EXECUTIVE SUMMARY

A. Introduction

The Municipality of Gamu was founded by the Royal Decree of the Spanish
Government. It is the oldest town in Mallig Plains and is centrally located in the
Province of Isabela approximately 10 kilometers away from the Provincial Capitol
of Isabela, 101 kilometers to the Regional Capitol at Tuguegarao City, Cagayan
and about 395 kilometers from the National Capital in the City of Manila. Gamu is
a 4th class municipality and has a total land area of 129.40 sq. km. which
composed of 16 barangays. The Municipality promotes tourism destination for the
5-5 Visita Iglesia.

Scope of the Audit

A financial, compliance and performance audit were conducted on the accounts

and transactions/operations of the Municipality of Gamu, Isabela for the year
2017. The audit aimed at ascertaining the fairness of presentation of the financial
statements, propriety of disbursements, and adequacy of accounting records. The
audit focused on a test basis, the review of operating procedures, interview with
concerned municipal officials and employees, verification and analysis of
accounts, and such other procedures considered necessary under the
circumstances.

The 2017 audit thrusts/focus for the Local Government Sector listed under the
unnumbered memorandum dated October 12, 2017 was prioritized for audit.

B. Highlights

B.1. Projects, Programs and Activities Undertaken by the Municipality in

2017

Projects, Programs
Location Project Cost Status
and Activities
Repair/ Improvement of Pintor Brgy. Pintor, Gamu,
496,000.00 Completed
Community Center Isabela
Gravelling of Furao Farm-to- Brgy. Furao, Gamu,
748,372.00 Completed
Market Road Isabela
Gravelling of Linglingay Farm- Brgy. Linglingay,
748,372.00 Completed
to-Market Road Gamu, Isabela
Renovation of Senior Citizen Brgy. District I, Gamu,
860,975.00 Completed
Building (Phase II) Isabela
Material’s Recovery Facilities (16
All 16 Barangays 498,576.00 Completed
units)
Concreting of Barcolan Brgy. Barcolan, Gamu,
1,994,528.00 Completed
Municipal Road Isabela
Concreting of Furao Municipal Brgy. Furao, Gamu, 1,994,528.00 Completed
 Projects, Programs
Location Project Cost Status
and Activities
Road Isabela
Brgy. Guibang, Gamu,
Concreting of Brgy. Roads 2,045,728.00 Completed
Isabela
Concreting of Lenzon Municipal Brgy. Lenzon, Gamu,
4,280,047.93 Completed
Road Isabela
Rehabilitation/ Improvement of
Brgy. Mabini 15,521,188.75 On-going
Mabini Farm-to-Market Road
Multi-Purpose Drying Pavement 8 Brgys. of Gamu 1,979,247.50 On-going

Likewise, it is worthy to note that the Municipality of Gamu is a recipient of the

Seal of Good Local Governance (SGLG) given by the Department of Interior and
Local Government.

B.2. Financial Information

The highlights of the financial condition, financial performance,

appropriations, allotments and obligations of the Municipality of Gamu, Isabela
for the year ended December 31, 2017, with comparative figures for CY 2016 are
as follows:
Increase
Accounts 2017 2016
(Decrease)
Financial Condition
Total Assets 130,062,517.24 109,015,873.46 21,046,643.78
Total Liabilities 51,805,357.99 43,996,357.26 7,809,000.73
Total Government Equity 78,257,159.25 65,019,516.20 13,237,643.05

Financial Performance
Total Revenue 93,833,365.53 93,945,144.23 (111,778.70)
Total Expenses 83,050,929.20 77,169,008.66 5,881,920.54

Appropriations, Allotments and Obligations

Appropriations - Current 94,578,035.00 95,776,217.00 (1,198,182.00)
Appropriations–
0.00 1,757,881.96 (1,757,881.96)
Continuing
Allotments – Current 94,578,035.00 95,776,217.00 (1,198,182.00)
Allotments – Continuing 0.00 1,757,881.96 (1,757,881.96)
Obligations – Current 87,605,233.26 72,920,312.59 14,684,920.67
Obligations - Continuing 0.00 323,628.50 (323,628.50)
 Comparative Statement of fund transfer to and from LGUs, NGAs, and
NGOs/POs are as follows:

Increase
Accounts 2017 2016
(Decrease)
Fund transferred to Other Agencies
Due from LGUs 0.00 479,960.49 (479,960.49)
Due from GOCCs 676,022.44 0.00 676,022.44
Due from NGOs/POs 0.00 100,000.00 (100,000.00)
Total 676,022.44 579,960.49 96,061.95
Fund received from Other Agencies
Due to LGUs 984,472.39 1,379,865.76 (395,393.37)
Due to NGAs 21,920,217.43 9,612,008.46 12,308,208.97
Due to GOCCs 1,018,583.30 1,107,113.99 (88,530.69)
Total 23,923,273.12 12,098,988.21 11,824,284.91

C. Auditor’s Opinion on the Financial Statements

We rendered a Qualified Opinion on the fairness of presentation of the financial

statement due to:

1. No clear cut reconciliation was undertaken despite having confirmation

letters on the reciprocal accounts- Due from LGU and Due to LGU as
appearing in the books of the Municipality of Gamu, Isabela and the
Provincial Government of Isabela, respectively, hence, disclosed a
discrepancy amounting to ₱450,630.00;

2. The recognition of Road Networks amounting to ₱15,098,081.95, net of

accumulated depreciation in the books was not supported with disclosures,
Registry of Public Infrastructures, Report on the Physical Count of Local
Road Network (RPCLRN), Local Road Network Ledger Card, Local Road
Inventory records with Road Map and Local Road Network Property Cards
hence, contributed to the total unreconciled balance amounting to
₱16,808,303.95 of Property, Plant and Equipment as against the inventoried
properties. Likewise, other PPE accounts inventoried were noted to have
differences against the recorded PPE amounts.

For the exceptions mentioned above, we recommended that:

1. The Municipal Accountant reconcile the Municipality’s Due from LGUs

records with that of the Provincial Government of Isabela to establish the
correct balances per report of Provincial Government of Isabela’s Books. In
case a valid claim is established, secure necessary documents to support the
recording of Due from LGUs – PGI amounting to ₱450,630.00. Likewise,
submit a statement of reconciliation to the Audit Team showing that the two
books have reconciled as of given date.
2. For the Road Networks not supported with proper documents:

1. Require the Inventory Committee to conduct an inventory of local roads

under their jurisdiction and prepare the Report on the Physical Count of
the Local Road Network at the end of every accounting period.
2. Pursue complete reconciliation of the RPCLRN and the updated
Registry of Public Infrastructures in coordination with the General
Services Officer and the Accountant through detailed review of prior
year’s transactions in order to identify any unrecorded road networks.
3. Direct the Municipal Accountant to:
a) maintain Local Road Network Ledger Card and maintain separate
subsidiary ledgers for the road and its components namely: road
lot, road pavement, drainage and slope protection structures, and
other miscellaneous structures;
b) support the beginning balance of Road Networks and its
components amounting to ₱5,035,000.02 in the GL and Ledger
Cards with the JEV and working papers;
c) make details of the recorded road, highways and bridges which
were closed to government equity in the prior years and
subsequently support the recording in its books of accounts the
amount of road works equivalent to the required transition
provision for CY 2017; and
d) make disclose in the Notes to the Financial Statements as
illustrated in Annex B of said circular.

4. Instruct the General Services Officer to (a) complete Local Road

Inventory records with Road Map and Local Road Network Property
Cards; and (b) submit the Report on Local Road Network of the LGU
prepared by the Inventory Committee as shown in Annex A of the
circular.

For the unreconciled PPE

1. Instruct the Chairperson of Local Road Networks to provide the

Municipal Accountant and the General Services Officer with complete
description and cost segregation of road components for road projects
after the conduct and reconciliation of inventory of local roads under
the LGU’s jurisdiction with those recorded in the Registry of Public
Infrastructure.

2. Direct the GSO and the Municipal Accountant to utilize the data to be
provided by the Chairperson of Road Networks and facilitate
reconciliation of the Road Networks account in the books of the
Municipality.
 3. For accounts other than the Road Networks, require the GSO and the
Municipal Accountant to revisit the items that caused the differences
of physical count as against the Accounting books.

4. Ensure the compliance of the concerned officials and monitor their

accomplishments.

D. Summary of Significant Observations and Recommendations

The audit observations and recommendation were discussed with Management

officials and staff in an exit conference held on April 19, 2018. Management’s
comments were incorporated in the report, where appropriate. Among the
significant observations and recommendations are as follows:

1. Eight (8) out of Nine (9) Cash in Bank Accounts of the Municipality were
presented fairly as of December 31, 2017 except for the one (1) remaining
Cash in Bank Accounts which is already a closed account with zero
balance yet reported in the Municipality’s books in the amount of
₱1,201.95.
We recommended that the Municipal Accountant reflect the status of the said
account with disclosure in the Notes to the Financial Statements. Likewise,
analyze and verify the details of closed bank account and make appropriate
adjustments, if warranted, to preclude misstatements of the account balance.
2. The Accounts Payable of the Municipality amounting to ₱949,464.17
remained outstanding for more than three (3) years as of December 31,
2017 instead of reverting it to the unappropriated surplus of the General
Fund consistent with Section 98 of PD No. 1445.
We recommended that the Municipal Accountant conduct a thorough review
and analysis of all outstanding accounts payable and if found to have no valid
claims against the local government unit, cause the reversion of the dormant
and long outstanding payables to the unappropriated surplus of the General
Fund to ensure that only valid claims remain in the books and a more reliable
presentation in accounting.
3. Due from Government Owned and Controlled Corporations (GOCCs)
account of ₱676,022.44 representing advance payment of the
Municipality’s share in the monthly premium contributions to
Government Service Insurance System (GSIS) which was automatically
deducted by the Department of Budget and Management (DBM) from
the Municipality’s Internal Revenue Allotment (IRA) remained dormant
since 1997.
We recommended that the Municipal Mayor seek the assistance of the
Sangguniang Bayan (SB) for a resolution requesting for the write-off of the
Due from GOCCs which remained dormant for more than 10 years together
 with the documentary requirements listed in COA Circular No. 2016-005 and
submit them to the Office of the Audit Team Leader.
4. Despite the declaration on the unconstitutionality of the fund per
Supreme Court Decision in GR Nos. 208566, 208493 and 209251 (Greco
Antonious Beda B. Belgica, et al., vs. Executive Secretary et al.) dated
November 19, 2013, the unutilized balances of Priority Development
Assistance Fund (PDAF) totaling ₱1,169,889.74 remained not remitted to
the Bureau of Treasury as of December 31, 2017.

We recommended that the Local Chief Executive require the Municipal

Accountant to facilitate the immediate remittance of the unutilized balance of
PDAF to the Bureau of Treasury in compliance with the declaration on the
unconstitutionality of the fund per Supreme Court Decision in GR Nos.
208566, 208493 and 209251 all dated November 19, 2013.

5. Payment of Fuel, Oil, and Lubricants, Salaries and wages Casual-

Contractual and Other Personnel Benefits totaling to ₱2,155,785.71 were
charged against 20% Development Fund which is not in accord with the
guidelines provided under DILG-DBM JMC No. 2011-1, which was
superseded by DILG-DBM JMC No. 2017-1 dated February 22, 2017.

We recommended that Management stop the practice of utilizing the fund for
purposes beyond those expressly prescribed by the above cited regulations.
Management should ensure that only development projects that contribute to
the attainment of desirable socio-economic development and environmental
outcomes of the LGU and shall essentially partake the nature of investment or
capital expenditures be charged against 20% Development Fund. Likewise,
Program of Works for projects related to maintenance of capital expenditures
be submitted for further verification. Stop paying honoraria to resource
speakers in adherence to the rules set in the Joint Circular, otherwise
disallowed in audit as this is irregular.

6. Implementation of projects funded under Bottom-up Budgeting, LGSF-

ADM and Solid Waste Management with total available fund of
₱26,520,000.00 were delayed, thus deprived the constituents of the timely
benefits that could have been derived had these projects been fully
funded and completed as planned.

We recommended that Management strictly prioritize, monitor and fast track

the implementation and completion of the said projects to ensure the
attainment of its intended purpose and benefits derived therefrom.

7. Pertinent documents required in the 2016 Annual Audit Report on the

Municipality for purchases of sheep and goats for dispersal amounting to
₱519,500.00 remained not complied with.
 We reiterated the previous year’s recommendation that Management ensure
that all disbursements of the Municipality are supported with complete
documentation. Likewise, the Municipal Agriculturist to submit the list of the
beneficiaries of the dispersal which will be the basis for the conduct of
confirmation. Should the required documents remain not submitted or should
the results of the confirmation be negative, the disbursements may be
disallowed in audit.

8. The unutilized amount from “Busog, Lusog, Talino (BLT)” program

with a net balance of ₱94,994.00 remained in the LGU books as of
December 31, 2017 thus, recipients have not yet benefited from the said
fund.
We reiterated our previous audit recommendation that the Municipality fully
utilize the funds received from Jollibee Foundation, Inc. with remaining
balance of ₱94,994.00 for the purpose it was intended. When the amount has
been used as intended and thereafter liquidated, proper documentation should
be observed. Otherwise, it should be returned to the source entity to eliminate
the liability of the LGU.

E. Summary of Total Suspensions, Disallowances and Charges

Balance as of Balance as of
Issued in Settled in
Particulars January 1, December 31,
2017 2017
2017 2017
Suspensions 88,716.65 64,500.00 153,216.65 0.00
Disallowances 2,674,770.33 88,716.65 140,105.68 2,623,381.30
Charges 0.00 0.00 0.00 0.00
Total 2,763,486.98 153,216.65 293,322.33 2,623,381.30

F. Status of Implementation of Prior Year’s Audit Recommendation

Out of the thirteen (13) audit recommendations in the CY2016 Annual

Audit Report including prior years, six (6) were implemented, five (5) were
partially implemented, and two (2) were not implemented. Those which were
partially, and not implemented were reiterated in this report, if warranted.