Republic of the Philippines

COMMISSION ON AUDIT
Province of Bohol
City of Tagbilaran

OFFICE OF THE SUPERVISING AUDITOR

May 30, 2014

Honorable Jose Mario J. Pahang

Municipal Mayor
Municipality of Antequera
Antequera, Bohol

S i r:

Pursuant to Section 2, Article IX-D of the Philippine Constitution, Section 43 (2) of

Presidential Decree No. 1445, otherwise known as the “Government Auditing Code of the
Philippines”, and in line with the Commission’s efforts towards informing Management on
how fiscal responsibility has been discharged, we are pleased to transmit the report of our
Auditor on the results of her audit on the accounts and operations of the Municipal
Government of Antequera for the year ended December 31, 2013.

The audit was conducted to ascertain the propriety of financial transactions and compliance
of the local government unit (LGU) with the prescribed rules and regulations. It was also
aimed to review managerial efficiency with the end in view of eliminating waste and
promoting efficient use of public funds and resources by determining whether desired results
have been achieved and the programs have accomplished their purposes and objectives.

We request that the findings and observations contained in the attached report be
appropriately acted upon and would appreciate being informed of the action(s) taken thereon
by submitting the duly accomplished Agency Action Plan and Status of Implementation
(AAPSI) form within 60 days upon receipt hereof.

We acknowledge the cooperation and support extended to our auditor and her staff during
the audit.

Very truly yours,

JOSE R. DESAMPARADO
Supervising Auditor

Copy furnished:
Sangguniang Bayan, Antequera, Bohol
 Name of Agency

AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION

Audit Observations and Recommendations
For the Calendar Year 2013
As of ________

Ref. Audit Audit Agency Action Plan Status of Reason for Action
Observations Recommendations Action Person/Dept.Responsible Target Implementation Partial/Delay/Non- Taken/Action
Plan Implementation Implementation, if to be Taken
Date applicable
From To

Agency sign-off:

______________________________ _________
Name and Position of Agency Officer Date

Note: Status of Implementation may either be (a) Fully Implemented, (b) On-going, (c) Not Implemented, (d) Partially Implemented, or (e) Delayed
 Republic of the Philippines
COMMISSION ON AUDIT
Office of the Auditor
Team 2– Bohol Province
Tagbilaran City

May 29, 2014

JOSE R. DESAMPARADO
Supervising Auditor
Commission on Audit
Province of Bohol
Tagbilaran City

S i r:

In compliance with Section 2, Article IX-D of the Philippine Constitution and pertinent sections
of Presidential Decree No. 1445, we conducted a financial and compliance audit on the
accounts and operations of the Municipality of Antequera, Bohol for the year ended December
31, 2013.

The audit was conducted to ascertain the propriety of financial transactions and compliance of
the agency with prescribed rules and regulations, the accuracy of financial records and reports, as
well as the fairness of the presentation of the financial statements. It was also aimed to review
managerial efficiency with the end in view of eliminating waste and promoting efficient use of
public funds and resources and the ascertainment of the agency’s effectiveness by determining
whether desired results have been achieved.

Our attached report consists of four parts, Part I - Audited Financial Statements, Part II– Detailed
Findings and Recommendations which were discussed with the municipal mayor on May 28,
2014, Part III – Status of Implementation of Prior Years’ Audit Recommendations and Part IV -
Annexes.

As discussed in Part II and III of this report, the valuation of the reported PPE totaling
P48,477,276.44 as of December 31, 2013 is of doubtful validity due to the failure of the LGU to
maintain adequate records as prescribed under Sections 119 and 123 of the NGAS Manual.
Likewise, supplies and materials totaling P867,350.21 purchased during the year were directly
issued to end users and treated as outright expenses without coursing through the inventory
account, thus accuracy and correctness of Inventory and Expenses accounts are unreliable.
Further, financial assistance granted to barangays, municipalities and public schools were
directly booked up as expense instead as a Receivable. Moreover, the validity of breeding stocks
in the amount of P267,000.00 which remained dormant for several years cannot be ascertained
due to the failure of the municipality to properly monitor the existence and condition of these
assets, maintain the required records and prepare an inventory report thereon.

Our audit was conducted in accordance with generally accepted state auditing standards and we
believe that it provides reasonable basis for the results of audit.

Very truly yours,

MARINETTE L. TALADUA
Officer-in-Charge, Team 2
 EXECUTIVE SUMMARY

Pursuant to Republic Act 7160, otherwise known as the Local Government Code of 1991,
the municipality like any other local government units, enjoys total independence in managing,
deciding and planning its own administrative, fiscal and developmental affairs in conformity
with the national government’s thrust for sustainable social and economic growth.

HIGHLIGHTS OF FINANCIAL OPERATION

For the calendar year 2013, the municipality was able to generate income in the total
amount of P49,715,456.39 derived from the following sources:

General Fund Special Educ. Fund Total

Local Taxes P1,264,670.03 P729,925.15 P1,994,595.18

Permits/Licenses 367,479.19 0.00 367,479.19
Service Income 1,194,910.37 0.00 1,194,910.37
Business income 4,182,629.55 0.00 4,182,629.55
Other Income 41,973,516.40 2,325.70 41,975,842.10
Total P48,983,205.54 P732,250.85 P49,715,456.39

The municipality appropriated a total of P57,989,976.64 in the General Fund and Special
Education Fund of which P51,990,593.18 was obligated.

The financial and operational highlight of the municipality for the year 2013, with a
comparison of the preceding year, is shown as follows:

2013 2012 Increase/(Decrease)

INCOME

P
Income other than IRA 8,064,287.39 P 8,317,254.87 P (252,967.48)
Internal Revenue Allotment 41,651,169.00 37,724,907.00 3,926,262.00
Subsidies 1,620,500.00 2,450,000.00 (829,500.00)

P
Total Income 51,335,956.39 P 48,492,161.87 P 2,843,794.52
EXPENSES
P
Personal Services 24,818,323.59 P 21,231,335.78 P 3,586,987.81
 Maintenance and Operating Expenses 21,062,022.36 21,059,233.75 2,888.61
Financial Expenses 1,277,840.35 1,328,437.46 (50,597.11)
Subsidies 2,800,623.31 4,451,238.08 (1,650,614.77)
P
Total Expenses 49,958,809.61 P 48,070,245.07 P 1,888,564.54

P
Net Income/(Loss) 1,377,146.78 P 421,916.80 P 955,229.98

P
Assets 103,478,473.84 P 75,166,253.20 P 28,312,220.64
Less: Liabilities 50,921,804.38 25,715,345.03 25,206,459.35

P
Government Equity 52,556,669.46 P 49,450,908.17 P 3,105,761.29

Financial Ratios:
Liquidity Ratio:

Cash+Receivables 54,720,334.40 26,109,645.10

Current Liabilities 38,956,074.02 8,103,644.94
1.40:1 3.22:1 (56.5%)

Current Ratio:

Current Assets 54,734,197.40 26,168,859.10

Current Liabilities 38,956,074.02 8,103,644.94
1.41:1 3.23:1 (56.3%)

SCOPE OF AUDIT

An audit was conducted on the accounts and operations of the Municipality of Antequera,
Bohol for CY 2013. The audit consisted of review of operating procedures, interview with
concerned government officials and employees, verification, reconciliation, and analysis of
accounts and such other procedures considered necessary. It was aimed at ascertaining the
propriety of disbursements and reliability of financial reports and determining whether the
agency’s operations had been conducted in accordance with laws, rules and regulations. The
audit was also aimed to review managerial efficiency with the end in view of eliminating waste
and promoting efficient use of public funds and resources and the ascertainment of the agency’s

ii
effectiveness by determining whether desired results have been achieved and the programs have
accomplished their purposes and objective.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the financial statements because the valuation
of the reported PPE totaling P48,477,276.44 as of December 31, 2013 is of doubtful validity due
to the failure of the LGU to maintain adequate records as prescribed under Sections 119 and 123
of the NGAS Manual. Likewise, supplies and materials totaling P867,350.21 purchased during
the year were directly issued to end users and treated as outright expenses without coursing
through the inventory account, thus accuracy and correctness of Inventory and Expenses
accounts are unreliable. Further, financial assistance granted to barangays, municipalities and
public schools were directly booked up as expense instead as a Receivable. Moreover, the
validity of breeding stocks in the amount of P267,000.00 which remained dormant for several
years cannot be ascertained due to the failure of the municipality to properly monitor the
existence and condition of these assets, maintain the required records and prepare an inventory
report thereon.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

1. Productivity Enhancement Incentive (PEI) ranging from P12,500.00 to P25,000.00 per

personnel or a total of P1,375,000.00 was excessively granted to each elective and
permanent officials and employees of the municipality contrary to DBM Circular No.
2013-3 thus resulting to irregular and unnecessary expenditures.

We recommend that the concerned recipients refund the PEI in excess of P5,000.00
authorized by the DBM. Henceforth, adhere to the DBM provisions and guidelines in the
granting of PEI to avoid disallowance in audit.

2. Supplies and materials totaling P867,350.21 purchased during the year were directly
issued to end users and treated as outright expenses without coursing through the
inventory account as prescribed under Section 114 of the Manual on the New Government
Accounting System, Volume I, thus accuracy and correctness of Inventory and Expense
accounts are unreliable.

We recommend that the management require the coordination between the Municipal
Accountant and the Municipal Treasurer/General Services Officer towards the
implementation of the perpetual inventory method in the recording of supplies and materials

iii
to ensure proper accounting and promote better control in the receipt and issuance of supplies
and materials.

3. The grant of Collective Negotiation Agreement (CNA) in CY 2013 totaling P570,000.00

was sourced from the appropriation for Personal Services contrary to Section 4.3 of
Budget Circular No. 2013-4 thereby rendering the transaction irregular as stated in Section
3 of COA Circular No. 2012-003 dated October 29, 2012.

We recommend that management:

a. Submit the supporting documents on the grant of CNA Incentive pursuant to the
provisions of Budget Circular No. 2013-4.

b. Ensure that the conditions/guidelines set for the grant of the CNA Incentive is
satisfied to avoid disallowance in audit.

4. Transfer of unexpended balance of the Local Calamity Fund and receipt of assistance for
the same purpose amounting to P1,181,125.00 were inappropriately recorded in the books
contrary to COA Circular No. 2012-002, thus, misstating the Liabilities accounts of the
LGU as of December 31, 2013.

We recommend that management direct the Municipal Accountant to make the

necessary correcting entries of the above transactions to fairly present the financial
statements of the LGU. Illustrative accounting entries were provided in Annex C of COA
Circular No. 2012-002 which will guide the Municipal Accountant in the proper
recording/accounting of LDRRMF.

5. Breeding stocks in the amount of P267,000.00 which remained dormant for several years
is of doubtful validity due to the failure of the municipality to properly monitor the
existence and condition of the dispersed breeding stocks/animals, maintain the required
records and prepare an inventory report thereon, contrary to Sections 114 and 124 of the
Manual on the New Government Accounting System, Volume I.

We recommend that the management:

a. Require the Municipal Accountant to maintain the Work, Other Animals and
Breeding Stocks Ledger Card (WOABSLC) as provided under Section 114 of the
NGAS Manual.

iv
 b. Require the conduct of physical inventory of the breeding stocks/animals and
recommend the participation/inclusion the Municipal Agricultural Officer as member
of the Inventory Team.

6. Financial assistance totaling P216,500.00 granted to barangays, municipalities and public

schools were directly booked up as expense contrary to Section 4(2) of PD 1445 and Section
3 of COA Circular No. 2012-01 dated June 14, 2012 which provided the
possibility/opportunity for the use of funds other than its intended/specific purpose.

a. Require the Municipal Accountant to observe proper account classification. Financial

assistance are subject to liquidation, hence should be treated/booked up as receivable and
expended only upon its proper liquidation by the implementing agency.

b. Require adjustments of the financial assistance treated as expense to its appropriate

receivable accounts and furnish this office of the copy of the JEV adjusting the same.

c. Require the Municipal Accountant to monitor/demand the liquidations by the recipient

agencies and organizations pursuant to COA Circular No. 2012-01.

d. Review all liquidation reports to ensure that funds are spent for its intended purpose only.
The rationale of the provision is to ensure that public funds will not be paid/used for
private purposes of for other purposes not within the intention of the donor.

SUMMARY OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Of the eight (8) audit recommendations embodied in the Annual Audit Report for CY
2012, two (2) were partially implemented and seven (6) were not implemented as of year-end of
CY 2013.

v
 TABLE OF CONTENTS
Page
PART I - AUDITED FINANCIAL STATEMENTS
- Audit Certificate 1-2
- Statement of Management Responsibility on the Financial Statements 3
- Consolidated Balance Sheet 4
- Consolidated Statement of Income and Expenses 5
- Consolidated Statement of Cash Flows 6
- Notes to Financial Statements 7-11

PART II - DETAILED FINDINGS AND RECOMMENDATIONS

a.)Financial and Compliance 12-24
b.)On Gender and Development
c.)Status of Issuance and Settlement of NS, ND and NC

d.)Compliance with Tax Laws

PART III - STATUS OF IMPLEMENTATION OF PRIOR YEARS’

RECOMMENDATIONS 25-29

PART IV - ANNEXES

A - Comparative Balance Sheets

A.1 - General Fund
A.2 - Special Education Fund
A.3 -
Trust Fund
B - Comparative Statement of Income and Expenses
B.1 - General Fund
B.2 - Special Education Fund
C - Comparative Statement of Cash Flows
C.1 - General Fund
C.2 - Special Education Fund
C.3 -
Trust Fund
D - Status of Appropriations
Allotments and Obligations
Current and Continuing
Appropriations
D-1 - General Fund
D-2 - Special Education Fund

Others :
 E- Procurements of Various Supplies and Materials Recorded as Outright
Expense
F- Schedule of Financial Assistance Charged to Donations

ii
PART I
 Republic of the Philippines
COMMISSION ON AUDIT
Audit Team No. 2
Audit Group-Bohol Province
Provincial Capitol Annex Building, J. A. Clarin Street, Dao District
Tagbilaran City
_________________________________________________________________________________

AUDIT CERTIFICATE

Hon. Jose Mario J. Pahang

Municipal Mayor
Municipality of Antequera
Antequera, Bohol

We have audited the accompanying Balance Sheet of the Municipal Government of

Antequera, Bohol as of December 31, 2013 and the related Statement of Income and Expenses
and Cash Flows for the year then ended. These statements are the responsibility of the
Antequera Municipal Government's 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 standards and
applicable Generally Accepted Auditing Standards (GAAS). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. Our audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our audit also includes
assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

As discussed in Part II and III of this report, the valuation of the reported Property, Plant
and Equipment totaling P48,477,276.44 as of December 31, 2013 is of doubtful validity due to
the failure of the LGU to maintain adequate records as prescribed under Sections 119 and 123 of
the NGAS Manual. Likewise, supplies and materials totaling P867,350.21 purchased during the
year were directly issued to end users and treated as outright expenses without coursing through
the inventory account, thus accuracy and correctness of Inventory and Expenses accounts are
unreliable. Further, financial assistance granted to barangays, municipalities and public schools
were directly booked up as expense instead as a Receivable. Moreover, the validity of breeding
stocks in the amount of P267,000.00 which remained dormant for several years cannot be
ascertained due to the failure of the municipality to properly monitor the existence and condition
of these assets, maintain the required records and prepare an inventory report thereon.

In our opinion, except for the effects of any adjustments which might have been made
had the above stated deficiencies been acted upon,, the financial statements referred to above
present fairly, in all material aspects, the financial position of the Municipality of Antequera,
Bohol as of December 31, 2013 and the related results of its operations and cash flows for the

1
year then ended, in conformity with applicable laws, rules and regulations and generally
accepted accounting principles applied on a consistent basis.

Our audit was conducted in accordance with generally accepted state auditing standards
and we believe that it provides reasonable basis for the results of audit.

COMMISSION ON AUDIT

By Authority of the Chairperson

MARINETTE L. TALADUA
Officer-in-Charge, Team 2

May 28, 2014

2
 Statement of Management Responsibility on the Financial Statements

The Management of the Municipal Government of Antequera, Bohol is responsible for all
information and representation contained in the Balance Sheet as of December 31, 2013 and the
related Statement of Income and Expenses and Statement of Cash Flows for the period then
ended. The financial statements have been prepared in conformity with generally accepted
accounting principles and reflect amounts that are based on best estimates and inform judgment
of management with an appropriate consideration of materiality.

In this regard, management maintains a system of accounting and reporting which

provides for the necessary internal controls to ensure that transactions are properly authorized
and recorded, assets are safeguarded against unauthorized use of disposition and liabilities
recognized.

MARIA SUSAN C. CABALTERA

Municipal Accountant

JOSE MARIO J. PAHANG

Municipal Mayor

3
 NOTES TO FINANCIAL STATEMENTS

1. General Agency Profile

1.1 On March 17, 1878, Governor General Romualdo Crespo of Spain issued a decree
officially creating the Municipality of Antequera, Bohol. The municipality, with a total
land area of 6,311 hectares is composed of twenty-one (21) barangays all located in the
interior part of Bohol Province.

1.2 The agency’s goals and objectives are to protect, govern and serve the constituents
towards national progress.

1.3 The LGU of Antequera maintained two economic enterprises, it’s Market and
Slaughterhouse and Antequera Waterworks System. Transactions are recorded in three
funds namely, General Fund, Special Education Fund and Trust Fund.

2. Basis of Financial Statement Presentation

2.1 The consolidated financial statements have been prepared in accordance with the
Generally Accepted Accounting Principles and Standards.

3. Summary of Significant Accounting Policies

3.1 The agency recorded taxes, fees, charges and other revenues using cash method of
accounting except the share from Internal Revenue Collections and Real Property Taxes
which are recorded under accrual method.

3.2 Property, Plant and Equipment are carried at historical cost, net of depreciation.
Depreciation is computed using straight line method with a residual value of 10% of its
cost.

3.3 Expenses incurred are recorded upon payment, except on year-end wherein accounts
payable are recognized.

4. Correction of Fundamental Errors

4.1 Prior Years Adjustment account is used to record the expenses related to previous years
while errors affecting the current year’s operations are recorded to current year accounts.

7
5. Cash and Other Cash Accounts

This account is broken down as follows:

2013 2012

Cash in Vault P341,469.50 P 151,308.05

Cash-Disbursing Officer 0.00 0.00
Petty Cash Fund 0.00 0.00
Payroll fund 0.00 0.00
Cash in Bank-Local Currency, Current Account 50,448,647.92 20,076,899.84
Total P50,790,117.42 P 20,228,207.89

Cash in Vault represents cash receipts during the month of December 2013 which are
deposited in January, 2014. Cash in Bank-Local Currency, Current Account represents
deposited collection of the LGU including receipts from National and Local Government
Agencies intended for projects.

6. Receivables

This account consists of:

2013 2012

Accounts Receivable P 260,725.98 P 272,647.98

Due from Officers and
Employees 2,639,545.00 2,279,545.00
RPT/SET Receivable 743,792.69 3,053,668.79
Receivables- Disallowances/Charges 250,913.31 250,913.31
Advances to Officers and Employees 35,240.00 24,662.13
Total P 3,930,216.98 P 5,881,437.21

Accounts Receivable represents unpaid balances of SEA and KKK Loans granted by the
LGU. Due from Officers & Employees consists mainly of unliquidated cash advances of former
Municipal Mayors Samuel O. Rebosura and Cecelia B. Rebosora amounting to P389,845.00 and
P1,134,700.00, respectively, and the incumbent Mayor Jose Mario J. Pahang amounting to
P1,115,000.00 which remained unliquidated at the end of the accounting period. Receivables -
Disallowances/Charges represent the cash shortage of the former Municipal Treasurer Marciano
Villocido and disallowances of Ladislao Poculan resulting from audit charges which become
final and executory. Advances to Officers and Employees Account represents balance of
unliquidated cash advances for travel.

8
7. Inventories

This account consists of:

2013 2012

Merchandise Inventory P 0.00 P 0.00

Accountable Forms Inventory 13,863.00 59,214.00
Total P 13,863.00 P 59,214.00

8. Property, Plant and Equipment

This account consists of:

Balance as of Net Addition/ Balance as of
Dec.31.2012 (Reduction) Dec.31.2013
Land and Land Improvements P1,817,463.72 190,585.00 P2,008,048.72
Office Buildings 13,575,246.75 521,589.61 14,096,836.36
School Buildings 277,318.82 40,490.00 317,808.82
Hospitals and Health Centers 2,331,498.86 925,472.49 3,256,971.35
Market and Slaughterhouses 4,929,785.25 0.00 4,929,785.25
Other Structures 6,881,744.56 221,505.55 6,660,239.01
Office Equipment 1,650,824.04 43,139.00 1,693,963.04
Furniture and Fixtures 369,636.01 0.00 369,636.01
IT Equipment and Software 2,962,180.05 163,037.50 3,125,217.55
Library Books 38,539.20 0.00 38,539.20
Communication Equipment 958,679.90 38,999.91 997,679.90
Construction and Heavy Equipment 15,493,546.91 1,319,833.14 14,176,713.77
Firefighting Equipment &Accessories 1,486,506.55 27,000.00 1,513,506.55
Medical, Dental and Laboratory
Equipment 350,080.00 350,080.00
Military and Police Equipment 5,837.25 0.00 5,837.25
Sports Equipment 44,538.63 53,718.00 98,256.63
Other Machineries and Equipment 1,811,932.54 0.00 1,811,932.54
Motor Vehicles 1,314,022.00 814,325.00 2,128,347.00
Other Property, Plant and Equipment 10,675,785.76 589,293.00 11,265,078.76
Roads, Highways and Bridges 1,944,300.88 88,617.75 2,032,918.63
Construction in Progress-Other Public
Infrastructure 335,612.40 0.00 363,947.40
Totals P69,255,080.08 1,986,263.66 P71,241,343.74
Less: Accumulated Depreciation 20,524,685.98 2,239,381.32 22,764,067.30
Total Property Plant and Equipment P48,730,394.10 P253,117.66 P48,477,276.44

Property, Plant and Equipment are recorded at cost. Construction in progress

represents the value of assets of still on going projects at the end of the accounting period.

9
9. Other Assets

This account consists of:

2013 2012

Breeding Stocks P 267,000.00 P 267,000.00

Totals P 267,000.00 P 267,000.00

Breeding Stocks represent breeding animals distributed to the 21 barangays for breeding
purposes.

10. Liabilities

This account consists of:

2013 2012
Current Liabilities:
Accounts Payable P1,293,309.10 P2,539,886.07
Due to Officers and Employees 1,389.56 10,389.56
Due to BIR 378,441.25 157,502.27
Due to GSIS 401,291.06 301,225.72
Due to PAG-IBIG 47,654.41 41,262.23
Due to PHILHEALTH 33,452.95 23,414.13
Due to NGAs 32,422,871.63 997,341.05
Due to GOCCs 148,833.43 410,033.33
Due to LGUs 3,504,046.27 2,260,082.08
Due to Other Funds 551,247.78 1,084,904.43
Guaranty Deposits Payable 69,846.75 69,846.75
Other Payables 94,689.83 207,757.32
Totals P38,956,074.02 P8,103,644.94

2013 2012

Long-Term Liabilities P10,925,103.82 P14,261,197.45

Accounts Payable account represents the obligated salary of the former Municipal
Treasurer dated July 15, 1993 which was held due to his suspension order; unclaimed loyalty
award of Mr. Fulgencio Paña dated December 29, 1999; and obligated expenses during the
month of December, 2013 which will be paid in January, 2014. Other payables represent loans
payable to private entities which will be remitted in January, 2014. Long-term liabilities account
represents loan released from Landbank for the purchase of heavy equipment amounting to
P9,045,000.00, P1,402,972.22 for road concreting and P477,131.60 for the improvement of the
waterworks system.

10
11. Deferred Credits

This account consists of:

2013 2012

Deferred RPT/SET Income P743,792.69 P3,053,668.79

Other Deferred Credits 296,833.85 296,833.85
Totals P1,040,626.54 P3,350,502.64

12. Equity

This account consists of:

  2012 2012

Government Equity, Beginning P49,450,908.17 P44,108,554.89

Add/Deduct
Retained Operating Surplus/Deficit: 1,377,146.78 421,916.80
Prior Year’s Adjustment 203,048.88 26,412.08
Other adjustments 1,525,565.63 4,894,024.40
Government Equity, End P52,556,669.46 P49,450,908.17

11
PART II
 PART II - FINDINGS AND RECOMMENDATIONS
A. FINANCIAL AND COMPLIANCE AUDIT

1. Productivity Enhancement Incentive (PEI) ranging from P12,500.00 to

P25,000.00 per personnel or a total of P1,375,000.00 was excessively granted to
each elective and permanent officials and employees of the municipality contrary
to DBM Circular No. 2013-3 thus resulting to irregular and unnecessary
expenditures.

Irregular expenditures, as defined under Section 3.1 of COA Circular No. 2012-003 dated
October 29, 2012, are those expenditures incurred without adhering to established rules,
regulations, procedural guidelines, policies and principles or practices that have gained
recognition in law. Irregular expenditures are incurred if funds are disbursed without conforming
to prescribed usages and rules of discipline. A transaction conducted in a manner that deviates or
departs from, or which does not comply with standards set is deemed irregular.

DBM Budget Circular No. 2013-3 dated November 21, 2013 provides, among others the
following:

“1.3 Section 1 of EO No. 80 directed the adoption of the Performance-Based Incentive

System (PBIS) for government personnel. Said system consists of the
following:

1.3.1 The Productivity Enhancement Incentive (PEI) in the amount of

P5,000.00 which shall continually be granted across-the-board, in
accordance with guidelines to be issued by the Department of Budget
and Management (DBM).
Xxxxxx

9.0 Grant of PEI to Employees in LGUs

LGU Employees, including those in barangay governments who are compensated

through monthly honoraria, may be granted the one-time PEI for FY 2013, at rates determined
by the respective sanggunian, depending on the LGU financial capability, and subject to the
following conditions:

9.1 The PEI shall be charged against LGU funds for FY 2013, subject to the
Personnel Services Limitation in LGU budgets pursuant to Sections 325 (a) and
33 (b) of R.A. No. 7160.”

Verification of CY 2013 payrolls revealed that the municipality paid a total of

P1,375,000.00 of Productivity Enhancement Incentive (PEI) to each elective and permanent
officials and employees, as follows:

12
 Payroll No. Payees Particulars Amount
100-13-12- Jose Mario j. Pahang, et Payment of PEI P1,125,000.00
2350 al.
100-13-12- Simon Leo C. Jadulco, -do- 250,000.00
2354 et al.
TOTAL P1,375,000.00

Employees and officials listed in the above-cited payrolls were given the amount ranging
from P12,500.00 to P25,000.00 each in December 2013. The same was recorded/charged to
Other Personnel Benefits (749) account.

The amount of PEI given to each official/employee grossly exceeded the amount
authorized in the afore-cited DBM Circular which fixed the said benefit to a maximum of
P5,000.00.

Based on the foregoing conditions, the above-cited disbursements are considered

irregular and are subject to issuance of a Notice of Disallowance.

Management comment:

The LGU officials cited item 9.1 of DBM Budget Circular No. 2013-3 which did not
specify the amount of PEI as long as the LGU observes the Personal Services Limitation.

Auditors’ rejoinder

DBM Budget Circular No. 2013-3 fixed the amount of PEI to P5,000.00 to be granted to
government employees, without any distinction as to the branch of government they are
employed. As such, the subject provision will apply to all branches of the government including
those employed in the LGUs.

Recommendation

We recommend that the concerned recipients refund the PEI in excess of P5,000.00
authorized by the DBM. Henceforth, adhere to the DBM provisions and guidelines in the
granting of PEI to avoid disallowance in audit.

2. Supplies and materials totaling P867,350.21 purchased during the year were directly
issued to end users and treated as outright expenses without coursing through the
inventory account as prescribed under Section 114 of the Manual on the New
Government Accounting System, Volume I, thus accuracy and correctness of
Inventory and Expense accounts are unreliable.

13
 Section 114 of the Manual on the New Government Accounting System (NGAS),
Volume I provides:

“Sec. 114. Perpetual Inventory Method.- Purchase of supplies and materials for
stock, regardless of whether or not they are consumed within the accounting period, shall
be recorded as inventory following the perpetual inventory method. Under the perpetual
inventory method, an inventory control account is maintained in the General Ledger on a
current basis. Xxx.”

The perpetual inventory method prescribes that purchases of supplies and materials shall
be coursed through the inventory account and issuances thereof shall be recorded as they take
place, except those purchased out of the petty cash fund which shall be for immediate use.

Under this method of accounting (for supplies and materials), a detailed inventory
records for each inventory item are maintained. The Chief Accountant shall maintain the
perpetual inventory records such as the Supplies Ledger Cards (SLC) for each commodity/stock.
The SLC shall be kept by the Accounting Office for each type of supplies and other inventory
items, to record acquisition, issuance and disposal. The physical inventory of supplies shall be
reconciled quarterly with the SLC and any discrepancies shall be immediately verified and
adjusted.

The General Services Officer or the Municipal Treasurer, as the case may be, shall
likewise maintain stock cards for supplies in their custody to account for the receipt and
disposition of the same. The balance per stock card should always reconcile with the ledger cards
of the accounting unit.

Post-audit of CY 2013 transactions revealed that purchases of office supplies,

accountable forms, animal/zoological supplies, drugs and medicines, medical, dental and
laboratory supplies and other supplies were directly issued to end users and treated as outright
expenses instead of booking them as inventory which is part of the LGU’s assets. Sample of
these transactions totaling P867,350.21 are detailed in Annex E (inclusive only of purchases
which amounted to P10,000.00 and up). These are charged to the following expense accounts, as
follow:

Office Supplies Expense P219,052.86

Accountable Forms Expense 50,984.00
Animal/ Zoological Supplies Expense 130,659.00
Drugs and Medicines Expenses 108,820.00
Medical, Dental and Laboratory Supplies 39,478.50
Expenses
Other Supplies Expenses 318,355.85
Total P867,350.21

14
 As of year-end of CY 2013, the Inventories account consisted only of Accountable Forms
Inventory in the amount of P13,863.00.

It was noted that even if the municipality regularly procured various supplies including
office supplies, animal/zoological supplies, drugs and medicines, medical, dental and laboratory
supplies and other supplies during the year, there were no inventories indicated for these
accounts in the balance sheet. The treatment of these procurements as direct expense resulted in
the misstatement of assets and expenses accounts, especially if not all of the supplies and
materials purchased in CY 2013 were used or consumed as of year-end.

Further verification revealed that the aforecited records (as prescribed under Section 114
of the NGAS Manual) supposedly kept by the Accounting Office and the General Services
Office/Municipal Treasurer’s Office were not maintained. Such disregard if not being acted upon
may also result to wastage of government resources especially if receipt and issuances thereof
are not duly accounted for. If not properly monitored, supplies and materials may be utilized for
purposes other than official.

Management comment

The concerned officials were amenable to the deficiency and committed compliance with
the implementation of the recommendation in the ensuing year.

Recommendation

We recommend that the management require the coordination between the

Municipal Accountant and the Municipal Treasurer/General Services Officer towards the
implementation of the perpetual inventory method in the recording of supplies and
materials to ensure proper accounting and promote better control in the receipt and
issuance of supplies and materials.

3. The grant of Collective Negotiation Agreement (CNA) in CY 2013 totaling P570,000.00 was sourced
from the appropriation for Personal Services contrary to Section 4.3 of Budget Circular No. 2013-4
thereby rendering the transaction irregular as stated in Section 3 of COA Circular No. 2012-003 dated
October 29, 2012.

Section 4 of Budget Circular No. 2013-4 sets the following policies in the grant of the
CNA Incentive for FY 2013:
4.1 Pre-Conditions for the Grant of the CNA Incentive
4.1.1 There should be a valid and subsisting CNA executed between the
representatives of management and the employees’ organization
accredited by the CSC as the sole and exclusive negotiating agent for
the purpose of collective negotiations with the management of an

15
 organizational unit listed in Annex “A” of PSLMC Resolution No. 01,
s. 2002, as updated.

4.1.4 Similarly, an LGU may grant the CNA Incentive only if, as of October
31, 2013, it has completed at least 70% of the targets under its
programs/activities/projects approved in the LGU budget for the
current year.

4.1.5 The NGA, SUC, GOCC, GFI, LGU or organizational unit has realized
savings from specific Maintenance and Other Operating Expenses
(MOOE) enumerated under items 4.3.1 to 4.3.6 hereof as of October
31, 2013.

4.3 Fund Sources of the CNA Incentive

The CNA Incentive for personnel in the NGAs shall be sourced solely from respective agency
savings from released allotments for MOOE for GY 2013. In GOCCs, GFIs, and LGUs, the
CNA Incentive shall be sourced solely from their respective savings from MOOE budgets for
FY 2013. Such savings are limited only to the following MOOE items:
4.3.1 Traveling Expenses;
4.3.2 Communication Expenses;
4.3.3 Repairs and Maintenance;
4.3.4 Transportation and Delivery Expenses;
4.3.5 Supplies and Materials; and
4.3.6 Utility Expenses

Post-audit of CY 2013 transactions revealed that LGU-Antequera granted a Collective

Negotiation Agreement (CNA) Incentive totaling P570,000.00. Each elective officials and
regular employees received the amount of P10,000.00, as reflected in the following payrolls, as
follow:
Account
OBR No. OBR Date Payroll No. Payees CNA Charged
12.18.201 P450,000.0 749
100-1312-1443 3 100-13-12-2349 Jose Mario J. Pahang, et al. 0
100-1312-1448 12.18.203 100-13-12-2353 Simeon Leo C. Jadulco, et al. 120,000.00 749
570,00
P 0.00

The above disbursements were recorded as Other Personnel Benefits (Account 749) per
JEV No. 1467-1. Based on the above data, the Obligation Request (OBR) numbers have already
denoted that the grant of CNA Incentive was funded from the appropriation for Personal Services
which is contrary to Section 4.3 of Budget Circular No. 2013-4 as previously stated. Section 5.3
of the same Budget Circular specifically states that “The specific expenditure item/s to be used
as fund source of the CNA Incentive shall not be augmented from other items under the Personal
Services, MOOE, or Capital Outlay.”

16
 The charging of CNA Incentive out of the appropriation for Personal Services rendered
the transactions irregular since it violates the afore-stated provisions of Budget Circular No.
2013-4.
Section 3 of COA Circular No. 2012-003 dated October 29, 2012 defines “IRREGULAR
EXPENDITURES” as “an expenditure incurred without adhering to established rules,
regulations, procedural guidelines, polices, principles or practices that have gained recognition
in laws. Irregular expenditures are incurred if funds are disbursed without conforming with
prescribed usages and rules of discipline. There is no observance of an established pattern,
course, mode of action, behavior, or conduct in the incurrence of an irregular expenditure. A
transaction conducted in a manner that deviates or departs from, or which does not comply with
standards set is deemed irregular. A transaction which fails to follow or violates appropriate
rules of procedure is, likewise, irregular.

Further, the documentary requirements for the grant of CNA Incentive were not attached
which prevented us to verify further the transaction whether the policies and conditions set for
the grant of the said benefit was met.

The grant of CNA Incentive warrants the issuance of a Notice of Disallowance if found
to be violative of the above-cited provisions of Budget Circular No. 2013-4. Accordingly,
refund of the total amount granted of P570,000.00 will be required from the persons found to be
liable in the granting of the CNA Incentive.

Management comment

The grant of CNA was provided in the 2013 Supplemental Budget No. 6 through an SB
Resolution authorizing the grant of the said benefit.

Auditors’ Rejoinder

Although the grant of CNA was supported with an appropriation, the concerned officials
authorizing the same should ensure that national laws relating to the grant of the said benefits are
being adhered to.

Recommendations

We recommend that management:

1. Submit the supporting documents on the grant of CNA Incentive pursuant to the
provisions of Budget Circular No. 2013-4.

2. Ensure that the conditions/guidelines set for the grant of the CNA Incentive is
satisfied to avoid disallowance in audit.

17
4. Transfer of unexpended balance of the Local Calamity Fund and receipt of assistance
for the same purpose amounting to P1,181,125.00 were inappropriately recorded in
the books contrary to COA Circular No. 2012-002 and misstating the Liabilities
accounts of the LGU as of December 31, 2013.

COA Circular No. 2012-002 dated September 11, 2012 provides the procedure in
recording the unexpended balance of Local Calamity Fund and receipts of fund intended for the
same purpose. Pertinent provisions follow:

5.1 LDRRMF
5.1.10 All unexpended/unobligated balance of the QRF and the DRRMF-MOOE
shall be transferred to the Special Trust Fund under the account “Trust
Liability-DRRM” (Code 438) in the Trust Fund books.
5.1.12 The account Trust Liability-DRRM in the Trust Fund books shall be used
to record transfers of the agency’s unutilized QRF and the DRRMF-
MOOE of the previous years, receipts of NDRRMF, DRRMF from other
LGUs and other sources. Subsidiary ledgers shall be maintained for
transfers of agency’s unutilized DRRMF to the special trust fund by year
of transfer, receipts of NDRRMF by transferring agency, DRRMF from
other LGUs by LGU and other sources by donor.
5.1.14 Equipment purchased out of Trust Liability-DRRM funds shall be recorded
in the Trust Fund books and shall be transferred to the General Fund
upon issuance of the equipment to the end user.

5.2 Other Funds Received for DRRM

5.2.1 The DRRM funds from the NG (Sec. 22.d of R.A. 10121) and from other
LGUs (Sec. 21 last sentence of the same law) shall be treated as special
trust liability account named “Trust Liability-DRRM” (438) in the Trust
Fund books of the receiving LGUs. Disposition of any unused balance shall
be subject to the National Disaster Risk Reduction and Management
Council (NDRRMC) guidelines.
5.2.4 Funds received from private or international donors as a result of the
request for assistance provided in Sec.2 of Rule 14 of the IRR of R.A, 10121
shall be duly receipted by the concerned LGU and treated as special trust
liability using the account “Trust Liability-DRRM” (Code 438) in the Trust
Fund books of the receiving LGUs. Utilization of the fund shall be in
accordance with the purpose of the grant. In the absence of a specific
purpose, the fund shall be used for purposes provided in the LDRRMFIP.

5.2 Other Funds Received for DRRM

6.1.1 Prior year’s balance of the LDRRMF for QRF and MOOE shall be
transferred from the General Fund to the Trust Fund books using the “Trust
Liability-DRRM” (Code 438).

18
 Financial assistance/donations amounting to P1,181,125.00 received from various
government agencies and private individuals for the victims of the 7.2-magnitude earthquake that
hit the Province of Bohol last October 15, 2013 were inappropriately recorded in the books as
follow:

General Fund Book

*Donations from Davao City Government, Province of Agusan del Norte, City
Government of Valenzuela, LGU-Kidapawan, LGU-Claver (Surigao del Norte), Land Bank of
the Phils. and Sen. Aquilino Pimentel )

Cash in Bank (111) 1,038,950.00

Due to LGUs (418) 1,038,950.00

*Donations from various private donors

Cash in Bank (111) 142,175.00

Due to LGUs (438) 142,175.00

Pursuant to the afore-stated provisions of COA Circular No. 2012-002, the donations
from the above mentioned donors should have been recorded as “Trust Liability-DRRM” in the
Trust Fund book.

Moreover, verification of the general ledger disclosed that the P88,433.68 unexpended
balance of the Calamity Fund for CY 2012 was booked under the Due from Other Funds account
in the Trust Fund which again was not the account prescribed in COA Circular No. 2012-002.
The inappropriate use of accounts misstates the liabilities account’s composition as of year-end.

Management comment

The accounting office assured to undertake the necessary adjustment of the above
mentioned accounts in the ensuing year.

Recommendation

We recommend that management direct the Municipal Accountant to make the

necessary correcting entries of the above transactions to fairly present the financial
statements of the LGU. Illustrative accounting entries were provided in Annex C of COA
Circular No. 2012-002 which will guide the Municipal Accountant in the proper
recording/accounting of LDRRMF.

19
5. Breeding stocks in the amount of P267,000.00 which remained dormant for several
years is of doubtful validity due to the failure of the municipality to properly monitor
the existence and condition of the dispersed breeding stocks/animals, maintain the
required records and prepare an inventory report thereon, contrary to Sections 114
and 124 of the Manual on the New Government Accounting System, Volume I.

Pertinent provisions of the Manual on the New Government Accounting System (NGAS),
Volume I state:

“Sec. 114. Perpetual Inventory Method.- Xxx.

The Chief Accountant shall maintain the perpetual inventory records comprising
Xxx, and Work, Other Animals and Breeding Stocks Ledger Card (WOABSLC) for each
equipment and livestock account in the inventory control account in the general ledger.

Sec. 124. Inventory of Supplies or Property.- The local chief executive shall
require the periodic physical inventory of supplies or property. Xxx.

Physical count of property, plant and equipment by type shall be made annually
and reported on the Report on the Physical Count of Property, Plant and Equipment
(RCPPE). This shall be submitted to the Auditor concerned not later than January 31 of
each year”

Our review on the LGU’s financial records disclosed the inclusion of the account
Breeding Stocks with a booked value of P267,000.00 as of year-end. This was recorded after the
municipality purchased livestock (cows) for the implementation of the animal dispersal program
in the 1990’s. For several years, said account posted the same balance hence appearing to be
dormant for quite some time.

An inquiry with the Municipal Agricultural Officer revealed that the dispersal program
which was initiated long time ago is still presently in force. The number of beneficiaries has
increased since the offsprings of the animals purchased by the LGU for breeding/reproduction
purposes were also dispersed/assigned to other recipients. On the other hand, death of dispersed
animals were requested with relief from accountability at COA.

However, documentation on the above cited circumstance was not readily available due
to the failure of the concerned LGU personnel to properly monitor the existence and
condition/status of these assets. Dormancy and non-movement of the Breeding Stocks account
despite a number of mortality and birth/reproduction (of some animals) may be attributed to the
LGU’s failure to maintain the required records as prescribed in Section 114 of the NGAS
Manual.

Further, the non-conduct of physical inventory of the breeding stocks/animals for several
years rendered difficulty in validating the reported value for this asset thereby distorting the
fairness of the financial presentation of this account as of year-end.

20
Management comment

The management has yet to conduct a physical inventory taking of the LGU-owned
breeding stocks to verify the existence and conditions of the same.

Recommendation

We recommend that the management:

a. Require the Municipal Accountant to maintain the Work, Other Animals and
Breeding Stocks Ledger Card (WOABSLC) as provided under Section 114 of
the NGAS Manual.

b. Require the conduct of physical inventory of the breeding stocks/animals and

recommend the participation/inclusion the Municipal Agricultural Officer as
member of the Inventory Team.

6. Financial assistance totaling P216,500.00 granted to barangays, municipalities and

public schools were directly booked up as expense contrary to Section 4(2) of PD 1445
and Section 3 of COA Circular No. 2012-01 dated June 14, 2012 which provided the
possibility/opportunity for the use of funds other than its intended/specific purpose.

COA Circular No. 2012-01 dated June 4, 2012 prescribes the rules and regulations in the
grant, utilization and liquidation of funds transferred to implementing agencies. The purpose of
this circular is to ensure that:

- The transfer is properly taken up in the books of both agencies;

- The transferred funds are used only for the intended purpose and that
- Proper accounting and reporting is made of the utilization of funds.

Post-audit of CY 2013 transactions disclosed that a total of P216,500.00 (Annex F) of

financial assistance were granted to the LGU’s (barangays and municipalities) and public schools
as follows:

Recipient Amount
Barangays P145,000.00
Municipalities 53,000.00
Public Schools 18,500.00
Total P216,500.00

Further verification revealed that these financial assistance were debited directly to
expense (Donations) account upon its grant to the implementing agencies instead of a debit to its
respective receivable account.

21
 Financial assistance is in the nature of fund transfers to other agencies/organizations for
implementation of a particular and specific purpose subject to accounting/liquidation, hence
should be treated as receivable of the source agency. This is to ensure that the purpose/intention
of the source/funding agency will be complied.

Among the fundamental and basic principles governing financial transactions and
operation of any government agency is Section 4(2) of PD 1445 which state as follows:

“Section 4(2) Government funds or property shall be spent solely for

public purposes.”

The rationale of booking up financial assistance as a receivable is to ensure that public

funds will not be paid/used for private purposes or for other purposes not within the intention of
the donor pursuant to Section 4(2) of PD 1445.

The rationale of booking up financial assistance to expense account resulted in the

understatement of receivables by at least P and overstatement of expenses by an amount
equivalent to the unutilized fund or the value of unimplemented projects during the year.
Moreover, treating financial assistance as outright expenses resulted in the absence of accounting
control and proper monitoring on the liquidation and the assurance that implementation was
undertaken in accordance with the intended purpose.

Further, for proper control and monitoring pursuant to afore-cited COA Circular, releases
of these funds should be taken up in the books of accounts of the source agency as receivables-
Due from LGUs for financial assistance extended to barangays and Due from NGOs/POs for
financial assistance granted to non-government and people’s organizations the same being
subject to liquidation by the implementing agency. It shall be taken up as expense only upon
liquidation by the implementing agency.

Management comment

Since financial assistance was provided in the annual budget as donation, the same
account was used by the accounting office in recording the disbursement.

Auditors’ rejoinder

Financial assistance shall be coursed through the Receivable account so that liquidation
of the same shall be effected. It may be charged against the Donation account only upon its
liquidation.

Recommendation

22
 a. Require the Municipal Accountant to observe proper account classification.
Financial assistance are subject to liquidation, hence should be
treated/booked up as receivable and expended only upon its proper
liquidation by the implementing agency.

b. Require adjustments of the financial assistance treated as expense to its

appropriate receivable accounts and furnish this office of the copy of the JEV
adjusting the same.

c. Require the Municipal Accountant to monitor/demand the liquidations by

the recipient agencies and organizations pursuant to COA Circular No. 2012-
01.

d. Review all liquidation reports to ensure that funds are spent for its intended
purpose only. The rationale of the provision is to ensure that public funds
will not be paid/used for private purposes of for other purposes not within
the intention of the donor.

B. ON GENDER AND DEVELOPMENT IMPLEMENTATION

Section B, Part 5 of the Updated Budget Operations Manual for Local Government
provides that at least 5% of the total annual appropriations must be allocated for GAD-related
activities for the programs/projects/activities of Local Government Units.

Likewise, Joint Circular No. 2004-1 of the DBM, NEDA and National Commission on
the Role of Filipino Women which amends Joint Circular 2001-1 dated August 15, 2001
provides that each local government units is mandated to allocate funds of at least 5% of the total
appropriation for the year for programs, projects and activities to promote gender-responsive
governance, protect and fulfill women’s human rights and promote women’s economic
empowerment n the GAD Plan and Budget prepared by the Chairperson of GAD Focal Point and
approved by the Head of the Agency.

For 2013, appropriation for GAD amounted to P2,008,500.00 which is deficient by

P392,000.00 than the required P2,400,500.00 ( 5% of the total appropriation of P48,010,000.00).
Of the total appropriation for GAD, the amount of P1,869,948.01 was obligated for the year.

C. ENFORCEMENT OF AUDIT SUSPENSIONS AND DISALLOWANCES

23
 There were no Notice of Suspensions, Disallowances and Charges issued to the
Municipality of Antequera in CY 2013. However, the appropriate Notices of Suspensions,
Disallowances and Charges for the deficiencies noted for CY 2013 transactions will be issued in
CY 2014.

D. COMPLIANCE WITH TAX LAWS

The National Internal Revenue Code of the Philippines or RA No. 8424 ensures the
efficiency of tax collection in all transactions by monitoring effectively, among others tax
incidence in contracts with the government and obtain vital information to discover potential
taxpayers for tax purposes.

During the year, the Municipality of Antequera complied with the provisions of the
National Revenue Code No. 2-98 dated April 17, 1998, as amended and the various issuances of
the Bureau of Internal Revenue, particularly on the withholding/deduction and remittance of the
required taxes from the claims of various suppliers/contractors and other claimants including
those from salaries and other emoluments/income of its employees.

24
PART III
 PART III

STATUS OF IMPLEMENTATION OF PRIOR YEARS’

AUDIT RECOMMENDATIONS
As of December 31, 2013

Management Status of Reason for Partial/

Audit Observation Recommendation Ref Action Implementation Non-
Implementation
1. Revenue of P2,543,610.85 1. Regularly monitor and always CY Not Implemented The
generated from the operation consider realized income 2012 municipality failed
of the LGU’s waterworks before effecting any to collect water fees
system did not sustain he obligations for waterworks on long overdue
year’s operating costs of operations to avoid incurrence accounts.
P4,042,096.60, thus resulted of loss.
in the continuous financial Also,
subsidy thereby depleting 2. Review and evaluate the expenses on major
the funds of the LGU. performance of waterworks repairs were
operation in order to identify incurred after the
factors that case the waterworks system
continuous incurrence of loss. suffered damages on
the onslaught of the
3. Require the Municipal 7.2-magnitude
Treasurer to intensify the earthquake.
collection of delinquent
accounts while at the same
time reduce expenditures
charged to these special
accounts operations.

2. The valuation of the reported 1. Prepare the necessary required CY Partially A physical count of
PPE totaling P69,255,080.08 report of actual physical 2012 Implemented the LGU’s assets
as of December 31, 2012 is inventory taking and submit a AAR was not completed
of doubtful validity due to copy to the concerned auditor. hence, the failure to
the failure of the LGU to Moreover, the report should be submit the inventory
maintain adequate records as presented in accordance with report.

25
 required under Sections 119 the recorded account
and 123 of the NGAS classification per trial
Manual, Volume I. balances, should be sub-totaled
per account classification for
easy reconciliation against the
amount per trial balances, duly
reconciled and certified correct
by concerned
officials/employees.

2. Require the Municipal

Treasurer or the General
Services Officer to maintain
Property Cards for each
category of equipment as
prescribed under Sec. 119 of
the NGAS Manual.

3. Require that
assignment/issuance of a
government property to an
accountable officer be duly
covered with an
Acknowledgement Receipt for
Equipment.

3. Cash advances for . Grant the subsequent cash CY Partially Liquidation reports
Intelligence and Confidential advances for intelligence and 2012 Implemented for cash advances
Fund of P2,279,545.00 confidential fund only after the AAR drawn for
remained unliquidated as of submission of liquidation intelligence and
year-end contrary to COA vouchers to the COA confidential
Circular No. 2003-003 dated Chairman or after the issuance purposes were
July 30, 2003, thus resulted of a credit advice from the regularly prepared
in the misstatement of COA Chairman in accordance and submitted to the
expenses and Government with COA Circular No. 2003- COA Central Office.
Equity accounts. 003. However, credit

26
 advice relating to the
2. Always comply with the said advances were
documentary requirements in not yet issued to the
the liquidation of cash LGU.
advances for intelligence and
confidential fund, as provided
for in COA Circular No. 2003-
003.

3. Must be guided by DILG

Memorandum Circular No. 99-
65 dated April 23, 1999.
4.
4. Disbursements for
1. Appropriate and utilize the CY Not Implemented MOOE’s not
maintenance and other 20% Development Fund for 2012 relating to a
operating expenses were tangible development projects AAR particular project are
inappropriately charged as provided under section 3 of still charged against
against the 20% the DILG-DBM Joint the 20%
Development Fund contrary Memorandum Circular No. Development Fund.
to the guidelines set under 2011-1 dated April 13, 2011 to
DILG-DBM Joint prioritize socio-economic and
Memorandum Circular No. environmental projects that are
2011-1 dated April 13, 2011, beneficial to the constituents.
thereby depriving the
intended beneficiaries of 2. Henceforth, stop utilizing the
socio-economic and 20% Development Fund for
environmental projects. maintenance and other
operating expenses.

5. Financial aid of P220,600.00 1. Direct the Municipal Treasurer CY Not Implemented Payment to Leagues
released to leagues were not to require or demand for the 2012 were not issued with
duly acknowledged with the issuance of an official receipt AAR the Official Receipt
issuance of an official of the government b the of the Republic of
receipt of the Republic of recipient Leagues concerned in the Philippines.
the Philippines, contrary to order to support the release of
Section 69 of the financial aid to the latter,

27
 Government Accounting and pursuant to Section 69 of the
Auditing Manual, Volume I GAAM, Volume I.
and were not supported with
fund utilization reports. 3. Require the Municipal
Accountant to record the
financial assistance not a
Donation (878) but a
Receivable or Due from NGO
account and monitor the
utilization of the funds
released to these Leagues by
requiring the recipient Leagues
concerned to submit
liquidation reports
6. The LGU’s monthly 1. Comply with Section 7 of CY Not Implemented The Budget Officer
contributions for Republic Act No. 9679 (An 2012 reasoned that since
government’s/employer’s Act Further Strengthening the AAR the municipality has
share to the Home HDMF and for Other appropriated for the
Development Mutual Fund Purposes) on the maximum HDMF-Employer’s
(HDMF) exceeded the government/employer’s share. share the amount
maximum of P100.00 per equivalent to 2% of
employee contrary to 2. Make an arrangement with the the employees’ basic
Section 7 of the Republic HDMF for the possible salary, the same
Act No. 9679 which resulted application of excess payments amount should be
in an over remittance of totaling P161,212.23 for future contributed and
P161,212.23 thus payments f the LGU’s remitted to HDMF.
unnecessarily depleting the contribution for its employees.
LGU funds.
7. One unit of ambulance 1. We recommend that the LGU CY Not Implemented Documents
donated by the PCSO was officials concerned coordinate 2012 necessary to effect
not yet recorded in the books with and request from the AAR the transfer of
of accounts of the PCSO for the copy of the Deed ownership of the
municipality thereby of Donation for the ambulance subject vehicle was
understating the Motor to facilitate the recording of not yet received by
Vehicles and Depreciation the same in the books of the LGU.
accounts. accounts and the transfer of

28
 ownership to the municipality.
Otherwise, appraisal thereof
should be made as basis in
recording the cost of vehicle in
the books of accounts.
8. Additional benefits in a form We recommend that management CY Not Implemented Said benefits were
of medical and optical stop the grant of the said benefits 2012 covered thru the
assistance totaling to its employees to avoid AAR CNA and the same
P71,220.00 were given to disallowance in audit. were appropriated in
some permanent LGU the budget.
employees, contrary to
Section 12 of RA 6758 or
the Salary Standardization
Law, thereby rendering the
disbursements irregular and
not proper as provided
under COA Circular No,
2012-003.

Prepared by: Reviewed by:

MAE L. DAÑO MARINETTE L. TALADUA

Audit Team Member Officer-in-Charge, Team 2

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PART IV - ANNEXES