EXECUTIVE SUMMARY

A. Introduction

The municipality of Santa Rosa is one of the first class municipalities in the Province of
Nueva Ecija. It comprises of 33 barangays. It has an area of 24,162 hectares with a
population of more than 69,000 individuals. The Municipality is managed by Mayor
Marita C. Angeles and assisted by Vice Mayor Eliseo DG Angeles, the Sangguniang
Bayan members, and the Municipal Department Heads. The Municipality has a total
manpower complement of 387.

B. Scope of Audit

A financial and compliance audit was conducted on the transactions and operations of
the Municipality of Sta. Rosa, Nueva Ecija covering the period January 1 to December
31, 2018 particularly on the audit focus and thrust contained in the Memorandum dated
July 9, 2018 of the Assistant Commissioner for Local Government Sector (LGS). The
significant observations noted in the audit are discussed in Part II of the report.

It was conducted to (a) ascertain the level of assurance that may be placed on the
management’s assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior
year’s unimplemented audit recommendations.

C. Financial Highlights

The comparative analysis of the assets, liabilities and government equity of the
Municipality for CYs 2018 and 2017 is shown below:

Account 2018 2017 Increase(Decrease)

Financial Condition
Assets ₱ 571,435,349.28 ₱ 470,159,569.41 ₱ 101,275,779.87
Liabilities 220,587,339.49 181,022,725.17 39,564,614.32
Equity 350,848,009.79 289,136,844.24 61,711,165.55
Results of Operations
Income ₱ 205,931,344.16 ₱ 190,671,476.98 ₱ 15,259,867.18
Expenses 158,736,503.16 140,559,104.78 18,177,398.38
Excess of Income over 47,194,841.00 50,112,372.20 (2,917,531.20)
Expenses
Sources and Application
of Funds
Allotment ₱ 306,546,645.77 ₱ 294,983,551.31 ₱ 11,563,094.46
Obligation 256,186,826.65 191,524,307.33 64,662,519.32
Balances ₱ 50,359,819.12 ₱ 103,459,243.98 (₱ 53,099,424.86)

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D. Independent Auditor’s Report

The auditor rendered a qualified opinion on the fairness of presentation of the financial
statements of the municipality for the year ended December 31, 2018 because the
reliability of the Real Property Tax (RPT) and Special Education Tax (SET) receivables
with an aggregate amount of ₱66,771,346.56 as of December 31, 2018 could not be
ascertained due to incorrect basis in recording of receivables at the beginning of the year.
(Observation No. 2)

For the exception cited above, we recommended that the Local Chief Executive (a)
instruct the Municipal Treasurer to (i) prepare an updated Certified List of Taxpayers,
bearing the names, amount due and collectible during the year, and submit the same to
the accounting unit to be used as the basis in setting up of RPT/SET tax receivables in the
succeeding year; (ii) ensure that the list of taxpayers bear vital information, such as the
addresses, to facilitate, if necessary, the sending of notices and other follow up
communications relative to tax campaign activities and other collection strategy that may
be implemented by Management; and (iii) introduce collection strategy that would
significantly help increase the tax collection of the municipality; and (b) require
Accountant to observe the provision under Section 20 of the New Government
Accounting (NGAS) Manual.

D. Other Significant Observations and Recommendations

Summarized below are the other significant observations and corresponding

recommendations that are discussed in detail in Part II of this report:

1. The correctness and existence of Property, Plant and Equipment (PPE) accounts with
a reported net book balance of ₱375,388,063.45, which represents 65.69% of the total
assets of the agency as of December 31, 2018 could not be ascertained due to (a) the
absence of vital supporting documents of the Accounting and the Property Office and
their failure to conduct the physical inventory, thus the non-reconciliation of records
between the two Offices; (b) doubtful correctness of the corresponding depreciation
which have parallel adverse effect on the reliability of the affected expense accounts;
and (c) issuance of PPE items without an Acknowledgement Receipt for Equipment
(ARE), inconsistent with the Manual on NGAS for LGUs, Volume II and Section 491
of GAAM Volume I. (Observation No. 1)

We recommended that the Local Chief Executive:

a) Issue a written order to the members of the inventory committee, indicating
therein the specific period for which the subject undertaking must be completed
and the period of submission of the updated physical inventory report in
accordance with Section 124 of the NGAS Manual. Sanctions for the continued
failure of the committee to come up with the required reports should also be
expressly provided in the said order to prevent the recurrence of similar lapses in
the future;
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 b) Require the reconciliation between the results of the actual physical inventory
report with the accounting record. Follow the procedures listed in Section 491 of
GAAM Volume I. For facility, we recommended that all offices start the count at
their respective units and the GSO to consolidate the result;

c) Instruct the head of the GSO to (i) update and maintain the required records,
reports and issue the necessary Property Acknowledgement Receipt /
Acknowledgement Receipt for Equipment (PAR/ARE) for those issued PPEs
under the care of the end users as required by regulation; and (ii) to facilitate such
undertaking, assign additional competent personnel to GSO in order to complete
the maintenance and updating of Property Card records of the said office; and

d) Require the Accountant to review the computation of depreciation expenses and

ensure that the same were based on the existing depreciable PPEs of the
municipal government.

2. Cash advances for trainings and seminar of officials in the Municipality in the
aggregate amount of P274,075.12 remained unliquidated as of December 31, 2018 in
violation of Section 89 of Presidential Decree No. 1445 and COA Circular No. 97-
002. (Observation No. 3)

We recommended that the officials concerned:

a) Cause the immediate liquidation of all cash advances. Invoke the penal
provisions of law authorizing the withholding of salary of personnel who
unjustifiably fails to settle his cash advances within the prescribed period.

b) Adhere to laws and rules on the grant, utilization and liquidation of cash advance,
specifically COA Circular Nos. 97-002 and 2012-001.

3. The Municipality has not complied fully with some provisions of Republic Act No.
9003 or the Ecological Solid Waste Management Act of 2000 on the formulation and
implementation of ecological solid waste management plans and programs, thus the
concern on total protection of the environment and general welfare of the constituents
has not been addressed. (Observation No. 4)
We recommended that the MSWMB:
a) facilitate the establishment of a functional MRF in the barangays and rehabilitate
those with existing MRF which are no longer functioning;

b) involve closely the Barangay officials in the full implementation of the existing
environmental laws and intensify the information campaign on the “no
segregation, no collection policy and the “no-littering policy” among the
residents; and
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 c) exercise strong political will to implement the environmental laws on preserving
and protecting the environment as mandated under Republic Act No. 9003.

4. The lenient implementation of market rules and regulations and the failure to renew
and/or require the signing of new lease contract/agreement for the old building with
the stall occupants resulted in the inefficient collection of revenues and the
accumulation of uncollected market rentals, goodwill and occupational privilege fee
amounting to ₱742,236.00 as of December 31, 2018. The observed condition had
deprived the municipal government of additional resources which could have been
utilized for the implementation of other priority projects and/or improvement of
facilities. (Observation No. 6)
We recommended that the Local Chief Executive direct the Office of the Market
Supervisor and the Municipal Treasurer (a) to issue follow up communications and/
or demand letters with penalty and sanction indicated to stall occupants for the
settlement of their respective delinquent accounts on market rentals and goodwill
obligations; (b) to make a thorough study on the appropriateness of the rental rate on
the Old Building stalls being charge by the municipality as compared with the current
prevailing rental rate. This will enable the management to justify and support
recommendation for market rental rate adjustment, subject to the approval of the
Sanggunian; and (c) effect the necessary renewal of contract/lease agreement on Old
building stalls between the municipal government and the stall occupants.
5. Several deficiencies were noted in the handling of collections of the agency such as a)
unauthorized collecting officer b) improper issuance and handling of official receipts
and c) non remittance of collections daily in violation of pertinent provisions of the
Government Accounting and Auditing Manual (GAAM) Volume I and the Manual on
New Government Accounting System (NGAS) for LGUs, thereby weakening control
over collections thus exposing government funds to risk of loss thru theft and/or
misuse. (Observation No. 9)
We recommended that the Local Chief Executive require the Municipal Treasurer to
designate an authorized collecting officer and cause the bonding thereof pursuant to
Sections 65 and 66 of GAAM Volume I. Also require all designated collection
officers to issue official receipts in strict numerical sequence and turn over to the
liquidating officer their collections daily and intact at close of each business day as
required under Section 73 of GAAM Volume I and Section 29 of the Manual on
NGAS for LGUs, respectively.
6. Programs/projects for disaster preparedness and mitigation were not fully
implemented by the LGU as of December 31, 2018 inconsistent with the provisions
of Republic Act (R.A) No. 10121 and Joint Memorandum Circular No. 2013-1 dated
March 25, 2013 issued by the Department of Budget and Management (DBM),
Department of Interior and Local Government (DILG) and National Disaster Risk
Reduction and Management Council (NDRRMC), thus, resulted in the failure of the

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 agency to strengthen its capability to respond in calamity disaster cases and failure to
improve the Local Disaster Risk Reduction Management System of the Municipality.
(Observation No. 12)
We recommended that the Local Chief Executive instruct the MDRRMC to revisit
and constantly monitor the status of implementation of approved plans within the
specified time frame. Further, timely utilize the MDRRM Funds for PPAs that would
prepare, mitigate and reduce the impact and/ or effect of calamities and adversities
that may occur in the area.

E. Summary of Total Suspensions, Disallowances and Charges as of

December 31, 2018

Suspensions, Disallowances and Charges (SASDC) including settlements thereof to the

Municipality of Sta. Rosa for the year 2018 revealed a zero (0.00) balance as of
December 31, 2018.

F. Status of Implementation of Prior Year’s Unimplemented Audit

Recommendations

Evaluation of the actions taken by management regarding the audit recommendations

contained in the 2017 Annual Audit Report revealed that out of the 19 recommendations,
seven were fully implemented, two were partially implemented and 10 were not
implemented thus, some were reiterated in Part II of this report.