EXECUTIVE SUMMARY

INTRODUCTION
The Municipality of Josefina was created by virtue of Republic Act (R.A.) No.
222 and was originally named as Barangay Gumahan. However, Republic Act No. 2788
renamed it as Josefina in honor of the late wife of former Assemblyman Vicente
Madarang Cerilles. It is a 4th class municipality with fourteen (14) barangays with a total
land area of approximately 9,734 hectares and a population of about 12,293. It is
basically an agricultural area with coconut and cassava as its main products. The
municipality belongs to the first district of the Province of Zamboanga del Sur.

The Local Government Unit (LGU) envisioned to obtained genuine spirit of peace
and unity with better and sustainable economy, good farm to market roads, a healthy and
empowered citizenry with a balance environment.

AUDIT METHODOLOGY

The Commission has been implementing risk-based audit in the conduct of its
audit services. However, to meet the evolving developments in public governance and
fund management, the results-based approach in audit was incorporated. The integration
of these two approached, called Integrated Results and Risk-Based Audit (IRRBA)
Methodology was applied in the audit of the account and operations of the LGU.

SCOPE OF AUDIT

A comprehensive audit was conducted on the accounts and operations of the

Municipality of Josefina for 2017. The audit consisted of review of operation procedures,
evaluation of the LGUs programs and projects, interview of concerned government
officials and employees, verification, reconciliation, and analysis of accounts, and such
other procedures considered necessary.

Specifically, the objective of the audit is to ascertain the propriety of the financial
transactions and compliance of the agency to prescribed laws, rules and regulations. It
was also made to ascertain the accuracy of the financial records and reports as well as the
fairness of the presentation of the financial statements. Performance audit was likewise
conducted with the objective of informing management where improvement can be
instituted in the field of revenues, expenditures and management of resources.

As a result of the risk assessment conducted and in compliance with the identified
audit thrust of the Local Government Sector for CY 2017, the following audit
areas/accounts were looked into:

1. Complete submission of accounts

2. Program/Project Implementation
3. Local Disaster Risk Reduction and Management (LDRRM)

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 4. Environmental Compliance (EC)
5. Gender and Development (GAD)
6. Special Education Fund (SEF)
7. 20% Economic Development Fund (EDF)
8. Allocations to Local Government Units (ALGU)
9. Cash and Cash Accounts
10. Cash Advances
11. Payment of Honoraria and Allowances
12. Hiring of Casuals, Job Orders, Contractual, Consultants
13. Credit Financing/Debt Servicing
14. Infrastructure Projects
15. Pag-ibig Contributions
16. Issuance of NS, ND and NC

However, due to the limitations and constraints, the audit areas on accuracy of
LGU’s reported accomplishment vis-à-vis major programs and projects as well as
efficiency and economy in the implementation of the same, Fund Transfers to Other
LGUs, PPE, and Revenue, identified in the Audit Instructions for CY 2017 as mandatory
areas, could not be evaluated.

FINANCIAL HIGHLIGHTS

2016 2017
Total Assets 180,578.00 254,414.00
Total Liabilities 107,958.00 139,905.00
Government Equity 72,620.00 114,509.00
Income 53,364.00 71,453.00
Expenses 44,003.00 50,075.00

STATEMENT OF APPROPRIATION, ALLOTMENTS AND OBLIGATIONS

2017 Current Year Appropriation

C Funct Appropria- Allotments Obligations Balances Balances of

o ion/ tions of Allotments
d PAP Appropria-
e tions
100 PS 26,847,611.84 26,847,611.84 26,378,320.15 469,291.69 469,291.69
200 MOOE 8,066,807.68 8,066,807.68 6,131,371.46 1,935,436.22 1,935,436.22
300 CO 1,708,000.00 1,708,000.00 118,400.00 1,589,600.00 1,589,600.00
FE 16,822,315.08 16,822,315.08 7,886,063.63 8,936,251.45 8,936,251.45
Total 53,444,734.60 53,444,734.60 40,514,155.24 12,930,579.36 12,930,579.36
Continuing Appropriations
200 MOOE - - - -
300 CO 10,388,946.00 10,388,946.00 5,644,137.00 4,744,809.00 4,744,809.00

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 During the year, the LGU also received funds from the National Government
Agencies such as Department of Agriculture (DA), Department of Social Welfare and
Development (DSWD), Philhealth, and Department of Interior and Local Government
(DILG) in the total amount of P36,982,021.17.

INDEPENDENT AUDITOR’S REPORT

The Auditor rendered a qualified opinion on the fairness of the presentation of

accounts in the Municipal’s financial statements which are discussed in detail in the
attached Report.

 the correctness and validity of the consolidated cash and cash equivalents
account amounting to P74,963,458.05 as of December 31, 2017 cannot be
ascertained due to the non-submission of the monthly BRS;

 the balance of the Advances to Officers and Employees account

(1030540), SDO (1030530) and Other Receivables (10306990) totaling
P1,754,492.94 remain unliquidated and long outstanding; and

 Report on the Physical Count of Property, PPE was not prepared and
submitted, hence, validity, existence and propriety of classification of
fixed assets accounts in the amount of P111,308,879.12 could not be
ascertained.

Summary of Significant Observations and Recommendations

Presented below are the significant audit observations and recommendations

noted in the course of audit:

1. Payment of Food expenses for the Sanggunian Bayan (SB) Office

consumption amounting to P45,806.86 were incurred without any legal basis
as stated under COA Circular No. 2013-003 resulting in the incurrence of
irregular expenditures.

We recommended to Management the following: 1.) stop the practice of charging

food expenses for office consumption against the LGU’s appropriations; and 2.)
food stuff consumption be charged against the Representation Allowances
enjoyed by the SB members.

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2. No separate book of accounts was maintained for the receipt of the
Philhealth Capitation Fund (PCF) as required under Philhealth Circular No.
40, s. 2000 and disposition of the fund under Philhealth Circular No. 10, s.
2012.

We recommended to Management the following: 1.) maintain a separate book of

accounts for the PCF for the receipt and disposition; and 2.) maintain a separate
subsidiary ledger for the eighty percent (80%) of the Per Family Payment
Reimbursement (PFPR) operational cost and the remaining twenty percent (20%)
to be utilized as honorarium.

3. Prices of medicines procured amounting to P351,659.11 cannot be evaluated

against The Philippine Drug Price Reference Index due to absence of basic
data on Purchase Orders issued as prescribed in COA Circular No. 96-010.

We recommended to Management the following: 1.) The Rural Health Unit

(RHU) when procuring medicines indicate the appropriate data info in detail as
required in COA Circular No. 96-010; 2.) Use the Drug Price Reference Index
(DRPI) as guide for the ceiling prices of medicine to be procured; and 3.) The
winning supplier indicate the date of receipt under the conforme portion of the
Purchase Order as reckoning date to compute the liquidated damages in case there
is failure to deliver the goods as agreed upon.

4. Post-qualification evaluation by the Technical Working Group (TWG) of the

Lowest Calculated Bidders in the total amount of P1,442,289.23 was not
observed to determine the validity and veracity of the requirements
submitted by the bidders as required under Rule X, Section 34 and 34.3 (a)
of the IRR of R.A. 9184.

We recommended that the TWG exercise utmost prudence in the post-

qualification of the bids in order to properly determine whether the bidder
concerned complies with and are responsive to all the requirements and
conditions specified in the IRR and provide evaluation data on the post-
qualification of the bidders such as: 1.) examination of expiration date of the
PhilGEPS Registration at the time of bid opening; 2.) ascertain that the bidder
should not have any tax liability with the Government from the time of
submission of its bid up to the time of contract award; and 3.) the bidder’s
Audited Financial Statement be stamped “Received” by the BIR.

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5. Notices of Award and Notices to Proceed for the procurement of goods were
not posted in PhilGEPS website which is not in accordance with certain
provisions of the 2016 Revised IRR of RA 9184.

We recommended to Management the following: 1.) The Bids and Awards

Committee (BAC) post in the PhilGEPS website the Notices of Award and
Notices to Proceed for the procurements done thru public bidding and all
instances of alternative methods of procurement, except for contracts with ABC
of Fifty Thousand Pesos (P50,000.00) and below; and 2.) The Municipal
Accountant ensure that the printout copy of postings of the Notices of Award and
Notices to Proceed in the PhilGEPS website is included among the supporting
documents for payment of procured goods and services.

6. Observers were not invited to attend at any stage of the procurement in

violation of Section 13 of the 2016 Revised Implementing Rules and
Regulations (IRR) of R.A No. 9184 thus defeating the purpose of
transparency, accountability and equity in its operations.

We recommended to the Management the following: 1.) The Bids and Awards
Committee send their invitations to observers in all stages of the procurement.
Invitations should be sent at least five (5) before the procurement activity as
directed in the Revised IRR of RA No. 9184; and 2.) Disbursement vouchers for
the payment of the various goods and infrastructures should be supported with a
copy of the invitation to observers.

7. Utilization of the Local Disaster Risk Reduction Management Fund

(LDRRMF) in the amount of P89,776.24 as payment of materials used for the
construction of nursery shade is not in accordance with COA Circular No.
2012-002, DILG MC No. 2012-73 and NDRRMC, DBM and DILG JMC No.

We recommended to Management the following: 1.) use NDRRMC, DBM and

DILG Joint Memorandum Circular (JMC) No. 2013-1 as a guide in the
formulation of the LDRRMFIP programs/projects/activities using the four (4)
thematic areas as mandated in R.A. No. 10121; and 2.) review and update
regularly the Local Disaster Risk Reduction Management Fund Investment Plan
(LDRRMFIP) to consider current vulnerabilities that may arise.

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8. Out of the P1,870,565.00 appropriation for the 70% Mitigation Fund of the
LDRRMF, only P302,671.63 or 16% was utilized.

We recommended to Management the following: 1.) use NDRRMC, DBM and

DILG JMC No. 2013-1 as a guide in the formulation of the LDRRMFIP
programs/projects/activities using the four (4) thematic areas as mandated in R.A.
No. 10121; and 2.) review and update regularly the LDRRMFIP to consider
current vulnerabilities that may arise.

9. Monthly submission of the Reports on the utilization of Disaster Risk

Reduction and Management Fund totaling P302,671.63 for the year were not
complied as required under JMC No. 2013-1 and COA Circular 2012-002.

We recommended that Management prepare and submit the following for

verification and validation, to wit: 1.) Report on Utilization of Disaster Risk
Reduction and Management Fund (Annex B); and 2.) Disclosure in the Notes to
Financial Statements the LDRRMF (Annex D).

10. Out of the 15 projects identified in the Annual Investment Plan (AIP) to be
funded out of the 20% Economic Development Fund (EDF), 15 or 100%
were not implemented, depriving the intended beneficiaries of the benefits
that could have been derived from those projects.

We recommended the following: 1.) The Local Development Council (LDC)

monitor the implementation of the projects as incorporated in the AIP; 2.) The
Municipal Engineer coordinate with the departments concerned to fast track the
implementation of the projects; 3.) The Municipal Mayor shall ensure
compliance with the responsibilities provided for in paragraph 5.0 of DILG and
DBM Joint Circular No. 2017-1 to achieve desirable socio-economic development
and environmental outcomes; and 4.) Incorporate projects in the AIP that is
within the scope allowable as identified in social development, economic
development and environmental management.

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11. Expenditures totalling P15,600.00 charged against SEF do not fall within the
primary purpose of the fund as provided under Section 272 of the Local
Government Code and No. 4, Joint Circular No. 01, series of 1998 of
DECS, DBM and DILG.

We recommended that in the preparation of the School Board Budget, the

members of the Local School Board give priority to programs, activities and
projects set in Section 272 of the Local Government Code and utilize the same to
such purpose prescribed by law for which the SEF was created.
12. The role of the Municipal Government on Solid Waste Management was not
fully complied as required under Republic Act No. 9003 resulting to the non-
establishment of a systematic, comprehensive and ecological waste
management program.

We recommended that management fully comply with the role of the LGU as
provided for under the Ecological Solid Waste Management Act of 2000 to have a
systematic, comprehensive and ecological waste management program.

13.a Annual GAD Plan and Budget was not submitted to the COA Team within
five (5) working days from the receipt of the approved plan from the DILG
and copy of the GAD Accomplishment Report within five (5) working days
from the end of January of the preceding year as required under JMC
Circular No. 2013-1 and COA Circular No. 2014-011.

13.b Establishment and Maintenance of GAD Database not set up

13.c. Non-formulation/enhancement and Implementation of the LGU GAD Code

In view of the foregoing observations noted above, we recommend that the GAD
Focal Point System: 1.) Strictly comply with the provisions of Joint Memorandum
Circular No. 2013-01 of the PCW-DILG-DBM-NEDA and other applicable rulings
relative to the submission of the approved GAD Plan and Budget and the preparation of
the Annual GAD Accomplishment Reports to be approved by the different offices
concerned and expenditures should be limited to the amount approved in the GAD Plan
and Budget to ensure that all planned projects and activities are implemented; 2.) Attend
GAD related seminars and trainings to keep abreast with updates and build up
competencies in the execution of GAD related laws and regulations; 3.) Gather and build
up sex-disaggregated data and GAD related information that can be sourced in the
agencies suggested by the Circular such as the NSO, NSCB, DSWD and DepED;
Maintain and establish GAD database to serve as basis for gender-responsive planning,
programming and policy formulation; and 4.) Assist formulation and passage of GAD
codes or ordinances to support the LGU in promoting, protecting and fulfilling women’s

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human rights, women economic empowerment and gender-responsive governance
towards the attainment of gender equality and women’s empowerment.

STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES AS OF YEAR

END

The status of issued Notice of Suspension (NS)/ Notice of Disallowance (ND)/

Notice of Charge (NC) is summarized hereunder:

Beginning Issued This Settled This Ending

Balance Period Period Balance
(As of (1/1/17 to (1/1/17to (As of
12/31/2016) 12/31/17) 12/31/17) 12/31/17)
Notice of Suspension 3,103,355.64 603,215.39 - 3,706,571.03
Notice of Disallowance 155,067.26 - - 155,067.26
Notice of Charge - - -
Total 3,258,422.90 603,215.39 - 3,861,638.29

Status of Implementation of Prior Year’s Audit Recommendations

Out of the thirty (30) audit recommendations contained in our CY 2016 Annual Audit
Report, fifteen (15) were fully implemented, five (5) were partially implemented, and ten
(10) were not implemented.

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