Republic of the Philippines

COMMISSION ON AUDIT
Office of the Supervising Auditor
Audit Group LGS-C, Cebu 1
Province of Cebu
Cebu City

June 8, 2015
HON. ELANITO A. PEA
Municipal Mayor
Municipality of Minglanilla, Cebu
Sir:
Pursuant to Section 2, Article IX-D of the Philippine Constitution, Section 43 (2) of
Presidential Decree No. 1445, otherwise known as the Government Auditing Code
of the Philippines, and in line with this Commissions efforts towards informing
Management on how fiscal responsibility has been discharged, we are pleased to
transmit the report of our Auditor on the results of her audit on the accounts and
operations of the Municipality of Minglanilla for the year ended December 31, 2014.
The audit was conducted to ascertain the propriety of financial transactions and
compliance of the agency to prescribed rules and regulations. 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.
We request that the recommended remedial measures be immediately implemented
and we will appreciate being informed of the actions(s) taken thereon by submitting
the duly accomplished Agency Action Plan and Status of Implementation form
(hereto attached) within 60 days upon receipt hereof.
We acknowledge the cooperation and support extended to our Auditor and staff
during the audit.
Very truly yours,

Sangguniang Panglungsod, Municipality of Minglanilla

Bureau of Local Government Finance (BLGF)
Secretary of Department of the Interior and Local Government
National Library (soft copy)
University of the Philippines Law Center (soft copy)
COA Commission Central Library (soft copy)

Republic of the Philippines

COMMISSION ON AUDIT

Office of the Auditor

Audit Team R7-11, Audit Group LGS-C, Cebu 1
Province of Cebu
Cebu City

April 23, 2015

The Supervising Auditor
Audit Group LGS-C, Cebu 1
Commission on Audit
Regional Office VII
Cebu City
Sir:
In compliance with Section 2, Article IX-D of the Philippine Constitution and pertinent
sections of Presidential Decree No. 1445, we conducted a Financial and Compliance
Audit on the accounts and operations of the Municipality of Minglanilla, Province of
Cebu for the year ended December 31, 2014.
The audit was conducted to determine the reliability of the LGUs accounts in order to
express an opinion on the fairness of presentation of the financial statements as well as to
determine whether or not the LGUs transactions were made in accordance with existing
laws, rules and regulations.
Our attached report consists of four parts. Part I contains the Audit Certificate, Statement
of Management Responsibility for Financial Statements, Audited Consolidated Financial
Statements and Notes to Consolidated Financial Statements. Part II presents the detailed
findings and recommendations that were discussed with concerned management officials
and staff in our exit conference on April 13, 2015. Part III presents the Status of
Implementation of Prior Years Audit Recommendations and Part IV is the Annexes.
As discussed in Part III of this report, the Land account amounting to P41,639,602.70
were not covered by Certificates of Title or other documents that would prove ownership.
The validity and existence of the PPE amounting to P113,433,032.17 could not be
ascertained as physical inventory of the Property, Plant and Equipment (PPE) was still
not conducted during the year and the unavailability of adequate records made it difficult
to apply other alternative audit procedures.
In our opinion, except for the effect of any adjustment which might have been made on
the matters mentioned in the preceding paragraph, the financial statements present fairly,
in all material respects, the financial position of the Municipality of Minglanilla, Cebu as
of December 31, 2014, and the results of its operations and cash flows for the year then

ended in accordance with applicable laws, rules and regulations and in conformity with
generally accepted accounting principles.
Our audit was conducted in accordance with generally accepted state auditing standards
and we believe that it provides reasonable basis for the results of audit.
Very truly yours,

EXECUTIVE SUMMARY
The Municipality of Minglanilla, Cebu was created by virtue of its Charter. It is a
first class municipality based on the latest classification of municipalities issued by the
Department of Finance.
Pursuant to RA No. 7160, known as the Local Government Code of 1991, the
Municipality like other local government units, enjoys total independence in managing,
deciding, and planning its own administrative, fiscal and development affairs in
conformity with the national governments thrust for sustainable social and economic
growth.
The following are the significant/completed projects of the Municipality for CY
2014 which we validated on a test basis and found to be completed and in order:
PROGRAM/PROJECTS

PROJECT COST

1.

Road Concreting of Old Railway in front of New Public

P
Market

8,069,808.15

2.

Road Concreting from Sports Complex to New Public

Market

1,481,332.50

3.

Asphalt Overly
Minglanilla

4.

Road Lighting of Old Railway in front of New Public

Market, Ward 1, Minglanilla

996,835.84

5.

Construction of Rentable Space Stall, Poblacion, Ward 1

482,170.00

(6.1mx0.05mx155L.M.)

at

Tungkop,

999,450.00

Financial Highlights
During the year the Municipality realized a total income of P213,661,743.89
compared to P188,498,478.39 in CY 2013 showing an increase of P25,163,265.50
13.34%.
The Agencys current appropriations and obligations amounted
P205,364,928.14 and P115,527,629.67.
Total operating expenses amounted
P123,209,271.65 or an increase of 4.38% as compared to last years expenditures
P118,033,122.72.

as
or
to
to
of

The Municipalitys assets, liabilities and government equity as of December 31,

2014 were P654,961,200.39, P195,205,700.10 and P459,755,500.29, respectively.

Scope of the Audit

An audit was conducted on the accounts and operations of the Municipality of
Minglanilla, Cebu for the calendar year ended December 31, 2014. The audit was made
to ascertain the regularity of disbursements, the reliability of financial reports and the
adequacy of accounting records and to determine whether plans, programs and activities
for the year were attained in an efficient, economical and effective manner.
Auditors Opinion on the Financial Statements
The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements as the Land account amounting to P41,639,602.70 was not covered
by Certificates of Title or other documents that would prove ownership. The validity and
existence of the PPE amounting to P113,433,032.17 could not be ascertained as physical
inventory of the Property, Plant and Equipment (PPE) was still not conducted during the
year and the unavailability of adequate records made it difficult to apply other alternative
audit procedures.
Significant Findings and Recommendations
The following
recommendations:

are

the

significant

findings

and

the

corresponding

1. The year-end financial statements and supporting schedules were submitted on

April 10, 2015 or a delay of fifty five days from the February 14 due date, in
violation of COA Circular No. 2010-001, dated March 2, 2010, thus,
precluding the Audit Team from performing timely review and evaluation of
the Municipalitys transactions.
We recommend strict compliance with COA Circular No. 2010-001, dated
March 2, 2010. The Accountant should immediately submit the year-end
financial statements and supporting schedules.
2. Procurement of goods and services was not done thru competitive public
bidding but thru negotiated procurement even if the conditions required to
resort to this mode of procurement were not present, in contrary to pertinent
provisions of the Revised Implementing Rules and Regulations (IRR) of RA
9184, resulting in the irregular disbursement of government funds and
preventing the government from obtaining the most advantageous price.
To ensure effective competition and in order to obtain the most advantageous
price for the Municipality, we recommend compliance with the procedures in
undertaking negotiated procurement as provided for under Section 53 of the
Revised Implementing Rules and Regulations of Republic Act No. 9184.
3. Disbursement of government funds in the total amount of P7,960,959.42 were
not supported with complete documentation. Although some supporting

documents were present, it however lacked the required data/information, thus

the validity, legality, and propriety of the transactions cannot be established
contrary to Section 4(6) of Presidential Decree (PD) 1445.
We recommend strict compliance with the aforementioned policies and
procedures in check disbursements. The Municipal Accountant should see to it
that all disbursement vouchers are duly supported with complete
documentation before payments are made.
4. Disbursements made through reimbursement basis to individual officials and
employees aggregating P67,135.77 constitute irregular disbursements in
circumvention of Section 93 of PD 1445 and COA Circular No. 97-002.
Moreover, these disbursements were not deducted of the withholding tax as
required under pertinent tax laws and Bureau of Internal Revenue rules and
regulations, thereby resulting in the loss of revenue due to the national
government which could have been used for priority projects
We recommend that management should adhere to the regulations requiring
payments to be made in checks drawn on duly approved vouchers and made
payable directly to the creditor to ensure that the required withholding tax
have been imposed.
5. Purchases of supplies and materials in the aggregate amount of P517,585.11
were made even without an approved Annual Procurement Plan in violation of
paragraph 2 Section 7 of RA 9184.
We recommend/require the Municipality to prepare an Annual Procurement
Plan and that no government procurement shall be undertaken unless it is in
accordance with the approved APP as required under Paragraph 2, Section 7
of RA 9184.
6. Our audit of the Disbursement Vouchers (DVs) for the payment of gasoline,
oil and lubricants in the total amount of P301,427.31 disclosed that the DVs
were not supported with properly accomplished and duly approved serially
numbered Drivers Trip Tickets with the following pertinent data:
a.
b.
c.
d.
e.
f.
g.

Signature of the passenger/s

Time of departure and arrival
Place of departure and arrival
Gasoline usage
Destination
Distance traveled
Signature of Chief of Office

We recommend that the use of government vehicle should always be

authorized through properly accomplished and duly approved Drivers Trip
Tickets which should be serially numbered, a summary of which shall be
made at the end of the month in a Monthly Report of Official Travels, for

audit purposes as provided for in the Manual on Audit for Fuel Consumption
of Government Motor Vehicles.
Status of Implementation of Prior Years Audit Recommendations
Of the seventeen (17) recommendations contained in our prior years Annual
Audit Report, one (1) was implemented, eleven (11) were partially implemented and five
(5) were not implemented.

TABLE OF CONTENTS
Page No.
PART I
Audit Certificate
Statement of Management Responsibility
Consolidated Balance Sheet
Consolidated Statement of Income and Expenses
Consolidated Cash Flows
Notes to Financial Statements

12
3
4
5
6
7 - 15

PART II - Detailed Finding and Recommendations

16 - 27
27
27
27

Financial and Compliance Audit

Compliance with Full Disclosure Policy
Compliance with Tax Laws
Unsettled Disallowances/Charges/Suspensions
PART III - Status of Implementation of Prior Years

Recommendation

PART IV Annexes
1.

Annex
No.

Financial Statements

2.

28 37

General Fund
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flow

Special Education Fund

Balance Sheet
Statement of Income and Expenses
Statement of Cash Flow

Trust Fund
Balance Sheet
Statement of Cash Flows

1
2
3
4
5
6

7
8

Status of Appropriations, Allotments and Obligations

General Fund
Current Appropriations
Continuing Appropriations

Special Education Fund

Current Appropriations
Continuing Appropriations

10

PART I

INDEPENDENT AUDITORS REPORT

STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL

STATEMENTS

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF INCOME AND EXPENSES

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

Republic of the Philippines

COMMISSION ON AUDIT
Office of the Auditor

Audit Team R7-11, Audit Group LGS-C, Cebu 1

Province of Cebu

Cebu City

INDEPENDENT AUDITORS REPORT

HON. ELANITO A. PEA
Municipal Mayor
Minglanilla, Cebu
We have audited the accompanying Balance Sheet of the Municipality of
Minglanilla, Cebu as of December 31, 2014 and the related Statements of Income and
Expenses and Cash Flows for the year then ended. These financial statements are the
responsibility of the management of the Municipality of Minglanilla. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with laws, COA and INTOSAI
standards and applicable Generally Accepted Auditing Standards (GAAS). Those
standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatements. An audit
includes examining on test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As discussed in Part III of this report, the Land account amounting to
P41,639,602.70 was not covered by Certificates of Title or other documents that would
prove ownership.
The validity and existence of the PPE amounting to
P113,433,032.17 could not be ascertained as physical inventory of the Property, Plant
and Equipment (PPE) was still not conducted during the year and the unavailability of
adequate records made it difficult to apply other alternative audit procedures.

In our opinion, except for the effect of any adjustment which might have been
made on the matters mentioned in the preceding paragraph, the financial statements
present fairly, in all material respects, the financial position of the Municipality of
Minglanilla, Cebu as of December 31, 2014, and the results of its operations and cash
flows for the year ended in conformity with generally accepted accounting principles.
COMMISSION ON AUDIT
By:

April 22, 2015

NOTES TO FINANCIAL STATEMENTS

(With Comparative Figures for CY 2013)

1. AGENCY PROFILE
1.1

The Municipality of Minglanilla is a first (1 st) class municipality, located

fifteen kilometers (15 kms.) south of Cebu City. It was founded in 1858 by
Father Fernando Sanchez, first priest assigned in the municipality. The place
was formerly called Buat, a local word for Bulad or dried fish. Father
Sanchez later changed the name to Minglanilla, taken from his obscure place
in Spain.
The municipality visualizes excellent public service as key to progress.
Pursuant to Republic Act 7160, otherwise known as the Local Government
Code of 1991, the municipality, like other local government unit enjoys
independence in planning, managing and deciding its own administrative,
fiscal and developmental affairs in conformity with the national governments
thrust for sustainable social and economic growth.
The agency maintains such funds as the General Fund, Special Education Fund
and the Trust Fund. The General Fund is composed of the General Fund
Proper, Market, Slaughterhouse and the 20% Development Fund.

1.2

The Municipality of Minglanilla operates economic enterprises such as the

Market Operation and the Slaughterhouse Operation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.2

Basis of Preparation
The financial statements presented were prepared in accordance with the
applicable law, rules and regulations in conformity with the generally accepted
accounting principles and standards. The agency is adopting the New
Government Accounting System (NGAS). All expenses are recognized when
incurred and reported in the financial statements on the period to which they
relate. Income is on accrual basis except for transactions when accrual is
impractical or when methods are required by law.
The costs of ending inventory of office supplies and other inventory items are
computed using the Moving Average Method.
Property, Plant and Equipment are carried at cost. Accumulated Depreciation is
computed using the straight line method.
7

Properties of the government which are used by the general public are accounted
for under the Public Infrastructure Projects and will be dropped from the
Property, Plant and Equipment account and recorded in the Registry of Public
Infrastructure Projects.
Payable accounts are recognized and recorded in the books of accounts only upon
acceptance of the goods/inventory/other assets and rendition of services to the
agency.
Financial expenses such as bank charges and interest expenses are separately
classified as MOOE.
2.2
2.2.1

Accounting Policy Observed For Each Account

Cash
All collections are deposited by the Municipal Treasurer daily to its depository
bank at the Development Bank of the Philippines. All expenses are paid thru
check except for expenses of Php 1,000.00 and below which are paid thru
petty cash fund.

2.2.2

Receivables
Real Property Tax Receivables are usually set up at the beginning of the year.
Any collections thereof are deducted from such receivable.

2.2.3

Equity
Government Equity account increases or decreases due to difference in
income and expenses during the year, prior years adjustments and transfer of
completed projects to the Registry of Public Infrastructures.

3. CASH
This account is broken down as follows:
2014
GENERAL FUND
Cash in Vault
Cash in BankLBP - Current Account
DBP - Current Account
DBP - Savings Account
DBP Trust Account

2013

2,986,833.29

2,154,965.76

271,345,346.57
16,613,885.45
3,270,656.09
7,316,117.72

174,867,295.80
46,091,422.43
3,247,902.29
51,547,420.22

301,532,839.12

277,909,006.50

SPECIAL EDUCATION FUND

Cash in Vault

2,018,805.68

1,409,355.26

Cash in BankDBP Current Account

12,467,450.47

10,251,932.70

Total Special Education Fund

14,486,256.15

11,661,287.96

35,183.30
0.00

0.00
13,182.78

21,569,533.83

18,896,178.33

21,604,717.13

18,909,361.11

337,623,812.40

308,479,655.57

Total General Fund

TRUST FUND
Cash in Vault
Cash Disbursing Officer
Cash in Bank DBP Current Account
Total Trust Fund
TOTAL CASH

Cash in Vault consists of cash collected/received during the last working day of
the year and was deposited to the bank on January 5 to 9, 2015.
Cash in Bank DBP-Trust Account represents the balance of the proceeds on the
sale of bonds issued.
An amount of Php 6,153.61 and Php 1,640.00 which was deposited to the bank on
October 7, 2005 under the General Fund and Trust Fund, respectively, is still in transit as
of December 31, 2014.
9

4. RECEIVABLES
This account includes the following:
2014
GENERAL FUND
Accounts Receivable
Due from Officers and Employees
Real Property Tax Receivables
Receivables-Disallowance/Charges
Advances to Officers and Employees
Total - General Fund

2013

0.00
4,650,000.00
5,172,206.78
1,340.93
529,007.27

686,053.84
3,150,000.00
4,106,435.67
1,340.93
98,385.01

10,352,554.98

8,042,215.45

90.00

0.00

4,797,503.89
4,797,593.89

4,871,720.56
4,871,720.56

841.40
0.00
3,664.00
82,458.00

841.40
0.00
3,664.00
82,458.00

86,963.40

86,963.40

15,237,112.27

13,000,899.41

SPECIAL EDUCATION FUND

Accounts Receivables
Special Education Tax Receivables
Total Special Education Fund
TRUST FUND
Due to NGAs
Due to Other Funds
Advances to Officers and Employees
Other Receivables
Total - Trust Fund
TOTAL RECEIVABLES

Due from Officers and Employees consist of cash advances for intelligence fund
by the previous municipal mayor in 2006, 2010 to 2012 and by the present mayor in 2013
and 2014. Liquidation for 2006 was sent to COA Manila on January 12, 2007;
liquidation for 2010 was sent to COA Manila on November 17, 2011; liquidation for
2011 was sent to COA Manila on March 8, 2012; liquidation for 2012 was sent to COA
Manila on July27, 2013; liquidation for 2013 was sent to COA-Manila on January 28,
2014; while 2014 liquidation was sent to COA-Manila on September 9, 2014 and
February 12, 2015, but no credit advice was received from them yet.
Other Receivables under the Trust Fund are old accounts under the KKK
Proponent Loans prior to the year 1993 but no records can be found as to the individual
listing of such loans.
10

5. INVENTORIES
This consists of the following:
2014

2013

GENERAL FUND
Office Supplies Inventory

65,134.70

0.00

225,746.61

186,235.35

2,990,502.31

750,151.92

210,624.00

210,624.00

3,492,007.62

1,147,011.27

Office Supplies Inventory

0.00

0.00

TRUST FUND
Office Supplies Inventory

0.00

0.00

3,492,007.62

1,147,011.27

Accountable Forms Inventory

Medical, Dental & Laboratory Supplies Inventory
Other Supplies Inventory
Total General Fund
SPECIAL EDUCATION FUND

TOTAL INVENTORIES

Medical, Dental and Laboratory Supplies is overstated due to the reason that
there was no dispensing and Inventory Report received from RHU 1 and 11 as of
December 14, 2014.
6. PREPAYMENTS
Prepayments consist of prepaid insurance of Php242,948.90 for 2014 and
Php169,995.39 for 2013 under the General Fund. These are insurance with the GSIS for
motor vehicles and fire insurance for the municipal building and the public market
building.
7. OTHER ASSETS
This account consists of Guaranty Deposit of Php10,500.00 with Mandaue
Compressed Gases Corp. on the oxygen and carbon dioxide tanks used by the Rural
Health Units.
11

8. PROPERTY, PLANT AND EQUIPMENT

This account consists of the following, net of accumulated depreciation:
2014

2013

41,639,602.70
56,244,226.66
3,972,861.71
3,699,694.55
2,273,181.43
1,691,884.08
180,987,038.43

41,644,204.70
57,576,491.55
4,068,934.27
4,058,417.20
1,694,051.30
1,205,870.85
133,054,669.58

290,508,489.56

243,302,639.45

3,273,283.82

2,217,997.29

Office Equipment, Furniture and Fixtures

579,936.50

722,864,37

Machineries and Equipment

Construction in Progress

58,360.72
261,048.60

61,144.17
199,943.80

4,172,629.64

3,201,949.63

2,447,500.00

2,447,500.00

297,128,619.20

248,952,089.08

GENERAL FUND
Land and Land Improvements
Buildings
Office Equipment, Furniture & Fixtures
Machineries and Equipment
Transportation Equipment
Other Property, Plant and Equipment
Construction in Progress
Total
SPECIAL EDUCATION FUND
Buildings

Total
TRUST FUND
Construction in Progress
Total Property, Plant and Equipment

Land and Land Improvement account consists of the assessed value of lots owned
by the municipality in the amount of Php 4,408,980.00, of which, these lots were
recorded based on the tax declaration given by the Municipal Assessor; and the
acquisition and incidental costs of the twenty-nine (29) lots purchased in 2011 for the
construction of the new public market complex in the amount of Php 37,230,622.70.
Land titles of these lots are still in process by the Municipal Assessor.
9. OTHER ASSETS
This account are Work/Other Animals of Php1,226,200.00 under the General Fund.
These are animals purchased and distributed to farmers, members of womens
organization and recipients for livelihood.
12

10. CURRENT LIABILITIES

This account consists of the following:
2014

2013

GENERAL FUND
Accounts Payable
Due to Officers and Employees
Due to BIR
Due to GSIS
Due to PAG-IBIG
Due to PHILHEALTH
Due to Other NGAs
Due to LGUs
Due to Other Funds
Guaranty Deposits Payable
Performance/Bidders/Bail Bonds Payable
Tax Refunds Payable
Other Payables
Total General Fund

8,993,199.01
704,104.01
1,028,847.32
1,108,174.84
173,557.85
62,713.00
7,011,061.75
3,372,731.68
0.00
923,279.14
1,959,558.06
1,808.88
246,667.00
25,585,702.54

5,517,264.43
637,703.44
919,891.97
926,786.15
158,198.60
59,363.00
7,011,061.75
4,615,040.22
0.00
693,245.14
1,940,353.06
1,808.88
276,979.18
22,757,695.82

SPECIAL EDUCATION FUND

Accounts Payable
Due to Officers and Employees
Due to BIR
Due to LGUs
Due to Other Funds
Performance/Bidders/Bail Bonds Payable
Other Payables
Total Special Education Fund

1,114,112.32
0.00
25,550.74
2,125,171.76
0.00
0.00
2,946.45
3,267,781.27

885,005.14
0.00
24,234.47
1,855,899.57
0.00
195.00
3,061.57
2,768,395.75

36,101.66
4,180,96
552,719.66
13,171,516.21
2,582.07
3,050,648.01
750.00
115,521.00
1,612,999.22
5,219,662.23
369,306.45
24,135,987.47
52,989,471.28

10,826.53
4,180.96
586,449.41
12,356,258.25
2,582.07
2,885,604.49
750.00
115,521.00
1,449,417.88
3,625,918.75
403,122.11
21,440,631.45
46,966,723.02

TRUST FUND
Due to BIR
Due to GSIS
Due to PHILHEALTH
Due to Other NGAs
Due to GOCCs
Due to LGUs
Due to Other Funds
Guaranty Deposits Payable
Performance/Bidders/Bail Bonds Payable
Trust Liability DRRM
Other Payables
Total Current Liabilities

13

Trust Liability DRRM under the Trust Fund represents the amount transferred
from General Fund on the unexpended portion of the Quick Response Fund and the
MOOE portion of the DRRM Fund of CY 2011 and 2013 in the amount of
Php5,219,662.23. The capital outlay portion of the DRRM Fund is retained in the
General Fund as a continuing appropriation.
11. LONG TERM LIABILITIES
This account represents a 10-year term bonds payable to finance for the planning,
design, construction and site development of the New Minglanilla Public Market which
was authorized under SB Ordinance No. 007, series of 2011, dated August 16, 2011 in the
amount of Php 120,000,000.00.
12. DEFERRED CREDITS
This account is composed of the following:
2014

2013

GENERAL FUND
Deferred Real Property Tax

6,671,018.31

5,386,800.39

Other Deferred Credits

8,870,999.14

3,162,328.22

15,542,017.45

8,549,128.61

6,671,018.31

6,472,176.48

3,193.06

3,193.06

22,216,228.82

15,024,498.15

Total General Fund

SPECIAL EDUCATION FUND
Deferred Special Education Tax
TRUST FUND
Other Deferred Credits
Total Deferred Credits

Other Deferred Credits under the General Fund include expenses on intelligence
fund which were already liquidated but no credit advice has been received from COA
Central Office in Manila in the amount of Php 4,650,000.00 and collections on goodwill
from the public market vendors in the amount of Php3,780,500.00.

14

13. EQUITY
This account consists of the following:
2014
GENERAL FUND
Government Equity, beginning
Add: Adjustments
Adjusted beginning balance
Add: Retained Operating Surplus
Current Operations
Prior Years Adjustments
Less: Transfer to Registry
Public Infrastructures
Reforestation Projects
Prior Years Adjustments
Government Equity, ending
SPECIAL EDUCATION FUND
Government Equity, beginning
Add: Adjustments
Adjusted beginning balance
Add: Retained Operating Surplus
Current Operations
Prior Years Adjustments
Less: Transfer to Registry
Prior Years Adjustments
Government Equity, ending
Total Equity

15

2013

380,500,743.63
0.00
380,500,743.63

332,005,183.33
0.00
332,005,183.33

86,097,558.56
112,523.59
20,473,005.59

62,804,048.67
126,252.53
14,434,740.90

446,237,820.19

380,500,743.63

10,494,385.92
0.00
10,494,385.92

8,401,871.83
0.00
8,401,871.83

3,047,571.43
0.00
0.00
24,277.25
13,517,680.10

2,336,691.19
0.00
236,573.40
7,603.70
10,494,385.92

459,755,500.29

390,995,129.55

PART II
DETAILED FINDINGS AND RECOMMENDATIONS
Financial and Compliance Audit
1. The year-end financial statements and supporting schedules were submitted on
April 10, 2015 or a delay of fifty five days from the February 14 due date, in
violation of COA Circular No. 2010-001, dated March 2, 2010, thus, precluding
the Audit Team from performing timely review and evaluation of the
Municipalitys transactions.
COA Circular No. 2010-001, dated March 2, 2010 provides the following:
2.0

Financial Reports to be Submitted

2.1

The list of FS and schedules to be submitted in COA Accounting Circular

Letter No. 2007-002 dated January 19, 2007 is hereby revised and shall
include the following:
2.1.1. Pre and Post-Closing Trial Balance
2.1.2. Adjusting and Closing Journal Entry Vouchers
2.1.3. Detailed Balance Sheet
2.1.4. Detailed Statement of Income and Expenses
2.1.5. Statement of Cash Flows
2.1.6. Subsidiary Schedule of General Ledger Accounts
2.1.7. Statement of Appropriations, Allotments, Obligations and Balance
(SAAOB)
2.1.8. Notes to Financial Statements
2.1.9. Statement of Management Responsibility

4.0

2.2

xxx

2.3

xxx

Submission Dates
4.1. The Accountants shall submit to the auditor the year-end FS and schedules
required in 2.0 above on or before February 14 of each year. This amends
the provision in Sec. 3.1 of COA Accounting Circular Letter No. 2007-002
dated January 19, 2007 which provides that year-end FS shall be submitted
within sixty (60) days after December 31 of each year.
16

4.2.

The Budget Officer/Head of the Budget Unit shall submit to the Accountant
the SAAOB for inclusion in the reports to be submitted in 4.1 above.

4.3.

xxx

4.4.

xxx

4.5.

xxx

4.6.

xxx

5.0 Penalty Clause

Any unjustified failure of the officials and employees concerned to comply with
the requirements herein imposed and shall be subject to the administrative
disciplinary action provided in Section 41 (3) of PD No. 1445.
The financial statements and schedules were submitted on April 10, 2015, or a
delay of fifty five days.
The failure of the Municipality to submit the above-mentioned statements and
schedules is in violation of COA Circular No. 2010-001, dated March 2, 2010 thus,
timely review and evaluation of the Municipalitys transactions could not be made.
Managements Comments:
In our exit conference, the Municipal Accountant apologized for the delayed
submission due to her leave of absence from office to take care of her sick father who
eventually died. Another reason was the delayed transmission of disbursement
vouchers and reports of collections and deposits from the Treasurers office. They are
trying their best to address this problem which is caused by the voluminous transactions
involved and the lack of manpower.
We recommend strict compliance with COA Circular No. 2010-001, dated
March 2, 2010. The Accountant should submit the year-end financial statements
and supporting schedules on or before February 14 of each year.
2. Procurement of goods and services was not done thru competitive public
bidding but thru negotiated procurement even if the conditions required to
resort to this mode of procurement were not present, in contrary to pertinent
provisions of the Procurement Manual for Local Government Units, resulting
in the irregular disbursement of government funds and preventing the
government from obtaining the most advantageous price.

17

Section 3 Procedural Steps for the Procurement of Infrastructure Projects, Part

Two Alternative Methods of Procurement of the Procurement Manual for Local
Government Units, Volume III provides the following:
Negotiated Procurement
1.1. Definition
Negotiated Procurement is a method of procurement whereby the LGU directly
negotiates a contract with a legally, technically and financially capable contractor. (IRRA Section 53)
1.2. Conditions for Negotiated Procurement
Negotiated procurement may be resorted to under any of the following circumstances:
1. There has been a second failure of public bidding;
2.

There exists imminent danger to life or property during a state of calamity, or when
time is of the essence arising from actual or man-made calamities or other causes
where immediate action is necessary to prevent damage to or loss of life or
property, or to restore vital public services, infrastructure facilities and other public
utilities. Under these conditions, the LGU has the option to undertake the project
through negotiated procurement or by administration, or in high security risk areas,
through the AFP;

3.

A contract has been rescinded or terminated for causes provided for in the contract
and existing laws, and the LGU decides to take over, because immediate action is
necessary to prevent damage to, or loss of, life or property, or to restore vital public
services, infrastructure facilities and other public utilities; or

4.

Where the subject contract is adjacent or contiguous to an on-going infrastructure

project, provided, however, that:
a. The original contract is the result of a competitive bidding;
b. The subject contract to be negotiated has a scope of work that is similar or
related to that of the original contract;
c. The work is within his contracting capacity (Technical: work experience,
personnel and equipment, Financial: NFCC, credit line), considering his
outstanding works in the ongoing contract and other ongoing awarded contracts;
d. The contractor uses the same prices or lower unit prices as in the original
contract less mobilization cost;
e. The amount involved does not exceed the amount of the ongoing project; and
f. The contractor has no negative slippage.
In such instances, negotiations for the procurement must be commenced before the
expiry of the original contract. (IRR-A Section 53 [d]) This negotiated contract can
only be undertaken once for a particular ongoing infrastructure project.

5.

Procurement of infrastructure projects from another agency of the Government

except in the case of GOCCs incorporated under Batas Pambansa Blg. 168.
18

6.

Where the amount involved is Fifty Thousand Pesos (P 50,000.00) and below,
provided that it does not result in splitting of contracts.

Shown on the table below is a list of procured infrastructure projects which were
done thru negotiated procurement instead of the required competitive public bidding
even though the conditions required to resort to this mode of procurement were not
present:
Date
07/21/14

09/04/14

Check
No.
289765

255473

Payee
Cash
Advance
Silverio
Cueva

Jocyn
Construction

Purpose
Payment of labor Construction of Upper
Tunghaan Elem. School, covered court Upper
Tunghaan, Minglanilla, Cebu w/ Project cost of
P206,165.00
Salaries - covered court Upper Tunghaan
Salaries - P. Geonzon, et al.
Salaries - Mahinay, et. al
Salaries - laborers of Tunghaan covered Court
Improvement of TB Dots at Cadulawan Health
Center

Amount
P

31,950.00

21,511.00
15,010.00
21,165.00
20,370.00
99,800.00

This practice resulted to the irregular disbursements of government funds as

there was no reasonable assurance that the Municipality obtained the most
advantageous price in the implementation of infrastructure projects. It was also
observed that the above listed procurements were not properly and completely
supported by other necessary documents, such as BAC Resolutions/Quotations, that
would establish the validity, propriety and legality of the claims.
Managements Comments:
Management informed us that for transaction covered by Check No. 289765
dated July 21, 2014, procurement of materials used in the construction of Upper
Tunghaan Elementary School and the improvement of TB Dots at Cadulawan Health
Center was done either thru public bidding or shopping. The labor was undertaken by
administration in order to provide employment to its unemployed residents per BAC
Resolution No. 01, series of 2014.
The Improvement of TB Dots at Cadulawan Health Center awarded to Jocyn
Construction was done thru shopping with PhilGeps posting of the Request for
Quotation (RFQ) and the Notice of Award. The amount of P99,800.00 was within the
P100,000.00 threshold of shopping for first class municipalities.
To ensure effective competition and in order to obtain the most
advantageous price for the Municipality, we recommend compliance with the
procedures in undertaking negotiated procurement as provided for under Section
3, Part Two of the Procurement Manual for Local Government Units, Volume III.
3. Disbursement of government funds in the total amount of P7,960,959.42 were
not supported with complete documentation. Although some supporting
documents were present, it however lacked the required data/information, thus
19

the validity, legality, and propriety of the transactions cannot be established

contrary to Section 4(6) of Presidential Decree (PD) 1445.
Disbursements constitute all cash paid out during a given period either in
currency or by check.
Section 4(5) of PD 1445 provides that claims against government funds shall be
supported with complete documentation.
Section 168 of the Government Accounting and Auditing Manual, Volume I,
states the basic requirements applicable to all classes of disbursements, as follows:
1. Certificate of availability of fund;
2. Approval of claim by head of office or his duly authorized representative;
3. Documents to establish validity of claim (Barangay Resolution)
4. Conformity of the expenditure to existing laws and regulations;
5. Proper accounting treatment.
Our review of municipal transactions disclosed that the following disbursements
were made with incomplete documentation in contrary to pertinent laws, rules and
regulations:
Date

Check
No.

03/11/14

4565987
2

03/11/14

4565987
1
4565996

04/05/14
04/11/14

4565998
4

04/29/14

4566005
1
4566599
9

04/15/14

Payee

Amount

Remarks

FDRCON Companypayment of garbage

collection services
Tri J Mktg,Inc.-payment of
spare parts
Bestblinds Industries
Corporation-payment of
roller blinds
Tarcisio dela Rosa-payment
of terminal leave

P 1,081916.00

Submit schedule of place

and date of garbage
collections
Submit Waste Material
Report
Submit Business Permit

Gerasmeo Eatery-payment
of catering services
Victor Hao Cuenco

20

7,630.00
92,020.49
132,083.83

8,800.00
155,000.00

Submit complete record of

leave cards, certification
of his total leave credits
and computation of his
terminal leave
Submit Business Permit
No
Official
Receipt/Business Permit
(DTI & Mayors Permit) to
practice his profession

04/22/14

4566000
8

Victor Hao Cuenco

155,000.00

No
Official
Receipt/Business
Permit(DTI & Mayors
Permit) to practice his
profession

05/06/14

4566008
8

Anthony Construction

762,435.76

05/23/14

4566017
5
4566018
8
4566019
5

Icon Stagecraft

168,482.14

No BAC resolution that

labor of said project will
be
undertaken
by
administration
No Contract of Agreement

Audioman Enterprises

327,857.15

No Contract Agreement

05/28/14
06/03/14
06/11/14
06/18/14
06/05/14
07/03/14

4566023
4
4566025
8
4566020
7
4566032
3

FDRCON Companypayment of garbage

collections
Square Cube Const.payment of filling materials.
Square Cube Const.payment of filling materials
Hoppers Builders
Icon Stagecraft

1,052,865.00
1,459,793.04
1,966,073.97
559,127.04
31,875.00

Total

Submit schedule of place

and date of garbage
collections
Submit
Contract
Agreement
Contract Agreement
Submit
New Financial
Cert.; New cert. of
Registration
No Contract Agreement

P7,960,959.42

The practice of the municipality in approving disbursements even without the

necessary supporting documents casts doubts as to the validity, propriety and legality of
the disbursements made.
Managements Comments:
The Accountant informed us that the above mentioned disbursement vouchers
had complete documentation but were inadvertently misplaced during the segregation
and filing of paid vouchers. The required supporting documents have been submitted
on April 28, 2015.
We recommend strict compliance with the aforementioned policies and
procedures in check disbursements. The Municipal Accountant should see to it that
all disbursement vouchers are duly supported with complete documentation before
payments are made.
4. Disbursements made through reimbursement basis to individual officials and
employees aggregating P57,135.77 constitute irregular disbursements in
circumvention of Section 93 of PD 1445 and COA Circular No. 97-002.
Moreover, these disbursements were not deducted of the withholding tax as
21

required under pertinent tax laws and Bureau of Internal Revenue rules and
regulations, thereby resulting in the loss of revenue due to the national
government which could have been used for priority projects.
Section 93 of PD 1445 provides that Warrants chargeable to revenue or trust
funds of the national government or checks drawn against the Treasury Checking
Account for Agencies maintained with any government depository shall be made
payable either directly to the creditor to whom the money is due or to a disbursing
officer for official disbursement.
COA Circular 97-002 dated February 2, 1997:
2. General Principles
Ideally, cash should be handled under the general principles of the
imprest system, to wit:
1. Daily receipts on collections must be deposited intact with the proper
bank.
2. All payments must be made by check.
3. Cash payments in small amounts may be made through the petty cash
fund. Replenishment of the petty cash fund shall be equal to the total
amount of expenditures made there from.
In practice, however, there are certain instances when it may be
very difficult, impractical or impossible to make payments by check. In
such case, payments maybe made by the disbursing officer in the form of
cash through his cash advance.
Revenue Regulations (RR) No. 2-98 defines withholding tax as a tax that is
collected at the time when income is paid. The person or the organization that pays the
income is given the responsibility of withholding the tax from the income payments and
remitting it to the government.
Pertinent provisions of Revenue Regulation No. 30-2003 dated December 12,
2003:
Section 5. Persons Required to Deduct and Withhold. - Sec. 2.57.3 of Revenue
Regulations No. 2-98, as amended is hereby further amended to read as follows:
Sec. 2.57.3. Persons required to deduct and withhold. xxx
xxx
xxx
Agents, employees or any person purchasing goods or services/paying for and
in behalf of the aforesaid withholding agents shall likewise withhold in their behalf,
provided that the official receipts of payments/sales invoice shall be issued in the name
of the person whom the former represents and the corresponding certificate of taxes
withheld (BIR form No. 2307) shall immediately be issued upon withholding of the tax.
22

All income payments which are required to be subjected to withholding tax shall
be subject to the corresponding withholding tax rate to be withheld by the person
having control over the payment and who, at the same time, claims the expenses, (e.g.
payments to utility companies which are required to be subjected to withholding tax
shall likewise be subjected to withholding tax even if the meter or billing statement (e.g.
electric or water meter or the telephone bill) is not in the name of the payor, as long as
valid proof that payment of a particular expense is being shouldered by the
aforementioned payor (i.e. contract between the registered user of the meter and the
payor); payments made by persons who are sharing portion of the bill which is in the
name of another person as long as he is a duly constituted withholding agent and shall
only withhold on the portion of the expense being shouldered by him).
xxx
The obligation to withhold is imposed upon the buyer-payor of income although
the burden of tax is really upon the seller-income earner hence, unjustifiable refusal of
the latter to be subjected to withholding shall be a ground for the mandatory audit of
his income tax liabilities (including withholding tax) upon verified complaint of the
buyer-payor.
From February 10, 2014 to December 29, 2014 the Municipality made payments
through reimbursement basis as shown below:
Date
02/10/14

Check No.
45659767

Payee
Wilfredo Alidon

Amount
P 5,107.15

02/10/14
05/23/14
05/23/14
05/23/14

45659770
45660159
45660164
45660165

Rebecca Nacario
Ederlita Cena
Minerva Violon
Rebecca Nacario

1,749.00
2,385.00
1,756.12
1,762.00

Purpose
Payment for the repair of air
conditioner
Telephone bill payment
Repair of KIA K2700
Telephone bill payment
Telephone bill payment

07/14/14
07/31/14

45660361
45660422

Minerva Violon
Rebecca Nacario

1,471.00
1,730.00

Telephone bill payment

Telephone bill payment

09/01/14
09/05/14

45660514
45660547

Minerva Violon
Eleno Miano

1,603.00
1,480.00

Telephone bill payment

Telephone bill payment

09/15/14
09/15/14
09/25/14
09/30/15

45660582
45660588
45660632
45660642

Minerva Violon
Aphrodite Fernandez
Ma. Theresa Vidal
Wilfredo Alidon

Total

1,342.50
4,860.00
1,440.00
30,450.00

Telephone bill payment

Payment of tarpaulin
Payment of tarpaulin
Complete Service package for
Mega Cebu Ambassadors

P 57,135.77

As a general rule, disbursements should be made by check. Payment for

procurement of goods and services through reimbursement basis to individual officials
and employees constitute irregular disbursements of government funds in
circumvention of Section 93 of PD 1445 and COA Circular 97-002 dated February 2,
1997.

23

Further, because these payments were not subjected to the appropriate

withholding tax as required in the above mentioned BIR Revenue Regulations, the
national government was deprived collection of additional income.
It should be remembered that taxes are the lifeblood of the nation and the noncollection thereof deprives the national government of the income that could have been
generated therefrom which could be used to finance other projects of the government.
Managements Comments:
Management promised to comply with our recommendation.
We recommend that management should adhere to the regulations
requiring payments to be made in checks drawn on duly approved vouchers and
made payable directly to the creditor to ensure that the required withholding tax
have been imposed.
5. Purchases of supplies and materials in the aggregate amount of P517,585.11
were made even without an approved Annual Procurement Plan in violation of
paragraph 2 Section 7 of RA 9184.
Paragraph 2-Section 7 of RA 9184 provides that: No government Procurement
shall be undertaken unless it is in accordance with the approved Annual Procurement
Plan of the Procuring Entity
Section 7.3.2 of the IRR of RA 9184 provides that the end-user units of the
procuring entity shall prepare their respective PPMP for their different Programs,
Activities, and Projects (PAPs).
Section 7.3.4 states that the budget office shall furnish a copy of the procuring
entitys budget proposal as well as the corresponding PPMPs to the BAC for its review
and consolidation into the proposed APP.
Section 7.3.5 also provides that the end-user units shall revise and adjust the
PPMP to reflect the budgetary allocation for their respective PAPs. The revised
PPMPs shall be submitted to the BAC for the finalization of the modes of procurement
under the proposed APP.
All procurement should be within the approved budget of the procuring entity
and should be meticulously and judiciously planned by the procuring entity concerned.
No government procurement shall be undertaken unless it is in accordance with an
approved Annual Procurement Plan (APP).
Our verification revealed that the Municipality failed to prepare an Annual
Procurement Plan. Shown below is a list of procured supplies and materials:
Date

Check

Payee/Particulars
24

Amount

03/04/1
4
03/12/1
4
03/24/1
4
04/29/1
4
06/04/1
4
06/13/1
4
06/13/1
4
06/13/1
4
06/13/1
4
06/13/1
4
Total

No.
4565983
9
4565987
5
4565990
5
4566004
8
4566020
1
4566023
9
4566024
0
4566024
1
4566024
3
4566024
4

Peoples Educational Supply, Inc.-purchase of office

supplies
Anthony Construction Supply, Inc.- construction
materials
Peoples Educ. Supplies-office supplies
Copylandia- toner

P 12,589.50
45,203.16
8,409.05
12,500.00

Pacifica Agrivet Supplies, Inc.

F F Sibi Enterprises-stickers
Metro Nutech Solution Corp.-computer Ink
D&C Drugstore & Gen. Mdse-medical and dental
supplies
Electroworld Incorporated-netbook
PC Quickbuys-computer ink

75,683.25
7,125.00
28,500.00
264,590.15
18,995.00
43,990.00
P517,585.11

The preparation of an APP is necessary to systematize the procurement process,

avoid confusion, ensure transparency and to take advantage of the volume discounts
inherent in bulk purchasing had procurement been properly planned.
Managements Comments:
Management informed us that Annual Procurement Plan is prepared before the
start of the calendar year, usually during the time when their budget is being prepared
by the Municipal Budget Officer. Each department prepares a Project Procurement
Management Plan (PPMP) and submits it to the Municipal Planning Office for
consolidation and preparation of the APP. At the start of the ensuing year, the APP is
already completed and ready for any procurement. Management promised to submit
copy of the CY 2014 APP as soon as possible.
We recommend/require the Municipality to prepare an Annual
Procurement Plan and that no government procurement shall be undertaken
unless it is in accordance with the approved APP as required under Paragraph 2,
Section 7 of RA 9184.
6. Our audit of the Disbursement Vouchers (DVs) for the payment of gasoline, oil
and lubricants in the total amount of P301,427.31 disclosed that the DVs were
not supported with properly accomplished and duly approved serially
numbered Drivers Trip Tickets with the following pertinent data:
25

h.
i.
j.
k.
l.
m.
n.

Signature of the passenger/s

Time of departure and arrival
Place of departure and arrival
Gasoline usage
Destination
Distance traveled
Signature of Chief of Office

The Manual on Audit for Fuel Consumption of Government Motor Vehicles

states that:
- All government motor vehicles shall be used exclusively and strictly for
official business.
- Use of government vehicle shall be properly controlled and regulated through
properly accomplished and duly approved Drivers Trip tickets which should
be serially numbered, a summary of which shall be made at the end of the
month in a Monthly Report of Official Travels, for audit purposes.
Shown below are the details of the Disbursement Vouchers for the payment of
gasoline, oil and lubricants with noted deficiencies:
Date

Check No.

Payee

03/24/14

45695903

03/24/14

45659891

04/02/14

45658846

04/07/14

45659968

Gas 2 Go Petron
Station

04/28/14

45660054

04/28/14

45660044

04/28/14

45660043

05/19/14

45660130

05/19/14

45660135

05/19/14

45660140

05/22/14

45660149

Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station

Net Amount

Gas 2 Go Petron
Station
Gas 2 Go Petron
Station
Gas 2 Go Petron
Station

Remarks

P No approval from Chief of

13,496.40 Office
14,121.50 No approval from Chief of
Office
49,538.80 No approval from Chief of
Office
Without Passengers signature
17,111.00 No approval from Chief of
Office
Without Passengers signature
25,999.54 No approval from Chief of
Office
15,881.00 No approval from Chief of
Office
19,664.22 No approval from Chief of
Office
10,366.45 No approval from Chief of
Office
11,934.30 No approval from Chief of
Office
53,563.13 No approval from Chief of
Office
41,160.19 No approval from Chief of
Office

26

05/26/14

45660178

05/26/14

45660179

Gas 2 Go Petron
Station
Gas 2 Go Petron
Station

Total

18,340.00
10,250.78

No approval from Chief of

Office
No approval from Chief of
Office

P 301,427.31

Failure of the Driver to fill up the above data rendered the documents useless.
The use of government vehicle not properly authorized, controlled and regulated created
doubts as to the validity, propriety and regularity of the gasoline, oil and lubricants
expense of the Municipality.
Managements Comments:
In reply to our Audit Observation Memorandum, the Municipal Accountant
informed us that Previously, drivers trip tickets we used are with signature of the chief
of office or the department heads but it was changed by the previous auditor to a new
form wherein the signature of the chief of office or the department head was deleted.
Other details of the trip ticket are the same and were filled up except in the speedometer
readings portion because according to the drivers whom I talked to, that the
speedometer was and is defective. Anyway, I already called up a meeting of all the
drivers and the personnel-in-charge to process the gasoline transactions to correct the
deficiencies.
We recommend that the use of government vehicle should always be
authorized through properly accomplished and duly approved Drivers Trip
Tickets which should be serially numbered, a summary of which shall be made at
the end of the month in a Monthly Report of Official Travels, for audit purposes as
provided for in the Manual on Audit for Fuel Consumption of Government Motor
Vehicles.
Compliance with PDAF Decision
The Municipality is in the process of returning to the National Treasury the
amount of P7,011,061.75 representing PDAF from Congressman Gullas in the amount
of P7,000,000.00 (P5,000,000.00 for organic farming and P2,000,000.00 for medical
missions) and P11,061.75 unexpended balance of PDAF from Democrito Mendoza.
Compliance with Full Disclosure Policy
The Municipality complied with the full disclosure policy per DILG MC # 201083 dtd. 10/31/10; 2011-08 dtd. 1/13/11 and 2011-134 dtd. 9/19/11. The required
documents and transactions were posted in the Municipalitys bulletin board.
Compliance with Tax Laws
27

Evaluation of the agencys operations during the year indicated compliance with
the requirements of tax laws and regulations. Taxes were withheld from compensation
and payments to contractors/suppliers and were remitted to the Bureau of Internal
Revenue in compliance with COA Memorandum No. 91-692 dated January 21, 1991.
Unsettled Disallowances/Charges/Suspensions
As of December 31, 2014, total disallowances amounted to P4,592,400.00
which is on appeal with the Commission Proper.

28

PART III
Status of Implementation of Prior Years Recommendations

Management
Action

Status of
Implementa
tion

Audit Observation

Recommendation

Ref

1.

Cash advances for

payroll fund drawn
by the Disbursing
Officer were not
supported
by
approved payrolls,
in violation of COA
Circular No. 97-002
dated February 10,
1997, resulting to
the
irregular
disbursement
of
government funds.

We
recommend
strict
compliance
with the provisions
of COA Circular No.
97-002
dated
February 10, 1997.
The
Disbursing
Officer should only
be allowed to draw
cash advances for
payroll fund equal to
the net amount of
the duly certified
and
approved
payrolls.

AAR
2013
pages
16-18

Implemented

2.

Productivity
Enhancement
Incentive (PEI) in
the
amount
of
P36,000.00/
P32,400.00/
P18,000.00
per
personnel or a total
of P5,345,900.00,
were granted to
officials
and
employees of the
Municipality
in
violation
of
Executive
Order
No. 80, dated July
20, 2012, resulting
in the irregular

We recommend that
all
concerned
officials
and
employees
be
directed to refund
the
P31,000.00/
P27,400.00/
P13,000.00 excess
amount
of
PEI
received, otherwise
all those involved
who authorized the
payment
thereof
shall
be
held
personally
liable
therefore.

AAR
2013
pages
18-19

Not
Implemented

A Notice of
28

Reason for
Partial/ NonImplementation

The amounts of
the CY 2014 PEI
were still in
excess of the
amount allowed
per
Executive
Order No. 80,
dated July 20,
2012.

Audit Observation

Recommendation

Management
Action

Ref

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

disbursement
of
Disallowance will be
government funds
issued in this regard.
in the total amount
of P4,561,400.00.
3.

The Municipality
was not compliant
with the
requirements on the
information and
publicity of
programs/projects/a
ctivities (PPA) per
COA Circular No.
2013-004 dated
January 30, 2013,
defeating the full
disclosure policy of
the government and
depriving the
citizens of their
right to information
of government
transactions.

We recommend that
management should
strictly comply with
all the provisions of
COA Circular No.
2013-004 to promote
public awareness in
the use of public
funds by the LGU
for all of its
projects/programs/ac
tivities implemented,
and to protect the
LGU
from
disallowance
of
expenses
or
sanctions, as the
case
may
be,
resulting from noncompliance with this
circular.

AAR
2013
pages
19-22

Partially
Implemented

No reasons were
given for the
partial
implementation.

4.

From January 2013December

2013,
262 employees of
the
Municipality
received
their
salaries with net pay
below the statutory
P4,000.00
per
month, which was
not in accordance
with Section 37 of
the
General
Provisions of the

It is recommended
that the Accounting
Section
should
strictly enforce the
pertinent provisions
of
the
General
Appropriations Act
on statutory net pay
to aid in the
promotion of an
efficient
and
effective
public
service by ensuring

AAR
2013
pages
22-23

Partially
Implemented

For CY 2014,
some employees
had net pay
below
the
statutory
P4,000.00
per
month.

29

Audit Observation
2013
General
Appropriations Act,
thus compromising
the general intent of
this legal mandate
which is employee
motivation
to
promote efficiency
and effectiveness in
civil service.

Recommendation

Management
Action

Ref

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

that personnel will

receive
adequate
amount of money
for
their
daily
subsistence.

5. The land account

amounting
to
P41,349,830.00 was
not covered by
Certificates of Title
and not supported
with
documents
contrary to the
provisions
of
Section 148 of COA
Circular No. 92-386
dated October 22,
1992, thereby, the
existence, accuracy
and validity of the
land
ownership
could
not
be
ascertained.

We recommend that
the
Agency
appropriate funds for
the titling of the land
and the Municipal
Assessors Office be
directed to exert
effort on titling all
parcels
of
land
owned
by
the
Municipal
Government.
The
Accounting Office
should set up and
maintain complete
accounting records
of real properties
and the Municipal
Treasurer maintain
and keep on file
complete records of
real properties.

AAR
2012

Partially
Implemented

Land and Land

Improvement
totaled
P41,639,602.70
as of December
31, 2014.
The Municipal
Assessor
said
that titling of
parcels of land
owned by the
Municipality is
being
undertaken.
Transfer tax had
already
been
paid in order to
transfer
tax
declarations in
the name of the
LGU.

6. The account Other

Receivables in the
amount
of
P82,458.00 under
the Trust Fund has
been dormant for

We recommend that
Management exert
effort to clear the
books
of
this
dormant account.

AAR
2012

Not
Implemented

No reason was
given for the
nonimplementation

30

Audit Observation

Management
Action

Recommendation

Ref

We recommend that
Management require
the
Municipal
Treasurer to prepare
a duly certified list
showing the name of
taxpayers and the
amount due and
collectible
during
the year and submit
to the Accountant in
compliance
with
Section 20, Vol. I of
NGAS Manual, to
ensure accurate and
reliable recording of
the
RPT/SET
Receivables in the
books of accounts.
Further,
Management
may
avail the software of
the
National
Computer Center.

AAR
2012

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

Not
Implemented

The Municipal
Treasurer said
that they could
not prepare a
certified list of
taxpayers
showing
the
amount of tax
due
and
collectible for
any given year
due to lack of
manpower. He
said that only
three employees
are under him,
two are incharge of the
RPT collections
while the other
one
is
undertaking the
manual
recording of the
daily collections
which
can
average
200
receipts per day.
Computerizatio
n
of
the
collection
system is ongoing.

more than nineteen

years resulting in
the doubtful validity
of the Receivables
account.
7. Real Property and
Special Education
Tax Receivables set
up at the beginning
of the year 2012
amounting
to
P11,442,218.20
each
were
not
supported with a
certified list of the
taxpayers showing
the amount of tax
due and collectible
and
subsidiary
ledgers were not
maintained,
contrary to Section
20, Vol. I of the
New Government
Accounting System
(NGAS)
Manual,
hence the validity
and valuation of
receivables
could
not be ascertained,
thus the accounts
balances
are
unreliable.

31

Audit Observation

Management
Action

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

Recommendation

Ref

8. Monthly
Bank
Reconciliation
Statements
were
submitted to the
Auditor after 69 to
108 days delayed
contrary
to
paragraph 3.2 and
3.4 to COA Circular
No. 96-011 dated
October 2, 1996,
thus the verification
thereof
were
delayed.

We recommend that
the
Municipal
Accountant prepare
and submit monthly
within ten (10) days
after the end of each
month to the Auditor
the
Bank
Reconciliation
Statements including
the paid checks,
original copies of
the
debit/credit
memos
for
the
verification of the
accuracy of the Cash
in Bank Account
Balances.

AAR
2012

Partially
Implemented

The Municipal
Accountant
informed us that
the delay in the
submission
of
Bank
Reconciliation
Statements were
due to the delay
in the transfer of
disbursement
vouchers
and
reports
of
collections and
deposits from the
Treasurers
office.
That
despite
the
delayed
submission,
there were no
reconciling items
with
material
amounts
as
reconciliation
between
the
Accounting and
the
Treasurys
records
were
regularly
undertaken.

9. Trial
Balances,
Disbursement
Vouchers, Official
Receipts and their
supporting
documents were not
submitted on time
contrary to Section

The
Municipal
Accountant should
submit the Trial
Balances not later
than the 20th day
after the end of each
month as prescribed
under Sec. 70 of the

AAR
2012

Partially
Implemented

The Municipal
Accountant
informed
the
Audit Team that
the delay in the
submission
of
Trial Balances
was due to the

32

Audit Observation

Recommendation

70 of the Manual on
the
New
Government
Accounting System
for
Local
Government Units,
Volume
I
and
Section 6.05 of
COA Circular 95006 and the Rules
and Regulations on
the Settlement of
Accounts, hence the
delay in auditorial
review of agency
reports
and
transactions.

NGAS
Manual,
Volume
I.
The
Municipal Treasurer
should submit to the
Accountant
the
Report of Checks
Issued/Disbursement
s and Report of
Collections
daily
together with the
Disbursement
Vouchers
and
Official
Receipts
pursuant
to
the
provisions of the
NGAS for LGUs
Manual.

10. Additional income

could have been
collected had the
Municipality
intensified
the
collection of Real
Property Tax and
Special Education
Tax
Receivables
amounting
to
P3,046,274.39 and
P2,742,787.66,
respectively, from
delinquent
taxpayers.
The
amount could have
been utilized for
projects beneficial
to its constituents.

We recommend that
Management
intensify its tax
collection drive for
an increased real
property/special
education
tax
collection.
The
Municipality should
avail of all legal
remedies either by
administrative action
through levy on real
property or judicial
actions as authorized
under Sections 256,
257 and 258 of
Republic Act 7160.

Management
Action

Ref

Status of
Implementa
tion

Reason for
Partial/ NonImplementation
delay in the
transfer
of
disbursement
vouchers, reports
of
collections
and
deposits
from
the
Treasurers
office. They are
trying their best
to address this
problem which is
caused by the
voluminous
transactions
involved and the
lack
of
manpower.

AAR
2012

33

Partially
Implemented

Management
informed us that
they do not have
the
required
manpower
to
intensify
their
collection of real
property
and
special education
tax. For CY
2014, collection
of local taxes
amounted
to
P41,608,514.86,
or an increase of
12.93%
as
compared to CY
2013 collection
of
P36,843,214.43.

Audit Observation

Management
Action

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

Recommendation

Ref

11. Real Property and

Special Education
Tax
Receivable
accounts amounting
to P10,987,892.70
and P10,987,892.70
respectively, were
not supported with a
certified list of the
taxpayers showing
the amount of tax
due and collectible
and
subsidiary
ledgers, contrary to
Section 20, Vol. I of
the
New
Government
Accounting System
(NGAS)
Manual,
hence
the
correctness of the
accounts could not
be relied upon.

The
Municipal
Treasurer
should
support the Real
Property
Tax
Receivables
and
Special Education
Tax
Receivables
with duly certified
list showing the
name of taxpayers
and the amount due
and
collectible
during the year, in
compliance
with
Section 20, Vol. I of
NGAS Manual, to
ensure accurate and
reliable recording in
the
books
of
accounts.

AAR
2011

Not
Implemented

The Municipal
Treasurer did not
furnish
the
Municipal
Accountant
a
certified
list
showing
the
names
of
taxpayers
and
the amount due
and collectible
for the year.

12.

An annual physical
inventory should be
conducted
and
updating
and
reconciliation of the
accounting
and
property
records
must be undertaken
in compliance with
accounting
and
auditing rules and
regulations.

AAR
2011

Partially
Implemented

As of December
31, 2014, PPE
totaled
P113,433,032.17
(excluding CIP).

Property, Plant and

Equipment for CY
2011 amounting to
P 157,647,355.29 or
47.42% of the total
assets were not
properly accounted
due to the failure to
conduct physical
inventory, update
the property records
and periodically
reconcile
accounting and
property records in
violation with

Physical
Inventory taking
was
not
conducted during
the
year.
Property records
were not updated
and
periodic
reconciliation of
the accounting
34

Audit Observation

Recommendation

Management
Action

Ref

Status of
Implementa
tion

Section 58 of P.D.
1445.

13.

Reason for
Partial/ NonImplementation
and
property
records had not
been conducted.

About thirty (30)

municipal
employees received
net pays below the
statutory net pay of
P 3,000.00 per
month, which is not
in compliance with
Section 43 of the
General Provisions
of Republic Act
10145, entitled the
General
Appropriations Act
for CY 2011, thus
defeating
the
general intent of the
law
to
boost
employees morale
and self-esteem in
order to promote
efficiency
and
effectiveness
in
government service.

We recommend that
the
Municipal
Accountant should
strictly enforce the
provisions stipulated
in GAA pertaining
to net take home pay
to
promote
an
efficient
and
effective
public
service by ensuring
that
government
personnel
has
enough to support
for their daily needs
until
the
next
payday.

AAR
2011

Not
Implemented

Some municipal
employees were
still receiving net
pay below the
statutory
requirement.

14. Seven (7) Motor

Vehicles owned by
the Municipality of
Minglanilla
were
not marked with the
prescribed
FOR
OFFICIAL
USE
ONLY and two (2)
of these vehicles
were
not
even
bearing
the

We recommend that
management should
take the initiative
that all government
vehicles should be
marked
appropriately.
Moreover,
proper
documentation must
be
prepared
to
support usage and

AAR
2011

Partially
Implemented

Eight of the nine

service vehicles
were still not
marked with the
prescribed FOR
OFFICIAL USE
ONLY and do
not
bear
permanent
government
plates.

35

Audit Observation

Recommendation

permanent
government plate.
Drivers
Trip
Tickets were not
also signed by the
passengers
and
Monthly Report of
Official Travel was
not prepared in
violation of COA
Circular No. 75-6
dated November 7,
1975.

consumption
of
gasoline, oil and
lubricants
in
compliance
with
COA Circular No.
75-6
must
be
adhered.

15. The LGU spent a

total
of
P3,446,762.70 for
the
CY
2010
Sugat/Kabanhawan
Festival
or
an
increase
of
P686,340.70
or
24.86%
as
compared to last
years expenses of
P2,760,422.00 for
various activities,
some expenditures
of which were
found
to
be
unnecessary
and
extravagant
in
violation of Section
163 and 165 of the
Government
Accounting
and
Auditing
Manual
(GAAM), Volume I
and COA Circular
85-55A, resulting to
wastage
of

We recommend that
the
municipality
should spend and
utilize its resources
with efficiency and
economy to prevent,
if not, minimize
unnecessary
and
excessive expenses
and observe strictly
Sections 163 and
165 of the GAAM
and COA circular
85-55-A.

Management
Action

Ref

AAR
2010

36

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

Partially
Implemented

No reasons were
given for the
partial
implementation.

Audit Observation

Management
Action

Recommendation

Ref

16. Financial assistance

from
Senator
Edgardo J. Angara
in the amount of
P500,000.00
was
not utilized during
the
year,
thus
defeating
the
purpose for which it
was given which
was to deliver basic
services
to
the
intended
beneficiaries.

We recommend that
the
Municipal
Officials
should
prioritize
the
implementation of
projects funded out
of
Financial
Assistance so that
expected
benefits
due to intended
recipients be timely
achieved
or
delivered.

AAR
2010

17. Purchase of forty

(40) units sprayer in
the total amount of
P705,000.00
was
found
to
be
overpriced
at
P15,550.00 per unit
or a total of
P622,000.00, while
the purchase of
fertilizer in the total
amount
of
P295,000.00
was
substandard
resulting to total
rejection of the
project.

Make representation
with the supplier to
refund
the
questionable
purchase
of
P917,000.00
otherwise
the
approving officers of
the transaction will
assume the liability
that
may
arise
thereof.

AAR
2006

Status of
Implementa
tion

Reason for
Partial/ NonImplementation

Partially
Implemented

The Livelihood
Projects
for
Women were ongoing.

Partially
Implemented

The Notice of
Disallowance
was issued to
concerned
officials
and
employees
however,
no
refund
was
made. A letter to
the
supplier
prepared
by
Engr. Enad was
mailed but no
response
was
received.

government funds.

37

Management
identified the
projects with
allocation.

PART IV
ANNEXES
1.

FINANCIAL STATEMENTS

Balance Sheet General Fund

Statement of Income and Expenses General Fund
Statement of Cash Flows General Fund

Balance Sheet Special Education Fund

Statement of Income and Expenses Special Education Fund
Statement of Cash Flows Special Education Fund

Balance Sheet Trust Fund

Statement of Cash Flows Trust Fund
2. STATEMENT
OF
APPROPRIATIONS,
OBLIGATIONS AND BALANCES

ALLOTMENTS,