EXECUTIVE SUMMARY

A. BACKGROUND

1. Legal Basis Executive Order 248

July 25, 1949

2. Organizational Set-up

a. Key Officials

Municipal Mayor : Hon. FredicandaDy

Municipal Vice Mayor : Hon. Ma. Cristina Vicencio

Municipal Treasurer : LilianCelajes

Municipal Accountant : Francisco Moscare

Municipal Budget Officer : TeresitaCapawing

Municipal Assesor : SozonteGlorioso

Municipal Planning and Dev’t. Coordinator : RizalinoAlaras

Municipal Engineer : Alfredo Rebadulla

Municipal Civil Registrar : NueloRebadomia

Municipal Health Officer : Ma. Sylvia Pacle

Municipal Agriculturist : Victor Tagaban

b. Personnel Complement

Permanent : 95

Elected : 12

Total Personnel Complement : 107

 B. FINANCIAL PROFILE

Financial Condition

2011 2010 Variance

Assets P 67,377,416.80 P 59,910,120.12 7,467,296.68
Liabilities 19,405,132.77 15,054,441.36 4,350,691.41
Government Equity 47,972,284.03 44,855,678.76 3,116,605.27

Financial Position

2011 2010 Variance

Income P 62,867,070.87 P 57,273,846.79 5,593,224.08
Expenses 60,745,211.60 53,442,181.12 7,303,030.48
Net Income 2,121,859.27 3,831,665.67 1,709,806.40

Cash Flows

2011 2010 Variance

Cash from Operating P 5,725,521.12 P 3,450,743.50 2,274,777.62
Activities
Cash from Investing (15,336,275.07) (4,290,500.60) (11,045,774.47)
Activities
Cash from Financing 8,984,952.01 - 8,984,952.01
Activities
Net Cash Provided (625,801.94) (839,757.10) 213,955.16
(Used In)
Cash Balance, Beg. 26,637,593.05 27,477,350.15 (839,757.10)
Cash Balance, End 26,011,791.11 26,637,593.05 (625,801.94)

C. SCOPE OF AUDIT

We conducted our audit in accordance with laws, COA and INTOSAI standards
and applicable Generally Accepted Auditing Standards. The audit included Financial and
Compliance Audit and involves examinations on a test basis evidence supporting the
amount and disclosures in the financial statements. It also included assessment of
accounting principles and significant estimates made by the management. Our audit
procedures included the conduct of inspection and review of disbursement vouchers
submitted as to legality, validity and propriety.
D. RESULTS OF AUDIT

1. Auditor’s Report on the Financial Statement

The Audit Team rendered a qualified opinion. Balance of Cash in Bank totaling to
P26,011,791.11 cannot be ascertained due to lack of supporting documents. No bank
reconciliations were made by the previous accountant. Loans Receivables – Others, Due
from LGUs, Due from Other Funds (TF) and Deferred Charges account which showed a
balance of P213,000.00, P121,373.40, P26,602.42 and P513,755.37 respectively
remained dormant for a number of years already, thus existence of which in the books
would continue to affect the true financial condition of the LGU. Cash in Vault account
balance in prior years totaling P2,165,740.45 was temporarily reclassified and booked up
as Other Receivables, affecting the true and correct balance of the financial statements.
Advances to Officers and Employees amounting to P4,317,346.80 remained unliquidated.

2. Significant Audit Findings and Recommendations

Financial and Compliance Audit

a. Collections for GF totaling P1,829,499.50, SEF for P270,881.89 and TF for

P3,760,250.00 were not deposited daily and intact, thus exposing funds from
possible loss and misappropriation contrary to certain provisions in RA 7160, PD
1445 and COA Circular 92-382.

We recommend that the Municipal Treasurer should deposit collections daily and
intact with the government depository bank. In addition, collections should not be
used to en-cash private checks. We further recommend that the Municipal
Accountant should submit to the Audit Team the complete Reports on Collections
& Deposits.

b. The Municipality did not establish Payroll Fund for the cash advances granted to
Disbursing Officer totaling to P11,133,838.68 for honoraria and wages for Job
Orders contrary to COA Circular No. 2006-001 dated November 9, 2006.

We recommend that the Municipality should establish Payroll Fund account for
the cash advances granted to the Disbursing Officer for honoraria, wages and
other personnel benefits to distinguish other cash advances granted to him for
easy liquidation and recording. We further recommend that the Municipal
Accountant should submit liquidation reports to the Audit Team.

c. Advances to Officers and Employees amounting to P4,317,346.80 remained

unliquidated as of December 31, 2011 of which some were granted to officials
and employees who still have unliquidated cash advances in the prior years. In
addition, Cash Advances of the Disbursing Officer totaling P24,132,469.45 from
 January to December remained unliquidated as of year-end in violation to certain
provisions of COA Circular 97-002 dated February 10, 1997.

We recommend that the Disbursing Officer and other concerned employees

should be required to liquidate their cash advances immediately. Moreover,
additional cash advances should not be granted to officers and employees unless
the previous cash advances given to them are first settled.

d. Some elected officials were granted cash advances not only for their traveling
expenses but also for other undertaking contrary to COA Circular 97-002 dated
February 10, 1997 which might result to possible misappropriation of funds.

We recommend that elected officials should not be given cash advances other
than for their official traveling expenses to avoid the risk of possible
misappropriation. Cash advances should be granted to the permanently appointed
Disbursing Officer. We further recommend that the officials concerned be
directed to settle their unliquidated cash advances.

e. The Revenue Collecting Officer who was not a duly designated officer was
granted cash advance in violation to Section 4.1.3 (v) of COA Circular 2009-002
and the basic internal policy for segregation of duties, thus exposing funds to
possible misappropriation.

We recommend that only duly designated Disbursing Officer be given cash

advances in accordance with Section 4.1.3 (v) of COA Circular 2009-002 dated
May 18, 2009. Moreover for a good internal control, no one should be in complete
control of two key functions in order to avoid overlapping of funds and other
possible misappropriations.

f. Advances to Officers and Employees totaling P114,020.00 were improperly

recorded in JEV as Cash-DO contrary to Section 112 of PD 1445, thereby
understating the Advances to Officers and Employees Account.

We recommend that the Municipal Accountant should appropriately record every

transaction in order to avoid misappropriation. Moreover, liquidation reports with
complete supporting documents should be submitted to the Audit Team on time.

g. The Municipality of Catubig has continuously allowed its regular employees to

receive net take home pay of below P 3,000 per month in violation to Section 41 of
RA 9336.

We recommend that the management should strictly follow the provisions of

Section 41 of RA 9336 by screening the loan application of its employees so that
their monthly net take home pay will not be reduced to an amount lower than
Three Thousand Pesos (P3,000), after all authorized deductions.
h. Deficiencies were noted in the procurements of goods and services through the
alternative modes of procurements due to failure of the management to observe
some procedures as provided in the IRR of RA 9184.

We recommend that the Municipality strictly adhere to the provisions of IRR of

RA 9184, specifically prepare and submit the Annual Procurement Plan, adopt
competitive bidding in all procurement activities, resort to alternative methods of
procurement only if the conditions set forth in RA 9184 are complied with and
payments should be made in check and paid directly to supplier. We further
recommend that the Municipal Accountant should see to it that all disbursements
are supported with complete documentations.

i. Disbursement vouchers covering the payments of repairs through Pakyaw

Contracts amounting to P 1,150,474.40 were not in accordance with RA 9184 and
GPPB Res. No. 018-2006.

We recommend that the above-mentioned provision should be strictly adhered to

promote efficiency and effectiveness for all the repairs of the Municipality.

j. Expenses totaling to P 3,198,309.87 covering the payments for goods and services
were inappropriately charged to 20% EDF in violation to DILG-DBM Joint
Memorandum Circular No. 1 s. 2011-1 dated April 13, 2011, thus defeating the
purpose for which the fund was created.

We recommend that the agency should strictly adhere to DILG-DBM Joint

Memorandum 2011-1 in order to attain socio-economic objectives where the fund
is intended for the benefits of the constituents.

k. Fuel consumption for CY 2011 amounting to P685,985.29 were not supported with
duly approved Trip Tickets. Likewise the related Monthly Report of Fuel
Consumption and Monthly Report of Official Travels were not prepared and
submitted, thus depriving the Audit Team’s timely verification and evaluation of
fuel consumed and official travels made, in violation to COA Circular No. 77-61
dated September 26, 1977.

We recommend the General Services Officer should accomplish the fuel

consumption report and prepare trip tickets for every trip of vehicle. All
requisitions must be certified by the Agency Head as to their necessity. Moreover,
copy of each document should form part of the disbursement voucher to enable the
auditor to conduct review of transaction and to be able to evaluate the fuel
consumed.

l. Delayed and incomplete submission not only of the vouchers and the monthly and
quarterly and annual reports in violation to Section 2 of PD 1445. Furthermore,
disbursement vouchers in the amount of P3,687,909.80 for GF, P15,034.04 for
SEF and P13,666.52 for TF were not submitted for audit in violation to Section
 347 of RA No 7160 and Paragraph 7 of COA Circular No. 2009-006 dated
September 15, 2009, thus disbursements could not be properly and promptly
evaluated as to its validity and legality.

We recommend that the Municipal Accountant should submit to the Audit Team
reports within ten (10) days from receipt hereof. We further recommend that the
accountable officers should prepare transmittal of documents submitted to the
Accounting Office in order to easily trace which office caused delay of
submission.

m. Expensive air fares, hotel accommodation and special hired vehicles totaling to
P172,504.52, P223,836.20 and P300,386.00 respectively were claimed by some
officials and employees in violation to Executive Order 298, dated March 23,
2004, thus overstating traveling expenses due to excessive claims.

We recommend that the agency should strictly observe the provisions mentioned in
granting cash advances and payment for official travels of officers and employees.
It should be noted that only P800/day is allowed to cover meals, hotel/lodging and
incidental expenses. We further recommend that the officers and employees should
avail themselves the regular mode of transportation and avoid claiming
reimbursement or purchase for gasoline to be used in private vehicles even during
official travels.

n. Disbursement Vouchers which were unsigned and lacking supporting documents

amounting to P29,525,800.88, P103,047.88 and P135,808.60 for GF, SEF and TF
respectively were still paid contrary to Item Nos. 5, 6 & 7, Section 4 of PD No.
1445 and COA Circular No. 97-004 dated July 1, 1997, casting doubt on the
legality and propriety of the transactions.

We recommend that all concerned officials and employees submit the required
supporting documents to avoid suspension and possible disallowance. We further
recommend to require all concerned officers and employees that all disbursements
shall bear their signatures and/or approval. For future claims, all concerned
officials and employees should process only those disbursement vouchers with
complete supporting documents and with approval of concerned officials.

o. The Municipal Accountant failed to prepare the Bank Reconciliation Statement as

required in Section 74 of PD 1445, COA Circular No. 96-011 and COA Circular
No. 97-002, thus it casted doubt on the reliability of the Cash in Bank account.

We recommend that management require the Municipal Accountant to prepare

Bank Reconciliation Statements for each account to determine the condition of the
agency’s account with those in the bank. The Accountant must see to it that bank
reconciliation statements are prepared for each account maintained at the bank as
mandated under Section 74 of PD 1445. This is to determine the condition of the
 funds in the banks and to reconcile the balances appearing in the books with the
respective bank balances by providing possible adjusting entries, if circumstances
warrant. The Municipal Treasurer and the Municipal Accountant must reconcile
their books of accounts at least quarterly to clear any reconciling items on time.

p. Loan Receivables - Others, Due from LGUs, Due from Other Funds (TF) and
Deferred Charges account which showed a balance of P213,000.00, P121,373.40
P26,602.42 and P513,755.37,respectively remained dormant for a number of years
already. Thus, existence of which in the books would continue to affect the true
financial condition of the LGU contrary to COA Resolution No. 2003-002 dated
January 30, 2003.

We recommend that management should institute appropriate measures by issuing

demand letters for the recovery/settlement of these amounts, otherwise send a
letter-request to COA Commission Proper (CP) for the write off of the accounts
after complying all the requirements prescribed by COA.

q. Cash in Vault account balance in prior years totaling P2,165,740.45was

temporarily reclassified and booked up as Other Receivables contrary to Section
69 of P.D. 1445, Section 32 & 33 of NGAS Manual for Local Government Units,
and Par. g of Art. 454 of Rules and Regulations Implementing the Local
Government Code of 1991, Section 111 & 112 of P.D. 1445, and COA Circular No.
2008-001 dated January 29, 2008thus, affecting the true and correct account
balance of the financial statements.

We recommend that management should institute appropriate measures for the

recovery/settlement of this amount by issuing a demand letter; otherwise proper
administrative and criminal action shall be instituted on the concerned officers and
employees.

r. TheReportofthe Physical Count of Property, Plant and Equipment(RPCPPE), and

the Report of the Physical Count of Inventories (RPCI)was not prepared contrary
to Section 124, Volume Iof NGAS Manual for Local Government Units due to the
failure of management tocreatetheinventorycommittee that will conduct the actual
physical countas required; Also, the failure of the Accounting Department to
maintain the Supplies Ledger Cards and Property, Plant & Equipment Ledger
Cards; as well as the failure of the Supply and Property Unitto maintain the Stock
Cards andProperty Cards, thus the accuracy/correctness and existence of
theProperty,Plantand Equipment, and Inventories accounts shown inthefinancial
statements valued at P20,942,439.00 and P101,915.32 respectively as of year-end
remained doubtful.

We recommend that the Local Chief Executive constitute a team who will conduct
the actual physical counting of the Property, Plant and Equipment and physical
count of inventories for CY 2011 onwards witnessed by COA to ensure reliable
financial statements. And that, strict adherence to the provisions of the NGAS
 Manual for Local Government Units on the preparation and submission of the
Report of the Physical Count of Property Plant and Equipment, and the Report on
the Physical Count of Inventories together with the related report such as the Waste
Materials Report (WMR), and the Inventory and Inspection Report of the
Unserviceable Properties (IIRUP) should be observed. This will facilitate prompt
detection of any missing, lost, destroyed or misappropriated items which shall be
use as a basis to record the dropping from the books. Also, this will facilitate
reconciliation of the balance of each PPE and Inventories account with the
accounting records hence the balance of Property, Plant and Equipment appearing
in the financial statements would be ascertained.

Further, we recommend that the Accounting Department shall maintain an updated

Property, Plant and Equipment Ledger Cards (PPELC) and Supply Ledger Cards
(SLC) for each type of PPE, and supplies/ inventories; the Property Cards (PC) and
the Supply Cards (SC) by the Property & Supply Unit and have it reconciled
annually for all PPE, and every semester for supplies/inventories. Any
discrepancy/ies shall immediately verify and adjusted to affect the true and correct
balances of the accounts in the financial statements.

s. The Deferred Charges and Watercrafts account were presented as Other Assets
account insteadofPrepayments, and Equipment & Machinery account respectively,
in contrary to the Prescribed Revised Philippine Government Chart of Accounts
per COA Circular No. 008-001 dated January 29, 2008 and Section 111 of P.D.
1445. Hence, the total of Other Assets account was overstated by P808,955.57;
while the Prepayments, and Equipment& Machinery account were understated by
P513,755.37 & P295,200.20 respectively.

The Municipal Accountant/Bookkeeper should be guided accordingly by the latest

issuance of the updated chart of accounts in recording financial transactions and its
presentation in the financial statements.He must make the necessary accounts’
reclassification as required in COA Circular No. 2008-001 dated January 29, 2008
which superseded the previous circulars on the revised chart of accounts, so as not
to misinform the reader and to ensure the account balances are fairly and properly
presented in the financial statement.

t. Other Deferred Credits amounting to P92,259.67 remained outstanding for years

casting doubt on the validity of the account contrary to Section 59 of P.D. 1445,
and Section 40 (2) Book VI of the 1987 Revised Administrative Code.

We recommend the Municipal Accountant to revert undocumented payables and

initiate the payment of legitimate one.
E. COMPLIANCE WITH TAX LAWS

u. A total of P955,410.21 taxes withheld from suppliers remained unremitted as of

year- end contrary to pertinent sections of Revenue Regulations No. 14-002 dated
September 9, 2002.

We recommend that the Municipal Treasurer immediately remit the unremitted

taxes withheld. The Municipal Treasurer and Accountant should deduct, withhold
and remit the corresponding internal revenue taxes as mandated by laws, rules and
regulations.

F. SETTLEMENT OF ACCOUNTS

No settlement of prior year’s disallowances

G. IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Number of Audit Recommendations 9

Implemented 0
Not Implemented 7
Partially Implemented 2