Audit identifies unreconciled cash, dormant funds, unreliable inventory

AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. FINANCIAL AUDIT
Unreconciled cash balances
1. Periodic reconciliation of balances between the accounting’s ledgers and

treasury’s cashbooks were not made resulting to net discrepancies
amounting to P3.182 million in the cash balances as of December 31, 2020.
1.1 Section 74 of Presidential Decree (PD) No. 1445 states that, “At the close
of each month, depositories shall report to the agency head, in such form
as he may direct, the condition of the agency account standing on their
books. The head of the agency shall see to it that a reconciliation is made
between the balance shown in the reports and the balance found in the
books of the agency.”
1.2 Also, Section 181 (c) of the Government Accounting and Auditing Manual
(GAAM) Volume 1 states that: “the accountable officer shall reconcile the
book balance with the cash on hand daily. He shall foot and close the
books at the end of each month. The accountable officer and the
accountant shall reconcile their books of accounts at least quarterly.”
1.3 Comparison between the accounting’s ledger balances and the treasury’s
cashbook balances for Cash in Bank – Local Currency, Current Account
(LCCA) and Cash – Local Treasury accounts disclosed net discrepancies
amounting to P3.182 million as of December 31, 2020. Summary of
discrepancies is presented in the following table while details shown in
Appendix “B”.
Balances as of December 31, 2020

Fund
Per Ledgers Per Cashbooks Net Difference
I. Cash in Bank - LCCA
General Fund (GF) 23,893,921.34 22,497,066.96 1,396,854.38
Special Education
Fund (SEF) 1,610,964.98 1,720,115.76 (109,150.78)
Trust Fund (TF) 13,608,131.83 11,719,064.79 1,889,067.04
Sub-Total 39,113,018.15, 35,936,247.51 3,176,770.64
II. Cash – Local Treasury
General Fund (GF) 90,017.79 84,822.79 5.00
Special Education
Fund (SEF) (3,236.54) (3,236.80) 0.26
Trust Fund (TF) 19.07 0.00 19.07
Sub-Total 86,800.32 81,585.99 5,214.33
TOTAL 39,199,818.47 36,017,833.50 3,181,984.97
1.4 Inquiry revealed that periodic reconciliations of balances between the

accounting’s ledgers and treasury’s cashbooks were not made by the
Municipal Accountant and the Municipal Treasurer, which resulted to the
above discrepancies.
Recommendation:
1.5 We recommended that the Municipal Accountant and the Municipal

Treasurer:
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a) Identify the discrepancies between the ledger balances and
cashbook balances, and effect the necessary adjustments in their
records to arrive at reconciled balances; and
b) Conduct periodic reconciliation of balances between the

accounting’s ledgers and treasury’s cashbooks at least quarterly.
Management’s Comments:
1.6 Management assured compliance with the audit recommendations.
Dormant/non-moving Cash in Bank-LCCA accounts
2. Existence of dormant and/or non-moving Cash in Bank – LCCA accounts

amounted to P1.019 million as of December 31, 2020.
2.1 Section 29(3) of the 1987 Constitution of the Republic of the Philippines
provides that “Xxx. If the purpose for which a special fund was created has
been fulfilled or abandoned, the balance, if any, shall be transferred to the
general funds of the Government.”
2.2 Permanent Committee, composed of the Department of Finance (DOF),

Department of Budget and Management (DBM) and Commission on Audit
(COA), Joint Circular No. 4-2012 dated September 11, 2012 prescribes the
rules and regulation implementing Executive Order No. 431 dated May 30,
2005, directing the reversion of all dormant accounts, unnecessary special
and trust funds to the general fund and for other purposes.
2.3 Section 3.2 of the above Joint Circular defines dormant accounts as the
collections authorized by law to be deposited with an Authorized
Government Depository Bank (AGDBs) but have remained inactive for
more than five (5) years.
2.4 Moreover, Section 2.9.1 of the DBM, DOF and Department of the Interior
and Local Government (DILG) Joint Memorandum Circular (JMC) No. 2
dated December 4, 2020 provides that “All unexpended cash balances of
public funds held in trust by LGUs for purpose that have been completed
or abandoned may be transferred by the LGUs concerned to their
respective general funds and shall be made available for appropriation to
support local government programs and projects in response to the
COVID-19 pandemic.”
2.5 Our verification of the Cash in Bank – LCCA balances as of December 31,
2020 disclosed that the LGU maintains dormant and/or non-moving
accounts, as follows:
Depository Amount
No. Particulars Remarks
Bank (Per Ledger)
1 LBP Pagadian ECCD Program Dormant for over
Branch 69,032.81 10 years
2 LBP Pagadian MDFO/DMAF Dormant for 5
Branch 0.18 years
3 LBP Pagadian Unidentified Non-moving for
Branch (20.00) over 4 years
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Depository Amount
No. Particulars Remarks
Bank (Per Ledger)
4 LBP Pagadian ARCP II & Loan Non-moving for
Branch Equity 906,551.50 over 2 years
5 LBP Pagadian ARCP II & Loan Non-moving for
Branch Proceeds 10,110.01 over 3 years
6 LBP Pagadian PHILHEALTH- Non-moving for
Branch Per Family Patient over 2 years
Rate 23,800.00
7 LBP Pagadian PHILHEALTH- Non-moving for
Branch Health Care Inst. 10,000.00 over 2 years
Total 1,019,474.50
2.6 The existence of the above dormant and non-moving accounts does not
only violate the aforesaid provisions but may also affect the LGUs funding
requirements since these funds could have been reverted to the
unappropriated surplus and made available for appropriation to support
local government programs and projects in response to the COVID-19
pandemic or for other purposes.
Recommendation:
2.7 We recommended that Management determine the necessity and authority

of maintaining the dormant and/or non-moving cash in bank accounts and
revert the same to the unappropriated surplus in the general fund, if
warranted, to be made available for appropriation to support other local
government programs and projects especially those for the response to
COVID-19 pandemic.
2.8 Management adhered with the audit recommendation, and will seek
authority from the Sangguniang Bayan for the closure of dormant accounts
and transfer to the General Fund.
Unreliable inventory account balances
3. The accuracy and existence of Inventory accounts amounting to P1.412

million as of December 31, 2020 could not be ascertained due to the (a)
absence of accounting and supply records; (b) non-observance of the
perpetual inventory method; and (c) non-conduct of physical count of
inventories.
3.1 International Public Sector Accounting Standard (IPSAS) 12 states:
“Inventories are assets:
a) In the form of materials or supplies to be consumed in the

production process;
b) In the form of materials or supplies to be consumed or
distributed in the rendering of services;
c) Held for sale or distribution in the ordinary course of
operations; or
d) In the process of production for sale or distribution.”
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3.2 Sections 114 and 124 of COA Circular No. 2002-003 dated June 20, 2002
state:
“Sec. 114. Perpetual Inventory Method. – Purchase of

supplies and materials for stock, regardless of whether or not
they are consumed within the accounting period, shall be
recorded as inventory following the perpetual inventory method.
Under the perpetual inventory method, an inventory control
account is maintained in the General Ledger on a current basis.
In addition, detailed inventory records are maintained for each
inventory item.
Regular purchases shall be coursed thru the inventory account

and issuances thereof shall be recorded as they take place,
except those purchased out of the petty cash fund which shall
be for immediate use and for stock in which case shall be
charged immediately to the appropriate expense accounts.
The Chief Accountant shall maintain the perpetual inventory

records comprising of Supplies Ledger Cards (SLC) for each
commodity/stock. xxx
The General Services Officer or the Municipal Treasurer, as the

case maybe shall likewise maintain stock cards xxx for
supplies; xxx to account for the receipt and disposition of the
same. The balance per stock card xxx should always reconcile
with the ledger cards of the accounting unit. Xxx”
Sec. 124. Inventory of Supplies or Property. – The local

chief executive shall require periodic physical inventory of
supplies or property. Physical count of inventory items by type
shall be conducted semestrally and reported in the Report of
the Physical Count of Inventories (RPCI). This shall be
submitted to the Auditor concerned not later than July 31 and
January 31 of each year for the first and second semesters,
respectively. Xxx”
3.3 As of December 31, 2020, the Inventory and Supply accounts of the LGU
has the following balances:
Balances as of
Account December 31,
2020
Office Supplies Inventory 93,288.69
Accountable Forms, Plates and Stickers 3,300.00
Drugs and Medicines Inventory 838,493.08
Medical, Dental and Laboratory Supplies 477,230.00
Total 1,412,311.77
3.4 Audit of Inventories and Supplies accounts disclosed the following

deficiencies:
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 Non-observance of the perpetual inventory method in recording
regular purchases of inventories and supplies. The items being
purchased were recorded directly to expense account;
 Non-observance of the proper Inventory Process in the control of

inventories and supplies as prescribed under Section 122 of COA
Circular No. 2002-003. Succeeding issuance of these items to
Requisitioning Unit/End User has no documents that the same
were received and issued to end-user;
 Non-preparation and non-maintenance of supply ledger cards and

stock cards by the Municipal Accountant and the Municipal
Treasurer acting as the General Services Officer (GSO),
respectively;
 Office Supplies Inventory account under the General Fund and

Drugs and Medicine Inventory account under the Trust Fund
amounting to P93,288.69 and P159,319.74, respectively, are non-
moving accounts during the year. Inquiry with the concerned
personnel from the Accounting Office revealed that all items in
Inventory and Supply accounts have already been distributed to
and used by recipients/end-users but were not recorded as
expense due to non-submission of the Summary of Supplies and
Materials Issued (SSMI) from the Municipal Treasurer acting as the
GSO; and
 Non-conduct of semestral physical count of all inventories and

supplies. In addition, we also noted that periodic conduct of
physical count of supplies and inventories were not included as one
of the duties and responsibilities of the newly constituted Inventory
Committee of the LGU per Executive Order No. 01, Series of 2021
dated January 6, 2021.
3.5 Non-adherence to the above accounting and reporting guidelines and

procedures for the proper control of inventories and supplies casts doubt to
the accuracy and existence of the inventory account balances, affecting
the fair presentation of accounts in the financial statements.
Recommendation:
3.6 We recommended that:
a) The Local Chief Executive include in the duties and responsibilities

of the newly constituted Inventory Committee the periodic conduct
of physical count of supplies and inventories and direct the latter to
conduct the same at least semi-annually, and prepare and submit
to our end the Report of the Physical Count of Inventories (RPCI)
not later than July 31 and January 31 of each year;
b) The Municipal Accountant observe the perpetual inventory method

in the recording of delivered inventories and supplies and
succeeding issuances thereof;
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c) The Municipal Accountant and the Municipal Treasurer acting as
the General Services Officer prepare and maintain complete
Supply Ledger Cards and Stock Cards, respectively, conduct
periodic reconciliation of their records, and update the same based
on the results of the physical inventory; and
d) The Municipal Treasurer in coordination with the Municipal

Accountant examine the existence of the reported inventory
accounts, prepare and submit the corresponding SSMI, as basis for
the recording of the necessary adjustments by the latter.
Unreliable Property, Plant and Equipment (PPE) account balances
4. The accuracy, existence and condition of Property, Plant and Equipment

(PPE) accounts reported at a net carrying amount of P220.482 million as of
December 31, 2020 could not be ascertained due to the (a) non-conduct of
physical count of PPE, (b) absence of property records and incomplete
accounting records, and (c) unidentified balances of Construction in
Progress accounts amounting to P5.883 million.
Non-conduct of physical count of PPEs
4.1 Section 102 of Presidential Decree (PD) No. 1445 otherwise known as the
Government Auditing Code of the Philippines states that “physical
inventory-taking, being an indispensable procedure for checking the
integrity of property custodianship has to be regularly enforced at least
once a year. All inventory reports shall be prepared and shall be properly
reconciled with accounting and inventory records.”
4.2 Likewise, Section 124 of COA Circular No. 2002-003 dated June 20, 2002
provides:
“Sec. 124. Inventory of Supplies or Property. – The local

chief executive shall require periodic physical inventory of
supplies or property. Physical count of inventory items by type
shall be conducted semestrally and reported in the Report of
the Physical Count of Inventories (RPCI). This shall be
submitted to the Auditor concerned not later than July 31 and
January 31 of each year for the first and second semesters,
respectively.
Physical count of property, plant, and equipment by type shall

be made annually and reported on the Report on the Physical
Count of Property, Plant and Equipment (RPCPPE). This shall
be submitted to the Auditor concerned not later than January 31
of each year.” (Underscoring supplied)
4.3 Recently, COA Circular No. 2020-006 dated January 31, 2020 was issued
to prescribe the guidelines and procedures in the conduct of physical count
of PPE, the recognition of PPE items found at station, and disposition for
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non-existing/missing PPE items, for the purpose of one-time cleansing of
PPE account balances of government agencies to establish PPE balances
that are verifiable as to existence, condition and accountability. This
Circular is issued for one-time cleansing of PPE account balances; thus, in
no case shall the herein procedures be used to further derecognize non-
existing/missing PPEs and/or cleanse subsequent discrepancies or
unreconciled balances in PPE accounts.
4.4 Our review of the LGU’s consolidated financial statements as of December

31, 2020 showed the following PPE account balances:
Balance as of December 31, 2020

Account Title Accumulated Carrying
Gross Amount
Depreciation Amount
Land 879,000.00 0.00 879,000.00
Land Improvements 97,163.40 0.00 97,163.40
Infrastructure Assets 82,295,049.26 0.00 82,295,049.26
Buildings and Other
Structures 113,891,834.90 41,543,255.00 72,348,579.90
Machinery and
Equipment 55,984,411.36 23,523,945.52 32,460,465.84
Transportation
Equipment 8,001,912.00 2,933,851.85 5,068,060.15
Furniture, Fixtures and
Books 835,590.25 400,986.03 434,604.22
Construction in Progress 26,476,045.68 0.00 26,476,045.68
Other Property, Plant and
Equipment 1,328,574.32 905,289.67 423,284.65
Total 289,789,581.17 69,307,328.07 220,482,253.10
4.5 Records show that the LGU prepared and submitted its Report on the
Physical Count of Property, Plant and Equipment (RPCPPE) as of
December 31, 2020. However, our verification revealed that there is no
actual physical inventory conducted by the constituted Inventory
Committee to determine the existence and condition of the various PPEs
of the LGU. Per inquiry with the concerned personnel of the Office of the
Municipal Accountant, the RPCPPE was prepared by their office based on
their available records. As such, the purpose of conducting actual physical
inventory and the subsequent preparation of the RPCPPE was defeated,
thus, the existence and condition of the PPE items were not determined.
Moreover, the above PPE balances may still include items which are
already unserviceable, which may be subject for disposal and dropping
from the PPE accounts.
4.6 Non-conduct of actual physical count of PPE cast doubt on the accuracy,
existence and condition of the reported PPE account balances in the
financial statements.
Absence of property records and incomplete accounting records
4.7 Section 114 of COA Circular No. 2002-003 provides that the Chief
Accountant shall maintain the perpetual inventory records comprising of
Property, Plant and Equipment Ledger Card (PPELC) for each category of
PPE. Such ledger cards shall contain the details of the PPE in the control
account in the general ledger. It provides further that the General Services
Officer or the Municipal Treasurer, as the case maybe shall likewise
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maintain property cards for PPE to account for the receipt and disposition
of the same. The balance per property cards should always reconcile with
the ledger cards of the accounting unit. They should also reconcile with
other property records like Acknowledgement Receipt for Equipment
(ARE).
4.8 Our verification revealed that Property Cards were not prepared and
maintained by the Municipal Treasurer acting as the General Services
Officer. Further verification revealed that the Municipal Accountant
prepared and maintained PPELCs but the same were not complete and
updated.
4.9 We emphasize that part of the fiduciary duty of the head of the agency is to
ensure the safeguarding of the assets of the LGU. This can only be
effectively undertaken if management has control and monitoring
measures of the assets acquired by the agency. Complete PPELCs and
PCs aim to achieve this by providing all useful information in relation to the
assets held. Moreover, to completely monitor all PPEs of the LGU with
regards to its existence and condition, the conduct of physical count of all
assets should be made at least annually.
Unidentified balances of Construction in Progress accounts
4.10 Section 111, PD No. 1445 provides:
“1. The accounts of an agency shall be kept in such detail as is

necessary to meet the needs of the agency and at the same
time be adequate to furnish the information needed by fiscal or
control agencies of the government.
2. The highest standards of honesty, objectivity and consistency

shall be observed in the keeping of accounts to safeguard
against inaccurate or misleading information.”
4.11 Likewise, Paragraph 27 of IPSAS 1 provides that “Financial statements

shall present fairly the financial position, financial performance and cash
flows of an entity. Fair presentation requires the faithful representation of
the effects of transactions, other events and conditions in accordance with
the definitions and recognition criteria for assets, liabilities, revenue and
expenses set out in IPSASs. The application of IPSASs, with additional
disclosures when necessary, is presumed to result in financial statements
that achieve a fair presentation.”
4.12 Our verification of the LGU’s PPE account balances disclosed that the
Construction in Progress accounts contain balances amounting to P5.883
million which could not be identified and/or verified in the absence of
subsidiary ledgers, supporting schedules and/or detailed breakdowns.
4.13 Based on the foregoing circumstances, the accuracy, existence and

condition of the reported PPE account balances as of December 31, 2020
could not be ascertained.
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Recommendation:
4.14 We recommended the following:
a) The Management comply with the guidelines and procedures in the

conduct of physical count of PPE, the recognition of PPE items
found at station, and disposition for non-existing/missing PPE
items, if any, for the purpose of one-time cleansing of PPE account
balances of the LGU to establish its existence, condition and
accountability, in accordance with COA Circular No. 2020-006;
b) The Municipal Accountant and Municipal Treasurer acting as the

General Services Officer to prepare and maintain complete PPE
Ledger Cards and Property Cards, respectively, conduct periodic
reconciliation of their records and update the same based on the
results of the physical inventory; and
c) The Inventory Committee to conduct annual physical count of PPEs

to facilitate the preparation and submission of RPCPPE not later
than January 31 of each year, complete with all the required
information, which shall serve as the basis for the reconciliation and
updating of accounting and property records.
4.15 Management commented that Executive Order No. 01-2021 was already
issued on January 06, 2021 for the creation of the Inventory Committee to
conduct the actual physical count of the LGU’s PPEs. Moreover, the
Management has already initiated the purchase of property tags/stickers to
be used during the physical count, and that they will notify the Office of the
Auditor of the schedule for the conduct of the same. Management also
assured compliance with the other audit recommendations.
Non-provision of depreciation expenses
5. Infrastructure assets and other PPE accounts with a reported balance

amounting to P112.274 million as of December 31, 2020 were not subjected
to depreciation, resulting to the overstatement of the affected asset
accounts and understatement of the corresponding expense accounts.
5.1 Section 4(o) of COA Circular No. 2002-003 dated June 20, 2002 provides:
“Sec. 04. Basic Features and Policies. – The new

government accounting system has the following basic features
and policies, to wit:
o. Depreciation. The straight-line method of

depreciation shall be used. A residual value
equivalent to ten percent (10%) of the cost shall be
set-up and depreciation shall start on the second
month after purchase/completion of the property,
plant and equipment. Public infrastructures shall not
be charged any depreciation.”
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5.2 The Circular provides that public infrastructures such as roads, bridges,
water systems, etc. shall be recorded in the Registry of Public
Infrastructure and disclosed in the Notes to Financial Statements. It further
provides that public infrastructures are not charged any depreciation, as
cited above.
5.3 However, COA Resolution No. 2014-003 dated January 24, 2014
prescribed the adoption of 25 Philippine Public Sector Accounting
Standards (PPSASs) effective January 1, 2014 which were based on the
International Public Sector Accounting Standards (IPSASs) published in
the 2012 Handbook of International Public Sector Accounting
Pronouncements of the International Public Sector Accounting Standards
Board. Each IPSAS provides transitional guidelines on the proper
implementation of the IPSASs. With the adoption of IPSASs, particularly
IPSAS 17 – Property, Plant and Equipment (PPE), infrastructure assets
shall be taken up as PPE. Also. the annual consumption of their service
potential and loss of value through depreciation and impairment shall also
be recognized.
5.4 Pertinent provisions of IPSAS 17 are as follows:
“4. This Standard applies to property, plant and equipment

including:
(a) Specialist military equipment; and

(b) Infrastructure assets. xxx
21. Some assets are commonly described as “infrastructure

assets”. While there is no universally accepted definition of
infrastructure assets, these assets usually display some or
all of the following characteristics:
(a) They are part of a system or network;

(b) They are specialized in nature and do not have
alternative uses;
(c) They are immovable; and
(d) They may be subject to constraints on disposal.
Although ownership of infrastructure assets is not confined

to entities in the public sector, significant infrastructure
assets are frequently found in the public sector.
Infrastructure assets meet the definition of property, plant
and equipment and should be accounted for in accordance
with this Standard. Examples of infrastructure assets
include road networks, sewer systems, water and power
supply systems and communication networks.
59. Each part of an item of property, plant and equipment with

a cost that is significant in relation to the total cost of the
item shall be depreciated separately. (Underscoring
supplied)”
5.5 Moreover, COA Circular No. 2015-008 dated November 23, 2015
prescribes the accounting guidelines for local road and road network
system on initial recognition, subsequent measurement and derecognition
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to ensure that all roads are properly valued and recorded, and also the
transitory provisions tor the transfer of the local roads accounts from the
Registry of Public Infrastructures to the books of accounts of the LGU
responsible for the management of these roads.
5.6 Our verification of the LGU’s PPE accounts disclosed that infrastructure
assets including road networks and water supply systems, and other PPE
accounts were not subjected to depreciation, as shown in the table below:
Balance as of December 31, 2020

Account Title Accumulated Carrying
Gross Amount
Depreciation Amount
Land Improvements 97,163.40 0.00 97,163.40
Road Networks 58,929,288.43 0.00 58,929,288.43
Water Supply
Systems 23,365,760.83 0.00 23,365,760.83
Markets 29,882,251.05 0.00 29,882,251.05
Total 112,274,463.71 0.00 112,274,463.71
5.7 As can be gleaned from the table above, depreciation expenses for
infrastructure assets including Road Networks and Water Supply Systems
were not set-up despite the adoption of IPSAS 17 as above-cited.
Moreover, other PPE accounts including Land Improvements and Markets
were not subjected to depreciation. The Markets account pertains to the
Guipos Public Market which was completed and accepted on May, 2020,
hence, the same should already be subjected to depreciation
5.8 Non-depreciation of PPE accounts as listed above does not only constitute
non-compliance with the accounting standards, particularly IPSAS 17, but
also affects the fair presentation of accounts in the financial statements.
Particularly, it resulted to the overstatement of the affected asset accounts
and the understatement of the corresponding expense accounts.
Recommendation:
5.9 We recommended that the Municipal Accountant:
a) Prepare a lapsing schedule for the computation of the depreciation

of PPE accounts, and record the same every calendar year; and
b) Effect the necessary adjustments for the recognition of the prior

years’ depreciation and the corresponding accumulated
depreciation of infrastructure assets, land improvement and market
accounts, taking into consideration the cost, year and month of
purchase/completion, and useful life.
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Unreconciled reciprocal accounts – Due from and Due to Other Funds
6. A discrepancy of P1.047 million between the consolidated balances of

reciprocal accounts, Due from Other Funds and Due to Other Funds, as of
December 31, 2020, affected the accuracy of the accounts in the financial
statements.
6.1 Section 111 of PD No. 1445 provides:
“1. The accounts of an agency shall be kept in such detail as is

necessary to meet the needs of the agency and at the same
time be adequate to furnish the information needed by fiscal or
control agencies of the government.
2. The highest standards of honesty, objectivity and consistency

shall be observed in the keeping of accounts to safeguard
against inaccurate or misleading information.”
6.2 Likewise, Paragraph 27 of IPSAS 1 provides that “Financial statements

shall present fairly the financial position, financial performance and cash
flows of an entity. Fair presentation requires the faithful representation of
the effects of transactions, other events and conditions in accordance with
the definitions and recognition criteria for assets, liabilities, revenue and
expenses set out in IPSASs. The application of IPSASs, with additional
disclosures when necessary, is presumed to result in financial statements
that achieve a fair presentation.”
6.3 Moreover, COA Circular No. 2015-009 dated December 01, 2015
prescribes the Revised Chart of Accounts for Local Government Units,
which includes, among others, the following account titles and
descriptions:
Account Title: Due from Other Funds

Account Number: 1-03-04-050
Normal Balance: Debit
Description: Debit this account to record in the agency
books the amount of advances to other
funds. Credit this account upon liquidation.
Account Title: Due to Other Funds

Normal Balance: Credit
Description: Credit this account to record the
authorized receipt of funds from one fund
to another fund maintained by the same
agency. Debit this account for transfer of
the funds to another fund. The Subsidiary
Ledgers shall be the different funds
maintained by the agency.
6.4 Our verification of the consolidated financial statements as of December

31, 2020, revealed that the reciprocal accounts, Due from Other Funds
and Due to Other Funds, have unreconciled balances of P13.066 million
and P14.113 million respectively, resulting to a discrepancy of P1.047
million, as shown below:
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Consolidated
Account GF SEF TF
Balance
Due from Other
Funds 10,572,946.31 0.00 2,493,060.58 13,066,006.89
Due to Other
Funds 3,121,364.91 4,494.12 10,987,473.19 14,113,332.22
Discrepancy 1,047,325.33
6.5 The discrepancy between the reciprocal accounts indicate that the
Municipal Accountant did not record the transactions properly in their
respective accounts. As reciprocal accounts, the balances of the Due from
Other Funds and Due to Other Funds must be equal at all times.
Therefore, the accuracy of the affected accounts could not be ascertained,
affecting the fair presentation of accounts in the financial statements.
6.6 This is a prior year’s observation but reiterated due to non-implementation

of the recommendation by the LGU.
Recommendation:
6.7 We recommended that the Municipal Accountant exert efforts to identify

the discrepancies between the reciprocal accounts, Due from Other Funds
and Due to Other Funds, reconcile the same, and effect the necessary
adjustments, as warranted, to reflect the correct account balances for fair
presentation of accounts in the financial statements.
6.8 The Management assured compliance with the audit recommendations

and will start tracing the balances of affected accounts in the prior years’
financial statements.
Unreliable Trust Liability – Disaster Risk Reduction Management Fund (DRRMF)

account balance
7. The accuracy of the Trust Liability – DRRMF account with a reported

balance of P4.450 million as of December 31, 2020 could not be
ascertained due to the (a) absence of subsidiary ledgers, (b) non-
disclosure of the amount and details of the unexpended balances of the
DRRMF in the Notes to Financial Statements (FS), and (c) cash deficit to
support said fund.
7.1 Section 5.1.16 of COA Circular No. 2012-002 dated September 12, 2012
provides that “the amount and details of the unexpended balance of
LDRRMF shall be discussed in the Notes to the Financial Statements. (A
sample of disclosure is in Annex D).”
7.2 Moreover, COA Circular No. 2015-009 dated December 01, 2015
prescribes the Revised Chart of Accounts for Local Government Units,
which includes, among others, the Trust Liability – DRRMF account, as
follows:
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Account Title: Trust Liabilities – Disaster Risk
Reduction and Management Fund
Description: This account is used to record the receipt
of amounts held in trust for disaster risk
reduction and management fund. Debit
this account for settlement or compliance
of the condition. Subsidiary ledgers shall
be maintained based on source. Unspent
DRRM funds of LGUs from current year
appropriations shall likewise maintain
subsidiary ledger by year.
7.3 Our review of the FS disclosed that the Trust Liabilities – DRRMF account
has a balance of P4.450 million as of December 31, 2020. Further
verification disclosed that the said amount is not supported with subsidiary
ledgers and that the accompanying Notes to FS did not contain disclosures
as to the amount and details of the unexpended balances of the DRRMF.
Only the amounts of available appropriations, utilization and year-end
balances for the Calendar Year 2020 were disclosed in the Notes to FS, in
which the year-end balances of both the 30% Quick Response Fund
(QRF) and the 70% Mitigation Fund (MF) revealed zero balances.
7.4 Comparison and analysis of the aforesaid account with its corresponding
Cash in Bank – Local Currency, Current Account (LCCA) disclosed
insufficiency of cash amounting to P2.521 million to support the DRRMF,
as shown below:
Balance as of
Account Title December 31,
2020
Trust Liability – DRRMF 4,449,542.79
Cash in Bank – LCCA (pertaining to DRRMF) 1,928,871.58
Cash Deficit 2,520,671.21
7.5 Inquiry with the accounting personnel revealed that the cash deficit as
presented above is the result of recording of prior years’ unspent DRRMF
without the actual receipt of cash to be held in trust for DRRMF.
7.6 Based on the foregoing circumstances, the accuracy of the Trust Liability –
DRRMF account could not be ascertained, affecting the fairness of
presentation of accounts in the financial statements.
Recommendation:
a) Prepare and maintain subsidiary ledgers to support the Trust

Liability – DRRMF account;
b) Provide disclosures in the Notes to FS pertaining to the amounts

and details of the unexpended balances of the DRRMF for the
current and prior years; and
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c) Examine the cash deficit and/or discrepancies between the
reported Trust Liability – DRRMF account and the corresponding
Cash in Bank – LCCA and effect the necessary adjustments, if
warranted.
Erroneous recognition of the receipt and utilization of Bayanihan Grant
8. Erroneous recognition of the receipt and utilization of the Bayanihan Grant

to Cities and Municipalities (BGCM) resulted to the understatement of the
corresponding expense and income accounts and overstatement of the
liability account.
8.1 Local Budget Circular (LBC) No. 125 dated April 7, 2020 prescribes the
guidelines and procedures on the release and utilization of the Bayanihan
Grant to Cities and Municipalities (BGCM). Pertinent provisions are hereby
quoted as follows:
“3.0 GUIDELINES
3.1 The BGCM shall be released to all cities and

municipalities to boost their capacity in immediately
responding to the COVID-19 emergency.
3.2 The grant shall be equivalent to the one-month FY 2020

Internal Revenue Allotment share of the cities and
municipalities. X x x
3.3 The corresponding Special Allotment Release Order and

Notices of Cash Allocation (NCA) shall be released by the
Department of Budget and Management (DBM) to the
Bureau of the Treasury (BTr) and Authorized Government
Servicing Banks (AGSBs), respectively, consistent with
the Department of Finance-DBM Joint Circular No. 20 16-
1 dated January 4, 2016.
3.4 Upon receipt of the Advice of NCA Issued, the BTr shall
release the corresponding Advices to Debit Account
(ADAs) to the AGSBs. In parallel, the BTr shall inform the
beneficiary cities and municipalities of their released
allocations through the issuance of Notices of ADA
Issued.
3.7 The utilization of the BGCM shall be subject to the usual

local budgeting process pursuant to the pertinent
provisions of the Local Government Code of 1991 (RA
No. 7160).
For easy monitoring/tracking of the utilization of the

allocation of each city and municipality, a special account
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in the general fund (SAGF) for the BGCM shall be
created through an ordinance by the local sanggunian
pursuant to Section 313 of PA No. 7160. The creation of
an SAGF for the BGCM may also be done by the local
sanggunian through inclusion in the pertinent
appropriation ordinance authorizing a supplemental
budget covering the BGCM.
It is understood that the provisional guidelines on the

preparation and approval of the annual/supplemental
investment programs prescribed under Department of the
Interior and Local Government-DBM Joint Memorandum
Circular No. 02 dated March 30, 20202 shall also apply to
the BGCM.”
8.2 Also, COA Circular No. 2015-009 dated December 01, 2015 prescribes the
Revised Chart of Accounts for Local Government Units, which includes,
among others, the following account titles and descriptions:
Account Title: Due to National Government Agencies

Description: This account is used to record the receipt
of funds for delivery of goods/services as
authorized by law, fund transfers from
NGAs for implementation of specific
programs or projects and other inter-
agency transactions. Debit this account for
delivery of goods /services, liquidation of
funds received and settlement of liabilities.
Account Title: Subsidy from National Government

Description: This account is used to record transfers
from the National government without
specific purpose or stipulation.
(Underscoring ours)
8.3 Our audit disclosed that the Office of the Municipal Accountant recognized
the receipt of the Bayanihan Grant as debit to Cash in Bank – Local
Currency, Current Account (LCCA) and credit to Due to National
Government Agencies (NGAs). Moreover, utilizations of said grant were
recorded as debit to Due to NGAs account and credit to Cash – LCCA
account.
8.4 However, the aforesaid LBC provides that a special account in the general
fund shall be created through a local ordinance authorizing a supplemental
budget for the BGCM; and that a supplemental investment program
covering the BGCM shall be prepared and approved in accordance with
existing rules and regulations. Therefore, the grant is a new revenue
source of the LGU which should have been recognized as income in the
books of accounts.
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8.5 Further, although the purpose of the grant is for the immediate response to
the COVID-19 emergency, the same could not be considered as a specific
purpose since there is no stipulation on the specific/identified programs or
projects to be implemented, hence, the receipt of said grant should not
have been recognized as liability particularly Due to NGAs account. The
appropriate account should be Subsidy from National Government account
since the programs/projects/activities (PPAs) to be implemented depends
only after the supplemental budget and investment program have been
prepared and approved by the local sanggunian, taking into consideration
the allowable PPAs enumerated in Item 3.5 of aforesaid LBC.
8.6 Inquiry with the concerned personnel from the Office of the Municipal
Accountant revealed that various adjustments were made at year-end to
record the purchases of various PPE items by debiting the corresponding
asset accounts and crediting the “Grants and Donations in Cash” account.
The account credited for the aforesaid adjustments, although an income
account, is still erroneous. The adjustments made should have been
credited to the Subsidy from National Government account.
8.7 Other expenditures which do not fit the criteria for recognition of assets
were left unadjusted as to their corresponding expenses.
8.8 Based on the foregoing circumstances, the receipt and utilization of the
BGCM were erroneously recognized in the books of accounts,
understating the expense and income accounts, and overstating the
liability account.
Recommendation:
a) Prepare the necessary adjusting entries affecting the recognition of

the receipt and utilization of the Bayanihan Grant; and
b) Restate the corresponding figures for CY 2020 in the preparation of

the CY 2021 financial statements to reflect prior year’s errors and
adjustments made.
Erroneous recognition of payment of salaries and wages
9. Payments of salaries and wages of regular employees where direct

payment is made to their respective accounts thru the issuance of
Automatic Debit Advice (ADA) by the LGU were erroneously recorded as
Advances for Payroll equivalent to the amount of net pay, while the
recording of the Salaries and Wages – Regular account and the relative
accounts pertaining to the mandatory obligations were made upon
liquidation, which affected the balances and presentation of accounts in
the books of accounts.
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9.1 COA Circular No. 2015-009 dated December 01, 2015 prescribes the
Revised Chart of Accounts for Local Government Units, which includes,
among others, the following account titles and descriptions:
Account Title: Advances for Payroll

Normal Balance: Debit
Description: This account is used to record the amount
granted to regular disbursing officer for
payment of salaries, wages, honoraria,
allowances and other personnel benefits.
Credit this account upon liquidation.
9.2 Our review of the financial transactions of the LGU revealed that the
salaries and wages of regular employees are paid thru the issuance of
Automatic Debit Advice (ADA) with the Land Bank of the Philippines (LBP).
With this mode of payment, the LBP directly credits the individual accounts
of regular employees’ equivalent to the amount of their respective net pay
based on the approved payroll.
9.3 However, we noted that the aforementioned payments of salaries and

wages thru ADA were erroneously recorded/debited to the Advances for
Payroll account equivalent to the total amount of net pay of the regular
employees, while the recording of the Salaries and Wages – Regular
account and the relative accounts pertaining to the mandatory obligations
were made only upon liquidation. Further verification disclosed that the
following supporting documents were attached to the payment thru ADA
and its subsequent liquidation:
Payment thru ADA Liquidation

1. Disbursement Voucher 1. Copy of Disbursement
2. Obligation Request Voucher
3. Approved Payroll 2. Copy of Obligation Request
3. Journal Entry Voucher
4. Approved payroll with
signatures of payees
5. Daily Time Records and
other pertinent documents
9.4 The payment thru ADA should not have been recorded as Advances for
Payroll since no amount of cash advance was granted to the concerned
Disbursing Officer for the payment/distribution of the net pay of regular
employees. Moreover, since payment is already made directly to the
accounts of the regular employees, the corresponding Disbursement
Vouchers should already contain complete supporting documents
including, but not limited to, approved payroll, daily time records, approved
leave of absences, and other pertinent documents. Finally, the proper
recognition of such payment is shown in the journal entry below:
Account Title Account Code Debit Credit

Salaries and Wages – Regular 5-01-01-010 xxx
PERA 5-01-02-010 xxx
Due to BIR 2-02-01-010 xxx
Due to GSIS 2-02-01-020 xxx
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Account Title Account Code Debit Credit
Due to Pag-IBIG 2-02-01-030 xxx
Other Payables (if any) 2-99-99-990 xxx
Cash in Bank-LCCA 1-01-02-010 xxx
9.5 The erroneous recording of salaries and wages of regular employees paid
thru ADA as discussed in the preceding paragraphs affected the balances
and presentation of accounts in the municipality’s books of accounts.
Recommendation:
9.6 We recommended that the Municipal Accountant carefully review and

record transactions pertaining to the payment of salaries and wages of
regular employees in accordance with the Revised Chart of Accounts for
Local Government Units.
9.7 Management assured compliance with the audit recommendation.
Non-disclosure in the Notes to Financial Statements
10. The disclosure requirements in the Notes to Financial Statements were not
fully adhered to, depriving users of the same of relevant and adequate
information.
10.1 COA Circular No. 2016-004 dated September 30, 2016 provides the
guidelines in the preparation of year-end financial statements (FS) and
reports consistent with the adoption of the IPSAS in the LGUs. It further
prescribed the format and presentation of various FS including the Notes
to FS as appended in Annex G of the same Circular.
10.2 Items 127 (b) and (c) of IPSAS 1 – Presentation of Financial Statements
state:
“The notes shall:
b) Disclose the information required by IPSASs that is not

presented on the face of the statement of financial
position, statement of financial performance, statement
of changes in net assets/equity or cash flow statement;
and
c) Provide additional information that is not presented on

the face of the statement of financial position, statement
of financial performance, statement of changes in net
assets/equity or cash flow statement, but that is relevant
to an understanding of any of them.”
10.3 Item 88 of IPSAS 17 – Property, Plant and Equipment (PPE) provides that
the FS shall disclose for each class of PPE the gross carrying amount and
the accumulated depreciation (aggregated with accumulated impairment
losses) at the beginning and end of the period; and a reconciliation of the
67
carrying amount at the beginning and end of the period showing the
additions, disposals, depreciation, impairment losses, revaluations, and
other changes. (Underscoring supplied)
10.4 Item 29 of IPSAS 2 – Cash Flow Statements provides that “Entities

reporting cash flows from operating activities using the direct method are
encouraged to provide a reconciliation of the surplus/deficit from ordinary
activities with the net cash flow from operating activities. This reconciliation
may be provided as part of the cash flow statement or in the notes to the
financial statements.”
10.5 Item 47 of IPSAS 24 – Presentation of Budget Information in FS provides

that the actual amounts presented on a comparable basis to the budget
shall be reconciled to the actual amounts in the financial statements,
identifying separately any basis, timing and entity differences.
10.6 Moreover, COA Circular No. 2015-008 dated November 23, 2015
prescribes the accounting guidelines for local road and road network
system. Item VI.2 provides that the total road network system shall be
disclosed in the Notes to Financial Statements, format of which is
presented in Annex B of said Circular.
10.7 Our review of the CY 2020 financial statements revealed that the following
disclosure requirements in the Notes to FS were not made and fully
adhered to:
Disclosure Requirements Remarks

Property, Plant and Equipment No carrying amounts presented for
each class of PPE.
Reconciliation of Net Cash Flows Not presented in the Notes to FS.

from Operating Activities to Surplus
(Deficit)
Reconciliation of Comparison of Not presented in the Notes to FS.

Budget and Actual Amounts and the
Statement of Financial Performance
Road Network System (Disclosures Not presented in the Notes to FS

per COA Circular No. 2015-008)
10.8 The Notes to FS contains explanatory and supplemental information that

accompany the FS; hence, incomplete disclosure requirements deprive
users of the same of relevant and adequate information.
Recommendation:
10.9 We recommended that the Municipal Accountant fully observe the

disclosure requirements in the preparation of the Notes to Financial
Statements to provide users a relevant understanding of the financial
statements.
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B. COMPLIANCE AUDIT
Non-preparation of Report of Accountability for Accountable Forms (RAAF)
11. The Collectors and the Municipal Treasurer did not prepare their RAAF and
the Consolidated RAAF (CRAAF), respectively, and submit the same to the
Office of the Auditor, to determine the movement and status of the
accountable forms in their possession as required under Sections 50 and
51 of COA Circular No. 2002-003.
11.1 Sections 50 and 51 COA Circular No. 2002-003 dated June 20, 2002
provide:
“Sec. 50. Report of Accountability for Accountable Forms

(RAAF). – The Report of Accountability for Accountable Forms
(Annex 42) shall be used to report the quantity of accountable
forms received, issued or cancelled by the accountable officer
as of the end of the month.
Treasurers/Collectors/tellers and other accountable officers

shall render this report of accountability for accountable forms
at the end of the month for consolidation by the local treasurer.
Such report shall also be prepared in case of transfer of office
or accountability by the accountable officer.
Sec. 51. Consolidated Report of Accountability for

Accountable Forms (CRAAF). – The Consolidated Report of
Accountability for Accountable Forms (Annex 43) shall be
prepared by the Treasurer to consolidate the RAAF of
accountable officers. The consolidated report accompanied by
the individual reports shall be submitted to the unit auditor
concerned for verification not later than the fifth day of the
ensuing month.”
11.2 Examination on the cash and accounts of the various collectors revealed
that they did not prepare their respective Report of Accountability for
Accountable Forms (RAAF) which they shall render at the end of each
month and submit to the Municipal Treasurer for consolidation. Likewise,
the Municipal Treasurer did not prepare his Consolidated RAAF (CRAAF)
accompanied with the individual RAAFs and submit the same to the Office
of the Auditor for verification not later than the fifth (5th) day of the ensuing
month.
11.3 The non-preparation of RAAF and CRAAF depicts a weakness of internal

controls over the handling of accountable forms since no proper monitoring
and accountability of the same can be made at any given time. Moreover,
accountability for accountable form cannot be easily established, thus,
there may be a risk that not all collections and accountable forms are
reported and accounted for.
69
Recommendation:
11.4 We recommended that:
a) The Collectors prepare their respective RAAFs at the end of each

month and submit the same to the Municipal Treasurer for
consolidation; and
b) The Municipal Treasurer prepare his CRAAF and submit the same
together with the individual RAAFs to the Office of the Auditor
within the prescribed period.
11.5 Management commented that a Memorandum addressed to all collectors

of the LGU was already issued informing the latter of their responsibility to
prepare and submit the monthly RAAF. Management further assured
compliance with the audit recommendations.
Remittance of collections were not made daily or frequently
12. The remittance of collections of the Collectors were not made daily
contrary to Section 29 of COA Circular No. 2002-003 dated June 20, 2002
resulting to the accumulation of collections in their possession and
exposing the same to the risk of loss and misuse.
12.1 Section 29 of COA Circular No. 2002-003 dated June 20, 2002, otherwise
known as the Manual on the New Government Accounting System (NGAS)
for Local Government Units, provides:
“Sec. 29. Reporting for Collections and Deposits. –

Collectors/tellers shall issue a receipt to acknowledge collections
made. The receipt may be in the form of pre-numbered Official
Receipts, or cash tickets and the like. At the close of each
business day, these collectors/tellers shall accomplish the Report
of Collections and Deposits (RCD) in four copies. The original
and two copies, together with the duplicates of the original
receipts issued, shall be submitted to the treasurer/cashier to
whom the cash collected shall be turned over. The fourth copy
of the RCD shall be retained by the collector/teller concerned. X
x x”
In the case of collectors assigned in the field, where travel time

from their places of assignment to the Treasurer’s Office is more
than one day, turnover of collections shall be made at least once
a week or as soon as the collections reach P5,000.00.”
12.2 During the conduct of examination of the cash and accounts of the various
collectors and in the verification of the Reports of Collections and Deposits
(RCDs), it was noted that they did not remit/deposit their collections daily
to the Municipal Treasurer as provided for in the above provision which
resulted to the accumulation of collections in their possession. We further
noted that collections were remitted by stub of accountable form. This
70
situation does not only violate the cited regulation but also exposes the
cash collections on hand to possible risks of loss or misuse.
Recommendation:
12.3 We recommended that Collectors remit their collections daily or frequently

as possible to avoid risks of loss and misuse.
12.4 Management assured compliance with the audit recommendation. In fact,

a Memorandum addressed to all Collectors was already issued mandating
the latter to adhere with the audit recommendation.
Unliquidated cash advances
13. Cash advances amounting to P3.547 million remained outstanding as of

December 31, 2020 due to the: (a) non-liquidation of cash advances within
the prescribed period; (b) grant of additional cash advances to concerned
officers and employees with outstanding cash advances; and (c) non-
implementation of strict monitoring for the liquidation and/or settlement of
long outstanding accounts, thereby, affecting the timing recognition of
expenses.
13.1 Pertinent provisions of COA Circular No. 97-002 dated February 10, 1997
state:
“4. Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.2 No additional cash advances shall be allowed to

any official or employee unless the previous cash
advance given to him is first settled or a proper
accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the

purpose for which it was given has been served.
5. Liquidation of Cash Advances
5.1 The AO shall liquidate his cash advance as follows:
5.1.1 Salaries, Wages, etc. - within five (5) days after

each fifteen (15) day/end of the month pay period.
5.1.2 Petty Operating Expenses and Field Operating

Expenses - within twenty (20) days after the end of the
year; subject to replenishment as frequently as necessary
during the year.
5.1.3 Official Travel - within sixty (60) days after return to

the Philippines in the case of foreign travel or within thirty
(30) days after return to his permanent official station in
71
the case of local travel, as provided for in EO 248 and
COA Circular No. 96-004.
5.8 All cash advances shall be fully liquidated at the end of

each year. (Underscoring ours)”
13.2 Similarly, Section 89 of PD No. 1445 mentions that:
“No cash advance shall be given unless for a legally authorized

specific purpose. A cash advance shall be reported on and
liquidated as soon as the purpose for which it was given has
been served. No additional cash advance shall be allowed to
any official or employee unless the previous cash advance
given to him is first settled or a proper accounting thereof is
made.”
13.3 Verification of the cash advances accounts disclosed that a total amount of
P3.547 million remained outstanding as of December 31, 2020, broken
down as follows:
Cash Liquidations Unliquidated

Unliquidated
Advances Pertaining Pertaining to Balance as
Account Balance as of
granted in CY to PY Cash CY 2020 Cash of
01/01/2020
2020 Advances Advances 12/31/2020
Advances to Special 1, 1,046, 1,827, 902,190 200,00
Disbursing Officer 882,595.00 690.00 095.00 .00 0.00
Advances to Officers 801, 641, 327,728 550,15
and Employees 717,561.07 441.40 116.60 .56 7.31
Advances for 25, 60,000 270,00
Operating Expenses 355,000.00 0.00 000.00 .00 0.00
Advances for Payroll 2,493,498.85 56,707,822.18 17,969.37 56,656,622.18 2,526,729.48
Total 5,448,654.92 58,555,953.58 2,511,180.97 57,946,540.74 3,546,886.79
13.4 Further verification disclosed that out of the total unliquidated cash
advances of P3.547 million, 1.44 percent or a total of P51,200.00 pertains
to cash advances granted during the CY 2020 which remained outstanding
for over 30 days to 1 year; 0.564 million or 15.91 percent for over 1 year to
5 years; while 82.65 percent or a total of P2.931 million pertains to cash
advances granted in prior years which remained outstanding for over 5
years. Aging schedule is as follows:
Aging of Cash Advances

Balance as
Over 30 Over 1
Account of Over 5
days to 1 Year to 5
12/31/2020 Years
Year Years
Advances to Special
Disbursing Officer 200,000.00 0.00 0.00 200,000.00
Advances to Officers
and Employees 550,157.31 0.00 294,221.59 255,935.72
Advances for Operating
Expenses 270,000.00 0.00 270,000.00 0.00
Advances for Payroll 2,526,729.48 51,200.00 0.00 2,475,529.48
Total 3,546,886.79 51,200.00 564,221.59 2,931,465.20
Percentage 100.00% 1.44% 15.91% 82.65%
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13.5 Conduct of our audit disclosed the following deficiencies:
 Over eighty percent (80%) of the cash advances are outstanding

for over five years where the grantees have already retired,
resigned on AWOL while some were already dead thus, the
possibility of collection/liquidation is remote. Furthermore, some of
these former employees’ whereabouts could no longer be traced;
 The LGU did not notify concerned officials and employees of their
responsibility to settle their obligations. In addition, the Municipal
Accountant did not prepare and send demand letters based on their
Schedule of AO with Unliquidated Cash Advance;
 Liquidation and/or settlement of various cash advances were not

made within the prescribed period;
 Cash advance by the previous Municipal Treasurer for Payroll Fund

granted on December 2008 amounting to P2.476 million which was
lost due to robbery was still recorded in the Advances for Payroll
account where the request for relief from accountability was denied;
and
 There were various cash advances granted to officers and

employees with outstanding cash advances. (See Appendix “C”)
13.6 Further, COA Circular No. 2012-001 dated June 14, 2012 provides that
one of the basic documentary requirements in granting cash advances
except for travel is the Certification from the Accountant that previous cash
advance have been liquidated and accounted for in the books. However,
such Certification was not attached to the subsequent grant of cash
advances for specific purpose.
13.7 The resort to cash advance system is a facilitative tool in the financial
operations of the government. As such, efficient and effective control over
the granting, utilization and liquidation of cash advance must be observed
to prevent accumulation of government funds in the possession of officers
and employees to utilize the same funds. Also, it would help if the officials
of the LGU implement the sanctions provided for against the concerned
officers and employees in case of misuse or loss of funds and facilitate the
liquidation of unsettled accounts within the prescribed period. The practice
of granting another cash advance without first liquidating the previous cash
advances violated the basic requirement, thus, defeated the effective
control of government funds.
13.8 The failure of a public officer to have duly forthcoming any public funds or
property with which he is chargeable, upon demand by any duly authorized
officer, shall be prima facie evidence that he has put such missing funds or
property to personal use pursuant to Article 217 of the revised Penal Code.
13.9 We always emphasized that it is the responsibility of the Head of the

Agency to ensure the proper granting, utilization and liquidation of all cash
advances in accordance with the rules and regulations pursuant to Item 8
of COA Circular No. 97-002.
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Recommendation:
13.10 We recommended the following:
a) Send demand letters to concerned accountable officers and

employees with outstanding cash advances for the immediate
liquidation and/or settlement of their accounts. In case of non-
liquidation and/or non-settlement, cause the withholding of salaries
or any money claims due them;
b) Refrain from granting additional cash advances to officers and

employees who still have outstanding cash advances. Cash
advances for the government programs/activities must be granted
only to eligible officers and employees;
c) Take appropriate actions on the unsettled accounts of accountable

officers who are no longer connected or not in active service with
the LGU and/or request for write-off of dormant accounts pursuant
to COA Circular No. 2016-005 dated December 19, 2016, if
warranted;
d) Regular monitoring and strict enforcement of controls in the

granting, utilization and liquidation of cash advances. Strictly
enforce the prescribed period for the liquidation of cash advances
as provided under COA Circular No. 97-002 to ensure the timely
recognition of expenses thereof;
e) Ensure that the basic documentary requirements prescribed under

COA Circular No. 2012-001 dated June 14, 2012 and other
pertinent issuances relative to the grant, utilization and liquidation
of cash advances are properly complied with; and
f) Advances for Payroll account amounting to P2.476 million

pertaining to the cash advance of the previous Municipal Treasurer,
who has already retired from the service, be reclassified to Other
Receivables account for fair presentation in the financial
statements since the asset was lost due to the robbery incident and
the corresponding request for relief of accountability was denied
and became final and executory.
Non-compliance with the reporting guidelines of the Bayanihan Grant
14. The LGU did not create and maintain a Special Account in the General
Fund and did not submit its Report on Fund Utilization and Status of
Program/Project/Activity Implementation on a monthly basis contrary to
Local Budget Circular No. 125 dated April 7, 2020 prescribing the
guidelines on the release and utilization of the Bayanihan Grant to Cities
and Municipalities (BGCM).
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14.1 Pertinent provisions of Local Budget Circular No. 125 dated April 7, 2020
prescribing the guidelines on the release and utilization of the Bayanihan
Grant to Cities and Municipalities (BGCM) state:
“3.0 GUIDELINES
3.7 The utilization of the BGCM shall be subject to the usual

local budgeting process pursuant to the pertinent provisions of
the Local Government Code of 1991 (RA No. 7160).
For easy monitoring/tracking of the utilization of the allocation of

each city and municipality, a special account in the general fund
(SAGF) for the BGCM shall be created through an ordinance by
the local sanggunian pursuant to Section 313 of RA No. 7160.
The creation of an SAGF for the BGCM may also be done by
the local sanggunian through inclusion in the pertinent
appropriation ordinance authorizing a supplemental budget
covering the BGCM.
It is understood that the provisional guidelines on the

preparation and approval of the annual/supplemental
investment programs prescribed under Department of the
Interior and Local Government-DBM Joint Memorandum
Circular No. 02 dated March 30, 20202 shall also apply to the
BGCM.
4.0 POSTING AND REPORTING REQUIREMENTS
The beneficiary cities and municipalities shall:
4.1 Comply with the posting requirements prescribed under PA

No. 9184 and its 2016 Revised IRR, and all relevant policies
issued by the GPPB;
4.2 Prepare a monthly report on fund utilization and status of

implementation of PPAs using the prescribed format (Annex C);
4.3 Post the accumulated reports on the LGU’s website and in

at least three (3) conspicuous public places in the locality at the
end of every month; and
4.4 The local chief executive (LCE) of the implementing

city/municipality shall send a written notice when said reports
have been posted on its website to the DBM, House of
Representatives, Senate of the Philippines, House Committee
on Appropriations, Senate Committee on Finance, and other
offices where the submission of reports is required under
existing laws, rules, and regulations.” (Underscoring ours for
emphasis)
14.2 Our verification of the LGU’s compliance with the above-mentioned

provisions disclosed that the Office of the Sangguniang Bayan has
enacted and approved Appropriation Ordinance No. 2020-02 authorizing a
supplemental budget covering the BGCM which includes a provision on
the creation of a special account in the general fund for the BGCM.
75
However, we noted that the Office of the Municipal Accountant did not
create and maintain a special account in the general fund for the receipt
and utilization of the same. The special account in the general fund should
have been adopted in order to provide adequate information as to the
assets, liabilities and equity of the special account.
14.3 Moreover, we noted that the LGU’s Local Finance Committee composed of
the Local Budget Officer, Local Treasurer and Local Planning and
Development Coordinator have not submitted the Report on Fund
Utilization and Status of Program/Project/Activity (PPA) Implementation to
the Office of the Auditor on a monthly basis. As to date, only the reports
covering the months of June to September, 2020 were prepared, and were
only submitted on January 21, 2021 upon verbal request for the same by
the Office of the Auditor. Per inquiry, no report has been prepared yet for
the months of October to December, 2020.
14.4 On the other hand, the Office of the Municipal Accountant has prepared
and submitted the Statement of Receipts and Disbursements (SORD)
pertaining to the receipt and utilization of the BGCM covering the period
April to December, 2020. Comparison of the Report on Fund Utilization
and Status of Program/Project/Activity Implementation and the SORD
disclosed discrepancies in the total amount of disbursements per month,
as shown below:
Per Report on Fund

Total Utilization and Status
Per SORD Discrepancy
Disbursements of PPA
Implementation
As of April, 2020 Cannot be
No Report Submitted 4,779,515.60
determined
As of May, 2020 Cannot be
determined
As of June, 2020 5,969,658.33 5,931,795.64 37,862.69
As of July, 2020 6,494,495.58 6,467,759.85 26,735.73
As of August, 2020 6,806,225.58 6,763,368.60 42,856.98
As of September,
7,662,756.18 7,601,432.41 61,323.77
2020
As of October, Cannot be
2020 determined
As of November, Cannot be
2020 determined
As of December, Cannot be
2020 determined
14.5 The resulting discrepancy as shown in the table above is due to the
difference in the recognition of disbursements. In the Report on Fund
Utilization and Status of PPA Implementation, the gross payments are
reported as total disbursements while in the SORD, only the payments (net
of tax) and the actual remittances to the BIR are reported as the total
disbursements. To simply put, the discrepancy is the amount of unremitted
taxes previously withheld from the payments to various suppliers.
14.6 Further verification of the Report on Fund Utilization and Status of PPA
Implementation as of September, 2020 disclosed that the amount
presented as obligations and disbursements amounting to P7.663 million
are lumped into one PPA only – Food Assistance and Other Relief Goods.
76
No amounts of obligations and disbursements were reported for other
PPAs indicated in the report, namely: food transportation including fuel and
accommodation expenses, training of health personnel, procurement of
medicines and vitamins, construction/repair of RHU building, and purchase
of tent for temporary shelter. Hence, the said report is not properly and
completely accomplished.
14.7 Non-creation of a special account in the general fund and delayed

submission of the Report on Fund Utilization and Status of PPA
Implementation in relation to the receipt and utilization of BGCM do not
only violate the above-mentioned pertinent provisions, but also adversely
affect the timely and proper reporting and monitoring of fund utilization and
implementation of PPAs, and the timely verification of the same.
Recommendation:
14.8 We recommended that Management:
a) Instruct the Municipal Accountant to create and maintain a special

account in the general fund for the receipt and utilization of the
BGCM with complete and separate subsidiary ledgers, trial balance
and financial statements; and
b) Instruct the Local Finance Committee, in coordination with the

Municipal Accountant, to prepare the Reports on Fund Utilization
and Status of PPA Implementation for the months of October to
December 2020, provide the breakdown of disbursements per
PPA, and submit the same to the Office of the Auditor.
14.9 Management admitted its lapses to create and maintain a special account
on the utilization of the Bayanihan Grant. Nevertheless, the Management
assured to identify and segregate transactions pertaining to the release
and utilization thereof, and committed to effect the necessary adjustments
in adherence to the audit recommendations.
Expenditures in excess of and/or without appropriations relative to Bayanihan Grant
15. The LGU incurred expenditures out of the Bayanihan Grant to Cities and
Municipalities (BGCM) in excess of and/or without the appropriated object
of expenditures amounting to P2.030 million, which is contrary to Section
305 of R.A. No. 7160, Section 4(1) of P.D. No. 1445 and Local Budget
Circular No. 125 dated April 7, 2020.
15.1 Section 305 (a) of RA No. 7160 provides that “No money shall be paid out
of the local treasury except in pursuance of an appropriations ordinance or
law”.
15.2 Similarly, Section 4(1) PD No. 1445 provides that “No money shall be paid
out of any public treasury of depository except in pursuance of an
appropriation law or other specific statutory authority”.
77
15.3 Local Budget Circular No. 125 dated April 7, 2020 prescribes the
guidelines and procedures on the release and utilization of the BGCM.
Items 3.7 and 5.0 thereof provide that:
“3.7 The utilization of the BGCM shall be subject to the usual

local budgeting process pursuant to the pertinent provisions of
the Local Government Code of 1991 (RA No. 7160).
5.0 The responsibility and accountability in the implementation

of programs, projects, and activities and proper utilization and
disbursement of the BGCM shall rest upon the LCE and other
local officials concerned. It is also the responsibility of said local
officials to ensure that the funds released to their respective
cities/municipalities are utilized strictly in accordance with
applicable budgeting, accounting, and auditing rules and
regulations, and pertinent provisions of RA No. 9184 and its
Revised IRR. (Underlining ours for emphasis)
15.4 In CY 2020, the LGU of Guipos, Zamboanga del Sur received a bayanihan
grant equivalent to one-month of their CY 2020 Internal Revenue Allotment
share or an amount of P7.664 million to boost their capacity in immediately
responding to the COVID-19 emergency. Thereafter, the local
sangguniang bayan enacted and approved Appropriation Ordinance No.
2020-02 authorizing a supplemental budget covering the BGCM. However,
our audit of the fund utilization of the BGCM disclosed that the LGU
incurred expenditures in excess of and/or without the appropriated object
of expenditures in the aforementioned Appropriation Ordinance amounting
to P2.030 million, as shown in the following table:
Budget Year Expenditures

Available
2020 in Excess of
Appropriations
Supplemental and/or
Actual (Based on the
Object of Expenditures Budget (Per Without the
Expenditures Appropriated
Appropriation Appropriated
Object of
Ordinance Object of
Expenditures)
No. 2020-02) Expenditures
1. Maintenance & Other Operating Expenditures (MOOE):
Food Assistance and 4,000,0 4,320,0 320,0
other Relief Goods 00.00 00.00 00.00 0.00
Food transportation
including fuel and
accommodation
expenses of medical
personnel directly
involved in the
implementation of
COVID-19 related PPAs 1,000,0 739,9 260,04
and expenses 00.00 53.60 0.00 6.40
Training of health
personnel in the conduct 63,6 30,0 33,64
of COVID-19 testing 44.00 00.00 0.00 4.00
Personal Protective
Equipment (Scrub Suits,
KN95, Goggles, Medical 209,2 209,2
gowns) 0.00 77.50 77.50 0.00
COVID-19 Rapid Test
Kits 0.00 377,680.00 377,680.00 0.00
78
Budget Year Expenditures
Available
2020 in Excess of
Appropriations
Supplemental and/or
Actual (Based on the
Object of Expenditures Budget (Per Without the
Expenditures Appropriated
Appropriation Appropriated
Object of
Ordinance Object of
Expenditures)
No. 2020-02) Expenditures
Thermometer 0.00 21,500.00 21,500.00 0.00
Various supplies for
COVID-19 Center 0.00 135,985.18 135,985.18 0.00
Food supplies and
ingredients for Kitchen
Community in Nutrition 220,9 220,9
Emergency 0.00 19.25 19.25 0.00
TOTAL MOOE 5,063,644.00 6,055,315.53 1,285,361.93 293,690.40
2. Capital Outlay (CO):
Procurement of 2,000,0 263,0 1,736,95
Medicines and Vitamins 00.00 45.00 0.00 5.00
Construction/Repair of
the existing building to
accommodate COVID-19
patients and Persons
under 300,0 647,3 347,3
Monitoring/Investigation 00.00 63.65 63.65 0.00
Purchase of Tent for
temporary shelter 300,000.00 300,000.00 0.00 0.00
Medical Equipment 0.00 139,130.00 139,130.00 0.00
Other Equipment (CCTV
Cam Package, TV,
Freezer, Washing
Machine, Misting
Machine, Alcohol
Dispensers, wall and 257,9 257,9
stand type) 0.00 02.00 02.00 0.00
TOTAL CO 2,600,000.00 1,607,440.65 744,395.65 1,736,955.00
GRAND TOTAL 7,663,644.00 7,662,756.18 2,029,757.58 2,030,645.40
15.5 Review of the objects of expenditures in the appropriation ordinance as

presented in the table disclosed that the local sanggunian erroneously
categorized the procurement of medicines and vitamins as part of the
capital outlay instead of maintenance and other operating expenditures.
15.6 Also, the LGU may not have carefully took into consideration the allowable
object of expenditures in the supplemental budget for BGCM during the
utilization/disbursement of the same, resulting to the incurrence of
expenditures in excess of and/or without the appropriated object of
expenditures amounting to P2.030 million. On the contrary, it may also be
possible that the LGU did not plan accordingly their intended
programs/projects/activities (PPAs) as incorporated in their supplemental
budget for BGCM, resulting to the available/excess appropriations (object
of expenditures) amounting to P2.031 million.
15.7 Should there be proper planning and coordination, the appropriated

amounts for the purchase of drugs and medicines, transportation and
training expenses could have been appropriated to other PPAs particularly
for those disbursements made in excess of and/or without the appropriated
amounts such as the procurement of medical supplies and equipment,
79
rapid test kits, food supplies and ingredients, other supplies and
equipment, and the construction/repair of building for COVID-19 Center.
15.8 Moreover, based on available records, we noted that there is no ordinance

and/or supplemental budget issued for the realignment/revision of the
above object of expenditures to support the expenditures made in excess
of and/or without the appropriated object of expenditures.
15.9 Proper controls were not implemented by the LGU officials concerned and
such action violated one of the fundamental principles governing the
financial transactions and operations of a government agency.
Recommendation:
15.10 We recommended that the concerned LGU officials cautiously take into
consideration the allowable objects of expenditures in their appropriation
ordinances and refrain from approving and incurring expenditures in
excess of and/or without the available appropriations. Otherwise, legal
sanctions will be imposed for its continued incurrence. To ensure sufficient
budget/appropriation for operational expenses and its
programs/projects/activities, proper planning and coordination among
concerned officials be observed in the preparation and approval of
appropriation ordinances.
15.11 Management commented that some expenditures may have been

erroneously charged and reported against the Bayanihan Grant which
should have been charged and reported against the Local Disaster Risk
Reduction Management Fund. Nevertheless, Management adhered to the
audit recommendations.
Auditor’s Rejoinder:
15.12 We remained, however, with our audit recommendation. Although there

could be a possibility that what Management has commented may be true,
the absence of reports and pertinent documents will not support such
claim.
Incomplete documentation for Fuel, Oil and Lubricants Expenses
16. Payments of fuel, oil and lubricants totaling P2.792 million were not
supported with duly approved Driver’s Trip Tickets, Monthly Report of
Official Travels and Monthly Report of Fuel Consumption contrary to COA
Circular No. 77-61 dated September 26, 1977, thereby, validity and
reasonableness of fuel consumption could not be ascertained.
16.1 COA Circular No. 77-61 dated September 26, 1977 was issued to
ascertain that all applicable laws, rules and regulations governing fuel
consumption and use of government vehicles are complied with. It also
aims to ascertain that wasteful, excessive and unnecessary expenditures
for fuel consumption are minimized. Lastly, it aims to ascertain that
expenditures for fuel consumption are effectively controlled and properly
accounted for.
80
16.2 The above circular provides that no disbursement voucher for fuel
consumption of government vehicles shall be allowed in audit unless duly
supported by properly accomplished and approved serially numbered
driver’s trip tickets. Thereafter, a summary of driver’s trip tickets shall be
made at the end of each month using the Monthly Report of Official
Travels.
16.3 Moreover, a monthly Report of Fuel Consumption shall be prepared and

submitted by the agency which shows among others, the different types of
vehicle utilized by the agency during the month, the total distance traveled,
total fuel used and normal fuel consumption for each vehicle.
16.4 Our audit of the submitted disbursement vouchers disclosed that payments
of fuel, oil and lubricants used for various government vehicles were not
supported with duly approved driver’s trip tickets. We further noted that the
agency has not prepared and submitted monthly report of official travels
and monthly report of fuel consumption to support said disbursements
amounting to P2.792 million. Breakdown as follows:
Check
Date Payee Particulars Amount
No.
10/01/202 2725125 Grandwa For various government 123,566.00
0 y Caltex service vehicle and PNP
Station vehicles
10/01/202 2725126 Grandwa For various heavy 217,082.0
0 y Caltex equipment for 0
Station repair/maintenance of
various barangay roads
0 y Caltex service vehicle 0
Station
24/02/202 2725303 Grandwa For use at the 50,117.0
0 y Caltex Sangguniang Bayan 0
Station Office
24/02/202 2413131 Grandwa For various heavy 135,894.0
0 y Caltex equipment for 0
Station repair/maintenance of
various barangay roads
0 y Caltex service vehicle and 0
Station ambulance
0 y Caltex service vehicle 0
Station
16/04/202 2725482 Grandwa For PNP Service Vehicles 82,559.2
0 y Caltex and Service Single Motor 0
Station of PNP Station
30/04/2020 2413141 RG Petrol Diesel fuel and lubricants 1,665,401.85
Gasoline used for various heavy
Station equipment of 547th
Engineer Battalion and
LGU Guipos for
Rehabilitation/Improveme
81
Check
Date Payee Particulars Amount
No.
nt of Barangay Road in
Brgys. Dalapan, Dagohoy,
Sikatuna and Datagan,
Guipos, ZDS
0 y Caltex service vehicles 0
Station
0 y Caltex service vehicles 0
Station
Total
P2,792,157.25
16.5 Inquiry with the OIC-Municipal Engineer revealed that there is no proper
control and monitoring in the releasing of gas slips to end-users of
government vehicles. The issuances of gas slips were not supported with
duly approved and serially numbered Driver’s Trip Tickets and no logbook
is being maintained to record such issuances.
16.6 The above-mentioned forms and reports are essential for effective
monitoring and proper control over the use of government vehicles to avoid
excessive and unnecessary expenditures for fuel consumption. Likewise, it
would establish the reasonableness of fuel consumption for a specified
period otherwise, the validity and reasonableness of paid fuel, oil and
lubricants expenses could not be ascertained.
16.7 This is a prior year’s observation but reiterated due to non-implementation

of the audit recommendations.
Recommendation:
a) Exercise effective control over the use of government vehicles and

the utilization of fuel, oil and lubricants through the preparation of
duly approved and serially numbered Driver’s Trip Tickets, Monthly
Report of Fuel Consumption and Monthly Report of Official Travels,
and regularly submit the same to the Office of the Auditor; and
b) Require the Municipal Accountant to carefully review and examine

that disbursement vouchers for fuel, oil and lubricants are
supported with complete and adequate supporting documents
before such claims are processed and released for payment.
Procurement of Petroleum Fuel, Oil and Lubricant (POL) Products
82
17. The Bids and Awards Committee (BAC) did not consider availing the
alternative mode of procurement of Direct Retail Purchase of Petroleum
Fuel, Oil and Lubricant (POL) Products under Section 53.14 of the 2016
Revised IRR of R.A. No. 9184, as amended, where the LGU could have
availed of the most reasonable and advantageous prices for the POL
products.
17.1 Section 53.14 of the 2016 Revised IRR of R.A. No. 9184, as amended thru
GPPB Resolution No. 24-2019 provides that:
“Section 53.14 Direct Retail Purchase of Petroleum Fuel, Oil

and Lubricant (POL) Products and Airline Tickets. Where
Goods and Services are required by a Procuring Entity for the
efficient discharge of its principal mandate, governmental
functions, or day-today operations, direct retail purchase of (i)
petroleum fuel, oil and lubricant (POL) products; and (ii) airline
tickets may be made by end-users delegated to procure the
same from identified direct suppliers or service providers.
17.2 Moreover, Annex “H” of the aforesaid IRR, as amended thru the same
GPPB Resolution provides, among others:
“Part IV. General Guidelines
J. Delegation of Authority. Xxx
For Negotiated Procurement under Section 53.14, the BAC and

the HOPE through a Resolution and issuance for the purpose,
respectively, shall delegate to specific officials, personnel,
committee or office in the Procuring Entity the conduct of Direct
Retail Purchase to efficiently and expeditiously deal with the
pressing need sought to be addressed. xxx
Part V. Specific Guidelines
D. Negotiated Procurement. Xxx
10. DIRECT RETAIL PURCHASE OF PETROLEUM FUEL,

OIL AND LUBRICANT (POL) PRODUCTS AND AIRLINE
TICKETS
a. Policy Considerations. All procurement of POL products

and airline tickets shall be done through competitive
bidding, except when the Procuring Entity has determined
that Direct Retail Purchase is the best modality for the
procurement of non-bulk POL products or where fees for
additional services or functionalities are charged on top of
the payment for the required POL products or airline
tickets.
In case of competitive bidding, other factors such as value-

added or related services may also be taken into account in
determining the procurement project’s ABC.
83
b. Definition. Where Goods and Services are required by a
Procuring Entity for the efficient discharge of its principal
mandate, governmental functions, or day to-day
operations, direct retail purchase of POL products and
airline tickets may be made by end-users delegated to
procure the same from identified direct suppliers or service
providers.
c. Conditions. The procurement of POL products and airline

tickets can be contracted by the end-user to identified
direct suppliers or service providers under the following
conditions:
i. For petroleum fuel (gasoline, diesel, and

kerosene), oil and lubricants:
a.) Direct retail purchase of POL products

estimated to be necessary for the operations
of the Procuring Entity within the fiscal year,
including provisions for foreseeable
emergencies based on historical records, shall
be reflected in the annual procurement plan
(APP) in its entirety including any amendment
thereto which shall be reflected in the
supplemental APP;
b.) Direct purchase must be made from any

available retailers, dealers or gas stations at
retail pump price;
c.) The requirement must be intended to be used

for any official government vehicles and
equipment for immediate consumption; and
d.) Payment may be made through cash advance,

reimbursement or other allowable payment
modalities subject to pertinent auditing and
accounting rules. xxx
d. Procedure.
i. The end-user delegated to directly purchase POL

products and airline tickets in accordance with
Part IV (J) of this Guidelines shall determine the
supplier or service provider capable of delivering
the required POL products and airline tickets at
retail pump price or at the most reasonable retail
price, as the case may be.
ii. Taking into account the usual trade and business

practices being observed in the industry and the
requirements and other reasonable considerations
identified by the end-user, direct retail purchase of
the required POL products or airline tickets shall
be carried out in accordance with pertinent
84
accounting principles and practices as well as of
sound management and fiscal administration
provided that they do not contravene existing laws
and regulations applicable to financial
transactions.”
17.3 Item 3.m of GPPB Resolution No. 011-2007, dated 31 May 2007 as
amended in GPPB Resolution No. 05-2018 defines retail pump price as
the price of petroleum fuel per liter, such as, gasoline, diesel oil and
kerosene, as established by retailers, dealers or gas stations for the day.
17.4 Our verification disclosed that the BAC through a resolution adopted
alternative mode of procurement in the procurement of POL products for
use of various government vehicles and heavy equipment. However, the
BAC resolutions only indicated that the alternative mode of procurement
used is “Negotiated Procurement” without specifying the type of negotiated
procurement as enumerated under Section 53 of the 2016 Revised IRR of
R.A. No. 9184 which may vary depending on the circumstances.
17.5 Moreover, review of the Purchase Orders disclosed that the unit price of
POL products is fixed for each Purchase Order regardless of its quantity.
We also noted that the date per sales invoice is closed to or the same with
the date of Purchase Order. Hence, there is doubt as to the process and
schedule of supply, delivery and utilization of fuel.
17.6 Inquiry with the OIC-Municipal Engineer revealed that a prior arrangement
with the concerned supplier/gasoline station has been entered into verbally
for the LGU’s supply and utilization of POL products. In fact, the LGU only
prepared the Purchase Orders and related documents upon notice from
the supplier for the payment of POL products which were supplied to the
former during a specific period, together with the fixed amount of unit price
as determined by the supplier for each type of POL product. Hence, the
procurement process adopted by the LGU for its purchase of POL
products contravenes the normal procurement process since the Purchase
Order is prepared only at a later date after the delivery and supply of POL
products.
17.7 Considering the day-to-day fluctuations in the prices of POL products, it is

possible that the fixed unit price indicated in the Purchase Order, which is
determined by the supplier, is over and above the actual average price of
the POL products already supplied to the LGU. The above practice may
also be subject to abuse and overpricing since the unit price is determined
by the supplier only after the delivery and supply of POL products. Further,
the unit price as fixed in the Purchase Order could not be compared to the
actual prices of POL products supplied to the LGU in the absence of
documents such as invoice and gas slips to show the quantity and unit
price of POL products for every withdrawal or supply of the same. As such,
the most reasonable and most advantageous price for POL products may
not have been availed of by the LGU.
17.8 In response to the foregoing circumstances, and due to the various

concerns and queries received by the GPPB relative to the procurement of
POL products, the GPPB issued Resolution No. 24-2019 as cited above to
provide Procuring Entities with a new and alternative mode of procurement
most suited for the procurement of POL products.
85
Recommendation:
17.9 We recommended that Management revisit its procurement procedures for

the purchase of non-bulk POL products, and consider availing the
alternative mode of procurement of Direct Retail Purchase of Petroleum
Fuel, Oil and Lubricant (POL) Products under Section 53.14 of the 2016
Revised IRR of R.A. No. 9184, as amended, to achieve the most
reasonable and advantageous prices.
Non-imposition of warranty security
18. Warranty securities were not imposed after the final acceptance of
infrastructure projects with contract costs amounting to P55.187 million,
which is contrary to Section 62 of the Revised IRR of R.A. No. 9184,
thereby leaving the Procuring Entity without financial guarantee in case of
structural defects that may manifest after acceptance.
18.1 Section 62.2 of the 2016 Revised IRR of R.A. No. 9184 provides the
different warranties to be imposed in the procurement of infrastructure
projects. Among these warranties include the warranty against structural
defects from the final acceptance of the project. Particularly, Section
62.2.3.3 provides that:
“To guarantee that the contractor shall perform his

responsibilities as prescribed in Section 62.2.3.1(a) of this IRR,
it shall be required to post a warranty security in accordance
with the following schedule:
Amount of Warranty
Security (Not less
Form of Warranty Security than the required
percentage of the
Total Contract Price)
a) Cash or Letter of Credit Five percent (5%)
issued by a Universal or
Commercial Bank: Provided,
however , That the Letter of
Credit shall be confirmed or
authenticated by a Universal or
Commercial Bank, if issued by a
foreign bank.
For biddings conducted by

LGUs, the Letter of Credit may
be issued by other banks
certified by the BSP as
authorized to issue such
financial instrument.
86
Amount of Warranty
Security (Not less
Form of Warranty Security than the required
percentage of the
Total Contract Price)
b) Bank guarantee confirmed by Ten percent (10%)
a Universal or Commercial
Bank.
For biddings conducted by

LGUs, the bank draft/guarantee
may be issued by other banks
certified by the BSP as
authorized to issue such
financial instrument.
c) Surety bond callable upon Thirty percent (30%)

demand issued by GSIS or a
surety or insurance company
duly certified by the Insurance
Commission as authorized to
issue such security.
18.2 Audit of disbursement vouchers covering the CY 2020 for completed and
accepted infrastructure projects with contract costs amounting to P55.187
million disclosed that these payments were not supported with warranty
securities in the form as prescribed above. Please see Appendix “D” for
details.
18.3 Government Procurement Policy Board (GPPB) Non-Policy Matter No.

108-2004 provides that “it can be deduced that the warranty obligation
under Section 62 of the IRR-A of R.A. 9184, which shall be secured by
specified forms of security stated therein is mandatory and exclusive.
Hence, though the contractor’s liability for warranty should be actually
included in the general and special conditions of the contract, the
requirement under the IRR-A of R.A. 9184 as to the terms of the warranty
obligation and the forms of security should be maintained.”
18.4 Based on the above guidelines, warranty securities shall be required from
the contractors of infrastructure projects after the acceptance by the
Procuring Entity of completed infrastructure projects. These warranty
securities shall guarantee that the contractor correct any structural defects
discovered after the acceptance.
18.5 Therefore, non-imposition of warranty securities from the contractors of

completed and accepted infrastructure projects leaves the Procuring Entity
without financial guarantee in case of structural defects that may manifest
after acceptance.
Recommendation:
18.6 We recommended that Management adhere to the provisions prescribed in

the 2016 Revised IRR of R.A. No. 9184 pertaining to the imposition of
warranty securities for completed and accepted infrastructure projects, in
87
order to protect not only the interest of the government but also those
project beneficiaries and other third parties involved in the execution of
government projects.

Management commented that they will coordinate with the contractors of
newly completed and accepted infrastructure projects for the submission of
their warranty securities, and that final payments for ongoing and to be
completed projects will be released only upon submission of the warranty
security.
Negotiated Procurement under Emergency Cases
19. Procurement of goods totaling P9.944 million undertaken through

Negotiated Procurement - Emergency Cases were not in accordance with
the procedures and guidelines prescribed under the 2016 Revised IRR of
RA No. 9184, as amended. The disbursements for said procurements also
lacked the necessary supporting documents contrary to Par. 6, Sec. 4 of
PD No. 1445 and COA Circular No. 2012-001, thereby affecting its legality,
validity and propriety.
19.1 Section 53.2 of the 2016 Revised IRR of RA 9184 provides:
“Section 53. Negotiated Procurement
Negotiated Procurement is a method of procurement of Goods,

Infrastructure Projects and Consulting services, whereby the
Procuring Entity directly negotiates a contract with a technically,
legally and financially capable supplier, contractor or consultant
in any of the following cases:
53.2 Emergency Cases. In case of imminent danger

to life or property during a state of calamity, or when time is
of the essence arising from natural or man-made calamities
or other causes where immediate action is necessary to
prevent damage to or loss of life or property, or to restore
vital public services, infrastructure facilities and other public
utilities. In the case of Infrastructure Projects, the Procuring
Entity has the option to undertake the project through
negotiated procurement or by administration or, in high
security risk areas, through the AFP.”
19.2 Pertinent provisions of Annex H – Consolidated Guidelines for the

Alternative Methods of Procurement of the 2016 Revised IRR, as
amended, state:
“IV. General Guidelines
L.2 Posting of Notice of Award, Contract and Notice to

Proceed. Unless the contract involves and affects national
security as determined by the HOPE in accordance with
Section IV(D) of this Guidelines, the BAC, through its
88
Secretariat, shall post the NOA, Contract/PO, including the NTP
if necessary, for information purposes, in the PhilGEPS
website, the website of the Procuring Entity concerned, if
available, and at any conspicuous place reserved for this
purpose in the premises of the Procuring Entity within ten (10)
days from their issuance, except for contracts with ABC of Fifty
Thousand Pesos (₱50,000.00) and below.” (Underscoring ours
for emphasis)
V. Specific Guidelines
D. Negotiated Procurement
2. Emergency Cases
b) Procedures (As amended under GPPB Resolution No.

03-2020)
iv. Upon confirmation and ascertainment of such

capability to address the emergency, the HoPE, upon
recommendation of the BAC or End-user unit or any other
appropriate bureau, committee, support or procuring unit,
authorized for the purpose shall immediately award the
contract to the Supplier, Contractor or Consultant.”
19.3 Appendix A prescribing the documentary requirements for alternative

methods of procurement, of the 2016 Revised IRR of RA 9184, as
amended, provides that in Negotiated Procurement through Emergency
Cases, the BAC shall indicate in the RFQ what stage of the procurement
process these requirements must be submitted, i.e., submission of offer/s,
evaluation of offer/s, or before issuance of Notice of Award, viz:
 Mayor’s/Business Permit
 PCAB License (For Infrastructure Projects)
 NFCC (For Infrastructure Projects with ABCs above P500,000.00)
 Income/Business Tax Return (For ABCs above P500,000.00)
 Omnibus Sworn Statement (For ABCs above P500,000.00)
19.4 GPPB Resolution No. 05-2020 allows the acceptance of an expired

Mayor’s Permit/Business Permit with Official Receipt for the renewal
application, and an unnotarized Omnibus Sworn Statement (OSS) as basis
for award under the Negotiated Procurement through Emergency Cases
modality subject to submission of Mayor’s/Business Permit and Notarized
OSS after award of contract.
19.5 Also, Paragraph 6, Section 4 of the Presidential Decree No. 1445,

otherwise known as the Government Auditing Code of the Philippines,
provides that “Claims against government funds shall be supported with
complete documentation”.
19.6 Our review and verification revealed that the LGU procured various goods
totaling P9.944 million in response to the COVID-19 pandemic which were
undertaken thru Negotiated Procurement – Emergency Cases per Section
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53.2 of the 2016 Revised IRR of RA No. 9184, as amended. See attached
Appendix “E” for details of disbursements.
19.7 Post-audit of the foregoing disbursement vouchers disclosed the following

deficiencies:
 No Mayor’s/Business Permit;
 No Income/Business Tax Return (For ABCs above P500,000.00);
 No Omnibus Sworn Statement (For ABCs above P500,000.00);
 No Notice of Award (NOA);
 No printout showing proof that the NOA, Contract/Purchase
Order, and Notice to Proceed were posted in the PhilGEPS
website (For ABCs above P50,000.00); and
 RFQs do not indicate the list of documentary requirements to be
required from suppliers nor indicate at what stage of the
procurement process the requirements be submitted.
19.8 Non-compliance of the Bids and Awards Committee (BAC) with the
prescribed guidelines and procedures set forth in the 2016 Revised IRR of
RA 9184, as amended, for the procurement of goods thru Negotiated
Procurement – Emergency Cases, and absence of complete supporting
documents to support the claims, affect the legality, validity and propriety
of said transactions.
Recommendation:
19.9 We recommended that the BAC comply with the guidelines and
procedures of Negotiated Procurement through Emergency Cases set
forth in the 2016 Revised IRR of RA No. 9184, as amended. Moreover, the
Municipal Accountant examine the completeness of supporting documents
of every claim before payment is made to ensure legality, validity and
propriety of the disbursements.
19.10 Management assured compliance with the audit recommendations. The

Management commented that they followed in good faith the GPPB
Resolution No. 03-2020 on Negotiated Procurement in Emergency Cases
during the State of Public Health Emergency. Moreover, the Management
committed to adhere with the prescribed guidelines and procedures of
existing procurement law, rules and regulations, and re-examine the
completeness of the documents.
Erroneous application of Variation Order
20. Change in the project site/location relative to the Construction of Perimeter

Fence with contract cost of P0.750 million was made thru a Variation Order
contrary to the 2016 Revised IRR of R.A. No. 9184.
20.1 Annex “E” – Contract Implementation Guidelines for the Procurement of

Infrastructure Projects, of the 2016 Revised IRR of R.A. No. 9184
provides, among others:
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“1.1 Variation Orders may be issued by the procuring entity to
cover any increase/decrease in quantities, including the
introduction of new work items that are not included in the
original contract or reclassification of work items that are either
due to change of plans, design or alignment to suit actual field
conditions resulting in disparity between the preconstruction
plans used for purposes of bidding and the "as staked plans" or
construction drawings prepared after a joint survey by the
contractor and the Government after award of the contract,
provided that the cumulative amount of the positive or additive
Variation Order does not exceed ten percent (10%) of the
original contract price. The addition/deletion of works under
Variation Orders should be within the general scope of the
project as bid and awarded. The scope of works shall not be
reduced so as to accommodate a positive Variation Order. A
Variation Order may either be in the form of either a change
order or extra work order.”
1.2 A Change Order may be issued by the implementing

official to cover any increase/decrease in quantities of original
work items in the contract.
20.2 Moreover, Non-Policy Matter No. 090-2013 dated November 11, 2013
issued by the Government Procurement Policy Board (GPPB) provides
that a change in the project site after the issuance of Notice of Award
(NOA) amounts to the modification of bidding documents and is not
allowed under the R.A. 9184 and its IRR. It further provides that:
“In changing the project site after the issuance of the NOA runs
counter with the following procurement rules and regulations:
(a) in the Invitation to Bid, the name and location of the contract
to be bid, the project background and other relevant information
regarding the proposed contract works, including a brief
description of the type, size, major items, and other important or
relevant features of the works; and (b) in the PBDs for
Infrastructure Projects (Section VII, Drawings), the actual
Drawings, including site plans, should be attached to said
section or annexed in a separate folder.
Modification of government contracts, after the same had been

awarded after a public bidding, is not allowed because such
modification serves to nullify the effect of public bidding and
whatever advantages the Government had secured thereby and
may also result in manifest injustice to other bidders.”
20.3 Section 322 of Republic Act (R.A.) No. 7160 provides that:
“Unexpended balances of appropriations authorized in the

annual appropriations ordinance shall revert to the
unappropriated surplus of the general fund at the end of the
fiscal year and shall not thereafter be available for the
expenditure except by subsequent enactment. However,
appropriations for capital outlays shall continue and remain
valid until fully spent, reverted or the project is completed.
Reversions of continuing appropriations shall not be allowed
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unless obligations therefor have been fully paid or otherwise
settled.
The balances of continuing appropriations shall be reviewed as

part of the annual budget preparation and the sanggunian
concerned may approve, upon recommendation of the local
chief executive, the reversion of funds no longer needed in
connection with the activities funded by said continuing
appropriations subject to the provisions of this section.”
(underscoring supplied)
20.4 Review of the available appropriations for CY 2020 revealed that the LGU
has continuing appropriations, among others, amounting to P0.750 million
for the construction of perimeter fence in the municipal grounds of the
LGU. This particular continuing appropriation is sourced out from the 20%
Development Fund of the CY 2019 Annual Budget without specifying the
exact project site/location in the Annual Investment Program.
20.5 Nonetheless, in CY 2020, the LGU has entered into contract with a
particular contractor for the implementation of various infrastructure
projects including this project with a cost of P0.750 million. Bid documents
disclosed that the project site is located in the Government Equipment
Garage, Poblacion, Guipos, Zamboanga del Sur.
20.6 Our audit disclosed that before the implementation of the above project,
there was a change in the project site/location as supported by
Variation/Change Order No. 01 dated May 20, 2020 without
increase/decrease in the contract amount. Details of the variation order
are as follows:
DETAILS OF VARIATION ORDER NO. 01

DESCRIPTIONS OF WORK:
1. Replacement of Portland concrete cement to CHB piling;
2. Deletion of perimeter fence in the Government Equipment Garage;
3. Addition of CHB perimeter fence in Fire Station; and
4. Addition of Beams of perimeter fence.
CORRESPONDING REASONS OF WORK:

1. Fencing of Government Equipment Garage is less priority than the
Fire Station fence; and
2. It is necessary to cover all the fences of the Fire Station to avoid
trespassers. (Underscoring ours)
20.7 Records show that no local resolution was enacted and approved for the
change in project site/location of the above project including the
realignment/augmentation/ provision of supplemental budget for the same.
20.8 Ocular inspection disclosed that the change in project location is deemed
questionable since the Fire Station is not yet constructed to date. As such,
the desired socio-economic development and benefits from the project,
which was funded from the 20% Development Fund of CY 2019, were not
attained to date.
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20.9 Inquiry with Management revealed that a Deed of Donation was entered
into by and between the Local Chief Executive (LCE) and the Bureau of
Fire Protection (BFP) for the donation of lot, which is duly owned by the
LCE, in favor of the BFP, for the purpose of the construction of Fire
Station. Accordingly, the construction of the Fire Station is to be
implemented in CY 2021.
20.10 Based on the foregoing circumstances, the Variation/Change Order

issued by the LGU was not in accordance with the above-cited provisions
since the change in project site/location does not fit into the definition and
purpose of variation/change order, which resulted to the modification of
bids.
Recommendation:
20.11 We recommended that Management refrain from issuing variation orders

for work/s, such as the change in project site/location, inconsistent with the
definition and purpose of a variation order under Annex “E” of the 2016
Revised IRR of RA No. 9184.
20.12 The management committed to adhere with the audit recommendation.

The LCE further certified that the subject project site/area where the
perimeter fence was constructed is a personal property duly donated in
favor of the government for the construction of the Municipal Fire Station
as part of public order and safety program of the government for the
general welfare of the community.
No Annual Procurement Plan (APP)
21. The LGU did not prepare its Annual Procurement Plan (APP) to cover all
procurements considered crucial to the efficient discharge of government
functions as required under Section 7 of the Revised IRR of R.A. No. 9184.
Only the Annual Procurement Plan for Common Use Supplies and
Equipment (APP-CSE) was prepared pursuant to Administrative Order No.
17 s. 2011 and DBM Circular Letter No. 2013-14.
21.1 Pertinent provisions of Section 7 of the Revised IRR of R.A. No. 9184 on
the Procurement Planning and Budgeting Linkage, are hereby quoted as
follows:
“7.1 All procurement shall be within the approved budget of

the Procuring Entity and should be meticulously and judiciously
planned by the Procuring Entity. Consistent with government
fiscal discipline measures, only those considered crucial to the
efficient discharge of governmental functions shall be included
in the Annual Procurement Plan (APP). For purposes of this
IRR, a procurement project shall be considered crucial to the
efficient discharge of governmental functions if it is required for
the day-to-day operations or is in pursuit of the principal
mandate of the Procuring Entity concerned. The APP shall
include provisions for foreseeable emergencies based on
historical records. In the case of Infrastructure Projects, the
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APP shall consider the appropriate timing/phasing of related
project activities, such as, engineering design and acquisition of
right-of-way site or location, to reduce/lower project costs.
7.2 No procurement shall be undertaken unless it is in

accordance with the approved APP, including approved
changes thereto. The APP must be consistent with the duly
approved yearly budget of the Procuring Entity and shall bear
the approval of the HoPE or second-ranking official designated
by the HoPE to act on his behalf.”
21.2 Sections 7.3 to 7.7 of the same IRR provide for the prescribed procedures
and guidelines in the formulation and revision of the APP.
21.3 On the other hand, Administrative Order No. 17, s. 2011 directs the use of
the Procurement Service and the Philippine Government Electronic
Procurement System in procurement activities in accordance with R.A. No.
9184, and improving the operation of the Procurement Service. Further,
DBM Circular Letter No. 2013-14 dated November 29, 2013 reiterates the
submission of the Annual Procurement Plan for Common Use Supplies
and Equipment (APP-CSE).
21.4 GPPB Circular No. 07-2015 dated July 16, 2015 was issued to reiterate
the requirement of preparing the APP in the format approved by the GPPB.
Items 1.3 and 4.1 provide that:
“1.3 This is also being issued to clarify that the APP-Common-

Use Supplies and Equipment (APP-CSE), which is to be
submitted to the Department of Budget and Management –
Procurement Service (DBM-PS) on or before 15 November of
every year pursuant to Administrative Order (AO) No. 17 Series
of 2011, and DBM Circular Letter No. 2013-14, for the purpose
of determining the quarterly cash requirements for common
supplies, materials, and equipment of the agency and for the
over-all management of the central procurement of common-
use supplies and equipment by the DBM-PS, is different from
the APP prescribed by Republic Act (R.A.) No. 9184 and its
associated issuances.” (Underscoring ours)
4.1 Per GPPB Resolution No. 20-2015, the GPPB approved

the revised format of the APP (attached as Annex “A”), to be
used by all procuring entities where all of their procurement
activities for the year, including the requirements in its APP-
CSE, are reflected. (Emphasis supplied)
21.5 Our review of the LGU’s records disclosed that the LGU did not prepare its
APP to cover all the procurements for CY 2020 as required in the aforesaid
guidelines. The LGU only prepared and submitted its APP-CSE for the
procurement of its common use supplies and equipment for CY 2020.
21.6 Inquiry with LGU personnel revealed that they were not aware of the
format and submission of the APP. They mistakenly thought that the APP-
CSE which they have prepared and submitted would suffice the above
requirements of law.
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21.7 However, in accordance with the aforesaid provisions, the APP should
have been prepared, revised and updated as needed to include all
procurements considered crucial to the efficient discharge of government
functions. This includes not only those requirements in the APP-CSE but
all procurements of the LGU such as, but not limited to the, procurement of
goods, services and infrastructure projects undertaken thru competitive
bidding and/or other alternative modes of procurement.
21.8 In the absence of the approved APP, procurements undertaken by the

LGU, other than those items included in their APP-CSE, are without basis.
Recommendation:
21.9 We recommended that Management prepare its APP to cover all

procurements including those items in the APP-CSE; revise and update
the APP as needed, and submit the same to the Government Procurement
Policy Board and the Office of the Auditor within the prescribed deadlines.
Henceforth, no procurement shall be undertaken without an approved
APP.
Information and publicity of Government PPAs
22. Non-compliance of the LGU with the pertinent provisions of COA Circular
No. 2013-004 dated January 30, 2013 on the information and publicity of
programs/projects/activities, adversely affected the timely preparation of
Quarterly Report of Publicized Government Projects/Programs/Activities
and the timely validation of the accomplished PPAs.
22.1 Pertinent provisions of COA Circular No. 2013-004 state:
“2.0 General Guidelines
2.1 At the beginning of the year, all government agencies shall

provide their respective assigned Supervising Auditors (SAs)
and Audit Team Leaders (ATLs) with a list of all on-going
government projects/programs/activities (“PPA”) and those that
are to be implemented during the year. The list shall include the
project name; implementing unit, office or division if it is not the
agency as a whole, brief description of the PPA; contractor or
supplier, if any, mode of procurement; funding source; cost or
approved budget; project duration including start and
completion dates; and location. Other information on the PPA
may be requested by the SA or ATL anytime for audit purposes.
3.0 Reporting and Monitoring
3.1 The Head of Agency shall inform its SA and ATL within ten
(10) days after the award of the infrastructure project or before
the start of the program/activity that the appropriate project
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signboards and/or public notices are already posted, and the
SA and ATL shall validate the same.
3.2 Based on the data sourced from the monthly monitoring

report prepared by the agency and verified by the Technical
Audit Specialist of this Commission, the Project Status (in
Annex “A”) should be maintained as current as possible and
updated, using the following schedule:” (Underscoring ours for
emphasis)
Frequency Interval of Verification

Contract
of (% of Work
Duration
Verification Accomplished)
90 days or less 2 times 50% and 100%
91-180 days 3 times 30%, 50% and 100%
181-240 days 4 times 25%, 50%, 75% and 100%
241-360 days 5 times 20%, 40%, 60%, 80% and
100%
361-720 days 7 times 15%, 30%, 45%, 60%, 75%,
90% and 100%
More than 720 10 times Every 10%
days
22.2 Perusal and verification of available records revealed that the LGU has not
furnished the Office of the Auditor at the beginning of Calendar Year 2020
a list of all its on-going government PPAs and those that are to be
implemented during the year. We also noted that Management did not
inform this Office within ten (10) days after the award of the infrastructure
project or before the start of the program/activity that the appropriate
project signboards and/or public notices are already posted. Finally,
Management did not promptly prepare and submit its monthly Monitoring
Report as to Project Status of its PPAs.
22.3 As to date, Management has already submitted its Report of Government

Projects/Programs/Activities as of December 31, 2020. However,
verification of said report disclosed that it is incomplete since it contains
only those PPAs undertaken thru competitive bidding and those
undertaken thru Shopping in which Invitation to Bid were posted in
PhilGEPS website. The same report does not contain PPAs undertaken
thru other alternative modes of procurement such as, but not limited to, the
procurement and distribution of relief goods/food assistance during
COVID-19 pandemic, construction materials for the renovation and
improvements of the RHU building, and procurement of drugs and
medicines.
22.4 Non-compliance with the pertinent provisions as provided under COA

Circular No. 2013-004 adversely affected the timely preparation of
Quarterly Report of Publicized Government Projects/Programs/Activities
and the timely validation of the accomplished PPAs. Moreover, non-
compliance of the same may adversely affect the promotion of good
governance through transparency and accountability.
Recommendation:
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a) Furnish the Office of the Auditor at the beginning of every calendar
year a list of all its on-going PPAs and those that are to be
implemented during the year;
b) Inform the Office of the Auditor within ten (10) days after the award
of the infrastructure project or before the start of the
program/activity that the appropriate project signboards and/or
public notices are already posted; and
c) Prepare and maintain a complete monthly Report of Publicized

Government Projects/Programs/Activities containing not only those
PPAs procured thru competitive bidding but also those that are
procured thru other alternative modes of procurement.
22.6 Management commented that they have already observed the posting of
sign boards and/or public notices but admitted that they were not able to
notify the Office of the Auditor of such postings. Nevertheless,
Management assured compliance with the audit recommendations.
Delayed/non-submission of periodic reports and transaction documents
23. Periodic reports and transaction documents relative to the receipts and
disbursements of government funds for CY 2020 were not submitted to the
Office of the Auditor within the reglementary period as required under
Sections 7.2.1.a and 7.1.1 of the Rules and Regulations on Settlement of
Accounts (RRSA) prescribed under COA Circular No. 2009-006.
23.1 Section 7.2.1.a of the Rules and Regulations on Settlement of Accounts

(RRSA) prescribed under COA Circular No. 2009-006 dated September
15, 2009 provides that “the Chief Accountant, Bookkeeper or other
authorized official performing accounting and/or bookkeeping functions of
the audited agency shall ensure that the reports and supporting documents
submitted by the accountable officers are immediately recorded in the
books of accounts and submitted to the Auditor within the first ten (10)
days of the ensuing month. Xxx” (underscoring ours)
23.2 In addition to the above quoted provision, Item 7.1.1 of the RRSA states
that “the Head of the agency, who is primarily responsible for all
government funds and property pertaining to his agency, shall ensure that:
(a) the required financial and other reports and statements are submitted
by the concerned agency officials in such form and within the period
prescribed by the Commission. xxx”
23.3 Records show that periodic reports and transaction documents relative to
the receipts and disbursements of government funds for CY 2020,
including, but not limited to, disbursement vouchers, liquidation reports and
its supporting documents, reports of checks issued, official receipts,
validated deposit slips and reports of collections and deposits, were not
submitted to the Office of the Auditor within the reglementary period as
prescribed in the aforesaid provisions, see Appendix “F”.
97
23.4 Delayed submission of the aforesaid periodic reports and transaction
documents precluded the timely audit of accounts and financial
transactions, early detection and correction of errors/deficiencies and
timely reporting of audit results to management, if any.
Recommendation:
23.5 We recommended that the Municipal Accountant and Municipal Treasurer

determine and resolve the causes of delay in the submission of periodic
reports and transaction documents relative to the receipts and
disbursements of government funds, and strictly observe the timely
submission of the same within the first ten (10) days of the ensuing month.
23.6 The Municipal Accountant commented that the delays incurred in the
submission of periodic reports and transaction documents for CY 2020
was because they were undermanned. Nevertheless, Management has
already provided additional manpower within the Office of the Municipal
Accountant and assured compliance with the audit recommendation.
Local Disaster Risk Reduction Management Fund (LDRRMF)
24. The LGU disbursed a total amount of P4.156 million for COVID-19 related
expenditures from the Special Trust Fund – Local Disaster Risk Reduction
Management Fund (STF-LDRRMF) despite the non-inclusion of such
programs/projects/activities (PPAs) in the LDRRMF Investment Plan
(LDRRMFIP).
24.1 Item 5.1.2 of COA Circular No 2012-002 dated September 12, 2012
provides:
“5.1.2 A LDRRMFIP for the DRRM program shall be prepared

annually. It shall present the 30% allocation for QRF in lump-
sum and the allocation for disaster mitigation, prevention and
preparedness with details as to projects and activities to be
funded. The LDRRMFIP shall also include under a separate
caption, the list of projects and activities charged to the
unexpended LDRRMF of previous years. Xxx”
24.2 National Disaster Risk Reduction and Management Council (NDRRMC),

Department of Budget and Management (DBM) and Department of the
Interior and Local Government (DILG) Joint Memorandum Circular (JMC)
No. 2013-1 dated March 25, 2013 provides:
“6.0 Policies and Procedures on the Utilization of the LDRRMF
Xxx
6.2 The projects and activities to be charged against the

LDDRMF shall be incorporated in the Local Disaster Risk
Reduction and Management Plan (LDRRMP), and integrated in
the approved Annual Investment Program (AIP) of the LGU.
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6.3 The release and use of the 30% QRF shall be supported by
a resolution of the local sanggunian declaring the LGU under
the state of calamity or a Presidential declaration of the state of
calamity upon recommendation of the NDRRMC.
6.4 The unexpended LDRRMF shall accrue to a special trust

fund solely for the purpose of supporting disaster risk reduction
and management activities of the Local Disaster Risk Reduction
and Management Council (LDRRMC) within the next five (5)
years.
6.5 The unexpended balance of the LDRRMF may be released

and utilized for new expenditure items upon submission of a
revised AIP as approved by the local sanggunian and Local
Chief Executive (LCE) upon recommendation of the LDRRMC
in accordance with the approved LDRRMP.” (Underscoring ours
for emphasis)
24.3 In addition, Local Budget Circular No. 124 dated March 26, 2020 provides
the policy guidelines on the provision of funds by local government units
for programs, projects, and activities to address the Corona Virus disease
2019 (COVID-19) situation. Items 2.5.5 and 2.5.6 of the mentioned Circular
provide:
“2.5.5 In view of the foregoing legal bases, LGUs are authorized

to utilize the LDRRMF, beyond the 30% QRF, to address the
disaster response requirements of the COVID-19 emergency,
among the other purposes sanctioned by the law (i.e., disaster
prevention and mitigation, preparedness, and rehabilitation and
recovery), provided that the same is consistent with the
approved LDRRMP as incorporated in the AIP.
2.5.6 Further, the unexpended balances of the LDRRMF that

accrued to the special trust fund pursuant to Section 21 of RA
No. 10121 may be used to address the disaster response
requirements of the COVID-19 emergency, among the other
purposes sanctioned by the law (i.e., disaster prevention and
mitigation, preparedness, and rehabilitation and recovery),
provided that the same is consistent with the approved
LDRRMP as incorporated in the AIP, and following the
procedures under COA Circular No. 2012-002 and NDRRMC-
DBM-DILG JMC No. 2013-1.”
24.4 Recently, the DILG and DBM issued JMC No. 2020-02 dated March 30,
2020 which prescribed the additional guidelines in the preparation and
approval of Annual Investment Programs of LGUs in view of the COVID-19
pandemic. Pertinent provisions of aforesaid JMC state that:
“2.1 All COVID 19-related PPAs and expenses to be funded by

the LGUs should be part of their respective approved AIPs. In
case the COVID-19-related PPAs and expenses are not among
those included in the approved AIP, the LDC shall prepare a
supplemental investment program for the purpose, to be
approved by the local sanggunian.
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24.5 Our audit disclosed that for CY 2020, the LGU disbursed a total amount of
P4.156 million charged to the unexpended LDRRMF of previous years in
the Special Trust Fund for the COVID-19 related expenditures, as shown
below:
Check
DV No./Date Payee Particulars Amount
No./Date
300-2003-23 02728602 National Food Payment of 300
3/24/2020 3/24/2020 Authority bags (50 kilos)
WD2 Rice 345,000.00
300-2003-24 02728606 National Food Payment of 500
3/25/2020 3/27/2020 Authority bags (50 kilos)
WD2 Rice 575,000.00
300-2004-29 02728608 Rabe General Payment of 1,000
4/1/2020 4/1/2020 Merchandise bags (50 kilos)
Rice 950,000.00
300-2004-30 02728612 Rabe General Payment of 700
4/27/2020 4/27/2020 Merchandise bags (50 kilos)
Rice 770,000.00
300-2004-31 02728613 Mindanao Golden Payment of 700
4/27/2020 4/27/2020 Grains bags (50 kilos)
Corporation Rice 770,000.00
300-2003-22 02728601 Alicia R. Buyser Cash advance for
3/20/2020 3/20/2020 the preparedness
and response of
COVID-19 465,800.00
300-2004-28 02728607 Alicia R. Buyser Cash advance for
4/14/2020 4/13/2020 the preparedness
and response of
COVID-19 279,890.00
TOTAL P4,155,690.00
24.6 Further verification revealed that the above PPAs were not included in the
LDRRMFIP for CY 2020 nor a revised or updated LDRRMFIP was
prepared for the inclusion of the same. Records show that the CY 2020
LDRRMFIP includes only the PPAs for the current year 70% Mitigation
Fund and the lump-sum amount for the 30% Quick Response Fund. It did
not include PPAs charged to the unexpended LDRRMF of previous years
in the STF.
24.7 Pursuant to NDRRMC-DBM-DILG JMC 2013-1, the unutilized balances of

the LDRRMF may be released and utilized for authorized new expenditure
items upon preparation and approval of the revised AIP. It is then
imperative that the LDRRMFIP shall be reviewed and updated to include
PPAs to be funded from the unexpended LDRRMF of previous years.
Recommendation:
a) Direct the LDRRM Officer to prepare the updated/revised

LDRRMFIP and submit the same to the LDRRM Council for
approval, which is in turn submitted by the latter to the Local
Development Council (LDC) for deliberation and inclusion in the
AIP, subject for approval by the Local Sanggunian and the Local
Chief Executive; and
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b) Direct the LDRRM Officer to include in the preparation of the
LDRRMFIP the PPAs to be charged to the unexpended LDRRMF
of previous years in the Special Trust Fund.
24.9 Management commented that a resolution was enacted and approved for
the preparation of a revised and updated LDRRMFIP to include PPAs for
COVID-19 response. However, the same did not come into fruition due to
busy schedule of concerned officials. Nevertheless, Management admitted
their lapses and assured compliance with the audit recommendations.
24.10 We remained, however, with our audit recommendations due to non-

submission of documents by Management to support their comments.
Special Education Fund
25. Pertinent provisions of the DepEd-DBM-DILG Joint Circular (JC) No. 1, s.

2017 were not strictly followed by the Local School Board (LSB) thereby
affecting the more strategic and efficient utilization of Special Education
Fund (SEF) totaling P1.9 million and deviates from the principle of
transparency and accountability.
25.1 Pertinent provisions of DepEd-DBM-DILG Joint Circular (JC) No. 1, s.

2017 Revised Guidelines on the Use of the Special Education Fund (SEF)
state:
5.1 “The LSB shall formulate a three-year program indicating

strategic prioritization policies in the allocation of the SEF
to schools taking into consideration equitable sharing,
priority needs and such factors as enrollment ratio,
distance of the schools, performance, drop-out rate, and
location of schools, as well as the goals and objectives of
the LGU’s Comprehensive Development Plan (CDP), and
the expenditures, programs, projects and activities in the
LGU’s Local Development Investment Program (LDIP)
prior to the formulation and preparation of its Annual
Budget for the incoming year. It is understood that the
DepEd representative to the LSB shall be responsible for
coordinating municipality/city school plans with that of the
province and ensuring that the School Improvement Plan
(SIP) and the Division Education Development Plan
(DEDP) are formulated collaboratively with the
stakeholders in the community.
5.2 The LSB in each province, city, or municipality shall be

responsible for the preparation and approval of the annual
budgetary requirements of the public schools based on the
DepEd-approved SIP and DEDP in the implementation of
ECCD Program, kindergarten, elementary and secondary,
formal and non-formal education programs, chargeable to
their respective SEFs.
101
5.2.1 All expenditure items to be included in the SEF
Budget shall be among those provided under Section 4.0
hereof and contained in the approved SIP and DEDP.
(emphasis supplied)
5.5 The preparation and approval of the SEF Budget for the
ensuing year shall be guided by the following schedule of
activities:
Person/s Indicative
Activities
Responsible Timelines
Submission to the LSB of the Local Not later
certified statement containing Treasurer and than July 15
the following: Local of the
1. Actual SEF Income Accountant current year
for the immediately
preceding fiscal year;
2. Actual SEF Income
for the first two
quarters of the
current year;
3. The estimated SEF
Income for the last
two quarters of the
current year; and
4. The annual estimates
for the ensuing year.
6.1 To promote and enhance transparency and accountability in

the allocation and utilization of the SEF, the parties
concerned shall comply with the following:
Person/s Indicative
Activities and Documents
Furnish the Local Budget LSB Not later
Officer, the Local Accountant, than seven
and the Local Treasurer a (7) days
copy of the SEF Budget as after the
basis for disbursement or approval of
certification of availability of the SEF
funds and for recording Budget
purposes.
Submit quarterly and annual LSB For quarterly
reports using the SEF Budget reports, not
Accountability Form No. 1 later than
(Annex B) on SEF utilization, the 20th day
as prepared by the Local after the end
Accountant, to the DepEd of the
CO, through appropriate quarter and
channels, copy furnished the for annual
local sanggunian concerned reports, not
and Regional Offices of the later than
DBM and DILG. the 15th day
102
Person/s Indicative
Activities and Documents
of February
The appropriate DepEd DepEd of the
offices shall prepare the representative following
consolidated provincial and in the LSB year.
regional reports.
Post the utilization report of LSB Pertinent
the SEF Budget in the deadline
website of the LGU and/or in consistent
at least three (3) conspicuous with the Full
public places for transparency Disclosure
and accountability in Policy of the
compliance with the Full DILG
Disclosure Policy of the DILG
25.2 Perusal of the Local School Board Budget for CY 2020 also revealed the
following:
1. The three-year program indicating the strategic prioritization

policies of LGU-Guipos was not found as required in Paragraph
5.1. In addition, they also lacked the approved SIP and DEDP
which are used as basis for the preparation and approval of the
annual budgetary requirements of the public schools as required
in Paragraphs 5.2 and 5.2.1;
2. The SEF Budget for FY 2020 is deficient of the certified statement

containing the (a) actual SEF Income for the immediately
preceding fiscal year; (b) the estimated and actual SEF Income for
the last two quarters of the current year; and (c) the annual
estimates for the ensuing year required in Paragraph 5.5.
3. The promotion and enhancement of transparency and

accountability in the allocation and utilization of the SEF were not
complied contrary to Paragraph 6.1, to wit:
 No proof that the LSB furnished the Local Budget Officer

(LBO), the Local Accountant, and the Local Treasurer a
copy of the SEF Budget as basis for disbursement or
certification of availability of funds and for recording
purposes;
 No proof that the LSB submitted quarterly and annual

reports using the SEF Budget Accountability Form No. 1
(Annex B) on SEF utilization, as prepared by the Local
Accountant, to the DepEd CO, through appropriate
channels, copy furnished the local sanggunian concerned
and Regional Offices of the DBM and DILG; and
 No proof of posting on the utilization report of the SEF

Budget in the website of the LGU and/or in at least three
(3) conspicuous public places for transparency and
accountability in compliance with the Full Disclosure Policy
of the DILG.
103
25.3 With all the noted deficiencies relative to the preparation of the
appropriation and utilization of SEF, it is apparent that the guidelines on
the use of the SEF and responsibility of the Local School Board as stated
in DepEd-DBM-DILG Joint Circular (JC) No. 1, s. 2017 were not strictly
followed, thereby affecting the more strategic and efficient utilization of
SEF totaling P1.9 million and deviates from the principle of transparency
and accountability.
Recommendation:
25.4 We recommended that Management through the Local School Board

prepare and approve SEF Budget in accordance with the DepEd-DBM-
DILG Joint Circular (JC) No. 1, s. 2017 to attain the goals and objectives
and observe transparency and accountability in the allocation and
utilization of the SEF.
Solid Waste Management
26. The LGU did not comply with the pertinent provisions of R.A. No. 9003,
particularly on the (a) expiration and non-renewal of its 10-year SWM Plan,
and the (b) temporary operation of an open dump site for its solid wastes.
Expired 10-year SWM Plan
26.1 Section 16 of Republic Act No. 9003, otherwise known as Ecological Solid
Waste Management Act of 2000 states that:
“Section 16. Local Government Solid Waste Management

Plans - The province, city or municipality, through its local solid
waste management boards, shall prepare its respective 10-year
solid waste management plans consistent with the national
solid waste management framework: Provided, That the waste
management plan shall be for the re-use, recycling and
composting of wastes generated in their respective jurisdictions:
Provided, further, That the solid waste management plan of the
LGU shall ensure the efficient management of solid waste
generated within its jurisdiction. The plan shall place primary
emphasis on implementation of all feasible re-use, recycling,
and composting programs while identifying the amount of
landfill and transformation capacity that will be needed for solid
waste which cannot be re-used, recycled, or composted. The
plan shall contain all the components provided in Sec. 17 of this
Act and a timetable for the implementation of the solid waste
management program in accordance with the National
Framework and pursuant to the provisions of this Act: Provided,
finally, That it shall be reviewed and updated every year by the
provincial, city or municipal solid waste management board.
104
For LGUs which have considered solid waste management
alternatives to comply with Sec. 37 of this Act, but are unable to
utilize such alternatives, a timetable or schedule of compliance
specifying the remedial measure and eventual compliance shall
be included in the plan.
All local government solid waste management plans shall be

subjected to the approval of the Commission. The plan shall be
consistent with the national framework and in accordance with
the provisions of this Act and of the policies set by the
Commission; Provided, That in the province of Palawan, the
local government solid waste management plan shall be
approved by the Palawan Council for Sustainable Development,
pursuant to R.A. No. 7611.
26.2 Perusal of the LGU’s 10-year SWM plan reveals that the plan covers the
calendar years 2009 to 2018 only. The said SWM plan has already expired
on CY 2018, hence, beginning CY 2019 to date, the LGU is operating its
activities without a SWM Plan.
26.3 Inquiry with the designated Municipal Environment Resource Officer

(MENRO) revealed that a new 10-year SWM plan was not yet prepared for
review by the Provincial SWM Board and subsequent approval of the
National Solid Waste Commission. The absence of an updated and current
10-year plan affects the attainment of overall protection of the public health
and environment.
Temporary operation of an open dump site for its solid wastes
26.4 Section 37 of the same R.A. provides that:
Section 37. Prohibition Against the Use of Open Dumps for

Solid Waste - No open dumps shall be established and
operated, nor any practice or disposal of solid waste by any
person, including LGUs, which constitutes the use of open
dumps for solid wastes, be allowed after the effectivity of this
Acts: Provided, That within three (3) years after the effectivity of
this Act, every LGU shall convert its open dumps into controlled
dumps, in accordance with the guidelines set in Sec. 41 of this
Act: Provided, further, That no controlled dumps shall be
allowed five (5) years following the effectivity of this Act..”
26.5 Our verification revealed that sometime in March 2020, the Municipality of
Guipos acquired a parcel of land for Eco-Tourism Park (Solid Waste
Disposal Site) located at Barangay Sikatuna, containing an area of ten
thousand (10,000) square meters, more or less, in the amount of One
Hundred Fifty Thousand Pesos (P150,000.00).
26.6 Interview with the designated MENRO revealed that the parcel of land was
purchased for the proposed Municipal Recovery Facility (MRF)/Eco-
Tourism Park as required by the Department of Environment and Natural
Resources – Environmental Management Bureau (DENR-EMB). The site
was used by the LGU as dumpsite for solid waste materials for a short
period of time only due to the poor road conditions which render the
dumpsite inaccessible especially during rainy season. As such, the LGU
105
proposed a parcel of land located at Purok 3, Barangay Poblacion, Guipos,
to be used as temporary dumpsite for its solid waste materials.
26.7 Upon ocular inspection, the wastes were dump in an open field. Additional
observations noted at the temporary waste disposal site which is located in
Purok 3, Barangay Poblacion, Guipos, are as follows:
 The perimeter area of the dumpsite is not enclosed in a fence thus

some wastes were scattered;
 There is no efficient garbage disposal mechanism in place because

the wastes were not segregated which may put risks to the
constituents since there are residual houses located within the 100-
meter distance from the dumpsite; and
 No recycling equipment for solid wastes.
26.8 Continued operation of an open dumpsite poses threat to the public health
and environment.
Recommendation:
a) Direct the Municipal SWM Board to develop a current and updated

10-year Municipal SWM Plan, submit the same to the Provincial
Solid Waste Management Board for review and subsequent
approval by the National Solid Waste Management Commission;
b) Stop the operation of the open dumpsite for its garbage disposal;
and
c) Develop the acquired parcel of land as sanitary landfill to be used

as final garbage disposal site of the LGU, as well as, improve the
accessibility and condition of roadways and thoroughfares.
26.10 The Management already conducted a meeting with the Municipal Solid
Waste Management Board regarding the update of the expired 10-Year
SWM Plan but because of the COVID-19 Pandemic, the Management
could not conduct face-to-face meetings needed for the Waste Analysis
and Characterization Study (WACS) and Information Education Campaign
(IEC) which are very important part in the updating of the plan.
Nevertheless, Management committed to adhere with the audit
recommendations.
26.11 We remained, however, with our audit recommendation. We understand

Management’s concerns over the required activities to be conducted for
the preparation of the updated 10-year SWM Plan, but said plan is a
requirement of law and should be prepared and approved upon the
normalization of the current situation.
106
Market Fees and Charges
27. Imposition and collection of Market Fees and Charges were based on
Article G of the Local Revenue Code of 2017 despite its being declared as
invalid for being confiscatory by virtue of Sangguniang Panlalawigan
Resolution No. 884-2020 dated September 24, 2020.
27.1 Pertinent provisions of R.A. No. 7160 otherwise known as the Local
Government Code (LGC) of 1991 state:
“SEC. 18. Power to Generate and Apply Resources. - Local

government units shall have the power and authority to
establish an organization that shall be responsible for the
efficient and effective implementation of their development
plans, program objectives and priorities; to create their own
sources of revenue and to levy taxes, fees, and charges which
shall accrue exclusively for their use and disposition and which
shall be retained by them; xxx (Underscoring supplied)
SEC. 186. Power to Levy Other Taxes, Fees or Charges. -

Local government units may exercise the power to levy taxes,
fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions of
the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall
not be unjust, excessive, oppressive, confiscatory or contrary to
declared national policy: Provided, further, That the ordinance
levying such taxes, fees or charges shall not be enacted without
any prior public hearing conducted for the purpose.
SEC. 191. Authority of Local Government Units to Adjust

Rates of Tax ordinances. - Local government units shall have
the authority to adjust the tax rates as prescribed herein not
oftener than once every five (5) years, but in no case shall such
adjustment exceed ten percent (10%) of the rates fixed under
this Code.
27.2 On July 14, 2020, the LGU transmitted to the Sangguniang Panlalawigan
(SP) for review the Municipal Ordinance No. 01 Series of 2020, otherwise
known as the Revised Revenue Code of 2020 of the Municipality of
Guipos, Zamboanga del Sur together with Sangguniang Bayan (SB)
Resolution No. 2020-11, approving the said Code. Upon review, the SP
declared the same valid and operative under SP Resolution No. 807-2020.
However, the Provincial Legal Office of Zamboanga del Sur rendered an
opinion that Municipal Ordinance No. 01 Series of 2020 was not valid as
the same was adopted within the required five-year period from the
approval of Municipal Ordinance No. 04 Series 2017 on September 04,
2017.
27.3 On the basis of such legal opinion, SP Resolution No. 807-2020 was
reconsidered during the regular session of SP on August 13, 2020.
Consequently, SP Resolution No. 823-2020 was adopted, otherwise
known as “A RESOLUTION REQUESTING THE MUNICIPAL
GOVERNMENT OF GUIPOS, THROUGH THE SECRETARY TO THE
107
SANGGUNIANG BAYAN, TO FORMALLY TRANSMIT MUNICIPAL
ORDINANCE NO. 04, SERIES OF 2017 (2017 MUNICIPAL REVENUE
CODE OF GUIPOS) TO THE SANGGUNIANG PANLALAWIGAN FOR ITS
REVIEW AND APPROPRIATE ACTION”.
27.4 On September 02, 2020, the Secretary of SB transmitted to the SP the

Municipal Ordinance No. 04-2017 including her Certification dated
September 1, 2020 stating among others that there was no public hearing
prior to the purported approval of the said Ordinance and the same was
not previously submitted to SP for review. Records made it only appear as
an Updated Revenue Code in 2017 in compliance to the Seal of Good
Local Governance (SGLG) requirements.
27.5 On September 24, 2020, SP issued Resolution No. 884-2020 “ADOPTING

COMMITTEE REPORT NO. 519-2020 OF THE SP COMMITTEE ON
RULES, LAWS AND PRIVILEGES, THEREBY, DECLARING VALID
MUNICIPAL ORDINANCE NO. 04 S. 2017 OF GUIPOS, ZAMBOANGA
DEL SUR”. The SP Resolution adopted the opinion of the Provincial Legal
Office of Zamboanga del Sur that Municipal Ordinance No. 01 Series of
2020 was not valid as aforementioned. It further resolved that Municipal
Ordinance No. 04, Series of 2017 as valid subject to the following
qualifications:
a. That the Market Fees and Charges under Art. G (page 97) are
hereby declared invalid for being confiscatory;
b. That the permit fee to slaughter under Art. H (page 99) shall be
collected on the basis of the previous ordinance on the matter;
and
c. That the percentage rate in words (2% and 1% respectively)
under Section 2A.02(d) must prevail over the percentage rate
in Arabic numerical (2.4 and 1.1%)
It is noted that the 2020 Revised Revenue Code is but an adoption

of the 2017 Revised Revenue Code, except on the Franchise
Term and Fee for tricycles. Further, there are no significant tax
rate adjustments. (Underscoring supplied)
27.6 We reviewed both Municipal Ordinances and noted that differences in the
imposition and rates of Market Fees and Charges as shown in the table
below:
Stall Rental/Fee Stall Rental/Fee

Market Section under M.O. No. 4, under M.O. No. 1,
S. 2017 S. 2020
A. Rental Fee on Market Stalls
1. On fixed stalls with booth constructed by the Municipal Government, per
square meter or fraction thereof, per month:
a. Dry Goods Section/Commercial
b. Grocery Section
c. Vegetables and Fruits Section P110.00/sq. m
d. Eating/ Eatery Section P1,300.00 (ground floor)
e. Flower Shop Section
f. Cold Storage Section P90.00/ sq. m
(second floor)
108
Stall Rental/Fee Stall Rental/Fee
Market Section under M.O. No. 4, under M.O. No. 1,
S. 2017 S. 2020
2. On stalls with booths constructed by the lessees, per square meter or
fraction thereof, per month:
a. Dry Goods Section
b. Grocery Section
c. Vegetables and Fruits Section
d. Eating/Eater Section P1,000.00 P90.00/ sq. m
e. Flower Shop Section
f. Cold Storage
3. On spaces in the wet section and live fowls and piglets section, including
the poultry dressing area, per square meter or fraction thereof, per month:
a. Fish Section P750.00 P750.00
b. Meat Section P850.00
c. Live Fowls and Piglets Section P850.00 N/A
Bagsakan Section
1. Piglets N/A P20.00/head
2. Live Fowls P5.00/head
27.7 As can be gleaned from the table above, the imposition of the municipal
charges differs particularly on the rental fees of market stall. Under M.O.
No. 4, S. 2017, the rental fee was fixed in amount while under M.O. No. 1,
S. 2020, the same was computed on a per square meter basis.
27.8 Inquiry with the Municipal Economic Enterprise & Development Officer
(MEEDO), who is in-charge in the imposition and collection of these
market fees and charges revealed that for the months of January to
February 2020, the rental fees on market stalls were based on the M.O.
No. 1, S. 2020 but for the remaining months of the CY 2020, the LGU
opted to use the rates under M.O. No. 4, S. 2017 upon verbal notice given
by the Municipal Mayor. Further, in view of the issuance of SP Resolution
No. 884-2020 as aforementioned, the LGU immediately adopted the M.O.
No. 4, S. 2017.
27.9 Finally, given the invalidity of the provision on Market Fees and Charges
under Article G of M.O. No. 4, S. 2017 (Local Revenue Code of 2017) due
to its being confiscatory, the same should not be used as basis for the
imposition and collection of Market Fees and Charges by the LGU.
Therefore, the imposition and collection of Market Fees and Charges
based on Article G of the Local Revenue Code of 2017 is without legal
basis.
Recommendation:
27.10 We recommended that Management seek representation with the

Sangguniang Panlalawigan as to what would be their basis for the
imposition and collection of Market Fees and Charges since the rates for
the same as provided under the Local Revenue Code of 2017 were
declared invalid for being confiscatory.
27.11 Management expressed their dismay on the issue but is still hopeful that
they will be able resolve the issues regarding the Municipal Revenue Code
109
especially on the rates of Market Fees and Charges. Nevertheless,
Management assured compliance with the audit recommendation.
Gender and Development
28. The objectives of the Gender and Development (GAD) Program to pursue
women’s empowerment and gender equality were not fully attained due to
the (a) non-establishment of sex-disaggregated data for the identification
of organization-focused gender issues, and (b) non-implementation of GAD
activities as planned and underutilization of the GAD Budget.
Absence of sex-disaggregated data for the formulation of organization-focused

activities
28.1 Items B.1 and B.2 of Section 4.0 of the PCW-DILG-DBM-NEDA Joint
Memorandum Circular (JMC) No. 2013-01 provide:
“B. Establishment and Maintenance of GAD Database
1. LGUs, through their Local Planning and Development

Offices (LPDO), shall spearhead the setting up and
maintenance of the GAD database to serve as basis for
gender-responsive planning, programming and policy
formulation. The GAD database, which can either be
manually operated or developed through software, shall form
part of the overall management information system (MIS) of
the LGU.
2. Sex-disaggregated data and GAD-related information may

be derived and/or sourced from the local National Statistics
Office (NSO), academe, CSOs as well as from studies,
surveys and administrative reports of the local offices of
NGAs such as, but not limited to the following: the
Department of Agriculture (DA), Department of Environment
and Natural Resources (DENR), Department of Agrarian
Reform (DAR), Department of Labor and Employment
(DOLE), Department of Trade and Industry (DTI).
The sex-disaggregated data and results of the Community-

Based Monitoring System (CBMS), the National Household
Targeting System for Poverty Reduction (NHTS-PR) and
Local Governance Performance Management System
(LGPMS) may form part of the GAD database.”
28.2 Inquiry disclosed that the LGU has no sex-disaggregated data for its
employees. For purposes of GAD, a sex-disaggregated data should
contain gender statistics and GAD-related information crucial for
evidenced-based planning and policy-making. One of the most important
components in coming up or formulating gender related issues is the
availability of sex-disaggregated data. Hence, the conceptualization of
Organization-focused PPAs to address gender issues that are not based
on or confirmed by sex-disaggregated data may continue the risk that the
programmed and implemented PPAs may not fully address the gender
issues and concerns.
110
28.3 This is a prior year’s observation but reiterated due to its non-
implementation.
Non-implementation of GAD activities as planned and underutilization of the

GAD Budget.
28.4 Item C.1.1 of the same JMC provides that “LGUs shall formulate their
annual GPBs within the context of their mandates to ensure gender
mainstreaming in their policies, programs and projects. GAD planning and
budgeting shall be integrated in the regular activities of the LGUs, the cost
of implementation of which shall be at least five percent (5%) of their total
Annual Budgets. The development, allocation and utilization of the GPB
shall be implemented in accordance with this JMC.”'
28.5 For CY 2020, the LGU allocated a total amount of P4.900 million or 5
percent of the total annual budget for its GAD-related activities. Review of
the GAD Plan and Budget and GAD Accomplishment Report as of
December 31, 2020 revealed that only P2.179 million or 44.46 percent of
the GAD Budget was utilized, while a balance of P2.722 million or 55.54
percent remained unutilized as of year-end. Details of which is shown in
the attached Appendix “G”.
Annual 5% GAD Unutilized

Utilization % %
Budget Appropriation Balance
98,008,393.00 4,900,419.69 2,178,502.10 44.46% 2,721,917.59 55.54%
28.6 Further review disclosed that the following GAD-related activities as

planned were not implemented which resulted to the low utilization of the
GAD Budget.
a. Municipal Pre-Marriage Orientation and Counselling

b. Conduct capability building seminars for youth leaders from
different organizations (Anti-Drug Campaign)
c. Screen and approve application of deserving students (SPES
Program)
d. Promotion of sportsmanship among youth (Sports Development);
and
e. Capability building for barangay officials on Katarungang
Pambarangay.
28.7 Non-implementation of GAD activities as planned and underutilization of

the GAD Budget defeat the objectives of the program to pursue
women’s empowerment and gender equality.
Recommendation:
a) Direct the GAD Focal Point System to establish sex-disaggregated

data for its own personnel, conduct gender analysis based on the
data established, identify organization-focused gender issues and
111
the appropriate GAD-related activities to address the same, and
incorporate them in the GPB for costing; and
b) Require the heads/representatives of the implementing offices to

ensure that GAD-related activities are implemented as planned,
and maximize the utilization of the GAD funds in order to attain the
objectives for which the funds were provided.
28.9 Management commented that some of the activities in the GAD Plan for
CY 2020 were not implemented due to the strict observation of health
protocols based on the guidelines of the National Inter-Agency Committee
as measures to combat the COVID-19 Pandemic. Further, Management
commented that the hindering factor on the delay of establishing sex-
disaggregated data for the GFPS is the time to conduct workshop on data
gathering for GAD database among representatives per department of the
LGU. Nevertheless, Management assured compliance with the audit
recommendations in CY 2021.
29. COMPLIANCE WITH TAX LAWS
29.1 During the Calendar Year (CY) 2020, the Municipality of Guipos was able
to comply with the withholding and remittance of taxes due to the Bureau
of Internal Revenue (BIR).
29.2 The balance of Due to BIR account as of December 31, 2020 is

summarized as follows:
Beg. Taxes Amount End.

Fund
Balance Withheld Remitted Balance
GF 386,219.54 4,516,904.66 4,507,505.43 395,618.77
SEF (1,071.43) 40,380.29 38,103.84 1,205.02
TF 22,761.11 1,364,199.88 1,368,392.46 18,568.53
Total 407,909.22 5,921,484.83 5,914,001.73 415,392.32
29.3 The above balances pertain to taxes withheld for the month of December,
2020 which were remitted on January, 2021.
30. COMPLIANCE WITH GSIS ACT OF 1997
30.1 During the CY 2020, the Municipality of Guipos was able to comply with
the withholding and remittance of employees’ personal shares due to
GSIS. The balance of Due to GSIS account as of December 31, 2020 is
summarized as follows:
Particulars Amount
Beginning balance, January 1, 2020 44,183.47
Amount withheld (January-December 2020) 7,523,606.69
Amount remitted (6,655,864.97)
Balance, December 31, 2020 911,925.19
112
30.2 The balance pertains to amount withheld for the month of December, 2020
which was remitted on January, 2021.
30.3 Likewise, the Municipality complied with the remittance of GSIS employer’s
share amounting to P3.410 million during CY 2020.
31. COMPLIANCE WITH HOME DEVELOPMENT MUTUAL FUND LAW
the withholding and remittance of employees’ personal shares due to Pag-
IBIG. The balance of Due to Pag-IBIG account as of December 31, 2020
is summarized as follows:
Particulars Amount
Amount withheld (January-December 2020) 1,413,340.90
Amount remitted (1,248,029.50)
31.3 Likewise, the Municipality complied with the remittance of Pag-IBIG

employer’s share amounting to P292,800.00 during CY 2020.
32. COMPLIANCE WITH NATIONAL HEALTH INSURANCE ACT
the withholding and remittance of employees’ personal shares due to
PhilHealth. The balance of Due to PhilHealth account as of December 31,
2020 is summarized as follows:
Particulars Amount
Amount withheld (January-December 2020) 800,378.84
Amount remitted (710,186.46)
32.3 Likewise, the Municipality complied with the remittance of PhiHealth

employer’s share amounting to P394,554.18 during CY 2020.
33. COMPLIANCE WITH PROPERTY INSURANCE LAW
33.1 For CY 2020, the Municipality of Guipos insured with the GSIS some of its
insurable properties to include the public market, motor vehicles and heavy
equipments, as follows:
113
Insurance
Description Cost of PPE Remarks
Premium Paid
Guipos Public 25,906,440.19 598,873.99 Policy No. FI-NM-
Market GSISPAG-0000739
Foton View Donated from 4,323.51 Policy No. MV-PC-
Ambulance 2012 PCSO GSISPAG-007109
2016 Isuzu Elf 1,199,900.00 5,100.12 Policy No. MV-CV-
Dropside GSISPAG-0005085
Fuso Mignon 1,455,000.00 10,341.72 Policy No. MV-CV-
Dump Truck 2016 GSISPAG-0005086
Isuzu Forward 1,725,000.00 12,760.92 Policy No. MV-CV-
Dump Truck 2016 GSISPAG-0005087
Total 30,286,340.19 631,400.26
34. COMPLIANCE WITH SENIOR CITIZEN AND PERSONS WITH DISABILITY
34.1 For CY 2020, the Municipality of Guipos appropriated a total amount of

P0.980 million for the Senior Citizen and Persons with Disability Program,
which is equivalent to one per cent (1%) of the total annual budget.
35. COMPLIANCE WITH LOCAL COUNCIL FOR THE PROTECTION OF

CHILDREN (LCPC)
35.1 For CY 2020, the Municipality of Guipos appropriated a total amount of

P0.980 million for the Local Council for the Protection of Children (LCPC),
which is equivalent to one per cent (1%) of the total annual budget.
36. SUMMARY OF LOANS PAYABLE
36.1 As of December 31, 2020, the Municipality of Guipos has an outstanding

balance of P57.369 million under the Loans Payable – Domestic account.
Breakdown of this balance is as follows:
Principal Outstanding
Creditor Purpose Date Term
Amount Balance
LBP/ Economic 2007 15 18,600,000.00 1,664,814.59
MBUSSP Development
LOGOFIND Social and 2007 15 2,202,406.05 412,939.62
Education
Development
DMAF/ Heavy 2015 10 34,600,000.00 18,136,002.02
MDFO Equipment
ARCP Economic 2015 15 10,538,463.19 8,536,957.05
Irrigation Development
for Farmers
LBP Construction of 2019 20 29,747,035.45 28,618,499.41
MBUSSP 1 New Public
Market
LBP IRA Unidentified 0.02
Total 95,687,904.69 57,369,212.71
114
37. HIRING OF AND PAYMENTS TO JOB ORDERS
37.1 The Municipality of Guipos hired one hundred thirty-eight (138) individuals
covered with Job Order for CY 2020 on a semestral basis to augment the
eighty-four (84) duly filled-up regular plantilla positions. Their salaries and
wages were charged against the Personal Services (PS) in the total
amount of P3.927 million.
38. STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES
38.1 The total audit suspensions, disallowances and charges found in the audit
of various transactions of the Municipality of Guipos as of December 31,
2020, are based on the Notice of Suspension (NS)/Notice of Disallowance
(ND)/Notice of Charge (NC) issued by this Commission, as summarized
hereunder:
Beginning This period Ending

Balance January 1 to Balance
Particulars
(As of December 31, 2020 (As of
12/31/2019) NS/ND/NC NSSDC 12/31/2020)
Notice of Suspension 15,226,983.61 0.00 0.00 15,226,983.61
Notice of Disallowance 5,899,187.30 0.00 0.00 5,899,187.30
Notice of Charge 0.00 0.00 0.00 0.00
Total 21,126,170.91 0.00 0.00 21,126,170.91
38.2 NS/ND/NC issued prior to effectivity of the 2009 Rules and Regulations on
the Settlement of Accounts (RRSA) are not included in the reflected
balance but are deemed disallowances/charges which shall continue to be
enforced in accordance with these Rules as provided under Section 28
thereof.
115

Audit identifies unreconciled cash, dormant funds, unreliable inventory

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AUDIT OBSERVATIONS AND RECOMMENDATIONS

Unreconciled cash balances

1. Periodic reconciliation of balances between the accounting’s ledgers and

Balances as of December 31, 2020

1.4 Inquiry revealed that periodic reconciliations of balances between the

1.5 We recommended that the Municipal Accountant and the Municipal

b) Conduct periodic reconciliation of balances between the

1.6 Management assured compliance with the audit recommendations.

Dormant/non-moving Cash in Bank-LCCA accounts

2. Existence of dormant and/or non-moving Cash in Bank – LCCA accounts

2.2 Permanent Committee, composed of the Department of Finance (DOF),

2.7 We recommended that Management determine the necessity and authority

Unreliable inventory account balances

3. The accuracy and existence of Inventory accounts amounting to P1.412

3.1 International Public Sector Accounting Standard (IPSAS) 12 states:

“Inventories are assets:

a) In the form of materials or supplies to be consumed in the

“Sec. 114. Perpetual Inventory Method. – Purchase of

Regular purchases shall be coursed thru the inventory account

The Chief Accountant shall maintain the perpetual inventory

The General Services Officer or the Municipal Treasurer, as the

Sec. 124. Inventory of Supplies or Property. – The local

3.4 Audit of Inventories and Supplies accounts disclosed the following

 Non-observance of the proper Inventory Process in the control of

 Non-preparation and non-maintenance of supply ledger cards and

 Office Supplies Inventory account under the General Fund and

 Non-conduct of semestral physical count of all inventories and

3.5 Non-adherence to the above accounting and reporting guidelines and

3.6 We recommended that:

a) The Local Chief Executive include in the duties and responsibilities

b) The Municipal Accountant observe the perpetual inventory method

d) The Municipal Treasurer in coordination with the Municipal

3.7 Management assured compliance with the audit recommendations.

Unreliable Property, Plant and Equipment (PPE) account balances

4. The accuracy, existence and condition of Property, Plant and Equipment

Non-conduct of physical count of PPEs

“Sec. 124. Inventory of Supplies or Property. – The local

Physical count of property, plant, and equipment by type shall

4.4 Our review of the LGU’s consolidated financial statements as of December

Balance as of December 31, 2020

Absence of property records and incomplete accounting records

Unidentified balances of Construction in Progress accounts

4.10 Section 111, PD No. 1445 provides:

“1. The accounts of an agency shall be kept in such detail as is

2. The highest standards of honesty, objectivity and consistency

4.11 Likewise, Paragraph 27 of IPSAS 1 provides that “Financial statements

4.13 Based on the foregoing circumstances, the accuracy, existence and

4.14 We recommended the following:

a) The Management comply with the guidelines and procedures in the

b) The Municipal Accountant and Municipal Treasurer acting as the

c) The Inventory Committee to conduct annual physical count of PPEs

Non-provision of depreciation expenses

5. Infrastructure assets and other PPE accounts with a reported balance

“Sec. 04. Basic Features and Policies. – The new

o. Depreciation. The straight-line method of

5.4 Pertinent provisions of IPSAS 17 are as follows:

“4. This Standard applies to property, plant and equipment

(a) Specialist military equipment; and

21. Some assets are commonly described as “infrastructure

(a) They are part of a system or network;

Although ownership of infrastructure assets is not confined

59. Each part of an item of property, plant and equipment with

Balance as of December 31, 2020