EXECUTIVE SUMMARY

A. Introduction

1. The Municipality of Las Nieves, Province of Agusan del Norte became an

independent town On June 22, 1963 by virtue of Executive Order No. 42
issued by His Excellency Diosdado Macapagal. Prior to this independence,
Las Nieves was once a district of Esperanza, Agusan del Sur.

Las Nieves is a second class municipality located about 12 kilometers North

of Butuan City. It has a total area of 58,269.00 hectares of which 5,203.97
hectares is classified as alienable and disposable, and 53,065.03 as
timberland.
The residents mostly derive their income from farming activities in the
municipality. Rice, corn and coconut are the three (3) major crops produced
by most of the farmers in the area.

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing.
Those standards require that we plan and perform the audit to obtain a
reasonable basis for our conclusions.

3. The audit covered the accounts and operations of the municipal government
for the year 2015 and was aimed at ascertaining the propriety of financial
transactions, management’s compliance to prescribed rules and regulations
and the fairness of the presentation of the financial statements. Value for
money audit was also conducted on the selection and implementation of
projects funded out of the 20% development fund to determine whether the
objectives of the projects were attained in the most efficient, effective and
economical manner.

B. Financial Highlights

a) Comparative Financial Position and Results of Operations

Increase/
2015 2014
Particulars (Decrease)
Assets ₱ 209,889,301.69 ₱ 129,948,978.48 ₱ 79,940,323.21
00
Liabilities 107,083,965.26 66,612,353.30 40,471,611.96
Government 102,805,336.43 63,336,625.18 39,468,711.25
Equity
Income 122,269,223.59 131,756,187.86 ( 9,486,964.27)
Expenses 82,915,128.36 119,931,452.45 ( 37,016,324.09)
Net Income 28,204,788.99 11,824,735.41 16,380,053.58
 b) Comparative Sources and Applications of Funds

Increase/
Particulars 2015 2014
Decrease
Appropriations ₱123,093,300.11 ₱108,276,345.92 ₱ 14,816,954.19
Allotment 123,093,300.11 108,276,345.92 14,816,954.19
Obligations 108,853,687.37 102,416,818.47 6,436,159.90
Funds received 34,411,879.98 14,975,720.00 19,436,158.98
from other agencies
Funds received - - -
from NGOs/POs
Funds transferred to - 3,957,500.00 (3,957,500.00)
other agencies
Funds transferred to 412,500.00 3,500,000.00 (3,087,500.00)
NGOs/POs

C. Audit Opinion

The OIC – Audit Team Leader rendered a qualified opinion on the

fairness of presentation of the financial statements of the Municipality of
Las Nieves, Agusan del Norte for CY 2015 because of the doubtful
validity and existence of Property, Plant and Equipment and inventories
amounting to ₱112,424,851.33 and ₱1,759,037.50, respectively due to
inadequate property records and non- submission of the physical
inventory reports.

D. Summary of Significant Observations and Recommendations

5. For the above-mentioned audit observations which have caused the issuance of
a qualified opinion, we recommended the following:

i. For PPE:

 Intensify efforts to timely complete the annual physical count of

PPE items and undertake the following steps to account for all
existing PPE items in the Municipality:

 Require each offices/units of the Municipality to conduct their

respective inventory-taking, tagging (inventory stickers) and
recording of all PPE items present in the offices and the same shall
be validated by the Inspectorate Committee and the General
Services Office;

 Turn-over to the General Services Office all defective or non-

functional PPE items for proper recording and disposal;
  The General Services Office shall consolidate all validated
inventory reports from the respective offices, together with the
respective property numbers for each PPE items, which shall be the
basis for updating of Property Cards and Report on the Physical
Count of Property, Plant and Equipment (RPCPPE);

 The General Services Office shall prepare the necessary

Acknowledgement Receipt (ARE), with corresponding serial
numbers, to be issued to the concerned accountable
officers/property holders, and shall maintain copies of duly received
ARE;

 The General Services Office shall furnish the Accounting Unit the
electronic and hard copies of the RPCPPE for their reconciliation
with the accounting records; and

 The Accounting Office shall determine any discrepancies between

the RPCPPE and accounting records and prepare the necessary
Subsidiary Ledger to record all unaccounted PPE items.

For Inventories:

 The Inventory Committee shall conduct physical count of

inventories every semester and provide the Accounting Office the
copy of the Report on the Physical Count of Inventories;

 The Accounting Office and the General Services Office shall

reconcile their respective records and make the necessary
adjustments for any discrepancies noted; and

 Henceforth, the General Services Office shall ensure that issuance

of supplies are duly documented with a Requisition and Issue Slip
(RIS), and shall consolidate weekly the RIS for which supplies and
materials were issued using the Summary of Supplies and Materials
Issued (SSMI). The SSMI together with the original copy of the
RIS shall be submitted to the Chief Accountant, who shall compute
cost of supplies issued and ending inventory using the moving
average method. Based on the SSMI, a JEV shall be prepared to
record the expenditures using appropriate expenditure accounts.

Moreover, require the heads of the Accounting Office and General Services
Office to strictly adhere to existing rules and regulations on the
maintenance of PPELC and SLC, and Property Cards and Stock Cards,
respectively, and ensure the conduct of the required annual and semestral
physical count of PPE and inventories, respectively, and timely
reconciliation with the Accounting and Supply records against the related
PPELC and Property Cards, and SLC and Stock Cards to facilitate timely
verification and adjustment of any discrepancies noted.
6. The other significant audit observations and recommendations are as follows:

i. Fund transferred to NGOs/POs totaling ₱6,750,705.47 remained

unliquidated as of December 31, 2015, contrary to the provision of Section
5.4 of COA Circular 2007-001 dated October 25, 2007.

Management demand for the submission of the required Fund Utilization

Reports and other supporting documents from the recipient NGOs/POs so
that proper accounting of the fund can be made. Henceforth, prohibit the
release of any funds to NGOs/POs with unliquidated balances to prevent
the further accumulation of the account balance

ii. Advances to Officers and Employees amounting to ₱1,261,116.50

remained unliquidated as of December 31, 2015 contrary to the provisions
of COA Circular No. 97-002, casting doubt on the reported balance.

Management demand from the officers and employees concerned for the
immediate liquidation/ settlement of their unliquidated cash advances
through issuance of demand letters issued by the Municipal Accountant
and noted by the Local Chief Executive, copy furnished the Audit Team.
Impose disciplinary actions against them. In case of non-compliance,
direct the Municipal Accountant to withhold the payment of their salaries
or any money due to them. Otherwise, filing of appropriate charges shall
be dealt with them.

iii. Cash Advance and liquidation for payment of registration fee during
attendance to the training conducted by private institution is excessive
against the allowed ceiling for registration fee of P1,200.00 per day,
contrary to the provisions of National Budget Circular No. 486 dated
March 26, 2003.

Management require the 16 officials and personnel who attended the

training to refund the excess payment of registration fee in the amount of
₱900.00 each. Henceforth, the Municipal Accountant shall make sure that
NBC No. 486 dated March 26, 2003 be followed in the payment for
registration fees of trainings conducted by Non-Government Organization
or Private Institution to avoid excessive disbursements.

iv. Liquidation of Cash Advance amounting to ₱15,000.00 for payment of

Laboratory Fee for Pap smear during the Women’s Month Celebration is
not supported with complete documentation contrary to the provisions in
Presidential Decree No. 1445 and COA Circular No. 2012-001 dated June
14, 2012, thus validity and propriety of the disbursement cannot be
determined.

Management direct the Municipal Accountant to require Dr. Bagaloyos to

submit the Official Receipt amounting to ₱15,000.00 to support the
liquidation of the cash advance of the latter. It is also recommended that
 the Management instruct the Municipal Accountant to make sure that the
liquidation of cash advances is duly supported with complete
documentation to ascertain the validity and propriety of the disbursements.

v. The Municipality granted additional cash advances to twelve (12)

personnel despite that they have existing unliquidated cash advances
contrary to COA Circular 97-002, item 4.1.2.

Management direct the officers and employees concerned to secure

certification from the Municipal Accountant that they have no outstanding
cash advance before claims for cash advance of travel expenses are
processed, and adhere strictly to COA Circular Nos. 97-002 to avoid
accumulated balances of cash advances.

vi. The submission of copy of contracts for infrastructure projects entered into
by the Municipality of Las Nieves is not in accordance with COA Circular
2009-001 dated February 12, 2009 thus, (a) Submission of copy of
contracts to the Auditor is delayed by 64 to 126 days; and (b) Incomplete
submission of documents forming part of the contracts.

Management ensure that the Auditor is furnished with the copy of the
contracts within five (5) working days from its execution and shall be
supported with complete documents as required in COA Circular 2009-001
dated February 12, 2009.

vii. Three (3) contracts entered into by the Municipality of Las Nieves for the
implementation of infrastructure projects were excessive against the COA
Evaluated Cost by ₱231,747.12 due to higher percentage of VAT which
does not conform with DPWH Department Order No. 22, series of 2015

Management direct the Municipal Accountant to deduct the excess

contract costs from the claims of the aforesaid contractors. Henceforth, the
LGU shall adhere to DPWH D.O. No. 22 series of 2015 in the preparation
of the ABC in all of its projects.

viii. Submission of accounts and financial statements of all Funds were not
submitted within the required period to submit contrary to the provisions
of Section 39 (1), (3) of PD 1445 and Section 7.2.1 (a) of COA Circular
No. 2009-006 dated September 15, 2009 thereby precluding the audit team
to conduct timely audit on the accounts of the municipality.

Management hire personnel to fill-up the vacated positions in the

Accounting Office and ensure that the Municipal Accountant strictly
comply with the provisions of Section 7.2.1(a) COA Circular 2009-006 in
the timely submission of accounts and financial statements to the Auditor.

ix. Pertinent provisions in RA 7160 on the use of the Special Education Fund
were not adhered, resulting to (a) failure to provide the basic facilities of
the schools, and (b) disbursement of fund to non-priority
program/project/activity.
 The Municipal School Board ensure that Special Education Fund will be
allocated and disbursed to the priority projects set forth in Section 100 of
RA 7160.

x. The Municipality failed to institutionalize the Gender and Development

database in accordance with PCW/NEDA/DBM Joint Circular No. 2012-
01, may result to ineffective planning and implementation of various
programs on GAD.

Management exert more effort in the establishment and maintenance of a

GAD database containing all sex-disaggregated data and gender statistics
to comply with the provisions of PCW/NEDA/DBM Joint Circular No.
2012-01.

xi. Non-compliance with the provisions on the creation and composition of

MDRRMO under Section 6 of the Implementing Rules and Regulations of
RA 10121 and NDRRMC-DILG-DBM-CSC Joint Memorandum Circular
No. 2014-1 dated April 4, 2014 may have affected the efficiency and
effectiveness of the implementing of MDRRM program and activities.

Management ensure strict compliance with RA 10121 and other rules and
regulations on the creation and composition of MDRRMO through the
enactment of a Sangguniang Bayan Ordinance, as required, with due
consideration on the Personnel Services (PS) limitation and availability of
funds and Department of Budget and Management (DBM) approval of the
position.

xii. Inclusion of Non-Peace and Order Programs in the Municipality’s Peace

and Order Programs and Activities for CY 2015 contrary to Joint Circular
No. 2015-001 dated January 8, 2015, resulted to overstatement of the CY
2015 Confidential Fund budget.

Management revise the CY 2015 Peace and Order Programs in accordance

with the provisions of Joint Circular 2015-001 to prevent the
overstated/excessive budget for the Confidential Fund. Thus, the
Management shall limit the disbursement or cash advance for CY 2015 CF
to not more than 30% of the revised POP.

xiii. Productivity Enhancement Incentive (PEI) amounting to ₱2,217,132.00

was not supported with complete documents, contrary to the provisions of
Section 4(6) of PD 1445, casting doubts on the propriety and validity of
the transaction.

Management direct the Municipal Accountant to require the concerned

personnel to submit the lacking documents and submit the same to the
Office of the Auditor for verification. Henceforth, the Municipal
Accountant shall ensure that disbursements of the Municipality is
supported with complete documentation as required in Section 4(6) of PD
1445.
E. Summary of total Suspensions, Disallowances, and Charges

7. Audit suspensions amounting to P 1,129,163.27 remain unsettled contrary to

Sections 5.4 and 7.1.1 of COA Circular No. 2009-006 dated September 15, 2009.

F. Statement on the quantity/number of recommendations implemented,

partially implemented and not implemented for the current year.

8. Out of the fifteen (15) audit recommendations contained in the CY 2014

Annual Audit Report, four (3) were fully implemented, eight (8) were partially
implemented and four (4) were not implemented.