9184 provides that all Procuring Entities are

mandated to fully use the PhilGEPS in accordance with the policies, rules,

regulations, and procedures adopted by the GPPB and embodied in this IRR. In this

connection, all Procuring Entities shall register with the PhilGEPS and shall

undertake measures to ensure their access to an on-line network to facilitate the open,

speedy and efficient on-line transmission, conveyance and use of electronic data

messages or electronic documents.

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Section 10 mandates that all procurement shall be done though competitive

public bidding, except as provided in Rule XVI which provides for the specific

highly exceptional cases under which procurement may be done through various

alternative modes.

Sections 13.1 and 13.3 states that, in order to enhance the transparency of the

process, the BAC shall, during the eligibility checking, shortlisting, pre-bid

conference, preliminary examination of bids, bid evaluation, and post-qualification,

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 its proceedings. Observers shall be invited at

least five (5) calendar days before the date of the procurement stage/activity.

Section 52 defines Shopping as a method of procurement of goods whereby

the Procuring Entity simply requests for the submission of price quotations for readily

available off-the-shelf goods or ordinary/regular equipment to be procured directly

from suppliers of known qualifications and shall be employed in any of the following

cases:

Where there is unforeseen contingency requiring immediate purchase:

Provided, however, that the amount shall not exceed the thresholds

prescribed in Annex H of this IRR. (not exceeding ₱100,000.00 for a 5th

class municipality)

Procurement of ordinary or regular office supplies and equipment not

available in the Procurement Service involving an amount not exceeding

the thresholds prescribed in Annex “H” of this IRR. (not exceeding

₱100,000.00 for a 5th class municipality)

Section 53 defines Negotiated Procurement as a method of procurement of

goods, infrastructure projects and consulting services, whereby the Procuring Entity

directly negotiates a contract with a technically, legally and financially capable

supplier, contractor or consultant in any of the following cases:

Two Failed Biddings Emergency cases Take-over of contracts Adjacent or Contiguous Agency-to-Agency Scientific, Scholarly or Artistic Work, Exclusive Technology and Media

Service

Highly Technical Consultants Defense Cooperation Agreement Small Value Procurement Lease of Real Property NGO Participation Community Participation United Nations Agencies

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During the year, the LGU has entered various contracts for infrastructure

projects, purchase of medicines, construction materials, medical supplies and

equipment and pakyaw labor. However, review of pertinent documents and post audit

of the foregoing transactions revealed that the municipality did not fully use the

PhilGEPS website in posting their Invitation to Bid (ITB). Posting of the ITB was

made thru the advertisement in the newspaper/tabloid. Likewise, COA was not

invited in all stages of procurement process.

Further, the LGU resorted to alternative modes of procurement such as

shopping and negotiated procurement for purchase of goods, services and in the

implementation of infrastructure projects. However, the BAC Resolution

recommending the alternative mode of procurement did not include sufficient

justification and lacked the conditions required in the IRR. In addition, procurement

of goods on reimbursement basis in the total amount of ₱497,785.98 were made,

which deprived the government from taxes that could have been derived therein.

Hereunder are the procurements made using the alternative modes:

Particulars

Alternative Mode of

Procurement Thru

Reimbursements (Net Amount)

Shopping Negotiated

Procurement

Goods

Office supplies 115,523.04

Food supplies 200,542.54 60,957.00

Drugs and Medicines 393,336.62

Fuel, oil and lubricants 89,067.98

Equipment 154,741.07 8,975.03

Other various expenses 223,262.93

Services

Lease of backhoe 123,500.00

Infrastructure projects/programs

General Fund

FMR (Right-of-Way) 1,399,834.50

Land (Evacuation Center) 645,000.00

Construction of 1 classroom (Guindaulan NHS) 96,331.23 20,000.00

Construction of pathway at Brgy. Salhag 104,798.04 37,166.25

Construction of pathway at Brgy. Jamoog 104,389.18 38,800.00

Reconstruction of Legislative Building 67,322.31 27,408.00

Repair of Municipal Hall 177,151.40 34,000.00

Trust Fund

Mudcrab Production-materials (BuB project) 146,250.00

Total 1,444,862.39 2,325,708.75 497,785.98

During our exit conference, management acknowledged the audit team’s audit

recommendation and promised to comply to promote economy and efficiency in the

procurement as envisioned in the Revised Implementing Rules and Regulations (IRR)

of RA 9184. The BAC Chairperson further assured to submit the complete necessary

documents.

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We recommend that management publish all their procurements in the

PhilGEPS website. Generally, public bidding should be used for all procurement

and all alternative modes of procurement be resorted to only if the conditions

which allows the use of such alternative method were met pursuant to the

Implementing Rules and Regulations of Republic Act 9184. Moreover, stop the

practice of procurement thru reimbursements.

Submission of Contract Documents –

5. Copies of contracts/purchase orders were not submitted within five (5) working days while, delivery documents were not furnished within 24-hours from

acceptance, contrary to COA Circulars No. 2009-001 and 002. Moreover,

payment for the purchase of lot for road right-of-way and evacuation center was

not supported with proper documentations in violation of COA Circular No.

2012-001 dated June 14, 2012 casting doubt on the propriety and legality of the

procurement.

Pertinent Sections of COA Circular No. 2009-001 dated February 12, 2009

relative to the submission of contracts/purchase orders are as follows:

a. Section 3.1.1 - Within five (5) working days from the execution of a contract by the government or any of its subdivisions, agencies or

instrumentalities, including government-owned or controlled corporations

and their subsidiaries, a copy of said contract and each of the documents

forming part thereof by reference or incorporation shall be furnished the

Auditor of the agency concerned.

b. Section 3.2 - A copy of any 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.

While, Section 6.9 of COA Circular No. 2009-002 dated May 18, 2009

provides the duties of the agency officials concerned, one of which is quoted, thus:

“Furnish the auditor copies of delivery documents within twenty-four (24) hours after

acceptance of deliveries of goods and services.”

Section 13.1 of COA Circular No. 2012-001 dated June 14, 2012 enumerates

the documentary requirements for the acquisition of Road Right-of-Way (ROW)/Real

Property (Land) common to both Negotiated Purchase and Payment by Court

Decision which included:

Project parcellary survey plan showing that said lot and structures are within the boundaries of the right-of-way;

Structural Mapping Plan of the lot affected; Certification by the Implementing Agency that the claim is not within the

original ROW of a converted local road;

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Certification by the Implementing Agency that there is no previous pending claim and previous payment on subject property;

Environmental Clearance Certificate (ECC) as required under Section 8 of RA No. 8974;

Copy of latest master list of Project-Affected-Persons (PAP) approved by the Agency’s authorized representative; and

In case of death of claimant or owner, judicial settlement duly advertised in a newspaper of general circulation

Additional documentary requirements for:

a. Negotiated Purchase: Independent Appraisal Report/Regional Committee Resolution

indicating the valuation of the land. Valuations should be based on the

provisions of RA No. 8974;

Applicable BIR zonal valuation; Certified photocopy of Authorized/agency Resolution to Purchase

Land or Land Rights indicating the approved/established valuations or

BIR zonal valuations;

Deed of Absolute Sale registered with the Register of Deeds where the land is located; and

Certified photocopy of Tax Clearance from Assessor’s Office where the land is located

- Certificate Authorizing Registration (CAR) - Capital Gains Tax (CGT) - Transfer Tax

b. If registered land: If whole lot is acquired, Transfer Certificate of Title (TCT) Certificate

of Land Ownership Award/ Original Certificate of Title/ Emancipation

Patent (CLOA/OCT/EP) certified as true copy by the Register of

Deeds and Tax Declaration (TD) certified as true copy by the

Assessor’s Office in the name of the Procuring Entity or previous

owner depending on the provisions of the sale; and

If portion of lot is acquired, certified true copy of TCT and TD in the name of the Procuring Entity or previous owner with annotation of the

sale

c. If unregistered land: Certified photocopy of TD in the name of the procuring entity or

previous owner with annotation of sale;

Notarized Affidavit of Ownership; Certification from the City/Municipal Treasurer that the claimant is the

sole entity paying the taxes for the property for the past 5 years;

Notarized joint affidavit of two adjoining landowners or Barangay/Local Officials concerned attesting to the ownership of land;

Such other documents deem necessary for the auditorial review and in the technical evaluation thereof; and

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If claim for payment or amount of sale exceeds ₱50,000 (EO No. 1035), certified photocopy of Claimant’s Surety/Indemnity Bond

issued by any Insurance Company duly accredited by the Insurance

Commission

Copies of contracts/purchase orders were not submitted within the prescribed

five (5) working days. Likewise, the audit team was not furnished with delivery

documents within twenty-four (24) hours from acceptance of deliveries of goods and

services.

Moreover, disbursements covering the payments for the acquisition of road

right-of-way for the construction of Farm to Market Road project and final payment

of the purchased land used for evacuation center in the total amount of ₱1,399,834.50

and ₱645,000.00, respectively lacked the necessary supporting documents such as but

not limited to the following: (Section 13.1 of COA Circular 2012-001)

Project parcellary survey plan showing that said lot and structures are within the boundaries of the right-of-way;

Structural Mapping Plan of the lot affected; Certification by the Implementing Agency that the claim is not within the

original ROW of a converted local road;

Certification by the Implementing Agency that there is no previous pending claim and previous payment on subject property;

Environmental Clearance Certificate (ECC) as required under Section 8 of RA No. 8974;

Copy of latest master list of Project-Affected-Persons (PAP) approved by the Agency’s authorized representative; and

In case of death of claimant or owner, judicial settlement duly advertised in a newspaper of general circulation

The foregoing circumstances showed that the validity and propriety of the

transactions were doubtful.

During the exit conference, the BAC Chairperson vowed to comp

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