EXECUTIVE SUMMARY

Introduction

The Municipality of Odiongan attained a pueblo (town) status in 1846 under the
term of Pedro Fortaleza as Teniente Absoluto from 1840-1855, hence the logo presently
used by the Municipality reflects 1846 as the year it was founded.

The Municipality’s operation is focused on the delivery of basic services and

provision of adequate facilities as provided under Section 17 of R.A. No. 7160; exercise
general supervision and control over all programs, projects, services and activities, and
generation of maximum resources and revenues for the implementation of development
plans, programs and projects.

The Municipal Government of Odiongan maintains three funds namely: General,

Special Education and Trust Funds.

Highlights of Financial Operation

For Calendar Year (CY) 2019, the Municipality generated a total income of
P189,368,085, which is higher by P17,470,864 or 10.16% compared with last year’s
P171,897,221. The share from Internal Revenue Collections of P137,728,995 represents
72.27% of the total income. Other major sources of income are local taxes, permits and
licenses, service, business and other income.

The total assets, liabilities, government equity, income and expenses for CY 2019
are as follows:

Increase/
CY 2019 CY 2018 (Decrease)
Total Assets P348,329,150 P304,497,398 P 43,831,752
Total Liabilities 59,303,151 53,293,556 6,009,595
Total Equity 289,025,998 251,203,842 37,822,156
Total Income 189,368,085 171,897,221 17,470,864
Total Expenses 151,369,044 133,637,036 37,999,041

Scope of Audit

Financial and Compliance as well as Value for Money Audits were conducted on
the accounts and operations of the Municipality of Odiongan for CY 2019. The
objectives of the audit were to ascertain the fairness and reliability of the Municipality’s
position and results of operations and compliance of the agency to laws, rules and
regulations as well as determine whether plans, programs and activities for the year were
attained in an efficient, economical and effective manner.
i
Audit Opinion on the Financial Statements

The Audit Team rendered a qualified opinion on the fairness of the presentation
of the financial statements of the Municipality of Odiongan due to the following:

a) The validity, correctness and existence of the reported balances of the Inventories
and Property, Plant and Equipment (PPE) valued at P2,475,180 and P178,304,418
(excluding Land and Construction in Progress and net of accumulated
depreciation), respectively, could not be ascertained due to (i) failure of the
Municipality to support the Inventories and PPE valued at P2,475,180 and
P143,556,366 respectively, as of end of the year with the corresponding inventory
reports; (ii) failure to reconcile the result of the physical count of PPE with the
accounting records; and (iii) unserviceable properties totaling P2,889,581.42 or
more were not yet disposed thus, affecting the fair presentation of the inventories
and PPE accounts in the financial statements and exposing the Municipality to
various risks in the management of its supplies and properties; (Observation No.
1)

b) The Receivable and Deferred Income accounts of Real Property Tax (RPT) and
Special Education Tax (SET) as at December 31, 2019 have abnormal negative
balances of P1,354,368 and P2,299,496, respectively, owing to the failure of the
Accounting Office to properly account for RPT/SET collections during the year,
rendering the said balances presented in the Financial Statements unreliable
contrary to Sections 111 and 112 of Presidential Decree (P.D.) No. 1445 and
Paragraph 27 of Philippine Public Sector Accounting Standards (PPSAS) 1;
(Observation No. 2)

c) Cash Advances totaling P2,144,547 remained unliquidated as at December 31,

2019 contrary to Section 89 of Presidential Decree (PD) No. 1445 and the
guidelines set in COA Circular No. 97-002 dated February 10, 1997 due to
inefficient and ineffective control over the granting, utilization and liquidation
thereof, thereby exposing the accumulated cash in custody of the accountable
officers to risks of possible misuse or misappropriation and affecting the
reliability of the financial statement as expenses drawn out from these cash
advances were not recorded during the year of incurrence; (Observation No. 3)
and

d) Receivables account totaling to at least P1,514,541 as at December 31, 2019

which remained long-outstanding or dormant in the books for more than 10 years
were not acted upon to facilitate the proper write-off thereof, resulting in the
overstatement of agency assets due to the inclusion of accounts with doubtful
existence. (Observation No. 4)

ii
Significant Observations and Recommendations

For the first exception cited above, we recommended and the management agreed
that the Municipal Mayor:

a. direct the inventory committee to conduct the complete physical count of all the
inventories and property, plant and equipment of the Municipality and prepare the
corresponding inventory reports which may include unserviceable properties. The
committee shall reconcile the results of the count with the property records and
accounting records and submit the complete and accurate RPCI and RPCPPE to
the auditor concerned, pursuant to Section 124 of the Manual on NGAS for
LGUs, Volume I;

b. require the Property Custodian and Accounting Unit to maintain property cards
and PPE ledger cards, respectively, indicating the details quantities, exact date of
acquisition, and status/condition of all PPEs and conduct periodic reconciliation to
bring both records into agreement.

For inventory items, maintenance of the supplies ledger cards by the

Municipal Accountant and stock cards by the Treasurer or General Services
Officer should be required to ensure a check and balance in the issuance of
supplies and materials; and

c. advise the Inventory Committee to report all the unserviceable properties in the
Inventory and Inspection Report of Unserviceable Property (IIRUP) supported
with proper documentation for subsequent disposal of same in accordance with
COA rules and regulations.

For the second exception cited, we recommended and the management agreed that
the Municipal Accountant together with the accounting staff:

a. henceforth, observe proper accounting for Real Property Taxes/ Special Education
Taxes pursuant to Section 19 of the NGAs Manual for LGUs, Volume 1 and
Revised Chart of Accounts prescribed under COA Circular No. 2015-009; and

b. trace the accounting errors made in CY 2019 as well as those made during the
previous years and effect the necessary adjustments to ensure fairness in the
presentation of the Financial Statements.

For the third exception cited, we reiterated our recommendation and the
Municipal Mayor agreed to:

a. require all accountable officers and employees to immediately settle their

outstanding cash advances; instruct the Municipal Accountant to send demand
letters for the overdue accounts and render report on the status of the demand
letters sent to enforce collection thereof to protect the interest of the government.
Section IV. General Guidelines of COA Memorandum No. 2017-010 dated May
iii
 15, 2017 provides that: xxx. The Audit Team Leader (ATL) shall request from the
Accountant proof of exhaustion of all remedies to collect receivables and
liquidate cash advances and fund transfers as basis for the issuance of the final
demand letter. There is therefore a need for the Accountant to issue demand
letter to the AO/employee/recipient/NGOs to liquidate their due and demandable
cash advances/fund transfers;

b. direct the Municipal Accountant to refrain from granting additional cash advances
to any official or employee unless previous cash advance given to him is first
settled or a proper accounting thereof is made, pursuant to Section 4.1.2 of COA
Circular No. 97-002 dated February 10, 1997; and

c. require the officials and employees to liquidate their cash advances within the
prescribed period provided in Section 5 of COA Circular 97-002.

For the fourth and last exception cited, we recommended and the management
agreed that local officials expedite the submission of the request for authority to write-off
dormant receivable accounts, unliquidated cash advances, and fund transfers of National
Government Agencies (NGAs), Local Government Units (LGUs) and Government-
Owned and Controlled Corporations (GOCCs) to the Commission on Audit in line with
COA Circular No. 2016-005 dated December 19, 2016, stating the reasons for write-off
and extent of follow-up made. The management should see to it that the request for write
– off is duly supported with the documents required in Item 8.3 of the mentioned circular.

For calendar year 2019, the following are the other significant observations and
recommendations:

1. The Municipality incurred lapses in the implementation and monitoring of the projects
charged against the 20% Development Fund for CY 2019 contrary to the Department
of the Interior and Local Government (DILG) and Department of Budget and
Management (DBM) Joint Memorandum Circular (JMC) No.2017-1 dated February
22, 2017, 2016 Revised Implementing Rules and Regulations (IRR) of Republic Act
(R.A.) No. 9184 and COA Circular No. 2009-001 dated February 12, 2009 thus,
exposing the Municipality to risk of non-attainment of the desired socio-economic
development and environmental outcomes. Moreover, the Municipality incurred
lapses in the processing of payments and recording of disbursements contrary to
pertinent provisions of PD No. 1445, COA Circular 2012-001 dated June 14, 2012 and
COA Circular No. 2015-009 dated December 1, 2015, casting doubt on the propriety
of the disbursements and the reliability of the affected accounts in the financial
statements. (Observation No. 5)

We recommended that (a) the Municipal Mayor instruct the Municipal Planning and
Development Coordinator (MPDC) together with all other employees concerned to (i)
closely monitor the implementation of development projects and see to it that the
priority projects identified in the Annual Investment Plan are promptly implemented in
order to deliver satisfactory benefits to the constituents; and (ii) ensure that the reports
on the status of government PPAs submitted to the Audit Team quarterly includes all
iv
 on-going and planned PPAs for the year to facilitate proper monitoring and evaluation
thereof; (b) the BAC to (i) furnish the Audit Team with a copy of Contracts/Purchase
Orders and their attachments within five (5) working days from execution/issuance as
required under Sections 3.1.1 and 3.2.1 of COA Circular No. 2009-001; (ii) observe
strictly the provisions of the 2016 Revised IRR of R.A. No. 9184 to ensure adherence
to the principles of transparency, competitiveness and public monitoring; (iii) prepare
the required reports/documents with extra care to avoid errors which could mislead
readers and users of the reports; and (iv) submit written explanations relative to the
deficiencies noted above; and (c) the Municipal Accountant (i) be guided by the
requirements of Section 4(6) of P.D. No. 1445, COA Circular No. 2012-001 and
Section 474 b(5) of R.A. No. 7160 for proper documentation of claims against
government funds; (ii) submit the lacking documents mentioned in the observation to
establish the propriety of the disbursements; (iii) observe the proper use of accounts in
recording transactions and effect the necessary correcting entries for proper
presentation of the accounts in the financial statements; and (iv) see to it that all
transactions pertaining to 20% DF are properly recorded in its Special Journal.

2. The Municipality failed to (a) secure a DILG – endorsed GAD Plan and Budget
(GPB); and (b) establish and maintain a GAD Database contrary to the provisions of
the PCW-DILG-DBM-NEDA Joint Memorandum Circular No. 2013-01 dated July
18, 2013 and the amendments in PCW-DILG-DBM-NEDA Joint Memorandum
Circular No. 2016-01 dated January 12, 2016 thereby, defeating the very purpose of
Gender and Development program to address gender issues and concerns within the
Municipality. (Observation No. 6)

We recommended that the Management, through its GAD Focal Point System (GFPS)
(a) observe the guidelines in the preparation and submission of GAD Plan and Budget
provided under PCW-DILG-DBM-NEDA JMC No. 2013-01 and the amendments in
PCW-DILG-DBM-NEDA JMC No. 2016-01 dated January 12, 2016 so as to obtain
Certificate of approval from the DILG Provincial Office; (b) give priority on the
establishment and maintenance of GAD database to have an effective basis for gender-
responsive planning, programming and policy formulation; and (c) undertake thorough
gender analysis, based on relevant data for proper identification of existing gender
issues, to ensure that the PPAs to be incorporated in the GPB are responsive to address
the same. Priority gender issues are identified through the agency/organization’s
review of its flagship or regular programs, analysis of sex disaggregated data and/or
relevant information that surface the unequal situation of women and men.

3. The Bids and Awards Committee (BAC) and its Secretariat and Technical Working
Group committed lapses in their procurement activities contrary to the 2016 Revised
Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No. 9184 and
other pertinent laws, rules and regulations, thereby rendering the contracts totaling to
at least P21,728,535 defective and exposing the Municipality to various risks in
project implementation. (Observation No. 7)

We recommended and the management agreed that the Bids and Awards Committee
(a) furnish the Audit Team with a copy of the Contract Agreement and its attachments
v
 within five calendar days from execution thereof as required under Section 3.1.1 of
COA Circular No. 2009-001 dated February 12, 2009; (b) observe strictly the
provisions of the 2016 Revised IRR of R.A. No. 9184 to ensure adherence to the
principles of transparency, competitiveness and public monitoring; (c) strengthen
internal control over the evaluation of bids and post-qualification of bidders; (d)
prepare the required documents/reports with extra care to avoid errors which could
mislead reader and users of the said reports; and (c) submit the lacking documents
cited in the observation to the Audit Team to comply with the requirements of the
2016 Revised IRR of R.A. No. 9184 and address the deficiencies enumerated.

4. The Municipality failed to operationalize the Energy Efficient Electric Vehicles (E-
Trike) project donated by the Department of Energy in CY 2019 thus, the objectives of
the project and the expected project outputs as embodied in the E-Trike Development
Plan and Deed of Donation dated May 23, 2019 were not attained. Moreover, the total
cost of the donated E-Trikes was not accounted for in the books of the Municipality,
thereby affecting the reliability of the affected accounts in the financial statements.
(Observation No. 11)

We recommended and the management agreed that the Municipal Mayor (a) instruct
the concerned municipal officials/personnel to fast track the implementation of the E-
trike project so that expected output from the project could be realized; (b) require the
Municipal Accountant to record the amount of the donated E-trike units in the books
of the Municipality to reflect the correct balances of the affected accounts in the
financial statements; and (c) prepare immediately the required Property Transfer
Report and submit the same, together with the Journal Entry Voucher (JEV) to the
donor agency for them to facilitate proper accounting of the donated e-trike units in
their books.

Other observations are presented in Part II of the Report.

The above, together with the other findings and recommendations contained in the
report were discussed with concerned municipal officials and staff. When appropriate,
management’s views and reactions were considered in the report.

Summary of Audit Suspensions, Disallowances and Charges

Appropriate action was not taken by Management to enforce the full settlement of
the audit suspensions and disallowances thus, audit suspensions and disallowances
totaling P7,247,927 and P28,347,747, respectively, remained unsettled as of year-end in
violation of pertinent sections of COA Circular No. 2009-006 dated September 15, 2009,
otherwise known as the 2009 Rules and Regulations on Settlement of Accounts (RRSA).
Likewise, the management allowed the settlement of disallowed claims on installment
basis even without the approval from the Commission on Audit contrary to COA Circular
2009-006 and COA Resolution No. 2015-031 dated September 15, 2009 and August 20,
2015 respectively thus, the recovery of the government’s irregularly utilized funds were
significantly delayed which is prejudicial to the best interest of the government.
vi
Status of Implementation of Prior Years’ Audit Recommendations

Out of the 35 prior years’ audit recommendations embodied in the CY 2018 and
prior years’ Annual Audit Reports, two were fully implemented, 26 were partially
implemented while seven were not implemented.

vii