01-AdamsIN2020 Audit Report

Republic of the Philippines
COMMISSION ON AUDIT
Office of the Supervising Auditor
Audit Group A – Province of Ilocos Norte
Provincial Capitol, Laoag City 2900
June 3, 2021
HONORABLE ROSALIA D. DUPAGEN

Municipal Mayor
Municipality of Adams, Ilocos Norte
Dear Mayor Dupagen:
We transmit herewith the report on the comprehensive audit on the accounts and
operations of the Municipal Government of Adams, Ilocos Norte for the year ended
December 31, 2020 in compliance with Section 2, Article IX-D of the Philippine
Constitution and pertinent sections of Presidential Decree No. 1445.
The audit was conducted to ascertain the propriety of financial transactions and
compliance with prescribed rules and regulations. It was also made to ascertain the
accuracy of financial records and reports, as well as the fairness of the presentation of the
financial statements. Likewise, a Value for Money Audit was conducted to assess or
determine whether the resources of the Municipality were utilized economically,
efficiently and effectively.
The report consists of four parts: Part I – Audited Financial Statements, Part II –
Audit Observations and Recommendations, Part III – Status of Prior Years’ Audit
Recommendations and Part IV – Annexes. The observations and recommendations were
discussed with the concerned management officials and staff in an exit conference held
on May 26, 2021. Management’s comments are included in the report, where appropriate.
We rendered a qualified opinion on the fairness of presentation of the financial

statements for reasons stated in the Independent Auditor’s Report.
We request that the comments and observations and recommendations contained

in this report be fully addressed and we would appreciate being informed of the action
taken in this regard within sixty (60) days from receipt hereof, pursuant to Section 89 of
the General Provisions of Republic Act No. 11469, otherwise known as the General
Appropriations Act 2020 by accomplishing the Agency Action Plan and Status of
Implementation attached herewith.
We acknowledge the cooperation extended to the audit team by the officials and
staff of that Municipality.
Very truly yours,
MARIA TERESA M. TOLENTINO

OIC-Supervising Auditor
cc: The Director, DILG, Regional Office No. 1, City of San Fernando, La Union
The Director, BLGF, Regional Office No. 1, City of San Fernando, La Union
The Director, DBM, Regional Office No. 1, City of San Fernando, La Union
The Assistant Commissioner, LGS, COA, Quezon City
The Presiding Officer, Sangguniang Bayan, Adams, Province of Ilocos Norte
MUNICIPALITY OF ADAMS
Province of Ilocos Norte
AGENCY ACTION PLAN and STATUS of IMPLEMENTATION

Audit Observations and recommendations
For the Calendar Year 2020
As of _______________
Agency Action Plan

Target Reason for Action
Ref Audit Audit Person/De Implementatio Status of Partial/Delay/No Taken/Actio
. Observations Recommendatio Action pt. n Date Implementati n- n to be
ns Plan Responsib on Implementation, taken
le if applicable
From To
Agency sign-off:
________________________________ _____________
Name and Position of Agency Officer Date
Note: Status of Implementation may either be (a) Fully Implemented, (b) Ongoing, (c) Not Implemented, (d) Partially Implemented, or
(e) Delayed
COMMISSION ON AUDIT
Office of the Team Leader
Audit Group A – R1 - Team 04
Provincial Capitol, Laoag City 2900
June 2, 2021
MS. MARIA TERESA M. TOLENTINO

OIC-Supervising Auditor
Commission on Audit
Audit Group A
Madam:
In compliance with Section 2, Article IX-D of the Philippine Constitution and

pertinent sections of Presidential Decree No. 1445, we conducted a financial and
compliance audit on the accounts and operations of the Municipality of Adams, Province
of Ilocos Norte for the year ended December 31, 2020.
The audit was conducted to ascertain the propriety of financial transactions and
compliance of the agency to prescribed laws, rules and regulations. It was also made to
ascertain the accuracy of financial records and reports as well as the fairness of the
presentation of the financial statements and whether these statements were prepared in
conformity with International Public Sector Accounting Standards (IPSAS). Likewise, a
Value for Money Audit was conducted to asses or determine whether resources of the
Municipality were utilized economically, efficiently and effectively.
The attached report consists of four parts: Part I – Audited Financial Statements,
Part II – Observations and Recommendations, Part III – Status of Prior Years’ Audit
Recommendations and Part IV – Annexes. The observations and recommendations were
discussed with the concerned management officials and staff in an exit conference on
May 26, 2021. Management’s comments are included in the report, where appropriate.
We rendered a qualified opinion on the fairness of presentation of the financial

statements for reasons stated in the Independent Auditor’s Report.
Our audit was conducted in accordance with International Standards of Supreme

Audit Institutions (ISSAIs) and we believe that it provides reasonable bases for the result
of audit.
Thank you.
Very truly yours,
ROWENA C. RAMOS
Audit Team Leader
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
on the
PROVINCE OF ILOCOS NORTE
For the Year Ended December 31, 2020

EXECUTIVE SUMMARY
A. INTRODUCTION
The Municipality of Adams, Ilocos Norte was created by virtue of Batas

Pambansa Bilang. 337, Section 136 otherwise known as the Local Government Code
of 1983. Adams was formally established by Proclamation No. 2289 dated May 16,
1983 by President Ferdinand E. Marcos. It has a total land area of 15,931 hectares of
which 12,139 hectares or 76% are forest.
The Municipality is under the leadership of Honorable Mayor Rosalia D.

Dupagen, assisted by the Honorable Vice Mayor Eric T. Bawingan and the
Sangguniang Bayan Members. The manpower complement of the Municipality as of
December 31, 2020 is composed of 12 elective officials, 2 co-terminus, 23
permanent, 3 casual, 4 temporary and 52 contractual workers or a total of 96.
B. OPERATIONAL HIGHLIGHTS
In response to COVID-19 pandemic, the Municipality allotted a total of

₱7,603,761.00 and had utilized a total of ₱7,303,761.00 for the necessary programs,
projects and activities (PPAs) related to the COVID-19 virus prevention, treatment,
repercussion and/or aftermath. The ending balance of ₱300,000.00 will be utilized in
the ensuing year, Calendar Year (CY) 2021. Details are as follows:
Source of Fund Beginning Utilization (₱) Ending Balance

Balance (₱) (₱)
DSWD RO I 1,490,189.00 1,490,189.00 0.00
DBM - Bayanihan Grant
(National Grant) 5,813,572.00 5,813,572.00 0.00
Donations 300,000.00 300,000.00
Total 7,603,761.00 7,303,761.00 300,000.00
To accelerate the social and economic development of the Municipality for

CY 2020, the following were the significant completed infrastructure projects:
Project/Program/Activity Name Location Total Cost (₱)

Local Access Road Poblacion 1 and 3 9,706,459.69
Construction of Road Basog, Adams 1,498,592.84
Completion of Evacuation Center ANHS ACES, Adams 517,854.90
Construction of Balinawang FMR Adams, Ilocos Norte 994,010.40
Construction of Maligligay FMR Maligligay, Adams 630,067.00
Construction of Solar Dryer Maligligay, Adams 530,520.80
Continuation of Municipal Hall Bldg. Adams, Ilocos Norte 1,189,062.32
Project/Program/Activity Name Location Total Cost (₱)
Improvement of Irrigation Facilities SanjeraTammo, Adams 500,817.60
C. FINANCIAL HIGHLIGHTS
Comparative analysis of the Statement of Financial Position and Performance

as presented below generally showed an increase in all Assets and Equity as well as
Revenue and Application of Funds, except Financial Expenses.
Accounts 2020 2019 Increase/ Increase/

Decrease Decrease %
Assets 248,211,624.38 235,061,721.63 13,149,902.75 5.59%
Liabilities 45,577,796.26 61,661,704.20 (16,083,907.94) (26.08%)
Government 202,633,828.12 173,400,017.42 29,233,810.70 16.86%
Equity
Sources of 2020 2019 Increase/ Increase/

Funds Decrease Decrease %
Local Sources 1,475,992.16 1,194,442.90 281,549.26 23.57%
External 87,622,444.00 62,175,764.00 25,446,680.00 40.93%
Sources
Total 89,098,436.16 63,370,206.90 25,728,229.26 40.59%
Application of 2020 2019 Increase/ Increase/
Funds Decrease Decrease%
PS 35,887,924.57 32,305,350.53 3,582,574.04 11.09%
MOOE 21,739,113.19 20,250,011.62 1,489,101.57 7.35%
Non-cash 12,770,010.40 9,112,372.86 3,657,637.54 40.14%
Expenses
Financial 1,087,576.99 1,451,033.01 -363,456.02 (25.05%)
Expenses
Total 71,484,625.15 63,118,768.02 8,365,857.13 13.25%
D. SCOPE OF AUDIT
The audit covered the financial transactions and operations including various
PPAs of the Municipal Government funded by regular, special and supplemental
appropriations, trust funds and fund transfers from various agencies for the period
January 1 to December 31, 2020.
The audit was conducted to ascertain accuracy of financial records and

reports, as well as the fairness of the presentation of the financial statements and
whether these statements were prepared in conformity with International Public
Sector Accounting Standards (IPSAS). Likewise, it was made to ascertain whether
programs as envisioned were attained in economical, efficient and effective manner.
E. STATE AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS
A qualified opinion was rendered on the fairness of the presentation of the

financial statements of the Municipality of Adams, Ilocos Norte as at December 31,
2020 because the (a) current and non-current portions of the Loans Receivable
totaling ₱13,470,000.00 were all presented as current; (b) Guaranty Deposits Payable
of ₱2,509,234.40 remained in the books for more than three years; and (c) Accounts
Payable totaling ₱1,336,239.00 remained outstanding for more than two years and
unadjusted in the books.
F. SUMMARY OF SIGNIFICANT AUDIT OBSERVATIONS AND

RECOMMENDATIONS
We commend the management for the favorable observations noted, to wit:
 The Municipality had continually implemented its 10-Year Solid Waste

Management Plan (SWMP) in adherence to the salient provisions of Republic Act
(RA) No. 9003, otherwise known as the Ecological Solid Waste Management Act
of 2000. During the year, the Municipality purchased a parcel of Land with an
area of 6,925 square meters for Sanitary Landfill.
 The Municipality continuously withheld income and expanded taxes from

procured goods and services and regularly remitted said taxes within the period
prescribed by the BIR Regulations.
 The Municipality purchased common-use supplies in PS-DBM before obtaining

in a Private Dealer if stocks were limited and not available in DBM, which is in
accordance with the provisions of Section 53 (e) of the Implementing Rules and
Regulations (IRR) of RA No. 9184, otherwise known as the Government
Procurement Reform Act (GPRA).
 The Gender and Development Fund for CY 2020 was fully utilized where actual
expenditures and implementation of PPAs exceeded the target by 33.79% or total
implemented PPAs of ₱4,575,950.00.
However, in the course of our audit, we had significant observations that need
to be addressed. These observations together with the corresponding
recommendations are summarized below and discussed in detail in Part II of the
Report. Management views and comments were taken through the issuance of the
Summary of Audit Observations and Recommendations (SAOR). The views and
comments were incorporated in the report where appropriate.
1. The validity, accuracy and reliability of Property, Plant and Equipment (PPE)
account totaling ₱232,577,443.57 cannot be ascertained and substantiated due to
some deficiencies between property and accounting records, which is not in
accordance with Section C.3 of Chapter V of the Manual on Property
Custodianship, thus the PPE account balances remained doubtful, affecting the
fair presentation of the account in the financial statements.
We recommended that Management instruct the Municipal Accountant to

coordinate with the GSO to reconcile and check their property records pursuant to
Section C3, Chapter V of the Manual on Property Custodianship.
Further, we recommended that Management require the General Services Officer

(GSO) to maintain Property Cards and the Municipal Accountant to maintain an
Equipment Ledger Cards so that reconciliation be made periodically and any
unreconciled differences be adjusted easily.
2. Payment of financial aid through the Aid in Crisis Situation (AICS) with a total
amount of ₱259,000.00 during the current year were debited to the account Other
Maintenance and Operating Expenses (OMOE) instead of Donations, which is not
in accordance with the Chart of Accounts for Local Government Units, thus the
OMOE was misused and misrepresented affecting the fair presentation of the
account in the financial statement.

properly or appropriately classify and record the expenses in accordance with the
Revised Chart of Accounts corresponding with the specific purpose/s of the
expenditure/s for which it was created to present fairly the accounts in the
financial statements.
G. SUMMARY OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS
Of the 25 prior years’ audit recommendations, 16 were fully implemented and

9 were not acted upon during the year.
H. SUMMARY OF SUSPENSIONs, DISALLOWANCES AND CHARGES
Audit suspensions, disallowances and charges amounted to ₱711,532.94,

₱5,380,997.72 and ₱0.00 respectively, in which suspensions and disallowances
remained unsettled at the end of the year. Details are as follows:
Balance, Balance,
Issuances Settlement
31-Dec-19 31-Dec-20
Suspension 684,814.19 258,106.99 231,388.24 711,532.94
Disallowance 5,380,482.72 515.00 5,380,997.72
Charge - - - -
TABLE OF CONTENTS
Part I – Audited Financial Statements
 Independent Auditor’s Report 1

 Statement of Management Responsibility for Financial Statements 3
 Consolidated Statement of Financial Position 4
 Consolidated Statement of Financial Performance 5
 Consolidated Statement of Changes in Net Assets/Equity 6
 Consolidated Detailed Statement of Cash Flows 7
 Statement of Comparison of Budget and Actual Amount 9
 Notes to Financial Statements 13
Part II – Audit Observations and Recommendations
A. Financial 41
B. Compliance Audit 54
C. Value for Money Audit 65
Part III – Status of Prior Years’ Audit Recommendations 69
Part IV – Annexes
A. Summary of Uncorrected Misstatements 86

PART I
AUDITED FINANCIAL STATEMENTS
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
INDEPENDENT AUDITOR’S REPORT
Hon. Rosalia D. Dupagen

Adams, Ilocos Norte
Opinion
We have audited the financial statements of the Municipality of Adams, Ilocos Norte,
which comprise the Statement of Financial Position as at December 31, 2019, and the
Statement of Financial Performance, Statement of Changes in Net Assets/Equity,
Statement of Cash Flows and Statement of Comparison of Budget and Actual Amounts
for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, except for the effects of the matter described in the Bases of Qualified
Opinion section of our report, the accompanying financial statements present fairly, in all
material respects, the financial position of the Municipal Government of Adams as at
December 31, 2019, and its financial performance, its cash flows, and its comparison of
budget and actual amounts for the year then ended in accordance with IPSASs.
Bases for Opinion
The (a) current and non-current portions of the Loans Receivable totaling ₱13,470,000.00
were all presented as current; (b) Guaranty Deposits Payable of ₱2,509,234.40 remained
in the books for more than three years; and (c) Accounts Payable totaling ₱1,336,239.00
remained outstanding for more than two years and unadjusted in the books, which
affected the fair presentation of the financial statements.
We conducted our audit in accordance with International Standards of Supreme Audit

Institutions (ISSAIs). Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are independent of the agency in accordance with the ethical requirements that
are relevant to our audit of the financial statements, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our
qualified opinion
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with IPSASs, and for such internal control as management
determines is necessary to enable the preparation of the financial statements that are free
from material misstatement, whether due to fraud or error.
Those charged with governance are responsible for overseeing the LGU’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not guarantee that an audit conducted in accordance with ISSAIs will
always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
COMMISSION ON AUDIT
BY:
ROWENA C. RAMOS
Audit Team Leader
June 1, 2021
OFFICE OF THE MUNICIPAL MAYOR
Statement of Management Responsibility for Financial Statements
The Management of the Municipality of Adams, Ilocos Norte is responsible for

all information and representation contained in the Statement of Financial Position as of
December 31, 2020 and the related Statement of Financial Performance, Statement of
Cash Flows, Changes in Net Assets/Equity and Statement of Comparison of Budget and
Actual Amounts for the period then ended. The Financial Statements have been prepared
in conformity with the International Public Sector Accounting Standards (IPSAS) and
reflect amounts that are based on best estimates and informed judgment of management
with appropriate consideration of materiality.
In this regard, management maintains a system of accounting and reporting which

provides for the necessary internal controls to ensure that transactions are properly
authorized and recorded, assets are safeguarded against unauthorized use or disposition
and liabilities recognized.
MICHAEL D. FIGUEROA
Municipal Accountant
ROSALIA D. DUPAGEN
Municipal Mayor
NOTES TO FINANCIAL STATEMENTS
1 - Profile
The Municipality of Adams, Ilocos Norte was created by virtue of Batas Pambansa
Bilang 337, Section 136 otherwise known as the Local Government Code of 1983.
Adams was formally established by Proclamation No. 2289 dated May 16, 1983 by
President Ferdinand E. Marcos. Situated within a mountainous and heavily forested
region, Adams is blessed with rich natural resources like beautiful mountains where
rare species of flora and fauna are found namely: Pico de Loro Mountain or popularly
known as the Mt. Palemlem – the highest peak in Ilocos Norte on the Northwest; Mt.
Pao on the Southwest and Mt. Mangnas on the Southeast. Scenic waterfalls like Pao
Falls, Anuplig Falls, Kanayupan Falls, Anat Falls, Aki and Cabacan Falls make
Adams a must see place of Ilocos Norte. Its cool climate similar to the climate of
Baguio City has earned its distinction as the “Little Baguio of the North”. It has a
total land area of 15, 931 hectares of which 12, 139 hectares or 76.204% are forest.
Adams has a total population of 2,309 with 681 families based on the latest census of
Social Welfare and Development Office, Adams, Ilocos Norte.
Adams is located at the Northeastern part of Ilocos Norte and is 106 kilometers away
from Laoag City, the capital of Ilocos Norte. A hinterland and a tropical rain forest
area, Adams is bounded by Apayao and Cagayan Province on the east, on the north
by the Municipality of Pagudpud, on the southwest by the Municipality of Vintar and
on the northwest by the Municipality of Dumalneg.
Presently, the Municipality is maintaining three funds namely; General Fund (100),
Special Education Fund (200) and Trust Fund (300).
2 - Consolidation
The financial statements of the LGU have been prepared in accordance with and
comply with the IPSAS. The consolidated financial statements are presented in
pesos, which is the functional and reporting currency of the LGU. The accounting
policies have been applied starting the year 2015.
3 - Summary of Significant Accounting Policies
3.1 Basis of Accounting
The financial statements are prepared on an accrual basis in accordance with the
IPSAS.
3.2 Revenue Recognition
Revenue from Non-exchange Transactions
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Taxes, Fees and Fines
The LGU recognizes revenues from taxes and fines when the event occurs and the
asset recognition criteria are met. To the extent that there is a related condition
attached that would give rise to a liability to repay the amount, liability is
recognized instead of revenue. Other non-exchange revenues are recognized when
it is improbable that the future economic benefit or service potential associated with
the asset will flow to the entity and the fair value of the asset can be measured
reliably.
Transfers from Other Government Entities
Revenues from non-exchange transactions with other government entities are

measured at fair value and recognized on obtaining control of the asset (cash, goods,
services and property) if the transfer is free from conditions and it is probable that
the economic benefits or service potential related to the asset will flow to the LGU
and can be measured reliably.
The LGU availed of the 5 – year transitional provision for the recognition of Tax
Revenue - Real Property and Special Education Tax. For the first year, there will be
no change in policy for the recognition of the aforementioned tax revenue.
Revenue from Exchange Transactions
Rendering of Services
The LGU recognizes revenue from rendering of services by reference to the stage of
completion when the outcome of the transaction can be estimated reliably. The stage
of completion is measured by reference to labor hours incurred to date as a
percentage of total estimated labor hours.
Where the contract outcome cannot be measured reliably, revenue is recognized

only to the extent that the expenses incurred.
Sale of Goods
Revenue from the sale of goods is recognized when the significant risks and rewards
of ownership have been transferred to the buyer, usually on delivery of the goods
and when the amount of revenue can be measured reliably and it is probable that the
economic benefits or service potential associated with the transaction will flow to
the LGU.
Interest Income
Interest income is accrued using the Effective Yield Method. The effective yield
discounts estimated future cash receipts through the expected life of the financial
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asset to that asset’s net carrying amount. The method applies this yield to the
principal outstanding to determine interest income each period.
Rental Income
Rental income arising from operating leases on investment properties is accounted

for on a straight-line basis over the lease terms and included in revenue.
3.3 Property, Plant and Equipment
All Property, Plant and Equipment (PPE) are stated at cost less accumulated
depreciation. Cost includes expenditure that is directly attributable to the acquisition
of the items. When significant parts of PPE are required to be replaced at intervals,
the LGU recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is performed, its
cost is recognized in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All other repair and maintenance
costs are recognized in surplus or deficit as incurred. Where an asset is acquired in a
non-exchange transaction for nil or nominal consideration the asset is initially
measured at its fair value.
Depreciation on assets is charged on a straight-line basis over the useful life of the
asset. It is charged at rates calculated to allocate cost or valuation of the asset less
any estimated residual value over its remaining useful life:
Estimated
Property, Plant and Equipment Useful Life
(in years)
 Land Improvements
 Land Improvements 10
 Runways/Taxiways 20
 Railways 40
 Electrification, Power and Energy Structures 10
 Infrastructure Asset
 Buildings
 Wood 10
 Mixed 20
 Concrete 30
 Leasehold Improvements
 Land 10
 Building
 Wood 10
 Mixed 20
 Concrete 30
15
Estimated
Property, Plant and Equipment Useful Life
(in years)
 Office, Equipment, Furniture and Fixtures

 Office Equipment 5
 Furniture and Fixtures 10
 IT Equipment – Hardware 5
 Library Books 5
 Machineries and Equipment
 Machineries 10
 Agricultural, Fishery and Forestry 10
 Airport Equipment 10
 Communication Equipment 10
 Construction and Heavy Equipment 10
 Firefighting Equipment and Accessories 7
 Hospital Equipment 10
 Medical, Dental and Laboratory Equipment 10
 Military and Police Equipment 10
 Sports Equipment 10
 Technical and Scientific Equipment 10
 Other Machineries and Equipment 10
 Transportation Equipment
 Motor Vehicles 7
 Trains 10
 Aircraft and Aircraft Ground Equipment 10
 Water-crafts 10
 Other Transportation Equipment 10
 Other Property, Plant and Equipment 5
Leased Assets may consist of vehicles and machinery. The assets’ residual values
and useful lives are reviewed, and adjusted prospectively, if appropriate, at the end
of each reporting period. An asset’s carrying amount is written down immediately to
its recoverable amount, or recoverable service amount, if the asset’s carrying
amount is greater than its estimated recoverable amount or recoverable service
amount. The LGU derecognizes items of PPE and/or any significant part of an asset
upon disposal or when no future economic benefits or service potential is expected
from its continuing use. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the surplus or deficit when the asset is
derecognized.
Public Infrastructures were not previously recognized in the books. The LGU
availed of the 5-year transitional provision for the recognition of the Public
16
Infrastructure. For the first year of implementation of the IPSAS, the LGU did not
recognize the Public Infrastructure in the books of accounts.
3.4 Leases
LGU as a Lessee
Finance leases are leases that transfer substantially all the risks and benefits
incidental to ownership of the leased item to the LGU. Assets held under a finance
lease are capitalized at the commencement of the lease at the fair value of the leased
property or, if lower, at the present value of the future minimum lease payments.
The LGU also recognizes the associated lease liability at the inception of the lease.
The liability recognized is measured as the present value of the future minimum
lease payments at initial recognition. Subsequent to initial recognition, lease
payments are apportioned between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognized as finance costs in surplus or deficit.
An asset held under a finance lease is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the LGU will obtain ownership of
the asset by the end of the lease term, the asset is depreciated over the estimated
useful life of the asset or the lease term whichever is shorter.
Operating leases are leases that do not transfer substantially all the risks and benefits
incidental to ownership of the leased item to the LGU. Operating lease payments are
recognized as an operating expense in surplus or deficit on a straight-line basis over
the lease term.
LGU as a Lessor
Leases in which the LGU does not transfer substantially all the risks and benefits of
ownership of an asset are classified as Operating Leases. Initial direct costs incurred
in negotiating an operating lease are added to the carrying amount of the leased asset
and recognized over the lease term.
Rent received from an operating lease is recognized as income on a straight-line

basis over the lease term. Contingent rents are recognized as revenue in the period in
which they are earned.
3.5 Financial Instruments
Financial Assets
Initial Recognition and Measurement
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Financial Assets are classified as financial assets at fair value through surplus or
deficit, loans and receivables, held-to-maturity investments or available-for-sale
financial assets, as appropriate. The LGU determines the classification of its
financial assets at initial recognition.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the marketplace (regular way
trades) are recognized on the trade date, i.e., the date that the LGU commits to
purchase or sell the asset.
The LGU’s financial assets include: cash and short-term deposits; trade and other
receivables; loans and other receivables and quoted and unquoted financial
instruments.
Subsequent Measurement
The subsequent measurement of financial assets depends on their classification.
Financial Assets at Fair Value Through Surplus or Deficit
Financial assets at fair value through surplus or deficit include financial assets held
for trading and financial assets designated upon initial recognition at fair value
through surplus or deficit. Financial assets are classified as held for trading if they
are acquired for the purpose of selling or repurchasing in the near term. Financial
assets at fair value through surplus or deficit are carried in the statement of financial
position at fair value with changes in fair value recognized in surplus or deficit.
Loans and Receivables
Loans and Receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. After initial
measurement, such financial assets are subsequently measured at amortized cost
using the effective interest method, less impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the effective interest rate. Losses arising from impairment are
recognized in the surplus or deficit.
Held-to-Maturity
Non-derivative financial assets with fixed or determinable payments and fixed

maturities are classified as held to maturity when the LGU has the positive intention
and ability to hold it to maturity. After initial measurement, held-to-maturity
investments are measured at amortized cost using the effective interest method, less
impairment. Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the effective
interest rate. The losses arising from impairment are recognized in surplus or deficit.
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Derecognition
The LGU derecognizes a financial asset or, where applicable, a part of a financial
asset or part of a group of similar financial assets when:
a) The right to receive cash flows from the asset have expired or is
waived;
b) The LGU has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without material
delay to a third party; and either: (a) the LGU has transferred substantially all the
risks and rewards of the asset; or (b) the LGU has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of
the asset.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities within the scope of IPSAS 29 are classified as financial

liabilities at fair value through surplus or deficit or loans and borrowings, as
appropriate. The LGU determines the classification of its financial liabilities at
initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of loans
and borrowings.
The LGU Groups of Financial Liabilities include trade and other payables, bank
overdrafts, loans and borrowings.
Subsequent Measurement
The measurement of financial liabilities depends on their classification.
Financial Liabilities at Fair Value Through Surplus or Deficit
Financial liabilities at fair value through surplus or deficit include financial

liabilities held for trading and financial liabilities designated upon initial recognition
as at fair value through surplus or deficit.
Loans and Borrowings
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses are
19
recognized in surplus or deficit when the liabilities are derecognized as well as
through the effective interest method amortization process.
Amortized cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the effective interest rate.
Derecognition
A financial liability is derecognized when the obligation under the liability is

discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount will reported
in the consolidated statement of financial position if, there is a currently enforceable
legal right to offset the recognized amounts and there is an intention to settle on a
net basis, or to realize the assets and settle the liabilities simultaneously.
Fair Value of Financial Instruments
The fair value of financial instruments that are traded in an active markets at each
reporting date is determined by reference to quoted market prices or dealer price
quotations (bid price for long positions and ask price for short positions), without
any deduction for transaction costs.
3.6 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and cash in bank, deposits on call
and highly liquid investments with an original maturity of three months or less,
which are readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value. For the purpose of the consolidated statement
of cash flows, cash and cash equivalents consist of cash and short-term deposits as
defined above, net of outstanding bank overdrafts.
3.7 Inventories
Inventory is measured at cost upon initial recognition. To the extent that inventory
was received through non-exchange transactions (for no cost or for a nominal cost),
the cost of the inventory is its fair value at the date of acquisition.
20
Costs incurred in bringing each product to its present location and condition are
accounted for, as follows:
a) Raw materials: purchase cost using the weighted average cost method;
b) Finished goods and work in progress: cost of direct materials and labor
and a proportion of manufacturing overheads based on the normal operating
capacity, but excluding borrowing costs.
After initial recognition, inventory is measured at the lower of cost and net
realizable value. However, to the extent that a class of inventory is distributed or
deployed at no charge or for a nominal charge, that class of inventory is measured at
the lower of cost and current replacement cost.
Net realizable value is the estimated selling price in the ordinary course of
operations, less the estimated costs of completion and the estimated costs necessary
to make the sale, exchange, or distribution. Inventories are recognized as an expense
when deployed for utilization or consumption in the ordinary course of operations of
the LGU.
3.8 Changes in Accounting Policies and Estimates
The LGU recognizes the effects of changes in accounting policy retrospectively.

The effects of changes in accounting policy are applied prospectively if
retrospective application is impractical.
The LGU recognizes the effects of changes in accounting estimates prospectively by

including in surplus or deficit.
3.9 Related Parties
The LGU regards a related party as a person or an entity with the ability to exert
control individually or jointly, or to exercise significant influence over the LGU, or
vice versa. Members of key management are regarded as related parties and
comprise the Governor, Mayors, Vice-Governors and Vice-Mayors, Sanggunian
Bayan Members, Committee Officials and Members, Accountants, Treasurers,
Budget Officers, General Services and all Chiefs of Departments/Divisions.
3.10 Budget Information
The annual budget is prepared on the modified cash basis, that is, all planned costs
and income are presented in a single statement to determine the needs of the LGU.
As a result of the adoption of the Modified cash basis for budgeting purposes, there
are basis, timing or entity differences that would require reconciliation between the
actual comparable amounts and the amounts presented as a separate additional
financial statement in the statement of comparison of budget and actual amounts.
21
Explanatory comments are provided in the notes to the annual financial statements;
first, the reasons for overall growth or decline in the budget are stated, followed by
details of overspending or underspending on line items.
3.11 Significant Judgments and Sources of Estimation Uncertainty
Judgments
In the process of applying the LGU’s accounting policies, management has made
judgments, which have the most significant effect on the amounts recognized in the
consolidated financial statements.
Operating Lease Commitments – LGU as a Lessor
The LGU has entered into property leases of certain of its properties. The LGU has
determined, based on an evaluation of the terms and conditions of the arrangements,
(such as the lease term not constituting a substantial portion of the economic life of
the commercial property) that it retains all the significant risks and rewards of
ownership of the properties and accounts for the contracts as operating leases.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below. The LGU based its assumptions and estimates on
parameters available when the consolidated financial statements were prepared.
However, existing circumstances and assumptions about future developments may
change due to market changes or circumstances arising beyond the control of the
LGU. Such changes are reflected in the assumptions when they occur.
Useful Lives and Residual Values
The useful lives and residual values of assets are assessed using the following
indicators to inform potential future use and value from disposal:
a) The condition of the asset based on the assessment of experts employed

by the LGU;
b) The nature of the asset, its susceptibility and adaptability to changes in

technology and processes;
c) The nature of the processes in which the asset is deployed; and
d) Changes in the market in relation to the asset.
22
Impairment of Non-financial Assets – Cash-Generating Assets
The recoverable amounts of cash-generating units and individual assets have been
determined based on the higher of value-in-use calculations and fair values less
costs to sell. These calculations require the use of estimates and assumptions. It is
reasonably possible that the assumptions may change, which may then impact
management’s estimations and require a material adjustment to the carrying value of
tangible assets.
The LGU reviews and tests the carrying value of assets when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Cash-
generating assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets and liabilities. If there are
indications that impairment may have occurred, estimates of expected future cash
flows are prepared for each group of assets. Expected future cash flows used to
determine the value in use of tangible assets are inherently uncertain and could
materially change over time.
Impairment of Non-financial Assets – Non - Cash Generating Assets
The LGU reviews and tests the carrying value of non-cash-generating assets when
events or changes in circumstances suggest that there may be a reduction in the
future service potential that can reasonably be expected to be derived from the asset.
Where indicators of possible impairment are present, the LGU undertakes
impairment tests, which require the determination of the fair value of the asset and
its recoverable service amount. The estimation of these inputs into the calculation
relies on the use of estimates and assumptions.
Any subsequent changes to the factors supporting these estimates and assumptions
may have an impact on the reported carrying amount of the related asset.
Fair Value Estimation – Financial Instruments
Where the fair value of financial assets and financial liabilities recorded in the
statement of financial position cannot be derived from active markets, their fair
value is determined using valuation techniques including the discounted cash flow
model. The inputs to these models are taken from observable markets where
possible, but where this is not feasible, judgment is required in establishing fair
values. Judgment includes the consideration of inputs such as liquidity risk, credit
risk and volatility. Changes in assumptions about these factors could affect the
reported fair value of financial instruments.
Provisions
Provisions were raised and management determined an estimate based on the

information available. Provisions are measured at the management's best estimate of
23
the expenditure required to settle the obligation at the reporting date, and are
discounted to present value where the effect is material.
4 - Cash and Cash Equivalents
2020 2019
Cash on Hand
Cash - In Local Treasury 28,104.87 38,826.84
Cash in Bank – Local Currency
31,754,421.9
Cash in Bank - Local Currency - Current Account 34,171,848.24
7
31,782,526.8
Total Cash and Cash Equivalent 34,210,675.08
4
Cash in banks earns interest based on the prevailing bank deposit rates.
5 - Receivables
2020 2019
Loans and Receivable Accounts
Real Property Tax Receivable 380,467.89 448,895.60
Special Education Tax Receivable 316,042.67 332,892.93
Loans Receivable - Others 127,342.21 127,342.21
Total 823,852.77 909,130.74
2020 2019
Inter-Agency Receivables
Due from National Government Agencies - -
39.1
Due from Local Government Units 39.10
0
Total 39.10 39.10
Transfers from other government agencies represent those funds received for
specific projects undertaken by the LGU for specific purpose. These funds were received
on the basis of the project budgets submitted. Accordingly, the LGU is contractually
bound to spend these funds only in connection with the projects. Furthermore, the
contracts stipulate that the funds received for the project may only be applied to the costs
incurred for the project, as and when the phases of the project are certified as
complete. The conditions remaining therefore represent phases of the projects that are yet
to be certified as complete. Returned of the unspent portion of the fund is subject to the
conditions stated in the respective Memorandum of Agreements executed between the
LGU and the proponent government agencies.
24
2020 2019
Intra - Agency Receivables
Due from Other Funds 10,833,425.03 12,929,910.86
Total 10,833,425.03 12,929,910.86
Advances 2020 2019

Advances for Operating Expenses 24,208.00 3,500.00
Advances to Special Disbursing Officer 87,408.00 110,508.00
Advances for Officers and Employees 100,289.00 118,482.00
Total 211,905.00 232,490.00
Other Receivables 2020 2019

Receivables – Disallowances and Charges 9,175,625.28 9,269,621.29
Due from Officers and Employees 164,842.74 178,088.46
Other Receivables 1,550,383.91 1,652,109.46
Total 10,890,851.93 11,099,819.21
As at 31 December 2020, the aging analysis of current exchange receivables is as

follows:
Neithe Past due but not impaired

r past
<30 30-
Total due or
day 60 >60 days
impai
s days
red
Real Property Tax Receivable 380,467.89 380,467.89
Special Education Tax
316,042.67 316,042.67
Receivable
Loans Receivables - Others 127,342.21 127,342.21
Due from LGUs 39.10 39.10
Receivables – Disallowances/
9,175,625.28 9,175,625.28
Charges
Due from Officers and
164,842.74 164,842.74
Employees
Other Receivables 1,550,383.91 1,550,383.91
Total 11,714,743.80 11,714,743.80
6 - Inventories
2020 2019
Inventory Held for Sale
Merchandise Inventory 183,870.00 183,870.00
Inventory Held for Distribution
25
Welfare Goods for Distribution 1,255,059.00 1,255,059.00
Agricultural and Marine Supplies for Distribution 572,605.00 572,605.00
Agricultural Produce for Distribution 192,000.00 192,000.00
Drugs and Medicine for Distribution 103,870.00 103,870.00
Inventory Held for Consumption
Fuel, Oil and Lubricants 95,520.00 95,520.00
Agricultural and Marine Supplies Inventory 45,279.00 45,279.00
Office Supplies Inventory 1,292,204.27 835,724.27
Accountable Forms, Plates and Stickers 15,977.94 16,937.94
Drugs and Medicines Inventory 339,804.10 257,000.50
Medical, Dental and Laboratory Supplies Inventory 343,598.00 21,500.00
Textbooks and Instructional Materials Inventory 17,035.00 17,035.00
Construction Materials Inventory 475,378.85 -
Other Supplies and Materials Inventory 127,666.43 127,666.43
Total 5,059,867.59 3,724,067.14
No inventory items were pledge as security during the current or prior financial
year.
26
7 - Property, Plant and Equipment
Property, Plant and January 1, Additions Transfers/ December 31, Additions Transfers/ As of December
Equipment 2019 Adjustments 2019 Adjustments 31, 2020
Land
863,223 863,223 1,863,223
Land .00 .00 1,000,000.00 .00
Land Improvements
6,831,152 75,89 6,907,042 6,907,042
Other Land Improvements .90 0.00 .90 - .90
Infrastructure Projects
55,518,981 11,883,966 67,402,947 82,365,370.
Road Networks .30 .53 .83 14,962,422.81 64
2,316,987 1,957,36 4,274,353 4,572,477
Flood Control Systems .22 5.80 .02 298,124.44 .46
18,147,307 4,040,77 22,188,078 28,061,566.
Water Supply Systems .49 1.44 .93 5,873,487.83 76
Parks, Plaza and 1,272,826 84,26 1,357,086 1,357,086
Monuments .90 0.00 .90 - .90
Other Infrastructure 2,575,249 1,077,43 3,652,683 6,640,361
Assets .19 4.50 .69 2,987,677.67 .36
Buildings and other Structures
Buildings 7,576,103 7,576,103 5,798,611
.76 .76 (1,777,492.03) .73
School Buildings 3,168,789 3,168,789 3,168,789
.46 .46 .46
Hospitals and Health 3,620,813 3,620,813 3,620,813
Centers .08 .08 .08
Markets 1,119,223 1,119,223 1,119,223
.53 .53 .53
Other Structures 11,412,879 8,380,44 19,793,322 21,395,323.
.22 3.15 .37 1,602,000.97 34
Machinery and Equipment
791,187 791,187 791,187
Machinery .00 .00 .00
27
1,866,632 152,84 2,019,479 499,789.25 2,519,268
Office Equipment .27 7.00 .27 .52
Information and 3,066,900 151,76 3,218,668 3,286,796
Communication .68 8.00 .68 68,128.05 .73
Technology Equipment
Agriculture and Forestry 4,818,885 4,818,885 5,317,585
Equipment .00 .00 498,700.00 .00
Communications 160,067 160,067 160,067
Equipment .18 .18 .18
Construction and Heavy 23,749,975 23,749,975 27,749,975.
Equipment .00 .00 4,000,000.00 00
Disaster Response and 2,409,457 7,601,06 10,010,521 10,044,521.
Rescue Equipment .14 4.00 .14 34,000.00 14
691,694 691,694 815,083
Medical Equipment .00 .00 123,389.00 .00
390,510 390,510 390,510
Sports Equipment .00 .00 .00
Other Machinery And 676,912 196,33 873,252 932,002
Equipment .75 9.50 .25 58,750.00 .25
Transportation Equipment
5,004,233 64,00 5,068,233 8,212,233
Motor Vehicles .00 0.00 .00 3,144,000.00 .00
Furniture, Fixtures and Books
856,701 29,99 886,698 934,498
Furniture and Fixtures .00 7.00 .00 47,800.00 .00
Construction in Progress
Construction in Progress- 11,296,429 (5,025,235.53 6,271,193 977,099
Infrastructure Assets .10 ) .57 (5,294,093.92) .65
Construction in Progress-
Buildings and Other
Structures - - 1,016,436.89 1,016,436.89
Other Property, Plant and Equipment
Other Property, Plant and 1,721,690 694,00 2,415,690 2,560,290
Equipment .05 0.00 .05 144,600.00 .05
Total 171,924,811.22 36,390,146.92 (5,025,235.53) 203,289,722.61 36,359,306.91 (7,071,585.95) 232,577,443.57
28
SCHEDULE OF DEPRECIATION
January 1, 2019 2019 December 31, 2019 2020 December 31, 2020
Accumulated
Net Book Depreciation Accumulated Net Book Depreciation Transfers/ Accumulated Net Book
Depreciation
Value Expense Depreciation Value Expense Adjustments Depreciation Value

Land
863,223.0 863,223.0 1,863,223.0

Land 0 - - 0 - - - 0
Land Improvements
Other Land 6,831,152.9 6,907,042.9 (901,667.07 6,005,375.8
Improvements 0 - - 0 ) - (901,667.07) 3
Infrastructure Assets
49,586,004.7 (9,123,830.18 58,279,117.6 (3,011,423.86 70,230,116.6
Road Networks 4 (3,190,853.62) ) 5 ) - (12,135,254.04) 0
2,245,944.1 (295,791.20 3,978,561.8 (138,882.93 4,137,803.3
Flood Control Systems 2 (224,748.10) ) 2 ) - (434,674.13) 3
16,707,636.9 (2,117,714.62 20,070,364.3 (678,238.14 25,265,614.0
Water Supply Systems 3 (678,044.06) ) 1 ) - (2,795,952.76) 0
Parks, Plaza and 762,186.0 (637,923.58 719,163.3 (97,027.08 622,136.2
Monuments 1 (127,282.69) ) 2 ) - (734,950.66) 4
Other Infrastructure 1,661,519.9 (1,198,996.05 2,453,687.6 (381,739.80 5,059,625.5
Assets 4 (285,266.80) ) 4 ) - (1,580,735.85) 1
Buildings & Other Structures
7,214,091.6 (509,114.21 7,066,989.5 (167,523.96 5,121,973.5
Buildings 1 (147,102.06) ) 5 ) - (676,638.17) 6
2,914,565.2 (354,889.87 2,813,899.5 (102,879.62 2,711,019.9
School Buildings 4 (100,665.65) ) 9 ) - (457,769.49) 7
Hospitals and Health 3,081,829.0 (631,448.22 2,989,364.8 (165,354.72 2,824,010.1
Centers 2 (92,464.16) ) 6 ) - (796,802.94) 4
894,527.8 (260,453.43 858,770.1 (38,421.98 820,348.1
Markets 1 (35,757.71) ) 0 ) - (298,875.41) 2
29
9,283,477.4 (2,550,817.07 17,242,505.3 (701,378.71 18,142,805.5
Other Structures 2 (421,415.27) ) 0 ) (322.01) (3,252,517.79) 5
Machinery & Equipment
94,806.0 (704,703.05 86,483.9 (35,759.58 50,724.3
Machinery 2 (8,322.07) ) 5 ) - (740,462.63) 7
723,430.1 (1,253,864.92 765,614.3 (137,457.43 1,127,946.1
Office Equipment 1 (110,662.76) ) 5 ) - (1,391,322.35) 7
1,641,670.6 (1,626,835.81 1,591,832.8 (161,962.66 1,497,998.2
ICT Equipment 0 (201,605.73) ) 7 ) - (1,788,798.47) 6
Agricultural and 4,629,310.3 (457,596.88 4,361,288.1 (675,183.91 4,184,804.2
Forestry Equipment 6 (268,022.24) ) 2 ) - (1,132,780.79) 1
Communication 86,002.1 (79,858.60 80,208.5 (3,589.5 76,618.9
Equipment 5 (5,793.57) ) 8 9) - (83,448.19) 9
Construction & Heavy 22,579,997.5 (3,190,477.50 20,559,497.5 (2,945,139.95 22,091,165.4
Equipment 0 (2,020,500.00) ) 0 ) 476,807.87 (5,658,809.58) 2
Disaster Response & 2,040,620.6 (934,436.78 9,076,084.3 (1,412,226.76 7,697,857.6
Rescue Equipment 1 (565,600.25) ) 6 ) - (2,346,663.54) 0
373,813.1 (373,165.71 318,528.2 (62,496.76 379,420.5
Medical Equipment 0 (55,284.81) ) 9 ) - (435,662.47) 3
126,613.8 (275,398.00 115,112.0 (30,731.44 84,380.5
Sports Equipment 5 (11,501.85) ) 0 ) - (306,129.44) 6
Other Machineries & 459,537.1 (258,646.50 614,605.7 (104,407.65 568,948.1
Equipment 1 (41,270.86) ) 5 ) - (363,054.15) 0
Transportation Equipment
1,715,062.3 (3,614,096.48 1,454,136.5 (430,752.07 4,096,875.2
Motor Vehicles 3 (324,925.81) ) 2 ) (70,509.19) (4,115,357.74) 6
Furniture, Fixtures & Books
417,590.1 (469,028.20 417,669.8 (54,733.70 410,736.1
Furniture & Fixtures 3 (29,917.33) ) 0 ) - (523,761.90) 0
Construction in Progress
Construction in
Progress-Infrastructure 11,296,429.1 6,271,193.5 977,099.6
Assets 0 - - 7 - - - 5

Construction in
Progress-Buildings 1,016,436.8
and Other Structures - - - - - - - 9
Other Property, Plant & Equipment
Other Property, Plant 1,201,888.6 (165,365.46) (685,166.86 1,730,523.1 (331,031.03 - (1,016,197.89) 1,544,092.1
30
and Equipment 5 ) 9 ) 6
Total 149,432,930.36 (9,112,372.86) (31,604,253.72) 171,685,468.89 (12,770,010.40) 405,976.67 (43,968,287.45) 188,609,156.12
The addition to the PPE accounts represent purchase of equipment for the year and the transitory provisions for the
transfer of the local roads accounts from the Registry of Public Infrastructures to the books of accounts.
The LGU measured the residual value of all items of PPE, but does not expect a residual value of these assets, because
these will be utilized for their entire economic lives and do not have a significant scrap value. During the current financial
year, the LGU reviewed the estimated useful lives and residual values of PPE, where appropriate.
31
8 – Liabilities
Financial Liabilities 2020 2019

Accounts Payable 1,336,239.33 878,379.27
Due to Officers and Employees 750,766.20 1,129,939.65
Loan Payable 13,470,000.00 17,960,000.00
Total 15,557,005.52 19,968,318.92
Inter - Agency Payables 2020 2019

Due to BIR 785,509.98 945,290.18
Due to GSIS 452,291.61 (41,459.91)
Due to PAG - IBIG 146,363.80 146,367.08
Due to PHILHEALTH 76,374.89 54,685.98
Due to NGAs 2,508,980.20 2,497,871.31
Due to GOCCs 570,943.48 570,943.48
Due to LGUs 110,848.06 116,426.31
Total 4,651,312.02 4,290,124.43
The first four accounts represents the amount deducted from the salaries of
officials and employees and is remitted to the respective government agencies
immediately on the month following the month for which these were deducted. While the
remaining accounts represents balances of funds received by the LGU for specific
purposes.
2020 2019
Intra - Agency Payables
Due to Other Funds 9,534,689.74 12,941,910.86
Total 9,534,689.74 12,941,910.86
Deferred Credits/Unearned Income 2020 2019

Deferred Credits
Deferred Real Property Tax 396,731.53 443,494.30
Deferred Special Education Tax 284,700.60 332,892.93
Other Deferred Credits 490,533.69 636,666.17
Total 1,171,965.82 1,413,053.40
32
Trust Liabilities 2020 2019
Trust Liabilities 6,640,008.62 15,852,560.80
Trust Liabilities - Disaster Risk Reduction and
5,255,236.93 4,184,486.62
Management Fund
Bail Bonds Payable 212,984.24 201,109.24
Guarantee/Security/Deposits Payable 2,509,234.40 2,766,378.72
Total 14,617,464.19 23,004,535.38
9 – Other Payables
2020 2019
Other Payables 45,358.95 43,761.22
Total 45,358.95 43,761.22
10 – Tax Revenue
2020 2019
Tax Revenue - Individual and Corporation
Community tax 63,649.48 64,646.74
Tax Revenue - Property
Real Property Tax - Basic 126,436.10 48,850.42
Discount on Real Property Tax -Basic 24,121.15 12,569.81
Special Education Tax 120,862.03 61,063.04
Discount on Special Education Tax 24,121.15 10,732.71
Tax Revenue - Goods and Services
Business Tax 13,688.80 135,389.70
Tax Revenue - Others
Other Taxes 278,440.40 409,749.56
Tax Revenue - Fines and Penalties
Tax Revenue – Fines and Penalties - Taxes on
10,216.00 -
Individual and Corporation
Tax Revenue – Fines and Penalties - Property
25,569.61 14,129.28
Taxes
Share from National Taxes
69,762,866.0
Share Internal Revenue Collection 62,125,764.00
0
Share from Tobacco Excise Tax 9,246,006.00 5,177,147.00
TOTAL 79,599,492.1 62,836,290.22
33
2
11– Service and Business Income

2020 2019
Service Income
Permit Fees 151,317.45 84,868.39
Registration Fees 3,525.00 4,055.00
Clearance and Certificate Fees 76,153.00 78,005.88
Inspection Fees 2,100.00 -
Other Service Income 467,434.28 51,911.00
Business Income
Rent/Lease Income 135,099.55 119,762.07
Receipt from Market Operations - 31,920.00
Receipt from Cemetery Operations 100.00 90.00
Interest Income 39,779.58 33,383.27
TOTAL 875,623.56 403,995.61
12 – Share, Grants and Donation

Grants, Donations and Subsidies 2020 2019
Subsidy from National Government 4,010,000.00 -
Grants and Donations in Cash 8,613,572.00 50,000.00
Grants and Donations in Kind - -
TOTAL 12,623,572.00 50,000.00
Grants and Donations in Cash represents receipts from Bayanihan for COVID-19
purposes, TEAM SUAL and from Province of Ilocos Norte for the Construction of
Sanitary Landfill. While Subsidy from National Government accounts represent amounts
from LGSF and from PGIN.
13 - Other Income
Other Income 2020 2019

Miscellaneous Income 34,248.07 79,921.07
TOTAL 34,248.07 79,921.07
34
14 - Employee Costs
2020 2019
Personnel Services
Salaries and Wages – Regular 20,841,151.26 20,341,897.54
Salaries and Wages – Casual/Contractual 538,054.00 191,453.28
Other Compensation
Personal Economic Relief allowance 1,159,545.45 944,500.33
Representation Allowance 1,451,625.00 1,420,387.50
Transportation Allowance 1,304,625.00 1,332,887.50
Clothing/Uniform Allowance 282,000.00 270,000.00
Subsistence Allowance 40,377.26 28,394.29
Laundry Allowance 4,714.67 13,366.94
Productivity Incentive Allowance 12,000.00 44,000.00
Honoraria 179,463.00 -
Hazard Pay 248,231.95 244,995.29
Longevity Pay 45,000.00 -
Year-End Bonus 1,839,257.00 1,903,896.00
Cash Gift 243,500.00 -
Other Bonuses and Allowances 2,402,899.00 1,893,535.00
Personnel Benefit Contribution
Retirement and Life Insurance Premiums 2,564,055.03 2,413,437.77
PAG-IBIG Contribution 58,950.00 57,000.00
PHILHEALTH Contribution 302,567.59 277,051.34
Employees Compensation Insurance Premiums 56,969.79 53,284.30
Other Personnel Benefit
Terminal Leave Benefits 2,312,938.57 403,763.45
Other Personnel Benefits - 469,500.00
TOTAL 35,887,924.57 32,305,350.53
15 – Maintenance and Other Operating expenses
2020 2019
Traveling Expenses
Traveling Expenses – Local 705,558.19 2,099,090.27
Training and Scholarship Expenses
Training Expenses 151,000.00 900,451.51
Supplies and Material Expenses
Office Supplies Expense 34,299.97 1,580.00
Accountable Forms Expense 8,675.00 -
35
Non-Accountable Forms Expenses - -
Welfare Goods Expenses 2,963,235.11 -
Food Supplies Expense 182,856.00
Drugs and Medicines Expenses 272,148.00 -
Medical, dental and Laboratory Supplies
652,507.00 -
Expenses
Fuel, Oil and Lubricant Expenses 895,887.50 834,794.25
Agriculture and Marine Supplies Expenses 796,665.00 498,000.00
Other Supplies and Material Expenses 23,950.00 -
Utility Expenses
Water Expenses 1,450.27 17,822.62
Electricity Expenses 238,765.75 233,520.24
Communication Expenses
Postage and Courier Services 655.00 -
Telephone Expenses 251,980.21 154,942.64
Internet subscription Expenses 97,026.58 107,450.66
Awards/Rewards and Prizes
Prizes - -
Demolition/Relocation and Desilting/Dredging
Expenses
Demolition and Relocation Expenses - -
Extraordinary and Miscellaneous Expenses 27,000.00 -
TOTAL 7,303,859.58 4,847,652.19
16 – Repairs and Maintenance
2020 2019
Repairs and Maintenance – Land Improvements - 163,275.00
Repairs and Maintenance – Infrastructure Assets 294,497.00 3,640,488.28
Repairs and Maintenance – Buildings and Other
4,750.00 61,300.00
Structure
Repairs and Maintenance – Machinery and
25,972.00 98,314.00
Equipment
Repairs and Maintenance – Transportation
741,620.00 207,575.00
Equipment
Repairs and Maintenance – Other Property,
13,550.00 -
Plant and Equipment
TOTAL 1,080,389.00 4,170,952.28
36
17 – Financial Assistance/Subsidy
2020 2019
Subsidy to NGAs 389,237.00 239,911.00
Subsidy to Local Government Units - -
TOTAL 389,237.00 239,911.00
18 – Transfers
2020 2019
Transfers of Unspent Current Year DRRM
1,070,750.31 798,052.50
Funds to the Trust Funds
Transfers for Project Equity Share - 33,512.14
TOTAL 1,070,750.31 831,564.64
19 – Taxes, Insurance Premiums and Other Fees
2020 2019
Taxes, Duties and Licenses 53,455.91 80,996.95
Fidelity Bond Premiums 31,128.75 31,128.75
Insurance Expenses 274,803.08 295,509.05
TOTAL 359,387.74 407,634.75
20 – Other Maintenance and Operating Expenses
2020 2019
Advertising Expenses - 34,800.00
Printing and Publication Expenses - -
Rent/Lease Expenses 72,000.00 72,000.00
Membership Dues and Contributions to
24,000.00 -
Organizations
Donations 4,515,689.97 2,414,100.33
Other Maintenance and Operating Expenses 8,383,786.90 8,302,872.07
TOTAL 12,995,476.87 10,823,772.40
37
21 – Financial Expenses
Financial Expenses 2020 2019

Bank Charges - 15,300.00
Interest Expense 1,087,576.99 1,435,733.01
TOTAL 1,087,576.99 1,451,033.01
22 – Non-Cash Expenses
Depreciation and Amortization 2020 2019

Depreciation - Land Improvements 901,667.07 -
Depreciation - Infrastructure Assets 4,307,311.81 4,506,195.27
Depreciation - Buildings and Other Structure 1,175,558.99 797,404.85
Depreciation - Machinery and Equipment 5,568,633.75 3,288,564.14
Depreciation - Transportation Equipment 430,752.07 324,925.81
Depreciation - Furniture, Fixtures and Book 54,733.70 29,917.33
Depreciation - Other Property, Plant and
331,031.03 165,365.46
Equipment
TOTAL 12,770,010.42 9,112,372.86
23 – Losses
2020 2019
Loss on Sale of Property, Plant and Equipment 24,499.59 -
TOTAL 24,499.59 -
24 - 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 RA No. 10121 otherwise known as the “Philippine
Disaster Risk Reduction and Management Act of 2010.” The amount available and
utilized during the year totaled P5,045,747.92 and P3,709,061.85 respectively, broken
down as follows:
Particulars Amount
Available Utilized Balance
Current Year
3,531,957.20 2,461,206.89 1,070,750.31
Appropriation:
Quick Response
1,059,587.16 886,145.00 173,442.16
Fund (QRF)
Mitigation Fund
(MF)
38
MOOE 2,343,370.04 1,446,061.89 897,308.15
Capital Outlay 129,000.00 129,000.00 -
Continuing
1,513,790.72 1,247,854.96 265,935.76
Appropriation:
Special Trust Fund
CY 2016 109,045.40 109,045.40 -
CY 2017 - - -
CY 2018 183,532.82 183,532.82 -
CY 2019 1,221,212.50 955,276.74 265,935.76
Total 5,045,747.92 3,709,061.85 1,336,686.07
25 - Notes to Cash Flow Statement
a) Cash and Cash Equivalent
Cash and Cash Equivalents consist of cash on hand and balances with banks. Cash
and cash equivalents included in the cash flow statement comprise the following
statement of financial position amounts:
2020 2019
Cash on Hand and Balances with Banks 31,782,526.84 34,210,675.09
Cash Equivalents
-
-
Total 31,782,526.84 34,210,675.09
b) Reconciliation of Net Cash Flows from Operating Activities to Surplus/(Deficit)
General SEF Trust

Surplus/(Deficit) 20,079,887.67 83,936.03 -
Non-cash Transactions
-
Depreciation 12,744,329.01 25,681.40
Increase(Decrease) in Payables 3,049,662.35 (116,333.47) 952,753.49
(Increase)Decrease in Current Assets 1,717,516.98 - 76,248.00
(Increase)Decrease in Receivables (2,790,547.73) 34,067.49 396,081.91
Net Cash from Operating Activities 34,800,848.28 27,351.46 1,441,210.57
26 - RECONCILIATION BETWEEN ACTUAL AMOUNTS ON A

COMPARABLE BASIS AS PRESENTED IN THIS STATEMENT AND IN THE
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED
DECEMBER 31, 2020
39
Maintenance &
Personal Other Operating Financial Capital
Income Services Expenses Expenses Outlay
35,887,924.5 23,199,100.5 5,619,368.2 12,184,500.6
Comparison Statement of Budget and Actual 89,122,935.75 7 0 9 2
Entity Differences
Basis Differences: 4,010,000.00 - 12,794,509.99 (4,531,791.30) (12,184,500.62)
Income not considered budgetary items 4,010,000.00 - - - -
Non-cash income
Gain on Sale of Assets
Transfers, Assistance and Subsidy From 4,010,000.00
Receipts not considered as income - - - - -
Sale of capital assets
Borrowings
Budgetary items not considered as expenses - - - (4,531,791.30) (12,184,500.62)
Debt Service (Loan Amortization, (4,531,791.30
Retirement of Debt Instruments) )
Interest Expenses capitalized
Capital Expenditures (12,184,500.62)
Expenses not considered budgetary - - 12,794,509.99 - -
Non-cash expenses - - 12,794,509.99 - -
40
Depreciation 12,770,010.40
Impairment Loss
Amortization - Intangible assets
Non-Operating Losses 24,499.59
Transfers, Assistance and Subsidy To
Timing Differences: - - - - -
Unconsumed Inventories charged to current
appropriations
Consumed Inventories and deferred charges
charged to prior period appropriations
Other Reconciling Items - - - - -
(Pertains to accounts recognized under Trust
Fund)
Per Statement of Financial Performance 93,132,935.75 35,887,924.57 35,993,610.49 1,087,576.99 -
41
PART II
AUDIT OBSERVATIONS AND RECOMMENDATIONS
AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. FINANCIAL AUDIT
Unreconciled balances of PPE accounts between the Accounting and Property Units
1. The validity, accuracy and reliability of PPE account totaling ₱232,577,443.57

cannot be ascertained and substantiated due to some deficiencies between
property and accounting records, which is not in accordance with Section C.3 of
Chapter V of the Manual on Property Custodianship, thus the PPE account
balances remained doubtful, affecting the fair presentation of the account in the
Section C3, Chapter V of the Manual on Property Custodianship states that:

“After the physical inventory taking, the Inventory Committee shall reconcile the
results of the count with the property and accounting records. The inventory listing
of the supplies and materials shall be checked against the stock cards maintained by
the accounting and finally against the control accounts. On the other hand, the
inventory listing of the equipment shall be checked on the property card maintained
by the Property Officer as against the equipment ledger cards maintained by the
accounting and the total thereof shall be compared with those in the general ledger”.
Verification of records from the Physical Inventory Reports submitted by the

General Service Officer (GSO) versus the PPE accounts appearing in the Notes to
Financial Statements submitted by the Municipal Accountant resulted in an
unreconciled difference of (₱13,849,553.61). Details are as follows:
Per Inventory
Items Per Book Report Difference
Submitted
Land 1,863,223.00 - 1,863,223.00
Other Land Improvements 6,907,042.90 702,931.85 6,204,111.05
Road Networks 82,365,370.64 81,868,373.39 496,997.50
Flood Control Systems 4,572,477.46 4,572,477.46 0.00
Water Supply Systems 28,061,566.76 28,061,566.96 0.00
Park, Plazas and Monuments 1,357,086.90 1,272,826.90 84,260.00
Other Infrastructure Assets 6,640,361.36 6,640,361.36 0.00
Buildings 5,798,611.73 8,765,166.08 (2,966,554.35)
School Buildings 3,168,789.46 3,168,789.46 0.00
Hospitals and Health Centers 3,620,813.08 3,620,813.08 0.00
Markets 1,119,223.53 1,119,223.53 0.00
Other Structures 21,395,323.34 21,361,590.34 33,733.00
Machinery 791,187.00 2,974,540.20 (2.183,353.20)
Office Equipment 2,519,268.52 2,430,085.97 89,182.55
Information Technology 3,286,796.73 582,561.00 2,704,235.73
41
Equipment
Agriculture and Forestry 5,317,585.00 5,417,909.00 (100,324.00)
Equipment
Communication Equipment 160,067.18 62,455.00 97,612.18
Construction and Heavy 27,749,975.00 30,845,000.00 (3,095,025.00)
Equipment
Disaster Response and Rescue 10,044,521.14 344,787.14 9,699,734.00
Equipment
Medical Equipment 815,083.00 512,444.00 302,639.00
Sports Equipment 390,510.00 390,510.00
School Equipment 55,495.00 (55,495.00)
Other Machinery and Equipment 932,002.25 932,002.25
Motor Vehicles 8,212,233.00 13,943,475.00 5,731,242.00
Furniture and Fixtures 934,498.00 934,498.00
Other Property Plant and 2560,290.05 405,017.24 2,155,272.81
Equipment
Construction in Progress 1,993,536.54 1,993,536.54
TOTAL 232,577,443.57 218,727,889.96 13,849,553.61
The unreconciled difference of (₱13,849,553.61) was attributed to the

following cause/s, to wit:
 There was no periodic reconciliation between accounting and property

records so that adjustment drawn or disposal made, if any from either of
these two records, may have not been taken up;
 No subsidiary ledger has been maintained by the Accounting Unit to

substantiate the general ledger for controlling purposes;
 Some of the properties recorded in the Physical Inventory Reports were

not recorded in the books as shown in the above matrix with the negative
differences;
 Positive differences indicates the properties recorded in the books but

were not recorded or included in the Physical Inventory Reports;
 Property Cards and Equipment Ledger Cards were not maintained by the
Property Unit and Accounting Unit;
 There are properties that were recorded in the books but not recorded per
Physical Inventory Report as follows:
a) Land ₱1,863,233.00
b) Sports Equipment 390,510.00
c) Other Machinery Equipment 932,002.25
42
d) Construction in Progress 1,933,536.54
 Buildings with a variance of ₱2,966,554.35 indicates the cost of Municipal

Hall which was recorded per inventory report but was not recorded in the
books;
 Unserviceable properties may already have been dropped in the property

records but still remain and recorded in the books;
 Newly acquired properties may have been recorded in the books but were
not included in the inventory report;
 Classification and category of properties were recorded differently

between the accounting and property records;
 Physical inventory taking of properties was not conducted during the

current year;
 The condition and status of the properties were not indicated in the
Physical Inventory Report whether these are serviceable, unserviceable,
obsolete and/or missing.
 Use of property tags were not done which could create confusion on the
classification, existence and category of the property; and
 Among other reasons for non-reconciliation was the lack of itemized

schedules of PPE to support the balances of PPE in the general ledger.
The inventory report shall tally/reconcile with the Accounting Unit’s records
and Property Unit’s records and that any discrepancy thereof between books and
physical inventory must be cleared and reconciled immediately.
With the aforesaid observations, the PPE and the Government Equity accounts
are misstated, thus the validity, correctness and existence of PPE totaling
₱232,577,443.57 as presented in the financial statement could not be ascertained and
substantiated at year-end. The condition or status of the same could not likewise be
established.
We recommended that Management instruct the Municipal Accountant

to coordinate with the GSO to reconcile and check their property records
pursuant to Section C3, Chapter V of the Manual on Property Custodianship.
Further, we recommended that Management require the GSO to
43
maintain Property Cards and the Municipal Accountant to maintain an
Equipment Ledger Cards so that reconciliation be made periodically and any
unreconciled differences be adjusted easily.
Management commented that these observations regarding PPE have been

continuously included in the prior years' audit observations. However, due to the
complexity and numerous number of the PPE, the related records have not been
reconciled for the last 6 months as per Management Action last CY 2019. Actual
reconciliation of records and verification of the PPE items have not been done in
more than a decade. The Management intends to continue the conduct of a physical
count and create an Inventory Committee for the purpose of this matter. The Agency
shall furnish a report of its findings as soon as the proper documentation of acquired
properties has been duly accomplished.
The Audit Team required Management to come up with reconciled property

records between Accounting and Property Units through the conduct of physical
inventory taking and periodic reconciliation of records. The existence of
discrepancies in PPE account balances has become a perennial issue and cause the
inaccuracy of the PPE balances presented in the financial statements.
Non-classification of current and non-current portions of the Loans Payable

account
2. The carrying amount of Loans Payable account amounting to ₱13,470,000.00

was incorrectly presented due to the non-classification of current and non-
current portions in the Statement of Financial Position, which is not in
accordance with Paragraphs 29 and 80 of IPSAS 1, thus affecting the fair
presentation of the financial statement.
Paragraph 29 of IPSAS I states that:
A fair presentation of financial statement also requires an entity to

present information including accounting policies in a manner that
provides relevant, reliable, comparable and understandable
information.
Paragraph 80 of IPSAS I states that:
A liability shall be classified as current when it is expected to be

settled in the entity’s normal operating cycle, or it is due to be
settled within twelve months after the reporting date.
All other liabilities shall be classified as non-current.
The Municipality had an outstanding loans payable to Land Bank of the

Philippine amounting ₱13,470,000.00 as of December 31, 2020 which is due for three
44
years. The purpose of this loan was for the acquisition of brand new Heavy
Equipment (Backhoe).
However, review of the financial statements showed that the liability amount
of ₱13,470,000.00 is classified as current only. Inquiry from the Municipal
Accountant disclosed that only ₱4,490,000.00 is due to be settled within twelve
months after the reporting date. The remaining balance of ₱8,980,000.00 is due in
two years thereafter. Therefore, the Loans Payable represents a current liability and
non-current liability.
As a result, the non-recognition of the non-current portion of the Loans

Payable affected the fair presentation of the financial statements.
We recommended and Management agreed to direct the Municipal

Accountant to present the current and non-current portions of the liability as
separate classifications on the face of the Statement of Financial Position in
accordance with paragraph 80 of IPSAS 1.
Retention monies deducted from progress billing retained in the books for more than
two years
3. Guaranty Deposits Payable totaling ₱2,509,234.40 which represents the

Retention Monies deducted in every progress billing from the procurement of
goods and infrastructure projects were retained in the books of account for
several years, contrary to Section 62.1 and Section 6.1 to 6.2 Annex E, both
under the Revised IRR of RA No. 9184, thus the validity and accuracy of the
account could not be ascertained.
Section 6.1 and 6.2 Annex E of the IRR of RA No. 9184 states that:
6.1. Progress payments are subject to retention of ten percent (10%) referred
to as the "retention money." Such retention shall be based on the total
amount due to the contractor prior to any deduction and shall be
retained from every progress payment until fifty percent (50%) of the
value of works, as determined by the procuring entity, are completed.
If, after fifty percent (50%) completion, the work is satisfactorily done
and on schedule, no additional retention shall be made; otherwise, the
ten percent (10%) retention shall be imposed.
6.2 The total "retention money" shall be due for release upon final
acceptance of the works. The contractor may, however, request the
substitution of the retention money for each progress billing with
irrevocable standby letters of credit of from a commercial bank, bank
guarantees or surety bonds callable on demand, of amounts equivalent
to the retention money substituted for and acceptable to Government,
provided that the project is on schedule and is satisfactorily undertaken.
45
Otherwise, the ten percent (10%) retention shall be made. Said
irrevocable standby letters of credit, bank guarantees and/or surety
bonds, to be posted in favor of the Government shall be valid for a
duration to be determined by the concerned implementing
office/agency or procuring entity and will answer for the purpose for
which the ten percent (10%) retention is intended, i.e., to cover
uncorrected discovered defects and third party liabilities.
Also, Section 62.1 of the same IRR provides for the retention money required
for goods which states:
For the procurement of Goods, in order to assure that manufacturing

defects shall be corrected by the supplier, a warranty security shall be
required from the contract-awardee for a minimum period of three (3)
months, in the case of Expendable Supplies, or a minimum period of
one (1) year, in the case of Non-expendable Supplies, after acceptance
by the Procuring Entity of the delivered supplies.
The obligation for the warranty shall be covered by either retention

money in an amount equivalent to at least one percent (1%) but not to
exceed five percent (5%) of every progress payment, or a special bank
guarantee equivalent to at least one percent (1%) but not to exceed five
percent (5%) of the total contract price. The said amounts shall only be
released after the lapse of the warranty period or, in the case of
Expendable Supplies, after consumption thereof: Provided, however,
that the supplies delivered are free from patent and latent defects and
all the conditions imposed under the contract have been fully met.
Review and analysis of the Notes to Financial Statement and the Schedules of
Accounts, revealed that the account Guaranty Deposits Payable totaling
₱2,509,234.40 as of December 31, 2020, which represent the retention monies
deducted from the progress billing were retained in the books of accounts for several
years and were not released upon final acceptance of the works done.
Summary of the Aging Schedules on Guaranty Deposits Payable are shown

below:
Less than 30 days 9,819.00

31-60 days 5,482.40
61-90 days 36,259.11
91-180 days 172,268.52
181-365 days 182,476.10
Over 1 year 194,662.31
Over 2 years 162,082.34
3 years and above 1,746,184.62
Total 2,509,234.40
46
Review of records and documents of the completed projects of the
Municipality that were already fully paid revealed that Certifications of Completion
and Inspection by the Project Monitoring Committee confirmed that the projects
being certified had been satisfactorily completed in accordance with the Plans and
Specifications of the contracts. Also, the completed projects have been turned-over to
the Municipality.
The purpose of this Guaranty Deposits Payable is used as security that the
winning bidder shall enter into contract with the procuring entity and guaranty the
performance by the contractor of the terms and conditions of the contract. After
which, withheld retention monies shall be released to the contractors upon request for
the 100% fulfillment of the contracts and upon final acceptance of the completed
projects Therefore, the Guaranty Deposits Payable is an obligation of the Procuring
Entity to release the retention money to the contractor upon full implementation of
the contract.

to release the retention money to the concerned contractors/suppliers pursuant
to Section 62.1 and 6.1 and 6.2 of the Revised IRR of RA No. 9184 in which the
contractor shall make a request to the procuring entity for the release of the
retention money and submit a security in the form of cash, bank guarantee,
irrevocable standby letter of credit from a commercial bank, GSIS or surety
bond callable on demand equivalent for the retention money substituted for.
Further, we recommended that Management instruct the end-users to

attach a certification that the projects were completed and inspected.
Management commented that majority of the stated Payable amounts were

from contractors/suppliers of past administration. After the change of the
administration, no update or submission of Surety Bond and Request Letter, in
which it is the only requirements needed, have been passed by these concerned
contractors/suppliers that led to the failure of the agency in releasing their retention
monies. Management will try to contact or approach or inform those
contractors/suppliers to submit their Surety Bond together with their Request Letter
to be able to process the release of their retention monies as soon as possible.
The Audit Team required Management to get in contact or write letters to the
concerned contractors and for those whose defects liability period have not expired,
require them submit the needed documents to release the retention money. If case
that there are no responses from them despite two consecutive notifications are sent,
this would signify their non-interest to collect the retention money and will serve as
the basis of the Municipality to revert the same into the unappropriated
supplies/income.
Payable accounts remained outstanding for more than 2 years
47
4. The validity of the Payable Accounts totaling ₱1,336,239.33 as of December 31,
2020 could not be ascertained due to the unliquidated balances which remained
outstanding for more than two years and remained unadjusted in the books,
contrary to Section 98 of PD No. 1445 and Section 3.2 of COA Circular No. 99-
004 dated August 17, 1999, thus overstating the balances of Accounts Payable,
affecting the fair presentation of the account in the financial statement.
Section 98 of PD No. 1445 provides for the reversion of unliquidated balances

of accounts payable which states that “the Commission, upon notice to the head of the
agency concerned, may revert to the unappropriated surplus of the general fund, any
unliquidated balance of accounts payable in the books, which has been outstanding
for two years or more and against which no actual claim, administrative or judicial,
has been filed or which is not covered by perfected contract on records.”
Section 3.2 of COA Circular No. 99-004 dated August 17, 1999, also
provides that:
Unliquidated obligations which has been outstanding for two years

or more and against which no actual claims, administrative or
judicial has been files or which is not covered by perfected
contracts on record should be reverted to the Cumulative Results of
Operations Unappropriated.
Accounts Payables refers to a valid and legal obligations/commitments of

government agencies for which goods/services/projects have been
delivered/rendered/completed and accepted.
Analysis of the Schedules of Payable Accounts revealed that there were

claims or obligations of the Municipality that remained outstanding for more than two
years as summarized below:
Less than 30 days 656,360.78

31 days to 90 days -
91 days to 180 days -
181 days to 365 days 99,990.00
Over 1 year -
Over 2 years -
Over 3 years 579,888.55
1,336.239.33
==========
It can be gleaned from the above data that out of the total amount of
Accounts Payable of ₱1,336,239.33, 43.40% or ₱579,888.55 were aged over 3 years.
48
Inquiry from the Municipal Accountant disclosed that the above claims were
not released or paid to creditors because the claims were not covered with sufficient
evidence and/or proper documentations to establish the validity of the payables. The
above cited Section 3.2 of COA Circular No. 99-004 clearly defines that unliquidated
obligations which remained outstanding for two years and more requires the reversion
of the account to the unappropriated surplus.
Setting-up expenses with no sufficient evidences/documents to support the

transactions is not valid, thus the regularity and validity of the supposed expenses that
were recorded /booked up as Accounts Payable could not be ascertained.
Furthermore, Section 40, Book VI, 1987 Administrative Code provides:

No obligation shall be certified to accounts payable unless the
obligation is funded on a valid claim that is properly supported by
sufficient evidence and unless there is proper authority for its
incurrence. Any certification for a non-existent or fictitious
obligation and/or creditor shall be considered void. The certifying
official shall be dismissed from service without prejudice to criminal
prosecution under the provision of the Revised Penal Code. Any
payment made under such certification shall be illegal and every
official authorizing or making such payment, or taking part therein
or receiving such payment, shall be jointly liable.

to analyze the payable accounts to ensure the accuracy of the balances in the
financial statements and only record transactions/set up liability based on valid
obligations with complete evidences or documents, and revert the balances of
Accounts Payable that have been outstanding for more than two years which are
undocumented and no longer valid to the Unappropriated Surplus pursuant to
COA Circular No. 99-004.
The Municipality required the Municipal Accountant to make a detailed report

of the Accounts Payable and if found not valid will be reverted to Un-appropriated
Surplus to be utilized to the priority programs, projects and activities of the
municipality.
The Audit Team required Management through the Municipal Accountant to

adjust and revert the Accounts Payable to Unappropriated Surplus after which a
thorough analysis of the account has been taken.
Misclassification of accounts
49
5. Payment of financial aid through the AICS with a total amount of ₱259,000.00
during the current year were debited to the account Other OMOE instead of
Donations, which is not in accordance with the Chart of Accounts for Local
Government Units (LGUs), thus the OMOE was misused and misrepresented
affecting the fair presentation of the account in the financial statement.
Under the Revised Chart of Accounts, the account “Other Maintenance and
Operating Expenses” consists of the following sub-accounts, to wit:
Account Code Account Title

5 02 99 010 Advertising Expenses
5 02 99 020 Printing and Publication Expenses
5 02 99 030 Representation Expenses
5 02 99 040 Transportation and Delivery Expenses
5 02 99 050 Rent/Lease Expenses
5 02 99 060 Membership Dues and Contributions
5 02 99 070 Subscription Expenses
5 02 99 080 Donations
5 02 99 090 Litigations/Acquired Assets Expenses
5 02 99 990 Other Maintenance and Operating Expenses
The account, OMOE (5-02-99-990) is used to record other operating expenses

not falling under any of the specific sub-accounts under maintenance and other
operating expense accounts.
The account Donations – (5-02-99-080) is used to record the amount of

aid/assistance to other levels of government/individuals/institutions.
One of the programs of the Municipality is to give financial assistance or aids

to the people of Adams who are undergoing medical treatment or who are in financial
crisis through AICS.
Post audit of the disbursement vouchers revealed that the Municipality paid
financial aid/assistance to the intended beneficiaries totaling ₱259,000.00 and were
debited to OMOE. Details as follows:
Debit Credit
MONTH
Account Amount (₱) Account Amount (₱)
January Other MOOE 6,000.00 Cash in Bank 6,000.00
February Other MOOE 20,500.00 Cash in Bank 20,500.00
March Other MOOE 17,500.00 Cash in Bank 17,500.00
April Other MOOE 8,000.00 Cash in Bank 8,000.00
May Other MOOE 23,000.00 Cash in Bank 23,000.00
June Other MOOE 67,000.00 Cash in Bank 67,000.00
July Other MOOE 3,000.00 Cash in Bank 3,000.00
August Other MOOE 58,000.00 Cash in Bank 58,000.00
50
September Other MOOE 5,000.00 Cash in Bank 5,000.00
October Other MOOE 23,000.00 Cash in Bank 23,000.00
November Other MOOE 25,000.00 Cash in Bank 25,000.00
December Other MOOE 3,000.00 Cash in Bank 3,000.00
TOTAL 259,000.00 259,000.00
From the above entries, the said account-OMOE was misused and
misrepresented, thus the total amount of ₱1,828,519.55 as of year-end was bloated by
₱259,000.00. The improper recording of the expenses by debiting to OMOE instead
of Donations, resulted in the misstatement of expenses, thus affecting the fair
presentation of the financial statements.

to properly or appropriately classify and record the expenses in accordance with
the Revised Chart of Accounts corresponding with the specific purpose/s of the
expenditure/s for which it was created to present fairly the accounts in the
Management commented that as per instruction of past auditors, they have

aligned the source of fund (ex: source of fund coming from OMOE should also be
accounted using OMOE account). However, as this practice resulted to
misrepresentation of expenses, they will follow their previous practice of using the
proper accounts as also stated in the recommendation.
The Audit Team accepted the explanations/justifications. We emphasized that

as per Chart of Accounts, OMOE had different sub-accounts and “Donation” is one.
Therefore, in the recording of expenses, the purposes for which these were disbursed
be considered in order that the appropriate account be used to have a fair presentation
of the financial statements.
Long outstanding receivables from Officers and Employees
6. The carrying amount of Due from Officers and Employees with a total amount
of ₱164,842.74 remained uncollected for as long as 12 years in which the
concerned officers and employees failed to settle their accounts, contrary to
COA Circular No. 2016-005 dated December 19, 2016, thus the efficiency and
effectiveness of collections is remote and below par.
COA Circular No. 2016-005 dated December 19, 2016 requires that:
6.1 All government entities shall conduct regular monitoring and

analysis of receivable accounts to ensure that these are collected
when these become due and demandable. xxx.
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The Account Due from Officers and Employees is used to record the amount
of claims from agency’s officers and employees for overpayment, cash shortages, loss
of assets, and other bills issued by the agency.
Analysis of the Schedules of the Account and inquiry revealed that these
receivables from officers and employees are their personal loans to a Private Lending
Institution in which government funds were used to pay their monthly amortizations
that were not deducted from their salaries but instead were paid by the Municipality.
The concerned officers and employees neglected to settle the amount paid for their
loan amortizations in a certain period. These were accumulated and remained
outstanding for several years.
Details are shown below:
Increase
Name of the Nature of the Period 2019 2020 (Decrease)
Employee Receivable (₱) (₱) (₱)
Abnasan, KMPC 2014 and 2,947.29 2,947.29 -
Carmelita 2017
Aman, Rata for Nov. 2014 10,500.00 10,500.00 -
Rosemarie 2014
Autriz, Ena loan 2017 2,590.72 2,590.72 -
amortization
Dupagen, Loan 2011, 32,455.05 32,455.05 -
Remedios Amortization 2014,
2016,
2017
Dupagen, Loan 2016 18,000.01 18,000.01 -
Teodoro Amortization
Fernandez, unknown 2008 1,107.06 1,107.06 -
Violeta
Manegdeg, Loan 2016, 84,055.56 70,769.84 (13,285.72)
Ernesto Amortization 2017
Medrano, Loan 2012, 24,794.07 24,794.07 -
Anavic Amortization 2017
Cabradilla, Over 2017 40.00 40.00 -
Leah reimbursed
Pedronan, KMPC 2017 1,588.02 1,588.02 -
Ernanie
Suniga Vena et Error in the 2018 10.59 10.59 -
al Checking
Dupagen, Unliquidated Sept.2020 - 40.00 40.00
Rosalia CA
Total 178,088.4 164,842.74 (13,245.72)
6
Percentage 92.56% 7.44%
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From the above details, it disclosed that the concerned officers and
employees failed to settle their accounts and only 7.44% or ₱13,285.72 has been
settled by only one officer. It was very clear from the above mentioned circular that
it is the obligation of the entity to monitor the receivable accounts when these become
due and demandable.
This malpractice of using government funds for personal matters and not for
government purposes resulted in the misappropriation or malversation of government
funds. This illegal use of funds in favor of the LGU’s personnel for their personal
obligations also led to loss of funds due to the remote collection thereof.
Provisions of Malversation of the Revised Penal Code covers the following:
Article 217. Malversation of public funds or property;

Presumption of malversation. – Any public officer who, by reason
of the duties of his office, is accountable for public funds or
property, shall appropriate the same or shall take or misappropriate
or shall consent, through abandonment or negligence, shall permit
any other person to take such public funds, or property, wholly or
partially, or shall otherwise be guilty of the misappropriation or
malversation of such funds or property shall suffer.
Article 220. Illegal use of public funds or property. – “Any public

officer who shall apply any public funds or property under his
administration to any public use other than for which such fund or
property were appropriated by law or ordinance shall suffer the
penalty of prison correctional in its minimum period or a fine
ranging from one-half to the total of the sum misapplied, if by
reason of such misappropriation, any damages or embarrassment
shall have resulted to the public service. In either case, the
offender shall also suffer the penalty of temporary special
disqualification. Xxx”.
In view of the aforementioned observations, the use of government funds or

property for the concerned officers and employees or permitting any other person to
take public funds for personal matters is an act of misappropriation or malversation,
hence, there is a need for the auditor to assess and establish the status of the
receivables and take appropriate action and/or demanding settlement of the accounts.
These audit issues are reiteration of audit findings of last year since
Management was not able to implement the recommendations. Thus, the auditor shall
continue to monitor the actions taken by Management.
We recommended and Management agreed to:
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a. Instruct the Municipal Accountant to intensify the immediate
collections of the account dues from the concerned officers and
employees through salary deductions from the general payroll;
b. Inform concerned officers and employees that failure on their part

to settle their accounts shall constitute a ground for the withholding
of their salaries, and
c. Strictly observe the provisions of Malversation or Misappropriation

of government funds under Article 217 and Article 220 of the
Revised Penal Code.
B. COMPLIANCE AUDIT
Purchase of a parcel of Land lacks the necessary supporting documents
7. The purchase of a parcel of Land with an area of 6,925 square meters for
Sanitary Landfill costing ₱1,000,000.00 was paid with lacking supporting
documents, contrary to Section 4 of PD No. 1445 and COA Circular No. 2012-
001, thus the validity and legality of the transaction was doubtful.
Section 4 of PD No. 1445 states that “Claims against government funds shall
be supported with complete documents”.
COA Circular No. 2012-001 provides the documentary requirements for

common government transactions to establish validity and legality of claims and in
conformity with laws, rules and regulations.
The Municipality had purchased a parcel of land with an area of 5,000 square
meters including the right-of-way with an area of 1,925 square meters at Malaggao,
Adams, Ilocos Norte for the purpose of putting up a Municipality Sanitary Landfill.
The procurement of land was appropriated out from the 20% Development Fund and
duly approved by the Members of the Sangguniang Bayan under Municipal
Resolution No. 22-2020 dated March 23, 2020. The proposed project was established
in compliance with RA No. 9003 or known as the Solid Waste Management Act.
The Provincial Appraisal Committee at the Office of the Provincial Assessor

conducted an ocular inspection on June 30, 2020 as requested by the Local Chief
Executive to appraise /assess the subject land to determine the current fair market
value. After a thorough deliberation and evaluation considering all other factors, the
members of the Committee unanimously agreed and arrived at the current and fair
market value of One Hundred Pesos (₱100.00) per square meter for a portion of the
lot for the proposed Sanitary Landfill which deemed reasonable and equitable to the
government.
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However, post audit and examination on the transaction for the payment of the
parcel of land under Check No. 67145189 dated July 16, 2020, disclosed the
following lacking supporting documents in which the validity and legality of the
transaction could not be ascertained as follows:
a) Project parcellary survey plan;

b) Certification from Head of the Agency that there is no previous pending
claim and previous payment on subject property;
c) Environmental Clearance Certificate (ECC) as required under Section 8 of
RA No. 8974;
d) Applicable BIR Zonal Valuation;
e) Deed of Absolute Sale registered with the Register of Deeds where the
land is located;
f) Certified Photocopy of Tax Clearance from Assessor’s Office where the
land is located; and
 Certificate Authorizing Registration (CAR)

 Capital Gains Tax (CGT)
 Documentary Stamp Tax (DST0
 Transfer Tax
g) Certified Photocopy of Transfer Certificate of Title (TCT) and Tax

Declaration (TD) in the name of the procuring entity (Municipality of
Adams)
As a result, the validity and legality in the purchase of lot costing

₱1,000,000.00 for the acquisition of the total area of 6,925 square meters for Sanitary
Landfill with incomplete supporting documents could not be established.
We recommended and Management agreed to instruct the Municipal

Accountant and Municipal Treasurer to immediately comply and submit to the
Office of the Auditor the necessary lacking supporting documents as mentioned
above pursuant to Section 4 of PD No. 1445 and COA Circular No. 2012-001.
The Audit Team required Management to submit the necessary supporting

documents to establish validity and legality of the transaction.
Incomplete supporting documents for the payment of gasoline, oil and lubricants
8. The reliability and reasonableness of Gasoline, Oil and Lubricants expenditures

for government motor vehicles with a total amount of ₱713,374.28 could not be
ascertained due to the absence of the Monthly Report of Fuel Consumption and
Driver’s Trip Tickets, contrary to COA Circular No. 77-61, thus, casting doubts
on the accuracy and correctness of the expenses.
55
Provisions of COA Circular No. 77-61 provides among others that the use of
government motor vehicles should be controlled through properly accomplished and
duly approved Driver’s Trip Tickets which should be serially numbered and
Requisition and Issue Voucher or its equivalent, a summary of which shall be made at
the end of the month in a Monthly Report of Official Travels, for audit purposes.
Also, a Monthly Report of Fuel Consumption of government motor vehicles shall be
submitted for verification purposes to determine the reasonableness of fuel consumed
during the period.
In the course of audit, gasoline and oil incurred by the Municipality for the
consumption of the government motor vehicles used were made through credit line
and reimbursement basis.
It is the practice of the Municipality that officials and employees who were
on official travel outside official station using government motor vehicle individually
reimburse the fuel and oil purchased. Total amount of ₱175,705.29 was reimbursed
for CY 2020 in which only the Driver’s Trip Tickets were attached to the
disbursement vouchers.
On the other hand, the Municipality entered into contract with a private
gasoline station for a credit line where the contract commenced only on July 15,
2020. It is stipulated in the contract that officers and employees get their needed
gasoline, oil and lubricants on credit from the gasoline station with the duly approved
Driver’s Trip Tickets and Gas Slips duly signed by the GSO, Municipal Mayor or
Vice – Mayor.
However, post audit on the payment of gasoline, oil and lubricants through
credit line with the total amount of ₱537,668.99 were paid without Driver’s Trip
Tickets, Gas Slips and the Monthly Report of Consumption, hence the actual
consumption for a certain month could not be determined. The Driver’s Trip Tickets
and the Gas Slips should correspond with the gasoline purchased in every use or
travel of the government motor vehicle. And this is the basis of the gasoline station to
issue charge invoice to every gasoline slip presented by the Municipality’s
representative.
Hence, the reasonableness of fuel consumption of each period could not be

determined due to the absence of the required reports which should summarize
monthly the fuel consumption of the Municipality. Likewise, the volume of gas and
oil needed for the motor vehicle in every official trip could not be controlled.
These documents are necessary to help the agency monitor and control the
fuel consumption of the government motor vehicles to minimize the expenses
incurred in every official travel and to ascertain that the fuel consumption were
effectively controlled and properly accounted for. Also, it shows the economical and
efficient utilization of fuel vis-a-vis the distance traveled for a particular period in the
use of government motor vehicles.
56
We recommended that Management instruct the GSO to prepare and
submit the required Monthly Report of Fuel Consumption and Driver’s Trip
Ticket in every official travel pursuant to COA Circular No. 77-61 as basis in
determining the reasonableness of fuel consumption in order to control any
wasteful, excessive and unnecessary consumption of gasoline.
Management commented that the preparation of a Monthly Report of Fuel

Consumption is already practiced by the Municipality as well as the Driver's Trip
Ticket as this is the basis for payment of fuel consumed and basis that such
disbursement was utilized by the proper personnel. However, these documents were
not included because the Management was not aware that such were required and
necessary attachments to the vouchers submitted since the beginning of the contract
entered between the Municipality and the private gasoline station. The Management
shall henceforth practice the submission of the required attachments as recommended
by the auditor.
The Auditor could not determine the propriety of the transaction if such
documents were not attached to the disbursement vouchers for audit. Hence, we
required Management through the Municipal Accountant to submit the Driver’s Trip
Ticket and Monthly Report of Fuel Consumption to establish validity, reasonableness
and completeness of the transactions.
Cash Advances were granted to the Head of the Agency
9. Cash advances were granted to the Head of the Agency for the implementation
of Supplemental Feeding Program, contrary to COA Circular No. 97-002 dated
February 10, 1997 and the goods purchased for this purpose were paid out from
the cash advances, thus Management was not able to fulfill its duty as a
withholding agent to withhold taxes that may be paid by the suppliers to the BIR
contrary to Section 2.57.3 of Revenue Regulations (RR) No. 2-98.
Paragraph 3.2 of COA Circular No. 97-002 states: “Special cash advances are
those granted on the explicit authority of the Head of the Agency only to duly
designated disbursing officers or employees for other legally authorized purposes”.
Paragraph 4.1.5 of the same Circular states: “Only permanently appointed

officials shall be designated as disbursing officers. Elected officials may be granted a
cash advance only for their official traveling expenses.
Section 2.57.3 of RR No. 2-98 constitutes all government offices including

government-owned and controlled corporations, as well as provincial, city or
municipality as withholding agents for purposes of the creditable tax required to be
withheld on income.
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Supplemental Feeding is a program or project of the Municipality through the
Social Welfare and Development Office that provides additional and supplemental
food intake to children ages 0-59 months old to get away from malnutrition and boost
their immune system during the current pandemic. This program aims to target the
children who are needing full support and attention for their healthy growth and
development.
Cash advances were made for the implementation of the Feeding Program by
the Agency Head and the Municipal Treasurer. Details are as follows:
Month Position Date Check No. Amount (₱)

Covered
July Agency Head 7/13/2020 67145165 25,610.00
August Mun. Treasurer 8/5/2020 67145240 5,673.00
Agency Head 8/5/2020 67145239 25,884.00
September Mun. Treasurer 9/4/2020 67145371 4,800.00
Agency Head 9/4/2020 67145372 1,311.00
Agency Head 9/7/2020 67145374 27,620.00
Agency Head 9/28/2020 67145412 32,020.00
October Mun. Treasurer 10/13/2020 67145479 3,600.00
November Mun. Treasurer 11/5/2020 67145537 3,100.00
Agency Head 11/5/2020 67145538 24,191.00
December Agency Head 12/17/2020 67145671 20,708.00
Agency Head 12/22/2020 67145693 1,350.00
TOTAL 175,867.00
It is clearly stated in COA Circular No. 97-002 that an elected official is not
allowed to be granted cash advances for any other special purpose other than for
official travelling expenses. Also, authority of the Agency Head is to designate
special disbursing officers or employees for other legally purposes like the feeding
program.
Moreover, post audit of liquidations of cash advances for the implementation

of feeding program in the total amount of ₱175,867.00 for the period July to
December 2020 revealed that payments of the needed goods/foods during the conduct
of feeding program were directly purchased from private dealers out from the cash
advances, hence no creditable tax were withheld.
From the foregoing observations, Management violated the rules and

regulations on cash advances pursuant to COA Circular No. 97-002 and Management
was not able to fulfill its duty as a withholding agent to withhold possible taxes that
may be paid by the suppliers to the BIR pursuant to Section 2.57.3 of RR2-98.
58
We recommended and Management agreed to designate proper special
disbursing officers or employees for other legally purpose for which the
expenditures were created.
Further, we recommended and Management also agreed to instruct the

Municipal Accountant to stop the granting of cash advances for the
implementation of feeding program or other projects and programs for specific
legal purpose. Purchases of needed goods for the implementation of the
programs are to be paid by checks directly to the supplier for purposes of the
creditable tax required to be withheld on income and be remitted to the BIR.
Improper/Absence of required dates in documents
10. The validity period for the delivery of one-unit Brand New Multi Cab costing
₱645,000.00 could not be ascertained due to the absence of entries in the date
portions in the supporting documents, thus affecting the efficiency and
effectiveness of the procurement process and an indication of weak internal
control system.
59
Internal control has been defined as the plan of organization and all the
coordinate methods and measures adopted within an organization to safeguard its
assets, check the accuracy and reliability of its accounting data, promote operational
efficiency and encourage adherence to prescribed managerial policies.
Review on the supporting documents for the payment of one-unit Multi-Cab

under Check No. 67144777 dated February 21, 2020 costing P645,000.00 revealed
that some of the attached supporting documents were undated as follows:
Prescribed Forms Unaccomplished data

1 Delivery Receipt (DR) Date of the DR when the items were delivered
2 Sales Invoice Date to acknowledge the goods were fully
delivered in good condition
3 Collection Receipt Date the goods were fully paid and payment
received by the bidder
4 Inspection and Date of Inspection of the goods delivered and date
Acceptance Report of acceptance/received
5 Notice of Award Date to acknowledge the receipt by the winning
bidder
6 Notice to Proceed Date receive by the winning bidder
From the above deficiencies, the auditor could hardly determine the timetable
of the procurement activities from the awarding of the procurement of goods up to the
time of the delivery, due to the absence of entries in the date portions from the above
mentioned documents, thus the effectiveness and efficiency of the procurement
process could not be established.
Dates in certain documents are required and necessary which may serve as
acknowledgement for the issuance of documents and the receipt of goods at a given
time. Also, this would indicate the exact period the goods or items were delivered,
received, inspected, and accepted. The purpose of which is to evaluate and assess
that the time table in the procurement activities was followed and it is in accordance
with the contract.
The absence of dates in a document would signify or connote concealment in

the procurement activities particularly in the delivery of goods as stipulated in the
contract. Also, it circumvents that liquidated damages be imposed if there were a
delay in the delivery of goods and the tendency that the delivery period was not met
by the bidder.
We recommended that Management instruct the:
60
a. Bids and Awards Committee to coordinate with heads of
implementing offices/units to accomplish completely and properly
the information in the prescribed forms specifically on the date
portions for every procurement activity, and to be vigilant in
accomplishing the prescribed forms to ascertain the authenticity
of the transactions and to promote operational efficiency and
effectiveness of the Municipality; and
b. Municipal Accountant to coordinate with the Inspection and

Acceptance Committee and the GSO to require the Suppliers to
indicate the date the goods were delivered and the date the
payment was received to determine that the terms and conditions
were in accordance with the contract.
Management commented that the Municipal Accountant – Designate, who

happens to be the Municipal Tourism Officer - Designate and Municipal Budget
Officer, has overlooked the absence of entries in the date portions in the supporting
documents due to the numerous tasks in connection with her multiple designations
especially so, the concerned Multicab has been purchased at the beginning of the
year. The Management, however, reassures the proper conduct of the procurement
process. Furthermore, the Municipality has a Municipal Accountant that Management
has advised to focus more on the tasks involved and to be vigilant in the conduct of
his duties.
The Audit Team accepted the explanations/justifications. However, the

multiple functions of an Officer were not a valid reason that such documents and
prescribed forms were not fully accomplished especially the date portions. We then
required Management to properly accomplish the forms.
GSIS Loan amortizations not deducted in the general payroll
11. The monthly loan amortizations of GSIS Consolidated Loans and Emergency
Loans availed by the officers and employees were not deducted in the general
payroll, which is not in conformity with Section 47 of the General Provisions of
General Appropriations Act (GAA) FY 2020, showing ineptness of those
preparing the payroll and allowing the piling or accumulation of surcharges and
interest for non-remittances of loan amortizations.
Section 47. Authorized Deductions of the General Provisions of the GAA FY

2020 states that:
Deductions from salaries, emoluments or other benefits accruing to any

government employee chargeable against the appropriations for Personal
Services may be allowed for the payment of individual employee’s
61
contributions or obligations due the following and in the order of
preference stated below:
a. The BIR, PHILHEALTH, GSIS, and HDMF;

b. Mutual Benefits associations, thrift banks and non-stock
savings and loan associations duly operating under existing
laws which are managed by and/or for the benefit of
government employees;
c. Associations/cooperatives/provident funds organized and
managed by government employees for their benefit and
welfare;
d. Duly licensed insurance companies accredited by the
appropriate government agency; and
e. Rural banks accredited by the Banko Sentral ng Pilipinas
Post audit of monthly payroll revealed that the loan amortizations of

employees due the GSIS were not deducted from their monthly salaries. This practice
was confirmed when the GSIS, Laoag Branch furnished the Audit Team copy of the
Demand Letter and the Monthly Positive Billing of the Municipality.
It has also been observed and assessed that net take home pays of the
concerned employees even after deducting the loans and premium contributions to
Private Lending Institutions (PLIs), the undeducted GSIS loan amortizations, were
still within the threshold of Five Thousand Pesos (P5,000.00) as prescribed under
Section 47 of GAA FY 2020.
The interests on delayed remittances and the sanctions of agency officials who
caused the delay/ failed to deduct the applicable contributions or obligations due to
the GSIS from the employees’ salaries is provided in Sections 7 and 52 of RA No.
8291 as follows:
SECTION 7. Interests on Delayed Remittances. — Agencies which

delay the remittance of any and all monies due the GSIS shall be
charged interests as may be prescribed by the Board but not less than
two percent (2%) simple interest per month. Such interest shall be paid
by the employers concerned.
L. PENAL PROVISIONS
SECTION 52. Penalty

(d) The treasurer, finance officer, cashier, disbursing officer, budget
officer or other official or employee who fails to include in the
annual budget the amount corresponding to the employer and
employee contributions, or who fails or refuses or delays by more
than thirty (30) days from the time such amount becomes due and
demandable, or to deduct the monthly contributions of the employee
62
shall, upon conviction by final judgment, suffer the penalties of
imprisonment from six (6) months and one (1) day to six (6) years,
and a fine of not less than Three thousand pesos (P3,000.00) but not
more than Six thousand pesos (P6,000.00), and in addition shall
suffer absolute perpetual disqualification from holding public office
and from practicing any profession or calling licensed by the
government.
(e) Any employee, who after deducting the monthly contribution or

loan amortization from a member's compensation, fails to remit the
same to the GSIS within thirty (30) days from the date they should
have been remitted under Section 6(a) shall be presumed to have
misappropriated such contribution or loan amortization and shall
suffer the penalties provided in Article 315 of the Revised Penal
Code, and in addition shall suffer absolute perpetual disqualification
from holding public office and from practicing any profession or
calling licensed by the government.
Hence, this malpractice of neglecting the employees’ obligations due the

GSIS is in violation of the General Provisions of GAA FY 2020 and are subject to the
imposition of sanctions in Sections 7 and 52 of RA No. 8291 for failure to remit.
coordinate with the Municipal Treasurer to strictly observe and deduct the
employees’ obligations due the GSIS, which shall be given preference over the
claims of Private Lending Institutions, pursuant to Section 47 of GAA FY 2020 in
order to forestall the imposition of sanctions spelled out in Sections 7 and 52 of
RA No. 8291 for those officials who failed to deduct the applicable GSIS loan
amortizations from employees’ salaries.
Management commented that concerning the non-deduction and non-

remittance of the monthly amortizations of the subject GSIS loans, they have
instructed the employees involved to personally remit their amortizations.
Remittances of loan amortizations were religiously made by such employees for a
while until such time that it has been neglected by the employees. Management also
observed that the report of deficiencies given by the Office of the GSIS does not
reconcile with the records of the Municipality and of the individual employees. Thus,
Management intends to employ their own officer who will focus on GSIS matters
including the update of the data with the GSIS in order to reconcile any discrepancies.
The Management also ensured to issue demand letters to the employees with
outstanding balances and to instruct the settlement of such loans immediately. They
further committed to resolve the matter before the end of CY 2021.
The Audit Team accepted the explanations/justifications. However, we

required Management through the concerned employees who prepare the general
payroll to religiously and preferably deduct the GSIS loan amortizations over that of
63
the Private Lending Organizations from the salaries of the concerned personnel,
pursuant to Section 47 of GAA FY 2020.
Wastage/misuse of issued checks indicates weak internal control
12. The Municipal Treasurer has used or issued many cancelled checks due to
erasures, changes or alterations of names, amounts either in figures or in words
and dates on the face of the checks, which is contrary to Section 2.1 of the
National Guidelines on Internal Control Systems, affecting the efficiency and
effectiveness on the treasury operations and an indication of weak internal
control system.
Section 2.1 of the National Guidelines on Internal Control Systems states:
Internal control comprises the plan of organization and all the

methods and measures adopted within an agency to ensure that
resources are used consistent with laws, regulations and policies;
resources are safeguarded against loss, wastage and misuse;
financial and non-financial information are reliable, accurate and
timely; and operations are economical, efficient and effective.
Checks is one of the kinds of Accountable Forms which are serially pre-
numbered with fixed amount or official documents for which the custodian shall be
accountable.
During the course of audit on the disbursement vouchers covering the periods
January to December 2020, it was revealed that some checks used or issued were
cancelled due to alterations or changes made by the personnel in charge in preparing
the checks . Details are summarized below:
Total Number of
Month Covered Cancelled Checks
January 15
February 30
March 11
April 5
May 3
June 12
July 4
August 8
September 6
October 11
November 2
December 12
Total 119
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From the above data, total checks that were cancelled during the year is 119
checks which is already equal to one booklet costing ₱510.00.
Inquiry with the Municipal Treasurer disclosed the following cause/s why
checks were cancelled:
 the preparation of checks were assigned to more than one staff;

 the Municipal Treasurer made pre-signed checks;
 lack of supervision by the Municipal Treasurer;
 changes in the name of Payees after the checks were issued; and
 changes of dates and amounts of the checks
Alterations and/or erasures on the financial data of the checks must be avoided
in order to minimize wastage of money and supplies or misuse of accountable forms.
This kind of practice affects the efficiency and effectiveness in the perforamance of
the Treasury’s operations.
The Municipal Treasurer, being the head of the department should closely
supervise the personnel assigned in the Treasury particularly in the preparation of
checks and ensure that legitimacy of transactions is effectively and efficiently
performed.
We recommended that Management instruct the Municipal Treasurer to

strictly supervise the personnel assigned in the Treasury Office and instruct them
to avoid erasures or alterations in the preparation of checks to minimize wastage
or misuse of accountable forms and to strengthen internal control system.
The Management acknowledged the recommendation of the auditor as to the

strict supervision of the personnel assigned in the Treasury Office. The Management,
as an additional control, shall also assign at least one representative from each of the
Treasury and Accounting Offices to proofread the data prior to printing of checks.
The Audit Team accepted the explanations/justifications. However, we

required Management through the Municipal Treasurer to closely supervise his staff
and in the same manner, the concerned personnel to be vigilant in the preparation of
checks to refrain from making erasures and/or changes.
C. VALUE FOR MONEY AUDIT
Delayed implementation of I-Build projects under the Philippine Rural Development

Project (PRDP)
65
13. Delayed implementation of the two I-Build sub projects for the construction of
Solar Dryers in the Municipality of Adams, resulting in the unutilized fund of
P242,300.00 or 64.28% of the total funds received for LGU counterpart, thus the
intended purpose and objective of the projects may not be achieved on the
targeted period and the intended recipients were deprived of their livelihood and
income that maybe derived from the projects.
The PRDP is a six-year project financed by a loan from the World Bank and a
grant from the Global Environment Facility (GEF). GOP Counterpart requirements
will be provided by the National Government and the participating LGUs, in
accordance with the annual work and financial plan. The PRDP Project started its
implementation in December 2014 and will closed in May 2021.
Funds allotted from the LGU counterpart (10%) for the implementation of
Solar Dryer under the I-Build sub-projects remained unutilized as of December 31,
2020, thereby the sub-projects remain unimplemented. In accordance with the
Disbursement Schedule and Project Implementation Plan in the Implementation
Management Agreement, the statuses of the sub-projects were as follows:
Date Total Funds Received

Status
Started/ Disb
Unutilize /
SP Name SP Cost Target LP/ GOP LGU urse
d Balance Defici
Completi GEF ment
ency
on Date
Constructi 1,405,000.00 NTP- 140,500.00 0.00 140,500.00 Not
on of 6/19/2017 yet
Maligliga started
y Solar
Dryer
Constructi 1,018,000.00 NTP- 101,800.00 0.00 101,800.00 Not
on of 6/19/2017 yet
Sinidanga started
n Solar
Dryer
Total 2,423,000.00 242,300.00 0.00 242,300.00
From the above tabulation, the Construction of Maliligay Solar Dryer and
Construction of Sinidangan Solar Dryer remained unimplemented. Per interview with the
I-Plan Head and as per recommendation by the PRDP Engineer, the location/vicinity of
these two sub-projects were relocated for the reason that the project site is a forest zone
area. This caused the Municipality to issue a Request for Change of Site to the
Department of Agriculture Regional Field Office I.
Analysis on the Evaluation Report submitted revealed the following:
Activity /Description Date Remarks

Notice o Award June 5, 2017
- Date Issued June 7, 2017
66
- Date Received
Contractor/s – Blue Mountain
Builders and General
Merchandise
Contract Signing June 14, 2017
Notice to Proceed
- Date Issued June 19, 2017
- Date Received June 30, 2017
Targeted Date to Start July 10, 2017
Target Completion Date (1) July 23, 2017
(2) August 3, 2017
Issued Suspension Order July 10, 2017 Two approved locations in
Sitio Sinidangan and
Maligligay was found under
Forest Protected Zone area of
the DENR, thus required
Special Land Use Permit
(SLUP) with appropriate fees
charged at P6,000.00 per
month plus Utilization Tax
PSO-RPCO Joint Validation of February 20, 2020 SES requirements for new
new proposed site for the two sites were complied with by
solar dryers the LGU. New sites are Sitio
Malaggao and Sitio Anat
Buaw Poroton
It can be gleaned from the Evaluation Report Status that there were lapses in
the course of action by the Municipality to submit the documentary requirements,
thus the delay was too long, that is, for more than two years. The Suspension Order
was served July 10, 2017. The two approved locations in Sitio Sinidangan and
Maligligay was found under Forest Protected Zone area of the DENR, thus required a
Special Land Use Permit (SLUP) with appropriate fees charged at P6,000.00 per
month plus Utilization Tax. Due to this reason, the Municipality of Adams was
hindered to accomplish and submit the Social and Environmental Safeguards (SES)
requirements.
The validation of the new proposed sites for the two Solar Dryers which are
in Sitio Malaggao and Sitio Anat Buaw Poroton was only conducted on February 20,
2020 and were found feasible for Solar Dryer construction as per Social and
Environmental Safeguards (SES) guidelines. Such documentary requirements for the
site were complied with by the LGU.
Nevertheless, the construction of the Solar Dryers did not proceed
immediately because of the implementation of Enhance Community Quarantine
(ECQ) for the COVID 19 public health crisis for the period March 17, 2020 to May
15, 2020. Also, Management claimed that there were restrictions and limitations in
the implementation of infrastructure sub projects due to the present pandemic.
67
Since the existence of the COVID 19, the Municipality of Adams is COVID
free, thus the pandemic was not a justifiable reason/s for the delay in the construction
of the Solar Dryer. After the ECQ ended on May 15, 2020 in the Province of Ilocos
Norte, construction of pending infrastructure projects continued
The Municipality received the approval letter of “No Objection” on Change

of Site dated November 3, 2020 from the OIC Regional Director, Department of
Agriculture which was then indorsed to the Local Chief Executive on November 23,
2020 and was received by the Municipality on December 9, 2020. The letter also
mentioned that the contractor may now proceed to the implementation of the two
projects to the new proposed sites.
However, during our ocular inspection of the new sites on January 27, 2021,
the projects were not yet started. Also, review of the documents revealed that the
execution of Contracts and Notices to Proceed for the construction in the new
approved sites were not yet issued or served to the contractor. Scrutiny of the
documents submitted by the Contractor from the period of bidding showed that some
of the legal documents were found un-updated like the Philgeps Registration,
Business Permit, BIR Certification, among others. Hence, this manifests that the
timetable to start the two projects was still undetermined by Management.
As a result, the delay in the implementation of the two subprojects deprived

the intended beneficiaries of the social, environmental and economic benefits that
could be derived from these projects because the Municipality did not take advantage
of the financial assistance granted by the national government.
We recommended that Management through the I-Plan Head and I-Build

Head to serve/issue the Contract and the Notice to Proceed immediately to the
Contractor as the new sites have long been approved, in order to hasten the
construction of the two unimplemented solar dryers and to timely deliver the
socio-economic benefits to the intended beneficiaries. Likewise, we
recommended that Management instruct the BAC to require the Contractor to
submit the updated legal documents.
Management commented that the Contract and Notice to Proceed were issued
in June 14, 2017 and June 19, 2017, respectively, but suspended due to various
reasons as mentioned. NOL for the Change of Site was issued on November 23, 2020
but the sub-projects were still suspended due to restrictions and limitations of
Infrastructure Projects and due to bad weather conditions experienced in the highland
areas in the last and first quarters of the year. It was only in February 16 & 17, 2021
when the two sub-projects finally resumed, but due to the weather conditions
particularly sudden rainfalls, the works were suspended and resumed occasionally
depending on the item of work currently on-going or being done. Items 104 and 200
needs water for proper compaction. These activities require a field density test result
of 95% and 100%, respectively, and a major requirement for inspection and
68
acceptance prior the next activity/work as described in the approved Specifications
indicated in the General Conditions of the Contract. In some cases, slight rain is a
great help for these items but too much is bad, thus the need to suspend. It should be
noted that structural concrete is the most critical part of the sub-projects. After few
months of alternate suspensions and resume orders due to sudden change of weather,
the two sub-projects were finally completed last May 14, 2021 and May 19, 2021,
respectively, with corresponding accumulated liquidated damages due to some delays
not considered.
The Audit Team accepted the explanations/justifications. We required

Management through the officers in charge of PRDP to submit the legal documents to
the PRDP-Department of Agriculture for the release of GOP Counterpart provided by
the National Government. Inspection and acceptance of the completed project is also
required.
69
PART III
STATUS OF IMPLEMENTATION OF PRIOR
YEAR’S AUDIT RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR
YEAR’S AUDIT RECOMMENDATIONS
Of the 25 audit recommendations embodied in the 2019 Annual Audit Report, 16 were
implemented, and 9 were not acted upon during the year. Presented below are the
recommendations and the management actions including the result of auditor’s
validation:
Audit Observation/ Action taken by Result of Auditor’s

Recommendation Ref. Management Validation
The validity and accuracy of AAR
the account Property, Plant 2019
and Equipment totaling page 35
P203,289,722.61 as of
December 31, 2019 could
not be ascertained due to the
non-conduct of physical
inventory taking, the non-
submission of Report of the
Physical Count of PPE
(RPCPPE) and the non-
reconciliation between the
accounting and property unit
which is contrary to Section
124 Volume I of the Manual
on the New Government
Accounting System (NGAS)
for Local Government Units
(LGU), and Section C3
Chapter V of the Manual on
property Custodianship,
hence affecting the fair
presentation of the financial
statement.
We recommended that
Management:
The Management Not Implemented
a. Prepare and submit will conduct a
Report on Physical Count physical count on Management has not
of PPE for the current the first week of July submitted the required
year 2019 to determine 2021 and create an Report of the Physical
the actual physical count Inventory Count of PPE.
and condition of PPE at a Committee for the
given date including purpose of
those unrecorded newly documenting and
69
purchased and those recording the PPE of
which could not be the Municipality.
accounted for;
The Management
b. Physical inventory taking will continue said Not Implemented
of properties by type shall Management
be conducted annually and activities and will As per validation, no
Direct the Property report its findings as physical inventory
Custodian to identify the soon as it will taking has yet been
unserviceable properties complete the proper taken.
already subjected for documentation of .
disposal and prepare the acquired properties,
Inventory and Inspection inventories and other
Report of Unserviceable PPE pursuant to the
Property. recommendations.
The account balances of AAR

Inventories Held for Sale, 2019
Inventories Held for page 37
Distribution and Inventories
Held for Consumption were
misleading due to failure of
the Agency to adjust the
inventory to its proper
expense account upon
issuance, distribution or
consumption of the affected
inventory contrary to the
provision of IPSAS 12 –
Inventories and Section 121
NGAS for LGUs, thereby
misleading the Inventory
Account, the related Expense
Account, and the
Government Equity Account.
We recommended that the The Management Not Implemented

General Service Officer will follow with the
prepare a Summary of recommendations No SSMI and RIS
Supplies and Materials and has devised a were prepared and
Issued (SSMI) together with system that all submitted by the GSO
the Requisition and Issue inventories will be to the Municipal
70
Slips (RIS) and submit the accounted and has Accountant yet.
same to the Chief required the
Accountant as her basis to personnel in charge
prepare a Journal Entry in the proper
Voucher (JEV) to record the recording of the
appropriate expense account assets of the
and compute the cost of Municipality.
supplies and materials issued The municipality
and the corresponding cost will conduct
of the ending inventory physical inventory
account. and reconciliation of
records. Not Implemented
Further, we recommended
that the Chief Accountant No adjustment/s was
make the necessary made by the
adjustment to the inventory Municipal Accountant
account and reflect the yet as to the
appropriate expense account issued/distributed
for the inventories that were inventories
already used, consumed or
distributed based on the
Summary of Supplies and
Materials Issued.
The accounts Advances to AAR

Officers and Employees, 2019
Special Disbursing Officer page 39
and Advances for Operating
Expenses amounting to
P118,482.00, P84,758.00 and
P3,500.00, respectively
remained unliquidated as of
year-end contrary to Section
89 of PD No. 1445 and COA
Circular No. 97-002.
We recommended that The Office of the Implemented

Management require all Mayor issued a
officers and employees with memorandum and Review and
demand letters to the verification of
outstanding cash advances to
concerned liquidations showed
account and settle employees to pay compliance with the
immediately after the their respective dues recommendations.
71
purpose for which these were to the Municipality
granted in conformity with and will follow the
COA Circular No. 97-002 recommendations of
the COA
dated February 10, 1997;
Section 89 of PD No. 1445;
immediately issue demand
letters to those employees
who are no longer in the
service with unsettled/
unliquidated cash advances;
refrain from granting
additional cash advances to
officers and employees with
existing cash advances
unless the previous cash
advances are first settled;
and cause the refund of any
unused/unspent/unutilized
cash advances and/or no
longer needed to the
collecting officer to be
receipted and shall be
deposited to the authorized
government depository bank.
Due from Officers and AAR

Employees (1-03-06-020) 2019
with a total amount of page 42
P178,088.46 as of December
31, 2019 remained
outstanding for several years
due to the failure of the
personnel to settle their
accounts thus, the probability
of collecting the same was
remote.
We recommended that The Office of the Not Implemented

Management intensify the Mayor will issue a
immediate collections of the memorandum and Review and post audit
72
account dues from the demand letter to the of payrolls showed
officers and employees employees to pay non-compliance with
concerned; refrain or stop their respective dues the recommendations.
this malpractice to use to the Municipality Reiterated under
government fund for the and will follow the Finding No. 6 in this
payment of personal loan recommendations of Report.
amortization of the officers the COA.
and employees; and non-
settlement and/or complete Likewise,
disregard to settle their Management will
accounts shall constitute a direct the Municipal
ground for the withholding Treasurer to deduct
of their salaries, and the the amount of their
auditor is compelled to issue advances to their
Demand Letters and/or make salaries for the
a narrative report to apply period of six months
the sanctions under the or one year.
provisions of Articles 217
and 220 of the Revised Penal
Code.
The validity of the Payable AAR

Accounts and Due to 2019
Officers and Employees page 44
totaling P878,379.27 and
P1,129,939.65 respectively
as of December 31, 2019
could not be ascertained due
to the unliquidated balances
which remained outstanding
for more than two years or
more and remained
unadjusted in the books
contrary to Section 98 of PD
No. 1445 and Section 3.2 of
COA Circular No. 99-004
dated August 17, 1999, thus,
overstating the balances of
Accounts Payable which
affected the fair presentation
of the account in the
financial statement.
73
We recommended that The Management Implemented
Management revert all required the
outstanding balances of Municipal Review of records and
Accounts Payable for more Accountant to make analysis showed
than two years to a detailed report of substantial compliance
Unappropriated Surplus the accounts with the
pursuant to the payables and recommendations
aforementioned COA whatever remains
Circular. Further, we were reverted to un-
recommended that the appropriated surplus
Municipal Accountant
analyze the payable accounts
and ensure the accuracy of
the balances in the financial
statements and record
transactions/set up liability
based on valid obligations
with complete evidences or
documents.
Policy on the grant and use AAR

of cellular phones as means 2019
of communication was not page 46
established to control the
necessity and reasonableness
of the expenses, hence,
contrary to PD No. 1445 and
Section 2.2 of COA Circular
No. 2012-003, resulting in
inefficient use of government
funds.
We recommended that The Management Implemented

Management evaluate the issued a
reasonableness of the memorandum Review and evaluation
cellphone plans granted to consistent to the use of the transactions
the officials and employees; of cellphones and substantiated the
and establish a managerial internet connections reasonableness and
policy on the grant and use in accordance to the correctness in the use
of cellular phones to officials reasonableness of cell phones and
and employees including the granted to officials internet.
allowable amount chargeable and employees
to the municipality and
limiting to one line per
74
officer in order to avoid
incurring excessive expenses
as prohibited under COA
Circular No. 2012-003 and
Section 2 of PD No. 1445.
Payment of promotional AAR

calendar 2019 amounting to 2019
P34,800.00 bear the name page 48
and picture of the current
local chief executive which
is not in conformity with
Section 2 of the COA
Circular No. 2013-004 and
DILG Memorandum
Circular No. 2010-101 dated
September 23, 2010, thus,
considered unnecessary
expenditures, resulting into a
disallowance.
We recommended that the Management Implemented

agency strictly abide with the adhered with the
prohibitions and guidelines recommendation. Records showed that
set by DILG Memorandum transactions of this
Circular No. 2010-101and nature were already
Section 2.2.7 of COA stop.
Circular No. 2013-004. We
recommended further, that
the municipality refrain from
displaying the names and/or
pictures of government
personnel to all sort of
government facilities and
properties in the
implementation of project
and activity of the
Municipality.
The reasonableness for the AAR

payment of Gasoline, Oil and 2019
Lubricants for the page 50
consumption of the
government motor vehicles
75
used were made through
reimbursement basis with a
total amount of P519,768.38
as of year-end which could
not be ascertained due to the
absence of the Monthly
Report of Fuel Consumption,
thus, casting doubts on the
accuracy and validity of the
expenses.
We recommended that The Management Not Implemented

Management prepare and directed the GSO to
submit the required Monthly follow the The said documents
Report of Fuel Consumption recommendations were not attached in
pursuant to COA Circular and entered into a the DVs. We required
No. 77-61 as basis in Memorandum of Management to submit
determining the Agreement (MOA) the same.
reasonableness of fuel with a gasoline
consumption. station that best
serves the interests
of the Municipality.
We recommended further Implemented
that Management may apply
for a credit line of gasoline The LGU already
to a creditable gasoline made an agreement
station to refrain from using with a private gasoline
reimbursement basis of station for credit line.
gasoline purchases.
Suspensions and AAR

disallowances in post audit 2019
have accumulated in the total page 51
amount of P684,814.19 and
P5,380,482.72, respectively
as of December 31, 2019
which remained unsettled
for several years due to the
inaction of those officials
and employees deemed
responsible and liable to
76
settle the required documents
as provided in Section 4 (6)
of PD No. 1445 hence, the
auditor is compelled to apply
Section 82 of PD No. 1445
and Section 13.1.1 of COA
Circular No. 2009-006 of
Rules and Regulation on
Settlement of Accounts.
We recommended that No action taken by Not Implemented

Management instruct the Management.
accounting unit and treasury No submission/
unit to process and pay only compliance has been
transactions with complete made by the
supporting documents in Management.
accordance with Section 4 Suspensions which are
(6) of PD No. 1445 to already more than 90
prevent the transactions to be days not settled will
suspended in audit. Further, now mature into
we recommended that disallowances.
Management instruct the
Municipal Accountant in
monitoring the settlement of
the suspensions and
disallowances in pursuance
of Section 7.1.1. of COA
Circular No. 2009-006. The
non- compliance/submission
of the documents may
compel the Auditor to issue
Notice of Disallowances in
pursuance to Section 8.2 of
PD 1445 and Section 13.1 of
COA Circular 2009-006.
Collections made by the AAR

Municipal Treasurer were 2019
not deposited intact daily or page 53
on the next banking days
contrary to Section 107 of
PD No. 1445 and Section 32
of Manual on the New
Government Accounting
77
System for Local
Government Units, thus
exposing government funds
to possible
misuse/misappropriation
which may result in the loss
of government funds.
We recommended that The Municipal Implemented

Management through the Treasurer/Collecting
Collecting Officer deposit Officer adhered with Verification of records
intact all collections with the the showed substantial
government depository bank recommendations compliance with the
daily or not later than the recommendations.
next banking day in pursuant
to Section 107 of PD No. The Auditor urged the
1445 and Section 32 of Collecting Office to
NGAS for LGUs to avoid the abide with the rulings
risk of possible loss and/or that all collections be
misuse of government funds. deposited intact daily
or not later than the
next banking day.
The auditor was precluded AAR

from rendering a complete 2019
verification and examination page 55
of the LGU’s transactions for
FY 2019 due to the delayed
and/or non-submission of
Report of Disbursements and
Report of Liquidations
together with the supporting
documents and other related
reports for the period of
October to December 2019
contrary to Section 7.1 and
7.2 of COA Circular No.
2009-006, and Section 122
of PD No. 1445, hence, the
validity and propriety of
expenditures for the current
year could not be established
and ascertained.
78
We recommended that Management already Implemented
Management through the submitted the reports
accounting unit strictly together with the Verification of records
comply with the above-cited supporting showed compliance
COA Circular No. 2009-006 documents with the
in the submission of Report recommendations.
of Disbursements, and
Liquidation Reports together
with the supporting
documents within the
prescribed period. Likewise,
we recommended that
Management cause the
suspension of payment of the
salaries of the employees
responsible for the delayed
submission or non-
submission of the required
monthly reports until the
same shall have been
complied in pursuance of
Section 122 of PD No. 1445.
There was a splitting of AAR

requisitions and contracts on 2019
the procurement of page 57
construction materials of
similar projects with a total
Approved Budget for the
Contract (ABC) of
P725,450.00 which is
contrary with the provisions
of RA No. 9184, Section
54.1 and GPPB NPN No.
136-2014, thus rendering
irregularities on the
transactions and the
possibility of wastage of
government funds.
We recommended that the The purchase orders Implemented

BAC consolidate the was not acted
procurement of goods with immediately during Verification of records
similar items and projects of that time because the showed substantial
79
the same nature in an Annual projects has its own compliance of the
Procurement Plan (APP) individual program recommendations.
with the dates of requisition of works, and
approximately close to one different locations so
another, into one purchase the BAC decided
request that are being bid out that it should have
to render a more competitive separate purchase
public bidding and in orders. Likewise, the
determining the single Municipal
largest completed contract. It Accountant who is
is explicitly spelled out in the also the Head of the
above-cited Section 54.1 of TWG acted lately
RA No. 9184 that splitting of because he waited
government contracts is not for the list of
allowed, thus the projects submitted to
transactions are subjected the COMELEC
into a disallowance. before he affixed his
signature in the
purchase order that’s
why it appears that
purchase orders are
submitted at the
same time to the
COA.
The Municipality entered AAR

into a contract for the lease 2019
of one-residential storey page 62
building at P6,000.00 per
month wherein some of the
procedural guidelines and
requirements indicated in
GPPB Resolution No. 08-
2009 were not being
followed. Also, the purpose
of its existence is considered
unnecessary because it is not
supportive to the mandate of
the LGU, thus, the validity
and legality of the Lease
Contract is uncertain and the
expenses incurred
established unnecessary
expenditures.
80
Leasing an Implemented
We recommended that Extension Office at
management justify the Laoag City is very Evaluation of the
purpose of leasing a necessary in catering justifications proves
residential house for its the lodging of its practicality and
official use and determine appointed, elected reasonableness.
the personnel to occupy the officials as well as Records and analysis
building/unit and specify the teachers, students showed substantial
amenities used by the and other residents compliance with the
personnel for official who were forced to recommendations.
purpose at a given specific stay at Laoag City
time. We recommended, overnight and
further that the Municipality participate with
conduct a Cost-Benefit provincial activities
analysis to assess the such as live-out
feasibility of leasing a seminars, meetings,
residential house. If it is not sports activities,
contributory to the mandate provincial programs.
of the LGU, consider the
possibility of not renewing The Management
the contract. canvassed the
cheapest and more
advantageous cost to
the Municipality
before it entered into
the lease agreement.
The legality for the AAR
procurement of 5 units 2019
handheld radio with page 65
accessories amounting to
P29,500.00 could not be
ascertained due to the
absence of the requirements
of National
Telecommunication
Commission (NTC), thus
may result to suspension or
disallowance in audit.
We recommended that Securing a permit Implemented

Management submit the will cost the
needed permit issued by Municipality more Evaluation of
NTC pursuant to NTC than the costs of justifications from not
Memorandum Circular No. Hand-Held Radios. securing a permit from
81
09-08-01 to ascertain the The Municipality the NTC proves and
legality on the procurement used the same substantiate its
of handheld radio and to give frequency with the practicality and
authority for its use. Adams Police reasonableness.
Station where their
frequency is
permitted. These
radios are very
helpful to the 5
Poblacion which do
not have cellular
signals.
Cash Advances totalling AAR
P335,182.00 composed of 2018
current and prior years’ page 37
advances remained
unliquidated as of December
31, 2018 contrary to Item 5.8
of COA Circular No. 97-002
dated February 10, 1997 and
Section 89 of PD No. 1445,
thus, expenses were not
recognized during the year of
incurrence overstating assets
and understating recorded
expenses in the year they
were incurred and exposing
funds to risk of possible
losses thru defalcation, loss
or misuse.
Cash Advances were Implemented
We recommended that partially settled and Records and its
Management initiate legal liquidated in CY liquidations showed
collection measure to recover 2019. Management compliance with the
the aging and dormant called the attention recommendations.
accounts from the persons of the AOs to settle
liable; grant cash advance and liquidate their
only to authorized/designated cash advances in the
accountable officers. ensuing year.
Implemented
Continue to remind all Cash Advances
accountable officers and granted to AOs were
employees to strictly abide already
with the provisions of settled/liquidated
82
Section 89 of PD No. 1445 within the prescribed
and COA Circular No. 97- period.
002 on the prompt
liquidation of cash advances.
The Municipality paid AAR

honoraria to appointed 2018
Municipal Task Force, Sitio page 39
Bucarot officials and Purok
Leader incurring a total of
P1,245,600.00 which is
considered an irregular
expenditure as per COA
Circular 2012-003, thus,
disallowed in audit.
Management already
We recommended stopped the granting Implemented
Management to stop the of honorarium to the
payment of honoraria officials. Somehow, Management already
without legal basis; and considering the stop the grant of
refund the total amount of status of their jobs Honoraria.
P1,245,600.00 paid to and the place of
Municipal Task Force, Sitio work destination Not Implemented
Bucarot officials and Purok which is far flung
Leaders in accordance with areas and as low No appeal has been
COA Circular No. 2012-003. income earners, the submitted, thus the
concerned Municipal disallowances are
Task Force could already final and
hardly refund the executory.
honoraria paid.
Conduct of out of town AAR
Annual Budget Hearing by 2018
the municipal officials and page 44
employees at Villa Silvina,
Baguio City on September
20-21, 2018 incurring a total
of P96,120.00 could have
been avoided had the
municipality observed the
provisions of COA Circular
No. 2012-003.
83
We recommended that Management already Implemented
Management observe avoided or refrained
prudence in the disbursement from traveling This nature of
of government of funds and outside the province transaction was
evaluate the necessity of in the conduct of any already stopped.
travels to be undertaken in seminars, Management complied
line with COA Circular No. conferences or with the
2012-003. similar activities. recommendations.
.
Purchase of Multi-Purpose AAR
Vehicle (MPV) under the 2018
Municipal Health Office was page 49
lacking of some supporting
documents which is not in
accordance with Sec 4(6) of
PD No. 1445, thus, the
validity, propriety and
legality of the transaction is
not ascertained.
We recommended that the Supporting Implemented

concerned officials and documents were
employees submit the submitted to the Review of records
necessary supporting COA. showed substantial
documents for its proper compliance with the
appraisal to avoid recommendations.
disallowance in audit.
The required documents for AAR

Fuel, Oil and Lubricant 2018
expenses were not attached page 51
to the disbursement nor
submitted monthly as
required in the Manual on
Audit of Fuel Consumption
COA Circular No. 77-61,
thus, charges to the account
is not adequately supported
affecting the propriety and
validity of charges made.
We recommended that No action was made Not Implemented

Management direct the by management.
84
concerned offices to Reiterated under
accomplish the necessary Finding No. 8 in this
attachment to the report.
disbursement as well as
submit the monthly reports
required in the manual to
support the propriety and
validity of charges made.
Some disbursements were on AAR

a reimbursement basis and 2018
lacking supporting page 53
documents which is not in
accordance with the
provisions of Sections 4(6)
and 93 of PD No. 1445 and
sound internal control.
We recommended that Management has Implemented

Management stop the already complied
practice of disbursing funds with the Records showed
on reimbursement basis. recommendations. substantial compliance
Direct the payment to the with the
supplier or through a recommendations.
disbursing officer duly
supported with complete
documentation in accordance
with Sections 4(6) and 93 of
PD No. 1445.
85
PART IV
ANNEXES

01-AdamsIN2020 Audit Report

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01-AdamsIN2020 Audit Report

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Republic of the Philippines

HONORABLE ROSALIA D. DUPAGEN

Dear Mayor Dupagen:

We rendered a qualified opinion on the fairness of presentation of the financial

We request that the comments and observations and recommendations contained

Very truly yours,

MARIA TERESA M. TOLENTINO

AGENCY ACTION PLAN and STATUS of IMPLEMENTATION

Agency Action Plan

MS. MARIA TERESA M. TOLENTINO

In compliance with Section 2, Article IX-D of the Philippine Constitution and

We rendered a qualified opinion on the fairness of presentation of the financial

Our audit was conducted in accordance with International Standards of Supreme

Very truly yours,

ANNUAL AUDIT REPORT

For the Year Ended December 31, 2020

The Municipality of Adams, Ilocos Norte was created by virtue of Batas

The Municipality is under the leadership of Honorable Mayor Rosalia D.

In response to COVID-19 pandemic, the Municipality allotted a total of

Source of Fund Beginning Utilization (₱) Ending Balance

To accelerate the social and economic development of the Municipality for

Project/Program/Activity Name Location Total Cost (₱)

Comparative analysis of the Statement of Financial Position and Performance

Accounts 2020 2019 Increase/ Increase/

Sources of 2020 2019 Increase/ Increase/

The audit was conducted to ascertain accuracy of financial records and

E. STATE AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

A qualified opinion was rendered on the fairness of the presentation of the

F. SUMMARY OF SIGNIFICANT AUDIT OBSERVATIONS AND

We commend the management for the favorable observations noted, to wit:

 The Municipality had continually implemented its 10-Year Solid Waste

 The Municipality continuously withheld income and expanded taxes from

 The Municipality purchased common-use supplies in PS-DBM before obtaining

We recommended that Management instruct the Municipal Accountant to

Further, we recommended that Management require the General Services Officer

We recommended that Management instruct the Municipal Accountant to

G. SUMMARY OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

Of the 25 prior years’ audit recommendations, 16 were fully implemented and

H. SUMMARY OF SUSPENSIONs, DISALLOWANCES AND CHARGES

Audit suspensions, disallowances and charges amounted to ₱711,532.94,

Part I – Audited Financial Statements

 Independent Auditor’s Report 1

Part II – Audit Observations and Recommendations

Part III – Status of Prior Years’ Audit Recommendations 69

A. Summary of Uncorrected Misstatements 86

INDEPENDENT AUDITOR’S REPORT

Hon. Rosalia D. Dupagen

Bases for Opinion

We conducted our audit in accordance with International Standards of Supreme Audit

Auditor’s Responsibilities for the Audit of the Financial Statements

OFFICE OF THE MUNICIPAL MAYOR

Statement of Management Responsibility for Financial Statements

The Management of the Municipality of Adams, Ilocos Norte is responsible for

In this regard, management maintains a system of accounting and reporting which

3 - Summary of Significant Accounting Policies

3.1 Basis of Accounting

3.2 Revenue Recognition

Revenue from Non-exchange Transactions

Transfers from Other Government Entities

Revenues from non-exchange transactions with other government entities are

Revenue from Exchange Transactions

Where the contract outcome cannot be measured reliably, revenue is recognized

Rental income arising from operating leases on investment properties is accounted