Sagbayan_bohol_es2013.pdf

EXECUTIVE SUMMARY The Municipality of Sagbayan is a fifth class municipality of Bohol province created by the issuance of an Executive Order by the late President Elpidio Quirino on February 9, 1949. It is part of the 2nd congressional district of the province and is politically subdivided into twenty four barangays with a total population of approximately 20,091 people per 2010 census. It has a total land area of 9,675 hectare and among the three towns known of its famous chocolate hills. The municipality, like any other municipalities, enjoys total independence in planning, managing and deciding its own administrative, fiscal and developmental affairs in consonance with the national trust for sustainable social and economic benefits to its constituents pursuant to Republic Act No. 7160 or otherwise known as the Local Government Code of the Philippines.

HIGHLIGHTS OF FINANCIAL OPERATION For CY 2013, the municipality’s actual financial performance against its approved annual and supplemental budget is presented hereunder: Income Expenditures/Appropriations

P

54,508,086.00

P

52,781,759.73

97%

Personal Services Maintenance & Other Operating Expenses Capital Outlay Economic & Social Services Non-Office Expenditures

P

27,418,439.66

P

27,418,439.66

100%

26,542,916.04 42,994.50 2,329,376.39 3,079,545.87

88% 100% 104% 99%

59,413,272.46

94%

Total

30,111,352.71 42,994.50 2,236,972.65 3,117,574.15 P

62,927,333.67

P

The municipality generated a total collection from all sources amounting to P52,781,759.73 which increased by 5.74% compared to that of last year’s collection of P49,917,093.23 or more by P2,864,666.50, shown in details as follows: Sources of Funds Local Taxes Permits & Licenses Service Income Business Income Other Income Total

P

P

CY 2013 3,068,019.87 1,212,130.76 743,667.13 5,217,041.75 42,540,900.22 52,781,759.73

CY 2012 3,250,899.05 1,508,007.73 934,689.92 6,137,430.05 38,086,066.48 49,917,093.23

P

P i

P

P

Increase/ Decrease (182,879.18) (295,876.97) (191,022.79) (920,388.30) 4,454,833.74 2,864,666.50

% Increase/ Decrease -6% -20% -20% -15% 12% 5.74%

However, municipality’s expenditures incurred during the year increased by P2,025,369.18 compared of last year’s figure of P47,547,559.00 summarized as follows:

Expenditures Personnel Services Maintenance & Other Oprtg. Exp. Financial Expenses Subsidies& Donations Total

Increase/ Decrease

P

CY 2013 29,175,040.67 P

CY 2012 27,666,950.84 P 1,508,089.83

P

17,219,259.08 489,828.43 2,688,800.00 49,572,928.18 P

18,120,088.23 (900,829.15) 663,419.93 (173,591.50) 1,097,100.00 1,591,700.00 47,547,559.00 P 2,025,369.18

% Increase/ Decrease

5% -5% -26% 145% 4.26%

For CY 2013, the total amount of P8,413,017.20 was appropriated for the 20% development fund. The following projects were programmed and its accomplishments: Projects Appropriation LBP Debt Servicing (Construction of flood Control) P 1,356,205.26 P LBP Debt Servicing (Purcharse of farm tractor) 156,664.21 Project to Different Barangays 250,000.00 Rehabilitation of farm to market roads 1,500,000.00 Health Services - Counterpart to referral hospital 100,000.00 Improvement of Waterworks System 3,500,000.00 Solid Waste Management 300,000.00 Updating of Comprehensive Land Use Plan (CLUP) 250,147.73 Construction of Multi-Purpose Building 1,000,000.00 Total P 8,413,017.20 P

% of Expenditures Accomplishment 1,318,502.82 156,664.21 100,000.00 3,471,797.50 295,930.00

97% 100% 0% 0% 100% 99% 99%

215,775.91 5,558,670.44

86% 0% 66%

FINANCIAL RATIOS The municipality’s assets, liabilities and government equity as of December 31, 2013 were as follows:

Classification Asset Liabilities Government Equity

CY 2013 97,843,066.87 53,949,704.40 43,893,362.47

CY 2012 56,499,171.17 14,174,379.36 42,324,791.81

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Increase (Decrease) 41,343,895.70 39,775,325.04 1,568,570.66

% Increase (Decrease) 73% 281% 4%

SCOPE OF AUDIT An audit was conducted on the accounts and operations of the Municipality of Sagbayan, Bohol for calendar year 2013. The audit was conducted to ascertain the propriety of financial transactions and compliance of the agency with prescribed rules and regulations and the programs and objectives achieved efficiently and effectively and to ensure economy, efficiency and effectiveness in the carrying out of the local government unit’s programs/projects/activities and/or management of its resources. It was also made to ascertain the accuracy of financial records and reports, as well as the fairness of the presentation of the financial statements. However, post-audit were applied only to selected transactions were due to time and personnel constraints.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS The auditor rendered an adverse opinion on the fairness of presentation of the financial statements as of December 31, 2013 due to the lack of valid basis in recording Real Property Tax (RPT) and Special Education Tax (SET) Receivables amounting to P1,290,587.93, therefore, correctness of the RPT and SET Receivables and their corresponding contra-accounts are unreliable. In addition, the validity and accuracy of the receivable accounts are unreliable because Cash Advances to Officers and employees amounting to P4,075,259.75 remained unliquidated while accounts with doubtful collectability including KKK Funds Receivables, Accounts Receivables and Other Receivables accounts amounting to P92,190.15, P6,690.03 and P11,673.47 respectively still existed as of December 31, 2013. Further, the existence, accuracy and condition of the Property, Plant and Equipment amounting to P 56,337,768.79 and Inventories costing P114,442.50 were not established due to the failure of the municipality to conduct a complete physical inventory count with corresponding report and to apply for relief of accountabilities and disposal of damaged properties. Likewise, Public Infrastructures with a total amount of P34,927,140.39, comprising 65% of the total Property, Plant and Equipment accounts were still carried in the books, thereby, overstating the LGU’s total assets and government equity accounts. Moreover, minimal balances of the Due to Other NGAs and Due to LGUs accounts remained in the agency books despite full implementation of projects therefore, validity of the accounts amounting to P269,212.53 and P42,199,629.24 respectively cannot be assured. Lastly, the accuracy and correctness of the reciprocal accounts, due from Other Funds and Due to Other Funds, are doubtful due to the unreconciled net difference of (P91,227.03).

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SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS 1. Effective internal control system was not adopted within the agency with the designation of the Revenue Collecting Clerk II assigned at the Municipal Treasurer’s Office who simultaneously performs disbursing functions, contrary to Section 124 of PD 1445 and Section 50 of GAAM Volume III. Further, the bond of the accountable officer is insufficient to cover the maximum amount of accountability handled, thus, detrimental and disadvantageous to the government and contrary to the Treasury Circular No. 02-2009 dated August 6, 2009 issued by the Bureau of Treasury. We recommend that the designated disbursing officer should not be allowed to perform collecting functions to avoid mishandling of government funds, thus, providing the agency of an opportunity to the provisions of Sections 124 of PD 1445 and Section 50 of GAAM Volume III. We recommend that management immediately increase the Fidelity Bonds of all accountable officers of the municipality to amounts corresponding to their maximum cash handled in accordance with the revised Schedule of premium Rates of Fidelity Bond issued by the Bureau of Treasury. 2. Casual employees who are not properly designated as accountable officers nor bonded in accordance with law, were allowed to do collecting functions contrary to Sections 65 & 66 of the Government Accounting and Auditing Manual collections and the possible ultimate loss of government funds. We recommend that management: a. Refrain from involving any employee in the collecting activities of the local government unit if he/she is not regularly appointed and officially designated personnel to perform collection/disbursement function. b. Require all accountable officers to apply for the proper amount of fidelity bond in relation to the handled cash accountabilities so as to safeguard government funds and protect the interest of the municipality. 3. The municipal accountant booked up an estimated Real Property Tax (RPT) and Special Education Tax (SET) Receivables at the beginning of the year in the books of accounts due to the absence of a certified list of taxpayers showing the amount due and collectible for the year contrary to Section 20, Volume I of the New Government Accounting System (NGAS) Manual for LGUs, thus misstating the financial statements. We recommend that management require the municipal treasurer to update data/information on the Real Property Assessment Roll and furnish the Municipal Accountant with the certified list of taxpayers containing taxes due and collectible as basis for recording the Real Property Tax/ Special Education Tax Receivables.

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4. The Municipal Treasurer did not post the Notice of Delinquency in the payment of Real Property Taxes at the main entrance of the municipal hall and in publicly accessible/conspicuous spaces contrary to Section Nos. 254 to 256 of the Local Government Code of 1991 thereby preventing the municipality from availing of the remedies in the collection of real property taxes from delinquent taxpayers. We recommend that the Municipal Mayor require the Municipal Treasurer to post the Notice of Delinquency in the payment of Real Property Tax at the main entrance of the Municipal Hal and in publicly accessible and conspicuous places in the barangays of the municipality in compliance with Section 254 RA 7160 and to avail of the remedies in the collection of the real property tax from the different taxpayers as stated in Section 256 of the Local Government Code of 1991. 5. Trust Receivables from KKK Funds amounting to P92,190.15 remained unsettled for more than 30 years contrary to Section 37 of Presidential Decree 1445 and Section 64 of Government Accounting Manual (GAAM) Volume I, thus, collectability and propriety of these accounts were doubtful. We recommend that management: a. Require the municipal accountant to send billings and/or demand letters to the individuals concerned who are still in the locality or whose whereabouts are known for possible collections. b. If collection is futile for valid reasons, request authority from the Commission on Audit for the write off of these accounts. c. Require the municipal accountant that for whatever result in the request for write off of the accounts, take the necessary adjustment in the books of the municipality. 6. Damaged and lost properties remained in the books of the municipality as of December 31, 2013, due to the failure of the municipal officials to conduct periodic physical inventory of supplies and property in violation to Section 124 of NGAS Manual, Volume I and failure of the general services officer or municipal treasurer to apply for relief of accountabilities within 30 days after the 7.2 magnitude earthquake in Bohol contrary to Presidential Decree 1445, thereby, existence, validity and correctness of the Inventories and Property, Plant and Equipment accounts cannot be ascertained. We recommend that the local chief executive initiate the move by creating the inventory committee to conduct the physical count of all properties of the municipality. The corresponding equipment/property ledger cards should also be maintained by the accounting section to serve as their subsidiary records of the Inventories and PPE accounts. In the absence of available records of acquisitions in v

the past years, they will have no other recourse but to take hold of the disbursement vouchers to obtain the necessary data to be recorded in the equipment/property ledger cards. We further recommend that management require the general services officer or municipal treasurer to submit the request for relief of accountability with complete supporting papers so that the auditors can take proper action on the request. 7. Insurable agency assets were not insured with the General Insurance Fund of the Government Service Insurance System (GSIS) contrary to Section 489 of the General Accounting and Auditing Manual (GAAM) and Republic Act No. 656 as amended by Presidential Decree No. 245, hence, the municipality was deprived of adequate and reliable protection against any damage to or loss of its properties due to the 7.2 magnitude earthquake. We recommend that management explain the failure to insure the properties. Further, we recommend that the management allocate funds for insurance with the GSIS General Insurance Fund of all the existing and future insurable assets of the municipality pursuant to Section 489 of GAAM, Volume I to secure the properties for whatever loss due to fire, earthquake, storm or other casualty. 8. The use of the motor vehicles were not supported with trip tickets, monthly reports of official travels and monthly reports of fuel consumption to substantiate the validity of the use of gasoline for official travels undertaken during the year, contrary to COA Circular No. 77-61 dated September 26, 1977, thereby the reasonableness and propriety of the total gasoline expenses recorded in the books amounting to P1,199,424.59 as of September 30, 2013 is doubtful. We recommend that management: a.) Require the Municipal Accountant to verify and ascertain that payments for gasoline, oil and lubricants are duly supported with completely filled up driver’s trip tickets for proper evaluation on the propriety and reasonableness of fuel consumption. b.) Immediately adopt the official and required format of the Trip Tickets as prescribed by COA Circular 77-61. c.) Direct the vehicle drivers concerned to completely fill up or indicate all the data or information on the prescribed Driver’s Trip Tickets. d.) Direct the vehicle drivers concerned to prepare and submit to the Auditor, on a monthly basis, the Monthly Report of Official Travels and the Monthly Report of Fuel Consumption for proper analysis, verification and the necessary audit action on fuel consumption.

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9. Minimal balances of Due to Other NGAs (416) and Due to LGUs (418) remained in the books of municipality despite the full implementation and completion of programs and projects contrary to COA Circular No. 2004-008 and Sections 98 and 99 of PD 1445 thereby resulting to the misstatement of the liability accounts. We recommend that management: a. Verify the Memorandum of Understanding or Memorandum of Agreement entered into with the donor-agencies to ascertain on the disposition/treatment of the balances of the Financial Assistance received. b. Transfer the unexpended balances in accordance with Sections 98 and 99 of PD 1445. 10. Reciprocal accounts Due From Other Funds (144) and Due To Other Funds (424) had an unreconciled amount or difference of P100,168.93 as of September 30, 2013 which rendered doubtful accuracy and correctness of accounts contrary to COA Circular 2004-008. We recommend that management instruct the Municipal Accountant to review and reconcile the transactions recorded in both accounts and make the necessary corrections/adjustments. Further, management should settle the accounts to allow the creditor-fund to utilize the amounts for their intended purpose, if any. 11. The Municipal Accountant failed to submit paid disbursement vouchers and official receipts together with the related financial reports of all funds to the Office of the Auditor within the prescribed period contrary to Section 107 of PD 1445, COA Circulars 95-006 and 96-011, and Volumes I and II of the NGAS Manual, resulting to the delay in the review and verification on the propriety and validity of the transactions recorded in the books and in rendering the necessary audit decisions on these transactions. It is suggested that management undertake the following: a. Adhere to the prescribed time frame for the submission of the monthly and financial reports to the Office of the Auditor pursuant to Section 107 of the Government Auditing Code of the Philippines and the pertinent provisions of COA Circular Nos. 95-006, 96-007 and 96-011 as well as the pertinent provisions of Volumes I and II of the NGAS Manual. b. Direct the Municipal Accountant to immediately submit the disbursement vouchers, official receipts and other the related Report of Disbursements/Reports of Checks Issued/Report of Collections and Deposits as well as Bank Reconciliation Statements so that the Auditor could conduct the required review and verification of the transactions recorded in the books and render the necessary

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audit decisions on these transactions as well as validate the propriety of the account balances per books at any particular month or period. 12. The Local Government Unit exceeded the 55% limitation for Personal Services in violation to Section 325 of RA 7160 while the uncontrolled hiring of casual and contractual/job order employees resulted in the incurrence of wages which were inappropriately charged as Repairs and Maintenance under the 20% Development Fund contrary to DILG and DBM Joint Memorandum Circular 2011-1, depriving the constituents of benefits which should have been enjoyed had there been proper usage of government funds for the implementation of government projects. We recommend Management the following: a. Direct the Municipal Budget Officer to charge its appropriate expense item in the annual budget and the Municipal Accountant to record the wages of casual employees to its appropriate accounts. b. Maximize the services of permanent employees so as not to exceed the 55% Personal Services Limitation and to minimize the hiring of casual employees as to necessity. c. Adopt and always observe the proper utilization of the 20% Development Fund in accordance with DILG and DBM Memorandum Circular 2011-001 dated April 13, 2011. 13. Laxity in the monitoring of obligations resulted to negative allotment balances in various offices of the municipalities with a total amount of P384,304.24 in violation to Section 158 of Government Accounting and Auditing Manual (GAAM) Volume I, thereby, defeating the purpose of the preparation of the Annual Budget. Require the Municipal Budget Officer and the Municipal Accountant to avoid passing payment of transactions without appropriation and complete documentation. Further, require the Municipal Budget Officer to always maintain and update registries of Appropriation, Allotment and Obligations (SAAO) in order to easily monitor balances and avoid incurrence of overdraft. If indeed the expense involved is inevitable, make use of Section 336 of RA 7160. 14. The management failed to implement the accounting, monitoring and reporting requirements promulgated by COA Circular 2012-002, thus, funds and disbursements for the purpose of risk reduction and management activities of the Local Disaster Risk Reduction and Management Council (LDRRMC) could not be properly verified.

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We recommend that management: a. Activate the Local Risk Reduction Management Council to mop out plans, projects and programs to address and respond risk reduction in times of calamities based on the actual calamities experienced by the LGU. b. Instruct the Municipal Accountant and Local Finance Committee to strictly comply with the accounting and reporting guidelines for the Disaster Risk Reduction Management Fund (LDRRMF) of the LGU as set forth in COA Circular No. 2012-002 to properly provide management with accurate financial data on available resources of Calamity Fund and its utilization to serve as guide in decision-making, and to prevent the incurrence of irregular, unnecessary and illegal disbursements of the Fund. c. Instruct the Municipal accountant to properly analyze the accounting entries involved in taking up the receipts and transfers of the Calamity Fund and to prepare and effect the necessary adjusting /correcting journal entries to reflect accurate financial data and reports. d. Advise the Accountant to follow the illustrative entries for accounting of LDRRMF provided in COA Circular No. 2012-002. e. Instruct the Municipal Accountant transfer the unexpended balance of the Local Disaster Risk Reduction and Management Fund for the Quick Response and Mitigation Funds-MOOE to the special trust fund solely for the purpose of supporting disaster risk reduction and management activities of the LDRRMCs within the next five (5) years pursuant to Section 21 of Republic Act 10121.

STATUS OF IMPLEMENTATION BY MANAGEMENT OF PRIOR YEARS’ AUDIT RECOMMENDATIONS Twenty-nine (29) audit recommendations were embodied in the 2012 and Prior Years’ Annual Audit Report. Seven recommendations eight (8) were fully implemented, six (6) were partially implemented and fifteen recommendations (15) were not implemented, hence reiterated for implementation.

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