Executive Summary Introduction The Municipality of Jovellar was formally created in 1649 under the ecclesiastical and civil jurisdiction of Nueva Caceres. In 1811, it became a full fledged town as Municipio de Quipia by virtue of a decree by the Governor General. The early Spanish colonization of the Philippines paved the way for the founding of the municipality of JOVELLAR with the influence of a Spanish resident named Don Cipriano Anduiza, wherein he changed the word Quipia to Jovellar. It was made known as Jovellar through a decree by the Governor General in honor of an illustrious Spanish General Joaquin Javellar y Soler, more popurlarly known as the father of the infamous head tax called “Cedula Personal”, Jovellar is a fourth-class Municipality composed of twenty-three barangays: a) Urban barangays — Rizal, Mabini, Magsaysay, Sto. Niflo, Aurora, Calzada, Cabraran, Quitinday, Plaza and White Deer; and b) Rural barangays - Bagacay, Bautista, Del Rosario, Estrella, Florista, Mamlad, Maogog, Salvacion, San Isidro, San Roque, San Vicente, Sinagaran and Villa Paz. The major functions of the Municipal Government of Jovellar are to enhance, develop and rehabilitate the socio-economic condition of the Municipality as well as the delivery of basic, regular and direct services to meet the priority needs and service requirements of its constituents. ‘The vision is to be an eco-tourism destination, a commerce and industry gateway in Albay with God-loving, empowered and peaceful inhabitants benefitting from progressive, modem, accessible infrastructure system with self-sufficient, competitive economy and ecologically balanced natural environment under a dynamic and transparent leadership. Audit Objectives We conducted our audit to obtain reasonable assurance whether the financial statements are free of material misstatements, It also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Scope of Audit A financial and compliance audit was conducted on the financial statements and operations of the Municipality of Jovellar for the Calendar Year (CY) 2019.Operational Highlights For CY 2019, the Municipality of Jovellar, Albay, was able to accomplish the following major programs, projects and activities (PPAs), among others, out of the 20% Local Development Fund and fund transfers from the Department of the Budget and Management (DBM) and Other National Government Agencies, viz: Table 1 Completed Projects ; Approved Budget | Contract Brejects for the Contract | Amount ame T._ Construction of Pathways a) Bagacay ES P 300,000.00 | _P 299,748.00 | Completed b) Bagacay 250,000.00 | 249,365.00 | Completed ¢) Cabraran 250,000.00 | 249,479.40 | Completed d) Estrella 250,000.00 | 249,199.99 | Completed e) San Isidro 250,000.00 | 249,083.96 | Completed )Sinagaran 250,000.00 | 249,124.02 | Completed Tl, Road Rehabilitation a)Mabini 400,000.00 | 399,476.00 | Completed b)Plaza 250,000.00 | 249,044.51 | Completed Rizal 200,000.00 | 199,215.50 | Completed THI. Construction of Multi-Purpose Hall a) Aurora 250,000.00 | 249,826.50 | Completed ’b)Calzada 200,000.00 | 199,069.76 | Completed )Del Rosario 250,000.00| 249,750.45 | Completed d)Estrella 200,000.00 | 199,056.78 | Completed e)San Isidro 200,000.00 | 199,056.78 | Completed #) San Rogue 300,000.00 | 299,824.50 | Completed Total 3,800,000.00 | 3,790,321.15 Table 2 On-going Projects ; ‘Approved Contract oe Budget for the | Amount ns Contract Construction of MRF at Brey.| P 200,000.00] P 199,056.78 | On-going Bagacay 7 Construction of Local Access | 10,100,000.00 | 10,060,037.02 | On-going Road at Brgy. San Roque Total P10,300,000,00 | P10,259,093.80B. Financial Highlights For CY 2019, the financial position and financial performance of the Municipality are as follows: ‘I. Comparative Financial Position Increase (Decrease) Particulars CY 2019 CY 2018 Tt % Assets, P117,684,000.05 | P112,201,119.72 | P 5,482,880.33 4.89 Liabilities P 35,387,216.82 | P 40,904,157.71 | (P5,516,940.89) | -13.49 Government Equity | P_82,296,783.23 | P 71,296,962.01 | P10,999,821.22 | 15.43 Il, Results of Operations Increase (Decrease) Particulars cy 2019 cy 2018 me a Total Revenue 'P80,217,461.53 | P74,430.273.04 | P5,787,188.49 |__7.78 Total Expenses 'P63,886,520.19 | _P59,709,689.60 | P4,176,830.59 | _7.00 Personal Services 29,859,517.86 | ___25,055,747.89 | 4,803,769.97 |_ 19.17 Maintenance and Other Operating | 26,368,253.38 27,615,195.20 | (1,246,941.82) | -4.52 Expenses ‘Non-cash Expenses 1,396,753.25, 1,570,495.50 |" (173,742.25) | -11.06 Financial Expenses eireescn 5,336,651.01 840,444.69 | 15.75 ‘Transfers, Assistance and 84,900.00 131,600.00 | (46,700.00) | -35.49 Subsidies Excess of Income Saat P16,330,941.34 | P14,720,583.44 | P1,610,357.90 | 10.94 C. Independent Auditor's Report on the Financial Statements ‘The Auditor rendered a qualified opinion on the faimess of presentation of the financial statements because of the following: a. Unreconciled difference amounting to P40.38 million between the Property, Plant and Equipment (PPE) accounts per Report on the Physical Count of PPE (RPCPPE) and the accounting records, equivalent to 34.31 per cent of the total assets of the LGU of P117.68 million as of December 31, 2019; and b. The LGU was unable take up in the books of accounts Local Road Networks amounting to P25.91 million due to its inability to conduct physical inventory and valuation thereof, contrary to COA Circular No. 2015-008 dated November 25, 2015.For the unreconciled discrepancy in the PPE between the RPCPPE and accounting records, we recommended that Management require the Municipal General Services Officer (MGSO) to finish the conduct of the physical inventory of the LGU’s PPE and to prepare the complete and final RPCPPE. Reconcile any discrepancy between the inventory report, the Accounting and GSO records and take up the necessary adjustments to correct the account balances. Further, the MGSO and the Municipal Accounting Office (MAO) shall maintain complete and updated Property Cards and PPE Ledger Cards, respectively. ‘that: For the observation on the unrecorded Local Road Networks, we recommended a, Management to constitute an Inventory Committee headed by the Municipal Engineer that shall conduct the inventory of the local roads under the jurisdiction of the Municipality. A Report on the Physical count of the Road Networks System shall be prepared copy furnished the Municipal Accountant and the MGSO; b, The MGSO to: (b.1) Render a Report on Local Road Network and Road Map; and, (b.2) Keep a complete and updated Local Road Network Property Card (LRNPCs) for all roads and its components; c. The Municipal Engineer to provide the Municipal Accountant and the MGSO with the complete description and cost segregation of road components for road projects; and d. The Municipal Accountant to: (4.1) Prepare the JEV to record the beginning balance of the local road network and its components; (d.2) Prepare and maintain Local Road Network Ledger Cards (LRNLCs); (4.3) Keep and maintain subsidiary records for roads and road components for every road network; and (d.4) Prepare a lapsing schedule for the computation of the depreciation for each component at the end of the year. D. Other Significant Audit Observations and Recommendations For the current audit period, the other significant audit findings and the corresponding recommendations are the following: 1, Advance copies and supporting documents of 13 contracts amounting to P5.38 million, were not submitted while 24 contracts totaling P6.44 million, were submitted late, with delays ranging from 182 to 192 days, contrary to Sections 3.1.1 and 3.2.1 of COA Circular No. 2009-001 dated February 12, 2009, thus, precluding the Auditor from conducting timely review thereof to verify compliance with existing procurement law, ivrules and regulations, and be able to inform Management of deficiencies/defects noted, if'any. ‘We recommended that Management require concerned officials to submit copies of the 13 unsubmitted contracts amounting to P5.38 million, together with its complete supporting documents for review. Henceforth, require the submission of advance copies of contracts/POs with the required supporting documents attached thereto, within five days after perfection thereof, in compliance with the requirements of COA Circular No. 2009-001. 2. The position of the Municipal Accountant has remained unfilled for years with only a designated Officer-in-Charge who is also the Disaster Risk Reduction and Management Officer (DRRMO) of the LGU, thus, may affect the efficiency and effectiveness of the Municipal Accounting Office as well as the Municipality’s in the delivery of basic and support services to its constituents, not in accordance with Section 474, Article IV, Title V, of RA 7160. ‘We recommended the following: a. For Management to immediately initiate the recruitment process for a qualified applicant to perform the duties and functions of a Municipal Accountant; b. To attract a greater number of qualified applicants to apply for the position, Publication and posting of the vacant position should be given wider dissemination, to include posting in the Civil Service Commission (CSC) website, in conspicuous places of the LGU premises, and even in social media; and ¢. Upon selection of the qualified applicant, the LGU to issue a permanent appointment for the position of Municipal Accountant in accordance with Civil Service rules and regulations. 3. Information on the amount and details of the utilization of the Local Disaster Risk Reduction and Management Fund (LDRRMF) totaling ®3.70 million were not adequately disclosed in the Notes to the Financial Statements pursuant to Item 5.1.16 of COA Circular ‘No. 2012-002 dated September 12, 2012 resulting in lack of information on the unexpended balance of the Fund as of the yearend. We recommended that the Local Chief Executive (LCE) require the Municipal Accountant to fully disclose details of the utilized and unexpended balance of the LDRRMF as of December 31, 2019 using the format prescribed in COA Circular No. 2012-002 for the information and guidance of Management and other users of the Municipality’s Financial Statements.4. The Reports on the Receipt and Utilization of Donations in Cash or in Kind received by ‘the Municipality and the Monthly Reports on the Receipt and Utilization of DRRM Fund were not prepared and submitted to the Office of the Civil Defense, copy furnished the COA Auditor, contrary to COA Circular No. 2014-002 dated April 15, 2014, affecting the availability of financial information which may be relevant in Management's decision-making process during calamities. We recommended that the LCE require the Municipal Accountant and DRRM Officer to prepare the Reports on Utilization of Donations -in Cash or -in Kind received by the Municipality and the Monthly Report on the Receipt and Utilization of the DRRMF and submit to the Office of the Civil Defense, copy furnished the COA Auditor. Henceforth, comply with the accounting and reporting guidelines as prescribed in keeping with the said Circular. 5. The Municipality had not updated its Local Tax Code of 2010, ten years since its enactment which could have generated more funds to the LGU for the implementation of its developmental PPAs to further improve the general welfare of its constituents, not in accordance with Section 191 of the R.A. No. 7160. We reiterated our previous audit recommendation for the LCE to direct the Municipal Treasurer, Municipal Assessor, and other concerned Department Heads to prepare and come up with Revised Revenue Code for the LGU. Thereafter, submit to the Sangguniang Bayan for approval the proposed Revised Local Tax Code. 6. The Municipality was still unable to secure approval of its 10-year Solid Waste Management Plan (SWMP), not in keeping with the provisions under R.A. No. 9003 or the Ecological SWM Act of 2000, thereby the SWM activities and accomplishments of the LGU could not be properly evaluated. We recommended that the LCE require the SWM Committee to comply with the requirements of the Ecological SWM Act of 2000, including the establishment of its own dumpsite with the aim of protecting the health of its constituents and the environment. 7. The Receivables amounting to P0.64 million, or 49 per cent of the total receivables totaling P1.30 million, that has remained dormant for at least five years as of December 31, 2019 remained in the books of accounts of the Municipality, contrary with Sections 2.0 and 6.1 of COA Circular No. 2016-005 dated December 19, 2016, overstating the receivable accounts and affecting the reasonableness of the presentation of the financial statements as of the yearend. ‘We recommended that the LCE require the Municipal Accountant to review and verify the dormant receivables of the LGU and issue demand letters to recipients/grantees. If the accounts remained uncollected despite the issuance of at least two demand letters, request for authority to write-off the doubtful accounts, in accordance with COA Circular No. 2016-005 dated December 19, 2016. viHenceforth, the Municipal Accountant should conduct regular monitoring and analysis of receivables to ensure that these are timely collected when the accounts become due and demandable. 8. Delays were incurred in the implementation of projects aggregating P28.24 million for CYs 2018 and 2019, not in keeping with Section 476(b)(4) of the Republic Act (R.A.) No. 7160 and Section 2.2 of DBM-DILG Joint Memorandum Circular No. 2017-01 dated February 22, 2017 to the disadvantage of the intended beneficiaries who were deprived of the benefits due them had the same been implemented within the stipulated time. ‘We recommended that Management: a. Require the Muni Planning and Development Office (MPDO) and Municipal Engineer's Office (MEO) to monitor the implementation of the various PPAs in order to achieve the desired outcomes which are essential in the attainment of its goals and objectives in improving the quality of life of its constituents; b. Adopt strategies, despite personnel limitations, so that planned projects by the LGU may be timely implemented within the budget year and completed within the stipulated time frames; and ©. Consider the equitable distribution of PPAs listed among the three important aspects of sector development mandated under DILG-DBM JMC No.217-1 dated February 22, 2017 and previous issuances, as well as the requirements of Sections 16 and 17 of the R.A. No 7160, in order to cater not only to the infrastructure needs of the constituents, but also on environment, agriculture, fishery and livelihood PPAs which will directly address the actual needs of the intended beneficiaries. E. Summary of Total Suspensions, Disallowances and Charges as of Year- End There were no suspensions, disallowances and charges issued during CY 2019 and the balances thereof as of December 31, 2019 are summarized as follows: Balance Balance Particulars as of eee as of 112019 | Issued | Settled | 12/31/2019 Suspension P0.00| _P0.00| _PO.00 0.00 Disallowance 0.00 0.00 0.00 0.00 Charges 0.00 0.00 0.00 0.00 Total 0.00[ P0.00| P0.00 0.00 viiF, Status of Implementation of Prior Year’s Audit Recommendations Of the 20 audit recommendations in prior years, six or 30 per cent were fully implemented, six or 30 per cent partially implemented while eight or 40 per cent remained not implemented by Management. viii