EXECUTIVE SUMMARY

Introduction

The Municipality of Gen. MacArthur is located at the southern part of Eastern Samar.
Classified as a 5th class municipality and composed of thirty (30) barangays, the town was
created from the barrios of Pambujan Sur, Calutan, San Isidro, Vigan, Binalay, Camcueves,
Domrog and Pingan of the town of Hernani by virtue of Republic Act No. 193, enacted on
June 22, 1947.

At present, the Municipality is headed by Mayor Flora C. Ty, supported by Vice

Mayor Joel Baldo and nine (9) Sangguniang Bayan Members.

Its vision - “A commercial hub of south-east Samar with God-loving, educated and
empowered people living peacefully in a sustainable environment with competitive economy
under dynamic and transparent local governance”.

An audit was conducted on the accounts of the Municipality covering the period
January 1 to December 31, 2020. The audit was aimed to ascertain the propriety and validity
of disbursements and receipts, and to obtain reasonable assurance about whether the financial
statements are free from material misstatements. The audit consisted of post-audit of
transactions, review of operating procedures, interview with concerned municipal officials
and employees, verification and analysis of accounts, and such other procedures considered
necessary under the circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.

Financial Highlights

The municipality’s total assets, liabilities, equity, income and expenses for current and
previous year are as follows:

Increase/(Decrease)
2020 2019
Amount Percent
Assets ₱265,674,963.90 ₱257,656,351.07 ₱ 8,018,612.83 3.11%
Liabilities ₱ 42,341,578.11 ₱ 37,249,458.49 ₱ 5,092,119.62 13.67%
Equity ₱223,333,385.79 ₱220,406,892.58 ₱ 2,926,493.21 1.33%
Income ₱110,820,301.13 ₱ 82,548,466.87 ₱28,271,834.26 34.25%
Expense ₱ 95,523,489.72 ₱ 76,193,050.98 ₱19,330,438.74 25.37%

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 Its appropriation, allotment and obligation for calendar year 2020 as compared with
CY 2019, including the funds received from the national government agencies and other
LGUs were as follows:

Increase/(Decrease)
Particulars CY 2020 CY 2019
Amount Percent
Appropriations, Allotments, Obligation
Appropriations ₱92,865,931.84 ₱79,020,954.00 ₱ 13,844,977.84 17.52%
Allotments ₱92,865,931.84 ₱79,020,954.00 ₱ 13,844,977.84 17.52%
Obligations ₱79,259,752.13 ₱69,831,757.23 ₱ 9,427,994.90 13.50%
Funds Received from Other Agencies
NGAs ₱31,726,362.00 ₱12,120,762.50 ₱19,605,599.50 161.75%
LGUs - - - 0%

Expenditure

Expenditures incurred out of current appropriation amounted to ₱79,512,191.79 while

those of last year amounted to ₱72,996,496.23 showing an increase of ₱6,515,695.56 or
8.92% as follows:

Increase/(Decrease)
Allotment Class 2020 2019
Amount Percent
Personal Services ₱36,948,286.59 ₱ 40,467,963.57 (₱ 3,519,676.98) (8.70%)
MOOE ₱17,674,551.18 ₱ 18,038,011.16 (₱ 363,459.98) (2.01%)
Capital Outlay ₱24,889,354.02 ₱ 14,490,521.50 ₱10,398,832.52 71.76%
TOTAL ₱79,512,191.79 ₱ 72,996,496.23 ₱ 6,515,695.56 8.92%

INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

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

financial statements due to: (1) The LGU did not install adequate and proper controls over
cash management, thus, resulting in overstatement of collections in CY 2020 by
₱161,548.15; and understatement of government equity by ₱16,278.00; (2) The reciprocal
accounts Due from Other Funds and Due to Other Funds with reported balances of
Ᵽ4,763,322.05 and Ᵽ4,291,488.36, respectively are of doubtful accuracy due to a total
variance of Ᵽ471,833.69; (3) The zero balance of inventories account in the Statement of
Financial Position is unreliable due to: a) the recognition of purchases totaling ₱9,666,583.36
as outright expenses, instead of inventory accounts, and b) the unrecorded cost of
undistributed inventories transferred to the distribution site amounting to ₱812,796.52 due to
the failure to conduct physical count, thereby overstating the related expense accounts by the
same amount; (4) The reliability and valuation of the Property, Plant Equipment (PPE)
totaling ₽259,505,622.80 could not be ascertained due to: a) non-submission of the Report
on the Physical Count of Property, Plant and Equipment as of December 31, 2020 and failure
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to conduct periodic physical count of PPE; b) failure to conduct periodic assessment for
impairment and also to provide Impairment Loss; and c) non- preparation of Stock Cards and
Ledger Cards; (5) Reconciliation between the balances presented in the Statement of
Comparison of Budget and Actual Amounts (SCBAA) and Statement of Financial
Performance (SFP) amounting to ₱10,967,965.83 were not disclosed on the face of the
SCBAA or in the Notes to Financial Statements; (6) Payment of catering services totaling
₱1,432,252.00 for the conduct of various meetings, SB sessions, orientations and various
events were all booked up as Extraordinary and Miscellaneous Expense in the books of the
LGU thereby, affecting the fair presentation of expense accounts; (7) The LGU’s recognition
of the Bayanihan Grant to Cities and Municipalities (BGCM) was not in accordance with the
pertinent guidelines, thereby understating the Trust Liability Account by ₱7,126,362.00 and
overstating the Due to NGAs by the same amount; (8) The LGU recognized a liability in
transferring the unexpended balance of Local Disaster Risk Reduction and Management
Fund (LDRRMF) for CY 2020 on Quick Response Fund (QRF) and Maintenance and Other
Operating Expenses (MOOE) in the amount of ₱4,286,493.32 instead of transferring actual
cash of the same amount, thus the cash, receivables and liabilities accounts were not fairly
presented; (9) Purchase of rescue vehicle was included in the CY 2020 Utilization of
LDRRMF and was disclosed in the notes to financial statements, however, contract of the
rescue vehicle was concluded on February 2, 2021, thus, utilization report as of December
31, 2020 and Notes to Financial Statements are inaccurate; and (10) Disbursement amounting
to ₱75,600.00 was charged to the General Fund account instead of the Trust Fund account,
thus, understating the cash balance in the General Fund by ₱75,600.00 and overstating the
cash balance in the Trust Fund account by the same amount.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

In addition to the exceptions cited, the significant observations and corresponding

recommendations were as follows:

1. The LGU did not install adequate and proper controls over cash management and
issuance of accountable forms, thus, resulting in: a) loss of one (1) booklet of Accountable
Form 51-C; b) collections were not deposited intact; and c) unreconciled errors and
irregularities in recording of collections and deposits.

We recommended that the Local Chief Executive should:

a. Install internal control system over collections and deposits in order to properly
safeguard its assets and records and to promote operational efficiency. Regular
evaluation of controls should be undertaken to identify procedural problems
resulting in deficiencies and inaccurate reports;

b. Instruct the Municipal Treasurer to separate the collections for General Fund,
Trust Fund and Special Education Fund to avoid certain errors such as deposit
of collections from TF to SEF account. Monitor and follow up the remittances
of the RCC daily to avoid overdue collections in the hands of the RCCs;

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 c. Direct the Municipal Treasurer to install strict monitoring in the issuance of
Accountable Forms to safeguard against possible loss and misuse;

d. Instruct the Municipal Treasurer to ensure that collections are deposited intact
to avoid discrepancies in the cash balances; and

e. Instruct the Accountant and Treasurer to reconcile monthly the balance of

Cash in Local Treasury to avoid errors in recording of collections and deposits.

2. The LGU’s utilization of the Bayanihan Grant to Cities and Municipalities (BGCM) was
not in accordance with the pertinent guidelines, raising doubts on the validity and legality
of the disbursements, and consequently compromising the purpose and objectives of the
said grant.

We recommended that the Local Chief Executive:

a. Directs the accountant to require the submission of the lacking documents on

various expenses;

b. Ensure that utilization of the BGCM for COVID related PPAs and within the
prescribed duration stated in Section 3.8 of LBC No. 125; and

c. Prepare and submit the monthly Report on Fund Utilization and Status of
Program/Project/Activity Implementation.

3. Implementation of projects under the 20% Development Fund (DF) were delayed by an
average of 40 days and 50.70% or ₱8,671,118.93 of the said fund remained unutilized,
thus, constituents were deprived of the intended benefits had the projects been
implemented and completed on time.

We recommended that the Local Chief Executive:

a. Ensure the timely implementation of the development projects by the

Municipality’s Local Development Council through proper coordination with
the Municipal Engineer, BAC and other offices involved; and

b. Require the Engineer and other concerned officials to expedite the

implementation of the unimplemented projects.

4. Various deficiencies were noted in the reporting of the Local Disaster Risk Reduction
and Management Fund (LDRRMF) for CY 2020:

4.1 Prior year unexpended balance amounting to ₱2,853,109.70 was not included in the
Local Disaster Risk Reduction and Management Fund Investment Plan
(LDRRMFIP) CY2020, thus available resources were not maximized to implement
PPAs to enhance disaster preparedness and strengthen response capabilities.

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 4.2 The LDRRMFIP was not prepared in accordance with the form required in Annex
A of COA Circular 2012-002 dated September 12, 2012, thus, LDRRMFIP for CY
2020 is inadequate of the required information.

4.3 The Monthly Report of Sources and Utilization of DRRMF were not submitted to
the audit team on or before the 15th day after the end of each month, contrary to
Section 5.1.5 of COA Circular No. 2012-002 dated September 12, 2012, thus
precluded the audit team from verifying the reports promptly.

4.4 One emergency procurement of relief goods was not posted in the GPPB Portal
pursuant to Item 9 of GPPB Circular No. 1 dated April 6, 2020, thereby defeating
the purpose of the circular which is to promote transparency and accountability.

We recommended that the LCE instructs the LDRRMO to:

a. include all the unexpended prior year balances in its LDRRMFIP and use the
format specified in Annex A of COA Circular No. 2012-002; and

b. submit the monthly report on sources and utilization on or before the 15 th day
after the end of each month through the LDRRMC and Local Development
Council (LDC) to the COA auditor of the LGU.

Moreover, the LCE to require the concerned personnel to post all emergency
procurements under the Bayanihan Act in the GPPB Portal as required in Item 9 of
GPPB Circular No. 1 dated April 6, 2020.

5. The LGU did not provide the required 20% counterpart or ₱151,200.00 for the Tulong
Panghanapbuhay sa Ating Disadvantaged/Displaced (TUPAD) Workers Program
contrary to the stipulations in the Memorandum of Agreement executed between the LGU
and the Department of Labor and Employment (DOLE) and Article 1159 of the Civil
Code of the Philippines, thus, forty-three (43) displaced citizens were deprived of the
benefits from the program.

We recommended that the Local Chief Executive provide the required 20%
counterpart of ₱151,200.00 and implement the TUPAD Program to the 43 intended
beneficiaries, otherwise, return the full amount of ₱151,200.00 to DOLE
representing unused funds after the project completion.

Summary of Audit Suspensions, Disallowances and Charges (SASDC)

The total audit suspensions, disallowances and charges found in the audit of various
transactions of the Municipality as of December 31,2020 was ₱1,273,487.20 based on the
Notice of Suspension (NS), Notice of Disallowance (ND), and Notice of Charge (NC) issued
by this Commission.

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Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the thirty-four (34) audit recommendations relative to the prior years’ audit, twenty-
four (24) were fully implemented, seven (7) were partially implemented and three (3) were
not acted upon by management.

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