EXECUTIVE SUMMARY

Introduction

Pinamalayan is a first-class Municipality by virtue of Department of Finance Order No.

23-08 dated July 29, 2008, as implemented by Bureau of Local Government Finance
(BLGF) Memorandum Circular No. 01-M (47)-08 issued on November 12, 2008. It is
located in the second district of the Province of Oriental Mindoro and is composed of 37
barangays.

Municipal Mayor Aristeo A. Baldos Jr. heads the Municipal Government of

Pinamalayan. Vice Mayor Rodolfo M. Magsino and the ten active Sangguniang Bayan
Members ably assist him in the administration of the Municipality.

Highlights of Financial Operations

The Municipal Government of Pinamalayan generated a total income of ₱416.35 million

for Calendar Year (CY) 2022 from Internal Revenue Allotment (IRA), tax revenue,
service and business income and other income. The largest income of the Municipality
came from the IRA which constitutes 87% of its total revenue. Total expenditures
incurred amounted to ₱332.7 million, of which expenditures for Personal Services and
Maintenance and Other Operating Expenses (MOOE) account for 42% and 43% of the
total expenditures.

For CY 2022, the appropriation of the Municipality of Pinamalayan for the General and
Special Education Funds totaled ₱514.48 million. Obligations charged against these
appropriations amounted to ₱361.4 million.

Appropriations Obligations
Current Appropriations
General Fund ₱438,586,705.82 ₱342,443,023.45
Special Education Fund 5,821,309.70 1,125,119.53
Total 444,408,015.52 343,568,142.98

Continuing Appropriations
General Fund 64,238,177.92 13,293,147.78
Special Education Fund 5,833,924.84 4,535,121.74
Total 70,072,102.76 17,828,269.52
Grand Total ₱ 514,480,118.28 ₱ 361,396,412.50

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 35% 32%

61%
83%

65% 68%

39%
17%

GF-Current GF-Continuing SEF-Current SEF-Continuing

Obligations Balance

The assets, liabilities, equity and expenses of the Municipality of Pinamalayan compared
with the preceding year are as follows:

Increase
Account 2022 2021
(Decrease)
Assets 1,080,215,432 892,424,828 187,790,604
Liabilities 412,634,475 304,512,933 108,121,542
Equity 667,580,957 587,911,895 79,669,062
Income 416,350,446 322,907,579 93,442,867
Expenses 332,705,992 278,273,092 54,432,900

900,000,000

800,000,000

700,000,000

600,000,000

500,000,000

400,000,000

300,000,000

200,000,000

100,000,000

0
Assets Liabilities Equity Income Expenses
2021 2020

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Major Accomplishments for CY 2022

For CY 2022, the Municipal Government of Pinamalayan was able to pass the
2022 Good Financial Housekeeping of the Department of Interior and Local Government
(DILG).

Scope of Audit

The audit conducted on test basis on the accounts and operations of the Municipality of
Pinamalayan, Oriental Mindoro for CY 2022 focused on the CY 2022 audit thrusts
provided under Unnumbered Memorandum dated September 14, 2022 of the Assistant
Commissioner, Local Government Audit Sector. It was aimed at (a) determining whether
Management presented fairly the financial statements in adherence to the International
Public Sector Accounting Standards (IPSAS); (b) ascertaining the level of assurance that
may be placed on management assertions on financial statements; (c) recommending
agency improvement opportunities; and (d) determining the extent of implementation of
prior years’ audit recommendations.

The completed projects out of local funds and fund transfers are still subject to technical
evaluation by COA Technical Audit Specialists and the results will be communicated to
the municipal officials through the issuance of the Audit Observation Memorandum.

Audit Opinion on the Financial Statements

We rendered a qualified opinion on the fairness of the presentation of the financial

statements of the Municipal Government of Pinamalayan for CY 2022 due to the
following:

1. Cash in Bank – Local Currency, Current Account and Cash in Bank – Local
Currency, Saving Account accounts totaling ₱304.556 million and ₱17.213
million, respectively, were doubtful due to (a) identified reconciling items with
net amount of ₱1.516 million which remained unadjusted in the books and
unreconciled balances in various reports; (b) existence of stale checks totaling
₱270,421.19 which remained unadjusted in the books at year-end; and (c) failure
to maintain cashbooks subsidiary ledgers for three CIB-LCCA accounts;

2. Property, Plant and Equipment (PPE) account of totaling ₱823 million, were
doubtful due to (a) existence of unreconciled balance of ₱7.19 million (exclusive
of construction-in-progress account) between the accounting records and the
Report on the Physical Count of Property, Plant and Equipment (RPCPPE) on
account of the (i) non-maintenance of complete inventory records; (ii) differences
between the GL and RPCPPE in recording PPE acquisitions and completed
projects during CY 2022; and (iii) deficiencies noted in the submitted RPCPPE;
and (b) noted misclassification of accounts amounting ₱5.3 million;

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 3. Accounts Payable and Due to Officer and Employees accounts totaling ₱35.03
million were doubtful due to (a) inclusion of unsettled obligations totaling ₱8.03
million which remained outstanding for more than two years, and (b) existence of
payables with unidentified names of creditors totaling ₱1.68 million; and

4. Due to National Government Agencies (NGAs) and Trust Liabilities account

balances totaling 63.96 million were doubtful due to (i) existence of unsupported
long outstanding balances of accounts totaling ₱18.39 million; and (ii)
misclassified accounts totaling ₱2.52 million under the Trust Liabilities.

To correct these deficiencies, we recommended that the:

a. Municipal Accountant and the Municipal Treasurer (i) ensure reconciliation of

their respective records relative to cash accounts, (ii) conduct a detailed review
and checking of bank records/reports, and request the necessary documents to
support the recording of the reconciling items, if any, (iii) exert continuous effort
to substantiate the identified reconciling items and effect the necessary
adjustments to corresponding records, if warranted, (iv) provide details of the
outstanding checks in the BRS for easy monitoring of its validity, and (v) review
the long outstanding/stale checks and ensure compliance with the procedures as
provided under the Manual on NGAS for LGUs;

b. Municipal Mayor consider the one-time cleansing of PPE account balances as

provided under COA Circular No. 2020-006 dated January 31, 2020 to come up
with a reliable PPE balance;

c. Inventory Committee (i) conduct a complete physical count and technical

valuation of the property, plant and equipment to establish the existence,
ownership and condition of the properties owned by the Municipality especially
for the local road network to determine the current value of the road components
and facilitate the preparation of the RPCLRN; and (ii) ensure that the required
details in the reports were accurately and completely filled out;

d. Municipal Accountant and GSO-Designate allot time and effort to (i) coordinate
and prepare complete supporting schedules to facilitate the reconciliation of the
property accounts and establishment of actual existence, ownership and condition
of the properties, especially the previous year’s PPE acquisitions; (ii) prepare and
maintain appropriate and required property records and reports for all PPE
accounts especially for the Road Networks; (iii) analyze the items included in
PPE accounts and reclassify the PPE items that do not meet the ₱50,000.00
threshold of capitalization pursuant to COA Circular No. 2022-004 dated May 31,
2022; and (iv) coordinate with the Municipal Engineer to complete the
maintenance of a road map with complete description and cost segregation of road
components for road projects;

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e. GSO-Designate (i) analyze the items included in the RPCPPE to exclude non-PPE
accounts such as repair and maintenance expense and inventory, expendable and
semi-expendable properties, and properties not presented during the physical
count; (ii) prepare and maintain RLRN and Road Map to account for the Local
Roads and reconcile with the Registry of Public Infrastructures maintained by the
Accounting Office; and (iii) collate the documents of the land owned by the
Municipal Government that remained uncovered by a Transfer Certificate of Title
(TCT);

f. Municipal Accountant ensure proper classification of accounts in accordance with

the Revised Chart of Accounts for LGUs as prescribed by COA Circular No.
2015-009 dated December 1, 2015 and review the entries made relevant to the
above transactions and effect the necessary adjustments, if warranted, and be
guided by COA Circular No. 2015-009 in recording similar transactions in the
books of the Municipality. Also, (i) analyze and conduct a thorough review of the
Accounts Payable and Due to Officers and Employees accounts under the GF and
SEF with payables outstanding for more than two years and effect the necessary
action accordingly; (ii) retrieve the supporting documents of payables with
unidentified creditors and provide the lacking details to support the balances of
the Accounts Payable and Due to Officers and Employees accounts; (iii) ensure
that only obligations with approved disbursement voucher and complete
supporting documents with delivery of goods or services rendered be booked as
accounts payable pursuant to the prevailing rules and regulation; (iv) adjust the
balance of recorded obligations after full payment to unobligated allotment
pursuant to Section 10 of the Manual on the NGAS for LGUs, Volume I; and (v)
exert continuous effort to collate details about the noted stale checks. In addition,
(i) conduct a thorough review and analysis of the Due to NGAs and Trust
Liabilities accounts and collate details, and coordinate with the implementing
offices to evaluate the implementation of PPAs/purpose related to these accounts
so that appropriate actions may be undertaken for the long outstanding fund
transfers/assistance; (ii) reclassify the funds that were not held in trust for a
specific purpose pursuant to Annex B of COA Circular No. 2015-009 dated
December 1, 2015 prescribing the Revised Chart of Accounts for LGUs; and (iii)
prepare and maintain subsidiary ledgers and schedules that will support the
recorded Trust Liabilities under TF-GBH PRI DLF and TF-RWMHEEF;

g. Municipal Engineer maintain road map and provide the Municipal Accountant
and the GSO with complete description and cost segregation of road components
for road projects; and

h. Municipal Treasurer and other concerned offices exert continuous effort to

coordinate with the suppliers and employees to inform them of the unclaimed
payables, otherwise provide certification to the Municipal Accounting Office that
there are no valid claimants for the long outstanding payables to facilitate the
reversion of funds.

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Significant Observations and Recommendations

The following are the other significant audit observations and recommendations in the
audit of the Municipality for CY 2022, details of which were presented in Part II of this
report. Management's views and reactions including those offered during the exit
conference on March 20, 2023 were considered in the Report, where appropriate.

1. Deficiencies in the liquidation of grant for COVID-19 benefits for Healthcare

Workers. (Observation No. 1)

We recommended that the (a) MHO provide justification on the

deficiencies noted in the liquidation of the COVID-19 Benefit grant and ensure
the veracity of documents before payments are made; (b) Municipal Accountant
ensure that income from grants received by the Municipality and disbursements
relative thereto are properly recognized and classified in the books of account for
fair presentation, transparency and accountability of the funds utilized; and (c)
concerned municipal officials submit the lacking documents for audit purposes
and ensure that future claims are supported with complete supporting documents
in compliance with Section 4(6) of PD 1445;

2. The regularity and propriety of the procurement and implementation of the locally
funded projects totaling ₱184.20 million were doubtful due to (a) procedural
lapses/delay in the procurement process contrary to the provisions of the 2016
Revised Implementing Rules and Regulations (RIRR) of Republic Act No. 9184
or the Government Procurement Reform Act; (b) non-adoption of the prescribed
Edition of Philippine Bidding Documents and other standard forms issued by
GPPB; (c) grant of delivery extension period beyond original contract delivery
terms; (d) deficiencies in granting contract time extension; and (e) noted
deficiencies and incomplete supporting documents contrary to Section 4(6) of
Presidential Decree No. 1445. (Observation No. 15)

We recommended that the (a) BAC Chairperson, thru the BAC Technical
Working Group and Secretariat, explain the noted lapses specifically on the
delays in the procurement process, inconsistencies in the dates indicated in
various documents and the absence of necessary procurement documents; (b)
Municipal Engineer provide explanation on the noted observations on the grant of
contract time extensions for the projects mentioned; (c) BAC strictly observe the
period of action provided in RA 9184 and its RIRR within which certain stages of
the procurement process must be completed and adopt the latest procurement
process and forms prescribed by the GPPB in conformity with the requirements of
Section 6 of the RIRR on standardization of government procurement; and (d)
Municipal Accountant, BAC, and the Municipal Engineer (i) provide explanation
on the noted deficiencies in the supporting documents; (ii) submit the lacking
documents; and (iii) ensure that future claims be supported with the documents as
prescribed under COA Circular No. 2012-001 dated June 14, 2012.

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3. The Inspection Report by the Technical Audit Specialist (TAS) of COA – Region
IV-B Regional Technical Services (RTS) dated July 04, 2022 disclosed various
deficiencies in the delivery of various equipment procured by the Municipality of
Pinamalayan due to (a) non-compliance with the technical specifications as
required in the Purchase Orders and (b) delay in the delivery of goods which
demand the imposition of liquidated damages in accordance with Section 3.1 of
Annex D of the Revised IRR of RA 9184. (Observation No. 17)

We recommended that the (a) Municipal General Services Officer provide

acceptable justification and communicate with the supplier the observations noted
relative to the deficiencies in the specifications of the goods; (b) Municipal
Accountant demand payment or institute appropriate action for the collection of
the liquidated damages totaling ₱1,494,504.00 from the concerned supplier, as the
case may be; and (c) concerned municipal officials submit the lacking documents
for audit purposes.

4. The optimal utilization of the 20% Development Fund was not maximized
registering a low implementation rate at 11.05%, low financial utilization rate at
54.97%, and delayed implementation of priority development projects for CY
2021 due to lack of proper planning, coordination and monitoring in the
implementation of the projects, thereby depriving the constituents of the
immediate benefits that could have been obtained had the development projects
been implemented. Moreover, discrepancy in budgetary reports rendered the
reliability of the reported balance under 20% Development Fund Budget doubtful.
(Observation No. 18)

We recommended that the (a) Local Development Council, Implementing

Office and Municipal Planning Development Coordinator (i) plan the
procurement and implementation of the identified priority development projects
under the 20% DF to ensure the completion of the PPAs and avoid duplication
with projects implemented by other agencies; (ii) coordinate with the barangays
with PPAs that will be included in the 20% DF AIP to avoid interruptions in the
implementation of the barangay development projects and ensure that the
barangays will be informed of their responsibilities as beneficiaries of the
municipal development projects; (iii) ensure that the recipients of the barangay
development program have counterpart fund to implement the requested PPAs as
planned; and (iv) confirm the feasibility of the PPAs and observe timeliness in
their implementation to achieve the desired socio-economic development targets
and outcomes; (b) Municipal Engineer submit the list of completed projects to the
MBO and MAccO to facilitate the reversion and re-appropriation of
savings/unexpended balances from completed projects under the 20% DF to
eligible development projects, and follow strictly the implementation period as
indicated in the AIP/PPMP; (c) Municipal Engineer and the BAC provide
periodically the MBO and the MAccO with the status of projects and the
procurements undertaken by the Municipality to assist the concerned offices in
the periodic review and monitoring of the balances of current and continuing

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 appropriations, and inform immediately the MBO and MAccO whenever there are
changes on the awarded PPAs and problems in the project’s implementation to
make the necessary adjustment in the financial reports relative to the affected
PPAs; (d) Municipal Accountant and Municipal Budget Officer effect
reconciliation of their records under the 20% Development Fund to ensure the
accuracy and reliability of the reported balances under the said fund; and (e)
Municipal Engineer and other concerned officials and employees provide
explanation on the long outstanding unimplemented PPAs under the Continuing
Appropriations, especially those whose status of implementation could not be
verified accordingly, and institute necessary actions for its effective
implementation.

5. The capacity of the Municipality to minimize or evade the effect of emergency

occurrences and disaster and attainment of the goals and objectives set by
Republic Act No. 10121 might be affected by the delayed or non-implementation
of planned PPAs due to (i) suppliers' inability to comply with the documentary
requirements, (ii) failure to bid the PPAs, (iii) lack of sufficient time to implement
the PPAs, (iv) existence of non-viable PPAs that were subject for programming
and/or reprogramming, and (v) other reasons, thus resulted to low implementation
rate at 46% of the total PPAs and low financial utilization rate at 35% of the total
Municipal Disaster Risk Reduction and Management Fund (MDRRMF) or 16 out
of 35 PPAs and ₱13.88 million out of ₱39.29 million, respectively.

Moreover, various lapses were observed such as (i) inclusion of non-disaster

related PPA in the CY 2022 Local Disaster Risk Reduction and Management
Fund (LDRRMFIP) and inconsistencies on PPAs and expected output between
AIP and LDRRMFIP; (ii) discrepancies in budgetary reports between the
Municipal Accounting and Budget Office, (iii) non-preparation of LDRRMFIP
for the unexpended balance of MDRRMF from previous years in the Special
Trust Fund, and (iv) disparity in various reports. (Observation No. 19)

We recommended that the (a) MDRRM Officer and the concerned

municipal officials monitor and facilitate the implementation of the PPAs under
the MDRRMF by monitoring the period of its implementation. Henceforth, ensure
that all projects appropriated in the MDRRMF be implemented during the year;
(b) MDRRM Officer (i) provide justification on the inclusion of Improvement of
MDRRM Office project in the CY 2022 LDRRMFIP for current year
appropriation under 70% MF – Disaster Preparedness thematic category
amounting to ₱1,500,000.00 and refrain from including non-disaster related
projects and programs in LDRRMFIP pursuant to NDRRMC, DBM and DILG
JMC No. 2013-1 dated March 25, 2013, (ii) provide justification on the non-
preparation of LDRRMFIP for the unexpended LDRRMF of previous years in
the Special Trust Fund amounting to ₱420,614.58 as well as the inconsistencies
on PPAs and expected output between AIP and LDRRMFIP, henceforth, ensure
that PPAs of MDRRMF be included in LDRRMFIP and integrated in the AIP,
and (iii) evaluate the PPAs in the continuing appropriation and special trust fund

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 including the CY 2021 Unprogrammed Unexpended DRRMF, and make
appropriate actions thereto; (c) MPDC, MDRRMC and MDRRM Officer provide
specific, measurable, achievable, realistic and time-bound (SMART) performance
indicators in each PPAs appropriated for MDRRM Fund; (d) Municipal
Accountant and MDRRM Officer explain the disparities in the amounts of the
Trust Liabilities – DRRMF in the general ledger and RSULDRRMF, and ensure
that the amount reflected in the reports represents the accurate data of MDRRMF;
and (e) Municipal Accountant and Municipal Budget Officer provide justification
on the observations noted regarding budgetary reports of LDRRMF and ensure
regular reconciliation of the same.

6. Deficiencies noted in the compliance with Philippine Commission on Women

(PCW) – Department of the Interior and Local Government (DILG) - Department
of Budget and Management (DBM) – National Economic and Development
Authority (NEDA) Joint Memorandum Circular (JMC) No. 2016-001 dated
January 12, 2016, amending PCW-DILG-DBM-NEDA 2013-01 dated July 18,
2013 such as (a) non-preparation and submission to COA of GAD
Accomplishment Report (AR); (b) non-preparation of GAD Agenda; and (c) non-
attendance of GAD Focal Point System (GFPS), Technical Working Group
(TWG) and Monitoring and Evaluation Team (MET) members to all required
GAD trainings, thus affecting the gender mainstreaming in the Municipality’s
processes, structures, and systems towards gender-responsive programs, projects,
and activities as required by Republic Act No. 9710. Moreover, the absence of
Implementing Rules and Regulations (IRR) for the Municipality’s GAD Code
precludes the Municipality to have concrete commitments on gender equality,
women’s human rights and women’s empowerment. (Observation No. 26)

We recommended that the Municipal Mayor instruct the GAD Focal

Person and GAD key personnel to (a) submit the DILG-received GAD AR and its
supporting documents for CY 2022 and ensure timely preparation submission of
the said report in the succeeding years pursuant to COA Circular No. 2014-001;
(b) facilitate the preparation of the GAD Agenda as well as continuous updating
of data for the GAD database pursuant to PCW-DILG-DBM-NEDA JMC No.
2016-01, amending PCW-DILG-DBM-NEDA JMC No. 2013-01, as basis in the
preparation of the annual GPB and GAD AR; (c) ensure and monitor attendance
of the GPFS members to GAD required trainings to capacitate and enhance their
knowledge and build their competencies on GAD-related laws and GAD-related
tools, among others; and (d) facilitate the formulation of the Municipal GAD
Code’s Implementing Rules and Regulations and ensure compliance with the
same for its effective implementation.

Summary of Audit Disallowance, Suspension and Charge

As of December 31, 2022, the Municipality of Pinamalayan has unsettled

suspension of ₱23,617,128.84, disallowance of ₱45,634.31 and no charge.

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Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Validation of the status of implementation of the 96 prior years’ audit

recommendations disclosed that six were fully implemented, 85 were partially
implemented while the remaining five were not implemented. Those audit observations
having material effects on the fairness of the presentation of the financial statements are
reiterated in this report.