PART II

DETAILED FINDINGS AND RECOMMENDATIONS

A. FINANCIAL AND COMPLIANCE AUDIT

1.Donated Assets by private entity to the municipality were not covered with Deeds of
Donation and Acceptance of Donations pursuant to the pertinent provisions in the
Handbook on Property and Supply Management hence, these were not recorded in the
books of accounts as donated assets in accordance with the financial statement assertion on
completeness , thus understating the Property, Plant and Equipment accounts.

The financial statement assertion of completeness requires that all transactions that
should be recorded have been recorded .On the other hand, the pertinent provision in the
Handbook on Property and Supply Management System requires a Deed of Donation as
attachment papers of the donated assets.

Moreover, Section23 of the Local Government Code of 1991 states:

“Local Chief Executive may, upon authority of the sanggunian, negotiate and secure
financial grants or donations in kind, in support of the basic services or facilities enumerated
under Section 17 hereof, from local and foreign assistance agencies without necessity of securing
clearance or approval thereof from any department, agency or office from the National
Government or from any higher local government unit; Provided, that projects financed by such
grants or assistance with national security implications shall be approved by the national
government agency concerned ; Provided, further, that when such national agency fails to act on
the request for approval within thirty (30) days from receipt thereof ,the same shall be deemed
approved.

The local chief executive shall, within thirty (30) days upon signing of such grant
agreement or deed of donation, report the nature, amount, and terms and of such assistance to
both the Houses of Congress and the President.”

The municipality received donated assets for almost five years now from the
Ambassador of China, who happened to visit the place and have maintained a cordial
relationship with the LGU officials . The ambassador has donated and constructed a building
known as the LobocChildren’s Palace wherein the worldwide known Loboc Children’s Choir
and Loboc Ambassador Band will perform and entertain the guests and tourist who will visit the
place Loboc , being one of the best tourist destinations in the country. The other one was the
lighting facilities /paraphernalia of the Loboc River Banks , this is one of the tourist attractions
during night time , river cruise while having dinner and with added entertainment from local
performers .The lightings directly delivered from China , the first of its kind in Bohol will
illuminates the riverbanks and nearby buildings/houses as well as the tourism complex being
operated by the municipality.

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 These donated assets are usually received at the Mayor’s office however, the
corresponding donation papers/documents were not prepared by both parties thus, remained
unrecorded in the books as of December 31, 2012.

Ideally, all donations should be covered by Deeds of Donation and after execution of the
Deed of Donation, the acting GSO/Treasurer’s office should be furnished with a copy thereof for
recording in the property records and thereafter, the Municipal Accountant for booking up the
same in the books of accounts.

In the absence of the deeds of donation, the assets remain unrecorded in the Property,
Plant and Equipment (PPE) accounts of the LGU thus, understate the particular accounts.

Management Comments:

It was recalled by the Municipal Mayor that during our courtesy call, we inquired about the
recording of donated assets given by the Ambassador of China and he added that a Deed of
Donation has been signed by Ambassador Chan in March 2012. However, deed of donation for
one (1) unit elevator donated by private entity will be prepared for the formal documentation.

Recommendation:

1. We recommend that the LGU will document every donated asset by executing a
deed of donation duly signed by the donor and donee , reflecting thereon the
type of asset being donated, the related costs, the intent for the use of the said
donation and to furnish the acting GSO/treasurer’s office and municipal
accountant with copies thereof for recording purposes.

2. Both the Treasurer and Accounting office shall record all donated assets in the
property and accounting records, respectively ,based on the deeds of donations
being furnished by the LCE office. These offices should coordinate to ensure
compliance with regulations on donated assets.

3. For donations without value , the Municipal Mayor may create a committee to
appraise the value of the donated asset for proper recordingin the books of the
LGU.

2. Contract amount of P 3,486,110.00 for the partial completion of an existing

Tourism/Heritage/Multi-Purpose Building was disbursed without complete/adequate
supporting documentslikewise,master plan ,detailed engineering activities/essential data
were not submitted contrary to R.A.9184and Section 168 ( C) of the GAAM rendering the
regularity,validity of the expenses doubtful, and delayed in the review of
contract&completion of the project .

Section 168 ( c) of the GAAM, Volume I, states as follows :

16
“Basic requirements applicable to all classes of disbursements”,

X xx ..
(C) Documents to establish validity of claims- Submission on documents and other evidence
to establish the validity and correctness of the claim for payment.

Annex “A” of Republic Act 9184 –Detailed engineering for the Procurement of Infrastructure
Projects.:

Detailed engineering shall proceed only on the basis of the feasibility study or preliminary
engineering study made which establishes the technical viability of the projects and conformance
to land use and zoning guidelines prescribed by existing laws. No Program of Work for any
project shall be approved without detailed engineering

A schedule of detailed engineering activities shall include the following :

1. Survey
2. Site Investigation
3. Soil and foundation investigation
4. Construction materials investigation
5. Preparation of Design Plans of the whole building
6. Preparation of Technical Specification
7. Quantity and Cost Estimates
8. Study of the seismicity of the area to determine the optimum safety of structures and
to minimize possible earthquake damage
9. Drainage details
10. Approve Budget for the Contract (ABC)

Post audit of expenses for the partial completion of theFarmer’s Trading Center/Multi-Purpose
Tourism Assistance Center (Phase II) amounting to P3,486,110.00 noted various discrepancies
as follows :

1. Certificate of Availability of Funds (CAF) was not completely filled-up as to the

source of funds , which is the basic information necessary for the funding.

2. Date of posting of the Invitation to Apply for Eligibility to Bid in the Philippines
Daily Inquirer was on April 1,2012 when the date of the receipt of Letters of Intent
(LOI) from prospective bidders was on March 23-28,2012 and the Pre-Bid
Conference was on March 29,2012

3. The date and time in the pre-bid conference was on April 2,2012 at 9:00a.m as
appearing in the Philgeps posting when the actual date of pre-bid conference was on
March 29,2012 at 1:55p.m as per minutes of pre-bid conference

4. The status in the Invitation to Bid in the Philgeps posting was “In Preparation” when
it should have been on “Active “status”

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 5. The information for the Opening of Sealed Bids was communicated by the Municipal
Mayor when it should have been the Chairman of the BAC

6. No bidder’s security as to prescribed format, amount and validity period was

submitted

7. No performance security posted by the winning bidder was attached

8. Notice to proceed /commence was issued by the Chairman, BAC , it should be the
Municipal Mayor being the Head of the Procuring Entity(HOPE)

9. Inspection and Acceptance Report (IAR) was not completely signed by all members
of the inspectorate team and the same not dated

10. Certificate of completion not dated

11. No PERT CPM diagram and bar chart with S- curve of the project

12. No copy of the building perspective and blue print of the entire building.

Moreover, master plan and completedetailed engineering activities in the construction of the
main building was inquired during our visit to the LGU to have a courtesy call to the municipal
mayor together with the head of offices, revealed that master plan &detailed engineering
activities were not conducted prior to the construction of the main building. However, the
municipal mayor instructed the municipal engineer to prepare the plans /specifications and
program of works/detailed engineering to support the construction of the Multi-Purpose
Building as envisioned by the local officials.

At present, the 2nd floor of the main building appears hollow because the construction were done
on a piecemeal basis depending on the availability of funds from the local and outside sources .
However, a total amount of P 11,181,855.04 (Annex A) have been infused for the construction of
the building, but until now it is not ready for use.

The lack of master plan, detailed engineering , feasibility study , budget consideration and
essential data necessary before the implementation of the project caused the delayed
implementation and completion of the project particularly the approved budget for the contract .
This will also contribute to the delay in the review/evaluation of the projects particularly the non-
submission of complete supporting documents.

COA Circular No.2009-001 dated February 12, 2009-states that-Audited agencies should furnish
the auditor with copies of perfected contracts within 5 working days upon approval together with
the supporting documents for review, the contract was signed April 19, 2012 however, copy
were of the same were not submitted to COA office.

It was also informed by the Acting Municipal Treasurer that the amount spent will be reimbursed
by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) in Manila after

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Completion/submission of all supporting documents furthermore, the municipality already
received P2.5 M as initial reimbursement of the expenses coming from TIEZA.

Management Comments:

Well taken -The Municipal Mayor instructed the Municipal Engineer to comply/submit related
documents, the Chairman, BAC to be extra cautious in the review of the data for Philgeps
posting, the Budget Officer, Municipal Accountant and Municipal Treasurer for the complete
documentation of the supporting papers. In addition, the LGU will hire competent personnel to
handle the review of all bidding documents prior to the posting in the Philgeps.

Recommendations:

1. 1.Submit all relevant documents to support for the payment of the partial completion of
the Tourism/Heritage Building as well as all the detailed engineering activities /programs
conducted prior to the implementation/construction of the building/project.

2. 2.The accounting unit should thoroughly review all supporting documents before any
payments shall be release to the contractor/supplier.

3.Construction in Progress- Public Infrastructure Account ofP

9,212.291.88(264)wasmisclassified to its appropriate asset account and were still carried
in the books contrary to Section 48 of GAAM Vol.III and Section 111 of P.D. 1445 thus ,
the accounts were misstated and not fairly presented in the financial statements.

Section 48 of Vol. III of the GAAM mentions the Specific Standards of Internal Control
which provides the proper recording of transactions and events. It partly states that financial
transactions and events shall be promptly recorded in accordance with state accounting
standards.

Section 111 of Presidential Decree No. 1445 states that,

“(1) The accounts of an agency shall be kept in such detail as is necessary to meet
the needs of the agency and at the same time be adequate to furnish the
information needed by fiscal or control agencies of the government.

(2) The highest standards of honesty, objectivity and consistency shall be observed in
the keeping of accounts to safeguard against inaccurate or misleading
information.

In the verification of accounts presented in the Balance Sheet, it was noted that the
Property, Plant and Equipment (PPE) accounts of themunicipality as of December 31,
2012includes the Construction in Progress (CIP) accounts totaling P9,212,291.88 as follows:

1. Construction in Progress (CIP)-Agency Asset = P 802,730.00

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 2. Construction in Progress(CIP) -Reforestration = P8,409,561.88

Total = P9,212,291.88
=============

Discussion with the municipal accountant on the existence of CIP accounts in the
balance sheet for more than five years, revealed that she only copied the corresponding accounts
from the previous reports , not minding the origin and status of the accounts presented in the
previous year’s financial statements. However, upon inquiry by the COA, she made a research
of the accounts and disclosed that these were misclassified accounts lodged to CIP - Agency
Assetinstead of a Land Account of P802,730.00 purchased for the Tertiary School Building
located in Barangay Camayaan, Loboc while CIP Reforestation of P8,409,561.88 represents
Other Structure accounts funded from the CBRMP loans of the LGU. The non-classification of
these CIP accounts particularly the CIP –Reforestation to Other Structures Accounts would lead
to the understatement of depreciation cost/expenses and overstatement of assets – Other
Structures for several years thus, misstated the financial reports.

Management Comments:

The previous Municipal Accountant explained that proper adjustments will be effected in
2013 reports.

RECOMMENDATION

We recommend that Management:

a.) Require the municipal accountant to maintain a subsidiary ledger for each
accounts as a tool to closely monitor moving/non-moving accounts and
minimize/avoid misclassification of some accounts to its appropriate account.

b.) Require the municipal accountant to reclassify the CIP accounts to their proper
account name for fair presentation in the financial statements.

4. The total amount of P13,374,535.00were spent for the implementation of the Gender and
Development (GAD) activities however, the programs and projects were not related to the
issues and concerns address to the equality of men and women of the municipality contrary
to Joint Circular No. 2004-1 of the Department of Budget and Management (DBM), National
Economic and Development Authority (NEDA) and the National Commission on the Role of
Filipino Women (NCRFW).

Joint Circular 2004-1 was issued to provide the guidelines for the preparation of Annual
Gender and Development (GAD) Plan, Budget and Accomplishment Report to implement the
section on programs/projects related to GAD of the General Appropriations Act.

Gender and Development (GAD) is defined in item 3 of the same circular as a

development perspective that recognizes the unequal status and situation of women and men in

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society. Women and men have different developmental needs and interest as a result of said
inequality, which is institutionalized and perpetuated by cultural, social, economic and political
norms, systems and structures.

As a developmental approach, GAD seeks to equalize the status and condition of and
relations between women and men by influencing the processes and outputs of policy-making,
planning and budgeting, implementation, and monitoring and evaluation so that they would
deliberately address the gender issues and concerns affecting the full development of women.

Section 32 of the General Appropriations Act for CY 2010 directed all departments,
bureaus, offices, agencies, SUCs, and LGUs to formulate a Gender and Development (GAD)
Plan designed to address gender issues within their concerned sectors or mandate and
implement applicable provisions in the Convention on the elimination of all forms of
discrimination against women.

CY 2012 budget of the municipality amounted to P93,762,261.32 and 5% of it will be

allocated for Gender and Development (GAD) amounting to P4,688,113.06 .

Analysis and review of the submitted GAD Accomplishment Report for CY 2012 (Annex
A) disclosed the total amount of P13,374,535.00was spent for the programs implemented for
GAD projects. However, it was noted that some items would not be considered as activities that
will address to the problems and concerns to the unequal status of women and men nor a
developmental approach that seeks to equalize the status and condition between women and men.

Further, the amount spent for the year exceeded from the 5% annual budget for GAD
programs by P8,686,421.93 or 185.29%. However, it was noted that only P80,000.00 was
actually appropriated in the CY 2012 budget for GAD related activities.

The following are considered non related activities/programs:

Programs/Projects/Activities GAD Activity Cost

Peace and Order Management Ensure peace and order P450,000.00

public safety in the
community & protection
against abuses
Sports & Youth Development Promotion of personal 200,000.00
development through
sports
Barangay Road Maintenance Access to various 4,000,000.00
services/provision of
comfortable transportation
facilities
Clean and Green Program Promotion, protection 800,000.00
&conservation of the
environment

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Ecological solid Waste Promotion of a healthy and 800.000.00
Management .Program free environment
Water for Life Program Provision of Adequate 1,800,000.00
&Potable Water Supply
Ensure Food sustainability Agricultural Support & 1,100,000.00
Extension program
Senior Citizens Welfare Promotion & 1,400,000.00
Empowerment of Sr.
Citizen in the LGU
Manpower Development & Promote 500,000.00
Capability building Program Personnel/professional
Development of employees
Total P11,050,000.00

It could be noted from the above schedule that the beneficiaries of implemented GAD
programs were not focused in accordance with the Framework Plan for Women to promote
gender-responsive governance, protect and fulfill women’s rights, and promote women’s
economic empowerment.

Women’s Empowerment is a goal of an essential process for women’s advancement. It is

the process and condition by which women mobilize to understand, identify and overcome
gender discrimination and achieve equality. Women become agents of development, and not just
beneficiaries. This kind of participation in development enables them to make decisions based
on their owned views and perspectives. To empower women, access to information, training,
technology, market, and credit is necessary.

In order to effectively institutionalize GAD as mandated under RA7192, otherwise

known as the Women in Nation Building Act, application of fund and reporting requirement
must be properly observed.

Management comments:

For CY 2013, the LGU will appropriate equivalent amount to finance GAD activities, the same
will be implemented for each LGU-Offices/Unts.

Recommendation:

We recommend that the Municipal Government should undertake the following:

a. Evaluate each program included in GAD Programs/Projects/Activities (PPAs) and

identify specifically the target beneficiaries and focusing on the needs of women and gender
inequality.

b. Plan and implement GAD programs that will recognize the need to remove the biases
against women and special attention to women through affirmative action.

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c.Management should strictly implement GAD identified activities pursuant to Joint
Circular No. 2004-1 of the Department of Budget and Management (DBM), National
Economic and Development Authority (NEDA) and the National Commission on the Role
of Filipino Women (NCRFW provide funds for the implementation of GAD activities and
programs.

5.Supporting Documents for the purchase of One( 1) Unit Brand New Volvo Excavator
totaling P8,448,000.00 are incomplete/inaccurate likewise, schedule in the opening of bid
were inconsistent contrary to Section 168 ( C ) of the GAAM and Section 4 of P.D.1445 and
Section 21 ( c) and ( E ) of R.A.9184 rendering the validity and regularity of the expenses
doubtful and misleading thus, disadvantageousto the government .

Section 168 ( c) of the GAAM, Volume I, states as follows :

“Basic requirements applicable to all classes of disbursements”,

X xx ..
(D) Documents to establish validity of claims- Submission on documents and other evidence
to establish the validity and correctness of the claim for payment.

Section 4 of P.D. 1445 further provides, “Financial transactions and operations of any
government agency shall be governed by the fundamental principles that Fiscal responsibility
shall, to the greatest extent, be shared by all those exercising authority over the financial affairs,
transactions and operations of the government agency and claims against government funds
shall be supported with complete documentation.”

Section 21of R.A.9184–Advertising and contents of the Invitation to Bid.”the invitation to

bid shall contain , among others :( C ) The date, time and place of the deadline for the
submission and receipt of the eligibility requirements, the pre-bid conference if any, the
submission and receipt of bids and the opening of bids ( e) source of funds

Review of the supporting documents for the purchase of One (1) unit Brand New Volvo
Excavator (Backhoe) revealed the following :

a.) Certificate of Availability of Funds (CAF) was not attached as supporting document
to the payment, this should have been prepared first prior to the procurement process
particularly the issuance of the Purchase Order to the supplier which serves as the
contract between the LGU hence, procurement should not be undertaken in the
absence of CAF.

b.) Obligation Request(OB-R) was signed by the requisitioning officer and approved by
the budget officer, the OB-Rnot numbered, dated and the responsibility
center/account code not filled up as to appropriate source of funds.

c.) Purchase Request (PR) was not completely filled up as to the date of request and
estimated unit cost of items to be purchased, the data will serve as reference for the

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 actual cost of the unit/items requested , these information can be sourced from other
government/private entity who have acquired the same model /unit.

d.) Purchase Order (PO) also not completely filled up as to actual date
received/conformed by the supplier the same without number and date, the data is
necessary in the computation of liquidated damages/penalty had the supplier failed to
deliver the unit on the date specified therein.

e.) Delivery Receipt dated December 26,2011 noted that the unit was received by the
Chairman, BAC however , the date of actual receipt was not indicated.

f.) Inspection and Acceptance Report (IAR) were inspected and accepted by the
inspection and property officer however, the same were not completely filled up ,
the date of actual inspection and acceptance . It was also noted that the name of
supplier written in the Inspection and Acceptance Report was Civic Merchandising
Excavator instead of Civic Merchandising Incorporated.

g.) It could be noted that the terms of payment was Cash on Delivery however ,it was
noted that the dates were not indicated in all the documents as provided for in the
different standard format , the dates will facilitate review of the document as to its
completeness ,validity and regularity as prescribed in the above-mentioned
regulations.

h.) BAC Resolution No.09, series of 2011 disclosed that only Civic Merchandising Inc.
submitted and considered Single Bidder with the Responsive Bid for the acquisition
of one unit brand new Volvo excavator , a bid price of P8,448,000.00
taking no alternative means of verifying price reasonableness on the part of the LGU.

i.) Discrepancy on the advertising (dates/times) in the Opening of Bids – it was noted
that the following information /schedule in the bid opening does not agree such as :

Philippines Daily Inquirer dated November 19, 2011 – November 25, 2011

Posting in conspicuous places ( 3 times) - November 25,2011

Philgeps Posting: Closing Date/Time - November 28,2011

It was also noted that BAC Resolution Declaring and Recommending Winning bidder was dated
November 25,2011while Philgeps closing date /time of posting was November 28,2011 three (3)
days after the actual opening of bids.In this situation, prospective bidders who were not able to
read in the newspaper or in the posting to conspicuous places and been dependent to Philgeps
posting could not participate in the bidding since, Philgeps data does not reconcile with other
source of information thus,failure to conduct competitive bidding .

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The services of the technical personnel from COA, Regional Office, Cebu City was requested to
inspect the said unit as well as establish the reasonableness of the price, and per inspection
report,based on the TechnicalInformation and Technology System (TITS) reference data on file ,
the cost of the said equipment with similar horsepower, rpm, bucket capacity and operating
weight and with Breaker included is P8,088,000.00 compared to the LGU of P8,488,000.00 or a
price difference of P 360,000.00 or 4.5 % .

It was also noted per report that the Breaker is a standard accessories and should be included in
the delivery otherwise, an equivalent cost of the Breaker shall be appropriately implemented
/deducted from the unit price of the excavator.

Management Comments:

The municipal mayor emphasized that the actual amount received by the supplier is only
P 7,995,428.57 (net of tax) instead of P 8,448,000.00 because the difference will be
remitted to the BIR.

Auditor’s rejoinder:

While it is true that the actual amount received by the supplier is lesser by P 452,571.43
representing tax withheld but, the amount remitted to the BIR will be credited to the
account of the supplier as paid taxes.

Recommendation/s:

1. Submit the Certificate of Availability of Funds (CAF) for the purchase of brand new
Volvo excavator amounting to P8,448,000.00 with complete information as to the
source of funds and justification for the non-submission of the document.

2. Submit justification on the failure of the budget officer to identify in the OB-R the
source of funds/account code for the purchase of the excavator

3. Submit justification/reason of why the Purchase Request (PR), Purchase Order,

Delivery Receipt ,Inspection and Acceptance Report ,Disbursement voucher and
other supporting documents were not completely filled up as required under
Section 168 ( C ) of the GAAM and Section 4 of P.D.1445 .

4. The BAC/procurement officer should submit justification on the price difference

per inspection report.

5. The requisitioning officer/ municipal engineer should submit justification on the

non-inclusion of the Breaker which is a standard accessory to the excavator per
technical report.

6. The price difference of P360,000.00 and cost of the Breaker which is still subject to
price verification will be charged to the personnel responsible in providing the

25
 Approved Budget of the Contract (ABC) / procurement of the Volvo excavator if
warranted.

7. Request the supplier for a price adjustments/refund of the price difference and the
cost of the Breaker which is a standard accessory to the excavator per inspection
report or require additional delivery of the Breaker/if warranted.

8. Submit valid reason/s on the discrepancies of the scheduled /date in the opening of
bids, particularly the three days difference from the posting of Philgeps and in the
newspaper.

6. Expenses for Fuel, Oil and Lubricants amounting to P3,027,904.95 were not supported
with properly accomplished driver’s trip tickets , monthly report of official travels and
monthly reports of fuel consumption while LGU’s motor vehicles were not marked “
For Official Use Only”contrary to Section 168(C) of the GAAM, Volume I, and COA
Circular No. 77-61 dated Septem ber 26, 1977, thereby casting doubt as to the
reasonableness and propriety of the expenses and the difficulty in the identity of the
municipality’s owned motor vehicles.

Section 168 (C) of the GAAM, Volume I, states as follows: “Basic requirements applicable to all
classes of disbursements:

Documents to establish validity of claim- Submission of documents and other evidences to

establish the validity and correctness of the claim for payment.

COA Circular No. 77-61 dated September 26, 1977 which provides:

Item B. Rules and Regulations – Specific

2. Use of motor vehicles shall be properly controlled and regulated.

“The use of government motor vehicles should be controlled through properly

accomplished and duly approved driver’s trip tickets , which should be serially
numbered , a summary of which shall be made at the end of the month in a Monthly
Report of Official Travels for audit purposes.”

“ All motor vehicles owned by the government should plainly marked “ For Official Use
Only “ ( 3 inches) , under which should be written the corresponding name of the Office
operating or using the same . The mark should appear on each side of the motor vehicle .
When there is no sufficient space on each side, the same should appear at the back and on
the front just below the windshield of the motor vehicles.”

“ All government vehicles shall bear government plates , except security vehicles exempt
from using government plates”

26
 3.Fuel consumption of government motor transportation shall be properly controlled
and accounted for through approved Requisition and Issue Voucher or equivalent.

4.Monthly Report of Fuel Consumption of government motor transportation shall

be submitted to the Auditor for verification purposes to determine the reasonableness
of fuel consumed during the period

5. No disbursement vouchers for fuel consumption (gasoline and oil) of government

vehicles shall be allowed in audit unless duly supported by properly
accomplished and
approved serially numbered driver’s trip tickets , and that the government vehicles
involved are plainly marked “For official Use Only” and bear government plates only
with the exception of security vehicles exempt from using government plates.

Verification of several disbursement vouchers/ supporting documents and expenses in the

payment for gasoline, fuel and lubricants (761) for CY 2012 revealed that the municipality
incurred P3,027,904.95for such expenses which is 19.12% or P485,908.05 higher from the
previous year expenses of P2,541,996.90.

Further verification revealed that the trip ticket used were not the standard form and the
same were not properly filled up particularly the signatures of the drivers and
passengers.Likewise, monthly report of official travels and monthly report of fuel consumption
were also not prepared and submitted.

Under this situation, the use of government vehicles could not be properly controlled and
regulated in the absence of the approved driver’s trip tickets which contain pertinent information
on the total gasoline purchased and consumed in liters, odometer reading, balance of vehicle tank
in liters at the beginning and end of the trip, place of destination, time of departure and arrival of
the trip, distance travelled in kilometers, vehicle plate number, purpose of the travel and the
name of the official passenger/s, contrary to COA Circular No. 77-61 dated September 26, 1977.

Likewise, official travels undertaken during any particular month were not duly summarized
in a Monthly Report of Official Travels nor the required Monthly Report of Fuel Consumption
prepared and submitted to the Auditor for proper review and analysis, contrary to the
aforementioned COA regulation.

Accordingly, the validity and propriety of the total purchases of gasoline ,oil and lubricants
expense incurred during the year amounting to P3,027,904.95 were rendered doubtful while the
frequency of the requisition and reasonableness of the fuel consumption for any particular
vehicle for any particular month or period could not be readily determined for failure to submit
the required above-mentioned reports .(approved driver’s trip tickets , the monthly reports of
official travels and the monthly reports on fuel consumption.)

Finally , failure to indicate the names of the passenger/s and their signatures in the approved
driver’s trip tickets would cause difficulty in pinpointing accountability/ responsibility and in
determining whether municipal officials and heads of offices provided with government

27
transportation were also granted commutable or reimbursable transportation allowances in the
annual budget. This is for purposes of deducting the amount of gasoline actually used for any
particular trip from their monthly transportation allowance/s

In addition, some vehicles owned by the municipality were not marked “For Official use
Only “ as required under COA Circular No. 77-61 dated September 26, 1977.

Management comments:

According to the previous accountant, separate files of trip tickets, utilization of fuel and
gasoline foe heavy equipment were kept for submission to COA. The municipal mayor will
designate one personnel to handle the reporting/documentation of these item, the conversion to
red plate and the marking of “for official use only” of the LGU vehicles.

We recommend that management:

1. Require the Municipal Accountant to verify and ascertain that payments for
gasoline and diesoline are duly supported with approved , driver’s trip tickets for
proper evaluation on the validity, propriety and reasonableness of fuel
consumption.

2. Direct the drivers concerned to prepare and submit properly filled up Driver’s Trip
Ticket with the following information for approval by the Municipal Mayor:

a. Vehicle Plate Number

b. Time of departure and arrival of the trip
c. Balance in Tank at the beginning and end of the trip
d. Distance Travelled
e. Odometer reading, if available
f. Number of litters of gasoline or diesoline purchased and consumed for the
trip
g. Place of Destination
h. Purpose of Travel
i. Name of Driver and Passengers and their respective signatures

3. Direct the accounting unit to require the driver to completely accomplish the
driver’s trip ticket , prepare the Monthly Report of Official Travels and the
Monthly Report of Fuel Consumption for proper review and analysis.

4. Require the official markings of “For Official Use Only” of all six (6) motor
vehicles in the name of the LGU and that the same should be in red plate.

7. No cashbooks were maintained by the various Collecting Officers of the municipality

contrary to the Handbook on Cash Examination, thus accountabilities of accountable

28
officers could not be immediately and readily determined as of any given time and
providing opportunities for possible manipulation and loss of funds.

The Handbook on Cash Examination prescribed the following applicable laws, rules and
policies:

ON CASH MANAGEMENT

Xxx
10. Every cash accountable office shall record his/her transactions in the
prescribed official cashbook. Entries in the cashbook shall be made personally
by her/him. However, in offices where the volume of transactions is heavy, the
Accountable Officer may be assisted in recording in the cashbook by a
subordinate duly designated by the agency head with the concurrence of the
auditor concerned. The work of his/her assistant shall be under his/her close
supervision and direct responsibility.

11. A newly appointed or designated cash accountable officer shall start with a
new cashbook. Before discharging his/her duties, the new Accountable Officer
shall undergo training in the office of the auditor on how to correctly record
the transactions in the cashbook and other matters related to his/her work. For
record purposes, the completion of such training shall be noted by the Auditor
in the inside cover of the cashbook.

12. The cashbook shall be kept in the office of the Accountable Officer and placed inside
the safe or cabinet when not in use. It shall not be removed from his custody without the written
approval of the auditor concerned, and if
removed, receipt shall be secured from the recipient thereof.

ON COLLECTION SYSTEM

Records and Books of Accounts

Under the New Government Accounting System (NGAS), the following are records of the
accountable officers and the books of accounts maintained for collections:

Xxx

Local Government Unit:

1. Cashbook – Cash in Treasury – shall be maintained by the Treasurer to record

collections and deposits to the bank based on the Report of Collection and
Deposit (RCD).

2. Cashbook – Cash in Bank – shall be maintained by the Accountable Officer to

record deposits of collections and withdrawals from the bank thru issuance of
checks.

Xxx

29
 Xxx

Inquiry/observation of the Treasury Unit disclosed that all Collecting Officers of the LGU did
not maintain cashbook in recording all their transactions contrary to the afore-stated provisions
on the Handbook on Cash Examination. The failure to maintain cashbook would hinder/delay in
establishing and immediate accountabilities of all accountable officers as of the given period.

The same handbook also stated that “A cash accountable officer (collecting and disbursing)
is required to maintain a cashbook for each fund handled to facilitate verification of his/her
accountability at any given time. Xxx”

Without the cashbook of the accountable officer, the cash accountability of the collecting
officer could not be readily determined, the accountability of the Collecting Officers were
determined only upon by matching their collections and remittances for a given period..

Moreover, in the absence of the cashbooks of the collecting officers, reconciliation of the
collections/remittances of the accountable officer and the subsidiary ledgers if any could be
difficult as required in the same Handbook on Cash Examination.

4. In relation to the keeping of cashbook, the Accountable Officer shall reconcile her/his
cashbook entries with the accounting records at least quarterly.

Xxx

In the absence of cashbooks, it would lead /exposesthe funds collected to the possibility of
manipulation/malversation or losses of government funds.

Management comments:

The acting treasurer will implement the recommendations and will instruct the collectors to
maintain cashbook.

Recommendation:

We recommend that management require all collecting officers to maintain and update the
entries in the cashbooks where all their transactions will be recorded pursuant to the
above-cited provisions on the Handbook on Cash Examination. Further, reconciliation of
the cashbook balances should be conducted against the subsidiary ledgers supposed to be
maintained by the accounting unit of the municipality.

8. The correctness, validity and condition of the Property, Plant and Equipment
amounting to P101,547,751.99 (net) were not established due to the failure of the
Municipality to submit/conduct a physical inventory report,maintain stock cards and
property ledger cards pursuant to Section 114 and 124 of the New Government
Accounting System (NGAS) Manual, Volume I.

Sections 114 and 124, Volume I of the NGAS Manual provide the following:
“

30
 Section 114. x xThe Chief Accountant shall maintain the perpetual inventory
records comprising of Supplies Ledger Cards (SLC) for each commodity/stock,
Property, Plant and Equipment Ledger Card (PPELC) for each category of plant,
property and equipment and Work, Other Animals and Breeding Stocks Ledger
Card (WOABSLC) for each type of livestock. Such ledger cards shall contain the
details of the property, plant and equipment and livestock account in the inventory
control account in the general ledger.

The General Services Officer or the Municipal Treasurer, as the case maybe
shall likewise maintain stock cards and property cards for supplies; property plant
and equipment; and work animals in their custody to account for the receipt and
disposition of the same. The balance per stock cards/property stock cards should
always reconcile with the ledger cards of the accounting unit. They should also
reconcile with other property records like Acknowledgement Receipt for
Equipment (ARE).”

“Section 124. Inventory of Supplies or Property – The local chief executive shall
require periodic physical inventory of supplies or property. Physical count of
inventory items by type shall be conducted semestrally and reported in the Report
of the Physical Count of Inventories (RCPI). This shall be submitted to the
Auditor concerned not later than July 31 of each year for the first and second
semesters, respectively.

Physical count of property, plant and equipment by type shall be made annually
and reported on the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE). This shall be submitted to Auditor concerned not later than
January 31 of each year.”

As of December 31, 2012, the Property, Plant and Equipment (PPE) accounts showed a
total balance of P101,547,751.99 comprising 81.08% of the agency’s total assets . However,
the correctness, validity and condition of these accounts were not established because actual
physical inventory taking was not conducted.

Review of inventory schedules revealed deficiencies as follows:

1. Schedule/Listing of Land Account amounting to P 3,260,564.55 exclude the

P802,730.00 Land account which was misclassified as Construction in Progress-
Agency Asset

2. Schedule of Electrification ,Power, and Energy Structures of P 5,666,709.77, these

items were listed on a piecemeal basis instead these should have been recorded on a
lump sum at the end of the year. Likewise, payroll for the installation of lights were
also listed instead this should have been incorporated in the specific project being
undertaken.

31
 3. Demolished and unserviceable items were still recorded in the schedule of inventory ,
these items should have been reflected in the Inventory and Inspection Report
(I & I ) as basis for the disposal of these items.

4. Manpower Training Center with book value of P 347,363.55 was noted as non-
serviceable

5. Schedule of inventory were not prepared of these items such as: a.) Office equipment
,furniture & fixtures b.) Machineries & Equipment c.) Transportation equipment d.)
Other PPE.

Moreover, the municipal accountant/municipal treasurer were not able to prepare a

detailed supporting schedule of these accounts thus, finding difficulty in the verification of
the account balances. Inquiry from the municipal treasurer’s office and the accounting office
revealed that they have no information as to the availabilityof the data reflected in the
previous inventory report.

Alternative audit procedures could not be employed since no property/stock and ledger
cards are maintained by the Treasurer’s Office and Accounting Unit, as basis for verification
of the receipt and disposition of property and supplies, contrary to the afore-cited regulation.
This observation is a reiteration of the prior year’s audit report however, the recommendation
remained not acted by the agency.

In addition, the municipal accountant have not submitted schedules of PPE however, the
inventory report as required by existing regulation remained not submitted. The amount
reflected in the schedules does not reconcile in the financial statements as of the year.

Management comments:

Inventory report and physical count of PPE items will be undertaken/submitted in CY

2013.

RECOMMENDATION

We recommend that Management:

a.) Conduct of a complete physical inventory of the Municipality’s properties by

creating an Inventory Committee composed of a representative from each
Offices/Units. The Municipal Mayor should assign a point personnel to oversee the
smooth inventory taking and the Inventory Report should be prepared to document
the actual output of the inventory team.

b.) Require the Inventory Committee to conduct the physical count of all the
properties recorded in the books and those not yet recorded but actually found in
the LGU offices/premises and to prepare the corresponding inventory reports

32
 thereof; and reconcile them with the accounting records to come up with the
correct account balances in the financial statement.

c.) Require the Municipal Treasurer and Municipal Accountant to maintain stock,
property and ledger cards, respectively to properly account the receipt and
disposition of property and supplies. The Office of the Municipal Treasurer should
request additional staff for the conduct of the physical inventory.

9.The Municipal Treasurer failed to maintain a Check Register as a tool in ensuring that
checks issued for any particular date are immediately recorded in chronological sequence,
including cancelled checks, and the release of checks to the rightful claimants thereof are
duly acknowledged and dated contrary to Section 42 of the NGAS Manual for LGUs,
Volume I thus exposing risk of payment to unrightful claimants.

Section 42 of the Manual on the NGAS for LGUs, Volume I, requires the following:

Release of Checks - The Treasurer shall release the check only to the payee or his duly
authorized representative. For purposes of releasing checks, the Treasurer shall maintain
a Check Register where all checks issued shall be recorded chronologically and where the
claimants shall be required to acknowledge receipt thereof.

Further, Section 44 (i) of the same NGAS Manual states that the Municipal Treasurer
shall record the check in the Check Register and release the check to the claimant. The
Treasurer shall then record the disbursement in the Cashbook – Cash in Bank, prepare the
Report of Checks Issued (RCI) and forward the RCI with DV and supporting documents to
the Accounting Unit.

In Annex E-1 it shows the prescribed format of a Check Register, while in Annex E-2 is the
instructions on the proper accomplishment thereof. The Check Register shall be prepared by
fund and for every bank account, with specific columns for the following information:

Date check was issued, the serial number of the checks drawn which shall be entered in
chronological sequence, including cancelled checks, name of the payee, amount of the check, the
date when the check is released to the payee and the name and signature of the payee or claimant
and the date received.

Verification of records and inquiry made disclosed that a Check Register is not being
maintained by the Municipal Treasurer of the LGU, contrary to Section 42 of the Manual on the
NGAS for LGUs, Volume I.

The actual practice of the LGU revealed that checks representing payments of claims were
released by the Municipal Treasurer to the respective payees or duly authorized representatives
who are only made to sign on the “Received Payment” portion of the Disbursement Voucher
(DV) to acknowledge receipt of payment as well as in the logbook. The check disbursement is
then entered in the Cashbook - Cash in Bank and reported by the Municipal Treasurer in the

33
 Report of Checks Issued for submission to the Accounting Unit together with the DV and
supporting documents.

As a consequence, management is not assured that checks are issued chronologically and
recorded in the proper register, as an internal control mechanism of detecting possible
irregularities in the issuance of checks. Furthermore, the non-implementation of the use of check
register will lead to possible dispute if the checks were not release/issued to the proper claimant.

Management comment:

Will implement the recommendations for CY 2013 transactions.

Recommendation:

We recommend that Management instruct the Municipal Treasurer to keep and maintain a
check register where all checks drawn for the day are immediately recorded in
chronological sequence and where the rightful claimants are required to acknowledge
receipt of the check thereon, pursuant to Section 42 of the NGAS Manual for LGUs,
Volume I, as a tool of management in detecting possible irregularities and avoiding
possible claim dispute.

10. Cash advances amounting to P2,666,034.35 remained outstanding /unliquidated in

the books for over one (1) year contrary to COA Circular No.97-002 dated February 10,
1997 thus overstating the assets, understating the expenses, and exposing to possible
misuse of government funds .

COA Circular No. 97-002 provides as follows:

Liquidation of cash advances-

Sec. 5.1.3 Official travel – within sixty (60) days after return to the
Philippines in the case of foreign travel or within thirty (30) days after return to his
permanent official station in case of local travel, as provided for in EO 48 and COA
Circular 96-004.

COA Circular No. 2003-003 dated July 30, 2003 specifically provides the Guidelines in the
Audit and Liquidation of Intelligence Fund and Confidential Funds of Local Government Units
which states that:

1. All cash advances chargeable against the intelligence and/or confidential funds of all local
government units shall be liquidated within one month from the date the purpose of the
cash advance was accomplished. For projects continuing beyond one month, a monthly
progress liquidation report shall be submitted.XXX

34
2. Subsequent cash advances shall be granted only after the issuance of credit notice from
the Chairman or the submission of the liquidation vouchers/reports for the previous cash
advance to the COA Chairman. One copy of the transmittal letter, for the purpose, duly
received by the Chairman or his authorized representative, must be forwarded to the
Accountant of the LGU and the auditor concerned for reference.

Review of the Advances to Officers & Employees (123) and Due from Officers & Employees
(148) for Accounts for CY 2012 disclosed the following balances

Account (123) Advances from officers & employees = P 701,034.35

(General Fund P503,104.35& SEF P197,930.00)

Account (148) Due from officers &Employees = 1,965,000.00

(Intelligence & Confidential Funds)
Total = P2,666,034.35
===========
Analysis of the receivable accounts (123) disclosed that some of the amounts were granted
wayback in2005 up to 2012 .

Presented in detailed as follows:

Aging of Accounts
Name of Employee/ Date Amount. 1 mo.- 6 Over 6 Over 1 year
General Fund Granted mos. mos.- 1 yr.
Acuna ,Antonio 2008-2011 P62,356.54 P62,356.54
Bernaldez, Teodosia 2011-2012 6,960.00 6,840.00 120.00
Digal, Luisito 2010-2012 53,432.30 17,696.00 35,736.30
Cempron, Maxilmiliano 2012 50,000.00 50,000.00
Requirme, Jake 2009-2012 58,612.92 54,912.90 3700.00
Jala, Orencia 2012 173.00 173.00
LimbagoPacifico 2012 15,384.00 15,384.00
SumampongPubleo 2012 4,396.90 4,396.90
Toledo, Coleto 2012 10,140.00 10,140.00
Varques, Elmer 2009 6,287.58 6,287.58
Ruaya, Hilario2012 520.00 520.00
Calipusan, Leon 2010-2012 121,448.00 38,248.00 83,200.00
Corona Melquiades 2012 18,140.00 4,000.00 14,140.00
Calipusan, Alexius 2010 14,175.11 14,175.11
Cempron, Auraliza 2001-2007 12,908.50 12,908.50
Palgan, Uldarico 2005 10,000.00 10,000.00
Sarigumba, Armi 2005 10,000.00 10,000.00
Delfin, Eduardo 2012 18,140.00 18,140.00
Calacar, Asterio 2012 18,140.00 18,140.00
Basanes, Lyn 2009-2012 19,263.50 15,500.00 3,763.50
Calipusan, George 2012 25,589.00 25,589.00
Sempron, Edgar 2011-2012 11,837.00 8,637.00 3,200.00
Balbido, Cleo 2011 10,000.00 10,000.00
Maquindang , Tommy 2012 400.00 400.00
Sub-total P503,104.35
SEF

35
 CAberte,Elizbeth 2008 6,000.00 6,000.00
Bualat,Helconida 2008 1,500.00 1,500.00
Jala, Melecio 2009 10,000.00 10,000.00
Raya, Glecerio 2009 8,000.00 8,000.00
Biliran, Mia Marie 2009 20,000.00 20,000.00
Inakay, Angelita 2009 20,000.00 20,000.00
Mondilla, Liza 2009 6,500.00 6,500.00
Odal, Evelyn 2009 13,000.00 13,000.00
Lerion. Maria G. 2009 9,700.00 9,700.00
Rances, Lorna 2010 5,000.00 5,000.00
Budiongan,Pacenita 2010 13,500.00 13,500.00
Dapar, Marcelo 2010 27,000.00 27,000.00
Tumanda, Dorothy 2010-2011 18,030.00 18,030.00
Calacar, Gemma 2010 3,500.00 3,500.00
Calape, Norma 2010 3,500.00 3,500.00
Lismis,Dorothy 2012 13,200.00 13,200.00
Galleto, Artemio 2012 20,000.00 20,000.00
Sub-Total P197,930.00

Due from Officers/Employees Account 123

(Intelligence Fund)

Leon, Calipusan 1210 480,000.00 480,000.00

(Municipal Mayor) 1211 500,000.00 500,000.00
2011 485,000.00 485,000.00
2012 500,000.00 500,000.00
Sub-Total P1,965,000.00
Grand
Total P2,666,034.35 P192,082.80 P643,454.00 P1,885,677.53
Data was extracted from the reports submitted by management in December 2012.

As gleaned from the above –mentioned data revealed that P1,885,671.53 or 70.73% were
receivables aging from one (1) year to five years which were not settled/liquidated some of these
amounts were granted from CY 2005 and onwards..

From the above-stated information , we noted that Intelligence /Confidential Funds of P

1,965.000.00 already aged from one (1) year to five years however,liquidation of these amount
were already submitted to the Chairman, COA, Q.C.as explained by the municipal accountant.

Records also shows that despite of the outstanding unliquidated cash advance of the
Mayor and other LGU personnel, the accounting unit being the internal auditor still
granted/allowed another cash advances contrary of Section 4.1.4 of COA Circular 97-002 that
prohibits the granting of Cash Advances .

Management comments:

Concerned personnel will avail the monetization of their leave credits to pay their outstanding
cash advances.

36
Recommendation:

Enforce immediate liquidation of all outstanding cash advances pursuant to COA Circular
No. 97-002, to avoid suspensions/disallowance in audit. Henceforth, ensure compliance of
COA Circular 97-002 in the grant, utilization, and liquidation of cash advances.

1.) Failure of the employee concerned to liquidate said cash advances may constitute a
valid cause for the withholding of his salary. In such event, effect
settlement/refunds through deduction from whatever amounts due the concerned
staff after /proper due notice.

3.) Send demand/collection letters to the concerned personnel for their immediate
liquidation likewise , accounting unit should closely monitor and stop the granting
of additional cash advances for those who have still th pending unliquidated
/outstanding cash advances.

4.) The accounting unit should closely monitor and stop the granting of additional cash
advances to the concerned personnel with pending unliquidated /outstanding cash
advances.

5.) Institute appropriate charges to the concerned personnel for

non-payment/liquidation of LGU funds entrusted to them if the situation warrants.

6.) Ensure reconciliation of the CIF accounts per schedule of Cash Advances /Accounts
Receivable against the certification issued.

11. Collective Negotiation Agreement (CNA) Incentive was paid to 82 LGU personnel
totalling P 410,000.00 contrary to DBM Budget Circular No.2012-4 dated December
17,2012.

Budget circular No.2012-4 dated December 17,2012 – Guidelines on the Grant on the
Grant of Collective Negotiation Agreement(CNA) Incentive for CY 2012 states :

1.2 Item m(4) (h) (ii)(aa) of the Senate and House of Representative Joint Resolution
No.4,s.2009,approve on June 17,2009,provides “(aa) Collective Negotiation
Agreement (CNA) Incentive –this may be granted to both management and rank-and-
file employees of agencies with approved and successfully implemented CNAs in
recognition of their efforts in accomplishing performance targets at lesser cost, in
attaining more efficient and viable operations through cost-cutting measures and
stems improvement xxx”.

3.1 Rank and file employees who are members of an employees organization which is
accredited by the Civil Service Commission (CSC) as the sole and exclusive

37
 negotiating agency in accordance with the rules and regulations issued by the Public
Sector Labor-Management Council (PSLMC)

4.1.1 There should be a valid and subsisting CNA executed between the representatives
of management and the employees’ organization accredited by the CSC as the sole and
exclusive negotiating agency for the purpose of collective negotiations with the
management of an organizational unit .

4.1.4 Similarly an LGU may grant the CNA Incentive only when it has completed at least
90% of the targets under its programs/activities /projects approved in the LGU budget
for the current year.

4.3 The CNA Incentive for personnel of the LGU shall be sourced sole from their
respective savings from MOOE budgets for CY 2012, such savings are limited to the
following MOOE items:

4.3.1 - Traveling expenses

4.3.2 - Communication Expenses
4.3.3 - Repairs and Maintenance Expenses
4.3.4 -Transportation and delivery expenses
4.3.5 -Supplies and Materials
4.3.6- Utility expenses

4.4.1 The CNA Incentive for the year shall be a one-time benefit to be granted not earlier
than January 15, 0f the following year.

4.4.3 It shall not be given upon signing and ratification of the CAN, as this would
transform the CNA Incentive into a CNA Signing Bonus which the supreme |Court has
ruled against, for not being a truly reasonable compensation.

4.4.4 The amount paid as CNA Incentive shall be recorded in the agency books under the
account “Personal Services-Other Bonuses”.

9.0 Agency Heads shall be responsible for the implementation of the provision of this
circular. They shall be held liable for any payment of the CNA Incentive not in
accordance with the provision hereof without prejudice, however, to the refund by the
employees concerned of any unauthorized payment they received.

The municipality of Loboc has granted a CNA Incentive to its 82 personnel for CY 2012
at P5,000.00 each totaling P 410,000.00 enumerated as follows : :

1. Office of the Mayor = P 55,000.00

2. Sangguniang Bayan = 60,000.00
3. Accounting Office =10,000.00
4. Municipal engineer = 5,000.00
5. MPDC = 5,000.00

38
 6. LCR =
15,000.00
7. Treasurers’ Office =
30,000.00
8. Assessors’ Office =
10,000.00
9. Waterworks Office =
10,000.00
10. Market and Slaughter House =
10,000.00
11. Agriculture Office =
20,000.00
12. Budget Office =
10,000.00
13. DSWD Office =
5,000.00
14. Rural Health Unit =
45,000.00
15. Tourism Office =
25,000.00
16. Delfin et.al = 85,000.00
17. Barangay Bookkeepers = 10,000.00
Total = P410,000.00
=============
However, review of pertinent documents as basis of the payments noted some
deficiencies such as :

1. Copy of the CNAapplication/approval/accreditation from the CSC was not

submitted/attached, this documents will serve as basis in granting the
incentive.

2. It was paid in September 2012 in violation of the above-mentioned circular

Section 4.4.1 the payment should have been made not earlier in January 15 of
the succeeding year

3. As of September 2012, savings from MOOE if any,were not yet identified

hence, expenses for the last quarter of 2012 were not yet incurred.

4. The total amount of P410,000.00 was paid without legal basis, not included in
the budget for 2012 hence, it and was charged to MOOE .

5. The amount was recorded as MOOE instead of “Personal Services-Other

Bonus”

Management comments:

The municipal mayor reacted on this comment because at first he was apprehensive of
approving the payment of CNA however, his budget officer/acting municipal treasurer
were able to convinced that it is within the bound of existing CNA regulations based on
the 2011 guidelines, such regulation is no longer applicable for CY 2012 CNA incentive.

It was agreed by management that concerned personnel should be granted monetization

of their leave credits to pay-off their existing cash advances and the CNA incentive.

39
 Recommendations:

1. Management should submit justifications on the release/payment of

CNA incentive of P410,000.00 prior to the identification of Savings from
some MOOE items which is the sole source of funds of the LGU CNA .

2. Revisit DBM Circular No. 2012-4, dated December 17, 2012 as guide in
the implementation of CNA Incentive

3. The Head of the Agency should require concerned LGU personnel to

refund the amount of P5,000.00 for the unauthorized payment received.

4. Concerned personnel should refund the amount and or awaits the

issuance of the Notice of Disallowance (ND).

12. Purchase of One (1) Unit Brand New Van Vehicle (Grandia) of P 1,693,875.40 was
charged to the Local Disaster Risk Reduction Management Fund(LDRRMF) , the
calamity fund for CY 2012, and paid without complete supporting documents contrary to
Sections 1 and 2 of Republic Act No.10121,Section 168 ( C ) of the GAAM , Vol. I
depriving the prioritization of projects and programs to address reduction of disaster -
related risks to the disadvantageous of the constituents while the regularity/validity of
expenses is doubtful .

Rule 18, Sections 1 and 2 of RA 10121 provides:

Section 1. – Utilization of the Local Disaster Risk Reduction Management Fund –

The present Local Calamity Fund shall henceforth be known as the Local Disaster Risk
Reduction and Management Fund (LDRRMF) , No less than 5% of the estimated revenue from
regular sources shall be set aside as the LDRMMF to support disaster risk management
activities such as, but not limited to pre-disaster preparedness programs including training,
purchase of life-saving rescue equipment, supplies and medicines for post-disaster activity , for
the payment of premiums on calamity insurance and construction of evacuation center ,Xxx

Section 2. - Quick Response Fund- of the amount appropriated, for LDRMMF ; thirty percent
(30%) shall be allocated to Quick Response Fund or standby funds for relief and recovery
programs in order that the situation and living condition of people in communities or areas
stricken by disaster, calamities. Epidemics or complex emergencies may be normalized as
quickly as possible.

The allocation of 5% for Local Disaster Risk Reduction Management Fund (LDRRMF) from the
total income from the regular sources is a statutory requirement that must be complied by each
local unit. The establishment of LDRRMF funds to strengthen the capacity of the national

40
government as well as local government units together with partner stakeholders , to build the
disaster resilience of communities, and to institutionalize arrangement and measures for
reducing disaster risk including projects climate risks and enhancing disaster preparedness and
response capabilities at all levels.

Section 168 ( c) of the GAAM, Volume I, states as follows :

“Basic requirements applicable to all classes of disbursements”,

X x x ..

(C) Documents to establish validity of claims- Submission on documents and other evidence
to establish the validity and correctness of the claim for payment.

For CY 2012 total budget of the LGU totaled P 93,762,261.32 . Five percent (5%) or P
4,688,113.06 should have been appropriated for the Local Disaster Risk Reduction and
Management Fund (LDRRMF) to support disaster risk management activities. However, the
LGU budgeted only P 2,000,000.00 which is lesser by P2,688,113.60 for the required calamity
fund annual budget.

Of the P2,000,000.00 budget for calamity fund, the P 1,693,875.40 was spent to purchase Van
Vehicle which is not one of the items mentioned for funding out of the LDRRMF.

Section 20. of R.A 10121 clearly stipulates that LDRRMF is intended to fund activities such as,
but not limited to pre-disaster preparedness program including training, purchase of life-saving
equipment, supplies and medicines, post - disaster activities and for the payment of premium on
calamity insurance.

Had the Vehicle Van –Grandia been charged to its proper fund, the LGU could have spent on
other projects for the safety & protection of its constituents in case of unforeseen calamity which
includes the purchase of life boats, riprap works ,clearing/ declogging of drainage and other
related activities for disaster risk reduction to ensure the welfare & protection of its constituents.

Furthermore, it was noted that payments was effected without complete supporting documents
attached to the voucher as follows:
1. Certificate of Availability of funds (CAF) was not completely filled up as to the actual
source of funds.
2. Disbursement voucher without number and date
3. Philgeps posting was on May 19,2012 however, date in the opening of bid in the letter of
invitation was May 16,2012 , the status of posting printed in the Philgeps was “In
Preparation” which means not yet accepted instead of an “Active” Status .
4. Check was prepared October 2,2012 while the voucher was approved for payment by the
LCE was October 3, 2012, one day before the approval of the disbursement voucher.
5. Purchase request, purchase order, inspection/acceptance report same without number and
date

41
 6. Bidding documents/invitation to witness/observe the bidding procedures were not
submitted to COA.
7. Per inspection report from the Technical Office, COA, Cebu City, a price difference of
P 43,870.00 was noted based from their data on file.

Management comments:

The municipal mayor commented that they opted to purchase the said vehicle so they
could use to accommodate guests, tourist and visitors who will visit the place if not use
during calamity activities/situation.

Auditor’s rejoinder:

The LGU can still purchase this type of vehicle charge to the proper/other fund instead
of LDRRMF.

Recommendations:

1. Submit justification on the difference between the dates of posting in the Philgeps
and in the schedule of Invitation to Bid (ITB) as well as the incomplete/inadequate
supporting documents.
2. The municipal accountant should review the validity ,accuracy and completeness of
supporting documents prior to the payment
3. Management should maximize the utilization of LDRRMF by implementing
programs& projects that will ensure the safety and protection of the constituents
from unforeseen calamities/events.
4. Submit to COA an invitation to observe in the phases of procurement/bidding
together with the documents before the actual date the bidding for advance
information.
5. The BAC should submit justification on the Price difference noted by technical
inspector per inspection report or require the refund of P43,870.00 from the
supplier/or charge the amount to the personnel responsible in the preparation of the
estimates or Approved Budget for Contract (ABC) as basis for payment.
6. Submit justification for the purchase of a high-end /luxury vehicle charged to
LDRMMF

Furthermore, all charges to the 5% LDRRMF should be related to the purpose to which
the fund is created.

13. Purchase of four (4) parcels of Land totaling P 2,530,918.30 were not in accordance
with Section 39 (2) of P.D. 1445, COA Circular No.2012-001 and Section 168 (c) of the
GAAM, Vol. I thus, the regularity/priority of the payment is doubtful.

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Section 39 ( 2) of Presidential Decree No. 1445- Submission papers relative to government
obligation states:

(2) In the case of deeds to property purchased by any government agency, the
Commission shall require a certificate of title entered in favor of the government or other
evidence satisfactory to it that the title is in the government.

COA Circular no 2012-001 dated June 14, 2012 states:

Section 13.1 Land – Documentary requirements common to both negotiated purchase and
payment by Court Decision:

a.) Project parcellary survey plan showing that said lot and structures are within the
boundaries of the right-of-way

b.) Structural mapping of the lot affected

c.) Certification by the implementing agency that the claim is not within the original
ROW of a converted local roads

d.) Verification from the Head of the implementing agency that there is no pending claim
and previous payments on subject property

e.) Environmental clearance certificate (ECC) as required under Section 8 of RA 8974

f.) Copy of latest updated master list of project-affected-person (PAP)

g.) In case of death of claimant or ownerjudicial; settlement duly advertised in a

newspaper of general circulation.

h.) Independent appraisal report/valuation should be based on the provision of RA 8974

i.) Applicable BIR zonal valuation

j.) Certified photocopy of authority to purchase land

k.) Deed of Absolute Sale registered with the Register of Deeds where the land is
located

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 l.) Certified photocopy of Tax Clearance from assessors’ office where the land isa
located – certificate authorizing registration,capital gains tax,documentary stamp tax
transfer tax

m.) If registered Land_ if the whole lot is acquired , Transfer Certificate of Title certified
as true copy by the Register of deeds of Tax Declaration certified true copy by the
Assessors Officein the name of the procuring entry

n.) If unregistered Land-certified true copy of TD in the name of the procuring entity or
previous owner with annotation of sale,notarized affidavit of ownership, certification
from the municipal treasurer that the claimant is the sole entity paying the taxes for
the property for the past five years,notarized joint affidavit of two adjoining
landowners attesting to the ownership of land,if claim for payment or amount of sale
exceeds P50,000.00 (EO No.1035) ,certified photocpopy of claimants surety bond
issued by the Insurance company.

Section 168( c) of the GAAM, Volume I, states as follows:

“Basic requirements applicable to all classes of disbursements”,

X x x..
( C ) Documents to establish validity of claims-Submission on documents and other evidence to
establish the validity and correctness of the claim for payment.

For CY 2012 the LGU purchased four (4) parcel of land from private individuals as
follows:

A.) EufemioB.Dango P2,105,700.00

B.) Fredeswinda Mira 42,000.00
C.) Magdalino Adorable 128,600.00
D.) CiprianaLimbago 120,900.00
Total P 2,397,118.30
============

Aside from the required documents needed to support for the acquisition and payment of
Land procured by the LGU from the above-mentioned regulations, we have also noted some
deficiencies on the documents as follows:

1. Deed of Absolute Sale not registered with the Register of Deeds

2. Affidavit of Adjudication By Sole Heir of Estate of Deceased Person with
Simultaneous Sale not duly advertised in a newspaper of general circulation
3. Special Power of Attorney (SPA) not attached
4. Sketch/Subdivision Plan not submitted
5. Tax Clearance not attached
6. DAR certificate of non-tenancy not submitted

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 7. All acquisition not advertised
8. Cadastral Lot numbers not indicated
9. No Tax Declaration attached
10. Affidavit of Legal Heirs not submitted
11. Certificate of Availability of Funds (CAF) not attached
12. Obligation Request not completely filled up as to actual source of funds
13. Disbursement Vouchers not completely filled up, no number and date
14. Pertinent documents for the sale/acquisition was signed on March 21, 2012
15. The obligation request was approved by the municipal mayor on March 26,
2012
16. The checks were prepared on March 26, 2012.
17. The disbursement voucher (DV’s) were approved for payment on March 27,
2012 one (1) day the checks were prepared prior to the approval of the DV’s
18. Title of the lot/Tax declaration were not yet transferred to the name of the
LGU.
19. The prices of the Lots/Land were not supported with the appraisal report
prepared by the Appraisal Committee as basis of the payment.
20. Agreement for the payment of capital gain tax was not mentioned/submitted.

Furthermore, for CY 2012supplemental budget of P2M was set aside for the purchase of lot
intended for the tertiary school building in Gotoson, Loboc ,Bohol however, actual amount paid
was P2, 397,118.30 with P397,118.30 paid from other source.

Management comments:

All deficiencies and lacking documents will be submitted/regularized in CY 2013.

Recommendations:

1.Submit all lacking documents to support the validity/regularity of the

disbursements.Management should revisit and adhere to the above-mentioned guidelines in
the procurement of land intended for the use the municipality to ensure legality of
documents and avoid cases filed in court by the rightful owners.

2,The accounting unit should check/review all the supporting documents prior to the
payments to ensure correctness and completeness of data to avoid suspension/disallowance
in audit.

3.Submit justifications on the prices/appraisal arrived and used as basis in the payment of
the land/lot.

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B.STATUS OF AUDIT SUSPENSIONS, DISALLOWANCE AND CHARGES ISSUED
AND/OR SETTLED DURING THE YEAR.

Notice of Suspension Notice of Disallowance Notice of Charge

Bal. Issued Settled Bal. Bal. Issued Settled Bal. Bal. Issued Settled Bal.
Beg. End Beg. End Beg. End
6,000.00 0.00 0.00 6,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

There were no Notices of Suspension/Disallowance/Chargeissued nor settled during the

year. Transactions/disbursements that merit suspension or disallowance in audit which are
incorporated and discussed in this report have been issued withAudit Observation Memoranda.
The issuance of the corresponding Notices of Suspension orDisallowance, as the case may be,
shall be made in the ensuing year.

C. COMPLIANCE WITH TAX LAWS

The National Internal Revenue Code of the Philippines or RA No. 8424 seeks to ensure
efficiency in our tax collection system by monitoring effectively, among others, the tax incidence
in contracts with the government and thus obtaining vital information for the discovery of
potential taxpayers for tax purposes.

The Office of the Municipal Accountant prepared the monthly listing of purchases made
by the municipality and the list of taxes withheld on salaries of officials and employees for
submission to the BIR together with remittances of taxes withheld therefrom in accordance with
Revenue Regulations No. 2-98.

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