EXECUTIVE SUMMARY

Introduction
Catarman was established in 1631 and was the center of civilization of the Province
of Camiguin until May 1, 1871 when the Mt. Vulcan Daan eruption destroyed it. It was
re-established into a Municipality through a Spanish Decree in 1912. Today, Catarman is
the second largest town of the Province of Camiguin, classified as a fifth-class
municipality.

The audit was conducted in order to: (a) obtain reasonable assurance that the
financial statements are free from any material misstatement whether due to fraud or error;
(b) assess the overall effectiveness of the agency’s compliance with established standards,
protocols and relevant laws and regulations, and (c) recommend measures for improvement
of operations.

For CY 2022, the Municipality of Catarman was a recipient of various awards and
recognitions as follows: 2nd Overall Most Competitive (5th to 6th class category) in the
Cities and Municipalities Competitiveness Index (CMCI) sponsored by the Department of
Trade and Industry (DTI), Secretary’s Bayanihan Service Award II National Winner (5th
to 6th class category) sponsored by the Department of Labor and Employment (DOLE),
National Anti-Drug Abuse Council (ADAC) Performance Award and Seal of Good Local
Governance (SGLG) both sponsored by the Department of the Interior and Local
Government (DILG).

Scope of the Audit

A financial, compliance and performance audit was conducted on the accounts and
operations of the Municipality for the Calendar Year 2022. The audit was conducted to
ascertain the propriety of financial transactions, fairness of the presentation of the financial
statements and compliance to prescribed rules and regulations.

Per Unnumbered Memorandum dated September 14, 2022 from Local Government
Sector Assistant Commissioner Roland A. Rey, the 2022 audit foci and thrusts, in addition
to the risk areas that may be identified as a result of the risk assessment conducted, include:

I. FINANCIAL AUDIT

On top of the identified accounts to be audited as a result of the agency risk

assessment, the following accounts shall be verified:

1. Cash and Cash Equivalents

• Conduct of compulsory cash examination at least once a year

• Review and analysis of the Statement of Accountability for
Accountable Forms to determine whether all accountable forms are

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 accounted for, all issuances thereof are reported, and the corresponding
proceeds remitted.
• Verification of the existence and validity of the cash in bank accounts.
• Emphasis on the cash analysis, to ascertain that the funds used were not
from the Trust Fund or the Special Education Fund and Program,
Projects and Activities are covered with actual funds/cash.

2. Property, Plant and Equipment (PPE)

• Validation of PPE accounts based on inventory reports and other

alternative documents showing validity and existence of the property.
• Verification of existence, correctness and completeness of amount
recognized on procured PPEs as well as those acquired through
donations in kind.
• One-time cleansing of the PPE accounts pursuant to COA Circular No.
2020-006 dated Jan. 31, 2020.

3. Financial Liabilities – Accounts and Loans Payable

• Confirmation from the creditors

• Verification of the completeness of the disclosures, which include the
name of the creditor, principal amount, terms of the loan, purposes and
loan status

II. COMPLIANCE AUDIT

1. Utilization of the 20% Development Fund, pursuant to Item 3.2 of

DBM-DOF-DILG JMC No. 1 dated November 4, 2020

III. OTHER AUDIT FOCUS AREAS FOR MANDATORY REPORTING

IN THE CY 2022 AAR

1. Audit of COVID-19 Vaccination Program of the LGUs

• Procurement of COVID-19 vaccines;

• Procurement of ancillary supplies and services or other goods and
services necessary for the storage, transport, deployment, and
administration of COVID-19 vaccines; and
• Completeness and accuracy of the accounting and documentation of the
distribution of vaccines, and the accuracy of the reporting therefor, as
well as the existence of the listed vaccine-recipients.

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 2. Fund transfers from National Government Agencies (NGAs),
Government-Owned-and/or-Controlled Corporations (GOCCs)
and other Financial/Lending Institutions (e.g. World Bank, Asian
Development Bank, International Monetary Fund, etc.)

• Ascertain that the funds received from NGAs are properly recorded in
the LGU’s books of accounts.
• Verify the LGU’s compliance with the Memorandum of Agreement
(MOA) or other pertinent documents for the timely and proper
utilization of the Trust Fund according to its intended purpose.
• Verify the LGU’s return of excess or unutilized fund to its source
agencies after the fulfillment of the fund’s purpose.
• Evaluation of the LGU’s extent of implementation of programs and
projects, and compliance with the budget and the procurement
regulations, terms and conditions for the programs/projects.

3. Audit of Revenues

• Verify the correctness of assessment and collection of Real Property

Tax (RPT) and Special Education Tax (SET) of the officials of
provinces and cities;
• Determine the correctness of recording the RPT and SET Receivables
in the books of accounts
• Determine the collection efficiency for the RPT and SET based on the
estimates/targets approved by the Bureau of Local Government Finance
(BLGF)

4. Payment of Casuals, Job Orders, Contractuals and Consultants

• Evaluate the payment to casuals, job orders, contractuals and

consultants pursuant to COA Memorandum No. 2012-010 dated
October 17, 2012 and COA Resolution No. 2021-044 dated December
28, 2021.

5. Utilization of DRRM Funds

• Verify the LGU’s compliance on the following:

- COA Circular No. 202-009 dated April 21, 2020;
- COA Memorandum No. 2014-009 dated August 28, 2014;
- COA Circular No. 2014-002 dated April 15, 2014; and
- COA Circular No. 2012-002 dated September 12, 2012

Financial Highlights
A comparative presentation of the financial position of the Municipality as of
December 31, 2022 and December 31, 2021 are shown below:

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 2022 2021
Assets ₱ 344,265,884 ₱ 278,680,814
Liabilities 63,749,404 34,566,428
Equity 280,516,480 244,114,386

On the other hand, the comparative presentation of the financial performance of the
Municipality for the years ended December 31, 2022 and December 31, 2021 is shown
below:

2022 2021
Revenue ₱ 124,282,989 ₱ 93,814,268
Expenses 94,211,666 74,777,728
Surplus 25,969,704 16,387,754

Also presented below is the comparative statements of its appropriations,

allotments, and obligations for CY 2022 and 2021:

Particulars 2022 2021

General Fund
Appropriation
Personal Services 45,663,077 ₱ 38,328,758
Maintenance &Other Operating Expenses 58,876,946 38,563,242
Capital Outlay 32,802,303 29,185,377
Obligation
Personal Services 41,236,105 34,932,847
Maintenance &Other Operating Expenses 46,145,423 27,320,067
Capital Outlay 23,194,870 21,898,359
Balance
Personal Services 4,426,973 3,395,911
Maintenance &Other Operating Expenses 12,731,523 11,243,176
Capital Outlay 9,607,433 7,287,018

Independent Auditor’s Report on the Financial Statements

The Auditor expressed a qualified opinion on the fairness of the presentation of the
financial statements of the Municipality in view of the following observations:

1. Receivable accounts totaling ₱3,133,604.08 as of December 31, 2022 has been long
outstanding and considered dormant under COA Circular 2016-005 and thus
affecting the reliability and fair presentation of the financial statements contrary to
International Public Sector Accounting Standards No. 1, Paragraphs 27 and 70.

2. The reliability and existence of Property, Plant and Equipment (PPE) account, with
a carrying amount of P200,558,964.01, could not be ascertained due to the
following: (1) unreconciled discrepancy of Property, Plant and Equipment (PPE)
accounts amounting to P375,383.86 between accounting and property records (b)
incomplete details of Report on Physical Count of Property, Plant and Equipment
(RPCPPE); (c) non-provision of depreciation expense to some Information and

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 Communication Technology (ICT) Equipment. Hence, not in consonance with
paragraph 27 of International Public Sector Accounting Standards (IPSAS) 1 and
Paragraph 59 of International Public Sector Accounting Standards (IPSAS) 17.

3. Deficiencies in the accounting for leave credits of officials and employees run
contrary to IPSAS 39 and COA Circular No. 2015-009 understating the Leave
Benefits Payable by P15,769,665.59 and understating the Terminal Leave Benefits
by P2,174,641.03 and Other Personnel Benefits by P31,820.67, respectively,
thereby affecting the fair presentation of the Financial Statements.

4. The 10% Retention was erroneously recorded in the books of accounts as Other
Payables instead of Guaranty/Security Deposits payable account, not in accordance
with COA Circular No. 2015-009, resulted to the understatement of
Guaranty/Security Deposits payable of ₱1,695,238.85, and an overstatement of
Other payables account by the same amount.

Other Significant Observations and Recommendations

In addition, the following is a summary of other significant findings and
recommendations in the audit of the operations of the Municipality for CY 2022. These
and other observations and recommendations are fully detailed in Part II of this Report

1. Several Significant delay in the submission of Disbursement Vouchers (DVs) and

its supporting documents, Liquidation Reports (LRs), Bank Reconciliation
Statements (BRS), Reports of Check Issued (RCIs) and Report of Collections and
Deposits (RCDs), contrary to Sections 7.1 and 7.2 of COA Circular No. 2009-006
dated September 15, 2009 and Section 3.4 of COA Circular No. 96-011 dated
October 2, 1996; thereby, hampering the objective review and evaluation of the
transactions.

We recommended that the Municipal Mayor direct the Municipal Accountant, in

coordination with the Municipal Treasurer, to submit the required
reports/documents within the prescribed period for this Office’s prompt verification
of the reports/documents and to provide timely feedback and recommendations of
the results thereof.

2. The 20% Development Fund appropriation for CY 2022 amounting to

₱40,443,779.89 was not optimized due to non-implementation of seven (7)
Programs/Projects/Activities (PPAs) listed in the Annual Budget totaling to
₱16,377,011.60, contrary to Sections 287 and 476 of the Local Government Code
and DBM-DOF-DILG Joint Memorandum Circular (JMC) No. 1 dated November
4, 2020, thus, constituents were deprived of the benefits that could have been
derived had the PPAs been implemented.

We recommended that Management: (a) Require the Municipal Development

Council and the budget committee during the preparation of annual budget for 20%

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 Development Fund to include only Programs/Projects/Activities which are feasible
and could be accomplished within the target date of completion; (b) Implement the
development projects programmed during the year as embodied in the Annual
Investment/Development plan and ensure optimum utilization of the 20%
Development Fund for the benefit of the constituents of the Municipality; (c)
Implement immediately all the projects under the continuing appropriation; and (d)
Ensure that all savings from completed projects and all projects which are no longer
feasible and not yet implemented are considered for immediate realignment, subject
to budgetary rules or reverted back to the unappropriated surplus of the 20%
Development Fund for re-appropriation to other development projects.

Summary of Total Suspension, Disallowances and Charges

The Municipality has no outstanding balance of audit suspensions and an audit

disallowances balance of ₱1,986,453.99 that remained unsettled as of December 31, 2022.

Status of Implementation of Prior Years' Audit Recommendations

It was observed that out of fourteen (14) audit recommendations embodied in 2021
Annual Audit Report, six (6) were fully implemented and eight (8) were partially
implemented.

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