EXECUTIVE SUMMARY

Vision

Oton, a Municipality of characters, where people are very friendly, God-loving, educated and
empowered, living in a healthy and ecologically balanced community with a vibrant economy
where good governance is practiced by morally upright and competent leaders.

Mission

Very friendly, effective and efficient delivery of basic services by the Local Government of
Oton with active participation of the civil society organizations for transparent governance.

Introduction

Oton is a first class municipality with a total land area of 8,644 hectares and is composed of
37 barangays. It is about 11 kilometers away from Iloilo City. At present, Oton has a
population of 93,334 as of the 2015 NSO survey with 20,288 households. A clean, peaceful
and progressive municipality, Oton is home to 14 subdivisions and its famous beaches have
become Metro Iloilo's residential hub due to its proximity to the city and its geographical
location. Residents enjoy basic necessities such as electricity, internet, cable TV,
transportation and accessible roads. The Katagman Festival is one of the annual activity
which highlights the town’s rich history and culture.

It enjoys full autonomy in managing, planning and deciding its own administrative, fiscal and
development affairs, consistent with the national government thrust or sustainable social
and economic growth granted under Republic Act 7160 otherwise known as Local
Government Code of 1991.

The personnel complement of the municipality as of December 31, 2017 totaled 330,
composed of 11 elective officials, 176 permanent employees and 143 job order/contract of
service.

Financial Highlights

The municipality’s assets, liabilities and residual equity as of the period ending December
31, 2017 amounted to P551,346,806.59, P152,982,107.90, and
P398,364,698.69, respectively. Comparison with the previous year’s totals is graphically
presented below:

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For CY 2017, the municipality generated a total income of P220,028,530.07 which is
11.45% or P22,606,063.56 higher compared to last year’s income of
P197,422,466.51. Total expenses incurred amounted to P152,122,484.33 generating an
excess of income over expenses of P67,906,045.74 at the end of the year which
correspondingly increased by 31.64% or P16,323,065.40 from last year’s figure of
P51,582,980.34.

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Comparative appropriation/allotment/obligation for Calendar Year 2017 and 2016 are
graphically presented as follows:

Scope of Audit

The audit covered the accounts and operations of the Municipality of Oton, Province of Iloilo
for the year ended December 31, 2017. The audit was conducted to determine the reliability
of the LGU’s accounts in order to express an opinion on the fairness of presentation of the
financial statements as well as to determine whether or not the LGU transactions were
made in accordance with existing laws, rules and regulations and its economy, efficiency
and effectiveness in the utilization of resources.

Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements because the accuracy, existence and ownership of the Property, Plant and
Equipment (PPE) account balances totaling P271,556,226.02 could not be ascertained due
to incomplete physical inventory of all its property which resulted to an unreconciled
variance amounting to P241,358,560.45 between the Report on the Physical Count of
Property, Plant and Equipment (RPCPPE) and the accounting records, cost of donated
three motor vehicles remained unrecorded in the books due to lacking supporting
documents resulting in an understatement of Government Equity and PPE accounts, thus
creating risk that these accounts may not be fairly presented in the financial statements,
Real Property Tax and Special Education Tax Receivables was not based on the Certified
List of Taxpayers, and reconciling items reflected in the Monthly Bank Reconciliation
Statements (BRS) amounting to P112,122.87 remained unadjusted/uncorrected hence,
causing doubt on the reliability and accuracy of Cash-LCCA total of P227,848,596.82 at
year-end, contrary to concerned regulations.

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Summary of Significant Audit Observations and Recommendations

For the exceptions presented in the preceding paragraph, we recommended that the:

1. Local Chief Executive direct the Inventory Committee to exert more efforts in the
completion of the physical inventory of the PPE and submit the RPCPPE not later than
January 31 of each year.

We further recommended that the General Services Officer prepare the property cards,
reconcile the postings with the records of the Municipal Accountant and effect the
necessary adjustments accordingly.

2. We recommended that the Local Chief Executive instruct the General Services Office and
other concerned officials to secure the Deed of Donation for the ambulance and mobile
dental vehicle and to fast track the transfer of ownership to the Municipality of Oton, Iloilo.

We also recommended that the Municipal Accountant make the necessary adjusting
entry to record the cost of three motor vehicles based on its appraised cost to be
determined by the Appraisal Committee and the recognition of depreciation for the
usage/passage of time relative to such vehicles.

3. We recommended that the Local Chief Executive direct the Municipal Accountant to
coordinate with the concerned depository bank to validate the identified reconciling items
and to draw the appropriate journal entries to take up all reconciling items and
adjustments of errors affecting Cash in Bank and other related accounts.

4. We recommended that the Local Chief Executive direct the Municipal Treasurer to furnish
the Municipal Accountant of a duly certified list of taxpayers and the corresponding
amount of tax due and collectible as basis for setting up the RPT/SET Receivables at the
beginning of the year.

The following are the other significant audit observations and their corresponding
recommendations:

1. Cash advances amounting to P898,302.37 remained unliquidated as of December 31,

2017 even if the purpose for which these were granted may have already been served
due to management’s continued inability to observe the guidelines provided under
Section 14 of Executive Order No. 298, COA Circular No. 97-002 and COA Circular
2012-004, thus exposing government funds to possible misuse or misapplication.

We recommended that the Local Chief Executive direct all concerned Municipal Officials
and Employees to cause the immediate liquidation of cash advances in accordance with
the above-cited provisions of law.

We also recommended that the Municipal Accountant:

a. Send within ten (10) days before the expiration of the 30 day period specified under
Section 14 of EO 298 for official local travel a written reminder under signature of the
head of agency or his authorized representative, enjoining the official or employee
concerned to liquidate his/her travel cash advance/s, pursuant to Section 3.3.2 (a) of
COA Circular 96-004.

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 b. Remove the name of the official or employee from the subsequent payrolls until such
time that the cash advance has been fully liquidated, if the official/ employee
concerned fails to liquidate the cash advance within the prescribed period, pursuant
to Section 3.3.2(b) of the same circular.

c. Refrain from granting additional cash advance to any official or employee unless the
previous cash advance given to him/her is first settled or a proper accounting thereof
is made.

2. Fund transfers from National Government Agencies (NGAs) amounting to

P9,510,000.00 and P1,480,723.18 remained unutilized/unliquidated/unimplemented
despite the timely release of the funds contrary to Section 43 of Presidential Decree
(PD) 1445 and COA Circular No. 94-013 dated December 13, 1994, thereby depriving
the constituents of the benefits that could have been derived from completed projects
and also deprived the Source Agency of resources that could have been put to other use
on some agencies needing assistance.

We recommended that the Local Chief Executive direct all concerned personnel to fast
track the implementation of the identified PAPs that will cater the needs of the targeted
beneficiaries otherwise, return the unutilized fund to the Source Agencies so it can be
used to finance other projects in some government agencies needing assistance.

We also recommended that the Municipal Accountant:

a. Implement the prompt and proper liquidation of trust funds received from Source
Agencies, including the return of excess/unutilized funds.

b. Reconcile the unliquidated fund transfers with the Source Agencies and prepare the
adjusting entries for the reconciling items noted.

Summary of Suspensions, Disallowances and Charges

Total suspensions, disallowances and charges as of December 31, 2017 amounted to

P2,431,744.81 as summarized below:

Total Suspensions P 188,795.57

Total Disallowances 2,242,949.24
Total Charges 0.00
Total P 2,431,744.81

Status of Implementation of Prior Years’ Audit Recommendations

Of the 36 audit recommendations embodied in the previous years’ Annual Audit Report,
18 were fully implemented, nine were partially implemented, and nine were not
implemented.