EXECUTIVE SUMMARY

HIGHLIGHTS OF FINANCIAL OPERATION

During the year revenues derived from all sources totaled P98,927,150.88 of the said
amount 35.30% represented the total Internal Revenue Allotment (IRA) which amounted to
P34,924,525.10. With an increase of P3,288,241.67or 3.44% could be noted, as compared with
last year’s total income of P95,638,909.31.

To cope with the current year’s operation, the municipality set aside a total appropriation
of P93,762,261.32 in its annual budget to fund current expenditures.

The financial and operational highlights of the municipality for the year 2012, with a
comparison of the preceding year is shown below:

Increase
2012____ __ 2011___(Decrease)Percentage
INCOME
Income Other than IRA P34,924,525.10 P35,861,415.00 (P936,889.90) (2.61%)
Internal Revenue Allotment 64,002,625.8859,777,494.314,225,131.57 _7.07%_
Total Income P98,927,150.88P95,638,909.31P3,288,241.67 3.44%

EXPENSES
Personal Services P35,677,151.51 P33,029,670.80 P2,647,480.71 8.02%
MOOE 35,909,316.26 35,449,426.12 459,890.14 1.30%
Financial 1,634,563.46 1,331,216.61 303,346.85 22.79%
Operating Expense/Loss ____________ _____________ ___________ _______
Total Expense P73,221,031.23P69,810,313.53P3,410,717.704.89%

NET INCOME/LOSS P25,706,119.65P25,828,595.78 (P 122,476.03)(0.47%)

Assets P125,242,552.09 P101,414,893.25 P23,827,658.80 23.50%

Less: Liabilities 22,691,134.8220,357,818.76P2,333,316.0611.46%
Government Equity P102,551,417.20P 81,057,074.44P21,494,342.7626.52%

FINANCIAL RATIO:

Cash + Receivables = 23,314,492.2618,734,680.73

Current Liabilities 4,689,265.91 7,625,551.83

LIQUIDITY RATIO = 4.97:1 2.46:1

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Current Assets___ = 23,411,741.0918,971,410.73
Current Liabilities 4,689,265.917,625,551.83

CURRENT RATIO = 4.99 2.49

The Annual Budget of the municipality registered a total appropriations of P93,762,261.32

which is P2,971,946.56 or 3.27% higher than the previous year of P 90,790,314.76 as shown
below :

Increase
2012 _ __ 2011 __ _(Decrease) Percentage
General Fund P92,390,761.32 P90,006,294.76 P2,384,466.56 2.65%
SEF 685,750.00 784,020.00 (P98,270.00) (12.53%)

Total P93,762,261.32P90,790,314.76P2,971,946.563.27%

SCOPE OF AUDIT

An audit was conducted on the accounts and operations of the Municipality of Loboc,
Bohol for CY 2012. The audit consisted of review of operating procedures, interview with
concerned government officials and employees, verification, reconciliation, and analysis of
accounts and such other procedures considered necessary. It was aimed at ascertaining the
propriety of disbursements and reliability of financial reports and determining whether the
agency’s operations had been conducted in accordance with laws, rules and regulations. The
audit was also aimed to review managerial efficiency with the end in view of eliminating waste
and promoting efficient use of public funds and resources and the ascertainment of the agency’s
effectiveness by determining whether desired results have been achieved and the programs have
accomplished their purposes and objectives.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the financial statements because the validity
and correctness of the recorded Property, Plant and Equipment amounting to P101,547,751.99 is
not certain due to the failure of the concerned officials to undertake the physical inventory-
taking, maintain stock cards and property ledgers, cash advances amounting to P 2,666,034.35
remained outstanding/unliquidated in the books thus, accuracy of asset balance could not be
ascertained. Finally Construction in Progress-Public Infrastructure of P 9,212,291.88 (264) was
misclassified to its appropriate asset account and were still carried in the books thus, the account
were misstated and not fairly presented in the financial statements for CY 2012.

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SIGNIFICANT FINDINGS AND RECOMMENDATIONS

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.

Recommendations:

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/treaurer’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 recording in the books of accounts.

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
documents likewise, master plan ,detailed engineering activities/essential data were not
submitted contrary to R.A.9184 and 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 .

Recommendations:

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.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 of P 9,212.291.88 (264) was misclassified 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.

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 RECOMMENDATION

We recommend that Management:

a.) Require the municipal accountant to maintain na individual subsidiary ledger to

closely monitor moving/non-moving accounts and minimize/avoid misclassification of
particular accounts.

b.) Require the municipal accountant to reclassify/effect proper classification of CIP to have
fair presentation in the financial statements.

4. Amount totaling P13,374,535.00 were 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).

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.

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, disadvantageous to the government .

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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 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 as well as the basis of the estimates/amount of the excavator purchased.

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 the preparation of the
Approved Budget for Contract/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 or require additional delivery
of the Breaker.

8. Submit valid reason/s on the discrepancies of the schedule /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
September 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.

Recommendation:

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:

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

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.

Recommendation:

We recommend that Management:

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

Inventory Committee composed of a representative each from the Mayor’s Office, from
the General Services Office (or the Municipal Treasurer’s Office) and a representative
from each department to prepare the necessary procedures in the proper and orderly
conduct of the physical count of the all the property, plant and equipment and
inventories owned by the Municipality;

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 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 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, as well as the release of checks to the rightful claimants are duly
acknowledged and dated thus, contrary to Section 42 of the NGAS Manual for LGUs, Volume I
thereby exposing risk of payment to wrong/unrightful claimants.

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 (10 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 .

Recommendation:

We recommend that management:

1.) 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.

2.) 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

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 cash advances for those who have still the 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 totaling
P 410,000.00 contrary to DBM Budget Circular No.2012-4 dated December 17,2012.

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.

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 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 , VolumeI thus, depriving the prioritization of
projects and programs to address reduction of disaster - related risks to the disadvantageous of
the constituents and the regularity, validity of expenses is doubtful .

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.

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 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 P43,870.00from 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 Section
39 (2) of P.D. 1445, COA Circular No. 2012-001 and Section 168 ( C ) of the GAAM,Vol. I
thus, the propriety of the payment is doubtful.

Recommendation:

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.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Of the eleven (11) audit recommendations embodied in the Annual Audit Report for the
year ended December 31, 2011, five (5) were implemented, two (2) were partially implemented,
and four(4) were not implemented

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