EXECUTIVE SUMMARY

A. Introduction

The Municipality of Aurora, Isabela became a regular municipality on July

3, 1948 by virtue of Executive Order No. 139 issued by His Excellency then
President Elpidio Quirino. Aurora is a third class municipality with agriculture as
its main source of livelihood. Its main products include rice, corn, tobacco,
calamansi and vegetable production. It is located on the central western part of the
Province of Isabela. The essence of such word is exemplified as the “Gateway to
the Mallig Region” if one comes from the Southern direction. The Municipality
has a total land area of 115.56 square kilometres or 11,556.00 hectares and
composed of 33 barangays with a total population of 38,096.

A financial, compliance and performance audit were conducted on the

accounts and transactions/operations of the Municipality of Aurora, Isabela for
the year 2018. The audit aimed at ascertaining the fairness of presentation of the
financial statements, propriety of disbursements, and adequacy of accounting
records. We have prioritized and looked into the audit thrust areas identified for
audit in 2018 consistent with the unnumbered memorandum issued by the
Assistant Commissioner for Local Government Sector. The audit focused on a test
basis, the review of operating procedures, interview with concerned municipal
officials and employees, verification and analysis of accounts, and such other
procedures considered necessary under the circumstances.

B. Highlights

B.1. Projects, Programs and Activities Completed in 2018

Bottom-up Budgeting (BuBs), 20% Development Fund, LDRRMF and Fund

Transfers

Projects,
Programs Location Project Cost Fund Status
and Activities
Construction of San Juan and 100%
Flood Control Sta. Rita Aurora, 1,416,050.97 BUB completed as
(Stone Masonry) Isabela of 3rd Qtr.

Road Cacal St., Sta.

100%
Rehabilitation of Rita, Aurora, 4,429,343.12 LGSF-ADM
completed
Existing PCCP Isabela

Road Don Mariano 100%

Rehabilitation of St., Sta. Rita, 1,471,508.89 BUB-ADM completed as
Existing PCCP Aurora, Isabela of 3/14/2018
 Projects,
Programs Location Project Cost Fund Status
and Activities
Construction of
Three (3) Barrel
Dalig, Aurora, 100%
Reinforced 1,154,389.88 20% DF
Isabela completed
Concrete Box
Culvert
100%
Construction of Bolinao, Aurora, Trust Fund - Completed
273,032.30
Road Isabela PGI as of
1/26/2018
100%
Construction of Bagong Tanza,
3,629,045.73 DRRMF completed as
Flood Control Aurora, Isabela
of 3rd Qtr.
Construction of 100%
Multi-Purpose Saranay, Aurora, 20% EDF per Completed
779,916.01
Building Isabela GF Account as of 3rd
Extension Qtr.
100%
Backfilling of
Ballesteros, Continuing completed as
Cemetery 1,479,978.50
Aurora, Isabela Appropriations of 5/9/2018
(Phase 1)
SWA
Construction of Public Market, Other PPAs - Completed
Canopy (Tricycle Sta. Rosa, 630,118.14 Continuing as of 4th Qtr
Terminal) Phase 1 Aurora, Isabela Appropriation 2018
100%
completed as
Construction of 2018
Bannawag of Nov. 28,
Magat River Flood 1,445,636.15 Beginning
Aurora, Isabela 2018. Final
Control Balance Fund
Payment on
process
Likewise, it is worthy to note that the Municipality of Aurora is a recipient
of the following awards and citations for CY 2018:

1. 2018 BSP Stakeholders Award; and

2. Kapit-Bisig Award (Municipal Level) LGU Coordination awarded on

July 10, 2018 Manila, Philippines.

B.2. Financial Information

The highlights of the financial condition, financial performance,

appropriations, allotments and obligations of the Municipality of Aurora, Isabela
for the year ended December 31, 2018, with comparative figures for CY 2017 are as
follows:

Increase
Accounts 2018 2017
(Decrease)
Financial Condition
Total Assets 555,760,607.06 263,022,194.06 292,738,413.00
Total Liabilities 101,008,604.95 84,210,943.48 16,797,661.47
Total Government Equity 454,752,002.11 178,811,250.58 275,940,751.53

Financial Performance
Total Revenue 424,183,730.86 174,562,066.17 249,621,664.69
Total Expenses 193,904,763.67 150,843,427.80 43,061,335.87

Increase
Particulars 2018 2017
(Decrease)
Appropriations, Allotments and Obligations
Appropriations - Current 177,770,631.43 117,863,515.78 59,907,115.65
Appropriations–
41,516,930.44 30,596,211.17 10,920,719.27
Continuing
Allotments – Current 177,770,631.43 117,863,515.78 59,907,115.65
Allotments – Continuing 41,516,930.44 30,596,211.17 10,920,719.27
Obligations – Current 105,803,003.25 85,092,999.28 20,710,003.97
Obligations - Continuing 14,227,026.95 6,177,424.58 8,049,602.37

Comparative Statement of fund transfer to and from LGUs, NGAs, and

NGOs/POs are as follows:
Increase
Accounts 2018 2017
(Decrease)
Fund transferred to Other Agencies
Due from LGUs 0.00 539,000.00 (539,000.00)
Due from NGAs 230,000.00 290,000.00 (60,000.00)
Due from NGOs/POs 440,000.00 6,000,000.00 (5,560,000.00)
TOTAL 670,000.00 6,829,000.00 (6,159,000.00)
Fund received from Other Agencies
Due to LGUs 1,360,812.58 777,620.76 583,191.82
Due to NGAs 18,257,947.18 16,145,684.62 2,112,262.56
 Increase
Accounts 2018 2017
(Decrease)
Due to GOCCs 0.00 35,000.00 (35,000.00)
TOTAL 19,618,759.76 16,958,305.38 2,660,454.38

C. Independent Auditor’s Report on the Financial Statements

The combined financial statements of the Municipality of Aurora, Isabela

were substantially prepared and presented in accordance with the International
Public Sector Accounting Standards (IPSASs). Thus, the Auditor rendered an
Unmodified Opinion on the fairness of presentation of the Municipality’s
financial statements as of December 31, 2018.

D. Summary of Significant Observations and Recommendations

The audit observations and recommendation were discussed with the

Management’s officials and staff in an exit conference held on April 3. 2019.
Their comments were incorporated in the report where appropriate. Among the
significant observations and recommendations are as follows:

1. The Real Property Tax Receivables and Special Education Tax Receivables
totaling P11,264,711.90 and P11,239,045.34, respectively, were not reconciled
with the Deferred Real Property Tax and Deferred Special Education Tax
accounts totaling P11,463,336.78 and P11,494,669.89, respectively or a total
difference of P198,624.88 in the General Fund and P255,624.55 in the Special
Education Fund.

We recommended that the Municipal Accountant make a detailed analysis on the

RPT/SET Receivables and its corresponding reciprocal accounts. Explain the
deficiencies noted and record the adjusting entries pertaining to the unreconciled
RPT/SET Receivables and Deferred RPT/SET accounts and take up the correction
of the differences noted, if warranted.

2. The Operating Lease Receivable from Globe Telecom totaling P342,000.00

remained uncollected as of December 31, 2018 due to non-payment of the
lessee on its monthly rental of P18,000.00 since June 2017 hence, efficiency of
collection from Investment Property was not fully realized.

We recommended that Management require the lessee concerned to settle

immediately their obligations at once totaling P342,000.00 and ensure monthly
collection of P18,000.00 thereafter, representing its rent without the need of
demand as prescribed in the Lease Contract Agreement. Likewise, assure the
faithful compliance by the lessee of the stipulations in the agreement especially
the protective clauses for the best interest of the Municipality, if any. Legal
action against the lessee for specific performance may also be resorted to, if
warranted.
3. The year-end balance of the Due from Other Funds account of P1,899,869.56
does not reconcile with its reciprocal account of Due to Other Funds of
P238,220.76 or a difference of P1,661,648.80.

We recommended that the Municipal Accountant review/reconcile the Due from

Other Funds and Due to Other Funds accounts and effect adjustments/corrections
in the books of accounts to present the correct balances. Likewise, ensure that the
balances of reciprocal accounts are at all times be the same so as not to affect the
presentation of the accounts in the financial statements.

4. The thirteen (13) Breeding animals valued at P251,580.00 remained included

in the books of the LGU hence the recorded value of Breeding Stocks totaling
P1,026,050.00 was overstated thus, affecting the fair presentation of the
account balances in the financial statements.

We recommended that the Municipal Accountant do the following:

 Take up the necessary adjusting entry of the death of 13 animals to fairly

present the Breeding Stocks balance in the financial statements.
 To record the death of 13 animals

Prior Period Adjustment xxx

Breeding Stocks xxx

 Ensure that the adjustment duly supported with Report on the Physical
Count of Inventories of Animals, Death Certificate signed by Livestock
Inspector/Veterinarian, Medical Records, Photograph of the dead animals,
Record of Ownership and Property Acknowledgement Receipt (PAR).

 Reconcile the reported death of 13 animals with the record of the

Municipal Agriculturist and monitor for any loss and addition to update
the record from time to time.

5. Government share on Pag-IBIG contributions exceeded the allowable

maximum share to be funded from the LGU funds thus, overstating the
expenditures incurred to the disadvantage of the government.

We recommended that the Municipality comply with the provisions of R.A. 9679
and limit the HDMF Contribution-Government Share at P100.00 per month for
each employee-member, in absence of any agreement that the LGU may increase
its employer’s share up to a certain limit. However, the employees may continue
to contribute more than P100.00 provided that their Net Take Home Pay shall not
be less than P5,000.00.
6. Only P7,157,957.98 and P6,373,442.63 of the total current and continuing
appropriation for 20% Development Fund of P19,939,600.00 and
P22,021,233.88, respectively, were utilized for CY 2018, leaving a significant
amount of unutilized balance totaling P28,429,433.27, hence, the desirable
socio-economic developmental and environmental management outcomes
that would enhance job generation and livelihood promotion among the
constituents were not fully attained.

We recommended that the Municipal Mayor to:

 Maximize the utilization of the 20% Development Fund by speeding up

the implementation of the prioritized programs, projects and activities
funded out of the 20% DF as per Annual Investment Plan and that closer
coordination among the officials involved in planning, execution and
monitoring be undertaken to achieve the desired level of outcomes.

 Instruct the Municipal Planning Development Officer to immediately look

into the unimplemented developmental projects as embodied in the
Annual Investment Plan. Identify causes of non-implementation and
develop feasible and specific solutions to effectively implement
developmental projects.

 Instruct the Municipal Engineer to be very prudent, meticulous,

conscientious and precise in evaluating the timely and perfect
implementation of each and every project. Likewise, he should also
conduct regular inspection of the projects so that accomplishment is
monitored and evaluated based on the project implementation schedule as
stated in the Annual Investment Plan.

 Instruct the Municipal Budget Officer to submit monthly to the Audit

Team a detailed Statement of Appropriations, Obligations and Balances,
showing, among others, the individual programs, projects and activities
funded with current and continuing appropriations under the 20%
Development Fund and review the balances of current and continuing
appropriations for every end of the year for possible inclusion in the
annual budget preparation. Unexpended balances of appropriations of
projects, programs and activities which were already completed/
accomplished should be re-appropriated for other PPAs of the ensuing
year upon recommendation of the Local Chief Executive and approval of
the Sangguniang Bayan.

7. Only P1,938,364.62 or 47.16% of the 70% allocation of the LDRRMF in CY

2018 was utilized contrary to the declared policy of the State which is to
strengthen the capacity of the Local Government Units to build a disaster
resilient community.
 We recommended that Management optimally use the 70% allocation of the
Disaster Risk Reduction Management Fund through the full implementation of
the projects and activities allowed and mentioned in Section 5 of NDRRMC,
DBM and DILG JMC No. 2013-1 to build a disaster resilient community and to
reduce disaster risks.

8. The quality of health services provided by the Rural Health Unit (RHU)
might not be sustained and improved due to a low percentage of utilization
and maximization of the Per Family Payment Rate (PFPR) Fund as caused
by material amounts of unutilized balances of the fund hence, the overall
goals of the health system were not fully achieved efficiently and effectively.

We recommended that the Management optimally utilize the fund primarily for
operational costs related to PFPR services by identifying necessary PPAs that
may be financed by the fund or procurement of necessary drugs and medicines
(based on the PNDF) or programs/projects/activities deemed necessary and
priority in accordance with the purpose of the fund with the intention that will
benefit its intended beneficiaries of the Municipality, in line with the security of
overall health goals.

E. Gender and Development (GAD)

LGU Aurora, Isabela has allocated P7,263,036.86 of its annual budget for
CY 2018 for Gender and Development (GAD). Also, it was able to accomplish
GAD programs/projects/activities totaling P6,609,571.68. Balances totaling
P1,053,465.18 represent unutilized balances from implemented programs as
reflected in the prepared and submitted copy of its GAD Plan and Budget for the
year with corresponding GAD Accomplishment Report to the Office of the
Auditor.

F. Summary of total suspensions, disallowances and charges

Balance as of Balance as of
Issued in Settled in
Particulars January 1, December 31,
2018 2018
2018 2018
Suspensions 0.00 0.00 0.00 0.00
Disallowances 0.00 0.00 0.00 0.00
Charges 0.00 0.00 0.00 0.00
Total 0.00 0.00 0.00 0.00

G. Status of Implementation of Prior Year’s Audit Recommendation

Out of the twenty one (21) audit recommendations in the CY 2017 Annual
Audit Report including prior years, seventeen (17) were implemented, three (3)
were partially implemented, and one (1) was not implemented. Those which were
partially, and not implemented which noted with auditor’s validation were
reiterated in this report, if warranted.