EXECUTIVE SUMMARY

Introduction

The Municipality of Alamada was created by virtue of Republic Act No. 5645 on
September 8, 1954 comprising of fourteen (14) barangays. It was formerly part of the
Municipality of Libungan. As it progressed and developed, three (3) additional
barangays were created in 1990 or a total of seventeen (17) barangays now comprising
the municipality with a total land area of 81,699 hectares.

Pursuant to Republic Act No. 7160, known as the Local Government Code of
1991, the municipality, like any local government units, enjoys total independence in
managing, deciding and planning its own administrative, fiscal and development affairs
in conformity with the national government’s thrust for sustainable social and economic
growth.

Presently, the three (3) – year term period for local governance of the
municipality is headed by Municipal Mayor Noemia D. Bartolome, MD, DSSP, FPSP
and Vice Mayor Leonigildo A. Calibara, Jr. The local government has manning
complements of 149 permanent employees, 10 elective officials, 13 co-terminus
personnel, and 133 job order individuals.

Audit Methodology

The audit was done on a sampling basis and used various audit techniques like
verification/confirmation, observation, interview with concerned officials and employees,
and other auditing procedures and methods considered necessary under the
circumstances.

The audit was focused on the different audit thrusts/areas issued by the Local
Government Sector.

Scope of Audit

A financial and Compliance Audit was conducted on the accounts and operations
of the Municipality of Alamada for the Calendar Year Ended December 31, 2017. The
audit was aimed to ascertain the agency’s compliance with laws, rules and regulations.
Also, a Value for Money Audit was conducted to determine whether government
operations were discharged effectively, efficiently and economically in attaining its goals
and objectives.
Financial Highlights

Financial Condition

As of December 31, 2017, the following were the consolidated assets, liabilities
and equity of the LGU, viz:

2017 2016 Increase (Decrease)

Amount %
Assets 434,078,879.30 327,762,122.48 106,316,756.82 32%
Liabilities 113,344,448.00 84,460,304.33 28,884,143.67 34%
Government 320,734,431.30 243,301,818.15 77,432,613.15 32%
Equity

434,078,879.30 2017
450,000,000.00
2016
400,000,000.00

350,000,000.00 327,762,122.48 320,734,431.30

300,000,000.00
243,301,818.15
250,000,000.00

200,000,000.00

150,000,000.00 113,344,448.00

100,000,000.00 84,460,304.33

50,000,000.00

0.00
Assets Liabilities Government
Equity
 Results of Operation

For the year ended December 31, 2017, the LGU registered the following:

2017 2016 Increase (Decrease)

Amount %
Revenue 237,787,151.41 225,649,751.04 12,137,400.37 5%
Expenses 161,358,264.79 164,941,010.64 -3,582,745.85 -2%
Surplus 76,428,886.62 60,708,740.40 15,720,146.22 26%
(Deficit)

237,787,151.41 2017
250,000,000.00
225,649,751.04 2016

200,000,000.00
164,941,010.64
161,358,264.79
150,000,000.00

100,000,000.00 76,428,886.62

60,708,740.40
50,000,000.00

0.00
Revenue Expenses Surplus (Deficit)

The total income and expenses included the subsidies from and to national government
agencies and other funds and donations.
Appropriation/Allotment and Obligation

The sources and application of funds of the LGU is shown below:

2017 2016 Increase (Decrease)

Amount %
Appropriation 102,876,365.61 181,593,813.80 (78,717,448.19) (43)%
Allotment 102,876,365.61 181,593,813.80 (78,717,448.19) (43)%
Obligation 87,187,286.71 131,134,242.00 (43,946,955.29) (33)%

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statement due to unaccounted difference of P68,772,185.99 of the Property,
Plant & Equipment (PPE) account as effect of non-reconciliation of balances per balance
sheet and Report on Physical Count of PPE (RCPPE); non-disposal of Unserviceable
Properties with total net book value of P10,405,979.66; non-provision of depreciation of
Infrastructure Assets; non-reliability of Real Property Tax Receivable, Special Education
Tax Receivable, the Deferred Real Property Tax and Special Education Tax Income
accounts due to non-reconciliation with the delinquent taxes as of CY 2017.

Summary of Significant Observations and Recommendations

1. Total balances of Property, Plant & Equipment per Report on the Physical
Count of Property, Plant, & Equipment (RPCPPE) amounting to
P152,911,917.17 did not reconcile with the balance per general ledger of
P221,684,103.16, resulting to unaccounted difference of P68,772,185.99 thus
management’s assertion on the accuracy and completeness of the balances of
the accounts could not be relied upon, affecting their fair presentation in the
financial statements.

Require the Accountant and the Property Officer to maintain complete property
and equipment ledger cards as required under Sec. 43 of NGAS, Volume I & Sec
C. 3, Chapter V of the Manual on Property Custodianship;

Require the Inventory Committee to conduct year-end physical inventory on

Property, Plant & Equipment, including the Construction-in-Progress and
completed Infrastructure Projects and submit it to the Accounting for
reconciliation of balances as a requirement to Sec 57 of the NGAS Manual,
Volume I to ensure correctness and reliability of the PPE account balances;

Require the Accountant and the General Services Officer to analyze the
discrepancy between the balances in the books and per physical count of the PPE
 Accounts and to make the necessary adjustments in their records to take up the
noted differences affecting current year’s transactions.

Require the GSO to annually provide a copy of the reconciled RCPPE to the
COA, not later than the 31st day of January of ensuing year, showing therein the
proper classification of PPE as shown in PPSAS accounts.

2. Unserviceable Properties with total net book value of P10,405,979.66 were

still included in the Property, Plant, and Equipment (PPE) account in the
financial statements as of December 31, 2017 which is not in accordance with
the Philippine Public Sector Accounting Standards (PPSAS) 17. Non-disposal
of the properties may result to further deterioration and loss of additional
income, if any, that could have been accrued to the government had they
have been disposed of in a timely manner through sale or negotiation.

Instruct the General Services Officer to prepare corresponding Inventory and

Inspection Report of Unserviceable Property (IIRUP) for the identified
unserviceable properties and initiate the process of disposing the unserviceable
properties in accordance with Section 79 of PD 1445 and the rules provided in
COA Circular No. 92-386;

Direct the Municipal Accountant to make necessary adjustments to take up in the

books the unaccounted unserviceable properties per RCPPE; and

After the disposal, require the General Services Officer to submit the necessary
documents, together with the Official Receipt to the Accounting Office, as the
basis of the latter to drop the unserviceable properties from the book of accounts
in accordance with the existing accounting and auditing rules and regulations.

3. Depreciation charges of the Infrastructure Assets account for Calendar Year

2017 were not provided by LGU Alamada contrary to PPSAS 17 – Property,
Plant and Equipment, thus, resulting to overstatement of net income, equity
and Property, Plant and Equipment accounts.

Compute and record the depreciation of Property, Plant and Equipment. Compute
the same using straight line method and depreciate it using the table of estimated
useful life as provided under COA Circular 2017-004.

4. The year-end balances of Real Property Tax and Special Education Tax
Receivables in the Balance Sheet totaling P8,229,531.08 did not reconcile
with the delinquent taxes amounting to P11,237,436.80 reported by the
Municipal Treasurer’s Office reflecting a total difference of P3,007,905.72,
thus casting doubt on the reliability of said accounts and the Deferred Real
Property Tax and Special Education Tax Income.
 Require the Municipal Treasurer to submit, every beginning of the year, to the
Municipal Accountant a duly certified list showing the name of taxpayers and the
amount due and collectible for the year pursuant to Section 20 of the NGAS
Manual to reconcile the variances noted and avoid the improper set-up of
RPT/SET Receivables in the succeeding periods.

5. Disbursements amounting to P2,512,639.00 were inappropriately charged to

Food Supplies Expense account contrary to COA Circular No. 2015-009,
thus overstating the said account in the financial statement.

Require the Municipal Accountant to draw Journal Entry to properly classify the
expenses in its appropriate accounts in the financial statements in accordance with
the provision of COA Circular 2015-009 dated December 1, 2015.

6. Accountability and control for the custody/use of some of the properties were
not clearly established due to uncertainties reported in the Report of Physical
Count on Property, Plant, and Equipment (RCPPE) such as irretrievable
and unreturned properties and absence of Property Tag/Number on some of
properties owned by the Municipality.

Require the Inventory Committee to conduct physical inventory on Property,

Plant & Equipment and properly established the custody/status of the
unreturned/missing/not-yet-returned properties to ensure correctness and
reliability of the PPE account balances;

Require the accountable officer/employee to immediately apply for Relief from

Accountibility for the loss properties;

Require the General Services Officer to institute measures to properly dispose all
properties found to be obsolete and unserviceable during the conduct of physical
count;

Require the General Services Officer to maintain complete property/equipment

cards as required under Sec. 43 of NGAS, Volume I & Sec C. 3, Chapter V of the
Manual on Property Custodianship;

Require the Inventory Committee to retrieve the records of the properties found to
have no tags and facilitate the placement/attachment of such Inventory
Tags/Stickers on all the properties for easier cross-examination with the AREs
and proper identification of the properties.
7. Cash Advances granted to Officers and Employees of LGU Alamada
amounting to P847,480.94 remained unliquidated as of December 31, 2017
due to granting, utilization and liquidation of cash advances was not in
accordance with the prescribed controls, contrary to Section 89 of PD 1445
and COA Circular 97-002.
 Adhere strictly with the rules and regulations for the granting, utilization and
liquidation of cash advances as prescribed under Section 89 of PD 1445 and COA
Circular 97-002.

Send demand letters to the concerned employees. If no settlement or satisfactory

explanation is received within thirty (30) days, cause the withholding of salary
due to the accountable officer/s.

Refrain from granting additional cash advances to accountable officers who have
previous unsettled cash advances.

8. Various supplies and materials totaling P10,259,982.72 were immediately

charged to expense accounts contrary to PPSAS 12 – Inventories and Section
114 of the New Government Accounting System (NGAS) Manual requiring
the agency to maintain inventory accounts for these assets.

We recommend that Management strictly observe the perpetual inventory method

in accounting for inventories as provided under the NGAS Manual. It is also
advisable to have a stockroom provided for the inventory items of the agency to
protect them from spillage/spoilage and unauthorized use.

9. The Municipality did not maximize its power and authority to collect local
taxes and other charges due to them as the collection from Real Property
Taxes (RPT) and Special Education Taxes (SET) during the year was
relatively low having decreased by 43% and 41%, respectively, from the
previous year hence the Muncipality was deprived from the additional
income which could have been used to finance its
programs/projects/activities.

Maximize its authority and power to collect delinquent taxes and other charges;

Intensify its strategies and/or utilize other workable and feasible collection
approaches to prevent the accumulation of past due accounts; and
Strictly comply with the provisions of Sections 254 and 269 of the Local
Government Code when Real Property Taxes become delinquent.

10. The SEF Budget did not include allocation for Early Childhood Care and
Development (ECCD) Program as mandated by Republic Act 10410 or Early
Years Act of 2013, thereby failing to support the holistic approach in
strengthening the early childhood care and development through interagency
sustenance and multisectoral collaboration.

Observe strictly the requirement set forth in Section 7 (b) of the Republic Act No.
10410 by allocating in Local School Board Budget adequate funds for various
activities in support of the implementation of the ECCD Program, and comply
 with the guidelines on allowable charges against the Special Education Fund set
forth in Section 4 of Joint Circular No. 1. s.2017 of DepED, DBM and DILG; and

Conduct consultation/discussion/hearing with the local ECCD Council, Child

Development Teachers, Day Care Workers and other stakeholders of the ECCD
System in planning and budget preparation for the implementation of the ECCD
programs.

11. Some projects, programs and activities under the 20% Local Development
Fund for Calendar Year 2017 were not implemented or completed as of
December 31, 2017, thus, falling short of the targeted desirable socio-
economic development and environmental outcomes for the benefit of its
constituents.

Exert their best effort to fully accomplish the targeted priority development
projects and programs embodied in the Annual Investment Plan pursuant to its
mandate. Strictly administer and supervise the implementation of development
projects and likewise monitor its implementation. Determine the reason for non-
implementation of some projects and evaluate the possibility to make
amendments to some projects which are not feasible for implementation.

12. Out of the insurable properties of the Municipality with a total book value of
P122,426,936.05 as of December 31, 2017, P94,829,152.81 or 77% were not
covered by insurance as required under Section 5, Republic Act No. 656 and
Section 489 of the GAAM, Volume I, thereby exposing the Municipality to
the risk of not being indemnified or compensated for any damage to, or loss
of its properties in cases of destruction thereof through fire, flood or other
force majeure.
Require the Municipal Finance Committee to include in annual appropriation the
amount necessary to cover the premiums for the insurance of its properties; and to
require the Municipal Treasurer to facilitate the submission of the updated list of
inventory of insurable properties with the GSIS so that necessary insurance
coverage can be applied with the GSIS Insurance Fund.
13. The net take-home pay of some officers and employees of the Municipality of
Alamada in CY 2017 has fallen below the mandatory net pay of P4,000.00
contrary to Section 47 of the General Provisions of the General
Appropriations Act (GAA) of 2017, dated December 29, 2016.

Ensure that employees will receive no less than the net take home pay prescribed
under the GAA which is P5,000 for CY 2018; evaluate requests for deduction for
the payment of loans and not permit if such will lower the employee’s net take
home pay below the required threshold instead, advise employees to personally
settle/directly remit dislodged payments for the loans from private lending
institutions over the counter.
 14. The Municipal Bids and Awards Committee did not prepare and submit the
Procurement Monitoring Report (PMR) to the Government Procurement
and Policy Board (GPPB).
Require the Municipal’s Bids and Awards Committee (BAC) to prepare the
Procurement Monitoring Report duly approved by the head of the procuring entity
and submit the same to the Government Procurement and Policy Board (GPPB) in
printed and electronic format within fourteen (14) calendar days after the end of
each semester. Also, make use of this report as a tool in monitoring, assessing and
improving the procurement processes.
15. Fuel consumption totaling to P6,383,646.68 were not duly supported with
Monthly Report of Official Travels and Monthly Report of Fuel
Consumption.

Require the General Services Officer or any authorized official to regularly

submit the Monthly Report of Official Travels with accomplished Drivers’ Trip
Ticket for each vehicle/equipment used, including the Monthly Report of Fuel
Consumption to the Office of the Auditor for verification, monitoring and
auditing of fuel, oil and lubricants used in accordance with COA Circular 77-61.

Status of Suspension, Disallowances and Charges

As of December 31, 2017, the Municipality of Alamada has no suspensions,

disallowances and charges.

Status of Implementation of Prior Year’s Audit Recommendations

We made a follow-up on the action taken by the Municipality of Alamada to

implement the audit recommendations of prior years and noted the following:

Status of Implementation No. of Recommendations

Fully Implemented 3
Partially Implemented 9
Not Implemented 5
Total 17

The results of the validation of the implementation of prior year’s

recommendations are presented in Part III of this report.