EXECUTIVE SUMMARY

Introduction

The Municipality of Arakan was created by virtue of Republic Act No. 7152,
approved by Her Excellency President Corazon C. Aquino on August 30, 1991. The word
Arakan is derived from Manobo term “ARA” which means abundance of natural resources in
the valley and “KAN” which means heroes, bravery and valor of Manobo leaders and settlers
of the area. Arakan is basically a territory of a number ethno-linguistic group, pre-dominantly
of the Manobo-Kulamanon and Manobo-Tinananon tribes.

The Local Government of Arakan shall develop a self-reliant Arakenos by providing

them equitable access to basic services and opportunities into dynamic leadership, teamwork
among officials and employees in collaboration with other constitution. Its programs/projects
are centered on the eight sectoral classifications namely, Agriculture, Environment,
Infrastructure, Education, Health, Social Welfare, Trade and Industry, and Tourism.

Highlights of Financial Operation

For calendar year 2010, the agency had collected a consolidated amount of
P100,389,825 and incurred expenditures amounting to P95,450,641 thus incurring a net
income of P4,939,184 for the year’s operation. The municipality has a consolidated annual
appropriation in the total amount of P107,175,317 and it obligated the amount of
P100,729,930 thereby, leaving an appropriation balance of P6,445,587.

Scope of the Audit

A financial and compliance audit was conducted for the accounts of the Municipality
of Arakan, Cotabato for CY 2010. These were made to determine the validity and propriety
of transactions, which were selected through sampling.

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements, as there were no substantive tests performed due to management’s
failure to submit financial reports and the expenses for donation amounting to P5,507,246
were of doubtful validity due to lack of sufficient documentation to validate the claims for
financial assistance/grants to various individual/beneficiaries.
Significant Findings and Recommendations:

1. Substantive tests could not be performed due to management’s failure to submit the
agency’s financial reports in accordance with Section 7.2.1(a) of COA Circular No. 2009-
006 dated September 15, 2009.

We recommend the submission of financial reports in accordance with the

aforementioned regulations in order to substantiate the financial statements submitted.

2. Cash Advances totaling P4,506,812.08 remained not liquidated as of December 31, 2010,
in violation of Section 89 of P.D. 1445 and COA Circular No. 97-002. Correctness of
same was of doubtful validity due to non-submission of liquidation reports as well as
erroneous presentation of accounts in the financial statements.

We recommend that the auditee should strictly adhere to the rules and regulations in the
granting, utilization and liquidation of cash advances. Ensure that the liquidation reports
are also submitted for audit.

3. Real property tax collections, both for the General Fund and Special Education Fund had
decreased by 50.56% or from P1,052,749 to P585,572. The amount of collection
represented 5% only of the total receivables from taxpayers of P11,229,415, an
indication of ineffective and inefficient discharge of functions, thus depriving its
constituents of a better delivery of service .

We recommend that management should exert more effort and exhaust effective
strategies to collect monies due the municipality to fund various priority development
project/programs of the local government unit and attain the goals and objectives set for
the benefit of its constituents.

4. Expenses for Donation at P5,507,246 were of doubtful validity due to lack of sufficient
documentation to validate the claims for financial assistance/ grants to various
individual/ beneficiaries.

We recommend that the payment of claims for donation expenses should be authorized
and supported with sufficient documentation to ensure that the transactions are valid and
the public interest is protected. Donation expenses should be properly charged against
the appropriation for the purpose. The said amount fixed by an Appropriation
Ordinance for the offices and officials authorized shall be the basis of control in the
disbursement of said funds.

5. Some travelling expenses were paid not in accordance with Executive Order No. 248, as
amended by Executive Order No. 298, dated March 23, 2004 prescribing the rules and
regulations on travels of government personnel, thus resulted to excessive claims for
traveling expenses.
 We recommend strict adherence to the rules and regulations on travels to minimize the
cost of travel and save the cost of unnecessary expenses to more beneficial activity of
the Municipality.

6. Management failed to prepare and submit an Annual Gender and Development Plan and
Accomplishment Report based on the established procedural guidelines set forth in Joint
Circular No. 2004-1.

We recommend to the auditee to conduct gender mainstreaming or self-assessment in

order to determine, among others, whether gender issues are addressed by GAD
interventions in the agency. Prepare the GAD plan and budget and accomplishments in
accordance with the procedural guidelines.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

All audit recommendations contained in the CY 2009 Annual Audit Report were not
implemented, two of which were reiterated in Part II of this report.