EXECUTIVE SUMMARY
INTRODUCTION
The Municipality of Subic was founded in 1542 by Juan de Salcedo, the Spanish
conquistor during the colonization of the Eastern Hemisphere. Legend tells that the
town’s name was a derivative of “Hubek” (Head of Plows), which the religious
missionaries mispronounced as “Subic”.
Today, Subic is a first class municipality with sixteen barangays separate and distinct
from the United Stated Naval Base, now Subic Bay Metropolitan Authority and from its
former barrio, Olongapo City.
As a highly urbanizing municipality, the local administration is faced with the challenges
of policy formulation and program implementation to create an environment that is
conductive to the development and growth of local enterprise.
FINANCIAL HIGHLIGHTS
The financial condition, results of operation and sources and application of fund for the
two comparative years as at December 31, 2013 were as follows:
Increase
(Decrease)
2013
FINANCIAL CONDITION
P 294,536,148.24
Assets
172,335,125.46
Liabilities
Government Equity
122,201,022.78
2012
P 299,095,971.30
175,763,212.93
123,332,758.37
P (4,559,823.06)
(3,428,087.47)
(1,131,735.59)
RESULTS OF OPERATIONS
Income
P 204,216,098.34
Expenses
201,321,160.90
Net Income
2,894,937.44
P 188,865,196.87
197,525,167.79
(8,659,970.92)
P 15,350,901.47
3,795,993.11
11,554,908.36
SOURCES OF APPLICATION OF FUNDS
Allotments
P 245,828,372.70
Obligations
209,905,881.54
Unexpended Balance
35,922,491.16
P 244,898,789.15
201,548,288.89
43,350,500.26
P
929,583.55
8,357,592.65
(7,428,009.10)
OPERATIONAL HIGHLIGHTS
During the year, the Municipality of Subic was the recipient of an upgraded category of
bronze to silver Seal of Good Housekeeping (SGH) award in recognition of the
Municipality’s outstanding performance and exemplary practice in the areas of sound
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fiscal management after satisfactorily complying with the Full Disclosure Policy (FDP),
have exemplary standards of frontline service, and proven to have no adverse or
disclaimer opinion rendered by Commission on Audit.
The highlights of its accomplishments included the following:
a. Education, being a flagship project, the Municipality sustained to work towards
its battlecry “Edukasyon Tungo sa Kaunlaran” which was performed hand in hand
with DepEd Subic towards achieving its motto “Better Education…Better Lives.”
b. The Kolehiyo ng Subic, one of its economic enterprises had a student population
of 2,622 students and produced 421 graduates for SY 2013-2014. In terms of
qualitative accomplishments, the College obtained in CY 2012, an overall
performance rating of 52.00% for BEEd, which is higher than the National
Passing Rate of 45.45% and 44.44% for BSEd , which is higher than the National
Passing Rate of 43.50%.In CY 2013, its overall performance was 21.43% for
BEEd, 65.91% for BSEd and 33.33% for the CPA Licensure examination.
c. The Integrated Coastal Resource Management Project (ICRMF) was established
which aims to secure the condition of the municipality’s marine resources. Its
objective is to enable the marginal fisherman of a steady fish catch to earn enough
money not only to feed their families, but to be able to sell their excess catch to
buy basic necessities to live a decent life. Also this program aims to stop all
illegal forms of fishing practices to insure a better future for the next generation of
Subikeños.
d. To have a viable income and to boast the Tourism industry in the municipality,
the Kolehiyo Ng Subic (KNS) opened a 2 year TESDA Course on “Tourism
Hotel Restaurant Operation (THRO) wherein graduates have a strong chance of
being employed in tourism related businesses.
e. In line with the campaign against illegal drugs and in coordination with the
Municipal Anti-Drug Addiction Council (MADAC), and under the direct
supervision of the Local Chief Executive, the office arrested for rehabilitation
ninety-four (94%) drug pushers and users from January to June, which is more or
less sixty percent (60%) of the total arrested persons for illegal drugs for the
whole province. This resulted to the reduction of illegal drugs supplies in the
Municipality of Subic and other nearby municipalities.
f. In the area of agriculture, accomplishment rates vis-à-vis targets were recorded on
crop production of 92 to 95% on rice, 101-144% on corn, 97 to116% on vegetable
production and 89 to 103% on monitoring of fruit bearing trees such as mangoes
and cashew trees. Accomplishment rates of 100 to 114% were registered in the
area of crop protection such as rat control, rat damage appraisal, and use of
observation stations for pest and disease surveillance; Accomplishment rate of
100% vis-à-vis targets were recorded on farm demonstration, institution building
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support services on Distribution of Certified Seeds, Distribution of Corn seeds,
Distribution of Zinc Sulfate and Distribution of registered Seeds.
SCOPE OF AUDIT
The audit covered the examination of the financial transactions and operations of the
Municipality of Subic for the year ended December 31, 2013. The audit was aimed to a)
ascertain the level of assurance that may be placed on management’s assertions on the
financial statements; b) recommend agency improvement opportunities; and c) determine
the extent of implementation of prior year’s audit recommendations.
AUDITOR’S REPORT
The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Municipality of Subic, Zambales for the year ended December
31, 2013 due to deviations from prescribed procedures and non-compliance with rules
and regulations resulting in errors in some account balances and accounting deficiencies
which are discussed in detail in Part II of this report and summarized as follows:
1.
The Municipality registered a favorable decrease of 48.09% in its cash overdraft
from the previous year’s P36.80 million to the current year’s P19.10 Million but
its recorded cash balance of P14.61 million at year-end was still insufficient to
cover the Municipality’s current liabilities including cash withheld for remittance
to BIR, GSIS, PhilHealth, PAG-IBIG and other agencies totaling to P33.72
million contrary to Section 337 of R.A. 7160.
We recommended that management:
a) exercise prudence in the use of the limited cash resources and stop the
practice of incurring obligations when the disbursements thereof exceed
fifty percent of the uncollected estimated revenues accruing to such local
fund in addition to the actual collections pursuant to Section 337 of RA
7160.
b) utilize the budget as a tool in maximizing the use of government funds.
Program the expenditures appropriately in line with the Municipal
Government’s short-term objectives;
c) exert efforts to collect revenues especially on delinquent accounts and
ensure that cash is always available for all proposed expenditures.
2.
Cash – Disbursing Officer amounting to P6,396,715.00 and Advances to Officers
and Employees amounting to P1,786,146.00 or a total of P8,182,861.00 remained
unliquidated as of December 31, 2013 in violation of COA Circular Nos. 97-002
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dated February 10, 1997, 2012-004 dated November 28, 2012 and 2003-003 dated
July 30, 2003, Section 89 of P.D. No. 1445 and Accounting Circular 2006-001
dated November 9, 2006.
We recommended that management:
a) require the Municipal Mayor to demand immediate liquidation of overdue
cash advances. Issue written notices and demand letters to all accountable
officials and employees within the municipality for all outstanding and
unliquidated cash advances as of December 31, 2013 pursuant to COA
Circular No 2012-004 dated November 28, 2012;
b) submit copies of written notices served to concerned accountable officers
and demand letters sent by the Municipal Mayor requiring settlement of
the outstanding cash advances in order to substantiate the courses of action
taken by management to enforce liquidation of these cash advances
pursuant to the prescribed Duty of Agency officials provided in COA
Circular No 2012-004 dated November 28, 2012;
c) require all officials and employees with cash advances to immediately the
liquidate the same and monitor the liquidation of all current advances to
prevent possible misuse of funds and eventual accumulation of
unliquidated cash advances; and
d) submit cash advances intended for intelligence fund directly to the COA
Chairperson’s Office within one month from the date the purpose of the
cash advance was accomplished and prior to the granting of any additional
cash advance.
3.
.
The ownership of the Land Account valued in the books at P24,429,688.35 was of
doubtful validity because management failed to take appropriate action to secure
the Transfer Certificate of Title or other documents evidencing that title is already
vested in the Municipality of Subic contrary to Section 39 of P.D. No. 1445.
We recommended that the Municipal Treasurer and the Municipal Assessor make
representations with concerned agencies such as the Bureau of Lands, Register of
Deeds and Bureau of Internal Revenue to facilitate the processing of titles to
convey real ownership of the Land Account in the name of the municipality.
4.
The accuracy, validity and existence of property, plant and equipment (PPE) with
a reported book balance of P185,111,766.80 was doubtful due to (a) nonagreement of the subsidiary ledger balance totaling P181,285,272.06 with the
general ledger of P185,111,766.80 showing a difference of P3,826,494.74; and
(b) non-completion of the physical inventory count of property of P12,739,791.83
which resulted in an unreconciled difference totaling P172,371,947.97.
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We recommended that management:
a) require the Municipal Treasurer and the Inventory Committee to complete
the physical inventory of property, plant and equipment and to prepare and
submit the report thereon in order to reconcile the results thereof with the
year-end balance per books of P185,111,766.80;
b) require the Accounting Office to investigate and reconcile the difference of
P3,826,494.74
between
the book inventory of PPE totaling
P185,111,766.80 and the property, plant and equipment ledger cards
(PPELC) maintained by the Accounting Office totaling P181,285,272.06;
c) require the Inventory Committee to conduct a thorough review of the
Report on the Physical Count of PPE by conducting actual count, validation,
verification and inspection of PPE owned by the Municipality to establish
their existence; and
d) require the Accounting Office and the Treasury Office to maintain complete
PPELC and property cards, reconcile their records and effect the necessary
adjustments to fairly present the balance of the affected accounts in the
financial statements.
5.
The balances of the Due to Other NGAs account of P4,137,156.58 consisting of
Priority Development Assistance Fund (PDAF) and other trust receipts remained
long-outstanding in the books as of December 31, 2013, due to the inability of
management to determine the details necessary for the implementation of the
projects to be funded from these funds contrary to Section 4.9 of COA Circular
No. 94-013 dated December 13, 1994.
We recommended that management:
a) determine the details of the unutilized PDAF Funds and see to it that all
balances of PDAF trust funds which are not covered by Notice of Cash
Allocations but only by Special Allotment Release Orders, whether
obligated or not, should be reverted to the Unappropriated Surplus of the
General Fund; and
b) proceed with the implementation of projects pertaining to the Trust Fund
balances of P521,394.53. All trust funds which are no longer needed or
not required by law or contractual agreement to be returned to the trustor
or after completion of the project/purpose for which said trusts are
intended should be returned and /or reverted at the earliest possible time to
the Source Agency or National Treasury as required under COA Circular
No. 94-013 dated December 14, 1994 and Section 122 of the Government
Accounting and Auditing Manual, Volume I.
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6.
Procurement of supplies and materials totaling P10,427,134.70 were inadequately
provided with the documentary requirements common to all purchases under the
alternative modes of procurement, not supported by certificates of inspection and
acceptance by the General Service Office (Municipal Treasurer) and not received
by the end-users as provided by laws, rules and regulations, thus leading to
doubtful validity, propriety and legality of the transactions in violation of Section
4(5) and 4(6) of P.D. No. 1445 or otherwise known as Government Auditing
Code of the Philippines and Section 9.2 of COA Circular 2012-001 dated June 14,
2012.
We recommended that the management:
a) ensure that disbursement vouchers are duly supported with the required
documents and the Purchase Orders and Acceptance and Inspection Reports
are properly accomplished, signed and completely substantiated with the
necessary information as enumerated in COA Circular Nos. 2012-001 and
2009-001; and
b) require the end-user departments to account for the utilization of the
supplies and materials acknowledged to have been received by them.
7.
Procurement of supplies and materials totalling P26,260,509.81 were made
through shopping instead of public bidding thereby producing results that may not
be the most economical and efficient on the part of the government contrary to the
provisions of the Revised Implementing Rules and Regulations of RA No. 9184.
We recommended that management :
a) require the Municipal Treasurer to consolidate all purchase requests and
adopt competitive public bidding as the primary mode of procurement of
goods and services to ensure that the lowest possible price can be obtained
from the procurement;
b) refrain from splitting the purchase order and/or contracts in order to evade
public bidding and resorting to the adoption of other alternative methods
of procurement of goods. Alternative methods of procurement such as
shopping should be resorted to only in highly exceptional cases provided
under the implementing guidelines of RA 9184.
8.
The municipality purchased 4,285 Liters of Effective Microwealth Probiotics
(EMP) under the Priority Development Assistance Fund totalling to
P2,995,215.00 despite the existence of a significant and unused quantity of the
said item which have been unused and carried in stock in the bodega for more
than two years contrary to the requirements of Section 428, Volume I of the
Government Accounting and Auditing Manual (GAAM) and Section 117 of COA
Circular No. 92-386 dated October 20, 1992. Furthermore, the municipality failed
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to record the lot/batch number and obtain samples for test analysis at the Food and
Drugs Administration for deliveries of chemicals and disinfectants contrary to
Section 117 of COA Circular No. 92-386 dated October 20, 1992 thereby
providing no assurance on product quality and conformity with BFAD standards.
We recommended that management:
a) submit explanation and documents to support the need and requisition for
the purchase of the anti-dengue solution product and in quantities which
far exceeded the municipality’s normal and sufficient level of stocks
equivalent to three- months consumption which resulted to overstocking
and possible wastage; and
b) submit samples of the Anti-dengue solution to the Food and Drug
Administration for testing as to product content, safety and efficacy.
Henceforth, implement the inspection and acceptance of chemicals and
disinfectants by noting the batch numbers and lot numbers of deliveries
and taking samples for test result analysis from the Food and Drug
Administration for quality assurance purposes.
.
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT
RECOMMENDATION
Out of the eighteen audit recommendations contained in the previous year’s audit report,
three were fully implemented, seven were partially implemented and eight were not
implemented as discussed in Part III of this report.
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