OBSERVATIONS AND RECOMMENDATIONS

Improper handling of collections

1. Due to the absence of proper planning in the preparation of annual procurement plan
(APP) as required under Section 7 of R.A. 9184 and complete disregard on the
regulations covering deposit of collections as required under Section 32 of the Manual
on the New Government Accounting System, collections of collecting officers remitted
to the Treasurer’s Office were still not deposited intact and were utilized to pay various
expenses, thus the fund was exposed to possible loss or misappropriation.

1.1 During the validation of the implementation of the previous year’s audit
recommendations pertaining to the handling of collections, we observed that the deposits
were made on the next banking day thus did not incur delays. But the collections were
not deposited intact leaving daily undeposited balance to amount as high as P200,955.43.
The dates of collections and of deposits made including the balances or undeposited
collections are shown in Appendix E.

1.2 Pursuant to Section 2(2) Article IX-D of the Constitution, the Manual on the New
Government Accounting System for LGUs prescribed under COA Circular No. 2002-003
dated June 21, 2002 was purposely crafted to design the accounting rules in the
implementation of certain provisions of Republic Act No. 7160. Stated in the Manual are
the guidelines in the receipt and disbursements including the proper accounting of all
monies accruing to the local government, whether general, special or trust fund. Section
32 of the Manual specifically provided that the Treasurer/Cashier shall deposit intact all
his collections as well as all collections turned over to him by the collectors/tellers with
the authorized depository bank daily or not later than the next banking day.
Consequently, the practice of retaining part of the collections as a cash reserve for cash
disbursements is no longer acceptable. Hence, the Local Treasurer/Cashier has to abide
and shall record all deposits made in the Cashbook-Cash in Vault.

1.3 When asked why the collections were not all deposited at one time, the Municipal
Treasurer reasoned out that there were instances requiring the payment of emergency and
unexpected expenses such as the repair and maintenance of vehicles wherein no available
supplier can convey on credit (Pls. refer to Appendix F). The requirements in this regard
of the different departments were apparently not incorporated in the agency’s APP.
Normal disbursement procedures prescribed under Sections 44-45 of the Manual were
not complied. Instead, the Municipal Treasurer resorted to utilization of the collections on
hand to pay the said expenses.

1.4 Although emergency expenses could not be avoided, it can be minimized had
their procurements during the year were properly planned. With this plan, the
procurement needs of various departments are determined beforehand, consolidated
according to their priority and necessity, and implemented following the schedules of
procurement.
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1.5 Section 7 of RA 9184 states that all procurement should be meticulously and
judiciously planned by the procuring entity. No government procurement shall be
undertaken unless it is in accordance with the approved Annual Procurement Plan of the
procuring entity.

1.6 Incurrence of expenses for the repair of garbage trucks/vehicles can be forecasted
had management maintained a record of history of repairs undertaken for each vehicle. In
cases of petty and inevitable expenses, the Municipal Treasurer may charge the expenses
from its Petty Cash Fund.

1.7 This observation was a reiteration of prior year’s observation on handling

collections and deposits. In spite of the awareness of the regulations on handling of
collections, the Municipal Treasurer opted to continue paying immediate and emergency
expenses out of the collections giving emphasis on providing immediate solutions to the
need at hand. Likewise, according to the Municipal Treasurer, various expenses were
already charged to the Petty Cash Fund but the petty cash fund could not afford to pay the
other emergency expenses.

1.8 Due to the absence of proper preparation of the annual procurement plan of the
municipality, various emergency expenses were incurred by the municipality. The
complete disregard on the regulations requiring the daily deposit of all collections to the
authorized government depository banks was not complied. The Municipal Treasurer still
failed to impose tighter measures on handling collections, thus daily collections were still
exposed to risk of misuse and misappropriation.

1.9 It is well noted that collections were recorded daily and accurately in the
cashbook as recommended previously. We commend the Municipal Treasurer’s effort on
accurately recording the collections daily on cashbook and ensuring that pre-mature
recording of collections were stopped.

1.10 We recommended that the various departments plan their procurement to be

consolidated thru its Local Planning Officer.

1.11 We also recommended that the Municipal Treasurer a) deposit intact all
collections to the authorized government depository bank daily b) refrain from
paying emergency expenses out of the collections and c) request for the increase in
the amount of Petty Cash Fund when necessary.

1.12 The Municipal Treasurer commented that they will comply with the
recommendations. In a reply letter dated February 12, 2015, the Municipal Mayor already
instructed the Municipal Treasurer to refrain from paying emergency expenses out of
collections. Instead, they will increase the Petty Cash Fund.

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 Unreliable Real Property Tax/Special Education Tax Receivable

2. Due to the absence of knowledgeable personnel to maintain the computerized records

of taxpayers, the Treasury Department has continuously not provided the certified List
of Taxpayers and the amounts due and collectible as the basis of the Municipal
Accountant in setting up the RPT/SET Receivable at the beginning of the year and the
corresponding subsidiary ledgers were not maintained in violation of the Manual on
the New Government Accounting System for Local Government Units, thus the
accuracy and validity of the RPT Receivable and SET Receivable balances as of
December 31, 2014 in the amounts of P228,009.22 and P266,299.71, respectively, could
not be ascertained rendering the balances unreliable.

2.1 In February 2014, the Municipal Accountant recorded the receivables at the
beginning of the year based on 31 December 2013 Report on Real Property Assessments
provided by the municipal assessor. No certified list of taxpayers including the amount
due and collectible for the year was provided by the Municipal Treasurer.

2.2 Real Property Tax Receivable/Special Education Tax Receivable shall be

established at the beginning of the year based on Real Property Tax Account
Registers/Taxpayers’ index card. At the beginning of the year, the Treasurer shall furnish
the Chief Accountant of a duly certified list showing the name of taxpayers and the
amount due and collectible for the year. Based on the list, the Chief Accountant shall
draw a Journal Entry Voucher (JEV) to record the debit to Real Property Tax
Receivable/Special Education Tax Receivable and credit to Deferred Real Property Tax
Income/Deferred Special Education Tax Income (Section 20 of the Manual on the New
Government Accounting System for Local Government Units).

2.3 Accordingly, no subsidiary ledgers which will identify the names of taxpayers and
the amount due and collected in support of the RPT/SET Receivable balances were
maintained in the accounting department which is not in accordance with Section 10,
Volume II of the same manual which requires the maintenance of subsidiary ledgers.

2.4 These offices do not have enough manpower to produce the required reports and
subsidiary ledgers.

2.5 The Municipal Assessor informed that an excel file of taxpayers is being
maintained in their office but the data is subject to tax revision. Due to lack of
knowledgeable person who is a computer literate in the Treasury Department, no list of
taxpayers was prepared.

2.6 It was also noted that the RPT/SET Receivable ending balances dropped from
P5,808,891.96 in CY 2013 to P494,308.93 in CY 2014. Due to the tax revision effected
in 2014 by the provincial government and settlement of taxes previously deferred by the
Sanggunian, the collections increased by fifty percent.

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 2.7 Because of the absence of subsidiary ledgers detailing the names of taxpayers,
amounts due and collected, the RPT Receivable and SET Receivable balances amounting
to P228,009.22 and P266,299.71, respectively, or a total of P494,308.93 as of December
31, 2014 could not be ascertained thus are unreliable. This observation is reiterated in
view of its non-implementation.

2.8 We recommended that management appoint support staff in the Accounting

and Treasury department who will maintain the records of taxpayers.

2.9 We also recommended that a) the Municipal Treasurer prepare the Certified
List of Taxpayers and submit it to the Accountant and b) the Municipal Accountant,
based on the list, take up in the books the RPT/SET Receivable with the
corresponding subsidiary ledgers (SL) that will monitor tax collections and
delinquencies.

Unreliable balances of Property, Plant and Equipment

3. The accuracy and valuation of property, plant and equipment (PPE) accounts with a
reported net book balance of P134,963,557.01 remained doubtful due to the absence of
personnel who will maintain and monitor the movements of PPE items in subsidiary
ledgers and property cards and non-creation of inventory team to conduct annual
physical inventory of all PPE items in violation of Sections 114, 120 and 124 of the
Manual on NGAS Volume I thus the account balances are unreliable.

3.1 As of December 31, 2014 the Property, Plant and Equipment amounting to
P134,963,557.01, net of accumulated depreciation, consists the following:
Land and Land Improvements P 17,050,871.56
Buildings 91,228,351.41
Office Equipment, Furniture and Fixtures 2,374,219.33
Machineries and Equipment 4,995,097.34
Transportation Equipment 1,368,038.75
Other Property, Plant and Equipment 11,228.62
Construction in Progress 17,935,750.00
Total PPE P134,963,557.01

3.2 Validation of the implementation of prior year’s audit recommendation revealed

that management has not yet created an inventory committee to conduct yearly physical
inventory. The Municipal Treasurer, being the Property Officer of the agency, still was
not able to maintain Property Cards, thus reconciliation with the property ledger cards
maintained in the accounting department likewise could not be done.

3.3 The local chief executive shall require periodic physical inventory of property.
Physical count of PPE by type shall be made annually and reported on the Report of the
Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to
the Auditor concerned not later than January 31 of each year (Section 124, NGAS Vol. I).

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3.4 The pertinent provisions of Sections 114 and 120 of the Manual on New
Government Accounting System (NGAS) for Local Government Units (LGUs) Volume I
provide that the Chief Accountant shall maintain the Property, Plant and Equipment
Ledger Card (PPELC) for each category of plant, property and equipment. Such ledger
cards shall contain the details of the property, plant and equipment account in the
inventory control account in the general ledger. The General Services Officer or the
Municipal Treasurer, as the case may be, shall likewise maintain property cards for
property, plant and equipment to account for the receipt and disposition of the same. The
balance per property card should always reconcile with the ledger card of the accounting
unit. They should also reconcile with other property records like Acknowledgement
Receipt for Equipment (ARE).

3.5 In the course of validation, the municipality still reflected weaknesses in internal
control on management of its properties. A copy of the Acknowledgement Receipt of
Equipment (ARE) evidencing the issuance of property to end-user was not attached in the
disbursement vouchers. Only the Inspection and Acceptance Reports were attached
showing the acceptance by the Property Officer and inspection by designated Property
Inspector. According to the Municipal Accountant, the AREs were maintained in their
office, however, the same were not presented to the audit team as of this date.

3.6 Sample inspection of the newly acquired properties revealed that tagging of
property showing the relevant information as to the date of acquisition, property number
and brief description were not conducted, thereby causing a risk of misidentification of
the property being issued and loss of asset without proper accountability.

3.7 The accounting department provided the audit team with the list of property but
the same could not be considered as reference for proper validation and physical
inventory taking because of incomplete information. The absence of property cards in the
treasury department aggravated the situation. Due to lack of manpower and inventory
committee, the management was still unable to conduct physical inventory of all PPE
maintained in their books. No report on the Physical Count of PPE reconciled with the
accounting records was submitted to the audit team, contrary to Section 124 of the
Manual on NGAS for LGUs Vol. I.

3.8 Likewise, the land account totaling P16,508,304.00 could not be ascertained as to
the ownership and encumbrance due to the absence of titles or deed of donation covering
the recorded parcels of land. The accounting records have incomplete information as to
the details of land.

3.9 The inventory list maintained by the accounting department consists of 29 parcels
of land. Inventory of evidences of ownership such as the duplicate copies of titles
obtained from the Municipal Treasurer corroborated only 17. The summary list with
cost/value of real properties owned was not maintained by the Treasury Department.

3.10 A list of the parcels of land owned by the municipality as recorded in the
Municipal Assessor’s Office was obtained. Certification from the Municipal Assessor
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revealed 132 land properties declared under the name of the Municipality out of which 96
are titled while 36 are covered only with tax declarations.

3.11 Inspection and comparison of the information gathered from the accounting and
treasury offices revealed the following:

3.11.a. Of the 17 owner’s duplicate copies of the titles, eight were included in the
inventory of land holdings maintained by the accounting department and five
were not. These are:

a) TCT # 2619-subdivided and transferred to new owners but the TCT

was not yet cancelled
b) TCT # 038-2013001644
c) TCT # 266232
d) TCT # 038-2010007175
e) TCT # 266400

3.11.b. Three titles (TCT # 204134, TCT # 204574 and TCT # 204135) were
classified under Investments account and one (TCT # 239461) was classified
under the Public Infrastructures account as per accounting’s records.

3.11.c. The 132 land properties declared under the name of the Municipality listed
in the assessor’s office could not be traced to the accounting and treasury records
owing to incomplete information or descriptions. More so, the absence of
common descriptions (e.g. land title, lot number, area, etc) in the subsidiary
ledgers for the land account precluded the determination of the actual cost and
completeness of the recorded land properties. Examples are the four parcels of
land (adjacent lot of Sibul Spring; Market Site – Calaylayan; Relocation of
squatter; and PNP Headquarters Site) totaling P6,204,139.00 which were included
in the land account but no details were provided as to the lot number, tax
declaration, title number, area and title or deed of donation in support of
ownership. These lots were recorded previously and carried in the books before
the assumption of the Municipal Accountant.

3.11.d. The lot pertaining to Market Site – Calaylayan was untitled because
according to the Municipal Accountant said lot was under court proceedings.

3.11.e. We also noted that the Municipality failed to maintain Real Property
Ledger Cards and property cards as required under Sec. 114 of the NGAS Manual
which is an effective reference in updating and reconciling respective records of
the Accountant and the Treasurer.

3.11.f. Interview with the Municipal Accountant disclosed that upon their
assumption to office, no records were turned-over to them with regards to this
account, thus their inability to prepare the complete inventory report and maintain
subsidiary records in support of the land account.
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 3.11.g. Alternative audit procedures were applied but due to time constraints and
unavailability of other records, the validity of the figures recorded in the
Accounting Department as land owned by the LGU could not be determined and
the correct amount could not be established. Summary list with costing of real
properties owned by the municipality and maintenance of property cards were big
factors in verifying the inclusion thereof of all the presented Transfer Certificate
of Titles (TCT) and tax declarations of the properties declared in the name of the
LGU. The same may provide certainty on the validity of the reported figures in
the financial statements.

3.12 Because of these deficiencies, the actual condition and existence was not
considered in determining the value of PPE, thus the account balances remained doubtful/
unreliable.

3.13 We recommended that a) the Municipal Accountant and the Municipal

Treasurer, in the absence of the General Services Office, maintain complete PPE
ledger cards and property cards, reconcile their records and effect the necessary
adjustments to fairly present the balances of the affected PPE items b) the
Municipal Treasurer and the created Inventory Committee conduct the physical
inventory of all Property, Plant and Equipment to establish their existence and
prepare and submit a report thereon to determine the accuracy and correctness of
the recorded PPE items and reconcile/investigate any discrepancy between the
inventory report and accounting records c) the Municipal Treasurer obtain copies
of the tax declarations of all properties declared in the name of the LGU, verify the
inclusion of all land in the inventory list against the tax declarations obtained and
determine whether all lands where the buildings/facilities owned by the LGU are
built are titled to the Municipality d) the Municipal Accountant to coordinate with
the Municipal Treasurer for recording the distinctiveness of each lot/land owned by
the municipal government and e) the Municipal Treasurer maintain a Summary
List with costs of all the real properties.

3.14 The Municipal Accountant commented that it was only two years that they did not
conduct physical inventory. Likewise, she emphasized the need for the Municipal
Treasurer, being the Property Officer, to prepare stock cards of all properties so that
reconciliation between the inventory per accounting record and physical inventory can be
made. The management informed that a list of properties by each department was
maintained and will be furnished to the audit team. The management commented that
they will comply with the recommendations.

Personal Services exceeded the limitation

4. Because the management overlooked its being IRA dependent and had not anticipated
the decrease of the share for CY 2012, the 45% Personal Services limitation was
exceeded in the amount of P940,356.47 in violation of Section 325(a) of the Local

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Government Code thus, the municipality deprived its constituents with the needed basic
services as mandated.

4.1 The Municipality of Abucay belongs to the third class municipality thus, its
budgetary allocation on personal services is only 45%. Our review showed that the
amount of P32,944,884.51 (including the PS for economic enterprises - Market and Sibul
in the amounts of P1,644,010.90 and P1,283,243.96, respectively) was expended for
personal services. Total income realized from regular income for 2012 amounted to
P64,616,162.63, 45% of which is P29,077,273.18. The expenses exceeded the limitation
by P940,356.47 computed as follows:

Total Personal Services P32,944,884.51

Less: PS for Market P1,644,010.90
PS for Sibul 1,283,243.96 2,927,254.86
Expenses for Personal Services 30,017,629.65
Limitation – 45% of Actual Regular
Income for 2012
(P64,616,162.63 x 45%) 29,077,273.18
Excess Amount on PS Limitation P 940,356.47

4.2 Section 325 (a) of the Local Government Code states that:

The use of provincial, city and municipal funds shall be subject to the
following limitations:

(a) The total appropriations, whether annual or supplemental, for

personal services of a local government unit for one (1) fiscal year shall
not exceed forty-five percent (45%) in the case of first to third class
provinces, cities and municipalities, and fifty-five percent (55%) in the
case of fourth class or lower, of the total annual income from regular
sources realized in the next preceding fiscal year. The appropriations for
salaries, wages, representation and transportation allowances of officials
and employees of the public utilities and economic enterprises owned,
operated, and maintained by the local government unit concerned shall
not be included in the annual budget or in the computation of the
maximum amount for personal services. The appropriations for the
personal services of such economic enterprises shall be charged to their
respective budgets.

4.3 The municipality’s share in Internal Revenue Allotment of 2012 in the amount of
P55,487,391.00 dropped by P1,667,585.00 as compared with CY 2011 IRA of
P57,154,976.00, causing the sudden decrease on the basis of PS limitation. Management
overlooked its being IRA dependent and had not anticipated the decrease in the share.
Also, as observed in the previous years, the economic enterprises (market and sibul) have
not reached their full potential of generating revenues. Thirty-nine per cent of the total
revenues were used to pay salaries and wages for these economic enterprises. By
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 exceeding its limitation on PS, the municipality deprived its constituents with the needed
basic services as mandated. The excess of P940,356.47 was applied for personal services
and not used to other beneficial projects of the municipal government for its constituents.

4.4 We recommended that management a) strengthen its collection efficiency to

increase revenues and augment the amount of PS limitation in order to cope up with
its financial requirement and b) handle the utilization of its resources diligently for
a more equitable distribution of its limited resources.

4.5 The management commented that they will comply with the recommendations
and informed that the 2015 Annual Budget no longer reflected Personal Services
exceeding the limitation.

Doubtful validity of gasoline expenses

5. Due to lack of personnel who will record and monitor gasoline consumptions,
management failed to implement the preparation of duly approved and properly
accomplished driver’s trip tickets summarized in a Monthly Report of Official Travels
as required under Section 361 of the Government Accounting and Auditing Manual
and the Manual on Fuel Consumption, thus the regularity, transparency and economy
of Gasoline, Oil and Lubricants Expenses amounting to P1,960,874.19 could not be
determined, rendering the account balance doubtful as to its validity.

5.1 Section 361 of the Government Accounting and Auditing Manual, Volume I
provides regulations on the use of government motor vehicles.

Use of government vehicles shall be properly controlled and regulated.

The use of government motor vehicles should be through properly

accomplished and duly approved driver’s trip ticket which should be
serially numbered, a summary of which shall be made at the end of the
month in a Monthly Report of Official Travels for audit purposes. xxx

Monthly Report of Fuel Consumption of government motor

transportation shall be submitted to the Auditor within the first ten
days of the succeeding month by the Chief, General Services Division
or equivalent. xxx

5.2 Control over the utilization of government vehicles and their corresponding fuel
consumption are captured in the following forms, records and reports pursuant to the
Manual on Fuel Consumption, to wit:

a) Driver’s Trip Tickets prepared in two copies, serially numbered and

duly approved by the head of the agency or duly authorized
representative.
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 b) Requisition and Issue Voucher or Equivalent served as the basis of
procuring gasoline and oil from a gasoline service station normally
supplying the agency with its fuel needs. The same shall be properly
accomplished and duly approved.
c) Daily Gas Issue Record where all properly accomplished and
approved RIVs or equivalent showing issues of gasoline to government
vehicles shall be entered. The RIVs shall be totaled daily and shall be
the basis for the preparation of the Monthly Summary of RIVs or
equivalent.
d) Summary of RIVs or Equivalent, where the daily totals of gasoline
issued entered in the Daily Gas Issue Record, shall be summarized
showing the monthly gasoline and oil consumed by the agency.
e) Monthly Report of Official Travels shall be prepared at the end of the
month, prepared by the driver concerned summarizing in
chronological order his trips for the month. For each vehicle, one
report shall be prepared monthly duly certified by the driver and
approved by the proper officer.

5.3 This is a reiteration of previous year’s audit observation. Management failed to

fully implement the preparation of duly approved and properly accomplished driver’s trip
tickets. It is noteworthy that management submitted driver’s trip tickets, but only for one
service vehicle with plate number SHA 734. All other gasoline requisitions, issuances
and payment were not supported with driver’s trip tickets, considering the municipality
has six motor vehicles such as one dump truck, one mini-jitney (Sibul Service), one jitney
jeep, two mini-dump trucks, one Nissan Sentra and three reconditioned construction
equipment which are backhoe, bulldozer and grader. The Monthly Report of Official
Travels was not submitted to determine the number of times the vehicle travelled in a
day.

5.4 Although the trip tickets for service vehicle (SHA 734) were submitted, these
were not completely accomplished to provide the following data:
a) time of departure from the place of origin and the time of arrival of the vehicle to
the place of destination
b) initial and final reading of the odometer at the start of the first and final trip
c) purpose/s of the travel
d) name/s and signatures of authorized passengers

5.5 Management used for the purchase of gasoline, oil and lubricants, a piece of paper
signed by the Municipal Treasurer or Municipal Mayor, as the case may be, addressed to
the gasoline station stating the quantity to be issued to the bearer of the request. The
system is very convenient for both the requestor and grantor of authority to purchase.

5.6 In controlling and monitoring the use of gasoline and motor vehicles, trip tickets
shall bear the complete information required in filling up trip tickets.

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5.7 There were no personnel to record and monitor gasoline consumptions, thus the
regularity, transparency and economy of Gasoline, Oil and Lubricants Expenses
amounting to P1,960,874.19 could not be determined rendering the account doubtful as to
its validity.

5.8 Moreover, the gasoline consumptions in CY 2013 amounting to P179,216.95

were charged against current year’s appropriations in violation of Sections 305, 350 and
447 of RA 7160.

5.9 Sections 305, 350 and 447 of the Local Government Code (RA 7160) state the
following:

Section 305 - No money shall be paid out of the local treasury except
in pursuance of an appropriations ordinance or law; xxx

Section 350 - Accounting for Obligations.- All lawful expenditures and

obligations incurred during a fiscal shall be taken up in the accounts
of that year.

Section 447 - Powers, duties, functions and compensation of the

Sanggunian Bayan.

Approve the annual and supplemental budgets of the municipal

government and appropriate funds for specific programs, projects,
services and activities of the municipality, or for other purposes not
contrary to law, in order to promote general welfare of the
municipality and its inhabitants. xxx

5.10 The expenditures were not recorded as Accounts Payable of CY 2013, thus the
account Gasoline, Oil and Lubricants Expenses for CY 2014 was overstated.

5.11 We recommended that management –

a) regulate and monitor strictly the use of motor vehicles and fuel consumption
by ensuring that all travels are covered by properly accomplished and duly
approved driver’s trip tickets and requisition issue slips and that all Monthly
Report of Official Travels and Reports of Fuel Consumption are submitted
to the Auditor; and

b) refrain from utilizing current year’s appropriation to pay prior year’s

expenditures without authority from the Sanggunian and record all
obligations during the fiscal year as obligations of that year.

5.12 The Municipal Mayor made instructions to all departments to strictly monitor the
use of all vehicles owned by the Municipality. The management commented that request
for purchase of gasoline will be accompanied by driver’s trip tickets and the gasoline
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 station was instructed not to supply gasoline to drivers without approved authority and
driver’s trip ticket. The Municipal Treasurer commented that drivers of garbage truck
were not knowledgeable enough to accomplish the trip tickets. To comply with the
recommendations, the management will assign the Property Officer to assume the duties
of preparation of driver’s trip tickets and Monthly Report of Fuel Consumption.

Gender issues and major final outputs not properly identified in GAD Plan

6. Due to the late creation of a technical working group and the GAD focal point which
will facilitate the development of GAD information for gender analysis and review of
sex disaggregated data, and the institutionalization of gender mainstreaming,
respectively, as required under Executive Order No. 273 mandating all government
agencies to incorporate GAD concerns in their planning, programming and budgeting
processes, gender issues and major final outputs were not properly identified resulting
in programs, projects and activities being implemented which are unfocussed to
management’s annual thrust and ultimately gender mainstreaming not accomplished.
Thus, potentials of women as well as men were not tapped depriving the community of
the local development that could have been derived thereto.

6.1 Executive Order No. 273 approved and adopted the Philippine Plan for Gender
Responsive Development (1995-2025), the purpose of which is to address and provide
direction for mainstreaming gender concerns in development. Henceforth, all government
agencies, including the local government units are directed to take appropriate steps to
ensure the full implementation of the policies/strategies and programs/projects outlined in
the 1995-2025 plan. Agencies are to establish or include as part of their overall
management system Gender and Development (GAD) efforts in the government. This is
accomplished by incorporating GAD concerns, as spelled out in the plan, in their
formulation, assessment and updating of their annual agency plans. Also, preparation and
updating of data/information as inputs to the plans must be made. Periodic monitoring
and assessment of their performance relative to key results desired/targeted for GAD
concerns must be made. In order to accomplish these tasks, a group of people called
GAD Focal Point composed of a Chairman and members from key offices and gender-
aware group must be created to facilitate the institutionalization of gender mainstreaming
within the agency (Joint Circular No. 2004-1 of DBM, NEDA and NCRFW and Joint
Circular No. 2013-01 of PCW, NEDA and DBM).

6.2 Management’s primary goals and objectives for CY 2014 are the following:

 Increase its per capita income by a stated realistic percentage;

 Provision of employment opportunities to the poor/indigent residents;
 Accessibility to all basic needs and services;
 Enhanced delivery of health care services; and
 Increase agricultural productivity.

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6.3 To accomplish the above enumerated goals and objectives, management
streamlined the following programs in its annual investment plan, which are:

GAD PPAs Appropriation Expended

Association of Female in Abucay P 30,000.00 P -
Senior Citizens 200,000.00 139,300.00
Persons with Disability 100,000.00 62,880.00
KALIPI 50,000.00 7,500.00
Children’s Protections 350,000.00 110,021.50
4P’s (Pantawid Pamilya) 100,000.00 10,000.00
Cooperatives 100,000.00 -
Aid to Indigents 300,000.00 261,400.00
Nutrition Program 200,000.00 60,841.00
PhilHealth Contribution 240,000.00 240,000.00
Medicines, Medical, Dental and
Laboratory Supplies 2,200,000.00 1,999,697.95
Maintenance of Peace and Order 1,500,000.00 551,670.69
Daycare Services 200,000.00 138,414.88
Educational Assistance 500,000.00 418,000.00
Skills Training/Livelihood 300,000.00 149,725.00
Donations 600,000.00 949,160.00
Agricultural Services 481,000.00 -
Total P7,451,000.00 P5,098,611.02

6.4 It was noted that the GAD activity of giving financial assistance and medicines
during calamities were streamlined in other various programs such as Disaster Risk
Reduction Management Plan, Aid to Persons with Disabilities-Minors/children and
Donation/Burial Assistance to Senior Citizens.

6.5 In addition to the locally funded GAD activities, management received funds for
supplemental feeding in the amount of P800,008.00. Summarizing the actual GAD
related activities undertaken by management therefore are distribution of medicines,
provision of medical and dental laboratory supplies, AICS, distribution of relief goods to
calamity stricken areas, scholarships, nutritional programs including the supplemental
feeding program downloaded by DSWD Regional Office, and other community services
such as scholarship grants, PhilHealth, daycare services and maintenance of peace and
order.

6.6 Totalling the various planned activities actually undertaken by management

which amounted to P5,098,611.02, it can be seen that more than 5% of the total
appropriations for CY 2014 (P79,468,082.00 x 5% = P3,973,404.10) were allotted for
GAD activities. To verify the responsiveness of the GAD programs relative to gender
issues and objectives identified by management, a copy of the approved annual GAD
plan for CY 2014 was requested from the GAD Focal Point (DSWD Head). However, no
GAD plan was submitted. Query as to the technical working group and GAD focal point
revealed their non-existence. More so, employees were not required to undertake
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 orientations and capacity development on GAD including GAD-related laws and
commitments. GAD information such as gender statistics and sex-disaggregated data
that have been systematically produced or gathered as inputs for planning, budgeting,
programming and policy formulation was not developed or maintained.

6.7 The absence of a GAD plan detailing the identified gender issues and strategies to
address them limited the evaluation of the gender responsiveness of the GAD activities
undertaken by management.

6.8 The municipality furnished the audit team with Executive Order No. 17 s. 2014
dated December 11, 2014 creating the GAD Focal Point System (GFPS), Executive
Committee (Execom), Technical Working Group and/or Secretariat. Due to the late
creation of the technical working group and GAD focal point including the absence of
GAD related information and non-training of employees, gender analysis was not
accomplished. Consequently, gender gaps/issues were not identified and analyzed and
major outputs/objectives were also not identified. Program/projects/activities planned
initially were not geared towards identified gender issues based on developed gender
information. Thus, potentials of women as well as men were not tapped as intended by
Executive Order No. 273 and related regulations depriving the community of the local
development that could have been derived thereto.

6.9 We recommended that the technical working committee and focal point
a) catalyze, coordinate, provide directions and monitor the programs/projects on
gender and development concerns within the agency and its clientele b) develop or
gather GAD information such as gender statistics and sex-disaggregated data to
serve as inputs for planning, budgeting, programming and policy formulation and
c) formulate a plan or program specifically addressing gender gaps/issues working
toward the targeted outputs.

6.10 We also recommended that management require the employees to undertake

orientations and capacity development on GAD including GAD-related laws and
commitments.

6.11 The management commented that they will comply with the recommendations.

Lump sum appropriation used for the rehabilitation of local roads and bridges

7. Due to the failure of the Local Development Council to provide list of projects in the
Annual Investment Program authorized by the Sanggunian, the lump sum
appropriation of P600,000.00 was utilized for the rehabilitation of local roads and
bridges without specifying the project location and cost for each project in violation of
Section 22(c ) of RA 7160 thus, resulting in unauthorized contracts covering each
specific project.

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7.1 Section 22(c) of Republic Act No. 7160 states that unless provided in the Code,
no contract may be entered into by the Local Chief Executive in behalf of the local
government unit without prior authorization by the Sanggunian concerned. Section 306
defines the authorization through the appropriation ordinance made by Sanggunian
directing the payment of goods, and services from the local government funds under
specified conditions or for specific purposes (underscore provided). Section 346 of the
same Act provides that disbursements shall be made in accordance with the ordinance
authorizing the annual or supplemental appropriations without prior approval of the
Sanggunian concerned. The stipulations are not meant to contradict and create confusion
among the implementers, rather to be implemented in harmony with each other. Hence, it
can be concluded that the absence of specific conditions, such as the amount appropriated
for each project, in this case, in the appropriation ordinance, likewise lacked the authority
inherent therein.

7.2 COA Memorandum No. 2010-014 dated April 22, 2012 clarified that the use of
lump sum appropriation shall include a list of projects, location and amount. It was
reiterated under No. 2 Annex B of COA Circular No. 2012-003 dated December 29,
2012. This was based on the Supreme Court decision on the case of Hon. Gabriel Luis
Quisumbing, et al. vs. Hon. Gwendolyn F. Garcia (Cebu) and Hon. Delfin P. Aguilar
(COA), under G.R. No. 175527 dated December 8, 2008.

7.3 Below are management’s investment programs and their corresponding

appropriations under its 20% Development Fund as per approved Annual Investment
Program. It can be seen that a lump sum appropriation in the amount of P600,000.00 was
allocated for the rehabilitation of roads and bridges which was authorized by the
Sanggunian Bayan.

Programs/Projects/Activities Appropriations
Economic Development
1. Rehabilitation of Roads & Bridges P 600,000.00
2. Rehabilitation of Parks & Plazas 300,000.00
3. Construction of Arcade at Mega Market 6,139,016.40
4. Debt Servicing 4,000,000.00
Sub-total 11,039,016.40
Environmental Management
MRF (Construction of building at dumpsite-
Capitangan) 2,500,000.00
Grand Total P13,539,016.40

7.4 The Municipal Accountant explained that the 20% Development Fund Budget was
prepared and submitted before the Local Development Council meetings were held, thus
the lump sum appropriation for rehabilitation of local roads and bridges were prepared.

7.5 The road projects undertaken by management charged against the lump sum
appropriation of P600,000.00 were the following:

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 Projects Amount
Rehabilitation of fishport – Barangay Wawa P 99,999.78
Rehabilitation of Roads and Bridges
Barangay Salian 49,260.00
Barangay Mabatang 71,922.20
Barangay Laon 49,811.84
Barangay Gabon 49,771.00
Barangay Calaylayan 49,781.50
Barangay Omboy 49,955.38
Total P420,501.70

7.6 The use of the lump-sum appropriation and the contract entered into by the Local
Chief Executive in behalf of the local government unit has no prior authorization by the
Sanggunian.

7.7 To correct the deficiencies, the contracts were not ratified by the Sanggunian
pursuant to Article 1317 of the Civil Code. It states that no one may enter into contract in
the name of another without being authorized by the latter, or unless he has by law a right
to represent him. A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf
it has been executed, before it is revoked by the other contracting party. Article 1392 of
the Civil Code states that ratification extinguishes the action to annul a voidable contract.

7.8 Due to the failure of the Local Development Council to provide list of projects in
the Annual Investment Program authorized by the Sanggunian, the lump sum
appropriation was utilized in the absence of authority of the Sangunian thus, rendered the
transactions unauthorized.

7.9 We recommended that the Local Development Council submit the list of
specific projects with the corresponding amounts that were contemplated under the
lump sum appropriations for approval of the Sanggunian.

7.10 We also recommended that the Sanggunian a) stop approving lump sum
appropriations and b) ratify the contracts already charged against the lump sum
appropriations.

7.11 In response to the observations, the Municipal Budget commented that they will
comply with the recommendations.

Non preparation of Solid Waste Management Plan

8. Because management overlooked the requirement of law, its 10-year solid waste
management plan was not prepared pursuant to Republic Act No. 9003, otherwise

34
known as the Ecological Solid Waste Management Act of 2000 thus, the objectives
provided for by the Act may not be achieved.

8.1 Section 16 of Republic Act No. 9003 states that a municipality, through its local
solid waste management board shall prepare a 10-year solid waste management plan that
shall be for the re-use, recycling and composting of wastes generated in its jurisdiction.
Further, the plan shall ensure the efficient management of the solid wastes generated.
Primary emphasis on implementation of all feasible re-use, recycling, and composting
programs shall be made. The amount of landfill and transformation capacity that will be
needed for solid waste which cannot be re-used, recycled, or composted shall be
identified. Likewise, the plan shall contain the following components as provided under
Section 17 of the Act, which are:

a) Municipal profile indicating component barangays, estimated population

including projection for the next 10 years, map of residential, commercial and
industrial centers, solid waste generation by source, and inventory of existing
waste disposal facilities;
b) Waste characterization identified by volume, percentage weight, material
type, and others;
c) Collection and transfer which includes the specific strategies and activities
undertaken by the barangays;
d) The methods and facilities required to process the solid waste including the
treatment facilities;
e) The source reduction component showing the methods by which the LGU
reduces the solid waste disposed through re-use, recycling, composting and
other recovery activities;
f) Recycling and composting, solid waste facility capacity and final disposal;
g) Education and public information;
h) Special wastes, resource requirements, privatization of solid waste
management projects; and
i) Incentive programs to encourage participation of concerned sectors.

8.2 Prohibited acts are likewise enumerated under Chapter VI of the Act, including
the fines and penalties corresponding thereto.

8.3 One of the key legal provisions of the Ecological Solid Waste Management
Section Act is the presence of the prescribed disposal facility that services the LGU.
Section 37 prohibits the use of open dump site. On the other hand, Section 41 provides
the criteria for the establishment of a sanitary landfill.

8.4 Presently, the sanitary landfill maintained by the LGU is an open dumpsite.
Maintenance of sanitary landfill pertains to clearing the municipal dumpsite wherein all
debris and residues were pushed to the rear portion of the dumping area. More so, the
refuse were merely compacted and covered with earth to form an effective seal.

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 8.5 For calendar year 2014, management has set aside P2,500,000.00 specifically for
the construction of materials recovery facility and concreting of road at the Municipal
Landfill located at Barangay Capitangan. During the year, the concreting of road at
Municipal Landfill was completed while the construction of the material recovery facility
is currently on-going and expected to be completed on February 16, 2015 as per Notice to
Proceed dated October 29, 2014.

8.6 Management overlooked the requirement of law on ensuring proper waste

generation, availability of on-site storage, efficient waste collection and segregation,
disposal and recycling, including requirements on maintenance of a sanitary landfill.

8.7 The Act establishes the adoption of a systematic, comprehensive and ecological
solid waste management program which shall, among other objectives, ensure the
protection of public health and environment, set guidelines and targets for solid waste
avoidance and volume reduction through source reduction and waste minimization
measures and ensure proper segregation, collection, transport, storage, treatment and
disposal of solid waste through the formulation and adoption of the best environmental
practices in ecological waste management.

8.8 Management reorganized its Solid Waste Management Board on July 10, 2014 to
perform the roles and responsibilities enumerated above in compliance with the prior
year’s audit recommendation. However, the absence of the 10-year plan containing all the
components done by local solid waste management board limited management’s
capability to implement various integrated solid waste management projects and
strategies together with its component barangays considering their very limited resources.
Thus, the objectives of R.A 9003 are far from getting accomplished.

8.9 We recommended that the local solid waste management board prepare the
10-year plan in accordance with R.A. 9003 and see to it that such plan works
towards the Act’s objectives.

Non submission of Purchase Orders and Contracts within the prescribed period

9. Due to the agency’s disregard on rules and regulations, copies of contracts and
purchase orders (POs) with the supporting documents were not submitted to the
Auditor within five working days upon execution and issuance, respectively, in
violation of COA Circular No. 2009-001 dated February 12, 2009, thus causing delays
in the auditorial and/or technical review of such contracts/POs.

9.1 Copies of perfected contracts and purchase orders together with the supporting
documents were not submitted to the Auditor for review within five working days upon
execution or issuance, respectively, together with the supporting documents.

9.2 COA Circular No. 2009-001 dated February 12, 2009 was issued to restate the
amendment of COA Circular No. 87-278 and COA Memorandum No. 2005-027
36
(Submission of copy of government contracts, purchase orders and their supporting
documents to the Commission on Audit).

9.3 Sections 3.1.1, 3.1.2 and 3.2.1 provide the following:

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 and controlled
corporations and their subsidiaries, a copy of said contract and each
of all the documents forming part thereof by reference or
incorporation shall be furnished to the Auditor of the agency
concerned.xxx

Section 3.1.2. The copies of documents required to be submitted shall

include but not limited to the following:

a) Invitation to Apply for Eligibility and to Bid;

b) Letter of Intent;
c) Eligibility Documents and Eligibility Data Sheet;
d) Eligibility Requirements;
e) Results of Eligibility Check/Screening;
f) Bidding Documents (Sec. 17.1, IRR-A, RA 9184);
g) Minutes of Pre-bid Conference, if applicable;
h) Agenda and/or Supplemental Bid Bulletins, if any;
i) Bidders Technical and Financial Proposals;
j) Minutes of Bid Opening;
k) Abstract of Bids;
l) Post Qualification Report of Technical Working Group;
m) BAC Resolution declaring winning bidder;
n) Notice of Post Qualification;
o) BAC Resolution recommending approval;
p) Notice of Award;
q) Contract Agreement;
r) Performance Security;
s) Program of Work and Detailed Estimates;
t) Certificate of Availability of Funds, Obligation Request;
u) Notice to Proceed; and
v) Such other documents peculiar to the contract and/or to the
mode of procurement and considered necessary in the
auditorial review and in the technical evaluation thereof.

Section 3.2.1. 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. Within the same period, the Auditor shall review and point
out to management defects and/or deficiencies, if any, xxx
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 9.4 Agency’s disregard of the above regulations hampered the timely review of the
Auditor of the perfected contracts in accordance with the existing rules and regulations
within a period ranging from five to 20 working days from receipt thereof, depending on
the complexity of the contract as well as their technical review by the Technical Audit
Specialist (TAS). Consequently, deficiencies therein could not be determined/evaluated
for subsequent communication to management for their appropriate action.

9.5 Section 4.1 of the same circular specifies the penalty clause which states that:

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.

9.6 Section 4.2 of the same circular likewise specified that continuous failure by
management to comply with the required submission, transactions covered by the
unsubmitted documents will be suspended in audit and the penalty prescribed by law
under 4.1 shall be enforced.

9.7 We recommended that the BAC and/or the implementing departments

furnish the Auditor’s Office with copies of approved contracts and purchase orders
within five days upon execution or issuance, respectively, to enable the timely review
and inspection thereof and to avoid audit suspension and penalty prescribed by the
circular.

Compliance with Tax Laws

10. Income tax on compensation of personnel, creditable income tax (expanded) and value
added tax from various suppliers amounting to P4,445,794.35 were withheld and the
amount of P4,383,715.58 were remitted to the Bureau of Internal Revenue in
compliance with Revenue Memorandum Circular No. 23-2007 dated March 23, 2007
and BIR Tax Revenue Regulation No. 10-2008 dated July 8, 2008.

10.1 The schedule of taxes withheld and remitted is as follows:

Due to Due to
Taxes Taxes
Month BIR, Total BIR,
Withheld Remitted
beginning Ending
January 27,236.72 164,245.75 191,482.47 190,297.06 1,185.41
February 1,185.41 267,142.66 268,328.07 267,142.65 1,185.42
March 1,185.42 275,444.25 276,629.67 276,321.05 308.62
April 308.62 269,478.34 269,786.96 269,786.96 -
May - 229,857.14 229,857.14 229,857.14 -
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 June - 429,956.53 429,956.53 428,549.85 1,406.68
July 1,406.68 309,817.22 311,223.90 309,004.96 2,218.94
August 2,218.94 281,335.29 283,554.23 283,321.45 232.78
September 232.78 588,131.67 588,364.45 588,131.67 232.78
October 232.78 717,251.36 717,484.14 717,321.53 162.61
November 162.61 375,405.66 375,568.27 375,568.27 -
December - 537,728.48 537,728.48 448,412.99 89,315.49
Total 4,445,794.35 4,383,715.58 89,315.49

10.2 Income tax on compensation of personnel, creditable income tax (expanded) and
value added tax from various suppliers amounting to P4,445,794.35 were withheld and
the amount of P4,383,715.58 were remitted to the Bureau of Internal Revenue in
compliance with Revenue Memorandum Circular No. 23-2007 dated March 23, 2007 and
BIR Tax Revenue Regulation No. 10-2008 dated July 8, 2008.

10.3 We commended the management’s effort to withhold and remit taxes in

accordance with the regulations issued by the BIR.

Enforcement of settlement of audit suspensions, disallowances and charges

11. Statement of Audit Suspensions, Disallowances and Charges reflected P0.00 balances
as of December 31, 2014.

11.1 Section 7.1.1 of the 2009 Revised Rules of Procedures of Commission on Audit
provides that the head of the agency is primarily responsible for all government funds and
property pertaining to the agency and ensure that required financial and other reports and
statements are submitted by the concerned agency officials in such form and within the
period prescribed by the Commission and that all requirements of transactions be
complied with to avoid audit suspensions, disallowances and charges.

11.2 During the year, notice of charge amounted to P11,924.22. Full settlement was
made, hence there was no balance at the end of the year. The table below shows the total
suspensions, disallowances and charges including the settlements thereto for calendar
year 2014.

Beginning This period Settlement Ending

Balance (January 1 to this period Balance (As
(As of December (January 1 to of
December 31, 2014) December 31, December
31, 2013) 2014) 31, 2014)
Notice of Suspension 0.00 0.00 0.00 0.00
Notice of Disallowance 0.00 0.00 0.00 0.00
Notice of Charge 0.00 11,924.22 11,924.22 0.00
Total 0.00 11,924.22 11,924.22 0.00

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11.3 We commended the auditee for having complied with the above stated
provisions.

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