EXECUTIVE SUMMARY

INTRODUCTION

The town of Bacacay was founded in 1959 but was officially created as a
municipality by virtue of Republic Act No. 687 on October 26, 1945. It is located in western
slope of famous Mayon Volcano, with a total area of 113.6 square kilometers or 11.306
hectares comprising of 56 barangays. It is primarily an agricultural community having
sufficient natural resources like vast fishing grounds, fertile soils, clean springs, waterfalls
and archaeological caves. Huge deposits of calcium bicarbonate of marbles could also be
found in several barangays of the municipality.

The municipality of Bacacay is a tourist place with caves and beaches. It is visited by
local and foreign tourists most especially at summer due to its beautiful beaches such as:
Kuron-Kuron Beach Resort, Viento de Mar Beach Resort, VRT (Tanchuling) Beach Resort,
Michaelangelus Beach Resort and the Misibis Beachfront Resort.

For the Calendar Year 2011, the local government was able to implement
development projects for the welfare of its constituents. These include the construction and
upgrading of day care centers, waste management program, purchase of 100KVA back-up
generator, road concreting of Napao-Vinisitahan-Cabasan Road, improvement of water
system and fishery livelihood support..

The Economic Enterprise being maintained by the municipality is its public market
made up of three separate buildings; the New Public Market, Lagman Market, and the
outside stalls of Multi-Purpose Covered Court. The area where independent commercial
stalls were constructed is being charged for the rental of government lots per square meter.
As a self-liquidating entity, the income derived from these markets is utilized for its
continuous and sound maintenance.

HIGHLIGHTS OF FINANCIAL OPERATION

Total appropriations for Calendar Year 2011 amounted to P 93,400,150.46, for the
General Fund and Economic Enterprise Fund, of which the amount of P 34,395,789.00
pertains to Personal Services, P 33,930,997.53 was set aside for Maintenance and Other
Operating Expenses and P 1,671,000.00 pertains to Capital Outlay. Also, the year’s
appropriations for 20% Development Fund, 5% Calamity Fund, Barangay Assistance; and,
the Gender and Development Program were P 23,402,363.93, P 3,953,675.00, P 56,000.00,
and P_4,499,000.00, respectively.

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 The Municipality of Bacacay realized a total actual income of P 88,908,742.64 for
Calendar Year 2011 which was higher by P 7,098,496.68 or 8.68% than the generated
income of last year’s P 81,810,245.96 under the general and special education funds.

Total expenditures or obligations for Calendar Year 2011 amounted to

P_58,890,214.68 were higher by P 5,973,464.65 or 11.29% than that of last year’s
P_52,916,750.03. Out of the total expenditures, P 32,726,421.61, P 26,163,793.07 and
P_1,117,700.00 were spent for Personal Services, Maintenance and Other Operating
Expenses, and subsidies/donations, respectively, leaving a net income of P 28,900,827.96
which was higher by P 600,832.03 or 2.12% from that of last year’s income of
P_28,299,995.93.

As of December 31, 2011, the agency had total assets of P 344,215,825.60 and total
liabilities and deferred credits amounting to P 113,230,647.30, thereby leaving a balance of
P_230,985,178.30 as equity.

SCOPE OF AUDIT

We conducted a Financial and Compliance Audit as well as Value for Money Audit
for the transactions and operations of the agency for the Calendar Year 2011 to determine the
fairness of the presentation of the agency’s financial statements as well as its compliance
with existing laws, rules and regulations. The audit covers the following identified audit foci:

a. 20% Development Fund

b. Procurement
c. Infrastructure Projects
d. Revenues
e. Gender and Development Program
f. Calamity Fund

As mandated, a Financial and Compliance Audit was conducted on selected

transactions of the municipality for Calendar Year 2011 to ascertain the fairness of the
presentation of the financial statements as well as compliance of the agency to applicable
laws, rules and regulations. Likewise, Value for Money Audit was conducted on selective
areas in order to determine whether government funds were utilized and/or implemented in
an economical, efficient and effective manner.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered an unqualified opinion on the fairness of the presentation of the
municipality’s financial position as of December 31, 2011 and the results of its operation for
the year then ended.

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 SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

The following are the significant audit findings and the corresponding
recommendation as a result of our audit on the transactions and operations of the agency for
Calendar Year 2011:

1. The set-up Real Property Tax (RPT)/Special Education Tax (SET) receivables at the
beginning of Calendar Year 2011 based on incomplete list of taxpayers with the
corresponding amount due by the Municipal Accountant was not in accordance with
Section 20 of the New Government Accounting System (NGAS) Volume I, thus the
year’s total collections on Real Property Tax and Special Education Tax amounting to
P_2,328,796.65 was only 91.79% of the year’s targeted collections for the same in the
amount of P 2,537,047.68.

We recommend that the Municipal Treasurer and her staff should update and
prepared the complete list of taxpayers with the corresponding amount due and collectible for
the year; and furnish the same to the Municipal Accountant that will be the basis for the
setting-up of RPT/SET receivables at the beginning of the ensuing year.

Also, we recommend that the Municipal Treasurer and the Municipal Accountant
should present in their financial reports and/or financial statements the gross amount of Real
Property Tax for both Basic and SET collections for the year in order to present the actual
financial condition of the LGU.

2. The 20% Development Fund appropriated for the development projects in Calendar
Year 2011 amounted to P_14,960,013.00 was lower by P 1,326,957.40 or 8.15% of the
required P_16,286,970.40, which was 20% of the Internal Revenue Allotment (IRA)
amounting to P_81,434,852.00, thus, the provisions on Section 287 of Republic Act No.
7160 was not fully complied with by the Local Government Unit (LGU). Also, the
report on the Status of Appropriations, Allotments and Obligations showed that the
appropriations for the 20% development programs/projects/activities amounted to
P_23,402,363.33, thus, the same was increased by P_8,442,350.33 or 56.43% when
compared with the approved annual budget for 20% development programs which was
contrary to Section 71 of the New Government Accounting System (NGAS) Manual,
Volume I.

We recommend that the Municipal Budget Officer should strictly comply with the
provisions of Section 287 of R.A. 7160 for the appropriation of no less than twenty percent
(20%) of the LGU’s internal revenue allotment for development projects; and Section 71 of
the New Government Accounting System (NGAS) Manual, Volume I for the full
presentation of the status of the utilization of 20% Development Fund as of year-end.

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3. Procurement of drugs and medicines amounting to P 495,406.10 was made thru
competitive public bidding in accordance with Article IV, Section 10 of Republic Act
No. 9184. However, the delivered drugs and medicines were not properly received by
the General Services Officer and were not inspected by the COA Inspector inconsistent
with Section 118 of New Government Accounting System (NGAS) Manual for Local
Government Units (LGUs), Volume I. Also, there was no Philippine National Drug
Formulary (PNDF) certification for the procured drugs and medicines inconsistent with
Republic Act No. 9502, thus, provision of good quality essential drugs to the people was
not ascertained.

We recommend that the General Services Officer or Municipal Treasurer, as the case
maybe, should accept the deliveries of items purchased by the Local Government Unit
(LGU) and the Bids and Award Committee Secretary/Agency Inspector should request the
assistance of a COA Inspectorate thru the Audit Team Leader to conduct the inspection of
the same.

Also, we recommend that the Bids and Award Committee (BAC) should strictly
observe the aforementioned provision of Republic Act No. 9502 also known as the
Universally Accessible Cheaper and Quality Medicines Act of 2008 and Rule No. 36 of its
Implementing Rules and Regulations (IRR) to ascertain that the procured drugs and
medicines are of good quality, essential to the people and within the Philippine National
Drug Formulary (PNDF).

4. The total appropriation for Gender and Development Programs for Calendar Year
2011 amounted to P_4,499,000.00 was more than the required 5% of the total
appropriations amounting to P 80,021,061.00 or P 4,001,053.05 which was in
accordance with the provisions of Joint Circular of DBM, NEDA, and NCRFW No.
2004-01 dated April 15, 2004 and Republic Act No. 7192, otherwise known as “Women
in Development and Nation Building Act.

We commend the efforts made by the Local Chief Executive, the Municipal Budget
Officer and the different implementers and/or Gender and Development focal points for the
effective utilization of Gender and Development budget for GAD related programs/projects.

5. Out of the year’s total appropriations for 20% Development Fund of amounted to
P_14,960,013.00, only P_5,000,000.00 or 33.42% of which was utilized for development
projects as of December 31, 2011. The agency did not fully implement the 20%
Development Fund for other specified development programs/projects/activities during
the year that resulted in the non-utilization of the remaining P 9,960,013.00 or 66.58%.

We recommend that the Municipal Environment and Natural Resources Office and
the Municipal Agriculture Office should report the implementation of the other targeted
programs or projects under the 20% Development Fund for Calendar Year 2011 in order to
fully present the remaining P 8,980,006.50.

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6. Collections from markets and market stall rentals amounted to P 150,850.00 and
P_1,114,219.50, respectively, as of December 31, 2011 revealed that the agency could
not afford to meet the economic enterprises’ operating costs of P 1,010,059.95 for the
period due to the unoccupied stalls, uncollected rentals of 86 stalls from the delinquent
stallholders and the business licenses not renewed by the concerned stallholders because
of their indecisiveness.

We recommend that the Municipal Treasurer should discuss with the Sangguniang
Bayan Members and the Local Chief Executive the market operations performance and the
related financial position in order to evaluate and apply the necessary marketing strategies to
effectively maximize the use of the market and slaughterhouses facilities by stallholders and
new market stallholders that would in turn increase the income from markets.

Also, we recommend that the Local Chief Executive, the Municipal Treasurer and her
staff should implement remedies for collection of stall rentals from delinquent stallholders,
thru the issuances of demand letters to these stallholders. If still the delinquent stallholders
did not settle their arrears despite the demand letters sent to them, civil remedies should be
applied by the LGU as contained in Article 262 of Rules and Regulations Implementing
R.A._7160.

7. The related Gender and Development programs/projects/activities implemented for

Calendar Year 2011 amounted to only P 4,293,582.00 resulting in the deficiency
amounting to P_205,418.00 or 4.56% of the approved annual GAD budget amounting
to P_4,499,000.00. Also, the GAD budget was not mainly intended for women because
the implementation of the programs/projects/activities applied to children, senior
citizens, disabled persons and indigent families inconsistent with the provisions of
Section 31, General Provisions, Republic Act No. 10147 otherwise known as the
“General Appropriations Act, Fiscal Year of 2011”.

We recommend that the concerned municipal officials who acted as GAD

implementers should report the unutilized GAD fund amounting to P 205,418.00 and account
the difference of P 60,000.00 between the presented appropriations by the GAD
implementers amounting to P_4,439,000.00 and the total GAD appropriations for GAD
related activities by the Municipal Budget Officer amounted to P_4,499,000.00.

Also, we recommend that the GAD implementers should focus on women’s human
rights and the promotion of women’s economic empowerment as provided in the
aforementioned provisions in order to maximize the GAD budget intended for women.

8. Calamity Fund amounting to P 3,953,675.00 was appropriated and spent for the
rehabilitation of damaged roads, drainage, cross drains, retaining walls and
improvement of irrigation canals in Calendar Year 2011 in accordance with Section 1
of Rule 19 of Republic Act No. 10121. However, the Accomplishment Report submitted
by the Municipal Engineer revealed that the total amount of P_4,927,576.00 was

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appropriated for the projects which include the Calamity Fund assistance from the
Province of Albay. Out of the seven (7) projects charged against the Calamity Fund,
only one (1) was completed during the year and the percentage of completion for the
projects was 52.76% due to erratic weather conditions. The other projects were still on-
going as of year-end.

We recommend that the Municipal Engineer should see to it that the completed
projects are properly maintained in order to ascertain the mitigation of disaster risks and
avoid the loss/destruction of properties of the inhabitants during natural calamities.

MANAGEMENT COMPLIANCE WITH TAX LAWS

The management of LGU Bacacay, Albay complied with tax laws by withholding
applicable tax on compensation, goods and services and Infrastructure Projects and remitting
the same to the Bureau of Internal Revenue (BIR) on a periodic basis in compliance with
Section 5.116 of BIR Revenue Regulations No. 2-98.

PROCUREMENT OF COMMONLY-USED SUPPLIES FROM PS-DBM

The Municipal Government of Bacacay, Albay procured some of its commonly-used

supplies requirements which are available at PS-DBM consistent with the Department of
Budget and Management (DBM) Circular No. 2011-6 dated August 25, 2011.

STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES

AS OF DECEMBER 31, 2011

Notice of Suspensions Notice of Disallowances Notice of Charge

P 0.00 P 0.00 P 0.00

STATUS OF IMPLEMENTATION ON PRIOR YEARS’ RECOMMENDATIONS

Out of thirteen (13) audit recommendations contained in prior year’s annual audit
reports, seven (7) were fully implemented and six (6) were partially implemented.

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