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Republic of the Philippines

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City

ANNUAL AUDIT REPORT

On the

CITY GOVERNMENT OF TACURONG

For the Year Ended December 31, 2012


Republic of the Philippines
COMMISSION ON AUDIT
OFFICE OF THE SUPERVISING AUDITOR
Local Government Sector
(Sultan Kudarat Province & Tacurong City)
Tel. No./Telefax No. (064)201-4797

May 20, 2013


c. Following the guidelines set by the DSWD on the implementation of SFP,
the Agency should promulgate guidelines to be followed by all day care
centers to ensure uniformity in the implementation of SFP from the receipt
of the food commodities to monitoring and evaluation of the program
implementation.

3.) The efficiency of implementing various projects, programs and activities (PPAs)for
CY 2012 funded under 20% Development Fund and Locally Funded amounting to
P 41,179,366.30 and P51,893,320.72, respectively, is doubtful due to inadequate
policy, planning, budgeting, execution and monitoring mechanism.

To ensure that the resources are managed in the most effective and efficient
manner to meet the needs of the constituents and stakeholders of the City, we
recommended the following:

1. Carefully plan and organize the projects management plan. Often, project
planning is ignored in favor of getting on with the work.
2. Prepare Annual Procurement Plan (APP) that are duly linked to Annual
Investment Plan (AIP) to ensure that every procurement is cost effective
and efficient.
3. Fast track the implementation of unimplemented PPAs.
4. Evaluate whether the programs and projects funded from prior years
budget are still relevant otherwise revert the fund to other programs and
projects which are more needed and applicable upon recommendation of
Local Chief Executive and approval by the Sanggunian concerned (Section
322 of RA No. 7160)
5. The City Development Council (CDC) should strictly monitor and evaluate
PPAs (Section 112 of RA 7160) and provide for project support or program
maintenance.
6. Strictly abide by the provisions of Section 4, Annex A of IRR of RA 9184.
Feasibility study and detailed engineering should be conducted first before
implementing any project.

4.) The agency failed to prepare and submit an Annual Procurement Plan for
Common-use Supplies and Equipment (APP-CSE) for 2012 and 2013 as required
under Department of Budget Management (DBM) Circular Letter No. 2011-06
and 2011-06A. As a result, the procurement of common used supplies and
equipment were acquired thru piecemeal scheme, thus, the agency was not able to
obtain the most advantageous price in its purchases.

a. Strictly comply with the requirements under DBM Circular Letter Nos.
2011-6 and 2011-06A, to ensure inclusion of agency procurement activities
for common-use supplies and equipment in the Consolidated APP-CSE, and
afford complete and accurate projection by the Procurement Services-
Department of Budget Management (PS-DBM) of inventory requirements
of government.
b. Submit its Annual Procurement Plan for common-use supplies and equipment
(APP-CSE) on or before November15 of each year to DBM using the
prescribed format as provided under DBM Circular Letter No. 2011-6.
EXECUTIVE SUMMARY

Introduction

Tacurong was once a barangay of the Municipality of Buluan, of the then Empire
Province of Cotabato. Tacurong was separated from its mother town of Buluan and
became a newly created municipality by virtue of Executive Order No. 462 signed by
then President Elpidio Quirino on August 3, 1951.

After 49 years of existence as municipality, Tacurong became the first component


city of the Province of Sultan Kudarat through Republic Act No. 8805 signed by then
President Joseph Estrada on August 16, 2000 and confirmed by the people of Tacurong in
an overwhelming YES vote on a plebiscite held on September 18, 2000.

Highlights of Financial Operations

The financial profiles of the City for CY 2012 with comparative figures for CY
2011 are as follows:

A. Financial Condition
Increase/(Decrease)
2012 2011
Amount %
Assets 580,401,201.27 607,216,971.57 (26,815,770.30) (4.42%)
Liabilities 61,969,274.37 61,361,433.13 607,841.24 1%
Equity 518,431,926.90 545,855,538.44 (27,423,611.54) (5%)

B. Operating Income
Increase/(Decrease)
2012 2011
Amount %

Local Taxes 41,211,443.43 36,385,045.86 4,826,397.57 13.26%


Permits & Licenses 7,205,310.92 6,453,723.70 751,587.22 11.65%
Service Income 7,677,229.22 6,660,704.63 1,016,524.59 15.26%
Business Income 17,249,404.93 15,713,583.46 1,535,821.47 9.77%
Other Income 260,065,145.93 318,941,425.75 (58,876,279.82) (18.46%
Total Income 333,408,534.43 384,154,483.40 (50,745,948.97) (13.21%
Net Income 33,460,132.14 105,061,928.63 (71,601,796.49) (68.15%)

C. Utilization of Funds
Increase/(Decrease)
2012 2011 Amount %
Appropriation 437,959,780.42 413,632,877.53 24,326,902.89 5.88%
Obligated 355,624,841.35 346,735,169.63 8,889,671.72 2.56%
Unobligated 82,314,939.071 66,897,707.90 15,417,231.17 23.05%
Scope of Audit

Financial and compliance audit was conducted on the accounts and operations of
the City of Tacurong for the calendar year 2012. The audit consisted of verification,
reconciliation and analysis of accounts and such other procedures considered necessary.

An auditwas conducted on the payments to casuals, job orders, contractual and


consultants; and fund transfer. These are the audit thrust areas for the CY 2012 of the
Local Government Sector provided under COA Memorandum No. 2012-010.

A Value for Money Audit was likewise conducted on the overall Comprehensive
Development Plan of the City for CY 2012 and its implementation of the 20%
Development Fund and Locally Fundedprojects

Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements as of December 31, 2012 due to the following:

1. The validity, existence and accuracy of the Property, Plant and Equipment
accounts totaling P100,779,138.00, could not be ascertained due to the
discrepancy between the GSO and Accounting records and the result of
inventory-taking. This is attributed to the non reconciliation of balances,
absence of evidence of ownership of Lands, failure to conduct a complete
physical inventory and failure to properly maintain the ledger and property
cards.
2. The yearend balances of the Real Property Tax (RPT) and Special Education
Tax (SET) Receivables amounting to P 4,752,940.22, are unreliable due to the
failure of the City Treasurer to submit the certified list showing the name of
taxpayers and the amounts due and collectible for the year.

Significant Audit Findings and Recommendations

A. Audit thrust areas

1. The necessity, propriety and legality of hiring Contract of Services/Job Orders of


the City Government is questionable because Section 2, Rule XI of the Omnibus
Rules Implementing Book V of Executive Order (EO) No. 292, Sections 209 to
211, Volume I of the GAAM and various labor and tax laws were not strictly
followed.

Recommendation:

We recommended that the City issue policy guidelines in the hiring of job
order in accordance with Section 2, Rule XI of the Revised Omnibus Rules
Implementing Book V of EO No. 292, COA rules and regulations and existing
labor and tax laws specified.
2. The implementation of the Department of Social Welfare and Development
(DSWD) Supplemental Feeding Program (SFP) was not completed on the
intended date of December 31, 2012 due to the delay in the release of funds to
the City, delay in the distribution of the menu cycle from DSWD and in the
procurement process of the City.

Recommendations:

To ensure the effectiveness of the program, we recommended the


following:

a. Strictly follow the procurement procedures prescribed under RA 9184.


b. Closely coordinate with the partner agency (DSWD) to fast track the
release of fund and cycle menu upon signing of the Memorandum of
Agreement.
c. Following the guidelines set by the DSWD on the implementation of
SFP, the Agency should promulgate guidelines to be followed by all day
care centers to ensure uniformity in the implementation of SFP from the
receipt of the food commodities to monitoring and evaluation of the
program implementation.

B. Value for Money Audit

Implementation of 20% Development Fund and Locally funded Projects

3. The efficiency of implementing various projects, programs and activities (PPAs)


for CY 2012 funded under 20% Development Fund and Locally Funded
amounting to P41,179,366.30 and P51,893,320.72, respectively, is doubtful due
to inadequate policy, planning, budgeting, execution and monitoring mechanism.

Recommendations:

To ensure that the resources are managed in the most effective and efficient
manner to meet the needs of the constituents and stakeholders of the City, we
recommended the following:

1. Carefully plan and organize the project management plan. Often, project
planning is ignored in favor of getting on with the work.
2. Prepare Annual Procurement Plan (APP) that are duly linked to Annual
Investment Plan (AIP) to ensure that every procurement is cost effective
and efficient.
3. Fast track the implementation of unimplemented PPAs.
4. Evaluate whether the programs and projects funded from prior years
budget are still relevant otherwise revert the fund to other programs and
projects which are more needed and applicable upon recommendation of
the Local Chief Executive and approval by the Sanggunian concerned
(Section 322 of RA No. 7160)
5. The City Development Council (CDC) should strictly monitor and
evaluate PPAs (Section 112 of RA 7160) and provide for project support
or program maintenance.
6. Strictly abide by the provisions of Section 4, Annex A of IRR of RA
9184. Feasibility study and detailed engineering should be conducted
first before implementing any project.

C. Financial and Compliance Audit

4. The agency failed to prepare and submit an Annual Procurement Plan for
Common-use Supplies and Equipment (APP-CSE) for 2012 and 2013 as required
under Department of Budget Management(DBM) Circular Letter No. 2011-06
and 2011-06A. As a result, the procurement of common used supplies and
equipment were acquired thru piecemeal scheme, thus, the agency was not able
to obtain the most advantageous price in its purchases.

Recommendations:

a. Strictly comply with the requirements under DBM Circular Letter Nos.
2011-6 and 2011-06A, to ensure inclusion of agency procurement
activities for common-use supplies and equipment in the Consolidated
APP-CSE, and afford complete and accurate projection by the
Procurement Services-Department of Budget Management (PS-DBM) of
inventory requirements of government.
b. Submit its Annual Procurement Plan for common-use supplies and
equipment (APP-CSE) on or before November 15 of each year to DBM
using the prescribed format as provided under DBM Circular Letter No.
2011-6.

5. Procedural lapses and non-compliance to the Implementing Rules and


Regulations (IRR) of R.A. 9184 were still observed on the procurement
procedures, thereby casting doubts to the commitment of the City Government to
adhere to the principles of transparency, competitiveness, accountability, equity,
efficiency, and economy in its procurement process.

Recommendation:

The City Government should always strictly abide by the Implementing Rules
and Regulations (IRR) of RA 9184, the team makes the following
recommendations to be more effective and efficient in processing procurement
activities of the City and fully improve the procurement procedures to attain the
principles of transparency, competitiveness and economy.
6. The yearend balances of the Real Property Tax (RPT) and Special Education
Tax (SET) Receivables amounting to P 4,752,940.22, are still unreliable due to
the failure of the City Treasurer to submit the certified list showing the name of
taxpayers and the amounts due and collectible for the year pursuant to Section
20, Volume I of the NGAS Manual.

Recommendation:

We recommended thatthe management strictly adhere to the provision of


Section 20, Volume I of the NGAS Manual in order to ensure reliability of the
balances of Real Property Tax Receivable and Special Education Tax Receivable
accounts. Setting up of RPT/SET Receivable should be done based on the
Certified List of Taxpayers..

7. The validity, existence and accuracy of the Property, Plant and Equipment (PPE)
accounts worth P100,779,138.00 could not be ascertained due to the discrepancy
between the accounting records and the result of the inventory-taking. This is
attributed to the non-reconciliation of balances, absence of evidence of
ownership of Lands, failure to conduct a complete physical inventory and failure
to properly maintain the ledger and property cards).

Recommendations:

a. Strictly observe the rules and regulations in the acquisition of real


properties and take immediate actions to ensure that all land and land
rights acquired are titled and registered in the name of the City
Government.
b. Conduct a complete physical inventory of all City property and
accomplish the Report of Physical Count Property Plant and
Equipment (RPCPPE) showing all the vital information.)
c. Major improvements which are permanent or capital in nature that
appreciably extend the life of the infrastructure or equipment should be
recorded in the corresponding Property Card of the PPE not in the
RPCPPE.
d. Require Accounting and General Services Departments to maintain
ledger and property/stock cards as control records and to facilitate the
regular reconciliation of records between the two offices.

Status of Implementation of Prior Years Audit Recommendations

Monitoring of the implementation of the forty three (43) audit recommendations


contained in the 2011 Annual Audit Report revealed that thirteen (13) were fully
implemented while eight (8) were partially implemented and twenty two (22) were not
acted upon.
Table of Contents

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PART I

AUDITED FINANCIAL STATEMENTS

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Republic of the Philippines
COMMISSION ON AUDIT
OFFICE OF THE SUPERVISING AUDITOR
Local Government Sector
(Sultan Kudarat Province & Tacurong City)
Tel. No./Telefax No. (064)201-4797

INDEPENDENT AUDITORS REPORT

HON. LINA O. MONTILLA


City Mayor
Tacurong City

We have audited the accompanying financial statements of the City Government of


Tacurong, which comprise the Balance Sheet as of December 31, 2012, and the
Statements of Income and Expenses and Cash Flows for the year then ended and the
summary of significant policies and other explanatory notes.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial
statements in accordance with Generally Accepted Accounting Principles. This
responsibility includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our


audit. We conducted our audit in accordance with the Generally Accepted Auditing
Standards. These standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the financial statements are
free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entitys preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes assessing the accounting principles used and
reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.

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CITY GOVERNMENT OF TACURONG
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period Ended December 31, 2012
(With comparative figures for CY 2011)
In Philippine Peso

2012 2011
Cash Flow From Operating Activities
Cash Inflows
Collection from Taxpayers 28,876,960.41 25,129,662.09
Share from Internal Revenue Collection 253,260,357.00 315,249,772.00

Receipts from Sale of Goods and Services 22,145.00 -


Interest Income 3,533,088.41 3,386,171.67
Dividend Income - 31,303.38
Other Receipts 84,809,950.15 80,358,623.85
Total Cash Inflow 370,502,500.97 424,155,532.99
Cash Outflows
Payments -
To Creditors/Suppliers 119,218,005.19 110,501,400.50
To Employees 80,500,870.32 76,683,580.61

Interest Expenses (165.92) -


Other Expenses 129,123,899.53 120,645,040.45
Total Cash Outflow 328,842,609.12 307,830,021.56
Net Cash from Operating Activities 41,659,891.85 116,325,511.43
Cash Flow From Investing Activities
Cash Inflows
From Sale of Property, Plant & Equipment - 3,017,067.35
Total Cash Inflow - 3,017,067.35
Cash Outflows
To Purchase of Property, Plant & Equipment 87,566,523.76 57,326,043.83
To Purchase of Debt Securities of Other
Entities - -
Total Cash Outflow 87,566,523.76 57,326,043.83
(54,308,976.48
Net Cash from Investing Activities (87,566,523.76) )
Cash Flow From Financing Activities
Cash Outflows
Payment of Loan Amortization of Loan 1,875,953.34 3,301,896.12
Total Cash Outflow 1,875,953.34 3,301,896.12

Net Cash from Financing Activities (1,875,953.34) (3,301,896.12)


Net Increase/Decrease in Cash (47,782,585.25) 58,714,638.83
Add: Cash Balance, Beginning 234,845,836.27 176,131,197.44
Cash Balance, End 187,063,251.02 234,845,836.27

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NOTES TO THE FINANCIAL STATEMENTS

1. General/Agency Profile

The City of Tacurong was created by Republic Act No. 8805 signed by former
president Joseph E. Estrada on August 16, 2000 and unanimously approved by the
people of Tacurong in a Plebiscite held on September 18, 2000.

As an Agro-Industrial, Commercial and Educational Center of the Province of Sultan


Kudarat and Central Cotabato, Tacurong is envisioned to be socially stable, self-
determining, ecologically balanced, politically mature and economically dynamic
City in the context of sustainable development.

Its mission is to improve quality of life of the people by institutionalizing people


empowerment, coupled with politically willed leadership in the promotion of peace,
order and public safety, improvement of ecological condition, reduction of poverty
incidence and rate of unemployment, expansion of basic social services, increasing
essential infrastructure and utilities and strengthening development administration.

Functions/ Programs of the management:

a. General supervision and control over all programs and projects.


b. Enforcement of laws and ordinances.
c. Maximize the generation of income out of new sources of revenue.
d. Implement development programs and priorities, and
e. Ensure delivery of basic services to its constituents.

The consolidated financial statements include the account of Tacurong City


Integrated Public Terminal and the Economic Enterprise Management and
Slaughterhouse maintained by the Agency.

2. Basis of Financial Statement Presentation

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

3. Summary of Significant Accounting Policies

a. Management maintains a system of accounting and reporting which


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

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b. Modified Obligation System is used to record allotments received and
obligations incurred. Separate registries are maintained to control allotments
and obligations for each class of allotment.

c. Petty Cash Fund account is maintained under the Imprest System through
Administrative Assistant IV as petty cash fund disbursing officer.

d. Costs of inventories are based on perpetual inventory method.

e. Plant, Property and Equipment are carried at historical cost. Infrastructure


under construction in-progress are valued following the construction period
theory. The public infrastructure such as roads, bridges and other
infrastructure for general public use are not subject for depreciation.

f. The straight-line method of depreciation is followed. Depreciation is not


likewise charge to infrastructure projects under construction. For equipment,
vehicles and other assets subject to depreciation, depreciation is computed
on the month following the purchase date.

g. Share from Internal Revenue Collections is accounted for under the accrual
method of accounting. All expenses are recognized when incurred and
income recognized when earned. Real Property Taxes are accounted
following the modified accrual method of accounting.

h. Appropriations, allotments and obligations are recorded and taken up in the


appropriate registries maintained by the City Budget Department.

i. Cash Advances for official travel, seminars and other time bound activities
are taken up as receivables from the concerned official or employee. Cash
advances of regular disbursing officers for payment of salaries and wages
and other personnel benefits are recorded as debit to Payroll Fund. Refunds
are credited to receivable account previously set-up.

4. Correction of Fundamental Errors

Fundamental errors of prior years are corrected using the Prior Years Adjustment
account while errors affecting the current years operations are effected to the current
year accounts.

5. Cash

This account is broken down as follows:


2012 2011
Cash in Vault P699,659.33 P119,338.28
Cash in Vault PTO 207,616.66 207,616.66
Cash - Disbursing Officer - -
Petty Cash Fund - -

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Payroll Fund - -
Cash in Bank-Local Currency, CA 47,062,264.85 53,713,087.36
Cash in Bank-Local Currency, SA 2,187,326.53 2,293,097.95
Cash in Bank-Local Currency, TD 136,906,383.65 178,512,696.02
Total P187,063,251.02 P234,845,836.27

Cash in Vault in the amount of P207,616.66 represents share of the City Government
deposited in the Provincial Treasurers Office, as of December 31, 1993.

Cash in Bank-Local Currency, Savings Account includes the amount of


P1,668,378.30 under the DBP-Savings Account which is a cash deposit required to
be maintained and used as hold-out deposit of long-term obligation.

6. Receivables

This account includes the following:


2012 2011
Accounts Receivable P88.00 P 9,052.90
Due from Officers and Employees 1,030,340.23 1,737,255.25
Real Property Tax Receivable 3,384,889.30 4,827,392.23
Special Education tax Receivable 1,368,050.92 2,590,225.91
Due from NGA's 40,203.05 40,203.05
Due from GOCC's 198,775.59 198,775.59
Due from LGU's 188,055.35 214,125.42
Due from NGO's/PO's 441,031.31 134,638.06
Due from Other Funds 5,817,132.31 1,215,323.80
Advances to Officers and Employees 274,653.26 314,177.97
Other Receivables 1,262,900.34 1,262,900.34
Loans Receivables - Others 2,000,000.00 2,000,000.00
Total P16,006,119.66 P14,544,070.52

Loans Receivable of P2,000,000.00 is loan granted to Medical Mission Hospital and


ACDC Foundation.

7. Inventories

The balance under inventory account is for Gasoline, Oil and Lubricants Inventory
account amounting to P 1,092,781.09 which remains unliquidated as of
December 31, 2012. This is a cash deposit of different offices for their Gasoline, Oil
and Lubricants expenses. This is created to effectively control over expenditures for
fuel consumption and to ensure the effective conservation of energy and proper
utilization of government motor transportation. The said inventories are stored with
New Isabela Petron Service Center and Nuestra Seora De Lourdes Petron Service
Center major gasoline station in Tacurong. However, this procedure has long been
stopped.

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The supplies and materials requested and purchased are released to different offices
by GSO through the stockroom custodian.

8. Prepayments

The prepayment in the amount of P1,073,646.39 includes P541,276.69 which is a


balance of Other Prepaid Expenses since 1993 that can no longer be identified as of
the current year and P532,369.70 which is an Advances to Contractors for
mobilization.

9. Property, Plant and Equipment

This account has a gross amount of P 509,355,083.45 less accumulated depreciation


of P 135,249,755.34 or a net amount of P 374,105,328.11 as follows:

Property, Plant and Balance Net Addition/ Balance


Equipment Dec. 31, 2012 (Reduction) Dec. 31, 2011
1 Land and Land Improvements P62,724,281.71 P4,728,180.37 P 57,996,101.34
2 Electrification, Power and
Energy Structures 13,539,249.86 2,030,884.31 11,508,365.55
3 Buildings 161,649,928.33 33,445,690.78 128,204,237.55
4 Office Equipment, Furniture
and Fixtures 44,911,175.35 2,568,332.46 42,342,842.89
5 Machineries and Equipment 91,259,633.06 12,808,496.50 78,451,136.56
6 Transportation Equipment 43,800,294.69 5,086,570.00 38,713,724.69
7 Other Property, Plant and
Equipment 13,510,445.90 2,012,421.84 11,498,024.06
8 Public Infrastructures - (11,770,285.16) 11,770,285.16
9 Construction in Progress 77,960,074.55 (8,155,396.07) 86,115,470.62
Total Property, Plant and
Equipment P509,355,083.45 P42,754,895.03 P 423,927,784.06
Accumulated Depreciation (135,249,755.34) _____________ (80,319,354.28)
Net Amount P374,105,328.11 P42,754,895.03 P343,608,429.78

Depreciation is not provided for buildings and other movable assets acquired in 2001
and earlier for lack of details as to construction/acquisition cost and date of
completion/acquisition.

For the year 2012, the decrease of P8,155,396.07 in Construction in Progress account
is due to the completed projects which were closed to its particular Public
Infrastructures account. Subsequently, the decrease in Public Infrastructures of
P11,770,285.16 is due to the transfers in registry.

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10. Other Assets

Other Asset in the amount of P639,875.00 is composed of Work Animals under Trust
Fund. These are Carabao purchased under the Cattle Dispersal Program from the
Priority Development Assistance Fund.

11. Current Liabilities

This account consists of the following:


2012 2011
Accounts Payable P 15,828,887.02 P 12,865,857.21
Due to Officers and Employees 11,210.00 -
Due to BIR 1,675,587.00 1,800,479.06
Due to GSIS 2,336,123.64 2,172,573.28
Due to Pag-ibig 436,125.32 386,039.04
Due to Philhealth 139,679.36 7,405.00
Due to Other NGA's 5,885,990.44 4,336,167.49
Due to Other GOCC's 31,146.03 29,993.53
Due to LGU's 4,259,557.61 3,423,871.48
Guaranty Deposits Payable 13,233,577.78 1,512,376.35
Due to Other Funds 1,578,199.55 13,963,143.50
Performance Bonds 483,998.99 643,546.02
Bail Bond Payable - -
Other payables 2,718,822.84 1,357,199.44
Total P48,618,905.58 P42,498,654.40

12. Long-term Liabilities

This account consists of the following:


2012 2011
DBP - City Abattoir P 3,865,694.47 P 5,055,138.91
DBP - Acquisition of Heavy Equipments 4,591,393.26 5,903,219.94
Total P8,457,087.73 P10,958,358.85

13. Deferred Credits

This account consists of the following:


2012 2011
Deferred Real Property Tax Income P 3,384,889.30 P4,827,392.23
Deferred Special Education Tax Income 1,368,050.92 2,590,225.91
Other Deferred Credits 140,340.84 486,801.74
Total P4,893,281.06 P7,904,419.88

Deferred Real Property Tax Income and Deferred Special Education Tax Incomeare
reciprocal accounts of Real Property Tax Receivable and Special Education
TaxReceivable during the set-up of RPT andSpecial Education Taxreceivable for the
year.

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14. Government Equity

The Government Equity shows a decrease of P27,423,611.54 over that of CY


2011, as follows:

Fund 2012 2011 Increase/


(Decrease)
General Fund P 486,342,841.88 P 514,695,485.13 P (28,352,643.25)
Special Educational Fund 26,976,940.53 25,947,908.82 1,029,031.71
Trust Fund 5,112,144.49 5,212,144.49 (100,000.00)
Total P518,431,926.90 P545,855,538.44 P(27,423,611.54)

The composition of the Government Equity for CY 2012 is as follows:

Government Equity, Beginning Balance P545,855,538.44


Add/
Deduct: Retained Operating Surplus
Current Operations P33,460,132.14
Prior Year's Adjustments (879,042.86) 32,581,089.28
Total P578,436,627.72
Add/
Deduct: Transfer from (to)
Transfer of completed Projects to
Registry:
Public Infrastructures P(61,141,501.82)
Transfer of PPE/completed projects
from Trust Fund 1,236,801.00
Other Adjustments: (100,000.00) (60,004,700.82)
Government Equity, Ending Balance P518,431,926.90

15. Income Accounts

Income accounts consist of:


2012 2011
Local Taxes P41,211,443.43 P36,385,045.86
Permits and Licenses 7,205,310.92 6,453,723.70
Service Income 7,677,229.22 6,660,704.63
Business Income 17,249,404.93 15,713,583.46
Other Income 260,065,145.93 318,941,425.75
Total Income P333,408,534.43 P384,154,483.40

13
16. Expenditure Accounts

Expense accounts consist of:


2012 2011
Personal Services P148,326,560.30 P137,125,870.86
Maintenance and Other Operating
Expenses 151,137,317.86 140,732,599.83
Financial Expenses 1,036,597.06 1,234,084.08
Total P299,948,402.29 P279,092,554.77

17. Local Disaster Risk Reduction Management Fund (LDRRMF)

The LDRRMF represents the amount set aside by the LGU to support its disaster risk
management activities pursuant to R.A. No. 10121 otherwise known as the
Philippine Disaster Risk Reduction and Management Act of 2010. The amount
available and utilized during the year totaled P15,855,885.00 and P7,083,278.10,
respectively, breakdown as follows:

Amount
Particulars
Available Utilized Balance
Current Year Appropriation:
Quick Response Fund(QRF) P4,756,765.50 P 199,430.60 P4,557,334.90
Mitigation Fund (MF) -
MOOE 6,733,470.50 3,860,964.00 2,872,506.50
Capital Outlay 4,365,649.00 3,022,883.50 1,342,765.50
Total P15,855,885.00 P7,083,278.10 P8,772,606.90

Continuing Appropriation: P12,614,413.00 P87,000.00 P12,527,413.00

Special Trust Fund


CY 2011 0.00 0.00 0.00
CY 2012 0.00 0.00 0.00
Total P12,614,413.00 P87,000.00 P12,527,413.00

The unexpended/unobligated balance for CY 2011 and CY 2012 totaling


P14,597,717.90 were transferred to the Special Trust Fund only on January 30, 2013
per JEV No. D010075.

14
PART II DETAILED FINDINGS AND
RECOMMENDATIONS

14
Detailed Findings and Recommendations
A. Favorable Observations

1. The City Government of Tacurong received the following awards and


recognition:

a. Gawad Pamana ng Lahi Regional Winner This is an award given by the


DILG to a LGU for reason of exemplary performance in Administrative
Governance, Social Governance, Economic Governance and Environmental
Governance. Along with this award is a cash incentive worth P2 Million
pesos.

b. Most Outstanding Sanggunian Regional Winner This is an award given by


the Philippine Councilors League together with the DILG to recognize
performance of Sanggunian of component cities and municipalities in
legislating measures that establish meaningful local administration and
development.

c. Regional Gawad Kalasag Award This is an award given by the RDRRMC


XII to Tacurong Citys Responsive Assistance and Coordinated Emergency
Search and Rescue (TRACER) as best volunteer organization. TRACER was
recognized for providing exceptional contributions in disaster risk reduction
and management and climate change adaptation, particularly in providing
much-needed help during the response phase of DRRM and for strengthening
the resilience and adaptive capacities of the constituency. In addition, the
Citys DRRMC also received a Special Citation Award as the 2nd Best
LDRRMC for Region XII.

2. The City implemented the following innovative programs and projects:

a. City Hall sa Barangay Project - all offices of the LGU are brought to the
Barangay for one day and for delivery of their services.

b. Business One Stop Shop Program all government agencies involved in the
processing of business permits are gathered in one area inside the City Hall
premises.It regulated the immediate processing of business permit
application or renewal of business or operation.

c. Activation of Joint Task Force Talakudong (JTFT) this is a partnership


between the City Government of Tacurong and the Philippine Army to
conduct security operations, promote peace and order and ensure public
safety to make Tacurong City a safe place to live in.

15
Findings and Recommendations

B. Audit Thrust Areas

Payments to Contracts of Services/Job Orders

1. The necessity, propriety and legality of hiring Contract of Services/Job


Orders of the City Government is questionable because Section 2, Rule XI of
the Omnibus Rules Implementing Book V of Executive Order (EO) No. 292,
Sections 209 to 211, Volume I of the GAAM and various labor and tax laws
were not strictly followed.

Legal Framework

The hiring of personnel under Contract of Services/Job


Orders/Contractuals applicable to Local Government Units is governed by the
following laws, rules, and regulations:

Laws, Rules and Pertinent Provisions/Particulars


Regulations
Section 2, Rule XI of Contracts of Services/Job Orders refer to
the Revised Omnibus employment described as follows:
on Appointments and
Other Personnel
a. The contract covers lump sum work or services such
Actions, Rules as janitorial, security, or consultancy services where
Implementing Book V no employer-employee relationship exist;
of EO No. 292,
otherwise known as the
b. The job order covers piece of work or intermittent job
Administrative Code of of short duration not exceeding six months on daily
1987 basis;

c. The contracts of services and job orders are not


covered by Civil Service Law, Rules and
Regulations, but covered by COA rules;

d. The employees involved in the contracts or job orders


do not enjoy the benefits enjoyed by government
employees, such as PERA, COLA and RATA.

Sections 209, 2010, Section 209. Contractual Personnel. - Contractual


211 and 517 of Volume personnel are those employed in the government in
I of the Government accordance with a special contract to undertake a
Accounting and specific work or job requiring special or technical
Auditing Manual skills not available in the employing agency, to be
(GAAM) accomplished within specific period, which in no
case shall exceed one (1) year and who perform or

16
Laws, Rules and Pertinent Provisions/Particulars
Regulations
Sections 209, 2010, accomplish the specific work or job under their own
211 and 517 of Volume responsibility with minimum direction or
I of the Government supervision
Accounting and
Auditing Manual Section 210. Compensation of contractual
(GAAM) personnel.- When hiring of contractual personnel is
authorized in the appropriation of the agency, they
may be paid compensation inclusive of fees,
honoraria, per diems compensation and allowances
not exceeding 120 percent of the minimum salary of
an equivalent position in the National Classification
and Compensation Plan except as may be authorized
by the Department of Budget and Management in the
following instances:

a. when the consultant or expert is an


acknowledged authority in his field of
specialization; and
b. where the consultant or expert is hired to
perform specific activity or service that
requires technical skill and expertise which
local labor force cannot provide or, if such
expertise is available, the supply is limited.

Provided, that in no case shall such compensation


exceed the salary of his immediate superior, except as
may be otherwise approved jointly by the Civil
Service Commission and the Department of Budget
and Management.

Section 211. Hiring of contractual personnel.

a. x x x
b. In no case shall contractual appointments or
contracts of personnel services be issued to
non-technical personnel or those whose duties
and functions are clerical or administrative in
natureand those who will hold positions in the
labor or trades and crafts group. If such
services are needed in support of the job or
project, the regular staff or personnel may be
augmented by hiring casual or emergency
staff.

17
Laws, Rules and Pertinent Provisions/Particulars
Regulations
Section 517. Contracting activities. Agencies may
enter into contracts with individuals or organizations,
both public and private, subject to the provisions of
law and applicable guidelines approved by the
President: Provided that contracts shall be for specific
services which cannot be provided by the regular
staff of the agency, shall be for a specific period of
time, and shall have a definite expected output.

RA 7160. Local Section 77. Responsibility for Human Resources and


Government Code Development. - The chief executive of every local
government unit shall be responsible for human
resources and development in his unit and shall take
all personnel actions in accordance with the
Constitutional provisions on civil service, pertinent
laws, and rules and regulations thereon, including
such policies, guidelines and standards as the Civil
Service Commission may establish: Provided, That
the local chief executive may employ emergency or
casual employees or laborers paid on a daily wage or
piecework basis and hired through job orders for
local projects authorized by the sanggunian
concerned, without need of approval or attestation by
the Civil Service Commission: Provided, further,
That the period of employment of emergency or
casual laborers as provided in this Section shall not
exceed six (6) months.

Republic Act No. 6850 Section 1. All government employees as of the


approval of this Act who are holding career civil
service positions appointed under provisional or
temporary status who have rendered at least a total of
seven (7) years of efficient service may be granted
the civil service eligibility that will qualify them for
permanent appointment to their present positions.

Article 99 of PD No. The minimum wage rates for agriculture and non-
442 (Labor Code of the agricultural employees and workers in all regions in
Philippines) the country shall be those prescribed by the Regional
Tripartite Wages and Productivity Boards (RTWPBs)

Minimum wage for Region 12 is P260.00 effective


January 1, 2012 as per Wage Order No. RB XII-16,
as amended. This was further increased to P270.00

18
Laws, Rules and Pertinent Provisions/Particulars
Regulations
effective April 18, 2012 pursuant to Wage Order No.
RB XII-17.

SC Ruling, Traders This Court has ruled that the existence of employer-
Royal Bank vs. NLRC, employee relationship cannot be proved by merely
G.R. No. 127864, showing the agreement of the parties. It is a question
December 22, 1999. of fact which should be supported by substantial
evidence. And in determining the existence of such
SC Ruling, GR No. relationship the elements usually considered are: (a)
G.R. No. 154472 dated the selection of the employee; (b) the payment of
June 30, 2005. wages; (c) the power of dismissal; (d) power to
control the employees conduct, with the control test
CSC Resolution No. generally assuming primacy in the over-all
030102 dated January consideration.
22, 2003

Personnel Profile

Based on the City Resolution No.251-3 series of 2005 also known as


Resolution Adopting and Approving the Revised Organizational Structure and
Staffing Pattern of the City Government of Tacurong the City has a total of 621
regular permanent plantilla positions. For CY 2012 the City has funded only 328
regular permanent plantilla positions and of these, only 309 positions are filled up.
To supplement its manpower requirements, the City hired 62 casual and 311 job
order employees. The details are shown in the table below:

VACANT
Personnel Plantilla Funded Filled Up
Unfunded Funded Total
Permanent 621 328 309 293 19 312
Elective 14 14 14 0 0 0
Co-terminus 16 16 13 0 3 3
Casual 0 68 62 0 6 6
Job Order 0 311 311 0 0 0
Total 651 426 698 293 28 321

Budget and Expenditure

Based on the approved annual and supplemental budgets for CY 2012, of


the Citys total appropriation of P374,172,431.87 the appropriation for Personal
Service and job order service under the MOOE are 34.45% and 5.54%,
respectively.

19
From the budget, a total of P148,747,500.25 was expended, as shown in
the table:

Object of Appropriation Actual Balance


Expenditure Expenditure
Personal Service 128,906,131.00 128,906,131.00 0.00
MOOE (Job Order) 20,722,568.00 19,841,369.25 881,198.75
Total 149,628,699.00 148,747,500.25 881,198.75

In addition, the PS appropriation of P128,906,131.00 is 41.58% of the Citys


(4th Class) total income from regular sources realized in the next preceding fiscal
year which is below the 55% limitation rule under Section 325(a) of R.A. 7160, as
shown in the table.

Total Regular Income (CY 2010) P 310,002,412.40


Total PS Allowable for CY 2012 (55%) 170,501,326.82
Less: PS for Budget Year 2012 (41.58%) 128,906,131.00
Still PS Allowable for Appropriation P 41,595,195.82
(13.42%)

Findings and Comments

Review of the submitted List of Job Order personnel, post audit of the
corresponding Payroll and interviews with the concerned City officials, we have
observed the following deficiencies:

1. Lack of documented guidelines and policies (SP


Resolution/Ordinance) in hiring Contract of Service/Job Orders.
The City Human Resource Management Office (CHRMO) has no direct
participation in the hiring of personnel rather the office awaits
recommendations from City Officials/Department Heads on who would
be accepted/recruited. The hiring has no criteria to base on
(designation/functions, qualifications, rates, prohibitions, etc) and done
as the need arises by the various Offices of the City.

2. Contrary to the law.

a. The daily rates of 84 Job Orders are below the minimum wage rate
(P200 to 250/day < P270/day) approved by the Regional Tripartite
Wages and Productivity Board.

b. The compensations received by these employees are not subjected to


the graduated rates of withholding tax on compensation contrary to
Section 2.78 of BIR Revenue Regulation No. 2-98. (see separate
findings for detailed discussions)

20
3. Non-compliance with COA rules and regulations. Upon review of the
Job Order Contracts, it was revealed that the hiring of Job Order
employees does not cover specific lump sum work, piece of work,
intermittent job that is identified with a specific project, job requiring
special or technical skills, for a specific period of time, and/or have a
definite expected output. Instead the City resorted to hire job orders in
the following instances:

a. In the sampled four offices, job order personnel were hired to


perform functions similar to the 62 vacant regular plantilla positions.

b. The 243 job order personnel assigned in the various offices are all
non-technical personnel and their duties and functions are clerical or
administrative in nature.

c. They render continuous service and their contracts are renewed


every after six months. Several job orders have been serving as such
for 2 to11 years now.

d. Salaries and wages of job orders were all charged to Other


Maintenance and Operating Expense (OMOOE) instead to the
proper Salaries and Wages and MOOE accounts.

Further, it appears that the services rendered by the Contract of


Services/Job Orders hired by the City can already be considered as government
services because applying the SC Rulings mentioned earlier, the power of control
as the ultimate factor in determining the existence of employer-employee
relationship is evident such as (a) selection of the employee; (b) the payment of
wages; (c) the power of dismissal; (d) power to control the employees conduct.
Although it is stipulated in their contract that their services are not considered as
government services, based on the SC cited ruling the job orders do not cover
lump sum work nor cover piece of work or intermittent job that is identified with
a specific project. As previously mentioned, they render continuous service and
their contracts are renewed every after six months.

The continuous hiring of job order personnel by simply renewing the same
has denied deserving employees appropriate remuneration, security of tenure and
other non-compensation benefits had their services been duly considered for
permanent status, if warranted.

In addition, the total PS appropriation showed that the same is below the
55 percent limitation rule under Section 325(a) of R.A. 7160, an indication that
the City has adequate funds for the regularization of qualified and competent job
order employees.

21
Managements Comment

The management took well the findings and commits to implement our
recommendations.

Recommendations:

We recommended that the City issue policy guidelines in the hiring of job
order in accordance with Section 2, Rule XI of the Revised Omnibus Rules
Implementing Book V of EO No. 292, COA rules and regulations and existing
labor and tax laws specified above.

If possible, plan further on how to achieve the ideal and realistic personnel
complement of the City otherwise follow the Organizational Structure of the City
instead of resorting to Job Order scheme.

Further, if merited under existing Civil Service rules and regulations, the
performances of the said job order personnel should be evaluated for possible
appointment to permanent regular positions.

Transfer of Funds DSWD Supplemental Feeding Program

2. The implementation of the Department of Social Welfare and Development


(DSWD) Supplemental Feeding Program (SFP) was not completed on the
intended date of December 31, 2012 due to the delay in the release of funds
to the City, delay in the distribution of the menu cycle from DSWD and in
the procurement process of the City. Also, the City has no documented
methods and procedures that show systematic flow of operation to ensure the
efficiency and effectiveness of the program.

Legal Criteria

The City Government entered into a Memorandum of Agreement (MOA)


with the DSWD R12 on May 29, 2012 for the implementation of the DSWD
Supplemental Feeding Program. The proponent of the program was the City
Social Welfare and Development Office, the target beneficiaries were the 1,710
children of the Citys 52 Day Care Centers and project implementation period was
from June 2012 to December 2012 (120 days).

The objectives of the program as provided in AO No. 8 Series of 2012, are


as follows:

1. To provide augmentation support for feeding program for children in


LGU-managed DCCs/SNP areas and communities using indigenous foods
and/or locally produced foods equivalent to 1/3 of Recommended Energy
and Nutrient Intake (RENI);

22
2. To improve knowledge, attitude and practices of children, parents and
caregivers through intensified nutrition and health education; and

3. To improve and sustain the nutrition status of the target children


beneficiaries.

Budget and Expenditure

The Project cost of P2,052,000.00 was received from the DSWD-R12 in


two tranches to procure the ingredients for the specified viands (P10/child/day)
for 120 days of SFP and the actual expenditures as of December 31, 2012
amounted to P810,104.56, as shown in the table below:

Amount
Received
1st tranche (June 26, 2012) P 1,045,323.00
2nd tranche (Nov. 23, 2012) 1,006,677.00
Total P 2,052,000.00
Expenditure 810,104.56
Balance P 1,241,895.44

Findings and Comments

1. Delayed implementation SFP implementation has only started on October


16, 2012. As a result, the target completion date of December 31, 2012 was
not met and has to be extended till April 2013. At year end, the program has
only been implemented for 47 days due to the following:

1. The first tranche of funds was received from the DSWD-R12 only on
June 26, 2012 and the implementation of the project only started in
October, four months after the target start date of June 2012.

2. The copy of the menu cycle which is integral in the preparation of the
meals was given late by the DSWD-R12.

3. Delay in the acquisition of needed food commodities for the feeding


program because of the delay in the processing of funds pending
compliance with existing budgeting, accounting and auditing rules and
regulations.

a. Payment to supplier-delivery mechanism was unclear, since


there was no written agreement/contract between the supplier
and the LGU indicating such, resulting to delay in the
acquisition of the food commodities. Late payment to the

23
supplier renders the supplier incapable of procuring and
delivering the food commodities necessary.

2. Non-compliance with procurement procedures The procurement of food


commodities resulted in negotiated procurement due to two (2) failed
biddings. However, we noted that no document was available to justify that
the following procurement procedures under negotiated procurement were
undertaken:

a. Procurement Planning.
b. Mandatory review and evaluation on the: (a) terms, (b) conditions, (c)
specifications, and (d) cost estimates and the
recommendations/decisions made possible revisions/adjustmentsand
technical requirements of the bid to determine the reason for every
failed bidding. (Section 35.2, IRR of RA 9184)
c. Maintenance of a registry of suppliers as basis for selecting the
suppliers for negotiations. (Section 53.1.2.2, IRR of RA 9184)
d. Invite and engage in negotiations with a sufficient number of
suppliers. (Section 53.1.2, IRR of RA 9184)
e. Negotiation, submission of offer and selection of suppliers. (Section
53.1.3-5, IRR of RA 9184)
f. Validation whether it is entering into a contract with a technically,
legally and financially capable supplier. (Section 53, IRR of RA 9184)
g. Invitation to observers in all stages of the negotiation. (Section 53.1.6,
IRR of RA 9184)

In addition, it was also revealed that the negotiated procurement was


conducted by the CSWD (end user) and not by the Citys BAC. The problems
encountered with the suppliers may largely be attributed to this.

3. Lack of documented methods and procedures from the City that show
systematic flow of operation to ensure the efficiency and effectiveness of
the program.

During the ocular inspection and observation we noted the following


deficiencies:

a. No clear agreement between the LGU and the daycare center worker
and the volunteer parents regarding their roles in the implementation
of the program as well as their commitment to the success of SFP.
Incidents of uneaten meals and absentees were observed. During days
where there were no classes, some mothers do not bring their children

24
to the center for feeding schedule. Cooperation of the parents in the
operation of the program is not assured.

b. The issuance of the food commodities to daycare workers was not


supported with the required Requisition and Issue Slip (RIS).

c. Day care centers have varying feeding schedules. Feeding schedules


should be continuous, if not daily. Some conducts the feeding schedule
7 days a week, some in 5 days; while some centers do not conduct
feeding schedule when the daycare worker is absent.

d. Since proper and intensive monitoring procedures are lacking, there is


no way of checking if the food stocks are properly stored or if the
kitchens used by the parents to cook the food are clean and sanitary
and more importantly if the portion of the food received by the child as
well as his/her food intake is equivalent to 1/3 of Recommended
Energy and Nutrient Intake (RENI).

e. The menu cycle consists of vegetables as the main ingredients. There


is no assurance that the prepared meals were actually consumed by the
children. This posed a risk of food wastage, spoilage, or the meals just
taken home and consumed by the other member of the family, thus not
serving the main purpose of SFP.

a) According to some of the parents, the quality of NFA iron


fortified rice served is poor and unpalatable. As a result, some
children refuse to eat them while other mothers bring their own
rice to replace the ones served (see pictures below).

f. No City Official (Health Unit/Social Welfare Unit) is present to


witness and supervise during monthly measuring activities, thus the
veracity of data reported is not authenticated. Also, it was found out
that only three (3) officers from the City monitor the 52 day care
centers.

25
g. The City Nutrition Committee was not tap to assist in monitoring and
providing technical assistance to the implementers of the program.

h. No feedback mechanism to document problems encountered for


improvement.

i. The nine Parent Effectiveness Sessions have not been conducted,


which is an integral component of the SFP.

j. The rice given by the DWSD-Regional Office was received directly by


the CSWDO, instead by the GSO, which is not the authorized
receiving unit of the City. This circumvents the regular process of
receiving and inspection of goods.

Managements Comment

The management took well the findings and commits to implement our
recommendations and fast tract the implementation of the program.

Recommendations:

To improve the effectiveness of the program, the management should


further study and understand the potential advantages and caveats in
implementation of SFP to achieve the desired benefits to education. As such, we
recommend the following:

1. The city should provide budget augmentation to achieve the desired


outcomes of the SFP.

2. Strictly follow the procurement procedures prescribed under RA 9184.

3. To address the delay in the procurement of food commodities, ensure that


the procurement plan is in place and is actually followed.

4. Closely coordinate with the partner agency (DSWD) to fast track the
release of fund and cycle menu upon signing of the Memorandum of
Agreement and for the smooth implementation of the program.

5. Introduce enhancement to the meals served to avoid wastage and ensure


that the food is palatable and is consumed by the children. Also,
coordinate with DSWD if the quality of rice used for the program can be
improved.

6. The rice delivered should be directly received by the GSO and


strictly ensure that the rice delivered is not expired.

26
7. Following the guidelines set by the DSWD on the implementation of
SFP, the Agency should write a set of guidelines to be followed by all
day care centers to ensure uniformity in the implementation of SFP from
the receipt of the food commodities to monitoring and evaluation of the
program implementation.

8. Ensure useful and intensive monitoring processes and evaluation of the


operation of SFP on all day care centers. We recommend that monitoring
should be done regularly, on a weekly basis and unannounced to observe
the actual conduct of the program. These monitoring activities ideally
lead to the identification of bottlenecks in program operation and to
suggestions of areas for improvement. This will also identify not just the
height and the weight of the children before and after the program but
also, the number of children actually reached and served; number of
meals served; the quality and quantity of the activities under the SFP, i.e.,
the training or education programs for day care center workers and
parents; how much is being spent in the various elements of the program;
food storage and inventory practices; and more importantly the
organization and participation of the community in the program.

a. Deputize the Barangay Officials or BHWs and solicit the help


of the SK to supplement manpower in monitoring the actual
implementation SFP

9. Information, education and communication (IEC) campaigns. Effective


IEC programs such as PES should be conducted to promote
understanding of the benefits of providing meals earlier in the day and
encourage the practices needed to realize early meal preparation, will
help to encourage the parents to participate in the program and decrease
resistance to the approach.

10. Solicit community support to increase community involvement in day


care centers, particularly since the program depend on the community to
prepare and serve meals to children. SFP with their communities behind
them are more effective than those with less community involvement.

11. Seek opportunities for integrated interventions.To be able to sustain


nutritional status of the beneficiaries, integrate feeding programs with
other interventions that address the primary nutrition and health problems
of the school-age population. Specifically recommended are milk
feeding, deworming, micronutrient fortification or supplementation, and
health nutrition and hygiene education.

27
Transfer of Funds Grants/Donations to NGOs/POs

3. The granting and utilization of funds to NGOs/POs amounting to


P935,322.24 were not in accordance with the revised guidelines provided
under COA Circular No. 2007-001.

Criteria

Article II, Section 23 of the Philippine Constitution provides that the State
shall encourage non-governmental, community-based, or sectoral organizations
that promote the welfare of the nation. Also, Section 34 of RA 7160
institutionalized the partnership of these organizations and the local government
units.

All funds granted to NGOs/POs for the implementation of projects shall


retain their character as public funds. In line with this, the granting and utilization
of funds to NGOs/POs is governed by COA Circular No. 2007-001 dated October
25, 2007 which prescribes among others the requisites for entitlement (Section
4.5), procedures for the availment, release and utilization (Section 4.6) and
limitations (Section 6.0)of the government funds.

Released Funds

In line with this mandated obligation of LGUs, the City Government


established a Cooperative Support Fund, a project in which the City Government
allotted a revolving fund designed to grant a certain amount (P50,000 to
300,000.00) to viable cooperatives to be used for Livelihood programs in the
condition that the said fund should be returned to City Government after one year.
For CY 2012 the City Government releases funds to NGOs/POs totaling
P955,322.24 as shown in the table below:

Date DV No. Payee Amount


January 3, 2012 D0100049 Dumaguil Farmers Multi Purpose 200,000.00
Cooperative
March 2, 2012 D0301817 City of Tacurong Agriculture Multi- 200,000.00
Purpose Cooperative
March 21, 2012 D0302218 Tacurong Hat Makers SKA 20,000.00
June 11, 2012 D0603978 Tacurong Teachers & Employees Multi- 200,000.00
Purpose Cooperative
July 4, 2012 D0704475 Sultan Kudarat Multi-Cab Operators 200,000.00
Multi-Purpose Cooperative
July 4, 2012 D0704493 Quipolot Multi-Purpose Cooperative 135,322.24
Total 955,322.24
Finding and Comments

During the year-under audit, the team noted the following deficiencies on
how the City releases the funds to NGOs/POs:

28
a. Lack of transparency. The City Government did not make public via
newspapers, agencys website, bulletin boards and the like, at least three
months prior to the target date of commencement of the identified priority
projects which may be implemented by NGOs/POs (Section 4.5.1, COA
Circular No. 2007-001).

b. No Committee created for the purpose and lack of documented


policies and guidelines. The City Government did not create a dedicated
committee to formulate policies and guidelines for selection criteria and
perform the selection process, including the screening of the qualification
documents, ocular inspection of the NGOs/POs business site, evaluation
of the technical and financial capability of the NGO/PO and awarding the
projects to the NGOs/POs (Section 4.5.2 and 4.5.3, COA Circular No.
2007-001).

c. Lacking and deficient documents. It was revealed that some of the


documents which are requisite for entitlement to the government funds are
lacking and deficient (Section 4.4, COA Circular No. 2007-001), as
tabulated in the table:

NGOs/POs Deficiencies
Dumaguil Farmers No authenticated copy of the latest Articles
Multi Purpose of Cooperation
Cooperative No Disclosure by the NGO/PO of the other
related business, if any, and extent of
ownership therein
The liquidity ratio is under 1 (0.80). This
shows that the Cooperative is not in good
financial condition. See computation
below:

123,218.68 (CA) = 0.80 (LR)


153,875.47 (CL)
Tacurong Teachers & No authenticated copy of the latest Articles
Employees Multi- of Cooperation
Purpose Cooperative
Disclosure by the NGO/PO of the other
related business, if any, and extent of
ownership therein

The livelihood project proposal is not clear


or well defined (the project was simply
described as capital for an income
generating project)

29
NGOs/POs Deficiencies
City of Tacurong No authenticated copy of the latest Articles
Agriculture Multi- of Cooperation
Purpose Cooperative
Sultan Kudarat Multi- Disclosure by the NGO/PO of the other
Cab Operators Multi- related business, if any, and extent of
Purpose Cooperative ownership therein
Quipolot Multi-
Purpose Cooperative
Tacurong Hat Makers All documents prescribed were not present.
SKA

d. Not in accordance with the prescribed limitations as discussed below:

1. Checks issued by the City Government covering the release of fund to


the NGO/PO was not crossed for deposit to its savings or current
accounts.(Section 6.1, COA Circular No. 2007-001)

2. It was observed that funds granted to two (2) cooperatives were used
for lending activity, prohibited under Section 6.2 of COA Circular No.
2007-001. The funds were lent to its members and charge with interest
as shown in the table below:

NGO/PO Interest Rate


Dumaguil Farmers Multi Purpose 1% per month or 12% per
Cooperative annum

Sultan Kudarat Multi-Cab 9.6% per month plus 3% for


Operators Multi-Purpose every month of delay plus
Cooperative service and processing fee.

e. No Fund Utilization Report.It was observed that the Fund Utilization


Report certified by the NGO/POs accountant and approved by its
President/Chairman was not submitted to the City Government together
with the inspection report and certificate of project completion, list of
beneficiaries with their acceptance/acknowledgment of the
project/funds/goods/services received duly validated by the internal
auditor or equivalent official. (Section 5.4, COA Circular No. 2007-001)

The failure of management to create a Committee to take charge of the


selection criteria and perform evaluation process precluded this Office from
determining compliance with the accreditation, awarding and monitoring
procedures by the City Government and the NGO/PO to ascertain efficiency,
economy and effectiveness of the fund utilization and validation of the receipt of
benefits by the intended beneficiaries.

30
Managements Comment

The management took well the findings and commits to implement our
recommendations.

Recommendations:

We recommended that management -


a. Create a dedicated committee to formulate and adopt the policies and
guidelines (City Ordinance/Resolution) provided under COA Circular No.
2007-001.

b. Strictly enforce the guidelines prescribed in the COA Circular No. 2007-
001.

c. Require the NGOs/POs to submit the final Fund Utilization Report


certified by its Accountant and approved by its President/Chairman to the
GO together with the Inspection Report, Certificate of Project Completion,
Acceptance Report from beneficiaries of the project, funds, goods,
services rendered; and

d. Require the Committee in charge to submit the lacking documents


identified above.

Transfer of Funds Philhealth Capitation Fund

4. The propriety and regularity of the utilization of the Philhealth Capitation


Fund (PCF) cannot be ascertained due to inadequate policies involving
planning and budgeting, and deficient supporting documents in its
disbursements.

Legal Framework

The City Government entered into a Memorandum of Agreement with


Philippine Health Insurance Corporation on May 21, 2002 for the implementation
of Medicare para sa Masa program. This program is offered to indigents which
provides regularbenefits refers to hospital benefit package that includes room
accommodation,medicines, laboratory and x-ray services, doctors fee with
certain ceiling and Outpatient Consultation and Diagnostic Package (OPB) to the
indigent population through the LGUs Rural Health Centers (RHU). The scheme
or mechanism of payment to the RHUs for the services provided for a particular
period is Philhealth Capitation Fund. (This is replaced by Per Family Payment
Rate on April 1, 2012)

31
Under the Philhealth Capitation Fund (now PFPR), LGUs can enrol
thousands of indigent residents to one year coverage.

Essentially, the scheme involved the LGU allotting a portion of its annual
budget as subsidy to poor constituents for Philhealth coverage.

As incentive, Philhealth pays back the sponsoring LGUs P300 per enrolled
family under the PCF (additional incentive of P100 for timely submission of
reports).

The Disposition of PCF (now PFPR) is governed by the following rules


and regulations:

Rules and Pertinent Provisions


Regulations
Philhealth Circular 1. The PCF constituted out of the proceeds of the
No. 16 dated July capitation amount shall be managed by the Local
12, 2004 Government Unit through the appropriate
management mechanism of the:

1.1 LGU Health Office


1.2 Local Provincial Health Board
1.3 Sub-LGU Health Board of District Health Board
1.4 Other mechanism approved by the Corporation

2. The following may be charged to PCF:

2.1 Drugs listed in the Philippine National Drug


Formulary (PNDF);
2.2 Equipment and supplies necessary/related to carry
out the delivery of the required services including
but not limited to medical equipment and
supplies, furniture & fixtures, appliances, office
equipment, consumables and supplies;
2.3 Site improvement of health facility
2.4 Referral fees for diagnostic services;
2.5 Administrative cost not exceeding twenty percent
(20%) of the total PCF.
Section VII, The twenty percent (20%) mandatory provision for
Philhealth Circular administrative expenses be divided as follows:
No. 13, s. 2002
1. Fifty percent (50%) shall accrue to the
physician/s;
2. Fifty percent (50%) shall accrue to the other RH
personnel directly involved in the provision of
services required hereof; and

32
Rules and Pertinent Provisions
Regulations
Section V (G), The disposition and allocation of PFPR shall be as
Philhealth Circular follows:
No. 10, s. 2012
1. Eighty percent (80%) of PFPR is for operational
cost and shall be divided, as follows:
a. Minimum of forty percent (40%) for drugs
and medicines (PNDF) (to be dispensed at
the facility) including drugs and medicines
for Asthma, AGE and Pneumonia; and
b. Maximum of forty percent (40%) for
reagents, medical supplies, equipment
(i.e., ambulance, ambubag, stretcher, etc),
information technology (IT equipment
specific for facility use needed to facilitate
reporting and database build-up), capacity
building for staff, infrastructure or any
other use related, necessary for the
delivery of required service including
referral fees for diagnostic services if not
able in the facility.
2. The remaining twenty percent (20%) shall be
exclusively utilized as honoraria of the staff of the
PCB facility and for the improvement of their
capabilities as would enable them to provide
better health service:

a. Ten percent (10%) for the physician;


b. Five percent (5%) for other health
professionals staff of the facility; and
c. Five percent (5%) for non-health
professionals/staff, including volunteers
and community members of health teams
(e.g., Womens Health Team, Community
Health Team)
Enrolled Indigent Family

The City Government enrolled 6,072 households and paid P3,643,200.00


for PhilHealth coverage of one year (January 1 to December 31, 2012).

DV No. Check No. Amount No. of enrolled household


D0402764 36391563 643,000.00 1,072
D0402765 36391564 3,000,000.00 5,000
Total 3,643,000.00 6,072

33
The PCF allocation and spending priorities of the City

Based on the accounting records, the PCF has a beginning balance


amounting to P2,213,792.02, and has received a total amount of P3,421,258.15
for CY 2012, as shown in the table below:

Beginning balance 2,213,729.02


Fund received during CY 2012
PCF 1,089,758.15
PFPR 2,331,500.00
Total 3,421,258.15
Expended 3,975,122.00
Ending balance 2,953,787.17

A closer look at the PCF spending as detailed in the table below shows
that 48% went to Maintenance and Operating Expense while 30% of the fund
was spent on Capital Outlay and 23% for honoraria of personnel.

Actual Expenditure
Rank Object of Expenditure
Amount %
1 Maintenance & Operating Expense
Drugs & Medicines 721,759.25
Laboratory & Medical Supplies 623,345.00
Office Supplies 546,043.25 48%
Training Expense 9,900.00
Total 1,901,047.50

2 Capital Outlay
Medical Equipment (BTS Machine, etc) 487,950.00
Office Equipment (Aircon, LCD TV, etc) 471,510.00
IT Equipment (PC, Digicam, etc) 125,792.00 30%
Furniture & Fixtures (patients bed, table, etc) 71,970.00
Other PPE (Washing Machine, etc) 14,029.00
Cellular phone 4,850.00
Total 1,176,101.00
3 Honoraria
(2) Physicians 591,331.29
Rural Health Personnel 240,642.21 23%
Pathologist 66,000.00
Total 897,973.50

TOTAL 3,975,122.00 100%

Findings and Comments

During the year-under audit, the team noted the following deficiencies on
how the City manages and utilize the Philhealth Capitation Fund:

34
a. No Budget Preparation and Planning

1. It is provided thatthe PCF shall be managed by the Local Government Unit


through the appropriate management mechanism of their local health
board. Review of the minutes of meeting of the board and interviews with
concerned officials revealed that the utilization of PCF was not planned nor
budgeted during the year (Capitation Fund Utilization and Program Plan).
Instead the fund was utilized only when the need arises. Even though PCF
is a trust fund and it is not stipulated in the MOA that utilization is based
on an approved budget, prudence dictates that the utilization of the fund
should be carefully planned and budgeted to achieve established goals,
objectives and strategies as far as health issues are concerned.

2. Also, the fund was not integrated in the City Development Plan and Annual
Investment Plan concerning the health department/issues.

b. Absence of Budget Accountability mechanism

Budget accountability encompasses the recording and reporting of


actual income and expenditures. It also includes the evaluation of operations
vis--vis planned targets. On the aspect of recording expenditures, it was
observed that the LHB did not keep track of the PCF spending. And as far as
the health issues are concerned, there is no conscious effort on the part of
LHB to relate or link expenditures with the performance or outcome of their
programs, projects and activities funded from the PCF.

Since no mechanism was established to monitor disbursements, the


following were observed:

- The budget (General Fund) of the City revealed that only P68,000 was
allotted for office supplies of the City Health Office, yet, the office has
spent a total of P546,043.25. Due to lack of APP from the office, the
necessity of spending more than what was budgeted for the office is
questionable.

- A total of P2,953,787.17remain unutilized.

c. Lack of supporting documents in the disbursement of 20%


Administrative Cost

1. Post audit of the disbursement of the administrative expense representing


twenty percent (20%) of the Philhealth Capitation Fund revealed that there
is no clear policy promulgated by the City (SP Resolution/Ordinance) on
the allocation of honoraria to be given to the physicians and other
personnel that may be entitled thereto (rates, supporting documents,
conditions, etc). This is contrary to Item 7, Congress of the Philippines

35
Joint Resolution (JR) No. 4 dated June 17, 2009 which stipulates that
salaries, wages, allowances and other emoluments and benefits of officials
and employees of local government units shall be determined by their
respective Sanggunians in accordance with pertinent provisions of R.A.
No. 7160. As a result, we observed the following deficiencies:

a) Was exclusively used to pay for honoraria of physicians and all


the personnel detailed in the City Health Office including job
order employees and personnel who have no direct participation in
delivering the OPB services to indigents. The budget should also
be used for capability-building and other trainings for health
personnel and not just solely for payment of honoraria.

b) No documentary support showing proofs of services for delivering


OBP services to indigents. Instead, these payments were just
supported with a letter from the Head of the City Health office
approved by the City Mayor indicating the percentage of
distribution of the fund and the corresponding payrolls.

2. The payment of referral fee to the Pathologist amounting to P66,000.00


was not supported with an official receipt.

Managements Comment

The management acknowledges the findings and will be discuss with the
Local Health Board as to the manner of disbursing the fund.

Recommendations:

Given the findings described above, the team makes the following
recommendations toimprove the undertakings of the Local Health Boardand
ensure that the PCF (now PFPR)is managed in the most effective and
efficientmanner for the advancement of the health services, responsive to the
needs of indigents in the City:

1. Prepare a Capitation Fund Utilization and Program Plan. Improve


linkage between planning and budgeting and prioritize wisely the use
of PCF to address the health issues of the City. All theseshould be
integrated in the Comprehensive Development Plan and Annual
Investment Plan of the City.

2. Formulate a clear policy approved by the Sanguniang Panlungsod that


will govern the proper distribution of the 20% administrative cost
including the basis of the allocation for the honoraria of physicians and
other personnel.

36
C. Value for Money Audit

Implementation of 20% Development Fund and Locally funded Projects

5. The efficiency of implementing various projects, programs and activities


(PPAs) for CY 2012 funded under 20% Development Fund and Locally
Funded amounting to P41,179,366.30 and P51,893,320.72, respectively, is
doubtful due to inadequate policy, planning, budgeting, execution and
monitoring mechanisms.

The Local Development Council (LDC), created under Section 106 of the
RA 7160, shall initiate the formulation of a comprehensive multi-sectoral
development plan to be approved by the Sanggunian. Such plans/programs
specifying the proposed projects are required under Article 410 of the IRR of the
Act to be submitted to the local finance committee before the calendar for budget
preparation, for inclusion in the local government budget, as well as, in the
budgets of National Government Agencies (NGAs) or Government-Owned or
Controlled Corporations (GOCCs) concerned. The matrix below shows the
planning frameworks of LGUs:

Planning Content Timeframe


Instrument
CLUP Policy guide for the regulation of land uses embracing 10-15 years
theLGUs entire territorial jurisdiction. It covers policies
onsettlements, protected areas, production areas,
andinfrastructure
CDP A multi-sectoral plan to promote the general welfare of 6 years
the LGU. Sectoral goals, objectives, strategies,
programs,projects and legislative measures
ELA A term-based component of the CDP. Sectoral 3 years
goals,objectives, 3-year strategies, prioritized programs
andprojects, prioritized legislative measures

LDIP Principal instrument for implementing the CDP and 3 years


ELAand to some extent, certain aspects of the
CLUPprioritized PPAs and program planned financing
AIP Yearly investment program of the LDIP. Prioritized PPAs 1 year
proposed for inclusion in the annual local budget

In addition, the implementation and monitoring of PPAs in the LGUs is


governed by some of the following law, rules and regulations:

Law, Rules and Relevant Provisions/Particulars


Regulations
Section 7 of Requires government agencies to plan their procurement by
IRR of RA preparing Annual Procurement Plan (APP), one each for
9184 Goods, Infrastructure Projects, and Consulting Services, that

37
Law, Rules and Relevant Provisions/Particulars
Regulations
should be duly linked in the budget and AIP of the City.
These documents serve as guide to the LGUs in ensuring the
effective and efficient utilization of their meager resources

Section 17.6 of No bidding and award of contract for infrastructure projects


IRR of RA shall be made unless the detailed engineering investigations,
9184 surveys and designs, including the acquisition of the ROW,
for the project have been sufficiently carried out and duly
approved in accordance with the standards and specifications
prescribed by the Head of the Procuring Entity concerned or
his duly authorized representative.

Annex A, IRR Detailed engineering shall proceed only on the basis of the
of RA 9184 feasibility or preliminary engineering study made which
establishes the technical viability of the project and
conformance to land use and zoning guidelines prescribed by
existing laws

Section 6, Local government units are reminded to adhere to


Administrative prescribed limits on personal services expenditures under the
Order No. 103 Local Government Code, and to maximize the utilization of
twenty percent (20%) of their Internal Revenue Allotments
for development projects
Section 109 Functions of Local Development Councils-
(5), RA 7160 xxx
(5) Coordinate, monitor, and evaluate the implementation of
development programs and projects

These existing policies and guidelines provide guidance to the LGUs


actions and initiatives and assure successful program implementation of the LGU.
However these provisions were not strictly complied with and followed by the
agency. Note that this has been the subject of observation in the previous years
and has remained uncorrected until now and consequently resulted to the
following:

a. Inadequate policy, planning and budgeting

It can be noted in the Annual Investment Plan (AIP), Annual and


Supplemental Budget for CY 2012 that the PPAs were described in generic
terms, lump sum appropriation and lack specificity such as the cost (ABC),
location(s) and time frames of implementation of each PPAs. This is
illustrated (Table 1) in a number of projects costing P69.6 Million described
merely as:

38
Table 1.
PPAs Schedule of Expected Output Amount
Implemen-
tation
Installation and Maintenance January to Installed and 1,652,071.00
of City Streets and Brgy. December maintained 90% of
Lighting System city & barangay
lighting system
Progressive Construction/ January to Constructed/ Rehab/ 13,000,000.00
Rehabilitation/ Improvement December Improved at least
of City Cultural & Sports 75% of City Cultural
Center & Sports Center
Concreting of City Road/ January to Concreted at least 10,000,000.00
Streets December 100olnm. More of
less of road annually
Construction of City Drainage January to Constructed at least 3,000,000.00
Canal-City Wide December 900 lnm. Drainage
canal annually
Construction/ Rehabilitation January to Constructed/ Rehab 5,000,000.00
of Barangay Roads/ Drainage December at least 1km. more or
Canal less of barangay road
Constructed/ Rehab
at least 500lnm.of
barangay drainage
canal
Tri-Media Program January to To have promoted 200,000.00
December and informed the
community of the
accomplishment of
the city
Sports Development Program January to Improved, discovered 1,500,000.00
December and enhanced the
ability of youth in
Sports Devt program
Cultural Enhancement January to To have conducted/ 800,000.00
Program & Operation Services December participated various
cultural enhancement
program
Gender & Development January to Strengthened gender 800,000.00
Program (GAD) December biases issue
Senior Citizen Program January to To have served at 700,000.00
December least 80% of the total
number of senior
citizen members
Peacekeeper /Social Security January to Reduced criminal 2,500,000.00
Program December rate by 30% and
maintained peace and
Traffic Enforcement Program January to 2,500,000.00
order in the area
December
None
Security Program January to 4,000,000.00
December
Cooperative Assistance January to To have increased 200,000.00
Program December number of
Cooperatives assisted

39
PPAs Schedule of Expected Output Amount
Implemen-
tation
by 30%

Agricultural Support Services January to To have increased 200,000.00


Program December agricultural
production by 30 &
more or less
Improvement & Maintenance January to To have 80% 600,000.00
of Baras Bird Sanctuary December maintained &
improved the
DECELA
Maintenance & Improvement January to To have 80% 100,000.00
of DECELA December maintained &
improved the
DECELA
Improvement & Maintenance January to To have 80% 300,000.00
Of City Public Market December maintained improved
the public market
Investment Promotion January to To promote the city 500,000.00
Program December and increase number
of investors &
businessman by at
least 20% more or
less annually
Barangay Development January to Increased by at least 15,000,000.00
Projects & Program- December 30% delivery of basic
20Barangays @ services to the
750,000.00/brgy barangays
Various Programs & Projects January to Increased by at least 1,050,000.00
Of SP @ 87,500.00 each December 30% delivery of basic
services to the
barangays
Purchase of School/ Office May to July To have purchased 300,000.00
Supplies for Teachers various school &
Office supplies for
teachers
Construction of School January to To have constructed 2,000,000.00
Buildings December at least 4 classrooms/
schools buildings
Repair & maintenance of January to To have 1,000,000.00
School Buildings December repaired/maintained
at least 75% of
school buildings city
wide
Procurement of Textbooks and May to July To have procured 500,000.00
Instructional Materials textbooks and
instructional
materials to all
schools
Procurement of IT Equipment January to To have procured IT 500,000.00
and Software December equipment and
software for various
schools

40
PPAs Schedule of Expected Output Amount
Implemen-
tation
Conduct/Attendance to January to To have conducted/ 700,000.00
relevant Trainings/ Seminars December attended various
trainings/ seminars
Conduct/ Participation to January to To have conducted/ 1,000,000.00
Sports Activities December participated to all
sports activities
Total 69,602,071.00

AIP was not supported with comprehensive data and information that
will show the extent of the problems of the City and how to address it. The
expected outputs of projects, plans and activities were not properly identified
and prioritized to achieve the Millennium Development Goals (MDG). The
quantitative and qualitative results that the agency is aiming for were not
determined. Further, the results whether immediate or long-term which
refer to the change that will occur after implementing the activity were not
stated.

In addition, it was also observed that specific provisions detailing the


expenditure program of each PPAs such as policies and guidelines to be
adopted, strategies, mechanics, rates (honorarium, allowance, cash
assistance/donation) and limitations in the use of funds were also lacking.

b. Low Budget Utilization/Unimplemented Projects

Analysis of the agencys Statement of Appropriations, Allotment,


Obligation and Balances vis--vis accomplishment reports revealed that about
28% of Current Funds and 76% of Continuing Funds remain unobligated.
These translate to unimplemented projects. The exact amounts are shown in
Table 2.

Table 2. Not implemented


PPAs/Source of Appro. Amount Percentage
Fund Obligated Unobligated Obli Unobli
Current
20% DF 63,377,089.53 38,753,968.50 24,623,121.03 61% 39%
Locally Funded 57,270,700.00 47,809,254.24 9,461,445.76 83% 17%
Total 137,568,666.26 86,563,222.74 34,084,566.79 72% 28%
Continuing
20% DF 16,041,342.29 3,323,171.86 12,781,170.43 21% 79%
Locally Funded 9,764,750.53 2,879,345.86 6,885,404.67 29% 71%
Total 25,806,092.82 6,202,517.72 19,666,575.10 24% 76%
Grand total 146,453,882.35 92,765,740.46 53,751,141.89 63% 37%
Note: Unobligated = unimplemented projects

41
Table 3 shows 33% and 9% of current and continuing funds,
respectively were not fully implemented.
Table 3. Not fully implemented
PPAs/Source of Obligated Amount Percentage
Fund Disbursements Balance Disb Bal
Current
20% DF 38,753,968.50 19,853,000.99 18,900,967.51 51% 49%
Locally Funded 47,809,254.24 37,734,996.36 17,084,646.41 79% 21%
Total 86,563,222.74 57,587,997.35 28,975,225.39 67% 33%
Continuing
20% DF 3,323,171.86 3,029,335.11 293,836.75 91% 9%
Locally Funded 2,879,345.86 2,598,482.16 280,863.70 90% 10%
Total 6,202,517.72 5,627,817.27 574,700.45 91% 9%
Grand total 92,765,740.46 63,215,814.62 29,549,925.84 68% 32%
Note: Balance=Not fully implemented projects

Also, prior years (CY 2011 & below) projects funded under the 20%
Development Fund and Locally Funded (continuing appropriations)
amounting to P12,781,170.43 and P6,885,404.67, respectively remain
idle/unutilized, thus the necessity of these projects are questionable.

c. Economic Efficiency of Infrastructure projects is doubtful

In the review of the infrastructure projects being undertaken by the City, it


appears that projects were implemented even without feasibility studies and
detailed engineering activities. This is due to absence of the following
supporting documents:

1. Certification that the detailed engineering surveys and designs have been
conducted according to the prescribed agency standards and
specifications(Section 4, Annex A of IRR, RA 9184).

2. The Design Plans, Program of Works (POW) and Approved Budget for
the Contract (ABC) are not supported with Detailed Unit Price Analysis
(DUPA) that contains/and or supported with the following to justify the
plans and cost estimates:

a) Model and capacity of equipment to be use


b) labor rates derivation
c) Canvassed prices of materials
d) Derivation of the cost of materials delivered on site

All the observations previously mentioned could have been brought about
by the following deficiencies:

1. Procedural lapses and non-compliance to the Implementing Rules and


Regulations (IRR) of R.A. 9184.

42
2. Limited technical capacities in planning and project development.
3. Limited number of technical personnel to carry out feasibility studies and
detailed engineering (this was attributed to delays of formulating
Program of Works and Program Designs).
4. Lack of Budget Accountability (monitoring and evaluation mechanism)
It was observed that the CDC did not keep track of the implementation of
AIP; concerned offices did not report to the CDC either. There was no
conscious effort to evaluate the implemented projects vis--vis planned
targets.

Managements Comment/Auditors Rejoinder

The management said that the findings and recommendations were already
addressed thru various efforts such as issuing Executive Orders and SP
Resolutions to monitor the PPAs of the City.

However, the reports the team reviewed for this finding speak otherwise.
We suggest that the management review these unimplemented and delayed
projects vis--vis program/project plans to see where the problems lie. The team
also emphasized the need to carefully plan the PPAs with complete, specific and
comprehensive data and information that will show the extent of the problems of
the City and how to address them.

Recommendations:

Given the findings described above, the team makes the following
recommendations toimprove the programs and projects implementation of the
City andto help ensure that the resources are managed in the most effective and
efficientmanner to meet the needs of the constituents and stakeholders of the City.

1. To improve planning and budgeting capabilities

a. Carefully plan and organize the project management plan. Often,


project planning is ignored in favor of getting on with the work.
However, many people fail to realize the value of a project plan in
saving time, money and many problems.
b. Prepare APPs that are duly linked to AIP to ensure that every
procurement is cost effective and efficient.
c. Enlist the help of other experts for technical knowledge on feasibility
studies and project development.
d. Widen the network for collaboration.
e. The guidelines and policies involving the implementation of programs
or project should already been included in the planning and budgeting
of these projects, duly approved by the Sangguniang Panlungsod.

2. To ensure that the plans are carried out

43
f. Clearly describe how the project will be managed and controlled in its
delivery/execution phase
g. Fast track the implementation of unimplemented PPAs.
h. Evaluate whether the programs and projects funded from prior years
budget are still relevant otherwise revert the fund to other programs
and projects which is more needed and applicable upon
recommendation of the Local Chief Executive and approval by the
Sanggunian concerned (Section 322 of RA No. 7160)
i. Make sure that the timeline set for every program/project is realistic
and is strictly followed.
j. The timing of execution spells out the success of a program or a
project.
k. Close coordination among offices.

3. To enhance accountability

l. The CDC is advised strictly to monitor and evaluate PPAs (Section


112 of RA 7160) and provide for project support or program
maintenance.

4. To improve economic efficiency in infrastructure projects.

m. Strictly abide by the provisions of Section 4, Annex A of IRR of RA


9184. Feasibility study and detailed engineering should be conducted
first before implementing any project.
n. Support the Design Plans, Program of Works and Approved Budget
Contract with a Detailed Unit Price Analysis.

Revenue Generation

6. The agency has yet to effectively exercise its authority to generate and collect
taxes. A number of revenue options under RA 7160 were not fully
maximized. At present the agency is still greatly dependent on IRA to meet
around 79% of its requirements.

During CYs 2008-2012, the LGU generated revenues of around P54


million to P67 million annually from local sources. Analysis of records revealed
that these revenues were not sufficient to meet its increasing needs. The LGU has
been greatly dependent on IRA to meet around 79% to 84% of its requirements,
as presented in the succeeding page.

Year Amount Percentage

44
IRA Local IRA Local
Revenues Revenue
2008 205,720,714.42 54,405,421.58 79.17% 20.82%
2009 246,051,014.00 64,734,868.74 79.08% 20.91%
2010 275,048,514.00 55,267,932.70 83.27% 16.73%
2011 315,249,772.00 57,390,424.33 84.60% 15.40%
2012 253,260,357.00 67,224,610.23 79.02% 20.98%

However, these revenues along with the share from IRA have remained
insufficient to address their requirements. At present, the LGUhas resorted to
loans and borrowings to finance developmental projects.
Further analysis of records disclosed that the LGUhas not fully exercised
its taxing powers and has yet to explore potential revenue sources allowed under
existing laws and regulations. This is discussed in the following instances:

a. The collection system adopted on taxes being imposed by the City may
not be considered efficient and effective due to inadequate policies and
laxity by the Treasurers office to validate the gross sales or receipts of
business establishments.

LGUs have the power to create sources of revenues, one of which is


the power to levy business tax. As provided under Section 143 of the Code,
LGUs may impose business tax on different business establishments based on
their gross sales or receipts for the preceding year.

Likewise, Section 140 of the Citys Revenue Code, as prescribed the


rates of business taxes that will be imposing to various businesses. Further,
Section 144 (d) of the same code, require operators of business subject to tax
to submit a sworn statement of their gross sales or receipts for the preceding
calendar year or quarter in such manner and form as may be prescribed by the
City Treasurer.

To validate the sworn statement of gross sales or receipts, the City


Treasurer or his authorized representative is mandated by LGC to inspect and
verify the gross sales or receipts of the taxpayers. [Section 470 (d)(4)]

The Citys policy of merely requiring firms/ business establishments


for a sworn statement from the manager/owner of their gross receipts is
inadequate. It is also observed that for CY 2012 there has been no attempt
from the City Treasurers Office to cross check or validate the sworn
statements with relevant information that may be available in other
government agencies like the BIR such as audited financial statement and
monthly payments of business tax (VAT and non-VAT). This practice may
result in grave under-declaration of income.In the absence of supporting
documents, there would be no concrete and accurate basis for the evaluation
of the application as well as the computation of the correct tax.

45
b. Inefficient implementation of local tax laws such as the following:

1. Ad valorem tax on idle lands was still not imposed and collected by
the City as mandated under Section 236 of LGC and Section 85 of the
agencys Revenue Code, as amended.Uncollected yearly taxes on idle
lands covering sample selected areas already amounted to P
117,851.65

Under Section 236 of the LGC, LGUs may, likewise, levy an


annual tax on idle lands at the rate not exceeding five (5%) percent of the
assessed value of the property which shall be in addition to the basic real
property tax.

Review of records disclosed that Section 85 of the Revenue Code


of the agency, as amended,imposed an additional ad valorem tax of 5% of
the assessed value of the property on idle lands. Examination of the tax
and assessment roll, however, revealed that the agency does not maintain a
record or list of all idle lands for CY 2012, hence they are not collecting
the said tax.

Note that this has been the subject of observation in the previous
years and has remained uncollected until now.Ocular inspections by the
team last CY 2011 revealed that there were idle subdivision lots and
agricultural lands which should have been subjected to ad valorem tax. As
can be gleaned in the tabulation below, yearly tax due on the sampled
subdivisions alone could have generated additional income to the City of
around P 117,851.65.

Barangay Places Inspected No. of Idle Assessed Tax Yearly


Lands Value Rate Tax Due
Buenaflor 1 Agricultural 223,110 5% 11,155.50
Lot (9.92 hec.)

Section 10
56 Residential 551,150 5% 27,557.50
Lot

Section 4
Grio 70 Residential 353,870 5% 17,693.50
Lot

46
Lot 421
Calean 2 lot 50,680 5% 2,534.00
Agricultural
Lot (5 hec.)

Diamante
44 Res. Lot 612,210 5% 30,610.50

Section 14
1 Agri. Lot (5 80,540 5% 4,027.00
hec.)

Section 496
20 Res. Lot 230,600 5% 11,530.00

Calean Section 16
1 Res. Lot 95,760 5% 4,788.00

Section 14
Kalandagan 1 Res. Lot 87,563 5% 4,378.15

Section 3
15 Res. Lot 71,550 5% 3,577.50

Section 4
Total 117,851.65

2. Non enforcement and collection of Franchise Tax from Franchise


Grantees with business operations in the City in accordance with
Article G of the Revenue Code of the City, as amended.
Under Article G of the Citys Revenue Code, as amended, provided that:

Section 104. Imposition of Franchise Tax. Any provision of


special law or grant of exemption to the contrary
notwithstanding, any person, corporation partnership or

47
association enjoying a franchise whether issued by the
national government or local government and doing
business in the City of Tacurong, shall pay a franchise tax
at the rate of fifty percent of one percent (50% of 1%) of
gross receipts and sales derived from the operation of the
business in Tacurong City during the preceding year.

Section 105. Coverage.

a) All business enjoying a franchise either granted by the


Congress of the Philippines, national franchising office,
or the Sangguniang Panlungsod when operating within
the territorial jurisdiction of Tacurong City shall be
subject to the levy and other City regulatory measures.

b) All government-owned or controlled corporations


engaged in public utility, public service and regulated
amusements operating in Tacurong City.

c) Any activity which the City Government is authorized


by law to provide, establish, maintain, operate or grant
establishments in operation thereon through franchise to
private persons such as but not limited to
communication and transportation facilities, pay
parking spaces, public transportation terminals, stalled
vehicles towing and impounding services, toll roads,
public corral, city pound, slaughterhouses, livestock
market, public markets, talipapa, electric supply
generation and distribution, public cemeteries,
sewerage system, waste collection and disposal and
other public utility.

Review of the Income Account - Franchise Tax (724) disclosed


that the City failed to collect said taxes from franchise grantees doing
businesses within the territorial jurisdiction of Tacurong City. These
franchise grantees/businesses engaged in public utility are the following:

1. Philippine Long Distance Telephone Company Inc. (PLDT)


2. Sultan Kudarat Telecommunication System Inc. (SKTSI)
3. Radyo Natin (Radio Station)
4. Sultan Kudarat Water District (SKWD)
5. JVL Star (Cable TV)
6. Sultan Cable System Inc. (SULCASI)
7. Sultan Kudarat Memorial Park (Public Cemetery)

48
Interview with the City Treasurer regarding the failure of the City
to collect Franchise Tax, specifically from PLDT, has revealed that this
franchise is exempted because their franchise contains in lieu of all
taxes clauses and they are already paying the business tax. As way of
rejoinder, it is already a settled jurisprudence, the first was in the 2001
case of PLDT vs. City of Davao, second, in case of PLDT vs. City of
Bacolod, et al and third, in the very recent case of PLDT vs. Province of
Laguna, that PLDT is not exempted from paying local franchise and
business taxes.

c. Failure of the City to conduct a thorough tax mapping of business


establishments.

Business tax mapping is proven to be one of the effective revenue


enhancement measures. This aims to identify new businesses that have been
put up, know whether there has been a conversion or use of a residential area
for business purposes, verify and update (if necessary) the true value of
existing businesses, and validate the line of businesses as registered.

Interview with the Chief-BPLO disclosed that the business tax


mapping has not been conducted yet; hence, appropriate actions could not be
implemented by the City of any deficiencies noted.

Managements Comments/Auditors Rejoinder

The management replied that the City Treasurers Office is exercising its power
and function in the validation and verification of the gross sales or receipts of the
taxpayers. They also reasoned that they are already implementing the Presumptive
Income Level Assessment and that further study or research will be made for the
enforcement of the Ad Valorem Tax and Franchise Tax.

Regarding the tax mapping, the management replied that this has already been
included in the plan of the City Treasurers Office and BPLO.

As a rejoinder, this team cannot find any evidence or any document that will show
that the CTO validated or verified the gross sales or receipts of the business
establishments, such as validating sworn statements with relevant information available
in other government agencies like the BIR such as audited financial statement and
monthly payments of business tax (VAT and non-VAT). Regarding the implementation
of the Presumptive Income Level Assessment, this team has not found any provision in
the Citys Revenue Code or any Tax Ordinance regarding the use of Presumptive Income
Level Assessment, hence we cannot rely on the statement that the agency is
implementing such.

49
With regard to the enforcement of Ad Valorem and Franchise Taxes, we would
like to emphasize that the City is duty bound to collect these taxes and should enforce
these without delay, unless there is an ordinance stopping such collection.

Recommendations:

In order to address the noted observations and increase collections, the Team
recommended that management:

a. Formulate a clear cut policy (SP Ordinance) that will improve the assessment
of business taxes such as:

1. Require all business establishments with at least gross receipts over


P500,000/annum that the sworn statement of gross sales or receipts for
the preceding calendar year should be supported with documents such
as audited financial statements and BIR Business Tax Returns (VAT &
Percentage Tax Remittance).
2. For smaller firms and market, make use of presumptive minimum
gross sales/receipts levels.
3. For lessors of Real Estate, sworn statements should at least be
supported with notarized contracts of lease.
4. Require that all real estate transfer tax payments must be accompanied
by confirmation of payment of other taxes, including the business tax
and mayors permit fees.

b. Require theCity Treasurer to inspect business establishments within the


jurisdiction of the City to ensure effective and efficient collection of business
taxes as mandated under [Section 470 (d)(4)] of LGC.

c. Enforce the collection of Ad Valorem Tax and Franchise Tax.

d. Conduct and intensify business tax mapping.If possible, the Treasurers


Office/BPLO coordinates with the Planning Office by linking to the
geographic information system (GIS) in order to identify new business and
commercial areas more easily.

D. Financial and Compliance Audit

Compliance with the Procurement Law (RA 9184)

7. The agency failed to prepare and submit an Annual Procurement Plan for
Common-use Supplies and Equipment (APP-CSE) for 2012 and 2013 as
required under DBM Circular Letter No. 2011-06 and 2011-06A. As a result,
the procurement of common used supplies and equipment were acquired
thru piecemeal scheme, thus, the agency was not able to obtain the most
advantageous price in its purchases.

50
Section 4 of DBM Circular Letter No. 2011-06 dated August 25, 2011
mandated that all National Government Agencies, including Military and Police
Units; GOCCs, GFIs, SUCs and LGUs are required to submit their Annual
Procurement Plan for Common-Use Supplies and Equipment (APP-CSE), using
the prescribed format. The submission of the APP-CSE, nonetheless, shall not
affect the responsibility of the procuring entity to submit their respective Annual
Procurement Plan pursuant to Section 7 of RA 9184 and its IRR.

The aforesaid Circular Letter, under Sec. 4.2 thereof, specifies the
deadlines for the submission of the APP-CSE; however, said deadlines had been
subsequently amended under DBM Circular Letter No. 2011-06A, as quoted
hereunder:

3.0 Thus, the following provisions shall supersede Item Nos. 4.2 and
4.3 of CL 2011-6, to read as follows:

4.2 The accomplished APP-CSE shall be submitted to the DBM on the


following due dates:

FY 2011 APP-CSE, on or before October 7, 2011;


FY 2012 AOO-CSE, on or before November 15, 2011; and,
The APP-CSE for the ensuring years thereafter, on or before
November 15 of each year. x x x

4.2.1 Procuring entities of the NGAs including SUCs, LGUs and


GOCCs/GFIs shall e-mail their APP-CSE at
app@procurementservice.org or click the provided link in the
Procurement Service website and shall submit one (1) hardcopy to the
following:

xxx
Procuring entities in the regions to the concerned DBM
Regional Office (RO).

As a rule, all government agencies are mandated to procure common-use


supplies and equipment from the Procurement Service of the Department of
Budget and Management (Sections 5[g], 52.1[b] and 53.5 of IRR, RA 9184 and
DBM Circular Letter No. 2011-6). In case the ordinary or regular office supplies
and equipment are not available at PS-DBM, the procuring entity may obtain
these items through the alternative method of procurement known as shopping
under Section 52(b) of the IRR of R.A. 9184. This is done by simply requesting
for the submission of price quotations directly from the suppliers of known
qualifications, provided that the amount thereof does not exceed the amount of
threshold for the specific agency. Otherwise, if it exceeds such amount, the

51
procuring entity must conduct public bidding as provided by Section 10 of R.A.
9184 to procure such items in bulk.

Inquiry with the BAC officials of the agency revealed that the required
APP-CSE for 2012 and 2013 was neither prepared nor submitted nor was emailed
to the PS-DBM as likewise required.

The agencys noncompliance with the aforementioned requirement as


stated in DBM Circular Letters 2011-06 and 2011-06A could eventually result in
the non-inclusion of the agencys actual and projected procurement of common
use supplies and equipment in the Consolidated APP-CSE for government, thus
preventing the PS-DBM from accomplishing its mandated function of projecting
inventory requirements and the overall management of the governments central
procurement of common-use supplies.

It appeared that the agency was not able to carefully and properly schedule
its purchases even if there was a prepared APP. This year, it was able to procure a
few items from PS-DBM but was not able to fullyutilize its services and acquire
consumables, equipment and other similar goods in bulk. Instead, these were
again acquired piecemeal thru alternative methods of procurement such as small-
value procurement (SVP) and shopping, and even thru competitive bidding, which
were not efficient and economical and thus, disadvantageous to the City in so
many ways. The purchasing system of the agency also showed that the City
favored procuring from various local suppliers rather than obtaining commodities
from PS-DBM, which by far offers the most economical purchases. Table below
illustrates this:

Procured thru Amount Percent


PS-DBM 117,238.80 3%
Various Local Suppliers 4,131,101.06 97%
4,248,339.86

The team would like to reiterate that this piecemeal scheme of procuring
common-use goods needed at or about the same time, or issuance of two or more
Purchase Orders based on common-use goods requisitions for items needed at
about the same time by the requisitioners is considered as Splitting of Purchase
Order which is contrary to Section 26 of COA Circular No. 92-386.

Further, in these piecemeal purchases, competitive bidding was still used


as mode of procurement which is so impractical and uneconomical. Shown below
are the comparison between the APP and the actual average number of piecemeal
procurement transactions per quarter that were processed by the agency as of
September 2012.

Common/Simil Per APP Per Actual


ar Goods Mode No. of Mode of Proc No. of transaction

52
of transaction
st
Proc 1 2nd 3rd 1st 2nd 3rd
Qtr Qtr Qtr Qtr Qtr Qtr
Office Supplies CB 1 1 1 P. Bidding 25 37 30
Alternative mode 12 12 21
Total 37 49 51

IT Equipment CB 1 1 none P. Bidding 9 5 13


Alternative mode 2 2 0
Total 11 7 13

Drugs & SVP 1 1 1 P. Bidding 2 3 5


Medicines Alternative mode 2 13 7
Total 4 16 12
Total 52 72 79

Furthermore, numerous Purchase Requests, Purchase Orders and


supporting documents were prepared and processed daily, resulting to tedious
procurement procedures notwithstanding the incurrence of more expenses for the
office supplies used in printing the supporting documents.

Managements Comments/Auditors Rejoinder

The management replied that they have an APP-CSE for CY 2012 but was
prepared late due to late submission of PPMP by various offices; hence the
required submission to the DBM by November 15 was not met.

The management also reasoned that they tried to procure from PS-DBM in
Koronadal City and said that PS-DBM Koronadal could only supply 20-25
percent of their supply requirement. The prices of supplies from PS-DBM in
Koronandal City may be low but if the cost to procure in terms of gas and oil
expenses and traveling expenses of personnel are added, the total cost would be
higher.

Again, we would like to stand by our findings that purchasing from PS-
DBM would be more advantageous and economical to the agency, aside from the
fact that the law requires it. We also would like to reiterate the value of buying in
bulk to minimize additional cost of procurement. Also, we encourage the
Management to compute the price of the supplies needed + other costs that may
incur in purchasing from PS-DBM vis--vis prevailing lowest cost from other
supplier(s) to show the difference and to justify that purchasing from PS-DBM is
in fact disadvantageous to the agency.Regarding their argument that the PS-DBM
has limited supply, this team is not convinced that this is such the case. Because
the agency was unable to submit the required APP-CSE, obviously, the agencys
supply requirement will not be supplied by the PS-DBM because the agencys
actual and projected procurement of commonuse supplies and equipment in the
Consolidated APP-CSE for government were not included.

53
Recommendations:

We recommended that the agency:

a. Strictly comply with the requirements under DBM Circular Letter Nos.
2011-6 and 2011-06A, to ensure inclusion of agency procurement
activities for common-use supplies and equipment in the Consolidated
APP-CSE, and afford complete and accurate projection by the PS-
DBM of inventory requirements of government.

b. Take advantage of the services of the PS-DBM in the procurement of


common-use supplies because aside from being required by IRR of
RA 9184, this will enhance the City Governments efficiency and
economy as this will free the agency from the tediousness of attending
to recurring transactions, and provide greater time for the procurement
of high value, highly specialized requirements for its more significant
projects.

c. Submit its Annual Procurement Plan for common-use supplies and


equipment (APP-CSE) on or before November 15 of each year to
DBM using the prescribed format as provided under DBM Circular
Letter No. 2011-6. This will help the DBM to anticipate the volume of
demand for the different common use supplies of the government for
the ensuing year.

d. In case of non availability of items in the PS-DBM, we recommend


that procurement of these common use goods should be procured in
bulk quantities to avoid piecemeal purchases and Splitting of Purchase
Order.

8. Procedural lapses and non-compliance to the Implementing Rules and


Regulations (IRR) of R.A. 9184 were still observed on the procurement
procedures, thereby casting doubts to the commitment of the City
Government to adhere to the principles of transparency, competitiveness,
accountability, equity, efficiency, and economy in its procurement process.

Section 3 of Republic Act (R.A.) No. 9184 otherwise known as the


Government Procurement Reform Act states that Government procurement
shall be governed by the following principles:

54
1. Transparency in the procurement process and in the implementation of
procurement contracts through wide dissemination of bid opportunities
and participation of pertinent non-government organizations.

2. Competitiveness by extending equal opportunity to enable private


contracting parties who are eligible and qualified to participate in
public bidding.

3. Streamlined procurement process that will uniformly apply to all


government procurement. The procurement process shall be simple
and made adaptable to advances in modern technology in order to
ensure an effective and efficient method.

4. System of accountability where both the public officials directly or


indirectly involved in the procurement process as well as in the
implementation of procurement contracts and the private parties that
deal with GOP are, when warranted by circumstances, investigated
and held liable for their actions relative thereto.

5. Public monitoring of the procurement process and the implementation


of awarded contracts with the end in view of guaranteeing that these
contracts are awarded pursuant to the provisions of the Act and this
IRR, and that all these contracts are performed strictly according to
specifications.

Review of the procurement procedures and post audit of sample


disbursement vouchers for CY 2012 still disclosed non-compliance to the
Implementing Rules and Regulations (IRR) of R.A. No. 9184. Note that this has
been the subject of observation in the previous years and has remained
uncorrected until now.

a. On the Basic Elements Annual Procurement Plan

1. No APP was prepared/approved for procurements under Special


Education Fund, Trust Fund and Supplemental Budget No. 2 and No.
3.

2. Deficiencies were observed in the approved APP of General Fund, as


shown below:

a) Disbursements that do not require procurement were included in


the APP, such as travelling expenses, taxes, insurance premiums,
interest expenses, other fees, membership dues, job order,
honoraria and loan payments

55
b) The APP for Infrastructure projects were described in generic
terms, lump sum appropriation and lack specificity such as the cost
(ABC) and location(s) for each project.

c) The mode of procurement which the City utilized for gasoline and
repair and maintenance expense for motor vehicles is SVP, which
is not proper. This will result in splitting of contracts since the
Approved Budget Contract is higher than the threshold amount
allowed under RA 9184 to be considered as SVP as illustrated
below:

Procurement Program/Project ABC Per APP Threshold Amount


per IRR (3rd Class
City)
Gasoline, Oil & Lubricants
1st Quarter 2,308,223.00
2nd Quarter 1,873,204.50 400,000.00
3rd Quarter 2,009,735.50
4th Quarter 1,975,967.00
Repair & Maintenance
Construction & Heavy Equipment
1st Quarter 1,015,000.00
2nd Quarter 1,010,000.00 400,000.00
3rd Quarter 1,010,000.00
4th Quarter 1,000,000.00

d) Some items in the APP do not match the budget allotment, per
appropriation ordinance (Annual Budget). Shown below are
sample comparisons with differences:

ABC Per
Procurement
APP Annual Difference
Program/Project
Budget
Office Supplies 3,896,852.00 3,634,000.00 262,852.00
Accountable Form Expense 469,900.00 870,000.00 400,100.00
Gasoline, Oil & Lubricants 8,167,130.00 7,197,374.00 969,756.00

e) Absence of a sound mechanism to ensure that the Approved


Budget Contract (ABC) reflects the most advantageous prevailing
price for the City Government (Section 36 of the IRR)

f) The schedule of procurement activity is not responsive to the needs


of end users because the procurements were not scheduled ahead
of time to meet the needs of end users, as seen in the table below:

a.) Date of Start of Procurement Activity


Procurement b.) Date of Acceptance/Turnover
Program/Project
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Office Supplies a.) Jan. 17 a.) Apr. 10 a.) July 10 a.) Oct. 9
Expense b.) Feb. 20 b.) May 15 b.) Aug. 14 b.) Nov. 13

56
Drugs & Medical a.) Jan. 17 c.) Apr. 10 c.) July 10 c.) Oct. 9
Expense b.) Feb. 20 d.) May 15 d.) Aug. 14 d.) Nov. 13
Gasoline, Oil & c.) Jan. 17 e.) Apr. 10 e.) July 10 e.) Oct. 9
Lubricants d.) Feb. 20 f.) May 15 f.) Aug. 14 f.) Nov. 13

g) Overall, the APP was not fully used or considered by the agency as
the main tool for procurement discipline of the agency.

b. On the Procurement Procedures Competitive/Public Bidding

1. Minutes of meetings (opening of bids & preliminary bid evaluation)


were not detailed and not clear. No record if Eligibility Check was
conducted to determine if a prospective bidder is eligible to participate
in the bidding, using the non-discretionary pass/fail criteria, as stated
in the ITB.
2. There is no bid evaluation report, TWG report (or any form of
documentation that will prove that the BAC conducts a separate
detailed evaluation to assess the completeness of the bid and
arithmetical corrections (Section 32, IRR).
a. Per record, the opening and preliminary examination of bids is
the bid evaluation.
3. The BAC and TWG do not conduct a detailed post qualification to
determine the veracity of documents submitted. It can be noted that
the post qualification conducted by the BAC and TWG is only to
validate and verify whether the goods/infrastructure projects offered
complied with the technical specification/requirement specified in the
Bidding Documents. This team cannot find any documentation/report
evidencing that the BAC validate and verify the authenticity of
registration documents, mayors permit, tax documents, whether the
bidder with the LCB is not blacklisted, and if the individual bidder or a
sole proprietorship, is not related to the persons mentioned in Sec. 47,
IRR of RA 9184, among others.
4. Observers were not invited in all stages of procurement activities.
Record shows that observers were invited during pre-procurement (if
any), pre-bid conference, and opening and preliminary examination of
bids stage only.
5. Absence of Certification that the detailed engineering surveys and
designs have been conducted according to the prescribed agency
standards and specifications in conformance with the provisions of
Section 4, Annex A of IRR, RA 9184. (Infrastructure)
c. On the Procurement Procedures Negotiated Procurement After Two (2)
Failed Biddings

57
We noted that no document was available to justify that the following
procurement procedures under negotiated procurement were undertaken:

1. Mandatory review and evaluation on the: (a) terms, (b) conditions, (c)
specifications, and (d) cost estimates and the
recommendations/decisions made possible revisions/adjustments and
technical requirements of the bid to determine the reason for every
failed bidding. (Section 35.2, IRR of RA 9184)
2. Maintenance of a registry of suppliers as basis for selecting the
suppliers for negotiations. (Section 53.1.2.2, IRR of RA 9184)
3. Invite and engage in negotiations with a sufficient number of
suppliers. (Section 53.1.2, IRR of RA 9184)
4. Negotiation, submission of offer and selection of suppliers. (Section
53.1.3-5, IRR of RA 9184)
5. Validation whether it is entering into a contract with a technically,
legally and financially capable supplier. (Section 53, IRR of RA 9184)
6. Invitation to observers in all stages of the negotiation. (Section 53.1.6,
IRR of RA 9184)

In addition, it was also revealed that the negotiated procurement was


conducted by GSO and not by the Citys BAC.

d. On the Procurement Procedures Shopping and Small Value Procurement

1. The procuring unit delegated to conduct shopping and SVP does not
conduct detailed procedures to validate whether it is entering into a
contract with a technically, legally and financially capable supplier,
contractor or consultant.
2. The procuring unit that was delegated to conduct shopping and SVP is
also the unit authorized to receive the goods. This constitutes a lack of
appropriate segregation of duties (check-and-balance) which will lead
to irregular/inappropriate procurement decisions.

Discussed below are the observations resulting in non-compliance to the IRR of


RA 9184:

a. The agencys common-use office consumables, equipment and other similar


goods that can be procured in PS-DBM or in bulk were acquired piecemeal
thru alternative methods of procurement such as small-value procurement
(SVP) and shopping, which are not efficient and economical and thus,
disadvantageous to the City in so many ways. Also, in these piecemeal

58
purchases, competitive bidding was still used as mode of procurement which
is so impractical and uneconomical. (See separate findings for details)
b. A very limited number of offers received; biddings were unusually attended
by lone bidder on several occasions. This is unusual since the bid items are
common, regularly used and can practically be procured anywhere (not
specialized).
In some instances, the bid prices for certain items (office supplies) are the
same as the ABCs. This raises suspicion since the published ABC is the total
price of all office supplies and not per item. Also, this gives room for doubt
that the prices may be leaked since the item prices are not available to the
suppliers and are only stated in the PRs. This practice defeats the purpose of
competitive bidding since the bid price is practically the same thus, the agency
does not get the best deal (see Annex for sample Abstract of Bid)

c. Alternative methods of procurement (Shopping and SVP) were adopted by the


BAC in most of its procurements. These methods did not ensure the widest
publicity needed for competitive bidding because the BAC left entirely to the
procuring unit (canvassers) the determination of which suppliers are to be
served canvass quotations. These methods do not ensure that the most
advantageous price was obtained.

d. Contracts were awarded to ineligible and non-responsive bidders.

Name of Awarded Deficiencies in eligibility and post


Bidder Goods/ Infrastructure Date qualification requirements
Project/Contract
Amount
CA Betalac Various Infrastructure Various 1. Certificate of PhilGEPS Registration
Construction Projects totaling P dates expired on March 16, 2012.
21,273,533.07 2. Latest Income Tax Return is for Tax
Year 2010
3. No Latest Business Tax Return

Palmares Various Infrastructure Various 1. Tax Clearance is up to December


General Projects totaling P dates 31, 2011 only.
Merchandise 20,243,710.81 2. Latest Income Tax Return is for Tax
Year 2010
3. No Latest Business Tax Return

RAQI Various Infrastructure Various 1. Latest Income Tax Return is for Tax
Builders & Projects totaling P dates Year 2010
Construction 1,927,619.70 2. No Latest Business Tax Return
Supply

59
Name of Awarded Deficiencies in eligibility and post
Bidder
GESACOM 32 units of Handheld September 1. Noqualification
Tax Clearancerequirements
Radio totaling P 17, 2012 2. No Latest Business Tax Return
207,360.00 3. No Certificate PhilGEPS
Registration
4. No Purchasers and dealers permits
from the National
Telecommunications Commission
(RA 3846, otherwise known as the
Radio Control Law)
La Forteza Various Drugs, Various 1. No Tax Clearance
Pharmacy medicines, medical and dates 2. Latest Income Tax Return is for Tax
dental supplies Year 2010 only.
totaling P 744,069.40 3. No Latest Business Tax Return
4. No CPR from BFAD

AJ Softdrive Various IT Equipment Various 1. No Tax Clearance


and Software totaling dates 2. Latest Income Tax Return is for Tax
P1,390,302.00 Year 2010 only.
3. No latest Business Tax Return

Obleada Various office supplies Various 1. No Tax Clearance


totaling P2,062,912.87 dates 2. Latest Income Tax Return is for Tax
Year 2010 only.
3. No latest Business Tax Return

Rheexan Various office supplies Various 1. No Tax Clearance


totaling P1,454,448.24 dates 2. Latest Income Tax Return is for Tax
Year 2010 only.
3. No latest Business Tax Return

Asaliah Various office supplies Various 1. No Tax Clearance


totaling P471,498.15 dates 2. Latest Income Tax Return is for Tax
Year 2010 only.
3. No latest Business Tax Return

Managements Comments

The management replied that some recommendations are already being


implemented. The BAC is also grateful to this office for providing the audit
observation for them to study further and comply with the requirements of RA
9184. Nonetheless, the recommendations are well taken and will be implemented.

Recommendations:

Given the findings above and our standing recommendation that the City
Government should always strictly abide by the Implementing Rules and
Regulations (IRR) of RA 9184, the team makes the following recommendations
to be more effective and efficient in processing procurement activities of the City
60
and fully improve the procurement procedures to attain the principles of
transparency, competitiveness and economy.

a. Strictly adhere to the PPMP and APP and make sure that these PPMPs
and APPs were carefully planned and scheduled to better manage the
resources, produce economical result, make the procurement
procedures more efficient and practical in the part of the government
and do away with redundancy.

b. In order to better appreciate the linkage between the APP and the
budget process, the LGU may refer to the pertinent provisions of the
Updated Budget Operations Manual (UBOM). Step 2.3 of the Budget
Preparation Process provides as follows:

In the preparation of the of the budget for the ensuing year


it is important that the Project Procurement Management
Plan is prepared simultaneously with the budget proposal to
provide details on the mode of procurement, schedule of
procurement, technical description and specifications of the
materials, equipment and civil works to be procured and its
proposed budget. This plan more or less is an important
determinant factor in projecting the quantity and quality of
the expected results of the Program/Project/Activity. The
preparation of the PPMP should be guided by the expected
output and cost estimates embodied in the approved AIP

c. In determining a realistic ABC, the LGU should ensure that the


determined ABC for a particular procurement of goods is the most
advantageous price prevailing in the market, (i.e. the mid point of the
range obtained from the results of the market analysis on the
prevailing market price). For this purpose, its end-user units should
always be updated on the current and prevailing market price of the
goods intended to be procured. It is prudent for the BAC Secretariat to
develop a price monitoring system to properly guide the end user unit
in preparing the ABC.

d. Shopping and SVP should not be delegated to GSO to promote check-


and-balance.

Compliance with Tax laws, rules and regulations

9. Personnel employed by the City Government on contractual/job order basis


were not subjected to withholding tax on compensation contrary to Section
2.78 of Revenue Regulation 2-98 as amended.

61
The rules and regulation on withholding of income taxes on compensation
are prescribed under the following sections of Revenue Regulation No. 2-98:
SECTION 2.78. Withholding Tax on Compensation. The
withholding of tax on compensation income is a method of collecting
the income tax at source upon receipt of the income. It applies to all
employed individuals whether citizens or aliens, deriving income from
compensation for services rendered in the Philippines. The employer is
constituted as the withholding agent.
SECTION 2.78.1. Withholding of Income Tax on Compensation
Income.
(A) Compensation Income Defined. In general, the term
"compensation" means all remuneration for services performed
by an employee for his employer under an employer-employee
relationship, unless specifically excluded by the Code.
The name by which the remuneration for services is designated is
immaterial. Thus, salaries, wages, emoluments and honoraria,
allowances, commissions (e.g. transportation, representation,
entertainment and the like); fees including director's fees, if the
director is, at the same time, an employee of the
employer/corporation; taxable bonuses and fringe benefits except
those which are subject to the fringe benefits tax under Sec. 33 of
the Code; taxable pensions and retirement pay; and other income
of a similar nature constitute compensation income.

The basis upon which the remuneration is paid is immaterial in


determining whether the remuneration constitutes compensation.
Thus, it may be paid on the basis of piece-work, or a percentage
of profits; and may be paid hourly, daily, weekly, monthly or
annually.

Remuneration for services constitutes compensation even if the


relationship of employer and employee does not exist any longer
at the time when payment is made between the person in whose
employ the services had been performed and the individual who
performed them.
The BIR, re: request for legal opinion from DOH on the applicable
withholding tax rates for job order contract employees, Revenue Ruling No. 008-
2010 dated June 3, 2010, ruled that:
x x x compensation of professionals and non-professionals hired as
regular or contractual employees of the DOH are subject to the
graduated rates of withholding tax on compensation under Section
2.78 of Rev. Regs. 2-98, as amended x x x

62
Post audit of Disbursement Vouchers for the CY 2012 revealed that the
personnel employed by the City Government on contractual/job order basis were
not subjected to withholding tax on compensation. A sample computation of
compensation of a few selected job order personnel as of October 15, 2012
subjected to withholding tax illustrates the following:

Alfredo Zuriaga S.W. Devera A. Lechonsito


Total Net Income received as 97,038.47 69,446.54 75,646.93
of Oct. 15, 2012
Statutory Exemptions 50,000.00 50,000.00 50,000.00
Net Taxable Income 47,038.47 19,446.54 25,646.93
Income tax based on the
annual tax rate table
(withholding tax) 5,055.77 1,444.65 2,064.69
Note: all three have no dependent

Managements Comment

The management took well the findings and commits to implement our
recommendation.

Recommendation

We recommended that the management strictly enforce the BIR Rules &
Regulations regarding the withholding of Compensation Income Tax (BIR RR 2-
98, as amended) and apply the appropriate taxes on the City personnel on
contractual/job order basis.

Property, Plant and Equipment Accounts

10. The validity, existence and accuracy of the Property, Plant and Equipment
accounts worth P100,779,138.00 could not be ascertained due to the
discrepancy between the accounting records and the result of the inventory-
taking. This is attributed to the non-reconciliation of balances, absence of
evidence of ownership of Lands, failure to conduct a complete physical
inventory and failure to properly maintain the ledger and property cards).

Sec. 124, Volume I of the NGAS Manual requires periodic physical


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

63
Section 114 of the same Manual requires the Chief Accountant to maintain
Property, Plant and Equipment Ledger Card (PPELC) for each category of
plant, property and equipment. The General Services Officer is required to
maintain property cards for property, plant and equipment in their custody to
account for the receipt and disposition of the same. The balance per property
cards should always reconcile with the ledger cards of the accounting unit.

Review and comparison of the reported balances in the RPCPPE


amounting to P409,215,820.45 with the accounting records of P509,994,958.45
revealed a difference of P100,779,138.00. Details are shown in Annex 5.

Audit of PPE accounts disclosed errors anddeficiencies that resulted in the


discrepancy. Note that this has been the subject of observation in the previous
years and has remained uncorrected until now.

a. Land account totaling P 2,906,217.58 purportedly owned and booked


up by the City has no evidence of ownership (absence of Transfer
Certificate of Titles) or remained unregistered in its name. See Annex
6 for details.

b. The General Services Office failed to conduct a complete physical


count of the city property. It was also observed that the inventory-
taking made by the GSO was unreliable because the submitted
RPCPPE were not properly accomplished and lacked vital information
such as the following:

Name, designation and unit/office of the accountable officer who is


accountable to the PPE
Date of Assumption first day of assumption of the duties and
responsibilities as accountable officer
Description brief description of the article/item e.g. acer,
monitor for personal computer, Epson for printer, etc.
Property Number assigned property number by the Supply
and Property Unit
Unit of Measure e.g. piece, set, etc.
Unit Value cost per quantity unit
Balance per Card quantity of items or articles appearing in
the Property, Plant and Equipment Ledger Card.
On Hand per Count quantity of items or articles per physical
count
Shortage/Overage excess of the quantity and total value of
items or articles per Property, Plant and Equipment Ledger
Card over that of the physical count or vice versa.
Remarks whereabouts, conditions and other relevant
information relative to property, plant and equipment

64
c. Major improvements/renovations permanent or capital in nature
that appreciably extend the life of the infrastructure or equipment were
counted and recorded separately as a new structure or equipment by
the GSO in the RPCPPE instead of capitalizing it to the original cost
of the PPE and counting it as one.

d. There was no regular reconciliation of records made between the GSO


and the Accounting Department.

e. Failure to properly maintain the ledger and property cards by the


Accounting and General Services Departments.

f. The Subsidiary ledger of the following Property, Plant and Equipment


accounts are not properly classified and/or have no proper
identifications:

1. Land (201)

Waterways Improvement 156,574.00


Roads 107,620.21
Plazas, Parks & Monuments 555,584.69
Flood Control 365,769.85
Irrigation Head Control Canal & Laterals 56,000.19
Plazas, Parks & Monuments 157,324.40
BLISS Site 89,511.00
Quarry Site 678,700.00
Public Cemeteries 37,482.50

2. Land Improvement (202)

Land Improvements 2008-below 2,288,537.17


Barangay Site EJC Montilla 61,210.00
Barangay Site- Upper Katungal 217,984.30

3. Office Buildings (211)

Building and Improvement 43,355.00

4. Schools Buildings (212)

School Buildings as of 2008 315,849.45

5. Hospitals and Health Centers (213)

Hospitals & Health Centers 76,275.75

65
6. Market and Slaughterhouse (214)

Market and Slaughterhouse 2010 & below 36,467,568.87

7. Other Structures (215)

i.Unidentified
Other Structures 2002 5,929,198.39

ii.Should be identified as School Building


HE Building 252,468.88

8. Construction in Progress Agency Assets (264)

Other Public Infrastructure (2004 & below) 6,508,474.38


Property, Plant & Equipment 12,005.00
LGU Facilities 788,067.28
Land Improvements 2,505,935.16
Buildings 2,365,520.79

Hence, fair presentation of the balances of Property, Plant and Equipment


in the financial statements could not be ascertained.

Managements Comments

The management said that they will provide appropriation for the titling of
land and register it in the name of the City.

They added that the conduct of physical inventory of all City properties is
already ongoing. In addition they have already instituted measures to reconcile the
records. As a result, there has been a decrease in the discrepancy between the
GSO and Accounting records from P 319,172,030.08 to P 100,779,138.00.

Recommendations:

The City Accountant and General Services Officer are enjoined to


implement the following recommendations, so as to ensure the validity, existence
and accuracy of the PPE accounts:

e. Strictly observe the rules and regulations in the acquisition of real


properties and take immediate actions to ensure that all land and land
rights acquired are titled and registered in the name of the City
Government.

f. Conduct a complete physical inventory of all the City property and


accomplished the RPCPPE showing all the vital information. (see

66
Annex 49, Volume II, NGAS Manual for the correct format of
RPCPPE)

g. Major improvements/renovations which are permanent or capital in


nature that appreciably extend the life of the infrastructure or
equipment should be recorded in the corresponding Property Card of
the PPE not in the RPCPPE.

h. Require Accounting and General Services Departments to maintain


ledger and property/stock cards as control records and to facilitate the
regular reconciliation of records between the two offices. This should
be given utmost importance.
i. Noted deficiencies in various subsidiary ledger schedules of PPE
should be reviewed to correct and adjust the accounts as may be
necessary.

Real Property Tax (RPT) and Special Education Tax (SET) Receivable Accounts

11. The yearend balances of the Real Property Tax (RPT) and Special
Education Tax (SET) Receivables amounting to P 4,752,940.22, are still
unreliable due to the failure of the City Treasurer to submit the certified list
showing the name of taxpayers and the amounts due and collectible for the
year pursuant to Section 20, Volume I of the NGAS Manual.

Section 20, Volume I of the Manual on NGAS provides that:

At the beginning of the year, the Treasurer shall furnish


the Chief Accountant of a duly certified list showing the
names of the taxpayers and the amounts due and collectible
for the year. Based on the list, the Chief Accountant shall
draw a Journal Entry Voucher to record the debit to Real
Property Tax Receivable/Special Education Tax Receivable
and the credit to Deferred Real Property Tax
Income/Deferred Special Education Tax Income account.

Examination of the Journal Entry Vouchers (JEVs) used to set-up the


RPT/SET Receivables for the year revealed that the respective amounts were
obtained from the Statement of 2012 RPT Target submitted by the City Treasurer.

Further, review and re-computation will show that the RPT/SET


Receivable and the corresponding deferred tax income for CY 2012 are both
understated by P8,448,801.53, as shown in the table below:

67
RPT/SET Receivable:

Total Assessed Value per Assessment Roll


for CY 2012 P1,414,025,360.00

Should be Current Year Receivable


P1,414,025,360.00x 2% 28,280,507.20
Less:
Recorded Receivable 19,831,705.67
Understatement P8,448,801.53
Note: Tax Rate 2% (Basic-1%, SET-1%)

Notably, the reflected amount of receivables as set-up by the agency were


mere estimates without supporting details such as the name of taxpayers and the
amount due from them as prescribed in the NGAS Manual. Hence, Property Tax
(RPT) and Special Education Tax (SET) Receivables amounting to P4,752,940.22
cannot be relied upon.

Moreover, the City Accountant also failed to prepare individual subsidiary


ledgers for every Real Property Units (RPUs) of the City. This is also an
indication of poor segregation of duties (weakness in internal control) since the
City Treasurer has the sole access to the records and at the same time performs
the collection function. Thus, there is a high risk of manipulation of records and
collection, and that proper tax collection and delinquencies could not be
monitored.

Managements Comments/Auditors Rejoinder

The management committed to submit the certified list of taxpayers for


CY 2013 to the Accounting Office. The planning for the required software for
Subsidiary ledgers of RPUs in order to monitor the tax collections and
delinquencies is still ongoing.

We acknowledge the Managements commitment, however, we would like


emphasize that these are recurring findings for almost five years now and
remained uncorrected until now.

Recommendations:

We recommendedthe management to strictly adhere to the provision of


Section 20, Volume I of the NGAS Manual in order to ensure reliability of the
balances of Real Property Tax Receivable and Special Education Tax Receivable
accounts. Setting up of RPT/SET Receivable should be done based on the
Certified List of Taxpayers.

68
We also recommended that the City Accountant maintain Subsidiary
Ledgers (SLs) in order to facilitate monitoring of tax collections and
delinquencies and at the same segregate duties between access to recording and
collection.

Unserviceable Properties and Waste Materials

12. Unserviceable properties and waste materials of undetermined amount were


not disposed of in accordance with COA Circular 92-386. Also, these
unserviceable properties were not reclassified as Other Assets account
pursuant to Section 4 (p) Volume I of the NGAS Manual.

Pertinent provisions of COA Circular No. 92-386 provides as follows:

Sec. 167. Disposal Procedures.-When the supplies or property of


a local government unit have become unserviceable from any
cause, or are no longer needed, the officer immediately
accountable therefore shall return the same to the head of the
department or office who shall cancel the corresponding
Memorandum Receipt. If no longer needed in the department, the
head of the department or office shall return the same to the
general services officer, xxx with the use of Property Return Slip
(LGU Form No. 12). The general services officer, xxx, shall,
through the local chief executive, file an application for its disposal
with the provincial, city or municipal auditor who shall conduct an
inspection and determination whether the supplies or property to
be disposed are: (1) xxx; (2) equipment; (3) building and other
physical structures; xxx..

Section 60 and 64 of NGAS Manual Vol. II states that:

Waste Materials Report shall be used to report all waste


materials previously taken up in the books as assets so that they
may be properly disposed of and dropped from the accounts.

The Inventory and Inspection Report for Unserviceable Property


shall be used as basis to drop from the books the unserviceable
properties carried in the Property, Plant and Equipment accounts.

Section 4 (p) Volume I of the NGAS Manual states that:

Assets declared by proper authorities as obsolete and unserviceable,


including assets of the agency no longer used, shall be reclassified to
Other Assets account from the corresponding inventory and
property, plant and equipment accounts.

69
Ocular inspection at the General Services Office (GSO) stockroom and
other agencys premises revealedan undetermined amount of unserviceable
properties and waste materials (see picture below), most of which have remained
for more than five (5) years.

Unserviceable Properties Waste Materials

Review of records and interview with the concerned GSO personnel


regarding these assets revealed the following deficiencies:

1. No Inventory Report showing the itemized list and complete


description of the assets.

2. Waste materials & unserviceable properties were not properly


stored/organized. Some were found in the stockroom mixed with
serviceable assets; some were found in the motorpool, sanitary landfill
site and City Engineering Compound.

3. Not all waste materials were accounted for because its either they
were not returned (such as spare parts, batteries, tire etc) or they were
destroyed without the presence of the Auditor or its representative.

4. Unserviceable properties were not yet reclassified to Other Asset


account

These properties may have lost their salvage values due tocontinuous
exposure to elements. Also, further deterioration could have been checked or
prevented had these been disposed of at the right time.

70
And although the waste materials may no longer be useful, it should have
been properly accounted for and protected from losses because of their value and
could be sold in the future.

Further, keeping these unserviceable items and waste materials in the


premises of the agency tends to lessen space that may be utilized for some other
purpose. The agency will benefit from the sale of these items which when
disposed earlier could earn higher scrap value rather than keeping it exposed to
theft and other bad elements.

Managements Comments

The management took well the findings and commits to implement our
recommendations.

Recommendations:

We recommended thatthe Disposal Committee, which was created by the


agency, follow the COA Revised Guidelines on Appraisal of Property and prepare
an Agency Appraisal Report to facilitate proper evaluation and disposal of these
unserviceable properties and waste materials the soonest possible time.

Also, we recommended that all unserviceable properties and waste


materials should be properly recorded and accounted for.

13. Gender and Development

It is commendable that the City Government has already passed a Gender


and Development Code (SP Resolution No. 339) last January 25, 2012. The GAD
Code aims to ensure that both women and men will equally benefit and participate
in the development programs and projects of its various departments. It will also
ensure the full participation and involvement of both sectors in the development
process, which is in pursuant to Republic Act 7192, otherwise known as the
Women in Development and Nation Building Act. For CY 2012, shown below
are the programs, projects and activities implemented by the City which are
designed to address some of the gender issues and concerns confronting the City:

PPAs Budget
A. Client-focused
Strengthening and Monitoring of Barangay Council for 10,000.00
the Protection of Children
Strengthening of City Inter-Agency Council on Anti- 10,000.00
Trafficking & Violence Against Women & Children
(CIACAT-VAWC)
Capability Training of Barangay VAWC-Desk in Charge 20,000.00
18 Day Campaign to End Violence Against Women 15,000.00

71
PPAs Budget
Operation of Crisis Intervention Center for Women and 250,000.00
Children and Youth Detention Home
Symposiums about Sexual Health 80,000.00
Sagip Anghel Task Force Monitoring and Operation 25,000.00
Strengthening of Men Oppose Violence Against Women 10,000.00
(MOVE)
Gender Sensitivity Training of leaders of different Women 35,000.00
Organizations

B. Organization-focused
Gender Sensitivity Training for Newly hired employees 45,000.00
and officials

14. Local Disaster Risk Reduction Management Fund (LDRRMF)

The City Government complied with the utilization, accounting and


reporting guidelines for the Local Disaster Risk Reduction and Management Fund
as provided under COA Circular No. 2012-002 and DILG Memorandum Circular
No 2012-73. This contributed to the award given by RDRRMC XII to the City as
Gawad Kalasag Awardee. The City was recognized for providing exceptional
contributions in disaster risk reduction and management and in climate change
adaptation.

E. Settlement of Suspensions, Disallowances and Charges

The total audit suspension, disallowances and charges found in the audit of
various transactions of the agency, as of December 31, 2012 is P0.00, based on the
Notice of Suspension (NS)/Notice of Disallowance(ND)/Notice of Charge (NC)
issued by this Commission, as summarized hereunder:

Particulars Notice of
Suspensions Disallowances Charges
Summary of Audit Suspensions, P87,000.00 P0.00 P0.00
Disallowances and Charges as of
December 31, 2011
Add: Issuances 803,897.21 0.00 0.00
Less: Settlements
Prior Year 87,000.00 0.00 0.00
Current Year 803,897.21 0.00 0.00
Balance, December 31, 2012 0.00 0.00 0.00

72
PART III

STATUS OF IMPLEMENTATION
OF PRIOR YEARS
RECOMMENDATIONS

0
PART III STATUS OF IMPLEMENTATION OF PRIOR YEARS
RECOMMENDATION

Monitoring of the implementation of the forty three (43) audit recommendations


contained in the 2011 Annual Audit Report revealed that thirteen (13) were fully
implemented, ten (10) were partially implemented while twenty (20) were not acted upon
and management is requested to exhaust all means to implement this recommendation.

Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
1. The validity, 1. Strictly observe C Provide Not There are still
existence and the rules and Y appropriation implemented Lands that are not
accuracy of the regulations in 2 for the titling of yet registered in the
Property, Plant the acquisition 0 Land. name of the City
and Equipment of real 1 Government.
accounts properties and 1
totaling take immediate A
P319,172,130.0 actions to A
8, which ensure that all R
represents the land and land
discrepancy rights acquired
between the are titled and
GSO and registered in the
Accounting name of the
records could City
not be Government.
ascertained due
to non 2. Transfer/drop Transferred/dro Fully
reconciliation from the books p from the implemented
of balances, the books
absence of completed/turne completed
evidence of d over projects projects to the
ownership of recorded as Registry of
Lands, failure Public Public
to transfer Infrastructures Infrastructures
completed (PI) accounts to
public the Registry of
infrastructure Public
projects, failure Infrastructures
to conduct a (RPI).
complete
physical 3. Conduct a Conducted a Partially Still on going
inventory and complete physical implemented
maintain a physical inventory of all
complete ledger inventory of all the City
and the City property.
property/stock property and
cards. accomplished
the RPCPPE
showing all the
vital
information.

73
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
(see Annex 49,
Volume II,
NGAS Manual
for the correct
format of
RPCPPE)

4. Major Major Partially There are still


improvements/r improvements/r implemented major
enovations enovations improvements/reno
which are recorded in the vations recorded in
permanent or corresponding the RPCPPE.
capital in nature Property Card.
that appreciably
extend the life
of the
infrastructure or
equipment
should be
recorded in the
corresponding
Property Card
of the PPE not
in the RPCPPE.

5. Require The Accounting Partially Not all articles of


Accounting and and GSO implemented PPE were
General started maintained the
Services maintaining necessary ledger
Departments to ledger and and property/Stock
maintain ledger property/stock cards.
and cards. Reconciliation of
property/stock records is still
cards as control ongoing.
records and to
facilitate the
regular
reconciliation of
records between
the two offices.
This should be
given utmost
importance.

2. The yearend We recommend the C Required the Not The City Treasurer
balances of the management to Y City Treasurer implemented did not furnish the
Real Property strictly adhere to the 2 to submit City Accountant
Tax (RPT) and provision of Section 0 accurate list of the complete and
Special 20, Volume I of the 1 RPT accurate list of
Education Tax NGAS Manual in 1 Receivables to taxpayers
(SET) order to ensure the City
Receivables reliability of the Accountant.

74
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
amounting to P balances of Real A
7,417,618.14, Property Tax A
are unreliable Receivable and R
due to the Special Education
failure of the Tax Receivable
City Treasurer accounts. Setting up
to submit the of RPT/SET
certified list Receivable should
showing the be done based on
name of the Certified List of
taxpayers and Taxpayers.
the amounts due
and collectible We also recommend Not
for the year in that the City implemented
pursuant to Accountant maintain
Section 20, Subsidiary Ledgers
Volume I of the (SLs) in order to
NGAS Manual. facilitate monitoring
. of tax collections
and delinquencies
and to segregate
duties between
access to recording
and collection. Take
up on the books the
RPT/SET discounts.

3. Lapping of We recommend the C The Partially There are still no


collections is management to Y management implemented written procedures
noted to have design study and 2 have discussed formulated by the
been practiced strictly implement a 0 the matter with City.
by most day-to-day detailed 1 the concerned
collectors/liquid written procedures 1 personnel and
ating officer for to address the above A agreed on the
a minimum cited weaknesses in A implementation
holding period internal control for R of the
of 2 days to receiving, recording, recommendatio
over 2 months reconciling, ns
with cash safeguarding and
retention from that all collections
P2,000.00 to as are remitted daily
much as over and deposited intact
P3.08M before with your depository
remittance/depo bank. We advise to
sit is made include sanctions
specially on that will compel all
Fridays and a personnel to strictly
day before comply with the
holidays due to procedures.
weak internal
control system
and poor

75
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
implementation
of existing rules
and regulations
(PD 1445 &
NGAS Manual)
over the proper
cash handling,
thus resulting in
exposing the
cash to high
risks of loss,
misuse, or
misappropriatio
n.

4. The City We strongly C The Not The IAS/IAU is


Government recommend that the Y management implemented still not organized.
failed to management 2 studies the
organize its organize an 0 organization of
Internal Audit IAS/IAU in 1 IAS/IAU.
Service/Unit compliance with the 1
(IAS/IAU) DBM Budget A
contrary to Circular No. 2004-4 A
Administrative re: Guidelines on the R
Order Nos. 278 Organization and
and 70 dated Staffing of Internal
April 28, 1992 Auditing Units. We
and April 14, would also like to
2003, remind the
respectively. management that it
This non is the primary
existence of responsibility of the
Internal Audit Head of the Agency
Unit poses a to install, implement
risk of financial and monitor a sound
irregularities system of internal
and control as mandated
mismanagement under existing COA
to the agency. and DBM Issuances.

5. The We recommend the C Procure from Partially Only 3% of the


procurement of management to Y PS-DBM implemented total CSE of the
common used always take City were
advantage the 2 purchased from
supplies and
services of the PS- 0 PS-DBM
equipment were
DBM in the 1
not procured procurement of 1
through PS- common-use
DBM and supplies because A
instead acquired aside from being A
piecemeal thru required by IRR of R
RA 9184, this will

76
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
alternative enhance the City
methods of Governments
procurement efficiency and
economy as this will
such as small-
free the agency from
value
the tediousness of
procurement attending to
(SVP) and recurring
shopping, and transactions, and
even thru provide greater time
competitive for the procurement
bidding. As a of high value, highly
result, the specialized
agency was not requirements for its
more significant
able to obtain
projects.
the most
advantageous The management is To submit the Not The required APP-
price also advised to APP-CSE to the implemented CSE was not
(economical submit its Annual PS-DBM submitted to the
procurement). Procurement Plan PS-DBM
Further, for common-use
numerous supplies and
Purchase equipment (APP-
CSE) on or before
Requests,
November 15 of
Purchase each year to DBM
Orders and using the prescribed
supporting format as provided
documents were under DBM Circular
prepared and Letter No. 2011-6.
processed daily, This will help the
resulting to DBM to anticipate
tedious the volume of
demand for the
procurement
different common
procedures use supplies of the
notwithstanding government for the
the incurrence ensuing year.
of more
expenses for the In case of non Procurement of Not The CSE are still
office supplies availability of items CSE will be in implemented acquired thru
used in printing in the PS-DBM, we bulk. piecemeal scheme.
the supporting recommend that
procurement of
documents.
these common use
goods should be
procured in bulk
quantities to avoid
piecemeal purchases
and Splitting of
Purchase Order.

77
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
We recommend the Make Not Not feasible due to
management thru representation implemented inability of the
the BAC to make a with the utility Utility providers to
providers. synchronized all
representation to all
billing statement
utility providers and
request to
synchronize release
of all billing
statements of all
offices, if possible.
While on paying
various utility
expenses, we
recommend the
management thru
the GSO to simplify
payment procedures
by consolidating all
statement of
accounts of every
office per utility
provider and issue a
single DV/Check for
each aggregate.

6. Procedural The City C Implement Partially There are still


lapses and non- Government should Y strictly the IRR implemented various provisions
compliance to always strictly abide 2 of RA 9184 of the IRR of RA
the by the Implementing 0 9184 that is not
Implementing Rules and 1 religiously
Rules and Regulations (IRR) 1 implemented
Regulations of RA 9184. A
(IRR) of R.A. A
9184 were R
observed on the
procurement
procedures,
thereby casting
doubts to the
commitment of
the City
Government to
adhere to the
principles of
transparency,
competitiveness
, accountability,
equity,
efficiency, and

78
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
economy in its
procurement
process

7. The Public 1. Review the C The Not These deficiencies


Market policies the Y management implemented are still present in
operated by the sanctions 2 had discussed the Market
City did not involved in the 0 the matter with
generate its operation of 1 the concerned
targeted income market and why 1 personnel on
for CY 2011 these are not A how to
and decreased strictly A implement the
by implemented. R recommendatio
P2,434,935.95 n
compared to
CY 2010 2. Instruct the City The City Not These deficiencies
income due to Market Administrator implemented are still present in
laxity in the Administrator to was assigned to the Market
implementation strictly enforce monitor the
of the Revenue the rules and operations of
Code of the regulations the Public
City. Further, prescribed in Market and
the less than the Revenue concerned
business-like Code of the City officials are
approach of not only to reminded of
managing the generate more their functions.
Public Market income but also
has resulted in to install
large receivable discipline in
from delinquent order to attain a
stall lessees that smooth and
amounted to P efficient market
3,641,477.41. operation and
collection.

3. Form an No action taken Not No composite team


independent implemented formed/created to
composite team inspect the Market.
composed of
representatives
from the offices
of Accounting,
GSO, Legal,
Engineering,
Sangguniang
Panglungsod,
BPLO,
Veterinary and
Health to make
an inventory of
the list of all

79
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
stallholders and
validate their
lease contracts
and business
permits. Inspect
all the stalls if
they are
compatible with
their businesses,
the physical
structures of the
stalls and if they
conform to all
sanitary rules.

4. Instruct the City No action taken Not Rental Receivable


Accountant to implemented are still not taken
take up in the up in the book of
book of accounts of the
accounts of the Market
Public Market
all the unpaid
stall fees as
receivable and
adopt the
accrual method
of accounting in
the collection of
stall fees.
Further,
maintain a
subsidiary
ledger to each
stallholders
based on the
inventory of the
team in order to
facilitate
monitoring of
tax collections
and
delinquencies
and at the same
segregate duties
between access
to recording and
collection.

5. Strictly enforce No action taken Not These deficiencies


the implemented is still present in
compatibility of the Market
business to stall

80
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
sections,
especially the
native section,
because this
will be a good
place to
showcase the
native products
of the Province
of Sultan
Kudarat and
allot stalls to
One Town One
Product (OTOP)
products
registered in the
DTI.

6. Prohibit No action taken Not These deficiencies


stallholders to implemented is still present in
transact the the Market
transfer of their
rights to
individuals
which involved
an unreasonable
large amount of
money. Publish
to a
conspicuous
place the rate of
transfer fees
prescribed in
the revenue
code to
discourage
individuals to
transact with the
stallholders.

7. We encourage The upgrading Fully


the management of the facilities implemented
to continuously of the market is
improve and on going
upgrade the
facilities of the
market, most
especially the
stalls in the
native section
(fire hazard),
wet and

81
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
carenderia
section (waste
and sanitation)

8. Various 1. Carefully plan C The Not No assurance if this


projects, and organize Y management implemented was implemented.
programs and the project 2 issue Executive
activities management 0 Orders to Reiterated in
(PPAs) funded plan. 1 address this. finding no. 5
under 20% DF 1
and Locally A
Funded 2. Prepare APPs A No action taken Not Reiterated in
amounting to that are duly R implemented finding no. 5
P41,179,366.30 linked to AIP to
and ensure that
P51,893,320.72 every
for CY procurement is
2011 were cost effective
either not fully and efficient.
implemented or
not 3. Enlist the help No action taken Not Reiterated in
implemented at of DILG and implemented finding no. 5
all, NEDA for
respectively, technical
due to knowledge on
inadequate feasibility
planning, studies and
budgeting, project
monitoring and development.
coordination
between offices, 4. Widen the The Fully
thus the network for management implemented
necessity of collaboration. conducted a
these activities Extend planning
may not be membership of workshop with
considered CDC to other participants
responsive and stakeholders coming from
effective. In like other active Barangays,
addition, NGOs within NGOs,
projects funded the city, natl Religious
under 20% gov agencies Groups,
Development (dti rep, dilg rep education and
Fund etc) other sectors
amounting to
P9.819 Million 5. Seek the active No action taken Not Due to political
were not participation implemented factors.
aligned with the and
projects involvement of
covered by the the
guidelines Congressman or
prescribed his

82
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
under DILG- representative
DBM Joint in the planning
Memorandum process.
Circular No.1,
s. 2005. 6. Clearly describe No action taken Not Reiterated in
how the project implemented finding no. 5
will be
managed and
controlled in its
delivery/executi
on phase

7. Fast track the The Partially Reiterated in


implementation management implemented finding no. 5
of issue Executive
unimplemented Orders to
PPAs. address this.

8. Evaluate The Partially Reiterated in


whether the management implemented finding no. 5
programs and issue Executive
projects funded Orders and SP
from prior Resolutions to
years budget address this.
are still relevant
otherwise revert
the fund to
other programs
and projects
which is more
needed and
applicable upon
recommendatio
n of the Local
Chief Executive
and approval by
the Sanggunian
concerned
(Section 322 of
RA No. 7160)

9. Make sure that No action taken Not Reiterated in


the timeline set implemented finding no. 5
for every
program/project
is realistic and
is strictly
followed.

10. The CDC is The Fully


advised to form management implemented
committees to issues an

83
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
monitor and executive order
evaluate PPAs to address this.
(Section 112 of
RA 7160) and
provide for
project support
or program
maintenance.

11. Strictly align Aligned the Fully


projects under projects under implemented
20% 20% DF to the
Development prescribed
Fund to the guidelines.
prescribed
guidelines
under DILG-
DBM Joint
Memorandum
Circular No.1,
s. 2005.

12. Avoid Stopped Fully


appropriating to appropriating implemented
the offices of funds to
Sangguniang Sanggunian
Panlungsod if Panglungsod
the
programs/projec
ts/activities are
not relevant to
or among the
functions of the
Sangguniang
Panlungsod, as
provided under
Section 458 of
R.A. 7160. This
will avoid
granting
political favors
or putting
political color
to a program,
project or
activity.
Instead,
appropriate to
the respective
implementing
unit(s) of the
City.

84
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
9. The budget 1. Have a better C Review the Fully
priorities for the linkage of Y 2012 SEF implemented
SEF were not planning and 2 Budget and
set relative to budgeting as 0 revise it in
targeted well as better 1 accordance with
improvements prioritization in 1 the prescribed
in student the use of SEF. A guidelines
performance Strictly A
because the prioritize the R
programs, programs,
projects and projects and
activities activities of the
funded through whole division
SEF by the of Tacurong
Local School City, as
Board were not stipulated in
clearly defined, DECS-DBM-
prioritized and DILG Joint
implemented in Circular Nos.
accordance with 01 s. 1998, 01-
DECS, DBM A s 2000, 100
and DILG Joint (c) of RA
Circular No. 01 7160and RA
s. 1998, RA No. 5447to address
5447 and the problems of
Section 99 (a) the students and
and 100 (c) of teachers and for
RA 7160. the operation
and
maintenance of
public schools,
and not for the
operation and
maintenance of
Division and
District offices.

2. Identified This is Partially The payment for


ineligible considered in implemented non-teaching are
expenditures the 2012 SEF still charged
amounting to Budget against SEF
P3,744,080.06
should be
replaced by the
City by
appropriating it
from General
Fund to SEF.
Refrain from
charging
personal
services of non-

85
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
teaching
personnel,
maintenance
and other
operating
expenses and
capital outlays
of the Division
and District
offices to the
SEF, or these
will be
disallowed in
audit.

3. Make use of the This is already Fully


School considered in implemented
Improvement the CY 2012
Plans (SIPs) in SEF Budget
the preparation
of SEF budget,
particularly on
how to improve
in English,
Mathematics
and Science
competencies.

4. Hiring and Deployment of Fully


deployment of SEF-paid implemented
SEF-paid teachers is
teachers should already in
be in accordance with
accordance with DepEd teacher-
DepEd teacher- deployment
deployment analysis
analysis.

5. Construction of This is Fully


classrooms and considered in implemented
other school the 2012 SEF
facilities should Budget
be in
accordance with
DepEd
classroom-need
analysis.

6. Limit the This is Fully


allocation for considered in implemented
sports the 2012 SEF
competitions in Budget

86
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
the LSB budget
and instead
allocate more to
support the
instructional
needs of the
schools in order
to improve
learning
outcomes. We
do recognize,
however, the
importance of
physical
development
and sports in
the well-
rounded
development of
the child but it
should be
stressed that
there is a
difference
between
physical
education and
school athletics,
on the one
hand, and the
development of
athletes (which
is the objective
of the Palaro),
on the other.

7. Limit the This is Fully


number of and considered in implemented
prioritize the 2012 SEF
activities under Budget
citizen
development
and extra/co-
curricular
programs which
are charged to
SEF. These
include
academic
competitions at
various levels
such as quiz

87
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
bees, math
contests,
science fairs,
cultural contests
and other
academic and
non-academic
competitions.
These activities
are not only
costly to
support but also
because they
take the time of
teachers and
students away
from the
classroom.

8. Enhance The City Partially The budget from


transparency Treasurer and implemented the National
and Accountant is Government
accountability now preparing (DepEd) were still
in the and submitting not presented to the
preparation of the report of LSB
SEF Budget. actual SEF
income and
expenditures to
the LSB

9. Tap the help of Tap the help of Fully


the Barangay the Barangay implemented
Government by Government
providing non-
financial
supports to the
schools within
their
jurisdiction.

10. To increase the No action taken Not The City


collection of implemented Treasurers Office
SEF tax, is yet to initiate an
consider aggressive
informing tax collection strategy
payers that of RPT.
paying the Real
property tax is
their way of
investing on the
education of
their children.

88
Reason for
R Status of
Management Partial/
Audit Observation Recommendation e Implementat
Action Non
f ion
Implementation
Craft an
effective tax
campaign that
advertises to the
community
where the SEF
goes and the
plans of the
City to improve
the basic
education, and
consequently
improve tax
collection.
Introduce some
innovative ways
that show these
important
messages.
(Example,
showing of a
picture of
students with
laptop in the
classroom with
a caption that
reads: Our
investment to
good, quality
Education.
Please pay your
Real Property
Taxes. Note:
this can be
translated in
local dialects)

89
PART IV
ANNEXES