Executive Summary

A. Introduction

The Municipality of La Trinidad was created by virtue of Republic Act (R.A.)

No. 531 on June 16, 1950. It became the capital town of the Province of Benguet
through the enactment of R.A. No. 4695 on June 16, 1966. It is composed of 16
barangays with a total land area of 8,079.51 hectares.

The Municipal Government derives its mandate from R.A.No. 7160 or the
Local Government Code of 1991. The role of the municipality is primarily to serve
as a general purpose government for the coordination and delivery of basic, regular
and direct services and effective governance of the inhabitants within its territorial
jurisdiction.

As of December 31, 2013, the Municipality had a total personnel complement

of 350, composed of 12 elected officials, 4 co-terminus, 206 permanent
employees,16casual employees and 112 job order/contractual.

B. Financial Highlights

B.I Comparative Financial Position

As of December 31, 2013, the municipality had total assets of

P421,897,194.31, total liabilities of P94,054,742.83 and total government equity
of P327,842,451.48. This year’s assets, liabilities and government equity
increased by P37,563,792.38, P17,252,943.25 and P20,310,849.13,respectively;
as compared with calendar year 2012.

B.II Sources and Application of Funds

For calendar year 2013, the municipality had a total operating income and
expenses of P259,556,440.26 and P172,067,523.97, respectively; this year’s
total operating income and expenses increased by P34,562,917.72 and
P14,794,301.33, respectively as compared with calendar year 2012. The net
income realized for 2013 increased by P11,166,671.81.

C. Operational Highlights

The municipality implemented various projects summarized as follows:

No. of Projects/Programs/ Project Cost
Fund Source Activities
Target Accomplished Target Accomplished
Municipal Development Fund 34 24 P29,200,000.00 P13,900,000.00
LDRRM Fund 46 18 9,500,000.00 1,132,000.00
Total 80 42 P38,700,000.00 P 15,032,000.00

D. Scope of Audit
 A financial and compliance audit was conducted on the accounts and operations
of the Municipal Government of La Trinidad for the year ended December 31, 2013.
The audit was aimed at ascertaining the propriety of financial transactions, fairness of
presentation of the financial statements and compliance with prescribed laws, rules
and regulations. A Value for Money Audit (VFM) was also conducted on the
programs, projects and activities of the municipality to determine whether these were
implemented in an efficient, economical and effective manner. It also included the
determination whether all revenues due to the municipality were collected.

E. Opinion in the State Auditor’s Report on the Financial Statements

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

financial statements of the Municipal Government of La Trinidad for reasons stated in
the Basis for Qualified Opinion in the Independent Auditor’s Report.

F. Observations and Recommendations

The following are the significant audit observations with the corresponding
recommendations:

1. Policies and guidelines on property and supply management were not adhered to
by the Municipality of La Trinidad that resulted in the following deficiencies: 1)
property and equipment (PE) with total cost of P9.405 million not presented/
missing during inventory-taking; 2) unserviceable and lost PPE with total book
value of P9.888 million and P.481 million, respectively, included in the PPE
account; and 3) non-recording of donated assets.
We have recommended that management: 1) Send demand letters, copy
furnished the Audit Team requiring the Accountable Officers (AO) to present
their property accountabilities, within 15 days. Should the AOs still fail to
present the property items under their care, instruct the Municipal Treasurer to
prepare Notice of Payment to be signed by the Municipal Mayor, copy
furnished the Municipal Accounting Office for the recording of receivable from
the concerned AO. In case the AO is already deceased, provide the Audit Team
a copy of Death Certificate coming from the NSO for their perusal and
appropriate action; 2)Require the Municipal Treasurer or the Property Officer to
immediately prepare and provide the Municipal Accounting Office (MAccO)
with a copy of the Inventory and Inspection Report of Unserviceable Property
(IIRUP) for the unserviceable property of P9.888 million as its basis in the re-
classification of the unserviceable PPE to Other Assets account;3) Instruct the
Municipal Accountant to prepare a Journal Entry Voucher (JEV) to recognize
the loss of assets in the books of accounts; and 4) Require the Municipal
Treasurer to secure deed of donation and other supporting documents with
regard to the donated assets and provide copies thereof to the MAccO as its
basis in recording them in the books of accounts. Have the donated asset
 appraised by a licensed appraiser, if the cost had not been provided by the
donor, for recording purposes.

2. Fund transfers of Priority Development Assistance Fund (PDAF) totaling

P1.571 million for calendar year 2013 to various Non-government
Organizations (NGOs) and Peoples Organizations (POs) were recorded as
outright expense instead of recording the same as Due from NGOs/POs
(Account Code 139), contrary to Sections 4.1 and 5.4 of COA Circular No.
2007-001, dated October 25, 2007.

We have recommended that the MAccO reclassify the amount transferred to the
NGOs/POs. Likewise, all future fund releases to NGOs/POs regardless of
source should be recorded as debit to account Due from NGOs/POs . We have
also recommended that management require the NGOs/POs to liquidate the
PDAF they received.

3. Productivity Enhancement Incentive (PEI) granted to officials and employees of

the Municipality of La Trinidad at one and half month basic salary but not less
than P18,000.00 plus P14,800.00 exceeded the allowable amount of P5,000.00,
contrary to Executive Order No. 80, s. 2012; hence, an overpayment of P6.116
million.

We have recommended that management cause the refund of the overpayment

of PEI from the officials and employees.

4. Sangguniang Bayan (SB) members were paid their Representation and

Transportation Allowances (RATA) even on actual regular sessions not
attended, contrary to Department of Budget and Management (DBM) Local
Budget Circular (LBC) No. 103, Section 52 of Republic Act No. 7160 and the
SB Resolution No. 85-2013, resulting in the overpayment of RATA amounting
to P276,975.00.
We have recommended to management the following: 1) Require the members
of the SB to fully refund the amount of overpayment that was not deducted from
their RATA due to absences and non-conduct of the required four sessions in a
month; 2) Instruct the Municipal Accounting Office to pay RATA claims of the
SB members based on actual work/attendance in regular sessions; 3) Support
claims for RATA with SB minutes of meetings and certification of attendance
from the SB Secretary; and 4) Strictly comply with the requirements of Section
52 of R.A. No. 7160, and Section 6, Article 2 of SB Resolution No. 85-2013 on
the conduct of at least one session in a week.

5. Accrual of Collective Negotiation Agreement (CNA) Incentive totaling P1.797

million was recorded in the books of accounts with incomplete supporting
documents contrary to pertinent accounting and auditing rules and regulations,
and the provisions of Budget Circular No. 2013-4 dated November 25, 2013;
thus, the validity, propriety and legality of the transaction are doubtful.
 We have recommended to management the following: 1) Submit to the Audit
Team the documentary requirements to support the payment of the CNA
Incentive as provided for in COA Circular No. 2012-001 and DBM Budget
Circular No. 2013-4; and 2) Strictly comply with the documentary requirements
of claims against government funds as provided for in COA Circular No. 2012-
001

6. The rates and fees collected from customers for the use of the Strawberry Valley
Hotel and Restaurant, an economic enterprise of the Municipality is not covered
by an appropriate tax ordinance passed by the SB; thus, the collections made
have no legal basis. Likewise, no operations manual is in place.

We have recommended that (a) The SB pass an ordinance providing for the
rates, fees or charges that will be collected from the customers for the services
rendered by the hotel; and (b) Management create a Technical Working Group
that will draft the operations manual of the Strawberry Valley Hotel and
Restaurant.

7. The Municipality of La Trinidad could have increased its revenue collections

had there been periodic review and amendment of the existing 2005 Revised
Revenue Code by the SB in accordance with the provisions of Republic Act No.
7160.

We have recommended that the Sangguniang Bayan consider the revision of the
existing 2005 Revised Revenue Code to be more relevant to the present times
and to increase the revenue of the municipality.

8. Of the 32 development projects in the 2013 Annual Development Plan of the

Municipality of La Trinidad with total appropriations of P25 million, eight
Programs/Projects/Activities with total appropriation of P11.1 million were not
completed as of yearend; hence, the socio-economic benefits that could be
derived from the immediate use of said projects were not attained. Likewise,
two PPAs with total appropriation of P6.2 million were not included in the 20
percent development fund identified by the Municipal Development Council.

We have recommended that management advise the Municipal Engineering

Office to facilitate the implementation of the eight uncompleted projects as of
December 31, 2013.We have also recommended that management provide the
Audit Team a copy of Municipal Development Council resolution indorsing the
two projects that are not included in the 2013 Annual Development Plan
including a copy of Sangguniang Bayan resolution approving the MDC
resolution.

9. Equipment units with total cost of P204,270.00 have not been utilized by the
intended beneficiaries; thus, the socio-economic benefits to be derived from the
DOLE Integrated Livelihood Programs towards Community Enterprise
 Development (DILP-CED) for the year 2013 were not fully attained. Likewise,
one unit hand tractor delivered amounting to P80,030.00 was not in accordance
with the specifications in the Purchase Order.

We have recommended to management the following: 1) Require the Dapiting

Alapang Neighborhood Association to provide its counterpart so that the
livelihood program can be started. If necessary, provide technical assistance to
DANA for the implementation of its home-based bakery livelihood project; 2)
Instruct the Ambiong La Trinidad Organic Practitioners Association to have the
shredder machine repaired by the supplier/manufacturer; 3) Coordinate with the
officers of STMC to determine if a suitable place has been identified and
provide assistance to the STMC for the installation of the dyer; 4) Create a team
that will monitor the progress of the livelihood program and provide technical
assistance to the beneficiaries; 5) Advise the Barangay Alapang Women’s
Association to provide the Audit Team with an explanation on why the
specifications of the hand tractor in their possession is different from what is
contained in the Purchase Order; and 6) Assist the beneficiaries in the
preparation of the specifications of the equipment or machineries to be procured
in order to prevent this incident to happen again in the future.

10. The sanitary landfill operated by the municipality has become an open dump
site and Barangay Materials Recovery Facilities have not been established
contrary to the provisions of Republic Act No. 9003, otherwise known as the
Ecological Solid Waste Management Act of 2000.

We have recommended to management to consider the following: 1) Consider

the hauling out of the solid waste dumped at the Alno Solid Waste Management
facility to another sanitary facility, as a temporary solution, to prevent the
occurrence of trash slide; 2) Increase the garbage fees collected through
amendment of the existing revenue code; 3) Impose fines and penalties to
stakeholders who commit violation of Municipal Ordinance No. 53-98,
otherwise known as the “Comprehensive Solid Waste Management of the
Municipality of La Trinidad, Benguet” and/or amending Ordinance No. 53-98
to be more relevant to the present time; 4) Continue the existing project
“Extension of Solid Waste Management Facility” in order that rehabilitation of
the existing SWM facility will proceed; 5) Strictly implement the segregation of
waste to reduce the waste that will be hauled out to another sanitary landfill to
minimize the cost of hauling; 6) Consider the establishment of Material
Recovery Facilities in the barangays or cluster of barangays; and 7) Consider
the procurement of heavy equipment units such as compactor, backhoe and
bulldozer to be used in the Alno Solid Waste Management Facility.

11. The transfer of amounts from the Priority Development Assistance Fund
(PDAF) to various Non-governmental Organizations (NGOs)/Peoples
Organizations (POs) totaling P1.571 million was not in accordance with the
provisions of COA Circular No. 2007-001, dated October 25, 2007.
 We have recommended to management the following: 1) Instruct the Municipal
Treasurer and the Municipal Accountant to coordinate with the recipient
NGOs/POs for the submission of the lacking documents to the Audit Team for
their evaluation and determination of the propriety of the PDAF released to the
concerned NGOs/POs; 2) Advise the recipient NGOs/POs to register with the
Bureau of Internal Revenue; 3) Make amendments to the existing Memorandum
of Agreement to incorporate all the provisions enumerated in Section 4.5.3 of
COA Circular No. 2007-001; and 4) Strictly follow the documentary
requirements and the provisions of the MOA prescribed in COA Circular No.
2007-001 for future releases or transfer of funds to NGOs/POs.

G. Status of Implementation of Prior Years’ Audit Recommendations

Out of 25 prior years’ audit recommendations and in the Interim Audit Report as
of June 30, 2013, eight were fully implemented, three were partially implemented
and 14 were not implemented by the municipality.