EXECUTIVE SUMMARY

A. INTRODUCTION

The Municipality of Conner was created by virtue of Executive Order No.42 signed by
President Diosdado Macapagal on June 25, 1963. It was named after an American soldier
and Engineer Norman C. Conner. He designed the road construction leading to the
settlements of what is now called the Municipality of Conner.
The municipality is classified as second-class municipality under the leadership of
Honorable Mayor Martina W. Dangoy. It has 21 regular and one administrative barangay
or a total of 22 barangays.
The municipality envisions to be “Apayao’s educational center and model on good
governance; the premier fruit producer and processor of the far north with empowered,
self-reliant and unified people in a sustainable community, guided by God and inspired
by sincere leaders.”

Audit Methodology and Scope of Audit

A financial audit and compliance was conducted to ascertain the propriety of the financial
transactions and observance of the agency with prescribed rules and regulations. A value
for money audit was likewise conducted to determine whether the programs, projects and
activities for the year were implemented in an efficient, economical and effective manner.

The audit was focused on the various audit thrusts/issues issued by the Local Government
Sector of the Commission on Audit. Walk through, analysis of data, interview with
concerned officials and employees, and other audit techniques that are necessary were
employed in the conduct of audit.
B. FINANCIAL HIGHLIGHTS

Conner is greatly dependent on its Internal Revenue Allotment which is composed of

95.50% of the total revenue. Other sources of funds include local taxes, permits and
licenses, service income and other income.
The financial condition and results of operations of the Municipality for CY 2019
compared to that of the preceding year is detailed as follows:

Particulars 2019 2018 Increase (Decrease)

A. Financial Condition
Assets 372,916,231.22 315,321,600.89 57,594,630.33
Liabilities 44,270,586.64 44,831,999.24 (561,412.60)
Government Equity 328,645,644.58 270,489,601.65 58,156,042.93
B. Result of Operations
Income 197,158,281.07 175,890,966.61 21,267,314.46
Expenses 156,855,089.04 132,410,442.29 24,444,646.75
Excess of Income 40,303,192.03 43,480,524.32 (3,177,332.29)

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Moreover, the comparative presentation of the sources and application of fund is as
follows:

Particulars 2019 2018 Increase (Decrease)

A. Sources of Funds (Appropriation)
Personal Services 80,794,565.83 66,500,050.00 14,294,515.83
MOOE 66,766,375.73 65,014,291.20 1,752,084.53
Financial Expenses -0- 633,000.00 (633,000.00)
Capital Outlay 50,524,585.80 64,951,830.40 (14,427,244.60)
Total 198,085,527.36 197,099,171.60 1,619,355.76
B. Application of Fund (Obligation)
Personal Services 78,241,312.65 66,485,346.66 11,755,965.99
MOOE 56,332,222.10 51,989,965.62 4,342,256.48
Financial Expenses -0- 363,538.00 (363,538.00)
Capital Outlay 23,652,981.36 16,796,491.11 6,856,490.25
Total 158,226,516.11 135,635,341.39 22,954,712.72

C. INDEPENDENT AUDITOR’S OPINION ON THE FINANCIAL

STATEMENTS

The auditor rendered a qualified opinion on the fairness of the presentation of financial
statements due to the unrecorded accounts payable amounting to ₱6,298,000.00 contrary
to the Philippine Public Sector Accounting Standards Nos. 30 and COA-DBM Joint
Circular No. 2013-1, thus resulting in the understatement of both Assets and Liabilities.

Likewise, in Observation No. 2 of this report, the Municipal Accountant failed to prepare
the monthly Bank Reconciliation Statements contrary to COA Circular No. 96-011 dated
October 2, 1996, resulting in the net overstatement of Cash in bank amounting to
₱5,206,747.84.

D. SUMMARY OF SIGNIFICANT OBSERVATIONS AND

RECOMMENDATIONS

The following significant observations were noted during the year and corresponding
measures were recommended:
1. Accounts Payable amounting to ₱6,298,000.00 was not recorded resulting in the
understatement of both Assets and Liabilities.

We recommended that the Municipal Accountant record the obligation and the
corresponding asset account.

2. The Municipal Accountant failed to prepare the monthly Bank Reconciliation

Statements resulting in the net overstatement of Cash in bank amounting to
₱5,206,747.84.

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 We recommended that the Municipal Accountant:

a. regularly prepare bank reconciliation statements for all bank accounts of the
municipality and henceforth, observe the prescribed period in the submission
of the same,

b. for the unrecorded disbursements, conduct a thorough review of all the

transactions and make the necessary adjusting entries for understated and
unrecorded disbursements;

c. prepare the following adjusting entries for the unrecorded interest income and
fund transfer:

On the General Fund:

Prior Period Adjustment 2,740,439.50
Cash in Bank-LCCA 2,740,439.50

On the DRRM Trust Fund:

Cash in Bank-LCCA 2,786,839.26
Trust Liability-DRRMF 2,786,839.26

3. Collections totaling ₱10,271,821.23 were not remitted intact to the Liquidating

Officer and have long delay in depositing to the bank thus, exposing the
government funds to possible misuse.

We recommended that:

a. all revenue collectors remit their collections regularly to the Liquidating

Officer; and

b. the Municipal Treasurer and the Liquidating Officer ensure prompt deposit,
and complete and correct reporting of collections to avoid possible misuse or
loss of government funds thru misappropriation.

4. Cash advances for purposes other than those allowed under COA Circular No. 97-
002 amounting to ₱6,930,075.00 were granted to officials and employees of the
municipality rendering the transaction irregular and unauthorized.

We recommended the following:

a. Cash advances for purposes other than travelling expenses shall not be granted
to elective officials; otherwise a Notice of Disallowance will be issued;
b. Grant cash advances only to designated disbursing officers who are properly
bonded.
c. Grant cash advances only for purposes that are allowed by law.

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 d. Direct the Municipal Accountant to reclassify the unliquidated account of the
former employees to its appropriate account thru the following proposed
adjusting journal entries:

Other Receivables 830,352.48

Advances to Officers and Employees 401,520.00
Advances for Operating Expenses 428,832.48

5. Stale Checks amounting to ₱115,809.12 were not cancelled, thus understating the
Cash in Bank-Local Currency, Current Account, as well as the liability and equity
balances of the General Fund Account.

We recommended that the Municipal Accountant verify the recorded outstanding

checks and make necessary adjusting entries for the stale checks.

6. Delayed implementation of the Special Area for Agricultural Development

project in violation of the Article IV of the Formatted Memorandum of
Agreement in the SAAD Manual.

We recommended that in the succeeding programs of the Municipality,

Management ensure timely implementation of project to attain its objectives.

We further request Management to submit a copy of the MOA and other related
documents as our basis to validate the propriety and legality of the disbursement.

7. The Management failed to implement the provisions of the Memorandum of

Agreement (MOA) for the livelihood projects provided thru financial loans
totaling ₱270,000.00, defeating its objective and depriving other members to avail
the same.

We recommended that:

a. Municipal Treasury Office and MSWDO evaluate/analyze the records of the

loans payments made and reconcile with the Municipal Accounting Office to
reflect the correct balances of the loan;

b. the Municipal Accounting Office make the necessary adjustments to update

the reconciled Loans Receivable account.

c. Management, thru the Municipal Social Welfare and Development Office,

employ mechanisms to collect the unpaid balance, otherwise enforce the
provision of the second paragraph of the Memorandum of Agreement in case
of failure of the borrowers to repay; and

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 d. Henceforth, strictly monitor the collection of all loans granted by the
Municipality in accordance with the respective MOAs or terms provided in
the programs.

8. Engineering and Administrative Overhead (EAO) for infrastructure projects

amounting to ₱2,542,962.80 are unreasonable resulting to the limited resources to
be programmed for the attainment of desirable socio-economic development and
environmental outcomes for the benefit of its constituents.

We recommended that the Management review their policy in setting or

allocating Engineering and Administrative Overhead (EAO) expense for all the
infrastructure projects to save funds for the other projects, thus attain more
desirable socio-economic development and environmental outcomes for the
benefit of its constituents.

9. The unused portion of the Engineering and Administrative Overhead (EAO)

totaling ₱2,542,962.80 is seemingly unreliable as it could not be determined due
to the absence of individual project ledger preventing the prompt reversion of
savings to finance other Programs, Projects and Activities of the Municipality.

We recommended that the municipality maintain individual ledgers for each

project to be able to know the remaining engineering and administrative overhead
for every completed project to be reported as savings for re-appropriation.

We further recommended that the Municipal Budget Office assign an individual

obligation number for each project in order to monitor the used and the remaining
balance of the EAO.

10. The Bids and Awards Committee declared contractors’ bids totaling
₱6,052,948.35 to be responsive although the minimum requirements on the
availability of pledged personnel were not met

We recommended that the BAC-TWG include in its post qualification activity not
only the determination of the existence of the documents stating the contractors’
pledges but also the analysis of these pledges to determine any duplicity of the
same. Moreover, we recommend that the BAC formulate its policy on the setting
of acceptable limit of contracts awarded to contractors with the same pledged key
personnel.

11. Out of the 79 projects programmed for the CY 2019, only 29 or 36.71% was
completed. Seven (7) unimplemented projects in CY 2017 and twenty three (23)
unimplemented projects in CY 2018 were still not completed as of December 31,

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 2019, indicating delayed implementation, thus the intended purpose and benefits
derived from the projects were not fully maximized.

We recommended that Management, through the Municipal Engineer and

Municipal Planning and Development Coordinator:

a. prepare and strictly observe the timetable for the completion of specific
projects and monitor the progress of its project implementation,

b. develop other applicable strategies for the effective and timely

implementations and monitoring of its programs and activities.

12. Projects/Programs/Activities (PPAs) and those that are to be implemented during

the year; the Report of Publicized Program, Projects and Activities (PPAs); and
the Monthly Monitoring Report on Projects/Programs/Activities (PPAs) were not
submitted which precluded the Audit Team to conduct timely execution of
appropriate audit procedures and prepare required reports.

We recommended that Management comply strictly with the provisions of COA

Circular No. 2013-004 on the preparation and submission of required reports on
PPAs.

13. Management failed to fully implement the CY 2019 Municipal Disaster Risk
Reduction Management Fund (MDRRMF) as appropriated and included in the
approved Municipal Risk Reduction Management Investment Plan (MDRRMIP)
contrary to RA 10121; thus strategic measures to reduce the risk of disaster and
mitigate the impact brought by calamities, man-made or caused by natural
phenomenon, if any were not assured.

We recommended that the Local Chief Executive ensure that all Programs,
Activities and Projects (PAPs) identified in the Municipal Disaster Risk
Reduction Management Investment Plan (MDRRMIP) are fully implemented in
the year they are appropriated in order to reduce the risk of disaster and mitigate
the impact of calamities, man-made or caused by natural phenomenon.

14. The functions of one Executive Assistant are duplications of the functions of some
department personnel resulting in unnecessary expenditures amounting to
₱217,410.00.

We recommended that management stop hiring personnel whose duties duplicates

the duties and responsibilities of existing personnel of the municipality to
conserve its limited resources.

15. Lack of adequate and well maintained comfort rooms within the municipality
does not only deprive employees, visitors, clients and the general public for the

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 use of more comfortable rooms for their personal necessities but is also contrary
to Section 901 of PD 1096.

We recommended that the Municipality include as a client focused gender project

and incorporate in their budget, the construction of well-maintained comfort
rooms to benefit visitors, clients and the general public.

16. The Municipality does not have a lactation station in the workplace for the
breastfeeding of female employees and clients depriving the female employees to
do their maternal function.

We recommended that management include as an organization-focused gender

issue, the establishment of a lactation station for its female employees who are
breastfeeding their young children and to give time for them to do their maternal
function even if they are working.

17. Some beneficiaries of the Special Area for Agricultural Development (SAAD)
program are not members of the marginalized sectors; hence the related
disbursements amounting to ₱1,286,520.00 did not justify the program’s ultimate
mission and vision.

We recommended that:

a. in the succeeding programs of the Municipality, Management with the

Municipal Agriculturist as the lead official strictly screen and identify
recipients so that the program’s purposes will be effectively served.

b. Management explain the discrepancy between the purchased and the

distributed fingerlings and why no specifics of feeds distributed were
indicated in the acknowledgement documents signed by beneficiaries,
otherwise a Notice of Disallowance will be issued.

18. The objective/purpose of the digital archiving and clouding report system of the
municipality amounting to ₱1,545,000.00 remained unattainable after almost two
years from procurement, rendering the procurement of the system unnecessary.

We recommended that management refrain from procuring systems or equipment

that cannot be fully utilized by the municipality to avoid wastage of public funds.

19. Disallowances amounting to ₱796,097.87 remained unsettled as of December 31,

2019 contrary to pertinent provisions of COA Circular 2009-006.

We recommended that Management strictly enforce settlement of suspension and

disallowances pursuant to Section 7 of 2009 RRSA.

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E. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT
RECOMMENDATIONS

Of the 43 audit recommendations embodied in the 2018 Annual Audit Report, 22 were
fully implemented, twelve (12) were partially implemented and nine (9) were not
implemented.

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