EXECUTIVE SUMMARY

A. Introduction

1. Sometime in June 1968, the Municipality of Alegria was created by virtue of

Republic Act No. 5239. Alegria was derived from the Spanish word “LIVELY”.
Its name was given by the late Judge Sixto Orga who happened to spend the night
in the place. Originally, it was Sitio Anahaw, founded by immigrants from the
Municipality of Bacuag.

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing. Those
standards require that we plan and perform the audit to obtain a reasonable basis
for our conclusion.

3. The audit covered the accounts and operations of the municipality government for
the year 2015 and was aimed at ascertaining the propriety of financial
transactions, management’s compliance to prescribed rules and regulations and
the fairness of the presentations of the financial statements. Value-for-money
Audit was also conducted on the selection and implementation of projects funded
out of the 20% development fund to determine whether the objectives of the
projects were attained in the most efficient, effective and economical manner.

B. Financial Highlights

a) Comparative Financial Position and Results of Operations

Particulars 2015

Assets 144,591,679.62
Liabilities 111,047,705.19
Government Equity 33,543,974.43
Income 70,175,263.47
Expenses 68,537,319.08
Net Income 1,637,944.39

b) Comparison of Budget and Actual Amounts

Difference
Particulars Budgeted Actual Final Budget
Final Amounts and Actual
Total Revenues and Receipts 65,049,998.00 56,781,659.40 8,268,338.60
Total Expenditures 65,049,998.00 55,824,425.41 9,225,572.59
Surplus (Deficit) for the period 957,233.99 (957,233.99)
C. Audit Opinion

4. Because of the significance of the matters described in the Independent Auditor’s

Report, we expressed a qualified opinion on the fairness of the presentation of the
financial statements of the Municipal Government of Alegria for CY 2015 because of
the following reasons:

a) Accuracy and existence of cash in bank account of P1,372,913.91 is doubtful

due to non-preparation of bank reconciliation and could not be validated to
subsidiary ledger for CY 2015.

b) Depreciable property and equipment amounting to P29,238,612.44 were not

provided by depreciation which could not be validated because of the absence
of updated inventory reports, lapsing schedule and other pertinent information
on the items comprising the PPE accounts for CY 2015.

c) Validity and existence of physical inventory of Inventories and Property, Plant

and Equipment (PPE) which stated in the statement of financial position at a
carrying amount of P100,537.49 and P82,019,315.65 respectively as of
December 31, 2015 could not be ascertained due to non-submission of the
report on physical inventory and failure to provide depreciation expense for
CY 2015.

d) Validity of Due from Other Funds of P17,246,112.37 and Due to Other Funds
of P6,999,340.75, and Subsidy From Other Funds of P12,983,694.25 and
Subsidy To Other Funds of P16,600,633.14 could not be ascertained due to
non-submission of reconciliations reports and schedule for CY 2015.

D. Summary of Significant Observations and Recommendations

5. For the above-mentioned audit observations which have caused the issuance of
qualified opinion, we recommended the following:

i. Compel the Municipal Accountant to see to it that reconciliation is made

between the balance shown in the reports of the depositories and the balance
found in the books of the agency pursuant to Section 74 of PD No. 1445.
Moreover, require him to prepare the Monthly Bank Reconciliation
Statements within ten (10) days from receipt of the bank statements and
submit the same to Auditor concerned as provided for in Section 3.2 of COA
Circular No. 96-011. Also, direct him to furnish the Auditor copies of
Accountant’s Advice of Local Check Disbursements to ensure that checks
encashed by government depository banks are for legitimate local
government expenditures.
 ii. Direct the Municipal Accountant to compute for depreciation for all
depreciable assets amounting to P29,238,612.44. Likewise, transfer
purchased property and equipment from Trust Fund books to General Fund
books amounting to P1,279,029.44.

iii. Require the Inventory Committee to conduct a complete physical count of all
inventories and properties owned by the Municipality. Direct them to prepare
the prescribed Report of the Physical Count of Inventories (RPCI) and
Report on the Physical Count of Property, Plant and Equipment (RPCPPE)
upon completion of the physical count and reconcile the said reports with the
accounting and property records. Moreover, instruct the Municipal Treasurer
to maintain property cards and issue Acknowledgment Receipt for
Equipment, and the Municipal Accountant to maintain Supplies Ledger
Cards and PPE Ledger Cards.

iv. Direct the Municipal Accountant to periodically review and analyze all prior
years and current year’s transactions involving reciprocal accounts and effect
adjustments in the respective books of accounts to ensure that all financial
transactions are properly taken up in the books.

6. The other significant audit observations and recommendations are as follows:

i. Cash advances totaling P3,631,411.17, excluding intelligence fund of

P1.250,000.00, remained unsettled as of December 31, 2015 in violation of
Section 89 of P.D. No. 1445 and Section 5.1 of COA Circular No. 97-002
dated February 10, 1997. Moreover, P744,525.01 represents unliquidated
cash advances in aggregate amounts of P50,000 and above per accountable
officer which the latter liable in Solana Covenant in 2004.

We recommended that management (a) Instruct the Municipal Accountant

to cause the withholding of the accountable officers concerned salary when
no liquidation of the previous cash advance is received on or before January
20 as provided for in Section 5.9 of COA Circular No. 97-002. (b) Issue
demand letters to be signed by the Municipal Mayor or his authorized
representative and the Municipal Accountant for the immediate liquidation
of cash advances. Otherwise, the Commission on Audit will have to submit
the reports of unliquidated cash advances, in aggregate amounts of
P50,000.00 and above per accountable officer, to the Civil Service
Commission, Philippine Anti-Graft Commission, Office of the Ombudsman
or Department of Justice for the filing of appropriate charges. (c) Require
the Municipal Accountant to draw an adjusting journal entries to reclassify
the advances for intelligence fund amounting to P630,000.00 by debiting
 Advances to Special Disbursing Officer and crediting Advances to Officers
and Employees with the same amount.
ii. Fund transfers from National Government Agencies (NGAs) and Local
Government Units (LGUs) totalling to P27,563,372.83 remained
unliquidated as of December 31, 2015 in violation of Sections 6.4 and 6.5 of
COA Circular No. 94-013 dated December 13, 1994. Of
which amount, the combined Cash-Local Treasury and Cash in Bank-Local
Currency, Current Account was only P1,738,862.52.

We recommended that management direct the Municipal Accountant and

accountable officers concerned to prioritize the liquidation of fund transfers
for every project. Direct them to observe strictly the submission of the
Statement of Receipts and Disbursements, Report of Checks Issued, Report
of Disbursements together with its complete supporting documents to the
Implementing Agency Auditor within the required time frame as provided
for in COA Circular No. 94-013. Submit the required documents and/or
other reports to the Source Agency to liquidate such fund transfers

iii. Out of P3,750,000.00 disallowed Priority Development Assistance Fund

(PDAF), only P2,500,000.00 was settled as of December 31 2015.
Moreover, it was not yet returned to the Bureau of Treasury (BTr) contrary
to Supreme Court Decision promulgated on November 19, 2013. Thus, it
deprived the national government of the benefit to immediately use the fund
to other vital programs, projects and activities of the government.

We recommended management to return the refunded PDAF of

P2,500,000.00 to the Bureau of Treasury pursuant to the Supreme Court
Decision dated November 19, 2013. Moreover, require the liable person to
settle the remaining disallowed amount of P1,250,000.00 as it has been
declared as unconstitutional by the Supreme Court.

iv. Non-development projects totalling P2,247,373.66 were charged against the

20% Development Fund (DF) of LGU-Alegria contrary to Sections 2.3 and
4 of DILG and DBM Joint Memorandum Circular No. 2011-1 dated April
13, 2011. Thus, depleting the fund for its improper use and non-
implementing of the expected development projects and programs.

We recommended that management stop the practice of charging expenses

to 20% DF which are not related to and do not partake the nature of
investment/ capital expenditures so that development programs and projects
envisioned by the government are properly implemented. Direct the
Municipal Officials to strictly adhere to the guidelines set forth in JMC No.
 2011-1 of the DBM and DILG in the appropriation and utilization of the
20% DF to ensure its optimal utilization.

v. Accumulated unexpended balance of Local Disaster Risk Reduction and

Management Fund (LDRRMF) since years 2011 to 2015 remained in the
General Fund account in violation of Section 3, Rule 18 of Implementing
Rules and Regulations of R.A. No. 10121 and Sections 4.4, 5.1.10 and
5.1.11 of COA Circular No. 2012-002 dated September 12, 2012. Thus,
unexpended balance of P3,089,090.65 as of December 31, 2015 was not
transferred to the Special Trust Fund under the account “Trust Liability-
DRRMF” in the Trust Fund books and may not be available for other social
services after five years.

We recommended that management open a separate bank account,

as Special Trust Fund, for the unexpended balance of LDRRMF to support
disaster risk reduction management activities of the Local Disaster Risk
Reduction Management Council within the next five years. Require the
Municipal Accountant to record all unexpended/ unobligated balance of the
Quick Response Fund (QRF) and the DRRMF-MOOE and transfer the same
to the Special Trust Fund under the account “Trust Liabilities-Disaster Risk
Reduction Management Fund” (Code 2-04-01-020) in the Trust Fund books.
Likewise, direct the latter to maintain subsidiary ledgers based on source
year.

vi. Wages paid to non-teaching personnel totaling P 72,000.00 were charged

against the Special Education Fund (SEF) in violation of Section 1 of
Republic Act (RA) No. 5447 and Item No. 2.3 of DECS, DBM and DILG
Joint Circular No. 01-A dated March 14, 2000. Likewise, claims were not
supported with complete required supporting documents in violation of
Sections 1.1, 1.1.1 and 1.1.2 of COA Circular No. 2012-001 dated June 14,
2012 and Section 4(6) of Presidential Decree No. 1445.

We recommended that management stop paying wages of non-teaching

personnel using Special Education Fund as it is not authorized in Republic
Act No. 5447 and DECS, DBM and DILG Joint Circular No. 01-A dated
March 14, 2000. Moreover, direct the Local School Board to prepare
Annual School Budget Board within the aforementioned law and circular.
Likewise, direct the Disbursing Officer to submit complete documentary
requirements in the granting and liquidation of cash advances as provided in
COA Circular No. 2012-001. Otherwise, require the Municipal Accountant
not to allow the Disbursing Officer for another cash advance and payments
of claims without complete required supporting documents.
vii. Project Procurement Management Plan (PPMP) and Annual Procurement
Plan (APP) were not prepared and maintained by the Agency for their
different programs, activities, and projects (PAPs) as required under Section
7, Rule II of the Revised Implementing Rules and Regulations (IRR) of R.A.
No. 9184.

We recommended that management strictly adhere Section 7, Rule II of the

Revised IRR of R.A. No. 9184 and prepare PPMP and consolidated APP.
Require the BAC to furnish the Office of the Auditor of the updated PPMP
and APP yearly for us to validate and ensure that all procurement
undertaken by the LGU were based on the approved annual procurement
plan.

viii. Implementation of various projects/programs by LGU-Alegria did not

comply with the prescribed competitive bidding process. Thus, it violated
Section 10, Rule IV of Revised Implementing Rules and Regulations (IRR)
of the Republic Act No. 9184, except as provided for in Article XVI of this
Act.

We recommended that management direct the Bids and Awards Committee

(BAC) to strictly adhere Section 10 of R.A. No. 9184 and its Implementing
Rules and Regulations by conducting public bidding for procurement of
goods and infrastructure projects. Moreover, conduct a post-qualification
of bidder with lowest calculated bid/price before the LGU-Alegria award the
contract. Require the BAC Secretariat to submit the complete contract
documents as provided in RA 9184 either the programs/projects were
undertaken by contract or by administration. Moreover, file appropriate
charges against responsible employees, if warranted.

ix. Disbursement vouchers for some projects/program implemented by the

agency were not supported by perfected Memorandum of Agreement
(MOA) contrary to Section 4 (6) of P.D. 1445 and Section 3.1.2 of COA
Circular No. 2012-001. Further, it disclosed that the receipts of funds for
specific programs or projects were utilized for other programs and projects
contrary to Section 3.0 of COA Circular No. 2012-003.

We recommended that management adhere faithfully the provisions cited in

the Memorandum of Agreement, program of work and Work and Financial
Plan. Require officials or employees concerned to stop utilizing the funds
intended for specific projects/programs to other purposes. Otherwise, they
may be liable for criminal liability, if warranted.
 x. The Municipality’s appropriation of P3,252.500.00 for Gender and
Development (GAD) was not covered by a GAD Plan and Budget (GAD
PB) duly reviewed and approved by the DILG Regional Office contrary to
Section 4.1.C.6.2 of PCW-DILG-DBM-NEDA Joint Circular No. 2013-01.
Moreover, it is not even duly received by the DILG. Thus, it includes wages
of job orders which were not gender related contrary to PCW-NEDAR
DBM Joint Circular No. 2012-01.

We recommended management to require the GAD Focal Person to submit

the GAD PB to the Provincial Planning and Development Office then to the
DILG Regional Office for review and approval or even just duly received by
the latter. Moreover, prepare and submit the annual GAD Accomplishment
Report based on the DILG-approved GPB or the enacted GPB following the
form prescribed in Annex E of PCW-DILG-DBM-NEDA Joint Circular No.
2013-01.

E. Summary of total Suspencion, Disallowances and Charges

7. In compliance with Section 6 of COA Circular No. 2009-006 dated September 15,
2009, the balances of the Audit Suspensions, Disallowances and Charges issued,
during the effectivity of the 2009 COA Rules and Regulations on the Settlement of
Accounts (RRSA), including settlements made thereof is shown below:

Balance, Issued in Settled in Balance,

Dec. 31, 2014 CY 2015 CY 2015 Dec. 31, 2015

Notice of Suspension P 9,234,415.07 P - P - P 9,234,415.07

Notice of Disallowance 3,750,000.00 - 2,500,000.00 1,250,000.00
Notice of Charge - - - -

The above settlement of P2,500,000.00 was made by the liable person on the
disallowance of Priority Development Assistance Fund (PDAF). The unsettled
amounts have to be reconciled by the Accounting Section except for the
P1,250,000.00. It shall be monitored and enforced pursuant to
Section 28.3 of COA Circular No. 2009-006 dated September 15, 2009.

We recommended that Management require the concerned persons liable to

settle their disallowances in accordance with the Revised RRSA.

F. Statement on the quantity/number of recommendations implemented, partially

implemented and not implemented for the current year.

8. Out of twenty four (24) audit recommendations embodied in Calendar Year 2014
Annual Audit Report (AAR), six (6) were implemented, twelve (12) was partially
implemented, six (6) were not implemented. Some of the findings are reiterated in
Part II of this report.