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 15, 2023

AUDIT OBSERVATION MEMORANDUM (AOM)

For: HON. ANTONIO B. TEROL

Punong Barangay
Barangay Upper
Mahaplag, Leyte

Attention: Candygie D. Domus

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 ₱3,726,410.89 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. Upper, 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 ₱3,726,410.89 properties under Property, Plant and Equipment
(PPE) account. The details are shown in Table 1.

Table 1. Property, Plant and Equipment

PPE Amount
Land 58,050.00
Electrification,Power & Energy Structures 155,116.00
Building 2,085,043.99
Other Structures 296,915.00
Furniture and Fixtures 162,984.90
IT Equipment 65,900.00
Other Machineries & Equipment 160,020.00
Other Property Plant & Equipment 84,000.00
Road Networks 508,811.00
Water Supply System 149,570.00
TOTAL ₱3,726,410.89

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.
AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 2 of 20
 and the properties were just lumped per major account in the property ledger card
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) Upper 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
AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 3 of 20
 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 ₱149,340.02 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 On February 2022, Barangay Upper received financial assistance from the LGU
Mahaplag amounting ₱150,000.00 to be used for Installation of Brgy. Streetlight
which was correctly recorded as Due to LGUs in the books.

2.3 Audit of disbursements for the said financial assistance revealed that a total of
₱149,340.02 were disbursed and the project was already completed as shown in
Table 2.

Table 2. Utilization of Financial Assistance

Check Should be recorded

Project Date Particulars Amount
No. as (PPE Account)
Insatallation 3/17/2022 578474 Materials 104,340.02
of Power Supply Systems
Streetlight 8/25/2022 623238 Labor 45,000.00

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 4 of 20

 Total 149,340.02

2.4 However, review on the entries made on the above disbursements totaling
₱149,340.02 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 3. 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
Report to Source Agency Credit- Subsidy from LGU

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

Table 4. Misstatements
Account Understatement
Power Supply Systems ₱ 149,340.02
Government Equity 149,340.02
TOTAL ₱ 298,680.04

2.8 We recommend the Municipal Accountant to make adjusting entry to

recognize above PPE amounting ₱149,340.02.

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 5 of 20

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.

Cash in Bank

3.0. The balance of Cash in Bank amounting to ₱2,391,576.69 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.

3.1. 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.

3.2. 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.

Section 3.3 The accountant shall draw journal vouchers to record

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

3.3. The Financial Statements of the Barangay showed that the Cash in Bank-LCCA
has a total balance of ₱2,391,576.69 as of yearend. However, no Bank
Reconciliation Statements were prepared and submitted by the Municipal
Accountant for CY 2022.

3.4. 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.

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

Audit Team why Bank Reconciliation Statements were not prepared.

3.6. 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.

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 6 of 20

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

4.0. The reports on the distribution of various relief goods with an aggregate
amount of ₱249,460.00 to the families/household affected by calamities were
not properly documented, contrary to Sections 2 and 4 of Presidential Decree
(P.D.) No. 1445, thus, the propriety of the program could not be ascertained.

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.”

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. Audit of disbursements in CY 2019-2022 disclosed that the LGU procured a total
of ₱249,460.00 goods for distribution. Details on the purchase of various relief
goods in response to calamities as follows:

Table 5. Food Items and Other Relief Goods

Date Check No. Particulars Amount
Without Distribution List
Food in preparation for Covid-19
(14 sacks rice, 3 boxes sardines
3/18/2020 482981 and 1 box noodles) 35,300.00
3/30/2020 482985 30 sacks rice, 12 cartoons sardines 81,600.00
4/5/2020 482990 14 sacks rice 28,560.00
subtotal without distribution list 145,460.00
With Distribution list
Purchase of Food Supplies (17
2/22/2022 578454 sacks rice) 34,000.00
(18 sacks rice) for people affected
4/18/2022 578488 by Typhoon Odette 36,000.00
12/23/2022 623256 (17 sacks rice) 34,000.00
AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 7 of 20
 subtotal with distribution list 104,000.00
Total 249,460.00

4.4. Perusal of the submitted documents related to the distribution of the purchased
relief goods revealed that no distribution reports was submitted for the
procurement totalling ₱145,460.00.00 while the distribution reports submitted for
the procured goods totaling ₱104,000.00 do not contain information as to the
quantity of such goods received by the affected beneficiaries.

4.5. 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.

4.6. We recommend that the Punong Barangay submit the reports on the
distribution of relief goods with complete details such as the name of the
beneficiary, signature and the items and quantity received

Non-disclosure of LDRRMF to the Notes to FS

5.0. 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 ₱383,362.82, contrary
to COA Circular No. 2012-002 dated September 12, 2012, thus additional
information value to the financial statements was not provided.

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:

Annex D
Notes to the Financial Statements

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

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 8 of 20

 amount available and utilized during the year totaled ₱_________ and
₱_________ , respectively, broken down as follows:

5.3. 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 ₱516,462.00 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 ₱332,660.00, while
continuing balance of the 5% BDRRMF has a balance of ₱199,560.00 as of
December 31, 2018. Details are shown in Table 6.

Table 6. BDRRMF balance

Amount
Particular
CY 2019 CY 2020 CY 2021 CY 2022 Total
Beginning
Balance 199,560.00 302,981.82 192,390.82 318,197.82
Current
Appropriation 103,421.82 118,069.00 125,807.00 169,165.00 516,462.82
Utilization 228,660.00 - 104,000.00 332,660.00
Balance as of
Year end 302,981.82 192,390.82 318,197.82 383,362.82

5.4. As can be seen in Table 6, the Barangay Local Government Unit of Upper,
Mahaplag, Leyte has still a significant amount of BDDRMF balance of
₱383,362.82 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.

5.5. 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.

5.6. 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

6.0. Disbursements from CY 2019 to CY 2022 amounting to ₱332,660.00 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.

6.1. 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.

6.2. 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.

6.3. For CY 2019-2022, the Barangay has a total appropriation of ₱716,022.82 (see
details in table 6, finding no. 5) 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. Upper, Mahaplag, Leyte Page 10 of 20
6.4. Despite the absence of a duly approved BDRRMFIP, disbursements totaling
₱332,660.00 were incurred and paid from the BDRRMF. Details of the
disbursements are shown in Table 7.

Table 7. Disbursements charged to LDRRMF

Date Check No. Particulars Amount
Spartan Boots, Raincoats,
megaphone, emergency 49,000.0
1/15/2020 482954 light and trapal 0
20,000.0
January 2020 482959 Food supplies 0
30 sacks rice, 12 cartoons 81,600.0
3/30/2020 482985 sardines 0
28,560.0
4/5/2020 482990 14 sacks rice 0
(Raincoats, Boots,
Emergency Light,
Flashlight, Fire
Distinguisher, Pala, 49,500.0
8/7/2020 538012 Helmet, Trapal) 0
Purchase of Food Supplies 34,000.0
2/22/2022 578454 (17 sacks rice) 0
(18 sacks rice) for people
affected by Typhoon 36,000.0
4/18/2022 578488 Odette 0
12/23/2022 623256 (17 sacks rice) 34,000.00
Total 332,660.00

6.5. 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.

6.6. 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.

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6.7. 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

7.0. 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.

7.1. 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.

7.2. 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.

7.3. 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 8. Available Funds for LCPC

CY 2022 CY 2021 CY 2020 CY 2019
Estimated IRA 3,334,106.00 2,486,552.00 2,323,386.00 2,040,298.00
SHOULD BE - 1% of RA 33,341.06 24,865.52 23,233.86 20,402.98
ACTUAL Appropriation - - - -
Lacking Appropriation 33,341.06 24,865.52 23,233.86 20,402.98

7.4. 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.

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 12 of 20

7.5. 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

8.0. 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.

8.1. 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).

8.2. 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 9.

Table 9. Fund for Senior Citizens and PWDs Programs/Projects

CY 2022 CY 2021 CY 2020 CY 2019
Estimated IRA 3,334,106.00 2,486,552.00 2,323,386.00 2,040,298.00
SHOULD BE - 1% of RA 33,341.06 24,865.52 23,233.86 20,402.98
ACTUAL Appropriation - - - -
Lacking Appropriation 33,341.06 24,865.52 23,233.86 20,402.98

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8.3. 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.

8.4. 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

9. Release of 10% Sangguniang Kabataan share totaling ₱1,020,553.00 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.

9.1. 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.

9.2. 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.

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

9.4. For CY 2019 to 2022, the Barangay release a total of ₱1,020,553.00 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).

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9.5. 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 10.

Table 10. Release of 10% SK share

Year Date Check No. Particulars Amount
2019 11/21/2019 482934 Transfer of 10% SK Shares 179,000.00
4/27/2020 482991 Transfer of 10% SK Shares 95,000.00
2020
10/14/2020 538036 Transfer of 10% SK Shares 118,000.00
8/25/2021 578412 Transfer of 10% SK Shares 207,099.00
2021 11/24/2021 578444 Transfer of 10% SK Shares 83,871.00
7/15/2022 623203 Transfer of 10% SK Shares 197,000.00
2022 9/20/2022 623219 Transfer of 10% SK Shares 56,000.00
12/15/2022 623241 Transfer of 10% SK Shares 84,583.00
Total 1,020,553.00

9.6. 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%
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 in which such policy is one of the highlights to be discussed.

9.7. 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.

9.8. 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 the 10% share of the SK.

9.9. 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

AOM No. 2023-001 Brgy. Upper, Mahaplag, Leyte Page 15 of 20

 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. Upper, Mahaplag, Leyte Page 16 of 20