EXECUTIVE SUMMARY
INTRODUCTION
Arayat is one of the twenty municipalities of Pampanga which is situated
in the north-eastern portion of the province. It is bounded on the north by
Magalang; on the south by Candaba and Sta. Ana; on the west by Mexico, all of
Pampanga; and on the east by Cabiao, Province of Nueva Ecija. Mt. Arayat lies
on the north and forms part of both of the municipalities of Magalang and
Arayat.
The municipality has varied terrain with slopes of 0-50%. It has a total
land area of 13,448 hectares. Mt. Arayat having the largest area occupies
23.64% of the total land area estimated at 3,125 hectares. Arayat has 30
barangays.
The auditee’s assets, liabilities and government equity as of December 31,
2010 were P35,278,624.33, P21,056,891.12 and P14,221,733.21, respectively.
SCOPE OF AUDIT
The audit covered transactions for calendar year 2010. It was conducted
to ascertain the propriety of financial transactions and compliance with
prescribed rules and regulations. It was also made to ascertain the accuracy of
financial records and reports, as well as the fairness of the presentation of the
financial statements.
AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS
The Auditor rendered a qualified opinion on the fairness of presentation of
the financial statements because the validity of the Property, Plant and
Equipment amounting to P13.41M as of December 31, 2010 cannot be
ascertained due to the failure of the Municipality to conduct a complete physical
inventory of PPE accounts and to reconcile them with the accounting records.
Alternative auditing procedures cannot be applied due to non maintenance of
subsidiary ledgers/property stock cards by both the Accounting office and
Property Office, respectively.
SIGNIFICANT FINDINGS AND RECOMMENDATIONS
1. The validity and existence of the Property, Plant and Equipment totaling
P13,410,162.42 was not fully ascertained due to the failure of the
Municipality to conduct complete physical inventory of PPE and to reconcile
accounting and property records.
We recommend that management a. Instruct the Committee on Inventory to conduct the physical inventory
of PPE to determine its actual existence. Prepare and submit the
inventory report to update and reconcile them with the accounting
records.
b. Require the Municipal Treasurer and the Municipal Assessor to make
representation with the Register of Deeds (RD) for the immediate
titling/transfer of ownership of various lots that are in the name of the
respective vendors/private individuals.
c. Require the Municipal Accountant to maintain separate registry for
each category of Public Infrastructures which shall be used to record
completed infrastructures for use of the general public and subsidiary
ledger cards for each category of assets.
2. Procurement of Supplies and Materials totaling to P7,540,263.32 were
recorded outright as expense and not coursed through the Inventory account
contrary to the provisions of Section 51 and 114 of NGAS Manual which
requires that the Perpetual Inventory Method be followed in the recording of
supplies and materials.
We recommend that management require the Municipal Accountant to strictly
follow the Perpetual Inventory Method in recording the purchases of supplies
and materials. Supplies Ledger Cards and Stock Cards should be maintained
by the Accounting and Treasurer’s Office to facilitate the reconciliation of the
physical inventory against the control accounts.
3. Actual collections of RPT/SET Receivable for CY 2010 totaled to
P3,869,379.72 or 17 % of the target of P22,919,362.03 due to poor
strategy adopted in the collection of delinquent taxes resulting in huge
amounts of unrealized revenues of P19,049,982.31 and depriving the
municipality of income for implementation of projects.
We recommend that management a. Closely supervise and monitor the collection strategy being adopted to
improve collection.
b. Require the Municipal Treasurer to maintain an updated taxpayer’s
ledger card to reflect the increase/decrease of property as guide in
assessment and accurate payment of tax due.
c. Undertake adequate legal measures and exert more efforts for the
improvement of collection for the ensuing year.
d. Instruct the Municipal Assessor to conduct frequent surveys to verify
and determine whether all real property within the municipality are
properly listed in the assessor’s roll and submit the same to the
Municipal Treasurer for his reference in collection of real property
taxes.
4. The Accountant failed to institute action to clear the books of dormant,
undocumented and long outstanding receivables totaling to P539,484.10
representing 1.6% of total assets and payables of P550,495.20 which is 2.8%
of total liabilities thus, these accounts remained dormant and outstanding
since 1999 or almost ten years contrary to Executive Order No. 431, COA
Circular No. 97-001 and COA Resolution 2003-002 thereby affecting the
fairness of presentation of the accounts in the financial statements.
We recommend that management require the Municipal Accountant to
conduct a final review, analysis and reconciliation of all dormant accounts
pursuant to the Guidelines on the Proper Disposition/Closure of Dormant
funds and/or accounts as provided by COA Circular No. 97-001 dated
February 5, 1997.
The other findings and recommendations are discussed fully in Part II of
this report.
STATUS
OF
IMPLEMENTATION
RECOMMENDATIONS
OF
PRIOR
YEAR’S
AUDIT
Of the six (6) recommendations embodied in the 2009 Annual Audit
Report, five (5) were not implemented and one (1) was partially implemented.