EXECUTIVE SUMMARY

INTRODUCTION

The Municipality of Matuguinao, Province of Samar, was created under Republic Act
No. 4221 on June 19, 1965. It is a 5th class municipality and one of the remote municipalities
of the Province of Samar which is composed of twenty (20) barangays.

A financial and compliance audit was conducted on the accounts and operations of
the municipality for calendar year 2019. The audit was aimed to ascertain the propriety and
validity of disbursements and receipts, and to obtain reasonable assurance about whether
the financial statements are free from material misstatements. The audit consisted of post-
audit of transactions, review of operating procedures, interview with concerned municipal
officials and employees, verification and analysis of accounts, and such other procedures
considered necessary under the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial
statements.

FINANCIAL HIGHLIGHTS

The Municipality’s total assets, liabilities, equity income and expenses for current
and previous years, are as follows:

Increase/(Decrease)
Particulars CY 2020 CY 2019
Amount Percent
Assets ₱ 150,078,351.44 ₱ 133,611,298.65 ₱ 16,467,052.79 12.32
Liabilities 30,764,762.89 35,655,171.88 (4,890,408.99) 13.71
Equity 119,313,588.55 97,956,126.76 21,357,461.79 21.80
Income 87,536,360.97 73,992,559.14 13,543,801.83 18.30
Expenses 96,395,650.59 84,379,840.54 12,015,810.05 14.24

On the other hand, the municipality’s appropriation/allotment/obligations and

expenditures for the current year and the previous year are as follows:

Increase/(Decrease)
Particulars CY 2020 CY 2019
Amount Percent
Appropriations 93,602,387.43 85,619,172.67 7,983,214.76 9.32
Obligations 93,907,359.42 80,443,360.23 13,463,999.19 16.73
Expenditures:
Personnel Services 44,265,345.82 36,621,249.41 7,644,096.41 20.87
MOOE 43,125,182.14 29,019,741.84 14,105,440.30 48.60
Capital Outlay 13,504,964.70 14,802,368.98 (1,297,404.28) 8.76
Financial Expenses 2,220.00 - 2,220.00 -
INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements because of the following:

1. Unreliable year-end balances of Advances totaling to ₱34,946,850.62 due to

recording of liquidation despite non-submission of Reports of
Disbursements/Liquidation Reports and supporting documents;

2. Erroneous recording of procured inventories totaling ₱2,501,780.32 as

outright expense, and recognizing expense amounting to ₱7,082,709.00
despite lack of records;

3. Unreliable accuracy and existence of the year-end balances of Inventories

totaling ₱7,354,656.50 due to: a) non-maintenance of Supplies Ledger
Cards (SLCs) by the Municipal Accountant; b) non-maintenance of Stock
Cards (SC) by the General Services/Supply Office; c) failure to conduct
physical count of inventories and non-preparation of the Report on the
Physical Count of Inventories (RPCI); and

4. Doubtful accuracy and existence of Property, Plant and Equipment (PPE)

accounts with book value reported at ₱112,040,782.80 as of December 31,
2020 due to: a) absence of Property, Plant and Equipment Ledger Cards
(PPELCs) and Property Cards (PCs); b) failure to conduct physical count of
properties and non-preparation of Report on the Physical Count of Property,
Plant and Equipment (RPCPPE); and c) unsubstantiated provision for
depreciation for the current year totaling ₱9,002,902.64.

SUMMARY OF SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

In addition to the exceptions cited, the significant observations and the corresponding
recommendations were as follows:

1. The agency failed to comply with the posting and reporting requirements in relation
to funds received under the BGCM amounting to ₱6,860,367.00, while portion of
the funds expended for fuel expenses totaling ₱117,025.00 were not supported with
driver’s trip tickets to prove they were COVID-19-related, thus negating
transparency and accountability, and undermining assurance that BGCM funds
were fully utilized for COVID-19.

We recommended that the Local Chief Executive (LCE): a) submit the duly
accomplished and approved driver’s trip tickets for fuel consumption listed in
Table 2; b) submit an explanation on the failure to prepare the monthly Report
on Fund Utilization, using the format prescribed in the DBM LBC 125; and c)
direct the posting of the report in at least three conspicuous public places in
the locality, and submit a certification to that effect.
2. The procurement of welfare goods for distribution to affected families of COVID-
19 was made through cash advances in the total amount of ₱2,754,000.00, instead
of emergency procurement, and the related liquidation reports thereof were not
submitted for audit, thus disregarding the necessary safeguards in the prevention of
abuses and corruption in the procurement process, and precluding review of
transactions.

We recommended that the LCE: a) submit an explanation why the

procurement of welfare goods were undertaken through cash advances and
not through emergency procurement; (b) henceforth, stop the practice of
granting cash advances for the procurement of goods and services; and c)
require the submission of the related liquidation reports and supporting
documents of the cash advances.

3. The agency failed to comply with the documentary and reporting requirements
relative to the payment of cash assistance under the ESP-SAP totaling
₱2,215,000.00 to 443 beneficiaries of 21 barangays of the municipality, thus the
actual occurrence and propriety of the payment and the efficient implementation of
the program could not be confirmed nor validated.

We recommended that the LCE: a) direct the Municipal Accountant to submit

the necessary supporting documents; and b) order the posting of the list of
beneficiaries who already received the emergency subsidy in the
Municipality’s official website, social media accounts, and at conspicuous
places in the municipality.

SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES

The audit suspensions, disallowances and charges of the Municipality as of

December 31, 2020 amounted to ₱31,870,362.23, ₱71,588.00 and ₱500.00, respectively.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ UNIMPLEMENTED

AUDIT RECOMMENDATIONS

Of the 32 audit recommendations relative to the prior years’ audit, nine were fully
implemented and 23 were not implemented.