EXECUTIVE SUMMARY

A. INTRODUCTION

The Provincial Government of Misamis Oriental was created by virtue of Amendment

Act No. 3777 dated November 28, 1939. It is presently classified as a first class province
composed of 23 municipalities, the highly urbanized City of Cagayan de Oro, and the
component Cities of Gingoog and El Salvador.

The Province of Misamis Oriental is divided into two branches, the executive and
legislative. The executive branch is headed by the Provincial Governor while the
legislative branch is headed by the Vice-Governor along with the 12 Sangguniang
Panlalawigan members. The province has 21 Department Offices headed by Department
Heads. As of December 31, 2020, the province has a total of 3,737 manpower
complement which is composed of 1,256 permanent employees, 15 elective officials, 37
contractuals (of which 22 are co-terminus, 15 are temporary), 377 casuals and 2,052 job
order employees.

B. FINANCIAL HIGHLIGHTS
I. A presentation of the financial position and financial performance of the Provincial
Government for CY 2020 and CY 2019 is shown below:

Financial Position

2020 2019
Particulars
(In Thousands of Pesos)
Total Assets P 4,820,796 P 4,852,512
Total Liabilities 1,689,082 2,070,894
Government Equity 3,131,714 2,781,618

Financial Performance

2020 2019
Particulars
(In Thousands of Pesos)
Income P 2,007,947 P 2,019,234
Expenses 1,607,893 1,615,241
Transfers, Assistance and Subsidy From 335,595 185,755
Transfers, Assistance and Subsidy To (295,761) (254,902)
Net Income 439,888 334,847
II. Appropriations/Allotments/Obligations

Particulars Appropriations Allotment Obligation

Personal Services 974,820,438.00 947,361,765.08 832,392,341.72
MOOE 1,457,335,769.00 1,039,925,487.09 847,535,872.30
Capital Outlay 240,026,099.00 52,505,014.22 46,309,123.22
20% Development Fund 261,402,749.00 178,997,229.96 157,963,704.93
5% Calamity Fund 90,000,000.00 70,000,000.00 60,182,734.00
Aid to Barangay 1,908,000.00 477,000.00 94,500.00
Other Budgetary Reserves 424,055,846.28 40,499,663.46 35,857,712.35
Budgetary Requirement-Special 63,406,829.00 49,588,067.00 28,501,674.37
Acct.
Supplemental Budget No.1 145,528,129.65 87,233,385.78 73,746,077.12
Supplemental Budget No.2 222,104,724.93 163,136,274.93 41,860,470.27
Total 3,880,588,584.86 2,629,723,887.52 2,124,444,210.28

Operational Highlights
For CY 2020 and CY 2019, the province reported a total current income of P2.008 billion
and P2.019 billion respectively, which is composed of the following:

2020 2019
Particulars
Amount Percent Amount Percent
(In Thousands) (In Thousands)
Tax Revenue P 253,229 12.61% P 372,331 18.44%
Non-Tax Revenue 98,459 4.9% 176,404 8.74%
Internal Revenue Allotment 1,656,264 82.49% 1,470,500 72.82%
Other Income from External
Sources 0 0.00% 0 0.00%
Total 2,007,947 100% 2,019,234 100%

C. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements for the year 2020 due to the following exceptions:

1. The balances of reciprocal accounts, Due from Other Funds and Due to Other
Funds, showed a total net difference of P416,454,268.27 which contradicts Annex
B of COA Circular No. 2015-009, dated December 1, 2015 thereby, affecting the
correctness and reliability of the balances.

2. The account Cash in Bank-LCCA of the eight (8) Provincial Government of

Misamis Oriental Hospitals showed a consolidated credit balance of
P189,724,460.50 contrary to the Generally Accepted Accounting Principles and
COA Circular 2015-009 dated December 1, 2015 prescribing the use of Revised

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 Government Chart of Accounts, thereby casting doubt to the correctness and
accuracy of the account.

3. Existence of unsettled and dormant accounts in Advances to Special Disbursing

Officers and Advances to Officers and Employees with balances of
P144,110,843.70 and P5,063,471.67 as of December 31, 2020 respectively
contrary to provisions of COA Circular 2016-005.

4. Included in the Accounts Payable account of the General Fund are long
outstanding payables amounting to P57,421,400.48 or 50.40% of the total
Accounts Payable as of September 30, 2020 which should have been reverted to
the unappropriated surplus of the General Fund pursuant to Section 98 of
Presidential Decree 1445.

5. Stale checks on Hospital Funds totaling P8,509,191.97 as of December 31, 2020

were not cancelled contrary to Section 104 Volume I of the Government
Accounting Manual for Local Government Units thus, understating the account
Cash in Bank and Accounts Payable.

6. Reconciling items reflected in the Monthly Bank Reconciliation of 8 Misamis

Oriental Provincial Hospitals and several Trust Fund accounts totaling
P8,484,973.80 remained unadjusted contrary to COA Circular No. 96-011 dated
October 2, 1996, and Section 74 of PD 1445 thus affecting accuracy of Cash in
Bank account.

D. Significant Audit Observations and Recommendations

In addition, the following is a summary of significant findings and recommendations in

the audit of the operations of the Province for CY 2020. These and other observations and
recommendations are fully discussed in Part II of this Report.

1. The Supplier Clarenzon Marketing delivered an expired and near the expiry date
laboratory supplies to Misamis Oriental Provincial Hospital (MOPH) - Gingoog
which is not in conformity with the Warranty as provided by the Supplier in the
Contract of Agreement with the Provincial Government.

We recommended the management to instruct the Requisitioning Office and the

Inspection Team to monitor properly the receipt of the items delivered and
immediately notify the Supplier in writing for any defects noted on delivery. Also,
revisit the conditions in the Contract of Agreement before accepting the items
delivered by the Suppliers. We further recommend the management to instruct the
Bid and Awards Committee to specify in the bid documents the expiration date of
the medicines to be delivered.

2. Provincial Government funds totaling P1,566,113.93 were released to Suppliers

despite disbursement vouchers did not bear the approval of the Provincial

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 Governor which is in violation to Section 4.5 of Presidential Decree No. 1445 and
Section 344 of Republic Act 7160, thus considered illegal.

We recommended the management to exercise utmost diligence in the

performance of their duties and responsibilities concerning disbursements of
public funds. Ensure that all the required documents are properly attached and
observe proper internal control through issuing checks only upon all signatories in
the disbursement voucher are reflected and to release the check only to person
with issued authority to claim from the Supplier.
3. Approved and paid disbursement vouchers, and other related financial reports for
CY 2020, were not submitted to the Auditor’s Office within the prescribed period
despite of repeated demands, when submitted, were incomplete, contrary to
Section 7.2.1 of (COA Circular 2009-06) The 2009 Rules and Regulations on the
Settlement of Accounts; thereby precluding the conduct of post-audit and the
timely feedback of the audit results to management.

We recommended the management to submit the aforesaid reports within the

period prescribed by the existing rules and regulations. We further recommend the
management to install measures that will facilitate the timely and periodic
submission of these reports. Thereafter, strictly enforce said measure and institute
appropriate actions against officers responsible for the delay and non-submission
of the aforementioned reports and supporting documents.

4. The Reports of Collection and Deposit (RCD) were not properly filled – up by the
accountable officers, which is not in accordance with Section 49, Volume II,
NGAS Manual for LGUs, thus, balances of their cash and accountable forms
cannot be properly ascertained.

We recommended that accountable officers adhere to existing rules and

regulations on the recording of the receipt and remittance of all collections
handled by them to facilitate monitoring and verification thereof, prevent loss
and/or misuse of government funds and avoid possible shortage in audit, which
have penal sanctions.

Filing of RCD should be done per accountable officer and per RCD Number,
which should be done in numerical order as also prescribed by existing rules and
regulations to facilitate proper recording, filing of reports and verification of
accountabilities.

5. Copies of Contracts entered into between the Provincial Government and various
Contractors/Suppliers were not submitted to the Provincial Auditor’s Office
within the reglementary period as provided under Section 3 of COA Circular No.
2009-001 dated February 12, 2009, thus precluded the Audit Team in the conduct
of auditorial and technical review of the transactions and the correction of
possible deficiencies.

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 We recommended the management to submit the copies of the noted contract
documents. Also, instruct the Bids and Awards Committee to strictly observe the
provisions of COA Circular No. 2009-001, that is, to furnish the Auditor copies of
contract documents within five (5) working days from the perfection of contract,
for conduct of auditorial and technical review.

6. Non-maintenance of subsidiary ledgers for Cash in Bank – Local Currency

Current Account for all funds of the Provincial Government of Misamis Oriental
contrary to Section 111 and 114 of PD No. 1445 and Section 12 of GAM for
LGUs cast doubts on the accuracy and reliability of its reported balance as of
December 31, 2020.

We recommended the management to strictly adhere with the rules and

regulations of PD 1445 and the provision of GAM for LGUs to ensure accuracy
and reliability of reported balance at year-end. Maintain hardcopy of Subsidiary
Ledgers as back-up in case of loss or system shutdown for all individual accounts.
A change or an upgrade of the current Accounting System (eBookkeeping) of the
Province that it may be able to generate Subsidiary Ledger and General Ledger
and other reports. Provide a viewing and printing access for the audit team for
easy generating of reports required during the conduct of audit.

7. Failure to post monthly report on fund utilization and status of implementation of

PPAs funded out of the Bayanihan Grant to Provinces by the Local Finance
Committee contrary to the requirement under Sections 4.2 to 4.4 of Local Budget
Circular No. 126 impairs the transparency over the proper utilization of the said
fund.

We recommended the management to instruct the Local Finance Committee to

post the accumulated reports on the LGU’s website and in at least three (3)
conspicuous places in the locality at the end of every month. Also, inform the
offices mentioned in the provision stated above of the status report of the
utilization of the Bayanihan Grant to Provinces. Further, submit a copy of report
to the audit team for audit purposes.

8. The completed infrastructure road projects under the CIP-Infrastructure Assets of

the Conditional Matching Grant to Provinces (CMGP) were not reclassified to its
appropriate account pursuant to Annex B of the Chart of Accounts for Local
Government Units.

We recommended that the Provincial Accounting Office should update their

record to effect the reclassification of the account.

9. No final acceptance was made for the infrastructure project under the Conditional
Matching Grant to Provinces (CMGP) of the Department on Interior and Local

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 Government (DILG) despite the lapse of the Defects Liability Period of 1 Year
from project completion pursuant to Section 62.2.2, IRR of R.A. 9184.

We recommended that the Accounting Division of the Province of Misamis

Oriental should require the issuance of the Certificate of Acceptance for claims of
retention money after 1 year from the date the project was completed.

The Provincial Engineer’s Office of Misamis Oriental is required to issue

Certificates of Acceptance for infrastructure projects after the defects liability
period of 1 year.

10. The mandatory documentary requirements for Negotiated Procurement under

Media Services and Small Value Procurement were not properly observed which
are not in conformity with Appendix A of Annex H of the 2016 Revised IRR of
RA 9184, thereby create a material defect in the procurement process.

We recommended to the Bids and Awards Committee Chairman to strictly

observe the mandatory documentary requirements for the transactions under
Negotiated Procurement as provided under Appendix A of Annex H of the 2016
Revised IRR of RA 9184. We recommended also to the Provincial Accounting
Office to strictly verify the attachments of the mandatory requirements for
transactions under Negotiated Procurement before processing the disbursement
voucher.
11. The Contractor fails to fulfill its obligations in the contract, in the Construction of
Misamis Oriental Agricultural & Tourism Complex, Phase I at Aposkahoy,
Claveria, Misamis Oriental, in violation of the provisions of the General
Conditions of the Contract (GCC) Clause 16.1, delaying/depriving the province of
the socio-economic benefits that would be generated thereat.

We recommended the termination of the contract as embodied in the GCC, Clause

16.1 and to rebid the project in accordance with the Implementing Rules and
Regulations of R.A. 9184.

12. The volume of sand and gravel subjected to tax pursuant to Sec. 138 of R.A. 7160
did not pass through the verification process due to the absence of related
documents certifying the actual extractions of sand and gravel on site.

We recommended that the Provincial Environment and Natural Resources Office

shall submit proof of verification on the actual volume of sand and gravel and
other quarry resources extracted on site, to be used by the Provincial Treasurer’s
Office for proper collection.

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E. SUMMARY OF SUSPENSIONS, DISALLOWANCES AND CHARGES
Below is the summary of Notices of Charge, Suspension, and Disallowance issued to the
Provincial Government of Misamis Oriental, details of which are shown in Appendices A
and B, summarized as follows:
Balance Issuance Settlement Balance
Period
Particulars as of Dec.31, Jan.1 to Dec. Jan. 1 to Dec. as of Dec.31,
Covered
2019 31, 2020 31, 2020 2020
Notice of Charge - P 0.00 P 0.00 P 0.00 P 0.00
Notice of 2013 P 11,495,867.54 P 0.00 P 0.00 P 11,495,867.54
Suspension 2014 18,825,379.05 0.00 0.00 18,825,379.05
2015 139,125.00 0.00 0.00 139,125.00
2016 10,459,283.00 0.00 0.00 10,459,283.00
2017 1,008,000.00 0.00 0.00 1,008,000.00
2019 *14,798,536.08 0.00 5,178,187.36 9,620,348.72
2020 0.00 16,903,370.60 6,141,358.73 10,762,010.87
Total Suspension P 56,726,190.67 P 0.00 P 0.00 P 62,310,014.18
2014 P 71,880,488.97 P 0.00 P 1,046,780.00 P 70,833,708.97
2016 400,000.00 0.00 0.00 400,000.00
2017 4,041,686.05 0.00 269,220.00 3,772,466.05
2018 701,286.00 0.00 0.00 731,241.90
2019 29,955.90 0.00 0.00 0.00
2020 0.00 0.00 0.00 0.00
Total Disallowance P 77,053,416.02 P 0.00 P 0.00 P 75,737,416.92
TOTAL P 133,779,607.59 P 0.00 P 0.00 P 137,947,431.10
*Adjusted due to under-recorded NS balance as of December 31, 2019

F. Status of Prior Year’s Audit Recommendations

Our evaluation disclosed the following:

No. of Recommendations
Status of
CY CY CY CY CY CY
Implementation TOTAL
2019 2018 2017 2016 2015 2014
Fully Implemented 26 9 5 3 5 3 1
Partially Implemented 20 1 4 1 7 5 2
Not Implemented 1 0 0 0 0 0 1
Total 47 10 9 4 12 8 5

Detail is shown in Part III of this Report.

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