EXECUTIVE SUMMARY

A. Introduction

The Municipality of Laak was formerly a barangay of the Municipality of Asuncion

and became one of the municipalities of Davao Province on April 4, 1979 by virtue of
Batas Pambansa Bilang 23. In 1998, it became one of the 11 municipalities which
comprise the Province of Davao de Oro as the old Davao Province was divided under
Republic Act No. 8470. It is a first-class town located at the northwestern part of the
Province of Davao de Oro. The Municipality has 40 regular barangays and 15 special
barangays.

Pursuant to Republic Act No. 7160, otherwise known as the Local Government
Code of 1991, the Municipality like other Local Government Units enjoys autonomy in
managing, directing and planning its own affairs and activities in conformity with the
national government thrust for social and economic growth and development.

The Municipality is headed by Local Chief Executive Honorable Antonio L.

Libuangan and Vice Mayor Hon. Mark Anthony S. Libuangan, and eight (8) elected
Sangguniang Bayan (SB) members and three (3) ex-officio SB members.

B. Audit Methodology

The Commission has been implementing risk-based audit in the conduct of its audit
services. However, to meet the evolving developments in public governance and fund
management, the results-based approach in audit was incorporated. The integration of
these two approaches, called the Integrated Results and Risk-Based Audit (IRRBA)
Methodology, was applied in the audit of the accounts and operations of the
Municipality.

C. Scope of Audit

A financial and compliance audit was conducted on the accounts and operations
of the Municipality of Laak, Province of Davao de Oro for Calendar Year 2020. The
audit consisted of review of operating procedures, evaluation of programs and projects,
verification, reconciliation, confirmation and analysis of accounts, interview of officials
and employees and such other audit procedures considered necessary.

D. Financial Highlights

The financial position and performance of the Municipality of Laak for the year
ended December 31, 2020, is provided in the proceeding tables:

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 Increase (Decrease)
Account Groups 2020 2019
Amount %
Assets 748,165,589.10 666,533,605.49 81,631,983.61 12.25%

Liabilities 289,619,679.56 293,674,530.04 (4,054,850.48) (1.38%)

Net Asset/Equity 458,545,909.54 372,859,075.45 85,686,834.09 22.98%

Revenue 343,459,162.05 306,333,001.79 37,126,160.26 12.12%

Current Operating Expenses 311,446,100.80 297,518,339.81 13,927,760.99 4.68%
Transfers and Subsidies From 32,013,061.25 8,814,661.98 23,198,399.27 263.18%
Transfer and Subsidies To 31,658,693.68 - 5,741,405.00 37,400,098.68 (651.41%)
Surplus/(Deficit) for the Period 63,671,754.93 3,073,256.98 60,598,497.95 1,971.80%

Appropriations per Fund

Total appropriations for the year 2020 and 2019 amounted to P389,379,970.98
and P338,516,446.28, respectively, which are broken down as follows:

Difference
2020 2019 Increase / (Decrease)
Amount %
General Fund
Personal Services 116,158,336.93 99,223,514.87 16,934,822.06 17.07%
MOOE 224,509,759.51 186,637,477.15 37,872,282.36 20.32%
Capital Outlay 46,251,452.01 49,828,861.80 -3,577,409.79 (7.28%)
Subtotal 386,919,548.45 335,689,853.82 51,229,694.63 15.26%
Special Education Fund
Personal Services 191,942.00 87,500.00 104,442.00 119.36%
MOOE 956,492.53 1,158,667.68 -202,175.15 (17.45%)
Capital Outlay 1,311,998.00 1,125,500.00 186,498.00 (16.98%)
Subtotal 2,460,432.53 2,371,667.68 88,764.85 (12.95%)
Grand Total 389,379,980.98 338,061,521.50 51,318,459.48 15.03%

Obligations per Fund

Total obligations for the year 2020 and 2019 amounted to P331,579,714.44 and
P291,471,158.29, respectively, which are broken down as follows:

Difference
2020 2019 Increase / (Decrease)
Amount %
General Fund
Personal Services 103,469,063.91 97,188,965.06 6,280,098.85 6%
MOOE 199,892,746.01 165,267,855.17 34,624,890.84 21%
Capital Outlay 27,381,105.52 27,636,218.56 (255,113.04) (1%)
Subtotal 330,742,915.44 290,093,038.79 40,649,876.65 14%
Special Education Fund
Personal Services 136,260.00 - 136,260.00 0.00%
MOOE 195,214.00 1,036,850.00 (841,636.00) (81%)

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 Difference
2020 2019 Increase / (Decrease)
Amount %
Capital Outlay 505,325.00 341,269.50 164,055.50 48%
Subtotal 836,799.00 1,378,119.50 (541,320.50) (39%)
Grand Total 331,579,714.44 291,471,158.29 40,108,556.15 14%

E. Independent Auditor's Report

We rendered a qualified opinion on the fairness of the presentation of the financial

statements of the Municipality of Laak due to the inclusion of unserviceable properties
with an estimated net book value of P10,626,916.75 and the erroneous recording of
impairment loss in the books resulting in the overstatement Government Equity accounts
by P 691,509.90

F. Summary of Significant Observations and Recommendations

1. Drugs, medicines and medical supplies donated by DOH amounting to

P1,147,993.96 were not recorded in the books of the Municipality, exposing to
possible loss or wastage through illegal or improper disposition.

We recommended that Management:

1.1 Require the Municipal Health Officer in this case or the authorized
representative, if any to render a report stating the volume of donated
items utilized or the number of issuances to end-user units as basis for the
Accounting Office to record the transactions relative to the
utilization/distribution of the donated drugs, medicines and medical
supplies that shall be treated as expenses for a given reporting date.

1.2 Unless the personnel-in-charge is able to provide a report on the

receipt/inventory and utilization of donated drugs, medicines and medical
supplies from DOH, he/she will be held liable for whatever pilferages or
wastages incurred from non-compliance with the applicable laws, rules
and regulations for property and supply management and that the related
transactions shall likewise be suspended in audit.

1.3 Establish accounting requirements/guidelines or implementing rules and

regulations adopted by the LGU for donated drugs, medicines and medical
supplies from DOH and/or other government agencies.

2. Procurement of goods totaling P25,159,565.00 through Emergency

Procurement not supported with project requirements, contrary to GPPB
Circular 01-2020 dated April 6, 2020 as prescribed under RA 11469.

We recommended that Management:

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 Direct the concerned end-user to submit justification on non-preparation
and submission of Project Requirement, otherwise these expenditures will
be considered as unnecessary that will subsequently disallowed in audit.

2.2. Also, direct BAC to submit justification/explanation on processing the

procurement of these items when these were not among the project
requirement submitted by Requisitioning

3. Incomplete documentary requirements as prescribed by the procurement

guidelines during the state of public health emergency cast doubts on the
regularity and propriety of the procurement transactions totaling
P32,186,080.00.

We recommended that Management submit the lacking documentary

requirements to verify the regularity and propriety of the procurement
transactions under the Bayanihan Act. Furthermore, Management is required to
submit explanation for the afore-cited deficiencies and courses of action to be
taken to avoid recurrence thereof.

G. Summary of Total Suspensions, Disallowances and Charges as at Year-End

The reported audit suspension, disallowance and charge of the Municipality of

Laak as at December 31, 2020, were as follows.
Beginning This Period
Balance January 1, 2020 to Ending Balance
Audit Action
December 31, December 31, 2020 December 31, 2020
2019 NS/ND/NC NSSDC
Notice of Suspension 0.00 0.00 0.00 0.00
Notice of Disallowance 10,133,367.72 0.00 269,239.89 9,864,127.83
Notice of Charge 0.00 0.00 0.00 0.00
TOTAL 10,133,367.72 0.00 269,239.89 9,864,127.83

H. Status of Implementation of Prior Years’ Audit Recommendations

Evaluation of the implementation of prior years’ audit recommendations disclosed

that out of the thirty-eight (38) audit recommendations, twenty-five (25) or 66% were
fully implemented and eleven (11) or 29% were partially implemented, and two (2) or
5% were not implemented by the management.

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