EXECUTIVE SUMMARY

A. Introduction
The Municipality of Casiguran is the oldest town in the Province of Sorsogon. It
was officially organized as pueblo in the year 1800. It is a fourth-class municipality
composed of 25 barangays.

The local government unit (LGU) is envisioned to be a model for academic

excellence, public health and safety, environmental preservation and good governance,
providing equal opportunity for all its constituents in a peaceful, friendly atmosphere
through a God-centered leadership of the incumbent elected officials.

The Municipality is headed by Mayor Jose Edwin B. Hamor, who is ably assisted
by Vice-Mayor Dennis Alfonso L. Escudero, the Sangguniang Bayan (SB) Members and
the Municipal Government Department Heads.

Audit Methodology and Scope of Audit

We conducted a Financial and Compliance Audit covering transactions of the

Municipality for calendar year (CY) 2020 to determine the fairness of the presentation of
the agency’s financial statements, as well as compliance with existing laws, rules and
regulations.

The audit was done on a sampling basis and various techniques were used like
verification/confirmation, observation, interview with concerned officials and employees,
evaluation of control system/s, and other auditing procedures and techniques considered
necessary under the circumstances.

The audit was focused on the different audit thrusts/areas issued by the Local
Government Sector of the Commission.

B. Financial Highlights
1. Financial Position:

Amount (₱) Increase

Particulars
CY 2020 CY 2019 Amount (₱) %
Assets 419,954,210.35 306,448,117.67 113,506,092.68 37
Liabilities 116,845,962.75 75,415,305.12 41,430,657.63 55
Net Assets/ Equity 303,108,247.60 231,032,812.55 72,075,435.05 31

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 2. Financial Performance:

Amount (₱) Increase

Particulars
CY 2020 CY 2019 Amount (₱) %
Income 175,655,643.09 122,591,631.99 53,064,011.10 43
Expenses 131,485,624.73 107,444,059.28 24,041,565.45 22
Surplus 44,170,018.36 15,147,572.71 29,022,445.65 192

C. Independent Auditor’s Report on the Financial Statements

We rendered a qualified opinion due to the following:

1. Unreliable Property, Plant and Equipment (PPE) accounts balance due to: (a)
unreconciled difference of ₱11.81 million between the PPE accounts balances
per General Ledger and per Report on the Physical Count of PPE; and (b)
discrepancy of ₱42.66 million between the balances of Construction in
Progress account per books and per report on actual ongoing projects.

2. The Due to National Government Agencies accounts balance is unreliable due

to a net discrepancy of ₱8.85 million between the balances per books and per
confirmation with source agencies.

3. The balances of the Due from Other Funds and Due to Other Funds accounts
are unreconciled by ₱18.50 million.

D. Significant Audit Observations and Recommendations

Our observations and recommendations contained in this report were discussed
with concerned officials during the course of audit and in an exit conference held with
concerned officials and staff of the Municipality on May 28, 2021. Their justifications or
comments, where appropriate, are incorporated in this report. The following are the other
significant observations with their corresponding recommendations:

1. The Bayanihan Grant to Cities and Municipalities in the amount of ₱9.47 million
was not utilized and disbursed strictly in accordance with the guidelines and
procedures prescribed under the Department of Budget and Management (DBM)
Local Budget Circular No. 125, as well as other applicable laws, and budgeting,
accounting, and auditing rules and regulations; hence affected the effective and
efficient implementation of Coronavirus Disease 2019-related programs, projects
and activities (PPAs).

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 We recommended that Management strictly adhere to the relevant existing laws,
rules and regulations on the utilization and disbursement of government funds by
observing, among others, the following:

a. Strengthen the linkage between the planning and budgeting processes to

optimize the utilization of resources and avoid conflicts in the implementation
of PPAs;

b. Direct the Bids and Awards Committee (BAC) to comply with the
requirement of RA No. 9184 that all procurement shall be undertaken in
accordance with the approved Annual Procurement Plan (APP)/supplemental
APP;

c. Instruct the Municipal Health Officer to use the latest Philippine National
Formulary in the procurement of medicines as well as in the day-to-day
clinical decision-making to achieve better health outcomes; and

d. Instruct the Municipal Accountant to ensure that all disbursements are

properly supported with the required documentation before payment to
warrant their validity and propriety and to avoid future disallowance or
suspension in audit.

2. The balances of the Inventories and Supplies and Materials Expenses accounts
amounting to ₱6.64 million and ₱31.73 million, respectively, as of December 31,
2020, are unreliable due to: (a) difference of ₱23.03 million between the cost of
inventories issued per books and per Summary of Supplies and Materials Issued
(SSMI); (b) unreconciled difference of ₱348,160 between the balances per books
and per Report on the Physical Count of Inventories (RPCI); and (c) weakness in
the internal control procedures in handling and accounting for inventories,
contrary to Section 111(2) of Presidential Decree No. 1445, International Public
Sector Accounting Standards (IPSAS) 12, pertinent provisions of the 2016
Revised Implementing Rules and Regulations (IRR) of Republic Act (RA) No.
9184, and the Manual on the New Government Accounting System (NGAS) for
Local Government Units (LGUs), Volumes I and II..

We recommended that the Municipal Accountant:

a. Refrain from recording supplies and materials expenses without the required
documentation;

b. Prepare journal entry vouchers based on transaction documents presented in

accordance with Section 31 of the Manual on the NGAS for LGUs, Volume
II; and

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 c. Carefully analyze the transactions before taking them up in the books of
accounts in order to properly account for the acquisition and issuance of the
supplies and materials inventory based on IPSAS 12, Inventories and Annex B
of COA Circular No. 2015-009.

We also recommended that Management:

a. Require the Inventory Committee to exercise diligence in performing its

functions and responsibilities as required in the pertinent provisions of the
Manual on the NGAS for LGUs, Volume I;

b. Require the Inventory Committee and the Office of the Municipal Accountant
to prioritize the reconciliation between the Inventories accounts balances per
books and per RPCI; and

c. Require the Municipal General Services Office (MGSO) and the Office of the
Municipal Accountant to properly prepare and maintain complete and updated
Stock Cards and Supplies Ledger Cards, respectively, and reconcile their
records regularly.

Further, we recommended that the MGSO:

a. Prepare and use the Requisition and Issue Slip and SSMI in accordance with
Sections 41 and 121 of the Manual on the NGAS for LGUs, Volume I and
Annex 33 of the Manual on the NGAS for LGUs, Volume II; and

b. Come up with internal control procedures that will ensure proper handling of
inventories to prevent or minimize the risk of loss and misuse such as
maintenance of logbook for expected and actual deliveries based on approved
purchase orders and delivery receipts and making use of Inventory Custodian
Slip for issuance of small tangible items with serviceable life of more than one
year but small enough to be considered as PPE.

Furthermore, we recommended that the BAC Secretariat prepare the indicative

and supplemental APP based on Project Procurement Management Plans
(PPMPs) and supplemental PPMPs, respectively, and submit the same to the
Government Procurement Policy Board and to COA in accordance with Section
7.4 of the Revised IRR of RA No. 9184.

3. The 20 per cent Development Fund was not optimally utilized due to the
partial/non-implementation of six development projects with a total cost of ₱3.27
million and incurrence of ineligible expenditures amounting to ₱1.77 million,
thereby deprived the intended beneficiaries of the benefits that could have been
derived therefrom.

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 We reiterated our prior years’ audit recommendation that Management strictly
comply with Department of the Interior and Local Government (DILG) and DBM
Joint Memorandum Circular (JMC) No. 2017-1, by taking into consideration the
following:

a. Develop a concrete plan that will articulate the PPA, timeline, expected
deliverables for each phase, key milestones, etc.;

b. Adopt strategies to maximize the utilization of the 20 per cent Development

Fund and implement the PPAs within the targeted timeframe to achieve the
social, economic and environmental outcomes essential in the attainment of
the constitutional objective of a desired quality of life for all; and

c. Ensure that the 20 per cent Development Fund is used solely for development
PPAs and no amount is utilized for expenditure items not allowed to be
charged thereof as provided in DILG and DBM JMC No. 2017-1.

E. Summary of Total Suspensions, Disallowances and Charges as of

Year-end

The Municipality has no unsettled suspensions, disallowances and charges as of

December 31, 2020.

F. Status of Implementation of Prior Years’ Audit Recommendations

Of the 98 prior years’ audit recommendations, 29 were fully implemented, 50
were partially implemented and 19 were not yet implemented as of December 31, 2020.