Executive Summary

Introduction

The Municipality of Northern Kabuntalan, Maguindanao was created by virtue of the

Muslim Mindanao Autonomy Act No.205 and signed into law by the Regional Governor
Datu Zaldy Ampatuan of the Autonomous Region in Muslim Mindanao on November 22,
2006. Northern Kabuntalan is the 11th municipality of the defunct Shariff Kabunsuan
Province, enacted by the Regional Legislative Assembly on the fifth Regulative Assembly
pursuant to Republic Act No.9054 or the Organic Act of the Expanded ARMM. The creation
of Northern Kabuntalan was affirmed by the majority of the people of Kabuntalan during a
plebiscite conducted by the Commission on Election on December 21, 2006.

Northern Kabuntalan was curved out from Kabuntalan Municipality, which is

composed of eleven (11) barangays as follows: Damatog, Gayonga, Guiawa, Indatuan,
Kapimpilan, Libungan, Montay, Labio, Tumaguinting, and Sabaken. Northern Kabuntalan
is located on the east of the first district of Maguindanao (Province of Shariff Kabunsuan
before). It is bounded on the north by the Municipality of Pigcawayan, Province of North
Cotabato, on the east by Midsayap of North Cotabato, on the South by Kabuntalan,
Maguindanao and on the west of Cotabato City.

The Municipality of Northern Kabuntalan has been disqualified to receive Internal

Revenue Allotment (IRA) since 2009 along with other municipalities in the ARMM for
failure to satisfy the requirements set by the Local Government Code.

We conducted financial and compliance audit on the accounts and operations of the
Municipality of Northern Kabuntalan, Maguindanao for Calendar Year ending December 31,
2018. Our examination was made in accordance with generally accepted and prescribed
auditing standards and accordingly included such other auditing procedures as it was
necessary.

Financial Highlights

The Total Assets, Liabilities and Equity of the Municipality of Northern Kabuntalan,
Maguindanao are shown below:

CY 2018 CY 2017 Increase %

(Decrease)
Assets ₱ 47,633,489.35 ₱ 47,662,324.23 ₱28,834.88 0.06%
Liabilities 1,904,567.61 1,904,567.61 - -
Equity 45,757,756.62 45,757,756.62 ₱28,834.88 0.06%

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 The Municipality’s Total Income is illustrated as follows:

CY 2018 CY 2017 Increase %

(Decrease)
Tax Revenue ₱ 194,494.18 ₱ 370,240.96 ₱ (175,746.78) (47.4%)
Other Income 14,268,966.04 6,075,309.38 8,193,656.66 134%
Total Income ₱ 14,463,460.22 ₱ 6,445,550.34 ₱ 8,017,909.88 124%

Current year’s total expenditures are as follows:

CY 2018 CY 2017 Increase %

(Decrease)
A.Operating Expenses
-Personal Services ₱ 2,296,000.00 ₱1,200,000.00 ₱1,096,000.00 91.30%
-MOOE 12,190,055.10 5,212,999.80 6,977,055.30 133%
Total Expenses ₱14,486,055.10 ₱6,412,999.80 ₱8,073,055.10 125%

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Municipality of Northern Kabuntalan, Maguindanao as of
December 31, 2018 because of the following deficiencies noted:

1. Cash balances of all funds totaling ₱62,245.02, could not be verified and
validated because of the absence of Bank Reconciliation Statement and the Bank
Statements.

2. The carrying amount of the Property, Plant and Equipment (PPE) amounting to
₱46,190,252.18 could not be ascertained due to absence of supporting documents,
and non-recognition of depreciation.

Summary of Significant Observations and Recommendations

The Office of the Auditor audited on the transactions of the Municipality of Northern
Kabuntalan, Maguindanao. There were deficiencies noted during the examination. The
significant observations and recommendations are as follows:

Observations Recommendations
1. The Municipal Accountant failed We reiterated our recommendations that
to prepare and/or submit the monthly the Office of the Municipal Accountant to:
Bank Reconciliation Statements (BRS)
contrary to Section 3.2 of COA Circular a. Request the depository bank (Land

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 Observations
No. 96-011 dated October 2, 1996,
thereby the correctness of the Cash in
Bank – Local Currency Current Account
as of December 31, 2018 amounting to ₱
62,245.02 cannot be ascertained.
2. The accuracy, validity and We recommend to the management the
existence of the Property, Plant and following:
Equipment (PPE) accounts balance of
₱46,190,252.18 could not be ascertained
due to non-preparation and non-
submission of Year-end Inventory
Report by management, in violation to
Section 4.3 of COA Circular No. 97-005
dated July 10, 1997.
3. The Municipal Government failed
to remit the total amount of ₱144,480.43
to the Government Service Insurance
System (GSIS) which appears in the
Consolidated Statement of Financial
Position as of December 31, 2018 and has
been outstanding for years.
Recommendations
Bank of the Philippines – Rosary Heights
Branch, Cotabato City) to provide the
agency with the copy of the bank
statements within five days after the end of
the month, and request for electronic
copies (snapshots) of transactions of bank
accounts to facilitate preparation of
monthly BRS; and
b. Prepare and submit monthly BRS
within the prescribed period to
ensure the correct and accurate
year-end balance of Cash in Bank
account.
a. Inventory Committee should
conduct yearly inventory of all
PPEs owned by the
Municipality pursuant to the
provision of Section 4.3 of COA
Circular No. 97-005 dated July
10, 1997.
b. PPE ledger cards and Property
Cards should be maintained by
the Accounting Division and by
the General Services Division,
and a periodic reconciliation
should be regularly made to
detect any discrepancies and
appropriate adjustments in both
records should be recorded and
reflected in the book of
accounts.
We recommend that the municipal
accountant should reconcile the municipal
records with that of GSIS to know the
exact amount of Due to GSIS account and
to try to make an arrangement with the
GSIS on how to settle the obligations.
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 Observations Recommendations

4. The Municipal Government failed We recommend that the municipal

to remit the total amount of ₱37,796.27 to
the Home Development Mutual Funds
(HDMF) which appears in the
Consolidated Statement of Financial
Position as of December 31, 2018 and has
been outstanding for years.
5. A fully depreciated asset was removed
from the Statement of Financial Position
as of December 31, 2018 contrary to
provision of Government Accounting
Manual (GAM), resulting to an
understated Property, Plant and
Equipment PPE) and Accumulated
Depreciation.
government should reconcile the records
with that of Pag-IBIG to determine the
correct amount of the obligation and settle
immediately.
We recommend that the municipal mayor
should instruct the municipal accountant
to include the Motor Vehicle in the
Statement of Financial Position and
adhere to accounting rules and
regulations.

Statement of Implemented, Partially Implemented and Unimplemented Audit

Recommendations

Of the four (4) audit recommendations, one (1) was implemented and three (3) were
not implemented.