EXECUTIVE SUMMARY

A. Introduction

The Municipality of New Bataan, which was once a barangay of Compostela,

was created as a Municipality under Republic Act No. 1456 dated June 18, 1968. It is
situated 15 kilometers from Compostela, its mother Municipality. It is composed of
16 barangays and has a total land area of 55,315 hectares. Out of this figure 30,792
hectares or 45.37 percent is timberland, 16,374 hectares or 24.11% is forest reserve,
5,438.0671 or .93 percent is unclassified public forest and 15,265.9329 hectares or
20.50 percent is alienable and disposable.

The Municipality is headed by its Local Chief Executive, Hon. Lorenzo L.

Balbin, Jr. the duly elected Municipal Mayor, while Hon. Margarito T. Rafols, the
duly elected Vice-Mayor, sits as the presiding Officer of the legislative branch of the
Municipality which is composed of eight (8) elected municipal councilors and three
(3) ex-officio council members.

The Municipality’s general organizational structure is in accordance with the

provisions of Republic Act No. 7160 and the related circulars and memoranda from
the different line agencies of the national government.

B. Financial Highlights

B.1 Financial Condition

The Consolidated Assets, Liabilities and Government Equity of the

Municipality of New Bataan for the year ended December 31, 2013 with comparative
figures for 2012 is as follows:

Increase/(Decrease)
Account 2013 2012
Amount Percentage
Assets P 192,153,510.30 P 158,202,547.93 P 33,950,962.37 21.46%
Liabilities 90,768,635.76 68,264,340.66 22,504,295.10 32.97%
Government Equity 101,384,874.54 89,956,207.27 11,428,667.27 12.70%

The 21.46% increase in assets is due to the increase in Receivables and

Property, Plant and Equipment. A higher Internal Revenue Allotment (IRA) also
contributed to such increase. A large portion of the increase in Liabilities is related to
Inter-agency Payables particularly Due to Other NGAs which represents fund
transfers for implementation of various projects. Government Equity increased during
the year due to adjustments for prior year's transactions, transfers of properties to
other funds, transfer of public infrastructures to Registry, and Retained Operating
Surplus for the current year.
B.2 Results of Operations

For CY 2013, the Municipality generated a Net Income of P10,735,585.72

which is P6,823,558.32 or 63.56% higher than CY 2012 Net Income of
P3,912,027.40. The difference is highly attributable to the increase in Internal
Revenue Allotment from P96,894,286.00 in 2012 to P108,726,915.00 in 2013.

Sources of income came from receipts of Internal Revenue Allotment, Local

Taxes, Permits and Licenses, Service income, Business Income, and Other Income
which is composed of Interest Income and Miscellaneous Income. Sources of income
with comparative figures for 2012 are shown below:

Increase/(Decrease)
Sources of Income 2013 2012
Amount Percentage
IRA P 108,726,915.00 P 96,894,286.00 P 11,832,629.00 12.21%
Local Taxes 2,933,035.46 4,303,343.53 (1,370,308.07) -31.84%
Business Income 1,671,045.49 4,663,791.40 (2,992,745.91) -64.17%
Other Income 1,660,619.22 1,509,694.15 150,925.07 10.00%
Permits and Licenses 1,161,075.66 1,702,473.33 (541,397.67) -31.80%
Services Income 394,858.69 503,280.77 (108,422.08) -21.54%
Total P 116,547,549.52 P 109,576,869.18 P 6,970,680.34 6.36%

For calendar year 2013, a large portion of the Municipality’s fund source
came from its Internal Revenue Allotment amounting to P108,726,915.00 which is
93.29% of the total income.

Services Business
Income Income
Permits and 0.34 1.43%
Licenses Other Income
1% 1.42%

Local Taxes
2.52%

IRA
93%

Total Revenue for CY 2013

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B.3 Sources and Application of Funds

Approved Annual and Supplemental Budgets of the Municipal Government

for CY 2013 showed that of the total P140,544,914.19 available funds, management
allotted P55,229,961.10 or 39.30% for Personal Services, P52,859,461.74 or 37.61%
for Maintenance & Other Operating Expenses and P32,455,491.35 or 23.09% for
Capital Outlay. Comparative figures for CY 2012 are presented below:

Increase/(Decrease)
Nature of Expenditure 2013 2012
Amount Percentage
Personal Services P 55,229,961.10 P 49,753,145.99 P 5,476,815.11 11.01%
Maintenance & Other
52,859,461.74 61,720,578.81 (8,861,117.07) (14.36%)
Operating Expenses
Capital Outlay 32,455,491.35 14,650,250.96 17,805,240.39 121.54%
Total P140,544,914.19 P 126,123,975.76 P 14,420,938.43 11.43%

It can be noted from the table above that there is a significant increase of
121.54% for Capital Outlay. Such figure translates the development direction of the
Municipality towards attaining its thrust during the year by prioritizing tangible
development projects and improvement of government facilities.

Shown below is a graphical information on the current year’s Status of

Appropriation, Allotment and Obligation for Personal Services, Maintenance and
Other Operating Expenses and Capital Outlay.

Allotment Obligation

54,697,357.92
55,229,961.10
52,859,461.74
46,995,627.77

32,455,491.35
26,611,168.52

Personal Services Maintenance & Other Capital Outlay

Operating Expenses

Obligations for Personal Services, Maintenance & Other Operating Expenses,

and Capital Outlay were below the allotted amount. An unexpended balance of
P12,240,759.98 or 8.71% was therefore obtained by the Municipality. This was the
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 result of the Municipality's continuous effort in efficiently managing its funds and
expenditures.

C. Operational Highlights

To effectively address the immediate needs of the people by way of proper

administration and efficient governance, the Municipality’s programs, projects and
activities were designed and implemented during the year to promote and heighten
the social, moral, cultural and environmental consciousness of its constituents. Major
activities initiated by the Municipality are presented below with their corresponding
targets and accomplishments and comparative figures for CY 2012:

Major Accomplishments % of Completion

Targets
Activities 2013 2012 2013 2012
Environmental Implementation ● Maintenance of ● Established 95% 95%
Protection of the Nursery Seedling Nursery
Reforestation Bank Seedling Bank
Program ● Maintenance of ● Maintenance of
Scion Grove Scion Grove
● Maintenance of ● Implementation
Rubber Nursery of Rubber
& Bud Wood Nursery & Bud
Project Wood Project
Infrastructure Construction of ● Constructed the ● Constructed the 75% 85%
Various following: following:
Infrastructure Building - 17 Building - 12
Projects
Roads and Roads and
Bridges - 6 Bridges - 6
Water System - 4 Water System -
3
Flood Control - 1 Solar Drier - 1
Electrification -
1
Solar Drier - 1
Local Statistical ● Updated ● Updated 100% 100%
Administration Research Barangay and Barangay and
Program Municipal Municipal
Profile Profile
Legislative and ● Accomplished ● Accomplished 100% 100%
Research committee committee
Program reports, reports,
resolutions, and resolutions, and
ordinances ordinances
Social and Empowerment ● 135 women were ● 150 families 100% 100%
Health of women and provided with provided with
Services provision of skills training in livelihood
equal rug making and
opportunity to cosmetology

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 access, ● Climate Change
participation Adaptation was
and benefits conducted in 10
Barangays
participated by
female
inhabitants
Promotion of ● 160 students ● 160 students 100% 100%
Special were provided were provided
Program for with with
Employment of employment employment
Students and ● 30 students were
provision of provided with
scholarship scholarship
program for the
youth
Provision of ● Served 1078 ● Served 1000 100% 100%
Day Care children children
Services ● Conducted ● Conducted peer
parenting group services
seminar
participated by
815 parents
Family Health ● Provided health ● Provided family 100% 100%
Program insurances to planning
families commodities
Nutrition and ● 1.5 reduction in ● Provided 100% 100%
Community the no. of treatment to
Outreach malnourished patients of Acute
Services children Respiratory
Infection and
Cardiovascular
Disease
● Conducted
lectures/informat
ion drives on
health and
nutrition

Economic Support for ● Established ● Established 90% 98%

Services Agriculture artificial artificial
Development breeding system breeding system
● Implemented ● Implemented
Agri-Pinoy Agri-Pinoy
Programs (Rice, Programs (Rice,
Livestock, Corn) Livestock, Corn)

The implementation of the development initiatives of the Local Chief

Executive were carried out thru efficient and effective governance that have been
substantially facilitated and correspondingly completed thru budgetary interventions
to enhance the operations of the Municipality of New Bataan. Below is a tabular
presentation of the status of projects/programs under the 20% Development Fund.

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 Percentage of
Projects/Programs Appropriations Obligations
Completion
Repairs and Maintenance of
2,968,816.00 2,470,461.72 75.00%
Government Facilities
Purchase, Construction and
Improvements of Government 28,307,086.74 23,432,321.41 75.50%
Facilities
Economic Services 1,523,400.00 1,430,510.50 100.00%
Debt Servicing 4,800,000.00 4,540,423.57 100.00%

D. Scope of Audit

A financial and compliance audit was conducted on the accounts and

operations of the Municipality of New Bataan, Province of Compostela Valley for the
year ended December 31, 2013, to ascertain the propriety of financial transactions and
operations and compliance of the agency to prescribed rules and regulations. It was
also made to ascertain the accuracy of the financial records and reports as well as the
fairness of the presentation of the financial statements.

E. Auditor’s Report

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

year-end financial statements of the Municipality of New Bataan due to the
following:

1. Due from Other Funds account balance of P2,541,711.11 did not reconcile
with Due to Other Funds account balance of P46,890.22, thereby
rendering them doubtful of validity.

2. Failure of the Municipal Accountant to observe the proper recording of

inventories under the perpetual inventory method resulting to the
understatement of inventories and overstatement of expenses amounting to
P790,377.38.

F. Observations and Recommendations

Presented and discussed below are the significant audit observations revealed
in the course of audit with the corresponding recommendations offered as remedial
measures thereon. These were all discussed with Agency Officials and employees and
their comments and/or justifications are incorporated in the report where appropriate.
These are as follows:

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1. Stale Checks totaling P307,104.17 as of October 31, 2013 were not adjusted
resulting to the understatement of the Accounts Payable and understatement
of Cash in Bank accounts.

Require the Municipal Accountant to prepare the necessary adjusting

entry for the stale checks for the fairness of accounts presentation in the financial
statements.

2. Depreciation expense amounting to P2,710,523.97 was not provided on

depreciable properties recorded under the Special Education Fund, Trust
Fund Proper, DSWD and MRDP Fund amounting to P2,105,276.64 ,
P2,246,905.00 , P69,450.00 and P410,844.00 respectively, contrary to Section
4 of the New Government Accounting System Manual, Volume I resulting to
the overstatement of Property, Plant and Equipment account,
understatement of depreciation expense and overstatement of income

Require the Municipal Accountant to provide monthly depreciation on all

depreciable assets in order to present fairly the Property, Plant and Equipment
accounts in the financial statements.

3. Cash Advances amounting to P195,934.63 were not liquidated within the

prescribed period and additional cash advances were granted to employees
with existing unliquidated cash advance contrary to pertinent provisions of
COA Circular No. 97-002 dated February 10, 1997, 2012-001 dated June 14,
2012 and COA Circular 2012-004 dated November 28, 2012, thus
accumulating unsettled cash advances at year end.

Require the Municipal Accountant to furnish the Agency Head the List of
Accountable Officers with unliquidated travel and special cash advances and the
corresponding demand letters for its immediate settlement for proper action by
the Local Chief Executive.

Instruct the Municipal Accountant to refrain from granting cash advances

to officers/employees with unsettled amounts to avoid accumulation of balances of
the account.

Management shall ensure strict compliance of COA Circular No. 97-002

dated February 10, 1997 and COA Circular 2012-001 dated June 14, 2012 for
future grants and subsequent liquidations of cash advances.

4. The Municipality paid Honoraria to the Bids and Awards (BAC) amounting
to P300,000.00 for the year 2013 contrary to the guidelines set forth under
Budget Circular 2004-5A dated October 7, 2005 and Budget Circular 2007-3
dated November 29, 2007.

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 Management should strictly adhere to the provisions of Budget Circular
Nos. 2004-5A, 2005-5A and 2007-3 for Bids and Awards Committee Honoraria
as to a) fund Source; b) average amount of monthly honoraria; and c) other
conditions provided in the aforesaid budget circulars.

Management shall refrain in including in the Annual Budget

appropriation for BAC Honoraria as fund source is from savings and collections
from procurement projects.

5. Honoraria totaling P1,035,200.00 were paid despite the absence of supporting

documents, contrary to Sec. 4 (6) of PD 1445 and COA Circular 2012-001
dated June 14, 2012, thus propriety cannot be established.

The Municipal Accountant should see to it that complete documents be

attached to the disbursement voucher/payrolls to warrant the claim of honoraria
to avoid audit suspensions/disallowances in accordance with the provisions of PD
1445 and COA Circular 2012-010.

6. Funds amounting to P460,856.68 as well as farm inputs worth P22,500.00

intended for the Expanded Modified Rapid Composting Program remained
unutilized hence the expected socio-economic benefits to some farmer-
beneficiaries were compromised.

Instruct the Municipal Agriculture Office to fast track the

utilization/implementation of the Expanded Modified Rapid Composting (EMRC)
remaining program funds to be able to attain its objectives. Further, future
receipt of program/project funds from other agencies shall be fully utilized and
timely implemented to be able to deliver on time the benefits that can be derived
there from to farmer-beneficiaries.

Instruct the Municipal Agriculture Office to distribute the remaining

fertilizers to identified beneficiaries.

7. Projects/Programs under the 20% Development Fund for calendar years

2011-2013 totaling P780,000.00 remained unimplemented as of December 31,
2013, thus, desirable socio-economic development and environmental
outcomes were not fully and timely realized at the disadvantage of the
intended beneficiaries.

Direct the implementing offices to timely and fully implement

projects/programs under the 20% Development Fund. Further, all
programs/projects proposed to be implemented during the budget year should be
implemented and completed in the said year in order to attain its objective in
providing socio-economic benefits to its intended beneficiaries.

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 Management shall strictly monitor the implementation of development
projects and evaluate the status of the unimplemented projects to determine
whether such projects are still feasible for implementation. In the event that such
projects are identified to be no longer achievable, management shall make
amendments in the Annual Investment Plan and propose other viable development
projects/programs to be funded out of the 20% Development Fund.

8. Due from Other Funds account balance of P2,541,711.11 did not reconcile
with Due to Other Funds account balance of P46,890.22, thereby rendering
them doubtful of validity.

Direct the Municipal Accountant to review the detailed schedules of Due

from and to Other Funds accounts and prepare necessary adjustments to correct
the balances as presented in the agency's financial statements.

9. Failure of the Municipal Accountant to observe the proper recording of

inventories under the perpetual inventory method contrary to Sec. 114 of the
New Government Accounting System Manual for Local Government Units,
resulting to the understatement of inventories and overstatement of expenses
amounting to P790,377.38.

Direct the Municipal Accountant to reconcile inventory accounts and their

corresponding expenses and to prepare the necessary adjustments to correct the
balances.

Require the Municipal Accountant to observe proper recording of

inventories under the perpetual inventory method.

G. Status of Implementation of Prior Years’ Audit Recommendation

Of the seven prior years’ audit recommendations, 57.14% or four were fully
implemented, 28.57% or two were partially implemented and 14.29% or one was not
implemented.

The overall impact of the implementation of prior years’ audit

recommendations highly improved the operations of the agency.

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