EXECUTIVE SUMMARY

A. INTRODUCTION

The Municipality of Luna was formerly called “Namacpacan”, an Ilocano word

which means “one who had given food”. On October 18, 1906, its name was changed
to Luna by the incumbent Mayor Primitivo Resurreccion Novicio by virtue of
Philippine Commission Act No. 1543. The municipality was reclassified from 4th to 3rd
class municipality per Department of Finance Order No. 23-08 dated July 29, 2008
with an average annual income of ₱42,545,000.00 from CY 2004-2007.

Like any local government unit, the municipality enjoys total autonomy in the
management of its own affairs in conformity with the development thrust of the
national government.

The Municipality of Luna, La Union is under the administration of Honorable

Mayor Rachel N. Pinzon. The municipality had a total working force of 166 personnel
as of December 31, 2020, which consists of the following:

Particular No. of Personnel

Elective 12
Appointive
 Permanent 67
 Casual 19
 Job Order 68
Total 166

B. OPERATIONAL HIGHLIGHTS

The Municipality was able to distribute relief goods to its constituents around
13,157 families during the Enhanced Community Quarantine due to COVID-19.
Despite the pandemic, the following projects were still implemented:

Target Accomplishment
Particulars
Qty. Amount Qty. Amount
Rehabilitation/Improvement of
6 ₱ 26,198,000.00 6 ₱ 26,114,293.93
Barangay Road, FMR
Concrete Paving of FMR 4 6,800,000.00 4 6,727,817.85
Construction of Slope Protection 2 9,062,363.00 2 9,006,272.01
Repair/Improvement/Continuation of
4 2,700,000.00 4 2,664,412.05
Building, School, Health Station
 The Municipality of Luna is conferred with the following awards:

 Certificate of Recognition to LCR-Luna for being one of the Performing

Local Civil Registry Offices in the Province of La Union

 2020 National ADAC Special Award: Cities and Municipalities who have
sustained the status of their unaffected barangays

 2020 National ADAC Special Award: City and Municipalities that have
sustained the Drug-Cleared Status of their Drug-Affected Barangays

C. FINANCIAL HIGHLIGHTS

Results of Financial Operations:

CY 2020 CY 2019 Increase/

Particulars (In Philippine (In Philippine Decrease Remarks
Peso) Peso)
Financial Position
Assets 243,848,261.60 259,371,334.84 (15,523,073.24) Decrease in Cash
& Cash
Equivalents due to
implementation of
various programs/
projects/activities
(PPAs) and
payment of
financial
liabilities.
Liabilities 36,945,152.96 48,592,034.70 (11,646,881.74) Due to payment of
financial
liabilities and
implementation of
PPAs using trust
liability.
Government Equity 206,903,108.64 210,779,300.14 (3,876,191.50)
Financial Performance
Income 147,218,740.60 146,299,620.31 919,120.29 No receipt of
Share from
Tobacco Excise
Tax but received
subsidies from
NGAs.
Expenses 151,719,932.10 133,407,421.94 18,312,510.16 Due to
implementation of
various PPAs
categorized as
MOOE.
 CY 2020 CY 2019 Increase/
Particulars (In Philippine (In Philippine Decrease Remarks
Peso) Peso)
Excess of Income (4,501,191.50) 756,246.67 (5,257,438.17)
Sources and Application of Funds
General Fund:
Allotments 172,737,564.49 166,305,059.93 6,432,504.56 Increase in Social
Services and
Social Welfare
Obligations 143,207,644.97 132,853,092.69 10,354,552.28 Increase in Social
Services and
Social Welfare,
and Health,
Nutrition and
Population
Control
Balance 29,529,919.52 33,451,967.24 (3,922,047.72)
Continuing Appropriations
Allotments 30,605,011.37 45,660,781.03 (15,055,769.66) Most of the PPAs
Obligations 27,024,916.32 31,411,619.69 (4,386,703.37) under Other
Purposes (RA
7171) were
implemented last
year.
Balance 3,580,095.05 14,249,161.34 (10,669,066.29)
Special Education Fund
Allotments 1,800,000.00 1,650,000.00 150,000.00 Increase in
Obligations 1,511,025.69 1,012,063.06 498,962.63 Maintenance and
Other Operating
Expenses
Balance 288,974.31 637,936.94 (348,962.63)

D. SCOPE OF AUDIT

A financial and compliance audit and value for money audit were conducted on
the accounts and operations of the Municipality of Luna, La Union for the period
January 1 to December 31, 2020.

The audit was done using various audit techniques like

verification/confirmation, observation, interview with concerned officials and
employees, evaluation of control system/s, and other auditing procedures and
techniques considered necessary under circumstances.

The audit was focused on the different audit thrusts/areas issued by the Local
Government Sector of the Commission.
E. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

We rendered a qualified opinion on the fairness of the presentation of the

financial statements because the Property, Plant and Equipment was understated by
₱28,454,637.69 due to (a) inappropriate accounting of major repair of various projects
as Repairs and Maintenance Expense totaling to ₱5,950,070.95; (b) non-recognition of
a completed infrastructure project amounting ₱564,462.86; and (c) non-adjustment of
2019 errors pertaining to completed local road networks totaling to ₱25,830,825.91.

F. SUMMARY OF OTHER SIGNIFICANT OBSERVATIONS AND

RECOMMENDATIONS

We commend the management for the following favorable observation:

1. Compliance with DILG Memorandum Circular No. 2011 – 08A

The Municipality of Luna has been religiously complying with DILG

Memorandum Circular No. 2011 – 08A, strict adherence to full disclosure of Local
Budget and Finances, and Bids and Public Offering.

As noted by the team, the following documents and transactions were posted
in a bulletin board inside the municipal hall premises:

a. Annual Budget Report

b. Quarterly Statement of Cash Flows
c. Statement of Receipts and Expenditures
d. Trust Fund Utilization
e. Quarterly Report of SEF (Special Education Fund) Utilization
f. 20% Component of the IRA Utilization
g. Statement of Debt Service
i. Items to Bid

However, the audit team noted the following significant audit observations and
recommendations on the operations of the Municipality of Luna, La Union during
the year:

1. Disbursements for food assistance and other relief goods for affected
households exceeded budgeted amounts by ₱989,231.97 due to lack of
monitoring by the Municipal Budget Officer and the Municipal Treasurer,
thus, affecting the validity and propriety of the transactions.

We have recommended that the Local Chief Executive require the

Municipal Budget Officer and Municipal Treasurer to judiciously review and
authorize transactions based on budgeted amounts to avoid technical issues that
would arise from excessive disbursement of funds as a result otherwise.
 Moreover, we have recommended that the Local Chief Executive enjoin
responsible officers to prepare resolutions for augmentation of savings or
appropriation ordinance for supplemental budgets in case additional funds will
be needed for programs with lacking budgeted amount as deemed necessary.

2. In-depth verification of various on-going projects of contractors for

infrastructure projects were deemed inadequate as post qualification by
the Bids and Awards Committee were only conducted in only one day and
associated report does not contain justification of issues arising from the
attached Statement of All On-Going Government and Private Contracts.
Moreover, the Municipality were deemed exposed to risk of loss from non-
performance of the Winning Contractor with the agreed upon contract
due to insufficient validity period of issued Performance Bond contrast
with the provisions of Section 39.1 of RA No. 9184, thus, creating risk of
non-attainment of quality standard within the time period of
infrastructure projects set by the Municipality.

We have recommended that the Local Chief Executive direct the Bids
and Awards Committee to:

 Submit justifications to support awarding of the listed projects despite

existence of negative slippage on the on-going projects declared by the
winning bidders in their Statement of All On-Going Government and
Private Contracts.

 Ensure that all vital information in the Statement of All On-Going

Government and Private Contracts are completely provided such as
contract duration, date started and percentage of completion, otherwise
disqualify bidders who are not complying with the said requirements.

 Conduct in-depth post qualification of submitted technical requirements of

bidders by examining on-going projects if there is a negative slippage as
well as conduct ocular inspections on those declared projects to evaluate
the ability of the prospective winning bidder to complete project under bid
with quality standards and scheduled time frame set.

 Since the certificate of final acceptance is yet to be issued, require all

contractors to give performance bond for the remaining uncovered period
of the completed projects, otherwise, suspend issuance of the certificate
until complied with. Thereafter, require performance bond from future
awardees covering the required period of validity by Section 39.4 of RA
No. 9184.

The above observations and recommendations and other findings found in Part
II of this report were discussed with the management and comments were
incorporated in the report.
 The exit conference with the Municipality of Luna, La Union was conducted
on May 24, 2021.

G. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS

Of the 41 prior year’s audit recommendations embodied in the 2019 Annual

Audit Report (AAR), 14 were fully implemented and 27 were not implemented by the
Municipal Government.

H. STATUS OF SETTLEMENT OF AUDIT SUSPENSIONS, DISALLOWANCES

AND CHARGES

For CY 2020, there was no Notice of Suspension, Disallowance nor Charge

issued.