EXECUTIVE SUMMARY

Introduction

The Municipality of Sto. Tomas was named after St. Thomas Aquinas, the high
priest of the Dominican Religious Order in 1666. The Municipality of Sto. Tomas is a
first class Municipality composed of 30 barangays. It is located in the northeastern
portion of the Province of Batangas, bounded on the north by the City of Calamba, on
the northeast by the Municipalities of Los Baños, Bay and Alaminos, on the west portion
of Tanauan City. It has a distance of 60 kilometers from Manila and 45 kilometers from
Batangas City, the provincial capital.

Sto. Tomas, a first class Municipality is within the 3rd District of Batangas and
serves as a gateway to the Province of Batangas and other southern provinces like
Mindoro, Quezon and Bicol. Likewise, it is also the entry of the Southern Tagalog
Access Road (STAR) that goes to Batangas City and the modern Batangas International
Port. Sto. Tomas comprise approximately 10 thousand hectares of land and its
population based on the certification provided by Philippine Statistics Authority with
reference No. 15SSSS-DHSD-244 ranges from 149,000 to 159,900 for the year 2015.

The Organizational Structure of the Municipality is as follows:

a. Key Officials
Municipal Mayor Edna P. Sanchez
Vice-Mayor Armenius O. Silva
Members of the Sanggunian: Florence M. Mabilangan
Catherine J. Perez
Renante V. Arcillas
Leovino M. Villegas
Gerardo M. Malijan
Cresenciano E. Ramos Jr.
Arlene F. Mañebo
Peter Thomas R. Reyes
Wilfredo M. Maliksi

b. No. of Personnel Complement

Permanent 265
Elective 11
Coterminous 23
Contractual 16
Casual 94
Job Order 313
Total 722

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Financial Highlights

The funds of the Municipality for Calendar Year (CY) 2017 totaling
P721,079,423.61 were sourced from local taxes, permits and licenses, service and
business income and internal revenue allotment. To carry out the projects, programs and
activities of the Municipality, the appropriations and allotment for CY 2017 totaled
P1,077,266,739.50, while the obligations at the end of the year amounted to
P627,514,086.21, leaving a balance of P449,752,653.29. The total assets, liabilities,
equity, income and expenses for CY 2017 are as follows:

Increase
CY 2017 CY 2016 (Decrease)
Assets 2,149,737,047.65 P1,589,125,512.81 P560,611,534.84
Liabilities 566,530,274.01 294,331,369.61 154,244,904.40
Equity 1,583,206,773.64 1,294,794,143.20 288,412,630.44
Revenue 721,194,923.61 594,698,328.99 126,496,594.62
Expenses 464,999,561.35 406,337,306.27 90,132,985.08

Scope of Audit

Financial, compliance and value for money audits were conducted on the accounts
and operations of the Municipality for CY 2017. The audit was conducted to ascertain
the fairness of the presentation of the financial statements and compliance of the
Municipality with laws, rules and regulations as well as the economical, efficient and
effective utilization of resources.

Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Municipality as of December 31, 2016 due to the following:

1. The Real Property Tax (RPT)/Special Education Tax (SET) Receivable

account balance amounting to P113,024,437.60 and P108,267,185.52,
respectively represent real property tax collectibles for CY 2018 was not in
accordance with Sections 19 and 20 of the New Government Accounting
System (NGAS) Manual, Volume I, thus overstated the financial statements as
of December 31, 2017.

2. Collection of real property taxes totaling to P9,840,303.53 inadvertently taken

up as credit to Other Deferred Credits account instead of Deferred Real
Property Tax Income/Deferred Special Education Tax Income, of which the
amount of P3,854,413.55 remained unadjusted for almost three (3) years,
while the amount of P5,985.889.98 were payment in advance, thus affected
the fair presentation of the financial statements.

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 3. The accuracy of Inventory Accounts totaling to P26,013,194.14 under the
General Fund (GF) were overstated by P13,520,755.62 and understated the
Government equity/expense account by P12,191,605.62 due to the inability of
the Officer-In-Charge, General Service Office/Municipal Treasurer to prepare
and submit the Summary of Supplies and Materials Issued (SSMI) together
with the Requisition Issue Slip to the Municipal Accountant for recording
issuances in the books of the agency. Likewise, the inventory account included
musical equipment totaling P1,329,150.00, thus understated the Property, Plant
and Equipment, Accumulated Depreciation and Government Equity/expense
accounts.
4. The account balance of Property, Plant and Equipment (PPE) amounting to
P1,111,319,784.76 remained doubtful of validity and accuracy, contrary to
Section 156 of the Manual on the New Government Accounting System
(NGAS) for LGUs and Manual on Property Custodianship, due to repeated
failure to create Inventory Committee who will conduct physical inventory,
prepare the Report on Physical Count on Property, Plant and Equipment
(RPCPPE) and reconcile the variance amounting to P547,321,983.63 with the
Accounting and Property Records. Further, the development cost of the
operating system taken up in CY 2015 totaling P3,461,110.80 remained in the
Construction in Progress (CIP) – Infrastructure Assets account as of December
31, 2017, overstated the PPE account and understated the Intangible Asset -
Computer Software account both by the same amount.

5. Accounts Payable balance of P25,795,590.16 as of December 31, 2017 was

overstated by P1,035,614.97 due to continuous recognition of obligation
without valid claims and documents to warrant payment of claims for more than
two years defying Section 98 of Presidential Decree (PD) No. 1445.

Significant Observations and Recommendations

For the deficiencies cited above, we recommended that:

1. the Municipal Mayor require:

• the Municipal Assessor to enhance the present operating system installed

on property assessment to eliminate errors noted and capture the actual
receivables;

• the Municipal Treasurer to furnish the Municipal Accountant certified list

of taxpayers with corresponding amount due and collectible for the year;
and

• the Municipal Accountant to comply strictly to Sections 19 and 20 of the

NGAS Manual, Volume I to fairly present the financial statements and
maintain Subsidiary Ledger (SL) which will identify the names of the
taxpayers and the amount due and collectible.

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2. the Municipal Mayor oblige the Municipal Accountant:

• to exercise diligence in the monitoring and supervision over person/s

involved/concerned in the preparation of the financial reports; and

• draw the necessary accounting entries to correct/adjust the error

inadvertently committed to fairly present the financial statements, as
follows:

Proposed Adjusting Entry:

Debit Credit

Other Deferred Credits P3,854,413.55

Prior Period Adjustments P3,854,413.55

a. To correct the accounting entry made due to errors in recording

Collection of Real Property Taxes for CYs 2002 – 2011

Other Deferred Credits P5,985.889.98

Deferred Real Property Tax Income 5,985.889.98 P5,985.889.98
RPT Receivable 5,985.889.98

b. To correct the entry in recording collection of RPT in advance.

3. the Municipal Mayor:

• direct the OIC-General Services Office to consolidate weekly the

Requisition Issue Slip (RIS) for which supplies and materials were issued
using the Summary of Supplies and Materials Issued (SSMI) to be
submitted to the Municipal Accountant together with the original copy of
the RIS for the preparation of the Journal Entry Voucher to record the
expenditures using appropriate expenditure accounts;

• require the OIC-GSO and the Municipal Accountant to review the

documents maintained to determine to reclassify musical instruments
falling under Other Supplies and Materials Inventory to Technical and
Scientific Equipment to reflect correct Report of Physical Count of
Inventory/Property, Plant and Equipment and accurate account balance,
respectively; and

• instruct the Municipal Accountant to compute cost of supplies issued and

ending inventory using the moving average method based on the RIS and
SSMI submitted by the OIC-General Services Office for the eventual
preparation of the JEV to record issuances to present correct inventory
and appropriate expense account balances.

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 4. the Municipal Mayor:

• direct the Municipal Accountant and the Property Officer to maintain

complete and updated PPE Ledger Cards and Property Cards, respectively.

• instruct the Municipal Accountant to prepare the necessary adjustment to

correct the error inadvertently committed in recording the development
cost of computer program to fairly present the financial statements;

• create an Inventory Committee to:

o conduct complete physical inventory taking;

o properly classify the equipment found during the inventory taking in

their appropriate account classification based on the new accounts
prescribed by the Commission on Audit (COA);

o reconcile the results of the count with the property and accounting
records; and

o submit the RPCPPE to the Office of the Auditor.

5. the Municipal Mayor instruct:

• the Municipal Accountant to recognize liabilities only in the books of the

agency, transactions with obligation requests and supported with complete
documents and strictly comply with the provisions of the law; and

• the Municipal Treasurer to notify the creditors about their claims and
require them the presentation of documents to support their claim within a
grace period of five (5) calendar days. If no claim has been made until the
grace period, require the Accountant to revert the payables for a fair
presentation of the account.

The other significant observations and recommendations in the audit of the

Municipality of Sto. Tomas for CY 2017 are summarized below:

1. Construction of ten (10) units Housing Projects/Socialized Resettlement

Subdivision, in addition to previously constructed 60 units amounting to
P2,819,916.37 and P11,979,991.35 in CY 2017 and 2015, respectively to be
awarded under a housing loan scheme to inhabitants/informal family settlers
living adjacent to the railroad at Poblacion 1, Sto. Tomas, Batangas remained
unoccupied for almost two years, thus an additional burden to the
Municipality of Sto. Tomas. Further, deficiencies/damaged and uninstalled
materials were noted, although the contracts were already fully paid.

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 We recommended that the Municipal Mayor:

• compel the Municipal Planning and Development Coordinator and the

Municipal Social Worker to reconcile the List of Beneficiaries vis-a-vis
issued First Batch of Awardees as against the Family Profile record to
facilitate the determination of deserving/qualified beneficiaries and submit
justification/explanation on the discrepancies noted;

• direct the Sanggunian Bayan to pass a resolution creating a task force who
will handle the eviction of the informal family settlers/inhabitants near the
railroad to the relocation site considering that the target dates for the
relocation was March 2015 and the housing units were completed almost
two years ago;

• define the duties and functions of the task force to fast tract clearing of the
railroad area including the dissemination on the availability of affordable
housing loan project to facilitate occupancy of the housing units;

• require the Municipal Accountant to compute the liquidated damages on

the uninstalled water closets and faucets until such time the said items
have been installed by the contractor and deduct the same from the
retention fee, when necessary; and

• require the concerned Contractor to undertake the necessary repair of the

deficiencies and completion of unfinished works noted during the ocular
inspection to prevent further damage pursuant to Section 62.2 of the RIRR
of RA No. 9184.

2. Expenses totaling P30,201,944.39 were utilized for non-GAD activities, thus

depleting the fund for more gender responsive activities.

We recommended that the Municipal Mayor direct the GAD Focal Point
Person to properly monitor and report regularly the status of implementation
of the activities stated in the Gender and Development Plan in order to address
the gender issues. Ensure that the programs and projects included in the GAD
Plan are gender responsive processes, procedures are properly followed and
other factors that would affect the implementation is considered to avoid
problems when it comes to implementation. Likewise, utilize the fund solely
for GAD related activities or to specific programs that are gender-responsive
and are aligned to the GAD mandate.

3. Weak internal control on the procurement of goods due to non-segregation of

duties, casts doubt on the procurement process contrary to Section 124 of
Presidential Decree (PD) No. 1445.

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 We recommended that the Municipal Mayor create Inspectorate Team
composed of representative from the offices of the Accounting, Treasury,
Budget and General Services in order to strengthen internal control to reduce
the possible risk of manipulation in the procurement of goods.

Further instruct the General Service Officer to direct personnel concerned not
to affix their signature on the lower portion of the canvass sheet which is
specifically for the signature of supplier only.

4. Financial and accounting reports as well as Disbursement Vouchers and their

supporting documents were not timely submitted to the Auditor, contrary to
Section 122 of Presidential Decree (P.D.) 1445, Section 347 of Republic Act
(RA) No. 7160 and Sections 7.1 and 7.2 of Rules and Regulations in
Settlement of Accounts (RRSA) prescribed by COA Circular No. 2009-006,
thus, affecting the immediate verification and audit of accounts and defeated
the purpose of providing timely financial information to interested users.

We recommended that the Municipal Mayor direct the Municipal Accountant

to strictly enforce the submission of required accounting and financial reports
within the prescribed period.

The concerned officers to look into the root cause of the delay in the
preparation and submission of the financial reports and effect appropriate
action/s when necessary, to make possible the early submission of the same.

5. The Municipal Government was not able to submit within the reglementary
period the Agency Action Plan and Status of Implementation (AAPSI) of
prior year’s audit recommendations contained in the CY 2016 Annual Audit
Report contrary to Section 88 of the General Appropriations Act of 2017
dated December 22, 2016, thus, incurred delay in the monitoring and
validation by the Auditor of their respective implementation as well as in the
submission of Annual Audit Report.

We recommended that the Municipal Mayor direct the assigned department

head/s or personnel to fast tract the submission of the Agency Action Plan and
Status of Implementation (AAPSI) of the CY 2016 Annual Audit Report, and
every year thereafter to the Auditor concerned to facilitate monitoring and
validations of the actions taken by the LGU on the related audit observations
and recommendations, and eventually to submit a validation report to the
Regional Office IV-A, for monitoring purpose. Compliance on the
submission of the same report to the above-mentioned oversight bodies should
also be made.

6. The Municipality failed to provide the Audit Team Leader with a list of all
government Program/Projects/Activities (PPAs) that are to be implemented
during the year, contrary to COA Circular No. 2013-004 dated January 30,

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 2013, thus, transparency on the implementation of government projects was
not achieved and validation by the Audit Team was not undertaken.

We recommended that the Municipal Mayor direct the Municipal Engineer

and the Officer-In-Charge (OIC) General Services Office (GSO) to ensure that
a list of all government PPAs for infrastructure and non-infrastructure
projects, respectively, to be implemented during the year is submitted to the
Audit Team Leader at the beginning of the year as required in COA Circular
No. 2013-004 dated January 30, 2013.

7. The Municipality of Sto. Tomas failed to submit the required

reports/documents to concerned offices contrary to Section 4.c.25 of Republic
Act No. 10121, Paragraph 7 of Joint Memorandum Circular No. 2013-1 of
National Disaster Risk Reduction Management Council (NDRRMC), and
Sections 5.1.5 and 5.1.6 of COA Circular No. 2012-002.

We recommended that the Municipal Mayor direct the Municipal Accountant

to prepare the certified Monthly Report on Sources and Utilization of Disaster
Risk Reduction and Management Fund and the Municipal Disaster Risk
Reduction and Management Officer to submit all the required
reports/documents to the concerned agencies within the prescribed period in
consonance with the afore-cited guidelines /issuances.

8. Contracts/Purchase Orders for the procurement of infrastructure projects and

goods amounting to P83,922,497.90 and P63,285,484.35, respectively, were
not furnished the Office of the Auditor within the reglementary period of five
(5) working days from its perfection/execution, and notification of goods
delivered was also not made from acceptance of delivery, thus reasonableness
of the contract amount, existence of the projects/delivered goods were not
reviewed and validated promptly contrary to COA Circular Nos. 2009-001
and 95-006.

We recommended that the Municipal Mayor instruct:

• the Bids and Awards Committee (BAC) Chairman thru the BAC
Secretariat and concerned personnel of the General Service Office (GSO),
to submit copies of perfected contracts/purchase orders together with the
required supporting documents and Notice of Delivery, respectively, to the
Office of the Auditor in accordance with the provisions of COA Circular
Nos. 2009-001 and 95-006 for proper evaluation and technical review of
the contracts as well as timely inspection of deliveries; and

• the BAC Chairman or Officer-In-Charge, GSO as the case maybe to

monitor submission of the above-mentioned documents to avoid
suspension in audit.

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 The foregoing, together with the observation and recommendation in Part II, of
this report were discussed in an exit conference conducted with the concerned Municipal
officials and employees on July 11, 2018. Management’s view and comments were
considered in the Report, where appropriate.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Of the 23 prior year’s audit recommendations embodied in the 2016 Annual Audit
Report, seven were fully implemented, eight were partially implemented and eight were
not implemented by the Municipality.

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