EXECUTIVE SUMMARY A. INTRODUCTION ‘The Municipality of Nabua is a “First Class” Municipality of the Province of Camarines Sur. It has 42 component barangays which occupy an approximate land area of 8,854.42 hectares and home to at least 83,874 inhabitants according to the 2015 census. Audit Methodology and Scope of Audit ‘The Financial, Compliance and Value for Money (VFM) audits conducted covered the accounts and operations of the Municipality of Nabua for all funds for the period from January 1 to December 31, 2019. In addition to the actual examination of the accounts using a sampling scheme, other various techniques were used such as observation, interview with the concemed officials and employees and other auditing procedures considered necessary under the circumstances. ‘The audit was focused on the different audit thrusts prescribed by the Local Government Sector of the Commission on Audit. B. FINANCIAL HIGHLIGHTS B.1. Financial Condition and Performance Comparative analysis of the Statement of Financial Position as graphically illustrated showed an increase in its Assets and Equity. On the other hand, the Statement of Financial Performance exhibit an increase in both income and expenses. Statement of Financial Position Assets Liabilities Equity CY 2019 629,554,867.19 228,991,052.49 400,563,814.71 CY 2018 584,383,997.57 243,068,183.78 _34%,315,813.79 In Pesosjancial Performance Statement of 2sa0io0020 a apoonoo 3 150,000,000.00 © tnoreoroa0 © soomanm “m= 7 Income Expenses Net Surplus crams) soncisans —isswoezao™ssseioese B.2. Sources and Application of Funds The following graphs illustrate the increase of Appropriations, Allotments and Obligations during the year in both the General and Special Education Funds. General Fund 300,000 000.00 2200000000 © 100,000000.00 — Allotments Obligations Balance CY 2019 231,481,864.92 194,527,264.33 _36,954,600.59 CY 2018 226,697,011.73 190,105,201.07 _36,593,810.66 Special Education Fund 2oxngoaco isontoaan B vomoonco = ‘smoooen —— aciasi| “eben | uastoenas | tetas setooin| —tsmoataeo | isms [msc mcy2019 wy 2018B.3. Major Program/Projects/Activities undertaken in CY 2019 Project/Program/Activity _ Actual Cost (P) Coneretng of Local Roads at various barangays in Nabua, Camarines | 16 657 645 39 Purchase of Backhoe 5,350,000.00 Construction of Stairs infront of "Maritatas” Building, Nabua, Camarines ce ee 994,350.24 Road Network (Public Assistance) at Zone 2-4, Barangay Bustrac, ‘Nabua, Camarines Sur 9nass OF Construction of Pathologic Pit, Perimeter Fence and Improvement of enone RHU Lying-in Building at Nabua, Camarines Sur . i ‘Water System Expansion at Barangay Bustrac, Nabua, Camarines Sur 497,247.52 Construction of Fence at Bustrac Elementary School, Barangay eigen Bustrac, Nabua, Camarines Sur i | Construction of Multi-Purpose Concrete Pavement at Lourdes Provincial High School (Continuation), Barangay Lourdes Young, 197,343.00 ‘Nabua, Camarines Sur Completion of Local Road (Half Lane), Barangay Topas Sogod, aaa Nabua, Camarines Sur fee Construction/Conereting of Elevated Pathway, Zone 2, Barangay San aan Miguel, Nabua, Camarines Sur ri Reblocking/Improvement of Local Road, Barangay San Vicente ee Gorong-gorong, Nabua, Camarines Sur : Riprapping, Zone 5, Barangay Santiago Young, Nabua, Camarines Sur 498,810.00 ‘Construction of Drainage System, Zone 5, Barangay La Purisima, Nabua, 498,850.54 Camarines Sur . Improvement of Drainage Canal at Migz Villafuerte Building, Nabua, 298,716.00 Camarines Sur nt Total 28,224, 760.16 Post-audit of financial transactions was made on a test basis; however, time constraints deterred validation and verification as to conformance to specifications and as to the existence of some of the projects. C. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS The Auditor rendered a qualified opinion on the fairness of presentation of the financial statements of the Municipality of Nabua, Camarines Sur for CY 2019 because property and accounting records of Property, Plant and Equipment (PPE) were not reconciled by a gross amount of P75.07 million; PPE Ledger Cards and Property Cards were not maintained; and Construction in Progress (CIP) account with long outstanding balance of P36.071 million was not adjusted.D. SUMMARY OF SIGNIFICANT OBSERVATIONS — AND RECOMMENDATIONS For the exceptions cited, we recommended that Management create an Inventory Committee who shall, on a full-time basis and within a prescribed period, conduct the physical count and prepare the Report on the Physical Count of PPE properly including maintenance of property cards; require the Accounting Office to maintain an updated PPE Ledger Cards for control purposes and see to it that these records facilitate identification and reconciliation; designate on a full time basis at least one personnel each from the Property and Accounting Offices to reconcile the Report on the Physical Count of PPE, Property Cards, Property Ledger Cards, and accounting records, taking into consideration the noted deficiencies in audit: a cut- off date as of December 31, 2018 may be started to facilitate current reconciliation, then move back from earlier years; direct the accounting office to investigate for the details of the long outstanding balance of CIP account, and provide necessary adjusting entries to reclassify the same to the appropriate PPE account; require the accounting office to adhere to the prescribed accounting rules relative to the asset recognition under Property, Plant and Equipment, including use and maintenance of Construction in Progress account during the construction period of an asset; and initiate administrative investigation and charges against responsible officers for continued neglect and failure to comply or perform their respective duties relative to property, plant and equipment despite repeated reminders from this Office. The Audit Team has communicated the observations and recommendations with the Management through the issuance of Audit Observation Memorandum (AOM) and discussed them with the concerned officials and employees during the exit conference conducted on July 13, 2020 in which the latter’s comments were incorporated in the report, where appropriate. The following are the significant observations together with the corresponding recommendations: 1. The validity, existence and accuracy of the recorded inventory accounts totaling 3,602 million as of December 31, 2019 cannot be established due to the failure to conduct an actual count nor submit the Report on the Physical Count of Inventories (RCPI) while the perpetual inventory method was not adopted which resulted to the overstatement of expenses and understatement of assets by the amount of unissued items. We recommended that Management require the: (a) Inventory Committee to prepare and submit a complete Report on the Physical Count of Inventories as of December 31, 2019 and onward to determine the correctness of the recorded inventories; (b) MGSO to submit the Summary of Supplies and Materials Issued (SSMD together with the corresponding RIS and Inventory Custodial Slips for the issued supplies/goods; (c) Municipal Accountant and MGSO to maintain supplies ledger cards and stock cards, respectively, for each type of inventories and reconcile the accounting and property records periodically to bring these accounts into agreement; (d) maintain the prescribed records to ensure proper accounting ivand promote better control in the receipt and issuance of supplies; and (e) provide a stock room for proper storage of inventories. 2. Absence of proper monitoring and reconciliation of accounts resulted in abnormal balance of the Due to BIR (2-02-01-010) account in the amount of P3.172 million as of December 31, 2019, thus reliability and accuracy of the account cannot be ascertained. We recommended that Management direct the Municipal Accountant to ensure that transactions pertaining to the Due to BIR account be traced to prior years” accounting entries to ascertain the cause of the negative balances and effect the necessary adjustments. F, SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES : Balances as of cy 2019 Balances as of rs 12312018 Issued Settled 127312019 Notice of Suspension | P 0.00; P 000) P 0.00 P 0.00 Notice of Disallowance | __104,033.72| 0.00 0.00 104,033.72 Notice of Charge 0.00 0.00 0.00 0.00 Total P 104,033.72] P 0.00; P 0.00 P__104,033.72 G. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS Out of the thirty-two (32) audit recommendations embodied in the previous Annual Audit Reports, four (4) were fully implemented, twenty-two (22) were partially implemented and six (6) were not implemented as of December 31, 2019.