PART II- OBSERVATIONS AND RECOMMENDATIONS

A. FINANCIAL AND COMPLIANCE AUDIT

Property, Plant and Equipment

1. The existence, completeness and accuracy of movable Property, Plant and

Equipment (PPE) account balances of ₱25.168 million as of December 31,
2018 could not be ascertained due to: a) unreconciled balance amounting to
₱8.827 million between the Accounting records and the inventory report:
and b) non-maintenance of PPE Ledger Cards (PPELC) and Property Cards
(PC) by the Accounting and Property Office.

Section 114 of the Manual on NGAS for LGUs provides that the Chief
Accountant shall maintain the perpetual inventory records comprising of Supplies
Ledger Cards (SLC) for each commodity/stock, Property, Plant and Equipment Ledger
Card (PPELC) for each category of plant, property and equipment and Work, Other
Animals and Breeding Stocks Ledger Card (WOABSLC) for each type of livestock.
Such ledger cards shall contain the details of the property, plant and equipment and
livestock account in the inventory control account in the general ledger.

In addition, the General Services Officer or the Municipal Treasurer, as the case
maybe shall likewise maintain stock cards and property cards for supplies; property, plant
and equipment; and work animals in their custody to account for the receipt and
disposition of the same. The balance per stock card/property cards should always
reconcile with the ledger cards of the accounting unit. They should also reconcile with
other property records like Acknowledgement Receipt for Equipment (ARE).

The financial statements showed the following balances of movable PPE as of

December 31, 2018:

Account Title Account Code Amount (₱)

Office Equipment 1-07-05-020 12,092,697.89
Information and Communication Technology
1-07-05-030
Equipment 10,193,244.45
Agricultural, Fishery & Forestry Equipment 1-07-05-040 448,500.00
Communication Equipment 1-07-05-070 212,043.00
Construction and Heavy Equipment 1-07-05-080 7,379,550.35
Disaster Response and Rescue Equipment 1-07-05-090 2,552,490.00
Medical Equipment 1-07-05-110 2,533,672.37
Sports Equipment 1-07-05-130 1,169,687.00
Other Machinery and Equipment 1-07-05-990 160,477.86
Motor Vehicles 1-07-06-010 10,815,100.00

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 Account Title Account Code Amount (₱)
Furniture and Fixtures 1-07-07-010 3,449,306.35
Construction in Progress-Infrastructure
1-07-10-020
Assets 87,734,863.90
Construction in Progress-Buildings and Other
1-07-10-030
Structure 10,720,787.13
Work/Zoo Animals 1-07-99-010 177,400.00
Other Property, Plant and Equipment 1-07-99-990 9,758,174.30
Breeding Stocks 90,150.00
Total   60,855,393.57
Less: Accumulated Depreciation 35,686,567.34
Net Book Value, December 31, 2018 25,168,826.23

Comparison of the inventory report and the Accounting records showed

unreconciled balances amounting to ₱8,827,687.01, details of which are shown below:

Account Name Per Books (₱) Per RCPPE (₱) Difference (₱)
Office Equipment 12,092,697.89 4,414,324.14 7,678,373.75
Information and
Communication Technology 10,193,244.4 7,584,401.7 2,608,842.6
Equipment 5 6 9
Agricultural, Fishery & 448,500.0 2,960,784.0 (2,512,284.0
Forestry Equipment 0 0 0)
Communication Equipment 212,043.00 234,212.00 (22,169.00)
Construction and Heavy 7,379,550.3 5,910,200.0 1,469,350.3
Equipment 5 0 5
Disaster Response and 2,552,490.0 2,043,289.0 509,201.0
Rescue Equipment 0 0 0
Medical Equipment 2,533,672.37 3,074,862.21 (541,189.84)
Sports Equipment 1,169,687.00 755,657.00 414,030.00
Other Machinery and 160,477.8 (5,108,072.1
Equipment 6 5,268,550.00 4)
Motor Vehicles 10,815,100.00 14,390,500.00 (3,575,400.00)
Furniture and Fixtures 3,449,306.35 2,080,151.20 1,369,155.15
Work/Zoo Animals 177,400.00 142,987.00 34,413.00
Other Property, Plant and 9,758,174.3 3,208,749.2 6,549,425.0
Equipment 0 5 5
Breeding Stocks 90,450.00 136,439.00 (45,989.00)
Total 61,032,793.57 52,205,106.56 8,827,687.01

The amount of ₱ 8,827,687.01represents the PPE not counted, hence not included
in the Inventory Report.
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 Moreover, the Accounting and Property Office did not maintain the PPE Ledger
Cards and Property Cards as required by the above provision of NGAS. PPE was
recorded once the disbursement voucher pertaining to the purchase of PPE was submitted
by the Treasury Office to the Accounting Office.

Because of the noted difference amounting to ₱8,827,687.01 between the

Accounting records and inventory report, the existence, correctness and accuracy of
movable Property, Plant and Equipment (PPE) balance of ₱25,168,826.23 as of
December 31, 2018 could not be ascertained.

We recommended that Management require the Accounting and Property

Office to: a) investigate and identify the noted differences between the Accounting
records and inventory reports that may require adjustment/s; and b) maintain the
required PPE Ledger Cards and Property Cards as required under Section 114 of
the Manual on NGAS.

Management agreed on the audit observations and promised to comply with the
audit recommendations.

2. Sports supplies and equipment transferred to public schools amounting to

₱1.014 million were recorded as Sports Equipment resulting to the
overstatement of the asset and government equity accounts by the same
amount.

Section 112 of PD No. 1445 mandates that each government agency shall record
its financial transactions and operations conformably with generally accepted accounting
principles and in accordance with pertinent laws and regulations.

COA Circular No. 2005-002 provides that the New Government Accounting
System (NGAS) adopts the definition of Property, Plant and Equipment under the
International Accounting Standards No. 16 which states that: “Property Plant and
Equipment are tangible assets that are held by an enterprise for use in the production or
supply of goods and services for rental to others, or for administrative purposes and
expected to be used during more than one period.

For CY 2018, a total of ₱1,014,420.00 were recorded to Sports Equipment

(1-07-05-130) account under the Special Education Fund (SEF).

Review of the transactions revealed that it pertains to the procurement of sports

supplies and equipment used during the 2018 Rinconada Meet sponsored by the Baao
District which covered the Local School Board of the LGU. Breakdown of the items
purchased are as follows:

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 Items Amount (₱)
Pommel Horse laminated wood, fully adjustable 89,489.00
Pommel Horse (mushroom) 41,100.00
Low Balance Beam for Elementary 33,578.00
Balance Beam (Women) 60,000.00
Balance Vault (Men) 43,000.00
Uneven Bars 35,000.00
Total (Equipment) 302,167.00
Other Supplies 712,253.00
Grand Total 1,014,420.00

Other supplies consists of kick pads, gum shields, punching bags, body armors,
gymnastic shoes, head gears, standard official volleyball nets, plastic cups, baseballs bats,
baseball ball leather official, baseman mitts leather, supporters with fiber, shot puts and
the likes.

The Inspection and Acceptance Report (IAR) showed that the above items were
issued and accepted by the Public Schools District Supervisor (PSDS) and the School
Principal on September 14, 2018. Also, the Report on the Physical Count of Property,
Plant and Equipment (RPCPPE) for Sports Equipment showed that these items were
already under the custody of the Property Custodians of DepEd Baao. Meaning, the
assets were already transferred to the DepEd and no longer in the custody of the LGU.

Considering that the items were already transferred and accepted by the PSDS and
School Principal and transferred to different schools, ownership and beneficial use was
no longer with the LGU. As such, it should have been recorded to Subsidy to NGAs
(5-02-14-020) account instead to Sports Equipment account.

Recognizing the items as asset by the LGU overstates the asset and government
accounts by ₱1,014,420.00.

We recommended that Management require the Municipal Accountant to

prepare the necessary adjusting entries to correct the overstatement supported with
documents evidencing the transfer of the assets to the DepEd.

According to the Municipal Accountant, the items were recorded to Sports

Equipment account because it was obligated as Sports Equipment by the Budget Office.
Nonetheless, she promised to make the necessary adjusting entries to record the transfer
of said assets to the DepEd.

3. Awarded projects amounting to ₱31.29 million were recorded to

Construction in Progress and Accounts Payable accounts at yearend, thereby
overstating both asset and liability accounts by the same amount.

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 In CY 2018, infrastructure projects funded out of the 20% Local Development
Fund were awarded to various contractors. Based on the contracts executed for each
infrastructure project, 100% completion is expected sometime in CY 2019.

At year-end, the Office of the Municipal Accountant made 12 entries, debiting the
Construction in Progress–Infrastructure Asset account and crediting the Accounts
Payable account totalling ₱25,477,041.16 representing the total contract price of the 12
projects namely:

CONTRACT
PROJECT TITLE
PRICE (₱)
Dredging of Waterways w/ Slope Protection 1,441,052.71
Construction of Box Culvert Line 1 & Line 3 2,411,325.42
Improvement of Inukaran FMR 9,779,125.1
Improvement of Rural and Urban Drainage Facilities 1,991,572.69
Concreting of Guevarra St. Sta Teresita Road 990,187.6
Concreting of Zone 1 Sagrada 2,490,736.27
Concreting of Sta. Cruz Service Road (beside PFE Gas Station) 743,233.63
Construction / Rehabilitation of Salvacion -San Vicente Bridge 1,496,340.75
w/ Approach
Concreting of Sta.Cruz - San Juan Road 1,396,839.11
Construction of San Isidro FMR 994,278.83
Concreting of FMR - Sitio Tipolo 745,838.9
Construction of San Vicente - Antipolo Old Road Phase II 996,510.15
TOTAL 25,477,041.16

Also, two debits to Construction in Progress–Building and Other Structure

account totalling ₱5,809,545.47 and credited the Accounts Payable account representing
the total contract price of two projects namely:

PROJECT TITLE CONTRACT

PRICE (₱)
Installation of Streetlights along Maharlika Highway, San Juan – 4,150,398.26
San Nicolas
Installation of 23 units LED Streetlights Along Diversion Road 1,659,147.21
TOTAL 5,809,545.47

While some if not most of the projects were started in December 2018 based on
the contracts and on the Consolidated Monthly Report on Government
Projects/Programs/Activities as of December 31, 2018 submitted by the Municipal
Engineering Office, no progress billing has been received as basis in the recording of
Construction in Progress account. Further, the recorded Construction in Progress was not
just a portion but the whole amount of the contract price for each project.

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 Under the Philippine Public Sector Accounting Standards (PPSAS), the account
Construction in Progress is used to record the accumulated cost or other appropriate value
of assets which are still in the process of construction, development or acquisition. This
account is credited for reclassification to the appropriate asset account upon completion.
Recognition of construction in progress is based on a certified and verified statement of
work accomplished.

Based on the foregoing, the recognition of assets by recording to Construction in

Progress account is premature for having no measurable basis. Because of the premature
recording of the Construction in Progress, it was made to appear that an asset in the form
of an on-going projects in the amount of ₱31,286,586.63 already exist at year-end which
is not the case.

In order that the incurrence of obligation by reason of the awards granted may be
reflected in the financial statements, disclosure in the Notes to Financial Statement would
have sufficed.

We recommended that Management through the Office of the Municipal

Accountant refrain from the pre-mature recording of Construction in Progress in
the absence of a measurable basis of recording.

According to the Municipal Accountant the whole contract price was recorded to
Construction in Progress account in order to reflect in the financial statements the
incurrence of obligation by reason of the awards granted. Nonetheless, she promised not
to record prematurely to CIP account the awarded projects at year-end.

Inter-Agency Payable

4. Fund transfers from National Government Agencies (NGAs) for completed

projects costing ₱44.650 million were not yet settled from the source agencies
while three completed projects costing ₱6.600 million and unexpended
balance of ₱1.090 million remain unliquidated despite completion of the
projects, thereby overstating the liabilities by at least ₱7.690 million.

COA Circular No. 94-013 dated December 3, 1994 requires that all cash/money
transferred from source agencies shall be taken up in the books as trust liability by the
implementing agency. It also provides that transferred funds shall be used only for its
intended purpose and shall be liquidated thru submission of Report of Disbursements and
any unused balances thereof shall be returned after the completion of project.

The financial statements as of December 31, 2018 of the LGU reflected the
following account balance of Due to NGA (2-02-01-050) account:

Account Title Account Code Amount (₱)

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Due to NGA- General Fund 2-02-01-050 6,819,161.70
Due to NGA- Trust Fund 2-02-01-050 57,417,067.50
Total 64,236,229.20

During the year, LGU Baao received the following fund transfers from various
national government agencies:

Date of
Fund No. PPA/Purpose Amount (₱)
Transfer
1/31/18 1 ARCP 2 Project Cristo Rey- Iyagan FMR 3,278,651.31
4/30/18 2 Construction of Evacuation Center 10,000,000.00
4/30/18 3 Improvement of Potable Water System, 2,152,000.00
Binit Lourdes
5/18/18 4 Implementation of SALINTUBIG 2017, 3,000,000.00
Caranday Potable Water
6/30/18 5 Road Opening at San Vicente 7,978,874.00
7/18/18 6 Payment of TUPAD wages & PPES of 315,000.00
Baao for 100 beneficiaries
12/11/18 7 Salud Bicolnon Award (DOH) 50,000.00
Total 26,774,525.31

The status of implementation of the above stated PPAs are summarized as

follows:

No. Status of Implementation

1 The project was completed on May 23, 2017 at a cost of ₱9,705,674.00.
The LGU has yet to receive the remaining 20% fund transfer from DAR
amounting to ₱819,662.83.
2 The project was on-going. Notice to Proceed (NTP)- October 26, 2018, as
of December 31, 2018 the contractor was paid 15% mobilization.
3 The NTP of the project was on December 28, 2018.
4 The NTP of the project was on January 16, 2019.
5 The NTP of the project was on January 15, 2019.
6 The fund transferred was returned to DOLE on CY2019.
7 According to the Municipal Health Officer, the fund received from DOH as
award shall be used for the installation of internet connection in the RHU
Office.

On the other hand, the status of fund transfers received from previous years, are
summarized as follows:

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a) Projects costing ₱44,650,261.42 were already completed but the fund transfers are
not yet settled since the LGU has yet to receive the remaining balance of the fund
transferred from the source agencies, as follows:

No. PPA Project Cost Remarks/Status

8 Const of Pugay- 3,266,666.16 Project completed on
Nababarera FMR September 15, 2015. The LGU
Phase I (DA) has yet to receive the 50%
balance of the FT amounting
to ₱1.470 million.
9 Construction of 1,421,852.15 Project completed on June 15,
Napapalaba St. 2015. The LGU has yet to
Sagrada, Baao (DA) receive the 50% balance of the
FT amounting to ₱1.470
million.
10 Construction of 2,472,241.95 Project completed on June 30,
Pugay FMR (DA) 2017
11 Const of Pugay- 2,930,583.56 Project completed on June 15,
Nababarera FMR 2017
Phase II (DA)
12 Construction of 3,083,344.86 Project completed on
Buluang- Lourdes September 14, 2016.
FMR (DA)
13 Rehabilitation of 2,277,979.20 Project completed on May 27,
Caranday- Del Pilar 2013. The LGU has yet to
FMR receive the balance of
₱193,475.71 from DAR
14 Rehabilitation of 2,562,943.60 Project completed on August
Caranday-Cristo Rey 8, 2013. The LGU has yet to
FMR receive the balance of
₱217,700.78 from DAR.
15 Concreating of 3,430,196.29 Project completed on
Agdangan-San Rafael November 30, 2013. The LGU
FMR has yet to receive the balance
of ₱291,171.63 from DAR.
16 Concreating of 23,204,453.65 Project completed on
Buluang-San Isidro- September 30, 2013. The
Sta. Teresita FMR LGU has yet to receive the
balance of ₱1,991,303.76 from
DAR.
Total 44,650,261.42

Review revealed that Project No. 8- Concreating of Pugay- Nababarera

FMR Phase 1 was implemented by administration and was already 100%
complete on September 15, 2015 as indicated in the Certificate of Completion and
Acceptance. However, verification of the subsidiary ledger of the Project

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 maintained by the Accounting Office revealed that labor payroll for the period
September 1- 15, 2015 was paid on October 9, 2015 when the Project was
evaluated as only 80% complete by the Municipal Engineers Office.

According to the former OIC-Municipal Engineer, there were labor

payroll/s that were not yet processed and paid. Considering that the Project was
certified as 100% complete on September 15, 2015, there was a presumption that
the labor payroll paid on October 9, 2015 was the last payroll for the Project. In
addition, no laborer/s would have allowed that they’re not paid for work/service
rendered in CY2015 and remained unpaid this CY2018. In usual circumstances,
laborers are paid on the 15th and 30th of the applicable month. If ever there was a
delay in payroll payment, nobody would allow that he had to wait years before he
got paid. Besides, majority if not all of these laborers belongs to the lower class
of society and depend only on the wage they received from the LGU.

b) Three projects costing ₱6,599,574.01were already complete but the fund transfer
was not yet settled from the source agency.

Fund
Project Cost
PPA Transfer Remarks/Status
(₱)
(₱)
Improvement of 2,000,000.00 2,199,799.66 Project completed on
Agdangan- Sta. Isabel September 25, 2018
Road
Improvement of 2,000,000.00 2,199,974.69 Project completed on
Bagumbayan- Pugay March 17, 2017
Aceess Road
Improvement of 2,000,000.00 2,199,799.66 Project completed on
Tapol- Iyagan Access March 27, 2017
Road
Totals 6,000,000.00 6,599,574.01

c) The unexpended balance amounting to ₱1,090,227.14 of the following PPAs were

not returned to the source agencies.

PPA Amount (₱) /Status

Sea Recovery Fund 29,535.90 Completed
Ante Mortem 630.00 Completed
Assistance from PCSO, purchase of medicine 843.90 Completed
PDAF 7.42 Completed
Salary Differential, DOH 1,840.00 Completed
Alien Registration Fee 1,060.00 Completed
Misc & SEA Repayment 6,010.00 Completed
SISKA loan repayment 1,430.00 Completed
LAKAS loan repayment 4,450.00 Completed
Botika Klinika 2.60 Completed

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 PPA Amount (₱) /Status
Linggap sa Mahirap 1.00 Completed
Assistance from DOLE desilting & 22.98 Completed
declogging
Kilos Asenso Program 191,783.00 Completed
Terminal Pay from DA 21,346.23 Completed
Renovation of RHU Baao (DOH) 164,474.90 Completed
Implementation of 2016 BUB Pro Yaman 666,789.21 Completed
Pinoy
Total 1,090,227.14

Per interview gathered, the unexpended balance of the PPAs- Renovation

of RHU Baao and Implementation of 2016 BUB Pro Yaman Pinoy amounting to
₱164,474.90 and ₱666,789.21, respectively shall be used for the maintenance of
the RHU building and for livelihood projects.

d) Four PPAs were on-going

PPA Balance/Cost Remarks

Integrated Community Food
Prod- Municipal Nursery at
Agdangan
Pinoy MD Project BUB
2016 DOH ROV
GPBP Potable WS
(SALINTUBIG), San Rafael
Integrated HEMS Training
Project 2016 BUB-DOH
Total
(₱)
460,198.67 On- going
362,925.96 Used to fund the schooling
of scholars who will be
graduating on April 2019.
2,000,000.00 On-going project
977,800.00 Fund for on-going trainings-
basic life support
3,800,924.63

e) Work of one project costing ₱3,266,623.36 was pending due to unavailability of

fund.

PPA Cost (₱) Remarks

Const of San Vicente- 3,266,623.36 Project was pending due
Antipolo FMR (DA) to unavailability of fund.
The LGU has yet to
receive the 50% balance
of the FT amounting to
₱1.470 million.

The Consolidated Monthly Report on Government

Projects/Programs/Activities as of December 31, 2018 indicated that Project No.
10- Construction of San Vicente- Antipolo FMR was already 100% complete as

32
 to clearing, 84% concreting, and 21% rip-rapping. The OIC- Municipal Engineer
explained that the declared percentage of completion referred to pertains to the
actual work done as it relate to the expected output for such work item in terms of
length/ quantity, such that if a certain FMR was designed/ programmed for 100
linear meters, 25% completion would mean that 25 linear meters of the FMR has
been fully completed.

The above remarks/status was obtained from documents submitted to our Office
such as Subsidiary Ledgers, Certificate of Completion and Acceptance, Statement of
Work Accomplishments, Consolidated Monthly Report on PPAs as of December 31,
2018, and interview gathered from LGU officials and employees. Our Office has not
received the Memorandum of Agreement (MOA) of the above PPAs, hence compliance
by the LGU to the MOA in the implementation of the PPAs could not be validated. Due
to time limitation, we were not able to validate the existence of the above projects.

We recommended that Management: a) require the Municipal Accountant to

validate the reliability of the recorded balances of fund transfers and refund the
unused fund in order that the account of the LGU in the books of the source
agencies are settled and/or request for authority to use the savings in the
implementation of other related projects; b) follow up from the source agencies –
DAR and DA the release of the remaining amount to be transferred; and c) ensure
that the projects are implemented promptly in accordance with the Memorandum
of Agreement.

The Municipal Engineer explained that they have already submitted the
documents required by the DAR and DA for the release of the remaining amount to be
transferred. Also, the Municipal Accountant promised that fund transferred and the
unexpended balances of completed projects shall be settled and returned to the source
agencies this CY 2019.

Revenue

5. Substantial improvements on real properties remain un-declared due to the

failure of the Office of Municipal Assessor to conduct regular real property
appraisal and assessment contrary to Section 204 of RA 7160 in relation to
Section 202, thereby failing to assess the same with appropriate real property
taxes to the disadvantage of the local government unit.

Section 202 of RA No. 7160 requires the owner or administrator of real property
to prepare, or cause to be prepared, and file with the provincial, city or municipal
assessor, a sworn statement declaring the true value of their property, whether previously
declared or undeclared, taxable or exempt based on the current and fair market value of
the property, as determined by the declarant. The sworn declaration of real property is
required to be filed with the assessor concerned once every three (3) years during the

33
period from January first (1st) to June thirtieth (30th) commencing with the calendar year
1992.

Section 204 of RA No. 7160 on the other hand empower Municipal Assessors to
declare by himself the undeclared property or improvements thereto, in default of the
owner so that the property may be assessed for taxation purposes based on its fair and
current market values.

We have conducted an ocular inspection to validate assessment values of

properties as appearing on the Field Appraisal and Assessment Sheet (FAAS) on selected
real properties on record with the Office of the Municipal Assessor. Said FAAS contain
identification information such as name of property owner, location, boundaries and area.
It also include information such as classification, usage, market values, assessment levels,
kinds of crops grown if any for land and structural characteristics for buildings. These
information taken together are the bases by which, real property tax assessments are
made by the Municipal Assessor.

The ocular inspection conducted last May 6, 2019 with the Municipal Assessor on
selected properties within Barangay San Nicolas, Baao revealed that the FAAS from
which current RPT assessments were based were not updated to reflect recent
improvements and or additions on the properties found on the area.

Based on records kept by the Office of the Municipal Assessor, there were four
hundred thirty-one (431) FAAS for Land, Plants and Trees, three hundred thirty-nine
(339) of which were classified as residential, eighty-six (86) were classified as
agricultural and the remaining six (6) were commercial or for other special purposes.
Despite being classified as mostly residential, there were only fifty-three (53) FAAS for
building for the whole of San Nicolas. Ocular inspection showed however that most lots
if not all were already constructed with residential buildings. Below table shows the real
property profile of Barangay San Nicolas:

FAAS –
Land, Plants FAAS -
Section & Trees Residentia Agricultural Others Building
l
1 33 16 17 - 4
2 5 2 2 1 4
3 50 8 42 - 5
4 20 - 20 - -
5 91 87 4 - 6
6 33 31 1 1 1
7 61 60 - 1 6
8 61 60 - 1 15
9 32 32 - - 4
10 45 43 - - 8
TOTAL 431 339 86 4 53

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 A total of 15 samples were selected and visited for validation purposes. Below are
the observations noted:

ARP NO. Remarks

97-0250374 With improvements undeclared, building expansion including
car park; and concrete and steel gate
97-0250509 Declared as Type III-A constructed in 1981. Actual residential
house is relatively new Type I-B structure.
97-0250453 Undeclared building Type II (No FAAS found for building)
97-0250122 Undeclared building Type II; two -storey (No FAAS found for
building)
97-0250419 Undeclared building Type II (No FAAS found for building)
97-0250415 Declared as Type III-B single storey dwelling constructed in
1968 with Zero assessed value. Actual building is a two-storey
building made of mixed materials (Type II), with a garage and
steel gate. Building appears to have maximized lot area. Must
take into consideration depreciation.
97-0250134 Undeclared building Type I-B, 2-storey building (No FAAS
found for building)
97-0250692 Undeclared building Type I-B, 3-storey building (No FAAS
found for building)
97-0250524 Undeclared building Type I-B, 2-storey building (No FAAS
found for building) Works on 2nd floor on-going. Structure for
water refilling station undeclared.
97-0250451 Declared as single storey Type III-C family dwelling in 1983
with zero assessed value. Actual residential building is Type II
bungalow with garage, concrete and steel gate, freshly painted/
newly renovated.
97-0250260 Undeclared building Type I-B, 2-storey building (No FAAS
found for building)
**** Four other residential buildings not traced to FAAS because names
given by occupant does not match declared owners of land
*Red and gray two-storey residential building (newly constructed)
**Yellow and green two-storey residential building (newly
constructed) in PNR Lot
***two-storey building, 1st floor used as store, 2nd floor used as
dwelling
**** Single storey Type I-B building, steel and concrete (white gate
and windows)

Part VI – Building / Structures of Resolution No. 083 and Ordinance No. 015
series of 1997 of the Sangguniang Panlalawigan provides for the Schedule of Buildings
and Other Improvements which shall be used by the Municipal Assessors in coming up
with the market value of buildings and other structures. Valuation, aside from the
building classification, also depend on the addition and deduction schedules which take
into consideration the materials used, size and additional property features.
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 Review of the FAAS submitted revealed that the preparer of the FAAS has failed
to consider features unique to each improvement such that property valuation do not
include additional cost/ charges as identified in addition schedules but provide
deductions for depreciation. According to the Municipal Assessor, they don’t really take
into consideration items indicated in the addition schedules because it will mean higher
real property taxes for the people and they might altogether refuse to pay the same.

The Team would like to remind the Office of the Municipal Assessor to do as the
law (Local Government Code of 1991) and the provincial ordinance required. Being a
part of the executive department, their duty is to execute the law/ordinance in its fullness
and not selectively provided all the requirements are met, unless a portion of said law or
ordinance has been declared inoperative for any reason. Selective application of the law/
ordinance provides too much discretion capable of being abused.

Ocular inspection by the Team revealed that there is a great need to update the
records of the Municipal Assessor, particularly the FAAS of the real properties in the
municipality, not only to have the new constructions declared but also to reflect
improvements on the properties which valuations remained the same for several years.
Failure to declare, appraise and assess real properties results to lower revenue on the part
of the municipality because it limits the revenue which can be collected.

To facilitate the update of the FAAS, there is a need to conduct ocular inspections
to identify which properties have undergone changes in use and valuation. The LGU
should not just wait for property owners to declare their improvements but instead take
positive steps to ensure all properties are duly appraised and assessed.

We recommended that the Management through the Office of the Municipal

Assessor prioritize the updating of its records particularly the Field Appraisal &
Assessment Sheet of all real properties in the Municipality so that correct amount of
real property taxes may be assessed.

The Municipal Assessor agreed with our recommendation, she however asked the
help of the Municipal Engineer to furnish the Office of the Municipal Assessor copies of
building plans to facilitate the preparation of FAAS.

LDRRMF

6. Accounting and reporting deficiencies, and disbursements charged to Local

Disaster Risk Reduction Management Fund (LDRRMF) were not in
compliant with the requirements set forth under Circular No. 2012-002.

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 COA Circular No. 2012-002 dated September 12, 2012 provides the
policies/guidelines on the accounting and reporting guidelines for the Local Disaster Risk
Reduction and Management Fund (LDRRMF).

Review of the Utilization Report of the LGU LDRRMF for CY 2018 revealed the
following:

a. Subsidiary ledgers (SL) were not maintained by the Accounting Office for
transfers of agency’s unutilized DRRMF to the special trust fund by year of
transfer, receipts of NDRRMF by transferring agency, DRRMF from other
LGUs by LGU and other sources by donor as required in Section 5.1.12 of
Circular No. 2012-002.

b. Unutilized balance of ₱ 14,504,541.40 for the previous years’ unexpended

amount and current year’s unutilized were not disclosed in the Notes to the
Financial Statements as required in the above cited Circular.

The aforementioned deficiencies hindered the LGU’s adherence to the principles

of strengthening the capacity of the LGUs disaster risk reduction and management
system, through decentralized powers, responsibilities and resources.

We recommended and Management agreed to require the Municipal

Accountant to: a) prepare the subsidiary ledgers as required by COA Circular No.
2012-001 and revert back to the General Fund the unutilized amount for CY 2013;
and b) disclose in the Notes to Financial Statements the current and previous years’
unutilized balances.

Others

7. Payrolls for Job Orders Workers (JOWs) amounting to ₱11.19 million were
not supported by service contracts as well as Certification by the LCE that
activities and services cannot be provided by regular/ permanent employees
contrary with Item 4.1.3 of COA Circular No. 2012-001, thus the necessity of
hiring job orders and the reasonableness of the expenditure cannot be
determined.

Item 4.1.3 of COA Circular No. 2012-001 dated June 14, 2012 enumerates the
following documentary requirements on hiring of casual/contractual personnel and job
order contracts:

 Certification by the LCE/Personnel Officer that the activities/services cannot

be provided by regular or permanent personnel of the agency (for first claim)
 Accomplishment Report
 Approved DTR

37
 During CY2018, payment to job order workers (JOW) reached its highest over a
three year period at ₱11,191,038.37. Comparative data over the last three years as well
as its components are shown in the table below:

Type CY 2018 (₱) CY 2017 (₱) CY 2016 (₱)

Environment/ Sanitary 1,509,349.98 1,044,903.21 1,055,218.66
Janitorial Services 1,057,310.47 764,448.09 455,059.30
Other Gen. Services 8,624,377.92 4,816,525.91 3,091,893.03
Total 11,191,038.3 6,625,877.21 4,602,170.99
7

Difference (against base year) 6,588,867.38 2,023,706.22

% of Increase 143% 44%

The continuous increase in the cost of hiring JOWs incurred did not come as a
surprise considering that as of December 31, 2018 there were one hundred forty-eight
(148) job orders in the LGU’s payroll excluding those who worked on infrastructure
projects.

Post audit of accounts disclosed that job order payrolls of LGU-Baao for CY 2018
were supported only with approved Daily Time Records (DTRs) and accomplishment
reports. The certification by the Local Chief Executive/Personnel Officer that the
activities/ services cannot be provided by regular or permanent personnel of the agency
was not attached to the disbursement voucher/payroll (for first claim). Although, there
were JOW contracts attached to the disbursement vouchers, they did not indicate the
functions, duties and responsibilities to be performed by each JOW.

JOWs perform overlapping functions

Review of accomplishment reports showed that a number of job order workers

performed overlapping functions. Noted was a plantilla position for private secretary in
the Mayor’s Office however, based on the accomplishment reports submitted by the
JOWs in the Office, some duties that were supposed to be performed by the permanent
employee/s were done by the JOWs:

JO Designation Functions
W
1 Administrative Aide Act as Assistant Private Secretary
2 Executive Assistant Prepare various office memoranda, request
letters, endorsements, memorandum
agreements, confidential documents and
executive orders; attendance to conferences
and meetings as directed by the LCE
Overtime claims not duly supported with documentary requirements

38
 Review of payroll showed that there were overtime pays claimed by some JOWs
however, only the Memorandum number and the time rendered were stated in the DTR.
The following supporting documents required in item 5.10 of COA Circular 2012-001
were not attached in the payroll.

 Overtime authority stating the necessity and urgency of the work to be done,
and the duration of overtime work;
 Overtime work program;
 Quantified Overtime accomplishment duly signed by the employee and
supervisor; and
 Certificate of service or duly approved DTR

It is worth mentioning that work done in the overtime period were not reported
separately in the accomplishment report hence, claims cannot be validated if the services
rendered were valid and reasonable.

Number of JOWs assigned to departments/sections appeared not justified

Since hiring of Job Order Workers was anchored on the LGUs need to
supplement the permanent employees’ work force, the number of JOWs to be assigned to
each department must be justified by the department’s workload as well as its expected
outputs. Hiring of JOWs shall be initiated by the heads of various offices, indicating in
their written request the number of JOWs requested, their specific functions and a
justification why they’re needed supported by their department’s performance target for
the quarter or semester as the case may be. The request inclusive of the justification and
the performance target will be the basis of the HR/LCE in the determination on whether
or not to grant the request for JOW subject to the availability of funds.

The following tables show the profile of the municipality’s work force. In the first
table, numbers appearing under the column ‘Permanent Employees’ are composed of
elective and filled positions. Numbers appearing under the column JOW refer to Job
Order Workers assigned to each department or section. Data are based on the JOW
contract provided in the Office of the Auditor and List JOW for CY 2018.

Permanent
Department/ Section JOW
Employees
Mayor’s Office 6 11
Internal Audit   1
Human Resource 1  
Disaster Risk Reduction Mgt. 2 2
Bids and Awards Committee   4
Zoning 1  
Licensing 2 1
Public Safety Office   12
Slaughterhouse   2
Tourism   2

39
 Permanent
Department/ Section JOW
Employees
Dept of Interior and Local Gov’t   2
Dept of Education/PSDS   3
Bureau of Internal Revenue   1
Commission on Election   3
Sangguniang Bayan & SB Sec 18 6
Liga   3
Accounting Office 5 6
Commission on Audit   1
Budget Office 4 1
Treasury Office 9 4
Engineering Office 7 11
Planning and Development Office 3 2
Assessor’s Office 4 2
Civil Registry 3 1
Social Welfare & Development 2 4
KALAHI   7
Senior Citizens   2
OPWD   2
Agriculture 11 5
Rural Health & Lying Ins 12 16
GSO 3 2
MENRO 1 17
E-Center 3  
Market 9 12
Meat 1  
Total 107 148

Permanent/Plantilla
Job Order Workers (JOWs)
Positions

40
 Elective positions 12 Clerical services 66
Co-terminus 1 Janitorial services 41
Department Heads 8 Security services 13
Staff/ core 86 Technical services 13
positions
Health and allied 12
services
Trades and 2
crafts/laborer
Others (Public Service 1
Assistant)
Total 107 Total 148
*11 out of 86 are with
Utility worker items

Based on the table above under the columns ‘Permanent/ Plantilla Positions,
twelve (12) are holding elective positions, one (1) is co-terminus, eight (8) are holding
department head positions for the delivery of basic services, and the remaining eighty-six
(86) are regular staff members/core positions. Eleven (11) out of the eighty-six (86)
staff/employees hold ‘Utility Worker’ items whose actual functions may or may not be
that of a utility worker.

Of the one hundred forty-eight (148) job order workers in the municipality,
majority perform clerical jobs (66) and janitorial works (41) while others are in security
services (13), technical services (13), health and allied services (12), laborers (2) and
public service assistant (1).

Review of the submitted accomplishment reports of the JOWs showed the

following:

1) Generic listing of accomplishments (if drivers, which vehicle/s were driven on

what dates and for what purpose?)
2) Listed accomplishments include outputs that were not quantifiable. (How
many clients were assisted per person? How many DTRs were reviewed?
How many memorandums were prepared, printed and distributed? How many
endorsement/ executive letters, memorandums were prepared?
3) Number of JOWs assigned was not proportional to the needs of the office
and/or work to be performed can already be performed by the permanent
employees assigned thereat. Offices with very limited clienteles or reportorial
responsibilities do not require a lot of manpower.

While the hiring of JOWs is not prohibited, Management should exercise

discretion in the selection and hiring of JOWs. Management should think of ways to
permanently address lack of manpower especially to key offices such as the Accounting
Treasury and Engineering Departments and endeavor to provide quality manpower rather
than flooding departments with JOWs which do not help in the attainment of each

41
department’s target performances. Further, Management must also ensure that
documentary requirements identified above must be attached to the vouchers to facilitate
review/evaluation of transaction.

Payments of wages to job orders without the above stated documents violated
Item 4.1.3 of COA Circular No. 2012-001.

We recommended and Management agreed to require the: a.) Human

Resource Officer to furnish the Office of the Auditor the certification by the Local
Chief Executive/Personnel Officer that the activities/ services to be rendered by the
JOWs cannot be provided by regular or permanent personnel of the LGU; include
in JOW contract the functions, duties and responsibilities for each JOW; and
evaluate the staffing requirements of each department taking into consideration the
available work force provided by permanent employees and the department’s
performance targets; b.) Accounting Office and Human Resource Office to ensure
that required supporting documents for overtime claims are attached in the payroll
and c.) JOWs to provide accomplishment reports which are quantifiable and
traceable to their department’s/section’s performance targets.

B. PROJECT EVALUATION

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1. The Municipality was not able to implement 39 projects budgeted at ₱37.16
million or 48.75 per cent of key programs and projects under the 20% Local
Development Fund, thereby depriving its constituents of the benefits they
could have derived had all the projects been implemented during the year.

DILG-DBM Joint Memorandum Circular No. 2017-1 dated February 22, 2017
provides that it is the responsibility of every Provincial Governor, City and Municipal
Mayor and Punong Barangay to ensure that the 20% of the IRA is optimally utilized to
help achieve desirable socio-economic development and environmental outcomes.

The total appropriation pertaining to the 20% Local Development Fund during the
year amounting to ₱56,887,445.40 was allocated as follows:

Balances (₱)
PPAs Appro'n (₱) Allotment (₱) Obligation(₱)Appro'n Allotment
Current Year's Appropriation
Economic Services 32,225,000 20,480,320 18,635,084 11,744,680 1,845,236
Social Services 9,456,811 6,056,811 6,002,440 3,400,000 54,371
Total CY Appropriation 41,681,811 26,537,131 24,637,525 15,144,680 1,899,606
Continuing Appropriation 15,205,634 1,500,000 1,496,341 13,705,634 3,659
Continuing Allotment - 26,192,573 14,378,599 - 11,813,973
Grand Total 56,887,445 54,229,704 40,512,465 28,850,314 13,717,239
* Rounded -off to the nearest peso
The fund was appropriated/ allotted for the implementation of eighty (80) projects
during the year under audit, thirty-one (31) of which to be funded out of current year’s
appropriation, nineteen (19) are from continuing appropriations and thirty (30) from
continuing allotments.

Verification of the Utilization Report for CY 2018 showed that twelve (12) out of
thirty-one (31) projects identified to be funded out of the current year appropriations and
eighteen (18) out of nineteen (19) projects under continuing appropriations and nine (9)
out of thirty (30) or a total of thirty-nine (39) projects budgeted at ₱37,163,626.41 are
totally unimplemented as of December 31, 2018 as shown below:

Name of Project Amount (₱)

Current Year’s Appropriation
Concreting of Bangad Heights, Sta. Cruz-Phase 2 500,000.00
Construction of Diversion Road (Sta. Cruz, San Vicente,
Salvacion and La Medalla) 1,000,000.00
Road Concreting-Zone 3-6, Salvacion 354,900.00
Improvement of Sta. Isabel Access Road 1,000,000.00
Concreting-San Roque Poblacion Road 1,000,000.00
Upgrading of concrete pavement w/ drainage (Quezon St.) 600,000.00
Improvement/Rehabilitation of Irrigation Canals 200,420.00

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 Name of Project Amount (₱)
Site Acquisition for Government Economic Development
Program 5,000,000.00
Development of Agri-Eco Tourism Destination (OMAg) 3,000,000.00
Site Development-Tourism Spring Resort 500,000.00
Installation of Potable Water Supply System (Upland
Barangays) 400,000.00
Procurement of Heavy Equipment (bulldozer) 3,000,000.00
CY Appropriation –Total 16,555,320.00

Name of Project Amount (₱)

Continuing Appropriation
Improvement of Lourdes Road (Alsum) 1,000,000.00
Procurement of Rice Transplanter (Walk-behind) 100,000.00
Construction of Organic Fertilizer Processing House
(Phase 2) 200,000.00
Acquisition of site/ROW for GEDP 6,000,000.00
Construction of Standardized Day Care Center 400,000.00
Installation of Potable Water Supply System (Various
Barangays) 300,000.00
Public Safety Monitoring/Alarm/Warning System (CCTV) 175,000.00
Acquisition of Site/ROW for GEDP 315,000.00
Energization of Upland Barangays 350,000.00
Tourism Spot Development 1,000,000.00
Market drainage line canal 100,045.54
Construction of Standardized Day Care Center 200,000.00
Installation of Potable Water Supply System (Upland
Barangays) 300,000.00
Public Safety Monitoring/Alarm/Warning System (CCTV) 80,677.53
CRBI of Local Roads and Bridges-Sta. Isabel Road 68,816.66
CRBI of Gov't. Bldgs & Structures-Health Center 1,000,000.00
CRBI of Irrigation Systems & Facilities 116,094.50
Acquisition of Site/ROW for GEDP 2,000,000.00
Continuing Appropriation –Total 13,705,634.23

Name of Project Amount (₱)

Continuing Allotment
Improvement of Irrigation Line Canals 300,000.00
Energization of Upland Barangays 70,450.00
Lourdes Old Road 499,975.67
Rapid Composting Machine 5,000,000.00
CRBI of Local Roads and Bridges - Del Pilar Road 196,183.50
Improvement of Bagumbayan-Pugay 135,988.31
Concreting- Del Pilar, FMR 249,997.00
Concreting- Sta. Teresa, FMR 236,029.00

44
 Name of Project Amount (₱)
CRBI of Flood Control/Drainage Structure 214,048.70
Continuing Allotment –Total 6,902,672.18

Audit revealed that while it would appear that the LGU was able to obligate
₱40,512,464.85 of its 20% Local Development Fund during the year, it was able to
complete only five (5) projects out of current and continuing appropriations for CY 2018
costing ₱5,049,993.21 as follows:

Name of Project Amount (₱)

Improvement of Iyagan Road 588,340.70
Improvement of San Juan – Bagumbayan Road 966,021.61
Construction of San Vicente – Antipolo Old Road 999,381.41
Improvement of Sitio Ibaba Agdangan Road 497,382.39
Construction of Grouted Riprap 1,998,867.10
CY Appropriation –Total 5,049,993.21

While the Municipal Government is now implementing projects by straight

contract as recommended in prior years, there are still many projects which are yet to be
implemented. The failure to implement these projects funded from the 20% Local
Development Fund deprived the constituents of the benefits they could have derived had
all projects been fully implemented during the year.

We recommended that Management require the Municipal Development

Council to judiciously plan the programs/ projects/ activities to be funded out of the
20% LDF in accordance with the mandate of DILG-DBM JMC No. 2017-1.

According to the Municipal Engineer, most of the projects funded out of the 20%
Local Development Fund were already bidded and awarded in the last quarter of 2018
and the expected completion date is in the 1st quarter of 2019.

45