EXECUTIVE SUMMARY

Carmen was formerly a Barangay under the Municipality of Kabacan. On November

16, l956 it became a municipality by virtue of Executive Order No. 214 of the late President
Ramon Magsaysay. At present, it is a first-class municipality with 28 Barangays comprising
its political subdivisions.

Municipality of Carmen is a service-oriented agency and its financial plan focuses on

the “Sustainable Economic Growth Through Agricultural Development” policy of the
administration. It is the desire of the municipal government to make the “tri-people” (The
Christians, Muslims and Lumads) feel and experience that the government is giving equal
opportunities for their socio-economic development.

The plans and programs for the CY 2020 are geared towards the attainment of various
priority projects which the present administration translated in a ten-point agenda, such as
food security, rural infrastructures, environmental protection, health and sanitation,
livelihood, eco-tourism development, youth and sports development, security and order,
barangay development and cooperative development.

In the formulation of these plans and programs, budgetary requirements have been
complied with, general limitations are met and the provision of statutory and contractual
obligations have been fully satisfied, in strict adherence to sections 324 and 325 of Local
Government Code (RA 7160) and other pertinent budgetary regulations.

Pursuant to Republic Act No. 7160, known as the Local Government Code of 1991,
the municipality like any other local government units, enjoys total independence in
managing, deciding and planning its own administrative, fiscal and development affairs in
conformity with the national government’s thrust for sustainable social and economic growth.

The Municipality of Carmen for CY 2020 is under the administration of the Honorable
Mayor Moises C. Arendain with Honorable Roger Ryan J. Taliño as Vice-Mayor together
with the 9 members of Sangguniang Bayan and with the help of four hundred three (403)
employees, distributed as follows:

Permanent Officials 205

Elective 13
Casual 40
Job Order and Contract of Service 145
Total 403

Audit Methodology

The audit was done on a sampling basis and used various techniques like
verification/confirmation, observation, interview with concerned officials and employees, and
other auditing procedures and methods considered necessary under the circumstances.
 The audit was focused on the different audit thrusts/areas issued by the Local
Government Sector of the Commission.

Scope of Audit

Financial and compliance, and value for money audits were conducted on the accounts
and operations of the Municipal Government of Carmen for the year 2020 to ascertain the
propriety of the financial transactions and compliance of the agency to prescribed laws, rules
and regulations. They were also made to ascertain the accuracy of the financial records and
reports as well as the fairness of presentation of the financial statements.

Financial Highlights

 Statement of Financial Position

Financial Position
1,200,000,000.00

1,000,000,000.00 1,022,504,435.58
1,016,127,060.37 868,775,306.52
774,858,931.37
800,000,000.00

600,000,000.00

400,000,000.00
241,268,129.00
153,729,129.06
200,000,000.00

‐
Total Assets Total Liabilities Total Equity
2020 2019

For CY 2020, the total Assets of the Municipality increased by Php 6,377,375.21 or
0.63%, while its liabilities decreased by Php 87,538,999.94 or 36.28% and the Equity
increased by Php 93,916,375.15 or 12.12% as compared to CY 2019.
Increase in asset is attributed to increase in inventory (particularly the merchandise
inventory and medical, dental and laboratory supplies inventory) and PPE (road networks,
power supply systems, buildings and other structures, construction and heavy equipment,
DRRM equipment, medical equipment, motor vehicle and CIP-Buildings and other
structures).
Decrease in liability is attributed to liquidation of Due to LGUs (for almost Php 89
million), payment of Other Payables (Php 21.7 million) and decreases in deferred real
property tax and deferred special education tax.
  Statement of Financial Performance

2020 Revenue Business

Internal Income
Revenue Locally Sourced
Revenues 25,214,627.20
Allotment 5.42%
418,671,778.00 46,273,168.15
90.04% 9.95% Service Income
4,837,717.23
Share, Grants 1.04%
and Donation Tax Revenue
27,764.94 16,220,823.72
0.01% 3.49%
Share, Grants and Donation Internal Revenue Allotment
Tax Revenue Business Income
Service Income

The Revenue for CY 2020 shows that 90.04% of the Operating Income is from the
Internal Revenue Allotment, while 9.95% was sourced locally from Business Income, Service
Income, and Local Taxes. The Municipality also had a minimal share from PCSO of
27,764.94 or 0.01% of the total Revenue.

Expenses

Financial Expenses 32,057.50

16,600.00

Non‐cash Expenses 52,802,908.12

35,690,506.41
Maintenance and Other Operating 196,000,460.59
Expenses 222,965,437.24

Personnel Services 129,583,814.52

111,018,191.37
‐ 50,000,000.00 100,000,000.00 150,000,000.00 200,000,000.00 250,000,000.00

2020 2019

The Municipality’s expenditures for CY 2020 increased by a total of Php 8,728,505.71

compared with the previous year. The net increase was due to the significant increases in
Personnel Services, significant increases in Non-cash Expenses and significant decreases in
the Maintenance and Other Operating Expenses.

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 Carmen as of December 31, 2020 in view of the
effects of the material exceptions observed in the course of the audit which are stated in the
Independent Auditor’s Report and as discussed in detail in Part II of the Annual Audit Report.
Significant Audit Observations and Recommendations

The following are the significant audit observations with their corresponding
recommendations:

1. The correctness of the reported year-end balance of the account Cash in Bank –
Local Currency, Current Account could not be established due to: (1) reconciling
items totaling Php 1,608,330.19 that remained unrecorded/unadjusted; (2)
disparity of Php 45,221,908.06 between the balances of bank accounts per
Subsidiary Ledgers (SLs) and per cashbook; (3) stale checks amounting to Php
152,451.90 that were not cancelled and reverted to the cash account; and, (4)
inclusion of closed/dormant accounts amounting to Php 276,416.26.
In view of the aforementioned observations, we recommended the following:
a. The Municipal Accountant shall regularly conduct monthly reconciliation of the
Cash in Bank records for all of its bank accounts (whether local or foreign) with
the depository bank balances within ten days from receipt of the bank statements
and at least quarterly reconciliation with the Municipal Treasurer’s cashbooks
(including the Cash in Bank accounts). We recommended that the Management
submit the BRS on time with complete supporting documents to the concerned
COA auditor for verification;

b. To be updated of any reconciling item, the Municipal Accountant shall conduct

thorough analysis and review of cash accounts through the Bank Statements, Bank
Reconciliation Statements and its other supporting schedules as to ascertain the
accuracy of the reports. The discrepancies noted in the Bank Reconciliation
Statements which are validated by supporting documents shall be adjusted
immediately to correct the balances of the Cash in Bank accounts. The long-
reported reconciling items shall be verified and analyzed to establish their validity
and accuracy. Furthermore, the Management shall furnish Bank Reconciliation
Statements to the banks, especially if the identified bank error is for adjustment by
the bank;

c. The Municipal Accountant and Municipal Treasurer shall revisit the undetermined
reconciling items (such as for LBP Account No. 2732-1064-59 under General
Fund) to determine the appropriate action or disposition to pave the way for their
elimination from their “open” status in the books. They shall combine their efforts
to retrieve the supporting documents/bank statements/records and history of
movements in cash balances of the said account, as well as to determine the date
when the discrepancy started to show up. Moreover, they could also trace cash
transactions in the cashbook of the said account since the balance in the cashbook
is consistent with the confirmed bank balance. These actions will be of assistance
to the preparation of monthly bank reconciliations for the said account. Once the
 reconciling item is validated by supporting documents, it should be immediately
adjusted or recorded;

d. The Municipal Treasurer shall submit and furnish to the Accountant all paid DVs
summarized in the Report of Checks Issued on a daily basis and copies of
validated Deposit Slips summarized in Report on Collections and Deposits to
ensure timely recording of disbursements and deposits in the books;

e. The Municipal Accountant and Municipal Treasurer shall analyze the dormant
bank account and communicate with the source agency to determine the nature
and terms of the account. Reversion to the General Fund may be applied if proven
that the unexpended amount is the balance of their counterpart funding to the
SEDIP. They shall cause the closure of the dormant account & transfer the
balance to an active account in order to protect the amount from possible risk of
loss of rights and ownership.

f. For the bank account which was confirmed as closed account but has balance in
the FS Schedule of Php 1,000.00, the Municipal Accountant shall analyze the
account and/or adjust the amount in their books and the financial statements;

g. The Municipal Accountant shall make the necessary adjusting entries for stale-
dated checks over 6 months but not over 2 years to exclude them from the list of
outstanding checks;

h. The Municipal Treasurer shall send written notice to the payees one month before
the check becomes stale. The cancelled stale checks shall be reported and attached
to the RCI prepared at the period of cancellation.

2. The reliability and accuracy of the reported year-end balance of the Land and
the Property, Plant, and Equipment (PPE) accounts could not be established due
to incomplete supporting ownership documents for seventeen (17) parcels of land
valued at Php 7,607,670.74 and unrecorded two (2) parcels of titled lands.

We recommended that the Management: (1) appropriate funds for the titling of lands
under the name of the Municipality and direct the Municipal Treasurer to prioritize
and expedite the processing of Transfer Certificate of Titles (TCTs) in order to
establish absolute ownership over the untitled lands, and (2) direct the Municipal
Accountant to record the unrecorded parcels of lands.

3. Trust Liabilities – Disaster Risk Reduction and Management (DRRM) account

was overstated by Php 4,795,915.93. Unreconciled balances of the unexpended
CY 2020 appropriations in the accounting and other financial records cast
doubts on the accuracy, valuation and fair presentation of the account.
 We recommended the following to the Management:

a. Resolve the discrepancies in the unexpended balances of the Current Year

Appropriations (MF-MOOE, MF-CO for completed projects and MF-CO for
unimplemented/partially implemented projects) reflected in the accounting and
other financial records of various departments of the Municipality in order to
arrive at the correct balances of STF and DRMMF-Continuing Appropriations
(from CY 2020) as of December 31, 2020;

b. Draw immediately the JEV to correct the total amount transferred to Special Trust
Fund under “Trust Liability-DRRM” in the Trust Fund books; and

c. The Management agreed to direct the MDRRMO and MPDC to convene in the
proper classification of the specific PPAs (either CO or MOOE, but not both) to
be funded from the LDRRMF of the LGU and to ensure that disbursements are
only made within the nature and budget appropriations of the PPAs for LDRRMF.

4. The Notes to Financial Statements did not provide adequate disclosures of

material balances and significant changes of account balances contrary to
pertinent disclosure requirements of International Public Sector Accounting
Standards thereby affecting effective understanding of intended users of the
Financial Statements.

We recommended and the management agreed that it will direct the Municipal
Accountant to provide the lacking disclosures and to strictly adhere to the disclosure
requirements of IPSAS in the Notes to Financial Statements to ensure that the
financial reports effective understanding by the intended users.

5. The utilized and unutilized balances of Local Disaster Risk Reduction and
Management Fund (LDRRMF) were not properly reported and disclosed.

We recommended and the Management agreed to: (1) resolve the discrepancies in the
LDRRMF balances that are reflected in the Monthly Utilization Reports for CY 2020;
and (2) ensure that the amount and details of the unutilized balances of the current,
continuing, and previous years’ appropriations of the LDRRMF are accurately,
properly, and adequately disclosed in the LDRRMF Utilization Reports and Notes to
Financial Statements.

6. The unexpended balance of the previous years’ Local Disaster Risk Reduction
and Management Fund (LDRRMF) amounting to Php 28,850,149.28 was not
incorporated in the LDRRMF Investment Plan (LDRRMFIP).

We recommended and the Management agreed that the LDRRMC, through its
LDRRM Officer, prepare a complete and comprehensive annual LDRRMF Investment
Plan which shall include the PPAs of current year appropriations and shall incorporate
 under a separate caption the list of PPAs to be funded from the unexpended balances
of previous years’ LDRRMF. The LDRRMO shall conduct periodic review of the
LDRRM and prepare a revised and updated Plan whenever new expense item is
introduced and integrated in the Revised/Supplemental AIP for approval of the LCE.

7. The Municipal Government of Carmen placed the amount of Php 5,357,712.30

under General Fund in time deposit account at Philippine Veterans Bank (PVB)
which could have been otherwise utilized in the implementation of
programs/projects/activities that would benefit its constituents.
We recommended and the Management committed to:
a. Re-assess the said fund and convene in resolution/ordinance as to its nature and
purpose. Moreover, the handling of the fund could be further improved by using it
in a more economic way; and,

b. Disclose the nature, purpose and other relevant information about the fund in the
Notes to Financial Statements.

8. Unutilized balance of the fund transfer for the first tranche of the Emergency
Subsidy Program – Social Amelioration Program (ESP-SAP) amounting to Php
45,000.00 was not reverted to the source agency.

We recommended that the Management return the unexpended balance to the

concerned source agency, as required under the aforementioned rules and regulations.

9. The Municipality of Carmen was partially compliant with the guidelines set forth
under Department of Budget and Management (DBM) Local Budget Circular
No. 125 dated April 07, 2020 due to lapses in planning, monitoring, posting and
reporting of the utilization of its Bayanihan Grant to Cities and Municipalities
(BGCM) Fund.

In view of the foregoing observations, we recommended the following and the

Management agreed to:

a. Require the Local Finance Committee (LFC) to timely and accurately prepare the
Monthly Reports on Fund Utilization and Status of Implementation of PPAs for
BGCM Fund;

b. Require the LFC to accomplish the necessary posting in their transparency boards
on a regular basis to always keep the public informed and updated on the
implementation and utilization of BGCM Fund pursuant to the transparency &
full disclosure policy of the government and Section 4.3 of the said circular;

c. Send a written notice & submit all monthly reports for BGCM Fund utilization to
the DBM and other government oversight offices where the submission of reports
 is required under existing laws, rules and regulations, in compliance with Section
4.4 of the said circular;

d. Require the LFC to convene in the determination of PPAs and expenses to be

funded from the funds of the LGU in order to properly indicate the specific PPAs
and for the timely preparation of supplemental investment programs, budgets&
utilization reports and to ensure that disbursements are only made within the
limited amounts and nature of the approved PPAs;

e. Direct the LFC to coordinate with the Municipal Accountant concerning the
allotment, obligations and disbursements for accurate monthly reporting on fund
utilization; and

f. Return to the National Treasury the unutilized balance of the BGCM Fund after
the lifting of State of Calamity.

10. The amount appropriated for GAD programs, projects and activities in CY 2020
was not fully utilized, leaving an unexpended balance of ₱8,718,275.60 at year-
end, thus defeating the intent of the program to pursue women’s empowerment
and gender equality.

We recommended that the management update their GAD Database and maximize the
utilization of GAD funds through the implementation of GAD-related programs and
projects in order to attain the objective for which funds were provided.

Summary of Total Suspensions, Disallowances and Charges

In compliance with COA Circular No. 2009-006 dated September 14, 2009 or the
COA Rules and Regulations on the Settlement of Accounts, the Municipality of Carmen had
no balances of Suspensions, Disallowances, and Charges as of December 31, 2020.

Status of Implementation of Prior Years’ Audit Recommendations

We made a follow-up on the action taken by the Municipality of Carmen to implement

the ten audit recommendations of prior years and noted the following:

Status of Implementation No. of Recommendations

Fully Implemented 4
Partially Implemented 0
Ongoing 6
Not Implemented 0

The results of the validation of the implementation of prior years’ recommendations

are presented in Part III of this report.