Tugaya2020 Audit Report COA

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
on the
Municipality of Tugaya
Lanao del Sur
For the Year Ended December 31, 2020

Copy furnished:
The President
Thru: The Minister, MILG-BARMM, Cotabato City
The Regional Director, BLGF, RO XII, Koronadal City
The Regional Director, DBM, RO XII, Roxas Street, Koronadal City
The Presiding Officer, Sangguniang Bayan of the Municipality of Tugaya, LDS
The Assistant Commissioner, Local Government Sector, COA, Quezon City
National Library of the Philippines, T.M. Kalaw St., Ermita, Manila (soft copy)
UP Law Center, Diliman, Quezon City (soft copy)
Province of Lanao del Sur
AGENCY ACTION PLAN AND STATUS OF IMPLEMENTATION

Audit Observations and Recommendations
CY 2020 Annual Audit Report
As of ___________________________, 2021
Agency Action Plan

Reason for Action
Target Partial/Delay/ Taken/
Audit Audit Person/ Status of
Ref. Action Implementation Non- Action
Observation Recommendations Dept. Implemetation
Plan Date Implementation, not
Responsible
if applicable taken
From To
Prepared by:
Name and Position of Agency Officer Date
Noted by:
Local Chief Executive COA Auditor
Note:
Status of Implementation may either be (a) Fully Implemented, (b) On-going, (c) Not Implemented, (d) Partially Implemented, or (e) De
EXECUTIVE SUMMARY
Introduction
The Municipality of Tugaya, Province of Lanao del Sur, was created by virtue of
Executive Order No. 42 dated June 25, 1963. It is a 5th class municipality and politically
subdivided into 23 barangays with total land area of 155.10 square kilometres and total
population of 23,814 people according to 2015 census.
The municipality is under the leadership of Hon. Al-Fattah N. Pacalna as Municipal

Mayor. It is supported by municipal vice-mayor, eight (8) municipal councilors and other
heads of 10 municipal offices with 55 regular personnel.
Financial Highlights
The financial highlights of the Municipality of Tugaya, Lanao del Sur, as of December
31, 2020 with comparative figures of 2019 are presented hereunder:
Financial Position
40,000
36,831 36,759
35,000
30,843 30,771
In Thousand Pesos
30,000
25,000
20,000
15,000
10,000
5,000
72 72
0
CY 2020 CY 2019
Assets Liabilites Equity
i
Financial Performance
140,000
119,933
In Thousand Pesos 120,000 113,946
97,891
100,000
85,192
80,000
60,000
40,000
20,000 12,699
5,987
-
CY 2020 CY 2019
Revenue Expenses Surplus (Deficit)
Sources and Allocation of Funds

140,000
119,392 118,978
120,000
98,917
In Thousand Pesos
98,478
100,000
80,000
60,000
40,000
20,000
414 439
0
CY 2020 CY 2019
Appropriations Obligations Incurred Balance
Scope of Audit
A financial and compliance audit was conducted on the accounts and transactions of
Municipality of Tugaya, Lanao del Sur, for calendar year 2020. The audit was aimed at
determining whether management presented fairly the financial statements of the
ii
Municipality in adherence to the International Standard of Supreme Audit Institution
(ISSAIs) and whether prevailing laws, rules and regulations have been complied with.
Independent Auditor’s Report on the Financial Statements
The Audit Team Leader rendered a qualified opinion on the financial statements due to
the effects of:
1. Doubtful existence, completeness and condition of all property, plant and

equipment (PPE) accounts with net book value of ₱36.630 million because of
partial conduct of physical count on some properties totaling ₱10.046 million
book value; and
2. Unrecognized depreciation expenses of ₱1,233,239.54 for CY 2020 and prior

years for some items of property, plant and equipment (PPE) with total book
value of ₱14,836,676.00.
Summary of Significant Audit Observations and Recommendations
1. The existence, completeness and condition of all property, plant and

equipment (PPE) accounts of the Municipality with net book value of
₱36.630 million for all funds cannot be ascertained due to partial conduct of
physical count on some properties totaling ₱10.046 million book value by the
Inventory Committee in compliance with Section 124, Volume I of New
Government Accounting System (NGAS) Manual for Local Government
Units (LGUs) and Item No. 5.1 of COA Circular No. 2020-006, thus, cast
doubt on the fair presentation of the said accounts in the financial
statements.
We recommended that the Inventory Committee shall continue the physical count
of all PPE items taking into consideration the prescribed procedural guidelines for
inventory taking as provided in COA Circular No. 2020-006, to wit:
a. Use the inventory working papers provided by the General Service Office
(GSO) as basis for inventory taking activities, taking into consideration the
capitalization threshold of ₱15,000.00;
b. Record/document the daily physical count in a standard Inventory Count Form

(ICF), which shall be used as the basis in the preparation of the RPCPPE after
the physical count;
c. Tag all PPE items counted with new property stickers containing the
information provided by the said Circular;
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d. State clearly in the ICF the PPEs’ condition, found at station and not found
during the physical count which described as “non-existing” or “missing”, as
well as other relevant information of each PPE; and
e. Prepare the RPCPPE upon completion of the physical count.
2. Inventory taking by the Inventory Committee to PPE items totaling of

₱10,046,602.00 may have been done inefficiently and ineffectively due to non-
preparation of Physical Inventory Plan (PIP) prior to its partial conduct of
physical count in contrary to Item No. 5.9 of COA Circular No. 2020-006.
We recommended that Inventory Committee shall prepare the Physical Inventory

Plan (PIP) prior to its inventory taking in order to ensure that all planned
inventory activities/procedures are efficiently and effectively performed by the
Committee members.
3. Depreciation expenses of ₱1,233,239.54 for CY 2020 and prior years was not
set-up for some items of property, plant and equipment (PPE) with total
book value of ₱14,836,676.00, in contrary to paragraphs 13, 59, 64 and 66 of
International Public Sector Accounting Standard (IPSAS) 17, thus, it may
overstate the asset and understate the expense accounts.
We recommended that Management require the accountant to compute, recognize

and record in the books of accounts the depreciation of the affected PPE accounts
by drawing a journal voucher and update/post the same in its corresponding
Journals and Ledgers.
4. No special account in the general fund (SAGF) was created for the
Bayanihan Grant to Cities and Municipalities (BGCM) fund received by the
Municipality amounting to ₱9,130,065.00 in contrary to Sections 313 of RA
7160, 105, Volume I of New Government Accounting System (NGAS)
Manual for Local Government Units (LGUs) and Item No. 3.7 (2nd
paragraph) of DBM LBC No. 125, thus, adequate information regarding the
receipt and utilization of funds may not be easily monitored/tracked.
We recommended that Management create a separate special account in the

General Fund (SAGF) for the BGCM Fund through an ordinance by the local
sangguniang pursuant to Section 313 of RA No. 7160 for purposes of easy
monitoring/tracking of the utilization of the allocation thereof.
5. Non-preparation and/or non-submission of monthly and separate year-end

post-closing trial balance and related financial statements for the receipts
and utilization of Bayanihan Grant to Cities and Municipalities (BGCM)
fund received by the Municipality amounting to ₱9,130,065.00 in contrary to
Section 110, Volume I of NGAS Manual for LGUs and Item No. 4.2 of DBM
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LBC No. 125, thus, proper classification and recognition of assets and
expenses accounts may not be correctly taken up in the books of accounts.
We recommended that Management prepare:
a. A monthly report on BGCM fund utilization and status of implementation of

PPAs in pursuant to DBM Local Budget Circular No. 125; and
b. A separate post-closing trial balance and financial statements for BGCM Fund
as special account for General Fund, which contains the summary of
transactions for the year as integral part of the schedules of the General Fund
trial balance for purposes of proper recording in the books of accounts in
pursuant to Section 110, Volume I of NGAS Manual for LGUs.
Summary of Total Suspensions, Disallowances and Charges
The total suspensions, disallowances and charges of the municipality amounted to ₱0.00,
₱36,036.00, and ₱0.00, respectively, as of December 31, 2020. The total disallowances
remained unsettled by the concerned responsible/liable persons in contrary to pertinent
provision of COA Circular No. 2009-006 dated September 15, 2009.
Status of Implementation of Prior Years’ Audit Recommendations
Of the 18 prior years’ audit recommendations embodied in the 2019 Annual Audit Report
(AAR), six (6) or 33.33 per cent were fully implemented, four (4) or 22.22 per cent were
partially implemented, and eight (8) or 44.45 per cent were not implemented.
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TABLE OF CONTENTS
Particulars Page No.
Part I – Audited Financial Statements
 Independent Auditor’s Report 1

 Statement of Management Responsibility for Financial Statements 3
 Consolidated Statement of Financial Position 4
 Consolidated Statement of Financial Performance 5
 Consolidated Statement of Cash Flows 6
 Consolidated Statement of Changes in Net Assets/Equity 7
 Statement of Comparison of Budget and Actual Amounts 8
 Notes to Financial Statements 10
Part II – Audit Observations and Recommendations 19
Part III – Status of Implementation of Prior Years’ Audit Recommendations 29
Part IV – Appendices
 Statement of Financial Position (By Fund) 36

 Statement of Financial Performance (By Fund) 37
 Statement of Cash Flows (By Fund) 38
 Statement of Changes in Net Assets/Equity (By Fund) 39
PART I
AUDITED FINANCIAL STATEMENTS
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
INDEPENDENT AUDITOR’S REPORT
HON. AL-FATTAH N. PACALNA

Municipal Mayor
Municipality of Tugaya, Lanao del Sur
Qualified Opinion
We have audited the accompanying combined financial statements of the Municipality of

Tugaya, Lanao del Sur, which comprise the Statement of Financial Position as at
December 31, 2020, and the Statement of Financial Performance, Statement of Changes
in Net Assets/Equity, Statement of Cash Flows, Statement of Comparison of Budget and
Actual Amounts for the year then ended, and notes to financial statements, including a
summary of significant accounting policies and other explanatory information.
In our opinion, except for the effects of the matter described in the Basis for Qualified
Opinion, the accompanying financial statements present fairly, in all material respects,
the financial position of the Municipality of Tugaya, Lanao del Sur, as at December 31,
2020, and its financial performance, its cash flows and its comparison of budget and
actual amounts for the year then ended in accordance with the International Public Sector
Accounting Standards.
Basis for Qualified Opinion
Doubtful existence, completeness and condition of all property, plant and equipment
(PPE) accounts with net book value of ₱36.630 million because of partial conduct of
physical count on some properties totaling ₱10.046 million book value; and unrecognized
depreciation expenses of ₱1,233,239.54 for CY 2020 and prior years for some items of
PPE with total book value of ₱14,836,676.00.
We conducted our audit in accordance with International Standards of Supreme Audit

Institutions (ISSAIs). Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are independent of the agency in accordance with the ethical requirements that
are relevant to our audit of the financial statements, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our
qualified opinion.
2

3

Consolidated Statement of Financial Position
As at December 31, 2020
(With Comparative Figures for CY 2019)
Amount
Note 2020 2019
ASSETS
Current Assets
Cash and Cash Equivalents 4 ₱ 192,259.09 ₱ 282,483.46
Receivables 875.00 875.00
Inventories 7,525.00 7,525.00
Total Current Assets ₱ 200,659.09 ₱ 290,883.46
Non-Current Assets
Property, Plant and Equipment 5 ₱36,630,385.09 ₱30,552,835.93
Total Non-Current Assets ₱36,630,385.09 ₱30,552,835.93
Total Assets ₱36,831,044.18 ₱30,843,719.39
LIABILITIES
Current Liabilities
Inter-Agency Payables 6 ₱ 72,056.46 ₱ 72,056.46
Total Current Liabilities ₱ 72,056.46 ₱ 72,056.46
Total Liabilities ₱ 72,056.46 ₱ 72,056.46
NET ASSETS/EQUITY
Government Equity ₱36,758,987.72 ₱30,771,662.93
Total Liabilities and Net Assets/Equity ₱36,831,044.18 ₱30,843,719.39
See Accompanying Notes to Financial Statements
4
Consolidated Statement of Financial Performance
Amount
Note 2020 2019
Revenue
Tax Revenue 7 ₱ 239,811.50 ₱ 410,101.63
Share from Internal Revenue Collections 8 109,560,775.00 97,462,416.00
Service and Business Income 9 3,390.00 19,421.82
Total Revenue ₱109,803,976.50 ₱97,891,939.45
Less: Current Operating Expenses

Personnel Services 10 ₱ 48,332,309.04 ₱44,808,339.84
Maintenance & Other Operating Expenses 11 64,855,246.43 39,524,857.80
Non-cash Expenses 12 610,034.84 610,034.84
Financial Expenses 1,800.00 2,020.00
Current Operating Expenses ₱113,799,390.31 ₱84,945,252.48
Surplus (Deficit) from Current Operation (₱ 3,995,413.81) ₱12,946,686.97

Add (Deduct):
Transfers, Assistance & Subsidy From 13 ₱ 10,130,065.00 ₱ 0.00
Transfers, Assistance & Subsidy To 14 (147,326.40) (247,026.11)
Surplus(Deficit) for the period ₱ 5,987,324.79 ₱12,699,660.86
5
Consolidated Statement of Cash Flows
Amount
Note 2020 2019
Cash Flows from Operating Activities
Cash Inflows
Collection from Taxpayers ₱ 239,811.50 ₱ 410,101.63
Share from Internal Revenue Allotment 109,560,775.00 97,462,416.00
Receipts from business/service income 3,390.00 19,421.82
Subsidy from National Government 10,130,065.00 0.00
Total Cash Inflows ₱119,934.041.50 ₱ 97,891,939.45
Less: Cash Outflows
Payment of expenses ₱ 2,686,101.40 ₱ 1,887,366.11
Payments to suppliers and creditors 55,306,293.61 28,116,111.80
Payments to employees 48,332,309.04 44,808,339.84
Other Expenses 7,011,977.82 9,770,426.00
Total Cash Outflows ₱113,336,681.87 ₱ 84,582,243.75
Net Cash Flows from Operating Activities 15 ₱ 6,597,359.63 ₱ 13,309,695.70
Cash Flows from Investing Activities

Cash Inflows
Total Cash Inflows ₱ 0.00 ₱ 0.00
Less: Cash Outflows
Purchase/Construction of PPE ₱ 6,687,584.00 ₱ 13,973,086.00
Total Cash Outflows ₱ 6,687,584.00 ₱ 13,973,086.00
Net Cash Flows from Investing Activities (₱ 6,687,584.00) (₱13,973,086.00)
Total Cash Provided by Operating

and Investing Activities (₱ 90,224.37) (₱ 663,390.30)
Add: Cash at the Beginning of the year 282,483.46 945,873.76
Cash Balance at the End of the Year ₱ 192,259.09 ₱ 282,483.46
6
Consolidated Statement of Changes in Net Assets/Equity
Accumulated Surpluses / (Deficits)

Amount
Note 2020 2019
Balance at January 1 ₱30,771,662.93 ₱18,072,002.07

Add (Deduct):
Change in Accounting Policy 0.00 0.00
Prior Period Errors 0.00 0.00
Restated Balance ₱30,771,662.93 ₱18,072,002.07
Add (Deduct): Changes in net
assets/equity during the year
Adjustment of net revenue recognized
directly in net assets/equity ₱ 0.00 ₱ 0.00
Surplus (Deficit) for the period 5,987,324.79 12,699,660.86
Total recognized revenue and expenses
for the period ₱ 5,987,324.79 ₱12,699,660.86
Balance at December 31 ₱36,758.987.72 ₱30,771,662.93
7
Statement of Comparison of Budget and Actual Amounts
Budgeted Amounts Difference Difference

Particulars Notes Original and Actual Final and
Original Final
Final Budget Amounts Actual
Beginning Balance ₱ 189,744.80 ₱ 277,483.46 ₱ 87,708.66 ₱ 0.00 ₱ 0.00
REVENUE
A. Local Sources
1. Tax Revenue
a. Community Tax ₱ 0.00 ₱ 9,614.00 ₱ -9,614.00 ₱ 9,614.00 ₱ 0.00
b. Real Property Tax 75,000.00 184,158.00 -109,158.00 184,158.00 0.00
c. Business Tax 30,000.00 30,000.00 0.00 0.00 30,000.00
d. Other Local Taxes 85,000.00 85,000.00 0.00 0.00 85,000.00
Total Tax Revenue ₱ 190,000.00 ₱ 308,772.00 ₱ -118,772.00 ₱ 193,772.00 ₱ 115,000.00
2. Non- Tax Revenue

a. Permit Fees ₱ 10,000.00 ₱ 10,000.00 ₱ 0.00 ₱ 0.00 ₱ 10,000.00
b. Registration Fee 10,000.00 10,000.00 0.00 3,390.00 6,610.00
c. Clearance and Certification Fee 10,000.00 10,000.00 0.00 0.00 10,000.00
d. Inspection Fee 10,000.00 10,000.00 0.00 0.00 10,000.00
e. Other Service Income 75,000.00 75,000.00 0.00 0.00 0.00
Total Non- Tax Revenue ₱ 115,000.00 ₱ 115,000.00 ₱ 0.00 ₱ 3,390.00 ₱ 111,610.00
Total Local Sources ₱ 305,000.00 ₱ 423,772.00 ₱ -118,772.00 ₱ 197,162.00 ₱ 226,610.00
B. External Sources
1. Share from the National Internal Revenue Taxes (IRA) ₱ 109,560,775.00 ₱ 109,560,775.00 ₱ 0.00 ₱ 109,560,775.00 ₱ 0.00
2. Other Receipts
a. Subsidy from National Government 0.00 9,130,065.00 -9,130,065.00 9,130,065.00 0.00
Total External Sources ₱ 109,560,775.00 ₱ 118,690,840.00 ₱ -9,130,065.00 ₱ 118,690,840.00 ₱ 0.00
C. Receipts from Borrowings ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
TOTAL REVENUE AND RECEIPTS ₱ 110,055,549.80 ₱ 119,392,095.46 ₱ 9,336,545.66 ₱ 118,888,002.00 ₱ 226,610.00
EXPENDITURES
General Public Services
Personnel Services ₱ 44,691,529.00 ₱ 44,691,529.00 ₱ 0.00 ₱ 44,683,413.04 ₱ 8,115.96
Maintenance & Other Operating Expenses 14,953,181.99 15,159,662.65 -206,480.66 15,041,277.52 118,385.13
Capital Outlay 1,900,000.00 1,900,000.00 0.00 1,749,582.00 150,418.00
Social Services and Social Welfare
Maintenance & Other Operating Expenses 0.00 9,130,065.00 -9,130,065.00 9,130,065.00 0.00
Economics Services
Personnel Services 3,648,896.00 3,648,896.00 0.00 3,648,896.00 0.00
Maintenance & Other Operating Expenses 2,715,000.00 2,715,000.00 0.00 2,715,000.00 0.00
Capital Outlay 2,373,822.00 2,373,822.00 0.00 2,373,822.00 0.00
LDRRMF
Maintenance & Other Operating Expenses
70% of 5% LDRRMF Mitigation Fund 3,851,489.78 3,851,489.78 0.00 3,851,489.78 0.00
30% of 5% LDRRMF Quick Response Fund 1,650,638.48 1,650,638.48 0.00 1,513,688.48 136,950.00
20% Development Fund
Capital Outlay 2,564,180.00 2,564,180.00 0.00 2,564,180.00 0.00
Gender and Development Fund
Appropriation for Senior Citizens and PWD
8
Budgeted Amounts Difference Difference
Particulars Notes Original and Actual Final and
Original Final
Final Budget Amounts Actual
Appropriation for Protection for Children
Appropriation for Peace & Order/Public Sfety
Appropriation for Eradication of Illegal Drugs
Aid to Barangays
Total ₱ 110,055,549.80 ₱ 119,392,095.46 ₱ -9,336,545.66 ₱ 118,978,226.37 ₱ 413,877.09
Surplus (Deficit) for the Period ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ -90,224.37 ₱ -90,224.37
9
Notes to Financial Statements
Note 1 - Profile
The Municipality of Tugaya, Lanao del Sur, was created by virtue of Executive
Order No. 42 dated June 25, 1963. It is a 5th class municipality and politically
subdivided into 23 barangays with total land area of 155.10 square kilometers
and total population of 23,814 people according to 2015 census.
The municipality is under the leadership of Hon. Al-Fattah N. Pacalna as

Municipal Mayor. It is supported by Municipal Vice Mayor, eight (8)
municipal councilors and other heads of ten (10) municipal offices with 55
regular personnel.
Note 2 - Basis for Financial Statements Presentation
The consolidated financial statements of the LGU have been prepared in

accordance with and comply with the International Public Sector Accounting
Standards (IPSAS). The consolidated financial statements are presented in
pesos, which is the functional and reporting currency of the LGU. The
accounting policies have been applied starting the year 2016.
Note 3 - Summary of significant accounting policies
3.1 Basis of accounting
The [consolidated] financial statements are prepared on an accrual basis in

accordance with the International Public Sector Accounting Standards
(IPSAS).
3.2 Revenue recognition
Revenue from non-exchange transactions
Taxes, fees and fines
The LGU recognizes revenues from taxes and fines when the event occurs
and the asset recognition criteria are met. To the extent that there is a
related condition attached that would give rise to a liability to repay the
amount, liability is recognized instead of revenue. Other non-exchange
revenues are recognized when it is improbable that the future economic
benefit or service potential associated with the asset will flow to the entity
and the fair value of the asset can be measured reliably.
10
Transfers from other government entities
The LGU availed of the 5 – year transitional provision for the recognition
of Tax Revenue- Real Property and/or Special Education Tax. For the first
year, there will be no change in policy for the recognition of the
aforementioned tax revenue.
Revenue from exchange transactions
Interest income
Interest income is accrued using the effective yield method. The effective
yield discounts estimated future cash receipts through the expected life of
the financial asset to that asset’s net carrying amount. The method applies
this yield to the principal outstanding to determine interest income each
period.
3.3 Property, plant and equipment
All property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditure that is
directly attributable to the acquisition of the items. When significant parts
of property, plant and equipment are required to be replaced at intervals,
the LGU recognizes such parts as individual assets with specific useful
lives and depreciates them accordingly. Likewise, when a major
inspection is performed, its cost is recognized in the carrying amount of
the plant and equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognized in surplus
or deficit as incurred. Where an asset is acquired in a non-exchange
transaction for nil or nominal consideration the asset is initially measured
at its fair value.
Depreciation on assets is charged on a straight-line basis over the useful

life of the asset.
Depreciation is charged at rates calculated to allocate cost or valuation of

the asset less any estimated residual value over its remaining useful life:
Public Infrastructures were not previously recognized in the books. The

LGU availed of the 5-year transitional provision for the recognition of the
Public Infrastructure. For the first year of implementation of the IPSAS,
the LGU will not recognize the Public Infrastructure in the books of
accounts.
11
3.4 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank only. For the purpose of
the consolidated statement of cash flows, cash and cash equivalents
consist of cash and short-term deposits.
3.5 Inventories
Inventory is measured at cost upon initial recognition. To the extent that

inventory was received through non-exchange transactions (for no cost or
for a nominal cost), the cost of the inventory is its fair value at the date of
acquisition.
After initial recognition, inventory is measured at the lower of cost and net
realizable value. However, to the extent that a class of inventory is
distributed or deployed at no charge or for a nominal charge, that class of
inventory is measured at the lower of cost and current replacement cost.
Net realizable value is the estimated selling price in the ordinary course of
operations, less the estimated costs of completion and the estimated costs
necessary to make the sale, exchange, or distribution. Inventories are
recognized as an expense when deployed for utilization or consumption in
the ordinary course of operations of the LGU.
3.6 Changes in accounting policies and estimates
The LGU recognizes the effects of changes in accounting policy

retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.
The LGU recognizes the effects of changes in accounting estimates

prospectively by including in surplus or deficit.
3.7 Budget information
The annual budget is prepared on the modified cash basis, that is, all
planned costs and income are presented in a single statement to determine
the needs of the LGU. As a result of the adoption of the Modified cash
basis for budgeting purposes, there are basis, timing or entity differences
that would require reconciliation between the actual comparable amounts
and the amounts presented as a separate additional financial statement in
the statement of comparison of budget and actual amounts. Explanatory
comments are provided in the notes to the annual financial statements;
first, the reasons for overall growth or decline in the budget are stated,
followed by details of overspending or underspending on line items.
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3.8 Significant judgments and sources of estimation uncertainty
Judgments
In the process of applying the LGU’s accounting policies, management

has made judgments, which have the most significant effect on the
amounts recognized in the consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below. The LGU
based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. However, existing
circumstances and assumptions about future developments may change
due to market changes or circumstances arising beyond the control of the
LGU. Such changes are reflected in the assumptions when they occur.
Useful lives and residual values
The useful lives and residual values of assets are assessed using the
following indicators to inform potential future use and value from
disposal:
a) The condition of the asset based on the assessment of experts

employed by the LGU;
b) The nature of the asset, its susceptibility and adaptability to changes in

technology and processes;
c) The nature of the processes in which the asset is deployed; and
d) Changes in the market in relation to the asset.
Note 4 - Cash and Cash Equivalents
Account Title CY 2020 CY 2019

Cash Local Treasury ₱ 15,907.00 ₱ 15,907.00
Cash in Bank - Local Currency, Current Account 176,352.09 266,576.46
Total Cash and Cash Equivalents ₱ 192,259.09 ₱ 282,483.46
Cash in banks earns interest based on the prevailing bank deposit rates. Short-term
deposits are made for varying periods, depending on the immediate cash requirements of
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the LGU and earn interest at the respective short-term deposit rate. The LGU bank
balance amounting to ₱192,259.09 includes an amount of ₱136,950.00which represents
unutilized Quick Response Fund for LDRRM Fund.
Note 5 - Property, Plant and Equipment

Land ₱ 4,400,000.00 ₱ 4,400,000.00
Other Land Improvements 17,195,000.00 15,195,000.00
Road Networks 2,889,888.00 1,607,798.00
Buildings 2,919,152.00 2,919,152.00
Markets 1,607,798.00 1,607,798.00
Other Structures 12,536,173.00 10,754,083.00
Office Equipment 1,874,025.00 1,374,025.00
Information & Communication Tech. Equipt. 22,700.00 22,700.00
Furniture and Fixtures 2,729,067.34 1,605,663.34
Books 19,625.00 19,625.00
Total Property, Plant and Equipment ₱ 46,193,428.34 ₱ 39,505,844.34
Less: Accumulated Depreciation and Impairment
Loss
Accumulated Depreciation - Other Land
Improvements ₱ 6,556,550.00 ₱ 6,136,970.00
Accumulated Depreciation - Buildings 2,548,754.18 2,386,067.74
Accumulated Depreciation - Office Equipment 178,759.45 170,453.57
Accumulated Depreciation - Information and
Communication Technology Equipment 20,430.00 20,430.00
Accumulated Depreciation - Furniture and Fixtures 242,852.62 223,390.10
Accumulated Depreciation - Books 15,697.00 15,697.00
Total Accumulated Depreciation and
Impairment Loss ₱ 9,563,043.25 ₱ 8,953,008.41
Property, Plant and Equipment, Net ₱ 36,630,385.09 ₱ 30,552,835.93
The LGU measured the residual value of all items of property, plant and equipment, but
does not expect a residual value of these assets, because these will be utilized for their
entire economic lives and do not have a significant scrap value. During the current
financial year, the LGU reviewed the estimated useful lives and residual values of
property, plant and equipment, where appropriate.
14
Note 6 - Inter-Agency Payables

Due to BIR ₱ 30,000.00 ₱ 30,000.00
Due to GSIS 42,056.46 42,056.46
Total ₱ 72,056.46 ₱ 72,056.46
The first two accounts represent the amount deducted from the salaries of officials and
employees and is remitted to the respective government agencies immediately on the
month following the month for which these were deducted.
Note 7 - Tax Revenue

Business Tax ₱ 0.00 ₱ 14,123.34
Community Tax 9,614.00 10,000.00
Real Property Tax- Basic 230,197.50 385,978.29
Total ₱ 239,811.50 ₱ 410,101.63
Note 8 - Share from Internal Revenue Collections

Share from Internal Revenue Collections (IRA) ₱ 109,560,775.00 ₱ 97,462,416.00
This account represents only the Internal Revenue Allotment (IRA) received by the local
government unit for the calendar years 2020 and 2019 from the Department of Budget
and Management, Regional Office XII, Koronadal City.
Note 9 - Service and Business Income

Permit Fees ₱ 0.00 ₱ 5,871.82
Registration Fees 3,390.00 10,000.00
Clearance and Certification Fees 0.00 1,050.00
Inspection Fees 0.00 2,500.00
Total ₱ 3,390.00 ₱ 19,421.82
15
Note 10 - Personal Services

Salaries and Wages - Regular ₱ 21,133,512.00 ₱ 17,904,399.00
Salaries and Wages - Casual/Contractual 14,780,000.00 14,040,000.00
Personal Economic Relief Allowance (PERA) 953,000.00 953,000.00
Representation Allowance (RA) 637,000.00 637,000.00
Transportation Allowance (TA) 637,000.00 637,000.00
Clothing/Uniform Allowance 1,025,000.00 2,100,000.00
Honoraria 550,000.00 550,000.00
Year End Bonus 1,700,827.00 0.00
Cash Gift 885,826.00 0.00
Retirement and Life Insurance Premiums 1,277,326.08 1,435,154.56
Pag-ibig Contributions 0.00 20,232.00
PhilHealth Contributions 154,448.68 138,300.00
Employees Compensation Insurance Premiums 25,169.28 36,454.28
Terminal Leave Benefits 3,737,200.00 5,796,800.00
Other Personnel Benefits 836,000.00 560,000.00
Total ₱ 48,332,309.04 ₱ 44,808,339.84
Note 11 - Maintenance and Other Operating Expenses

Traveling Expenses - Local ₱ 1,281,475.00 ₱ 1,285,850.00
Training Expenses 598,450.00 112,470.00
Office Supplies Expenses 612,929.50 2,050,450.00
Food Supplies Expenses 859,230.00 677,320.00
Welfare Goods Expenses 7,550,000.00 0.00
Drugs and Medicines Expenses 1,210,115.00 240,900.00
Medical, Dental and Laboratory Expenses 715,000.00 0.00
Fuel, Oil and Lubricants Expenses 212,250.20 212,550.00
Other Supplies and Materials Expenses 2,047,665.00 595,220.00
Electricity Expenses 537,050.00 0.00
Repairs and Maintenance - Land Improvements 1,541,840.00 1,800,550.00
Repairs and Maintenance - Buildings and Other
Structures 2,070,500.00 1,533,445.66
Repairs and Maintenance - Infrastructure Assets 37,737,063.91 20,414,262.14
Repairs and Maintenance - Furniture and Fixtures 749,700.00 591,414.00
Taxes, Duties and Licenses 120,000.00 120,000.00
16
Representation Expenses 600,000.00 184,000.00
Transportation and Delivery Expenses 115,815.00 0.00
Donations 500,600.00 2,936,410.00
Other Maintenance & Operating Expenses 5,795,562.82 6,650,016.00
Total ₱ 64,855,246.43 ₱ 39,524,857.80
Note 12 - Non-Cash Expenses

Depreciation - Land Improvements ₱ 419,580.00 ₱ 419,580.00
Depreciation - Buildings and Other Structures 162,686.44 162,686.44
Depreciation - Machinery and Equipment 8,305.88 8,305.88
Depreciation - Furniture, Fixtures and Books 19,462.52 19,462.52
Total ₱ 610,034.84 ₱ 610,034.84
Note 13 - Transfers, Assistance and Subsidy From

Subsidy from National Government ₱ 10,130,065.00 ₱ 0.00
The account Subsidy from National Government composed of ₱9,130,065.00 for General
Fund which represents Bayanihan Grant to Cities and Municipalities (BGCM) Fund
coming from National Government for purposes of COVID-19 related programs, projects
and activities (PPAs) and other expenses during the period of COVID-19 pandemic
period in the country or Philippine State of Emergency period, and of ₱1,000,000.00 for
Trust Fund which represents Financial Assistance coming from BARMM Government to
the Municipality in relation to the COVID-19 pandemic crises.
Note 14 - Transfers, Assistance and Subsidy To

Subsidy to Other Local Government Units ₱ 101,286.90 ₱ 169,830.45
Subsidy to Other Funds 46,039.50 77,195.66
Total ₱ 147,326.40 ₱ 247,026.11
17
Note 15 - Reconciliation of Net Cash Flows from Operating Activities to
Surplus/(Deficit)
Calendar Year 2020

Particulars GENERAL
TOTAL TRUST FUND
FUND
Surplus/(Deficit) ₱ 5,987,324.79 ₱ 6,163,154.79 ₱ -175,830.00

Non-cash transactions
Depreciation 610,034.84 434,204.84 175,830.00
Net Cash from Operating Activities ₱ 6,597,359.63 ₱ 6,597,359.63 ₱ 0.00
18
PART II
AUDIT OBSERVATIONS AND
RECOMMENDATIONS
DETAILED AUDIT OBSERVATIONS AND RECOMMENDATIONS
1. The existence, completeness and condition of all property, plant and

equipment (PPE) accounts of the Municipality with net book value of
₱36.630 million for all funds cannot be ascertained due to partial conduct of
physical count on some properties totaling ₱10.046 million book value by the
Inventory Committee in compliance with Section 124, Volume I of New
Government Accounting System (NGAS) Manual for Local Government
Units (LGUs), and Item No. 5.1 of COA Circular No. 2020-006, thus, cast
doubt on the fair presentation of the said accounts in the financial
statements.
2. As provided in Item No. 5.1 of COA Circular No. 2020-006, states that:
“Each government agency shall conduct physical count of all its PPE, whether
acquired through purchase or donation, including those constructed by
administration and found at station.”
3. Furthermore, Section 124, Volume I of NGAS Manual for LGUs provides that:
“The local chief executive shall require periodic physical count of property, plant,
and equipment by type which shall be made annually and reported on the Report
on the Physical Count of Property, Plant and Equipment (RPCPPE).”
4. For calendar year 2020, the total ending balances of property, plant and
equipment (PPE) accounts for all funds is amounting to ₱46,193,428.34with total
accumulated depreciation of ₱9,563,043.25 and net book value of ₱36,630,385.09
as tabulated below:
Calendar Year 2020

Account Title
Total General Fund Trust Fund SEF
Land ₱ 4,400,000.00 ₱ 2,550,000.00 ₱ 1,850,000.00 ₱ -
Other Land Improvements 17,195,000.00 7,400,000.00 9,795,000.00 -
Road Network 2,889,888.00 2,889,888.00 - -
Buildings 2,919,152.00 2,919,152.00 - -
Markets 1,607,798.00 1,607,798.00 - -
Other Structures 12,536,173.00 11,621,080.00 915,093.00 -
Office Equipment 1,874,025.00 1,874,025.00 - -
Information & Comm.Tech. Equipment 22,700.00 22,700.00 - -
Furniture and Fixtures 2,729,067.34 2,705,329.84 - 23,737.50
Books 19,625.00 19,625.00 - -
Total Property, Plant & Equipment ₱ 46,193,428.34 ₱ 33,609,597.84 ₱ 12,560,093.00 ₱ 23,737.50
Less: Accumulated Depreciation 9,563,043.25 6,625,243.25 2,937,800.00 -
Accumulated Impairment Losses - - - -
Total Property, Plant & Equipment, net ₱ 36,630,385.09 ₱ 26,984,354.59 ₱ 9,622,293.00 ₱ 23,737.50
19
5. Considering the year-end total balances of PPE accounts as presented in the
preceding paragraph, some PPEs with book value of ₱5,978,682.00 was only
considered for a physical count by the Inventory Committee in compliance with
Item No. 5.1 of COA Circular No. 2020-006. The detailed breakdown of PPE
accounts that was physically counted and found at station are as follows:
Type of PPE Amount

Land ₱ 2,550,000.00
Buildings 2,919,152.00
Office Equipment 275,350.00
Furniture and Fixtures 234,180.00
Total ₱ 5,978,682.00
6. The Inventory Committee make used of the Inventory Count Form (ICF) for all
those PPEs found at station. They marked and assigned them with new Property
Number and determined their conditions whether it is serviceable or not.
7. The Committee also considered items found at station that were not included in
the submitted Report of Physical Count of Property, Plant and Equipment
(RPCPPE) as of December 31, 2020 and PPEs not properly classified in the
financial statements totaling to ₱4,067,920.00 as tabulated below:
Type of PPE Amount

Motor Vehicle ₱ 3,970,000.00
Disaster Response and Rescue Equipment 97,920.00
Total ₱ 4,067,920.00
8. The unit cost/value of each PPE items found at station appeared in RPCPPE and
ICF is subject for further verification from available records and subject for
appraisal, if warranted.
9. However, the totality of PPEs appeared in RPCPPE as of December 31, 2020 and
PPEs found at station based on accomplished ICF during inventory taking
represent only a portion of the totality of PPE accounts as presented in the
financial statements. This conduct of physical count of some PPE items signifies
partial compliance with Section 124, Volume I of NGAS Manual for LGUs and
Item No. 5.1 of COA Circular No. 2020-006 dated January 31, 2020.
10. Thus, the existence, completeness and condition of all PPE items cannot be
ascertained which may cast doubt as to its fair presentation in the financial
statements.
20
11. We recommended that the Inventory Committee continue the physical count
of all PPE items taking into consideration the prescribed procedural
guidelines for inventory taking as provided in COA Circular No. 2020-006, to
wit:
a. Use the inventory working papers provided by the General Service Office
(GSO) as basis for inventory taking activities, taking into consideration
the capitalization threshold of ₱15,000.00;
b. Record/document the daily physical count in a standard Inventory Count

Form (ICF), which shall be used as the basis in the preparation of the
RPCPPE after the physical count;
c. Tag all PPE items counted with new property stickers containing the
information provided by the said Circular;
d. State clearly in the ICF the PPEs’ condition, found at station and not
found during the physical count which described as “non-existing” or
“missing”, as well as other relevant information of each PPE; and
e. Prepare the RPCPPE upon completion of the physical count.
12. Inventory taking by the Inventory Committee to PPE items totaling of

₱10,046,602.00 may have been done inefficiently and ineffectively due to non-
preparation of Physical Inventory Plan (PIP) prior to its partial conduct of
physical count in contrary to Item No. 5.9 of COA Circular No. 2020-006.
13. Under Item No. 5.9 of COA Circular No. 2020-006 dated January 31, 2020, it
states that:
“In coordination with the General Service Office, the Inventory Committee shall
plan/strategize on how to conduct and complete the physical inventory within the
prescribed period. It shall prepare a Physical Inventory Plan (PIP) containing, at
least, the specific assignments/duties of the Committee members, the cut-off date
and a schedule specifying the dates and locations of the inventory taking activities
from start up to the targeted completion of the physical inventory.”
14. A physical count on the following PPE items totaling to ₱10,046,602.00 as

tabulated below was conducted by the Inventory Committee on Property, Plant
and Equipment (PPE). The Committee used the Inventory Count Form (ICF) for
PPE items found at station as prescribed by COA Circular No. 2020-006 for the
conduct of inventory, where conditions and new property number of PPE items
found at station were indicated therein.
21
Type of PPE Amount
Land ₱ 2,550,000.00
Buildings 2,919,152.00
Motor Vehicle 3,970,000.00
Office Equipment 275,350.00
Furniture and Fixtures 234,180.00
Disaster Risk Reduction Equipment 97,920.00
Total ₱ 10,046,602.00
15. Prior to its conduct of inventory taking, the Committee presented only the latest
Report on Physical Count of Property, Plant and Equipment (RPCPPE) and PPE
Ledger Cards (PPELC). The required Physical Inventory Plan (PIP), which
contained the specific assignments/duties of each Committee members and the
dates and locations of all their activities, was not prepared in contrary to said
above circular.
16. Thus, inventory taking by the Inventory Committee to PPE items may have been
done inefficiently and ineffectively.
17. We recommended that Inventory Committee shall prepare the Physical

Inventory Plan (PIP) prior to its inventory taking in order to ensure that all
planned inventory activities/procedures are efficiently and effectively
performed by the Committee members.
18. Depreciation expenses of ₱1,233,239.54 for CY 2020 and prior years was not
set-up for some items of property, plant and equipment (PPE) with total
book value of ₱14,836,676.00, in contrary to paragraphs 13, 59, 64 and 66 of
International Public Sector Accounting Standard (IPSAS) 17, thus, it may
overstate the asset and understate the expense accounts.
19. International Public Sector Accounting Standard (IPSAS) 17 provides for the
following:
“Depreciation is the systematic allocation of the depreciable amount of an asset

over its useful life; Depreciable amount is the cost of an asset, or other amount
substituted for cost, less its residual value.” (paragraph 13)
“The depreciable amount of an asset shall be allocated on a systematic basis over

its useful life.” (paragraph 66)
“Each part of an item of property, plant, and equipment with a cost that is
significant in relation to the total cost of the item shall be depreciated
separately.” (paragraph 59) and
22
“The depreciation charge for each period shall be recognized in surplus or
deficit, unless it is included in the carrying amount of another asset. “(paragraph
64)
20. It was noted upon review and verification of the PPE accounts under General
Fund of the Municipality that annual depreciation for some items of PPE with
total book value of ₱14,836,676.00 as of December 31, 2020 were not recognized
and/or set-upped for a number of years. Some PPEs were acquired/recognized
from 2009 to 2020. Below is the breakdown of the said PPE accounts:
Year of Year of Non-Recognition of

PPE Accounts Cost/Book Value
Acquisition Depreciation
Road Network 2009-2014 ₱ 1,003,265.04 2020 (1 year)
2019 604,532.96 2019-2020 (2 years)
Market 2019 1,607,798.00 2019-2020 (2 years)
Other Structures 2016 200,000.00 2016-2020 (5 yrs.)
2018 600,000.00 2018-2020 (3 yrs.)
2019 9,038,990.00 2019-2020 (2 yrs.)
2020 1,782,090.00 2020 (1 yr.)
Total ₱ 14,836,676.00
21. Further, it was also noted that under Trust Fund (TF) and Special Education Fund
(SEF), there were still PPE items with no provision of annual depreciation as
shown below:
Account Title Fund Year of Acquisition Cost/Book Value

Other Structures TF 2017 ₱ 915,093.00
Furniture and Fixtures SEF 2018-2019 23,737.50
Total ₱ 938,830.50
22. It is apparent from the above data that the Municipal Accountant did not compute
for and provide depreciation nor recognize/record in the books of account the
corresponding Accumulated Depreciation and annual Depreciation of the above-
mentioned PPE items in contrary to paragraphs 13, 59, 64 and 66 of IPSAS 17.
23. As of December 31, 2020, the computed total depreciations that were not
recognized in the books of account is amounting to ₱1,233,239.54 using the
straight line method with corresponding estimated useful lives and residual value.
Details of which are presented below in the tabular form.
23
No
Annual Depreciation Not
PPE Accounts Cost/Book Value Depreciation
Depreciation Recognized
Recognized
Road Network ₱ 1,003,265.04 ₱ 173,390.07 1 yr. ₱ 173,390.07
604,532.96 38,287.08 2 yrs. 76,574.16
Market 1,607,798.00 61,096.32 2 yrs. 122,192.65
Other Structures 200,000.00 7,600.00 5 yrs. 38,000.00
600,000.00 22,800.00 3 yrs. 68,400.00
9,038,990.00 343,481.62 2 yrs. 686,963.24
1,782,090.00 67,719.42 1 yr. 67,719.42
Total ₱1,233,239.54
24. The non-recognition of depreciation over PPE accounts may result in

overstatement of the asset and understatement of expense accounts.
25. We recommended that Management require the accountant to compute,

recognize and record in the books of accounts the depreciation of the affected
PPE accounts by drawing a journal voucher and update/post the same in its
corresponding Journals and Ledgers.
26. No special account in the general fund (SAGF) was created for the
Bayanihan Grant to Cities and Municipalities (BGCM) fund received by the
Municipality amounting to ₱9,130,065.00 in contrary to Sections 313 of RA
7160, 105, Volume I of New Government Accounting System (NGAS)
Manual for Local Government Units (LGUs) and Item No. 3.7 (2nd
paragraph) of DBM LBC No. 125, thus, adequate information regarding the
receipt and utilization of funds may not be easily monitored/tracked.
27. Section 313 of Republic Act No. 7160 states that:
“Local government units shall maintain special accounts in the general fund
(SAGF) for the following:
xXx
d. Development projects funded from the share of the local government unit
concerned in the internal revenue allotmentand such other special accounts
which may be created by law or ordinance. Receipts, transfers, and expenditures
involving the foregoing special accounts shall be properly taken up thereunder.
xXx” (Emphasis Ours)

28. Under Section 101 of NGAS Manual for LGUs, Volume I, it provides also that
“LGU shall maintain SAGF for such other special accounts which may be
created by law or ordinance.”
24
29. Further, Item No. 3.7 (2nd paragraph) of DBM Local Budget Circular No. 125
dated April 7, 2020 states that:
“For easy monitoring/tracking of the utilization of the allocation of each city and
municipality, a special account in the general fund (SAGF) for the BGCM shall be
created through an ordinance by the local sanggunian pursuant to Section 313 of
RA No. 7160. The creation of an SAGF for the BGCM may also be done by the
local sanggunian through inclusion in the pertinent appropriation ordinance
authorizing a supplemental budget covering the BGCM.”
30. The Bayanihan Grant to City and Municipality (BGCM) fund received by the
Municipality amounting to ₱9,130,065.00 is classified and be treated as other
special account in the General Fund as mentioned in the above cited provisions in
the preceding paragraphs.
31. However, verification from accounting reports/records revealed that no SAGF

was created for the BGCM fund received by the Municipality in contrary to
above-cited regulations/guidelines.
32. Thus, adequate information regarding the receipt and utilization of BGCM fund
received by the Municipality may not be easily monitored/tracked.
33. We recommended that Management create a separate special account in the

General Fund (SAGF) for the BGCM Fund through an ordinance by the
local sangguniang pursuant to Section 313 of RA No. 7160 for purposes of
easy monitoring/tracking of the utilization of the allocation thereof.
34. Non-preparation and/or non-submission of monthly and separate year-end

post-closing trial balance and related financial statements for the receipts
and utilization of Bayanihan Grant to Cities and Municipalities (BGCM)
fund received by the Municipality amounting to ₱9,130,065.00 in contrary to
Section 110, Volume I of NGAS Manual for LGUs and Item No. 4.2 of DBM
LBC No. 125, thus, proper classification and recognition of assets and
expenses accounts may not be correctly taken up in the books of accounts.
35. Under Item No. 4.2 of DBM Local Budget Circular No. 125, it states that
“The beneficiary cities and municipalities shall prepare a monthly report on fund
utilization and status of implementation of PPAs using the prescribed format.”
36. Moreover, Section 110, Volume I of NGAS Manual for LGUs provides that:
“At the end of the year, post-closing trial balance shall be prepared for each
special account. Also, the following financial statements shall be prepared:
25
a. Balance Sheet,
b. Statement of Income and Expenses, and
c. Statement of Cash Flows.
These reports shall form part of the schedules of the General Fund trial balance.”
37. The management prepared and submitted only a Report of Funds Utilization and
Status of Programs/Project/Activity Implementation as of August 31, 2020 for the
BGCM fund received by the Municipality totaling to ₱9,130,065.00. No monthly
reports was prepared and submitted by the concerned Local Finance Committee
from the receipt of BGCM fund to date except for the month of August 31, 2020.
38. However, the said submitted report was not the required or the prescribed one
under LBC 125 which will provide for the total of funds as to amounts received,
obligated and disbursed as per PPAs. This report did not present the detailed
charges of each PPAs.
39. Based on the vouching and verification of submitted reports, the management
utilized the BGCM fund of ₱9,130,065.00 for the following COVID-19-related
programs, projects, and activities (PPAs) and expenses in pursuant to LBC No.
125, to wit::
a. Procurement of personal protective equipment;
b. Procurement of equipment, reagents, and kits for COVID-19 testing;
c. Procurement of medicines and vitamins;
d. Procurement of hospital equipment and supplies;
e. Procurement of disinfectant, sprayers, disinfection tents, and other

disinfecting supplies and misting equipment;
f. Food, transportation (including fuel), and accommodation expenses of

medical personnel and other LGU personnel directly involved in the
implementation of COVID-19-related PPAs;
g. Food assistance and other relief goods for affected households;
h. Expenses for the construction/repair of additional space/building to

accommodate COVID-19 patients and persons under
monitoring/investigation; and
i. Other necessary COVID-19-related PPAs and expenses.
26
40. Moreover, verification of COVID-19 related project/program/activity conducted
by the Municipality during the period of pandemic and State of Emergency in
relation to the utilization of BGCM fund, among others, are as follows:
a. Tugaya Inter-Agency Task Force for Emerging Infectious Diseases (IATF-

EID) Strategic meeting;
b. Distribution of personal protective equipment, face masks, face shield,

protective gears, and alcohol;
c. Disinfection activities in different barangays of Tugaya, Lanao del Sur with a

COVID-19 infected;
d. Relief goods distributions held in different barangays of Tugaya, Lanao del

Sur for affected households for COVID-19;
e. Joint Tugaya IATF control check point operation in all entries and exits of
Tugaya, Lanao del Sur;
f. Management of Tugaya Community Quarantine Facility;
g. Management of COVID-19 deaths and its burials;
h. Management of Locally Stranded Individuals (LSIs) from Provincial

Community Quarantine Facility (PCQF) to Tugaya Ligtas Covid Center;
i. Daily monitoring of LSIs/ROF under Home Quarantine Program;
j. Assisted the MILG contact tracing activities in different barangays of Tugaya,

Lanao del Sur;
k. RT-PCR (Swabbing) activities for closed contact of COVID-19 positive; and
l. COVID-19 awareness campaign.
41. Under Section 110, Volume I of NGAS Manual for LGUs, it prescribed the
preparation of post-closing trial balance for each special account which includes
financial statements. Such reports form part of the schedules of the General Fund
trial balance in proper recognition of appropriate asset and expense accounts in
the books of accounts.
42. Considering the above COVID-19 related expenses and activities, the Local
Accounting Office was unable to prepare and submit a separate post-closing trial
balance and related financial statements for BGCM Fund for purposes of proper
taking up of detailed expenses of each COVID 19 related PPAs in non-
compliance with Section 110 of NGAS Manual for LGUs, Volume I.
27
43. Thus, detailed information regarding the receipt and utilization of BGCM Fund
received by the Municipality may not be established and the proper classification
and recognition of asset and expense accounts in relation thereto may not be
correctly taken up in the books of accounts.
44. We recommended that Management prepare:
a. A monthly report on BGCM fund utilization and status of

implementation of PPAs in pursuant to DBM Local Budget Circular No.
125; and
b. A separate post-closing trial balance and financial statements for BGCM

Fund as special account for General Fund, which contains the summary
of transactions for the year as integral part of the schedules of the
General Fund trial balance for purposes of proper recording in the books
of accounts in pursuant to Section 110 of NGAS Manual for LGUs,
Volume I.
Summary of Suspensions, Disallowances and Charges
45. Remained unsettled disallowances of ₱36,036.00as of December 31, 2020 by

the concerned responsible/liable persons in contrary to pertinent provision of
COA Circular No. 2009-006 dated September 15, 2009.
46. During the year, no notices and settlements of suspensions/disallowances/charges

were issued, thus, the total suspensions, disallowances and charges of the
municipality remained the same amounted to ₱0.00, ₱36,036.00, and ₱0.00,
respectively, as of December 31, 2020.
47. The total disallowances of ₱36,036.00 are still unsettled by the concerned
responsible/liable persons in contrary to pertinent provision of COA Circular No.
2009-006 dated September 15, 2009.
48. We recommended that concerned municipal officials and employees, who are
determined as persons responsible/liable, settle/comply immediately with the
requirements of the subject of disallowances.
Compliance with Tax Laws and Mandatory Contributions
49. Income tax and GSIS, Pag-ibig and PhilHealth premium contributions were
deducted among the municipal employees’ salaries and were remitted to
concern Offices of BIR, GSIS, Pag-ibig and PhilHealth in compliance with
applicable laws, rules and regulations on employees’ income tax and
mandatory contributions.
28
PART III
STATUS OF IMPLEMENTATION
OF PRIOR YEARS’ AUDIT
RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT
RECOMMENDATIONS
Of the 18 prior years’ audit recommendations embodied in the 2019 Annual Audit Report
(AAR), six (6) or 33.33 per cent were fully implemented, four (4) or 22.22 per cent were
partially implemented, and eight (8) or 44.45 per cent were not implemented.
Status of
Ref. Audit Observations Recommendations
Implementation
AAR 1. Unreconciled and We recommended that the

2019, uncorrected previous year following courses of actions
pages accounts balances were be made by the LGU Local
19-21 carried forwarded in the Chief Executive, to wit:
current year financial
statements due to partial a. Direct the LGU
reports submitted, incorrect Accountant:
usage of salvage
value/residual value, and 1. To secure the Fully
partial recognition of monthly bank Implemented
account, thus, it affects the statement from its
fair presentation of asset authorized
and expense accounts in the government
financial statements, to wit: depository bank
(AGDB) for all their
a. Unreliable balance of bank accounts
account Cash in Bank – maintained and then
Local Currency Current prepare the
Account of corresponding
₱266,576.46; monthly bank
reconciliation
b. Doubtful existence of statements for each
Property, Plant and bank accounts
Equipment (PPE) maintained in
accounts totalling to accordance with
₱30.552 million; Section 74 of PD No.
1445 and Section 3.2
c. Net understatement of of COA Circular No.
Property, Plant and 96-011;
Equipment (PPE)
accounts by ₱1.483 2. To conduct in-depth Partially
million; and review once at each Implemented
annual reporting date
the residual value and
29
Status of
Implementation
the useful life of an

d. Incorrect recognition of asset upon
account “Road recognition of
Network” totalling to depreciable amount of
₱1.607 million. each lug’s property,
plant and equipment;
3. To prepare a lapsing Not

schedule for the Implemented
computation of the
depreciation for each
component of Road
Network account at
the end of the year;
4. To maintain a Fully
subsidiary record Implemented
particularly Property
Ledger Cards (PLC)
for property, plant
and equipment
accounts and Local
Road Network Ledger
Card for local road
network and its
components; and
5. To take the necessary Not

adjustments noted in Implemented
the books of accounts
by drawing a Journal
Entry Voucher (JEV);
b. Direct the Local Partially

Inventory Committee to Implemented
continue the conduct of a
physical count of all
equipment belonging to
their respective offices;
and (2) then to submit a
complete Annual
Physical Inventory of all
property under the
30
Status of
Implementation
agency control as of 31,

December, on General
Form (41) not later than
31 January of each year;
c. Require the LGU General Partially

Services Officer to Implemented
maintain a Local Road
Inventory and Road Map;
and
d. Direct the Municipal Not

Engineer to provide the Implemented
local accountant and the
general services officer
with the complete
description and cost
segregation of road
components for road
projects.
AAR 2. Leniency of the We recommended that Local Partially

2019, application of internal Chief Executive compel Implemented
pages control measures over the those responsible local
21-22 utilization of government officers to act and do their
fund/property resulted in respective duties and
unsound financial functions faithfully in
management system, accordance with laws, rules
delayed submission of and regulations as well as
reports, not updated adherence in the application
reports/records/ledgers, and of internal control measures
unrecorded and undetected to ensure that all moneys and
errors in the Municipality’s properties of the
financial operations. Municipality are properly
accounted for and taken up
in the books of accounts.
31
Status of
Ref. Observation Recommendations
Implementation
AAR 3. Taxes withheld on We recommended that Local

2019, compensation paid to local Chief Executive:
pages government officials and
23-24 employees and for a. Require the local Fully
purchases of goods/services Accountant to review all Implemented
were remitted to Bureau of the taxes withheld from
Internal Revenue (BIR) in all local officials’
pursuant to Revenue compensation and from
Memorandum Order No. all suppliers for goods
23-2014 dated June 20, purchased or services
2014 and Revenue rendered; and
Memorandum Circular No.
1-2018 dated January 4, b. Encourage the local Fully
2018. Treasurer to continue Implemented
remit the taxes withheld
4. Of the total on individual
remittances of employee/supplier and
₱3,100,322.58 for taxes mandatory premium
withheld and contributions of
GSIS/Philhealth/Pag-ibig employee/employer to
contributions, the concerned Offices,
₱2,653,830.73 or 85.60 per as the case maybe, on or
cent thereof was remitted before the due date
before the due date while prescribed by BIR,
₱446,491.85 or 14.40 per GSIS, Pag-ibig and
cent of it was beyond due Philhealth Offices.
date which is in contrary to
pertinent laws, rules and
regulation of
BIR/GSIS/Philhealth/Pag-
ibig manner of remittances.
AAR 5. Budget documentary We recommended that Fully

2019, forms/documents and concerned LBO attend Implemented
pages attachments for 2019 trainings on the BOM for
24-25 Annual Budget were not LGUs. And further, require
fully complied with as him and all other concerned
prescribed in Budget municipal officials to make
Operations Manual for use of the prescribed forms
Local Government Units and/or contents of the
(Local Budget Circular No. budgetary documents in the
32
Status of
Implementation
112 dated June 10, 2016). preparation of municipal

annual budget in compliance
with LBC No. 112 and BOM
for LGUs.
AAR 6. The previous and We recommended that Local

2019, current unexpended Chief Executive require:
pages balances of local Disaster
25-26 Risk Reduction and a. The members of the Fully
Management (DRRM) fund, LDRRMC to include in Implemented
although remained in the the Local Disaster Risk
General Fund, was not Reduction Management
incorporated in the Local Fund Investment Plan
Disaster Risk Reduction (LDRRMFIP) all
Management Fund unexpended balances of
Investment Plan local DRRMF; and
(LDRRMFIP) and not
adequately disclosed in the b. The Municipal Not Implemented
Notes to the Financial Accountant to disclose
Statements, respectively, in all unobligated balances
non-compliance with Item of local DRRMF in the
Nos. 4.4, 5.1.10 and 5.1.16 Notes to Financial
of COA Circular No. 2012- Statements using the
002. prescribed format.
AAR 7. The total We recommended that the Not Implemented

2019, suspensions, disallowances concerned municipal
pages and charges of the officials and employees, who
26-26 municipality amounted to are determined as persons
₱0.00, ₱36,036.00, and responsible/liable,
₱0.00, respectively, as of settle/comply immediately
December 31, 2019. The with the requirements of the
total disallowances subject of disallowances.
remained unsettled by the
concerned responsible/liable
persons in contrary to
pertinent provision of COA
Circular No. 2009-006
dated September 15, 2009.
33
Status of
Implementation
AAR 8. Unexpended/unoblig We recommended that top

2018, ated balance of Local management instruct:
pages Disaster Risk Reduction and
33-34 Management Fund a. The Municipal Treasurer Not Implemented
(LDRRMF) amounting to to issue a check with
₱924,966.76 is still complete supporting
remained under General documents for the fund
Fund in contrary to Section transfer of unexpended
21 (3rd paragraph) of RA LDRRM Fund from
10121 and Item 5.1.10 of General Fund to Special
COA Circular No. 2012- Trust Fund, and
002, thus, the presentation
of cash account is b. The Municipal Account
overstated and of liability to record the transfer of
account is understated in the unexpended LDRRM
financial position. Fund by drawing a
Journal Entry Voucher
taking the appropriate
accounting entries under
General and Trust Fund.
i. For General Fund Not Implemented

books, debit the
account Transfer of
Unspent Current Year
DRRM Funds to the
Trust Funds (Account
Code 5-02-15-010)
and credit the account
Cash in Bank – Local
Currency Current
Account (Account
Code 1-01-02-010).
ii. While for Trust Fund Not Implemented

books, debit the
account Cash in Bank
– Local Currency
Current Account
(Account Code 1-01-
02-010) and credit the
account Trust
34
Status of
Implementation
Liabilities – Disaster
Risk Reduction and
Management Fund
(Account Code 2-04-
01-020).
35
PART IV – APPENDICES
Appendix 1
Statement of Financial Position
As at December 31, 2020
TOTAL GENERAL FUND SEF TRUST FUND

Note CY 2020 CY 2019 CY 2020 CY 2019 CY 2020 CY 2019 CY 2020 CY 2019
ASSETS
Current Assets
Cash and Cash Equivalents 4 ₱ 192,259.09 ₱ 282,483.46 ₱ 187,259.09 ₱ 277,483.46 ₱ 0.00 ₱ 0.00 ₱ 5,000.00 ₱ 5,000.00
Receivables 875.00 875.00 0.00 0.00 875.00 875.00 0.00 0.00
Inventories 7,525.00 7,525.00 7,525.00 7,525.00 0.00 0.00 0.00 0.00
Total Current Assets ₱ 200,659.09 ₱ 290,883.46 ₱ 194,784.09 ₱ 285,008.46 ₱ 875.00 ₱ 875.00 ₱ 5,000.00 ₱ 5,000.00
Non-Current Assets
Property, Plant and Equipment 5 ₱ 36,630,385.09 ₱ 30,552,835.93 ₱ 26,984,354.59 ₱ 20,730,975.43 ₱ 23,737.50 ₱ 23,737.50 ₱ 9,622,293.00 ₱ 9,798,123.00
Total Non-Current Assets ₱ 36,630,385.09 ₱ 30,552,835.93 ₱ 26,984,354.59 ₱ 20,730,975.43 ₱ 23,737.50 ₱ 23,737.50 ₱ 9,622,293.00 ₱ 9,798,123.00
Total Assets ₱ 36,831,044.18 ₱ 30,843,719.39 ₱ 27,179,138.68 ₱ 21,015,983.89 ₱ 24,612.50 ₱ 24,612.50 ₱ 9,627,293.00 ₱ 9,803,123.00
LIABILITIES
Current Liabilities
Inter-Agency Payables 6 ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Total Current Liabilities ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Non-Current Liabilities
Other Payables ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Total Non-Current ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Total Liabilities ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 72,056.46 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
NET ASSETS/EQUITY
Government Equity ₱ 36,758,987.72 ₱ 30,771,662.93 ₱ 27,107,082.22 ₱ 20,943,927.43 ₱ 24,612.50 ₱ 24,612.50 ₱ 9,627,293.00 ₱ 9,803,123.00
Total Liabilities and Net

Assets/Equity ₱ 36,831,044.18 ₱ 30,843,719.39 ₱ 27,179,138.68 ₱ 21,015,983.89 ₱ 24,612.50 ₱ 24,612.50 ₱ 9,627,293.00 ₱ 9,803,123.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
36
Appendix 2
Statement of Financial Performance

Revenue
Tax Revenue 7 ₱ 239,811.50 ₱ 410,101.63 ₱ 193,772.00 ₱ 332,905.97 ₱ 46,039.50 ₱ 77,195.66 ₱ 0.00 ₱ 0.00
Share from Internal Revenue Collections 8 109,560,775.00 97,462,416.00 109,560,775.00 97,462,416.00 0.00 0.00 0.00 0.00
Service and Business Income 9 3,390.00 19,421.82 3,390.00 19,421.82 0.00 0.00 0.00 0.00
Total Revenue ₱ 109,803,976.50 ₱ 97,891,939.45 ₱ 109,757,937.00 ₱ 97,814,743.79 ₱ 46,039.50 ₱ 77,195.66 ₱ 0.00 ₱ 0.00
Less: Current Operating Expenses

Personnel Services 10 ₱ 48,332,309.04 ₱ 44,808,339.84 ₱ 48,332,309.04 ₱ 44,808,339.84 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Maintenance & Other Operating Expenses 11 64,855,246.43 39,524,857.80 63,809,206.93 39,466,162.14 46,039.50 58,695.66 1,000,000.00 0.00
Non-cash Expenses 12 610,034.84 610,034.84 434,204.84 434,204.84 0.00 0.00 175,830.00 175,830.00
Financial Expenses 1,800.00 2,020.00 1,800.00 2,020.00 0.00 0.00 0.00 0.00
Current Operating Expenses ₱ 113,799,390.31 ₱ 84,945,252.48 ₱ 112,577,520.81 ₱ 84,710,726.82 ₱ 46,039.50 ₱ 58,695.66 ₱ 1,175,830.00 ₱ 175,830.00
Surplus (Deficit) from Current Operation ₱ -3,995,413.81 ₱ 12,946,686.97 ₱ -2,819,583.81 ₱ 13,104,016.97 ₱ 0.00 ₱ 18,500.00 ₱ -1,175,830.00 ₱ -175,830.00
Add (Deduct):
Transfers, Assistance and Subsidy From 13 10,130,065.00 0.00 9,130,065.00 0.00 0.00 0.00 1,000,000.00 0.00
Transfers, Assistance and Subsidy To 14 -147,326.40 -247,026.11 -147,326.40 -247,026.11 0.00 0.00 0.00 0.00
Surplus (Deficit) for the period ₱ 5,987,324.79 ₱ 12,699,660.86 ₱ 6,163,154.79 ₱ 12,856,990.86 ₱ 0.00 ₱ 18,500.00 ₱ -175,830.00 ₱ -175,830.00
37
Appendix 3
Statement of Cash Flows

Cash Flows from Operating Activities
Cash Inflows
Collection from taxpayers ₱ 239,811.50 ₱ 410,101.63 ₱ 193,772.00 ₱ 332,905.97 ₱ 46,039.50 ₱ 77,195.66 ₱ 0.00 ₱ 0.00
Share from Internal Revenue Allotment 109,560,775.00 97,462,416.00 109,560,775.00 97,462,416.00 0.00 0.00 0.00 0.00
Receipts from business/service income 3,390.00 19,421.82 3,390.00 19,421.82 0.00 0.00 0.00 0.00
Subsidy from National Government 10,130,065.00 0.00 9,130,065.00 0.00 1,000,000.00
Total Cash Inflows ₱ 119,934,041.50 ₱ 97,891,939.45 ₱ 118,888,002.00 ₱ 97,814,743.79 ₱ 46,039.50 ₱ 77,195.66 ₱ 1,000,000.00 ₱ 0.00
Less: Cash Outflows
Payment of expenses ₱ 2,686,101.40 ₱ 1,887,366.11 ₱ 2,674,851.40 ₱ 1,872,766.11 ₱ 11,250.00 ₱ 14,600.00 ₱ 0.00 ₱ 0.00
Payments to suppliers and creditors 55,306,293.61 28,116,111.80 54,271,504.11 28,072,016.14 34,789.50 44,095.66 1,000,000.00 0.00
Payments to employees 48,332,309.04 44,808,339.84 48,332,309.04 44,808,339.84 0.00 0.00 0.00 0.00
Other Expenses 7,011,977.82 9,770,426.00 7,011,977.82 9,770,426.00 0.00 0.00 0.00 0.00
Total Cash Outflows ₱ 113,336,681.87 ₱ 84,582,243.75 ₱ 112,290,642.37 ₱ 84,523,548.09 ₱ 46,039.50 ₱ 58,695.66 ₱ 1,000,000.00 ₱ 0.00
Net Cash Flows from Operating Activities
15 ₱ 6,597,359.63 ₱ 13,309,695.70 ₱ 6,597,359.63 ₱ 13,291,195.70 ₱ 0.00 ₱ 18,500.00 ₱ 0.00 ₱ 0.00
Cash Flows from Investing Activities
Cash Inflows
Total Cash Inflows ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Less: Cash Outflows
Purchase/Construction of PPE ₱ 6,687,584.00 ₱ 13,973,086.00 ₱ 6,687,584.00 ₱ 13,954,586.00 ₱ 0.00 ₱ 18,500.00 ₱ 0.00 ₱ 0.00
Total Cash Outflows ₱ 6,687,584.00 ₱ 13,973,086.00 ₱ 6,687,584.00 ₱ 13,954,586.00 ₱ 0.00 ₱ 18,500.00 ₱ 0.00 ₱ 0.00
Net Cash Flows from Investing Activities
₱ -6,687,584.00 ₱ -13,973,086.00 ₱ -6,687,584.00 ₱ -13,954,586.00 ₱ 0.00 ₱ -18,500.00 ₱ 0.00 ₱ 0.00
Total Cash Provided by Operating and
Investing Activities ₱ -90,224.37 ₱ -663,390.30 ₱ -90,224.37 ₱ -663,390.30 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Add: Cash at the Beginning of the year 282,483.46 945,873.76 277,483.46 940,873.76 0.00 0.00 5,000.00 5,000.00
Cash Balance at the End of the Year ₱ 192,259.09 ₱ 282,483.46 ₱ 187,259.09 ₱ 277,483.46 ₱ 0.00 ₱ 0.00 ₱ 5,000.00 ₱ 5,000.00
38
Appendix 4
Statement of Changes in Net Assets/Equity
Accumulated Surpluses / (Deficits)

CY 2020 CY 2019 CY 2020 CY 2019 CY 2020 CY 2019 CY 2020 CY 2019
Balance at January 1 ₱ 30,771,662.93 ₱ 18,072,002.07 ₱ 20,943,927.43 ₱ 8,086,936.57 ₱ 24,612.50 ₱ 6,112.50 ₱ 9,803,123.00 ₱ 9,978,953.00
Add (Deduct)
Change in Accounting Policy 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Prior Period Errors 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Restated Balance ₱ 30,771,662.93 ₱ 18,072,002.07 ₱ 20,943,927.43 ₱ 8,086,936.57 ₱ 24,612.50 ₱ 6,112.50 ₱ 9,803,123.00 ₱ 9,978,953.00
Add (Deduct) Changes in net
assets/equity during the year
Adjustment of net revenue recognized
directly in net assets/equity ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00 ₱ 0.00
Surplus (Deficit) for the period 5,987,324.79 12,699,660.86 6,163,154.79 12,856,990.86 0.00 18,500.00 -175,830.00 -175,830.00
Total recognized revenue and expenses
for the period ₱ 5,987,324.79 ₱ 12,699,660.86 ₱ 6,163,154.79 ₱ 12,856,990.86 ₱ 0.00 ₱ 18,500.00 ₱ -175,830.00 ₱ -175,830.00
Balance at December 31 ₱ 36,758,987.72 ₱ 30,771,662.93 ₱ 27,107,082.22 ₱ 20,943,927.43 ₱ 24,612.50 ₱ 24,612.50 ₱ 9,627,293.00 ₱ 9,803,123.00
0.00
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Republic of the Philippines

ANNUAL AUDIT REPORT

For the Year Ended December 31, 2020

AGENCY ACTION PLAN AND STATUS OF IMPLEMENTATION

Agency Action Plan

Name and Position of Agency Officer Date

Local Chief Executive COA Auditor

The municipality is under the leadership of Hon. Al-Fattah N. Pacalna as Municipal

Assets Liabilites Equity

Revenue Expenses Surplus (Deficit)

Sources and Allocation of Funds

Appropriations Obligations Incurred Balance

Independent Auditor’s Report on the Financial Statements

1. Doubtful existence, completeness and condition of all property, plant and

2. Unrecognized depreciation expenses of ₱1,233,239.54 for CY 2020 and prior

Summary of Significant Audit Observations and Recommendations

1. The existence, completeness and condition of all property, plant and

b. Record/document the daily physical count in a standard Inventory Count Form

e. Prepare the RPCPPE upon completion of the physical count.

2. Inventory taking by the Inventory Committee to PPE items totaling of

We recommended that Inventory Committee shall prepare the Physical Inventory

We recommended that Management require the accountant to compute, recognize

We recommended that Management create a separate special account in the

5. Non-preparation and/or non-submission of monthly and separate year-end

We recommended that Management prepare:

a. A monthly report on BGCM fund utilization and status of implementation of

Summary of Total Suspensions, Disallowances and Charges

Status of Implementation of Prior Years’ Audit Recommendations

Particulars Page No.

Part I – Audited Financial Statements

 Independent Auditor’s Report 1

Part II – Audit Observations and Recommendations 19

Part III – Status of Implementation of Prior Years’ Audit Recommendations 29

 Statement of Financial Position (By Fund) 36

INDEPENDENT AUDITOR’S REPORT

HON. AL-FATTAH N. PACALNA

We have audited the accompanying combined financial statements of the Municipality of

Basis for Qualified Opinion

We conducted our audit in accordance with International Standards of Supreme Audit

Total Assets ₱36,831,044.18 ₱30,843,719.39

Total Liabilities ₱ 72,056.46 ₱ 72,056.46

Total Liabilities and Net Assets/Equity ₱36,831,044.18 ₱30,843,719.39

See Accompanying Notes to Financial Statements

Less: Current Operating Expenses

Surplus (Deficit) from Current Operation (₱ 3,995,413.81) ₱12,946,686.97

See Accompanying Notes to Financial Statements

Cash Flows from Investing Activities

Total Cash Provided by Operating

See Accompanying Notes to Financial Statements

Accumulated Surpluses / (Deficits)

Balance at January 1 ₱30,771,662.93 ₱18,072,002.07

See Accompanying Notes to Financial Statements

Budgeted Amounts Difference Difference

2. Non- Tax Revenue

The municipality is under the leadership of Hon. Al-Fattah N. Pacalna as

Note 2 - Basis for Financial Statements Presentation

The consolidated financial statements of the LGU have been prepared in

Note 3 - Summary of significant accounting policies

3.1 Basis of accounting

The [consolidated] financial statements are prepared on an accrual basis in

3.2 Revenue recognition

Revenue from non-exchange transactions

Taxes, fees and fines