EXECUTIVE SUMMARY

A. INTRODUCTION

The Agency
The financial statements pertain to the Municipality of Titay, Province of Zamboanga
Sibugay for the year ended December 31, 2016. This municipality was created by virtue of
Executive Order No. 395 dated May 24, 1960 was signed by President Carlos P. Garcia as
corporate municipality of the Province of Zamboanga del Sur now Zamboanga Sibugay after
separated from the former. At present, it is composed of 30 barangays, with a total land area of
35,293 hectares and classified as second class municipality. Population at present is 57,796.
The LGU is envisioned to provide a progressive, peaceful, self-sufficient and God-
centered community with empowered-healthy people, supportive, committed and responsible
governance for a balance development. LGUs mission is to have a wholesome quality of life for
the local population, thru a consultative system of governance, geared towards an equitable and
sustainable socio-economic growth and development.
Audit Methodology
The Commission has been implementing risk-based audit in the conduct of its audit
services. However, to meet the evolving developments in public governance and fund
management, the results-based approach in audit was incorporated. The integration of these to
approaches, called the Integrated Results and Risk-Based Audit (IRRBA) Methodology, was
applied in the audit of the accounts and operations of the LGU.
Scope of Audit
A financial and compliance audit was conducted on the accounts and operations of the
Municipal Government of Titay, Zamboanga Sibugay, for the year ended December 31, 2016.
The audit consisted of review of operating procedures, post audit of transactions, inspection of
projects, interview of concerned government officials and employees, verification, reconciliation
and analysis of accounts and such other procedures considered necessary in the conduct of the
audit.
B. HIGHLIGHTS ON FINANCIAL OPERATIONS
During the year, the actual income of the municipality amounted to P 154,905,858.76 or
17.82% increase of the previous year, while expenses and subsidiestotaled P112,632,070.76 or
6.02% increase of the previous year , leaving a net income of P 42,936,914.00 or 50.03%
increase.

SOURCES OF INCOME 2016 2015 Inc. (Dec.)

Gross Income 154,905,858.76 127,300,533.78 27,605,324.98

Expenses (include Fin.Exp & Subsidies) 112,632,070.76 105,848,831.83 6,783,238.93
Net Income 42,936,914.00 21,451,701.95 21,485,212.05
 ACCOUNT DESCRIPTION C.Y. 2016 C.Y. 2015 Inc. (Dec.)
Total Assets 275,032,884.97 255,283,532.81 19,749,352.16
Total Liabilities 139,676,810.41 159,362,739.48 (19,685,929.07)
Government Equity, End 135,356,974.65 95,920,793.33 39,436,181.32

C. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Municipality of Titay, Province of Zamboanga Sibugay as of
December 31, 2016, due to the following:
1. Continuous failure to conduct physical inventory of PPE totaling P148,701,417.37
and to reconcile the property and accounting records;
2. Un-reconciled balances of Due from Other Funds of P12,905,912.96 and
P9,429,551.90 Due to Other Funds of which are reciprocal accounts and should
have the same balances;
3. Non-preparation of the Bank Reconciliation Statements for Cash in Bank balance
of P44,331,422.44; and
4. Non-liquidation of cash advances which affects the timing recognition of
expenses.
D. SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS
Presented below are the significant audit observations and recommendations noted in the
course of audit:
1. The Property, Plant and Equipment, except for various office buildings, furniture and
fixture, office equipment and motor vehicles, with a total net book value of P 45,187,817.09
were not insured with the General Insurance Fund of the Government Service Insurance
System (GSIS) against any insurable risk contrary to the requirement of the Property
Insurance Law (R.A. No. 656), as amended and COA Cir. 79-112 dated Aug. 30, 1979.
We recommend that the Municipal Treasurer, Municipal Accountant and other Officials
concerned should insure its government property with the GSIS against any insurable risk every
year.
2. Disbursements vouchers/Payrolls of General Fund Account (January – July 2016) and its
supporting documents were not stamped “PAID”, thereby exposing them to possible re-
use, contrary to the fundamental principles of internal control.
We recommend that the Municipal Treasurer stamp “PAID” in all disbursement
vouchers/payrolls and its supporting documents upon payment to avoid reusing of the same for
another payment.
3. Non- submission of copies of contracts and purchase orders to the Office of the Auditor
for review within (5) days upon perfection thereof and non-notification of deliveries within
24 hours upon acceptance and delivery.
We recommend that the management to observe the following:
1. Submission of contracts, purchase order, loan agreements and other agreements entered
into by the LGU to the auditor within five (5) days upon perfection thereof pursuant to
Section 6.6 of COA Circulars No. 2009-001 and COA Circular No. 2009-002; and
2. Notify the auditor of deliveries of goods and services procured by the agency within
twenty four (24) hours after acceptance pursuant to Section 6.9 of COA Circular No.
2009-002.
4. The Accounting Unit continued to incur delay in the submission of Disbursement
Vouchers and Reports of Check Issued including its supporting documents to the Audit
Team.
We recommend that the management to instruct the concerned officials to submit the paid
disbursement vouchers including the supporting documents to the audit team for examination
and verification in compliance with the above cited regulation.
5. The Municipality failed to submit the Program of Works as supporting documents to the
disbursement vouchers contrary to Item 3(i) of Annex A of the Revised IRR of RA 9184
and COA Circular 2012-001 dated June 14, 2012.
We recommend that the management to instruct the concerned officials to submit the Program of
Works including the supporting documents to the audit team for examination and verification in
compliance with the above cited regulation.
6. The Municipality failed to submit the Monthly Report of Official Travels and the
Monthly Report of Fuel Consumption to the Audit Team contrary to the provisions of
COA Circular No. 77-61 dated September 26, 1977; thus , precluded the auditor from
conducting validation and evaluation of official travels and reasonableness of fuel
consumption.
We recommend that the official drivers of the Local Government and other concerned personnel
to prepare and submit the Monthly Report of Official Travel and the Monthly Report of Fuel
Consumption pursuant to COA Circular No. 77-61 dated September 26, 1977. The Monthly
reports will provide a summary of trips per vehicles in chronological order of the serially
numbered Driver’s Trip Tickets.
7. Travelling expenses amounting to P 205,292.37 were disbursed despite lacked of
necessary supporting documents attached and where found in excess of allowable per
diems contrary to Executive Order (EO) no. 248 dated May 28, 1995 and amended by EO
no. 298 s. 2004.
We recommend to the management to require the Municipal Accountant to examine the
completeness of the supporting documents for travel before payment.
8. Stale checks amounting to P 468,967.11 in the General Fund and P43,286.00 in the Trust
Fund respectively remained unadjusted in the books of accounts as of December 31, 2016
thereby making the Cash in Bank – Local Currency Current account balance unreliable.
We recommend that the Municipal Treasurer to send a written notice to the payees of the
existence of the stale checks. Accordingly, to require the Municipal Accountant to prepare a
Journal Entry Voucher (JEV) debiting the Cash-in-bank, LCCA account and crediting Accounts
Payable to reflect the accurate balances of both the cash-in-bank and accounts payable accounts.

9. Service charges in the total amount of P 38,400.00 imposed by the banks were incurred
contrary to sound internal control policies, causing doubts on the legality of cash
transaction, accuracy of the cash balances and the integrity of the cash records.

We recommend the Municipal Treasurer to adopt internal control measures to preclude the
incurrence of unnecessary expenditures in the form of bank services charges and to ensure that:
1. Issuances of checks are duly backed up with cash in the depository bank; and
2. Errors, such as, differences in the amounts indicated in the check and Advice of Checks
Issued, be avoided.

Proper controls and procedures in the payment of obligations and in the monitoring of the
respective cash in bank balances should be observed to avoid possible disallowance in post-audit.

10. Statement of Financial Performance for Trust Fund was not prepared contrary to
Paragraphs 21 of PPSAS 1.
We recommend that the Municipal Accountant should strictly observe the guidelines on the
preparation and presentation of the Financial Statements specifically on the submission of a
complete set of financial statements.

11. Disclosures of information in the Notes to Financial Statements were not adequately
provided contrary to paragraph 127 of the Philippine Public Sector Accounting Standards
(PPSAS) No. 1.

We recommend that the Local Chief Executive to direct the Municipal Accountant to strictly
observe the rules and regulations on the preparation of the financial statements. Also, the
Municipal Accountant and the Municipal Budget Officer to reconcile monthly their respective
records to avoid the accumulation of the reconciling items and to facilitate the reconciliation of
their balances.

12. The Municipality failed to implement the mechanisms and processes of Joint Circular
2013-1 PCW/DILG/DBM/NEDA - Magna Carta for Women (MCW)

We recommend that the LGU officers and employees to conduct gender analysis and assessment
in accordance with the PCW/DILG/DBM/NEDA Joint Circular No. 2013-1 in order to formulate
policies and plans which can address the relevant gender issues in the locality and mainstream
the programs, projects and activities that could solve the issues identified to attain gender
equality.
E. STATUS OF ISSUANCE OF AUDIT SUSPENSIONS, DISALLOWANCES AND
CHARGES (SASDC)
The Status of issued Notice of Suspensions (NS), Notice of Disallowances (ND) and
Notice of Charges (NC) is summarized hereunder:

Beginning This period Ending Balance

Balance January 1 to December 31, (As of December
(As of January 1, 2016 31, 2016)
2016) NS/ND/NC NSSDC
Notice of Suspension - 16,033,507.02 1,535,969.88 14,497,537.14
Notice of Disallowance 4,835.12 - - 4,835.12
Notice of Charge - - -
Total 4,835.12 16,033,507.02 1,535,969.88 14,502,372.26

F. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS

The status of implementation of Prior Year’s Audit Recommendation is summarized in

the table below:

Status of Implementation No. of Recommendation Percentage to Total

Fully Implemented 6 30%
Partially Implemented 5 25%
Not Implemented 14 45%
Total 20 100%