EXECUTIVE SUMMARY 1. INTRODUCTION ‘The town of Bacacay was created as a municipality by virtue of Republic Act No. 687 on October 26, 1945. It is located in western slope of Mayon Volcano, with a total land area of 113.6 square kilometer comprising of 56 barangays. It is primarily an agricultural community having sufficient natural resources like vast fishing grounds, fertile soils, clean springs, waterfalls and archeological caves. Huge deposits of calcium bicarbonate of marblés could also be found in several barangays of the Municipality. Audit Objective ‘The audit wag conducted to: (a) ascertain the level of assurance that may be placed on the management’s assertions on the financial statements; (b) determine the propriety of the transactions as well as the extent of the compliance with applicable laws, rules and regulations; (c) recommend agency improvement opportunities, and (d) determine the extent of implementation of prior years’ audit recommendations. Scope of Audit A financial and compliance audit was conducted on the financial statements and operations of the Municipality for Calendar Year 2017. Value for Money Audit (VFM) was also conducted on selected areas of the Municipality’s operations. 2, FINANCIAL HIGHLIGHTS a, Financial Position The assets, liabilities and government equity of the Municipality of Bacacay as of ‘December 31, 2017 as compared to 2016 are shown below: [ | Gaetan Tncrease (Decrease) Particulars €¥ 2017 cY2016 | Amount | Pereentage | | (%) Assets P_376,366,640.27 |P _468,305,808.79 | P _108,170,831.48| 93.09% _| | Liabilities 130,309,851.17 111,529,920.16 | ___18,779.931.01 | 16.84% [Government 446,256,789.10 356,865,888.63 | _89,390,900.47| 25.0% | Equity Lb. Financial Performance I Increase (Decrease) Particulars CY 2017 CY 2016 Amount | Percentage z ()_ ‘Total Income P | 151,597,419.62 | P_136,296,535.98 |P 15,300,883.64 | 11.23% PS 50,238,544.10| _ 44,804,499.39 | 5,434,044.71 | 12.12% MOOE | | 29,977,509.43} -26,106,377.82 | 3,871,131.61| 14.83% Non Cash Expenses 8,769.805,42 6.578.550.27 | 2.191,.255.15 | 33.31% Total Expenses | p|_$8.985:858.95 | P__77,489.427.48 |P_11,496.431.47 | 14.83% Excess of Income " Over Expenses. || S2611,560.67 |P 58,807.108.50 | 380445217 6.47% ¢. Appropriation/Allotment/Obligations Tnerease (Decrease) | Particulars ICY 2017 CY 2016 Amount Percentage (%) ‘Appropriation | P 308 513,151.84 |P_140,149,086.63 | P _168,363,065.22 | 120%. ‘Allotment 293,979,780.59 |__104,395,101.33 | __189,584,679.26 |_181.60% [Obligations 117,055,657.25 78,344,853,78 | _38,710,803.47 | 49.41% 3, INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS The Auditor rendered a disclaimer opinion on the faimess of presentation of the Municipality's finangial statements as of December 31, 2017 because the validity, accuracy and existnbe of the Property, Plant and Equipment (PPE) accounts with a net book balance of P231,90 million as of December 31, 2017 which comprise 40.22 per cent ot its total assets of #576.57 million could not be ascertained due to the repeated inability of the Municipality t9 conduct a complete physical inventory of all its properties, maintain PPE inventory records and prepare and/or submit the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) at year-end, for several years, The inadequdcy of the records hindered the Audit Team to apply adequate alternative procedures to ascertain the correctness of the year-end balances of these accounts. 4, SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS, For the curfent audit period, the significant audit observations and the corresponding recommendations are the following 1. Cash aavanc remained unliquidated as at year-end due to the inability of Management to strictly enforce the rules and regulations on the grant, utilization and liquidation of cash advances as provided by COA Circular No. 97-002 dated3. February 10, 46 of the Mant unliquidated ¢: We recommer 997, Section 89 of Presidential Decree (P.D.) No. 1445 and Section 1 on NGAS for LGUs, Vol. 1, thus, resulting in the accumulation of ‘ash advances totaling P280,051. that Management: a. Require the Accountable Officers to liguidate/settle immediately their outstandin| cash advances by submitting the duly accomplished liquidation reports and to refund any unexpended balance 10 the Cashier/Collecting Officer; and b. Direct the advance t¢ him is se Section 89| \Municipal Accountant not to allow the granting of additional cash officers and employees unless the previous cash advance given 10 fled or a proper accounting thereof is made as required under lof P.D. No. 1445 and paragraph 4.1.2 of COA Circular No, 97-002. Donated Property, Plant and Equipment amounting to £484,631 were not booked up or recor rded in the agency’s books, contrary to Section 63 of PD. No. 1445, thus, understating the corresponding PPE account in the same amount. We recommer Accountant to fed that the Local Chief Executive (LCE) requires the Municipal -cord in the books the donated PPEs amounting to P484,631. We also recommended that the LCE require the Property Officer to conduct an inventory of o recording. We likewise ier donated properties not yet taken up in the books for proper commended that the LCE require the Property Officer and the Municipal Accountant to ensure that every donated property must be supported by a Deed of Donat} acquisition at Government A ‘Standard (PPSIt on and other supporting documents in order to properly record the cost or at appraised value in accordance with the Philippine ‘ounting Standard 7.2 and Philippine Public Sector Accounting (S) 23. . a, The appropriation for the CY 2017 Local Council for the Protection of Children (LCPC) programs and activities totaling P375,000 was significantly lower than the amount of Pi41 million that should have been allocated representing pre percent (1%) of the internal revenue allotment of the Municipality, trary to Section 15 of R.A. No. 9344 and DILG MC No. 2012- 120, thus the strengthening and implementation of the programs of the LCPC may have been unfavorably affected. We recommended that Management allocate in the Annual Budget of the Municipality 1 allotment (1} amount equivalent to one percent (1%) of its internal revenue | for strengthening and implementation of the programs and activitiesof the Local 15 of RA. No. b. The LCPC| mil for the Protection of Children (LCPC) as required in Section 1344 also known as the “Juvenile Justice and Welfare Act of 2016”. was unable to submit the required reports specified in Item I, Part IL of the DILG Memorandum Circular No. 2012-120 for CY 2017, especially the| Work and Financial Plan, thereby precluding the Audit Team from determining and evaluating whether or not the projects and activities funded by LEPC totaling P375,000 during the year were indeed the same projects or activiti it intend to undertake, which could have an unfavorable effect on the effective implementation of its programs, projects and activities. We recommended that Management prepare and submit the necessary reports enumerated i Item No. 1, Part II of DILG Memorandum Circular No. 2012-120 by the end of current year for the proper and effective implementation of PPAs in the succeeding year. . Evaluation o} showed that a} related or cai with Section NCRFW. the Gender and Development (GAD) Accomplishment Report number of activities/programs/projects (PPAs) were not gender not be directly attributed to women empowerment, inconsistent 2 of Joint Circular No, 2004-01 of the DBM, NEDA and We reconmentied that Management require the GAD Focal Person to attend training/seminar on gender sensitivity, GAD Planning and Budgeting in order that issues and concerns on GAD could be easily addressed and incorporated in their GAD Plan ai received and Budget. Also, copy furnished COA of the GAD PLAN and Budget ‘eviewed by the MPPDO and DILG for CY 2017 and henceforth, furnish the sane to the Auditor. ». Payments of ineligible expenses amounting to #266,246 were charged against the Special Ei the provision: (LEO) of 199 as amended, lucation Fund (SEF) of the Municipality for CY 2017, contrary to of RA. No. 5447, Section 272 of the Local Government Code (R.A. No. 7160), DECS-DBM-DILG Joint Circular No. 1,8. 1998 ‘and DEPED-DBM-DILG Joint Circular No. 1, s. 2017, thus resulting in inefficiency in the utilization of the scarce government resources on SEF. We recomme! fed that the Local Chief Executive: a. Direct thé Municipal Accountant to stop paying expenditures similar to the above-enumerated ineligible expenses charged against the SEF, particularly related to since disbj activities for the implementation of the ALS Programs of DepEd yursements related to ALS programs should be charged against the General Appropriations of DepEd pursuant to E.. No, 356, Transportation Allowance: Services of Teaching and Non-Teaching Personnel of DepEd, Consultancy ‘other similar expenses that will not directly benefit public school ivchildren, jotherwise these warrant the issuance of audit suspensions and disallowances; and 4. Instruct the Municipal School Board to prioritize the programs, projects and ‘activities in the preparation of the Anmual Municipal School Board Budget for SEF, pursuant to the pertinent provisions of R.A. No. 5447, R.A. No. 7160, DECS-DBM-DILG JC No. 01, s. 1998, as amended, and DEPED-DBM-DILG Joint Cireular No. 01, s. 2017, in order to benefit directly the intended recipients of the SEF. 5, SUMMARY OF/TOTAL SUSPENSIONS, DISALLOWANCES AND CHARGES AS OF YEAR-END The table below presents a summary of the total suspensions, disallowances and charges issued during|CY 2017 and the balances thereof as of December 31, 2017. Particulars Suspensions | Disallowances | Charges Balance, January 1,|2017 P__17,081,62648|P 299,889.02 [P 0.00 Issued during the period 0.00 0.00 0.00 Total i P_17,081,626.48 |P 799,889.02 [P 0.00 Settlements during the period | ___17,081,626.48 0,00 0.00 Balance, December 31, P 0.00/% — 299,889.02 | ¥ 0.00 2017 i 6. STATUS OF} IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS Of the 14 prior years’ audit recommendations, ten or 71.42 per cent were implemented by Management, three or 21.42 per cent were partially implemented and one or 7.16 per cent was not implemented.