EXECUTIVE SUMMARY

Introduction

Historical accounts claim that Libmanan, Camarines Sur was founded during the Spanish
regime. No record was available regarding its date of creation nor law creating it. On July 16,
2001, the Sangguniang Bayan of Libmanan through SB Resolution No. 0-132 adopted
September 15, 1574 as foundation date of the town. The largest of the thirty-five (35)
municipalities of the province, it occupies the largest land area with seventy-five (75) barangays.

The following are the reported major accomplishments of the municipality for calendar
year 2012, subject to validation by the Audit Team:

Source of Fund Project/Program/Activity Amount

20% Economic
Development Pulungan Center P 150,000.00
Improvement of Liga Multi-Purpose Bldg. 104,943.25
Riverbank Stabilization Project 630,000.00
Small Water Impounding Project 499,500.00
Electrification Program 999,000.00
Barangay Development Projects 1,187,798.00
Construction of Drainage Canal 999,500.00
Solid Waste Management Project 1,984,771.80
Libmanan River Protection Program 898,869.60
Construction of Goat Breeding Center 499,500.00
Agro-Forestry Project 97,742.90
School and Various Community Projects 333,861.00
Water Supply Project 178,460.00
Heavy Equipment 2,496,799.05
Other Barangay Development Projects 13,280,739.14
Other Infrastructure Projects 984,290.60
General Fund Cultural Program 957,725.65
Information & Communication Technology 74,348.00
Human Resource Development 49,740.00
Tourism Development Program 417,975.30
Clean and Green Program 791,248.60
Women Welfare Program 262,311.00
Technology & Livelihood Program 57,288.00
Special Education Program 96,364.00
 One Town One Product Project 59,406.20
Ugnayan Center 69,956.00
Peace & Order Program 153,615.05
Cooperative Enhancement Program 99,187.25
Improvement of Plaza Rizal 198,923.97
Youth & Sports Enhancement Program 481,773.50
School & Various Community Projects 450,000.00
Repainting of Plaza Rizal 47,050.00
Motor Pool 97,403.00
Construction of Stage 399,500.00
Libmanan Landmark at San Isidro 78,060.50
Loan Amortization 2,864,459.00
Libmanan-Pulantuna Watershed Management
Trust Fund Program 329,377.48
Farm-to-Market Roads (Malinao, Tanag, Sta.
Cruz and San Isidro) 2,795,457.62
Farm-to-Market Roads (Villa Socorro,
Cawayan, Villadima and Bahao) 4,658,419.15
Renovation of Public Market 128,799.00
Calamity Fund Irrigation, Canals & Laterals 999,000.00
Watercraft 679,000.00
Drugs & Medicines 97,402.00
Purchase of Foods & Other Supplies including
Animal/Zoological Supplies 337,664.00
Purchase of Communication Equipment 111,992.00
Other Property, Plant & Equipment purchased 279,865.00

Highlights of Financial Operations

Comparative Financial Condition

Increase
Particulars CY 2012 CY 2011 (Decrease)
Assets P 219,024,623.20 P 222,099,918.28 P ( 3,075,295.08)
Liabilities 89,343,833.59 116,085,646.17 ( 26,741,812.58)
Government Equity 129,680,789.61 106,014,272.11 23,666,517.50

The Municipality’s total assets and liabilities decreased by P3,075,295.08 and

P26,741,812.58 equivalent to 1.38% and 23.04%, respectively, while its government equity
increased by P23,666,517.50 or 22.32% over that of last year.
Comparative Sources of Income
 Increase
Sources of Income CY 2012 CY 2011 (Decrease)
Local Taxes P 7,371,865.92 P 7,424,715.28 P ( 52,849.36)
Permits & Licenses 937,679.32 854,611.76 83,067.56
Service Income 1,298,445.28 1,359,067.64 ( 60,622.36)
Business Income 1,722,032.00 1,980,626.20 ( 258,594.20)
Internal Revenue Allotment 123,473,483.00 127,005,500.00 ( 3,532,017.00)
Other Income 51,523,836.78 3,873,341.66 47,650,495.12
Gain on Sale of Disposed
Assets 178,470.00 -0- 178,470.00
Total P 186,505,812.30 P 142,497,862.54 P 44.007,949.76

Expenditures

Increase
Allotment Class CY 2012 CY 2011 (Decrease)
Personal Services P 74,392,492.25 P 73,814,464.67 P 578,027.58
MOOE 36,009,846.17 37,598,250.53 ( 1,588,404.36)
Subsidies/Donations 5,598,700.00 4,882,626.00 716,074.00
Financial Expenses 409,046.87 -0- 409,046.87
Total P 116,410,085.29 P 116,295,341.20 P 114,744.09

Scope of Audit

A financial and compliance audit had been conducted on the accounts of the Municipality
of Libmanan from January to December 2012. The audit consisted of the review of the
municipality’s operating procedures, interview with concerned officials and employees,
verification/analysis on test basis of accounts, computations, comparison of current with prior
year’s data and other procedures considered necessary under the circumstances. The following
areas had been identified as audit foci pursuant to COA Memoranda dated January 28, 2013 and
2012-010 dated October 17, 2012:

1. Cash and Cash Accounts

2. Cash Advances
3. Credit Financing/Debt Servicing
4. Local Disaster Risk Reduction and Management Fund (LDRRMF)
5. 20% Development Fund
6. Outstanding Legal Cases and Final and Executory Decisions on Legal Cases
7. Complete Submission of Accounts
8. Seal of Good House Keeping
9. Compliance with Full Disclosure Policy
10. Compliance with Tax laws and Regulations
11. Gender and Development (GAD)
12. Suspensions, Disallowances and Charges
 13. Payments to Casuals, Job Orders, Contractuals and Consultants
14. Fund Transfers

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion in view of the unreconciled year end Property,
Plant and Equipment (PPE) valuations of the General Services Office and the Accounting
Department. There were no sufficient records/documents relative to the PPE which will allow
the adoption of alternative audit procedures to determine the validity and reliability of the
reported year-end net valuations of PPE amounting to P115,630,153.50 which is 52.79% of
the agency’s Total Assets.

Summary of Significant Findings and Recommendations

A. Cash and Cash Accounts

1. Stale Checks totaling P448,297.05 remained unadjusted for so long a time inconsistent
with COA Cir. No. 96-011 thereby understating the Cash-in-Bank, Local Currency
Current Account and Government Equity accounts at the end of the year.

We recommended that the Municipal Accountant coordinate closely with the Municipal
Treasurer to determine whether the checks which became stale are still unclaimed or had been
received by the concerned payees. If unclaimed but whose original disbursement voucher (DV)
and the supporting documents are still with the Treasurer, the stale check shall be marked
“Cancelled”. The original DV and supporting documents shall be returned to the Accountant who
shall prepare a Journal Entry Voucher (JEV) to record the transaction as Accounts Payable.
Pertinent provisions of the Manual on the New Government Accounting System (NGAS)
provides the specific procedures in taking up the stale checks.

2. Petty Cash Fund under the Trust Fund amounting to P360,984.00 was not liquidated
at the end of the year inconsistent with Section 48 of the Manual on the New
Government Accounting System (NGAS) which failure had resulted to an
overstatement of both the Assets and Liabilities accounts at the end of the year.

The Disbursing Officer must see to it that the Petty Cash Fund be liquidated at the end of
the year for the proper accounting of the actual expenses incurred during the period. However, if
at the end of the year the PCF had not been fully disbursed, the unused cash shall be returned to
the treasury and have the amount receipted. In the ensuing year, at new PCF shall be set up.

B. Cash Advances

3. Due from Officers and Employees totaling P39,459.23 as of December 31, 2012 have
remained unliquidated due to the failure of concerned municipal personnel to submit
liquidation reports within the period prescribed under COA Circular Nos. 97-002 and
96-004, resulting in the overstatement of both the Assets and Equity accounts.
 We recommended that the Accountable Officers immediately liquidate the outstanding
cash advances and adhere strictly to the abovementioned provisions of COA Circular 97-002 to
avoid suspension of salaries for non-liquidation of cash advances. We recommended further that
the Municipal Accountant strictly observe the provisions of COA Cir. No. 96-004 for the proper
monitoring of all cash advances.

C. Local Disaster Risk Reduction Management Fund (LDRRMF)

4. The Local Disaster Risk Reduction and Management Officer (LDRRMO) failed to
submit the Report on the Sources and Utilization of the Disaster Risk Reduction
Management Fund (DRRMF) required under Section 5 of COA Circular No. 2012-002
dated Sept. 12, 2012, inconsistent with Rule 6 of Republic Act No. 10121, thus,
preventing the timely verification and review of transactions to determine whether
said fund had been expended strictly in accordance with the prescribed guidelines.

We recommended that the LDRRM Officer submit the required report strictly in
accordance with Sec. 5.1.5 of COA Cir. No. 2012-002.

D. 20% Development Fund

5. The Municipality failed to strictly adhere to the provisions of DILG Memorandum

Circular No. 2010-138 dated Dec. 2, 2010 in the utilization of its 20% component of the
Annual Internal Revenue Allotment shares as mandated under Sec. 287 of RA 7160,
otherwise known as the Local Government Code of 1991. Some disbursements were
made for items which did not partake the nature of capital expenditures and
investments nor take into account cost recovery and return of investment, thus,
resulting in an inefficient utilization of the fund.

We recommended that the LGU should adhere strictly to DILG Memo Cir. No. 2010-
138 in the utilization of its 20% LDF as mandated by Sec. 287 of RA 7160. Also, development
projects enumerated under DILG Memo Cir. No. 2007-05 dated Jan. 26, 2007 must be given
priority and expenditures which should be charged to the fund must be in consonance with the
Municipal Development Plan to bring optimum benefits to the constituents of the Municipality .
The incurrence of valid expenditures which are not in accordance with the guidelines of the
DILG must be a proper charged against the General Fund Proper and not against the 20% LDF.

E. Procurement

6. Infrastructure projects were awarded mostly to few favored suppliers with a single
calculated/rated responsive bids, thus, raising doubts as to the effectiveness and
efficiency of the procurement process of the Municipality of Libmanan as mandated by
 Republic Act No. 9184 and its IRR otherwise known as the “Government Procurement
Reform Act.”

We recommended strict adherence by the Municipality to the provisions of RA 9184.

7. The review and evaluation of contract and ocular inspection conducted by the COA
Technical Audit Specialist on the Improvement of Cultural Center, Phase 1, project
had resulted to a total disallowance of P134,967.05.

We recommended that the Municipal Engineer be extra careful in the preparation of the
Municipality’s ABC because it is the basis of the contractor’s bid and is the ceiling for
acceptable bid prices in accordance with the provision of RA 9184. The ABC should be based
on the approved Bidding Documents for the contract which contain the same work items and
quantities as those to be used by the contractors in preparing their bids.

F. Revenues

8. The municipality could have earned additional income from market stalls rental by as
much as P935,007.50 as of December 31, 2012 had the Libmanan Public Market
Supervisor been more aggressive and persistent in exercising his duties required by
Section 14 of Municipal Ordinance No. 12-02 and had strictly enforced Item(b) of the
terms and conditions of the Lease Contract provided in Section 30 of the same
ordinance, An Ordinance Enacting the Market Code of Libmanan, Camarines Sur.

We recommended that the Libmanan Public Market Supervisor be more aggressive

and persistent in enforcing all ordinances and regulations in all matter relative to the operations
of the public market in compliance with Section 14 of Municipal Ordinance No. 12-02.

We also recommended that the Libmanan Public Market Supervisor be more determined
in collecting the monthly stalls rental and to strictly enforce Item(b) of the terms and conditions
of the Lease Contract provided in Section 30 of the same ordinance.

We further recommended that the Market Supervisor immediately send out demand
letters to delinquent stallholders to pay their arrears and after the lapse of the grace period,
declare the stall vacant and submit the same to the Market Board for proper adjudication,
notwithstanding the immediate filing of appropriate legal charges to those stallholders who
failed to pay their arrears after due demand.

9. Economic Enterprise operations continuously suffered Losses Before Subsidies,

Donations & Extraordinary Items totaling to P52,398,857.74 from CYs 2009 to 2012
since its creation in 2008 due to the annual minimal income generated yet huge amount
of expenses for personal services have been incurred, thus, defeating the main objective
of its creation which is to substantially increase the income of the municipality.
 We recommended that the Operations Head of the three economic enterprises namely,
Public Market, Slaughterhouse and Cemetery with the help of the Municipal Treasurer strategize
to maximize their revenues in the ensuing years.

We further recommended that the Municipal Budget Officer, in the preparation of the
Municipality’s Annual Budget of the next calendar year, include in the Personnel Schedule of
the Market, Slaughterhouse and Cemetery Offices those employees who are only actually
rendering their services in these premises.

G. Special Education Fund

10. Disbursements totalling P224,664.11 were charged to the Special Education Fund
(SEF) contrary to Sections 100 and 272 of Republic Act No. 7160, otherwise known as
the Local Government Code of 1991 and DECS/DBM/DILG Joint Circulars No. 01,
series of 1998 as amended, thus, depleting the SEF funds that should have been
allocated for priority activities/projects.

We recommended that the Local School Board strictly comply with Sections 100 and 272
of RA 7160 and DECS/DBM/DILG Joint Circular No. 1. Series of 1998, on the charging of
expenses against the SEF. Expenditures which are not a proper charge against the SEF must be
charged against the funds of the DepEd since it has also its own budget.

We recommended further that concerned officials of the LGU desist from approving
expenditures which are not legitimate charges against the SEF to avoid suspension and
disallowance of the transactions involved.

H. Complete Submission of Accounts

11. Monthly accounts and Bank Reconciliation Statements were submitted beyond the
prescribed deadline provided for under COA Cir. Nos. 2009-006 dated Sept. 15, 2006
and 96-011 dated Oct. 2, 1996, respectively, causing delay in the conduct of verification
and review of said accounts and reports, hence, corrections of deficiencies noted were
not brought to the immediate attention of the municipal officials concerned.

We recommended that the Municipal Accountant should desist from the practice of
submitting monthly accounts beyond the prescribed deadline provided for under COA Cir. No.
2009-006 to prevent delay in the timely rendition of required reports. We recommended further
that Bank Reconciliation be submitted in accordance with COA Cir. No. 96-011 to avoid the
accumulation of unidentified reconciling items in the agency’s books.
I - Job Order Contracts/Contractuals

12. Appropriations for the Economic Enterprises of the Municipality of Libmanan were
used for the payments of the wages of some contractual workers who performed
services totally different from the purposes for which the economic enterprises were
established, thus, the main objective of the creation of these economic enterprises
which was to substantially increase the income of the Municipality was not realized.

We recommended that Management should desist from charging wages of contractuals

assigned to the different departments of the Municipality to the budgets of the Market,
Slaughterhouse and Public Cemetery because their functions are totally different from the
purpose for which these three Economic Enterprises were created.

I. Credit Financing/Debt Servicing

Records from the Accounting Office disclosed that the loans secured by the Municipality
from the Development Bank of the Philippines and the Land Bank of the Philippines were both
authorized by the Sangguniang Bayan for the purchase of heavy equipments. The following
heavy equipments were purchased: Bulldozer, Dump Truck and Loader.

Verification of the agency’s financial statements for CY 2012 disclosed that the total
principal balance of P16,607,732.90 (P4,595,443.15 + P12,014,289.75) was correctly taken up in
the municipality’s books of accounts as Long-Term Liabilities.

J. Local Disaster Risk Reduction Management Fund

The LDRRMF represents the amount set aside by the LGU to support its disaster risk
management activities pursuant to Republic Act No. 10121 otherwise known as the “Philippine
Disaster Risk Reduction and Management Act of 2010.” The amount available and utilized
during the year totaled P9,515,412.05 and P4,322,220.45, respectively. The amount of
P4,958,223.79 which represents the 2011 and 2012 balances for Quick Response Fund and
MOOE was transferred to Trust Fund account (Special Trust Fund) on January 28, 2013.

L. Outstanding Legal Cases & Final and Executory Decision on Legal Cases

There were no outstanding legal cases and final and executory decision on legal cases
during the year under review.

M. Suspension, Disallowances and Charges

 Suspensions Disallowances Charges
Balance, 1/1/12 P -0- P 72,195.79 P -0-
Issued in 2012 -0- -0- -0-
Settlement in 2012 -0- 40,535.00 -0-
Balance, 12/31/12 P -0- P 31,660.79 P -0-

N. Audit of funds and activities for Gender and Development (GAD)

The municipality’s Gender and Development programs/projects/activities were in

accordance with the rules and regulations set forth under the GAD Circular, thus, promoting the
welfare of the targeted beneficiaries and has contributed to the improvement of the quality of
life of the people. The fund was sufficiently appropriated to carry out the planned
programs/projects/activities.

O. Fund Transfers to NGO/PO

There were no fund transfers to NGO/PO during the year.

P. Seal of Good House Keeping

13. The Municipality of Libmanan, Camarines Sur passed the Department of Interior and
Local Government (DILG) Seal of Good Housekeeping and qualified as recipient of
the P1,000,000.00 Local Government Support Fund (LGSF).

The Management of Libmanan is commended for their coordinated efforts to strictly

comply with the regulations of the Department of Interior and Local Government (DILG) which
resulted to being conferred with the Seal of Good Housekeeping for which few Local
Government Units received. Continued compliance is again encouraged.

Q. Compliance with Full Disclosure Policy

The Audit Team cannot comment on the compliance or non-compliance by the LGU in
2012 with the Full Disclosure Policy as contained in DILG Memorandum Circular Nos. 2010-83
dated October 31, 2010, 2011-08 dated January 13, 2011 and 2011-134 dated September 19,
2011 because of the new assignment of COA Personnel to man the audit teams and support
services of the revised structure under COA Resolution No. 2012-019 dated December 20, 2012.
The actual turn-over of work load for the municipality of Libmanan from the previous Audit
Team to the incumbent Audit Team was made on February 12, 2013.
R. Compliance with Tax laws and Regulations

14 .The Management through the Accountant complied with the regulations of the BIR,
GSIS, PAG-IBIG and PHILHEALTH, since the mandatory deductions effected and the
remittances were made within the deadline.

The Accountant is commended for her diligent efforts to see to it that BIR, GSIS, PAG-
IBIG and PHILHEALTH deductions were effected and that the remittances were always made
within the deadline, thus, avoiding the impositions of penalties and surcharges.

S. Others

15. The reported net book value of Property, Plant and Equipment in the financial
statements at the end of the year totaling P115,630,153.50 representing 52.79% of the
Municipality’s total assets could not be validated due to the failure of the General
Services Office to reconcile its Report on the Physical Count of Property, Plant and
Equipment (RPCPPE) with that of the Accounting records contrary to the COA
Handbook on Property and Supply Management System and Section 114 of the
Manual on the New Government Accounting System (NGAS), Vol I.
We recommended that the Municipal Accountant and the GSO exert efforts to reconcile
their property records. For properties issued to officials of other government agencies, we
recommended to send letters to the heads of their offices informing them of the property
accountabilities of the concerned government officials with a request not to issue property
clearance unless a clearance from money and/or property accountabilities from LGU Libmanan
be secured first before their transfer to other assignments and/or retirement.

16. Accounts Payable totalling P2,933,193.43 and Due to Officers and Employees totalling
P495,955.62 remained in the books for two years and above contrary to Sec. 98 of PD
1445, otherwise known as the State Audit Code of the Philippines resulting in an
overstatement of liabilities and correspondingly understating the agency’s equity.

We recommended that Accounts Payable under the General and Special Education Funds
which remained in the books for two years and above and against which no actual claimant and
not covered by perfected contracts on record be reverted to the Unappropriated Surplus of the
General Fund of the agency by drawing appropriate adjusting journal entries to be effected in the
agency books immediately.

17. The year-end balances of Due from Other Funds and Due to Other Funds which are
reciprocal accounts were not reconciled having a difference of P4,109,190.65 contrary
to Sections 28 and 152, Volume III of the Manual on the New Government Accounting
System (NGAS) for Local Government Units, hence, not correctly stated in the
financial statements of the LGU as of December 31, 2012.
 We recommended that the Municipal Accountant should immediately verify the causes of
disparity of the balances of these reciprocal accounts. Prepare and record the necessary adjusting
journal entries in the appropriate books of accounts to bring the balances of the reciprocal
accounts agree with each other. Adherence to the prescribed procedures in recording intra-
agency receivables and payables stated in Sections 28 and 152 of the NGAS is earnestly enjoined
to avoid omission which eventually lead to unreconciled reciprocal accounts.

Status of Implementation by the Management of Prior Years’ Audit Recommendations-

Of the twenty-nine (29) prior years’ audit recommendations, two (2) were implemented,
thirteen (13) were partially implemented while the remaining fourteen (14) were not
implemented.