EXECUTIVE SUMMARY Introduction The Municipality of General Luna, formerly a sitio of Macalelon, Quezon was created into a municipality on November 1, 1929 under Executive Order No. 207. It is located along the coast of Tayabas Bay in the southwestem portion of Quezon Province and is one of the 12 municipalities covered by Bondoc Peninsula with a total land area of 10,215,5857 hectares subdivided into 27 barangays. It is currently classified as a 4" class municipality with farming and fishing as the two major economic activities and is considered one of the food bowls of the Province due to its abundant supply of farm and fishery products. Its most featured celebration is the Centurion Festival held during the Lenten Season which has been a tourist attraction. I maintains General, Special Education and Trust Fund books. ‘The Organizational Structure of the Municipality is as follows: Key Officials ‘Municipal Mayor = Jose Stevenson M. Sangalang Municipal Vice Mayor ~ Jevito P. Red Members of the Sangguniang Bayan 1. Melaica M. Batariano 2, Kristine Chemobyl V. Florida 3. Rolando P, Atienza 4, Manvel G. Suarez 5. Jose Stenlee M. Sangalang 6. Remegio R. Agoncillo 7. Tomas P.Odiame 8, Miguel R. Salvo 9, William Pelotos Municipal Accountant = Madonna A. Suarez Municipal Treasurer ~ Monaliza L. Plata r TL was complemented with a total workforce of 143 personnel in Calendar Year (CY) 2017, with the following details: Elected -u Permanent = 70 Coterminous - 2 Job Order = Total Bis.Financial Highlights For CY 2017, the Municipality generated a total income of P84,937,843 from tex revenue, service and business income, share from Internal Revenue Collections and other income, The total funds utilized for the year amounted to 277,517,658 out of the total appropriations of 99,193,083 leaving an unexpended balance of P21,675,42S. The unutilized Capital Outlay appropriation amounting to P8,782,025 will be continued in CY 2018, The Municipality's comparative financial position and results of operations for CYs 2016 and 2017 are summarized below and shown in detail in the attached audited financial statements. Increase/ 2017 2016 Decrease Total Assets P 100,127,643 PR 96,045,038 P 4,082,605 Total Liabilities 46496875 48,244,142 (1,747,267) Total Net Assets/Equity ‘53,630,768 47,800,896 5,829,872 Total Income 84,937,843 75,550,266 9,387,577 Total Expenses 79815637 60,795,588 19,020,039 Scope of Audit Financial and compliance audit was conducted on the accounts and operations of the Municipality for CY 2017 to ascertain the fairness of the presentation of the financial statements and compliance of the Municipality with laws, rules and regulations as well as the economical, efficient and effective utilization of resources. Auditor’s Opinion on the Financial Statements The Auditor rendered a qualified opinion on the faimess of the presentation of the financial statements of the Municipality due to the following: 1, The existence and valuation of the Property, Plant and Equipment (PPE) accounts With @ net book value totaling B30,556,626.13 could not be ascertained due to the failure of the Inventory Committee to complete the physical inventory during the year as well as to prepare and maintain property cards and subsidiary ledgers for each category of PPE. » Cash advances granted to Municipal Officers and Employees totaling P94,439.98 recorded under the Advances to Officers and Employees account of 37,940.00 and Advances to Payroll account of P56,499,98 remain unliquidated at year-end, resulted to overstatement of the respective asset accounts and understatement of related expenses equivalent to the amount of unreported disbursements,3, The non-recording in the books of the Municipality of the donated ambulance from the Philippine Charity Sweepstakes Office (PCSO) resulted to understatement of the Property, Plant and Equipment (PPE) account at year-end. Moreover, the donated ambulance was not provided with depreciation, resulting in the understatement of the related expense account and overstatement of the equity and asset accounts For the exceptions cited above, the Auditor recommended the Municipal Mayor the following courses of action: * create Inventory committee to complete the physical count of PPE of the Municipality and submit the RPCPPE to the Audit Team for validation pursuant to Section 124 of the MNGAS for LGU; + require the Municipal Treasurer to prepare and maintain complete and updated Property, Plant and Equipment Ledger Cards (PPELC) and Property Cards, and reconcile their records regularly with the Accounting Office; and ‘* instruct the Municipal Treasurer and the Municipal Accountant to reconcile their records regularly. ‘* instruct the Municipal Accountant to ensure the proper granting. utilization and liquidation of all cash advances within the prescribed period in accordance with the above-cited rules and regulation; and © instruct the Municipal Accountant to send written notice or demand to the Accountable Officers to immediately settle their cash advances, otherwise, implement the withholding of their salary to be applied to their accounts * instruct the Municipal Accountant to take up in the books of the Municipality the donated ambulance for fair presentation of PPE account in the financial statements; and * instruct the Municipal Accountant to compute, record and present the accumulated depreciation in the financial statements pursuant to Paragraphs 43, 66, 69 and 71 of PPSAS 17 for proper valuation. Significant Observations and Recommendations ‘The following are the other significant audit observations and recommendations in the audit of the Municipality for CY 2017; 1. Five parcels of land recorded in the books at P3,091,310.00 remain untitled in the name of the Municipality, thus exposes the subject lots to third party claims.v We reiterate our recommendation that the Municipal Mayor instruct the Municipal Assessor to facilitate the titling of the five parcels of land in compliance with Section 148 of Commission on Audit (COA) Circular No, 92-386. Failure of the Municipal Treasurer's Office to exercise fully the statutory remedies 10 enforce collection of delinquent accounts resulted in the accumulation of real property tax delinquencies to P19,573,940.92 taxes as of December 31, 2017, thus the Municipality stands to lose potential revenues which could have been utilized for its development programs and projects. ‘We reiterated our recommendation that the Municipal Mayor require the Municipal Treasurer to exert extra effort and adopt the remedies to enforce collection of delinquent real property taxes in accordance with R.A, No, 7160, Fully depreciated and unserviceable properties totaling P183,734,50 were not disposed of due to failure of the designated Property Custodian to prepare the Inventory and inspection Report of Unserviceable Property (TIRUP) as required under Section 79 of Presidential Decree (P.D.) 1445 and Section 125 of the MNGAS for LGU, thereby depriving the Municipality of the possible additional income that cen be derived therefrom. We reiterated our recommendation that the Municipal Mayor instruct the Municipal ‘Treasurer to: * conduct the physical inventory of the unserviceable properties of the Municipality; ‘© prepare and submit the ITRUP as part of the disposal procedures; and + dispose the unserviceable properties in accordance with the steps and procedures ‘enumerated under Section 79 of P.D. No. 1445 to generate additional income out of the proceeds from sale thereof Guaranty/Security Deposits totalingP212,414,84which have been outstanding for two ‘years or more, were still not reverted to the Uneppropriated Surplus of the General Fund, contrary to Section 98 of Presidential Decree (P.D,) No. 1445, thus existence and correctness of the balance of the account cannot be relied upon, We recommended that the Municipal Mayor instruct the Municipal Accountant to confirm with the contractor and to request him to submit documents pertaining to his claims, revert the account to the Unappropriated Surplus of the General Fund, subject to an authority from the Sangguniang Bayan through a Resolution with the condition that appropriation shall be made in the event that claim arises in the future pursuant to the provisions of Section 98 of P.D, No. 1445.. The Municipality failed to revert back to the unappropriated surplus of the General Fund the unexpended balance of Local Disaster Risk Reduction Management (LDRRM) Fund after 5 years amounting to P916,106.93, contrary to Section 21 of Republic Act (R.A.) No. 10121, hence depriving the Municipality of funds which could be used for other social services. Moreover, the Report on Sources and Utilization of DRRMF for various months of CY 2017 were not prepared by the Municipal Accountant and submitted by the LDRRM Officer to the COA Auditor, contrary to Section 5.1.5 of Commission on Audit (COA) Circular No. 2012-002, hhence monthly monitoring and evaluation on the utilization of DRRM fund for various projects and activities could not be made, We recommended that the Municipal Mayor require the: © Municipal Accountant to revert back to the General Fund the unexpended balance of LDRRM Fund for CYs 2011-2012 totalingP916,106.93 and to prepare the Report on Sources and Utilization of DRRMF using the prescribed format as provided in Section 5.1.5 of COA Circular No, 2012-002; and * LDRRMO to submit the monthly Report on Sources and Utilization of DRRMF to the COA Auditor for monitoring and evaluation. |. Immediate and full settlement of the short-term loans (micro-financing benefits) and the disallowed Representation Allawance and Transportation Allowance (RATA) in 2006-2007 with balances of P22,524.70 and P4,861.00, respectively, were not fully settled at year-end, contrary to Section 2 of P.D. No. 1445 and Section 7.1 of the 2009 Rules and Regulations on the Settlement of Accounts (RRSA). We recommended that the Municipal Mayor instruct the: Municipal Accountant to take up in the books under the Other Receivables account the balance of P22,524.70 which pertains to the unsettled balance of short-term loans for fair presentation of PPE account in the financial statements; * MT to pursue the immediate refund of the total amount of 222,524.70, otherwise deduct it from the salary or from whatever money due the concemed Municipal officials/employees; and © MT to refund the overpayment made by borrowers/employees as presented in ‘Annex 8 and adopt measures to properly monitor balances of the account. . ‘The Water Supply System of the Municipality of 211,230,972.11 was erroneously recorded under Other Property, Plant and Equipment (PPE) sccount, contrary to COA Circular No. 2015-009, resulting in the overstatement of the said account and understatement of Water Supply System account by the same amount.We recommended thet the Municipal Mayor require the Municipal Accountant to take up the necessary accounting entries to adjust the account to ensure fair presentation of the affected accounts in the financial statements. The above observations and recommendations contained in the report were communicated to the Municipal Mayor and other key officials under various Audit Observation Memoranda and discussed in the exit conference conducted on June 19, 2017. Management’s views and comments were considered in the report, where appropriate. Status of Implementation of Prior Year’s Audit Recommendations Of the 19 prior year's audit recommendations embodied in the 2016 Annual Audit Report, eight were fully implemented, four were partially implemented and seven ‘were not implemented by the Municipality,