EXECUTIVE SUMMARY

Introduction

Coron is the main gateway to a group of island municipalities, known as the

Calamianes, in the northern Palawan which are famous for their eco-tourism attractions.
Eco-tourism is one of the visions of Coron, this is to develop tourism on an
environmentally sustainable basis, to develop a diversity of destinations, activities,
attractions and markets to minimize exposure to external threats to the tourism industry,
and to enhance and contribute to social cohesion and cultural preservation and adapt to
the climate change.

The major infrastructure project undertaken is the reclamation of the bay on

Barangay Poblacion 2 and Poblacion 3, called the Coron Waterfront Development
Project, implemented by the Palawan Provincial Government with profit sharing
agreement with the Municipality of Coron. When completed, it will feature at least 2
hotels, floating restaurants, souvenir shops, zip line and other tourist facilities and
amenities and nature park.

Financial Highlights

As of December 31, 2017, total assets amounted to ₱531,053,507.40 which

increased by ₱65,619,567.83 while liabilities of ₱144,504,660.62 decreased by
₱12,636,551.31. Government Equity in the amount of ₱386,548,846.78 showed an
increase of ₱78,256,119.60. Total realized revenue increased by ₱41,693,734.47 along
with an increase in the total expenses by ₱11,936,687.78.

Increase
CY 2017 CY 2016 ∆%
(Decrease)
Total Assets 531,053,507.40 465,433,939.57 65,619,567.83 12%
Total Liabilities 144,504,660.62 157,141,211.93 (12,636,551.31) -9%
Total Equity 386,548,846.78 308,292,727.18 78,256,119.60 20%
Total Income 250,171,473.73 208,477,739.26 41,693,734.47 17%
Total Expenses 169,548,585.69 157,611,897.91 11,936,687.78 7%

Scope of Audit

Financial, compliance and value for money audits were conducted on the accounts
and operations of the Municipality of Coron, Province of Palawan for the Calendar Year
ended December 31, 2017. The audit was conducted in accordance with Philippine Public
Sector Standards on Auditing. By applying standard audit techniques and procedures, we
ascertained the fairness of the presentation of the financial statements and compliance of
the Municipality to laws, rules and regulations as well as the economical, efficient and
effective utilization of resources.
Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the financial statements because the
validity, correctness and existence of the Property, Plant and Equipment (PPE) account
with a carrying value of ₱181,070,355.89 (excluding Land) could not be ascertained due
to; a) incomplete physical count of the municipality’s property; b) non-maintenance of
property ledger card by accounting office; and c) non-maintenance of property records by
the General Services Office (GSO) contrary to the provisions of New Government
Accounting System (NGAS) Manual for Local Government Units.

The audit team was unable to satisfy themselves as to the carrying value of the
account by means of other auditing procedures due to inadequacy of reliable reports and
records.

Significant Audit Findings and Recommendations

For exceptions cited above, the audit team recommended the following:

2. The GSO should maintain Property Cards per class and category of property,
plant and equipment indicating acquisition date, the brief descriptions and work
back on the previous years and reconcile with the records of the accounting office
to determine the correctness of the property records. Update the property issue
slip/PAR to check custodianship of the property.

3. The LCE should require each department heads to fast track the inventory taking
of all properties under their office and submit the inventory report to the
committee for validation and verification of the correctness and existence of the
property.

4. The LCE should compel the inventory committee to fully accomplish the
RPCPPE, indicating the actual count and complete details, and the results of the
actual count shall be reconciled with the property and accounting records. All
discrepancies between physical count and property records must be investigated,
adjusted and reconciled immediately. From thereon, perform periodic inventory
of PPE and prepare report on the results thereof, in accordance with existing
regulations.

Other deficiencies noted in the audit of the accounts and transactions of the
Municipal Government of Coron, Palawan for the year 2017, as discussed in detail in Part
II of the Report.
1. Cash advances granted to officials and employees totaling ₱3,033,503.52
remained unliquidated as of December 31, 2016 contrary to the provisions of
COA Circular No. 97-002 dated February 10, 1997.

We strongly recommended that the municipality should strictly implement the

proper granting, utilization and liquidation of all cash advances as prescribed in COA
Circular No. 97-002.

We likewise recommended that the Municipal Mayor to serve a written notice

to all accountable officers and demand settlement of the outstanding cash advances.

In all instances, the Municipal Mayor and Municipal Accountant must ensure
that each provisions of COA Circular No. 97-002 dated February 10, 1997 are strictly
observed and that all cash advances are fully liquidated at the end of the year.

Lastly, grant of cash advances to individuals who are not employed in the
municipal government must likewise be stopped as the Municipal Mayor has no
administrative supervision over them and thus withholding of salaries cannot be
instituted against them.

2. Donations and financial assistance were granted without appropriate and

complete documentation contrary to Sections 2 and 4(2) of Presidential Decree
(PD) No. 1445 and Section 335 of Republic Act (RA) No. 7160.

We recommended the following remedial measures to regulate the granting of

financial assistance:

a. Create the policies and guidelines on the grant of donation/financial assistance

containing the following:

 Type of financial assistance (medical, burial etc.)

 Approval limits for specific cases.
 Criteria in granting the donation/financial assistance and the
documentary requirements for each particular case.

b. All cases should be referred to the MSWDO for eligibility evaluation and the
case study report should be prepared and be made part of the supporting
documents of the claim.

c. All disbursements for financial assistance should be supported with

appropriate and complete documentation pursuant to Section 4(6) of P.D. No.
1445.
3. The Municipality failed to submit the Statement of Comparison of Budget and
Actual Amounts contrary to Paragraphs 14 and 21 of the Philippines Public
Sector Accounting Standards (PPSAS) No. 24 and PPSAS No. 1, thus users of
the reports are not assured on the operation and performance of the Local
Government Unit as at December 31, 2017.

We recommended that the Municipal Accountant and the Municipal Budget

Officer to reconcile and submit the Statement of Comparison of Budget and Actual
Amounts.

4. The Municipality is not fully compliant with the provisions of Republic Act
(R.A.) No. 10121 or the “The Philippine Disaster Risk Reduction and
Management Act of 2010”, COA Circular No. 2012-002 dated September 12,
2012 and NDRRMC-DBM-DILG Joint Memorandum Circular No. 2013-1 dated
March 25, 2013.

a. The Municipality failed to transfer the unexpended balance of the Local

Disaster Risk Reduction and Management Fund (LDRRMF) for CY 2017 to
a Special Trust Fund.

b. Trust Liability – DRRMF amounting to ₱8,676,015.36 was recorded under

the General Fund books.

c. The Municipality failed to regularly submit the Report on the Sources and
Utilization of the Disaster Risk Reduction and Management Fund contrary
to COA Circular No. 2012 – 002.

d. Expenditures totaling ₱416,720.00 not related to disaster mitigation,

prevention, preparedness, response, rehabilitation and recovery were
charged to the Local Disaster Risk Reduction and Management Fund
contrary to NDRRMC-DBM-DILG Joint Memorandum Circular No. 2013-1
dated March 25, 2013.

e. The amount and details of the unexpended balance of LDRRMF was not
disclosed in the Notes to Financial Statements.

We recommended the following corrective measures:

 The Municipal Accountant to transfer the unexpended balance of the

LDRRMF to a special trust fund in the Trust Fund books pursuant to Section
21 of R.A. No. 10121 to ensure that funds are available for disaster risk
reduction and management activities of the Local Disaster Risk Reduction and
Management Council and maintain a separate bank account. The Municipal
Treasurer to transfer the unexpended QRF and DRRMF – MOOE to the TF
bank account.
  Make the appropriate correcting journal entry close the “Trust Liability –
DRRMF” account erroneusly recorded under the General Fund;

 Submit the Monthly Report on Sources and Utilization of th DRRMF duly

certified correct by the Municipal Accountant on or before the 15th day after
the end of each month; and

 The Municipality to be more prudent in the utilization of its LDRRMF, taking

into consideration the existing rules and regulations governing the utilization
of the said fund.

 Disclose the details of the unexpended balance in the Notes to Financial

Statements.

5. The Municipality has not efficiently and economically carried out its SWM
function due to (a) lax implementation of policies and regulations on waste
segregation and collection; and (b) lack of facility and procedures on the
transfer, recovery/processing and storage, contrary to the provisions of Republic
Act No. 9003.

a. The Municipality still operating the existing controlled open dumpsite.

b. The barangays of the Municipality of Coron did not establish/maintain their

own MRF which was not in conformity with Section 32 of R.A. 9003.

c. Public information on the wastes segregation was not yet conducted by the
LGU.

We recommended that the Local Chief Executive, the Municipal Development

Council and the Municipal Solid Waste Management Board (a) earmark the financial
support of the Municipality to the barangays under the 20% Development Fund on
Solid Waste Management Program for the establishment of MRFs and for the
implementation of waste segregation at source; (b) enforce strictly the no
segregation, no collection policy and the no-littering policy and intensify information
campaign among the residents; and (c) prioritize the establishment of sanitary landfill
and possibly seek the assistance of the provincial government and other government
agencies in seeking Free and Prior Informed Consent (FPIC) from the IP.

6. The Municipality did not submit copies of executed contracts and purchase
orders to the COA Auditor within the period prescribed under COA Circular
No. 2009-001 dated February 12, 2009, therefore preventing timely auditorial
and technical review and communication of any defects/deficiencies found in
audit. Also, the required Procurement Monitoring Report (PMR) was not
prepared and submitted to the GPPB.
 For the abovementioned deficiencies, we recommended the following
corrective measures:

 The Municipal Mayor to enjoin the BAC Secretariat for the timely submission of
copies of government contracts and each of all the documents forming part
thereof within five (5) working days from execution, and the designated Supply
Officer should furnish the COA of the POs within five (5) working days from
issuance date pursuant to COA Circular No. 2009-001 dated February 12, 2009 to
ensure timely review and evaluation of the same so that management could be
immediately informed of any defects/deficiencies noted thereon.

 Prepare the Procurement Monitoring Report (PMR) and submit the same to the
GPPB in the prescribed format within fourteen (14) calendar days after the end of
the semester as required under Section 12.2 of R.A. 9184 and its IRR.

7. Absence of budgetary provision for the Local Child Protection Council (LCPC)
allocation for CY 2017 may result to failure to effectively carry out the mandate
of the program contrary to Republic Act No. 9344 and DILG Memorandum
Circular No. 2012-120.

We recommended that the LGU provide for the 1% LCPC funding allocation
in their Annual Budget in the succeeding years.

8. The Municipality is not fully compliant on the requirements on information and

publicity of its Projects/Programs/Activities for Calendar Year (CY) 2017
contrary to the provision of COA Circular No. 2013-004 dated January 30, 2013
as amended by COA Circular No. 2015 – 006 dated August 20, 2015.

We recommended the Local Chief Executive (LCE) to instruct the Municipal

Engineer to submit the list of on-going government PPAs and those to be
implemented during the year. The LCE should regularly submit the monitoring
report and to submit at the beginning of the year a list of on-going government PPAs
and those that are to be implemented during the year. Strict compliance with the
provisions of COA Circular No. 2013-004 dated January 30, 2013.

The findings and recommendations contained in the report were discussed with
Municipal officials and staff on June 14, 2018. Management’s views and reactions were
considered in the report, where appropriate.

Status of Implementation of Prior Year’s Audit Recommendation

Of the nine (9) audit recommendations embodied in the CY 2016 Annual Audit
Report, one (1) was implemented and eight (8) were unimplemented.