09-BacacayAlbay2017 - Observations and Recommendations

PART II
OBSERVATIONS AND RECOMMENDATIONS
I. FINANCIAL AND COMPLIANCE AUDIT
1. The Municipal Accountant and her staff at the Municipal Accounting Office,
deserve full recognition and appreciation by the Audit Team for submitting the
2017 year-end Financial Statements (FS) of the Municipality of Bacacay within
the legal deadline or on or before February 14, 2017.
Item 4.1 of COA Circular No. 2010-001 dated March 2, 2010 is quoted hereunder;
thus,
“4.0 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.”
On February 13, 2017, we officially received the 2017 year-end Financial

Statements, together with e-copy, of the Municipality of Bacacay, submitted by the
Accounting Department. Our initial review disclosed the submitted financial reports to be
complete and in order. For this, we commend the Municipal Accountant, together with all
her staff at the Accounting Department for exerting their best effort to beat the legal
deadline for the submission of the 2017 year-end Financial Statements of the Local
Government of Bacacay. Said timely submission will likewise pave way for the earlier
submission and transmittal of our Annual Audit Report for the Municipality of Bacacay.
We commended the Management for the timely submission by the Municipal
Accounting Office of the CY 2017 year-end FS on or before the mandated deadline in
compliance with Item 4.1 of COA Circular No. 2010-001 dated March 2, 2010.
We also recommended that the Municipal Accountant and her Staff continue
to maintain the same efficiency and continue to exert effort towards making quality
and reliable Financial Reports.
Management Comment:
Management express their gratitude to the audit team that their efforts have been
recognized and also the Municipal Accountant thank her staffs and the LGU officials and
employees for the support extended to them.
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2. The Accounting Office was unable to comply with the timely submission of the
monthly and quarterly trial balance, together with the required reports and
schedules for the General Fund, Trust Fund and Special Education Fund for CY
2017.
Section 70, Vol. 1 of the Manual on the New Government Accounting System
(NGAS) –Local, provides that monthly pre-closing trial balances for each fund shall be
submitted not later than the twentieth day after the end of the month and shall be supported
by the Status of Appropriations, Allotments and Obligations, for both the current and
continuing appropriations. Copies of these trial balances shall be submitted to the COA
Auditor, Local Sanggunian and Local Treasurer.
The trial balance at the end of the quarter shall also be supported by a schedule of
subsidiary ledger balances of the controlling accounts in the General Ledger.
The Audit Team noted that the Accountant was unable to submit the monthly and
quarterly trial balances and its supporting reports and schedules within the reglementary
period. We noted that, as of December 2017, the submission of the aforecited financial
reports was late by an average of 72 days or by at least two and a half (2½) months, as
shown in Annex A. Only the January to September 2017 monthly/quarterly financial
reports were submitted as of December 2017.
The late submission of the required monthly and quarterly financial reports and
their supporting schedules prevented the Stakeholders and Audit Team from performing
timely review, verification and evaluation of the same as mandated by regulation.
Furthermore, Section 122 (2) of PD No. 1445, provides that the failure on the part
of the officials concerned to submit the documents and reports mentioned above shall
automatically cause the suspension of payment of their salaries until they shall have
complied with the requirements of the Commission.
We recommended that the Local Chief Executive require the Municipal

Accountant to immediately submit the trial balances and the required supporting
reports and schedules for the months of September to December of CY 201`7 and
henceforth, observe the timely submission to COA of the aforecited monthly and
quarterly financial reports together with the supporting reports/schedules for the
General Fund, Trust Fund and Special Education Fund, in accordance with the
above-cited regulations.
We also recommended the strict observance by Management of the timely

submission of financial reports, otherwise, the inability to submit the required reports
shall be a ground for the imposition of penalty as provided in Section 122 (2) of PD
No. 1445.
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Management Comment:
During the exit conference last April 13, 2018, Management stated that due to lack
of personnel the required reports as stated above were not submitted on time. But they
assured the Audit Team that they will exert extra effort in order to meet the deadlines and
submit the required reports on time.
3. Cash advances totaling ₱280,051 remained unliquidated as at year-end.
COA Circular No. 97-002 dated February 10, 1997 provides the following rules
and regulations on the granting, utilization and liquidation of cash advances, viz:
“4.1 General Guidelines
4.1.1 Xxxx.
4.1.2 No additional cash advances shall be allowed to any official
or employee unless the previous cash advance given to him is
first settled or a proper accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the purpose
for which it was given has been served.
Xxxx
5.1 The AO shall liquidate his cash advance as follows:
5.1.1 Salaries, Wages, etc. – within five (5) days after each fifteen
(15) day/end of the month pay period.
5.1.2 Petty Operating Expenses and Field Operating Expenses –
within twenty (20) days after the end of the year; subject to
replenishment as frequently as necessary during the year.
5.1.3 Official Travel – within sixty (60) days after return to the
Philippines in the case of foreign travel or within (30) days
after return to his permanent official station in the case of
local travel, as provided for in EO 248 and COA Circular No.
96-004.
Failure of the AO to liquidate his cash advance within the

prescribed period shall constitute a valid cause for the
withholding of his salary and the instruction of other
sanctions as provided for under paragraphs 9.2 and 9.3
hereof.
5.7 When a cash advance is no longer needed or has not been used for a
period of two (2) months, it must be returned to or refunded
immediately to the collecting officer.
5.8 All cash advances shall be fully liquidated at the end of each year.
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Except for petty cash fund, the AO shall refund any unexpended
balance to the Cashier/Collecting Officer who will issue the
necessary official receipt.”
Likewise, Section 89 of Presidential Decree No. 1445 (PD 1445), otherwise known
as the Government Auditing Code of the Philippines, states that “no cash advance shall be
given unless for a legally authorized specific purpose. A cash advance shall be reported on
and liquidated as soon as the purpose for which it was given has been served. No
additional cash advance shall be allowed to any official or employee unless the previous
cash advance given to him is first settled or a proper accounting thereof is made.”
A review of the year-end financial statements of the Municipality showed that

unliquidated cash advances to officers and employees had a balance amounting to
₱280,051 pertaining to travelling expenses and registration fees for seminars/conventions
which should have been reported on or liquidated as soon as the purpose for which it was
given has been served. We noted however, that the balance of unliquidated cash advance
this year increased by ₱22,962 or by nine per cent as compared to that of last year’s
balance of ₱257,088.
Further analysis showed that of the total outstanding cash advances of ₱280,051,
₱101,449 remained unliquidated for more than four years, ₱41,218 for over a year, while
₱137,382 for less than a year as shown in Annex A.
The Municipal Accountant claimed that her Office has been continuously
reminding the officials and employees of their obligation to settle their outstanding cash
advances, by sending out demand letters. However, despite the constant reminders, the
outstanding cash advances remained unsettled as of the end of the year. The inability on
the part of the Municipality to strictly enforce the guidelines on the granting and the
immediate liquidation of cash advances resulted in the accumulation of unliquidated cash
advances at year-end amounting to ₱280,051.
The foregoing circumstances showed a total disregard of the rules and regulations
on the granting, utilization and liquidation of cash advances as provided by COA Circular
No. 97-002 and Section 89 of P.D. No. 1445.
We recommended that Management:
a. Require the Accountable Officers to liquidate/settle immediately their

outstanding cash advances by submitting the duly accomplished
liquidation reports and to refund any unexpended balance to the
Cashier/Collecting Officer; and
b. Direct the Municipal Accountant not to allow the granting of additional

cash advance to officers and employees unless the previous cash advance
given to him is settled or a proper accounting thereof is made as required
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under Section 89 of P.D. No. 1445 and paragraph 4.1.2 of COA Circular
No. 97-002.
Management Comment:
Management responded that some amounts in the unliquidated cash advance

pertains to former Municipal Accountant. According to them it was not liquidated till now
because the former Accountant asserts that the Municipality has terminal benefits that is
due to him/her that is why the cash advances was not settled. They also added that they
have exerted their efforts to liquidate that amount but to no avail. Nevertheless,
Management promise to do their best to comply with the audit recommendation.
4. The Municipality paid ₱381,996 more than the rate of the government share of
the contributions of its covered employees to the Pag-IBIG Fund.
Rule VI, Section 1 of the Implementing Rules and Regulations (IRR) of Republic
Act No. 9679, otherwise known as the PAG-IBIG Fund Law provides that following
guidelines:
“Section 1. Rate of contributions. Covered employees and employers shall

contribute to the Fund based on the monthly compensation of covered
employees as follows:
a. Employees earning not more than One Thousand Five Hundred Pesos
(₱1,500.00) per month – one percent (1%);
b. Employees earning more than One Thousand Five Hundred Pesos
(₱1,500.00) per month – two percent (2%)
c. All employers – two percent (2%) of the monthly compensation of all
covered employee.
The maximum monthly compensation to be used in computing employee and

employer contributions shall not be more than Five Thousand Pesos
(₱5,000.00): Provided, that this maximum may be fixed from time to time by
the Board of Trustees through rules and regulations adopted by it, taking into
consideration actuarial calculations and rates of benefits. x x x.
A member may, however, be allowed to contribute more than what is required

herein should he or she desires. x x x”
A review and recomputation of the monthly payrolls and verification of remittances

of the personal and government share of Pag-IBIG Fund premium contributions to the
Home Development Mutual Fund (HDMF) from January to December 2017 disclosed that
the government share for monthly Pag-IBIG contribution for covered employees was
computed at a flat rate of two per cent based on the monthly Basic Salary, instead of the
maximum compensation of ₱5,000 or a monthly contribution of only ₱100, as provided
under R.A. No. 9679 or the HDMF Law of 2009 as shown hereunder :
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Total Amount Paid for Government Share during CY 2017 ₱485,196.24
Allowed by Law 103,200.00
Excess Payment for Government Share during CY 2017 ₱ 381,996.24
Thus, the computation of the government counterpart of the monthly contributions

of covered employees to the Pag-IBIG Fund at two per cent based on employees basic
salary instead of the maximum amount of ₱5,000.00 is contrary to Pag-IBIG Fund Law,
thus, the government paid more than what it should have paid, resulting in the excess
payment of contributions in the amount of ₱381,996, thereby overstating the expenditures.
Interview with the accounting personnel disclosed that this has been their usual practice
even in the previous years.
a) Require the Accounting Section to adjust in the payroll the government share
to the Pag-IBIG contributions at only ₱100 per month per covered employee
in compliance with Rule VI, Section 1 of the IRR of Republic Act (R.A.) No.
9679 also known as Home Development Mutual Fund Law of 2009; and
b) Require the Accounting Section to make representations with the HDMF and
discuss the possibility of offsetting the amount of ₱381,996 representing the
excess government share deducted from the future remittances of Pag-IBIG
contributions by the LGU.
Management Comment:
Management was not aware of such ruling. According to them this was the practice
of the Municipality in which the present administration adopted but since this Audit
Observation was issued with regards to incorrect remittances, Management assured that the
audit recommendation will be implemented this 2018.
5. The payroll for salaries and wages of the officials and employees of the
Municipality was still being paid out of a cash advance drawn for the purpose
instead of paying the salaries and wages through the Automated Teller Machine
(ATM) service facility of the Authorized Government Servicing Banks (AGSBs).
Section 2 of P.D. No. 1445 otherwise known as “The Government Auditing Code
of the Philippines” provides that: “it is the declared policy of the State that all resources of
the government shall be managed, expended or utilized in accordance with law and
regulations, and safeguarded against loss or wastage through illegal or improper
disposition, with a view to ensuring efficiency, economy and effectiveness in the operations
of government. The responsibility to take care that such policy is faithfully adhered to rests
directly with the chief or head of the government agency concerned.”
Our evaluation of the payroll disbursement system including the manner of

payment of the salaries and wages of the officials and regular employees including the JOs
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and contractual employees by the LGU, showed that the payroll was still being paid
through cash advances, instead of paying the salaries and wages through the Automated
Teller Machine (ATM) facility of the Authorized Government Servicing Banks (AGSBs),
that is more efficient, more economical and lesser risk on the part of the Disbursing Officer
(DO) as well as that of the payee since the payroll money need not be withdrawn by the
DO from the AGSB then transported back to the LGU.
There was a recommendation made by a member of the Senate of the Republic of

the Philippines that the DILG should instruct all LGUs to distribute the salaries of
employees including JOs and contractual employees, through the ATM in view of the
information received by his office that a number of LGUs are still disbursing their
employees’ salaries in cash, which could be susceptible to corrupt activities, such as
proliferation of ghost employees, despite the modernization of various government
transactions and efforts to eradicate corruption in the government.
There is a greater risk in keeping the government fund safe while it is being
transported back considering the time of travel and the distance from the AGSB to the
LGU aside from the additional time consumed and extra efforts exerted in preparing,
liquidating, recording and monitoring the cash advance. The government funds may be
unnecessarily exposed to possible risk of loss through theft, misuse or misappropriation. It
is therefore necessary that the LGU now avails of the ATM service facility of the AGSB in
paying the salaries, wages and other benefits of its personnel.
We recommended that Management consider the use of the ATM facility

available at the AGSB in paying the salaries, wages and other benefits of the officials
and employees of the LGU, in order to safeguard the government funds against
unnecessary risk of loss through theft, misuse or misappropriation and improve cash
management with a view to ensuring efficient and economical use of government
funds.
We also recommended that the LCE request the Municipal Accountant, the
Municipal Treasurer and the Municipal Human Resource and Management Officer
to negotiate with the Agency’s AGSB for the use of their ATM service facility in
paying the payroll of the LGU.
Management Comment:
Management in their letter dated March 26, 2018 replied that they are very grateful
of the Audit Teams recommendations to use the ATM service facility on the payment of
salaries and wages of the municipal officials and employees. The innovation if adopted in
their municipality will ensure effective and efficient management of expenditure and
disbursements. They also added that the risk in keeping the government fund safe while in
transit will be minimize. The Management is very much willing to use the above
mentioned service facility the soonest possible time after completion of the needed
documentary requirements.
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6. Cash advances were granted to the Disbursing Officer (DO) in excess of the
amount covered by her bond.
Section 305 (f) of RA No. 7160, otherwise known as the Local Government Code
of 1991, states that every officer of the local government whose duties permit or require
the possession or custody of local funds shall be properly bonded.
The government will be remunerated only up to the amount covered by the bond, in
case of loss of the government funds. Management therefore should refrain from granting
cash advances to the accountable officer in excess of the maximum accountabilities
covered by the bond.
Audit of the Municipality’s transactions revealed that all Cash Advances were
drawn by a lone DO who is duly bonded with the Fidelity Fund of the Bureau of the
Treasury in the amount of ₱0.50 million. The fidelity bond covers a maximum cash
accountability of ₱1 million, as provided in Annex C of Treasury Circular No. 02-2009
dated August 6, 2009.
We noted however, that during the period under audit the DO was granted cash
advances in excess of ₱1 million, the maximum cash accountability covered by his bond,
as shown in the following transactions:
Date Check
Particulars Amount (₱) Excess (₱)
(2017) No.
Cash advance for the payment of
April 12 724619 125,300.13
salaries 1,125,300.13
May 30 724820 2,695,109.21 1,695,109.21
salaries and Mid-Year Bonus
June 15 724901 2,558,023.83 1,558,023.83
salaries/differentials/honorarium
June 28 724945 1,391,265.70 391,265.70
salaries and various refunds
July 13 725012 1,227,931.25 227,931.25
salaries
Aug. 15 775818 1,324,853.80 324,853.80
salaries/wages and OT
Sept. 14 776024 1,095,136.75 95,136.75
salaries/wages
Oct. 12 776195 1,290,062.86 290,062.86
salaries
Nov. 15 776384 salaries/wages/Year-End Bonus 3,663,853.22 2,663,853.22
and OT
Dec. 12 776565 1,251,752.29 251,752.29
salaries/wages
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Clearly, as shown in the table above, the DO was granted cash advances in excess
of her maximum cash accountability covered by her bond. Therefore, in case of loss, the
government may not be able to recover the loss because of inadequate or improper bond.
We recommended that Management discontinue the practice of granting Cash

Advances in excess of the maximum cash accountability of the DO covered by the
bond or otherwise, increase the fidelity bond of the DO enough to cover his maximum
cash accountabilities in order to ensure adequate protection of government funds.
Management Comment:
Management promised to comply with the audit recommendations and also they
added that Special Disbursing Officer will be created for non-regular transactions such as
funds downloaded to them by DSWD.
7. The OIC-Municipal Treasurer was not able to submit to the Municipal

Accountant, at the beginning of CY 2017, a duly certified list showing the names
of taxpayers and the amount due and collectible for the year.
Section 20 of NGAS Manual for LGUs, Volume 1, provides for the basis of
recording RPT and SET Receivables, to wit:
“Real Property Tax Receivables/Special Education Tax Receivables shall

be established at the beginning of the year based on Real Property Tax
Account Register/Taxpayer’s index card. At the beginning of the year, the
Treasurer shall furnish the Chief Accountant of a duly certified list showing
the name of taxpayers and the amount due and collectible for the year. Based
on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to
record the debit to Real Property Tax Receivable/Special Education Tax
Receivable and crediting to Deferred Real Property Tax Income/Deferred
Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the account

Deferred Real Property Tax Income/Deferred Special Education Tax Income
shall be debited while the Real Property Tax Income due to the municipality is
recognized/credited. The share of the Province and Barangay shall also be
credited to Due to LGUs.”
Verification of records showed that the OIC-Municipal Treasurer was not able to
submit a certified list of taxpayers and amount due and collectible during the year 2017 to
the Municipal Accountant, instead a Report on Real Property Assessment prepared by the
Municipal Assessor was used to estimate and set-up the RPT and SET Receivables, thus,
the reliability of balances of the receivable accounts amounting to ₱8.27 million and ₱8.43
million, respectively for a total receivables of ₱16.69 million in the year-end financial
statements cannot be ascertained and may not be accurate. The absence of the certified list
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of taxpayers and amount due and collectible may lead to inaccurate financial reporting, as
well as provide unrealistic basis of setting collection targets for the year.
We recommended that at the beginning of the year, the Local Chief Executive
(LCE) requires the OIC-Municipal Treasurer to submit to the Municipal Accountant
a duly certified list of taxpayers, based on the Real Property Tax Account
Register/Taxpayer’s index card, showing the name of the taxpayers and the amount
due and collectible for the year to establish the RPT and SET Receivables, in
compliance with Section 20 of the Manual on NGAS for LGUs, Volume I.
Management Comment:
Management commented that they are not aware that the list must come from the
Municipal Treasurers Office but promised to comply with the audit recommendations.
8. The General Services Officer/Property Officer was not properly bonded.
Section 101 of P.D. No. 1445 and Section 488 of the GAAM, Volume I provides
that:
“Every Officer of any government agency whose duties permit or

require the possession or custody of government property shall be
accountable therefor and for the safekeeping thereof in conformity with laws
and shall be properly bonded in accordance with law.”
Verification disclosed that the designated General Service Officer or Property

Officer/Custodian, whose duties permit and require her to possess or take custody of
government property for which she is primarily liable and who is accountable for the
safekeeping of the government property under her custody, was not duly bonded contrary
to Section 101 of P.D. No. 1445 and Section 488 of the GAAM, Volume I, which require
that as an accountable officer, she should be duly bonded. If the AO is not duly bonded,
the government interest may not be properly safeguarded against loss, misuse or
misappropriation. The government may not be duly compensated or may not be able to
recover the book value of the property in case of loss thereof. Bonding guarantees the
payment of a specified sum as damages in the event the AO causes financial loss to the
government.
Further, Treasury Bill No. 02-2009 states that:
“Every officer, agent and employee, accountable for public property

shall be liable for its money value in case of improper or unauthorized use or
misapplication thereof, by himself or any person for whose acts he may be
responsible. He shall likewise be liable for all losses, damages or
deterioration due to negligence in the keeping or use of the property, whether
or not it be, at the time of such loss, damage or deterioration, in his actual
custody.”
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The Circular also states that the Head of the Agency has the primary responsibility
at all levels whether National, Local or Corporate, for all government funds and property
pertaining to his agency. Upon the appointment of the agency of an accountable officer to a
bondable position he must notify in writing the Bureau of Treasury (BTr) having
jurisdiction over the agency within five (5) days from such appointment for the application
for bond and in case of failure to notify the BTr, the Head of Agency shall be primarily
liable to any such loss or damage to public properties and may incur an account of such
failure.
The GSO/Property Custodian may not be aware that he must be properly bonded
upon his appointment and acceptance of his duties and responsibilities.
We recommended that the Local Chief Executive (LCE) requires the

Accountable Officer to apply for proper bonding with the Bureau of Treasury as
required by Section 101 of P.D. No. 1445 and Section 488 of the GAAM, Volume I, in
order to safeguard the interest of the government and to enable the government to
recover a specified sum in case of loss, misuse or misappropriation of public property
by the AO.
Management Comment:
The Municipal Accountant stated that they really have overlooked the bond of their
GSO and promised that they will abide by the audit recommendations promptly.
9. The LGU was not able to create an Inventory Committee that shall conduct a
physical count of its Property, Plant and Equipment (PPE) amounting to ₱231.90
million.
Section 124 of NGAS Manual, Volume I for LGUs provides that:
“The Local Chief Executive shall require periodic inventory of supplies

or property. Physical count of inventory items by type shall be conducted
semestrally and reported in the Report of the Physical Count of Inventories
(RPCI) and shall be submitted to the Auditor not later than July 31 and
January 31 of each year for the first and second semesters, respectively.
Physical count of property, plant and equipment by type shall be made
annually and reported on the Report of Physical Count of Property, Plant
and Equipment (RPCPPE). This shall be submitted to the Auditor concerned
not later than January 31 of each year.”
Section 156 of COA Circular No. 92-386 further states that:
“The local chief executive shall require an annual physical inventory of

all supplies or property of the LGU as of December 31 of each year, to be
conducted by Office or Department by a Committee of three (3) consisting of
the representative of the Local Chief Executive as Chairman, and the General
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Services Officer, Municipal or Barangay Treasurer, as the case may be, and
the Supply Accountable Officer of the Department or Office concerned, as
Members.”
While Section 147 of the same Circular provides that:
“The Buildings and other physical structures of the LGU shall be under
the accountability and responsibility of the Provincial or City General
Services Officer, Municipal Mayor or Punong Barangay, as the case maybe.
He is required to keep a separate and updated record of these properties and
to submit an inventory report to the provincial, city or municipal auditor on
or before the 15th day of January each year showing, among others, the
condition of said properties.”
Physical count is an indispensable procedure to ascertain the accuracy of the

accounts, to check the integrity of property custodianship and to determine the existence,
whereabouts, conditions/serviceability and other relevant information relative to the PPE.
Similarly, it serves as basis to reconcile property records and accounting records to
determine the correct valuation of recorded assets. Likewise, it aids the Property Officer in
identifying obsolete and unserviceable property, plant and equipment that could be
dropped from the books of accounts so that the true value of the PPE account could be
determined.
Our audit showed that the Agency was not able to conduct a complete physical
inventory of all the reported PPEs as of December 31, 2017 totaling ₱231.90 million
representing 40.22 per cent of the total assets of the Municipality amounting to ₱576.57
million. This is a reiteration of our previous years’ audit observations which the LGU has
not implemented for several years already, thus also affected the audit opinion rendered by
the Auditor.
We noted that the Municipality has submitted a partial RPCPPE as of June 30,
2017 which was duly transmitted to the Auditor. We observed that the report does not
indicate the property number of the PPEs. The report likewise, listed some properties and
equipment the cost of which represents only a very minimal percentage of the reported
PPE in the financial statements as of December 31, 2017. Further, the physical inventory
taking was not completed during the period and no updated RPCPPE was prepared, thus,
rendering the balances of the PPE accounts as of December 31, 2017 unreliable. The
inability by the LGU to conduct a complete physical count of its PPE, and the non-
reconciliation by the Accounting Department and the General Services Office of their
respective PPE records, cast doubt as to the existence of the PPE, and the accuracy and
validity of the PPE balances reported in the financial statement as of December 31, 2017.
We therefore reiterated again the previous years’ recommendation that the

Local Chief Executive:
a. Create an Inventory Committee of three (3), consisting of a representative

of the Local Chief Executive as Chairman, and the General Services
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Officer or the Municipal Treasurer, and the Supply Accountable Officer,
as Members in accordance with Section 156 of COA Circular No. 92-386;
b. Require the Inventory Committee to conduct a physical count of properties

and equipment based on the finalized List of Properties and Equipment
within each Office/Department and to indicate the assigned property
number and actual condition of the property and equipment whether it is
serviceable or unserviceable;
c. Require the designated Property/Supply Officer to reconcile the inventory

list of properties and equipment to the individual Property Cards and
update the List of Properties and Equipment for each Office/Department;
d. Require the Municipal Accountant to reconcile the Inventory Report for

PPE with the Property Ledger Cards with their corresponding cost/book
values; and
e. Require the Municipal Accountant to prepare a summary of all property

and equipment, including buildings and other physical structures, not
found during the physical count and in coordination with the designated
Property/Supply Officer and the Municipal Engineer, determine their
status. Submit to the Auditor a report of inventory of unserviceable
property and equipment and a list of buildings and other structures not
physically found during the actual inventory, with their corresponding
cost/values together with the physical inventory report.
Management Comment:
During the exit conference Mr. Andres Barcellano said that they already have the
complete physical inventory that will be submitted to the Audit Team for evaluation. As of
April 19, 2018 no physical inventory was submitted to the Audit Team.
10. The efficient and effective discharge by the Municipal Government of its Solid
Waste Management functions was not totally carried out.
One of the points to be addressed by Local Government Units (LGUs) is the

spiraling generation of solid waste brought about by fast population growth and rapid
urbanization as it carries various consequences not only in the environment, but also in the
health and well-being of its citizen and the future generations. Wastes, if properly
disposed/managed, can be a valuable resource of solid waste materials for re-using,
recycling and composting, otherwise it can be a cause of pollution and it can pose health
risks.
Section 17 paragraph b.2 (vi) of Book 1 of the Local Government Code of 1991
provides, among others, as follows:
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“Section 17. Basic Services and Facilities.
(b) Such basic services and facilities include, but are not limited to,
the following:
(2) For a municipality:
(vi) Solid waste disposal system or environmental management

system and services or facilities related to general hygiene
and sanitation; xxx”
Republic Act No. 9003, otherwise known as the Philippine Ecological Solid Waste
Management Act of 2000, was enacted by the government to provide for an ecological
solid waste management program, to create the necessary institutional mechanisms and
incentives and to declare certain acts prohibited with corresponding penalties.
In our review of the implementation and compliance of the Municipality with the
provisions and requirements of the Solid Waste Management Act, we noted the following:
a. There is a need for the Solid Waste Management Board of the Municipality of
Bacacay to review, update and secure approval of appropriate authorities of
its 10-year Solid Waste Management Plan.
Section 16, Article 1, Chapter III of R.A. No. 9003 provides that:
“Sec. 16. Local Government Solid Waste Management Plans. – The
xxx municipality, through its local solid waste management boards, shall
prepare its respective 10-year solid waste management plans consistent with
the national solid waste management framework: Provided, that the solid
waste management plan shall be for the re-use, recycling and composting of
wastes generated in their respective jurisdictions: Provided, further, that the
solid waste management plan of the LGU shall ensure the efficient
management of solid waste generated within its jurisdiction. The plan shall
place primary emphasis on implementation of all feasible re-use, recycling,
and composting programs while identifying the amount of landfill and
transformation capacity that will be needed for solid waste which cannot be
re-used, recycled, or composted. The plan shall contain all the components
provided in Sec. 17 of this Act and a timetable for the implementation of the
solid waste management program in accordance with the National
Framework and pursuant to the provisions of this Act: Provided, finally, that
it shall be reviewed and updated every year by the xxx municipal solid waste
management board.
For LGUs which have considered solid waste management
alternatives to comply with Sec. 37 of this Act, but are unable to utilize such
alternatives, a timetable or schedule of compliance specifying the remedial
measure and eventual compliance shall be included in the plan.
36
All local government solid waste management plans shall be
subjected to the approval of the Commission. The plan shall be consistent
with the national framework and in accordance with the provisions of this Act
and of the policies set by the Commission; xxx”
We noted that the Municipality was still in the process of securing approval by
appropriate authorities of its 10-year Solid Waste Management Plan. Although efforts
were already made by the Municipality to comply with the requirements of the National
Solid Waste Management Commission (NSWMC), the same however fell short of the
requirements of the NSWMC. Per interview with the designated MENRO, we found out
that the Municipality is still in the process of revising its 10-year Solid Waste Management
Plan to conform with the current needs and situation of the Municipality. Further, he
stressed that approval of the 10 – year plan cannot be attained at once since they were not
able to complete the revision due to lack of manpower. He also added that the Municipal
Solid Waste Management Board must be active in order for them to finish the revision and
to submit the same for approval of the Commission.
Considering the foregoing, the inability of the Municipal Solid Waste Management
Board to review, update and cause approval of its SWMP, did not give assurance that the
Municipality’s Solid Waste Management will be consistent with the national framework
and in accordance with the provisions of the Ecological Solid Waste Management Act of
2000 or R.A. No. 9003 and of the policies set by the Commission.
b. The existence of an open dump site at Barangay Banao was not in accordance
with Section 37 of R.A. No. 9003.
Section 37 of the R.A. No. 9003 provides as follows:
“Sec. 37. Prohibition Against the Use of Open Dumps for Solid
Waste. - No open dumps shall be established and operated, nor any practice
or disposal of solid waste by any person, including LGUs, which constitutes
the use of open dumps for solid wastes, be allowed after the effectivity of this
Acts: Provided, That within three (3) years after the effectivity of this Act,
every LGU shall convert its open dumps into controlled dumps, in
accordance with the guidelines set in Sec. 41 of this Act: Provided, further,
That no controlled dumps shall be allowed five (5) years following the
effectivity of this Act.”
The existing open dumpsite at Barangay Banao used by the Municipality of

Bacacay for the Solid Waste Disposal Site was not yet converted into a controlled dump
(sanitary landfill) in accordance with the guidelines set in Section 41 of the Ecological
Solid Waste Management Act of 2000. Mr. Bermas claimed that it cannot be considered as
an open dumpsite since after dumping all the waste from the mainland, it is immediately
covered with soil using a backhoe in which case, according to him, it will now be
considered a Residual Containment Area.
37
Additionally, only the solid wastes of the barangays in the mainland were collected
because of lack of available funds and also because of the remote location of other
barangays. When asked how the coastal barangays dispose of their wastes, he also claimed
that in CY 2015, he conducted trainings in barangays, where solid wastes cannot be
collected, on how to properly segregate the solid wastes and how to properly dispose of
them. But since he cannot monitor their compliance regularly, he admits that some
constituents throw garbage along the seaside.
He also added that the Municipality has already found a Sanitary Landfill to
purchase, located in Brgy. Banao. They are still awaiting for the issuance of an
Environmental Compliance Certificate by the DENR before making the payment.
A dumpsite as defined, is a piece of land where waste materials are dumped or

discarded or a wasteland. Since the Municipality dumps all its waste in that area,
regardless if they covered it with soil or not, it is considered as a dumpsite as defined
above. The continuous use of the open dumpsite will pose potential danger to human
health and environment.
c. The Municipality has not conducted trainings and/or seminars for Solid Waste
Management (SWM) collectors and personnel to ensure that solid wastes are
handled properly and in accordance with the guidelines pursuant to the
Ecological Solid Waste Management Act.
Section 23(a) and (b) of R.A. No. 9003 provides the minimum standards and
requirements for the collection of solid waste, as follows:
“Sec. 23. Requirements for Collection of Solid Wastes. - The

following shall be the minimum standards and requirements for the collection
of solid waste:
(a) All collectors and other personnel directly dealing with collection
of solid waste shall be equipped with personal protective
equipment to protect them from the hazards of handling wastes;
(b) Necessary training shall be given to the collectors and personnel

to ensure that the solid wastes are handled properly and in
accordance with the guidelines pursuant to this Act; xxx”
Further, Rule X (b) of the IRR of R.A. No. 9003 is specific for Municipal Health
Officer as follows:
“b) The xxx Municipal Health Officer shall provide necessary

training to the collectors and personnel to ensure that the solid
wastes are handled properly in accordance with the guidelines
pursuant to the Act. The Commission through the National
38
Ecology Center, in coordination with the DOH shall develop
training guidelines.”
During our validation, we gathered that no trainings were provided to the SWM
collectors and personnel but there have been meetings conducted regularly with them.
However, trainings were provided to the Barangays of the Municipality of Bacacay dealing
with the Solid Waste Management, such as the establishment of Materials Recovery
Facilities (MRFs) and the enforcement of SWM policies included in the barangay budget.
We observed that there is still a need for the Municipality to intensify its trainings and/or
seminars especially of its personnel who are directly involved in Solid Waste Management.
a. Require the Municipal Solid Waste Management Board to hasten the

review and updating of its 10- year Solid Waste Management Plan and
cause its approval by appropriate authorities, pursuant to Section 16 of
Republic Act. No.9003, dated January 16, 2001;
b. Undertake to immediately convert the Municipality’s dumpsite to an

Ecological Park or Sanitary Landfill (SLF), in compliance with Section 37
of R.A. No. 9003; and
c. Intensify the SWM information dissemination campaign, conduct SWM

trainings and seminars, and enforce the SWM regulations by imposing
penalties for its non-compliance.
Management Comment:
Management replied that they already have the Solid Waste 10 year plan but not yet
approved by the proper commission. With regards to the open dumpsite in barangay
Banao, the DENR ordered its closure and eventually will be turned into sanitary landfill.
They also added that no trainings were conducted or given to SWM collectors or personnel
and promised that the said trainings will be incorporated in their budget.
11. Donated Property, Plant and Equipment amounting to ₱484,631 were not booked
up or recorded in the agency’s books.
Section 63 of PD 1445 states that:
“xxx all moneys and property officially received by a public officer in

any capacity or upon any occasion must be accounted for as government
funds and government property. Government property shall be taken up in
the books of the agency concerned at acquisition cost or an appraised
value.”
39
The Philippine Government Accounting Standard (PGAS) 7.2 and the Philippine
Public Sector Accounting Standard (PPSAS) 23 provides that the cost of donated property
shall be based on its fair value or appraised value.
Verification of donated properties to the Municipality of Bacacay, disclosed that

several Property, Plant and Equipment worth ₱484,631 have not been booked up or
recorded in the books. The following properties were donated by the Department of Health
(DOH) through the Rural Health Unit:
Donated Donor Date

Amount
Property Agency Received
5 units Instrument
table, stainless
Steel, Brand:
DOH-ROV,
Elmed, Size: ₱ 48,800.00 3/16/2017
Legazpi City
13x17 inches,4
caster wheels with
brakers
2 units Weighing
Scale with
measuring stick, DOH-ROV,
14,996.00 1/26/2017
dult, Brand: Triup, Legazpi City
Model: TWRS-
200
8 units Power
Generating Set, 5
DOH-ROV,
kva, Brand: 318,792.00 7/13/2017
Legazpi City
Seemark, Model:
SDE6700T
4 units Cervical
Inspection Set/
Vaginal Speculum
DOH-ROV,
Set, Brand: Zaryab 19,552.00 3/20/2017
Legazpi City
Instruments,
Model: TRWS-
200
1 unit Medicine DOH-ROV,
21,787.00 3/27/2017
Cabinet Legazpi City
8 units Weighing
Scale (Infant)
DOH-ROV,
digital, Model: 60,704.00 3/16/2017
Legazpi City
H13-001,apacity:
20 kg x 5 kg
TOTAL ₱ 484,631.00
40
According to the Head of the RHU there are other Donated PPEs but the
documents were lost or misplaced during the transfer of their office. The Municipal
Accountant during our interview said that other donated PPE in previous years were
recorded if the copy of the deed of donation were furnished to her, but during CY 2017,
she was not aware of any donation since no documents were given to her Office for
recording purpose, thus resulted in unrecorded and unaccounted PPEs.
We recommended that the Local Chief Executive (LCE) requires the

Municipal Accountant to record in the books the donated PPEs amounting to
₱484,631.
We also recommended that the LCE require the Property Officer to conduct
an inventory of other donated properties not yet taken up in the books for proper
recording.
We likewise recommended that the LCE require the Property Officer and the
Municipal Accountant to ensure that every donated property must be supported by a
Deed of Donation and other supporting documents in order to properly record the
acquisition at cost or at appraised value in accordance with the Philippine
Government Accounting Standard 7.2 and Philippine Public Sector Accounting
Standard (PPSAS) 23.
Management Comment:
The Municipal Accountant said that some donated PPE were already booked up.
They will also coordinate with the Municipal Health Office to provide them with the deed
of donations and inventory of all donated PPE for proper recording.
12. Unserviceable properties within the agency premises were not yet disposed and
derecognized from the books of the LGU.
Section 379 of RA No. 7160 provides, among others, that in the local government
units, when property has become unserviceable for any cause or is no longer needed, it
shall, upon application of the officer accountable therefor, be inspected and appraised by
the concerned auditor (now appraisal committee), and if found valueless or unusable, shall
be destroyed in the presence of the inspecting officer. If found valuable, the same shall be
sold at public auction to the highest bidder.
Likewise, existing regulations on disposal as contained in COA Circular No. 92-
386 provide that when supplies or properties of a local government unit become
unserviceable from any cause, or no longer needed, these shall be returned immediately to
the head of the department or office who shall cancel the corresponding Memorandum
Receipt (now Acknowledgment Receipt for Equipment). If no longer needed in the
department, the head of the department or office shall return the same to the General
Services Office with the use of Property Return Slip. In cases where the assets are for
disposal, the LGU shall prepare the Inventory and Inspection Report for Unserviceable
Properties (IIRUP). These properties shall be appraised by the Committee which shall
41
determine the floor price in the public auction to be conducted under its supervision.
Disposable assets may also be transferred without cost to other government agencies or
these may also be condemned or even donated to charitable, scientific, educational or
cultural activities.
New Government Accounting System (NGAS) Manual for LGUs provides that:
“Sec. 124. Inventory of Supplies or Property. –xxx Physical count of

property, plant, and equipment by type shall be made annually and reported on
the Report on the Physical Count of Property, Plant and Equipment
(RPCPPE). This shall be submitted to the Auditor concerned not later than
January 31 of each year. “
“Sec. 125. Disposal of Supplies or Property. - Disposal procedures shall be in

accordance with applicable rules and regulations on supply and property
management in local government units. The Waste Materials Report (WMR)
and the Inventory and Inspection Report of Unserviceable Property (IIRUP)
shall be used.”
We have observed in our review of the Partial Report on the Physical Count of
Property, Plant and Equipment (RPCPPE) as of June 31, 2017 submitted to the Audit
Team that no unserviceable property was identified by the Inventory Committee. It should
be noted that one of the purpose of inventory taking of PPE is to aid the Property Officer in
identifying obsolete and unserviceable PPE that could be derecognized from the books of
account so that the true value of the PPE account could be determined.
However, inquiry from the Accounting personnel disclosed that they are not aware
that there are unserviceable properties that must be derecognized in the books since no
report of such, was given by the Inventory Team.
Additionally, upon interview with the Head of Inventory Team she explained that
they are not able to prepare the Inventory and Inspection Report of Unserviceable
Properties (IIRUP) because of lack of manpower and they are busy doing their other
functions. She also showed us the store room of all unserviceable properties which
includes computers, printers and other accessories, tables, chairs, air cons, motor boat
engines, etc. and she also relayed that there is also a garbage truck in which the location is
unknown to her due to passage of time. She also added that other unserviceable PPEs were
placed at the back of the stage, inside the Gym, in which some chairs and tables were
missing, and other area in the office which can accommodate the PPE.
Many of the said properties are exposed to the elements, thus, hastening their
deterioration that further decreases their respective market values. Also, these occupy
valuable space in the already congested storeroom of the Agency that could have instead
been used for other worthwhile purposes.
These properties, although considered as unserviceable, should not be left out in the
open and subjected to the changing elements of nature for a long time so that they will not
42
deteriorate further and their value would not be greatly diminished when properly disposed
of, hence, will generate additional income to the Municipality.
Also, keeping the unserviceable properties in the books of the LGU overstates the
amount of assets presented in the financial statements
We recommended that the GSO facilitate the immediate disposal of the

aforementioned unserviceable properties and waste materials to recoup any salvage
value thereof. Specifically, we reiterate the following measures:
a. The General Service Officer make a complete inventory of all

unserviceable PPEs of the Municipality;
b. Management constitute an Appraisal Committee to appraise the values of

the unserviceable PPEs and furnish the auditor a copy of the appraisal
report thereof:
c. Hasten the disposal of the properties to maximize the potential income that
can be generated from the proper disposal thereof based on the most
appropriate mode of disposal pursuant to the provisions of Sections 379 to
381 of RA No. 7160; and
d. Require the Municipal Accountant to make the necessary entries to

derecognize the unserviceable properties from the books of the LGU after
the duly conducted disposal procedures.
Management Comment:
Management promised to comply with the audit recommendations.
13. The Municipality was unable to prepare and submit a Local Disaster Risk
Reduction and Management Fund Investment Plan (LDRRMFIP) for CY 2017.
Paragraph 5.1.2 of COA Circular No. 2012-002 dated September 12, 2012 provides:
“A LDRRMFIP for the DRRM program shall be prepared annually. It shall
present the 30% allocation for QRF in lump-sum and the allocation for disaster
mitigation, prevention and preparedness with details as to projects and activities
to be funded. The LDRRMFIP shall also include under a separate caption, the
list of projects and activities charged to the unexpended LDRRMF of previous
years.”
Our evaluation of the LDRRM operations showed that the mandated LDRRMFIP
was not prepared and submitted by the Agency for CY 2017.
43
The Municipality of Bacacay appropriated for CY 2017 a total amount of ₱7.43
million for LRRDMF. The total amount of ₱0.58 million was expended as of the end of the
year based on the verification of the Audit Team.
In the absence of such plan, the Audit Team was not able to readily determine
whether the LDRRMF funded programs, projects or activities undertaken were indeed the
same as those that the Municipal Government prioritized or planned to undertake during
the year.
We recommended that Management require Municipal Disaster Risk

Reduction and Management Officer (MDRRMO) to prepare and submit the
LDRRMFIP for CY 2017 required under COA Circular No. 2012-002 indicating the
30% allocation for QRF and the allocation for disaster mitigation, prevention and
preparedness with details as to the projects and activities to be funded thereof and
include also under a separate caption, the list of projects and activities charged to the
unexpended LDRRMF of previous year. Henceforth, the MDRRMO prepare and
submit the same annually, furnishing copy to the Audit Team.
Management Comment:
Management responded that they are not aware that such report exist and they
thought that the Annual Investment Plan is the required report but nonetheless, since the
audit team have provided them with the format they need, the report will be submitted
soonest.
14. The Municipal Disaster Risk Reduction and Management Council (MDRRMC)
was not able to prepare the programs/projects and activities (PPAs) for the funds
totaling ₱2.41 million, representing the unexpended balance of LDRRMF for CY
2016 and the Council was not also able to prepare the MDRRMFIP for CY 2017.
Section 4.4 of COA Circular No. 2012-002 dated September 12, 2012 provides that
the unexpended LDRRMF shall accrue to a special trust fund solely for the purpose of
supporting disaster risk reduction and management activities of the Local Disaster Risk
Reduction Management Council (LDRRMC) within the next five years. The LDRRMC
shall decide on the use of the unexpended balance of the LDRRMF which shall be
incorporated in the Local Disaster Risk Reduction Management Fund Investment Plan
(LDRRMFIP).
Further, Section 5.1.11 of the same Circular provides that all

unexpended/unobligated balance of the LDRRMF for CO shall be made continuing in the
General Fund Books until the projects funded therefore are completed and any savings
shall be available for use in the disaster risk reduction and management activities as
provided in the LDRRMFIP.
Based on our interview with the Municipal Budget Officer and Municipal Disaster
Risk Reduction and Management Officer (MDRRMO) regarding the unexpended balance
44
of the CY 2016 QRF and DRRM-MOOE amounting to ₱2.41 million (shown in the
computation below), disclosed that the Municipal Disaster Risk Reduction and
Management Council (MDRRMC) was not able to prepare the programs/projects and
activities (PPAs) for the unexpended balance of LDRRMF for CY 2016 and previous
years, which should have been incorporated in the Local Disaster Risk Reduction
Management Fund Investment Plan (LDRRMFIP) for CY 2017 of the LGU, contrary to
the above-cited regulations.
CY 2017 Estimated Revenue from Regular Sources ₱ 148,553,655.00

Required % for LDRRMF Allocation 5%
Required LDRRMF for CY 2017 ₱ 7,427,682.75
Amount Appropriated per Annual Budget CY 2017 ₱ 7,427,685.00

Add: Unexpended Balance for CY 2016 without
PPAs prepared by MDRRMC to be included
in the MDRRMFIP 2,409,899.95
Amount of Fund to be prepared with CY 2017
MDRRMFIP ₱ 9,837,584.95
However, it was also found out that the Council was not also able to prepare and
submit the LDRRMFIP for CY 2017, wherein the PPAs or use of the unexpended balance
of the LDRRMF for CY 2016 and prior years will be incorporated, although there were
PPAs included in the CY 2017 LDRRMF Budget, resulting in no PPAs
accomplished/implemented which can be charged against the unexpended balance of
LDRRMF of the previous years, to the detriment of the constituents of the LGU.
Moreover, it should be noted that any savings from projects that were completed
from the LDRRMF for Capital Outlay (CO) shall be available for use in the disaster risk
reduction and management activities and should also be provided in the LDRRMFIP as
stated in the above cited Circular.
We recommended that MDRRM Officer coordinate with the Municipal

Budget Officer and Municipal Accountant to determine the amount of unexpended
balance of LDRRMF for CY 2016 and prior years and if any, savings from the
completed projects of the LDRRMF for Capital Outlay (CO) as of December 31, 2017
and prepare the MDRRMFIP for CY 2018 incorporating the
projects/programs/activities (PPAs) chargeable against computed amount of fund, for
approval by the LDRRMC.
Management Comment:
Management promised to comply with the Audit Recommendation.
15. a. The appropriation for the CY 2017 Local Council for the Protection of
Children (LCPC) programs and activities totaling ₱375,000 was significantly
45
lower than the amount of ₱1.41 million that should have been allocated
representing one per cent of the internal revenue allotment of the Municipality.
Section 15 of R.A. No. 9344 known as the “Juvenile Justice and Welfare Act of
2016”, provides that, “One percent (1%) of the internal revenue allotment of barangays,
municipalities and cities shall be allocated for the strengthening and implementation of the
programs of the LCPC: Provided, that the disbursement of the fund shall be made by the
LGU concerned.” This provision was reiterated by DILG MC No. 2012-120.
A review of the CY 2017 Annual Budget of the Municipality showed that the total
amount of ₱375,000 was appropriated to finance the LCPC programs and activities as
shown in their Annual Budget. The amount represented merely 26.51 percent of the
amount of ₱1.41 million that should have been allocated for LCPC computed at one per
cent of ₱141.42 million representing the internal revenue allotment of the Municipality for
CY 2017. Therefore, this year’s allocation for LCPC is lower by 73.49 percent or ₱1.04
million, representing the additional amount that should have been utilized for
strengthening and implementation of the LCPC programs and activities during the year.
Since the funds appropriated was considerably lower than the amount required then, it
could have unfavorably affected the programs and activities of the LCPC in terms of the
availability of funds and the number of programs, projects and activities to be implemented
during the year.
We recommended that Management allocate in the Annual Budget of the

Municipality the amount equivalent to one percent of its internal revenue allotment
(IRA) for strengthening and implementation of the programs and activities of the
Local Council for the Protection of Children (LCPC) as required in Section 15 of
R.A. No. 9344 also known as the “Juvenile Justice and Welfare Act of 2016”.
b. The LCPC was unable to submit the required reports, such as the Work and
Financial Plan, specified in Item I, Part II of the DILG Memorandum Circular
No. 2012-120 for CY 2017.
The LCPC, as an institutional mechanism in the LGU that advocates child rights,
plans and initiates/recommends interventions and monitors children’s programs and
activities in the locality, needs enough funds for the strengthening and implementation of
its various programs, projects and activities. That is why DILG MC No. 2012-120, enjoins
all Local Chief Executives and all others concerned to appropriate in the LGUs Annual
Budget one percent (1%) of its internal revenue allotment as required by R.A. No. 9344 for
the strengthening and implementation of programs, projects and activities of the LCPC.
Section II of DILG MC No. 2012-120, provides among others the programs,

projects and activities (PPAs) that can be funded by the one percent IRA for the
strengthening of the LCPC such as, the preparation of the Annual Work and Financial
Plan, the Local Development Plan for Children, the Local Investment Plan for Children,
and etc., as well as the conduct of advocacy activities for children, capability building
activities for children, etc., and such other programs, projects and activities, all for the
benefit and protection of children.
46
Upon verification no work and financial plan and other reports required were
submitted by the Municipality. During our interview, the Municipal Social Welfare
Development (MSWD) Officer claimed that the information needed in preparing the
reports were submitted by them to the Municipal Planning and Development Office. We
requested a copy of the said information and we found out that only the Project
Procurement Management Plan (PPMP) was submitted.
The non-preparation of the report casts doubt on the proper and effective
implementation of the PPAs, and whether they were really planned and implemented in
accordance with the parameters set forth by regulation.
We recommended that Management prepare and submit the necessary reports

enumerated in Item No. 1, Part II of DILG Memorandum Circular No. 2012-120 by
the end of current year for the proper and effective implementation of PPAs in the
succeeding year.
Management Comment:
16. The monthly Bank Reconciliation Statements (BRS) for the Agency’s current
bank accounts for CY 2017 were not prepared regularly and promptly and
submitted to the Auditor.
One of the internal controls in safeguarding assets particularly the account Cash in
Bank is the preparation of Bank Reconciliation Statement (BRS). The BRS is an
indispensable tool to determine whether the cash-in-bank balance recorded in the books of
accounts reconciles with the depository bank’s record.
Section 74 of P.D. No. 1445, otherwise known as the “Government Auditing Code
of the Philippines” requires that at the close of each month, depositories shall report to the
agency head, in such form as he may direct, the condition of the agency account standing
on their books. The head of the agency shall see to it that a reconciliation is made between
the balance shown in the reports and the balance found in the books of the agency.
COA Circular No. 96-011 provides the following Guidelines on Bank

Reconciliation Statements:
“Section 3.1 The depository/servicing banks shall furnish the Local Accountant
with the Bank Statements (BS) including debit/credit memos (DM/CM), paid
checks, etc., within five (5) days after the end of each month which shall be the
basis for the preparation of the monthly Bank Reconciliation Statements.”
“Section 3.2 The Local Accountants shall within ten (10) days from receipt of
the Bank Statements, reconcile the same (BS) with the General Ledgers (GL)
and prepare the BRS in five (5) copies.”
47
“Section 3.3 The accountant shall draw journal vouchers to record all valid
reconciling items that require adjustment and correction in the GL.
Section 3.4 The duplicate and quadruplicate copies of the BRS including the
paid checks, original copies of debit/credit memos, shall be submitted to the
Auditor concerned for verification within ten (10) days for receipt after the end
of each month.”
Verification made by the Audit Team disclosed that the monthly BRS of the
Municipality’s bank accounts for CY 2017 were not prepared and submitted regularly by
the Municipal Accountant to the Auditor. Table below shows the delayed submission of
the monthly BRS:
Period Covered by BRS Date of Submission

January 2017 May 12, 2017
February 2017 June 16, 2017
March 2017 June 28, 2017
April 2017 August 18, 2017
May 2017 August 18, 2017
June 2017 October 4, 2017
July 2017 December 1, 2017
August 2017 December 1, 2017
September 2017 January 23, 2018
October 2017 January 23, 2018
November 2017 Not yet submitted
December 2017 Not yet submitted
The regulations above stated require that the BRS shall be prepared by the
Municipal Accountant within ten days after receipt of the Bank Statements and should be
submitted to the Auditor within ten days after the end of each month, including the original
copies of the bank statements, paid checks and debit/credit memos.
The inability of the Accountant to prepare the required monthly BRS on a regular
basis prevented the Agency to detect errors, if any, on a timely basis and make the
necessary corrections immediately to ensure that the reported Cash in Bank balances
reconcile with the balance/s as shown in the Agency’s depository banks.
Likewise, the absence of up-to-date and complete BRS on the current bank
accounts casts doubt on the existence, validity and accuracy of the reported Cash in Bank
balances as at December 31, 2017 amounting to ₱291.63 million and affects the fairness of
presentation of the Agency’s financial statements as at year end.
Also, because monthly BRS were not prepared and submitted to the Auditor as
required, verification of the validity and correctness of the Cash in Bank, Local Currency
Current Account balance could not be made.
48
The Accounting personnel in-charge of the preparation of the BRS explained that
she was preparing the monthly BRS as required, only that the same were incomplete and
prepared late and not submitted to the Auditor due to the delayed release by the depository
banks of the monthly Bank Statements (BS).
While it is true that the delayed release by the bank of the BS contributes largely to
the inability of the Accountant to prepare and submit promptly the BRS, however, this
should not preclude them from exerting extra effort to secure snapshots of their bank
transactions, in lieu of the bank statements, to check and monitor the status and accuracy of
their bank account balances.
We recommended that Management require the Municipal Accountant to:
a. Coordinate with the Depository Banks for the prompt delivery of the
monthly bank statements with the supporting documents, but in cases
where the bank statements are not yet available, secure snapshot copy of
the bank transactions to facilitate the timely reconciliation of its bank
accounts; and
b. Prepare and submit the monthly Bank Reconciliation Statements for all its
bank accounts for Calendar Year 2017 for the immediate preparation of
the correcting/adjusting entries for discrepancies/errors or other
reconciling items requiring corrections in order to reflect the correct
balance of the cash account in the financial statements and henceforth,
prepare and submit regularly the monthly BRS to the Auditor.
Management Comment:
The Municipal Accountant said that delayed submission of monthly BRS was due
to LBP late delivery of monthly bank statements and in addition lack of personnel. But
Management promised to do their best so that they can submit the required report on time.
17. Evaluation of the Gender and Development (GAD) Accomplishment Report

showed that a number of activities/programs/projects (PPAs) were not gender
related or cannot be directly attributed to women empowerment.
Section 5.2 of Joint Circular No. 2004-01 provides that “The Agency GAD Focal
Point shall prepare the annual GAD Accomplishment Report in coordination with the
agency budget officer following the format prescribed in Annex B to be approved by the
agency head.”
The GAD Accomplishment Report submitted was prepared by GAD Focal

Point/Person and approved by the Municipal Mayor.
49
Our evaluation of the GAD Accomplishment Report showed that the following
activities reported in the Accomplishment Report were not gender related or cannot be
directly attributed to women empowerment:
a. Construction of Typhoon resilient building/ evacuation center

b. Provision of level 1 water system to supply potable water in the remote
barangays
c. Skills training on Early Childhood Care and Development (ECCD)
d. Conduct seminars and advocacies to far flung areas regarding abused of
children
e. To provide health cards to indigent families (Philhealth Pang MASA)
f. Clean and Green Activity / waste disposal
g. Purchase of medical, dental and laboratory supplies
We recommended that Management require the GAD Focal Person to attend

training/seminar on gender sensitivity, GAD Planning and Budgeting in order that
issues and concerns on GAD could be easily addressed and incorporated in their
GAD Plan and Budget. Also, copy furnished COA of the GAD PLAN and Budget
received and reviewed by the MPPDO and DILG for CY 2017 and henceforth,
furnish the same to the Auditor.
Management Comment:
Management asserted that what they have incorporated in their GAD plan /
activities was approved by DILG. But Management promised that they will ensure that
proper programs/activities will be incorporated in their GAD Plan so that issues and
concerns on GAD could be easily addressed.
18. Local Disaster Risk Reduction Management Fund (LDRRMF) for Quick
Response Fund (QRF) and the DRRMF-MOOE totaling ₱9.77 million was not
transferred to the Trust Fund books of the LGU under the account Trust
Liability-DRRM.
Section 21 of R.A. No. 10121 requires that the unexpended LDRRMF shall accrue
to a Special Trust Fund for the purpose of supporting disaster risk reduction and
management activities of the LDRRMC within the next five (5) years.
Section 5.1.10 of COA Circular No. 2012-002 dated September 12, 2012, likewise
states that all unexpended/unobligated balance of the QRF and the DRRMF-MOOE shall
be transferred to the Special Trust Fund under the account “Trust Liability-DRRM” (Code
438) in the Trust Fund books.
Verification of records and analysis of the SAOB, Report on Utilization of

LDRRMF and Financial Statement of the Municipality revealed that the unexpended
balance of the CY 2017 LDRRMF for QRF and the DRRMF-MOOE totaling ₱9.77
50
million (computation is shown in the table below) was not transferred to the Trust Fund
books of the LGU under the account Trust Liability-DRRM as of December 31, 2017.
Appropriation Obligation Balance

30% Quick Response Fund
(QRF) ₱ 2,887,581.60 ₱ 0.00 2,887,581.60
70% DRRMF-MOOE 16,509,513.19 9,625,973.96 6,883,539.23
Total ₱ 19,397,094.79 ₱ 9,625,973.96 ₱ 9,771,120.83
Inquiry from the concerned personnel disclosed that they were not able to transfer
the unexpended balance of the CY 2017 LDRRMF, which resulted in overstatement of the
Cash account in the General Fund and understatement of the Cash and Liability accounts
in the Trust Fund presented in the financial statements as of December 31, 2017.
We recommended that Management direct the Municipal Accountant to:
a) Coordinate with the Municipal Budget Officer to provide the Accounting

Department with the unexpended balance of the CY 2017 LDRRMF for
QRF and the DRRMF-MOOE based from the SAAOB at year end; and
henceforth in the ensuing years; and
b) Strictly comply with Section 21 of R.A. No. 10121 and Section 5.1.10 of
COA Circular No. 2012-002 dated September 12, 2012 on the transfer of
the unexpended balance of the QRF and DRRMF-MOOE to the Special
Trust Fund under the account Trust Liability-DRRM at year end, to
correctly present the balances of the accounts in the financial statements
for General Fund and Trust Fund.
Management Comment:
According to the Municipal Accountant the 2016 and 2015 unexpended balance
were already transferred under the account Trust Liability and 2017 unexpended balance
will be transferred this year.
19. No Contractor’s All Risk Insurance was provided for the 27 infrastructure
projects contracts totaling ₱66.45 million awarded by the Municipality during the
CY 2017.
Clause 15.1 of the GCC of the Philippine Bidding Documents for the Procurement
of Infrastructure Projects 4th Edition December 2010, which was approved and adopted by
the GPPB in its Resolution No. 06-2010 dated December 17, 2010, requires that:
“The Contractor shall, under his name and his own expenses, obtain and
maintain for the duration of this contract, the following insurance coverage:
51
a. Contractor’s All Risk Insurance;”
The Contractor Risk and Warranty Security - The Contractor shall assume full
responsibility for the Works from the time project construction commenced up to final
acceptance by the Procuring Entity and shall be held responsible for any damage or
destruction of the Works except those occasioned by force majeure. The Contractor shall
be fully responsible for the safety, protection, security, and convenience of his personnel,
third parties, and the public at large, as well as the Works, Equipment, installation, and
the like to be affected by his construction work.
We have noted in our review of the 27 infrastructure projects contracts with total
amount of ₱66.45 million awarded by the Municipality during CY 2017, that the
contractors of these projects did not provide Contractor’s All Risk Insurance (CARI) as
required in the foregoing regulation.
Although the Bids and Awards Committee (BAC) of the municipality has the
discretion to customize the bidding documents and require additional necessary document
as part of the bidding documents to be submitted by the bidders, they cannot alter or omit
the required minimum necessary documents stated therein. The General Conditions of the
Contract, which requires the contractor to provide a Contractor’s All Risk Insurance, is
among those bidding documents that contains specific instructions that it should not be
altered, therefore the Municipality should invariably require the contractors of
infrastructure projects to provide the aforementioned insurance upon award of the contract.
It is also noteworthy that the premium for Contractor’s All Risk Insurance are among the
overhead expenses included in the computation of the Approved Budget for the Contract
(ABC) as stated in the DPWH Department Order No. 72 series of 2012, thus, to require the
contractor to provide this insurance will not be a burden to them, since it is deemed
included in the contract cost.
While a Performance Security was duly posted by the contractor, this insurance
guarantees only the faithful compliance of the contractor of his obligations under the
contract. The non-provision of Contractor’s All Risk Insurance for the infrastructure
projects being implemented by the Municipality exposes the projects for losses had there
been any untoward circumstances in which the insurance could compensate for damages
incurred.
We recommended that the Local Chief Executive and BAC require the
contractor to provide/submit a Contractor’s All Risk Insurance (CARI) upon award
of the contract for infrastructure projects. The procuring entity has also the right to
impose other sanctions against the Contractor that fails to provide the required
insurance as stated in Clause 15 of the General Conditions of the Contract.
Management Comment:
52
20. Payments of ineligible expenses amounting to ₱266,246 were charged against the
Special Education Fund (SEF) of the Municipality for CY 2017.
Republic Act (R.A.) No. 5447 approved on September 25, 1968 is an Act creating a
Special Education Fund (SEF) to be constituted from the proceeds of an additional real
property tax and a certain portion of the taxes on Virginia-type cigarettes and duties on
imported leaf tobacco, defining the activities to be financed, creating School Boards for the
purpose, and appropriating funds therefrom.
Under R.A. No. 5447 the SEF shall be expended exclusively for the following
activities of the Department of Education (DepEd):
a) The organization and operation of such number of extension classes as may be

needed to accommodate all children desiring to enter Grade I, including the
creation of positions of classroom teachers, head teachers and principals for such
extension classes, which shall not exceed the standard requirements of the Bureau
of Public Schools: Provided, That under equal circumstances, in the opening of
such extension classes, priority shall be given to the needs of barrios;
b) The programming of the construction and repair of elementary school buildings,

acquisition of sites, and the construction and repair of workshops and similar
buildings and accessories, thereof to house laboratory, technical and similar
equipment and apparatus needed by public schools offering practical arts, home
economics and vocational courses, giving priority to elementary schools on the
basis of the actual needs and total requirements of the country;
c) The payment and adjustment of salaries of public school teachers under and by
virtue of R.A. No. 5168 and all benefits in favor of public school teachers provided
under R.A. No. 4570;
d) The preparation, printing and/or purchase of textbooks, teachers’ guides, forms and
pamphlets, approved in accordance with the existing laws to be used in all public
schools;
e) The purchase and/or improvement, repair and refurbishing of machinery,

laboratory, technical and similar equipment and apparatus, including spare parts
needed by the Bureau of Vocational Education and secondary schools offering
vocational courses;
f) The establishment of a printing plant to be used exclusively for the printing needs
of the Department of Education and the improvement of regional printing plants in
the vocational schools;
g) The purchase of teaching materials such as workbooks, atlases, flip charts, science
and mathematics teaching aids, and simple laboratory devices for elementary and
secondary classes;
53
h) The implementation of the existing program for citizenship development in barrio
high schools, folk schools and adult education classes;
i) The undertaking of educational research, including the Board of National

Education;
j) The granting of government scholarships to poor but deserving students under R.A.
No. 490; and
k) The promotion of physical education, such as athletic meets.
Section 272 of R.A. No. 7160 also provides that the proceeds of the SEF shall be
allocated for the operation and maintenance of public schools, construction and repair of
school buildings, facilities and equipment, educational research, purchase of books and
periodicals, and sports development as determined and approved by the Local School
Board.
Joint Circular (JC) No. 1, s. 1998 of DECS-DBM-DILG (as amended by JC Nos.

01-A and 01-B) provides that the Local School Boards shall give priority to the following
expenses chargeable against Special Education Fund:
a. Operations and maintenance of public schools, including organization of extension,

non-formal, remedial and summer classes, as well as payment of existing
allowances of teachers granted by local government units chargeable against the
SEF as of December 31, 1997, provided that any additional allowances that maybe
granted to teachers by LGUs shall be charged to the general fund of the LGUs
subject to existing budgeting rules and regulations;
b. Construction and repair of school buildings, facilities and equipment including the
acquisition, titling and improvement of school sites;
c. Educational research;
d. Acquisition/procurement of books, instructional materials, periodicals and

equipment including information technology resources; and
e. Expenses for school sports activities at the national, regional, division, district,
municipal and barangay levels as well as for other DECS-related activities
including co-curricular activities.
Further, Section 4 of DEPED-DBM-DILG Joint Circular No. 2017-01, updating the

policies and guidelines contained in previous JCs of the DepEd, DBM, and DILG (JC No.
1 S. 1998, JC No. 1-A s. 2000, JC No. 1-B s. 2001 and JC No. 4 s. 2001) indicates the
allowable expenses chargeable against Special Education Fund, as follows:
1. Operation and maintenance of public schools
54
1.1. Payment of compensation/allowances of teachers locally hired in elementary
and secondary schools identified to have shortages per the teacher deployment
analysis of DepEd; the rates of compensation/allowances shall be determined
by the LSB based on funds available, but not to exceed the salary schedule
being implemented by the local government unit (LGU) concerned: Provided,
that for the purpose of hiring teachers chargeable against the SEF, the LSB in
each province, city or municipality shall utilize the list found in the Registry of
Qualified Applicants (RQA);
1.2. Payment of salaries/wages of utility workers and security guards hired in

public elementary and secondary schools which have not been provided such
position in the DepEd budget; and
1.3. Payment of expenses pertaining to the operation of schools, which may include
utilities and communication expenses.
2. Construction and repair of school buildings
2.1. Construction, repair and maintenance of school buildings and other facilities
for public elementary and secondary schools, which are deemed to have
shortage of classrooms or of other facilities, as the case may be, per DepEd
classroom deployment analysis, subject to existing standards/specifications set
by DepEd and/or Department of Public Works and Highways; furthermore,
this item shall be given priority in the SEF Budget; and
2.2. Acquisition and titling of school sites.
3. Facilities and equipment
3.1. Acquisition of laboratory, technical and similar apparatus, and information

technology equipment and corollary supporting services (e.g. internet
connection, maintenance, etc.), subject to the prevailing requirements and
specifications set by the DepEd.
4. Educational research
4.1. Educational research other than the research subject areas funded in the DepEd
budget, subject to the prevailing policies and guidelines of the DepEd.
5. Purchase of books and periodicals
5.1. Purchase of library books and periodicals for the libraries of the different
elementary and secondary schools in the province, city, and municipality, and
purchase of instructional materials, workbooks and textbooks needed by public
elementary and secondary schools, subject to the prevailing policies and
guidelines of the DepEd.
55
6. Sports development
6.1. Expenses for school sports activities at the national, regional, division, district,
municipal and barangay levels, as well as for other DepEd related activities,
subject to the prevailing requirements and specifications set by the DepEd.
7. Funding for the ECCD Program, particularly for the following purposes
7.1. Direct services related to the implementation of the ECCD program, such as
salaries/allowances of locally hired Child Development Teachers and/or Day
Care Workers, etc.;
7.2. Organization and support of parent cooperatives to establish community-based

ECCD programs;
7.3. Provision of counterpart funds for the continuing professional development of

ECCD public service providers;
7.4. Provision of facilities for the conduct of the ECCD Program; and
7.5. Payment of expenses pertaining to the operations of National Child

Development Centers, including, but not limited to, utilities (i.e. electricity and
water expenses) and communication (i.e. telephone expenses).
Our audit of the disbursements charged against the SEF disclosed the ineligible
expenses paid during CY 2017 totaling to ₱266,246 (Annex B). Review of the SEF
disbursements disclosed that most of the ineligible expenses were payments for activities
related to the implementation of ALS programs for CY 2017. Pursuant to Executive Order
No. 356, dated September 14, 2004, the ALS programs which are administered by the
Bureau of Alternative Learning System, then the Bureau of Non-formal Education, are
funded from the General Appropriations of the DepEd and therefore disbursements for the
implementation of ALS programs are not proper charges against the SEF.
Based on the foregoing provisions of laws, rules and regulations, it could be

concluded that SEF is not the appropriate funding source for the above-cited expenses, as
these are not related to the purpose for which the fund was created and allocated. Said
expenses should have been charged against the available funds of the DepEd.
We recommended that the Local Chief Executive:
a. Direct the Municipal Accountant to stop paying expenditures similar to the

abovementioned ineligible expenses charged against the SEF, particularly
related to activities for the implementation of the ALS Programs of DepEd
since disbursements related to ALS programs should be charged against
the General Appropriations of DepEd pursuant to E.O. No. 356, otherwise
these warrant the issuance of audit suspensions and disallowances; and
56
b. Instruct the Municipal School Board to prioritize the programs, projects
and activities in the preparation of the Annual Municipal School Board
Budget for SEF, pursuant to the pertinent provisions of R.A. No. 5447,
R.A. No. 7160, DECS-DBM-DILG JC No. 01, s. 1998, as amended, and
DEPED-DBM-DILG Joint Circular No. 01, s. 2017, in order to benefit
directly the public school children, who are the intended recipients of the
SEF.
Management Comment:
Management responded that they are not aware that there is a separate fund in
DEDEP specific for ALS. They have promised that they will discontinue the practice of
charging ALS disbursements to SEF.
II. COMPLIANCE WITH TAX LAWS
The Municipality has been compliant with the regulations on withholding of taxes
from all government money payments and all other tax regulations pertinent to its
operations for Calendar Year 2017.
III. STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES
The suspensions, disallowances and charges issued during CY 2017 and the
balances thereof as of December 31, 2017 are summarized as follows:
Balance as of CY 2017 Balance as

January 1, 2017 Issued Settled of December
31, 2017
Suspension ₱ 17,081,626.48 ₱ 0.00 ₱17,081,626.48 ₱ 0.00
Disallowance 299,889.02 0.00 0.00 299,889.02
Charges 0.00 0.00 0.00 0.00
Total ₱ 17,381,515.50 ₱ 0.00 ₱17,081,626.48 ₱299,889.02
57

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PART II

OBSERVATIONS AND RECOMMENDATIONS

I. FINANCIAL AND COMPLIANCE AUDIT

“4.0 Submission Dates

On February 13, 2017, we officially received the 2017 year-end Financial

We recommended that the Local Chief Executive require the Municipal

We also recommended the strict observance by Management of the timely

3. Cash advances totaling ₱280,051 remained unliquidated as at year-end.

“4.1 General Guidelines

5.1 The AO shall liquidate his cash advance as follows:

Failure of the AO to liquidate his cash advance within the

A review of the year-end financial statements of the Municipality showed that

We recommended that Management:

a. Require the Accountable Officers to liquidate/settle immediately their

b. Direct the Municipal Accountant not to allow the granting of additional

Management responded that some amounts in the unliquidated cash advance

“Section 1. Rate of contributions. Covered employees and employers shall

The maximum monthly compensation to be used in computing employee and

A member may, however, be allowed to contribute more than what is required

A review and recomputation of the monthly payrolls and verification of remittances

Thus, the computation of the government counterpart of the monthly contributions

We recommended that Management:

Our evaluation of the payroll disbursement system including the manner of

There was a recommendation made by a member of the Senate of the Republic of

We recommended that Management consider the use of the ATM facility

We recommended that Management discontinue the practice of granting Cash

7. The OIC-Municipal Treasurer was not able to submit to the Municipal

“Real Property Tax Receivables/Special Education Tax Receivables shall

Upon collection of Real Property Taxes from taxpayers, the account

8. The General Services Officer/Property Officer was not properly bonded.

“Every Officer of any government agency whose duties permit or

Verification disclosed that the designated General Service Officer or Property

Further, Treasury Bill No. 02-2009 states that:

“Every officer, agent and employee, accountable for public property

We recommended that the Local Chief Executive (LCE) requires the

Section 124 of NGAS Manual, Volume I for LGUs provides that:

“The Local Chief Executive shall require periodic inventory of supplies

Section 156 of COA Circular No. 92-386 further states that:

“The local chief executive shall require an annual physical inventory of

While Section 147 of the same Circular provides that:

Physical count is an indispensable procedure to ascertain the accuracy of the

We therefore reiterated again the previous years’ recommendation that the

a. Create an Inventory Committee of three (3), consisting of a representative

b. Require the Inventory Committee to conduct a physical count of properties

c. Require the designated Property/Supply Officer to reconcile the inventory

d. Require the Municipal Accountant to reconcile the Inventory Report for

e. Require the Municipal Accountant to prepare a summary of all property

One of the points to be addressed by Local Government Units (LGUs) is the

(2) For a municipality:

(vi) Solid waste disposal system or environmental management

Section 37 of the R.A. No. 9003 provides as follows:

The existing open dumpsite at Barangay Banao used by the Municipality of

A dumpsite as defined, is a piece of land where waste materials are dumped or

“Sec. 23. Requirements for Collection of Solid Wastes. - The

(b) Necessary training shall be given to the collectors and personnel

“b) The xxx Municipal Health Officer shall provide necessary

We recommended that Management:

a. Require the Municipal Solid Waste Management Board to hasten the

b. Undertake to immediately convert the Municipality’s dumpsite to an

c. Intensify the SWM information dissemination campaign, conduct SWM

Section 63 of PD 1445 states that:

“xxx all moneys and property officially received by a public officer in

Verification of donated properties to the Municipality of Bacacay, disclosed that