DETAILS OF FINDINGS AND RECOMMENDATIONS

Favorable Observations
The Municipal Government of Aurora, Zamboanga del Sur is operating four (4)
Economic Enterprises which are treated as special accounts in the General fund book
namely: Market Operations, Slaughterhouse, Waterworks and Tourism (Operation of Aurora
Mountain Resort) and the motor pool.
As shown in the General Fund, Pre-closing Trial Balance for the year ended December
31, 2014 income of the four above-mentioned economic enterprises is shown below:
Business Enterprises
1. Market & Slaughter House
2. Water Works Operation
3. Tourism (Operation of Aurora
Mountain Resort)
Total

Revenue
5,614,671.75
7,442,585.08
1,575,157.00

14,632,413.83

.
For CY 2014, the municipality had implemented the following infrastructure
projects, to wit:
1.
2.
3.
4.
5.

Project
Repair/Rehab of RHU Roofing
Phase I
Repair/Rehab of RHU Building Phase II
Concreting of Bougainvillea Street FMR
Construction of National Child Development Center
Installation of Bureau of Fire Protection Roofing

Total Cost
800,000.00
1,300,000.00
3,267,319.00
2,300,000.00
189,796.00

Financial and Compliance Audit:

Hereunder are the observations noted in the operations of the municipality and the
corresponding recommendations offered to correct the deficiencies:
A. CASH ADVANCES:
Finding:
1. Transactions involving cash advances to the Disbursing Officer for Payroll Fund
lacked the mandatory documentary requirements contrary to the provisions set
forth under COA Circular No. 2012-001 dated June 14, 2012 thus, validity, legality
and accuracy of the transactions are doubtful.
COA Circular No. 2012-001 dated June 14, 2012 or the Revised Documentary
Requirements for Common Government Transactions provides that one of the documentary
18

requirements common to all cash advances except for travels is a certification from the
Accountant that previous cash advances have been liquidated and accounted for in the
books.
Furthermore, Section 1.1.1 of the same Circular provides that:
1.1.1 Payroll Fund for Salaries, Wages, Allowances, Honoraria and Other
Similar Expense
The cash advances for payroll fund shall be equal to the net amount of the
payroll for the pay period.
Additional Documentary Requirements
o Approved contracts (for initial payment)
o Approved Payroll or list of payees indicating their net payments
o Approval/authority (presidential directive or legislative enactment) or legal
basis to pay any allowance/salaries/wages/fringe benefits
o Daily time record (DTR) Approved by the supervisor (emphasis supplied)
Perusal of the records shows that the disbursement vouchers are only supported by a
list of disbursement vouchers composing the cash advance and at times by the Accountants
Advice.
There are no certification from the Accountant that the previous cash advances
granted to the accountable officer have been liquidated and accounted for in the books or
DTRs been attached in any of the transactions involved. Moreover, the list of disbursements
attached is not an equivalent substitute to the required approved payroll or list of payees as
required under the circular.
The failure to attach all of the aforementioned documentary requirements in all of
the cash advances for payroll fund is an indication of a weak internal control in the
disbursement of government funds thus, validity, legality and accuracy of the transactions
are doubtful.
Management Comment:
Complying with the aforementioned documentary requirements is impractical
considering the distance of the Municipality from the depository bank and the
accompanying risk to the disbursing officer. Other effect would be the delay on the release
of the salaries and wages to the employees. Nonetheless, the aforementioned documentary
requirements are already attached together with the payment of the Payroll.
Management has likewise requested the Landbank of the Philippines to open an
extension office in the Municipality or at least an ATM machine. That way, management
19

would be able to comply with the documentary requirements set forth under COA Circular
No. 2012-001 as the ATM mode will be used.
Auditors Rejoinder:
COA Circular 2012-001 so specifically enumerates the documentary requirements
necessary to be attached for cash advances. Therefore, it is imperative for the Management
to comply with the regulation considering that the Commission is tasked to post-audit the
transactions involved.
Recommendation
The Municipal Accountant should observe strict compliance of the documentary
requirements to be attached to the disbursement vouchers before the same shall be
authorized for payment.
2. Various officials and employees of the Municipality failed to liquidate timely their
cash advances totaling P 1,352,142.87 as of 31 December 2014 contrary to the
provisions set forth under Section 89 of PD 1445 and Section 5.1.3 of COA Circular
97-002 dated 19 February 1997 thus, overstating the asset account and understating
the related expenditures.
COA Circular No. 97-002 dated 10 February 1997 provides, in part, that
5. Liquidation of cash advances.
5.1 The accountable officer shall liquidate his cash advance as
follows:
X x x.
5.1.3

Official travel - within sixty (60) days after return to the

Philippines in the case of foreign travel or within thirty
(30) days after return to his permanent official station in
the case of local travel, as provided for in EO 248 and
COA Circular No. 96-004.
Failure of the accountable officer to liquidate his cash
advance within the prescribed period shall constitute a
valid cause for the withholding of his salary and the
institution of other sanctions as provided for under
paragraphs 9.2 and 9.3 hereof. X x x.

Also, Section 89 of Presidential Decree No. 1445 provides that:

No cash advance shall be given unless for a legally authorized specific purpose. A
cash advance shall be reported on and liquidated as soon as the purpose for which it
20

was given has been served. No additional cash advance shall be allowed to any
official or employee unless the previous cash advance given to him is first settled or
a proper accounting thereof is made. (underscoring ours)
Moreover, the Commission on Audit has issued on 28 November 2012 Circular No.
2012-004 on the subject "Demand for Immediate Liquidation and Settlement of All Cash
Advances as of 31 December 2011". Pertinent provisions of the said Circular provide that:
6.0 Final demand to settle unliquidated cash advance
Wherefore, final notice and demand is hereby made to all concerned to settle and
liquidate all outstanding cash advance as of December 31, 2011 on or before
January 31, 2013. Provided, however, that those who have been issued by the
Commission on Audit notice and demand, prior to the issuance of this Circular, to
settle and liquidate their cash advances within a specified period, shall do so within
the period specified in the said notice. x x x.
7.0 Duty of Agency officials
On or before December 15, 2012, all heads of government agencies shall
disseminate in writing this Circular to all accountable officials and employees within
their respective agencies and serve a written notice to and demand settlement of the
outstanding cash advances as of December 31, 2011.
The Chief Accountant shall, within the same period, furnish the head of agency and
the head of the accounting unit thereat a list of accountable officers with
unliquidated and outstanding cash advances.
9.0 Consequences of failure to liquidate
9.1 Failure of an accountable officer to liquidate his outstanding cash
advance on or before January 31, 2013 shall constitute cause for the filing of
malversation charge under Article 217, failure to liquidate cash advance
under Article 218, both of the Revised Penal Code or criminal prosecution
under Section 128 of P.D. 1445.
9.2 The suspension of salaries of erring accountable officers shall be ordered
by the auditor concerned to the proper agency official through the head of
the Agency.
9.3 Appropriate administrative proceedings shall likewise be instituted.
Records show that the unliquidated cash advances under the account Advances to
Officers and Employees (148) as of December 31, 2014 is P 1,352,142.87. The amount is
slightly lower by P 522,161.39 from the December 31, 2013 balance of P 1,874,304.26. The
details are broken down as follows.
21

General Fund
SEF
Trust Fund
Total

P
P

CY 2014
1,117,488.37 P
70,320.00
164,334.50
1,352,142.87 P

CY 2013
Increase (Decrease)
1,646,461.26 P
(528,972.89)
87,570.00
( 17,250.00)
140,273.00
24,061.50
1,874,304.26 P
(522,161.39)

Aging of the Advances to Officers and Employees account as of December 31, 2014
for all funds, as shown in Annex E, disclosed the following:
No. of months/ years past
No. of Cash
Amount
Percentage
due as of 31 December 2014
Advances
Three years and above
81
P
583,696.05
43.17%
Over Two years
2
11,920.00
0.88%
Over One year
13
291,503.00
21.56%
91 365 days
11
164,109.72
12.14%
31 to 90 days
9
161,314.10
11.93%
30 days or less
4
139,600.00
10.32%
Total
P
1,352,142.87
100.00%
Of the total balance of P 1,352,142.87: P 583,696.05 or 43.17% were at least three
years past due; P 11,920.00 or 0.88% were two years past due; P 291,503.00 or 21.56% were
more than a year past due; P 164,109.72 or 12.14% were at least 91 days but not more than
365 days past due; P 161,314.10 or 11.93% were at least 31 days to 90 days past due; and P
139,600.00 or 10.32% were at most 30 days past due as of 31 December 2014.
Moreover, it was noted in the submitted reports that some cash advances were
granted to officials and employees even when subject personnel have pending unliquidated
cash advances. The condition still prevails despite the issuance of demand letters to
concerned officials in various batches dated September 12, 17, June 4, and January 29 all in
2014, June 30 in 2013, and December 31, September 4, and February 3 all in 2012 whereby
the last paragraph thereof has explicitly stated that Be reminded that no additional cash
advances will be granted unless previous cash advance is fully liquidated.
This finding is a reiteration of last years Audit Observation Memorandum but
remained not complied by Management most especially by the Municipal Accountant, who
has the responsibility to issue a certification that previous cash advances have been
liquidated and accounted for in the books. It is emphasized that these transactions are
considered illegal expenditures as defined under COA Circular No. 85-55A and updated
under COA Circular No. 2012-003 dated 29 October 2012 for granting cash advances to
officials prohibited to receive additional cash advances as explicitly stipulated under the
aforementioned Section 89 of Presidential Decree 1445, thus are disallowable in audit.
The failure to liquidate the cash advances at the end of the year or as soon as the
purpose has been served shall subject the accountable officers concerned to the penalty
provisions of Section 128 of Presidential Decree No. 1445. Also, the non-liquidation of cash
22

advances when no longer needed provides an avenue for the misuse or misappropriation of
the funds which was granted for a specific purpose.
Recommendation:
Management should:
1. Demand the concerned officials and employees with unliquidated cash
advances indicated in the list to effect immediate settlement of cash advances,
otherwise, the necessary sanction for its settlement as provided for in
paragraph 9.1 of COA Circular No. 2012-004 dated 28 November 2012 shall
be enforced;
2. Refrain from granting additional cash advances to Accountable Officer with
previous unliquidated cash advances; and
3. Ensure the compliance with the documentary requirements, more so with
regards to the Certification of the Accountant concerning the previous
liquidation of cash advances.
Management Comment:
Management will comply with the documentary requirements. With regards to those
who have outstanding cash advances, arrangements have already made to make monthly
deductions on employees payrolls until the cash advance has been settled.
B. REVENUE
3. Revenue Collectors were delayed in the turnover of their collections to the
Liquidating Officers from 36 to 91 days in violation of Section 29 of the NGAS, thus
exposing the government funds to risk of loss through force majeure or misuse.
Section 29 of NGAS also provides:
Sec. 29.
Reporting for Collections and Deposits.
Collectors/tellers shall issue a receipt to acknowledge collections
made. The receipt maybe in the form of pre-numbered Official
Receipts, or cash tickets and the like. At the close of each business
day, these collectors/tellers shall accomplish the Report of
Collections and Deposits (RCD) in four copies. The original and
two copies, together with the duplicates of the official receipts
issued, shall be submitted to the treasurer/cashier to whom the cash
collected shall be turned over. The fourth copy of the RCD shall be
retained by the collector/teller concerned. Barangay Treasurers
deputized to collect taxes imposed by provinces, cities and
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municipalities shall follow the same procedures in turning over

their collections to the treasurer/cashier concerned.
In the case of collectors assigned to the field, where travel time from
their places of assignment to the Treasurers Office is more than one
day, turnover of collections shall be made at least once a week or as
soon as the collections reach P5,000.00.
Verification of Report of Collections for the period of January 1 to March 31, 2014
was made. It showed that several Revenue Collectors were delayed in remitting /liquidating
their collections, to wit:

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The practice of delayed turnover of collections manifests weak internal control, thus
exposing funds to the risk of misuse or loss through force majeure.
Management Comment:
Considering the actual situation prevailing in the LGU, it was made an office policy
to remit/turn-over collections twice-a-week for collectors assigned in the treasury office and
once a week for collectors assigned in the Market, Slaughterhouse and Aurora Mountain
Resort. Nevertheless, collectors can remit their collections anytime when his/her
accountable forms are already consumed.
Moreover, with the ITAX computerization system, remittances on RPT Collections
were made daily, since no transactions can be made the following day if the transactions
from the other day were not closed, thus avoiding delayed remittance of collections.
Auditors Rejoinder:
Despite the Managements policy to have the remittances be made twice-a-week for
collectors assigned in the treasury office and once a week for collectors assigned in the
Market, Slaughterhouse and Aurora Mountain Resort, still the aforementioned employees
were able to remit their collections way beyond the prescribed period the Management has
set for them to comply with thus rendering the office policy ineffective.
Recommendation:
The accountable officers/collectors should remit/turnover their collections to the
liquidating officer for deposit to the depository bank on a regular basis in accordance with
Section 29 of the NGAS Manual. The Municipal Treasurer should set more effective control
measures to avoid or minimize delayed remittance of collections and institute disciplinary
action to concerned accountable employees under her supervision, if necessary.
4. The reliability
P119,036,566.50
reconciliation of
Education Fund
1445.

of the reported Cash In Bank account balances totaling

per subsidiary ledger cannot be established because of noncash balances per books and per cashbooks for General, Special
and Trust Fund bank accounts, contrary to Section 74 of PD No.

Section 74 of PD No. 1445, states:

Section 74. Monthly reports of depositories to agency head. At the close
of each month, depositories shall report to the agency head, in such from
as he may direct, the condition of the agency account standing on their
books. The head of the agency shall see to it that reconciliation is made
between the balance shown in the reports and the balance found in the
books of the agency.
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In our review of the Cash-in-Bank accounts of the LGU as of September 30, 2014, it
was noted that account balances per cashbooks and Subsidiary Ledgers (SL) were not
reconciled as it revealed a difference of P 53,384,458.26, as detailed in Annex F.
The difference may be due to several factors such as un-updated cashbooks,
unrecorded interest income/deposits, over/under recording of disbursements which indicated
errors and possible misstatement of Cash in Bank accounts in the financial statements. The
absence of available files/records as reference makes it difficult to conduct a detailed indepth determination of significant reconciling items. The unreconciled balances could have
been detected had the Municipal Treasurer and the Municipal Accountant reconciled their
book balances monthly or as the need arises. Non-reconciliation of the above-mentioned
records rendered the accuracy and correctness of the Cash in Bank account balances
doubtful.
Recommendation:
Management shall require the Municipal accountant and the Municipal Treasurer
verify the unreconciled balances in the Cash in Bank accounts for all funds and to prepare
the necessary adjustments to reconcile the balances per Cashbooks and SLs.
Management Comment:
The Treasurer and Accountant concurred that reconciliation of balances in the cash in
bank for all funds as well as the balances per cashbooks and Subsidiary Ledgers will be
done this year.
C. PAYMENT TO CASUALS AND JOB ORDER
5. Human Resources Plan has remained not prepared and submitted and the specific
duties and responsibilities appearing in the Job Order Contracts remained vague,
hence the necessity of hiring personnel thru job order could not be determined and
its efficiency and responsiveness thereof could not be assessed vis--vis to the actual
needs of the agency.
CSC Memorandum Circular No. 3, series of 2012 dated 16 February 2012 has
enumerated the basic components of a Human Resources Plan as follows:
b. HR Management Systems and Programs
b.1. HR Plan with the following basic components:

Organizational Profile
o Agency Mandate, Vision, Mission and Strategic Goals
o Organizational Chart/Functional Chart/Personnel Chart
o Job Description of all positions
26

HR Systems
o Recruitment/Promotion
Qualification Standards (QS)
Merit Promotion/Selection Plan or merit System (For
Closed-Career)
Personnel Selection Board
Succession Planning
o Retention
Performance Management System
Training and Development
Career Pathing Program
Employee Welfare
o Rewards and Recognition
Program on Awards and Incentives for Service
Excellence (PRAISE)
o Retirement
Pre-retirement Program
o Employee Relations
Grievance Machinery
o Employee Health and Wellness Program
o Employee Discipline
Committee on Decorum and Investigation (CODI)

Human resources Information System (HRIS)

An HR Plan is aimed to further the management of human resources towards

productive contributions to the vision and mission of the agency and to sharpen the
recruitment, promotion, retention, personnel relations, rewards and incentives as well as
succession planning and retirement practices and policies beneficial to both individual
employees and to the agency as a whole. The plan would thus justify the necessity of hiring
additional personnel of the agency as well as meeting the optimum efficiency of its human
resources while operating within the limitations set forth under the law.
In the course of audit, we asked for a copy of the Human Resources Plan from the
designated Human Resource Management Officer. Only the following documents are
transmitted to the office as of this writing:
1.
2.
3.
4.
5.

HR Profile as of 21 January 2015

HR Inventory as of 21 January 2015
Personnel Schedule
Plantilla of Casual Employment
Job Order Contracts

27

One of the most essential part in a Job Order Contract is the definition of the Duties
and Responsibilities of the contracting parties. This is the reason why an accomplishment
report is made a necessary requirement in order to ascertain that the specific duties and
responsibilities are met and achieved and it serves as a gauge if it would be necessary to
renew specific contracts.
Review of the Job Order contracts disclosed that the documents bear no specific
duties and responsibilities but merely state that Perform such other duties and
responsibilities as maybe assigned by competent authorities. No other documents were
submitted nor attached to the payrolls to indicate the specific duties and responsibilities
given by other competent authorities. Such case has been made more compelling as the LGU
has exceeded its PS Limitation during the year while the employees contracted and renewed
on a regular basis were mostly charged to the repairs and maintenance accounts under parks,
plazas and monuments (852), irrigation, canals and laterals (855) or other public infra (860)
or under Other MOOE (969).
This finding is already a reiteration of a previous years observation made by the
Commission but has still remained not complied with.
Recommendation:
Management should:
1. Instruct the HRMO-designate to ensure the preparation of the HR Plan
composed of those enumerated under CSC MC No. 3, series of 2012; and
2. Ensure that duties and responsibilities are specifically stipulated in all the
contract of services/MOA or Job Order contracts. Specific instructions given
by those competent authorities to which specific employees are detailed with
should be likewise attached to the contracts.
Management Comment:
The HR Plan was not made as the CSC has not yet come up with the templates of the
same. This year, the preparation of the HR Plan is expected to push through as a conference
about the matter will be made in March.
D. PAYMENT OF HONORARIA:
6. Honoraria to members of the Bids and Awards Committee and the Technical
Working Group amounting to P 205,500.00 were made despite the lack of
prescribed documentary requirements as provided for under COA Circular No
2012-001 dated 14 June 2012 and the funds were sourced from the regular
appropriations under the General Fund contrary to DBM Budget Circular No
2007-3 dated 29 November 2007 amending DBM Budget Circular No. 2004-5A.
28

Items 3.1 and 3.2 of DBM Budget Circular No. 2007-3 dated 29 November 2007
provides for the source of payment of honoraria and overtime pay for personnel involved in
government procurement are as follows:
3.1 The amount necessary for payment of honoraria and overtime pay authorized
under BC No. 2004-5A dated October 7, 2005 shall be sourced from the
following:
3.1.1 Collections from successfully completed procurement projects limited,
however, to activities prior to awarding of contracts to winning
bidders:

Proceeds from sale of bid documents;

Fees from contractor/supplier registry;
Fees charged for copies of minutes of bid openings, BAC
resolutions and other BAC documents;
Protest fees; and
Proceeds from bid security forfeiture.
xxx

Item 3.4 of the aforementioned Circular cited the manner of payment of honoraria
and overtime pay as follows:
3.4

The manner of payment of honoraria and overtime pay to entitled government

personnel to be charged against collection from successfully completed
procurement projects (activities prior to awarding of contracts to winning
bidders) enumerated under item 3.1.1 and savings cited under item 3.2 of this
Circular shall be in accordance with item 6.2 of BC No. 2004-5A, except use
of savings by national government agencies which shall allow the General
Provision of the GAA on the disbursement of funds, i.e.; through the National
Treasury and/or authorized servicing banks under the Modified Disbursement
Scheme.

DBM Budget Circular No. 2004-5A or the Guidelines on the Grant of Honoraria to
Government Personnel Involved in Government Procurement dated 7 October 2005,
under Item 6.2 provided:
6.2

Pursuant to the DOF-DBM-COA Permanent Committee Resolution No. 20052 dated June 2005, all agencies are authorized to treat the collections from the
sources identified in item 6.1 hereof as trust receipts to be used exclusively for
the payment of honoraria and overtime pay subject to the guidelines in item
5.0 of this Circular. Any excess in the amount collected shall be remitted by
NGAs to the Bureau of the Treasury. In the case of GOCCs and LGUs, the
29

same shall form part of their corporate or local government funds,

respectively.
While the Chairs and members of the BAC, TWG and the Secretariat are allowed to
receive honoraria for their participation in procurement activities, they are nonetheless
barred from receiving overtime pay for procurement-related services rendered in excess of
official working hours, pursuant to Item 5.10 of DBM BC No. 2004-5A.
Documentary requirements for payment of honorarium to government personnel
involved in Government Procurement are enumerated under item 5.7.1 of COA Circular No.
2012-001 dated 14 June 2012 as follows:

Office Order creating and designating the BAC Composition and authorizing
the members to collect honoraria
Minutes of the BAC Meeting
Notice of award to the winning bidder of procurement activity being claimed
Certification that the procurement involves competitive bidding
Attendance Sheet listing names of attendees to the BAC meeting

Perusal of the payment of honorarium to the BAC, TWG and the Secretariat
disclosed that the payments amounting to P 205,500.00 were sourced out from the General
Fund and journalized under the Other MOOE (969) or Other Payables (439) accounts.
In addition, all of the four payroll for the honoraria during CY 2014 were not
supported with documentary requirements.
Furthermore, per inquiry with the Accounting Office, it was ascertained that
collections from proceeds of sale are booked up under the Other Payables account. Part of
the honorarium is likewise sourced from the budget of the BAC.
This indicated that the collections, as a source of the BAC Honorarium, are recorded
under the General Fund, under a payable account, which is in contravention with the
intention of the DBM Budget Circulars. No copy of the declaration of savings from the
2014 budgets of the Sangguniang Bayan has likewise been attached to the payrolls to justify
their charges to the General Fund. Moreover, the use of Other MOOE or Other Payables
account is not justified as it has to be Honoraria (720) account under the Personnel Services.
As pointed out in a prior Audit Observation Memorandum, the local government has
already exceeded its PS Limitation in 2014.
Noted likewise in audit is the grant of overtime pay to Mr. Lovenel C. Oral,
Government Service Officer in May 2014 who is a member of the BAC Secretariat and has
been claiming honorarium for his role. Among those tasks performed are a) Facilitate LGU
Official Transaction canvass and spare parts and materials; b) Prepare supporting docs for
Bidding of LGU Project 10hrs; and c) preparation of voucher for winning bidders, all of
which are procurement-related services.

30

The deficiencies and errors committed precluded the Auditor from determining the
legality of the claims of those involved in the government procurement vis--vis those
successfully completed procurement projects as basis of the claims. These deficiencies
warrant the suspension of transactions involved.
Recommendation:
1. Collection of amounts necessary for the payment of the honoraria and overtime pay
sourced from those enumerated under item 3.1 should be accounted for as trust
receipts;
2. Reclassify all collections from successfully completed procurement projects and the
payment of the aforementioned honoraria to the Trust Fund accounts;
3. The Municipal Accountant should refrain from charging the BAC Honoraria and
overtime pay from the General Fund unless supported by a declaration of savings
from the Sangguniang Bayan as emphasized under 3.1.4 of BC No. 2007-3;
4. Refrain from granting overtime pay to any of the government personnel involved in
government procurement, who have claimed honoraria, for any procurement
related services rendered beyond office hours pursuant to 5.10 of BC No. 2004-5A;
and
5. Observe strict compliance with the documentary requirements enumerated in 5.7.1 of
COA Circular No. 2012-001.
Management Comment:
The required documents stated in the AOM are in the possession of the BAC. The
Accounting Office has not been furnished with copies thereof despite the requests that it be
attached to the vouchers. Rest assured that this year Management will be complying with the
documentary requirements.
E. PROCUREMENT PROCESS
7. Several claims in CY 2014 totalling P4,696,568.88 were paid by the LGU despite the
covering disbursement vouchers (DVs) lacked some documentary requirements, in
violation of Section 4 (6) of PD No. 1445.
The fundamental principles governing the financial transactions and operations of a
government agency as provided in Section 4 (6) of Presidential Decree No. 1445, otherwise
known as the State Audit Code of the Philippines, states:

31

(6) Claims against government funds shall be supported with complete

documentation.
Our post-audit of the selected transactions of the Municipality from January 1 to
June 30, 2014 totalling P 4,696,568.88 disclosed that several claims were paid despite lack
of the documentary requirements, in violation of Section 4 (5) of PD 1445, thereby casting
doubts as to the validity, propriety and legality of the claims. Shown hereunder are the
details of this observation:
a. Payment of concreting materials of Quirino Street-ANHS road to RUDHIL
Construction & Ent. Inc in the amount of P 1,589,226.78 per Check No.
4508469 dated February 6, 2014.
1. No Minutes of pre-bid conference;
2. No evidence of invitation of three observers in all stages of the
procurement process;
3. No results of Eligibility Check/Screening;
4. No documents enumerated under Section 23.1, Revised IRR of
RA 9184; and
5. No Inspection and Acceptance Report prepared by the
Department/Agency property inspector and signed by the Head
of Agency or his authorized representative.
b. Payment of Digital Sound System to Better Component in the amount of
P1,315,442.98 per Check No. 45082448 dated January 1, 2014.
1. No Minutes of pre-bid conference;
2. No results of Eligibility Check/Screening; and
3. No documents enumerated under Section 23.1, Revised IRR of RA
9184
c. Payment of diesel and gasoline for heavy and light equipment in the amount
of P1,082,814.32 to Stella Maris Gasoline Station per Check No.45082595
dated May 9, 2014.
1. No authenticated photocopy of the Annual Procurement Plan;
2. No printout copy of advertisement posted in the PhilGEPS;
3. No results of Eligibility Check/Screening;

32

4. No documents enumerated under Section 23.1, Revised IRR of

RA 9184;
5. No Minutes of Pre-Bid Conference; and
6. No evidence of invitation of three observers in all stages of the
procurement process;
d. Payment to Artifex Computer Center for purchase of Equipment use for the
Community-Based Monitoring System (CBMS) to survey in 44 Barangays in
the amount of P709,084.80 per Check No. 2004309 dated June 24, 2014.
1. No authenticated photocopy of the approved Annual Procurement Plan;
2. No results of Eligibility Check/Screening;
3. No documents enumerated under Section 23.1, Revised IRR of RA
9184; and
4. No evidence of invitation of three observers in all stages of the
procurement process.
Recommendation:
Management should submit to the Office of Auditor those lacking documents of the
post-audited transactions to avoid suspension and/or disallowance in audit. Henceforth, the
Municipal Accountant shall ensure that all documentary requirements are prepared and
attached to the Disbursement Voucher to facilitate the review and audit of the transactions of
the Municipality.
Management Comment:
The required documents stated in the Audit Observation Memorandum were in the
possession of the BAC. The BAC likewise committed to submit those aforementioned
documents after the old BAC Secretariat will furnish them of the same. Rest assured that
this year Management will be complying with the documentary requirements.
F. LOCAL DISASTER RISK REDUCTION AND MANAGEMENT FUND
8. The accounting and reporting of the 2014 LDRRMF for disaster activities of the
Municipalities of Aurora, Zamboanga del Sur in the amount of P 4,928,826.98 is
inconsistent with Section 5 of COA Circular No. 2012-002 dated September 12,
2012, resulting in the difficulty of ascertaining the accuracy and completeness of the
utilization of said fund.

33

Section 5 of COA Circular No. 2012-002, provides:

5. 0 Accounting and Reporting Guidelines
5.1 LDRRMF
Xxx.
5.1.2 A LDRRMFIP for the DRRM program shall be prepared
annually. It shall present the 30% allocation for QRF
in lump sum and the allocation for disaster mitigation,
prevention and preparedness with details as to projects
and activities to be funded. The LDRRMFIP shall also
include under a separate caption, the list of projects
and activities charged to the unexpended LDRRMF of
previous years. A sample format of the LDRRMFIP is
shown in Annex A.
Xxx.
5.1.5 A Report on Sources and Utilization of DRRMF using
the format in Annex B shall be prepared and certified
correct by the Local Accountant. The Local Disaster
Risk Reduction and Management Officer (LDRRMO)
shall submit the report on or before the 15th day after
the end of each month through the LDRRMC and
Local Development Council (LDC) to the COA auditor
of the LGU.
Xxx.
The 2014 Annual Budget of the Municipality for LDRRMF amounted to
P4,928,826.98. Our verification of the sources and utilization of the fund, revealed the
following:
1. The Monthly Report on Sources and Utilization of DRRMF was not submitted
by the Municipal Accountant and the Local Disaster Risk Reduction and
Management Officer (LDRRMO) to the Audit Team; and
2. The Local disaster Risk Reduction and Management Fund Investment Plan
(LDRRMFIP) was not submitted.
The above deficiencies precluded us from determining whether or not the
projects/activities funded by LDRRMF were carried out as programmed Likewise, the
failure of the accountant to record and report the Disaster Risk Reduction Management Fund
in accordance with COA Circular No. 2012-002 affected the accuracy, reliability and the fair
presentation of the Financial Statements for CY 2014.
34

Recommendation:
The Accountant shall strictly adhere to the pertinent provisions of COA No. 2012002 on the accounting, reporting and utilization of LDRRMF.
Specifically, management should:
1. Require the accountant to prepare the monthly Report on the Receipt and
Utilization of Disaster Risk Reduction and Management (DRRM) Fund and
submit to the COA Auditor thru the Local Disaster Risk Reduction and
Management Officer (LDRRMO) every 15th day of the month; and
2. Submit immediately the Local Disaster Risk Reduction and Management
Investment Fund (LDRRMFIP) as required under COA Circular No. 2012-002
indicating the 30% allocation for QRF and the allocation for disaster mitigation,
prevention and preparedness with details as to projects and activities to be
funded.
Management Comment:
Management will comply with the recommendation of the Commission.
G. 20% ECONOMIC DEEVELOPMENT FUND
9. Loan Amortization for the completion of Municipal hall amounting to P500,145.55
was appropriated from 20% Development Fund contrary to DILG-DBM Joint
Memorandum Circular No. 2011-1 dated April 13, 2011, which provides the specific
guidelines in the utilization of the 20% development fund thereby depriving the
intended beneficiaries of the benefits that could have been derived from
development projects.
Pertinent provisions of JMC No. 2011-1 read:
4.0 EXPENDITURE ITEMS NOT COVERED
The following items that are not related to and/or not connected with
the implementation of the development projects, programs and
activities shall not be paid out of the 20% development fund:
Xxx.
4.1 Construction, repair or refinishing of administrative
offices;
Xxx.

35

Loan amortization for the construction repair or refinishing of administrative office

such as municipal hall is therefore covered by the prohibition on the use of the 20%
Development Fund. It does not contribute to the attainment of desirable socio-economic
development and environmental management outcomes.
Recommendation:
Management should stop the practice of appropriating the 20% Development Fund
for purposes other than those allowed under DILG-DBM Joint Memorandum Circular No.
2011-1. Attention is invited to the responsibility of the Local Chief Executive as provided in
paragraph 5.0 and the corresponding sanctions in case of utilizing the fund other than those
allowed by law.
Management Comment:
The Municipal Development Council (MDC) carefully allocated the Programs,
Projects, Projects and Activities (PPAs) being funded by the 20% Development Fund in
accordance with DILG-DBM JMC No. 2011-001. The allocation of Loan Amortization for
the Completion of the Municipal Hall was unintentionally done and an honest overlook.
Management commits to adhere to the recommendation to stop, if theres any, the
practice of appropriating the 20% Development Fund for purposes other than those allowed
under the JMC.
H. GENDER AND DEVELOPMENT (GAD)
10. The Municipality appropriated only P200,000.00 for Gender and Development
(GAD) programs which represented only .2% of its total appropriations for CY
2014 instead of P4,928,826.95 as required under Section 2.3 of PCW, NEDA and
DBM Joint Circular No. 12-01, thereby defeating the purpose for setting up the
fund.
Section 2.3 of Joint Circular No. 2012-01 of the Philippine Commission on Women
(PCW), National Economic and Development Authority (NEDA) and the Department of
Budget and Management (DBM) states:
Pursuant to the MCW and the General appropriation Act (GAA), all
government departments, including their attached agencies, offices,
bureaus, state universities and colleges (SUCs), government owned
and controlled corporations (GOCCs), local government units
(LGUs) and other government instrumentalities shall formulate their
annual GPBs within the context of their mandates to mainstream
gender perspective in their policies, programs and projects. GAD
Planning shall be integrated in the regular activities of the agencies,
the cost of implementation of which shall be at least five percent (5%)
36

of their total budgets. The computation and utilization shall be

implemented in accordance with specific guidelines provided
therein.
Verification disclosed that the approved Annual Budget for CY 2014 of LGU-Aurora
has appropriated only P 200,000.00 for GAD programs/projects/activities. Likewise, there
was no GAD Plan and budget prepared for CY 2014. The Budget Officer informed the Audit
Team that there were number of GAD related activities incorporated in the
budget/appropriations of the Office of the City Mayor, Rural Health Unit and MSWDO.
However, to date, no annual GAD accomplishment report for CY 2014 was submitted to our
Office.
The absence of the GAD Plan and Budget and the corresponding Accomplishment
Report left the Auditor without any basis in determining whether the required allocation of
5% for GAD projects/programs/act has been complied and precluded the Auditor from
validating the implementation of the programs and projects funded from GAD funds.
This finding is a reiteration of prior years audit observation as contained in the
Annual Audit Report for the calendar year ended December 31, 2013.
Recommendation:
Management should appropriate at least five percent (5%) of the total budget for GAD
programs/activities/projects, prepare the required Annual GAD Plan and Budget as well as
the Annual GAD Accomplishment Report pursuant to Section 2.3 of Joint Circular No.
2012-01
Management Comment:
For the 2014 GAD, the GAD Plan made was only for the MSWDO linking with the
Agricultures Office for the related activities.
As a prospective measure thereafter, the Municipal Mayor has already convened the
GAD Technical Working Group to collect data from all offices and to formulate the 2015
GAD Plan. By end of February, Management will be submitting the 2015 GAD Plan as well
as the GAD Annual Accomplishment Report.
I. ENVIROMENTAL COMPLIANCE AUDIT
11. The programs on solid waste management were not implemented in violation of the
provisions of Republic Act 9003, which resulted to the failure in achieving the
purposes for which the law was enacted upon.

37

Section 10 of the Republic Act 9003, otherwise known as the Ecological Solid Waste
Management Act states that the LGUs shall be primarily responsible for the implementation
and enforcement of the provisions of this Act within their respective jurisdictions.
On the other hand, excerpts from Section 12 of such Act, states that:
Xxx The City and Municipal Solid Waste Management Boards shall have the
following duties and responsibilities:
(1) Develop the city or Municipal Solid Waste Management Plan that
ensure the long-term management of solid waste, as well as
integrate the various solid waste management plans and
strategies of the Barangays in its area of jurisdiction. Xxx
Review of the CY 2014 Annual Budget of the Municipality of Aurora disclosed that
there was an appropriation to support the ecological waste management program of the LGU
amounting to P200,000.00 under the Office of Municipal Planning and Development
Officer. Verification of the registries and actual disbursements disclosed that the programs
were not implemented, as follows:

Interview made with the Ecological Solid Waste Management Officer disclosed that
the program was not yet implemented due to the fact that the Ten-Year Solid Management
Plan was only approved by National Solid Waste Management Commission last November
12, 2014.
Recommendation:
Management shall prioritize the implementation of the programs on solid waste and
do such other acts required from LGU pursuant to Republic Act 9003 particularly on waste
segregation and collection until its final disposal to the dumpsite to protect the public from
possible health hazards.
Management Comment:
The Solid Waste Management PPAs were not implemented since Management is still
waiting for the approval of the proposed Solid Waste Management Plan (SWMP) submitted
to National Solid Waste Management Commission (NSWMC). The conditional approval of
the SWMP dated 12 November 2014 was received only on 29 December 2014.
38

Compliant to the conditional approval, the LGU shall revise/update the SWMP in
accordance with the annotated outline issued by the NSWMC and shall be submitted to the
Commission not later than 15 March 2015 as required. Upon its final approval by NSWMC,
the SWMP will be implemented accordingly.
J. PERSONAL SERVICES LIMITATIONS
12. The Personal Services Budget has exceeded by P 4,929,079.37 the 45% limitation
set forth under Sec 325(a) of RA 7160 for 1 st to 3rd class municipalities, thereby
depriving its constituents of funds that would have otherwise been used for
development projects and operating expenses.
Section 325(a) of Republic Act 7160, otherwise known as the Local Government
Code of 1991, provides that:
Section 325. General Limitations. The use of the provincial, city, and municipal
funds shall be subject to the following limitations:
(a) The total appropriations, whether annual or supplemental, for personal services
of a local government unit for one (1) fiscal year shall not exceed forty-five
percent (45%) in the case of the first to third class provinces, cities and
municipalities, and fifty-five percent (55%) in the case of fourth class, or lower,
of the total income from regular sources realized in the next fiscal year. The
appropriations for salaries, wages, representation and transportation allowances
of officials and employees of the public utilities and economic enterprises owned,
operated and maintained by the local government concerned shall not be
included in the annual budget or in the computation of the maximum amount for
personal services. The appropriations for the personal services of such economic
enterprises shall be charged to their respective budgets;
(b) xxx (emphasis supplied)
Item 4.3 of the Local Budget Circular No. 98 dated 14 October 2011, which sets forth
the guidelines in determining the LGU Budget Compliance on its PS Limitation, lists
down the following waived items from the limitation set under Section 325(a):
(a) Absorption of the cost of hospital services transferred from provinces to newly
created cities;
(b) Creation of mandatory positions specified in the Code, for the initial year of
such creation;
(c) Payment of the minimum Year-End Bonus of P1,000.00 for the Punong
Barangay and P600.00 for other mandatory barangay officials, and their Cash
Gifts; and
39

(d) Payment of Retirement Gratuity and Terminal Leave Benefits of employees.

Item 6.5 of the same Circular likewise provides that:
6.5 Budget review
In budget review, the reviewing authority shall disallow new and/or
additional PS costs for the budget year if the PS limitation is exceeded, without
prejudice to reconsideration by the LGU Concerned of re-adjustments on the new
and/or additional PS Costs of priority for implementation.
The Municipality has earned a total of P 82,652,015.69 during the immediate
preceding year, per its Statement of Certified Income. Being a Second Class Municipality, it
is subjected to the 45% PS Limitation or about P 37,193,407.06 of its 2012 Income.
However, per recalculation of the PS Budget, it has exceeded the 45% limitation set forth
under the Local Government Code by P 4,929,079.37. (See Annex G for details).
The Sangguniang Panlalawigan of Zamboanga del Sur, through the recommendation
of the Provincial Finance Committee, has likewise made a similar finding in Resolution No
2K14-336. However, under Resolution No. 2K14-432, the Sanggunian has granted the
Municipalitys plea for reconsideration on the disallowance made on its PS Appropriation.
In the resolution, no grounds were stated as basis for the appeal but the Sanggunian has
merely stipulated that Section 325 of RA 7160 must be observed for the ensuing year.
Failure of the Municipality to appropriate their Personnel Services within the limits
set forth by law has restricted funds that would have otherwise been better spent in other
projects and programs of the Municipality.
Management Comment:
Management has already submitted to the Auditors office the justification of the
Municipality for purposes of PS Limitation which was eventually allowed by the
Sangguniang Panlalawigan.
Auditors Rejoinder:
The Municipality could have foreseen beforehand the reduction of the IRA and the
effect of that one-time grant received on the eventual calculation of the Personal Services
limitation thus should have already determined by then the priority transactions to be paid
out from the fund given enough years to prepare for the same.

40

Recommendation:
Management should be mindful of the PS Limitation set forth by law by prioritizing
expenditures within the PS component and ensure that income targets are met or exceeded in
order to have a bigger income base for purposes of PS Computation.
K. PAYMENT OF OVERTIME PAY
13. Several Heads of Offices who are not entitled to overtime pay claimed payment for
overtime services in contravention to Section 284, Volume I of the Government
Accounting & Auditing Manual and Section 4.0 of DBM Budget Circular No. 10
dated 29 March 1996.
Section 4.0 of DBM Budget Circular No. 10 dated 29 March 1996 enumerates the
exempted government personnel from claim of overtime pay as follows:
xxx
4.1.7

Positions of equivalent category as those above-mentioned in State

Universities and Colleges (SUCs), Local Government Units (LGUs) and in
Government-owned and/or Controlled Corporations (GOCCs) and
Government Financial Institutions (GFIs);
4.1.8 Incumbents of intermediate positions which have been allowed and created
in-between the above enumerated positions in the existing organizational
structure/staffing pattern of government agencies, SUCs, LGUs, GOCCs and
GFIs;
4.1.9 Elective officials; and
4.1.10 Other appointive officials whose equivalent rank is higher than a chief of
division. (underscoring supplied)
Paragraphs 2 and 3 of Section 284 of GAAM Volume I have provided for the
rationale behind the exclusion of government personnel enumerated under 4.1.8 and 4.1.9,
to wit:
Section 284. Officials and employees not entitled to overtime pay. The payment of
overtime services contemplated herein shall not apply to officials occupying
positions enumerated hereunder:
xxx
Additionally, since intermediate positions have been allowed and created in
between the above enumerated positions in the existing organizational
structure/staffing pattern of government agencies, government-owned and/or
controlled corporations, state universities and colleges and local government units,
41

and inasmuch as these positions involve coordinative and integrative functions and
in some cases incumbents of these positions exercise general supervision over line
divisions and units, incumbent of said positions are likewise excluded from receiving
overtime compensation.
Elective officials are also excluded from receiving meal allowance and other
forms of compensation since they do not have fixed hours of service. (Underscoring
supplied)
Audit of the disbursement vouchers involving payment of overtime services
disclosed that some of the Department Heads have claimed overtime payments despite the
clear exclusions of the concerned government officials from the same. Among those who
had claimed are as follows:
Name

Designation

Maria Lourdes P. Soy-open

Ma. Milagros C. Tigue

Municipal Assessor
Municipal Accountant
Former Municipal Budget
Officer
Municipal Budget Officer

Cristita D. Lopez
Antolin T. Quinco
Total

Total overtime pay

claimed
P
54,590.98
28,169.58
20,305.78
P

13,218.23
116,284.57

Heads of Offices, being supervisory in nature are excluded from the claim of
overtime pay. In the position classification and compensation scheme, the Municipal
Government Department Heads having salary grade 24 is equivalent to an Assistant Bureau
Director while Municipal Government Assistant Department Heads earning at a salary grade
22 rate is equivalent to a Division Chief.
The overtime pay granted to the aforementioned department heads could have been
avoided and reduced the actual expenses incurred in relation to the excess of PS Limitation.
Management Comment:
Such grants were previously allowed if the purposes of which is for the submission
of the reports.
Auditors Rejoinder:
Management should be mindful of the prohibition stated under existing regulations
and avoid further claims by those aforementioned department heads to avoid the suspension
of the transactions involved. It is emphasized that the entitlement of the honoraria is not
based on the nature of the work but on the position.

42

Recommendation:
Management should refrain from granting overtime payments to Heads of Offices
who are not entitled to claim the same and have the aforementioned employees refund the
Overtime Pay given to them.
L. PROPERTY, PLANT, AND EQUIPMENT
14. The validity and existence of the municipalitys Inventories, Property, Plant and
Equipment & Other Assets valued at P6,313,704.44, P212,881,438.21 and
P348,648.00, respectively remained doubtful due to the non-maintenance of
Property Records and the continued incomplete conduct of physical count thereof,
contrary to the provisions set forth under Section 119 and 124 of the NGAS Manual
Volume 1.
Volume 1 of the Manual on the New Government Accounting System for Local
Government Units, particularly Section 114 provides:
Perpetual Inventory Method. xxx
The Chief Accountant shall maintain the perpetual inventory records
comprising of Supplies Ledger Cards (SLC) for each commodity/stock,
Property, Plant and Equipment Ledger Card (PPELC) for each category of
plant, property and equipment and Work, Other Animals and Breeding Stocks
Ledger Card (WOABSLC) for each type of livestock. Such ledger cards shall
contain the details of the property, plant and equipment and livestock
account in the inventory control account in the general ledger.
The General Services Officer or the Municipal Treasurer, as the case maybe
shall likewise maintain stock cards and property cards for supplies; property,
plant and equipment; and work animals in their custody to account for the
receipt and disposition of the same. The balance per stock card/property
cards should always reconcile with the ledger cards of the accounting unit.
They should also reconcile with other property records like
Acknowledgement Receipt for Equipment (ARE). (underscoring ours)
Section 119 of the same Manual discussed about the property records that are to be
maintained by the local government, to wit:
Property Records to be Maintained. The General Services Officer or the
Local Treasurer, as the case maybe, shall number each type of supplies and
maintain Stock Cards per stock number. He shall likewise maintain Property
Cards per category of property, plant and equipment.
Deliveries of supplies or property shall be immediately recorded in the
property records on the basis of the AIR and other supporting documents.
43

The AIR and other supporting documents shall be forwarded to the Chief
Accountant for the preparation of the DV and recording of deliveries in the
appropriate ledger cards.
Sections 124 and 125 of the same Manual further provides that:
Sec. 124. Inventory of Supplies or Property. The local chief executive shall
require periodic physical inventory of supplies or property. Physical count of
inventory items by type shall be conducted semestrally and reported in the
Report of the Physical Count of Inventories (RPCI). This shall be submitted
to the Auditor concerned not later than July 31 and January 31 of each year
for the first and second semesters, respectively.
Physical count of property, plant, and equipment by type shall be
made annually and reported on the Report on the Physical Count of
Property, Plant and Equipment (RPCPPE). This shall be submitted to the
Auditor concerned not later than January 31 of each year.
Sec. 125. Disposal of Supplies or Property. - Disposal procedures shall be in
accordance with applicable rules and regulations on supply and property
management in local government units. The Waste Materials Report (WMR)
and the Inventory and Inspection Report of Unserviceable Property (IIRUP)
shall be used.
As of 31 December 2014, the total net property, plant and equipment of the
Municipality per accounting records showed a balance of P 212,881,438.21. Inventories
meanwhile had an ending balance of P 6,313,704.44 while Other Assets remain unchanged
and valued at P 348,648.00.
As an annex attached to the 2014 Annual Financial Statements of the Municipality
of Aurora, the RPCPPE is not compliant with the explicit instructions given under Annex 49
of NGAS Volume II. For one, majority of the Balance per Card or On Hand per Count
columns in the RPCPPE are unfilled. Likewise, the Unit of Measure column presents the
book value of the property and not what was intended therein. These would indicate that the
Municipal Treasurers Office, the current custodian of the properties, did not have the
control as to the number of properties in the books or the Inventory Committee did not
finish with the Physical Count.
Per inquiry with the Treasury, it was ascertained that there are no Property Ledger
cards ever maintained. Instead, what they have are the Memorandum Receipts (MRs)
arranged per office as a proof. In addition, they still seek the records from the Municipal
Accountants Office as to the details and status of the properties within the control and
jurisdiction of the LGU. Furthermore, per inspection, the property tags of the properties
were not updated to indicate that such were being inventoried during the calendar year.

44

Various accounts were likewise observed to have no corresponding Accumulated

Depreciation accounts as follows:
Account Classification
Land Improvements
Markets & Slaughterhouses
Other Structures
Total

SEF
30,540.00
313,454.90
343,994.90

Trust Fund
632,808.76
283,530.00
892,790.52
1,809,129.28

Total
663,348.76
283,530.00
1,206,245.42
2,153,124.18

Furthermore, it was also determined in the RPCPPE that the various unserviceable
items declared in the inventory list but were still kept within its respective account
classifications instead to the Other Assets Account (290). Such non-reclassification has
bloated the PPE accounts and the non-disposal thereof has put at risk the LGU to lose the
salvage value had the property been properly disposed of.
With regards to the Inventory balance, No Report of Physical Count of Inventories
has ever been submitted to the office indicating a failure to conduct a physical count of the
same. Likewise, inventory items involving office supplies, textbook and instructional
materials, and medical, dental and laboratory supplies were also likewise ascertained to
have been dormant for several years now.
Furthermore, pending the issuance of the Municipalitys notes to the financial
statements and based on the 2013 Notes, the Office Supplies Inventory items remained
unreconciled for a decade despite the last bulk purchase made in 2005. In addition, the
gasoline, oil, and lubricants inventory has increased by P 377,484.91 from P 2,874,256.00
as of December 31, 2013 despite the recommendation from the Commission to ensure the
liquidation of the previous issuances of gasoline.
The Breeding Stocks balance meanwhile has not changed for several years already.
In addition, no breakdown of the property ledgers were provided for by the management
that would indicate that each type of breeding stock ledgers were maintained and such
balances were regularly updated.
We remind the management that parts of this finding is already a reiteration of the
observations made by the Commission during the previous Annual Audit Reports but has
remained not complied with during the current audit period.
Recommendation:
1. The Municipal Treasurer/Property Officer shall maintain stock ledger cards,
property ledger cards, WOABSLC and other subsidiary records and reconcile
accounting and property records periodically;
2. The Inventory Committee shall conduct complete physical inventory of all
property and reconcile results with accounting records and record any
adjustments in the books;
45

3. The Municipal Accountant shall provide depreciation on all depreciable

assets and ensure the reconciliation and update of the aforementioned
dormant accounts; and
4. The Municipal Treasurer/Property officer prepare the Inventory and
Inspection Report of all identified unserviceable properties and facilitate their
immediate disposal to prevent further deterioration and decrease in salvage
values. The Municipal Accountant effect the necessary adjustment in the PPE
Account to reclassify the book value of unserviceable properties to Other
Assets account pending disposal and close the corresponding Accumulated
Depreciation.
Management Comment:
A new GSO was designated by the Municipality this year. With this development,
Management expects that the Physical Count will be completed this year as it is still
ongoing.
The Municipal Accountant has likewise purposely opted not to depreciate long-ago
properties pending the completion of the physical count of the properties.

M. SUBMISSION OF ACCOUNTS
15. The agency did not submit contracts of on-going and completed projects and
request for COA inspection, contrary to COA Circular No. 2009-001 dated
February 12, 2009, thus, timely review of contracts and inspection, deliveries and
project implementation cannot be made.
COA Circular No. 2009-001 provides that within five (5) working days from the
execution of a contract or a purchase order, a copy of said contract/PO and its supporting
documents, forming part thereof by reference or incorporation shall be furnished to the
Auditor of the agency concerned.
Our review of the procurement of the infrastructure projects, showed that the agency
had not strictly complied with the rules with respect to the submission of contracts and its
bidding documents. In some instances, the contracts were only forwarded/submitted to COA
during the submission of the paid vouchers for final custody and post-audit. Moreover, the
Audit Team observed that agencys requests for COA final inspection were made long after
the completion of the projects.
Infrastructure contracts are initially reviewed by the Auditor on the auditorial and
legal aspects after which these are referred to the Technical and Information Technology
Services, COA Regional Office IX, for review as to their technical aspects. Any deficiency
observed in the award of the contract or in the legal and technical aspects is immediately
46

communicated to management for corrective measures. The prompt submission of contracts

and all supporting documents would allow the timely review of the contracts in terms of
compliance with requirements of applicable laws, rules and regulations, completeness of
documentary requirements and initial evaluation of the contractual covenants to ensure that
they are not disadvantageous to the government.
Recommendation:
Management shall submit copies of contracts together with all the supporting
documents and request for COA inspection for deliveries of goods purchased and projects
undertaken within the prescribed period or immediately upon completion of the projects,
pursuant to COA Circular No. 2009-001.
Management Comment:
Management will submit the contracts before the month of February 2015 ends.
16. Disbursement vouchers and Official receipts for the three funds were not
completely submitted to the Office of the Auditor for audit as of February 23, 2015
in violation of COA Circular No. 95-006 and Sections 100 of PD 1445, thus
precluding the Auditor from establishing their propriety, accuracy and reliability.
Reiterated hereunder are the rules and regulations pertaining to the submission of
vouchers and documents to the Office of the Auditor:
Section 6 of COA Circular No. 95-006 dated May 18, 1995 states the following
duties and responsibilities of agency officials:
Section 6.03 Accountable Officers shall submit the records of receipts,
disbursements, expenditures, operation, and all other transactions, together with the
supporting documents, to the Chief Accountant in the manner and within the
timeframe prescribed in existing rules and regulations.
Section 6.04 Disbursing Officers in particular shall faithfully comply with Section
100 of Presidential Decree No. 1445 which require them to render monthly reports of
their transactions pursuant to existing auditing regulations not later than the fifth
of the ensuing month on the auditor concerned.
Section 6.05- The official involved in the daily recording of transactions in the books
of accounts shall turn-over the receipts and the disbursement records with all paid
vouchers and documents evidencing the transactions to the Auditor within ten (10)
days from date of receipt of said documents.
Further, Section 39 (1) (3) of Presidential Decree No. 1445

47

SUBMISSION OF PAPERS RELATIVE TO GOVERNMENT OBLIGATIONS.

(1) The Commission shall have the power, for purposes of inspection, to require
the submission of the original of any order, deed. Contract, or other
documents under which any of the collection of, or payment from, government
funds may be made, together with any certificate, receipt, or other evidence in
connection therewith. x x x
(3) It shall be the duty of the officials or employees concerned, including those
on the non-government entities under audit, or affected in the audit of
government x x x, to comply promptly with these requirements. Failure or
refusal to do so without justifiable cause shall constitute a ground for
administrative disciplinary action as well as for disallowing permanently a
claim under examination. x x x (underscoring ours)
Shown hereunder is the status of submission of accounts in the 2014 General Fund,
SEF and Trust Fund, viz:
Month

General Fund
Vouchers

GF-Official
Receipts

January
February
March
April
May
June
July
August
September
October
November
December

April 25, 2014

October 29, 2014
August 14,2014
August 22, 2014
October 1 , 2014
October 29, 2014
January 19, 2015
January 12, 2015
February 10, 2015
February 10, 2015
February 10, 2015
Not yet submitted

April 25, 2014

October 29, 2014
October 29, 2014
August 22, 2014
October 29, 2014
October 29, 2014
January 12, 2015
January 12, 2015
January 12, 2015
January 12, 2015
Not yet submitted
Not yet submitted

SEF Vouchers
& Official
Receipts
August 8, 2014
October 29, 2014
October 29, 2014
August 22, 2014
October 29, 2014
October 29, 2014
February 5, 2015
February 5, 2015
February 5, 2015
Not yet submitted
Not yet submitted
Not yet submitted

Trust Fund
Vouchers
August 8, 2014
October 29, 2014
October 29, 2014
Oct.29, 2014
Oct.29, 2014
Oct.29, 2014
February 5, 2015
February 5, 2015
February 5, 2015
Not yet submitted
Not yet submitted
Not yet submitted

We noted that there were some disbursement vouchers that were included in the
transmittal letter but not included in the bundle of vouchers that were submitted, to wit:
1. May 13, 2014
2. August 8, 2014

MT 100-1402329, 339, 355

MT 100-1404165
MT 100-1404174
SDO 100-1402107,137, 153

3. August 14, 2014 -

SDO 100-1403159,161
RC1-100-1403612, 622

4. August 25, 2014 -

MT 100-1401071
48

SDO- 100-141035, 049, 072

We further noted that the Office of the Municipal Accountant is very much delayed
in submitting vouchers and official receipts to the Office of the Auditor. As of the date of the
exit conference, the vouchers were not completely submitted to the office of the Audit for
audit. The SEF and TF transactions submitted for the months covering from July to
September 2014 were only partially made.
The continued practice of the LGU of not submitting paid transactions within the
prescribed period hinders the review and verification of the financial transactions at the most
proximate period to the date of incurrence where errors can be immediately corrected.
This observation is a reiteration of prior years (CY 2013) AAR findings and
recommendation.
Management Comment:
The Office of the Municipal Accountant has been undermanned for the past years
with only four personnel, including the Municipal Accountant, making the financial
statements for the municipality and the 44 barangays. Submission of the original vouchers
will be made only after the vouchers are verified with the financial statements.
Part of the delay is likewise attributed to the late submission of the vouchers from
the Office of the Municipal Treasurer. Vouchers for November and December were only
received by the Accounting office in February. For this year, however, the two offices will
do their best to effect the early submission of the documents and reports.
Auditors Rejoinder:
Lack of manpower should not be a reason for the Office of the Municipal
Accountants failure to submit timely the required accounts. Instead, the Accountant should
make a representation with the Municipal Mayor for additional manpower if it so
necessitates. Likewise, close interaction with the Treasurer is a must in order to devise
strategies to make the submission of accounts faster and timely.
Recommendation:
The Office of the Municipal Accountant should observe strictly the prescribed period
in the submission of paid vouchers and other financial transactions pursuant to Section 6 of
COA Circular No. 95-006 dated May 18, 1995 to allow the timely audit of the same. Failure
of the accountable officer to render account is punishable under Article 218 of the Revised
Penal code.
17. The Municipality did not submit list of ongoing programs/projects/activities and
the monthly monitoring report to the Commission on Audit and provide
49

notification to its constituents and to the public in general of its ongoing projects, in
violation of COA Circular No. 2013-004 dated January 30, 2013.
COA Circular No. 2013-004, provides:
Xxx
2.1

3.2

At the beginning of the year, all government agencies shall provide their
respective assigned Supervising Auditors (SAs) and Audit Team Leaders
(ATLs)
with
a
list
of
all
on-going
government
projects/programs/activities ("PPA") and those that are to be
implemented during the year. The list shall include the project name;
implementing unit, office or division if it is not the agency as a whole;
brief description of the PPA; contractor or supplier, if any; mode of
procurement; funding source; cost or approved budget; project duration
including start and completion dates; and location. Other information on
the PPA may be requested by the SA or ATL anytime for audit purposes.
SIT
2.2.1

All government agencies, or the implementing unit, office or

division as the case may be, shall notify the public of their PPA
through the posting of relevant information detailed in Item 2.1
above on signboards, blackboards, whiteboards, posters,
tarpaulins, streamers, electronic boards or similar materials
(collectively, "Signboards") not exceeding 3 feet by 2 feet, in
conspicuous places within the agency premises, and in the venue
where the PPA is located or carried out. This requirement applies
to all government PPAs, regardless of amount or source of funds.

2.2.4

Xxx

Based on the data sourced from the monthly monitoring report prepared
by the agency and verified by the Technical Audit Specialist of this
Commission, the Project Status (in Annex "A") should be maintained as
current as possible and updated, using the following schedule: Xxx

Review of the calendar year 2014 Annual Investment Plan (AIP), Annual Budget and
other reports submitted disclosed that the municipality has existing on-going projects and
various projects to be implemented during the calendar year 2014. However, in spite of these
existing projects, the Municipal Engineer submitted the list of all on-going government
projects/programs/Activities only after the end of the year and the MPDC totally failed to
submit the monthly monitoring report.
Moreover, the head of the agency did not inform the audit team that the appropriate
projects signboards and/or public notices were already posted, thus resulting in inability of
the audit team to validate the same. During spot inspection of selected ongoing projects of
50

the Municipality, we noted that the project signboard of concreting of Campo ICommonwealth Farm to Market Road amounting to P 16,500,000.00 was not displayed at
the project location.
Recommendation:
Management shall:
1. Direct the Municipal Engineer to provide the Commission on Audit at the
beginning of the year, the list of the ongoing projects/programs/activities and
those that are to be implemented. The list shall include the project name;
brief description of the PPA; contractor or supplier, mode of procurement;
funding source; cost or approved budget; project duration including start and
completion dates; and location;
2. Direct the MPDC to submit regularly the monthly monitoring reports in
coordination with the Municipal Engineers Office to the Audit Team. The
report should also categorize the projects as to its nature, status of
completion, cost and funding source; and
3. Notify the public through signboards of their projects location and inform the
SA thru ATL that the appropriate project signboards and/or public notices are
already posted.
Management Comment:
Management will be submitting the list of the ongoing projects/programs/activities
as well as comply with the reporting requirements to the Commission.
N. COMPLIANCE WITH TAX LAWS AND FULL DISCLOSURE
Management has complied with tax laws. Management has likewise complied with the
Fully Disclosure Policy as evidenced by its receipt of the Seal of Good Housekeeping from
the Department of the Interior and gLocal Government.

STATUS OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES

Beginning
Balance

Issued from
January to

51

Settlement
January to

Balances as of
December 31,

As of January
01, 2014
Notice of
Suspensions
Notice of
Disallowance
Notice of
Charge
Total

December 2014

December 2014

2,246,742.29

2,246,742.29

2014

2,156,147.29

2,156,147.29

90,595.00

90,595.00

Notices of Suspension/s, Disallowance/s and Charge/s issued prior to the effectively

of the new Rules and Regulations on Settlement of Accounts (COA Circular No. 2009-006
dated September 15, 2009) are not reflected in the status of balances but are still deemed
disallowance/charges which shall continue to be enforced in accordance with Sec. 28 of the
above cited circular.

52