EXECUTIVE SUMMARY

Highlights of Financial Operation

Total assets as of year-end was P95,940,907.84; total liabilities, P49,358,745.31; and

total government equity, P46,582,162.53. Total income generated during the year was
P53,478,968.72 while total expenditures was P45,988,883.48, leaving a balance of
P7,490,085.24.

Scope of Audit

A comprehensive audit was conducted on the accounts and operations of the Municipality
of San Miguel, Province of Zamboanga del Sur for the Calendar Year 2013. The audit included
review of operating procedures, verification, reconciliation and analysis of accounts, interview
with concerned government officials and employees, verification, reconciliation and analysis of
accounts, and such other procedures we considered necessary under the circumstances.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the Financial Statements as of December 31,
2013 which are discussed in detail in the attached report.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

1. The Municipal Treasurer’s continuously failed to deposit regularly and intact

collections amounting to P4,065,271.01 in contrary to Section 32, Volume I of COA
Circular No. 2002-003 dated June 20, 2002, otherwise known as the Manual on the
New Government Accounting System (For Local Government Units), thereby
exposing government funds to the risk of loss through misuse or theft.

Require the Municipal Treasurer to follow strictly provisions of Section 32 of NGAS.

The Municipal Mayor on the other hand (1) should regularly monitor the deposits of
these collections because from CY 2010 to CY 2012 there was already a huge amount of
undeposited collections as follows:

Account (101) CY 2010 CY 2011 CY 2012

Cash in Vault 903,776.38 2,247,960.57 1,466,216.61

and (2) ensure that the Municipal Treasurer strictly comply with the existing regulation.
Otherwise, institute disciplinary action on the continued practice of not depositing intact
all collections.
2. The Municipality failed to record in the books of accounts the cost of purchase of
Work/Breeding/Other Animals under account 281 and failed to prepare
Work/Other Animals and Breeding Stocks Property Card, yet, incurred expenses
for Agricultural Supplies under account (762) in the total amount of P62,165.00 as
of December 31, 2013, contrary to COA Circular No. 2004-008 and COA Circular
No. 2002-003, resulting to understatement of Other Asset account.

Require the Municipal Accountant to book-up the cost of work/breeding/other animals

purchased/acquired/produced. Also, the Office of the Municipal Agriculturist together
with the Office of the Municipal Treasurer and in coordination with the Office of the
Municipal Accountant should conduct an actual inventory on the status of
Work/Breeding/Other Animals. The Municipal Treasurer, on the other hand, being the
Property Officer should prepare the Property Card for Work/Other Animals and Breeding
Stocks.

3. Copy of contract and purchase order on the Rehabilitation/Renovation of Public

Market (Shopping Center) under Priority Development Assistance Fund (PDAF) of
Congressman Francis Escudero in the amount of P487,003.65 were not submitted
within five (5) working days from its execution and issuance and Inspection Report
by the agency’s authorized engineer and Certificate of Completion were not
submitted nor attached to the Disbursement Voucher in violation to COA Circular
Nos. 2009-001 and 2012-001.

Management shall (1) instruct the Municipal Treasurer to submit copies of the contracts,
Purchase Orders (POs) and its supporting documents to the Auditor within five (5)
working days from its execution and issuance of POs so that any defect and/or
deficiencies of that transaction could be pointed out immediately and gives the
management the opportunity to correct the same; and (2) instruct the Municipal Engineer
to prepare and submit an Inspection Report after completion of any infrastructure
projects.

Further, any unjustified failure of the officials and employees concerned to comply with
the requirements herein imposed shall be subject to the administrative disciplinary action
provided in (a) Section 127 of Presidential Decree No. 1445; (b) Section 55, Title I-B,
Book V of the Revised Administrative Code of 1987; and (c) Section 11 of Republic Act
No. 6713.

4. Claims for meals and snacks charged to Representation Expenses under account
783 totaling to P304,220.00 were processed even without complete supporting
documents to prove the validity, propriety and legality of the claim contrary to
Section 4 (5-6) of PD 1445.
 We advise that management shall (1) require the Office of the Municipal Treasurer to fill-
up properly the various Proofs of Canvass, the PRs and POs; (2) require also the BAC to
attach the Certificate of Posting and duly signed the various BAC Resolutions; and (3)
require the Municipal Accountant to signed the DV and look into the completeness of the
supporting documents. If the claim lacks the necessary supporting documents, it shall be
returned to the claimant for compliance before payment shall be made.

5. Unnecessary travelling expenses incurred by Sangguniang Bayan Members and

various Department Heads in the total amount of P161,800.00 which were not
relevant to their work assignments and functions, contrary to Section 4.1 of COA
Circular 2012-003, thus, draining the funds and resources of the Municipality which
could be utilized to support the developmental projects due to the constituents.

We advise the Honorable Municipal Mayor to limit the issuance of Travel Order
particularly during attendance to Trainings/Seminars to those which are related to ones’
work assignments and functions taking into consideration the austerity measures program
that the government is taking and the necessity of the training/seminar to the participants.

6. Transfer of Funds from Trust Fund (TF) and Special Education Fund (SEF) to
General Fund (GF) were made contrary to Section 4 (3) of P. D. 1445 making the
concerned officials and employees liable for illegal use of public funds.

The Municipal Officials and concerned employees should stop the practice of using Trust
Fund and Special Education Fund for the purposes other than to which these funds were
intended.

7. There was an absence of internal control on the disbursements of financial

assistance granted to individual in crisis situation charged to 5% Gender and
Development (GAD) Fund in the total amount of P30,500.00 contrary to Section 123
and Section 4 of P.D. No. 1445 which contributed to the difficulty in ascertaining the
validity and propriety of the transactions.

We recommend to the (1) Municipal Social and Welfare Development Office to require
the claimant or respondent with a certificate from the Punong Barangay that he/she is a
bonafide resident of that barangay and an indorsement letter or a recommendation letter
from the Punong Barangay that he/she is below poverty level and needs to avail financial
assistance (2) Local Chief Executive to install, implement, and monitor a sound system of
internal control in the disbursements of public funds.

8. The disbursements and utilization of the Local Disaster Risk Reduction and
Management Fund (LDRRMF) was not in accordance with the Joint Memorandum
 Circular No. 2013-1 dated March 25, 2013 of the National Disaster Risk Reduction
and Management Council, Department of Budget and Management and
Department of the Interior and Local Government in the total amount of
P281,624.01, defeating its purpose to enhance transparency and accountability in
the use of the fund.

The Municipal Budget Officer in approving Obligation Request (ObR) for obligations
charged against LDRRMF shall ensure that the same is in accordance with the guidelines
set under Paragraphs 5.1 to 5.4 of Section 5 of the Joint Memorandum Circular No. 2013-
1 dated March 25, 2013 of the National Disaster Risk Reduction and Management
Council, Department of Budget and Management and Department of the Interior and
Local Government. On the other hand, the Local Chief Executive shall approve only the
procurement within the sample lists of the Memorandum Circular No. 2012-73 of the
DILG such that the 70% of the 5% may be utilized only to procure early warning
systems, preparedness equipment and other equipage and in relation to the corresponding
activities under four aspects (a) prevention and mitigation (b) preparedness (c) response
and (d) reconstruction and rehabilitation.

9. Collections were not reported and turned over by the Collectors to the Liquidating
Officer/Municipal Treasurer as required in Section 29 of COA Circular No. 2002-
003, resulting to the understatement of income for a particular period and exposed
government funds to the risk of loss through misuse or theft.

Require the collectors to turnover their collections within the prescribed period. The
Liquidating Officer/Municipal Treasurer shall see to it that every time collections are
turned over, all accountable forms whether issued or not must be presented and accounted
for. On the other hand, the issuance of accountable forms to the collectors shall be
controlled to ensure that no accountable forms are issued when the previous ones were
not yet fully accounted for.

10. The accuracy of the Cash in Bank- Local Currency, Current Account (LCCA) for
the General Fund and Special Education Fund in the total amount of P27,351,513.30
are doubtful due to the non-preparation of bank reconciliation statements.

Reconciliation of the cash in bank account should be made pursuant to Section 3.2 of
COA Circular No. 96-011 dated October 2, 1996 to establish accurate balances of all bank
accounts. In addition, the Municipal Accountant should maintain subsidiary ledger for
each bank account for easy preparation of the monthly bank reconciliation statement.
Lastly, bank reconciliation statement should be prepared per bank account number.

11. Cash advances were not liquidated as of December 31, 2013 in violation of Section
89, PD 1445, thereby accumulating huge balance of advances to officers and
employees account of P5,939,333.35 due to non-liquidation of these cash advances.
 Require the accountable officers concerned to liquidate their cash advances so that proper
accounting could be made thereof to ensure fairness of accounts presentation in the
financial statements. The Municipal Accountant as an internal auditor should strictly
implement the rules and regulations on cash advances to avoid accumulation of huge
amount of unliquidated cash advances. Lastly, limit the granting of cash advance to those
provided for in Section 03 of COA Circular No. 97-002 dated February 10, 1997.

12. Penalties were incurred for payment of electric bill beyond its due date totaling to
P35,701.10, contrary to Section 4 of COA Circular No. 2012-003 dated October 29,
2012, thus, draining the funds and resources of the Municipality which could be
utilized to support the developmental projects due to the constituents.

Require the Municipal Treasurer to refund the amount of P35,701.10 for the penalty of
late payment. Payment for electricity and other utilities shall be given priority and shall
be made on or before the due date to avoid incurrence of unnecessary expenditures.

13. Disbursement Vouchers, Payrolls and Official Receipts including its supporting
documents were not submitted within the reglementary period in violation to COA
Circular No. 95-006 dated May 18, 1995 and Section 122 of PD 1445, thus hindered
the submission of Interim Audit Report on Local Government Units as of June 30,
2013 as required on the COA Unnumbered Memorandum dated April 29, 2013.

We recommend to the management to require the Municipal Treasurer to submit on time

the Disbursement Vouchers, Payrolls and Official Receipts including its supporting
documents to the Accounting Office. The Municipal Accountant, on the other hand,
shall also submit these reports within ten (10) days after receipt to the Office of the
Auditor for verification and post-audit. If warranted, institute suspension of payment of
their salaries until they have complied with the aforesaid requirements pursuant to
Section 122 (2) of PD. 1445.

14. Monthly pre-closing trial balance was not submitted within the required period as
required in Section 70 of the Manual on the New Government Accounting System
(Local Government Units), Volume I, resulting to the delay in the verification of the
financial statements.

Require the Municipal Treasurer to submit on time the RCI together with the
Disbursement Vouchers to the Municipal Accounting Office. The Municipal Accountant
on the other hand, upon receipt of the reports should prepare the trial balance monthly
together with the required supporting documents as provided in Section 70 of the Manual
on the New Government Accounting System (Local Government Units), Volume I, to
facilitate verification by this Office. Should there be any corrections and/or unaccounted
 items that may be noted in the process, the necessary adjustments should be effected
immediately.

15. Disbursement Vouchers were processed without the complete documents necessary
to prove the validity, propriety and legality of the claim in violation to Section 4 of
PD 1445 resulting to suspension and/or disallowance of the subject claims.

We advise the Municipal Accountant to examine the completeness of the supporting

documents for every transactions of the Municipality before approving the same. If there
are claims submitted to the Accounting Office for processing, but lacks the required
supporting documents, it shall be returned to the claimant for proper documentation. On
the other hand, the Municipal Treasurer shall also ensure that the Municipal Accountant
had already certified the DVs before making any payment pursuant to Section 4 of PD
1445.

16. Disbursement Vouchers and their supporting documents were not stamped “PAID”
in violation of COA Circular No. 92-389 dated November 03, 1992, thereby, opens
the possibility of reusing the supporting documents for another claim.

We require the Municipal Treasurer to strictly comply with the requirements under COA
Circular No. 92-389 to maintain a sound internal control in the disbursement of
government funds. The perforation of the documents shall not be limited only to the
Disbursement Voucher but should include all supporting documents to avoid their reuse.
A stamp shall be made which shall provide a space for the number of the check issued
and date of actual payment and said spaces should be properly filled up.

17. Supporting documents of the Disbursement Vouchers and Payrolls were not
properly numbered and indicated on the face of the Disbursement Vouchers
contrary to COA Circular No. 2002-003, thereby causing difficulty in identifying
and tracing the same to the respective journals and related reports and documents.

We require the Municipal Accountant to observe strictly Section 32, Volume I1 of COA
Circular No. 2002-003, particularly on the numbering of the supporting documents and
proper listing on it on the face of the Disbursement Voucher to maintain a sound internal
control in the disbursement of government funds.

18. Various expenses for Gasoline, Oil & Lubricants, Spare Parts, Repair and
Maintenance-Motor Vehicle, Agricultural Expenses, Travelling Expense, Salaries &
Wages-Casual and Subsidy for Barangay Livelihood Project totaling to
P2,084,968.27 were charged to 20% Development Fund, contrary to DILG-DBM
Joint Memorandum Circular No 2011-1, dated April 13, 2011, thus, the
constituents/recipients of the Municipality were deprived of the benefits derived
from developmental projects and programs.
 The Municipal Budget Officer shall approve the Obligation Request (ObR) in accordance
with the guidelines set under Paragraph 3.0 of DILG-DBM Joint Memorandum Circular
No. 2011-1, dated April 13, 2011. Further, we are reminding the Local Chief Executive
that utilizing such fund, whether willfully or through negligence, for any purpose beyond
those expressly prescribed by law or public policy shall be subject to the sanctions
provided under the Local Government Code and under such applicable laws.

The 20% Development Fund shall be appropriated and disbursed only for the very
purpose for which such fund was established.

Status of Implementation of Prior Year’s Audit Recommendations

Of the thirty seven (37) prior years audit recommendations issued, thirteen (13) were
unimplemented due to some difficulty in implementing during the year, twelve (12) were also
partially implemented and twelve (12) were implemented during the year.