EXECUTIVE SUMMARY
A.
Introduction
We conducted the audit on the Municipality of Sta. Ana, Pampanga, a third class
municipality comprising of 14 barangays.
Our audit was made in accordance with Philippine Public Sector Standards on Auditing
and we believe that it provided a reasonable basis for the audit.
B.
Financial Highlights
The comparative data on the financial condition, results of operation and sources and
application of funds of the Municipality for the years 2017 and 2016 are presented below:
Particulars
CY 2017
Financial Condition
Total Assets
207,679,997.92
Total Liabilities
93,009,744.63
Net Assets/Equity
114,670,253.29
148,009,176.82
91,939,343.14
56,069,833.68
59,670,821.10 40%
1,070,401.49 1%
58,600,419.61 105%
Results of Operations
Total Revenue
162,902,797.24
Total Expenses
103,661,465.88
Surplus(Deficit)
59,241,331.36
122,755,447.27
100,072,721.87
22,682,725.40
40,147,349.97 33%
3,588,744.01 4%
36,558,605.96 161%
Sources and Application of Funds
Allotment
147,628,578.70
Obligations
110,207,170.50
Balances
37,421,408.27
114,840,896.99
94,139,306.37
20,701,590.62
32,787,681.71
16,067,864.13
16,719,817.65
C.
CY 2016
Increase/ (Decrease)
Amount
%
29%
17%
81%
Scope of Audit
The audit covered the examination, using risk-based approach, of the accounts and
financial transactions of the Municipality of Sta. Ana, Pampanga for CY 2017
particularly those contained in the Memorandum dated October 12, 2017 of the COA
Local Government Sector Assistant Commissioner. Part II of this Report contains the
audit exceptions on the 2017 Audit Focus and Thrusts for the Local Government Sector
and other high-risk accounts.
The audit was aimed to (a) verify the level of assurance that may be placed on
management’s assertions on the financial statements; (b) determine compliance of
management with the laws, rules and regulations on the pre-identified audit thrusts/areas
and recommend agency improvement opportunities thereon; and (c) determine the extent
of implementation of prior year’s audit recommendations.
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D.
Independent Auditor’s Report
We rendered a qualified opinion on the fairness of the presentation of financial
statements of the Municipality of Sta. Ana, Province of Pampanga for the year ended
December 31, 2017 owing to the (a) overstatement of inventory account due to inclusion
of non-existent inventories costing ₱2,286,023.33; (b) overstatement of the Property,
Plant and Equipment (PPE) account due to non-recognition depreciation to the new
municipal building aggregating to ₱1,121,060.25; and (c) failure to establish the year-end
balance of the PPE accounts due to absence of property records, non-conduct of
inventory count and failure to submit inventory report.
For the above errors, we recommended that the Accounting Office (a) coordinate with the
Municipal Treasurer, other concerned departments, and end-users on the reconciliation of
the inventory and PPE accounts balances; and (b) draw the appropriate journal entries to
adjust/correct all noted deficiencies for accurate and fair presentation of the Inventory
and PPE.
E.
Summary of Other Significant Audit Observations and Recommendations
Summarized below are the significant audit observations with their recommendations, the
details of which are presented in Part II of this report. Management views and comments,
including those offered during the exit conference were incorporated in the report, where
appropriate.
1. Audit of cash accountabilities of the OIC-Municipal Treasurer for the period June
30, 2017 to August 7, 2017 showed several deficiencies: (a) collections not remitted
entirely by Collecting Officers to the Municipal Treasurer; (b) Report on Collections and
Deposits (RCDs) not properly accomplished, reviewed and verified by the Municipal
Treasurer; (c) erroneous posting of collections in the cashbook; (d) accountable forms not
controlled and monitored; and (e) delayed reconciliation of cash balances between the
Offices of the Municipal Accountant and the Municipal Treasurer, contrary to pertinent
provisions of the Manual on the New Government Accounting System (NGAS) for Local
Government Units (LGUs) and other regulations resulting in cash shortage of
₱423,307.92 and missing accountable forms. (Observation No. 3)
We recommended that the Municipal Treasurer (a) locate the missing accountable forms,
otherwise issue notice of such loss for the information and guidance of all collecting and
disbursing officers, provincial, city and municipal treasurers, bureau, provincial and city
auditors and other concerned in preventing against the possible fraudulent use of such
accountable forms; (b) diligently perform his duties and responsibilities by installing an
effective management oversight and staff supervision; (c) conduct detailed and
systematic verification of collections reported by the collecting officers; (d) ensure that
postings made in the cashbook are correct and accurate; (e) require the collecting officers
to (i) prepare their individual RCD in four copies and Report of Accountability for
Accountable Forms (RAAF); and (ii) prohibit the practice of transfer of accountable
forms between collectors; (f) assign a personnel who will (a) monitor the requisition,
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receipt and distribution of accountable forms; (b) maintain a separate logbook which shall
show particulars of the accountable forms, such as: serial numbers, the date of issue, and
the name and signature of the person to whom the forms were issued; the prepare and
submit the monthly Consolidated Report of Accountability for Accountable Forms
(CRAAF); (g) institute segregation of duties and responsibilities to prevent errors and
fraud by ensuring that no single person has complete control over custodianship and
recording functions; and (h) ensure that the appropriate fidelity bond for all collecting
officers is filed at the Bureau of Treasury on a timely basis as prescribed by Section 101
of PD No. 1445 and Bureau of Treasury Circular No. 02-2009 dated August 6, 2009 to
protect the government from losses.
We also recommended that the Municipal Accountant and OIC-Municipal Treasurer
closely coordinate and regularly reconcile their respective records for the early detection
and correction of errors.
2.
The Municipality complied with the guidelines set out in Department of Interior
and Local Government (DILG)-Department of Budget and Management (DBM) Joint
Memorandum Circular No. 2017 – 1 dated February 22, 2017 on the appropriation and
utilization of the 20% Development Fund (DF). However, non-compliance with Republic
Act (RA) No. 9184 or the Government Procurement Act was noted along with the
deficiencies in the infrastructure contract payments therefrom such as absence of detailed
engineering, design plans, design analysis, and technical specifications, as-built plans,
and test analysis of construction materials, among others, hence, raising doubt on the
propriety thereof. (Observation No. 6)
We recommended that the Local Chief Executive require the (a) Bids and Awards
Committee (BAC) to (i) meticulously and judiciously prepare the APP including
approved changes thereto, and ensure that all procurements are based on the approved
APP and appropriate procurement modality for the efficient discharge of government
functions pursuant to Section 7 of the Revised Implementing Rules and Regulations
(RIRR) of Republic Act (RA) No. 9184; (ii) submit copies of the contracts and bidding
documents of the completed infrastructure noted above; and (iii) henceforth, submit the
copies of the contract entered into by the Municipality and all the documents forming part
of it such as the bidding documents within five days from the execution of such contract
pursuant to COA Circular No. 2009-001; (b) Municipal Engineer to (i) determine and
address the cause of the deficiencies pertaining to the absence of detailed engineering,
design plans, design analysis, and technical specifications, as-built plans, and test
analysis of construction materials; and (ii) work on the completion of the supporting
documents to preclude the noted transactions from being suspended or disallowed in
audit; and (c) Municipal Accountant to (i) improve compliance with the regulation on the
rendition of accounts and financial reports for timely verification and audit of accounts;
(ii) observe the due dates of submission of the required financial reports and documents
to the Audit Team; (iii) submit the noted disbursement vouchers (DVs) to preclude the
issuance of notice of suspension within fifteen (15) days following the issuance of this
Audit Observation Memorandum; and (iv) ensure that documents are sufficient before
payment to the contractor is made.
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3.
The Municipality has not complied with the provisions of Republic Act No.
10121 and other pertinent guidelines on the utilization and reportorial requirements of the
5% Disaster Risk Reduction Management Fund (DRMMF) which observations included
the following: (a) non-issuance of a revised and updated Executive Order (EO) for the
reorganization of the Municipal Disaster Risk Reduction Management (MDRRM)
Council; (b) inability of the MDRRM Officer to fulfill his duties full time due to his
concurrent designation as OIC-Municipal Treasurer; (c) unfilled mandatory positions for
the MDRRM Office; (d) non-submission of monthly utilization reports; (e) failure to
immediately transfer the unexpended appropriations to the special trust fund account; (f)
non-revision of the Annual Investment Program for new expenditures items funded by
the unexpended balance of the Local Disaster Risk Reduction Management Fund
(LDRRMF); and (g) lacking and unreliable documents to support the disbursement
vouchers. (Observation No. 8)
We recommended that the (a) Local Chief Executive (i) issue a revised and updated
executive order for the reorganization of MDRRM Council; (ii) prioritize the placement
of a full-time MDRRM Officer to focus on core functions of the MDRRM Office and
(iii) fill up the three mandatory positions at the MDRRM Office to handle the
administration and training, research and planning, and operations and warning; (b)
Municipal Accountant (i) submit monthly reports on the sources and utilization of
LDRRMF based on the required format of COA Circular 2012-002; and (ii) facilitate the
immediate transfer of the remaining balance of the 5% DRMMF to the special trust fund
account; (c) Municipal Planning and Development Officer (MPDO) ensure the revision
of the Annual Investment Program for the inclusion of new expenditure items which will
be charged against the unexpended balance of the 5% DRRMF; and (d) Municipal
officials concerned (i) submit the following documentary requirements: documents
supporting the existence of two project billboards, duly approved comprehensive
construction and health program, certification of the first aider from the Philippine
National Red Cross or by any organization accredited by the same, documents such as
distribution lists in support of the distribution of PPE, garments and relief goods, logbook
of activities for the de-clogging of canals project; and (ii) improve compliance to the
provisions of RA No. 10121 and relevant COA and Department of Public Works and
Highways (DPWH) issued circulars and memorandum.
Also, we recommended that management submit an explanation, for evaluation of the
Audit Team as basis for its next audit action, on the following deficiencies noted: (a)
₱58,757.23 difference between the contract price and the re-computed Approved Budget
for the Contract (ABC) using the DPWH prescribed percentage rates, (b) ₱7,252.67 for
the cost of unnecessary labor and COA tarpaulin paid under pay item “Project
Billboard/Signboard”, (c) ₱4,670.34 for the cost of the un-complied Construction,
Occupational, Safety and Health (COSH) program, and (d) amount paid for the common
borrow which was not required by the project.
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4.
Due to the failure of the Bids and Awards Committee to meticulously evaluate the
bidding documents, the Municipality of Sta. Ana, Pampanga awarded two procurements
of goods contracts totaling ₱4,998,000.00 to an ineligible bidder which was not in
accordance with the 2016 RIRR of RA No. 9184. (Observation No. 12)
We recommended that the BAC Chairman and Technical Working group (TWG)
members submit a written explanation on the deficiencies noted as basis for the Audit
Team’s next audit action. Further, we recommended that Local Chief Executive instruct
the BAC to comply with guidelines set forth by the RIRR of RA No. 9184 for all the
procurement transactions of the Municipality.
5.
The Approved Budget for the Contract prepared and approved by agency officials
for several projects did not conform with the standard specifications provided in the
DPWH Department Order (DO) No. 197, series of 2016 hence, the ABC of projects
totaling ₱34,700,000.00 was above the COA evaluated cost by ₱3,473,338.75.
(Observation No. 16)
We recommended that the Local Chief Executive require the Municipal Engineer to (a)
submit an explanation, for evaluation of the Audit Team as basis for its next audit action,
on the difference noted between the agency computed ABC and the re-computed ABC
using the DPWH prescribed percentage rates; and (b) henceforth, comply with the
DPWH guidelines in the preparation of ABC to prevent unwarranted bloating of project
cost.
6.
Recurring deficiencies were noted in the de-clogging/clearing of canals and
waterways, to wit: (a) construction equipment required for the completion of the project
not included in the list of Equipment, Owned or Leased and/or under Purchase
Agreement, Pledged to the Proposed Contract and Equipment Utilization Schedule
provided by the Contractor; and (b) construction materials such as common borrow
which was not among the contractual requirements based on engineering plans and
documents prepared by the Municipality was nevertheless included in the Detailed Unit
Price Analysis and paid to the Contractor which could have been determined had the
BAC conducted the post-qualifications of bidders in meticulous manner as prescribe
under the RIRR of RA No. 9184. (Observation No. 17)
We recommended that the Local Chief Executive require the Municipal Engineer to
submit an explanation, for evaluation of the Audit Team as basis for its next audit action,
on the deficiencies noted relative to the construction equipment and common borrow
delivered by the Contractor which did not meet the specifications as contained in the
DUPA of the Municipality.
Further, we recommended that the Bids and Awards Committee undertake postqualification proceedings in a meticulous manner to streamline procurement activities in
accordance with the RIRR of RA No. 9184.
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7.
Inappropriate payments to contractors were made for (a) unnecessary labor and
materials included in the pay item for projects billboards; (b) uninstalled project
billboards; and (c) Occupational Safety and Health Program which was not complied
with, hence resulted in unnecessary expenditures at the expense of the government.
(Observation No. 18)
We recommended that Management require the Municipal Engineer to submit an
explanation, for evaluation of the Audit Team as basis for its next audit action, on the
deficiencies noted for the cost of unnecessary labor and materials on the installed COA
tarpaulin and uninstalled municipal tarpaulin paid under pay item “Project
Billboard/Signboard” and for the cost of the un-complied COSH program.
Henceforth, we recommended that the Municipal Engineer refer to COA Circular No.
2013-004 dated January 30, 2013 and Department of Labor and Employment (DOLE)
DO No. 13, series of 1998 in the preparation of cost estimates and bill of materials
pertaining to project billboards and COSH program.
8.
A difference of ₱100,000.00 between the total loan proceeds credited to the
account of the Municipality and the total approved loan per Loan Agreement was noted
in the review of loan account of the Municipality. Further, in the audit of the projects
funded out of the loan, the following were noted: (a) procedural and documentary
deficiencies in the acquisition of the lot; and (b) pay item amounting to ₱223,748.14
included in the contract cost was not installed hence, may be disallowed in audit.
(Observation No. 20)
We recommended that management (a) make proper representation with the LBP to
clarify the difference of ₱100,000.00 between the total amount of proceeds credited to the
account of the Municipality and the total approved loan per Loan Agreement; (b) require
the Municipal Budget Officer to keep the registries of appropriations and balances
updated to reflect the correct balances of accounts; and (c) require the Municipal
Engineer to submit an explanation on the noted observation of the Regional Technical
Services Office (RTSO) relative to the uninstalled Unglazed Tiles Wall Finish under Subitem B – Floor and Wall Finishes of Item VIII – Architectural Works amounting to
₱223,748.14, otherwise, the same shall be disallowed in audit.
9.
Procedural and documentary deficiencies contrary to the RIRR of RA No. 9184,
Presidential Decree No. 1445, COA Circular Nos. 2012-001, 2009-001 dated June 14,
2012 and February 12, 2009, respectively, were noted in the procurement of supplies
thereby creating doubt on the propriety of the procurement process conducted and the
regularity of the transactions. (Observation No. 23)
We recommended that the BAC and Municipal Accountant submit to the Audit Team (a)
an explanation on the deficiencies noted for the evaluation of the Audit Team as basis for
the next audit action; (b) the lacking documentary requirements; and (c) un-submitted
disbursement vouchers and bidding documents. Further, we recommended that the BAC
refer to the pertinent provisions of the RIRR of RA No. 9184 in the procurement of
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goods. Moreover, we recommended that the Municipal Accountant check compliance
with COA Circular 2012-001 which prescribes the guidelines for the documentary
requirements for common government transactions.
We also recommended that the Municipal Treasurer comply with the timely submission
of the contracts/POs and notifications of deliveries to the Audit Team. Lastly, we
recommended that management cause the immediate refund of the cost of undelivered
paid office supplies from Narciso Balagtas Trading in the amount of Ᵽ29,280.00.
10.
A number of DVs and their supporting documents paid in January 2017 to
December 2017 with transaction value of ₱18,360,750.51 were not yet submitted for
audit/verification which was not in consonance with Section 7.2.1(a) of COA Circular
No. 2009-006 dated September 15, 2009 and Section 39 of Presidential Decree No. 1445,
hence, precluding the audit team from conducting the timely audit thereof. (Observation
No. 31)
We recommended that the Municipal Accountant, in coordination with other concerned
Municipal officials (a) strictly comply with the regulation on the rendition of accounts
and financial reports for the timely verification and audit of accounts; and (b) observe the
prescribed dates of submission of the required financial reports and documents to the
Audit Team.
We also recommended that Municipal Accountant (a) cause the immediate submission of
the above-said disbursement vouchers to the Audit Team for verification. Lastly, we
recommended that the Local Chief Executive require all concerned Municipal officials to
strictly comply with required submission of accounts and rendition of reports and avail of
administrative remedies, as necessary, to compel compliance thereto.
11.
The Municipality registered a high percentage rate of 94% for the utilization of its
20% Development Fund for CY 2017. However, it has included in its 20% DF budget
low-impact programs that are not fully responsive to a meaningful local development
cause as prescribed under the DILG-DBM Joint Memorandum Circular (JMC) No. 20171 dated February 22, 2017. (Observation No. 33)
We recommended that the Local Chief Executive, in coordination with the Municipal
Development Council come up with a studied screening and ranking method in
identifying priority programs and projects to arrive at a reasonable assurance that the
20% Development Fund is utilized for desirable social, economic and environmental
outcomes with high economic development impact and that are harmonized with national
development plans, goals and strategies in order to optimize the utilization of resources.
F.
Summary of Total Suspensions, Disallowances, and Charges At Year-End
As of year-end, suspensions, disallowances and charges stood at ₱0.00, ₱881,572.94 and
₱0.00, respectively.
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G.
Status of Implementation
Recommendations
of
Prior
Years’
Unimplemented
Audit
Out of the 88 audit recommendations in the previous year’s Annual Audit Report, 28
were fully implemented, 14 were partially implemented, and 46 were not implemented.
Those not fully implemented were accordingly reiterated in this audit report to draw
attention for their implementation.
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