EXECUTIVE SUMMARY

INTRODUCTION
Prior to its proclamation as a province on J anuary 5, 1968, Agusan del Norte
formed part of the province of Agusan del Sur. By virtue of Republic Act No. 4979,
Agusan was subdivided into what are now Provinces of Agusan del Norte and Agusan del
Sur.

Pursuant to Republic Act No. 7160, otherwise known as the Local Government
Code of 1991, the Province, like any other local government units, is mandated to deliver
efficient and effective services to its constituents with the aim of enhancing socio-
economic growth in line with the national government’s reconstruction and social
transformation.

To pursue its mandate, the Agency handles three Funds, General Fund, Trust Fund
and Special Education Fund. The sources of the said funds are from the Internal Revenue
Allotment and Collections from real property taxes, business permits and licenses and
miscellaneous fees.

For Calendar Year 2012, the Province total revenue amounted to P568,913,695.04
which includes the internal revenue allotment of P497,149,574.00. Out of this, a total of
P421,651,425.03 was incurred for expenditures.

Total assets, liabilities and equity as of December 31, 2012 were
P1,157,120,926.18, P213,765,852.49, and P943,355,073.69, respectively.

SCOPE OF AUDIT

A financial and compliance and value for money audits were conducted on the
accounts and operations of the Province of Agusan del Norte for calendar year 2012.

The audit included verification of the financial statements as to whether they are
free of a material misstatement/s and fairly presented in accordance with the generally
accepted auditing standards and accounting principles. Transactions were reviewed to
determine whether expenditures were incurred in compliance with existing laws, rules
and regulations. Interviews with the provincial officials and employees and analysis of
accounts were also included and other procedures considered necessary.

STATE AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Province of Agusan del Norte.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

FINANCIAL AND COMPLIANCE

1. Cash in bank balance as of December 31, 2012, totaling P 328,766,656.19 is of
doubtful validity due to non-preparation of updated bank reconciliation
statements, contrary to Section 3.2 of Commission on Audit Circular (COA)
No. 96-011.

Require the Provincial Accountant to submit immediately and regularly the
monthly bank reconciliation statements of all cash in bank accounts to establish
the accuracy and reliability of these accounts.

2. Stale checks amounting to P151,137.05 remained unadjusted in the books
resulting in an understatement of the Cash in Bank – Local Currency,
Current Account as well as the Payable Accounts by the same amount as of
December 31, 2012.

Require the Office of the Accountant as well as the Office of the Treasurer to
adhere strictly to the provisions of Section 59 of the New Government Accounting
System (NGAS) Manual Volume I.

3. Reconciling items pertaining to prior years still reflected in the Bank
Reconciliation Statements as of December 31, 2012 contrary to Commission
on Audit Circular No. 96-011 dated October 2, 1996.

Require the Office of the Accountant to prepare necessary adjustments on the
above stated reconciling items in accordance with Commission on Audit Circular
No. 96-011 dated October 2, 1996 and in order that the Cash in Bank balance shall
be accurate.

4. The Province failed to enforce full liquidation of prior year’s cash advances
of its officials and employees in violation of Commission on Audit (COA)
Circular No. 97-002 and Section 2 of Presidential Decree (P.D.) 1445, thereby
exposing the funds to possible misuse.

Send final demand to all concerned officials and employees to settle and liquidate
their outstanding cash advances as of December 31, 2012 as soon as possible.
Failure to liquidate outstanding cash advances shall constitute cause for the
withholding of salary and filing of malversation charges under Article 217 or 218
of the Revised Penal Code or Criminal Prosecution under Section 2 of the PD
1445.

5. The honoraria for various school teachers pertaining to CY 2011 totaling
P905,612.02 were charged against the current appropriations, in violation to
Section 350 of RA 7160, thereby depleting funds for current year operations
and misstating total expenditures reflected in the financial statements.

Adhere to the provisions set forth in Section 350 of RA 7160 which requires for
the taking up of expenditures and obligations on the year they were incurred.
Expenditures of the Province should be properly programmed such that budgets
could appropriately cover total operational requirements for the whole year.
6. Payment for expenditures for Trust Fund were debited to Due to Other
NGAs instead of Construction in Progress account pursuant to Sections 97
and 104 of Volume I of the New Government Accounting System (NGAS)
Manual for LGUs.

Instruct the Accounting Office to adhere to the provisions of the New
Government Accounting System Manual in the recording of transactions and
prepare necessary adjustments.
7. Advances to Contractors account in the amount of P11.3M representing cost
of heavy equipment purchased, were not reclassified to Property, Plant and
Equipment account as of December 31, 2012, contrary to Section 50 of the
New Government Accounting System (NGAS) Manual Volume I.

Make the necessary adjustments to recognize and classify to Property, Plant and
Equipment account the balance of Advances to Contractors pursuant to Section 50
of the New Government Accounting System. Further, also effect the recognition
of the appropriate accumulated depreciation and depreciation expenses.
8. The Due to LGUs account balance as of December 31, 2012 included the total
amount of P9,471,157.02 which pertains to other national offices or sectors,
contrary to the prescribed description as directed by Section 154 of NGAS
Manual, Volume III.

Make the necessary adjustments to reclassify payables to DOH and PCSO or Due
to NGAs and GOCCs, respectively to present a more reliable/accurate financial
statements.
9. Weak internal controls on the management of cash, cash items, and
accountable forms expose collections and the like to possible loss, theft, and
misappropriation.

Observe the provisions set forth in Sections 101 and 111 of PD 1445, as well as
Treasury Circular No. 02-2009.
Ensure that sound controls are placed in the management of cash and cash items,
like the maintenance of subsidiary ledgers for each collecting officer, the presence
of safety vaults for cash safekeeping, the maintenance of permanent record books
of the collecting officers for accountable forms, and the protection of collection
offices from intrusion by unauthorized persons.
Ensure that employees handling cash are adequately bonded, application of which
is based on collections for the last six months prior to the application/renewal of
bond.
10. The 20% Development Fund was not fully utilized for desirable socio-
economic development and environmental outcomes since ineligible expenses
totaling P2,074,616.15 were charged to said fund during the year, contrary to
DILG-DBM Joint Memorandum Circular No. 2011-1.
Adhere strictly to the amended guideline, DILG and DBM J oint Memorandum
Circular No. 2011-1 in the formulation of 20% Development Fund Plan for
implementation in the ensuing year in order to fully maximize appropriations for
the 20% Development Fund. Payment of wages to job order employees and the
other identified inappropriate charges to this fund during the year should be
charged against the regular appropriations for General Fund.
Procurement
11. The Agency failed to comply with the posting requirements on the
procurement of infrastructure projects pursuant to Sections 21.2.1.b and
37.1.6 of the Revised Implementing Rules and Regulations (IRR) of Republic
Act 9184.

Post the Invitation to Bid and Notice of Awards in the PhilGEPS website to
comply with the provisions set forth in Sec. 21.2.1 of the IRR of RA 9184.

12. Procurement of supply and material with a gross amount of P14.45M or 84%
of the high-value population tested in a total amount of P17.26M, did not tally
with the Project Procurement Management Plan (PPMP) and with the budget
of offices, in contradiction to Section 7.2 of the revised IRR of R.A. 9184.
Strictly adhere to Section 7.2 of the Implementing Rules and Regulations of R.A.
9184 of the agency’s procurement planning so as not to prejudice the real intent
and purpose of the above-said provision.


Complete Submission of Accounts

13. Delayed submission of the accounts of all Funds contrary to the provisions of
Section 7.2.1 (a) of COA Circular No. 2009-006 dated September 15, 2009,
thus the Provincial Auditor’s Office was prevented from conducting timely
audit of the financial transactions of the Province, and from ascertaining the
correctness of the disbursements and collections, and from promptly
informing management of deficiencies, if any.

Observe the prescribed period in the submission of the Provincial accounts which
is within the first ten (10) days of the ensuing month as provided in Section 7.2.1
(a) of COA Circular No. 2009-006 dated September 15, 2009.

Unsettled Suspensions, Disallowances and Charges

14. Audit suspension and disallowance balances in a total amount of
P1,629,168.31 and P96,000.00 respectively, remained unsettled as of
December 31, 2012, contrary to Section 9.4 and Section 10.4 of COA Circular
No. 2009-006 dated September 15, 2009.

Strictly follow the provision of Section 9.4 and Section 10.4 of COA Circular No.
2009-006 dated September 15, 2009.

Gender and Development Implementation

15. The Agency had not submitted the Gender and Development (GAD) Plan of
2012 contrary to the provisions of Item 5.1 of Joint Circular No. 2004-1 dated
April 5, 2004 of the Department of Budget and management (DBM), National
Economic and Development Authority (NEDA) and the National Commission
on the Role of Filipino Women (NCRFW).
Strictly follow the provisions of Item 5.1 of J oint Circular No. 2004-1 dated April
5, 2004 of the Department of Budget and Management (DBM), National
Economic and Development Authority (NEDA) and the National Commission on
the Role of Filipino Women (NCRFW).
Credit Financing/Debt Servicing
On loans and payments, records showed that the Provincial Government promptly
paid the monthly installments on their loan amortizations. It also has complete
records on loans released and payments, thus correctly presented in its annual
financial statements. (Annex O-1 & Annex O-2)
The recent loans applied were made thru the Provincial Resolution No. 140-2012
dated May 21, 2012 the amount of Php 86,300,000.00 for the acquisition of eight
(8) units heavy equipments which are to be implemented soon and Provincial
Resolution No. 328-2012 in the amount of Php 200,000,000.00 for the proposed
construction of the new Provincial Capitol Building/Extension at Barangay
Sanghan, Cabadbaran City which will start soon.
Local Disaster Risk Reduction and Management Fund (LDRRMF)
The Agency appropriated a total amount of Php 27,937,065.00 for the Local
Disaster Risk Reduction and Management Fund. Said amount represented 5%
mandatory requirement of the total annual budget. The total obligations incurred
during the year amounted to Php 9,104,392.54 of which obligations liquidated
totaled to Php 7,721,992.54 thus an unliquidated obligation as of year end of
P1,382,400.00. (Annex Q)
The unobligated balance of Php 18,832,672.46 was transferred to trust fund
account for future use of the agency’s Disaster Risk Reduction and Management.
Revenues
The Provincial Government was able to collect for the year 2012 the total amount
of Php4.17M revenue shares out of Real Property collections by every
municipalities from the targeted collectible of Php4.40M. out of their initiatives
and concerted efforts the uncollected amount was barely 5% or in the amount of
Php228,848.68. (Annex P)
Special Education Fund
Disbursements from the Special Education Fund for CY 2012 are in accordance
with the guidelines set forth in J oint Circular issued by DECS, DBM and DILG.
(Annex R)
Outstanding Legal Cases and Final and Executory Decisions on Legal Cases
Out of the three (3) cases filed by the Province of Agusan del Norte, one was
decided in its favor, affirming the notice of assessment in the amount of
P3,401,001.92 against National Transmission Corporation. The other one was
elevated to Court of Appeals having been declared to be invalid the extraction fee
against S.R. Metals. The last case for collection of real property taxes against
PPA, which was still on trial as of year end. (Annex T)
Seal of Good Housekeeping
The Province of Agusan del Norte had been an awardee for the years 2011
(Bronze) and 2012 (Silver), having complied with requirements. However, there
are some transactions in Trust Fund that had not been posted in PhilGEPS as
required, and as embodied in the findings and recommendations.

COMPLIANCE WITH TAX LAWS
For Calendar Year 2012, the Provincial Government of Agusan del Norte had
remitted the total amount of P33,264,911.84 out of the total tax withheld for the year of
P34,405,329.73 and its beginning balance of P5,047,111.43 leaving a balance of
P6,187,529.32 for all funds.

STATUS OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Of the eight (8) audit recommendations for the year 2011, four (4) were complied
with, two (2) were partially implemented and two (2) were not implemented.
























Sign up to vote on this title
UsefulNot useful