EXECUTIVE SUMMARY

A. INTRODUCTION

The Municipality of Masantol, a second-class municipality, lies in the western part of

Pampanga and is close to Manila Bay. It is composed of 26 barangays and with a total
land area of 13,746 hectares. The main source of livelihood is culturing sugpo and crabs.

Our audit was made in accordance with International Standards of Supreme Audit
Institutions (ISSAIs) and we believe that it provided a reasonable basis for the audit
results.

B. FINANCIAL HIGHLIGHTS

The following comparative data show the financial condition, results of operations and
sources and application of fund of the Municipality of Masantol, Pampanga:

Increase (Decrease)
Particulars CY 2019 CY 2018
Amount %
Financial Condition
Total Assets ₱158,203,363.55 ₱156,524,987.86 ₱1,678,375.69 1.07%
Total Liabilities 49,541,764.60 52,523,273.18 - 2,981,508.58 -5.68%
Net Assets/Equity 108,661,598.96 104,001,714.68 4,659,884.28 4.48%

Results of Operations
Total Revenue 147,970,655.97 136,105,626.70 11,865,029.27 8.72%
Total Expenses 162,096,728.28 139,291,255.70 22,805,472.58 16.37%
Subsidies and Donations 18,714,676.69 27,558,630.78 - 8,843,954.09 -32.09%
Surplus(Deficit) 4,588,604.38 24,373,001.78 - 19,784,397.40 -81.17%

Sources and Application of Funds

Appropriations 152,477,391.47 137,338,301.25 15,139,090.22 11.02%
Obligations 138,751,715.39 125,389,562.44 13,362,152.95 10.66%
Balances 13,725,676.08 11,948,738.81 1,776,937.27 14.87%

C. SCOPE OF AUDIT

The audit covered the examination, using risk-based approach of the accounts and
financial transactions of the Municipality of Masantol for CY 2019 particularly those
contained in the Memorandum dated July 9, 2019 of the COA Local Government Sector
Assistant Commissioner. Part II of this Report contains the audit exceptions on the 2019
Audit Focus and Thrusts for the Local Government Sector and other high-risk accounts.

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The audit was aimed to (a) verify the level of assurance that may be placed on
management’s assertions on the financial statements; (b) determine compliance of
management with the laws, rules and regulations on the pre-identified audit thrusts/areas
and recommend agency improvement opportunities thereon ; and (c) determine the extent
of implementation of prior year’s audit recommendations.

D. INDEPENDENT AUDITOR’S REPORT

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements of the Municipality for the year ended December 31, 2019 because the
accuracy, correctness and existence of the reported Property, Plant and Equipment
account balance with a carrying amount of ₱90,653,606.85 could not be ascertained
owing to inability of management to (a) conduct physical inventory of PPE and submit
the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) thereon;
(b) maintain PPE Ledger Cards, Real Property Ledger Cards for Land and Property Cards
to support the PPE account balances; (c) maintain lapsing schedule to support the
depreciation expense and accumulated depreciation for assets and (d) cover various
parcel of land declared as owned by the Municipality with Transfer Certificate of Titles
(TCTs) )/Original Certificates of Title (OCT), which are the best evidence of ownership.

For the above deficiencies, we recommended that the Local Chief Executive require the
Accounting Office, Treasurer’s Office and Inventory Committee, as the case may be, to
(a) conduct complete physical count of all properties and submit the Report of Physical
Count of Property, Plant and Equipment; (b) prepare and maintain PPE Ledger Cards,
Real Property Ledger Cards for Land and Property Cards for each category of assets
starting with current year’s acquisition; (c) set up a spreadsheet application or lapsing
schedule for the PPE items to facilitate the computation for the periodic depreciation for
each PPE item; and (d) facilitate confirmation with the Land Registration Authority
(LRA) and seek technical assistance, if necessary, to title all lots in the name of the
Municipality of Masantol.

E. OTHER SIGNIFICANT FINDINGS AND RECOMMENDATIONS

The other significant findings and recommendations on the accounts and operations of
the Municipality are as follows:

1. The reported balances of the accounts (a) Cash Local Treasury of ₱1,132,455.83;
and (b) Cash in Bank of ₱49,845,463.77 were unreconciled with that of the cashbooks
with total balances of ₱1,078,168.35 and ₱50,900,283.32, respectively, thus rendering the
reliability of the accounts doubtful, contrary to Section 181 of the Government and
Accounting Manual, Volume 1. (Observation No. 2)

We recommended that management require the Municipal Treasurer – OIC and the
Accountant to (a) determine the causes of the discrepancies between the accounting
books and the cash books for subsequent appropriate action; and (b) conduct

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reconciliation of cash account records at least quarterly to identify the nature of
differences and record the necessary adjusting entries in the books of accounts.

2. The recorded balances of the Real Property Tax (RPT) Receivable, Special
Education Tax (SET) Receivables and Deferred Credits accounts as of December 31,
2019, were unreliable due to (a) absence of subsidiary ledgers for individual taxpayers;
and (b) failure of the Acting Municipal Treasurer to furnish the Municipal Accountant
with certified list of taxpayers as basis for the latter to set up the receivables at the
beginning of the year, contrary to Section 20, Volume I of the NGAS Manual.
(Observation No. 3)

We recommended that the (a) Municipal Treasurer prepare the certified list of taxpayers
based on the Assessment Roll from the Municipal Assessor’s Office starting with active
taxpayers and expanding the roll by aiming to increase it annually until all taxpayers are
covered; and (b) Municipal Accountant (i) set up the RPT/SET Receivable based on the
Certified List of Taxpayers and provide and maintain subsidiary ledgers of individual
taxpayer, starting with those active taxpayers, to support the general ledger balances and
facilitate monitoring and reconciliation of tax collections and delinquencies; and (ii) exert
efforts to trace the unreconciled discrepancies of the four reciprocal accounts.

3. Reciprocal accounts were not reconciled resulting in a discrepancy of

₱175,560.27, thus affecting the fair presentation of the financial statements as of year-
end. (Observation No. 4)

We recommended that management instruct the Accounting Office to exert efforts to

trace the unreconciled discrepancy of ₱175,560.27.

4. The Municipality did not procure their commonly-use office supplies amounting
to 1,329,464.80 from the Procurement Service (PS) of the Department of Budget and
Management (DBM) for CY 2019 in violation of Sections 52 and 53.5 of the Revised
IRR of RA 9184, Section 4 of Administrative Order No. 17 dated July 28, 2011 and
GPPB Resolution No. 24-2014 dated October 31, 2014. Furthermore, the Municipality
failed to abide by the provisions of Sections 114 and 121, Volume I of the New
Government Accounting System in recording purchases for supplies. (Observation No. 5)

We recommended that the Local Chief Executive direct the Municipal Treasurer/General
Service Officer to (a) procure the common-use supplies directly from the PS-DBM as
provided under Section 53.5 of the Revised IRR of RA 9184 and Section 4 of
Administrative Order No. 17 dated July 28, 2011; (b) secure a Certificate for Non
Availability of Stock from the DBM-PS or its equivalent before resorting to alternative
modes of procurement; and (c) abide by the requirements of the New Government
Accounting System on the purchase, recognition and issuances of Supplies and Property.

5. The Municipality failed to submit its accounts and their supporting documents to
the Audit Team within the period required under Section 347 of RA No. 7610 and COA
Circular No. 2009-006 dated September 15, 2009 which precluded the conduct of post-

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audit and the timely communication to the management of any reportable deficiencies
and/or observations. (Observation No. 7)

We recommended that the Local Chief Executive require the Municipal Accountant to
strictly comply with the regulations on the rendition of accounts in order not to delay the
verification and audit of transactions in the appropriate period.

6. Observations noted on the hiring of Job Order (JO) personnel and the payment of
their salaries included (a) continuity and automatic renewal of appointments every six (6)
months for the performance of regular and recurring office functions; (b) provision of
salary rates on a monthly basis instead of daily basis; (c) inconsistent and unreliable
information on the DTRs and Payroll Sheet; and (d) non- referral to DTRs for payrolls
contrary to Republic Act No. 7160 or the Local Government Code of 1991, CSC
Memorandum Circular No. 40 s. of 1998 dated December 14, 1998, CSC Resolution No.
020790 dated June 05, 2002, Presidential Decree No. 1445 and COA Circular 2012-001
dated June 14, 2012. (Observation No. 8)

We recommended that Local Chief Executive (a) instruct the HR department to (i) initiate
the conduct of the review of the agency’s organizational structure and staffing to
determine the appropriate manpower complement; (ii) submit a written explanation on the
variances noted on the submitted DTR of Ms. Angelika Usi and for the above-mentioned
differences of affixed signatures on DTRs and Payroll Sheet; (iii) install internal control
on the hiring and supervision/management of all personnel; and (iv) refer to the
provisions of CSC Resolution No. 02-0790 for the policy guidelines for contract of
services; and (b) require the Accounting and Treasurer’s Office to strengthen internal
control over the (i) release of the payment of salaries and wages; and (ii) processing of
payroll and liquidation reports by checking the sufficiency of the supporting documents
for each and every type of transactions.

7. The Municipality complied with Department of Interior and Local Government

(DILG) and Department of Budget and Management (DBM) Joint Memorandum Circular
No. 2017 - 1 dated February 22, 2017 on the appropriation of 20% Internal Revenue
Allotment for Development Fund of ₱26,870,508.40, registering a utilization rate of 69%
or ₱18,500,132.07 in CY 2019. However, it could have maximized the attainment of its
desired socio-economic development and environmental management outcomes had it
implemented its ₱8,220,000.00 worth of projects and proposed other high-impact projects
from the tipping fees of ₱3,170,508.40 charged to the Fund. (Observation No. 10)

We recommended that the Local Chief Executive (a) refrain from proposing non-capital
investment projects under the 20% Development Fund; and (b) ensure the effective and
efficient implementation of the proposed projects within their targeted completion period
through close monitoring and supervision to maximize the developmental benefits and the
early enjoyment thereof by the intended beneficiaries.

8. The Municipality has observed some provisions of RA No. 10121 and with some
of the minimum standards under NDRRMC Disaster Preparedness Minimum Standards

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Volume 2. However, it may not be considered fully disaster-prepared owing to the (a)
inadequacy of trainings attended by the responders; (b) lack of power tools/heavy
equipment; and (c) insufficient internal control on the receipt, recording, storage,
management, and distribution of supplies, and disaster response equipment. (Observation
No. 11)

We recommended that the (a) MDRRMC and members of the emergency response team
(i) attend trainings to gain knowledge and understanding, awareness and skills for
prevention, mitigation, preparedness, response, rehabilitation and recovery; and (ii)
purchase and maintain the minimum standards of power tools/heavy equipment at the
minimum as required by the disaster preparedness minimum standards volume 2 of the
National Disaster Risk Reduction and Management Council; and (b) Municipal
Accountant and the Municipal Treasurer install an effective internal control in the
recording, maintenance and distribution of relief items and disaster response equipment in
accordance with the above-mentioned rules and regulations.

9. Disallowances of ₱351,416.75 remained unsettled as of December 31, 2019 which

was not in consonance with COA Circular No. 2009-006 which prescribes the use of the
Rules and Regulations on the Settlement of Accounts (RRSA). (Observation No. 11)

We recommended that management strictly enforce settlement by persons liable for the
audit disallowances within the prescribed period, pursuant to the 2009 Revised Rules of
Procedures of the Commission on Audit. Also, we recommend that management send
demand letters to the last known address of inactive persons liable.

F. SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND

CHARGES AT YEAR-END

Suspensions, disallowances and charges as of December 31, 2019 stood at ₱0.00,

₱351,416.75, and ₱0.00, respectively.

G. IMPLEMENTATION OF PRIOR YEAR’S UNIMPLEMENTED AUDIT

RECOMMENDATIONS

Of the 25 prior year’s audit recommendations, five were fully implemented, seven were
partially implemented and the other 13 were not implemented.