EXECUTIVE SUMMARY

* Introduction

Baclayon is located in the southwestern part of Bohol which is seven (7)

kilometers from the capital City of Tagbilaran It has an area of 3,442,1807 hectares or
about 0.84 % of the area of Bohol province. It consists of seventeen ( 17) barangays of
which 6 are in the coastline, 10 are in the upperland and 1 island barangay. The main
source of livelihood of its people are farming and fishing.

The town of Baclayon was established on November 17,1595 by the two Jesuit
priests Fr. Juan de Torres and Fr. Gabriel Sanchez. This was the first town to be
established in Bohol by the Spaniards where the oldest church in the entire province is
found. At present, the municipality is still under the able administration of Mayor A.
Alvin J. Uy.

* Highlights of Financial Operation

To accelerate the social and economic growth development of the municipality

for calendar year 2011, the following are some of the significant programs and
accomplishments implemented during the year funded out of General Fund Proper
amounting to P 3,270,369.95 and the 20% Development Fund totaling P3,697,969.35
validated on a test basis:

GF Proper

Improvement of Market/Stalls/ Facilities P1,067,642.98

Improvement of Municipal Building 234,865.04
Improvement/Const. – Public Market 546,174.04
Construction of Fence 114,484.00
Development Projects for Barangays 549,278.80
Improvement/ Const.Lying In Center 189,450.00
Development of Tourism Site 189,596.14
Construction- Retaining Well - BNHS 229,702.00
Construction of Police Station 99,176.95
Improvement of Baliaut Spring 50,000.00 P 3,270,369.95

20% DF

Solid Waste Management Program 779,600.00

Rehabilitation of Waterworks 1,204,733.40
Construction of Livestock Display Area 383,533.12
Waste Management 501,227.88
Farm to Market Road 773,518.50
Stage Improvement 10,227.00
CLUP Updating 45,129.45 3.697,969.35

Total P 6,968,339.30

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 Financial Profile

Sources and Application /Utilization of Funds

Revenues of the municipality were derived from real property taxes, municipal
business licenses, receipts from public market, utilities, waterworks and other economic
enterprises, permits, rentals and other charges. Interests from bank deposits also formed
part of the total income. However, the municipal government depended largely on the
Internal Revenue Allotment from the national government.

For the year 2011 , the municipality was able to collect P46,701,640.48
which is P3,649,671.15 or 8.48% higher than that of last year’s P43.051,969.33.

To cope with the current year’s operation , the municipality set aside a total
appropriation of P48,149,785.21 an increase of P2,188,301.14 or 4.68 % than that of
the preceding year’s figure of P46,743,412.58.

The total expenditures incurred during the year for all funds amounted to
P40,703,931.74 or an increase of about P 3,498,523.42 or 9.40% than the preceding
year’s figure of P37,205,408.32. Total expenditures for continuing appropriation
amounted to P5,534,890.47 or 41.68% out of P13,279,414.39.

The municipality’s total assets, liabilities and equity as of December 31, 2011
amounted to P69,480,640.88, P8,778,643.49 and P60,701,997.39 respectively. The total
assets and government equity increased by 4.01% and 7.23 % while liabilities is
decreased by 13.97% over that of last year’s figures.

The municipality has substantial assets to meet its current liabilities with a current
ratio of 3.85:1 as shown below:

Current Assets = P27,845,660.88 = 3.85:1

Current Liabilities P 7,239,421.10

Its liquidity ratio on the other hand is 3.81:1 computed as follows:

Cash+Receivables = P27,573,879.10 = 3.81:1

Current Liabilities P 7,239,421.10

The municipality has no long term debt.

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Scope of Audit

An audit was conducted on the accounts and operations of the Municipality of

Baclayon Bohol for Calendar Year 2011. The audit consisted of the review of the
operating procedures, interviews with concerned officials and employees, verification,
reconciliation and analysis of accounts, post-audit, validation of projects and such other
procedures considered necessary. It was aimed at ascertaining the propriety of
disbursements and reliability of financial reports and determining whether the agency’s
operations had been conducted in accordance with law, rules and regulations. The audit
was also aimed to review managerial efficiency with the end in view of eliminating waste
and promoting efficient use of public funds and resources, and to ascertain the agency’s
effectiveness by determining whether desired results have been achieved and the
programs have accomplished their purpose and objectives.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

As discussed in Part II, management’s assertion on the accuracy, validity

existence and correctness of the Property Plant and Equipment aggregating
P35,976,609.73 or 51.78% of the assets cannot be substantiated because of the non
preparation and submission of the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE) and the inclusion of unserviceable properties costing P161,089.00
rendered the total PPE as of year end doubtful .The agency’s inadequate records did not
permit us to apply alternative auditing procedures. Moreover, obligations amounting
to P1,474,456.62 for goods not yet received and services not yet rendered were
recorded in the books as Accounts Payable overstating the total of such account
amounting to PP2,595,775.36 by 56.76% as of December 31, 2011. Finally, the
unremitted /unaccounted funds of P290,090.70 understated the income during the year.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

1. Contrary to Section 50 of the Government Accounting and Auditing Manual

Volume III, the Disbursing Officer was allowed to perform the collection
functions giving the opportunity to conceal errors and irregularities that resulted
to the unremitted / unaccounted funds in the total amount of P290,090.70.

a.) Require the disbursing officer to restitute immediately the cash shortage of
P290,070.70 and submit a written explanation why this shortage occurred.

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 b.) The disbursing officer should no longer be allowed to undertake collection
of revenues and receipts to eliminate opportunities to conceal errors and
irregularities.

c.) The Municipal Treasurer should ensure that internal control objectives
over cash receipts/collection cycle are achieved through continuous
supervision of personnel . by making them aware of their duties,
responsibilities and accountabilities.

d.) Implement Sections 29 and 30 of NGAS Manual Volume I effective

immediately.

2. Failure to renew the expired Fidelity Bonds of all accountable officers at the
Municipal Treasurer’s Office whose duties require the possession or custody of
local funds rendering them not properly bonded in violation of Section 305 (f)
and 4.2 of Treasury Circular No. 02-2009 dated August 6, 2009 thus
disadvantageous to the municipality if and when loss of government funds may
arise due to any unforeseen events.

Require the Accountable Officers concerned to immediately renew their bonds

sufficient to their actual accountabilities required under Treasury Circular No. 02-
009 and explanation from the Municipal Treasurer for her laxity to comply
Section 305(f) of Local Government Code of 1991 and Treasury Circular No. 02
-009 dated August 6, 2009.

3. Issuance of official receipt booklets were not properly controlled/monitored

contrary to Section 91 and 95 of GAAM Volume I resulted to the accumulation
of unremitted collections by the collectors and non recording of income
exposing government funds to risk of loss or misappropriation.

a). The Municipal Treasurer should implement and take responsibility in

safeguarding and controlling the issuance of accountable forms which
includes adequate documentation and recording of movements and pre-
numbering of accountable forms to ensure their sequential use and
establish accountabilities pursuant to Section 91 and 95 of GAAM
Volume 1.

b.) Provide adequate safe for unused accountable forms and direct the
Municipal Treasurer to restrict access to unauthorized personnel.

c.) Issuance of booklets of official receipts to duly designated revenue

collectors should be properly monitored and controlled as well as their

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 remittances/ returns of consumed OR booklets in accordance with Section
30 of NGAS Manual Volume I.

d.) Ensure that only duly bonded/designated staff be allowed to issue official
receipts and receive collections.

4. Contrary to Section 43 of NGAS Volume I the municipal treasurer failed to

prepare daily the Report of Checks Issued for all checks released to claimants for
each fund instead the disbursement vouchers were used as basis in recording in
the Checks Disbursement Journal which may result to unrecorded disbursements
and unreconciled cash in bank balances at any given period.

a) Instruct the municipal treasurer to prepare daily the Report of Checks

Issued of the checks released to claimants for each fund which shall be
submitted to the municipal accountant as basis for the preparation of
Journal Entry Voucher and subsequently for recording in the Check
Disbursement Journal.

b) The municipal treasurer should record all checks issued including cancelled
checks chronologically in the cashbooks.

5. Obligations amounting to P1,474,456.62 for goods not yet received and

services not yet rendered were recorded in the books as Accounts Payable,
contrary to Section 04 (s) of the Manual on the New Government Accounting
System for LGUs, Volume I, thereby overstating the total Accounts Payable
amounting to P 2,595,775.36 by 56.76% as of December 31, 2011.

a.) Require for the immediate adjustment of those accounts for goods that
are not yet delivered and services not yet rendered by excluding them in
Accounts Payable.

b.) Ensure that obligations are recorded in the books only as soon as the goods
are accepted and services are rendered and the corresponding bills are
received from the contractor or supplier.

c.) Require that these obligations be subsequently covered with completely

documented and approved disbursement vouchers as basis of recording of
the payable accounts in the books.

d.) Ensure that amounts obligated per books reconcile with the actual amount
of goods delivered/services rendered.

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6. Management’s assertion on the accuracy, validity existence and correctness of the
Property Plant and Equipment aggregating P 35,976,609.73 or 51.78% of the
assets cannot be substantiated because of the non preparation and submission of
the Report on the Physical Count of Property, Plant and Equipment (RPCPPE)
while unserviceable properties costing P161,089.00 and eleven (11) other items
with unidentified cost were still included in the PPE contrary to Section 124 of
the Manual on the New Government Accounting System ( NGAS) and Section 79
of P.D. 1445, rendered the total PPE as of year end doubtful .

a.) The Local Chief Executive should enforce the creation of the inventory
committee to conduct and finished the physical count of all properties of
the municipality.

b.) In the absence of available records the LCE shall create the Appraisal
Committee to evaluate and appraise the property of the LGU.

c.) The corresponding equipment/ property ledger cards should also be

maintained by the accounting section to serve as their subsidiary records
of the Inventories and PPE accounts.

d.) Submit the corresponding Report on the Physical Count of Property, Plant
and Equipment to the auditor in accordance with Section 124 of the
Manual on New Government Accounting System (NGAS) Volume I.

e.) To drop unserviceable properties from the PPE accounts pursuant to

Section 79 of P.D.1445 and classified to its appropriate account pending
for disposal.

f.) Ensure that Acknowledgement Receipt for Equipment (ARE) is renewed

every three (3) years to preclude the possible loss of property and
equipment.

7. Laxity of management to monitor the daily attendance of the employees contrary

to Section 2 and 5 Rule 17 of the Omnibus Rules Implementing Book V of
Executive Order No. 292 and letter C of Memorandum Circular 21 may lead to
possible fraudulent claims of salaries, wages and other personal benefits.

a.) Use the biometrics time clock in the daily time records of employees in
order to reflect the actual hours rendered in the office and to
control/monitor the attendance of all government employees.

b.) Monitor all employees’ attendance in their respective work areas to ensure
that all services due to the public are properly rendered.

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 c.) Monitor and record all under-times and tardiness in the DTRs to support
salaries/wages claims.

8. The use of motor vehicles were not supported with properly accomplished driver’s
trip tickets, monthly reports of official travels and monthly reports of fuel
consumption to substantiate the validity and regularity of the use of gasoline for
official travels undertaken during the year, contrary to COA Circular No. 77-61
dated September 26, 1977, thereby the reasonableness and propriety of the total
gasoline expenses recorded in the books as of December 31, 2011 amounting to
P842,606.67 is doubtful.

a.) Require the Municipal Accountant to verify and ascertain that payments for
gasoline, oil and lubricants are duly supported with completely filled up
driver’s trip tickets for proper evaluation on the propriety and
reasonableness of fuel consumption.

b.) Direct the vehicle drivers concerned to completely fill up or indicate the
following data or information on the Driver’s Trip Ticket:

1. Vehicle Plate Number

2. Time of departure and arrival of the trip
3. Balance in Tank at the beginning and end of the trip
4. Distance Traveled
5. Odometer reading, if available
6. Litters of gasoline purchased and consumed
for the trip
7. Place of Destination

a. Purpose of Travel
b. Name of Driver and Passengers and their respective signatures

c.) Use immediately the prescribed Driver’s Trip Tickets with all the required
data indicated and properly filled up the form.

d.) Direct the vehicle drivers concerned to prepare and submit to the Auditor,
on a monthly basis, the Monthly Report of Official Travels and the
Monthly Report of Fuel Consumption for proper analysis, verification and
the necessary audit action on fuel consumption.

9. Excessive registration fees ranging from P2,000.00 to P4,000.00 per day were
incurred by officials in the attendance of conventions/meetings of organized
Leagues contrary to National Budget Circular No. 486 dated March 26, 2003 and
Executive Order No. 298 dated March 23, 2004 had unnecessarily depleted the
funds of the government. Further, claims were granted even if not supported with

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 the necessary supporting documents contrary to Section 4 of PD 1445 thus,
regularity of traveling expenses for CY 2011 amounting to P1,107,143 51 is
unreliable.

a.) Stop the grant of registration fees in excess of P1,200.00 per day per
person pursuant to National Budget Circular No. 486.

b.) Grant per diems in accordance to Executive Order No. 298 dated March
23, 2004.

c.) Adhere strictly to the provisions of National Budget Circular No. 486
Executive Order No. 298 dated March 23, 2004 and COA Circular 85-55A
.

10. The non- utilization of the Calamity Fund amounting to P1,799,375.00 for CY
2011 is contrary to Section 1,2 and 3 of Rule 18 of RA 10121, the Philippine
Disaster Risk Reduction and Management Act of 2010 thereby defeating the
purpose for which the fund was established and appropriated thus, responsiveness
to disaster risk management may not be properly addressed to the disadvantage of
the constituents.

a.) Observe strictly the proper allocation of the Calamity Fund as to 70% for
Local Disaster Risk Reduction and Management Fund (LDRRMF and
30% as Quick Response Fund (QRE).

b.) Give due regard on the maximum utilization of the 70% for pre disaster
preparedness programs so that intended purpose is attained/achieved as
provided in Section 2 and 3 of Rule 18 RA 10121.

c.) Advise the accountant to transfer the unexpended balance of the Calamity
Fund appropriation to a Special Trust Fund for the purpose of supporting
disaster risk reduction and management activities of the Local Disaster
Risk Reduction and Management Council (LDRRMC) within the next five
years.

11. Financial aid released to leagues amounting to P65,000.00 were not duly
acknowledged with the issuance of an official receipt of the Republic of the
Philippines, contrary to Section 69 of the Government Accounting and Auditing
Manual, Volume I and were not supported with fund utilization reports, hence,
transfer and receipt of said funds could not be properly validated/accounted which
possibly be opened to the risk of loss and wastage of government funds.

a.) Direct the Municipal Treasurer to require or demand for the issuance of an
official receipt of the government by the recipient Leagues concerned in

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 order to support the release of financial aid to the latter, pursuant to
Section 69 of the GAAM, Volume I.

b.) Require the Municipal Accountant to monitor the utilization of the funds
released to these Leagues by requiring the recipient Leagues concerned to
submit liquidation reports. In this manner, the propriety and validity of the
expenditures could be properly evaluated.

c.) Require the Leagues concerned to submit a copy of their Constitution and
By-laws as basis of reviewing bodies in determining the propriety of the
fund release.

d.) Further advice all Leagues through its officers to purchase and use the
Official Receipt of Republic of the Philippines.

12. The 20% Development Fund intended for the implementation of priority
development projects was not optimally and fully utilized during the budget year
it was appropriated leaving a total unutilized appropriation of P5,420,367.00 as
of December 31,2011, contrary to the provisions of DILG-DBM Joint
Memorandum Circular No. 1 series of 2005, thereby delaying the delivery of
socio-economic and environmental development benefits to the constituents of the
municipality.

a.) Strictly comply with the provisions of Section 287 of the Local Government
Code of 1991 and the related DILG-DBM Joint Memorandum Circular
No. 1, series of 2005 on the prompt and full utilization of the 20%
Development Fund for the implementation of the priority development
projects in order to optimally attain the socio economic and environmental
development of the municipality.

b.) Utilize all balances of the 20% Development Fund continuing

appropriations for the implementation of development projects in order to
attain the intended purpose for which the fund was appropriated

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Of the thirty (30) audit recommendations embodied in the Prior years’ and CY
2010 Annual Audit Report, ten (10) were implemented, six (6) were partially
implemented, while eight (8) were not implemented and (6) were reiterated in Part II of
this report.

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