Executive Summary

INTRODUCTION

The Municipality of Zamboanguita, Negros Oriental was created on May 13,

1908 by an action of the Philippine Commission under Executive Order No. 37. It is a
fourth class municipality located on the southeastern coast of Negros Oriental, and is the
third town located twenty eight kilometers south of Dumaguete City. It has a total land
area of 15,139 hectares and consists of ten barangays.

SCOPE OF THE AUDIT

A financial and compliance audit was conducted on the accounts and operations
of the Municipality of Zamboanguita, Negros Oriental for the calendar year ended
December 31, 2014. The audit was aimed at ascertaining the fairness of the presentation
of the financial statements, the propriety and legality of disbursements and the degree of
compliance with existing laws, rules and regulations.

The audit focused on the cash and cash accounts, revenues, payment of honoraria
and allowances, environmental compliance audit, compliance with full disclosure policy,
Special Education Fund, Local Disaster Risk Reduction and Management Fund, 20%
Development Fund, procurement, public infrastructure projects and property, plant and
equipment accounts.

Our examinations consisted of the verification of records on a test basis, review of

operation procedures, inspection of projects, interview with concerned officials and
employees, analysis of accounts and such other procedures considered necessary in the
circumstances in our audit.

HIGHLIGHTS OF FINANCIAL OPERATION

ASSETS, LIABILITIES AND EQUITY

Increase
2014 2013 (Decrease) Percentage

Assets P 135,236,149.91 P 147,486,268.11 (P12,250,118.20) (8.31%)

Liabilities 52,702,895.74 48,070,270.34 4,632,625.40 9.64%

Equity 82,533,254.17 99,415,997.77 (16,882,743.60) (16.98%)

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INCOME AND EXPENSES

Increase
2014 2013 (Decrease) Percentage

Income 68,411,463.39 62,195,940.70 6,215,522.69 9.99%

Expenses 60,313,736.78 54,722,059.56 5,591,677.22 10.22%

APPROPRIATIONS

The current appropriations of the municipality for calendar year 2014 amounted
to P70,410,286.58. It showed an increase of P5,602,727.10 or 8.65% lesser than the
appropriation of P64,807,559.48 in CY 2013 as presented hereunder:

Increase
2014 2013 (Decrease) Percentage
CURRENT:
General Fund P 69,475,286.58 P 64,044,559.48 P 5,430,727.10 8.48%
SEF 935,000.00 763,000.00 172,000.00 22.54%
Sub-Total 70,410,286.58 64,807,559.48 5,602,727.10 8.65%
Continuing -CO - - -
Total 70,410,286.58 64,807,559.48 5,602,727.10 8.65%

OBLIGATIONS

For calendar year 2014, the municipality’s expenditures were within the
appropriations set by the Sangguniang Bayan for CY 2014. It reached P65,705,068.48
from current and continuing appropriations showing an increase of P3,748,574.40 or
6.05% as compared to last year’s P61,956,494.08 as shown hereunder:

Increase
2014 2013 (Decrease) Percentage
CURRENT:
General Fund P 63,366,286.09 P 59,139,038.48 P 4,227,247.61 7.15%
SEF 520,699.06 664,556.49 (143,857.43) -21.65%
P63,886,985.15 P59,803,594.97 P4,083,390.18 6.83%
Continuing-CO P1,818,083.33 P2,152,899.11 (P334,815.78) -15.55%
Total P 65,705,068.48 P 61,956,494.08 P 3,748,574.40 6.05%

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AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the financial statements because the
Municipality did not conduct a physical count of its movable property, plant and
equipment, thus the existence as well as the reliability of the account balances in the
financial statements as of December 31, 2014 which amounted to P16,997,317.41 or
12.56% of the total asset accounts could not be ascertained. Due to inadequacy of
accounting records, we were unable to satisfy ourselves as to inventory quantities by
other audit procedures.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

1. The municipality did not conduct a physical count of its movable property, plant and
equipment as required in Section 124 of the NGAS Manual, Volume I, Property
ledger cards were not maintained, thus the existence as well as the reliability of the
account balances in the financial statements as of December 31, 2014 which
amounted to P16,997,317.41 or 12.56% of the total asset accounts could not be
ascertained.

We recommend that:

1. The Mayor strictly require the Inventory Committee to conduct the physical
count of properties and reconcile the same with related property and
accounting records and for the municipal treasurer’s office to maintain
property cards in accordance with existing regulations and locate the missing
two (2) DG computers with printers including its accessories and the black
Suzuki 125.

2. The Municipal Engineer inform the Accounting Department of any public

structures due for demolition so that appropriate documents can be prepared
thereto and to submit written explanation why the health center in Barangay
Lutuban is being occupied by a private individual and an updated and signed
Acknowledgement Receipt for Equipment (ARE) or Application for Relief from
Accountability for lost properties, if warranted.

3. The Municipal Accountant to reclassify the fully depreciated and

unserviceable assets from the Property Plant and Equipment to Other Asset
accounts and to locate the disbursement vouchers of the unbooked medical
equipment and record the same in the book of accounts.

2. Balances of cash received from the national government agencies totalling

P2,430,286.54 and unexpended balances of Priority Development Assistance Fund
(PDAF) of P306,522.30 were not remitted/returned the National Treasury/source
agency contrary to the provisions of Executive Order No. 431, Section 6.7 of COA

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 Circular 94-013 and to the ruling of the Supreme Court on November 19, 2013
declaring all past and present legal provisions on pork-barrel as unconstitutional.

We recommended that the Municipal Officials concerned remit the

unexpended balances of cash received from the national government and PDAF
to the source agency or the National Treasury as required under Section 6.7 of
COA Circular 94-013 and the Supreme Court decision dated November 19, 2013
under General Ruling Numbers 208566, 208493 and 209251.

3. Purchases of Fuel, Oil and Lubricants in the amount of P1,311,048.90 were

conducted through Direct Contracting instead of Public Bidding thus contrary to
Sections 10, 47 and 50 of the Revised Implementing Rules and Regulations of
Republic Act 9184.

We recommend that:

1. Management strictly comply with the provisions of Sections 10, 47 and 50 of the
Revised Implementing Rules and Regulations of 9184 by conducting public bidding
in order to obtain the most advantageous price for the government.

2. The Municipal Accountant to ensure that all claims are duly supported with all the
required documents applicable to the mode of procurement used before processing
and paying the same to prevent irregular disbursements.

4. Maintenance and Other Operating Expenses (MOOE) totaling P 1,901,790.81 were

erroneously recorded as Construction and Heavy Equipment and Motor Vehicle
accounts, thus overstating the Property Plant and Equipment and understating several
MOOE accounts.

We recommend that management instruct the Municipal Accountant to

prepare the necessary adjusting entries to correct/adjust the erroneous
classification of affected accounts in order to present accurate and reliable
account balances in the financial statements.

5. The local Chief Executive gave assistance to constituents of other municipalities

from the Development Acceleration Program (DAP) received by the municipality
from the Department of Budget and Management contrary to DBM SARO No. G-12-
01378 dated December 20, 2012, thus rendering the grant of financial assistance
irregular. Moreover, the disbursement vouchers were not supported with the basic
supporting documents required under Administrative Order No. 1 series of 2011 thus
the validity of the disbursements cannot be determined.

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 It is recommended that the Local Chief Executive refund the questioned
financial assistance granted to constituents from other municipalities and comply
with DBM SARO No. G-12-01378 on the limitation of the grant of financial
assistance to residents of Zamboanguita only. Furthermore, the personnel of the
Municipal Social Welfare Office must see to it that the documents attached to the
claim are complete to avoid audit suspension or disallowance.

SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND CHARGES

As of December 31, 2014, the Municipality of Zamboanguita has a balance of

P1,643,327.00 in disallowances, with no suspensions and charges.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Out of the thirty-seven (37) recommendations embodied in the previous years’

Annual Audit Reports, only seventeen (17) were fully implemented, nine (9) were
partially implemented and eleven (11) was not implemented at all.