Genluna_quezon_es2015.pdf

EXECUTIVE SUMMARY Introduction The Municipality of General Luna, formerly a sitio of Macalelon, Quezon, was created into a municipality on November 1, 1929 under Executive Order No. 207. It is located along the coast of Tayabas Bay in the southwestern portion of Quezon Province and is one of the 12 municipalities covered by Bondoc Peninsula with a total land area of 10,215.5857 hectares subdivided into 27 barangays. It is currently classified as a 4th class municipality with farming and fishing as the two major economic activities and is considered one of the food bowls of the Province due to its abundant supply of farm and fishery products. Its most featured celebration is the Centurion Festival held during the Lenten Season which has been a tourism attraction. It maintains General Fund (GF), Special Education Fund (SEF) and Trust Fund (TF) books. The Organizational Structure of the Municipality is as follows: Municipal Mayor Municipal Vice Mayor Members of the Sangguniang Bayan

Municipal Accountant Municipal Treasurer

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Jose Stevenson M. Sangalang Jovito P. Red

1. 2. 3. 4. 5. 6. 7. 8. 9. -

Melaica M. Batariano Kristine Chernobyl V. Florido Miguel R. Atienza Miguel R. Salvo Felipe T. Alvarez Mercedita V. Manongsong Manuel A. Abarquez Lani O. Suarez Tomas P. Odiame Madonna A. Suarez Monaliza L. Plata

It was complemented with a total workforce of 124 personnel in 2015, with the following details: Elected Permanent Job Order Total

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11 62 51 124

Financial Highlights For Calendar Year (CY) 2015, the Municipality of General Luna generated a total revenue of P70,171,133 from tax revenue, service and business income, share from internal revenue collections and other income. The total funds utilized for the year amounted to P63,474,660 out of the total appropriations of P73,373,457, leaving an unexpended balance of P9,898,797. The Municipality’s financial position and results of operations for CY 2015 are summarized below and shown in detail in the attached audited financial statements. Assets Liabilities Net Assets/Equity Income Expenses

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69,823,164 36,390,253 33,432,911 70,171,133 64,064,193

Scope of Audit Financial and compliance and value for money audits were conducted on the accounts and operations of the Municipality of General Luna for Calendar Year 2015 to ascertain the fairness of the presentation of the financial statements and compliance of the Municipality with laws, rules and regulations as well as the economical, efficient and effective utilization of resources. Audit Opinion on the Financial Statements The Auditor rendered a qualified opinion on the fairness of the presentation of the consolidated financial statements of the Municipality of General Luna, Quezon due to the following: 

The existence and valuation of the Property, Plant and Equipment (PPE) with a net book value of P12,592,616.03 could not be ascertained due to the failure of the Municipality to conduct physical inventory during the year as well as to prepare and maintain property cards and subsidiary ledgers for each category of PPE.

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Five parcels of land recorded in the books at P3,091,310.00, based on acquisition cost and market value, were not supported with Transfer Certificate of Title.

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The Real Property Tax/Special Education Tax Receivables as of December 31, 2015 of P10,621,520.73 each, or a total of P21,243,041.46 were unreliable due to the inclusion of collectibles prior to 2002 and penalties for all unpaid property taxes.

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Causes or reasons for changes between the original and final budget and for material differences between the budget and actual amounts were not disclosed on the face of the Statement of Comparison of Budget and Actual Amounts (SCBAA) or in the

notes to the financial statements (FS); and reconciliation of actual amounts per SCBAA versus the actual amounts in the FS was likewise not disclosed, contrary to Philippine Public Sector Accounting Standards (PPSAS) No. 24, thereby denying the users of the financial statements of the chance to identify these variances and to determine whether the Municipality had operated within its approved budgets for which it is held publicly accountable. Significant Observations and Recommendations For the exceptions cited above, the Auditor recommended to the Municipal Mayor the following courses of action: 

Require the Inventory Committee to conduct physical inventory of PPEs and prepare and submit the inventory report within the prescribed period; and Municipal Accountant and Municipal Treasurer to prepare and maintain complete and updated PPE Ledger Cards and property cards, respectively, and require them to reconcile these records regularly.

 Issue an office order designating a responsible person that will locate the copy of Deed of Donation for the donated cemetery lot and will facilitate the transfer of title of these five lots in the name of the Municipality to avoid contingent claims that may arise in the future and in compliance with Section 148 of COA Circular No. 92-386; Require the Municipal Treasurer to exert all efforts to collect the real property taxes from the former owners of the four lots so as to transfer their Tax Declaration in the name of the Municipality; and Require the Municipal Budget Officer to provide appropriate funding for the said undertaking.  Require the Municipal Treasurer to prepare the report on property tax delinquencies showing separately the collectibles from 2002-2014 and those prior to 2002; and Require the Municipal Accountant to adjust the books for RPT/SET Receivables based on the collectibles for 2002-2014 only. Require the Municipal Treasurer to complete the list of taxpayers with corresponding tax due from which set up will be based.  Require the Municipal Accountant to see to it that the Notes to Financial Statements includes disclosures showing the a) changes in budgets; b) material discrepancies between the budget and actual amounts; and c) reconciliation of actual amounts per SCBAA and per financial statements, to enhance the transparency of the Municipality’s financial statements which will guide the users/readers in making sound financial decision.

The following are the other significant audit observations and recommendations in the audit of the Municipality of General Luna for the year 2015: 1. The Municipal Treasurer did not deposit the municipal collections promptly and intact, contrary to Section 32 of the Manual on New Government Accounting System, exposing the funds to possible loss and/or misuse. We recommended that the Municipal Mayor require the Municipal Treasurer to strictly adhere with the above-cited regulations to deposit all municipal collections promptly and intact in order to protect municipal funds against risk of loss and/or misuse. 2. Immediate and full settlement of the short-term loans (micro-financing benefits) and the disallowed Representation Allowance and Transportation Allowance (RATA) in 2006-2007, recorded in the Other Receivables account, was not enforced, thus, unsettled balances of P117,089.68 and P4,861.00, respectively, remained as of yearend, indicating laxity of concerned municipal officials in recovering the improperly/illegally applied government funds, hence they might be held liable for the amount still unrecovered pursuant to Section 342 of the Local Government Code of 1991 and Section 7.1 of the 2009 Rules and Regulations on the Settlement of Accounts. We reiterated our recommendation that the Municipal Mayor require the: 

Municipal Accountant and Municipal Treasurer to implement the immediate refund of the total amount of P121,950.68, otherwise, deduct it from salary or from whatever money due the concerned municipal officials/employees. In case the payees are no longer in the service, we further recommended to require the Municipal Treasurer, the Municipal Accountant and other municipal officials who signed their clearance from money accountability to personally pay the unrecovered amount from these people; and

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Municipal Accountant to correct the account title used in recording the disallowed RATA from Other Receivables to Receivables-Disallowances/Charges account for proper and fair presentation of account balances in the financial statements.

3. Fully-depreciated and unserviceable properties totaling P183,734.50 were not disposed of as required under Section 79 of PD No. 1445 and Section 125, Chapter 7, Volume I of the Manual, thereby depriving the Municipality of the possible additional income that can be derived therefrom. We recommended that the Municipal Mayor instruct the General Services Officer to prepare and submit the Inventory and Inspection Report of Unserviceable Property and undertake the necessary action for the disposal of the said properties in accordance with applicable rules and regulations.

4. The Municipality resorted to piecemeal procurement thru shopping as alternative mode of procurement for various supplies and materials totaling P2,702,611.43 due to non-consolidation of the Municipality’s Project Procurement Management Plan (PPMP), in violation of Sections 10 and 7.3.4, Sections 48.2 and 52 of the Implementing Rules and Regulations of Republic Act No. 9184 (IRR-RA9184), hence it has not availed of savings in terms of lower cost and less time and efforts to processing, inspection, acceptance and payment. We recommended that the Municipal Mayor require the BAC Secretariat to consolidate the Municipality’s PPMPs and to stop the practice of procuring supplies and materials by piecemeal through shopping as alternative mode of procurement and adopt Public Bidding as the primary mode of procurement in compliance with RA No. 9184. 5. Payments totaling P1,277,537.83 for office supplies, other maintenance and operating expenses, and various equipment were made thru reimbursement to the Municipal Officials and Employees in violation of COA Circular No. 97-002 and Section 48 of RA No. 9184, thus taxes totaling P26,802.79 were not withheld in violation of Section 2 (a) of BIR Revenue Regulations No. 1-87 and deprived the government of income due thereon. We recommended that the Municipal Mayor: 

require the Municipal Treasurer to adhere strictly to the provision that all payment should be made by check directly payable to the suppliers;

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stop granting reimbursement to all Municipal officials and employees;

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ensure that the proper procurement purchases are implemented by the Department Head responsible for procurement; and

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refund the amount of P26,802.79 representing withholding tax not withheld, in addition to the unremitted amount of P10,122.96 and P13,958.99 in CY 2014 and 2013, respectively.

6. Prepaid e-load/cellular card allowance, mobile post-paid plan and use of internet totaling P1,010,595.96 were excessive, contrary to COA Circular No. 2012-003 and were not supported with proper documentation, contrary to Section 4(6) of PD No. 1445, casting doubt in the reasonableness and regularity of the payments. We recommended that the Municipal Mayor in coordination with the Sangguniang Bayan, adopt and implement cost measures to observe economy in the telephone and internet expenses:

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Consider the use of post-paid plan offered by telecommunications network from P500.00 to P1,000.00 for head of offices and P2,000.00 to P2,500.00 per month for Municipal Vice-Mayor and Mayor.

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Review the amounts of E-Load allowance in relation to the available /mobile phones and internet connection and consider its reduction.

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Utilize alternatives modes of communication such as internet for long-distance communication.

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Consider the features of communication networks of free long distance calls for Smart to Smart or Globe to Globe phones.

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Set reasonable limits on use of mobile phones to the entitled officials. Any excess on the limit set shall be for the personal account of the users.

We also recommended that if cell cards/E-Load shall be allowed, consider purchase in bulk by the GSO, following the required procurement procedures and distribute the same in accordance with the guidelines. Further, we recommended to refund the total amount of: 

P145,769.57 representing the amount paid for the Globe post-paid plan as second mobile phone provided to the Municipal Mayor; and

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P88,500.00 pertaining to the three months reimbursements for October to December, 2014 charged to current appropriation.

We also recommended to require the Municipal Accountant to submit the following documents:    

Official Receipts for the purchases of E-Load. Acknowledgement Receipt by the Department Heads for the receipt from the Vice-Mayor of E-Load allowances. Canvass of prices for the purchases of E-Load. Proof or evidence that expenses were incurred for official functions.

We recommended the Municipal Mayor to: 

adopt and implement control measures to ensure that the amount granted for cellphone allowance is reasonable and used for official business only; and

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consider requiring the concerned officials to apply for a minimum mobile plan instead of granting cash for prepaid cellular cards and to fix the maximum amount that each official could charged/reimbursed to avoid unnecessary/excessive expenses.

7. Eight projects with appropriation of P2,580,000.00 under the 20% Development Fund were not implemented as of December 31, 2015, contrary to Section 4 of Joint Memorandum Circular No. 1, s, 2005 dated September 20, 2005 of the Department of the Interior and Local Government (DILG) and Department of Budget and Management (DBM), thus depriving the intended beneficiaries of the maximum benefits that could be derived from the projects. We reiterated our recommendation that the Municipal Mayor require the Municipal Planning and Development Coordinator to implement fully the projects under the 20% Development Fund to ensure that the intended beneficiaries can avail the maximum benefits that may be derived from the projects. 8. The list of all on-going government projects/programs/activities (“PPA”) and those that are to be implemented during the year and its monthly monitoring report were not submitted to the Commission on Audit for review and validation within the prescribed period, contrary to Sections 2.1, 3.1 and 3.2 of COA Circular No. 2013004 dated January 30, 2013. We recommended that the Municipal Mayor submit the: 

List of all on-going government projects/programs/activities (“PPA”) and those that are to be implemented during the year, as of January 1, 2015; and

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Monthly monitoring report in compliance with the above cited regulations.

9. Expenses incurred for vegetable production and training totalling P490,044.50 charged to the 20% Development Fund are not considered as investment and capital expenditures, contrary to Joint Memorandum Circular No. 2011-1 dated April 13, 2011. We recommended that the Municipal Mayor require the refund of the amount of P490,044.50. 10. Expenses incurred totaling P1,735,191.87 for KALAHI-CIDSS Projects as LGU counterpart to the project were charged to 20% Development Fund, contrary to the intended development and priority projects under Joint Memorandum Circular No. 2011-1. Moreover, payment for salaries included therein of P1,233,000.00 for KALAHI support staff were not supported with approved payrolls bearing the payees signature, contrary to Section 4(6) of PD No. 1445. We recommended that the Municipal Mayor require the Municipal Planning and Development Officer to see to it that only projects that truly contribute to the development of the Municipality are included in the 20% Development Fund. We further recommended to refund the amount of P1,735,191.87.

11. Unnecessary and excessive traveling expenses were incurred, contrary to COA Circular No. 2012-003 and claim for reimbursement of gasoline expenses were not supported with complete and properly accomplished Driver’s Trip Tickets, contrary to COA Circular No. 77-61 and Section 4(6) of PD No. 1445. We recommended that the Municipal Mayor: 

refund the excess claims of per diems in the total amount of P163,680.00;

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assign a Liaison Officer who will be in charge for the submission of documents/follow-ups of official matters;

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submit to the Audit Team for evaluation the properly accomplished Driver’s Trip Tickets for reimbursement of gasoline totaling P172,087.11; and

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plan travels to attain economy in incurrence of traveling expenses.

12. The Municipality incurred expenses for meals and snacks of P391,840.00 for programs and activities during town fiesta and Christmas celebration and P1,765,504.43 for trainings/meetings or similar activities, or a total of P2,157,344.43, contrary to Section 2 of PD No. 1445, Section 335 of RA No. 7160 and COA Circular No 2012-003, hence considered excessive and unnecessary expenditures. We recommended that the Municipal Mayor require the Municipal Budget Officer to implement COA Circular No. 2012-003 to avoid incurrence of excessive, extravagant and unnecessary expenditures. We also recommended to refund the amount of P304,890.00 and P86,950.00 representing payment for meals and snack during town fiesta and Christmas celebration, respectively, as this violate Section 335 of RA No. 7160. 13. Expenditures totaling P2,286,585.83 incurred in prior years were charged against the current appropriations and paid in CY 2015, contrary to Sections 350 and 351 of RA No. 7160 and Section 119 of PD No. 1445, hence considered unlawful expenditures. We recommended the Municipal Mayor to:  require the Municipal Budget Officer to stop the practice of charging prior years’ expenses against current appropriation; and  refund the amount of P2,286,585.83. 14. Financial assistance totaling P241,856.00 under the Aid to Individual in Crisis Situation (AICS) Program exceeding P3,000.00 each thru cash advance of the Municipal Treasurer charged against Philippine Charity Sweepstake Office (PCSO)

were released directly to the recipient, contrary to DSWD Department Order No. 22, as amended by Administrative Order No. 5, Series of 2008 and were acknowledged thru Reimbursement Expense Receipt (RER) only by the recipients, casting doubt whether the financial assistance were received by the intended qualified beneficiaries. We recommended that the Municipal Mayor require the: 

Municipal Social Welfare Officer to coordinate with the Municipal Treasurer and Accountant to prepare checks payable directly to the accredited government drugstores for medical assistance and funeral parlor for burial assistance; and

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Municipal Accountant to submit to the Auditor for evaluation the official receipts for the payment made by the recipients to the funeral parlor for burial assistance and official receipts issued by hospitals and drug stores for medical assistance.

The observations and recommendations were discussed with concerned Management officials and staff on June 20, 2016 and their comments were incorporated in the report, where appropriate. Status of Implementation of Prior Year’s Audit Recommendations Of the 44 prior year’s audit recommendations embodied in the 2014 Annual Audit Report, 20 were fully implemented, 13 were partially implemented and 11 were not implemented by the Municipality.