Aom 006 Aics.docx

Republic of the Philippines COMMISSION ON AUDIT Local Government Sector Nueva Ecija B & Aurora - Team No. 27 AOM No. 2018-018(2018) Date: October 3, 2018

AUDIT OBSERVATION MEMORANDUM

For

:

HON. ALEXANDER A. DAUS Municipal Mayor Laur, Nueva Ecija

Attention

:

SANGGUNIANG BAYAN MEMBERS RONALYN G. BAYRO Municipal Accountant ROMEO O. ESCASINAS MSWDO

Financial Assistance under the AICS Program Several deficiencies were noted during the conduct of the Municipality’s cash assistances to clients totaling to ₱996,900.00 as of December 31, 2018 such as: (1) absence of formulated guidelines, policies and/or procedures in determining the prospective beneficiaries; (2) incomplete documentation of the disbursement vouchers for the cash assistance pay outs; and (3) the assistances granted were recorded under Other Maintenance and Operating Expenses account instead of Donations account which was not in concurrence with Revised Chart of Accounts of the LGUs. Hence, may result in indiscriminate grant and may favor clients other than those that are really in need and in crisis situation. Likewise, casted doubt on the validity of the assistances given to the clients. The Municipality of Laur, through the Social Welfare and Development Office (MSWDO), had continued to realize its commitment to the care, protection and rehabilitation of the individuals and families in the community having less in life in terms of physical, mental and social well-being by granting financial assistance on medical, burial, educational, food and shelter to its constituents. In fact, for the past year, out of P2,000.000.00 appropriation, 1,533,700.00 has been actually disbursed for that purpose. For the year under audit, Municipality reduced their appropriation to ₱1,000,00.00 only for Assistance to Individual Crisis Situation (AICS) Program of the Municipality. And as at year-end, the Municipality disbursed ₱996,900.00 for that purpose. 1. Absence of formulated guidelines, policies and/or procedures Section 2 of P.D. No. 1445, also known as The State Audit Code of the Philippines, states that All resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned.

Per DSWD MC No. 02 S. 2014, the Assistance to Individuals in Crisis Situation (AICS) is part of the DSWD’s protective services for the poor, marginalized and vulnerable/disadvantaged individuals. The beneficiaries of the AICS shall be the walk-in and referred clients. Priority shall be given, first, to beneficiaries belonging to indigent families, second, to families belonging to the informal sector, and third, other poor, marginalized and vulnerable/disadvantaged individuals. Section 4.4 of the same MC states that “The assessment of the case shall be based on the data gathered during interview, client’s current need, and supporting documents presented. The assessment shall likewise include capacity of the family in addressing the problem and available resources that the family could tap. The assessment of the worker shall be the basis for the recommendation. The Municipality adopted the DSWD’s AICS to assist people in crisis and give aids to people who are in need of emergency assistance brought about by critical situation like cash, food commodities, medical assistance and others. The following process is the current practice of the Municipality in the grant of financial assistance under AICS Program based on the random interview conducted with several clients: 1. The prospective client who needs financial assistance goes to the Mayor’s office and verbally ask for assistance and shows certificate of indigency issued by their respective Punong Barangays. 2. A staff from the office of the Municipal Mayor goes to the office of the MSWD to endorse the client for assessment. There are also some instances where the clients go to the MSWDO for direct assessment, instead of going straight to the Mayor’s Office. 3. The MSWDO prepares the case study report and recommends that the client is eligible for financial assistance. 4. The client will bring the assessment and recommendation made by the MSWD including their letter request and certificates of indigency. 5. The Municipal Budget Officer will prepare the Obligation Request (ObR) 6. Once the ObR has been prepared, the client will go to the Municipal Accounting Office for preparation of Disbursement Voucher and validation of the supporting documents; 7. Once DV is issued, the client will be endorsed to the Municipal Treasurer’s Office for check preparation 8. Lastly, the client will head back to the Mayor’s office for the approval of the Disbursement Voucher for payment and counter signing of checks. In the course of our post-audit, we observed that the amount granted varies from one person to another although the kind of financial aid or assistance given belongs to the same category such that for medical assistance, an individual or indigent received ranging from P300.00 to P1,000.00, without taking into consideration the following factors (a) gravity of the patients’ illness, (b) cost of hospital bills in case of hospitalization, and (c) cost of medicines and medical procedures. We have also noted that there are vouchers with attached note on how much shall be given to the prospective client. A scrutiny revealed that the note with predetermined amount was from the Office of the Mayor. Further, it was disclosed that the amount paid amounting to ₱1,000.00 per beneficiary is the practice of the Municipality since 2013 and it was supposed to be fixed for all beneficiaries until the Office of the Mayor implemented a predetermined amount per beneficiary. Moreover, our audit team noted that some cash assistances given for medical reasons are just for purchase of medicines such as salbutamol, cefalexin, cotrimaxozole, salbutamol, cephalexin, captopril and the like which are readily available in the Municipal’s RHU and are distributed, free of charge. Letter inquiry with the MSWDO disclosed that specific guidelines for the assessment of the qualification of individuals requesting medical and financial assistance were not yet established.

Hence, documents often requested for submission and the process were patterned after the DSWD’s Memorandum Circular on the Implementation of the AICS program. Without the regulation of the management, the processing and approval of the financial assistance becomes subjective and dependent upon the judgment of the officials who are in the seat of authority to determine the amount of the financial aid or assistance. Nonetheless, relying solely on the judgement of one may result to inconsistencies and potential bias particularly on the amount of assistance to be given to the requesting individuals. Moreover, prospective clients who are much more deserving to receive assistance might be overlooked due to the absence of such of clear cut guidelines in the AICS program of the Municipality 2. Incomplete documentation of the disbursement vouchers for the cash assistance pay outs Section 4 (6) of P.D. No. 1445 requires that claims against government funds shall be supported with complete documentation. Likewise, Section 4.2 of DSWD MC No. 02 S. 2014 enumerates the necessary documents needed to properly support the assistance the client was seeking from the agency such as: a. b. c. d. e.

certification of indigency doctor’s prescription statement of account from hospitals enrolment assessment form and other documents that will support the assistances needed by prospective beneficiaries.

Post audit of submitted disbursement vouchers revealed that supporting documents attached to substantiate the claims of the recipients were lacking or missing. Representative samples of transactions with missing or lacking documents are shown in Annex A and are summarized as follows: a. Most of the claim contain certificate of indigency instead of referral letter. b. Medical Assistance – lack of clinical abstract or medical certificate issued. For medicine assistance, prescriptions attached are not original. c. Burial Assistance – no funeral contract and/or death certificate attached d. Transportation Assistance – no police blotter or any document that will justify the claim Moreover, our audit of the assistance to individuals in crisis situation necessitates us to require some documentary requirements we seem reasonable such as but not limited to pictures, IDs and the like. Thus, the deficiencies noted rendered the validity of the payments made doubtful. Inquiry with the concerned personnel revealed that they are not aware with the documentary requirements for the financial assistance. They thought that their current practice in documentation of AICS program are sufficient because they also attach case study analysis prepared by the MSWDO which is only required for ₱10,000.00 above financial assistances per DSWD Memorandum Circular on AICS. However, the audit team believes that case study reports should also have sufficient documentary evidences. Based on the foregoing, without the above documentary evidences, we are constrained from determining the legitimacy of the claims for assistance, thus, casting doubt on the validity, regularity and reasonableness of the same. Likewise, the absence of the same shall cause us to suspend the transactions relative thereof being irregular for lack of compliance with Section 4(6) of PD 1445. 3. The assistances granted were recorded under Other Maintenance and Operating Expenses account instead of Donations account which was not in concurrence with Revised Chart of Accounts of the LGUs

Our analysis of the journal submitted by the Municipal Accountant that the expense account used by the Municipal Accountant to record the financial assistances granted was Other Maintenance and Operating Expenses account instead of Donations account as prescribed by the Revised Chart of Accounts of Local Government Units which states that “Donations” is the account to be used to record the amount of aids/ assistances to other levels of government/individuals/instituition. Verbal inquiry with the Municipal Accountant unveiled that this has been a practice since her assumption in year 2009 and did not bother to reclassify since there will be no significant effect on the financial statements. however, proper classification of expenses is necessary in order to fairly present and not misinform the users of the financial statements. The Municipal Accountant should have been more prudent in recording government transactions such that the correct account should be used properly to avoid confusion as to the nature of the transactions when viewed by the end users of the financial statements of the municipality. The foregoing observations casted doubt if the financial assistance were extended to those who are really in crisis situation, thus, we recommend the following: 1. The Sangguniang Bayan formulate the Municipality’s own implementing guidelines, policies and procedures on the management of the AICS, in conformity with the provisions set forth by the DSWD MC No. 02 S. 2014, as basis in the granting of financial or in-kind assistances to its constituents; 2. Municipal Accountant (a) ensure that all payments for AICS be adequately and properly supported by the required documents enumerated under Section 4.2 of DSWD MC No. 02 S. 2014 to establish the validity of the claims; (b) make the necessary adjustments to correct the erroneous recording of the AICS; and (c) henceforth, ensure that the proper account is used in the payment of AICS. May we have your comments on the foregoing audit observations within fifteen (15) calendar days from receipt hereof.

HADIYAH A. ALIÑO OIC-Audit Team Leader

VIRGINIA A. YACAT OIC-Supervising Auditor