EXECUTIVE SUMMARY

Introduction

The word “Calatagan” is a derivative of the tagalog word “latag” and is synonymous to
Kapatagan. It means a plain or flat portion of the land lying between two mountains or hills,
thus Calatagan means a large expanse of wide plain lands. At the beginning of the century,
record shows there were less than two hundred settlers who chose this flat portion of
Batangas because of its agricultural potentials and its proximity to the sea. Archeological
researchers, however, show that there could have been more people when the Spaniards
arrived there in 1890. The land occupied by the Municipality of Calatagan was formerly
known as Hacienda de Calatagan, which was owned by the family of Don Enrique Zobel.
Considerable portions of the original hacienda were still owned by the family but much of the
land was subdivided into residential lots and was subsequently sold to the original
occupants.

The organizational structure of the Municipality of Calatagan, Batangas is as follows:

a. Key Officials

Municipal Mayor Peter Oliver M. Palacio

Municipal Vice-Mayor Andrea Anne V. del Rosario

Members of the Sanggunian

Rexio P. Bautista
Noel A. delas Alas
Florentino V. Cahayon
Teodulo Jose O. Caisip
Jose Z. Coz, Jr.
Eligio C. Bautista
Theresa P. Pelea
Anthony R. Sayo
Danilo L. Pineda (ABC)
Amiel Ann A. Caraig (SK Federation President)

Municipal Accountant Josefa A. Mendoza

Municipal Treasurer Sofia R. Taguibao

b. Number of Personnel Complement

Permanent 90
Temporary 3
Elective Officials 12
Job-Orders 94
Total 199

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Scope of Audit

Financial and compliance audits were conducted on the accounts and operations of the
Municipality of Calatagan, Batangas for CY 2018. The audit was conducted to ascertain the
adequacy and reliability of the books of accounts and financial reports, fairness of the
presentation of the financial statements and Municipality’s compliance with applicable laws,
rules and regulations, as well as adherence to prescribed policies in handling its finance and
its operation in general.

Financial Highlights (in Totals)

For the Calendar Year 2018, the Municipal Government of Calatagan, Batangas generated
revenue of ₱224,980,930.73, sourced from local taxes, permits and licenses, service and
business income, and internal revenue allotment. The total appropriations/allotments was
₱254,265,828.44 of which ₱201,341,345.57 or 79.19% was obligated during the year, thus
leaving on unexpended balance of ₱52,924,482.87 or 20.81%.

The total assets, liabilities, equity, income and expenses of the Municipality for CYs 2018
and 2017 are as follows:

2018 2017 Increase/(Decrease)

Assets ₱ 546,625,274.17 ₱369,300,905.01 ₱177,324,369.16
Liabilities 137,922,659.49 151,019,505.45 (13,096,845.96)
Equity 408,702,614.68 218,281,399.56 190,421,215.12
Income 224,980,930.73 156,983,836.10 67,997,094.63
Expenses 149,528,249.85 115,193,345.55 34,334,904.30

Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements of the Municipality of Calatagan, Batangas due to:

1. The existence, reliability and completeness of Property, Plant and Equipment worth
₱448,929,330.80, gross of accumulated depreciation, could not be ascertained due to:
a) partial physical count and incomplete Report of Physical Count of Property, Plant and
Equipment (RPCPPE) totaling ₱247,923,411.15; b) discrepancies between the RPCPPE
submitted by the Municipal Treasurer’s Office and the Subsidiary Ledgers (SL) of the
Accounting Department totaling to ₱146,734,664.22; c) presence of
beginning/unidentified balances of PPEs in the Accounting’s SL totaling ₱64,300,198.28;
d) non-recognition of depreciation for PPEs with a total cost of ₱4,111,125.74; e) various
projects funded from the trust fund which were completed as of December 31, 2018
included items and works totaling ₱6,212,756.00 that were not recorded as PPE and
were not subject to depreciation in the general fund; and f) PPE Ledger Card and
Property Card were not maintained while Acknowledgement Receipts for Equipment
were not updated, thereby affecting the fair presentation of the PPE accounts in the
financial statements.

2. The reliability of Real Property Tax (RPT) Receivable and Special Education Tax (SET)
Receivable totaling ₱36,978,334.71 could not be ascertained due to its discrepancies

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 with the Municipal Treasurer’s Office reported balance of ₱17,991,835.20 in their
delinquent real property and special education taxes as of December 31, 2018, thereby
incurring a total difference of ₱18,986,499.51, thus, affecting the fair presentation of the
financial statements.

Likewise, Report of RPT Delinquency as of December 31, 2017 showed an ending

balance of ₱17,991,835.20, contrary to Section 258 and 269 of Republic Act No. (RA)
7160, thereby showing weakness on the internal control of the Municipality in enforcing
its collections.

3. The reliability, validity and correctness of the year-end balances of accounts Due from
LGUs and Due to LGUs of the Municipality amounting to ₱0.00 and ₱6,106,290.86,
respectively, could not be fully ascertained due to: (a) non-reconciliation of the said
receivables and payables with the books of the Province of Batangas; (b) presence of
long outstanding unaccounted/unsupported balance of Due to LGUs of ₱106,550.09
and; (c) inclusion of various items amounting to ₱3,061,337.69, the nature of which does
not primarily fall under such account, contrary to the provisions of PD 1445 and COA
Circular 2015-009, thus affecting the fair presentation of the financial statements.

4. Subsidy from Other Funds account balance of ₱2,008,000.00 at year end did not
reconcile with its reciprocal account Subsidy to Other Funds of ₱2,958,368.85, thus cast
doubt on the accuracy of the recorded transactions.

Significant Audit Observations and Recommendations

For the exceptions cited above, the Audit Team recommended that the Municipal Mayor
direct the:

1. a. The Inventory Committee headed by the Municipal Treasurer prepare inventory list
by category and perform the actual and complete physical count of PPE in order to
determine the existence of the recorded PPE accounts and reconcile the results of
the count with the accounting records and establish the causes of discrepancies,
whether items have already been missing, donated, sold and unserviceable to
arrive at the correct balance in the financial statements. As to the infrastructure
assets, coordinate with the Municipal Engineer to verify their existence, prepare
and maintain the required Property Cards and update ARE to facilitate the
reconciliation of RPCPPE with the accounting records;

b. The Accounting Department exhaust all efforts to fully identify the PPEs included in
the beginning/unidentified balances. Secure the necessary documents to support
those PPEs to be able to reconcile with the Inventory Report of the GSO. Also,
trace those PPEs without depreciation and with negative balances to establish their
correct carrying value. Likewise, review the composition of the accounts under
those PPEs and identify the appropriate classification for those items identified in
the audit, including those PPEs disbursed in the Trust Fund. Secure proper
documentation before effecting the necessary adjusting entries for erroneous
recording or for inclusion to ensure that the amounts are valid and conform to the
rules and regulations that will cover such adjustments; and

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 c. The Municipal Accountant and the Municipal Treasurer as the designated GSO
maintain complete and updated PPE Ledger Cards and Property Cards,
respectively, to facilitate the reconciliation of both records.

2. We also recommended that the Municipal Mayor instruct the following:

a. Municipal Accountant and the Municipal Treasurer reconcile their records to

present reliable RPT and SET Receivables in the financial statements;

b. Municipal Assessor to Submit Monthly Report of Assessment of Real Properties

and Individual Tax Payers Assessment to the Municipal Treasurer for reconciliation
of their individual records;

c. Municipal Treasurer exhaust all efforts and devise strategies to collect all
delinquent real property taxes and encourage the tax payer to pay their dues on
time. Conduct verification on those outstanding balances to determine the
accuracy of the receivables and its collectability; and

d. Municipal Treasurer submit copy of the document providing the legal basis for
the .5% assessment rate of the real property of Solar Philippines Calatagan
Corporation in Barangay Biga and Paraiso that was used in the computation of
levied special education tax.

3. Also, we recommended that the Municipal Mayor direct the Accountant and her staff to:

a. Coordinate again with the Provincial Accountant and reconcile their records on
receivables/payables and their corresponding payables/receivables in the books of
the Province to establish the correct balances of the intra-agency accounts;

b. Coordinate with the concerned officials and departments heads to obtain

information on those long outstanding accounts. Secure the necessary documents
to properly identify the creditor/local government unit to whom it’s due. Once the
specific local government unit had been identified, verify the reported balances in
the subsidiary ledgers through confirmation letters and exhaust efforts to fully
ascertain the validity and legality of those obligations; and

c. Review the composition of the accounts under the Due to LGUs and identify the
appropriate classification for those items identified in the audit. Secure proper
documentation before effecting the necessary adjusting entries for erroneous
recording/inclusion in the Due to LGUs account to ensure that the amounts are
valid and conform to the rules and regulations that will cover such adjustments.

4. We recommended that the Municipal Accountant review in detail all entries made on the
Subsidy from/to Other Funds particularly those made in the General Fund and Special
Education Fund and check any unrecorded transaction/s in its reciprocal account/s.
Draw the Journal Entry Voucher (JEV) to make necessary adjustments to present the
correct balance of the accounts in the financial statements.

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In addition, the following are other significant findings and recommendations:

1. Bank Reconciliation Statements of the Municipality showed stale checks amounting to

₱198,305.18, which understated the cash and liability accounts by the same amount and
unfairly presented these accounts in the year-end financial statements as of December
31, 2018.

We recommended that the Municipal Treasurer effect the cancellation of the stale
checks and the Municipal Accountant make proper adjustments in the municipality’s
books of accounts to fairly present its financial statements as of December 31, 2018.

2. The reliability, validity and correctness of the year-end balance of Due to National
Government Agencies (NGAs) account of the Municipality could not be fully ascertained
due to the presence of long outstanding unaccounted/unsupported balance of Due to
NGAs of ₱55,849.20 and inclusion of various items amounting to ₱1,566,299.03, the
nature of which does not primarily fall under such account, contrary to Section 111 of
P.D. 1445 thus affecting the fair presentation of the financial statements.

Likewise, the balance of ₱561,204.32 from fund transfers to various national government
agencies and counterpart of the Municipality for the completed projects and programs
were not remitted to the sourced agency or reverted back to the General Fund, thereby
depriving them of additional funds that can be used to support its other programs and
activities. Meanwhile, projects sourced from fund transfers of various National
Government Agencies were not fully utilized as of year-end, leaving ₱14,096,806.94
unexpended and ₱6,888,206.00 unimplemented and unutilized at yearend, contrary to
Section 4.9 of COA Circular 94-013 thereby depriving constituents of timely basic and
value-added services and benefits that could have been derived therefrom.

We recommended that the Municipal Mayor instruct the following:

a. The Municipal Accountant to review the composition of the accounts under the Due
to NGAs and identify the appropriate classification for those items identified in the
audit. Secure proper documentation before effecting the necessary adjusting
entries for erroneous recording/inclusion in the Due to NGAS account to ensure
that the amounts are valid and conform to the rules and regulations that will cover
such adjustments.

b. The Municipal Accountant to immediately submit the liquidation reports if not yet
submitted and the check to the source agency for refund of the unexpended
balance. See to it that future fund transfers are fully implemented within the time
frame to avoid delay in liquidation. As to the balance of fund transfers of completed
projects with counterpart from the Municipality, identify the amounts to be remitted
to the source agency and to be reverted in the General Fund for appropriation.

c. The Head of the Municipal Planning and Development Office to coordinate with the
concerned department heads to enforce the utilization and implementation of those
projects that were not yet implemented while pursue the continuation of those
ongoing utilization. Likewise, see to it that their respective time frames and
schedules are strictly monitored and evaluated to avoid delays in its
implementation.

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3. The Municipality entered into a contract agreement with various contractors for the
implementation of various projects with a total amount of ₱14,057,937.07 funded from
the fund transferred by Department of Environment and Natural Resources (DENR) and
Department of the Interior and Local Government (DILG). However, implementation of
the contract agreement, utilization of the fund transfer and the corresponding
disbursements contained lapses and inconsistencies contrary to the provisions of RA
9184 and COA Circular 2009-001, thereby, cast doubt on the propriety and veracity of
such transactions/payments which indicated a probable cause of irregular expenditures
and weaknesses in the internal control of the project implementers.

We recommended that the Municipal Mayor instruct the Bids and Awards Committee to
strictly observe the provisions of the IRR of RA 9184.

We also recommended for a written justification from the BAC Chairman for the noted
deficiencies and inconsistencies in the procurement process as a) non-conduct of pre-
procurement conference, b) non-submission of the NFCC c) non-submission of contracts
for review and evaluation by the Commission on Audit d) failure to provide proof of
invitation to bid as observers to a private group in a sector or discipline e) posting of bid
and performance securities not in accordance with the provisions f) non-submission of
bid evaluation and post-qualification reports and award of contract to bidders in spite
deficiencies in the bidding process.

4. The 20 percent Development Fund of the Municipality totaling ₱26,073,351.00 had been
planned to be fully utilized in CY 2018 for the implementation of 31 various development
projects but it was reported as of December 31, 2018 that 27 projects amounting to
₱22,304,856.25 were implemented while three with total contract cost of ₱2,466,800.00
were ongoing and one with total budget cost of ₱500,000.00 was not implemented.
Thus, the local development fund was not optimally utilized during the period and the
planned or desired local socio-economic development and environmental management
outcomes for the benefits of the constituents have not yet been fully realized. Also, it
was observed that the unimplemented development project was due to conversion of
development site into industrial zone, suggestive that the Comprehensive Development
Plan was not appropriately utilized in the annual investment program planning.
Likewise, the municipal Annual Budget showed the programs/projects/activities of the
development fund in lump sum amounts or not itemized contrary to Article 454(d) of the
Implementing Rules and Regulations of RA 7160. Furthermore, it was found out that
continuing appropriation amounting to ₱1,412,901.83 was realigned from various
infrastructure projects to road networks contrary to Sections 321 and 336 of Republic Act
No. 7160 and Articles 417 and 454(b) of the Act Implementing Rules and Regulations.

We recommended that the Municipal Mayor and other concerned municipal officials
ensure effective utilization of the 20% Development Fund which is primarily intended to
fund projects that shall contribute to the attainment of desirable socio-economic
development and environmental management outcomes. Any delay in the completion of
development projects means to slow down community development or realization of
local development objectives. We further recommended that the development
projects/activities shall be shown in itemized appropriations in the municipal budget and
any changes shall be made pursuant to Sections 321 and 336 of Republic Act No. 7160
and Articles 417 and 454(b) of the Act Implementing Rules and Regulations or through
supplemental budgeting with only one exception which is the privilege granted to Local

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 Chief Executive and the Sangguniang Bayan with respect to augmentation of their
offices’ budget through ordinance.

5. The LGU allocated ₱9,203,060.03 to support its gender and development activities less
than the at least five (5) percent of its annual and supplemental budget appropriations of
₱207,491,937.18 or ₱10,374,596.86, thus a budget deficit of ₱1,171,536.83 and the
GAD database was not yet operational contrary to Section 43 and 36 (c), respectively of
Republic Act No. 9710 or “The Magna Carta of Women”. Also, the Local Chief
Executive did not issue an appropriate policy directive to all LGU departments/offices for
the preparation of their annual Gender and Development Plan and Budget and annual
Gender and Development Accomplishment Report, and to disseminate and implement
the Gender and Development Plan and Budget; the format/template used in the
preparation of Annual Gender and Development (GAD) Plan and Budget and
Accomplishment Report was not as prescribed and the implemented Annual Gender and
Development (GAD) Plan and Budget for Calendar Year 2018 was not a DILG endorsed
document in violation of Joint Memorandum Circular No. 2016-01 of Philippine
Commission on Women, Department of the Interior and Local Government, Department
of Budget and Management and National Economic and Development Authority.

We recommended that the Municipality strictly comply with Sections 43 and 36 (c) of
Republic Act No. 9710 or “The Magna Carta of Women” that the LGU shall allocate at
least five (5) percent of its total appropriation for gender and development and shall
establish and maintain an operational GAD database which is one of the institutional
mechanisms for gender mainstreaming. We further recommended stringent compliance
with the provisions of Joint Memorandum Circular No. 2016-01 dated January 12, 2016
of Philippine Commission on Women, Department of the Interior and Local Government,
Department of Budget and Management and National Economic and Development
Authority to issue a policy directive during preparation and implementation of GAD plan
and budget; to plan, budget and prepare accomplishment report as prescribed and to
utilize the GAD budget based on the DILG endorsed GAD plan and budget.

6. Pertinent provisions of Republic Act (RA) No. 10121 and COA Circulars No. 2012-002
and 2014-009 in the utilization, accounting and reporting of Local Disaster Risk
Reduction and Management Fund (LDRRMF) were not strictly observed by the
Municipality, thus the desired results for which the fund was created could not be fully
achieved.

Based on the forgoing observations, we recommended the Municipal Mayor:

 Require the Municipal Disaster Risk Reduction and Management Office (MDRRM) to
enforce the implementation of the programs and projects of the Municipality under
70% Mitigation Fund and have those programs completed within the intended time to
avoid delay in the delivery of services and benefits to the constituents;

 Require the Municipal Budget Officer to monitor the utilization of 5% LDRRMF.

Ensure that program and projects are aligned with their intended appropriation; and

 Require LDRRM Officer to submit the Report on Sources and Utilization of DRRMF
on or before the 15th day after the end of each month through LDRRMC and Local
Development Council (LDC) to the COA Auditor pursuant to COA Circular 2012-002.

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 Also, coordinate with the Municipal Budget Officer and the Municipal Accountant to
prepare the report in accordance with the prescribed format.

7. Violation and infractions of existing laws, rules and regulations were noted in the audit of
the utilization of the Special Education Fund, thus defeating the purpose to which the
fund was created.

For the foregoing deficiencies, we recommended the following:

 That the Local Chief Executive, as the Head of the Local School Board, adhere
strictly with the existing laws, rules and regulations in the prioritization and utilization
of Special Education Fund particularly for the operation and maintenance of public
schools, construction and repair of school buildings, facilities and equipment,
educational research, purchase of books and periodicals and sports development as
provided in Sections 100(c) and 272 of the Local Government Code of 1991 and
DepEd-DBM-DILG Joint Memorandum Circular No. 1, s. 2017 in order to ensure an
effective educational development within the locality;

 That the Local Chief Executive instruct the Municipal Accountant and Municipal
Budget Officer to assist the members of the LSB in the preparation of SEF budget
and in the identification and selection of programs, projects and activities in strict
compliance with the prescribed law and regulations of Department of Education
(DepEd), Department of Budget and Management (DBM) and Department of the
Interior and Local Government (DILG) and accounting and auditing rules of the
Commission on Audit; and

 That the Local Chief Executive require the concerned Department of Education
officials to immediately submit the above mentioned supporting documents to
substantiate the transaction and the OIC-Municipal Accountant ensure that the
supporting documents were complete before processing of claims pursuant to
Section 4 (6) of Presidential Decree No. 1445 to avoid suspension in audit.

8. Non-compliance of certain provisions of the Omnibus Rules on Leave (Rule XVI of the
Omnibus Rules Implementing Book V of Executive Order No. 292) and appropriation
ordinance were noted in the audit of the monetization of leave credits of some of the
municipal officials and employees thus, the privilege may not be appropriately provided
and local funds were not properly charged.

For the foregoing, we recommended the following:

 That the local government unit strictly adhere with the limitations on the grant of
monetization of leave credits pursuant to the provision of Section 23 of the Omnibus
Rules on Leave (Rule XVI of the Omnibus Rules Implementing Book V of Executive
Order No. 292);

 Charge the monetization of the leave credits of the officials and employees of the
LGU in accordance with its appropriations ordinance and Section 3.2.2 of the
Department of Budget and Management Budget Circular No. 2002-1 dated January
14, 2002; and

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  That Mr. Anthony R. Sayo, refund the corresponding amount for the excess
monetized leave credits totaling 45.25 days.

9. For CY 2018, the Municipality had an outstanding balance of ₱2,094,121.36 which

pertains to unremitted withholding taxes of BIR, GSIS and PAG-IBIG premiums and loan
repayments of municipal government employees under the general fund. However, out
of those amounts, ₱247,160.10 are recorded previous years’ balances, which were not
identified and were not completely supported with necessary documents, contrary to
Republic Act No. 8424, 8291 and 9679 hence, had remained outstanding and unremitted
over the years.

We recommended that the Municipal Mayor instruct the Municipal Accountant to exert
further efforts to communicate with GSIS and PAG-IBIG to confirm the balances and/or
to check with the records whether all premiums/loan repayments/contribution deducted
from the payroll of employees and Government Share (GS) for all employees were
remitted in order to identify the affected employees on the unremitted balance, if any. As
to Due to BIR, exhaust all available means to secure documents and journals to trace
back those old balances and identify the specific tax payers. Otherwise, if the mentioned
agencies were able to confirm that they have no outstanding claims from the
Municipality, request for the reversion of such payables following the applicable
guidelines.

10. Cash advances vouchers for confidential expenses and its prescribed supporting
documents were not submitted to the COA Audit Team pursuant to Joint Circular No.
2015-01 of Commission on Audit, Department of Budget and Management, Department
of the Interior and Local Government, Governance Commission for GOCCs and
Department of National Defense. Likewise, the expenses were recorded as Intelligence
Expenses instead of Confidential Expenses in the budget allocation and in the financial
statements.

We recommended that the Municipality strictly adhere to the provisions of the Joint
Circular No. 2015-01 of Commission on Audit, Department of Budget and Management,
Department of the Interior and Local Government, Governance Commission for GOCCs
and Department of National Defense dated January 8, 2015 prescribing the guidelines
for the documentary requirements of the granting of cash advances for confidential
expenses; submit its disbursement vouchers to the concerned COA Audit Team Leader
within seven (7) days after the release of the check covered with transmittal letter
enumerating the supporting documents in a sealed envelope and identify the expense
correctly in the municipal documents as confidential expenses instead of as intelligence
expenses.

11. The Municipal Government of Calatagan was non-compliant with the certain provisions
of Republic Act No. 9003, otherwise known as the “Ecological Solid Waste Management
Act of 2000”, due to continuous operation of a) open dump site, instead of sanitary
landfill; b) Solid Waste Management Board was not functional; c) segregation of solid
waste at the source has been implemented but inspection of the facility showed mixed
garbage and d) mandate to establish Materials Recovery Facility (MRF) was not yet fully
implemented.

We recommended that the Municipality fully implement the provisions of Republic Act
No. 9003 or “Philippine Ecological Solid Waste Management Act of 2000” that espouses

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 on the implementation of the 3R or the reduce, reuse and recycle concept with focus on
reduction of pollution and waste generation.

12. The Municipality has not yet established the Municipal Council for the Protection of
Children (MCPC). There was neither Sangguniang Bayan resolution or ordinance nor
Local Chief Executive Administrative Order issued to organize it, contrary to Section 15
of Republic Act No. 9344 or the “Juvenile Justice and Welfare Act of 2006”.

We recommended that the LGU organize the Municipal Council for the Protection of
Children (MCPC) and activate, strengthen, and sustain it pursuant to Section 15 of
Republic Act No. 9344 or the “Juvenile Justice and Welfare Act of 2006.

13. The Municipality failed to submit the Agency Action Plan and Status of Implementation
(AAPSI) on the CY 2017 Annual Audit Report, contrary to Section 93 of the General
Provisions of Republic Act No. 10964, dated December 19, 2017, otherwise known as
General Appropriations Act of 2018 thus, the actions taken by management on prior
year’s audit recommendations were not duly monitored.

We recommended that the Municipal Mayor direct the department head/s or personnel
concerned to comply with the completion and submission to the Audit Team of the
Agency Action Plan and Status of Implementation (AAPSI) for part III of CY 2018 AAR
and on every AAR thereafter.

14. The Municipality made various changes in its Annual Budget for Calendar Year 2018 like
augmentation of personal services and realignment of maintenance and other operating
expenses and capital outlays contrary to Sections 321 and 336 of Republic Act No. 7160
and Articles 417 and 454(b) of the Act Implementing Rules and Regulations affecting the
integrity of planning and budgeting processes of the Municipality.

We recommended that the Municipality strictly observe the provisions of Sections 321
and 336 of Republic Act No. 7160 and Article 417 454(b)of the Act Implementing Rules
and Regulations and promote the Code objectives of discouraging careless preparation
of the annual budget or any practice that undermines the integration of planning and
budgeting at the local level.

15. Review of the Municipality’s three loan agreements with the Land Bank of the Philippines
disclosed that for Calendar Year 2018 its General Fund liquidity ratio was 2.285 to 1 or
the Municipality was 228 percent capable of settling its current obligations and the said
fund monthly average cash balance for the same period was ₱78,977,515.53. Thus, the
Municipality had enough resources in CY 2018 and did not need the loan from Land
Bank of the Philippines amounting to ₱51,900,000.00 to fund the construction of its
sanitary landfill and should have saved expenses on 7% interest rate, commitment fees
of ½ of 1% based on unavailed portion of the loan, handling fees of 1% based on
approved amount and other related expenses. Furthermore, the Municipality had
previous loans with the Land Bank of the Philippines contracted on September 21, 2015
amounting to ₱18,100,000.00 for lot acquisition for the construction of senior high school
and another loan contracted on January 2, 2016 totaling ₱30,000,000.00 also for lot
acquisition and development of new municipal cemetery that would not be necessary too
because similar indicators of the sufficiency of internal resources contrary to Section
305(g) of Republic Act No. 7160 or the Local Government Code of 1991 and Article
405(c) of its Implementing Rules and Regulations.

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 We recommended that the Municipality consider carefully and reevaluate thoroughly its
credit financing policy in light of the indicators that the existing loans should have not
been resorted to or availed with to implement the local government infrastructures or
development projects.

16. The Municipality still maintained High Interest Savings Account with Land Bank of the
Philippines amounting to ₱3,086,345.30 which remained idle for several years, despite
the existence of various loans with an outstanding balance of ₱50,203,535.37 as of
December, 31, 2018, contrary to Section 21 of COA Circular No. 92-382, thus showing
weakness in the cash management of the Municipality.

We recommended that the Municipal Mayor instruct the department heads concerned
particularly its local finance committee to evaluate the cost/benefit of credit
financing/loan and in maintaining time deposits, in line with Section 4(8) of PD 1445.

17. The necessity and propriety of hiring the services of 94 job order workers could not be
ascertained due to the absence of the study as to the actual workload and the required
number of manpower in the respective offices of the Municipal Government, contrary to
declared policy of the State to utilize government resources judiciously with the view of
to ensuring efficiency, economy and effectiveness or the meager local government
resource was charged with expenditures not based on sound management and fiscal
administration.

We recommended that the Municipal Mayor task the Human Resource Management
Office to undertake a thorough study and evaluation on the actual workloads and
manpower requirements of the Municipality for each department/office to provide an
accurate information/data on the need or necessity to augment existing personnel
complement through job order workers employment and ensure that local resources
were expended judiciously.

The foregoing observations and recommendations in Part II of this Report were discussed in
an exit conference conducted with the concerned Municipal officials and employees on May
24, 2019. Management’s views and comments were considered in the Report, where
appropriate.

Unsettled Suspensions, Disallowances and Charges

As of December 31, 2018, the total outstanding audit disallowances of the Municipality of
Calatagan based on the Notice of Disallowances and Notice of Settlement, Suspensions,
Disallowances and Charges (NSSDC) issued by the Commission totalled ₱31,750.00.

Status of Implementation of Prior Year’s Audit Recommendations

Of the 35 audit recommendations embodied in the 2017 and prior years’ Annual Audit
Reports, 13 were fully implemented, 12 were partially implemented and 10 were not
implemented by the Municipality.

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