EXECUTIVE SUMMARY

A. INTRODUCTION

The Agency

The Municipality of Mawab was created on August 14, 1959 by virtue of

Republic Act No. 8470. It is bounded on the Northeast by the Municipality of
Nabunturan, on the Northwest by the City of Tagum, on the West by the
Municipality of New Bataan, and on the South by the Municipality of Maco. It
has a total land area of 16,952 hectares out of the total 466,693 land area of the
province.

It is a third class municipality of the Compostela Valley Province. It is

composed of 11 barangays, namely: Poblacion Mawab, Andili, Bawani,
Concepcion, Nuevo Iloco, Nueva Visayas, Salvacion, Malinawon, Tuboran,
Sawangan and Saosao.

The Municipality is headed by its Local Chief Executive, Dr. Evalina J.

Jampayas. She is assisted by Vice Mayor Hon. Nicomedes T. Comonal, the duly
elected Vice-Mayor, who sits as the presiding Officer of the legislative branch of
the Municipality with eight (8) Sangguniang Bayan Members and two (2) ex-
officio council members, namely: the President of the Liga ng mga Barangay and
the Indigenous People’s (IPs) representative. The total working force of the
Municipality as of December 31, 2015 is 207 which consists of 11 elective, 1
appointive, 58 permanent, 2 co-terminus, 3 casuals and 132 job orders.

Audit Methodology

The Commission has been implementing risk-based audit in the conduct of

its audit services. However, to meet the evolving development in public
governance and fund management, the result-based approach in audit was
incorporated. The integration of these two approaches, called the Integrated
Results and Risk-Based Audit (IRRBA) Methodology, was applied in the audit of
the accounts and operations of the LGU.

Scope of Audit

A comprehensive audit was conducted on the accounts and operations of

the Municipality of Mawab, Province of Compostela Valley for 2015. The audit
was undertaken to ascertain the propriety, reliability and accuracy of financial
reports. It also reviews the utilization of management resources and test on the
adequacy of related systems and controls set by the agency and interviews of
concerned personnel and officials of the Municipality.

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 B. FINANCIAL HIGHLIGHTS

The Consolidated Assets, Liabilities, Government Equity, Income and

Expenditures of the Municipality of Mawab for the year ended December 31, 2015 is
as follows:

Particulars CY 2015 CY 2014 Increase/Decrease %

Assets P 264,716,666.47 236,377,591.41 28,339,075.06 11.98%

Liabilities 107,976,527.81 96,037,548.35 11,938,979.46 12.4%

Government
Equity 156,740,138.66 140,340,043.06 16,400,095.60 11.7%

Income 104,236,236.10 90,201,235.12 14,035,000.98 15.6%

Expenses 87,958,917.91 75,026,338.29 12,932,579.62 17.2%

Surplus/Deficit 16,277,318.19 15,174,896.83 1,102,421.36 7.26%

The Total Assets of P264,716,666.47 increased by 11.98% or P28,339,075.06

compared to last years’ P236,377,591.41 which is attributable to the additional funds
downloaded by the different national agencies for the various livelihood programs
and projects.

Meanwhile, the Municipality of Mawab generated a Net Income of

P16,277,318.19 which is 7.26% or P1,102,421.36 higher than in CY 2014. This is
highly attributed to the increase in Internal Revenue Allotment from P70,895,004.00
in 2014 to P80,853,736.00.

During the year, the LGU also received funds from various National
Government Agencies in the total amount of P16,203,206.70 for various
projects/programs which were downloaded to them.

C. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

We have rendered a qualified opinion on the fairness of the presentation of the

financial statements due to unreconciled balance of actual physical count of PPE and
balance per books by P46,684,745.18, thus the existence of the related PPE accounts
could not be ascertained, delayed submission of monthly Bank Reconciliation and the
non-liquidation of Cash Advances resulted to unreliable balance of Cash in Bank
accounts in the Financial Statements.

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D. SUMMARY OF SIGNIFICANT OBSERVATIONS AND
RECOMMENDATIONS

Presented below are the significant audit observations and recommendations

noted in the course of audit.

1. Delayed submission of monthly Bank Reconciliation Statements preclude the auditor

for the timely review and verification of the status of cash in bank accounts. Moreover, it
also hindered the validation of long outstanding and unadjusted reconciling items as of
December 31, 2015, contrary to Sections 3.2 and 3.3 of the COA Circular No. 96-011
dated October 2, 1996, hence, the presentation of the cash accounts in the financial
statements could not be relied upon.

We have recommended to: a) direct the Municipal Accountant to ensure that

submission of the BRS be on time as prescribed by COA Circular No. 96-011 dated
October 2, 1996 in order to present the accurate cash balances in the financial statements;
and b) require the Municipal Accountant to effect the necessary adjustments for all the
long outstanding reconciling items which were reflected in the BRS and ensure that
proper documentation for these adjustments be submitted to the Audit Team.

2. Cash Advances in the total amount of P2,706,795.89 remained unliquidated as of

December 31, 2015 even if the purpose for which they were granted have already been
served. Moreover, P18,000.00 of these advances represent balances prior to December
31, 2011 contrary to the provisions of Section 5.1 of COA Circular No. 97-002 dated
February 10, 1997, which could result to possible misuse of government funds.

We have recommended for the a) strict enforcement of liquidation of cash

advances within the prescribed period as provided in COA Circular No. 97-002. b) to
stop granting additional cash advances to those officials or employees with unliquidated
cash advances; c) to withhold the salary of the Accountable Officers still employed in the
municipality who failed to liquidate their outstanding cash advances until the full amount
is settled/liquidated; and d) require the issuance of an Order of Payment for any
outstanding cash advance on the day after its liquidation has been due and enforce full
refund of any unexpended cash advance

3. Excess claim of 5 school days equivalent to P32,550.00 was incurred on the

disbursements of fund for Supplementary Feeding Program of DSWD for CY 2015,
contrary to COA Circular No. 2012-003 dated October 29, 2012, which resulted to
excessive expenditure and loss of government funds.

We have recommended to: a) require the Municipal Accountant to ensure that in

the disbursement of funds for supplementary feeding, the actual no. of school days shall
be considered in the payment, to avoid disallowance in audit; b) submit a written
justification/explanation for the release of funds in excess of the no. of school days; and
c) demand the refund of the excess amount of P32,550.00 covering the period where no
classes were held.

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4. Incomplete details in the supporting documentation and improper charging to various
expenditures were made for payments of Catering Services for CY 2015 totaling
P3,407,045.00, contrary to Section 4(6) of Presidential Decree No. 1445, thus validity
and propriety of the disbursements could not be ascertained.

We have recommended to: a) ensure that the supporting documents for the
payment of catering services be supported with accurate Purchase Requests, dated
attendance sheets, activity/program designs and other documents that could attest that
services have been delivered; b) submit an explanation why the aforementioned
deficiencies occurred in the various transactions for payment of catering services; and c)
require the refund of the amount of P17,500.00 representing the amount spent for
meals/snacks during the conduct of cooperative activities.

5. The Municipality appropriated P884,775.00 for the 20% Development Fund for
programs classified under the MOOE not in consonance to Section 287 of RA 7160 and
guidelines set forth in Section 3 of DILG/DBM Joint Memorandum Circular No. 2011-
001 dated April 13, 2011, thus the developmental objectives by which the fund was
created has not been faithfully carried out and may not adequately contribute to the
attainment of desirable socio-economic developmental output.

We have recommended to; a) ensure that projects to be charged to the 20% DF

should have the nature of investment or capital expenditures that would improve the
socio-economic condition and environmental management in the delivery of services for
the betterment of the constituents; b) properly appropriate in the General Fund proper
expenses for the repairs/rehabilitation of classrooms and the upgrading of Day Care
Centers and exclude the above project’s expenses in the 20% DF; and c) exercise fiscal
responsibility and be prudent in the utilization of the 20% Development Fund provided
by the Local Government Code and Joint Memorandum Circular No. 2011-01.

6. Designation as Head of Office of personnel hired under a Job Order contract is

contrary to the provisions in Sections 14 and 15 of the Civil Service Commission (CSC)
Memorandum Circular No. 40 series of 1998 and Section 4 of the Civil Service
Commission Resolution No. 02-0790 series of 2002, thus, continuity of service and
accountability for their worked performed could not be ascertain.

We have recommended to: a) adhere strictly to the provisions of CSC Regulations

and refrain from hiring job orders to a plantilla positions since they are not allowed by
law to exercise supervision and control to regular employees; b) ensure that the
provisions on hiring of Job Orders be strictly followed as per above-mentioned CSC
Memorandum Circular and to carefully observe all the prohibitions especially in
designating job order personnel as head of office; and c) refund immediately the excess
payment of wages totaling P57,772.00.

7. Payment of Service Fees/Honoraria to employees holding a plantilla positions totalling

P190,931.46 had no legal basis, contrary to DBM Budget Circular No. 2007-2 dated
dated October 7, 2007, hence this resulted to irregular disbursement of government funds.

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 We have recommended to: a) strictly adhere to the provisions of DBM Budget
Circular No. 2007-2 in granting service fees/honoraria to municipality personnel; and b)
stop granting payment of service fees/honoraria and other remuneration to all designated
personnel to ensure that rules and regulations be followed to avoid disallowances in audit.

8. Special Education Fund totaling P90,552.00 spent for meals, snacks and trainings do
not specifically fall within the purposes for which SEF was appropriated, contrary to
Sections 100(c) and 272 of RA 7160 and DECs-DBM-DILG Joint Circular No. 01 s.
1998. Moreover, these were made thru payroll instead of reporting the actual expenses
thereof, hence there is a risk that funds may not be properly accounted for and
disbursements may have violated the rules and regulations on Procurement, thus casting
doubt on the validity and propriety of the expenditures.

We have recommended to: a) direct the LSB to allocate budget to programs,

projects/activities which are enumerated in Sections 100 and 272 of RA 7160 and DECs-
DBM-DILG Joint Circular No. 01 s. 1998; b) ensure that disbursements charged against
the Special Education Fund are in accordance with the various regulations on the
utilization of SEF to avoid suspensions and/or disallowances in audit; c) ensure that the
procurement of meals and snacks during all the activities to be undertaken by the
Municipal School Board chargeable against the Special Education Fund shall be
supported with receipts and not payroll, in order to account for the actual purpose of the
disbursements; and d) submit explanation/justification why SEF were utilized for
expenses that are not among those listed in the priority expenses chargeable against the
said fund.

9. The Due from NGOs/POs (Account 139) balances of P2,500.00 in the Trust Fund
Books composed of funds transferred to three (3) cooperatives, remained un-liquidated as
of December 31, 2015, contrary to COA Circular No. 2007-001 dated October 25, 2007.

We have recommended to: a) require the Municipal Accountant to implement the

provisions of COA Circular No. 2007-001 and ensure that proper granting, utilization and
liquidation be implemented; and b) enforce liquidation/settlement of the minimal
balances by sending demand letters to the grantees NGOs/PO who failed to liquidate their
balances and institute sanctions for non-liquidation thereof.

10. Excessive travel claims totaling P58,800.00, unattached Accountable Form (AF No.
51) for payment of registration fees and booking-up as fully liquidated in the books of
accounts despite the absence of receipts for registration fees, were made for the various
travels of Sangguniang Bayan (SB) Members, contrary to COA Circular No. 2012-003
dated October 29, 2012 and Section 4 (6) of Presidential Decree No. 1445, hence,
propriety and validity of the claims could not be ascertained and could also result to
possible loss of government funds.

We have recommended to: a) instruct the concerned SB Members to refund

immediately the excess travel claims at P11,760.00 each totaling P58,800.00; b) require

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the PCL to attach a Government Official Receipt/AF No. 51 and not a PCL BIR
Registered receipt since they are mandated to issue the said accountable forms being a
government organization; and c) require the Municipal Accountant to scrutinize the
documents attached to the liquidation reports to ensure its completeness of
documentation, before drawing JEV to take up the liquidation.

11. The LGU had rented heavy equipment from Private Entity during the implementation
of Infrastructure projects by Administration in CY 2015 specifically the Concreting of
Road to New Terminal, contrary to the provision of Annex A letters a & b of
Government Procurement Policy Board (GPPB), hence the agency incurred unnecessary
rental expense amounting to P251,250.00 which could have been avoided had they used
their own equipment.

We have recommended to: a) strictly adhere to the conditions stipulated in Annex

A of Government Procurement Policy Board (GPPB) before resorting to implement
infrastructure projects by administration, to avoid suspensions and/or disallowances in
audit if found to be not in accordance with regulations; b) ensure that infrastructure
projects by administration be given utmost priority in the utilization of agency’s owned
heavy equipment, so as to minimize the cost of the project; and c) require the Municipal
Engineer to submit a written explanation why he did not request an inspection of the
project from the Office of the Auditor in order to attest the completeness and
reasonableness of the project cost.

E. SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND

CHARGES AS OF YEAR-END.
The reported audit suspensions, disallowances and charges of the municipality as
of December 31, 2015 are as follows:

Beginning Ending
Balance, January 1 – December 31, 2015 Balance,
1/1/15 Issuance Settlement 12/31/15

Notice of Suspension 0 0 0 0

Notice of Disallowance - - - -

Notice of Charge - - - -

Total 0 0 0 0

F. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS.
Out of the 21 audit recommendation embodied in 2014 Annual Audit Report, 14
or 66.67% were fully implemented, six or 28.57% were partially implemented and one or
4.76% was not implemented.

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