EXECUTIVE SUMMARY

A. Introduction

Bacarra, the third oldest town in Ilocos Norte was founded by the Augustinian in
1570. It was recognized as a municipality by the Spanish Government in 1778 with
Manuel Paras as the first Town Executive. A third class municipality located in the
northwestern central part of the province and part of the first Congressional District.
It has a total land area of 7,104 hectares spread in 43 barangays, 18 are in the urban
and 25 are rural barangays.

The municipality is under the leadership of Honorable Nicomedes C. de la Cruz,

Jr. who is ably supported by 11elective officials, 97 permanent, 1 co-terminus, and 71
contractual employees or a total of 180 as of December 31, 2015.

B. Highlights of Financial Information

The Municipality’s total assets, liabilities, government equity, income and

expenses for CY 2014 compared with that of the preceding year are as follows:

CY 2015 CY 2014 Increase/(Decrease)

Assets 131,377,447.63 112,372,898.80 19,004,548.83

Liabilities 55,322,389.20 47,134,832.80 8,187,556.40
Equity 76,055,058.43 65,238,066.00 10,816,992.43
Income 103,702,508.32 88,591,715.85 15,110,792.47
Expenses 76,128,837.39 76,165,684.77 (36,847.38)
Net Income (Loss) 27,573,670.93 12,426,031.08 15,147,639.85

The sources and application of funds for CY 2015 compared with the
preceding year are as follows:

CY 2015 CY 2014
Appropriation Obligation Appropriation Obligation
Current Appropriations
Personal
36,965,343.08 34,627,672.63 35,793,104.77 34,966,573.06
Services
MOOE 42,446,881.92 36,412,730.05 40,073,108.35 35,404,800.26
Capital Outlay 28,064,951.00 22,849,929.21 12,756,284.25 12,332,339.38
Total 107,477,176.00 93,890,331.89 88,622,497.37 82,703,712.70

Continuing Appropriations
Capital Outlay 1,491,098.99 1,247,285.00 16,103,769.21 14,840,253.18
C. Operational Highlights

For calendar year 2015, the municipality’s major objective was geared
towards the excellent delivery of basic services to its constituents. The Municipal
Government of Bacarra had implemented 41 various infrastructure projects funded
from various sources which was validated by the Audit Team on sampling basis.

No. of Projects Project

Appropriation Expenditure
Funding Source Implemented Status
20% Economic
32 15,593,992.37 15,499,047.29 Completed
Development Fund
RA 7171 4 4,375,923.20 4,373,632.13 Completed
Special Education
1 500,000.00 499,483.46 Completed
Fund
Bottoms-Up
4 2,796,263.00 2,796,263.00 Completed
Budgeting

Total 41 23,266,178.57 23,168,425.88

For 2015, the Municipality of Bacarra again received and attained numerous
Major Awards and Citations as follows:

a. The Bacarra TB DOTS Center/ Municipal Health Officer had been awarded with
Pinnacle of Excellence Award and Pillar of Performance on Microscopy
Laboratory on December 11, 2015 which was given by DOH-Regional Office I.

b. 2015 Seal of Child-Friendly Local Governance given on November 30, 2015

conferred by the Council for the Welfare of Children.

c. Top Regional Performer and Nominee for the 2014 National Best PESO (Public
Employment Service Office) award for CY 2014

d. Award of Excellence – Best Implementer on Rabies Control (Municipality

Category) for the Search for Rabies-free Communities in Ilocos Norte

D. Scope of Audit and Methodology

A financial and compliance audit was conducted on the accounts and operations
of the Municipality of Bacarra for calendar year 2015 based on the Local Government
Sector audit thrusts for the year. The audit was conducted to ascertain the propriety of
financial transactions and the accuracy of financial records and reports.
E. Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of preparation of the

financial statement because the validity and accuracy of the reported balance of the
Property, Plant and Equipment is not ascertained because of the non-recognition of
donated motor vehicles totalling to P1.98 million and undetermined amount of the
constructed buildings which were funded from national agencies; and the continued
inclusion in the books of accounts the unserviceable properties worth P1.661 million.

F. Significant Findings and Recommendations

Favorable Observations

a. The Municipal Accountant had submitted the year-end financial statements for
CY 2015 and its schedules ahead of time.

b. The municipality had properly utilized its 5% LDRRMF to support its disaster
risk management activities. Out of the P4,685,650.40 appropriations,
P2,512,174.68 was utilized in relation to pre-disaster preparedness programs and
quick response program (e.g. purchase and installation of CCTV, DRRM
equipment, rehabilitation of MDRRM Office, trainings conducted, relief goods,
medicines, materials distributed to typhoon victims, and financial assistance to
calamity victims).

The unexpended portion of the Maintenance and Other Operating Expenses

(MOOE) was transferred to Trust Liability - LDRRMF for the purpose of
supporting disaster risk reduction and management activities within the next five
years.

c. For the CY 2015, the covering taxes on the compensation of employees and the
taxes on the procurement of goods, services and infrastructure projects from
suppliers/contractors totalling P4,442,055.01 was withheld with a beginning
balance of P127,972.14. Taxes remitted during the year totalled P4,374,637.92
leaving an unremitted balance of P195,389.23 which represents the taxes withheld
for December 2015.

d. The Municipality had consistently complied with the withholding of GSIS

contributions and loan amortization and its timely remittance, in accordance with
Sections 14.1 and 14.2 of the Implementing Rules and Regulations of RA 8291,
otherwise known as the Government Service Insurance System Act of 1997.

e. The Municipality had manifested its continued support for a cleaner environment
by taking relevant steps in support of the RA 9003, otherwise known as the
Ecological Solid Waste Management Act of 2000. During the year the
municipality purchased a land for the proposed expansion of the sanitary landfill.
 However, some transactions which need to be corrected and improved are
enumerated in the herein audit observations with its corresponding recommendations, as
follows:

1. Validity and accuracy of the Property, Plant and Equipment (PPE) could not be
ascertained due to:

1.1 Motor Vehicles and Buildings accounts were understated by undetermined

amount due to the non-recording of donated properties and the non-recognition of
the constructed buildings funded from national government agencies.

1.2 Unserviceable properties costing P1.661 million were still carried in the books of
accounts and RPCPPE thereby overstating the PPE account.

1.3 Expenses for the major repair and/or upgrading of the municipal properties
amounting to P360,800.00 were not capitalized thereby understating the affected
Property, Plant and equipment (PPE) accounts and overstating the Repairs and
Maintenance expenses.

We have recommended the following:

a. GSO-Designate and Municipal Accountant to obtain the necessary documents

as the basis of determining the cost of the properties to be reflected in the
RPCPPE and in the books of accounts to show the correct balances of the
affected asset accounts.

b. GSO-Designate to prepare and use the proper format of the IIRUP for the
unserviceable property and facilitate its proper disposal in accordance with
prescribed rules and regulations.

c. Municipal Accountant prepare the JEV to adjust the cost of upgrading and
major repairs undertaken to its properties which should had been capitalized.

2. Unclear policies and procedures of the municipality pertaining to receipts and

collections resulted in delayed remittances and deposits, thereby weakening
accounting controls over cash transactions.

2.1 Failure to effect regulations on reporting and remittance of collections

2.2 Weak procedures and policies on verification of reports of collections

We have recommended that management implement measures to ensure prompt

reporting, remittances and deposit of collections in order to reflect the correct cash
balances in the financial statements:

a. Revenue collectors should be required to prepare RCD’s at the close of each

business day and effect remittance of ALL their daily collections. For
 computerized receipts, the collectors should generate their daily collections
and not by the OR series that they wanted to remit. Also, stop ante-dating the
receipt of collections.

b. The liquidating officer should strengthen its verification and remittance

function. Procedures for verification of receipts should be streamlined to
ensure prompt recording and remittance of collections.

c. The Treasurer’s Office should be provided with a link/network on the

computerized collection system to be utilized as added controls to ensure
correctness of amounts and proper cut-off of transactions.

3. The regular employees and officials are allowed to receive their monthly net take
home pay below P3,000.00 which is contrary to Section 48 of the General Provisions
of Republic Act No. 10651, otherwise known as the General Appropriation Act 2015,
thus defeating the purpose of maintaining sufficient amount for family subsistence.

We have recommended that management strictly comply with the provisions of

Section 48 of GAA 2015 by screening the loan application of its employees so that
the monthly net take home pay will not be reduced to an amount below P3,000 after
all the authorized deductions. Also, restructure the deductions particularly debt
servicing of the concerned employees to conform to the required amount of net take
home pay.

4. Registration fee on various seminars and conferences attended by employees

conducted by non-government or private organization exceeded the allowable amount
of P1,200.00 per day contrary to DBM National Budget Circular (NBC) No. 446, thus
disallowed in audit.

We have recommended that management enforce the ceiling of P1,200.00 set for
seminars, conventions etc. sponsored by non-government and private organization.
Transactions occurred with registration fees beyond what is permissible should be
refunded by the concerned officials and employees.

5. Municipal officials and employees had been granted authority to travel out of town
with travelling allowance without considering the necessity and relevance of the
attendees to seminar/lakbay-aral/official travel which is not in observance with
austerity measures, thus the municipality incurred unnecessary expenses.

We have recommended that the LCE should always observe the austerity measures
hence refrain from approving travel order which is deemed not necessary or
improper.

6. Job Orders were granted travel authority to attend seminars, trainings and workshops
and were allowed to claim per diems and travel allowances contrary to CSC Memo
Circular No. 40 s. 1998, thus incurred additional expense.
 We recommend that management shun from granting travel order to job order
personnel considering the nature of their employment in order to avoid incurrence of
additional expenses. In case where a job order is deemed warranted attending a
seminar, a justification should be attached to each approved travel authority.

7. The Municipal Project Monitoring Committee (PMC) did not conduct inspection and
monitoring of various infrastructure projects which is contrary to Section 4 of
Executive Order No. 376, thus proper facilitation of project implementation,
monitoring and evaluation could not be ascertained.

We have recommended that the Project Monitoring Committee perform the duties
and functions lodged to them in order to comply with the contemplated transparency
of governance. Hence, the proper monitoring on the implementation and status of
projects are made on time and any deviation maybe timely addressed and issues
pertaining thereto maybe resolved accordingly.

8. The procuring entity’s lapses on determining the proper type of procurement used in
implementing project and proper evaluation of the bidder have resulted to awarding to
a contractor who is not wholly authorized to engage in the activity it hopes to
participate.

We have recommended that the procuring entity be more cautious in determining the
nature of procurement to be implemented and must abide with the provisions of R.A.
9184. The personnel directly or indirectly involved in the procurement process must
see to it that the pertinent laws and procedures are faithfully complied with in the
discharge of their respective functions to avoid any error or violation like awarding a
contract to unqualified contractor /supplier which may prejudice the interest of the
agency.

9. Contracts were awarded to suppliers who are not wholly authorized to engage in the
business it hopes to participate, contrary to the provisions of the procurement law,
thus the municipality may not have been able to obtain the best possible quality and
price of the goods it had procured.

We have recommended that the BAC evaluate and review thoroughly the
qualifications of bidders on every projects to be implemented by the municipality to
ensure that the contract would be awarded to the most capable and competent supplier
to undertake the project itself to prevent the entry of a third party leading to
overcharges on the project cost.

10. The total disbursement for the supplemental feeding for CY 2014-2015 exceeded the
budget provided by DSWD by P250,218.20 which implies a poor budget planning on
the implementation of supplemental feeding program.
 We have recommended that management require the persons responsible to properly
budget the funds for supplemental feeding program, any future overspending will be
disallowed in audit.

11. The inclusion of four laptops aside from the computer desktops and equipment that
were “supposedly” given to the association of various industries of the municipality
(Meat Marketing, Sugar Cane Vinegar, Duhat Fruits, and Water Lily Processing) are
deemed unnecessary.

We have recommended that management should properly plan its project to avoid the
inclusion of unnecessary items which is not in congruence to the objectives of the
project, to avoid disallowance in audit.

G. Summary of Suspensions, Disallowances and Charges as of December 31, 2015

Audit suspensions and disallowances amounting to P27,500.00 and

P1,169,164.73 respectively, remained unsettled at the end of the year.

Two disallowances totalling to P1,110,000.00 are under appeal with COA

RO1 Case No. 2016-005 and 2016-006.

H. Status of Implementation of Prior Year’s Audit Recommendations

Of the fifteen recommendations embodied in 2014 Annual Audit Report,

seven were implemented, four were partially implemented and four were not acted
upon during the year which we reiterated in this report for full implementation in the
ensuing year.