EXECUTIVE SUMMARY
A. Introduction
We conducted an audit on the Municipality of Guagua, a first-class municipality
comprising of 31 barangays.
Our audit was made in accordance with International Standards of Supreme Audit
Institutions (ISSAIs) and we believe that it provided a reasonable basis for the audit
results.
The audit covered the examination, using risk-based approach, of the accounts and
financial transactions of the Municipality for CY 2021 particularly those contained in the
Memorandum dated October 13, 2021 of the COA Local Government Sector Assistant
Commissioner. Part II of this Report contains the audit exceptions on the 2021 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.
B. Financial Highlights
The financial condition, results of operation and sources and application of funds of the
Municipality for the years 2020 and 2021 are presented below:
2021
2020
Increase
(Decrease)
Financial Condition
Total Assets
Total Liabilities
Total Equity
697,267,223.05
296,218,301.39
401,048,921.66
602,677,373.95
180,161,547.37
422,515,826.58
94,589,849.10
116,056,754.02
(21,466,904.92 )
Results of Operations
Total Revenues
Total Expenses
Excess of Income Over Expense
386,453,760.74
324,075,143.49
62,378,617.25
375,306,891.13
319,743,310.58
55,563,580.55
11,146,869.61
4,331,832.91
6,815,036.70
Sources and Application of Funds
Allotments
Obligations
Balances
383,217,280.03
336,782,286.60
46,434,993.43
418,894,257.55
336,320,715.12
82,573,542.43
(35,676,977.52 )
461,571.48
(36,138,549.00 )
i
C. Auditor’s Opinion
We rendered a qualified opinion on the fairness of presentation of the financial
statements because the existence and accuracy of the Property, Plant and Equipment
(PPE) with reported carrying value of ₱306,298,776.80 as of December 31, 2021 was
unreliable due to (a) incomplete physical count of PPE; (b) incomplete property cards,
and property, plant and equipment ledgers cards; (c) unreconciled inventory report and
accounting records; and (d) inclusion of small tangible items and items with value below
the capitalization threshold in the inventory report.
We recommended that the (a) Head of the General Service Unit and Municipal
Accountant (i) maintain complete property and ledger cards; and (ii) exert more efforts in
reconciling the reported PPE items in the inventory report and accounting records; and
(b) Municipal Accountant, in coordination with the Head of the General Services Unit,
determine all small value items for reclassification and make the necessary adjusting
entry to reflect the correct balances of the PPE accounts.
D. Other Significant Observations and Recommendations
1.
For CY 2021, the Municipality, through the efforts of the Municipal Health Office
and other municipal offices, was able to inoculate 64,162 individuals pursuant to
Republic Act (RA) No. 11525 otherwise known as the COVID-19 Vaccination Program
Act of 2021 to address the adverse impact of COVID-19.
However, the records of vaccines and the masterlist of the names and profiles of the
vaccinated residents, healthcare workers and uniformed personnel maintained by the
Municipal Health Office and Municipal Planning and Development Office, respectively,
as required by Implementing Rules and Regulations of RA No. 11525 and Department of
Health Department Memorandum No. 2021-0099 dated February 23, 2021, were
rendered unreliable, resulting in the difficulty in determining if the received vaccines
were properly managed and accounted for. (Observation No. 1)
We recommended that the Local Chief Executive, instruct the Municipal Health Office to
(a) coordinate with the Provincial Government and Department of Health (DOH)
Regional Office (RO) No. III for the noted deficiencies on the transferred vaccines; (b)
prepare and submit to the Audit Team a detailed record of received and issued vaccines;
and (c) henceforth, ensure the preparation and maintenance of complete and accurate
records and reports.
Further, we recommended that the Municipal Planning and Development Officer conduct
thorough review of the masterlist of vaccinated individuals and make the necessary
corrections.
2.
The Municipality’s practice of continuously paying expenses, that were not
emergency in nature, through cash advances instead of direct payment through check and
granting of cash advance despite non-liquidation of previous cash advance by
accountable officers which are not in accordance with the provisions of COA Circular
ii
No. 97-002 dated February 10, 1997 indicates internal control weaknesses on the
agency’s disbursements.
Further, Petty Cash Fund and Cash Advances amounting to ₱60,000.00 and
₱15,227.50, respectively, remain unliquidated at year end contrary to the same COA
circular resulted in the understatement and overstatement of the corresponding expense
and asset accounts, respectively. (Observation No. 3)
We recommended that the Municipal officials and employees observe strictly the
guidelines on the granting, utilization and liquidation of cash advances, and effect the
payment of expenses through check payable directly to the supplier or creditor except in
cases where (a) needed items are extremely necessary and urgent which cannot be
conveniently paid by check, and (b) the item/service is petty in nature.
Further, we recommended that the Local Chief Executive (a) demand the immediate
liquidation or refund of the outstanding year-end balances of Petty Cash Fund; (b)
instruct the concerned accountable personnel to liquidate their cash advances as soon as
the purposes were served, and no additional cash advances shall be granted unless the
previous ones were liquidated or settled; and (c) require explanation on the delayed
liquidation of the funds.
3.
The Municipality failed to follow the provisions set forth on the Manual on the
New Government Accounting System (NGAS) for Local Government Units (LGUs)
relating to the accounting and management of inventory as manifested by the (a) nonconduct of semi-annual physical count of inventories and non-submission of the Report
on the Physical Count of Inventories (RCPI); (b) non-maintenance of complete property
and accounting records; and (c) errors/inconsistencies on the recording of inventory
transactions resulting to unreliable inventory account balance as of December 31, 2021
totaling ₱3,415,463.90.
Moreover, (a) purchase of goods totaling ₱297,516.00 were not paid directly to
suppliers but were paid through reimbursements and did not pass through the normal
process of procurement which is not in accordance with the provisions of COA Circular
No. 97-002 dated February 10, 1997; and (b) some goods were paid with lacking
documents contrary to Section 9 of COA Circular 2012-001 dated June 14, 2012.
(Observation No. 4)
We recommended that the Local Chief Executive (a) instruct the Inventory Committee to
facilitate the conduct of the physical count of all inventory items semestrally to establish
the correct balances for each account and submit a complete and accurate RPCI; and (b)
direct the Municipal Accountant and Head of the General Services Unit to prepare and
maintain complete supplies ledger cards and property cards for all inventories.
Further we recommended that Local Chief Executive direct all department heads and
designated supply officers to (a) formulate policies and procedures in the control and
monitoring of all inventories purchased and received; (b) ensure the preparation and
iii
timely submission of reports pertaining to the issuance of inventory items; and (c) strictly
comply with the rules and regulations contained in the NGAS Manual for the proper
recording, valuation and preparation of the required inventory reports.
Moreover, we recommended that the Local Chief Executive instruct officials and
employees concerned to ensure that (a) all disbursements were supported with complete
documentation; and (b) payment for goods and services be made through check, directly
payable to suppliers, except in cases where needed items are extremely necessary and
urgent which cannot be conveniently paid by check.
4.
The Municipality was able to appropriate 20% of its Internal Revenue Allotment
(IRA) for the implementation of developmental projects and implement 13 out of the 39
planned projects pursuant to Section 287 of the Local Government Code or RA No. 7160.
However, delay in the implementation of projects was noted which may be attributed to
the Municipality’s failure to commit and identify the specific period of implementation of
the programs/projects/activities (PPAs) in its Annual Investment Program (AIP) and
Annual Procurement Plan (APP) contrary to the provisions of the RA Nos. 7160 and
9184. (Observation No. 7)
We recommended that the Local Development Council, chaired by the Local Chief
Executive, strengthen the cycle of planning, execution, monitoring and evaluation of
programs and projects for prioritization under the 20% Development Fund in order to
ensure well prepared and implementation-ready programs and projects.
Further, we recommended that the Municipal Development Council and Bids and Awards
Committee, in coordination with the Municipal Engineering Office, include in the AIP
and APP the specific period of implementation of the PPAs for the ensuing year to ensure
timely implementation thereof.
5.
The failure of the Municipality to comply with provisions of the guidelines on the
release and utilization of funds from other government agencies as manifested by the
delay in the implementation of projects/programs resulted in the unutilized funds to be
returned to the National Treasury. (Observation No. 8)
We recommended that the Local Chief Executive instruct the Municipal Engineer and
other implementing departments to monitor the implementation of programs and projects
to ensure timely completion and avoid non-compliance with the conditions of the
transfers and lessen the eventual termination of projects and return of funds.
Further, we recommended that the Local Chief Executive instruct the Municipal
Accountant and Municipal Treasurer to return the unutilized funds from the National
Disaster Risk Reduction and Management Fund to the National Treasury.
6.
The Municipality failed to maximize the utilization of the Local Disaster Risk
Reduction and Management Fund (LDRRMF) and observe the reportorial and recording
requirements required under COA Circular Nos. 2012-002 and 2014-002 dated
iv
September 12, 2012 and April 15, 2014, respectively, particularly on the (a) inclusion of
the list of PPAs charged to the unexpended LDRRMF of previous years and funds
sourced from General Appropriations Act in the Investment Plan; (b) preparation of
LDRRMF utilization reports which may hinder the attainment of the fund’s objective of
reducing disaster risks.
Further, the non-recognition of expense accounts resulted in the difficulty of
monitoring the expenditures charged against the unexpended LDRRMF which is not in
consonance with Section 110 of Presidential Decree No. 1445. (Observation No. 10)
We recommend that the Municipal Disaster Risk Reduction and Management Council (a)
prepare a comprehensive and an in-depth LDRRM Investment Plan, both for current and
previous years’ LDRRMF; and (b) conduct thorough evaluation and planning of the
DRRM PPAs for effective and efficient utilization of the LDRRMF.
Moreover, we recommend that the LDRRM Officer and Municipal Accountant (a) ensure
that all DRRMF are included on the Report on Utilization of DRRMF for easy
monitoring of the utilization of the fund; and (b) prepare all required reports pursuant to
COA Circular Nos. 2012-002 and 2014-002.
Likewise, we recommend that the Municipal Accountant recognize the appropriate
expense accounts for the recording of expenditures charged under the unexpended
LDRRMF.
7.
Owing to the failure of the Local School Board (LSB) to appropriate the available
Special Education Fund (SEF) for the implementation of projects, programs and activities
that may be beneficial to the teachers and students, the purpose of the fund, which is to
provide supplementary annual budgetary needs for schools and learning centers as
provided under the DepEd-DBM-DILG Joint Circular No. 1, s. 2017, was not served.
(Observation No. 12)
We recommended that the Local Chief Executive, as Chairman of the LSB, the CoChairman and other members of the LSB (a) conduct consultation/discussion with heads
of schools and other stakeholders for strategic prioritization in the allocation of the SEF
and to properly plan the PPAs to be implemented from the fund; and (b) coordinate with
the Municipal Treasurer, Municipal Budget Officer and Acting Municipal Accountant for
the available SEF and maximize the utilization of the Fund to attain its goals and
objectives.
8.
Deficiencies inconsistent with Municipal Ordinance No. 13, series of 2019 and
COA Circular No. 97-002 dated February 10, 1997 such as payment of assistance were
made through petty cash, deficient/insufficient supporting documents, and inconsistencies
between the recorded and received assistance rendered the validity of the recorded
disbursements doubtful.
v
In addition, deviations among the powers, duties and functions of the Municipal
Mayor, Vice-Mayor and Members of the Sangguniang Bayan provided in Section 444,
445, and 447 of Republic Act No. 7160 or the Local Government Code of 1991, were
noted such that elected officials acted as disbursing officers for financial assistance
grants. (Observation No. 13)
We recommended that the Local Chief Executive, instruct the concerned municipal
offices to (a) stop paying financial assistance through petty cash fund; (b) henceforth,
strictly comply with the rules and guidelines in the grant of financial assistance
particularly on the required supporting documents; and (c) submit an explanation on the
inconsistencies noted between the recorded assistance and those actually received by the
beneficiaries.
Further, we recommended that elected officials refrain from the practice of granting
financial assistance directly to its constituents.
Moreover, we recommended that Local Chief Executive instruct the Municipal Social
Welfare and Development Officer, Municipal Treasurer, and Municipal Accountant to
devise a coordinated system in the assessment, evaluation, and payment of financial
assistance to ensure that all the beneficiaries are eligible, the transactions are properly
documented, and the assistance are actually received by the beneficiaries.
E. Summary of Total Suspensions, Disallowances, and Charges at Year-End
There were no suspensions or disallowances issued during the year. The Statement of
Audit Suspensions, Disallowances and Charges showed no balance as of December 31,
2021.
F. Status of Implementation of Prior Year’s Audit Recommendations
Out of the 26 prior year’s audit recommendations, 10 were implemented, one was
partially implemented, and 15 were not implemented.
vi