EXECUTIVE SUMMARY

Introduction

The Municipality of Balabac became a Municipality by virtue of Republic Act No.

2022 dated June 22, 1957 which was published in the Official Gazette on November 30,
1957. It is classified as a second (2nd) class Municipality with twenty (20) barangays under
its jurisdiction. According to 2020 census, it has a population of 42,527 people. The
Municipality consists of some 36 islands, including the eponymous Balabac Island.

Financial Highlights

The Municipality realized a total income of ₱326,034,828.00 for CY 2022, ninety

eight percent (98%) of which came from the Share from Internal Revenue Collections
(IRA) amounting ₱320,982,319.00. Total appropriations for the year is ₱326,433,408.22.

The total assets, liabilities, equity, income and expenses for CY 2022 compared
with that of the preceding year are as follows:

Increase/
2022 2021
(Decrease)
Total Assets ₱589,381,546.55 ₱475,363,702.33 ₱114,017,844.22
Total Liabilities 153,987,033.69 124,629,548.56 29,357,485.13
Total Equity 435,394,512.86 350,734,153.77 84,660,359.09
Total Income 326,034,828.00 237,344,508.30 88,690,319.70
Total Expenses 231,326,893.78 191,410,846.22 39,916,047.56

Scope of Audit

The Audit Team conducted financial and compliance audits on the accounts and
operations of the Municipal Government of Balabac, Palawan for the calendar year ended
December 31, 2022. The audit was conducted in accordance with the International
Standards of Supreme Audit Institutions to (a) ascertain the level of assurance that may be
placed on management’s assertions in the financial statements; (b) evaluate the extent of
compliance with laws and regulations as well as the propriety and validity of transactions;
(c) recommend agency improvement opportunities; and (d) determine the extent of
implementation of prior year’s audit recommendations.

Audit Opinion on the Financial Statements

The Auditor did not express an opinion on the accompanying financial statements
due to the following:

The required financial reports and financial transactions documents for CY 2022
were not submitted to the Auditor’s Office within the prescribed period, thus prevented the
 Audit Team from validating the correctness of the accounts’ balances and conduct post
audit of the financial transactions and related accounts. We were unable to satisfy ourselves
by alternative audit procedures to confirm the presented account balances in the financial
statements. As a result of these matters, we were unable to determine the fairness of
presentation of the accounts making up the statement of financial position, statement of
financial performance, statement of cash flows, statement of changes in net assets/equity,
statement of comparison of budget and actual amounts for the year then ended and the
notes to the financial statements.

Significant Observations and Recommendations

For the exception cited above, the Audit Team recommended that the Municipal
Mayor instruct the Municipal Accountant to exert extra effort in the preparation of financial
reports and strictly adhere to laws, rules and regulations pertaining to the prompt
submission of financial statements and reports to the Audit Team as these reports are the
responsibility of the accounting office.

Other deficiencies noted in the audit of accounts and transactions of the Municipal
Government of Balabac for the year 2022, as discussed in detail in Part II of the Report,
are as follows:

1. The existence, accuracy and reliability of the Cash and Cash Equivalents accounts as of
December 31, 2022 amounting to P220,954,626.35 could not be ascertained due to (a) non-
preparation of Bank Reconciliation Statements (BRS) contrary to Section 3 of COA
Circular No. 96-011 dated October 2, 1996; (b) non-submission of certified true copy of
cashbooks of the Accountable Officers contrary to Section 348 of Republic Act (R.A) No.
7160 or the Local Government Code of 1991; and (c) Failure to update the Subsidiary
Ledger (SL) to support the balances of the controlling accounts in the General Ledger (GL).

We recommended that the Municipal Mayor instruct the:

(a) Municipal Accountant to regularly prepares the monthly BRS for all cash-in-bank
accounts for CY 2022 and promptly submit them to the Audit Team for in strict
compliance to Section 3 of COA Circular No. 96-011 dated October 2, 1996;

(b) OIC-Municipal Treasurer to maintain and regularly update his cashbook and
submit the duly certified true copies to the Audit Team for review and validation of
cash balances. Moreover, reconcile the cashbook balances with the accounting records
every end of the month; and

(c) Municipal Accountant to take extra efforts in updating the SLs and observe strict
adherence to Sections 9 and 10 of the MNGAS for LGUs, Volume II, to support the
balances of the controlling accounts in the general ledger.
2. Cash advances totaling ₱816,655.80 remained unliquidated as at December 31, 2022 due
to the failure of the management to strictly observe the provisions of COA Circular No.
97-002 dated February 10, 1997, thereby exposing the funds to possible abuse or
misuse.

We recommended that the:

a. Municipal Accountant (i) serve de m a nd l e t t e r to all concerned AOs for the

settlement of their outstanding cash advances, copy furnish the Audit Team for
monitoring; (ii) consider withholding the salaries of AOs still connected with the
Municipality who refuse to settle their accounts without justifiable reason; (iii) trace
and identify the discrepancies, reconcile Status of Unliquidated Cash Advances
(SUCA) with Trial Balance (TB) and update documents based on reconciled amounts;
and (iv) ensure that the provisions of COA Circular No. 97-002 are strictly observed in
the granting, utilization and liquidation of cash advances; and

b. Municipal Mayor request for write-off of the accounts of deceased employees and
those dormant unliquidated cash advances pursuant to the guidelines prescribed under
COA Circular No. 2016-005 and initiate the filing of appropriate action against the
AOs who still failed to settle their accounts after demand, if warranted.

3. The existence, completeness and accuracy of Property, Plant and Equipment (PPE)
valued at ₱272,946,856.72 are doubtful due to (a) non-reconciliation of Report on the
Physical Count of PPE (RPCPPE) with TB and failure to conduct physical inventory on
road networks; (b) non-maintenance of subsidiary ledger; (c) non-submission of the
lapsing schedule; (d) doubtful balance of Construction in Progress (CIP) of
₱7,850,909.49; and (e) failure to avail one-time cleansing of PPE accounts as provided
under Commission on Audit (COA) Circular No. 2020-006.

We reiterated our recommendations that the:

a. Municipal Mayor (i) instruct the Inventory Committee to complete the physical count
of all Municipality’s PPE and update the RPCPPE and submit the RPCLRN. During
the actual count, the type, description, serial number, acquisition date,
name/designation of employee accountable, location and condition of the property
counted shall be indicated in the Inventory Sheet. Serially pre-numbered inventory
tags shall also be pasted to the counted item/property for easy identification; and (ii)
avail the sunset provision of COA Circular No. 2020-006 for the one-time cleansing
of the PPE to eventually come up with balances that are verifiable as to existence,
condition, and accountability;

b. Municipal GSO and the Municipal Accountant to retrieve relevant records to maintain
and update the required PCs and the RPLC and PPELC, respectively, per category of
PPE and henceforth maintain the same in accordance with Sections 119 and 120 of
the MNGAS for LGUs, Volume I;
 c. Inventory Committee, Municipal GSO and Municipal Accountant, after completing
the actual physical count of PPE, perform reconciliation of the result of the actual
physical count of PPE with the required property and accounting records to establish
correctness and validity of the account balances presented in the financial statements;
and

d. The Municipal Accountant to (i) identify discrepancies and reconcile the trial balance
and the Notes to FS and update documents based on reconciled amounts; (ii) prepare
the lapsing schedule of all PPE to properly determine the correctness and validity of
reported depreciation expenses and carrying amount of PPE; and (iii) coordinate with
the Municipal Engineer and determine the updated/current status of the long
outstanding CIP accounts and make the necessary adjustments in the books, if
warranted.

4. The MGB failed to submit the Gender and Development (GAD) Plan and Budget for CY
2022 to the Audit Team and six (6) GAD projects, programs and activities (PPAs) were
not implemented during the year based on GAD Accomplishment Report (AR), thus, the
objective of providing equal development opportunities to men and women through
gender-responsive was partially achieved based on the provisions of Philippine
Commission on Women-Department of the Interior and Local Government-Department of
Budget and Management-National Economic and Development Authority (PWC-DILG-
DBM-NEDA) Joint Memorandum Circular (JMC) No. 2013-01, as amended under JMC
No. 2016-01 dated January 12, 2016.

We recommended that the GFPS: (i) prepare and submit GPB based on formulated
PPAs in GAD Agenda with at least five percent (5%) of annual budget; and (ii) continue
to fully implement the GAD PPAs in order to strengthen its gender-responsive governance
in the Municipality.

5. A total of 34 programs, projects, and activities (PPAs) totaling ₱57,466,596.60 under the
current and continuing appropriations of 20% Development Fund (DF) were not fully
implemented during the year manifesting inefficiency in the implementation and
monitoring of development projects contrary to the provisions of the Department of the
Interior and Local Government (DILG) and Department of Budget and Management
(DBM) Joint Memorandum Circular (JMC) No. 2017-1 dated February 22, 2017 to the
disadvantage of the constituents.

We recommended that the:

a) Municipal Mayor (i) ensure the full or optimum utilization of the 20% DF by promptly
implementing the PPAs that were identified in the Status Report as of December 31,
2022 in accordance with Section 5 of DILG and DBM JMC No. 2017-1 to maximize
the developmental benefits of the intended beneficiaries; and (ii) consider realigning
or reprogramming the unutilized/unimplemented PPAs to other viable development
projects;
 b) Municipal Engineer (i) require the concerned project engineer, officers and employees
to be prudent in overseeing the timely implementation of PPAs under their
responsibility; (ii) assist the MPDC in identifying among those projects not yet
completed or started subject for possible realignment or reprogramming and provide
satisfactory explanation on why these projects were not yet implemented; (iii) provide
complete information on the status of projects funded by the 20% DF together with all
the necessary details; and (iv) provide satisfactory explanation for the delayed or non-
implementation of PPAs despite the considerable lapse of time; and

c) MPDC (i) ensure close coordination with the Municipal Engineer and the Municipal
Accountant for proper monitoring of the implementation of projects funded by the
20% DF and provide all the necessary information regarding its status of
implementation for the timely preparation and submission of the Status Report of
Government PPAs to the Audit Team; and (ii) conduct intensive review of the
continuing projects funded by the 20% DF to determine if the PPAs are still part of the
vital needs of the Municipality otherwise consider reprogramming them to other
priority PPAs; and (iii) continue to identify development projects that are doable and
more beneficial to the constituents.

6. The reporting of the municipality’s LDRRMF was not in accordance with the pertinent
provisions of Republic Act (R.A) No. 10121 and COA Circular No. 2012-002 dated
September 12, 2012, as manifested by to (a) delayed submission of Monthly Report on
Utilization of DRRMF; (b) unreliable LDRRMF Utilization Report and unutilized prior
years LDDRMF; (c) non-submission of the Approved LDRRMF Investment Plan.

We recommended that the (a) Municipal Accountant observe strict compliance on the
preparation and submission of monthly Report on Fund Utilization of LDRRMF; (b)
MDRRMC observe the balanced implementation of DRRM activities addressing the four
thematic areas of disaster risk reduction and management by making sure that
implementation of prevention and mitigation projects and activities are given utmost
priority and ensure the efficient and timely utilization of the LDRRMF to strengthen the
Municipality’s capacity and build its resilience to disasters including climate change
impacts; and (c) MDRRM Officer comply with the submission to the Audit Team of the
LDRRMFIP and the monthly Report on Fund Utilization with proof of receipt by OCD and
the DILG-LGOO.

Unsettled Audit Suspensions, Disallowances and Charges

The total audit of disallowances found in the audit of various transactions of the
Municipality of Balabac, Palawan amounted ₱112,141,601.73 which remained unsettled
as of December 31, 2022. There are no audit suspensions and charges as of yearend.

Status of Implementation of Prior Year’s Audit Recommendations

Out of the 30 audit recommendations cited in the CY 2021 Annual Audit Report,
eight (8) were implemented, fifteen (15) were partially implemented and seven (7) were
not implemented as of December 31, 2022.