EXECUTIVE SUMMARY

Introduction
The Municipality of Tagoloan was established during the Spanish regime. It is
classified as a first class Municipality composed of ten (10) barangays.

Tagoloan is envisioned to be a self-sufficient, healthy, peaceful and sustainable

agri-industrial town administered by strong and committed government leaders with a
highly educated citizenry enjoying an improved quality of life. Their mission statement is
to pursue a holistic and sustainable development through the principles of good
governance, people empowerment, competitiveness, public and private sector partnership
with the guidance of the Divine Providence.

The Municipality of Tagoloan is under the stewardship of Mayor Nadya E. Elipe,

in Calendar Year 2022 and ably assisted by 15 department heads, 12 elective officials, 239
permanent, 558 job order/contract of service/memorandum of agreement, and 5
coterminous personnel.

The audit consisted of a review of operating procedures, inquiry of concerned

agency personnel, verification, reconciliation and analysis of accounts, and such other
procedures considered necessary. The audit was aimed to verify the level of assurance that
maybe placed on management’s assertions on the financial statements; recommend agency
improvement opportunities; and determine the extent of implementation of prior years’
audit recommendations.

Financial Highlights

I. Financial Position and Financial Performance

Particulars CY 2022 CY 2021

(Php)
Assets ₱ 873,290,304 ₱835,782,693
Liabilities 276,866,146 175,215,124
Equity 596,424,077 660,567,569
Revenue 489,407,312 614,989,396
Expenses 446,449,180 389,901,967
Surplus/Deficit 35,116,283 236,096,726
II. Appropriation, Obligations and Balances

Particulars CY 2022 CY 2021

(Php)
Appropriation 586,859,814 679,570,352
Allotment 586,859,814 685,473,752
Obligation 338,040,631 453,715,836
Balance 248,819,183 231,757,916

Independent Auditor’s Report on the Financial Statements

We rendered a modified opinion on the fairness of presentation of the financial

statements of the Municipality of Tagoloan, Misamis Oriental as of December 31, 2022
due to the following exceptions:

1. Cash Advances totaling to P35.86 million, including P4.77 million outstanding

for more than 3 years, remained unsettled as at year-end due to inadequate
monitoring and non-enforcement of the regulations to liquidate cash advances,
contrary to Section 5.8 of COA Circular No. 97-002 and Section 5.8 of COA
Circular No. 2012-001, resulting to non-recognition of expenses on the period to
which they relate and exposed government funds to risk of misuse or loss.

2. Due from Officers and Employees aged 10 to 21 years with an aggregate amount
of P1.117 million remained dormant yet no action was undertaken to facilitate
the write-off under COA Circular No. 2016-005, resulting in the overstatement
of receivables by the same amount and understatement of the corresponding
expenses in the year of incurrence.

3. Out of recorded land totaling P10,311,450.00, twenty-six (26) real properties

with a total land area of 25.99 hectares were not titled and cast doubt on their
ownership, contrary to International Public Sector Accounting Standards
(IPSAS) No. 17 and COA Circular No. 92-386, thereby, exposing them to
adverse claims in the future.

4. Fund transfer from DOH-Center for Health Development-Northern Mindanao for

the Medical Assistance Indigents Program (MAIP) amounting to P9.9 million in
March 2021 was recorded as Hospital Fees instead of Due to National
Government Agencies, as required under COA Circular No. 94-013 and Section
112 of PD No. 1445, thus overstating the revenues and understating the liability
accounts. In addition to, the Municipality’s non-submission of the liquidation
reports to the Office of the Auditor, and the non-optimal utilization of the funds
precluded the verification of the reports and the timely delivery of the program
to eligible beneficiaries.
Summary of Significant Audit Observations and Recommendations

In addition, the following are the significant findings and recommendations in the
audit and/or evaluation of the operations of the Municipality of Tagoloan for CY 2022
which needs immediate action:

1. Appropriations for the 20% Local Development Fund for CY 2022 were
underutilized by ₱42,311,909.58 or 73% for the priority development projects
as prescribed under Section 80 of Republic Act No. 7160 and DILG and DBM
Joint Memorandum Circular No. 2017-01, thus the basic benefits of the
program were not efficiently and effectively delivered to the recipients as
expected.

We recommended that Management monitor and expedite the implementation of

the remaining projects under the 20% LDF to adequately deliver the basic services
to the constituents and maximize its benefits to its intended beneficiaries in
compliance to the provisions of Section 5 of DILG-DBM Circular No. 2017-01
and RA No. 7160 through the following remedial measures;

• Submit justification letter for the non-implementation/ delayed completion of

the projects, and plan of action carried out by the concerned officials; and
• Expedite/mobilize the concerned offices in the early planning and
implementation of development projects to avoid incurring possible additional
cost as a result of delayed implementation.

2. Warranty Securities posted by contractors were inadequate or less than the

required amount by P1.5 million, contrary to Section 62.2.3.3 of the Revised
Implementing Rules and Regulations (IRR) of RA No. 9184, hence, the
Municipality is not guaranteed that that it will be indemnified in case the
contractor fails to perform his responsibilities over structural defects/failures
that may arise due to faults attributable to improper construction, use of
inferior quality/substandard materials, and any violation of the contract plans
and specifications of the projects.

We recommended and Management agreed to:

•Require the contractors to post additional warranty security to meet the required
amount of 30% of the contract cost; and

•Require the Municipal Engineer and the Municipal Accountant to strictly impose
the correct amount of the warranty for all completed projects in the future.

3. The Bids and Awards Committee (BAC) was unable to prepare and submit
the Procurement Monitoring Report (PMR) to the Government Procurement
Policy Board (GPPB) as required under Section 12.2 of the 2016 Revised
Implementing Rules and Regulations (IRR) of RA 9184, thus the status of
procurement of goods and infrastructure contracts, and compliance by the
 LGU of the procurement standards cannot be readily monitored affecting its
transparency and integrity.

We recommended that Management require the BAC to prepare the duly approved
Procurement Monitoring Report, and to submit the same to the Government
Procurement and Policy Board (GPPB) in printed and electronic format within
fourteen (14) calendar days after the end of each semester in conformity to Section
12.2 of the 2016 Revised IRR of RA 9184.

4. Integrated Community Production and Materials Recovery Facility

amounting P1.459 million and P0.55 million, respectively, remained
unimplemented/partially implemented since 2016 and 2019, thus depriving the
intended beneficiaries of timely use of the project.

We recommended that the Management:

• Direct the Bidding and Awards Committee (BAC) to fast track the procurement
of goods/contract necessary to complete the project for the timely delivery of
benefits/services to the intended beneficiaries in compliance to the provisions of
the Local Government Code of 1991; and
• Carry out its responsibilities particularly to properly manage the fund, and to
return to DENR- RFO 10 and Bureau of Treasury any unutilized amount totaling
P2.099 million, after the completion of the project.

5. Collections of the Waterworks system fees of the Tagoloan Sta. Ana Water
Sanitation System (TWSS) from August 2020 to December 5, 2022 amounting
P1.855 million remained unremitted by the Collector, thus tantamount as cash
shortage, in violation of Sections 69, 103,105 and 106 of PD 1445 and Article
217 of the Revised Penal Code of the Philippines.

We recommended that the Local Chief Executive strictly enforce the following:

1) Direct the Collecting Officer for the immediate full restitution of the unremitted
funds;
2) Instruct the Municipal Treasurer and Accountant to submit justifications/proof
of due diligence in their supervisory capacities:

a) Municipal Treasurer on the lack of supervision with regards to the

requisition and issuance of the accountable forms including the conduct
of physical count thereto, and on the weak monitoring of the collections
and prompt remittances/deposits of his subordinate; and
b) Municipal Accountant on the absence of the monitoring report
considering there was highly unusual trend of the Waterworks System
Fees in his books of accounts from CY 2020 to 2022, respectively.
 3) Carry-out investigation report and Institute appropriate administrative
and/or criminal charges against the Accountable Officer and other liable
officers for malversation of public funds, pursuant to Article 217 of the Revised
Penal Code.

6. Late and partial reporting of collections and deposits by the accountable

officers have exposed funds to misuse or misappropriation and deprived the
Municipality of the immediate use of the income earned in violation of Section
29 of the Manual on New Government Accounting System (NGAS) Volume I
and Section 104 of the PD No. 1445.

We recommended that the Municipal Treasurer require all revenue collecting

officers to stop the practice of delaying and making partial remittance of
collections. And to remit religiously their collections on a daily basis, or in the
case of the collectors assigned in the field, where travel time from their places of
assignment to the Treasurer’s Office is more than one day, turnover of collections
shall be made at least once a week or as soon as their collections reach P5,000.00,
in conformity to the provisions of the NGAS Manual for LGUs.

We also recommended that the Municipal Treasurer exercise due diligence in the
supervision over accountable officers under his supervision as mandated under
Section 104 of P.D 1445.

7. The required Report of Accountability for Accountable Forms (RAAF), and

the Consolidated RAAF respectively, were not prepared by the accountable
officers and the statement of accountable forms were not reviewed by the
Treasurer contrary to Sections 30, 50 and 51 of the Manual on New
Government Accounting System (MNGAS) Volume 1 for LGU, thus the
completeness of the remittances made by the collectors and the balances of the
accountable forms could not be readily established making it susceptible to
misuse to the prejudice of the LGU.

We recommended that the Local Chief Executive instruct:

1.The Municipal Treasurer to direct all Revenue Collectors to remit all their
collections promptly and to review all their Report of Collections and Deposits to
ensure that all collections and issued and unissued accountable forms are fully
accounted to prevent loss or misuse of collections. The Treasurer shall:

a) Verify the Report of Collections and Deposits particularly to examine the

Statement of Accountable Forms as to initial balances on hand, receipts, issues
and the ending balances on hand;

b) Conduct a physical count of accountable forms remaining in the custody of

collector and check the same against new balances on hand column; and
 Accountable forms shall be issued only to those accountable officers who have
religiously and completely remitted their collections in compliance with the
provisions of Section 30 of the Manual on NGAS Volume I; and

2.All Revenue Collectors to prepare their respective RAAF and the Municipal
Treasurer to prepare the Consolidated RAAF and to submit these to our Office
within the 5th day of the ensuing month.

8. Subsidiary ledgers for the collections and remittances of the Revenue

Collectors were not maintained by the Municipal Accounting Office as
required under contrary to Section 111 of Presidential Decree (P.D.) No. 1445
and Section 10 of the Manual of New Government Accounting System for
Local Government Agencies, Volume II, thus the reconciliation of
accountability with accounting records could not be undertaken and the
accountabilities of each Revenue Collectors could not be readily determined at
any given date which exposed collections to risk of loss.

We recommended that Management direct the Municipal Accounting Office to keep

and maintain complete subsidiary ledgers of all Revenue Collectors to readily
determine their accountabilities and avoid loss of government funds.

9. Non segregation of incompatible functions such as authorization, processing

and custodianship in the granting of cash advances for financial assistance to
special disbursing officers of the Mayor, Sangguniang Bayan and Municipal
Social Welfare Development Office amounting P6.93 Million, P7.46 Million
and P6.86 Million respectively, or totaling P21.08 Million for CY 2022, runs
contrary to the National Guidelines on Internal Control System, Section 123
of PD 1445, Administrative Code of 1987, thus casting doubt as to propriety of
the Donation Expenses totaling to P20.112 Million and unliquidated cash
advances of P8.48 Million, and allowing the opportunity to manipulate
irregularities and misappropriation of public funds.

We recommended that Management segregate custodianship, processing and

authorization of government functions for proper check and balance in the granting
of Financial Assistance, as such duties are responsibilities are incompatible and
shall be handled by same office in compliance to National Guidelines on Internal
Control System, Section 123 of PD No. 1445, Administrative Code of 1987, by
adopting the following internal control procedures:

To discontinue the granting of financial assistance under the

accountabilities of special disbursing officers assigned to the same department
carrying-out the authorization, processing and custodianship functions
particularly the following:
 -Municipal Social Welfare Office – incompatible since the officer has been
discharging the functions with respect to the evaluation and processing of the
financial assistance

-Mayor – incompatible since the officer has been discharging the

authorization/approval functions

To discontinue the granting of financial assistance under the

accountabilities of the three (3) special disbursing officers of the Office of the
Sangguniang Bayan due to incompatibility of the legislative functions and social
welfare functions as provided under the Local Government Code

To centralize the custodianship of the granting of financial assistance to the

employee/s under the Office of the Municipal Treasurer for proper observance of
the segregation of incompatible functions

10. Disbursement vouchers (DVs), payrolls and financial reports were submitted
late from 62-189 days after the reglementary period and 186 DVs amounting
to P23,850,812.57 remained unsubmitted or unaccounted contrary to COA
Circular No. 2009-006, Section 347 of RA 7160 and Section 44 of NGAS
Manual for LGU, thus the validity and regularity of the P23.85 million
disbursements were not determined.

We recommended that Management:

•Instruct the Municipal Accountant and the Municipal Treasurer to submit the 186
unaccounted DVs to this Office; and

•Direct the Municipal Treasurer and the Disbursing Officer not to allow other
persons to have possession of the DVs and supporting documents and to strictly
follow the procedures in the disbursement by check prescribed under Section 44,
Volume 1 of the NGAS Manual for LGU to ensure that copies of the DVs and
supporting documents are kept, filed and submitted to this Office completely and
on time.

11. All paid disbursement vouchers (DVs) and its supporting documents were not
stamped "PAID", contrary to Section 2(Q) of the COA Circular No. 92-389
and Section No. 1445, thus exposing to risks of possible re-use of same
documents for other claims of same nature.

We recommended and management agreed to direct the Municipal Treasurer’s

Office to stamp “PAID” all vouchers, payrolls and its supporting documents after
the corresponding check is signed and issued to the payees in strict compliance
with Section 2(Q) of COA Circular No. 92-389 and Section 124 of PD No. 1445.
 12. The Office of the Treasurer and other Accountable Officers were not properly
enclosed making it susceptible to intrusion by unauthorized persons,
inconsistent with Sections 2 and 124 of Presidential Decree (PD) No. 1445, thus
weakening the internal controls and exposing to risks of theft and loss of
funds/property.

We recommended that Management to prepare and implement adequate

safeguard/enclosures in the Office of the Municipal Treasurer and all Accountable
Officers to amply protect them against intrusion by unauthorized persons to prevent
the loss of funds/property, to comply with the provisions of Sections 2 and 124 of
PD No. 1445.

13. Eighty-eight percent (88%) of insurable properties amounting to

P299,475,301.39 of the Municipality were not covered with property insurance
with Government Service Insurance System (GSIS) as provided under Section
5 of Republic Act (RA) No. 565, thus leaving these properties at risk of total
loss without right of indemnification.

We recommended that Management adopt the following measures in accordance

with above-cited regulations:

• To identity the insurable properties and insure with the GSIS following the
guidelines on COA Circular No. 2018-002; and

• To appropriate funds for the payment of insurance premiums on the property from
the Local DRRMF for the payment of premiums on calamity insurance as prescribed
under Section 21 of RA 10121.

Deficiencies observed in the course of the audit were earlier communicated through
Audit Observation Memoranda (AOM) and discussed in the exit conference with
concerned LGU-Tagolaon officials and employees on March 20, 2023. Their comments
were incorporated in this report where appropriate.

Summary of Total Suspensions, Disallowances and Charges for CY 2022

Beginning Ending
Particulars Issued Settlement
Balance Balance
Notice of
Suspension ₱51,146,094 ₱ 6,792,163 ₱16,526,149 ₱41,412,108
Notice of
Disallowance 1,234,878 30,575,272 0 31,810,150
Notice of Charge 248,987 0 0 248,987
Total ₱52,629,959 ₱37,367,435 ₱16,526,149 ₱73,471,245
Status of Implementation of Prior Years’ Audit Recommendations

Monitoring and evaluation of the actions taken by the management relative to the
implementation of 37 prior years’ audit recommendations disclosed that five (5) were fully
implemented, eleven (11) were partially implemented, and twenty-one (21) were not
implemented.