EXECUTIVE SUMMARY

A. Introduction

1. The Municipality of Alegria was created under Executive Order No. 357. This
order was signed by then President Carlos P. Garcia, President of the Philippines on
the 15th day of September 1959 and took effect not earlier than January 1, 1960.
Alegria was derived from the Spanish word “LIVELY”. Its name was given by the
late Judge Sixto Orga and it is composed of twelve (12) barangays.

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing. Those
standards require that we plan and perform the audit to obtain a reasonable basis for
our conclusions.

3. The audit covered the accounts and operations of the municipal government for
the year 2019 and was aimed at ascertaining the propriety of financial transactions,
management’s compliance to prescribed rules and regulations and the fairness of the
presentation of the financial statements. Value for money was also conducted on the
selection and implementation of projects funded out of the 20% development fund,
LDRRMF, Solid Waste Management, BUB, ADM, PAMANA, SALINTUBIG and
Trust Fund, with the objective to determine whether the purposes of the projects were
attained in the most efficient, effective and economical manner.

B. Financial Highlights

a) Financial Position and Results of Operations

Particulars 2019 2018
Assets P 223,151,002.04 P 185,847,413.94
Liabilities 124,197,548.01 110,418,360.72
Government Equity 98,953,454.03 75,429,053.22
Income 113,338,233.13 91,841,588.68
Expenses 91,950,333.84 88,885,426.97
Net Income 21,387,899.29 2,956,161.71

b) Sources and Applications of Funds

Particulars 2019 2018

Appropriations 82,334,479.00 81,179,515.00
Allotment 82,334,479.00 81,179,515.00
Obligations 67,174,240.48 64,847,782.95
Funds received from other agencies 23,098,000.00 9,136,505.00
Funds received from NGOs/POs - -
Funds transferred to other agencies - -
Funds transferred to NGOs/POs - -
C. Audit Opinion

4. The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Municipality of Alegria for CY 2019 because of the
following reasons:

i. Doubtful accuracy and reliability of the Cash in Bank – LCCA account

balance of P22,894,057.37 as of December 31, 2019 due to non-preparation of
the Bank Reconciliation Statements (BRSs);

ii. The existence, accuracy and reliability of the Accounts Receivable, Due
from NGAs, Due from LGUs, and Due from Other Funds accounts reported at
P2,287,680.75, P2,335,726.14, P2,977,305.40, and P17,246,112.37, respectively
could not be validated and are therefore doubtful due to absence of ledgers and
schedules to support the account balances; and

iii. Failure to keep records and non-conduct of comprehensive physical

inventory of the inventory, property, plant and equipment (PPE) and biological
asset accounts in the amount of P100,537.49, P138,440,315.21 and P84,500.00,
respectively, rendering the amounts reflected in the financial statements as of
December 31, 2019 doubtful as to completeness and existence.

D. Summary of Significant Observations and Recommendations

5. For the above-mentioned audit observation, which have caused the issuance of a
qualified opinion, we recommended that:

i. The Municipal Accountant prepare and submit to COA without delay the
CYs 2016-2019 BRS of all its bank depository accounts maintained at the Land
Bank of the Philippines (LBP), Surigao City Branch and to comply always such
requirement mentioned in Section 74 of P.D. No. 1445 and Sections 3.2 and 3.4
of COA Circular No. 96-011;

ii. The Municipal Accountant exert more effort to look for the available
documents and substantiate the balances of the Accounts Receivable, Due from
NGAs, Due from LGUs and Due from Other Funds accounts. Prepare ledgers
and schedules correspondingly. If it will prove ineffective in spite of enormous
effort made, the accountant and the municipal mayor may request the write off
of the said receivable accounts subject to the guidelines and the requirements set
forth in COA Circular No. 2016-005 dated December 19, 2016. Strictly adhere
to the provisions of Sections 111.1, 114 and 112 of P.D. No. 1445 so that the
accounts in the financial statements can be readily verified to their existence,
accuracy and reliability; and

iii. The Mayor constitute an Inventory Team that will initiate plans and
spearhead the conduct of physical count of all the supplies and property of the
 LGU as mandated in Section 124 of the NGAS Manual; Direct the designated
Property Custodian to plan and conduct periodic physical inventory of the
supplies and property of the LGU, awaiting the constitution of an inventory
team by the Municipal Mayor. The RPCPPE and RPCI prepared by the office
of the Custodian, as a result of the inventory taking, shall be reconciled with the
accounting records. These Reports shall also be submitted to COA pursuant to
Section 124 of NGAS Manual for LGU; Instruct the Property Custodian to
make and maintain a list of all the supplies and property of the LGU, with
complete information thereof reflected therein like the name and description of
the supply or property, serial number, property number, location, cost, date
acquired/completed, etc. The list shall be reconciled with the similar records in
the accounting at least a quarter; Advise the Municipal Accountant to maintain
Supplies, PPEs and other property Ledger Cards. Ensure that all the PPEs in the
list/schedule must contain complete information like the name and description
of the supply or property, serial number, property number, location, cost, date
acquired/completed, etc. Reconcile the accounting records with the list/reports
being kept by the Property Custodian at least quarterly; Instruct the Property
Custodian to property tag every PPE including the breeding stocks. This will
help in easy and fast monitoring of the assets and identification thereof in case a
loss of the same; Prescribe the Property Custodian to provide PAR to every PPE
issued to respective end users. Accountability to the property redounds to the
latter; and adhere to Sections 119, 120 and 124 of the NGAS Manual, Volume
1, Section 3(c), Chapter V of the Manual on Property Custodianship, and
other pertinent laws, rules and regulations governing the conduct of physical
count of properties, maintenance of records and submission of reports thereof to
the Auditor.

6. The other significant audit observations and recommendations are as follows:

i. The Municipality did not observe pertinent provisions governing the

utilization and implementation of the 20% Development Fund (DF) defeating
the purpose for which the fund was created.

We recommended that the Municipal Mayor, through the coordination of

the Municipal Engineer, implement all the PAPs included in the 20% DF
budget. Optimally utilize the fund as planned. Every PAPs included in the AIP
was considered very important, extremely necessary and imperatively urgent.
As such, there will be no reason that these may not be given priority to be
implemented during the year; Instruct the Municipal Treasurer to ensure transfer
of cash equivalent to 20% of the IRA to the 20% DF bank account; Stop the
charging of non-developmental expenses against the 20% DF. Submit to COA
the legal basis of the payments totaling P521,627.21. Non-compliance hereof,
or after evaluation by this end of the submitted legal basis or proof and the same
was found wanting of merit, this may result to suspension or disallowance of the
amount as circumstances may warrant; and adhere faithfully to Section 2 of
P.D. No. 1445, Section 287 of R.A. No. 7160, and Items 3, 4 and 5 of DILG-
DBM JMC No. 2017-1 in the utilization and implementation of the 20% DF.

ii. The Municipality did not observe pertinent provisions governing the
budgeting, utilization and reporting of the Local Disaster Risk Reduction and
Management Fund (LDRRMF) defeating the purpose for which the fund was
created.

We recommended that Management stop the charging of administrative/

operating expenses against the LDRRMF, as well as those disbursements
without corresponding appropriation. Submit to COA the legal basis on the
payment of office equipment, travel expenses for non-DRRM related activities,
communication, internet expense and fuel for non-disaster related activities in
the total amount of P138,501.70 and those expenditures without appropriation
amounting to P97,560.20. Non-compliance hereof, or after evaluation by this
end of the submitted justification and the same was found wanting of merit, this
may result to suspension or disallowance of the amount as circumstances may
warrant; Direct the MDRRMO-designate to include in the LDRRM Plan the
allocation for the Response, Rehabilitation and Recovery areas of the 70%
allocation as mentioned in Item 4 of NDRRMC-DILG-DBM-CSC JMC No.
2013-1; Require the Municipal Accountant to accrue and transfer the
unutilized/unexpended LDRRMF to the special trust fund and to maintain
subsidiary ledgers by year of transfer; Instruct the Municipal Treasurer to open
a separate bank account to be used as a special trust fund for the
unspent/unutilized LDRRMF; Advise the MDRRMO-designate to prepare and
submit to COA the Report on Sources and Utilization of LDRRMF as
prescribed in Item 5.1.5 of COA Circular No. 2012-002; and ensure compliance
to the provisions of Section 2 of R.A. No. 10121, Section 4(1) of P.D. No. 1445,
Items 4 and 6.4 of NDRRMC-DBM-DILG JMC No. 2013-1, Item 4.3 of
NDRRMC-DILG-DBM-CSC JMC No. 2014-1 and Item 5.1.12 of COA
Circular No. 2012-002 on budgeting, utilization and reporting of the LDRRMF.

iii. The Municipality still did not submit its accounts to the Commission on
Audit (COA) in a manner prescribed in Section 122 of Presidential Decree
(P.D.) No. 1445 and Chapter 4 of the New Government Accounting System
(NGAS) Manual for Local Government Units (LGUs) precluding the timely
conduct of audit on the said accounts and the transparency and accountability on
government transactions were not fully upheld.

We recommended that the Municipal Mayor reprimand and direct the

concerned officials and employees to immediately submit the respective
Reports, Statements, and other documents to COA in a manner prescribed in
Section 122 of P.D. No. 1445 and Chapter 4 of the NGAS Manual for LGUs.

iv. Sixty-one disbursement vouchers (DVs) for CY 2019 financial

transactions with subject amount of P2,727,680.28 remained unsubmitted to the
Auditor for examination and audit contrary to Section 100 of Presidential
Decree (P.D.) No. 1445, Section 7.2.1 of COA Circular No. 2009-006 and
Section 44 of NGAS Manual for LGU, Volume I precluding the Audit Team to
ascertain their existence, validity and propriety.

We recommended that the Accountant and Treasurer submit to the Auditor

the lacking/missing DVS without delay. Failure to comply may warrant the
issuance of a Notice of Suspension or Notice of Disallowance and the filing of a
crime of failure to render accounts as defined in Article 218 in relation to
Article 222 of the Revised Penal Code. Strictly adhere to Section 100 of P.D.
No. 1445, Section 7.2.1 of COA Circular No. 2009-006 and Section 44 of
NGAS Manual for LGU, Volume I, in the reporting and submission of the
accounts/disbursement vouchers to the Auditor.

v. Relevant provisions covering the hiring and payment of salaries of the 168
Job Orders (JOs) of the Municipality in CY 2019 totaling P8,273,194.00 were
not adhered by the LGU, thus the necessity, legality and propriety thereof could
not be ascertained.

We recommended that the HRMO-designate execute a standard form

contract with the Job Orders as prescribed in the CSC Resolution No. 021480
bearing the necessary information as required therein. These contracts should
bear two (2) witnesses and which a copy thereof should be issued to and
received by the concerned employee.

vi. Eight (8) out of nine (9) individuals who occupied respective LGU-owned
real properties for business purposes were not covered with a Memorandum of
Agreement or Lease Agreement/Contract which is signed by and between the
individual and the municipality in violation with the intent espoused in Section
2 of Presidential Decree (P.D.) No. 1445 and Section 444(b)(3)(vii) of Republic
Act (R.A.) No. 7160 precluding the Auditor to ascertain whether the best
interest of the government had been duly protected.

We recommended that the municipal mayor, through an authority from the

SB, to immediately execute a MOA or lease agreement with the above-
mentioned individuals who have none of the document and to do the same with
every businessman who has intention of renting or leasing any of the LGU-
owned real properties. Make sure that each agreement must be completely
filled up and duly notarized. The Municipal Accountant and Treasurer must
likewise assist in ensuring the compliance thereof as integral points of collection
and recording of the possible income, respectively.

vii. The Municipality of Alegria did not observe pertinent provisions

governing the formulation and implementation/utilization of the Gender and
Development (GAD) fund defeating the purpose for which the program was
created.
 We recommended that the GFPS formulate the LGU GPB based on the
GAD Agenda or identified priority gender issues which were derived from the
information gathered from the sources mentioned in Sections 4.1.C.2.1 and
4.1.C.1.4 of the PCW-DILG-DBM-NEDA JMC No. 2013-01; Advise the
Municipal Engineer to prepare the POW for the Children’s Park so that it will
be implemented immediately; Instruct the MSWDO to ensure implementation
of all the identified integral GAD activities that will resolve GAD issues and
concerns; and strictly adhere to Section 2 of R.A. No. 9710 and Section
4.1.C.2.1 of the PCW-DILG-DBM-NEDA JMC No. 2013-01 in the formulation
and implementation/utilization of GAD fund.

E. Summary of total Suspensions, Disallowances, and Charges

7. Audit suspension and disallowances amounting to P11,353,402.06 and

P63,058,689.29, respectively, remained unsettled contrary to Sections 5.4 and 7.1.1 of
COA Circular No. 2009-006 dated September 15, 2009.

F. Statement on the quantity/number of recommendations implemented, partially

implemented and not implemented for the current year.

8. Monitoring of the implementation of 15 recommendations contained in CY

2018 Annual Audit Report (AAR) revealed that two were fully implemented, 10 were
partially implemented and three were not implemented. Moreover, of the 13 partially
implemented and six unimplemented recommendations, from CY 2017 AAR, four
were fully implemented, 10 were partially implemented and five remained
unimplemented.