EXECUTIVE SUMMARY

Introduction
Umingan, a first class municipality is situated at the southeastern most part of Pangasinan. It is
located at the foot of Caraballo Mountain with rolling hills and verdant plants. It was once a town
of Nueva Ecija, and in 1902, it was annexed to the Province of Pangasinan. It has a total land
area of 29,753 hectares with fifty-eight (58) barangays.

The municipality is under the able leadership of Hon. Eldred P. Tumbocon and assisted by the
Hon. Vice Mayor Alain P. Rabang and was manned by 304 officials and employees
assigned in different offices, to wit:
Number
Elective 12
Regular/Permanent 132
ESI/PAO 73
Casuals 76
Market Guards 6
Cemetery Caretaker 5
Total 304

Financial Highlights
Presented below are the financial position, sources of funds, appropriations and
obligations of the Municipality of Umingan during the CYs 2013 and 2012:

Increase
2013 2012 (Decrease) %
Assets 58,064,518.71 P70,688,124.72 (12,623,606.01) (18)
Liabilities 12,616,877.57 33,177,020.09 (20,626,776.17) (62)
Government Equity 45,425,396.10 37,511,104.63 7,914,291.47 21
Income 123,136,595.75 108,489,257.69 14,647,338.06 14
Expenses 111,516,081.39 103,392,665.67 8,123,415.72 8
Appropriations 123,302,174.00 122,720,228.00 581,946.00 .47
Obligations 117,838,771.64 113,614,574.74 4,224,196.90 4

Operational Highlights
The significant accomplishments of the municipality for the period 2013 are as follows:

Projects/Activities Amount Status

National Funded Projects:
1. Supplemental Feeding Program 1,410,240.00 On-going
 2. Rehabilitation of Flood Control Structures -
Puraw, Nampalcan and Carayungan Sur 10,000,000.00 Completed
3. Concreting of Sta. Maria-Prado 14,983,692.93 Completed
4. Sta. Cruz, La Paz - Farm to Market Road 9,987,196.99 Completed
5. Supplemental Feeding Program 1,265,160.00 Completed
6. Construction of Seed Warehouse - Brgy. Don
Montano 900,000.00 Completed
7. Ricos SWIP 21,995,000.00 On-going
8. Scholarship Grant 600,000.00 Completed
9. Community Base Participatory Action
Research(CPAR) 500,000.00 On-going
10. PHIC Projects 1,017,250.00 On-going
11. Construction of 20 units SFRs for Luna
Weste, Luna Este, Concepcion, Casilan 796,248.15 Completed
Municipal Funded Projects:
1. Construction of Auditorium Covered Court 3,500,000.00 Completed
2. Construction of ABC, Library and MTC 2,370,200.00 On-going
3. Improvement of New Cemetery 794,815.39 On-going
4. Installation of Material Recovery Facility 739,899.91 On-going
Donation and Grant Projects
1. Improvement of Park, Plaza and Monument 500,000.00 Completed

Scope of Audit
The audit covered the accounts and operations of the Municipality for the calendar year
2013 and was aimed at determining whether Management presented fairly the financial
statements of the Municipality in adherence to the generally accepted accounting
principles in the Philippines; whether prevailing laws, rules and regulations have been
complied with; and whether funds were utilized in the most efficient, effective and
economical manner. Financial, compliance and value for money audits were conducted
to achieve these audit objectives.

Opinion on the State Auditor’s Report on the Financial Statements

A qualified opinion on the fairness of the presentation of financial statements was
rendered due to the non-submission of a physical inventory report on time and
insufficiency of records did not allow us to apply adequate alternative procedures to
ascertain the validity, accuracy and existence of the Property, Plant and Equipment (PPE)
valued at P76,696,882.17 (gross of depreciation). Likewise, the non-provision of
depreciation on PPEs amounting to P5,535,198.84 rendered the PPE and Income
accounts overstated while the Accumulated Depreciation and Depreciation Expense
accounts were understated.
Significant Findings and Recommendations
1. Timely compliance with the requirements of existing rules and regulations in the
custody and management of properties owned by the agency were not complied, thus,
the accuracy, validity and existence of the property, plant and equipment amounting
to P76,696,882.17 could not be readily ascertained. (Finding No. 1, Page 23)

We have recommended that management strictly adhere with the provisions of the
NGAS Manual in the custody and management of government properties. Conduct
physical inventory of government properties regularly and update/prepare the
required reports of serviceable and unserviceable properties. Also, maintain
subsidiary records and Property Card to facilitate periodic reconciliation of the Report
on the Physical Count of Property, Plant and Equipment with the books of accounts.

2. Some PPE totaling P5,535,198.84 were not provided with depreciation contrary to the
provisions of the NGAS, thereby, rendering the Asset and Expense accounts
overstated and understated, respectively, by the amount of the depreciation that
should have been provided from the date of its acquisition. (Finding No. 2, Page 25)

We have recommended that the Accounting Unit should exhaust all possible means to
determine the dates of acquisition of the depreciable Property, Plant and Equipment
mentioned above. In addition, compute and record immediately the depreciation in
the books of accounts in order to present fairly the value of the Property, Plant and
Equipment in the financial statements.

Below is the suggested pro forma adjusting entry:

Prior Year’s Adjustment P xxx

Accumulated Depreciation – Asset Account P xxx

3. Infractions of the provisions of Budget Circular No. 10 and COA Circular No. 2012-
001 in the payment of overtime services to employees of the municipality were
disclosed in audit, thus, detrimental to the financial interest of the LGU. (Finding No.
3, Page 26)

We have recommended that the LGU strictly observe the provisions of existing laws,
rules and regulations in the rendering of overtime. Overtime pay received by the
department head during the year should be refunded.

To protect the interest of the LGU, the department heads should perform/produce
more adequate plan of work activities for the ensuing year in order to avoid overtime
work. In addition, the rank and file should submit the necessary documents to support
the overtime payments.

4. The municipality was not able to observe the budgetary requirements and limitations
on annual appropriations for personal services, hence, the total expenses incurred
exceeded 45% of the total income realized for the next preceding fiscal year which
was contrary to Section 325(a) of RA 7160, thus, the full implementation of the
Salary Standardization Law was not achieved. (Finding No. 5, Page 27)
 We have recommended that the municipality should observe the budgetary
requirements and limitations on annual appropriations for personal services as
provided in Section 325 of the Local Government Code of 1991. This may allow the
full implementation of the Salary Standardization Law that may redound to the
benefits of its officials and employees.

5. The municipality allocated funds totaling P3,000,000.00 under its continuing

appropriations for environmental management, however, some of the provisions of
the Implementing Rules and Regulations of the Philippine Ecological Solid Waste
Management Act of 2000 otherwise known as RA 9003 were not yet implemented.
(Finding No. 6, Page 29)

We have recommended that the LGU should comply with the Rules and Regulations
of Republic Act 9003. The municipality should adopt a systematic, comprehensive
and ecological solid waste management program which shall

1. Ensure the protection of public health and environment.

2. Utilize environmentally-sound methods that maximize the utilization of valuable
resources and encourage resources conservation and recovery;
3. Set guidelines and targets for solid waste avoidance and volume reduction through
source reduction and waste minimization measures, including composting,
recycling, re-use, recovery, green charcoal process, and others, before collection,
treatment and disposal in appropriate and environmentally-sound solid waste
management facilities in accordance with ecologically sustainable development
principles;
4. Ensure the proper segregation, collection, transport, storage, treatment and disposal
of solid waste through the formulation and adoption of the best environmental
practices in ecological waste management excluding incineration

6. The municipality granted year-end incentives to Job Orders/Contractual personnel

ranging from P2,500.00 to P10,000.00 eachwhich was contrary to the provisions of
Section 4 of Budget Circular No. 2010-1, thus inimical to the financial standing of the
municipality. (Finding No. 7, page 30)

We have recommended that management should observe the rules and regulations on
the grant of year-end bonus. Recipients of the year-end incentives herein specified
should be required to refund the amounts received.

7. The Countrywide Agri and Rural Economic Development Foundation, Inc. was not
able to submit documentary requirements relative to the implementation of the project
within sixty (60) days after its completion to the LGU which was not in line with the
provisions of the Memorandum of Agreement, thus, we were not able to ascertain
whether the utilization of fund accrued to the best interests of the supposedly
beneficiaries. (Finding No. 8, Page 31)
We have recommended that the necessary documents to support the validity and
propriety of the implemented project funded out of the Priority Development
Assistance Fund from the office of Senator Revilla be submitted, viz:
 1. Status report of the project
2. Copy of the report of disbursement by CARED as liquidation of the fund utilized
3. Copy of the report of project completion and acceptance by the beneficiaries
4. Special Power of Attorney/Authority of Ms. Marina C. Sula to represent CARED
Foundation and receive payment.

8. Collections were not deposited intact and promptly with the authorized depository
bank of the Municipality contrary to the provisions of Section 69 of PD 1445,
thereby, not only exposing the LGU funds to the risk of loss and theft but also for
possible misapplication and utilization. (Finding No. 9, Page 33)

We have recommended that the Municipal Treasurer strictly comply with the above
cited provisions in the handling of government funds. Collections should be deposited
in full and intact daily to safeguard its funds from the risks of loss or theft and
possible misuse.

9. The Petty Cash Fund (PCF) was not kept under the imprest system which was not in
conformity with Section 48, Volume I of the New Government Accounting System
and Section 1.2 of COA Circular No. 2012-001, thus, showing a large amount of
petty cash balances on hand as appearing in the books of accounts at the end of the
month or at year-end amounting to P1,161,249.18. (Finding No. 10, Page 35)

We have recommended that the LGU should adopt the Imprest System in keeping the
Petty Cash Fund account to refrain from maintaining excessive balances at any given
period.

Replenishment of the PCF should equal the amount of expenditures made therefrom
to avoid excessive withdrawals resulting in huge amount of the fund on hand at the
end of each month as shown in the financial statements.

Likewise, the Municipal Accountant should see to it that all disbursements under the
PCF should be supported by Petty Cash Replenishment Report which should include
the Summary of Petty Cash Vouchers paid, the related PCVs and all supporting
documents forming parts thereof.

10. No Real Property Tax and Special Education Tax receivables were established at the
beginning of the period which may be due to the absence of certified list of taxpayers
with stated amount due and collectible for the period which were not in conformity
the NGAS provisions, thus, the accounts showed abnormal balances at month-end or
(P12,029,993.90) and (P3,158,613.35), respectively, on December 31, 2013 till before
effecting adjustment on the accounts at year-end. (Finding No. 12, Page 37)

We have recommended that the Municipal Treasurer furnished the accounting unit
with a duly certified list of taxpayers with stated amount due and collectible for the
year, to enable the setting-up of real property taxes receivables at the beginning of the
accounting period. In addition, we recommend the accounting unit to establish
RPT/SET receivable to correct the abnormal balances of affected accounts.
11. Outstanding cash advances amounted to P2,524,724.41 as of December 31, 2013, in
violation of the provisions of COA Circular No. 97-002 2013, resulting to non-
recognition of asset or expense accounts, thus, prejudicial to the financial interest of
the agency. (Finding No. 13, Page 38)

We have recommended that the Management strictly observe the provisions of COA
Circular No. 97-002 in the granting of cash advances. Extra effort should be exerted
for the immediate settlement/liquidation of the cash advances especially those granted
to elected officials.

We further recommended strict adherence to prescribed policy requiring that only

cash advance for their travelling expenses shall be granted to elected officials.
Refrain from granting cash advance for travelling expenses and allowances of group
participants to a single payee especially elected officials.

In addition, it is also recommended to issue demand letter in case officials/employees

were not able to liquidate immediately their cash advances, if not possible, the
following remedial measures may be resorted to:

a. Withhold the salaries and/or other benefits as provided for under Section 5.1.3 of
COA Circular No. 97-002 and/or:
b. Appropriate administrative actions against the official/employee be undertaken
for the liquidation of their cash advances.

c. No granting of additional cash advances to official/employee unless their previous

cash advances were liquidated.

This is without prejudice to the intention of the LGU to install other means of internal
control to encourage personnel adheres to prescribed policy.

12. Deficiencies in keeping the accounts of infrastructures projects affected the accuracy
and reliability of the balances of the controlling accounts of Construction in Progress
and Public Infrastructures as shown in the financial statements at year-end. (Finding
No.14, Page 41)

We have recommended that the Accounting Office should properly classifies partial
payments of on-going projects under the Construction in Progress account to reflect
in the financial statements the infrastructure projects of the agency which are still on-
going construction.

13. Due to NGAs account (416) reflected an abnormal balance amounting to

(P9,951,015.15) in the financial statement as of December 31, 2013, which was not
in conformity with sound accounting principle, thus, affecting the accuracy and
validity of the financial statements. (Finding No. 16, Page 42)

We have recommended that the management should make an adjusting entry to

properly take up in the books the amount of LGU counterpart on the paid National
Funded Projects after due verification.
 We cannot propose any amount for adjustment since we cannot reconcile the ledger
balances due to incomplete records and time constraints. We propose the following
adjusting entries only:

Government Equity (for completed projects) xxxx

Public Infrastructures xxxx

Public Infrastructures xxxx

Due to NGAs
xxxx
Or
Construction in Progress (for on-going projects) xxxx
Due to NGAs xxxx

14. Funds appropriated for the 20% Local Development Fund were not fully utilized for
the period and prior years, since the unexpended balance at year-end amounting to
P2,273,578.65, P2,877,158.01 and P3,531,661.78 for the period 2013, 2012 and
2011, respectively, were not made as continuing in the General Fund books until
project were completed and any savings therefrom were also funded in related
activities, thus, depriving the constituents of the supposed benefits that may accrue
therefrom. (Finding No. 18, Page 44)

We have recommended 4 that the Management fully utilized the 20% Development
Fund in the implementation of development projects as cited under the DILG
Memorandum Circular. Refrain from utilizing the fund for any purpose beyond those
expressly prescribed by law or public policy to avoid the sanctions prescribed under
the Local Government Code and under such other applicable laws.

15. Procurements were not supported with some basic documents/requirements as

required under COA Circular No. 2009-001 dated February 12, 2009 which was not
in consonance with Section 4, paragraph 6 of PD 1445, thus, casting doubts on the
validity and propriety of claims that had been paid. (Finding No. 19, Page 44)

We have recommended AOM No. 2013=001 dated February 3, 2013 that all
necessary documents and other requirements be complied by the municipal officials
concerned. Further, the Municipal Treasurer should pay only claims that are duly
approved/certified and supported with complete documentation in compliance with
Section 4(6) of PD 1445.

16. The agency was not able to render accounts on time which was not in line with the
provision of existing laws, rules and regulations, thereby, causing undue delay in the
examination of financial transactions and rendering of the required reports. (Finding
No. 22, Page 47)

We have recommended that the concerned personnel exert utmost efforts to meet the
demands of timely reporting and submission of accounts. This is to avoid undue
delays that preclude the timely conduct of audit and rendering of the required reports
in compliance with existing laws, rules and regulations.
17. The municipality could have generated additional funds to support its operation and
implementation of more development programs and projects had intensified efforts
been exerted in the collection of past due accounts of local taxes and rentals on stalls
amounting to P10,423,196.25 and P484,208.75, respectively. (Finding No. 24, Page
50)

We have recommended that the LGU officials should exert extra effort to intensify
collection of delinquent accounts and adopt all necessary measures to enable the
collections of unpaid stall rentals and local taxes. These will provide additional
funds to support the projected expenditure of the LGU which may be beneficial to its
constituents.

18. Taxes withheld from contractors amounting to P2,042,686.11 remained unremitted to

the Bureau of Internal Revenue as of December 31, 2013, contrary to the provisions
of the Bureau of Internal Revenue Regulations, thereby, detrimental to public
interests. (Finding No. 25, Page 50)

We have recommended that the amount of P2,042,686.11 be remitted to the BIR

immediately. Taxes withheld should be remitted within the reglamentary period set
forth under existing revenue rules and regulations and in order to enable the timely
utilization of the much-needed fund by the national government.

19. Payment of monthly amortization of interest amounting to P30,963.40 which should

have been the liability of the concerned Municipal Officials was paid by the LGU as
seen in the General Ledger of the account Due to BIR which was not in line with the
provisions of the National Internal Revenue Code, thus, detrimental to the financial
interest of the agency. (Finding No. 26, Page 52)

We have recommended 4 that the one responsible for the handling of the Due to BIR
account be held liable for the unpaid withholding taxes together with the applicable
penalties, i.e., the 25% surcharge and 20% interest on the total amount due.

Other Findings and Recommendations

20. Prior year’s expenditure amounting to P140,515.74 was inappropriately charged to
current appropriation which was not in conformity with Section 119 of PD 1445, thus
affecting the correctness of the expense accounts as shown in the financial statements.
(Finding No. 4, Page 27)

We have recommend that management should record in the books of accounts all
disbursements as they occur and properly classifies account in order to ensure fair
presentation of the financial statements.

21. Withdrawals made for the payment of salaries and wages were not equal to the net
amount of the payroll corresponding to the pay period which resulted with an
unexpended balance at the end of each month or P247,197.52 at year-end which was
not in line with the provision of COA Circular No. 97-002, thus, depriving the LGU
 of available funds for its operation and placing the fund at risk of misuse or
misapplication. (Finding No. 11, Page 37)

We have recommended that the management refrain from the practice of making
withdrawals of more than the net amount of payroll payable for one pay period in
compliance with the COA Circular No. 97-002.

22. The Other Asset account amounting to P180,716.13 had been long outstanding in the
books of accounts due to the absence of subsidiary records to sustain its disposition,
thus, the tedious of maintaining non-moving account that was uncertain affected the
fair presentation of the financial statements. (Finding No. 15, Page 41)

We have recommended that management review the Other Asset account for possible
dropping of its balances from the books of accounts to avoid the tedious of
maintaining account balances that is not moving and uncertain.

23. Accounts pertaining to the Local Disaster Risk Reduction Management Fund were
not properly maintained in line with Section 5 of COA Circular No. 2012-002, thus,
affecting the reliability and accuracy of the financial statements. (Finding No. 17,
Page 43)

We have recommended that the Municipal Accountant make an adjusting entry to

reclassify the account Fire Fighting Equipment (Code 231) to Disaster Response and
Rescue Equipment (Code 231). Likewise, provide the corresponding Accumulated
Depreciation of the account in order to present its net book value in the Balance
Sheet.

In addition, any unexpended LDRRMF should accrue to a special trust fund solely for
the purpose of supporting disaster risk reduction and management activities of the
LDRRMC within the next five (5) years.

24. Copies of approved contracts, purchase order, delivery receipts and all documents
forming part thereof were not submitted for review within the prescribed period as
provided in COA Circular No. 2009-001, thus, prejudicial to public interests.
(Finding No. 20, Page 46)

We have recommended that the management should require the Supply Officer to
submit the copies of approved Purchase Orders and Contracts to the Audit Team
within the period prescribed in Section 4 of COA Circular No. 2009-001 dated
February 12, 2009 and impose administrative disciplinary action as therein provided
against the concerned employee upon unjustified failure of compliance

25. Allowance given to municipal scholars totalling P247,800.00 were charged from the
SEF which was not in accordance with the priority projects/activities specified under
DECS-DBM-DILG Joint Circular No. 01 dated April 14, 1998, thus defeating the
purpose for which the fund was created. (Finding No. 21, Page 47)

We have recommended that the Local School Board should strictly comply with the
provisions of DBM-DECS-DILG Joint Circular No. 01. This is to provide an equal
 distribution of the Special Education Fund among the priority expenditures identified
in the annual budget to efficiently achieve its objective.

26. No Gender and Development focal point was formed and GAD Plan, Budget and
Accomplishment Report were not submitted to the Philippine Commission on
Women for review and endorsement to the Department of Budget, thus, contrary with
PCW-NEDA-DBM Joint Circular No. 2012-01. (Finding No. 23, Page 49)

We have recommended that the LGU create a GAD Focal Point System who shall
take the lead in mainstreaming gender in agency programs, activities and projects
(PAPs) and coordinate the preparation of the agency GPB and the GAD PAR and
provide technical assistance to offices or unit within the agency on gender
mainstreaming.

Likewise, a GAD Plan and Accomplishment report should be prepared and submitted
to PCW to allow evaluation and determination of responsiveness to gender issues in
order to ensure the promotion of public welfare and basic services.

Status of Implementation of Prior Year’s Audit Recommendation

We made a follow-up on the action taken by management to implement the
recommendations of prior year and noted the following:

Status of Implementation No. of Recommendations

Fully Implemented 4
Partially Implemented 4
Not Implemented 2

The result of the validation of the implementation of prior year’s audit recommendations
is presented in Part III. Some of partially implemented and unimplemented prior year’s
audit recommendations were reiterated in the current year audit report where appropriate.