EXECUTIVE SUMMARY

I. Introduction

The Provincial Government of Cagayan came into existence by virtue of

Commonwealth Act No. 2711 dated March 10, 1917. The Province comprises an
aggregate land area of 909,594 hectares, which constitute three percent of the total land
area of the country and is the second largest Province in Region II. It is classified as a
first-class Province with one component City and 28 Municipalities.

The audit covered the accounts and operations of the Provincial Government of
Cagayan for CY 2022 and was aimed at determining whether management presented
fairly the financial statements of the Province in adherence to the generally accepted
accounting principles, whether prevailing laws, rules and regulations have been complied
with and whether funds were utilized in the most efficient, effective and economical
manner. Financial, compliance, and performance audits were conducted to achieve these
audit objectives.

II. Financial Highlights

The highlights of the financial position, performance, appropriations, allotments

and obligations of the Provincial Government of Cagayan for the year ended December
31, 2022, with comparative figures for CY 2021, are as follows:

Increase
Accounts 2022 2021
(Decrease)
Financial Position
Total Assets ₱12,175,931,868.95 ₱11,245,243,414.90 ₱930,688,454.05
Liabilities 1,253,339,628.83 1,739,327,736.52 (485,988,107.69)
Total Government Equity 10,922,592,240.12 9,505,915,678.38 1,416,676,561.74

Financial Performance
Total Income ₱4,280,793,267.86 ₱3,202,910,322.78 ₱1,077,882,945.08
Total Expenses 2,016,978,572.36 1,412,042,945.35 604,935,627.01
Appropriations, Allotments and Obligations
Appropriations- Current ₱4,631,384,261.04 ₱3,338,708,216.18 ₱1,292,676,044.86
Appropriations- 11,233,468.61 33,068,191.38 (21,834,722.77)
Continuing
Allotment- Current 4,517,237,123.14 3,338,708,216.18 1,178,528,906.96
Allotment- Continuing 11,233,468.61 33,068,191.38 (21,834,722.77)
Obligations- Current 3,209,810,396.13 1,230,082,045.57 1,979,728,350.56
Obligations- Continuing 9,693,568.61 492,361,024.46 (482,667,455.85)
 Comparative Statement of Fund Transfers to and from NGAs, LGUs, NGOs and POs

Funds Transferred to
2022 2021 Increase
Other Agencies
(Decrease)
NGAs ₱7,383,636.41 ₱9,091,083.68 (₱1,707,447.27)
GOCCs 19,460.30 19,460.30 -
LGUs 741,386,418.59 714,666,577.75 26,719,840.84
NGOs/POs 1,376,760.00 1,431,760.00 (55,000.00)
TOTAL ₱750,166,275.30 ₱725,208,881.73 ₱24,957,393.57

Funds Received from

Increase/
Other Agencies 2022 2021
(Decrease)
NGAs ₱286,838,253.53 ₱663,929,767.99 (₱377,091,514.46)
GOCCs 6,762,698.18 6,888,592.72 (125,894.54)
LGUs 14,889,442.28 20,130,118.07 (5,240,675.79)
NGOs/POs - - -
TOTAL ₱308,490,393.99 ₱690,948,478.78 (₱382,458,084.79)

III. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fair presentation of the financial
statements of the Provincial Government of Cagayan for the year-ended
December 31, 2022, due to: (a) the effects of the overstatement of cash in bank balance
due to non-reversion of long outstanding stale checks in the amount of ₱100,897,609.76;
(b) overstatements of the Other Property, Plant and Equipment, Other Maintenance and
Operating Expenses (OMOE) and Other Receivables accounts in the amount of
₱114,683,277.12, ₱157,933,354.52 and ₱27,001.95, respectively due to misclassification
of accounts; (c) overstatement of Accounts Payable account in the amount of
₱515,919.05 due to non-reversion of outstanding balance for more than two years and
without valid claims, to the unappropriated surplus of the general fund; and (d)
understatement of Grants and Donations In-Kind account in the amount of
₱586,038,942.28 due to non-recognition of COVID-19 vaccines received from DOH.

IV. Summary of Significant Audit Observations and Recommendations

The following are among the Audit Team’s significant audit observations and
recommendations for CY 2022, to wit:

1. Due from LGUs account balance under the General Fund as of December 31,
2022 accumulated to ₱739,819,007.20 due to the grant of additional fund
transfers to recipient barangays without full liquidation of previous fund
 transfers granted to them which is not in keeping with COA Circular No.
2012-001 dated June 14, 2012.

We reiterated our recommendation that Management:

a) instruct the accountant to require the concerned barangays to submit

immediately the liquidation reports of their unliquidated fund transfers in the
total amount of ₱739,819,007.20, otherwise Notice of Suspension will be
issued;

b) assign one personnel responsible/in-charge in monitoring the submission of

liquidation reports due for submission and issue final demand letters to
concerned barangays who failed to comply. This will ensure immediate
submission of liquidation reports after the purpose/s for which it was granted
has been served or completed; and

c) instruct the accountant not to allow the payment of fund transfer unless the
required certification that previous fund transfers have already been liquidated
or accounted for, thus avoiding accumulation of unliquidated fund transfers
pursuant to the provisions of Section 3.1.1 of COA Circular No. 2012-001
dated June 14, 2012.

2. The Provincial Government of Cagayan (PGC) was able to collect a

significant amount of ₱47,299,938.31 or 94.60% out of the targeted amount
of ₱50,000,000.00 for the Real Property Taxes (RPT) in CY 2022 leaving an
uncollected amount of ₱2,700,061.69 or 5.40%, which is indicative of the
Province’s efficient collection effort to fully realize its income potential for
the benefits of its constituents.

We commended Management for its high collection rate of 94.60% for RPT for
CY 2022 and to improve further its collection efficiency in order to meet or even
exceed its estimates or target collection within a given year.

3. Various cash advances were granted to 14 employees of the Provincial

Government of Cagayan (PGC) in the total amount of ₱320,806,000.00 for
payment of COVID-19 Pandemic Relief Assistance or ₱1,000.00 for each
recipient in the Province of Cagayan, charged under the different Programs,
Projects and Activities (PPAs) of the Province during the 45-day period of
prohibition for the release and disbursement of funds without the required
petition for issuance of Certificate of Exception which is contrary to Section
13 of COMELEC Resolution No. 10747 dated December 16, 2021.

In addition, the amount of ₱27,984,000.00 charged from the Province’s CY

2022 Peace and Order fund for the payment of COVID-19 Pandemic Relief
Assistance was not indicated in its CY 2021 and 2022 Peace and Order and
Public Safety Plans (POPS Plan) and was not supported with a Peace and
 Order Council (POC) resolution contrary to Items 2.2 and 2.3 of DILG
Memorandum Circular (MC) No. 2020-079 dated May 1, 2020.

Moreover, the amount of ₱85,768,000.00 charged from the Province’s

Calamity Fund for the payment of COVID-19 Pandemic Relief Assistance
was excessive by ₱10,768,000.00 from the budgeted amount of ₱75,000,000.00
as indicated in their Local Disaster Risk Reduction and Management Plan
(LDRRMP) for CY 2022 contrary to Annex D of COA Circular No. 2012-003
dated October 29, 2012.

Consequently, due the deficiencies noted, the validity, legality, reliability and
propriety of the transactions could not be ascertained.

We recommended that Management furnish the audit team a copy of the PGC’s
compliance as regards the submission of amount disbursed during the 45-day ban
in compliance with the Certificate of Exception issued by the COMELEC En
Banc thru Minute Resolution No. 22-0406 dated April 13, 2022 on the following
PPAs for our final evaluation, as follows:

i. CY 2022 Development Assistance to LGUs;

ii. 5% Calamity Fund for the provision of alternative livelihood
and/or relief assistance to victims of calamities and/or disasters;
iii. Social welfare and development program; and
iv. Summer Program for Assistance to College Students (SPACS).

V. Summary of Total Suspensions, Disallowances and Charges

Beginning Ending
Issued Settlement
Balance Balance, % of
Particulars During the During the
January 1, December 31, Settlement
Year Year
2022 2022
Suspensions
Prior Years 7,327,108.05 0.00 0.00 7,327,108.05 0.00%
Current Year 0.00 0.00 0.00 0.00 0.00%
Total 7,327,108.05 0.00 0.00 7,327,108.05 0.00%

Disallowances
Prior Years 86,607,189.26 0.00 0.00 86,607,189.26 0.00%
Current Year 0.00 0.00 0.00 0.00 0.00%
Total 86,607,189.26 0.00 0.00 86,607,189.26 0.00%

Charges
Prior Years 0.00 0.00 0.00 0.00 0.00%
Current Year 0.00 0.00 0.00 0.00 0.00%
Total 0.00 0.00 0.00 0.00 0.00%
VI. Status of Implementation of Prior Years’ Audit Recommendations

The status of implementation of prior years’ audit recommendations embodied in CY

2021 Annual Audit Report are summarized as follows:

Implemented 17
Not Implemented 7
Not Implemented and Reiterated in CY 2022 AAR 3 10
Total 27