EXECUTIVE SUMMARY

1. Introduction

The Municipality of Malay was created by virtue of Republic Act No. 381 dated June 15,
1949. It is located in the northwest tip of Panay Island bounded on the north by
Sibuyan and Sulu Sea, on the east by the Municipality of Nabas, on the west by the
Municipality of Buruanga and on the south by the Province of Antique. It is one of the
seventeen (17) municipalities that comprise the Province of Aklan having a land area of
6,731 hectares.
The Municipality of Malay is where the internationally known tourist destination Boracay
Island is located. It comprises seventeen (17) barangays, fourteen (14) of which are
located in the mainland namely: Argao, Balusbos, Caticlan, Cogon, Cubay Norte, Cubay
Sur, Dumlog, Kabulihan, Motag, Naasug, Nabaoy, Napaan, Poblacion and Sambiray
while the remaining three (3) barangays namely: Balabag, Manocmanoc and Yapak
are located in Boracay Island. Malay has a population of 45,811 consisting of 10,180
households based on census of population conducted by the National Statistics Office
(NSO) in 2010.
The Municipality’s general organizational structure is designed based on the provisions
of the Local Government Code (RA 7160) as well as other pertinent rules and
regulations of the government.

Audit Methodology

A comprehensive audit was conducted on the accounts and operations of the

Municipality of Malay, Aklan for CY 2017. The audit consisted of review of operating
procedures, inspection of the Municipal’s programs and projects on a test basis,
interviews of concerned government officials and employees, verification, reconciliation,
and analysis of accounts, and such other procedures considered necessary under the
circumstances. The audit aimed to ascertain the fairness and reliability of the
Municipality’s financial position and results of operation. Further, it aimed to check on the
validity and propriety of transactions.

A value for money audit was also conducted to determine if the agency’s
programs/projects/activities and/or management of its resources was carried out
economically, efficiently and effectively.

Scope of Audit

In compliance with Section 2, Article IX-D of the Philippine Constitution and pertinent
sections of Presidential Decree No. 1445, we conducted a Financial and Compliance
Audit on the accounts and operations of the Municipality of Malay, Aklan for the year
ended December 31, 2017.

The audit was conducted to ascertain the propriety of financial transactions and
compliance of the agency to prescribed rules and regulations. It was also made to
ascertain the accuracy of financial records and reports, as well as the fairness of the

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presentation of the financial statements, recommend agency improvement opportunities
and determine the extent of implementation of prior year’s audit recommendation.

2. Financial Highlights

Comparative Financial Position

2017 2016 Inc/(Dec) %
Assets 1,121,602,552.31 859,058,394.03 262,544,158.28 30.56%
Liabilities 316,944,472.89 194,987,000.30 121,957,472.59 62.55%
Government Equity 804,658,079.42 664,071,393.73 140,586,685.69 21.17%

The Municipality’s assets, liabilities and government equity as of December 31, 2017
were P1,121,602,552.31, P316,944,472.89, and P804,658,079.42, respectively. The
assets, liabilities and government equity correspondingly increased by 30.56%, 62.55%,
and 21.17% respectively.

Comparative Results of Operation

2017 2016 Inc/(Dec) %

INCOME:
General Fund 527,815,393.31 441,585,806.10 86,229,587.21 19.53%
Special Educ. Fund 32,769,824.80 20,109,025.67 12,660,799.13 62.96%
Trust Fund 0.00 0.00 0.00 0.00
Total 560,585,218.11 461,694,831.77 98,890,386.34 21.42%
EXPENSES:
General Fund 392,111,024.59 316,464,619.99 75,646,404.60 23.90%
Special Educ. Fund 14,668,333.45 3,393,962.19 30.10%
11,274,371.26
Trust Fund 0.00 0.00 0.00 0.00
Total 406,779,358.04 327,738,991.25 79,040,366.79 24.12%
Surplus 153,805,860.07 133,955,840.52 19,850,019.55 14.82%

The municipality collected P560,585,218.11 which is P98,890,386.34 or 21.42% higher

than the last year’s collection of P461,694,831.77. The surplus for the year amounting to
P153,805,860.07 increased by P19,850,019.55 or 14.82% compared to last year’s
income of P133,955,840.52.

Total expenditures for the year amounted to P406,779,358.04 or 24.12% higher

compared to last year’s expenditure of P327,738,991.25.

Comparative Appropriations, Allotments and Obligations (Current and Continuing)

Particulars 2017 2016 Inc./(Dec.) %

Appropriations:
General Fund 722,362,810.98 577,205,862.44 145,156,948.54 25.15%
Special Educ. Fund 35,548,570.57 38,785,141.69 (3,236,571.12) (8.34%)
Total 757,911,381.55 615,991,004.13 141,920,377.42 16.80%
Allotments:
General Fund 722,362,810.98 577,252,737.80 145,110,073.18 25.14%

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 Special Educ. Fund 35,548,567.57 38,785,141.69 (3,236574.12) (8.34%)
Total 757,911,378.55 616,037,879.49 141,873,499.06 16.79%
Obligations:
General Fund 482,306,746.76 333,551,042.87 148,755,703.89 44.60%
Special Educ. Fund 14,817,447.00 25,568,192.32 (10,750,745.32) (42.05%)
Total 497,124,193.76 359,119,235.19 138,004,958.57 2.55%

3. Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the financial statements as of December 31,
2017 due to non-completion of the physical inventory of Property, Plant and Equipment
thus, resulted to difficulty in determining the accuracy, existence, and ownership of the
Property, Plant and Equipment (PPE) account amounting to P370,552,853.23. The
inadequacy of the records did not permit the auditor to apply alternative audit procedures
thereon.

4. Summary of Significant Audit Observations and Recommendations

Findings and observations on the audit conducted with the corresponding

recommendations as of December 31, 2017 are summarized as follows:

1. The Municipal Accountant submitted to the Audit Team the year-end Financial
Statements for CY 2017 beyond the reglementary period and not able to submit
fully supporting journals and ledgers contrary to the provisions of COA Circular
2010-001 dated March 2, 2010, thus, the financial condition and operations of the
Local Government could not be determined.

We recommended that the Municipal Accountant prepare and submit the year-
end 2016-2017 Financial Statements and all supporting schedules and reports
with the accompanying Statement of Management Responsibility for Financial
Statements to the COA Auditor within the reglementary period.

2. Total collections as of December 31, 2017, amounting to P6.588 million was not
deposited by the Municipal Treasurer intact and not later than the next banking
day, exposing the same to the risk of improper use or possible loss, contrary to
the provisions of paragraphs 1 and 4, Section 69 of P.D. 1445 and Section 32 of
the Manual on New Government Accounting System (MNGAS) for Local
Government Units (LGUs) Vol. I.

We recommended that the Management:

1. Require the Municipal Treasurer to deposit intact all collections with the
AGDB, daily or not later than the next banking day;
2. Follow strictly the rules and regulations stated in Paragraphs 1 and 4, Section
69 of P.D. 1445 and Section 32 of the MNGAS for LGUs, Vol. I; and
3. Submit justification why the amount of P6.588 million was not deposited to the
authorized depository bank intact on January 3, 2018, the first banking day of
CY 2018.

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3. The Cashbook/CRR/CDR/CkDR or its equivalent maintained by the Municipal
Treasurer were not footed, balanced, ruled and certified correct at the end of
each month contrary to Sections 26 and 27 of the Manual on the New
Government Accounting System (MNGAS) for Local Government Units (LGU),
thus her accountability could not be regularly monitored resulting to possible
misstatement in cash balances.

We recommended that the Municipal Treasurer foot, rule, balance and certify
correct immediately at the end of the month below the last entry in his
Cashbook/CRR/CDR/CkDR or its equivalent in accordance with the above
regulations.

4. Monthly bank reconciliation statements in the depository account of the

Municipality were not submitted to the Office of the Auditor contrary to Section 74
of P.D. 1445, thus, errors if any, may not be immediately detected and corrected,
casting doubt on the correctness of the P567.629 million Cash in Bank balance.

We recommended that the Municipal Accountant:

1. Prepare the bank reconciliation statement every month as provided in the

New Government Accounting Manual and submit the same to the Office of
the Auditor within the prescribed period; and
2. Prepare and submit the Monthly Bank Reconciliation Statements for the CY
2017 on all depository accounts, duly reconciled with the cashbooks of the
treasury office.

5. Delayed submission of accounts by the management to the Office of the Audit

Team Leader precluded the latter to conduct the timely audit of the transactions,
contrary to Sections 7.2.1(a) of COA Circular No. 2009-006 dated September 15,
2009 and 122 of Presidential Decree No. 1445.

We recommended that the Municipal Accountant enforce daily the submission of

all the reports and documents from the Municipal Treasurer. Then all submitted
reports and supporting documents by the accountable officers shall immediately
be recorded in the books of accounts of which the same shall be submitted within
ten (10) days of the ensuing month to the Office of the Audit Team Leader as
mandated under par. 6.05 of COA Circular No. 95-006 dated May 18, 1995.

6. The existence, condition and whereabouts of the P370.553 million carrying value
of the Property, Plant and Equipment (PPE) or 33.04% of the total assets of
P1.122 billion cannot be validated due to the non-completion of the physical
inventory contrary to Section 124 of the Manual on the New Government
Accounting System (NGAS) for Local Government Units (LGU) Volume I, giving
doubts to the correctness of the reported balance.

We recommended that:

1. The inventory taking shall be done by the office and prepare the corresponding
RPCPPE on the results thereof; and

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 2. The RPCPPE shall then be reconciled with accounting records in order to
ensure that PPE account balances in the financial statements are fairly
presented.

7. The Local Council for the Protection of Children (LCPC) of the Municipality of
Malay was not able to develop a plan/identified Programs/Projects/Activities
(PPAs) for the strengthening and implementation of its programs, thus, the
amount of P1.104 million allocated was not utilized, hence depriving its
constituents, especially the children of benefits that could be derived from the
same.

Recommendations:

1. Develop a comprehensive juvenile intervention program covering at least 3-

year period;
2. Identify Programs, Projects and Activities (PPAs) that responds to the
special needs, problems, interest and concerns of children. Follow DILG
Memorandum Circular No. 2012-120 dated July 4, 2012 in identifying PPAs;
and
3. Implement the approved appropriation for the identified PPAs of the LCPC.

8. Incomplete delivery of embankment materials and improper planning of the labor

component resulted to deficiencies in the amount of P8,452.50 and P34,888.24,
respectively or aggregating to P43,340.74 as per COA Evaluation Report for
Infrastructure Projects.

We recommended that the Management:

1. Be realistic and economical in planning the work to be done in the projects to

be implemented to avoid the occurrence of the above mentioned deficiencies;
and
2. Refund the amount of P43,340.74 and submit to the office of the Audit Team
the corresponding Official Receipt.

9. The estimated cost of P800.00/cu.m. for backfilling materials was unrealistic

compared to the actual bid price of P250.00/cu.m. or a difference of
P550.00/cu.m. or 69%, thus casting doubt on the reasonableness of its cost per
Program of Works (POW). Likewise, the deliveries of the same were not
supported with complete documentation as prescribed under COA Cir. No. 2012-
001 dated June 14, 2012.

We recommended that the Management:

1. Be abreast of the current prevailing price of materials to be procured in order

that costing or estimates in the POW should be realistic;
2. Follow strictly and submit the documentary requirements as prescribed under
COA Cir. No. 2012-001 dated June 14, 2012; and
3. Justify why there was an over estimated cost of P550.00 per cu. m. of
backfilling materials as against the actual bid price.

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10. Priority projects for 2017 amounting to P36.226 million under the 20%
Development Fund (DF) were not implemented on time, thus, depriving the
constituents of the benefits they may derived thereon. Likewise, approved
request for realignment and Revised Annual Investment Plan were not submitted.

We recommended that the Management:

1. Proper planning should be made in identifying the priority projects to be

funded under the 20% DF to guarantee its completion within the target set and
to ensure efficient and effective delivery of services to the constituents;
2. Follow strictly the laws and regulations stipulated in JC No. 2017-1 dated
February 22, 2017;
3. Justify the delayed implementation of the above projects; and
4. Submit copy of the following:
a. Approved request for realignment; and
b. Revised Annual Investment Plan.

11. The Municipality of Malay was not able to achieve its solid waste management
plan due to inability to fully implement its Projects/Programs/Activities amounting
to P31.577 million, contrary to Sections 2 of R.A. 9003, thus, depriving the
constituents and tourists the benefits they may derived therefrom.

We recommended that proper planning and efficient implementation should be

made on identified Projects, Programs and Activities under the Solid Waste
management Services to guarantee its completion within the target set and to
ensure efficient and effective delivery of services to the constituents.

12. Programs/Projects/Activities (PPA) implemented in CY 2017 had no provision for

billboard contrary to Pars. 2.2 to 3.1 of COA Circular No. 2013-004 dated
January 30, 2013, thus, depriving the public of the information of the essential
features/elements of the same and affecting the transparency and accountability
on good governance.

We recommended that the Management:

1. Provide and post within 10 days after the award of the infrastructure project or
before the start of the program/activity the appropriate project signboards
and/or public notices in the project site;
2. Follow strictly the provisions of COA Cir. No. 2013-004 dated January 30,
2013; and
3. Justify why signboards/billboards were not provided in the POW.

13. The project amounting to P4.980 million was constructed on the “NO BUILD
AREA” zone in violation of Sections 1 and 2 of Municipal Ordinance (MO) No. 96-
97, thus the purpose of protecting the ecology and preserving its natural
environment and beauty as tourist destination was affected and may result to
wastage of government resources. Likewise, same are not supported with
Certification of No Objection from DENR nor with approved request for
realignment and the revised Annual Investment Plan.

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 We recommended that the Management:

1. Strictly follow the MO No. 96-97 in order to attain the main purpose of
regulating the construction of all building and other structures in Boracay
Island;
2. Submit the following:
a. Approved request for realignment from Construction of Comfort Room to
Construction of Comfort Room & Tourist Information/Lounge, Baywatch
and Rescue Unit Center;
b. Certification of No Objection from the DENR;
c. Revised Annual Investment Plan (AIP); and
d. Justification on the above audit findings.

5. Summary of Suspensions, Disallowances and Charges

As of December 31, 2017, total unsettled suspensions amounted to P53,046,414.02

while total disallowances amounted to P3,175.00.

6. Statement of Implementation of Prior Year’s Audit Recommendations

Of the 26 recommendations enumerated in last year’s Annual Audit Report, 16 was

implemented, six were partially implemented and four remained unimplemented.

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