EXECUTIVE SUMMARY

INTRODUCTION

The Municipality of Alitagtag was founded on the first day of January 1910 by
virtue of an Executive Order passed on the 9th day of May 1908. It is a fourth class
Municipality in the 3rd District of Batangas and politically subdivided into 19 barangays.

The Municipal Government is headed by Honorable Anthony Francis G. Andal,

Municipal Mayor and supported by the members of the Sangguniang Bayan, local
officials and employees.

The Municipality received various awards this year as follows:

 Declared as drug cleared municipality by the Philippine Drug Enforcement

Agency (PDEA)
 Received an award on since out of the 7 Local Governance Assessment Areas, the
municipality had complied with the 2 areas
 Received an award from the Provincial Health Office since they are part of the
Municipalities with high case detection rate and treatment success rate for all
forms (for tuberculosis program)

ORGANIZATIONAL STRUCTURE

The Organizational Structure of the Municipality is as follows:

a. Key Officials

Municipal Mayor Hon. Anthony Francis G. Andal

Municipal Vice-Mayor
Sangguniang Members
Municipal Accountant
Acting Municipal Treasurer
Hon. Edilberto G. Ponggos
Hon Manuel Abrigo
Hon. Ruben Ilagan
Hon. Nathaniel Castillo
Hon. Ambrosio Sandoval
Hon. Floro Adajar
Hon. Jerome Garcia
Hon. Bernardo Reyes Jr.
Hon. Geraldine Borromeo
Hon.Gaudencio Magundayao
Mr. Rameses P. Caraan
Ms. Mercelita B. Dimalaluan

i
 b. Number of Personnel Complement

Permanent 46
Contractual 54
Elective Officials 11
Co-terminus 4
Total 115

FINANCIAL HIGHLIGHTS

For Calendar Year 2017, the Municipality of Alitagtag, Batangas generated a total
income of ₱76,673,045.52 which were sourced from local taxes, internal revenue
allotment, permits and licenses, service, business and other sources of income which is
higher than year 2016 by 11.99%. To carry out the programs, projects and activities of
the Municipality, the appropriations and allotments for Calendar Year 2017 totaled to
₱88,688,340.27 while the obligations at the end of the year amounted to ₱68,706,841.78,
thus, leaving an unexpended balance of ₱19,981,498.49.

Assets of the Municipality is mainly comprised of Property, Plant and Equipment

(65%) and Cash in Bank (31%).

3%
31%
Cash
1%
Receivables
65% Prepayments and Inventories
Property, Plant and Equipment

While liabilities of the Municipality are comprised of mainly of inter-agency

payables pertaining to trust receipts intended for specific purposes and are due for
liquidation. Liabilities also include trust liabilities for the Local Disaster Risk Reduction
and Management Fund (held intact within 5 years for disaster-related activities), deferred
income and payables of other types.

Account s Payable
62% 19% Int er and Int ra-agency Payable s
Trust Liabilit ies
De fe rred Incom e
O t he r Payables
12 %
2%
5%

ii
 Most of the income earned by the municipality is generated from the Internal
Revenue Allotment (IRA) (87%) and tax revenues (8%) such as taxes on property,
business, and local taxes.

87% Internal Revenue Allotment

Tax Revenues
Business and Service Income

8%
5%

The total assets, liabilities, equity, income and expenses for CY 2017 compared
with that of the preceding year are as follows:

Increase/
CY 2017 CY 2016 Decrease

Assets 197,055,840.45 157,774,315.82 39,281,524.63

Liabilities 38,738,757.71 25,460,635.93 13,278,121.78
Equity 158,317,082.74 132,313,679.89 26,003,402.85
Income 76,673,045.52 68,460,016.38 8,213,029.14
Expenses 60,182,378.36 53,740,242.02 6,442,136.34

200,000,000.00

150,000,000.00

100,000,000.00 2017
2016
50,000,000.00

0.00
Assets Liabilities Equity Income Expenses

As shown in the graph above, everything increased in values for the year 2017.
The largest increase of 52.15% is in liabilities that is attributable to trust receipts from
national government agencies (NGAs) that are accounted as Due to NGAs. These funds
are used primarily for infrastructure projects resulting in increase of PPE while the
unutilized funds increased cash balances for 2017, thereby an increase in assets of

iii
32.61%. Whereas, the Municipality’s equity is composed of assets mainly financed from
income from Internal Revenue Allotment and has low-reliance on liabilities.

SCOPE OF AUDIT

Financial and compliance audits were conducted on the accounts and operations
of the Municipal Government of Alitagtag for CY 2017. The audit was conducted to
ascertain the adequacy and reliability of the books of accounts and financial reports,
fairness of the presentation of the financial statements, and compliance with applicable
laws, rules and regulations as well as adherence to prescribed policies in handling its
finances and operations in general.

AUDIT OPINION

The Auditor rendered qualified opinion on the fairness of the presentation of the
financial statements of the Municipality due to its failure to substantially address prior
year’s issues on PPE such as prioritization of a complete physical count of Municipal
properties, inaccurate PPE account balances, and inclusion of barangay structures in the
PPE account balances. Hence, the existence, accuracy and reliability of the reported
balances of the Property, Plant and Equipment (PPE) accounts with a net book value of
₱128,392,286.61 as of December 31, 2017 remained doubtful contrary to Sections 114
and 124 of the NGAS Manual for Local Government Units, and Section 79 of P.D. 1445.

Moreover, the accuracy and reliability of Real Property Tax (RPT) Receivable
and Special Education Tax (SET) Receivable totaling ₱4,509,889.48 could not be
ascertained due to discrepancies with the Municipal Treasurer’s Office’s reported
delinquencies of ₱2,308,788.83 of December 31, 2017, or a total difference of
₱2,201,100.65, thus affecting the fair presentation of the financial statements.

Lastly, the failure to reconcile the budget and actual amounts of revenue and
expenses per Statement of Comparison of Budget and Actual amounts as at December 31,
2017 to the total revenues and expenses per Statement of Financial Performance for the
same year and the CY 2017 surplus with the net cash flows from operating activities
which casted doubts in the reliability and correctness of the amounts presented in the
financial statements.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

For the exceptions cited above, we recommended the following courses of action:

1. That the Municipal Mayor prioritize the completion of physical count of the
Municipal properties by:

iv
 a. designating dedicated personnel under the supervision of the GSO to
continue without interruption the count of all other PPE items until
completed.

b. requiring the designated GSO and Municipal Accountant to immediately

reconcile the results of inventory per PPE account in order to arrive at PPE
amounts that are existing and serviceable.

c. compelling the use of stock cards in the General Service Office to

facilitate better monitoring and easier reconciliation.

d. requiring execution of deeds of donation to formally transfer barangay

structures to the barangays. Consequently, we recommended the
Municipal Accountant to facilitate drawing of adjusting journal entry in
the Municipal books and the recording of said properties and costs of their
improvements in the barangay books of accounts.

2. That the Municipal Mayor:

a. Instruct the Acting Municipal Treasurer to facilitate reconciliation of the

differences in the Treasury records resulting in discrepancies in the year-
end delinquent taxes;

b. Require the Municipal Accountant to record Discounts on Real Property

Taxes-Basic/Discounts on Special Education Tax on prompt payment and
Tax Revenue-Fines and Penalties upon collection of penalties as provided
in the new chart of accounts for LGUs and reduce receivables based on
gross amounts of taxes collected and set-up receivables based on the total
collectibles for the year as provided by the Municipal Treasurer; and

c. the Municipal Accountant and Municipal Treasurer to reconcile the list of

delinquent real property tax as of year-end against the recorded RPT and
SET Receivables to present an accurate and reliable receivable accounts in
the financial statements.

3. That the Municipal Mayor direct the Municipal Accountant to prepare and
immediately submit the required reports and to strictly adhere with the rules on
disclosing information in the notes to financial statements in compliance with
PPSAS.

Other significant observations and recommendations in the audit of the Municipal

Government of Alitagtag for CY 2017, are summarized as follows:

1. The Municipality was able to implement nine out of thirteen developmental

projects planned for 2017 with a total appropriations of ₱8,383,115.26. However,

v
 construction of multipurpose hall and activity center at Alitagtag Central School
was not yet completed at the time audit, incurring more than 200 days delay
without any extension order submitted and thereby entitling the Municipality to
liquidated damages.

We recommended that the Municipal Mayor, as head of the Municipal

Development Council:

 require the continuation of the implementation of priority developmental

projects funded by 20% Development Fund and consider other feasible
priority projects for the reversion of appropriated funds for projects not
implemented to ensure that the full intention of development will benefit all
its constituents;

 in case of delays in the completion of works exceeding 10% of the specified

contract time, rescind the contract, forfeit the contractor’s performance
security and takeover the prosecution of the project or award the same to a
qualified contractor through negotiated contract and impose liquidated
damages; and

 instruct the Bids and Awards Committee to the validate the contractor’s list
of on-going projects/awarded not yet started; coordinate/confirm with other
agencies/entities and ensure that all possible on-going projects/awarded not
yet started are included therein. Check, verify and validate all the eligibility
documents submitted by contractors before awarding projects.

2. Daily collections were not deposited intact and timely by the Municipal Treasurer
to the Municipal bank account in the Landbank of the Philippines-Bauan Branch
contrary to Section 32 of the New Government Accounting System (NGAS) and
Section 69(1) of Presidential Decree No. 1445, due to lapping of collections and
remittances thereby imposed the risk of funds being lost or misused.

We recommended that the Municipal Mayor require the Municipal Treasurer to

deposit collections intact daily or not later than the next working day pursuant to
Section 32 of the New Government Accounting System and Section 69(1) of
Presidential Decree No. 1445. Moreover, impose strict measures on internal
control on handling collections to prevent the recurrence of lapping of Municipal
funds.

3. Taxes on honoraria totalling ₱248,500.00 paid to National Government Agency

employees, and ₱440,369.50 paid to municipal employees were not withheld by
the Municipality, contrary to the National Internal Revenue Code of 1997,
Revenue Regulations No. 2-98, as amended, Revenue Memorandum Order No.
23-2014, and Revenue Memorandum Circular No. 105-2017, thereby depriving
the national government of income due thereon.

vi
 We recommended that the Municipal Accountant properly withhold creditable
income taxes of 5% or 10%, whichever is applicable, from the honoraria paid to
employees of national government agencies and remit the same to the BIR
through BIR Form No. 0605 on a monthly basis and BIR Form No. 1601-EQ on a
quarterly basis, to help the government accelerate the collection of income.

We also recommended that the Municipal Accountant subject the honoraria of

employees of the municipal government to withholding tax on compensation upon
payment, in accordance with the prescribed rates under RMC No. 105-2017, and
remit the same to the BIR through the monthly BIR Form No. 1601-C.

4. The determination of social pension beneficiaries was not effectively and

efficiently implemented by the Municipality contrary to Department of Social
Welfare and Development Administrative Order No. 15 s. 2010, hence, the social
protection due to them was not provided.

We recommended that the Municipal Mayor require the MSWDO to include all
the eligible and qualified senior citizens in order of priority provided under the
DSWD Administrative Order No. 15 series of 2010 dated December 13, 2010 in
the updated list of eligible senior citizens for submission to the DSWD Field
Office. Likewise, conduct quarterly validation and monitoring to the beneficiaries
to determine their situation and the utilization of the stipend for the full
implementation of Social Pension Program of the government.

5. Market stall occupants at Alitagtag Public Market are not covered by Contracts of
Lease embodied in a public instrument and subsidiary ledgers of the lessees were
not maintained in violation of COA Circular No. 88-282A, thereby ambiguities
and/or misunderstandings between the Municipality of Alitagtag and the market
stall occupants cannot be precluded/avoided. Also, the revision of the Municipal
Revenue Code which imposes realistic rates on taxpayers was not effected,
contrary to Section 191 of Republic Act (R.A.) No. 7160, thus depriving the
Municipality of the opportunity to increase its revenues for the delivery of basic
services for the benefit of its constituents.

We recommended that the Management:

 Execute a yearly contract of lease embodied in a public instrument for every

public market stall rental in accordance with COA Circular No. 88-282A to
ensure that interests of both parties are protected, ambiguities and/or
misunderstandings are avoided, and peaceful operation of the public market
in the Municipality is maintained.

 Formulate clear policies, rules and regulations, and administrative provisions

pertaining to collections of market stall rental fees, imposition of surcharges,

vii
 and other administrative matters affecting public market transactions in order
to attain smooth, peaceful and full control over the conduct and operation of
the public market, and to ensure that transactions are properly documented.

 Maintain individual subsidiary ledgers of the market stall lessees for easy
monitoring and enforcing of collections.

 Effect the revision of the Local Revenue Code to attain realistic rates of
taxes and enhance collection.

6. Disaster preparedness and mitigation programs, projects and activities funded out
of the current year 5 percent Local Disaster Risk Reduction and Management
Fund, Continuing Appropriations and prior year’s unexpended balance in the
Trust Fund books were not fully utilized due to deficiencies in planning in
violation of R.A. No. 10121 and NDRRMC-DILG-DBM-CC Joint Memorandum
Circular No. 2014-1, thereby weakening the Municipality and its constituents’
capability to respond to disasters and emergencies, and possibly endangering their
lives and properties.

We recommended that the Municipal Mayor:

 Direct the LDRRMO to incorporate in planning for the utilization of

LDRRM Fund the prior year’s unexpended balance of the LDRRMF in the
LDRRM Investment Plan to maximize all available sources of DRRM funds.

 Instruct the LDRRMO to carefully plan disaster preparedness and mitigation

programs and activities through assessment of disaster risk in the
Municipality and its barangays. Prepare the LDRRMF Investment Plan with
emphasis on the identification of specific projects/program to be included,
the total budget available to be allotted from the current year appropriations
and the previous five years’ unexpended balance, their proper allocation and
the probability of its implementation to successfully reduce disaster risk and
mitigate the adverse effects of calamity. Determine and update the
probability and/or necessity of planned activities to keep up with what is
currently essential to the disaster-preparedness and mitigation needs of the
Municipality and its barangays.

 Limit the utilization of LDRRMF to disaster risk management activities

relative to prevention and mitigation, preparedness, response,
reconcstruction and rehabilitation, as well as procurement of basic rescue
and equipment, in accordance with existing laws and regulations.

The above together with other observations and recommendations contained in

the report were discussed with concerned Municipal Government officials and employees

viii
during the exit conference conducted on June 21, 2018. Management views and reactions
were considered in the report, where appropriate.

Other audit observations are presented in Part II of the Report.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Of the 19 audit recommendations embodied in the 2016 Annual Audit Report, 4

were fully implemented, 9 were partially implemented and the remaining 6 were not
implemented by the Municipality.

ix