EXECUTIVE SUMMARY

A. INTRODUCTION

1. Bayabas, Surigao del Sur was created by virtue of Executive Order No. 452 on
November 20, 1961. It has seven barangays namely: Amag, Balete, Cabugo,
Cagbaoto, Lapaz, Magobawok and Panaosawon.

2. The audit was conducted in accordance with applicable legal 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 conclusions.

3. The audit covered the accounts and operations of the municipal government for
the year 2014 and was aimed at ascertaining the propriety of financial transactions,
management’s compliance to prescribed rules and regulations and the fairness of the
presentation of the financial statements. Value for Money Audit was conducted on
the utilization of the Special Education Fund to determine whether the objectives of
the projects were attained in the most efficient, effective and economical manner and
expended according to its intended purpose.

B. FINANCIAL HIGHLIGHTS

a.) Comparative Financial Position and Results of Operation.

Particulars 2014 2013 Increase/(Decrease)
Assets P25,768,908.11 P24,922,957.01 P 845,951.10
Liabilities 2,172,693.18 2,639,126.77 (466,433.59)
Government Equity 23,596,214.93 22,283,830.24 1,312,384.69
Income 43,252,157.10 36,820,977.08 6,431,180.02
Expenses 40,418,585.70 33,064,679.71 7,353,905.99
Net Income 2,833,571.40 3,756,297.37 (922,725.97)

b.) Comparative Sources and Application of Funds

Particulars 2014 2013 Increase/(Decrease)
Appropriations P34,688,828.32 P29,718,415.76 P 4,970,412.56
Allotments 34,688,828.32 29,718,415.76 4,970,412.56
Obligations 34,445,547.95 28,415,028.88 6,030,519.07
Funds received from
2,461,340.00 632,760.00 1,828,580.00
other agencies
Funds transferred to
427,000.00 357,000.00 70,000
other agencies/LGUs

C. AUDIT OPINION

4. The Audit Team Leader rendered a qualified opinion on the fairness of

presentation of the financial statements of the Municipality of Bayabas for CY 2014
because of the doubtful validity and existence of property plant and equipment of
P12.645 million due to non-submission of the report on physical count of property
plant and equipment and inadequacy of accounting records.
D. SUMMARY OF SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

5. For the above-mentioned audit observation which has caused the issuance of a
qualified opinion, we recommended to direct the inventory committee to submit the
inventory report and the Municipal Treasurer to maintain property records.

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

i. Non-recording of daily collections in the Cashbook

We recommended strict compliance with the provisions of Section 181 of GAAM

Volume I by recording daily collections in the cashbooks to facilitate determination of
cash on hand balance at a given time.

ii. Non-renewal of bonds and non-bonding of some accountable officers

We recommended to provide adequate funding for fidelity bond premiums of

accountable officers and to renew the present bond coverage of bonded Municipal
officers to ensure protection of government resources against unwarranted losses.

iii. Non-compliance with the posting requirements on the procurement of

infrastructure projects

We recommended that the LGU strictly comply with the provisions of the
Implementing Rules and Regulations (IRR) of Republic Act (RA) 9184 particularly on
the posting requirements in the procurement of infrastructure projects.

iv. Unexpended/unobligated balance of the Quick Response Fund (QRF)of the Local
Disaster Risk Reduction Management Fund (LDRRMF) amounting P875,322.82 not
transferred to the Special Trust Fund in the Trust Fund books of accounts.

We recommended to advise the Municipal Accountant to transfer to the Trust

Fund books as a Special Trust Fund under the account “Trust Liability-DRRM“ all
unexpended/unobligated balance of QRF and to maintain Subsidiary Ledgers (SL) for
transfers of agency’s unutilized DRRMF to the special trust fund by year of transfer.

v. The 20% Development Fund and Economic Enterprise operations of the

Municipality are not maintained in special accounts of the General Fund

We recommended to advise the Municipal Accountant to maintain special

accounts in the General Fund for the 20% Development Fund and other Economic
Enterprise operations of the Municipality. Separate financial statements such as
Statement of Financial Position, Statement of Financial Performance and Cash Flows
should be prepared and presented as part of the schedules of the General Fund Trial
Balance.

vi. Granting additional cash advances to officials and employees even if the previous
cash advances were not yet liquidated resulted in the accumulation of the account to
P127,382.92 as of December 31, 2014.
 We recommended strict compliance to the provision of COA Circular No. 97-002
dated February 10, 1997 on the granting, utilization and liquidation of cash advances.
Moreover, refrain from granting additional cash advances to officials and employees
with outstanding balances.

vii. Non-preparation and non-submission of the Procurement Monitoring Report

(PMR) to the Government Procurement Policy Board (GPPB).

We recommended to advise the BAC Secretariat, thru the BAC Chairperson to

prepare the PMR of the Municipality and submit to the GPPB in printed and electronic
format within fourteen (14) calendar days after the end of each semester in compliance
with Section 12.2 of Revised IRR of RA 9184.

viii. The required BAC composition for LGUs not observed

We recommended strict compliance to GPPB Resolution No. 01-2004 which

provides for the BAC composition for LGUs. The Local Chief Executive shall see to it
that the designated BAC members are from the regular offices under her office.

ix. The bid evaluation process in determining the Lowest Calculated Bid
inappropriately done.

To correct the above noted practices, we recommended the following courses of

actions:

1) Direct the BAC to observe strictly Section 32.2.1 of the Revised IRR of RA 9184
in the determination of award of contracts/Purchase Orders;

2) Direct the Accounting Office to check completeness of the supporting documents

to substantiate the claim before signing box B of the DV; and

3) Direct the Treasury Office to verify suppliers’ claim prior to the preparation of
the checks to avoid check cancellation in cases of failure to deliver and/or deliveries not
in accordance with the specifications called for in the Purchase Orders.

x. Travelling expenses of non-teaching personnel amounting to P205,149.00 were

charged to the Special Education Fund, thus depriving the student populace of the
benefits had this amount been used for the operation and maintenance of the elementary
and secondary public schools.

We recommended to stop the practice of charging ineligible expenditures to

Special Education Fund to ensure that goals and objectives in the imposition of the
additional one percent (1%) tax on real property are achieved.
E. SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND CHARGES

7. For CY 2014, no audit suspensions and disallowances were issued to

management. The unsettled amount of P161,279.16 represents the audit
suspensions and disallowances of P158,919.16 and P2,360.00 respectively issued
in prior years.

F. STATEMENT ON THE QUANTITY/NUMBER OF RECOMMENDATION

IMPLEMENTED, PARTIALLY IMPLEMENTED AND NOT IMPLEMENTED
FOR THE CURRENT YEAR.

8. Out of the nine (9) audit recommendations contained in the CY 2013 Annual
Audit Report four (4) were fully implemented, one (1) was partially implemented
and four (4) were not implemented.