EXECUTIVE SUMMARY

A. Introduction

1. The Municipality of Barobo is presently classified as 3rd class municipality in

the province of Surigao del Sur. It was created by virtue of E.O. 407 on
October 24, 1960. The LGU is politically subdivided into 22 barangays, of
which Barangay Poblacion is the largest barangay in terms of area and share
of Internal Revenue Allotment. According to the 2015 census, it has a
population of 49,730 people. Presently, the Municipality is under the
administration of Honorable Mayor Joey S. Pama.

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing. Those
standards require that we plan and perform the audit to obtain a reasonable
basis for our conclusions.

3. The audit covered the accounts and operations of the municipal government
for the year 2019 and was aimed at ascertaining the propriety of financial
transactions, management’s compliance to prescribed rules and regulation and
the fairness of the presentation of the financial statements.

B. Financial Highlights

4. Comparative Financial Position – analysis of the Statement of Financial

Position, as graphically presented hereunder, showed an increase in Assets and
decrease in Liabilities. Meanwhile, the amount of Liabilities represents 16
percent of the total Assets for FY 2019.

300,000,000.00

250,000,000.00

200,000,000.00
Pesos

150,000,000.00

100,000,000.00

50,000,000.00

0.00
2019 2018

Governmen
t Equity Assets
42% 50%

Liabilities
8%

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 5. Comparative Results of Operations - analysis of the Statement of Financial
Performance, as graphically presented hereunder, showed an increase in both
Income and Expenses. Meanwhile, the net surplus showed an aggregated
increase in the amount of ₱11,201.233.19.

180,000,000.00
160,000,000.00
140,000,000.00
120,000,000.00
Axis Title

100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
Revenue Expenses Surplus

C. Audit Opinion

6. The Auditor rendered a qualified opinion on the fairness of the presentation of

the financial statements of the Municipality of Barobo, Surigao del Sur for CY
2019 due to the following reasons:

6.1. No adjusting journal entries were taken up in the books to record the
restoration of cash equivalent and the recognition of appropriate
payable/liability account for the unreleased/unclaimed checks at the end
of the reporting period, which is not in accordance with the Philippine
Public Sector Accounting Standards, thus, resulting to the
understatement of the accounts thereof by ₱4,475,891.93.

6.2. Prior year expenses aggregating ₱1,330,402.95 million were erroneously

recorded as current year expenses, contrary to Sections 61 and 119 of
P.D. No. 1445 and PPSAS 1, thus resulted in the overstatement of the
affected expenses accounts and understatement of the surplus for the
current period.

6.3. Uncollected Rental Fees from delinquent Terminal Stallholders

amounting to ₱255,767.00, was not recorded in the book of accounts of
LGU Barobo which is not in accordance with the Philippine Public
Sector Accounting Standards and COA Circular 2015-009, resulting to
an understatement of Operating Lease Receivable and Government
Equity Accounts, in the same amount.

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D. Summary of Significant Observations and Recommendations

7. For the above-mentioned audit observations and which have caused the
issuance of a qualified opinion, we recommended to Management the
following corrective measures:

7.1. Direct the Municipal Treasurer to prepare a schedule of

unreleased/unclaimed checks at the end of the reporting period and
submit thereafter to the Municipal Accountant;

7.2. Direct the Municipal Accountant to post adjustments in the books of

accounts that correspond to the unreleased or unclaimed checks at every
end of the calendar year;

7.3. Require the Municipal Accountant to review all journal entries to ensure
that transactions are properly recorded to reflect in the financial
statements the actual results of operation for every calendar year;

7.4. Require the Municipal Accountant to ensure that only actual and valid
expenses shall be taken up in the books using the appropriate expenses
accounts and be recorded in the period to which these expenses relate.

7.5. Ensure proper recording of financial transactions by requiring the:

MEE Administrator to-

7.5.1. Update its financial records and compute the correct amount of
the uncollected balances from the contract of lease as of
December 31, 2019;

7.5.2. Furnish the Municipal Accountant’s Office, copies of the

previous and current notarized contract of lease of stallholders;

7.5.3. Coordinate with Municipal Treasurer’s Office and Municipal

Accountant's Office for the proper record keeping and prompt
collection of the said uncollected balances.

Municipal Accountant to-

7.5.4. Prepare appropriate adjusting entries to record the uncollected
balances from stallholders as of December 31, 2019; and

7.5.5. Ensure that the succeeding revenues from contract lease will be
recorded in accordance with accrual basis and Philippine Public
Sector Accounting Standards;

8. Other significant audit observations and the corresponding recommendations

summarized as follows:

8.1. The existence, completeness, and accuracy of the Cash Local Treasury
Account in the amount of ₱8,359,980.33, could not be ascertained due

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 to: a)Presence of unreconciled balances between the Subsidiary Ledger
(SL) balances and treasury records; b) Negative balances in the
Subsidiary Ledger; and c) Cashbooks to record collections and deposits
were not updated nor properly accomplished.

We recommended and Management agreed to

8.1.1. Direct the Municipal Treasurer and Accountant to intensify their
efforts to reconcile their records and effect appropriate
adjustments in their respective records/cashbook, when
necessary, to establish the correct balance of Cash-Local
Treasury Account and other affected accounts.

8.1.2. Require the Municipal Accountant to review the entries

affecting the negative balances of Cash-Local Treasury Account
and ensure the fairness of the presentation of the said account.

8.1.3. Instruct the Municipal Treasurer to faithfully record all the

transactions of Cash Local Treasury Accounts to the Cashbook-
Cash in Treasury and reflect the correct balance of Cash on hand
at a certain date.

8.2. Had MEEDO observed the proper procedures in posting the notice of
vacancy for unoccupied stalls, in compliance with section 48 of the
MEEDO Code, the public and the potential applicants could have been
informed of such vacancy and the MEEDO could have generated an
approximated amount of ₱475,200.00, as additional income from stall
rentals.

We recommended and Management agreed to require the MEE

Administrator to:
8.2.1. Ensure that the Notices of Vacancy of Market Stalls are posted
in conspicuous places in compliance with Section 48 of the
MEEDO Code; and

8.2.2. Coordinate with the MEEDO Board and formulate strategies

that will make sure that all stalls are leased by qualified
stallholders, to maximize the income potentials of the
stalls/booths within the public market.

8.3. The MEE Administrator and Market Collector assessed and collected
Stall Rentals Rates, which are lower than prescribed Market Stall Rental
Rates under Section 50 of the MEEDO Code of Barobo, thus, LGU
Barobo lost an amount of ₱496,308.75 as underassessment/collection.

We recommended and Management agreed to require the MEE

Administrator to:

8.3.1. Instruct the Market Supervisor to assess and collect daily rental
fees based on the rates prescribed under MEEDO Code; and

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 8.3.2. Coordinate with the MEEDO Board to formulate plans in
updating/amending the rate of rental fees to be collected from
market stall rentals.

8.4. Due to the inability of the MEE Administrator to strictly impose

measures in collecting the Bus/Jeep Terminal perimeter and stall rental
fees, an amount of ₱255,767.00 remained uncollected, which is not
accordance with Sections 7 and 90 of the MEEDO Code of Barobo.
Thus, deprived the LGU Barobo of much-needed funds that could help
in carrying out its services and in that benefit the general public.

We recommended and Management agreed to require the MEE

Administrator to strictly impose the collection of the balances from the
delinquent stallholders, and if the delinquent stallholders failed to pay
after due notifications, revoke the contract of lease, in consonance with
the MEEDO Code of Barobo.

E. Summary of total Suspensions, Disallowances and Charges

9. Suspension amounting to ₱8,146,727.80 and disallowance of ₱11,000.00

remained unsettled contrary to Section 5.4 and 7.1.1 of COA Circular No.
2009-006 dated September 15, 2009. as shown ‘in the table below:

Audit Beg. Bal. Bal. End

Issued Settled
Action Jan. 01, 2019 Dec. 31, 2019
Suspensions ₱ 8,146,727.80 ₱ 00.00 ₱ 00.00 ₱8,146,727.80
Disallowances 11,000.00 0.00 00.00 11,000.00
Charges 00.00 0.00 00.00 00.00
Total ₱ 8,157,727.80 ₱ 00.00 ₱ 00.00 ₱8,157,727.80

F. Status of Implementation of Prior Years’ Audit Recommendations

10. Monitoring on the implementation of 33 audit recommendations contained in

prior years’ Annual Audit Report revealed that 18 were fully implemented and
15 were partially implemented by the Management.