REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
REGIONAL OFFICE NO. VIII
LGAS C – Leyte II and Biliran Province
Provincial Satellite Auditing Office (PSAO)
Baybay City, Leyte

Team R8-03, Baybay City

AOM No. 2023-001

Date: August 9, 2023

AUDIT OBSERVATION MEMORANDUM (AOM)

For: HON. AVELINA A. MORING

Punong Barangay
Barangay Sto. Niñ0
Mahaplag, Leyte

Attention: Jinky G. Apiag

Barangay Treasurer

Rodulfo S. Loreto
Municipal Accountant

We have audited some of the Barangay transactions for Calendar Years 2019,
2020 and 2021 and 2022 and observed the following deficiencies:

Property, Plant and Equipment

1. The accuracy, existence and valuation of all properties of the barangay under
Property, Plant and Equipment (PPE) amounting ₱3,124,022.38 as of
December 31, 2022, continued to be unconfirmed due to a) non-conduct of
physical count of its properties for the past 10 years; b) not detailed PPE
Ledger Cards; c) non-maintenance of Property Cards by the Designated
Property Custodian,contrary to Item 7.2.5, Chapter VII of Manual on the
Financial Management of Barangays and other pertinent COA rules and
regulations.

1.1. Chapter 7 of the Manual on the Financial Management of Barangays prescribes

the specific Policies and Procedures on Investment Property, Property, Plant and
Equipment, and Biological Asset. Items 7.1.18 and 7.1.19 of the Manual provides
that:
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AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page
 Property, Plant and Equipment/Infrastructure Assets

7.1.18 The barangay shall conduct an annual physical inventory of

all supplies, property and equipment of the barangay.

7.1.19 Report on the results of physical inventory of property/equipment

shall be reconciled with the accounting records.

7.1.7 Property/Equipment Ledger Card (PELC) shall be maintained by

the C/M Accountant as subsidiary ledgers for all property and
equipment of the barangay.

1.2. Likewise, Item 2.1.6 of COA Circular No. 2010-001 requires the Accountants to
submit subsidiary schedules of general ledger accounts, on or before February 14
of each year.

1.3. The Statement of Financial Position for CY 2022 of Barangay Sto. Niño reflected
a total amount of ₱3,124,022.38 properties under Property, Plant and Equipment
(PPE) account. The details are shown in Table 1.

Table 1. Property, Plant and Equipment

PPE Amount

Land 942,282.00
Office Building 1,054,041.20
Other Structure 186,435.00
Furniture and Fixtures 79,779.00
I.T Equipment 66,646.00
Sports Equipment 48,504.00
Other Property Plant and Eqipment 95,800.00
Road Networks 321,890.00
Water Supply System 328,645.18
TOTAL ₱3,124,022.38

1.4. However, no inventory report was submitted and the Barangay had never
submitted an inventory report for the past 10 years. Thus, the accuracy of all the
properties of Barangay as shown in Table 1 could not be ascertained.

1.5. The Audit Team was not able to confirm the recorded PPE because though the
Municipal Accountant had already maintained the PPE Ledger Cards (PPELC),
there is no detailed description of the property such as the brand, size, color, etc.
and the properties were just lumped per major account in the property ledger card
instead of having a different PPELC for each class of property. There was also no
data on the reference and quantity.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

1.6. During the audit, the Barangay Treasurer informed the Audit Team that no Report
on Inventory of Property and Equipment (RIPE) has been prepared due to the
absence of an Inventory Team to conduct the physical count of barangay
properties and Property Custodian to maintain property records. Also, it was
disclosed that their equipment were not labeled with Property Tags, hence, some
procured equipment were difficult to trace.

1.7. This observation was consistently included in the Audit Report on Barangay
(ARB) Sto. Niño since CY 2013 or for the past 10 years. The continued failure of
the barangay officials to implement the audit recommendations is a blatant
defiance of the rules on property management and other relevant laws and
regulations. This is despite the seminar conducted by COA to all barangay
officials on the adoption of the Barangay Financial Management Manual wherein
the RIPE was first introduced.

1.8. The RIPE is intended to confirm the existence of the reported assets in the books
of the Barangay and validate whether these assets are within the vicinity of the
same or in its designated location. Without the RIPE, the amount in the books
cannot be substantiated while the existence of the properties cannot be confirmed.
Losses, damages or unserviceable properties will not be detected and the persons
liable for such losses will not be held accountable thereof.

1.9. Due to the above mentioned deficiencies, the accuracy, existence and reliability of
the PPE accounts cannot be confirmed which will affect the fair presentation of the
Barangay’s assets in its Financial Statements.

1.10. We recommend that the Punong Barangay should:

a. Create an Inventory Committee and instruct its members to conduct a

complete physical count of all properties of the barangay every year,
prepare and accomplish the Report on Inventory of Property and
Equipment completely when the physical count is concluded and
submit to COA and the Municipal Accountant;

1.11. We also recommend that the Barangay Treasurer as the Property Officer
Designate to:

a. Provide Property Tags for each equipment with complete labels;

b. Update the PAR of each employee every three years;
c. Provide adequate storage for Unserviceable Equipment;
d. Request for disposal of unserviceable properties, and
e. Maintain Property Cards for all properties of the Barangay

1.12. Also, we recommend that the Municipal Accountant should:

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 a. maintain and update the prescribed PPELC for each class of PPE
with complete details; and
b. provide the required depreciation of properties and submit the
detailed computation thereof to the Audit Team

1.13. Lastly, we recommend that the Barangay Treasurer as the Property Officer-
Designate and the Municipal Accountant should periodically reconcile their
respective records so as to establish a more reliable PPE balance.

Cash Local Treasury

2.0. The Cash - Local Treasury account was overstated by ₱265,064.24 due to
over/under recording of collections, non-recording of various deposits and
uncorrected unreconciled beginning balance between the cash examination
report and the general ledger contrary to the provision of Section 111 of PD
1445 and Section 3.3 of COA Circular No. 96-011 dated October 2, 1996.

2.1. Section 111 (2) of PD 1445 provides that the highest standards of honesty,
objectivity and consistency shall be observed in the keeping of accounts to
safeguard against inaccurate or misleading information.

2.2. For CY 2022, the Barangay has a Cash in Treasury account balance of
₱273,879.24 in its Financial Position. However, review on the submitted General
Ledger and Journals for CY 2022 versus the conduct of cash examination
disclosed that the balance should have been ₱8,815.00 as of December 31, 2022.
The outstanding balance was due to over/under recording of collections,
over/under recording of deposits and non-recording of deposits for CYs 2020 to
2022 and non-adjustment of beginning balance of Cash in Treasury which
should have been ₱190.00, per cash examination conducted last July 17, 2023.
Details are shown in table 2.

Table 2. Corrections in the Cash in Treasury Account

Amount Addition
Date Particulars
(Deduction)
Over recording of deposits, per
ledger , 1,210.00, per audit,
February 2020 340.00 870.00
Under recording of deposits,
per ledger 1,020.00, per audit,
March 2020 1,210.00 (190.00)
April 2020 Unrecorded deposit (1,020.00)

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 Amount Addition
Date Particulars
(Deduction)
Overstated Recording of
Deposits, per Ledger 2,311.00,
December 2020 per audit 85.00 2,226.00
Over recording of Collections,
per Ledger 6,989.52, per audit
December 2021 5,600.00 (1,389.52)
Under Recording of Deposits,
per Ledger 225.00, per audit
July 2021 4,420.00 (4,195.00)
October 2021 Unrecorded deposit (480.00)
November 2021 Unrecorded deposit (85.00)
December 2021 Unrecorded deposit (3,889.52)
Erroneous recording of January
December 2022 2023 collection (85.00)
April 2022 Unrecorded deposit (150,000.00)
Under recording of deposits,
per ledger, 940.00, per audit
May 2022 1,280.00 (340.00)
under recording of deposits, per
ledger, 3,300.00, per audit
July 2022 4,300.00 (1,000.00)
Under recording of deposits,
per ledger 930.00, per audit
September 2022 3,730.00 (2,800.00)

October 2022 erroneous recording of deposit 670.00

Over recording of deposits, per
ledger 8,110.00, per audit
November 2022 7,670.00 440.00
December 2022 Unrecoded deposit (440.00)
Uncorrected beginning balance
for CY 2020 Cash in Treasury ,
per ledger beginning balance,
103,546.20, per audit (cash
January 2020 examination report) 190.00 (103,356.20)
TOTAL (265,064.24)

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2.3. The amount of ₽190.00 should have been the beginning balance of Cash in
Treasury on January 2020 per the conduct of Cash Examination of the auditor
on July 17, 2023 as follows:

Table 3. Beginning balance of Cash in Treasury per Cash Examination.

Month Collections Deposits Balance
Balance last Cash Exam,
October 15, 2019     600.00
October 16-31, 2019 - - 600.00
November 2019 2,555.00 570.00 2,585.00
December 2019 101,442.66 103,837.66 190.00

2.4. The non-adjustment of the above items amounting ₱265,064.24 resulted in an

overstatement of Cash in Treasury as of year-end by the same amount.

2.5. We recommend the Barangay Bookkeeper to prepare Journal Entry

Vouchers to record the above items so as to come up with the correct Cash
– Local Treasury account balance.

Cash in Bank

3. The balance of Cash in Bank amounting to ₱100,990.79 is unreliable due to

non-preparation of monthly Bank Reconciliation Statements (BRS) contrary
to Section 111 (2) of Presidential Decree No. 1445 and Section 3.2 and 3.3 of
COA Circular 96-011.

3.2. Section 111 (2) of PD 1445 provides that the highest standards of honesty,
objectivity and consistency shall be observed in the keeping of accounts to
safeguard against inaccurate or misleading information.

3.3. Pertinent provision of COA Circular No. 96-011 dated October 2, 1996, provide:

Section 3.2 The Local Accountants shall within ten (10) days from
receipt of the Bank Statements (BS), reconcile the same BS with
the General Ledgers (GL) and prepare the BRS in five (5) copies.

Section 3.3 The accountant shall draw journal vouchers to record

all valid reconciling items that require adjustment and correction in
the GL.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

3.4. The Financial Statements of the Barangay showed that the Cash in Bank-LCCA has
a total balance of ₱100,990.79 as of yearend. However, no Bank Reconciliation
Statements were prepared and submitted by the Municipal Accountant for the 4
year audit period.

3.5. The failure to submit the BRS resulted to difficulty in ascertaining the accuracy
and correctness of the funds Cash in Bank Balance at yearend. Further, errors
committed by the bank cannot be promptly corrected.

3.6. We recommend that the Municipal Accountant submit explanation to the

Audit Team why Bank Reconciliation Statements were not prepared.

3.7. We also recommend that the Municipal Accountant prepare and submit the
BRS of the Barangay within 10 days from receipt of Bank Statements in
order to have a reliable Cash in Bank Balance

Release of 10% SK Fund share

11.0. Release of 10% Sangguniang Kabataan share totalling ₱511,699.00 were not
made within the prescribed period and were not supported by Official
Receipts issued by the Sangguniang Kabataan Treasurer contrary to Sections
3.8 and 5.1.4 of the Handbook on the Financial Transactions of the
Sangguniang Kabataan(HFTSK) and Section 4.6 of Presidential Decree
(P.D.)No. 1445, thus, funds intended for SK may be used by the barangay for
other purposes and was not properly documented.

11.1. Section 3.8 of the Handbook on the Financial Transactions of the Sangguniang
Kabataan provides that revenue generated from sources expressly authorized
under RA No. 10742 and collections thereof shall at all times be acknowledged
properly by issuing an Official Receipt (OR). Revenue collected by the SK
through direct deposit to the SK’s bank account shall be supported with a copy of
Validated Deposit Slip (VDS)/Credit Memo (CM) in lieu of OR.

11.2. Moreover, section 5.1.4 of the same handbook provides that upon receipt of the
monthly internal revenue allotment (IRA) of the barangay, the Punong Barangay
shall automatically release not later than five (5) working days without further
delay the share of the SK equivalent to ten percent of the general fund of the
barangay by issuing check in the name of the SK for deposit to the latter’s bank
account.

11.3. In addition, section 4.6 of P.D.1445 states that Claims against government funds
shall be supported with complete documentation.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

11.4. For CY 2020 to 2022, the Barangay release a total of ₱511,699.00 of the 10% SK
share as required by the Department of Budget and Management (DBM),
Department of the Interior and Local Government (DILG) and National Youth
Commission (NYC) Joint Memorandum Circular (JMC) No. 1, s. 2019 dated
January 23, 2019).

11.4. However, it was disclosed that the release was not made monthly or within the
prescribed period which is not later than five (5) working days upon receipt of the
monthly internal revenue allotment (IRA) of the barangay as some were released
in lump sum. Details is shown in table 11.

Table 11. Release of 10% SK share

Date Check No. Particulars Amount
10% share for the months
of January and February
2/25/2020 492179 2020 24,241.00
10% share for the month
3/5/2020 492184 of March 2020 12,120.00

10% share for the months

8/17/2020 529736 of April to July 2020 48,483.00

10% share for the months

11/16/2020 529764 of August to October 2020 36,362.00
10% share for the months
of November to December
12/10/2020 529776 2020 24,224.00

10% share for the months

9/6/2021 564969 of January to July 2021 90,669.00
10% share for the months
of August to December
12/13/2021 599288 2021 64,765.00

10% share for the months

7/15/2022 599288 of January to July 2022 122,987.00
10% share for the months
of August to December
11/16/2022 638827 2022 87,848.00
Total 511,699.00

11.5. Furthermore, the above releases were not supported with Official Receipts issued
by the Sangguniang Kabataan Treasurer. In an interview with the Municipal
Accountant, the SK officials may not still be aware that their receipts of 10%
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page
 shares should be supported with official receipts and that they are yet to attended
the seminar on the Handbook on the Financial Transactions of the Sangguniang
Kabataan conducted by the Commission in which such policy is one of the
highlights to be discussed.

11.6. The delayed release of SK shares exposes the risk of the fund being used for other
purposes while the Official Receipts issued by the SK Treasurer would have
supported the disbursements made by the barangay as proof of receipt by the SK.

11.7. We recommend that the Barangay shall automatically release not later than
five (5) working days without further delay upon receipt of the monthly IRA
of the barangay.

11.8. We further recommend that the Barangay Treasurer demand the SK

Treasurer for the issuance of Official Receipts of the above releases and
submit the same to the audit Team.

Local Disaster Risk Reduction Management Fund

4. The reports on the distribution of various relief goods with an aggregate

amount of ₱167,520.00 to the families/household affected by calamities
charged to the Local Disaster Risk Reduction Management Fund were not
properly documented, while the related expense were erroneously recorded
as Food Supplies Expense instead of Welfare Goods for Distribution upon
initial recording and Welfare Goods Expense upon distribution, contrary to
Sections 2 and 4 of Presidential Decree (P.D.) No. 1445 and COA Circular
No. 2015-009 dated December 1, 2015, , thus, the propriety of the program
could not be ascertained while the accounts Welfare Goods Expense and
Food Supplies Expense were misstated as at year end.

4.1. Section 2 of P.D. 1445 states that:

“It is the declared policy of the State that all resources of the
government shall be managed, expended or utilized in accordance
with law and regulations, and safeguard against loss or wastage
through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of
government. The responsibility to take care that such policy is
faithfully adhered to rests directly with the chief or head of the
government agency concerned.”

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4.2. While Section 4 of P.D. 1445 provides, that financial transactions and operations
of any government agency shall be governed by certain fundamental principles.
Paragraph 6, thereof, states that claims against government funds shall be
supported with complete documentation.

4.3. Moreover, COA Circular No. 2015-009 dated December 1, 2015 prescribed the
Revised Chart of Accounts for LGUs to conform with the adoption of the Phil.
Public Sector Accounting Standard (PPSAS). On recording of expenses, the
following accounts were prescribed to be used by LGUs:

Welfare Goods for Distribution

1-04-02-020
Debit

This account is used to record the cost of goods for distribution to people
affected by calamities/disasters/ground conflicts such as canned goods,
blankets, mats, kitchen utensils, flashlights and other similar items. Credit this
account for issuance to end-users, transfers or write-down.
Welfare Goods Expenses
5-02-03-060
Debit

This account is used to record the cost of goods issued/distributed to people

affected by calamities/disasters/ground conflicts such as canned goods,
blankets, mats, kitchen utensils, flashlights and other similar items. This also
includes the cost of food served to people affected by
calamities/disasters/ground conflicts.
Food Supplies Expense
5-02-03-050
Debit

This account is used to record the cost of food issued to hospital/rehabilitation

patients, jail inmates and the like.

4.4. Audit of disbursements in CY 2019-2022 disclosed that the LGU procured a total
of ₱167,520.00 goods for distribution paid from the BDRRMF. Details on the
purchase of various relief goods in response to calamities charged to the Local
Disaster Risk Reduction Management Fund are as follows:

Table 4. Food Items and Other Relief Goods

Date Check No. Particulars Gross Amount

Food Supplies for Distribution(15 sacks rice, 2

box sardines, 5 box noodles, 86 pcs beefloaf, 2
box coffee, 12 pcs tuna budget size, 21 pcs tuna
3/20/2020 453157 small, 64 pcs.cornedbeef, 5 packs cellophane) 49,210.00
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 Date Check No. Particulars Gross Amount

Food supplies for distribution(15 sack rice, 3 box

sardines, 6 box noodles, 4 box beefloaf, 1 box
coffee twin pack, 1 box coffe single pack, 1 box
4/3/2020 453162 nescafe, 4 box corned beef) 58,350.00
3 sacks rice, 1 box beefloaf, 1 box sardines, 20
packs biscuits, 2 box 3&1 coffee and 2 box
3/3/2021 533097 noodles 18,100.00
1/21/2022 590620 15 SACKS RICE 34,500.00

1 box beefloaf, 1 box sardines, 2 box noodles, 2

1/21/2022 590621 pack nescafe, 1 kilo sugar, 10 pack plastic bag 7,360.00
Total 167,520.00

4.5. Perusal of the submitted documents related to the distribution of the purchased
relief goods revealed that the reports on the distribution do not contain
information as to the quantity of such goods received by the affected
beneficiaries.

4.6. Moreover, it was also disclosed that the issuances of the above transactions were
erroneously recorded as Food Supplies Expense instead of Welfare Goods for
Distribution upon initial recording and Welfare Goods Expense upon distribution.

4.7. The improper documentation on the distribution of the relief goods casts doubts
on the regularity and even existence of the program which aims to provide relief
of the affected families, while the erroneous entry of expense resulted in an
overstatement of Food Supplies Expense by ₱167,520.00 and an understatement
of the Welfare Goods Expense by the same amount.

4.8. We recommend that the Punong Barangay submit the reports on the
distribution of relief goods with complete details.

4.9. We also recommend the Bookkeeper to record issuances of relief goods not as
Food Supplies Expense but as Welfare Goods Expense.

Disclosure of LDRRMF to the Notes to FS

5. The disclosure in the Notes to Financial Statements pertaining to the

LDRRMF lacks the necessary details and not in the prescribed format
provided in COA Circular No. 2012-002 dated September 12, 2012, thus
significant information of value to users of financial statements was not
provided.

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5.1. COA Circular 2012-002 dated September 12, 2012 was issued to prescribe
accounting and reporting guidelines for the LDRRMF of LGUs (including
BLGUs) and NDRRMF given to LGUs and Receipts from other sources.

5.2. Whereas, Section 5.1.16 of the same Circular states “The amount and details of
the unexpended balance of LDRRMF shall be discussed in the Notes to Financial
Statements”. A sample of disclosure was attached as Annex D of the same
circular as shown below:

5.3. Review on disclosure made on the Notes to Financial Statements of the LDRRMF
of the barangay disclosed that it was not in the prescribed format as provided in
Annex D of COA Circular No. 2012-002 as it only shows in lump-sum the
available, utilized and balances from previous years unexpended and current
appropriations.

5.4. The Notes failed to discuss in detail the balances under current years
appropriations under 30%QRF and 70%Mitigation Fund and the detailed
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 breakdown of the unexpended prior years balances which should have given
additional value to the financial statements.

5.5. We recommend that the Barangay Bookkeeper and Municipal Accountant

disclose in the succeeding Notes to Financial Statements balances of the
LDRRFM using the format provided in annex D of COA Circular 2012-002.

Incomplete LDRRMF Investment Plan

6. Prior year’s unexpended DRRMF were not transferred to the Special Trust
Fund nor was included in the LDRRMF Investment Plan for CYs 2019, 2020,
2021, and 2022, contrary to Sections 4.4 and 5.1.2 of COA Circular 2012-002,
thus, the funds were left idle in the bank and the objectives of providing the
fund for its purpose may not have been attained.

6.1. Section 4.4 of COA Circular 2012-002 states “The unexpended LDRRMF shall
accrue to a special trust fund solely for the purpose of supporting disaster risk
reduction and management activities of the Local Disaster Risk Reduction
Management Council (LDRRMC) within the next five years. The LDRRMCs
shall decide on the use of the unexpended balance of LDRRMF which shall
be incorporated in the Local Disaster Risk Reduction Management Fund
Investment Plan.”

6.2. Whereas, Section 5.1.2 of the same circular states, “A LDRRMFIP for the DRRM
program shall be prepared annually. It shall present the 30% allocation for QRF
in lump sum and the allocation for disaster mitigation, prevention and
preparedness with details as to projects and activities to be funded. The
LDRRMFIP shall also include a separate caption, the list of projects and
activities charged to the unexpended LDRRMF of previous years.”

6.3. Upon examination of the LDRRMF Investment Plan attached to the Annual
Budget, it was observed that the LDRRMF Investment Plan only included the
items/activities intended to be undertaken/procured out of the current year’s
budget. Also, it was noted that in every Supplemental Budget, a separate
LDRRMF Investment Plan was prepared to identify how the additional funds will
be used, but none was made for the unexpended balances of prior years.

6.4. The Barangay Local Government had a balance of ₱277,357.56 out of its prior
year’s LDRRM as of December 31, 2018 but the Statement of Financial Position
of the barangay showed a Trust Liabilities balance of zero denoting that the
portion of ₱252,795.01 which represented the unused 70% Mitigation Fund-
MOOE and 30% QRF was not recorded under Trust Liability – DRRM and was
not transferred to the Special Trust Fund. The same observations were noted for
CYs 2019, 2020, 2021, and 2022. Consequently, the unexpended balances of prior

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 years’ cannot be used in the absence of the LDRRMFIP which should have
indicated the PPAs for which said prior years’ balances will be used for.

6.5. While it is true that the BDRRM Council will decide on the use of the
unexpended balance of LDRRMF, the same should be reflected in the
LDRRMFIP. Moreover, the continued non-utilization of the unexpended
LDRRMF from previous years left the funds idle in the bank instead of using the
fund to improve the LGU’s capability on disaster mitigation, prevention and
preparedness.

6.6. We recommend that the Barangay Kagawad who is the Chairman of the
Committee on Appropriation (CCA), provide breakdown of the ₱218,410.76
BRRM Fund unexpended balance as of December 31, 2022 which should
only include the unexpended balances for the past 5 years.

6.7. We also recommend that the Municipal Accountant thru her Designated
Bookkeeper record the prior year’s unused BDRRM Fund as Trust
Liabilities under Special Trust Fund, based on the amount provided by the
CCA.

6.8. Further, we recommend that the Punong Barangay, as Chairman of the

LDRRM Council, identify the project/s to be funded from the unexpended
BDRRM Fund of previous years, incorporate the same in the LDRRMF
Investment Plan and implement the project/s to fully equip the Barangay and
its residents in times of disasters.

20% Development Fund

7.0. Seven projects identified to be priority development projects for CY 2019 to

2022 totaling ₱1,197,746.39.00 remained unimplemented as of December 31,
2022, contrary to Section 3.2.3 of DBM-DOF-DILG JMC No. 1 dated
November 24, 2020 hence, optimal utilization of the fund was not achieved
and the constituents were deprived from enjoying its benefits.

7.1. DBM-DOF-DILG Joint Memorandum Circular No. 1 dated November 24, 2020
provides the revised guidelines on the appropriation and utilization of the 20% of
the annual internal revenue allotment for development projects. The JMC was
issued to increase the responsiveness of the guidelines and promote greater
autonomy, transparency and accountability in the LGUs’ appropriation and
utilization of their respective 20% DF. Pertinent sections of the subject
Memorandum Circular are as follows:

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 a) Section 3.1 – In accordance with Section 287 of RA No. 7160, each LGU
shall appropriate in its annual budget no less than twenty
percent (20%) of its annual IRA for development projects.

b) Section 3.2 – The LGUs are enjoined to observe the following policies and
guidelines in the appropriation and utilization of the 20% DF:

3.2.1 The 20% DF shall be utilized to finance the LGUs'

priority development projects, as embodied in their
respective duly approved local development plans, and
medium-term and annual investment programs, which
should be harmonized with the Regional Development
Plan and the Philippine Development Plan.

3.2.2 The development projects that may be included under

the 20% DF shall be those that are necessary,
appropriate, or incidental to efficient and effective local
governance, and those which are essential to the
promotion of the general welfare of the people.

3.2.3 The LGUs shall ensure that the development

projects to be funded out of the 20% DF are well-
planned and procurement-and-implementation-
ready.

3.2.4 Technical assistance may be sought from National

Government Agencies (NGAs), such as, but not limited
to, the Department of Agriculture, DBM, Department of
Education, Department of Environment and Natural
Resources, DOF, Department of Health, DILG,
Department of Public Works and Highways,
Department of Social Welfare and Development, and
National Economic and Development Authority, for the
determination of the more relevant and responsive
development projects that may be included under the
20% DF and to ensure compliance with the standards
prescribed by the NGAs concerned.

3.2.5 The following expenditure items shall not be allowed to

be charged against the 20% DF:

3.2.5.1 Personal Services expenditures, such as salaries,

wages, overtime pay, and other personnel
benefits;

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 3.2.5.2 Administrative expenses, such as supplies,
meals, representation, communication, water
and electricity, petroleum products, and the like;
3.2.5.3 Traveling expenses, whether domestic or
foreign;
3.2.5.4 Registration fees and other expenses related to
the conduct of and participation to trainings,
seminars, conferences or conventions;
3.2.5.5 Purchase, maintenance or repair of
administrative office' furniture, fixtures,
equipment or appliances; and
3.2.5.6 Purchase, maintenance or repair of motor
vehicles used for administrative purposes.

7.2. During the conduct of our audit, it was noted that the Barangay had appropriated
projects for 20% Development Fund amounting to ₱336,254.00, ₱378,050.39,
₱404,695.20 and ₱565,000.80 for CY 2019, CY 2020, CY 2021 and CY 2022,
respectively. For the 4-year period, the 20% DF appropriation totaled to
₱1,684,000.79 while the continuing balance of the same fund as of January 1,
2019 amounted to ₱587,344.20. The said annual appropriations were for the
following projects:

Table 5. Projects to be paid from 20% Development Fund

Appropriati
CY Project/Title
on
Utilization Balance
Previous Installation of Solar Streetlights 500,000.00 498,375.90 1,624.10
Years Construction of Drainage 87,344.20 81,740.01 5,604.19
Continuing Canal/Box Culvert
subtotal prior years continuing 587,344.20 580,115.91 7,228.29
2019 Construction of Drainage Canal 136,254.40 - 136,254.40
Construction of MRF 50,000.00 38,894.00 11,106.00
Road Re Blocking 100,000.00 - 100,000.00
Installation of Solar Lights (1 50,000.00 - 50,000.00
solar panel)
subtotal 2019 336,254.40 38,894.00 297,360.40
2020 Rehabilitation of Multi-Purpose 338,050.39 - 338,050.39
Center
Construction of Drainage 40,000.00 - 40,000.00
Canal/Box Culvert/flood wall
subtotal 2020 378,050.39   378,050.39
2021 Rehabilitation of Water System 234,695.20 - 234,695.20
Installation of Solar Streetlights 100,000.00 - 100,000.00
Rehabilitation of Artificial Reef 70,000.00 - 70,000.00
subtotal 2021 404,695.20 -  404,695.20
2022 Rehabilitation of Water System 325,000.80 - 325,000.80
Construction of Nursery 90,000.00 - 90,000.00
Construction of Drainage 150,000.00 110,412.00 39,588.00
Canal/Flood Wall
subtotal 2022 565,000.80 110,412.00 454,588.80

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 Appropriati
CY Project/Title
on
Utilization Balance
Total 2,271,344.99 729,421.91 1,541,923.08

7.3. However, due to COVID-19 pandemic the Barangay decided to realign the
unexpended PPAs from 2019 budget totaling P297,360.40 in order to appropriate
funds for covid-related expenses. Supplemental Budget No. 1 dated May 15, 2020
was passed containing the following information.

Table 6. Realignment of 20% 2019 Unexpended PPAs

CY 2020 Supplemental Budget No. 1
Realligned From Realigned To Utilization Balance
PPA Amount PPA Amount
Construction of 136,254.40 Food Assistance 122,360.40 21,500.00 100,860.40
Drainage Canal for affected
families and
Covid Frontliners
Construction of MRF 11,106.00 Purchase of 75,000.00 24,675.00 50,325.00
Protective Gears
(PPE's)
Road Re Blocking 100,000.00 Installation of 100,000.00 91,795.28 8,204.72
Isolation Rooms
Installation of Solar 50,000.00  
Lights (1 solar panel) -
  297,360.40   297,360.40 137,970.28 159,390.12

7.4. Review of utilization revealed that out of the available appropriations the
barangay disbursed a total amount of ₱2,084,000.00 to implement the projects
funded under 20% Development Fund from CYs 2019 to 2022 as follows.

Table 7. Disbursements paid out of 20% Development Fund – CY 2019-2022

PPA Particular Check Check Gross
Date No. Amount
Installation of Solar Materials-Solar Streetlights 11/18/2019 453106 498,375.90
Streetlights
Construction of Drainage Payroll- const of Box Culvert 10/5/2020 533017 29,600.00
Canal/Box Culvert Materials- const. of Box 10/12/2020 533019 52,140.01
culvert
Construction of MRF Materials-Fabrication of 5 6/25/2019 453054 29,894.00
MRF
Labor-Fabrication of MRF 6/25/2019 453055 9,000.00
Food Assistance for Food Supplies 7/23/2020 453200 21,500.00
affected families and Covid
Frontliners
Purchase of Protective Materials-Isolation Room 5/27/2020 453173 24,675.00
Gears (PPE's) (medical supplies)
Installation of Isolation Materials for Isolation 5/27/2020 453174 66,215.28
Rooms Rooms(stand fan, folding bed,
trapal, trash bins, balde, tabo)
Materials for Isolation 6/28/2020 453185 11,200.00
(folding bed, sprayer)
Payroll-for installation of 6/28/2020 453186 2,400.00
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page
 PPA Particular Check Check Gross
Date No. Amount
Isolation rooms
Materials Isolation 7/6/2020 453191 11,980.00
room(electrical works)
Construction of Drainage Payroll for construction of 9/14/2022 590693 34,500.00
Canal/Flood Wall Drainage canal/flood wall
Materials for construction of 10/12/2022 590705 75,912.00
Drainage canal/flood wall
Total 867,392.19

7.5. As can be seen in Tables 5, 6 and 7, only 7projects were implemented during the
4-year period. Out of the ₱2,271,344.99 appropriation, ₱867,392.19 was actually
disbursed, which is only equivalent to 38.18% of current and previous years
appropriation.

7.6. Review of the status of implementation of projects of the barangay disclosed that
seven projects identified and budgeted in CYs 2019 to 2022 and prior years
continuing appropriation totaling ₱1,197,746.39.00 were not implemented.

Table 8. Unimplemented Projects Appropriated in CYs 2019-2022

Budget
PPA Appropriation
Year
Rehabilitation of Multi-Purpose Center ₱338,050.39
2020 Construction of Drainage Canal/Box 40,000.00
Culvert/flood wall
Rehabilitation of Water System 234,695.20
2021 Installation of Solar Streetlights 100,000.00
Rehabilitation of Artificial Reef 70,000.00
Rehabilitation of Water System 325,000.80
2022
Construction of Nursery 90,000.00
Total 1,197,746.39

7.7. We recommend that the Punong Barangay implement all the projects
appropriated under 20% Development Fund so that funds are utilized to its
optimum to help achieve the desirable socio-economic development and
environmental outcomes of the Barangay.

May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.

MA. SHIELA T. ELMIDO

State Auditor II
OIC- Audit Team Leader

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page

 SANTIAGO P. SEÑASE
State Auditor IV
OIC-Supervising Auditor
Proof of Receipt of AOM:
Name of Receiving Date
Officer Signature
Officer Received
Punong Barangay
Barangay Treasurer
Municipal Accountant

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page