EXECUTIVE SUMMARY

A. INTRODUCTION
The Agency

The Municipality of Compostela was created on August 1, 1948 under Executive

Order No. 56 by the then President Elpidio Quirino. It is a 1 st class Municipality with a
total land area of 32,100 hectares, more or less, with total population of 75,666. It has 16
component Barangays.

The primary concern of the local government is the delivery of basic services in
line with its vision, mission, goals and objectives for the year 2014. The present
leadership of Hon. Lema P. Bolo together with Vice Mayor Atty. Reynaldo P. Castillo,
eight Sangguniang Bayan members assumed full responsibility in the implementation of
its plans and targets and ably supported by eleven (11) municipal government department
heads.

B. AUDIT METHODOLOGY

The Commission has been implementing risk-based audit in the conduct of its
audit services. However, to meet the evolving developments in public governance and
fund management, the results-based approach in audit was incorporated. The integration
of these two-approaches, called the Integrated Results and Risk-Based Audit (IRRBA)
Methodology, was applied in the audit of the accounts and operations of the LGU.

C. SCOPE OF AUDIT

A comprehensive audit was conducted on the accounts and operations of the

Municipality of Compostela, Province of Compostela Valley for calendar year 2015. The
audit consisted of review of operating procedures, evaluation of programs and projects,
verification, reconciliation, confirmation and analysis of accounts, interview of officials
and employees and such other audit procedures considered necessary.

D. FINANCIAL HIGHLIGHTS

The Assets, Liabilities, Government Equity, Income and Expenses of the

Municipality of Compostela for the year ended December 31, 2016, (with comparative
figure of 2015) are as follows:
Increase/(Decrease)
Account 2016 2015
Amount Percentage
Assets 442,579,492.13 310,056,810.66 132,522,681.47 43%
Liabilities 147,478,416.66 70,273,936.99 77,204,479.67 110%
Government Equity 295,101,075.47 239,782,873.67 55,318,201.80 23%
Income 229,830,632.48 204,243,893.28 25,586,239.20 (13%)
Expense 168,864,175.82 158,028,679.54 10,835,496.28 7%
Net Income 40,847,157.56 46,215,213.74 (5,368,056.18) (12%)
 Total assets of P442,579,492.13 increased by 43% or P132,522,681.47 as
compared to last year’s P310,056,810.66 while liabilities of P147,478,416.66 increased
by P77,204,479.67 or 110% as compared to last year’s P70,273,936.99.

A Net Income of P40,847,157.56 was generated for the year which is 13.14%
lesser than calendar year 2015 of P47,215,213.74.

Increase(Decrease)
Sources of Income 2016 2015
Amount Percentage
Tax Revenue 19,936,631.62 19,945,739.17 (9,107.55) 0

Share from Internal 167,888,112.0 152,221,872.0

Revenue Collections 0 0 15,666,240.00 10.3
Service & Business (4,234,535.97
Income 18,360,879.18 22,595,415.15 ) 18.74
Shares, Grants &
Donations 22,877,096.52 6,522,560.67 16,354,535.85 250.74
Other Income 767,913.16 33,482.75 734,430.41 2193.46
229,830,632.4
Total Income 8 201,319,069.74 28,511,562.74 14.16

The Municipality realized a total income of P229,830,632.48 showing an

increase of 13% or P25,586,739.20 as compared to last year’s P204,243,893.28.

Also shown below is the breakdown of expenditures for 2016 with comparative
figures of 2015, to wit:

Increase(Decrease)
Expenses 2016 2015
Amount Percentage
Personal Services 53,448,270.72 49,027,671.23 4,420,599.49 9
MOOE 97,450,008.37 87,110,770.23 10,339,238.14 11.87
Financial Expenses 184,500.55 455,172.28 -270,671.73 -60
Non-Cash Expenses 17,781,396.18 12,543,571.46 5,237,824.72 42
Total Expenses 168,864,175.82 149,137,185.20 19,726,990.62 13

Shown below are the comparative appropriations and obligations for 2016 &
2015.

Expenditures 2016 2015 Increase(Decrease)

Personal Services 69,486,604.08 49,062,898.81 20,423,705.27
MOOE 103,347,682.57 99,207,460.00 4,140,222.57
Appropriation Capital Outlay 67,630,232.83 46,173,612.68 21,456,620.15
Total 240,464,519.48 194,443,971.49 46,020,547.99
Expenditures 2016 2015 Increase(Decrease)

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 Personal Services 53,448,270.72 48,577,722.13 4,870,548.59
Obligation MOOE 97,450,008.37 72,885,788.52 24,564,219.85
Capital Outlay 17,965,896.73 14,082,842.06 3,883,054.67
Total 168,864,175.82 135,546,352.71 33,317,823.11

E. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the LGU as of December 31, 2016, for failure of the municipality
completely conduct physical inventory of its property, plant, and equipment (PPE) valued
in the books at P144 Million which is 32.6% of its total assets, hence, its correctness and
existence cannot be ascertained.

F. SUMMARY OF SIGNIFICANT OBSERVATIONS AND

RECOMMENDATIONS

Presented and discussed below are the significant audit observations and
recommendations noted in the course of audit.

1. Unimplemented and delayed implementation/completion of eighteen (18) 20%

Development Fund projects costing P19,624,451.85 funded in calendar years
2016, 2015 & 2014 and twenty one (21) Locally Funded projects funded in
calendar years 2016 and 2015 totaling P20,951,806.73, deprived the constituents
of the socio-economic benefits which adversely affected the efficiency of the
local governance.

The Local Chief Executive shall ensure the timely implementation of

projects/programs under the 20% Development Fund and Local Funds. Further,
she shall see to it that programs/projects proposed to be undertaken during the
budget year should be implemented and completed in the said year in order to
attain its objective in providing socio-economic benefits to its intended
beneficiaries as well as minimize peso devaluation.

Instruct the Municipal Engineer to strictly administer and supervise the

implementation of development projects and locally funded projects to ensure its
timely completion.

Create a Team headed by the Municipal Planning and Development Coordinator

to evaluate, assess and address the causes on the delay of project implementation.
Determine whether these are still feasible for implementation. In the event that
such projects are identified to be no longer achievable, management shall make
amendments in the Annual Investment Plan and propose other viable development
projects/programs to be funded out of the 20% Development Fund and local funds.

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2. Purchase Orders/contracts totaling P6,284,851.58 were still issued to bidders
despite the non-posting of Performance Security by the winning bidders contrary
to the provisions of RA 9184 which is greatly prejudicial to the interest of the
government.

Require the General Service Office to see to it that Performance Security has
been provided by the winning bidders before the issuance of the
contract/purchase orders as a guarantee for their performance.

Management shall forfeit the bid security, impose appropriate sanctions,

disqualify the bidder and declare the bidding a failure, in case of failure of the
winning bidder to post the required Performance Security in accordance with
Section 40 of RA 9184.

3. Failure of management to enforced the conditions of the contract in the delivery

of goods worth P1,450,469.25 intended for the Sustainable Livelihood Program
has adversely affected the livelihood needs of the beneficiaries, thus, poverty
reduction goals were not fully attained.

Management shall see to it that program funds intended to the poor constituents
be efficiently and effectively be implemented in order to uplift their living
conditions.

Direct the General Services Office to monitor the complete deliveries of goods on
schedule dates and the Municipal Agriculture Office to fast track the
implementation of Sustainable Livelihood programs in order to achieve program
goals and objectives.

4. Liquidated Damages totaling P 694,238.82 was not deducted from the claims of
Renel’s Fruit Nursery, DG Agrivet and North Davao Producers and Agri-Services
Inc. for delayed deliveries of goods.

Management shall initiate appropriate measures/sanctions on defaulting bidders

to protect the interest of the government.

Require the Municipal Accounting Office to carefully check and review claims of
suppliers for the proper imposition of liquidated damages that will be deducted
from their claims.

Require the Bids and Awards Committee to conduct thorough evaluation of

documents submitted by bidders especially on staggered delivery of goods.

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G. SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND
CHARGES

The total audit suspensions, disallowances and charges found in the audit of
various transactions of the agency for calendar year 2016 is based on the Notice of
Suspension (NS) Notice of Disallowances (ND) and Notice of Charge (NC) issued by the
Commission on Audit, as summarized hereunder:

Beginning This Period Ending

Audit Action Balance 01.01.2016 to 12.31.2016 Balance
12.31.2015 NS/ND/NC NSSSDC 12.31.2016
Notice of Suspension 6,241,492.45 4,814,473.96 9,910,663.81 1,145,302.60
Notice of
Disallowance 660,936.15 0.00 0.00 660,936.15
Notice of Charge 0.00 0.00 0.00 0.00
Total 6,902,428.60 4,814,473.96 9,910,663.81 1,806,238.75

H. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS

Out of the 13 prior years’ audit recommendations in last year’s Annual Audit
Report, eight or 61.5% were fully implemented, two or 15.4% were partially
implemented, and three or 23.1% remained unimplemented by management as of year-
end.