EXECUTIVE SUMMARY

A. Introduction

We conducted an audit on the Municipality of San Rafael, a first-class municipality

located at the northern part of the province of Bulacan. The Municipal Government is
headed by Honorable Mayor Cipriano D. Violago, Jr. who is ably assisted by Honorable
Vice Mayor Edison M. Veneracion and ten Sangguniang Bayan members.

Our audit was made in accordance with Philippine Standards on Auditing and we believe
that it provided a reasonable basis for the audit results.

The audit covered the financial transactions and operations of the Municipality for the
calendar year 2016. The objectives of the audit were (a) to ascertain the level of
assurance that may be placed on management’s assertions on the financial statements; (b)
recommend agency improvement opportunities; and (c) determine the extent of
implementation of prior year’s audit recommendations.

B. Financial and Operational Highlights

The comparative data on the financial condition, results of operation and sources and
application of funds of the Municipality for the years 2016 and 2015 are presented below:

Amounts in Million Pesos

Increase (Decrease)
2016 2015 Amount %
Financial Condition
Total Assets 652.64 515.95 136.69 26.49%
Total Liabilities 229.18 161.40 67.78 42.00%
Total Equity 423.46 354.55 68.91 19.44%
Results of Operations
Total Revenues 235.63 223.45 12.18 5.45%
Total Expenses 168.66 140.66 28.00 19.91%
Excess of Income Over Expense 61.85 72 (10.15) -14.10%
Sources and Application of Funds
Appropriation 308.38 330.85 (22.47) -6.79%
Allotments 308.38 330.85 (22.47) -6.79%
Obligations 237.85 260.78 (22.93) -8.79%
C. Auditor’s Opinion

We rendered a qualified opinion on the fairness of presentation of the financial

statements due to the reliability of the Land account amounting to P19,693,167.31 was
not established for lack of supporting ownership documents.

D. Summary of Significant Observations and Recommendations

Summarized below are the significant audit observations with their recommendations, the
details of which are presented in Part II of this report. Management views and comments,
including those offered during the exit conference were incorporated in the report, where
appropriate.

1. No safety vault was installed at the Office of the Market Master; thus, daily
collections were brought home by the accountable officer for safekeeping prior to
its remittance to the Municipal Treasurer’s Office exposing the funds of the
government to possible loss thru theft or misplacement contrary to Sections 2 and
123 of PD 1445. (Observation No. 1)

We recommended that the Municipal Government to purchase and install a safety

vault or steel cabinet with vault where collections can be kept before they are
remitted at the Municipal Treasurer’s Office and to provide additional security
features at the Office of the Market Master to safeguard their collections.

2. The granting of cash advance for the Confidential Fund amounting to P500,000.00
revealed several deficiencies contrary to COA-DBM-DILG-Governance
Commission for GOCCs-DND Joint Circular No. 2015-01 dated January 8, 2015,
thus its regularity was not established. (Observation No. 2)

We recommended that Management require the officials concerned to (a) submit

the deficient documents; (b) strictly follow the Joint Circular on the release, use,
and reporting of the Confidential Fund; (c) ensure the submission to the
Commission on Audit the cash advance voucher together with the transmittal and
its supporting documents within seven (7) days the after release of the check; and
(d) maintain the Cash Disbursement Record.

3. The unserviceable properties with net carrying value of P290,211.37 were not
disposed of as required under Section 79 of P.D. 1445 and were not properly
secured exposing them to elements that may lead to possible loss and further
deterioration. (Observation No. 4)

We recommended that Management take immediate steps to dispose of all

unserviceable properties to prevent possible loss and avoid further deterioration in
accordance with the guidelines provided by the COA Circular No. 89-296 dated
January 27, 1989.

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4. Out of the total net carrying value of the property as of December 31, 2016
amounting to ₱259,749,499.73, representing insurable properties of the
Municipality as of December 31, 2016, 97.20% or ₱252,466,514.62 were not
covered with 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 property
in case of destruction thereof through fire, flood or other force majeure for insurable
properties not covered by insurance. (Observation No. 5)

We recommended that Management (a) require the Municipal Finance Committee

to include in its budget the insurance expenses of all insurable properties of the
Municipality; and (b) require the Municipal Treasurer to facilitate the submission of
the updated list of inventory of insurable properties with the GSIS so that the
necessary insurance coverage can be applied with the GSIS insurance fund.

5. The Municipality did not fully comply with some provisions of Republic Act No.
9184 or the Procurement Law; thus transparency in the procurement process was
not promoted. Moreover, the deficiencies noted in the post audit of the said
transactions rendered the validity of the claims doubtful/questionable. (Observation
No. 6)

We recommended that Management (a) strictly comply with the pertinent

provisions of RA 9184 on the invitation of observers for all stages of the
procurement process and on the use of Competitive Bidding to ensure transparency
in the procurement process; and (b) submit the relevant documents to establish the
validity of the claims for payment.

6. The Municipality failed to observe COA Circular No. 2013-004 dated January 30,
2013 relative to information and publicity of projects/programs/activities of
government agencies, thus transparency and accountability in the operations were
not promoted. (Observation No. 7)

We recommended that Management comply strictly with the aforementioned

regulation and require the Municipal Engineering Office and other officials
concerned to disclose all transactions involving PPAs for transparency and
accountability.

7. The operation of three-wheeled public conveyances within the Municipality’s roads

could not yet be effectively regulated and managed owing to their non-coverage
from the local ordinances on traffic management notwithstanding the requirements
of Section 458 of R.A. 7160, the Local Government Code of 1991, and directives
from the Department of Transportation and Communications (DOTC) and
Department of the Interior and Local Government (DILG) relative thereto, which
condition may (a) expose both pedestrians and motorists to increased risk to
accidents; and (b) obstruct the continuous flow of traffic. (Observation No. 8)

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 We recommended that the (a) Members of the SB consider enacting appropriate
ordinance on the regulation of the operations of three-wheeled public conveyance to
prevent undesirable outcomes as a result of unregulated proliferation of tricycles
along the Municipality’s highways, which may pose hazards and imminent danger
to pedestrians and motorists’ lives and properties; and (b) strictly implement the
various ordinances on traffic guidelines.

8. The Municipality appropriately provided budget for the 20% Development Fund in
the total amount of P31,277,328.00 for CY 2016 in compliance with DILG-DBM
Joint Memorandum Circular No. 2011 – 1 dated April 11, 2011. Of the total budget,
only P26,179,240.82 was expended, registering a utilization rate of only 83.70%,
thus, the Municipality failed to maximize the attainment of the desired socio
economic development as envisioned in the Annual Investment Plan. (Observation
No. 9)

We recommended that Management (a) direct the Municipal Planning and

Development Office and Municipal Engineer to monitor the effective and efficient
implementation of the projects under the 20% Development Fund so that timely
necessary interventions may be made for the attainment of the objectives of the
programs; (b) direct the other responsible officials concerned to address the issues
that impede the full implementation of priority projects; (c) continue to invest in
high–impact or developmental projects and include in the Annual Investment Plan;
and (d) cause the re-appropriation of the balance of the fund in the ensuing year to
finance development projects for the benefit of the Municipality’s constituents.

9. The LDRRMF Utilization Report was not regularly prepared and submitted on a
monthly basis contrary to NDRRMC, DBM and DILG Joint Memorandum Circular
(JMC) No. 2013-1 dated March 25, 2013 and COA Circular No. 2012-002 dated
September 12, 2012, thus stakeholders were denied of early availability of
information on the use of LDRRMF. Moreover, it prevented the timely review by
the Audit Team of the fund utilization in order to determine whether or not the
activities to address the Municipality’s disaster preparedness and mitigation were
achieved. (Observation No. 10)

We recommended that Management (a) require the LDRRMO, through the

LDRRMC and Local Development Council (LDC), to prepare the Report on
Sources and Utilization of DRRMF to be certified correct by the Local Accountant
and submitted to the COA Auditor of the LGU on or before the 15th day after the
end of each month; and (b) continue to allocate 5% of the budget for the Local
Disaster Risk Reduction and Management Fund and utilize it in accordance with the
guidelines on the matter.

10. The Municipality has not substantially complied with the provisions of R.A. No.
9003 or the Ecological Waste Management Act of 2000 for its failure to establish a
functional Material Recovery Facility in 33 barangays in violation with Section 32
of the said Act. (Observation No. 11)

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 We recommended that the Local Chief Executive and the MENRO (a) involve
closely the barangay officials in solid waste management and activate the Barangay
Solid Waste Management Committees in every barangay for the strict enforcement
and continual implementation of the existing environmental laws; (b) continuously
intensify information campaign and educate the constituents on the necessity of
establishment of MRF in every barangay; (c) consider extending financial
assistance, resources, and technology to the 33 barangays which have remained
non-compliant to the basic requirements of R.A. 9003; and (d) take appropriate
action to provide adequate supply of electricity at the Material Recovery Facility
(MRF) of the Municipality so it could operate efficiently and effectively.

11. The Municipality of San Rafael, Bulacan has consistently complied with BIR
Revenue Regulation No. 2-98 on the remittance of taxes withheld on or before the
10th of the following month. (Observation No. 12)

We recommended that Management continue to comply with BIR Revenue

Regulation No. 2-98 on the remittance of taxes withheld within the prescribed
period.

12. The Municipality of San Rafael, Bulacan has complied with the withholding of
GSIS monthly premiums from employees’ compensation although the amounts
remitted were not in full contrary to Section 6 (b) of R.A. No. 8291. (Observation
No. 13)

We recommended that Management direct the (a) Accounting Office and the
Human Resource Office to tally their records of premiums withheld and remitted;
and (b) Accounting Office and Treasury Office to invariably comply with the full
remittance of withheld premiums and government share on or before the 10th of the
following month in compliance with Section 6 of R.A. No. 8291.

E. Summary of Total Suspensions, Disallowances and Charges at year-end

Suspensions, disallowances and charges as of December 31, 2016 stood at P0.00,

P3,708,525.44 and P0.00, respectively.

F. Status of Implementation of Prior Years’ Unimplemented Audit

Recommendations

Out of the 40 recommendations embodied in the 2015 Annual Audit Report, 26 were
implemented, another 12 were partially implemented, while the remaining 2
recommendations were unimplemented by Management.