EXECUTIVE SUMMARY

A. Introduction

1. Dinagat Islands was once part of the 1st District of the Province of
Surigao del Norte until it became a separate province on October 2, 2006
through Republic Act No. 9355, otherwise known as the Charter of the
Province of Dinagat Islands. The formal operation of the newly created
LGU started only in June 2007.

2. The Province of Dinagat Islands is the fifth province of Caraga Region and
is composed of seven municipalities, namely: Basilisa, Cagdianao, Dinagat,
Libjo, Loreto, Tubajon, and San Jose as the capital municipality. Province
of Dinagat Islands is a third class Province in its income classification. The
five municipalities are classified as fourth class municipalities. While
Dinagat and Tubajon are classified as fifth class municipalities.

3. The audit was conducted in accordance with laws and International

Standards of Supreme Audit Institutions (ISSAIs). These standards require
that appropriate planning is undertaken in the performance of audit aimed
to obtain reasonable assurance that the financial statements are free of
material misstatements, and to provide reasonable basis for our opinion.

4. The audit covered the accounts and operations of the provincial government
for the year 2020 and was aimed to ascertain the propriety of financial
transactions, management’s compliance to prescribed laws, rules and
regulations and the fairness of the presentation of the financial statements.
Value for money was also conducted on the selection and implementation
of projects funded out of the 20% Development Fund to determine whether
the objectives of the projects are attained in the most efficient, effective and
economical manner.

5. It was focused on the audit thrust areas identified by the Local Government
Sector (LGS) for calendar year 2020.

B. Financial Highlights

6. Comparative Financial Position and Results of Operations

Increase/
Particulars 2020 2019 (Decrease)
Assets 1,673,372,427.44 1,389,410,338.22 283,962,089.22
Liabilities 322,148,718.94 239,015,117.54 83,133,601.40
Government Equity 1,351,223,708.50 1,150,395,220.68 200,828,487.82
Income 764,095,887.73 649,731,829.17 114,364,058.56
Operating Expenses 531,168,467.15 495,510,692.54 42,951,459.40
Transfers, Assistance and 13,819,812.87 (15,081,305.45) 28,901,118.32
Subsidy From (To)
Surplus (Deficit) 246,747,233.45 139,139,931.18 107,607,302.27

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 7. Comparative Sources and Application of Funds
Increase/
Particulars 2020 2019 (Decrease)
Appropriations 944,517,799.70 802,696,586.68 141,821,213.02
Allotment 944,517,799.70 802,696,586.68 141,821,213.02
Obligations 586,833,195.84 546,397,135.95 40,436,059.89

C. Favourable Observations

8. One of the most noticeable performance of the Province is on fiscal

management by consistently maintaining surpluses, while providing the
basic needs of its constituent in the implementation of its programs, projects
and activities.

9. The Province is compliant to the full disclosure policy advocates by the

Department of Interior and Local Government Units (DILG) under its MC
No. 2011-13 dated September 19, 2011.

10. The stringent and coordinated plan of action in the combat of COVID-19
pandemic, brought the Province to the Second to the last Province,
throughout the country that was infected by CoVID-19 disease and awarded
by PNP Caraga as the BEST LGU in combatting CoVID-19.

D. Audit Opinion

11. The Supervising Auditor rendered a qualified opinion on the fairness of

presentation of the financial statements of the Province of Dinagat Islands
for CY 2020 because of the following reasons, to wit:

11.1 The improper classification of the Provincial Guest Center Building

as Investment in Property with carrying value of ₱16.444 million
rather than in an appropriate account to Property, Plant and
Equipment (PPE) inconsistent with International Public Sector
Accounting Standards (IPSAS) Nos. 16 and 17; and

11.2 The accuracy, existence and validity of the Property, Plant and
Equipment and Biological Assets accounts balances of ₱696.043
million and ₱1.401 million, respectively, in the statement of
financial position as of December 31, 2020 are doubtful due to non-
reconciliation of accounting and property records.

12. For the above-mentioned audit observations, which have caused the
issuance of a qualified opinion, we recommended for Management to:

12.1 Instruct the Provincial Accountant to reclassify the account

Investment Property-building its appropriate PPE account; and

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 12.2 Direct the Provincial Accounting Office and the Inventory
Committee to reconcile their records in order that appropriate
adjustments of the accounts affected be promptly effected, leading
to a reliable and fair presentation of the accounts in the Statement of
Financial Position.

E. Summary of Significant Observations and Recommendations

13. The other audit observations and recommendations are as follows:

13.1 Placement of ₱51.500 million cash in time deposits of the General

Fund proper, out of the unimplemented programs, projects and
activities of the Province of Dinagat Islands, is not in accordance
with COA Circular No. 92 -382 dated July 3, 1992 and Department
of Finance Circular No. 6 - 90 dated December 6, 1990.

We recommended that Management ensure that the amount placed

under time deposits are idle funds in consonance with Section 21 and
22 of COA Circular No. 92 – 382 and DOF Circular No. 06 – 90,
so that continuous implementation of the PPAs cannot be affected
due to restrictions of availability of funds.

13.2 The Province of Dinagat Islands (PDI) did not create Special
Account in the General Fund (SAGF) for the “Bayanihan Grant to
Province” (BGP) grant as required under Item 3.7 of the Local
Budget Circular No. 126 dated April 13, 2020.

We recommended that Sangguniang Panlalawigan enact an ordinance

authorizing the creation of SAGF to ensure effective planning and
maximize the attainment of the fund for which it was established in
accordance with Item 3.7 of LBC No. 126 and Section 313 of RA 7160.
Likewise, require the Provincial Accountant to prepare and submit
timely the quarterly Fund Receipts and Utilization Report of other
special accounts in the general fund in accordance with Section 141 of
the Government Accounting Manual for LGUs, Volume I.

13.3 Boat Rental used for 24/7 emergency response operation and
transportation assistance in support to Balik Probinsya Program
totaling ₱535,800.00 charged against Bayanihan Grant and Local
Disaster Risk Reduction Management Fund were not supported with
complete documentation contrary to Section 4 of Presidential Decree
1445, thus, the validity and propriety of the disbursements could not
be ascertained.

We recommended that Management direct the Provincial

Accountant to require the end-users to submit immediately the
lacking supporting documents in the payment of boat rentals in
accordance with Section 4 of PD 1445 to prove the validity and
propriety of the transactions.

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 Also, make use of the donated sea ambulances to cater patient from the
District Hospitals when referred to hospitals outside the Province to
maximize the use of ambulances with complete accessories and to
minimize the incurrence of the cost for boat rental.

13.4 Procurement of additional 258 pieces of Cadaver Bags intended for

COVID-19 response operations amounting to ₱438,600.00 exceeded
the three – months estimated consumption, therefore deemed excessive
procurement as defined under COA Circular No. 2012-003 dated
October 29, 2012. Hence, economical use of government funds was not
achieved contrary to Section 2 of PD 1445.

We recommended that Management enhance effective planning and

proper coordination in the procurement of goods and avoid over –
stocking of cadaver bags to ensure that public funds are properly
managed and utilized in view of efficiency, economy and effectiveness
in the operations.

13.5 Splitting of Purchase Requisitions and/ or Purchase Orders of

medicines and medical supplies used for Dengue Prevention and
Control Program totaling ₱845,869.00 and the procurement for the
project of Integrated Diversified Organic Farming totaling
₱1,000,675.00 charged against Local Disaster Risk Reduction
Management Fund (LDRRMF) contravened COA Circular No. 76-41
dated July 30, 1976. Moreover, the procurements were done through
small value procurement similarly circumventing the conduct of
competitive public bidding contrary to RA 9184 and other
procurement guidelines, thus depriving the LGU to avail of the most
advantageous price.

We recommended that Management, through the BAC, enhance

consistent planning and procedure to conduct public bidding on all
programs, projects and activities in the approved APP covered by
competitive public bidding, as the default mode of procurement, that
exceeded the threshold being a fourth class Province; and for it to issue
the required BAC Resolution duly approved by the Head of Procuring
Entity in case the change in the modality of procurement is resorted
and justified. Likewise, to stop the practice of splitting of
requisition.

13.6 The programs, projects and activities attributable to Local Disaster Risk
Reduction Management Fund (LDRRMF) were: a) not funded
proportionately resulting to incurrence of substantial maintenance and
other operating expenses totaling ₱13.100 million and capital expenditures
of ₱16.660 million which are more of administrative in nature; and b)
procurement of agricultural supplies and tilapia amounting to ₱0.485
million for Integrated Diversified Organic Farming Systems (IDOFS) and
₱0.615 million related to CoVID 19 activity which did not partake disaster
prevention, mitigation, preparation, response, rehabilitation and recovery
activities, thus the inefficient and ineffective utilization of fund contrary to
Section 2 of PD 1445 and NDRRMC-DBM-DILG Joint Memorandum
Circular No. 2013-1 dated March 25, 2013.

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 We recommended that Management (a.) allocate the LDRRMF
proportionately and design effective planning in programing the
projects and activities; (b.) direct the PDRRMO not to charge the
procurement of agricultural supplies from IDOFS and as CoVID-19
activity to ensure compliance with NDRRMC-DBM-DILG JMC
No. 2013-1 dated March 25, 2013 in the allocation and utilization of
LDRRM Fund; and (c.) to accurately report those inventoriable
items to avoid misleading information on the status and
classification of the inventory.

13.7 The Province still failed to maintain a Sanitary Landfill or its

equivalent disposal facility in handling solid wastes contrary to
Section 44 of Republic Act No. 9003, thereby exposing health
hazard and unfriendly environment to its constituents.

We recommended that Management strictly adhere the guidelines

set under Sections 17(h) and 44 of Republic Act 9003 with emphasis
of DILG Memorandum Circular No. 2009-168 dated
October 27, 2009 in the management of solid waste to ensure public
health safety and environment friendly while providing the basic
services beneficial to the constituents of the Province.

13.8 Eighty–Four percent or ₱3.070 million of the total appropriation for

Special Education Fund were not fully utilized and there is no
allocation for Early Childhood Care and Development Program
required in RA No. 10410 and DepEd-DBM-DILG Joint
Memorandum Circular No. 1, s. 2017.

We recommended that Management, through the Local School

Board, fully utilize or at least increase the utilization of SEF and fast
track the implementation of the prioritized programs, projects, and
activities pursuant to DepEd, DBM and DILG Joint Circular No. 1,
series 2017, dated March 3, 2017 to ensure the intended beneficiaries
of optimum benefits.

Further, we recommended for Management to incorporate in its

budget the programs and activities intended for ECCD to support the
holistic needs of the young children of the Province as mandated
under Section 7 (b) of RA No. 10410.

13.9 The Province of Dinagat Islands paid across the board contract
premium to personnel hired through job order contract totaling
₱13.621 million without specific legal authority, thereby resulting to
unauthorized disbursement of public fund.

We recommended that Management submit immediately legal basis

and / or justification for the payment of across-the-board contract
premium to prove the propriety and validity of the disbursements.
Otherwise, the transactions will be re–evaluated on the basis of
available information/documents submitted.

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13.10 The certainty of the Provincial Government’s subsidies to various
barangays amounting to ₱1.425 million intended for a specific
purpose could not be established due to lack of monitoring
mechanism contravened Sections 2 and 124 of Presidential Decree
No. 1445. Likewise, paid disbursement vouchers totaling
₱1.401 million for Barangay Development Program were not
submitted for audit contrary to Section 6.05 of COA Circular
No. 95-006, thus hindering post-audit of the transactions.

We recommended for Management to: a) issue a policy or guidelines

that will strengthen the Provincial Government’s monitoring
mechanism on the utilization of cash subsidy extended to the
barangays; b) Process and released goods as requested by other LGUs
rather than thru outright financial assistance; and c) require the
Provincial Accountant to submit the pertaining paid vouchers to the
Audit Team within the timeline provided for in COA Circular
No. 95-006 dated May 18, 1995.

13.11 Funds transfer in the amount of ₱3.750 million from the Department
of Health from CY 2010-2019 for six (6) programs/projects intended
to improve/enhance the delivery of health-care services in the
province remained not fully utilized, thus depriving the end users of
the timely benefits that may be derived therefrom, had the
projects/programs been implemented as planned.

We recommended that Management take immediate implementation of

the programmed PPAs funded by DOH, but which have not yet been
completed or started, by adopting effective strategies, procedures and
controls to ensure timely accomplishment and for immediate
liquidation of the funds received if the purpose for which it has been
transferred has been served.

13.12 Several paid disbursement vouchers and other necessary documents/

reports for calendar year 2020 transactions were not completely
submitted for audit by the Provincial Treasurer and Provincial
Accountant, contrary to Sections 39 and 100 of Presidential Decree
(PD) No. 1445 and COA Circular No.2009-006 dated
September 15, 2009.

We recommended for Management to direct the concerned Offices

to strictly observe the timely submission of accounts and the
required schedules in accordance with Section 39, 100 and 122 of
PD 1445 and Section 7.2.1 of COA Circular No. 2009-006 dated
September 15, 2009.

13.13 Of the 158 priority development projects under 20% Development

Fund for calendar year 2020 aggregating ₱398.234 million, 114
development projects totaling ₱348.606 million were not fully
implemented, incurred ineligible disbursements of ₱0.512 million and
granted fund transfers of ₱6 million contrary to DILG-DBM Joint
Memorandum Circular No. 2017-1 dated February 22, 2017.

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 We recommended for Management to: (a.) Prepare a catch-up plan
and fast track the implementation of the above-mentioned priority
development projects; (b.) refrain from charging the 20% DF of
expenditures that do not contribute to the attainment of
socio–economic development and environmental management and
those that do not partake the nature of investment or capital
expenditures; and (c.) direct the Provincial Planning and
Development Coordinator to enhance proper planning in the
allocation and utilization of 20% DF to ensure proper
implementation of the projects and to meet the need of the intended
beneficiaries in timely manner.

F. Summary of Total Suspensions, Disallowances and Charges

14. There are no Notices of Audit Suspensions, Disallowances and Charges that
were issued in CY 2020. Likewise, there are no balances of the said
accounts as of the beginning of the year.

G. Statement of the quantity/number of recommendations implemented,

partially implemented and not implemented for the current year.

15. Of the 14 audit recommendations contained in the CY 2019 Annual Audit

Report, eight were fully implemented, five were partially implemented and
one is not implemented.

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