EXECUTIVE SUMMARY

Introduction

The Municipality of Motiong is a fourth (4th) class municipality in the Province of

Samar. It is formerly known as “Mutya” which means “Place of Treasure” because the
natives believed that the place was full of treasures. The name lasted for so many years.
When the Americans came in 1886, the name of the place was unknowingly changed to
Motiong. Formerly, it was a barrio of the Municipality of Wright (Paranas). However,
through the effort of Mr. Mariano Sapetin and other civic spirited citizens of Motiong
residing in Manila, the barrio was separated from the Municipality of Wright as an
independent municipality by virtue of R.A. No. 290 on June 16, 1948.

A financial and compliance audit was conducted in its accounts and operations for
the calendar year 2017. The audit was aimed to ascertain the propriety and validity of
disbursements and receipts, and to obtain reasonable assurance about whether the
financial statements are free from material misstatements. The audit consisted of post-
audit of transactions, review of operating procedures, interview with concerned municipal
officials and employees, verification and analysis of accounts, and such other procedures
considered necessary under the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the
financial statements.

Financial Highlights

The municipality’s total assets, liabilities, equity, income and expenses for current
and previous years’ are as follows:

Particulars CY 2017 CY 2016

Assets 137,320,777.28 122,163,316.48
Liabilities 51,710,430.40 34,014,144.76
Equity 85,610,346.88 88,149,171.72
Income 78,003,445.17 74,557,324.66
Expenses 79,908,680.48 66,845,688.77

Its appropriation/allotment/obligation for current and previous year are as follows:

Particulars CY 2017 CY 2016

Appropriation/Allotment 77,640,960.00 68,938,755.00
Obligation 76,563,092.48 64,313,803.42
Independent Auditor’s Report

The Auditor rendered a qualified opinion on the municipality’s financial

statements for CY 2017 because the reliability of reported income in the statement of
financial performance could not be ascertained due to errors in the classification of
accounts Subsidy from Other Funds and Subsidy to Other Funds amounting to
P20,360,683.07 and P14,814,746.06, respectively. Likewise, the Due from Other Funds
was overstated by P500,000.00 due to an error in recording the transfer of LGU
counterpart for the KALAHI-CIDSS program. Moreover, the expenses for the year were
also overstated because the fund transfer to the barangays totaling P700,000.00 were
erroneously debited to various expenses instead of Due from Local Government Units
and the adjusting entries made for the similar transactions in CY 2016 amounting to
P795,000.00 were erroneous because the adjustments were made in the Trust Fund
instead of in the General Fund. Further, the reliability of the accounting and recording of
the LDRRMF could not be ascertained because the unexpended portion of the Local
Disaster Risk Reduction and Management Fund (LDRRMF) for CY 2017 and prior years
totaling P 2,517,412.96 was not transferred to the Special Trust Fund. Moreover,
registries and subsidiary records for the LDRRMF were not maintained while the
required reports for the fund utilization were not submitted monthly. Likewise, the
relevant information pertaining to LDRRMF were not disclosed in the Notes to Financial
Statements. The Cash in Bank, LCCA and Trust Liabilities accounts amounting to
P35,836,594.23 and P9,675,571.83, could not be relied upon due to errors in adjusting
entries made as presented in Part III item no. 1 of this report. Finally, the accuracy of the
carrying amount of Property, Plant and Equipment (PPE) accounts totaling
P92,658,916.80 could not be ascertained due to the absence of updated property cards
and ledger cards.

Summary of Significant Observations and Recommendations

1. Prior years’ expenditures totaling P1,776,246.40 for the Year-end Bonus and
Productivity Enhancement Incentive (PEI) which have no cash back up in CY 2016,
were appropriated and paid out of the current years’ budget, thus adversely affecting
the availability of funds for the current year’s operations.

We recommended that the Municipal Budget Officer, Municipal Treasurer and

the Municipal Accountant closely monitor the LGU’s expenditures depending on
the availability of cash to avoid the incurrence of payables without cash back-up
in order to minimize cash insufficiency for a given fiscal period, otherwise, the
provisions of Section 351 of RA No. 7160 shall be imposed against responsible
officials.

2. The Memorandum of Agreement (MOA) between the LGU and the recipient
barangays amounting to P700,000.00 did not stipulate the period when the barangays
will submit their liquidation reports, while some stipulation therein were not
implemented in accordance with the provisions on the reciprocal duties and
responsibilities of the contracting parties, thereby resulting in the risks of
 misappropriation or loss of government funds. Moreover, some transactions lacked
supporting documents, thus their validity and propriety could not be ascertained.

We recommended that management consider the improvement of the existing

clauses in the MOA to include provisions on:

a) The period within which to submit the liquidation reports by the concerned
barangays;

b) The delay in the submission of liquidation reports of the transferred funds

should disqualify the delinquent barangay/s from receiving additional funds
for its future projects.

We further recommended that management review its provisions in the

Memorandum of Agreement to determine if these are feasible, and do not violate
other rules and regulations.

We also recommended that the Mayor should require all Barangays requesting
for financial assistance from the Municipal Government to submit the necessary
plans and specifications of the project, the map indicating where these are to be
undertaken, in compliance with COA Circular No. 2012-001 dated June 14,
2012.

3. There was delay in the implementation of the Infrastructure projects totaling

P9,266,000.00 funded under the Local Government Support Fund- Assistance to
Disadvantaged Municipalities (LGSF-ADM) Program, thus depriving the constituents
of the benefits that could have been derived from the use of the infrastructure.
Likewise, documents were not submitted for audit, thus, resulting in the difficulty in
validating the status of the implementation of the infrastructure projects.

We recommended that the Municipal Mayor direct the Municipal Engineer to

ensure that the implementation of the LGSF-ADM projects be within its
targeted timeline and strictly comply with the provisions of DILG-DBM JMC
No. 2017-03. Furthermore, we recommended that the Mayor require the
Accountant to submit copies of all documents to support the status of the project
implementation.

4. Expenditures totaling P1,828,938.63 were inappropriate charges against the 20%

development fund. Moreover, utilization reports and their supporting documents
were not submitted for audit.

We recommended that management refrain from using the 20% Development

fund for expenditures that do not qualify as investment and capital
expenditures. Henceforth, strictly observe the provisions of DILG-DBM Joint
Memorandum Circular No. 2017-1 dated February 22, 2017 on the
appropriation and utilization of the development fund. We also recommended
 that management should submit regularly and on time the utilization of the fund
for the current and continuing appropriations with its supporting documents.

5. The Annual Special Education Fund (SEF) Budget was not prepared and submitted,
thus precluding the auditor in determining if the disbursements and the contents of the
approved budget were in accordance with the set guidelines for the establishment of
the Fund. Moreover, the SEF was utilized not in strict compliance with regulations
and disbursements were not supported with complete and proper documentation.

We recommended that the Municipal Accountant see to it that all claims are
adequately supported with complete and proper documents as required under
COA Circular No. 2012-001. Likewise, prepare and submit the Obligation Slips
for the disbursement vouchers submitted together with the approved SEF
Budget. We also recommended that the Local School Board and other concerned
Municipal Officials strictly implement the provisions of Sections 4.0 and 5.0 of
DepEd-DBM-DILG Joint Circular No. 1, s. 2017.

6. The Municipality failed to allocate one percent (1%) of its Internal Revenue
Allotment (IRA) for the strengthening and implementation of the program, projects
and activities of the Local Council for the Protection of Children (LCPC), thus the
LCPC programs and projects in the locality may not be achieved.

We recommended that the Local Chief Executive and other concerned

Municipal Officials allocate 1% of the IRA for the strengthening and
implementation of the programs, projects and activities of Local Council for the
Protection of Children and strictly adhere to the provisions of Section 15 of the
Republic Act 9344 and DILG Memorandum Circular No. 2012-120.

7. Consultancy services totaling ₱46,500.00 procured by the municipality did not follow
the procedures enumerated in the procurement law, thus the necessity was not
ascertained.

We recommended that the Municipality comply with the provisions of RA 9184

and its IRR in the hiring of consultants:

a) The BAC shall observe the procedures required in Item 7 of Annex H of the
2016 revised IRR of RA 9184.

b) The BAC shall undertake negotiations with, and validate the capability of the
individual consultants to undertake and fulfill the consultancy work based on
the Terms of Reference, and to recommend to the Mayor the award of the
contract.

c) In accordance with Section 54.6 (e) of the 2016 Revised IRR of RA 9184,
consultants are mandated to register with PhilGEPS and provide a
PhilGEPS Registration Number as a condition for the award of the contract.
8. The Municipality procured cell cards and postpaid line subscriptions amounting to
P586,251.98 through procurement per office/individual and reimbursement from the
petty cash fund. Likewise, claims for postpaid line subscriptions were not duly
supported with the Statement of Account and other supporting documents. Moreover,
some officials maintained two (2) or more accounts of postpaid line subscriptions and
availed of unlimited amount of mobile phone charges, thus exposing government
funds to misuse.

We recommended that management procure telephone/communications services

for cellular/mobile phones in accordance with Government Procurement Reform
Act (RA 9184) and its IRR. Likewise, officials and employees who are entitled to
the Telephone Expenses allocation/budget should be in line with item No. 5,
Annex D of COA Circular No. 2012-003.

The Municipal Mayor should instruct the Municipal Accountant to require that
all claims for telephone/communication services under MOOE be supported
with Statement of Account/Bill from telecommunication service providers,
official receipts/invoices and certification that calls are official as required in
COA Circular No. 2012-001. Likewise, official receipts/invoices printed in
thermal papers should be photocopied.

Moreover, the monthly allocation for Telephone Expenses should be at a rate not
exceeding what is usual or proper, not unreasonably high and beyond just
measure or amount and not in excess of reasonable limits, taking into account
the prevailing rates or available promos offered by various telecommunication
service providers.

In addition, we recommended that the municipality submit a copy of existing

memorandum or order and Sanggunian Bayan Resolution detailing the
guidelines for all claims of the Telephone Expense and the corresponding rates
entitled for each official or employee.

9. The imprest system was not followed in maintaining the petty cash fund and claims
for its replenishment were made mostly twice a month with an average amount of
P109,634.14 or a total of P 1,315,609.69 due to payment of expenses for office
supplies, meals and snacks, telephone expenses, and other expenses. Moreover, some
transactions lacked supporting documents, hence necessity, reasonableness and
appropriateness of the charges cannot be determined.

We recommended that the Municipality comply with the provision of

establishing the Petty Cash Fund as follows:

a. Require the Petty Cash Custodian to use the petty cash fund only for the
recurring petty operating expenses of the LGU.
 b. Discontinue the practice of procuring office supplies, materials and spare
parts through reimbursement per office. Instead all procurements should be
included in the Annual Procurement Plan and to be procured in bulk at the
DBM Procurements Services for the common-used supplies and through the
provision of RA 9184 for other supplies and materials.

c. Complete information and specific details should be indicated in the Petty

Cash Voucher especially those claims for meals and snacks and discontinue
the practice of charging to the petty cash fund the meals and snacks during
travel.

d. Ensure that all charges to the Petty Cash Fund are supported with complete
documentation as prescribed in Item 1.2.2 of COA Circular No. 2012-001
dated June 14, 2012.

10. Submission of paid disbursement vouchers, payrolls\liquidation reports, official

receipts, pre-closing trial balances, and bank reconciliations statements for CY 2017
for all funds were delayed by at least 33 days to a maximum of 378 days.

We recommended that the Municipal Treasurer and Accountant be required to

strictly observe the timely submission of the accounts and financial reports in
accordance with Section 347 of RA 7160, Section 7.2.1 (a) of COA Circular No.
2009-006 dated September 15, 2009, Section 3.2, 3.3 and 3.4 of COA Circular
No. 96-001 dated October 2, 1996 and Section 39 of PD 1445.

11. The original copies of several paid disbursement vouchers and their supporting
documents totaling P4,208,077.78 were not submitted for audit, thus causing delay in
the timely review of the transactions.

We recommended that the Municipal Accountant and the Municipal Treasurer

be directed to immediately submit the disbursement vouchers together with their
supporting documents, and to strictly observe the timely submission of accounts
as provided under Section 7.2.1(a) of COA Circular No. 2009-006 dated
September 15, 2009 and Sections 39(1) and 39(3) of PD 1445.

12. Management failed to submit to the Auditor the Agency Action Plan and Status of
Implementation, thus the extent of compliance and action/s taken by the LGU to
implement the audit recommendations in the 2016 Annual Audit Report were not
ascertained at year-end.

We recommended that management formulate an action plan to implement the

audit recommendations, and submit immediately the duly accomplished AAPSI
form to the audit team; copy furnished the DBM, the House Committee on
Appropriation and the Senate Committee on Finance, as mandated by Section
96 of RA 10717.
13. Checks issued by the Treasurer were not in chronological order and checks reported
as cancelled were not presented for audit, indicating the absence of internal controls
in the handling of check disbursements that may lead to loss of government funds and
unaccounted accountable forms.

We recommended that management require the Municipal Treasurer to keep

and maintain a check register where all checks drawn for the day, including
cancelled ones, are immediately recorded in chronological sequence and where
the rightful claimants are required to acknowledge receipt of the check thereon.
Further, cancelled checks should be submitted for audit to prove their actual
status.

Statement of Audit Suspensions, Disallowances and Charges (SASDC)

The total audit suspensions, disallowances and charges found in the audit of
various transactions of the Municipality as of December 31, 2017 was P52,504.23 based
on the Notice of Suspension (NS), Notice of Disallowance (ND), and Notice of Charge
(NC) issued by this Commission.

Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the thirty (30) audit recommendations contained in the 2016 and Prior Years’
Annual Audit Report, five (5) were implemented, nineteen (19) were partially
implemented and six (6) were not acted upon by management.