EXECUTIVE SUMMARY

Introduction

The Municipality of Catarman, Northern Samar, was created by virtue of R.A.

No. 4221 which was enacted on June 19, 1965. It is a first class municipality composed
of the fifty-five (55) barangays Agricuture is the main source of livelihood.

The municipality is headed by the Municipal Mayor Francsico C. Rosales, Jr. He

is assisted by Vice Mayor Ma. Clarissa C. Bonsol; Ms. Marietta D. Pabello, the Municipal
Treasurer; Ms. Arniza V. Osido, the Municipal Accountant; and Mr. Jose C. Esquillo, the
Municipal Budget Officer. The present personnel complement is composed of one hundred
seventy five (175) permanent employees and eleven (11) elective official including the
ABC President.

A financial and compliance audit was conducted on the accounts and operations
of the Municipality of Catarman, Northern Samar, for the Calendar Year 2017. The audit
was aimed to ascertain the propriety and validity of dibursements and receipts as well as
the reliability of the accounts as presented in the financial statements. The audit consisted
of review of operating procedures, interview with concerned municipal officials and
employees, verification and analysis of accounts, and such other procedures considerred
necessary under the circumstances. The audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by
management; as well as evaluating the overall pressentation of the financial statements.

Financial Highlights

The financial position and financial performance of the municipality for the current
an previous year are presented below:

Increase (Decrease)
Account 2017 2016 Amount %
Assets 643,117,198.84 504,858,774.38 138,258,424.46 27.39
Liabilities 118,644,045.64 105,407,380.69 13,236,664.95 12.56
Equity 524,473,153.20 399,451,393.69 125,021,759.51 31.30
Income 537,373,740.53 509,320,370.06 28,053,370.47 5.51
Expenses 438,764,556.30 466,001,169.41 (27,236,613.11) (5.84)

Appropriations
The total appropriations for Calendar Year 2017 amounted to P364,278,028.00
representing an increase of P51,414,762.00 or 16.43% over last year’s appropriations.
The table on the next page shows its breakdown with comparative figure for 2016, as
follows:
 Increase (Decrease)
Allotment Class 2017 2016 Amount %
Personal Services 133,272,370.00 128,168,539.00 5,103,831.00 3.98
Maintenance and Other 129,578,432.34 93,034,727.00 33,543,705.34 36.06
Operating Expenses
Capital Outlay 101,427,225.66 91,660,000.00 9,767,228.66 10.66
Totals 364,278,028.00 312,863,266.00 51,414,762.00 16.43

Obligations

In view of the increase in the total appropriations, the total obligations from current
appropriations amounted to P276,676,242.75. An increase of P14,525,978.32 or 5.54%
compard to last year’s obligations of P262,150,264.43. The table below shows its
breakdown with comparative figures for CY 2016, as follows:

Increase (Decrease)
Allotment Class 2017 2016 Amount %
Personal Services 103,445,164.36 133,052,614.19 (29,607,449.83) 22.25
Maintenance and 86,382,627.48 78,204,727.45 8,177,900.03 10.46
Other Operating
Expenses
Capital Outlay 86,848,450.91 50,892,922.79 35,955,528.12 70.65
Totals 276,676,242.75 262,150,264.43 14,525,978.32 5.54

Independent Auditor’s Report

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements because of the continued failure of the Municipal Accountant to
prepare and submit the bank reconciliation statements with the paid checks and original
copies of the debit and credit memos of all depository accounts of the LGU within the
prescribed period thus, the accuracy of the Cash in Bank balance totaling P60,365,395.16
was not ascertained, and the failure of the Accounting Office to record the thirty eight (38)
lots with a fair market value of P362,808,947.42 all with Tax Declaration in the name of
LGU-Catarman while the seven (7) lots that were booked up in the amount of
P3,930,567.28 are not registered in the name of the Municipality which both conditions
has the effect of understating the reported balance at year end.

Summary of Significant Observations and Recommendations other than the basis for
Qualified Opinion

1. The Municipality did not insure properties amounting to P381,581,374.15 with the
General Insurance Fund of GSIS, mandated in Section 3.1 of COA Circular No. 92-
390 dated November 17, 1992, and Section 5 of Republic Act 656, as amended by PD
245 dated July 13, 1973, thus exposing the local government to unnecessary loss or
damage in cases of natural or man-made calamities.
 We recommend that the Local Chief Executive direct the concerned officers or
officials to identify/inventory and classify the insurable properties as such, to
facilitate the funding of insurance expenses in the future and the application for
insurance coverage with the GSIS. Henceforth, strictly comply with the provision
of COA Circular No. 92-390 dated November 17, 1992.

2. A total of P31,561,351.21 in remittances to GSIS, Pag-IBIG, PhilHealth, CFI, Land

Bank, DBP and Quedan were not supported with remittance list and officall receipts
and/or validated deposit slips contrary to the provisions of COA Circular No. 2012-001
dated June 14, 2012 thereby creating doubt on the correctness and completeness of the
remittance made.

We recommend that the Municipal Accountant should see to it that the every
remittance vouchers are supported with remittance list which should be equal to
the amount of the disbursement vouchers and the validated deposit slips and/or
official receipt issued by the agency concerned to acknowledge remittance
pursuant to COA Circular No. 2012-001 dated June 14, 2012.

3. Financial transactions in connection with the operations of the Local Economic

Enterprise of the municipality were not separately accounted as Special Account under
the General Fund for management to have adequate information and monitoring of its
financial transactions as provided for in COA Circular No. 92-381 dated July 3, 1992
and the Manual on the Setting Up and Operations of Local Economic Enterprise.

We recommend that the Municipal Accountant set up a special account in the

General Fund of each LEE to record all transactions pertaining to its operations
and prepare the corresponding periodic financial statements to provide
management with information on the results of its operation and determine
sustainability and viability of these economic enterprises.

4. Financial Assistance amounting to P758,000.00 from the Special Education Fund were
paid to school officials with disbursement vouchers covering the payment were not
completely supported and no utilization/liquidation reports were submitted, thus it is
not known whether the funds were spent legally and for public use.

To correct the error noted, we recommend that LGU Catarman should require
the persons granted financial assistance to submit requires supporting documents
and/or utilization/liquidation reports pursuant to Section 4(6) of PD 1445 and
COA Circular No. 2012-001 dated June 14, 2012.

5. The unexpended/unutilized LDRRMF from CY 2012 to CY 2016 and that of CY 2017

amounting to P11,756,665.15 was not transferred to a Special Trust Fund instead were
continually recorded in the General Fund in violation to Section 2 of RA 10121
(Philippine Disaster Risk Reduction and Management Act of 2010) and COA Circular
No. 2012-002 dated September 12, 2012. Subsidiary Ledgers were not maintained to
record utilization of the fund.
 We recommend that the Local Chief Executive should direct the Municipal
Accountant to determine how much was the unspent/unexpended balance of the
fund in a yearly basis from CY 2012 to the present and effect its transfer to the
Special Trust Fund. She should present in the Notes to Financial Statements the
amount and details of the fund in accordance with the prescribed format in Annex
D of COA Circular No. 2012-002.

It is further recommended that Municipal LDRRM Officer be instructed to

prepare and submit the LDRRMF Investment Plan and Monthly Report on
Sources and Utilization of DRRM Funds.

6. The LGU provided only P1,585,000.00 or .5% for Gender and Development out of the
total annual budget of P318,841,987.00 contrary to Section 43 of RA 9710 thus GAD
issues may not be properly addressed. Moreover, the GAD Plan and Budget was not
submitted to DILG for review and endorsement and Annual Accomplishment was not
prepared, contrary to pertinent provisions of PCW, NEDA and DBM Joint
Memorandum Circular No. 2013-01, thus there was no assurance that the GAD
programs, projects and activities were aligned to the priorities of the province and its
implementation was effectively sustained.

We recommend that the LGU provides at least five percent (5%) of their total
budgetary allocation for Gender and Development Budget as provided in Section
43 of RA 9710.

We further recommend that the Local Chief Executive require the GAD focal
person to submit the GAD Plan and Budget to the PPDO before it is submitted to
the DILG for review and approval. Likewise, require the submission of the
Accomplishment Report.

7. Contracts of projects funded from funds received from National Government Agencies
were not submitted within five (5) days from its perfection, hence the review of the
contract and evaluation of its implementation were not done contrary to COA Circular
94-001 dated February 12, 2009.

We recommend that management should require the concerned personnel to

submit copies of contracts for infrastructure projects together with the complete
supporting documents within five (5) working days from the date of perfection
thereof pursuant to the provisions of COA Circular No 2009-001 to facilitate
timely review thereof in time for corrective measures of possible defects before
the implementation of the projects and for our office to conduct evaluation of its
implementation.

8. Due to the absence of an approved 10-Year Solid Waste Management Plan, evaluation
of the implementation of the Solid Waste Management Program of the LGU could not
 be made thus, compliance with pertinent provisions of Republic Act 9003 dated
January 26, 2001 could not be ascertained.

We recommend that management should facilitate the immediate approval of the

10-Year Solid Waste Management Plan pursuant to section 16 and 17 of Republic
Act no. 9003. Likewise, we recommend to management to strictly enforce
compliance of pertinent provisions of the law for the protection of public health
and the environment.

9. Payments of wages to job order employees in the aggregate amount of P15,281,183.00

were not supported with necessary documents, thus, the necessity of hiring them could
not be determined, contrary to certain provisions in Section 4(6) of Presidential Decree
No. 1445 and the governing rules of the Civil Service Commission.

We recommend that proper documentation, sound management and fiscal

administration should be observed in order to attain efficiency in the use of
government funds.

10. Contract of consultancy services for three (3) consultants entered into by the Office of
the Sangguniang Bayan did not undergo public bidding as required in Republic Act
9184 or the Government Procurement Reform Act thus, transparancy in the hiring of
these consultants were not guarateed. In addition, the nature of work to be done as
indicated in the contract and the accomplishment reports submitted are more or less
similar and not quantified hence, the need to acquire their services could not be
evaluated.

In view of the foregoing, we recommend the following courses of action:

1. Engaging the services of consultants should be done through public
bidding and shall follow the usual bidding processes and timelines to
promote transparency in hiring consultants.

2. The contract should specify the scope of activities and the quantity of
each activities.

3. Accomplishment report attached to the claims should likewise be

specific and quantified

11. All Journal Entry Vouchers (JEV) prepared by the Accounting Unit of the LGU to
support the recording of transactions in the appropriate journals were not signed by the
Head of the agency or Authorized officials in accordance with Section 31, Chapter 2,
Volume II of the NGAS.

It is recommended that the Municipal Accountant should have the JEV signed
and approved before recording the journal entries of the transactions made by
the LGU in the appropriate journals to determine correctness of the entries made
in accordance with Section 31, Chapter 2, Volume II of the NGAS.
12. One percent (1%) of Internal Revenue Allotment was not allocated for the
Programs/Projects/Activities of the Local Council for the Protection of Children
(LCPC) mandated under Section 15 of Republic Act No. 9344 otherwise known as the
Juvenile Justice and Welfare Act of 2006.

To correct the deficiencies, we recommend that the Municipal Mayor thru the
concerned officials to appropriate one percent (1%) from its IRA in the LGUs
Annual Budget in compliance with RA 9344 and DILG Memorandum Circular
No. 2012-120 dated July 4, 2012. We further recommend that the MCPC propose
and implement Programs/Projects/Activities that advocated child rights, plan
and conduct monitoring/interventions on children’s programs and projects.

Compliance with Tax Laws

As observed in the audit of of disbursements for salaries of officials and employees
as well as in the procurement of infrastructure, goods and services from ccontractors and
local suppliers, the withholding of taxes was strictly observed. Regular remittances were
likewise made for all taxes withheld. While the year-end balance of Due to BIR increased
compared to that of the preceeding year, the bulk of these unremitted withholding tax were
from the payment for infrastructure projects which were made in December and
withholding of taxes from compensations for the month of December. However, this were
remitted in January and Feburary of the ensuing year.

Statement of Notice of Suspension, Disallowance and Charges

The Statement of Audit Suspensions, Disallowances and Charges (SASDC) as of

December 31, 2017 showed a total suspensions and disallowances amounting to ONE
HUNDRED NINETEEN THOUSAND SIX HUNDRED THRIRTY THREE PESOS
AND 36/100 (P119,633.36). There was a settlement of Notices of Suspension amounting
to P3,643,076.88 under Notice of Settlement of Suspension/Disallowance/Charges
(NSSDC) No. 2017-001 dated June 27, 2017. The details are as follows:

Beginning Issued this Settled this Ending

Balance as of Period Period Balance (As
December (ND/ND/NC) (NSSDC) of December
Particulars 31, 2016 January 1 to January 1 to 31, 2017
December December
31, 2017 31, 2017
Notice of Suspension 3,738,235.82 0.00 3,643,076.88 95,158.94
Notice of 24,474.42 0.00 0.00 24,474.42
Disallowance
Notice of Charge 0.00 0.00 0.00 0.00
Total 3,762,710.24 0.00 3,643,076.88 119,633.36