EXECUTIVE SUMMARY

Introduction

The Province of Quezon, formerly known as Tayabas, was established on March 12, 1901,
with Lucena as its capital and the late Hon. Cornelius Gardiner as its first Governor. It was
at this time that the seat of the Provincial Government was transferred from the Municipality
of Tayabas to Lucena City.

On June 12, 1902, the district of El Principe (now known as Aurora), then a dependency of
Laguna, and the district of Infanta, including Polillo that used to be a part of Laguna, were
annexed to Tayabas. Six months later, Marinduque, which during that time was a separate
province, was also annexed to Tayabas. Marinduque became a separate province in 1921.

On September 7, 1946, President Manuel A. Roxas, by virtue of Republic Act (RA) No. 14
renamed the Province of Quezon in honor of President Manuel L. Quezon, a native of Baler,
formerly a part of Quezon.

The Provincial Government of Quezon with Taxpayer Identification Number 600-000-633-

148 is exempt from income tax, and is registered with General (Overall) Public Service
Activities as line of business/industry.

The Organizational Structure of the Province is as follows:

a. Key Officials

Governor : Hon. David C. Suarez

Vice-Governor
Members of the Sanggunian
: Hon. Samuel B. Nantes
:
1. Hon. Aileen R. Buan
2. Hon. Claro M. Talaga, Jr.
3. Hon. Hermilando C. Alcala, Jr.
4. Hon. Ferdinand M. Talabong
5. Hon. Elizabeth U. Sio
6. Hon. Donaldo C. Suarez
7. Hon. Vincent Dominic H. Reyes
8. Hon. Isaias B. Ubana II
9. Hon. Rhodora B. Tan
10. Hon. Raquel M. Mendoza

b. No. of Personnel Complement

Permanent : 1,659
Casual : 1,471
Contractual/Job Order : 3,257
Elective Officials : 15
Coterminous : 9
6,411

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Financial and compliance audit were conducted on the accounts and operations of the
Province for CY 2018 in accordance with generally accepted auditing standards to ascertain
the fairness of the presentation of the financial statements and compliance of the Province
with laws, rules and regulations and the economical, efficient and effective utilization of
resources.

Financial Highlights

For Calendar Year (CY) 2018, the Province of Quezon generated a total income of
P3,418,031,366.10 from local taxes, Internal Revenue Allotment (IRA), permits and
licenses, service, business and other income which increased by P300,131,383.74 as
compared to last year’s total income of P3,117,899,982.36.

The financial position and results of operation for CY 2018 of the Province are summarized
below and shown in detail on the attached audited financial statements.

Increase /
2018 2017
(Decrease)
Total Assets P9,228,923,350.32 P7,855,094,703.92 P1,373,828,646.40
Total Liabilities 2,779,935,823.76 2,286,426,591.35 493,509,232.41
Total Equity 6,448,987,526.56 5,568,668,112.57 880,319,413.99
Total Income 3,960,551,839.36 3,291,984,073.68 668,567,765.68
Total Expenses 2,963,348,676.01 2,390,250,262.33 573,098,413.68

Independent Auditor’s Report

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

statements of the Province of Quezon due to the following observations:

1. The reported balance of the Cash in Bank – Local Currency Current Account
(CIB – LCCA) as of December 31, 2018 totaling P1,967,903,247.21 was
unreliable due to the presence of (a) long outstanding reconciling items; (b) stale
checks totaling P758,270.20; and (c) non-existent deposit account with the
Philippine National Bank (PNB) totaling P323,531.08, hence the account’s
balance is not fairly presented in the Statement of Financial Position, contrary to
Paragraph 27, Fair Presentation and Compliance with Philippine Public Sector
Accounting Standards (PPSAS) 1.

2. Cash Advances totaling P8,115,859.55 were not liquidated as of December 31,

2018, P1,682,940.04 or 21 percent of which pertains to unliquidated cash
advances which have been outstanding for one to 22 years due to non-
settlement by the Accountable Officers, who were either retired, resigned or
deceased, resulting in the overstatement of balance and understatement of the
related expense accounts’ balances by the same amount, contrary to Item 5.8 of
the Commission on Audit (COA) Circular No. 97-002.

3. The reciprocal accounts’ balances of the Due from Other Funds and Due to
Other Funds under the General Fund, Special Education Fund and Trust Fund,
showed a difference of P57,815,782.67 due to erroneous recording of various

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 transactions, contrary to Section 111 of Presidential Decree (PD) No. 1445,
resulting in an unreliable information in the financial statements.

4. Agricultural and Marine Supplies for Distribution account balance of

P78,075,464.10, as of December 31, 2018 includes inventories totaling
P12,202,361.25 which have been outstanding in the books for two to three years
due to the failure of the accountable persons to submit to the Provincial
Accounting Office the List of Recipients (LOR) including the duly signed
Certificate of Acceptance, thus, affecting the fairness and reliability of the
account’s balance, contrary to Paragraph 44 Philippine Public Sector Accounting
Standards (PPSAS) 12 and Paragraph 27 of PPSAS 1.

5. The balance of the Property, Plant and Equipment (PPE) accounts totaling
P6,794,448,099.95 per Accounting records was not reconciled with the
Cumulative Annual Report of Property, Plant and Equipment of the General
Services Office (GSO) amounting to P4,654,988,219.50, showing a difference of
P2,139,499,880.45, due to non-completion of physical count and non-
reconciliation of records by the Accounting and GSO, thus rendering the
account’s balance unreliable and not fairly presented, contrary to Paragraph 27
Philippine Public Sector Accounting Standards (PPSAS) 1.

6. The Breeding Stocks account balance amounting to P6,976,533.80 is doubtful

and unreliable due to the presence of dormant balances totaling P5,961,800.00
which have been outstanding for six to 10 years. Moreover, the balance of the
Breeding Stocks account was not reconciled with the records of the General
Services Office amounting to P479,810.00 showing a difference of
P6,496,723.00, hence not fairly presented, contrary to Paragraph 27, Fair
Presentation and Compliance with Philippine Public Sector Accounting
Standards (PPSAS) 1.

7. The balance of the Construction in Progress (CIP) - Building and Other

Structures account as of December 31, 2018 totaling P127,084,569.20 of the
General Fund could not be relied upon due to the presence of non-moving
balances totaling P16,246,724.48 which have been dormant for seven to 13
years thus, contrary to Paragraph 27 of PPSAS 1.

8. The balance of the Due to Officers and Employees account as of December 31,
2018 under the General Fund amounting to P52,427,627.35 is unreliable and not
fairly presented in the Financial Statements due to the inclusion of negative
balances totaling P467,192.21, contrary to Paragraph 27 Philippine Public Sector
Accounting Standards (PPSAS) 1.

9. The accuracy and reliability of the Due to GSIS account balance totaling
P48,142,043.09 as of December 31, 2018 are doubtful due to significant amount
of unreconciled balances amounting to P18,428,505.26. Moreover, improper
posting resulted in negative balances amounting to P1,538,624.03, contrary to
Paragraph 27 Philippine Public Sector Accounting Standards (PPSAS) 1.

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For the exceptions cited above, the Auditor recommended that the Provincial Governor
require the:

1. a. Provincial Accountant to:

 recognize immediately in the books the valid reconciling items for fair
presentation of Cash-in-Bank and other affected accounts’ balances;

 verify and analyze long-reported reconciling items to establish their validity and
correctness and revisit the reconciling items without available supporting
documents to determine the appropriate action or disposition to pave the way for
their elimination; and

 to prepare the adjusting entry reverting to Cash in Bank the stale checks totaling
P758,270.20 and recognizing the corresponding payable account.

 Provincial Treasurer to:

 closely monitor the issuance of checks to avoid the incurrence of stale checks;
and

 exert more efforts in finding documents that will support the existence of the PNB
accounts, otherwise, if all efforts prove futile, deduct the balance of P323,531.08
from the Terminal Leave of the retired cashier (deceased).

2. a. Provincial Accountant to:

 enforce the liquidation of all cash advances within the prescribed period in
accordance with Item 5.8 of COA Circular No. 97-002, otherwise, initiate the filing
of malversation charges against the erring accountable officer under Article 217
and 218, both of the Revised Penal Code;

 review cash advances which have been outstanding for 10 years or more and
exert extra efforts in sending final demand letters to ensure liquidation; and

 coordinate with the Provincial Prosecutors Office (PPO), Regional Trial Court
(RTC) and Department of Education (DepEd) for the assistance in the collection
of the cash advances of their accountable officers.

b. Provincial Governor to file for a request for authority to write-off unliquidated cash
advances to the COA following the guidelines and procedures on the write-off of
unliquidated cash advances per COA Circular No. 2016-005 dated December 19,
2016.

3. Provincial Accountant to make the necessary adjustments/corrections in the books of

accounts to show the correct balances of Due from Other Funds and Due to Other
Funds; and ensure that the transactions affecting the accounts are recorded properly
and promptly reconciled to avoid future misstatements.

4. Provincial Agriculturist as well as the accountable personnel in charge of the project to

submit all unsubmitted Lists of Recipients (LOR) including the duly signed Certificates of
Acceptance to the Provincial Accounting Office and henceforth, submit the same

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 immediately upon issuance of the supplies for recording in the books for fair
presentation of the affected accounts’ balances in the Financial Statements.

5. Provincial Accountant and the Provincial General Services Office Head to:

 conduct analysis of PPE accounts to identify, investigate and clear reconciling

items;

 perform regular reconciliation of property cards with accounting records to ensure

that all discrepancies are immediately investigated, cleared and reconciled with
the book of accounts; and

 prepare necessary journal entries to adjust the duly investigated reconciling

items in order to reflect the correct account balances.

6. a. Provincial Veterinarian and Provincial Agriculturist to conduct regular monitoring of

breeding stocks and to submit an updated report on the status of breeding stocks
to the General Services Office and Provincial Accounting Office to effect
adjustment;

b. Provincial Accountant and the Head-Provincial General Services Office to

regularly reconcile their records; and

c. Provincial Accountant to conduct analysis of the Breeding Stocks account and

effect necessary adjusting journal entries, if warranted.

7. Provincial Accountant to:

 exert efforts in tracing the documents pertaining to the completed projects to

effect the necessary adjustment in the books of account relative to the transfer of
CIP - Buildings and Other Structures to appropriate Buildings and Other
Structures accounts upon completion with the corresponding Accumulated
Depreciation at year-end for fair presentation of the balances in the Financial
Statements; and

 confirm with the Provincial Engineer the status of the projects with no final
payments.

8. Provincial Accountant to analyze and implement necessary adjustments to correct the

balances; and require her to regularly monitor the account and take up the necessary
adjusting entries to ensure that the account balance is fairly presented in the Financial
Statements.

9. Provincial Accountant to thoroughly review the account Due to GSIS and to undertake
the reconciliation of the unreconciled amounts and the negative balances to ensure that
the account balance is fairly presented in the Financial Statements.

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Significant Audit Observations and Recommendations

1. The Collecting Officers of various Hospitals did not remit their collections to the
Provincial Treasurer’s Office regularly and promptly with an average delay of three to
86 days, contrary to Section 307 of Republic Act (RA) No. 7160 and Section 29 of
the Manual on the New Government Accounting System for Local Government Units,
thus exposing the unremitted collections to risk of loss and/or misuse.

We recommended that the Provincial Governor direct (a) the Provincial Treasurer
and Provincial Accountant to compel the accountable officers to promptly remit their
collections to avoid possible misuse, theft, and misappropriation of government funds
and to facilitate timely recording; and (b) the Chief of Hospitals to ensure and monitor
that collections of the hospitals are remitted by the accountable officer on time and
intact.

2. The collections received by the Accountable Officer of Bondoc Peninsula District

Hospital were utilized for payment of daily marketing expenses instead of remitting
the same to the proper authorities, contrary to Presidential Decree (PD) No.1445 and
Republic Act (RA) No. 7160, thus resulting to misappropriation of funds.

We recommended that the Provincial Governor require the:

a. Provincial Accountant to adopt measures to address the concerns on the

proper disbursement of government funds by the Chief of Hospital and the
Accountable Officer to avoid future problems regarding their cash
accountabilities; and

b. Chief of Hospital to direct the Accountable Officers to stop using hospital

collections for hospital operations and request for a reasonable amount of
cash advance to be used in their daily operation.

3. The Collecting Officers of Bondoc Peninsula District Hospital and Sampaloc

Medicare Community Hospital did not maintain/prepare cashbooks to record
collections and remittances pertaining to the General and Consignment collections of
the agency, rendering it difficult to establish the accuracy of the balances of the said
fund, contrary to Chapter 2, No. 7 of the Revised Cash Examination Manual.

We recommended that the Chief of Hospital of BPDH and SMCH instruct their
Collecting Officers to prepare cashbook for the General and Consignment collections
to facilitate determination of their accountabilities in a given reporting period.

4. The Collecting Officer of Bondoc Peninsula District Hospital (BPDH) did not
accomplish monthly certifications on his monthly cash accountability in the cashbook
as required in Section 26 of the Manual on the New Government Accounting System
(MNGAS) For Local Government Units (LGUs), Volume II, thus correctness of
balances may not be determined.

We recommended that the Chief of Hospital require the Collecting Officer to prepare
monthly certification in his cashbook in compliance with Section 26 of the MNGAS for
LGUs, Volume II.

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Summary of Total Suspension, Disallowances and Charges as of Year-end

There were no unsettled suspensions and charges as of December 31, 2018. While the total
unsettled disallowances at year-end amounted to P5,800.00.

Status of Implementation of Prior Year’s Audit Recommendations

Of the 17 audit recommendations embodied in the 2017 Annual Audit Report, seven were
fully implemented, eight were partially implemented and two were not implemented by the
Province.

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