EXECUTIVE SUMMARY

Introduction

The coastal Municipality of Nasugbu is bounded on the north by the Municipalities of

Maragondon, Magallanes and Alfonso (Cavite); on the east by the Municipalities of Laurel,
Calaca and Balayan (Batangas); on the south by the Municipalities of Lian and Tuy
(Batanags); and on the west by China Sea. Nasugbu has a total land area of 27,633
hectares subdivided into 42 barangays, including the 12 barangays of Poblacion which were
formally organized under Presidential Decree No. 87 and approved in 1972. The rest of the
30 barangays of Nasugbu were formally organized on June 1, 1963, the date of approval of
Republic Act No. 3590 (Revised Barrio Charter) mandating their organization.

Nasugbu is a first class municipality that continuously gains its prominence through the
development of various popular tourist attractions since its declaration as one of the tourist
town of the country by mandate of Presidential Proclamation No. 1520.

The organizational structure of the Municipal Government of Nasugbu as follows:

a. Key Officials

Municipal Mayor Antonio A. Barcelon

Municipal Vice-Mayor Larry D. Albanio

Members of the Sanggunian

Dennis S. Apacible
Arvin B. Ordiales
Apolo V. Villafania
Arlene R. Chuidian
Mildred B. Sanchez
Roderick S. Cabral
Dionisio B. Botobora
Jacinto V. Bautista
Arnold Mendoza (ABC President)
Rachelle Ann B. Villapando (SK Federation President)

Municipal Accountant Arnold R. Chuidian

Municipal Treasurer Rosauro O. Salac

b. Number of Personnel Complement

Permanent 268
Temporary 12
Elective 12
Co-terminus 10
Casual 71
Job Order 588
Total 961
Scope of Audit

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Financial and compliance audits were conducted on the accounts and operations of the
Municipality of Nasugbu, Batangas for Calendar Year 2019. The audit was conducted to
ascertain the adequacy and reliability of the books of accounts and financial reports,
fairness of the presentation of the financial statements and Municipality’s compliance with
applicable laws, rules and regulations as well as adherence to prescribed policies in
handling its finances and its operations in general.

Financial Highlights (in Totals)

For the Calendar Year 2019, the Municipal Government of Nasugbu, generated revenue
of₱474,974,053.35, sourced from local taxes, Internal Revenue Allotment (IRA), service,
business and other sources of income. Total appropriations/allotments was
₱850,558,349.93 of which ₱ 511,197,107.92 or 60.10% was obligated during the year, thus
leaving an unexpended balance of ₱339,361,242.01 or 39.90%.

The total assets, liabilities, equity, income and expenses of the Municipality for CYs 2019
and 2018 are as follows:

2019 2018 Increase/(Decrease)

Assets ₱1,328,326,002.46 ₱1,630,229,267.47 (₱301,903,265.01)
Liabilities 389,473,397.54 776,366,072.55 (386,892,675.01)
Equity 938,852,604.92 853,863,194.92 84,989,410.00
Income 474,974,053.35 455,375,912.14 19,598,141.21
Expenses 352,512,245.53 314,924,927.52 37,587,318.01

Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements of the Municipality of Nasugbu due to:

1. The existence, accuracy and completeness of Property, Plant and Equipment accounts
amounting to ₱1,262,947,873.42, gross of accumulated depreciation, could not be
ascertained due to the continuous failure of the Municipality to conduct a complete
physical count and submit a complete Report of Physical Count of Property, Plant and
Equipment thus resulting to discrepancies between the RPCPPE submitted by the
General Services Office (GSO) and the Subsidiary Ledgers (SL) of the Accounting
Department totaling to ₱68,384,153.38. Likewise, old balances of PPEs in the
Accounting’s SL totaling ₱243,663,896.17 remain unidentified. Moreover, PPE Ledger
Card and Property Card were not maintained while Acknowledgement Receipts for
Equipment were not updated, thereby affecting the fair presentation of the PPE accounts
in the financial statements.

2. The Real Property Tax (RPT) Receivable and Special Education Tax (SET) Receivable
and the total of the Report of Delinquent Accounts both posted a balance of
₱147,192,943.66; however, as per audit the Municipal Treasurer’s Report of Delinquent
Accounts amounted to ₱183,718,277.59, incurring a difference of ₱36,525,333.93,
thereby casting doubts on the reliability of Real Property Tax (RPT) Receivable and
Special Education Tax (SET) Receivable as presented in the financial statements.

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Significant Audit Observations and Recommendations

For the exceptions cited above, the Audit Team recommended that the Municipal Mayor
direct the:

a. Inventory Committee headed by the General Services Officer prepare the inventory list
by category and perform the actual and complete physical count of PPE in order to
determine the existence of the recorded PPE accounts and reconcile the results of the
count with the accounting records and establish the causes of discrepancies, whether
items have already been missing, donated, sold and unserviceable to arrive at the
correct balance in the financial statements. As to the infrastructure assets, coordinate
with the Municipal Engineer to verify their existence, prepare and maintain the required
Property Cards and update ARE to facilitate the reconciliation of RPCPPE with the
accounting records;

b. Accounting Department exhaust all efforts to fully identify the PPEs included in the
beginning/unidentified balances; secure the necessary documents to support those
PPEs to be able to reconcile with the Inventory Report of the GSO; obtain proper
documentation before effecting the necessary adjusting entries for erroneous recording
or for inclusion to ensure that the amounts are valid; and conform to the rules and
regulations that will cover such adjustments; and

c. Municipal Accountant and the General Services Officer maintain complete and updated
PPE Ledger Cards and Property Cards, respectively, to facilitate the reconciliation of
both records.

d. Municipal Treasurer to come up with a corrected balance of its Report of Delinquent

Accounts as of December 31, 2019 and reconcile their records with the Municipal
Accountant to present a reliable RPT and SET Receivables in the financial statements.

In addition, the following are other significant findings and recommendations:

1. The Approved Budget for the Contract (ABC),amounting to ₱ 40,000,000.00,of the

Supply & Delivery for the Upgrade & Enhancement to Integrated Revenue Generating
with Administrative& Financial Management Systems Computerization Project of the
Municipalitylacks a detailed computation of its individual cost components, thus the
allocated fund for each item of cost cannot be determined. Likewise, some pertinent
provisions of RA 9184 and its Implementing Rules and Regulations pertaining to
Consulting Services were not followed, creating doubts on whether the contract price of
₱39,967,400.53 is reasonable and advantageous to the Municipality. In addition, after a
year from the expiration of the contract, the computerization project was not fully
operational, resulting to only 3 out of 9 application systems in full implementation,thereby
both failing to achieve its objectives and the efficient, effective, and economic delivery of
services to the constituents.

We recommended that the Municipal Mayor instruct the BAC Chairman in coordination
with the BAC TWG to explain the observed inconsistencies in the procurement process
and to immediately submit the aforementioned lacking documentsand other relevant
supporting documents/reports to facilitate further review and evaluation by the Audit
Team and the COA Information and Technology Audit Office.

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 We further recommended that the Municipal Mayor instruct:

a. all department heads concerned to resolve all the issues hindering the full
implementation of the computerization project, discuss them with the supplier, and
come up with a favorable solution.

the Municipal Planning and Development Office to expedite the finalization and
encoding of the Annual Investment Plan for CY 2021 to permit other departments to
proceed with their usage of the system.

2. Under-remittance by the Municipality of the mandatory deductions including loan

amortizations to the GSIS, Philheath and Pag-Ibig violates the prescribed regulations
issued by these agencies thus may cause forfeiture of claims/benefits of Municipal
employees and deprives the concerned government agencies of funds due to them.

We recommended that the Municipal Mayor require the Accounting Office to analyze the
accounts with unremitted balances and ensure that the responsible officials/employees
to remit immediately the withheld funds to BIR, GSIS, Philhealth, and PAG-IBIG.

3. The balance of fund transfers from various national government agencies were not fully
utilized as of year-end with ₱19,518,397.92 left unexpended, thereby depriving both the
constituents of timely benefits that could have been derived therefrom and the source
agency of additional funds to finance future projects.

We reiterated our recommendations that the Municipal Mayor instruct:

a. the Municipal Accountant to immediately submit the liquidation reports, if not yet
submitted, and coordinate with the source agency for refund of the unexpended
balance; and

b. the Head of the Municipal Planning and Development Office to coordinate with the
concerned department heads to expedite the pending implementation of projects and
pursue the completion of projects on-going utilization. Likewise, see to it that future
fund transfers are fully accomplished within the time frame and refund immediately to
the source agency any balance accruing to them.

4. The Municipality exhibited laxity in their issuance of business permits, which resulted to
the continued operation of fifty-six percent (56%) or two-hundred twenty (220) stalls
without permit in the Nasugbu Public Market as per submitted report of BPLO; moreover,
twenty (20) suppliers/contractors of the Municipality and Barangays understated their
gross receipts in their applications for business permit for CY 2019, thus depriving the
Municipality of the opportunity to increase its revenues for the delivery of basic services
beneficial to its constituents. Moreover, the Municipality fell short by ₱7,588,966.65 in
total revenues for CY 2019 amounting to ₱474,974,053.35 or only 98% of the total
estimated revenue of ₱482,563,020.00 were realized, signifying that the targeted
revenues were not a result of careful evaluation among concerned departments and
efforts were not fully exerted in the attainment of its economic goals.

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 We recommended that Municipal Mayor instruct:

a. The BPLO, in coordination with the Market Specialist to require stallholders to obtain
their business permit.

b. The BPLO to strategize the tightening of the enforcement of the Local Revenue
Code to ensure that all businesses operating within the Municipality have secured
their business permit.

c. The BPLO, to recompute the unpaid taxes of the business-taxpayers corresponding

to the understatement of gross receipts, proceed with the collection thereof, and
submit to the Audit Team the results of the actions taken.

Likewise, we recommended that the Municipal Mayor direct the municipal officials
concerned to undertake careful planning and execution of the proposed annual budget
on the basis of reasonable and/or realistic projection of revenues for the ensuing year, in
accordance with the intent of local government budgeting that will support the proper
allocation of expenditures as provided under Section 316 of RA 7160. Moreso, exert
tremendous efforts to attain the targeted revenue for the benefit of its constituents.

5. The Municipality partially converted the closed dump site into a new open-dump solid
waste facility pending the operation of their alternative technology for solid management
contrary to Paragraph 4, Section 17 (h), Article 1, Chapter III of RA No. 9003 or the
“Ecological Solid Waste Management Act of 2000”. Likewise, the provisions of DENR
Administrative Order (DAO) No. 9, series of 2006 and the Safe Closure and
Rehabilitation Plan (SCRP) were not fully implemented. Moreover, the LGU’s 10-year
Solid Waste Management Plan is still pending approval by the National Solid Waste
Management Commission (NSWMC).

We recommended that the Municipal Mayor instruct the MENRO:

a. to strictly implement the Safe Closure and Rehabilitation Plan (SCRP) with the
detailed plan and corresponding cost estimate that was duly acknowledged by the
Environment and Management Bureau (EMB) to ensure that the open dumpsite
closure and rehabilitation are done with environmental protection measures and
safeguards in place;

b. to submit to the Audit Team status and monitoring reports of the Safe Closure and
Rehabilitation Plan; and

c. to expedite the compliance of the requested documents necessary for the approval
of the 10-Year Municipal Solid Waste Management Plan (2019-2028) by the National
Solid Waste Management Commission (NSWMC).

6. Post-qualification of bidders and evaluation of bids were not meticulously conducted for
84 infrastructure contracts, resulting in the awarding of multiple contracts to the same
contractors with overlapping implementation periods despite identical sets of personnel
and equipment, contrary to Section 34.1 and 34.3 of the Revised Implementing Rules
and Regulations (RIRR) of RA 9184, incurring delays in project completion ranging from
23 to 97 days, thereby depriving the constituents of the benefits derived from the timely

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 accomplishment thereof.

We recommended that the Municipal Mayor instruct:

a. the BAC Chairman, in coordination with the BAC-TWG, to meticulously conduct the
evaluation of bids and post-qualification in order to ascertain that the winning bidders
can comply with the terms and conditions of the contracts and ensure that the
personnel and equipment of the contractors with simultaneous or overlapping
periods differ from each other;

b. the BAC, if it verifies any of the deficiencies enumerated in Section 34.3 of the
Revised IRR of Republic Act 9184 to be due to the contractor’s fault or negligence, to
disqualify the contractor from the award for the procurement of Infrastructure
Projects;

c. the Municipal Engineer to monitor the project implementation of the Municipality in

accordance with functions cited in Section 477 (b) (3) of RA 7160 and ensure the
timely completion thereof. Likewise, address immediately the incidence of negative
slippage to avoid further damages to the government and its constituents; and

d. the BAC Chairman and the Municipal Engineer to closely coordinate in the
evaluation of contractors, particularly on their performance of work.

7. Time and again, the Annual Budget for the Special Education Fund for CY 2019 was not
supported by an Annual Implementation Plan (AIP) due to the failure of the Local School
Board to submit a 3-year School Improvement Plan, thus casting doubts on whether the
strategic prioritization policies were attained as provided by Sections 5.1 to 5.2.2 and 5.4
of the Joint Circular No. 1, series of 2017 of the Department of Education, Department of
Budget and Management and Department of the Interior and Local Government.
Likewise, the Municipality incurred non-priority expenses amounting to ₱762,026.25
contrary to Section 4 of the aforementioned guidelines.

We recommended that the Municipal Mayor instruct the Local School Board to submit
the School Improvement Plan and the Annual Implementation Plan and refrain from
approving the Special Education Fund Annual Budget without these supporting
documents to ensure that the Special Education Fund (SEF) will be utilized for the
intended purpose or according to the identified priority areas listed in the Annual
Implementation Plan (AIP) culled from the DepEd-approved School Improvement Plan
(SIP).

Likewise, we recommended that the Municipality refrain from charging non-priority

expenses from the Special Education Fund and strictly comply with the provisions of the
above-stated regulations; otherwise, such transactions will be suspended or disallowed
in audit if incurred repeatedly.

8. The Municipality had allocated less than one percent (1%) of its Internal Revenue
Allotment (IRA) for the programs/projects/activities of the Local Councils for the
Protection of Children (LCPC) and the appropriated amount of P230,000.00 was
intended for social services of children contrary to Rule 15.b of Rule 15.b of Rules and
Regulations Implementing Republic Act No. 9344 or the “Juvenile Justice and Welfare

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 Act of 2006” and to DILG Memorandum Circular 2012-120.

We recommended that the Local Chief Executive, as the chairperson of the Local
Councils for the Protection of Children (LCPC), enjoin the members of the Council to
adhere to the provisions of Rule 15.b of Rules and Regulations Implementing Republic
Act No. 9344 or the “Juvenile Justice and Welfare Act of 2006” and to DILG
Memorandum Circular 2012-120 that mandate the LGU to strengthen and implement the
programs, projects and activities of the Local Councils for the Protection of Children
(LCPC).

9. The Annual Gender and Development (GAD) Plan and Budget of the Municipality
implemented in Calendar Year 2019 were not submitted to the Provincial Planning and
Development Office (PPDO) of the Provincial Government to ensure the alignment of the
municipal GAD PPAs with the priorities of the province. The document too was not
subsequently forwarded to the DILG Provincial Office for its review and endorsement.
Likewise, the Annual Gender and Development (GAD) Plan and Budget was not
prepared following the prescribed format or template. The practice was contrary to Joint
Memorandum Circular No. 2016-01 of Philippine Commission on Women, Department of
the Interior and Local Government, Department of Budget and Management and
National Economic and Development Authority and cast doubts that municipal GAD
PPAs were relevant and appropriate in responding to gender issues and concerns of
that LGU.

We recommended stringent compliance with the provision of Section 5(2) of the Joint
Memorandum Circular No. 2016-01 dated January 12, 2016 of the Philippine
Commission on Women, Department of the Interior and Local Government, Department
of Budget and Management and National Economic and Development Authority that the
Municipality shall submit her Annual Gender and Development (GAD) Plan and Budget
(GPB) to the Provincial Planning and Development Office (PPDO) of the Provincial
Government to ensure the alignment of the municipal GAD PPAs with the priorities of
the province and then to the DILG Provincial Office for its review and endorsement to
the concerned LGU for incorporation in her annual budget to be enacted by her Local
Sanggunian.

10. The Municipality has not yet established a Gender and Development (GAD) Database
due to the discontinuance of its Community-Based Monitoring System (CBMS), a project
identified to be the source of sex-disaggregated data and other GAD related information,
which casts doubt on whether the addressed gender issues were responsive to the
actual situation and needs of its constituents.

We recommended that the Municipal Mayor direct the MPDC in coordination with the
GAD Focal Point:

a. to spearhead the establishment of the GAD Database, manual or electronic,

consisting of sex-disaggregated data and other GAD-related information;

b. to ensure the effective implementation of the database that contains systematically

gathered and regularly updated information relevant to gender-responsive planning,
programming, and policy formulation; and

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 c. to evaluate thoroughly the data gathered from the database to come up with gender-
responsive and gender-sensitive plans and programs which are in accordance with
the GAD mandate.

11. The 20 percent Development Fund of the Municipality for CY 2019 reported a utilization
of only 90 percent, amounting to P53,327,562.53, leaving 10% unutilized. Of the total
utilization, P1,996,130.85 in expenditures were not among the 20% Development Fund
priority projects mentioned in the Joint Memorandum Circular (JMC) No. 2017-1,
Likewise, there were projects listed in the Annual Investment Program that were neither
specific nor exact, having appropriations that were lump sum or not itemized contrary to
Article 454 (d) of the Implementing Rules and Regulations of RA 7160. Moreover, it was
noted that projects amounting to P13,950,000.00 were realigned, contrary to Articles 417
and 454 (b) of the Implementing Rules and Regulations of Republic Act No. 7160.

We recommended that the Municipal Mayor instruct:

a. the Municipal Planning and Development Coordinator (MPDC) to ensure the efficient
and effective utilization of the 20% Development Fund which is primarily intended to
fund projects that shall contribute to the attainment of desirable socio-economic
development;

b. the Management to strictly observe Article 454 (d) of the Implementing Rules and
Regulations of RA 7160, which states that disbursements from special accounts shall
proceed from itemized appropriation which shall be for specific development
projects/activities embodied in the local development plan and/or public investment
program formulated and prioritized by the Local Development Council and approved
by the Sanggunian concerned.

We likewise recommended that changes in the Annual Budget be implemented in

accordance with Article 417 and 454 (b) of the Implementing Rules and Regulations of
RA No. 7160.

12. The Municipality had not conducted the post-verification for the request for suspension
of work for the project Supply, Delivery, Construction and Installation of MRF located in
Dayap, Nasugbu, Batangas with a contract amount of ₱49,968,385.00, thereby casting
doubt on the veracity of contractor’s request for suspension contrary to the stipulations
of the Government Procurement Manual, Volume 3.

We recommended that the Municipal Mayor instruct the Municipal Engineer:

a. to make a reassessment or investigation on the veracity of the reasons provided by

the contractor for their request for the suspension of work and grant the said
request only if there isa valid reason to suspend work per Government Procurement
Manual Volume 3;

b. to require the contractor to complete the project as soon as possible and impose
applicable sanctions and penalties if warranted, in accordance with Sections 8 of
Annex E (Contract Implementation Guidelines for the Procurement of Infrastructure
Projects) of the Revised Implementing Rules and Regulations (IRR) of RA 9184;
and

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 c. to compute the amount of liquidated damages, if warranted, to be deducted from the
next payments to be made to the contractor.

13. The Programs, Projects and Activities (PPAs) for the total available appropriations of
Disaster Risk Reduction Management (DRRM) Fund amounting to ₱40,650,149.73 were
not comprehensively identifiable in the Local Disaster Risk Reduction Management
Investment Plan (LDRRMIP). Likewise, payment of ₱257,047.58 for general and
maintenance expenses of MDRRMO were charged against the 70% mitigation fund,
which may result in the insufficiency of funds for calamity purposes, contrary to Section
12 of Republic Act (RA) 10121 and COA Circular No. 2012-002 dated September 12,
2012.

We recommended that the Municipal Mayor instruct:

a. The Municipal Disaster Risk Reduction Management Council to include in the

LDRRMP the PPAs within the DRRM fund in compliance with the provisions under
COA Circular No. 2012-002 dated September 12, 2012.

b. The LDRRMP should be reviewed annually to include the activities to be funded from
the unexpended 30% QRF and 70% DRRMF-MOOE of the preceding year.

c. Refrain from using DRRMF for programs/projects/activities which are not directly
related to disaster preparedness, mitigation, response and rescue operations.

14. The Report on Local Road Networks and the corresponding Report on the Physical
Count of Road Network were not submitted by the Municipality contrary to existing rules
and regulations, thus precluding the audit team in their timely verification thereof.

We recommended that the Local Chief Executive enjoin the concerned officials to
ensure the annual preparation of the required reports, the conduct of inventory of roads
and submission of the same to the Office of the Auditor within the prescribed period.

15. Required delivery documents for the sixty-three (63) deliveries from procured equipment,
goods and materials during the year were not furnished to the Auditor, contrary to
Section 6.9 of COA Circular No. 2009-002, thus creating doubts on whether these
deliveries actually took place.

We recommended that the Municipal Mayor instruct the General Services Officer to
inform the COA office for the deliveries of procured equipment, goods and materials for
proper inspection of the items within 24 hours as provided under COA Circular No. 2009-
002.

16. The Municipality failed to submit the Agency Action Plan and Status of Implementation
(AAPSI) on the CY 2018 Annual Audit Report, contrary to Section 93 of the General
Provisions of Republic Act No. 10964, dated December 19, 2017, otherwise known as
General Appropriations Act of 2018 thus, the actions taken by management on prior
year’s audit recommendations were not duly monitored.

We reiterated our recommendation that the Municipal Mayor direct the department
head/s or personnel concerned to comply with the completion and submission to the
Audit Team of the Agency Action Plan and Status of Implementation (AAPSI) for part III

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 of CY 2019 AAR and on every AAR thereafter.

The foregoing observations and recommendations in Part II of this Report were discussed
with the concerned Municipal officials and staff through the issuance of Audit Observation
Memoranda. Management’s views and comments were incorporated in the Report, where
appropriate.

Unsettled Suspensions, Disallowances and Charges

As of December 31, 2019, the total outstanding audit suspensions, disallowances and
charges of the Municipal Government of Nasugbu based on the Notice of Suspensions
(NS), Notice of Disallowances (ND), Notice of Charges (NC) and Notice of Summary of
Suspensions, Disallowances and Charges (NSSDC) issued by this Commission totaled
₱32,117,933.05.

Status of Implementation of Prior Years’ Audit Recommendations

Of the 79 audit recommendations embodied in CY 2018 and prior years’ Annual Audit
Reports, 8 were fully implemented, 22 were partially implemented and the remaining 49
were not implemented.