EXECUTIVE SUMMARY

A. Introduction

1. Bislig became a town on January 21, 1921 per Executive Order No. 62 issued by
Gov. General Francis Burton Harrison on December 28, 1920. By virtue of
Republic Act No. 8804 which was approved by His Excellency President Joseph
Estrada on August 18, 2000, Bislig became a component city. It was duly ratified
and approved in a plebiscite conducted on September 18, 2000. Its vision is, “Bislig,
a vibrant and livable city; a leading producer of agricultural and aquamarine
products, and an eco-tourism destination in Southern Philippines.”

2. The audit was conducted in accordance with the applicable legal and statutory
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 city government for the year
2017 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 was also conducted to
determine whether programs, projects and activities were attained in the most
efficient, effective and economical manner.

B. Financial Highlights

a) Comparative Financial Position and Results of Operations

Particulars 2017 2016 Increase (Decrease)

Assets 1,619,252,143.87 1,451,224,899.49 168,027,244.38
Liabilities 473,662,824.07 404,562,048.83 69,100,775.24
Government Equity 1,145,589,319.80 1,046,662,850.66 98,926,469.14
Gross Income 644,900,881.07 594,369,871.38 50,531,009.69
Operating Expenses 518,691,286.39 462,201,316.43 56,489,969.96
Transfers, Assistance 29,767,086.43 27,482,594.20 2,284,492.23
and Subsidy To
Surplus (Deficit) 96,442,508.25 104,685,960.75 (8,243,452.50)

b) Comparative Sources and Applications of Funds

Particulars 2017 2016 Increase (Decrease)

Appropriations 649,538,973.71 606,994,212.07 42,544,761.64
Allotment 649,538,973.71 606,994,212.07 42,544,761.64
Obligations 532,485,551.95 491,349,637.74 41,135,914.21
Funds received from 77,567,511.29 31,044,211.51 46,523,299.78
other agencies
Funds transferred to 11,319,398.60 11,476,620.20 (157,221.60)
other agencies
Funds transferred to 7,843,388.50 7,919,854.50 (76,466.00)
NGOs/POs
C. Audit Opinion

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

financial statements of the City Government of Bislig for CY 2017 because of the
following reasons:

i. Completed infrastructure projects totaling ₱36,012,149.08 were not recognized

to its appropriate asset account and not closed to government equity, thus
misstating the year-balances of the asset and equity accounts;

ii. Absence of some Property, Plant, and Equipment in the amount of

₱3,908,332.55 casted doubt on the reliability of the recognized PPE.

iii. Unrecorded amount of ₱130,645.35 representing the uncollected rentals of

the
property owned or administered by the City.

D. Summary of Significant Observations and Recommendations

5. For the above-mentioned audit observations that have caused the issuance of a
qualified opinion, we recommended that Management shall:

i. Instruct the City Engineer to consistently furnish the City Accountant the report
of all completed projects which serves as basis in the recording of
adjustment/reclassification of the accounts. Further, direct the City Accountant
to draw the necessary journal entry for the recognition of the assets
accompanying the completion of the said projects; and

ii. Instruct the City Accountant to review the applicable accounting standard on
the recognition principle of the property, plant, and equipment. Moreover, we
recommended that the City Accountant disclose the missing PPE in the notes to
financial statements to provide adequate information.

iii. Instruct the City Accountant that the uncollected/outstanding rental/lease on

properties owned or administered by the City Government of Bislig be
recognized and recorded as receivables and income in accordance with PPSAS
1.7 on accrual basis. Likewise, direct the CEEDO Manager to submit the
monthly delinquency report of stalls and its details to the City Accounting
Office for proper recording and monitoring of the unpaid rentals/leases.

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

i. Cash in Bank-Local Currency, Time Deposit in the amount of ₱52,321,954.49

being held by the depositary bank for the loan granted to LGU-Bislig City was
presented in the line item of Cash and Cash Equivalents in the Statement of
Financial Position inconsistent with Philippine Public Sector Accounting
Standards (PPSAS) 2, Cash and Cash Equivalents which resulted to
misclassification of accounts.
 We recommended that Management direct the City Accountant to reclassify the
Cash in Bank-Local Currency, Time Deposit under the line item of Investment
in the Statement of Financial Position.
ii. Non-preparation of bank reconciliation statements of some bank accounts and
delayed submission of the same casted doubt on the accuracy of cash in bank
balances in the Statement of Financial Position and precluded the Auditor for
its timely review.

We recommended that Management instruct the City Accountant to prepare

bank reconciliation statements in all bank accounts of the City to show the
correct cash in bank balances reflected in the Statement of Financial Position.
Further, remind the City Accountant to observe the legal deadline on the
submission of bank reconciliation statements to the Office of the Auditor.

iii. Accountability for the unaccounted property, plant, and equipment of the City
in the amount of ₱3,908,332.55 was not established pursuant to Section 101 of
Presidential Decree No. 1445 and Section 54 of Manual of NGAs for LGUs.

We recommended that the City General Services Officer send demand letters to
the concerned accountable officers for the production of the missing
government properties and/or report explaining why they were not found during
the physical count. Also, advise the accountable officer to request for relief from
accountability to COA for the lost items within the reglementary period.

iv. The Bislig City has no updated Revenue Tax Code which is not in accordance
with the Department of Interior and Local Government (DILG) and the
Department of Finance (DOF) Joint Memorandum Circular No. 2012-01 dated
January 13, 2012, thus, deprived the LGU to generate additional revenues for
the City’s economic development and fiscal sustainability.

We recommended that Management expedite the enactment of the revised City

Revenue Code to provide a current tax rates that would boost the income
generation of the city. We also recommended that the existing articles and
provisions be revisited with end-in-view of considering the call of the present
times towards the best interest of the public and the government.

v. Specific details of some priority development programs, projects and activities

were not provided in the Annual Investment Plan funded out of the 20%
development fund pursuant to Item 1.2 of DILG-DBM Joint Memorandum
Circular No. 2017-01 which limits vital information on full disclosure,
transparency, and accountability of project implementation.

We recommended the Local Development Council, in coordination with the

local officials, civil society organizations and other stakeholders, to carefully
identify PPAs that are specific in nature covering the complete description of
the project, location, intended beneficiaries and estimated cost of the PPAs.
Further, we recommended to secure concurrence from the Local Sanggunian
when the appropriated amounts indicated in the Annual Budget and AIP were
stated in generic term before the implementation of the PPAs to clothe them
with legal authority.
 vi. Four (4) mandatory positions for the City Disaster Risk Reduction and
Management Office (LDRRMO) were not provided pursuant to Section 5.1 to
5.2 of DILG-DBM-CSC JMC No. 2014-1, thus, may not assure the continuity
of implementation of DRRM plans and its realization in the long run.

We recommended that Management create the mandatory positions for

LDRRMO and appoint personnel who met the qualification standards set in the
NDRRMC-DILG-DBM-CSC Joint Memorandum Circular (JMC) 2014-1 dated
April 4, 2014 in order to institutionalize the LDRRMO’s organizational
structure and manpower compliment aimed to carry out the DRRM plans and
programs in the long run.

vii. The non-submission of Local Disaster Risk Reduction and Management Officer
(LDRRMO) on the Monthly Report on Sources and Utilization of Disaster Risk
Reduction and Management Fund through the LDRRMC and Local
Development Council (LDC) to the COA Auditor of the LGU as required under
Section 5.1.5 of COA Circular 2012- 002 precluded the timely review and
verification of the said report.

We recommended that Management direct the LDRRM Officer to coordinate

with the Acting City Accountant to prepare the Report on Sources and
Utilization of LDRRM Fund on monthly basis in order to submit the said report
to the concerned offices on the due dates pursuant to Section 5.1.5 of COA
Circular No. 2012 -002.

viii. The continuous operation of the City’s existing residual containment area
(RCA) contravened Section 17 (h) paragraph 4 and Section 37 of RA No. 9003
which exposed high risk of public health and environmental hazards.

We recommended that Management to strictly adhere the full implementation

of RA No. 9003 and hasten the establishment of sanitary landfill to ensure the
protection of the City’s constituents from the possible ecological impact.

ix. Allocation for construction, repair and maintenance of school buildings and
other facilities of the SEF budget for CY 2017 with an aggregate amount of
₱1,287,622.50 or 13.74% of ₱9,370,284.77 total budget was only minimal
inconsistent to Item 4.1.2.1 of DEPED-DBM-DILG Joint Circular No. 1, series
of 2017 dated January 19, 2017, thus deprived the elementary and secondary
schools of better classrooms and other facilities that are conducive to learning.

We recommended the Local School Board to prioritize in the formulation of

SEF budget the construction, repair and maintenance of school buildings and
other facilities pursuant to Item 4.1.2.1 of the DEPED-DBM-DILG Joint
Circular No. 1 dated January 19, 2017 in order to provide improved academic
environment and basic education services.

x. Ineligible expenditures in the amount of ₱270,500.00 were charged to Special

Education Fund (SEF) contrary Section 272 of Republic Act No. 7160 and Item
No. 4.0 of DEPED-DBM-DILG Joint Circular No. 1, series of 2017 dated
January 19, 2017, thereby defeating the purpose for which the fund was
intended.
 We recommended Management to stop the practice of charging ineligible
expenditures against the Special Education Fund and to adhere strictly to the
provisions of Section 272 of RA 7160 and other regulations governing the
utilization of the SEF.

xi. Attribution of Programs/Projects/Activities (PPAs) in the City’s approved 2017

GAD Plan and Budget (GPB) and GAD Accomplishment Report (GAD AR)
were not supported by gender analysis using the Harmonized Gender and
Development Guidelines (HGDG) contrary to Section 3.0 of PCW-DILG-
DBM-NEDA Joint Memorandum Circular No. 2016-01 dated January 12, 2016,
thus, the risk that PPAs may not address gender issues and funds expended were
not related to GAD.

We recommended that Management through its GFPS facilitate the conduct of

gender analysis using the HGDG for proper identification of gender-responsive
PPAs in the GPB and to undertake the same analysis on its prepared GAD AR
to determine the actual expenditures that can be attributed to GAD budget.

xii. The City’s GAD Plan and Budget (GPB) and GAD Accomplishment Report
(GAD AR) were prepared but not submitted to the Provincial Planning
Development Office (PPDO) contrary to Section 4.0 (3) of PCW-DILG-DBM-
NEDA Joint Memorandum Circular No. 2016-01 dated January 12, 2016 which
may not assure that the PPAs are GAD responsive.

We recommended that Management through its GFPS first submit the GPB and
GAD AR to the PPDO to ensure alignment of priority PPAs of the province.
Then to the DILG Provincial Office for review and endorsement to be
incorporated in the LGU annual budget.

xiii. The Quarterly Report on Government Projects/Programs/Activities (PPAs) as

of December 31, 2017 showed incomplete information contrary to the
provisions of COA Circular No. 2013-004, thus, precluded the management and
oversight bodies the full details on the status of PPAs implementation.

We recommended Management to submit the quarterly report on publicized

government projects/programs/activities providing all the vital information
pursuant to COA Circular Number 2013-004. Also, we recommended that
Management direct the City Planning Office in coordination with the City
Engineering Office to act as the consolidator of the reports submitted by the
different departments/offices of the LGU on the status of PPAs implementation.

xiv. Significant delays on the acquisition of goods and services contravened the
provisions of RA 9184 which might affect the efficiency of the delivery of
public service and the operational performance of the city government.

We recommended that Management assess the impact of the significant delays

in the procurement process of the city and introduce improvements in the
soonest possible time to achieve efficient delivery of goods and services.
Furthermore, direct the City Accountant to coordinate with the General Services
Officer, City Treasurer, and end-users on the basic and additional documents
 for all transactions to facilitate on time processing of the DVs and establish
tracking system to easily monitor the flow of the transaction.

xv. Unexpended balances of Priority Development Assistance Fund (PDAF)

totaling ₱1,100,100.00 were not returned to the Bureau of Treasury contrary to
the Supreme Court Decision GR. Nos. 208566, 208493, and 209251 dated
November 19, 2013, hence deprived the national government to re-appropriate
the said funds to aid various priority programs, projects and activities.

We recommended that Management direct the City Accountant to prepare and

process the necessary disbursement voucher relative to the outstanding PDAF
funds in the possession of LGU-Bislig City and instruct the City Treasurer to
immediately return the said funds to the Bureau of Treasury.

xvi. Higher percentage of Value Added Tax (VAT) component provided on the
Approved Budget for the Contract (ABC) and Contract Cost of the four (4)
infrastructure projects of 12% contrary to the DPWH Department Order (D.O.)
No. 22 series of 2015 dated February 18, 2015 resulted in higher project cost.

We recommended Management to instruct the Bids and Awards Committee

(BAC), City Planning and Development Office and the City Engineering Office
to review the composition of Approved Budget for the Contract (ABC) on the
on-going procurements and apply the new VAT rate in the computation of
project cost pursuant to the provisions of DPWH Department Order No. 22
Series of 2015 for the future projects.

xvii. Twenty percent development fund of the City was not fully utilized leaving a
total unexpended balance of ₱59,721,838.48, hence deprived the constituents of
the benefits that could be afforded in the implementation of priority programs,
projects and activities geared towards the desired socio-economic development
and environmental outcomes.

We recommended that Management direct all department heads involved in the

implementation of PPAs to review all plans and timetables and monitor the
utilization of the 20% development fund to ensure that the allocated funds are
optimally used according to its intended purpose. Moreover, instruct the
implementing office/s to expedite the implementation of the projects and
appraise the viability of the projects which are not yet implemented during the
year for appropriate reversion of appropriations duly approved by the Local
Sanggunian.

xviii. The non-utilization of the Special Trust Fund account and capital outlays for
DRRM in the current year budget totaling ₱42,736,610.61 and ₱18,611,451.95
respectively as of December 31, 2017 was due to the absence of comprehensive
LDRRM Plan and structured monitoring mechanism which affected the City’s
disaster preparedness, prevention, mitigation, and response capabilities.

We recommended that the City Disaster Risk Reduction and Management

Office to formulate comprehensive and integrated LDRRM Plan and to prepare
and submit to the Sangguniang Panlungsod, through Local Disaster Risk
Reduction and Management Council (LDRRMC) and Local Development
 Council, the annual LDRRMO plan and budget indicating the proposed
programming of the current LDRRM Fund and Special Trust Fund- DRRM to
ensure that the available LDDRM funds are used to strengthen the local disaster
risk reduction management. Moreover, establish a structured monitoring system
to track down the implementation of various PPAs for DRRM whether these
were achieved according to its expected results.

E. Compliance with Tax Laws

7. For Calendar Year 2017, the City of Bislig was able to withhold the total amount
of ₱39,959,631,61 of taxes, of which ₱38,484,632.33 was remitted to the Bureau of
Internal Revenue leaving an unremitted balance of ₱1,474,999.28.

Kind of Fund Tax Withheld Tax Remitted Balance

General Fund 38,135,410.50 36,862,266.97 1,273,143.53
Special Education Fund 166,725.48 159,968.34 6,757.14
Trust Fund 1,657,495.63 1,462,397.02 195,098.61
TOTAL 39,959,631.61 38,484,632.33 1,474,999.28

7.1 The balance of the collection represents the taxes withheld in the month of
December 2017 which was remitted in the month of January 2018.

F. Status of Suspensions, Disallowances, and Charges

8. As of year-end, the status of audit suspensions, disallowances and charges is as

follows:
Beginning Ending
Balance Balance
Audit Action Issued Settled
December 31, December 31,
2016 2017
Before the SASDC
Disallowances 12,467,596.92 - - 12,467,596.92
SASDC
Suspensions - - - -
Disallowances 10,955,948.60 - 100,740.17 10,855,208.43
Total 23,423,545.52 - 100,740.17 23,322,805.35

8.1 The settlement of ₱100,740.17 pertained to a deficiency of 127.14 square meters

masonry works on the project Covered Court Phase II, City Hall Compound,
Poblacion, Bislig City.
G. Statement on the quantity/number of recommendations implemented,
partially implemented and not implemented for the current year.
9. Out of the 26 audit recommendations embodied in the CY 2016 Annual Audit
Report, 14 were fully implemented, 11 were partially implemented and one was not
implemented.