DETAILED COMMENTS AND OBSERVATIONS I.

Financial and Compliance Audit Reconciliation of cash in vault account and cash in bank account balance per treasury cashbook as against the same account balance appearing in the general/subsidiary ledger maintained in the accounting office was not made even at least once a month thus, rendering the reliability of the said account balance doubtful. 1. Reconciliation from the accounting point of view is the process of bringing into agreement balance of account between two separate but related sets of books. Whereas bank reconciliation statement is the process of bringing into agreement the cash account balance per book of the agency maintained in the accounting office and the book balance per bank statement. In both cases, the objective is to prove the integrity and reliability of the cash record; determine the actual cash balance per agency, the bank and treasury account; detect error committed by either the agency, the bank or the treasury; and adjust the error committed and update the record. Relative to this, Section 8 of COA Circular No. 97-002 specifically requires the reconciliation of cash accounts balances per cashbook of the Municipal Treasurer with the balance appearing in the book of account maintained in the Municipal Accounting Office. Whereas, section 474 of RA 7160 requires the preparation of monthly bank reconciliation statement to prove the integrity and/or reliability of the cash in bank account balances. For the year ending December 31, 2010, the following are the cash account balances appearing in the respective cashbook and books of account by the municipal treasury office and the municipal accounting office, such as:
Cash in Vault Account 101 Spl Educ Fund 35,453.49 18,029.66 17,423.83 Cash in Bank Account 111 Spl Educ Fund 735,085.47 255,213.19 479,872.28 No BRS

2.

3.

4.

General Fund Per Treasury Cashbook P Per Subsidiary Ledger Difference P 224,499.87 606,527.58 (382,027.71)

Trust Fund 21,148.00 39,699.48 (18,551.48)

Total 281,101.36 664,256.72 (383,155.36)

General Fund Per Treasury Cashbook P Per Subsidiary Ledger Difference Per Bank P 20,136,523.82 18,761,835.88 1,374,687.94 No BRS

Trust Fund 3,384,088.67 2,636,010.77 748,077.90 No BRS

Total 24,255,697.96 21,653,059.84 2,602,638.12

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5.

For the nth time, the municipal accounting official concerned failed to come up with the required cashbook reconciliation and bank reconciliation statement hence, the failure to make adjustment both in the cashbook and in the subsidiary ledger the errors committed in the balance of cash in vault and cash in bank account. This in effect cast doubt to the reliability and validity of the cash in vault and cash in bank account balances appearing in the balance sheet and trial balance of the municipality. Recommendation

6.

We recommend that reconciliation of cashbook maintained in the treasury office and subsidiary ledger kept in the accounting office be prepared at least once a month as required. Meanwhile, the local chief executive should require the accounting official concerned to prioritize and to exert more extra effort to prepare and submit the required monthly bank reconciliation statement so as to present a more reliable financial condition of the municipality. The reliability and validity of the balance of the Property, Plant and Equipment account amounting to P68.79 million appeared doubtful due to inability of the Municipality to conduct physical inventory taking contrary to Section 375 (d) of RA 7160 and Section 124 of the New Government Accounting System (NGAS) Manual. This is a reiteration of previous recommendation.

7.

Section 375 (d) of Republic Act 7160 states that Every Officer primarily accountable for government property, which supposedly is the General Services Officer or the Municipal Treasurer in the case of Municipality, shall keep a complete record of all property under his responsibility and render an inventory report therefore. While under Section 124 of the NGAS, provides that the Local Chief Executive shall require periodic physical inventory of supplies or property. Physical count of Property, Plant and Equipment by type shall be made annually and shall be reported on the Report of Physical count of Property, Plant and Equipment. This shall be submitted to the Auditor concerned not later that January 31 of each year. During the year under audit, it was observed that the municipality still failed to conduct physical inventory taking of property, hence, no report was submitted to this Office. This deficiency created doubts on the validity and correctness of the balance of the Property, Plant and Equipment account amounting to P68.79 million. They commented that due to inadequacy of records and lack of competent personnel they were unable to conduct the required physical inventory taking of PPE. They showed willingness however, to comply with our recommendation.

8.

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Recommendation 9. The Local Chief Executive should require the Municipal Accountant and the designated Property Officer to strictly observe the yearly preparation of physical inventory of all property owned by the Municipality, reconcile it with the books of account and submit the corresponding report to the Auditor to ascertain its validity. Local income collected were not deposited intact and regularly with the municipalitys authorized depository bank in violation of Section 69 of PD 1445 as reiterated in Section 28 of COA Circular No. 92-382 opening an avenue to the risk of loss and/or misuse of government funds. 10. As provided for in Section 69 of PD 1445, Public Officers authorized to receive and collect moneys arising from taxes, revenues or receipt of any kind, shall deposit intact the full amount so received and collected by them to the depository bank of the agency concerned. Moreover, Section 28 of COA Circular No. 92-382 requires that the Treasurer of the agency/municipality concerned, shall likewise deposit intact all his collection with the authorized depository bank daily or not later than the next banking day. It further requires that when the travel time from the agency going to the depository bank would consume a day or more, deposit of collection shall be done at least once a week or as soon as the amount of collection reaches P10,000.00. Considering the recent infrastructure development of road leading to Casiguran, particularly the widening and concreting of national highways and construction of various concrete bridges, travel time nowadays to and from Casiguran town to Baler, the site of depository bank would entail only two to three hours. The cash examination conducted on October 3, 2010, disclosed that the total cash of P845,547.44 remained in the hands of the Municipal Treasurer. This represent the undeposited collection as of December 31, 2009 and the total collection less deposit made from January to September 30, 2010 for 88.43% deposit, the summary of which is shown below:
Gen. Fund 303,007.10 4,009,322.82 Total Cash on Hand 4,312,329.92 Less: Deposit 3,774,185.38 Undeposited Collection P 538,144.54 Beginning Balance P Coll'tn Jan to Aug 2010 Spl Educ Fund Trust Fund 63,359.04 164,652.23 838,297.77 2,085,983.93 901,656.81 2,250,636.16 843,490.86 2,001,399.21 58,165.95 249,236.95 Total 531,018.37 6,933,604.52 7,464,622.89 6,619,075.45 845,547.44

11.

12.

13.

14.

While the Municipal Treasurer was able to present the total undeposited cash during the cash count, the fact remained and which we emphasized, the violation of rules and regulation committed for failure to deposit intact the total collection. The Municipal Treasurer reasoned out that in deed, he is all set and preparation is in process for the deposit of collection still on hand and/or in vault. 17

15. 16.

As of December 31, 2010 however, the total outstanding balance of collection per cashbook of the Municipal Treasurer was P281,101.36. Verification revealed that from October to December 2010, the Municipal Treasury Office collected total income of P2,770,436.65. Summing up or include the balance of P845,547.44, the total collection as of year end is P3,615,984.09. Of this 92.22% or P3,334,882.73 were deposited, leaving an undeposited balance of P281,101.36 as of year end. This showed partial compliance with our recommendation and the lapping practices being resorted to by the accountable officer concerned in depositing collection, the summary of which is as follows, whereas the detail is presented in Annex C:
General Fund Beginning Balance Coll'tn Oct. to Dec 2010 Total Cash on Hand Less: Deposit Undeposited Collection P 538,144.54 1,364,165.61 1,902,310.15 1,677,810.28 P 224,499.87 Spl Educ Fund 58,165.95 555,906.86 614,072.81 578,619.32 35,453.49 Trust Fund 249,236.95 850,364.18 1,099,601.13 1,078,453.13 21,148.00 Total 845,547.44 2,770,436.65 3,615,984.09 3,334,882.73 281,101.36

17.

The total undeposited collection still considered huge in amount was kept in vault which is open to risk of loss or misuse. The audit team rejoined and insisted full compliance with the rules and regulation in the cash management, particularly the deposit intact and regularly of full amount of cash collections. Recommendation

18.

The Municipal Treasurer is hereby advised to deposit intact and regularly the full amount of collection received from all sources with the authorized government depository bank to avoid possible loss or misuse. Likewise, refrain from retaining part of collection as cash reserved for disbursement. Strict compliance with Section 69 of PD 1445 as reiterated in Section 28 of COA Circular No. 92-328 is enjoined. Loans receivables were not properly documented and monitored casting doubt to the probability of collection hence, the objective of ensuring the efficiency and effectiveness of the loan assistance program was not fully attained.

19.

It is provided in Section 42 of the Revised Manual on Instruction to Treasurer that receivable accounts should not be allowed to remain in the book outstanding and/or uncollected for a period not exceeding three months.

20.

Verification of the municipalitys financial statements particularly the balance sheet as of December 31, 2010 disclosed an amount of P5,511,706.14 as

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outstanding loan receivables. This represents financial assistance in the form of loan granted to various individual/constituents of the municipality. 21. The prospect of collection however, cannot be ascertained due to absence of proper mechanism to effect the collection of the same. It was noted that loan carpets folder for each borrower which supposedly contain the application for loan, feasibility study for livelihood projects and the approved amount for the loan and the loan agreement itself were not kept and maintained. Collection ratio though satisfactory is still a failure in as far as Section 42 of the Revised Manual of Instruction to Treasurer is concerned. In the year ending December 31, 2009, the total loan granted to individual beneficiaries accumulated to P4,456,438.84. This uncollected receivables however had increased to P5,511,706.14 as of the end of the year 2010. Verification disclosed that from January to December 31, 2010, a total of P4,505,000.00 was granted to borrowers as shown in the general ledger for general fund alone. For general fund alone, the total uncollected loan receivables at the beginning of the year was P3,991,6456.75. From January to December 31, 2010, additional loan granted amounted to P4,505,000.00 making the total loan receivables booked up under general fund of P8,496,656.75. Of this, 40.60% or P3,449,732.70 was collected, leaving an uncollected loan receivables of P5,046,924.05 for general fund, (Annex D). It was further observed that some of these balances were granted more than six months already contrary to Section 42 of the Revised Manual of Instruction to Treasurer. The failure to collect full payment of the loan within three months as required affects the livelihood assistance program and likewise the finances of the municipality for they were not able to collect and re loan the payment to other deserving constituent/beneficiaries. Recommendation 24. Instruct the municipal treasury official concerned to, a) exert efforts to send demand letter or billing statement to individual borrower to collect their loans on due date so that funds can be made available for relending to other needy constituents, b) maintain a complete and updated carpet folder for each individual borrower containing the application, feasibility study and the amount approved for livelihood project and for other purpose including the loan agreement, c) keep and maintain also an updated subsidiary ledger card for each borrower to monitor the loan granted, the payment collected and the outstanding balance, and d) Impose surcharge as penalty for consistent late payment and/or for delinquent borrower.

22.

23.

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The Municipality failed to comply fully with the provision of RA 7191 particularly in providing 5% appropriation for the Gender and Development related activities and the monitoring of accomplishment relative thereto in violation to DBM, NEDA and NCRFW Joint Circular No. 2001-01. 25. Joint Circular No. 2001-01 dated December 19, 2001 of the Department of the Department of Budget and Management, the National Economic development Authority and the National Council on the Role of Filipino Women requires each and every local government unit to provide in its annual budget 5% of the estimated income from the internal revenue allotment for the Gender and Development (GAD) related activities. The circular likewise requires the local government unit to prepare a comprehensive plan and programs for implementation and to submit the end result in a report form to the Department of Interior and Local Government for monitoring and evaluation purposes. During the year under audit, it was observed that the municipality appeared partially compliant only with the provision/requirement of the circular. In the course of audit, we have noted the following: a. b. c. d. 28. The Municipality provided P100,000.00 budget for the GAD which is only less than 1% of the IRA as compared to 5% of P87.80 million or P4.39 million requirement. There was no specific plan and/or program defined for the purpose. There was no accomplishment report prepared and submitted to the DILG or to any office, as required. There was not even an oversight committee created to assess and evaluate the responsiveness of the GAD related activities.

26.

27.

We were informed that the management did not only overlook the intent and purpose of the RA 7192, but they were not aware of the reporting requirement and the provision of the 5% appropriation thereto. We recommend that proper implementation and evaluation on the effectiveness of the GAD related activities and a comprehensive and responsive plan and program be formulated and a report for the end result be submitted to the office concerned. Likewise, we recommend that an oversight committee be created and a Focal Person be designated, who shall be responsible for the smooth implementation of the program.

29.

30.

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STATEMENT OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES (SASDC) For the Quarter Ending December 31, 2010 Beginning Balance (As of September 30, 2010) 0.00 0.00 0.00 0.00 This period October 1 to December 31, 2010 NS/ND/NC 0.00 0.00 0.00 0.00 NSSDS 0.00 0.00 0.00 0.00 Ending Balance (As of December 31, 2010) 0.00 0.00 0.00 0.00

Notice of Suspension Notice of Disallowance Notice of Charge Total

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