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. Niño
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 to ₱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:

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 1 of 20

 xxx

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, an inventory report has not been provided to the Audit Team, and the
Barangay has consistently failed to submit one over the last decade.
Consequently, the accuracy of all the listed Barangay properties in Table 1
remains uncertain.

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
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 2 of 20
 instead of maintaining different PPELC for each class of property. There was also
no data on the reference and quantity.

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 manifests a
complete disregard 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 may 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
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 e. Maintain Property Cards for all properties of the Barangay

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

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.

Unrecorded Property, Plant and Equipment

2. Project amounting ₱448,633.00 charged to Financial Assistance (FA) from

LGU Mahaplag were erroneously not recorded to its appropriate PPE
account, contrary to Section 4.2 of COA Circular 2020-006, thus the PPE and
Government Equity were understated at year-end.

2.1 Section 4.2 of COA Circular 2020-006 provides that the cost of an item of PPE
shall be recognized as an asset if, and only if:

a. it is probable that the future economic benefits or service potential

associated with the item will flow to the entity;
b. the cost or fair value of the item can be measured reliably;
c. beneficial ownership and control clearly rest with the government;
d. the asset is used to achieve government objectives; and
e. it meets the capitalization threshold of ₱15,000.00

2.2 For CY 2021 and 2022, Barangay Sto. Niño received financial assistance from the
LGU Mahaplag totaling ₱450,000.00 which were correctly recorded as Due to
LGUs in the books.

Table 2. Financial Assistance – CY 2021-2022

Date Project Amount
April 2021 Road Concreting ₱150,000.00
August 2021 Road Concreting 150,000.00
March 2022 Rehabilitation of Multi-Purpose Hall 150,000.00
Total ₱450,000.00

2.3 Audit of disbursements for the said financial assistance revealed that a total of
₱448,633.00 were disbursed and the projects were already completed as shown in
Table 3.

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 Table 3. Utilization of Financial Assistance
Should be
Check Particular
Project Date Amount recorded as
No. s
(PPE Account)
4/22/2021 564927 Materials 97,250.00
Road Concreting 4/22/2021 564929 Materials 4,992.00 Road Networks
4/26/2021 564934 Labor 47,600.00
subtotal Road Concreting 149,842.00
11/23/2021 564997 Materials 108,441.00
Road Concreting Road Networks
11/29/2021 565000 Labor 40,500.00
subtotal Road Concreting 148,941.00
Rehabilitation of 7/4/2022 599279 Materials 107,150.00
Building
Multi-Purpose Hall 7/15/2022 599284 Labor 42,700.00
subtotal Rehabilitation of Multi-Purpose Hall 149,850.00
TOTAL 448,633.00

2.4 However, review on the entries made on the above disbursements totaling
₱448,633.00 revealed that these were not recorded to their proper PPE account but
were erroneously directly recorded as debit to Due to LGUs upon disbursement,
even before preparation and submission of utilization report to source agency.

2.5 The projects should have been recognized as Property, Plant, and Equipment
(PPE) in the books of the barangay, considering that the latter is the rightful
owner of these assets and bears the responsibility for their maintenance.
Additionally, they meet the criteria outlined in section 4.2 of COA Circular 2020-
006 regarding the recognition of PPE as assets.

2.6 The correct recording upon receipt of FA, completion of the project and
submission of Fund Utilization Report to the source agency should be the
following:

Table 4. Accounting entries on utilization of FA

Particulars Entry
Receipt of Financial Assistance Debit - Cash in Bank
from Other LGUs Credit- Due to LGUs
Payment of Materials for Projects Debit- Construction Materials Inventory
Credit- Cash in Bank
Cash Advance for Labor Debit- Advances For Payroll
Credit- Cash in Bank
Payment of Labor Debit- Construction in Progress
Credit- Advances For Payroll
Upon Completion of Project Debit - Property, Plant and Equipment
Credit - Construction Materials Inventory
Credit - Construction in Progress (Labor)
Submission of Fund Utilization Debit - Due to LGUs
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 5 of 20
 Report to Source Agency Credit- Subsidy from LGU

2.7 The non-recording of PPE resulted in the following misstatements at year-end:

Table 5. Misstatements
Account Understatement
Road Networks ₱ 298,783.00
Building 149,850.00
Government Equity 448,663.00
TOTAL ₱ 897,266.00

2.8 We recommend the Municipal Accountant to make adjusting entry to

recognize above PPE amounting ₱448,663.00.

2.9 Henceforth, we recommend that the Municipal Accountant record only as

debit to Due to LGUs the amount of utilization upon submission of Fund
Utilization Report to source agency, and the amount of excess upon refund of
the same to the source agency.

20% Development Fund

3. Procurement of materials and labor for rehabilitation of Multi-Purpose Hall

and Rehabilitation of Water System Phase II charged to the 20%
Development Fund which increased the economic value of existing properties
of the Barangay totaling ₱153,777.00 were not capitalized but were instead
recorded as expenses, contrary to Section 63 of PD 1445 and Section 4.2 of
COA Circular 2020-006, thus the pertinent accounts were misstated.

3.1. Section 63 of PD 1445 provides that, except as may otherwise be specifically

provided by law or competent authority, all moneys and property officially
received by a public officer in any capacity or upon any occasion must be
accounted for as government funds and government property. Government
property shall be taken up in the books of the agency concerned at acquisition cost
or an appraised value.

3.2. Moreover, section 4.2 of COA Circular 2020-006 provides that the cost of an item of PPE
shall be recognized as an asset if, and only if:

a. it is probable that the future economic benefits or service potential

associated with the item will flow to the entity;
b. the cost or fair value of the item can be measured reliably;
c. beneficial ownership and control clearly rest with the government;
d. the asset is used to achieve government objectives; and
e. it meets the capitalization threshold of ₱15,000.00
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3.3. In the review of disbursements of the Barangay charged to the 20% Development
Fund in CYs 2019 to 2022, we noted that the Barangay spent for materials and
labor in the total amount of ₱153,777.00 that were erroneously recorded under
Repairs and Maintenance-Buildings and Other Structures and Repairs and
Maintenance-Infrastructure Assets expenses instead of adding the amount to the
Buildings and Water Supply Systems asset account. Major construction that
benefit more than one year and increase the economic life of existing asset are to
be recorded in the appropriate Property, Plant and Equipment account. The details
are shown in Table 6.

Table 6. List of capitalizable procurements erroneously recorded as expense

Erroneously Should be
Check recorded as recorded as
Project Date Particulars Amount
No. (Expense (PPE
Account) Account)
Rehabilitation 1/17/2020 492140 Materials 49,000.00 Repairs and Buildings
of Multi- 1/17/2020 492141 Labor 51,000.00 Maintenance-
Purpose Hall Buildings and
Other Structures
subtotal Rehabilitation of Multi-Purpose Hall 100,000.00
Rehabilitation 1/17/2020 492148 Materials 38,877.00 Repairs and Water
of Water 1/17/2020 492157 Labor 14,900.00 Maintenance- Supply
System-Phase Infrastructure Systems
II Assets
subtotal Rehabilitation of Water System-Phase II 53,777.00
TOTAL 153,777.00

3.4. The incorrect classification of the aforementioned transactions as expenditures,

rather than assets, led to the following inaccuracies in the year-end financial
statements.:

Table 7. List of capitalizable procurements erroneously recorded as expense

Account Overstatement Understatement
Repairs and Maintenance- Buildings and Other Structures ₱ 100,000.00
Repairs and Maintenance-Infrastructure Assets 53,777.00
Buildings ₱ 100,000.00
Water Supply Systems 53,777.00
Total ₱ 153,777.00 ₱ 153,777.00

3.5. We recommend that the Bookkeeper prepare the accounting entries to

reclassify the cost of the procured materials and labor totaling ₱153,777.00
as additions to the Buildings and Water Supply Systems account.

Cash Local Treasury

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4.0. 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.

4.1. 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.

4.2. For CY 2022, the Barangay has 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 7.
Table 7. Corrections in the Cash in Treasury Account
Amount
Date Particulars Addition
(Deduction)
February 2020 Over recording of deposits, per ledger , 1,210.00, per ₱ 870.00
audit, 340.00
March 2020 Under recording of deposits, per ledger 1,020.00, per (190.00)
audit, 1,210.00
April 2020 Unrecorded deposit (1,020.00)
December 2020 Overstated Recording of Deposits, per Ledger 2,311.00, 2,226.00
per audit 85.00
December 2021 Over recording of Collections, per Ledger 6,989.52, per (1,389.52)
audit 5,600.00
July 2021 Under Recording of Deposits, per Ledger 225.00, per (4,195.00)
audit 4,420.00
October 2021 Unrecorded deposit (480.00)
November 2021 Unrecorded deposit (85.00)
December 2021 Unrecorded deposit (3,889.52)
December 2022 Erroneous recording of January 2023 collection (85.00)
April 2022 Unrecorded deposit (150,000.00)
May 2022 Under recording of deposits, per ledger, 940.00, per audit (340.00)
1,280.00
July 2022 under recording of deposits, per ledger, 3,300.00, per (1,000.00)
audit 4,300.00
September 2022 Under recording of deposits, per ledger 930.00, per audit (2,800.00)
3,730.00
October 2022 erroneous recording of deposit 670.00
November 2022 Over recording of deposits, per ledger 8,110.00, per audit 440.00
7,670.00
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 8 of 20
 Amount
Date Particulars Addition
(Deduction)
December 2022 Unrecorded deposit (440.00)
January 2020 Uncorrected beginning balance for CY 2020 Cash in (103,356.20)
Treasury , per ledger beginning balance, 103,546.20,
per audit (cash examination report) 190.00
TOTAL ₱ (265,064.24)

4.3. 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 8. Beginning balance of Cash in Treasury per Cash Examination.

Month Collections Deposits Balance
Balance last Cash Exam, 600.00
October 15, 2019
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

4.4. 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.

4.5. 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

5. 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.

5.1. 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.

5.2. 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.

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 Section 3.3 The accountant shall draw journal vouchers to record
all valid reconciling items that require adjustment and correction in
the GL.

5.3. 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 CY 2022.

5.4. 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.

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

Audit Team why Bank Reconciliation Statements were not prepared.

5.6. 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.

Lacking Details or Supporting Documents for Distribution of Relief/Welfare Goods

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

amount of ₱101,717.00 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.

6.1. 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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6.2. 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.

6.3. 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.

6.4. Audit of disbursements in CY 2019-2022 disclosed that the LGU procured a total
of ₱101,717.00 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 9. Food Items and Other Relief Goods

Check Gross
Date Particulars
No. Amount
12/21/2021 599213 Stockpiling of Goods(15 sacks rice, 10 box sardines, 8 ₱ 52,717.00
boxes noodles, 1 box coffee)
12/27/2022 638843 Rice and Canned Goods (15 sacks rice, 6 boxes noodles, 49,000.00
6 boxes sardines, 2 boxes bihon)

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 Check Gross
Date Particulars
No. Amount
Total ₱ 101,717.00

6.5. 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.

6.6. 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.

6.7. 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 ₱101,717.00 and an understatement
of the Welfare Goods Expense by the same amount.

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

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

Non-disclosure of LDRRMF to the Notes to FS

7. There was no disclosure in the Notes to Financial Statements pertaining to

the amount and details of the unexpended balance of Local Disaster Risk
Reduction Management Fund (LDRRMF) amounting ₱151,486.00, contrary
to COA Circular No. 2012-002 dated September 12, 2012, thus additional
information value to the financial statements was not provided.

7.1. 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.

7.2. 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:

Annex D
Notes to the Financial Statements
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 12 of 20
 Note____. Local Disaster Risk Reduction Management Fund (LDRRMF)

The LDRRMF represents the amount set aside by the LGU to support its
disaster risk management activities pursuant to R.A No.10121, otherwise known
as the Philippine Disaster Risk Reduction and Management Act of 2010.The
amount available and utilized during the year totaled ₱_________ and
₱_________ , respectively, broken down as follows:

7.3. Verification of amounts presented in the Annual Budget and Supplemental

Budgets prepared for Calendar Years 2019 to 2022 disclosed that the barangay
appropriated a total amount of ₱319,920.00 as 5% LDRRMF. Moreover, the
report showing the balances and list of utilizations made in CYs 2019-2022,
signed by the Barangay Bookkeeper and certified correct by the Municipal
Accountant, states that the utilizations of the fund totaled ₱168,434.00, while
continuing balance of the 5% BDRRMF balance as of December 31, 2018 had
zero balance. Details are shown in Table 10.
Table 10. BDRRMF balance
Amount
Particular
CY 2019 CY 2020 CY 2021 CY 2022 Total
Beginning Balance 64,060.00 94,968.00 95,068.00
Current Appropriation 64,060.00 72,725.00 77,717.00 105,418.00 319,920.00
Utilization - 41,817.00 77,617.00 49,000.00 168,434.00
Balance as of Year end 64,060.00 94,968.00 95,068.00 151,486.00

7.4. As can be seen in Table 10, the Barangay Local Government Unit of Sto. Niño,
Mahaplag, Leyte has still a significant amount of BDDRMF balance of
₱151,486.00 as of December 31, 2022. However, review of the Notes to
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 Financial Statements disclosed that the amount and details of the unexpended
balance of LDRRMF were not discussed.

7.5. The Notes failed to disclose the amount available, utilized and balances during the
four- year period under audit, CYs 2019, 2020, 2021, and 2022. The balance
should have been discussed in a detailed manner so as to give additional value to
the financial statements.

7.6. We recommend that the Municipal Accountant disclose in the succeeding

Notes to Financial Statements the details of the unexpended balance of the
BDRRMF using the format provided in COA Circular No. 2012-002 dated
September 12, 2012.

Utilization of BDRRMF

8. Disbursements from CY 2019 to CY 2022 amounting to ₱168,434.00 were

paid from BDRRM Fund despite the non-preparation and non-submission of
the LDRRMF Investment Plan by the BDRRMO, contrary to Sections 5.1.2
and 5.1.3.2 of COA Circular No. 2012-002 which resulted to irregular
expenditures.

8.1. Section 5.1.2 of COA Circular 2012-002 states that, a Local Disaster Risk
Reduction and Management Fund Investment Plan (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 under a separate caption, the list of projects and activities charged to the
unexpended LDRRMF of previous years.

8.2. Section 5.1.3.2 of the same circular states that the release and use of LDRRMF
shall be supported by LDRRMFIP for projects and activities listed in the
approved plan as incorporated in the local development plan and annual work
and financial plan.

8.3. For CY 2019-2022, the Barangay has a total appropriation of ₱319,920.00 (see
details in table 10, finding no. 7) for its BDRRMF including previous years
balance. It was, however, noted that a Work and Financial Plan was prepared
annually and not the prescribed BDRRMFIP. The said document lacks
information on the Functional Classification (Gen. Public Services, Health,
H o u s i n g , Community Development); Schedule of Implementation (Starting
Date & Completion Date); Amount of Appropriation and classification whether
MOOE or Capital Outlay.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 14 of 20

8.4. Despite the absence of a duly approved BDRRMFIP, disbursements totaling
₱168,434.00 were incurred and paid from the BDRRMF. Details of the
disbursements are shown in Table 11.

Table 11. Disbursements charged to LDRRMF

Check
Date Particulars Amount
No.
11/05/2020 529756 Purchase of Materials for DRRM ₱ 41,817.00
12/21/2021 599210 Boots, Flashlights, Raincoats 24,900.00
12/21/2021 599213 Stockpiling of Goods(15 sacks rice, 10 box sardines, 8 52,717.00
boxes noodles, 1 box coffee)
12/27/2022 638843 Rice and Canned Goods (15 sacks rice, 6 boxes noodles, 49,000.00
6 boxes sardines, 2 boxes bihon)
Total ₱ 168,434.00

8.5. Without an approved LDRRMFIP, the Chairman Committee on Appropriation

had no basis for certifying the existence of available appropriations authorized for
the purpose. Thus, disbursements charged against LDRRMFIP were irregular. In
addition, the absence of an approved plan denotes that the procured items and
other activities were not approved by the other members of the LDRRM council
and based only on arbitrary decision of the requesting officials.

8.6. We recommend that the BDRRMO, through the Punong Barangay, convene
the LDRRM Council and prepare the LDRRMFIP which also includes PPAs
to be paid from previous years unexpended DRRMF annually as basis for
the use of the LDRRMF based on the priority programs, projects and
activities included in COA Circular 2012-002.

8.7. We also recommend that the Punong Barangay, the Chairman Committee on
Appropriation, and the Barangay Treasurer stop processing disbursements
from LDRRMF without the approved LDRRMFIP.

Lack of Appropriation for LCPC

9. No funds were appropriated in the CY 2019 to 2022 budget of the barangay

for the implementation of programs, projects and activities for the protection
of children, contrary to Republic Act No. 9344, thus protection of children’s
rights within the barangay is not strengthened.

9.1. Republic Act No. 9344 (Juvenile Justice and Welfare Act of 2006) adopts as a
policy the protection of the interests of children and promotes their physical,
moral, spiritual, intellectual and social well-being. The Act also recognizes the
rights of children to assistance, proper care and nutrition and special protection
from all forms of neglect, abuse, cruelty and exploitation, and other conditions
prejudicial to their development.
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 15 of 20
9.2. Section 15 of the said Act mandates the creation of Local Councils for the
Protection of Children (LCPC) in all levels of local government. It provides
further that 1% of the internal revenue allotment (IRA) of barangays,
municipalities and cities, shall be allocated for the strengthening and
implementation of the LCPC.

9.3. Our perusal of the Annual Budget of the barangay disclosed that no funds were
appropriated for the implementation of programs, projects and activities (PPA)
intended for the Council for the protection and well-being of children although the
barangay has established and created their own LCPC. Based on the estimated
IRA for the noted budget years, the following could have been appropriated for
LCPC programs and activities:

Table 12. Available Funds for LCPC

CY 2022 CY 2021 CY 2020 CY 2019
Estimated IRA 2,099,960.00 1,546,064.00 1,466,224.00 1,273,899.00
SHOULD BE - 1% of IRA 20,999.60 15,460.64 14,662.24 12,738.99
ACTUAL Appropriation - - - -
Lacking Appropriation 20,999.60 15,460.64 14,662.24 12,738.99

9.4. Without the necessary budget and plan, the rights, interest and well-being of the
children in the barangay will not be protected, established and strengthened.

9.5. We recommend that the Punong Barangay include in its annual budget an
appropriation equivalent to 1% of its IRA intended for the protection and
welfare of the children in the barangay, identify and implement the
programs, projects and activities using the said fund pursuant to RA 9344.

1% Allocation for Senior Citizen and PWD

10. No funds were appropriated for programs and projects for Senior Citizens
and Persons with Disabilities (PWD) in CY 2019 to 2022 which should be 1%
of the barangay’s IRA, contrary to DBM and DSWD Joint Circular No.
2003-01 dated April 28, 2003, thus depriving the elderly citizens in the
barangay the full benefits of the programs due them.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 16 of 20

10.1. DBM-DSWD Joint Circular No. 2003-001 dated April 28, 2003 was issued to
prescribe guidelines for the implementation of Section 29 of the General
Appropriations Act of 2003 which states that the plans, programs and projects
intended to address the concerns of senior citizens and persons with disability
shall be integrated in the regular activities of the agencies. Sections 4.2 and 4.3
thereof directs all government agencies, departments, bureaus, offices,
commissions and state universities and colleges to allocate at least one percent
(1%) of their respective budget to be utilized in the implementation of
programs/projects/activities/services which will address the needs of older persons
and persons with disabilities (PWDs).

10.2. Our perusal of the Annual Budgets of the barangay disclosed that no funds were
appropriated for Senior Citizens and PWDs programs and activities for the
periods CY 2019, CY 2020, 2021 & CY 2022 as shown in Table 13.

Table 13. Fund for Senior Citizens and PWDs Programs/Projects

CY 2022 CY 2021 CY 2020 CY 2019
Estimated IRA 2,099,960.00 1,546,064.00 1,466,224.00 1,273,899.00
SHOULD BE - 1% of RA 20,999.60 15,460.64 14,662.24 12,738.99
ACTUAL Appropriation - - - -
Lacking Appropriation 20,999.60 15,460.64 14,662.24 12,738.99

10.3. Without the necessary appropriation sanctioned by law, the elderly citizens and
PWDs of the barangay are deprived of the benefits of the programs, which could
have been financed from the said amount.

10.4. We recommend that the Punong Barangay and its Council appropriate funds
in its annual budget for programs and projects benefitting Senior Citizens
and Persons with Disabilities (PWDs) at an amount of no less than 1% of the
annual IRA as required by the Expanded Senior Citizen Act, R.A. No. 9994.

Release of 10% SK Fund share

11. Release of 10% Sangguniang Kabataan share totaling ₱522,299.00 were not
made within the prescribed period and were not supported by Official
Receipts issued by the Sangguniang Kabataan Treasurer while shares
totaling ₱115,603.00 were still not released to the SK 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.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 17 of 20

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.

11.4. For CY 2019-2022, the Barangay has released a total of ₱522,299.00 of the 10%
SK share. However, as of to date, shares totaling ₱115,603.00 were still not
released to the SK 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). Details is shown in tables 14 and 15.

Table 14. Release of 10% SK share

Date Check No. Particulars Amount
2/10/2020 492178 Open Account 10,600.00
10% share for the months of January and 24,241.0
2/25/2020 492179 February 2020 0
3/5/2020 492184 10% share for the month of March 2020 12,120.00
10% share for the months of April to July 48,483.0
8/17/2020 529736 2020 0
10% share for the months of August to 36,362.0
11/16/2020 529764 October 2020 0
10% share for the months of November to 24,224.0
12/10/2020 529776 December 2020 0
subtotal 2020 156,030.00
10% share for the months of January to July 90,669.0
9/6/2021 564969 2021 0
10% share for the months of August to 64,765.0
12/13/2021 599288 December 2021 0
subtotal 2021 155,434.00
10% share for the months of January to July 122,987.0
7/15/2022 599288 2022 0
AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 18 of 20
 10% share for the months of August to 87,848.0
11/16/2022 638827 December 2022 0
subtotal 2022 210,835.00
Total 522,299.00

Table 15. Unreleased 10% SK Shares

No.
Monthly 10 %SK TOTAL SK
Yea of Released Unreleased
IRA Share 10 % share
r Mos. SK Shares SK Shares
(a) ( b) (bxc)
©
2019 107,300.00 10,730.00 12 128,760.00 - 128,760.00
2020 120,456.00 12,045.60 12 144,547.20 156,030.00 - 11,482.80
2021 128,832.00 12,883.20 12 154,598.40 155,434.00 - 835.60
2022 174,997.00 17,499.70 12 209,996.40 210,835.00 - 838.60
Total 637,902.00 522,299.00 115,603.00

11.5. Moreover, it was disclosed that though the barangay has released some of the SK
shares for 2019 and 2021, it 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 it were released in lump sum
as can be seen in table 14.

11.6. Furthermore, the said 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%
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

11.7. The delayed and non-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.

11.8. We recommend that the Barangay release the unreleased SK shares totaling
₱115,603.00 and ask for Official Receipt from SK Treasurer as their proof of
receipt and for future SK shares to be automatically released not later than
five (5) working days without further delay upon receipt of the monthly IRA
of the barangay.

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 19 of 20

11.9. 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.

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

SANTIAGO P. SEÑASE
State Auditor IV
OIC-Supervising Auditor

Proof of Receipt of AOM:

Date
Officer Name of Receiving Officer Signature
Received
Punong Barangay
Barangay Treasurer
Municipal Accountant

AOM No. 2023-001 Brgy. Sto. Niño, Mahaplag, Leyte Page 20 of 20