EXECUTIVE SUMMARY A. INTRODUCTION ‘The Local Government Unit of Milaor is a 4" class municipality with twenty (20) barangays. At present, the Municipality is under the leadership of the newly elected Municipal Mayor Anthony R. Reyes and Vice Mayor Senen B. Bermas. Their vision is to be socially, economically, developed municipality with adequate infrastructures sustained by empowered citizenry in a peaceful and ecologically balanced environment governed by competent and gender responsive leaders by year 2022. Like other local government units, it enjoys the genuine local autonomy to enable it to attain its fullest development as self-reliant community and effective partner in the attainment of the national goals, Audit Methodology and Scope of Audit We conducted a financial and compliance audit on the accounts and operations of the Municipality of Milaor, Camarines Sur for calendar year 2016. We conducted our audit to ascertain the propriety of financial transactions and compliance of the agency to prescribed rules and regulations. It was also made to ascertain the accuracy of financial records and report, as well as the faimess of the presentation of the financial statements. B. FINANCIAL HIGHLIGHTS B.1 - Comparative Financial Position and Performance area CY 2016 cy20s — |_metease Deerense) Condition Amount fo Assets 'P223,480,169.66 | P209,630,577.93 | P13,849,591.73 | 6.61% Liabilities 164,624,074.67| 140,099,315.39 | 24,524,759.28 | 17.51% ‘Government Equity P58,856,094.99 | P69,531,262.54 | (P10,675,167.55] -15.35%Financial CY 2016 cy 2015 Hnerease (De) Performance Amount % Total P80,276,654.94 | P77,711,459.85 | P2,565,195.09] 3.30% Revue 276, 711,459. 565, 3.30% Total 9 Expense 65,580,554,92 | 57,635,768.38 | —7,944,786.54| 13.78% Net Surplus _| P9,762,516,04 | P17,690,811.30 | (P7,928,295.26) | -44.82% B.2—Sources and Application of Funds ‘The Budget Officer did not submit the Statement of Appropriations, Allotment, Obligations and Balances (SAAOB) for Calendar Year (CY) 2016. An Audit Observation was included this report. B.3 - Major Programs/Projects/Activities undertaken in CY 2016 ‘The LGU reported five (5) completed infrastructure projects for the year: PROJECT/PROGRAM ACTIVITY NAME TOTAL COST (P) 1 Almida-Dalipay Local Road 2 Repair and Renovation of RHU Building Constuction of Senior Citizen Office, Balagbag , Milaor 3. Camarines Sur 996,980.85 Constrcution of Day Care Center , Balagbag . Milaor 4 Camarines Sur _____ 996,841.97 5_ Repair and Improvemen of Day Care Center 2,448,408,22 Tofal 15,581,137.25 C, AUDITOR'S OPINION ON THE FINANCIAL STATEMENTS ‘The auditor rendered a qualified opinion on the fairness of presentation of the financial statements of the Municipality of Milaor, Camarines Sur for reasons that: (1) Collections totaling P4.287 million were not deposited in the bank as of December 31, 2016; (2) The annual physical inventory conducted by the LGU on its Property, Plant and Equipment (PPE) was incomplete, thus the existence and condition of unaccounted items amounting to P45.806 million could not be ascertained; (3) Cash advances totaling P1.819 million remained unliquidated as of December 31, 2016 (4) Disbursement vouchers totaling P1.151 million and their supporting documents were not submitted to COA for audit; and (5) The accounting and treasury records of Cash- in-Bank-LCCA account were not reconciled by P1.460 million. iiD. SUMMARY OF SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS For the exceptions mentioned above, the auditor recommended that ‘Management: (1) direct the concerned Municipal Treasurer to immediately deposit the balance of the Cash-Local Treasury account, (2) refrain from granting additional cash advances to officers and employees unless the previous cash advances are liquidated, demand immediate liquidation of all unsettled cash advances, specifically the substantial amount of prior years’ balances, intensify the regular monitoring of granting, utilization and settlement of all cash advances and enforce the implementation of the provision in the withholding of salary for officer and employees and AOs with unliquidated cash advances as provided by the above circulars; 3) to direct the property custodian maintain individual subsidiary ledgers for each PPE account to facilitate periodic reconciliation with the accounting records and proper monitoring thereof, conduct reconciliation to reclassify the assets to its proper account, issue Acknowledgement Receipts of Equipment (ARE) on all properties and prepare necessary report to perform proper disposal of unserviceable properties; (4) direct the Municipal Treasurer to submit to the Municipal Accountant the disbursement vouchers and their supporting papers for the latter to take up the transactions in the Agency’s books then submit to COA for audit to forestall the issuance of Notice of Suspension; and (5) direct the immediate reconciliation of the corresponding cash balances ‘maintained by the Municipal Treasurer and Municipal Accountant to ensure correctness and reliability of the reported cash balances as of December 31, 2016. The Audit Team has communicated the observations and recommendations with the Auditee through the issuance of Audit Observation Memorandum (AOM) and discussed them with the agency officials during the exit conference held on May 22, 2017, and their comments were incorporated in this report, where appropriate. The following are the; other significant observations together with the corresponding recommendations: 1. Disbursements for Debt Servicing for Infrastructure Projects in the amount of 7.639 million exceeded the budget by P3.197 million. iiiWe recommended that management avoid incurring expenditures beyond its budget and adhere to the rules and regulations, specifically Resolutions issued by the Sangguniang Panlalawigan on budget review. 2. Payments for Personal Services (PS) exceeded the 55% limitation by P1.709 ‘million contrary to Section 325(a) of RA 7160 and Local Budget Circular No. 98 dated October 14, 2011, depriving the constituents of the funds for other developmental activities We recommended that the Municipality stricly comply with the provisions prescribed by Section 325 of the Local Government Code of 1991, otherwise known as RA 7160, and LBC No. 98 dated October 14, 2011 on its appropriation for Personal Services in the budget for the ensuing years. 3. Expenditures totaling P465,018.81 were inappropriately paid out of the 20% Economic Development Fund resulting to inefficient utilization of the thereof, We recommended that Management require strict compliance to the provisions of DILG-DBM Joint Memorandum Circular 2011-1 on the utilization of the 20% EDF as mandated by Section 287 of RA 7160, giving priority to development projects specified in the LGU’s Annual Investment Plan. 4, Expenses incurred for the 22nd Women in Nation Building Annual Congress at Tocos Norte and Team Building Activity in Baguio totaling P356,580.00 did not pass the the test of prudence. We recommend that Management: (a) remind the officials and employees that not all letters of invitation to seminars, trainings, conventions, ete. are mandatory, hence, give priority to those that are useful and significant in relation to the affairs of the LGU (b) limit the number of participants to seminars, trainings, and conventions for those who are capable to conduct echo-seminar in order to minimize costs {c) conduct activities, such as team building, in areas near or within the Municipality so as to lessen costs. E. SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES Balances as of CY 2016 Balances as of Particulars 1/1/2016 __ [Issued | Settied 12/31/2016 Notice of Suspension _| P 1,727,198.35 |__0.00 0.00 | P 1,727,198.35 Notice of Disallowance | 1,675,357.89 | 0.00 0.00. 1,675,357.89 [Notice of Charge 0.00[ 0.00 0.00 0.00 { Total P3,402,556.24| 0.00 0.00 | P3,402,556.24F. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATION Review of management's actions on our prior years’ audit recommendations revealed that out of the twenty-four (24) audit recommendations, cight (8) was implemented, five (5) were partially implemented and eleven {I1) were not implemented as of December 31, 2016.