EXECUTIVE SUMMARY

A. Introduction

1. Municipality of Socorro is a fourth-class municipality in Siargao Island in the

Province of Surigao del Norte, Philippines. The status of being a municipality was
granted on February 22, 1961 pursuant to Executive Order No. 219 by then
President Diosdado Macapagal. The Municipality lies 60 kilometers southeast of
Surigao City. It faces the Pacific Ocean to the east, the red mountain of Mindanao
in the west, the municipality of Dapa in the north, and in the south by the Carrascal
Cantilan peninsula. It is composed of fourteen (14) barangays covering an area of
12,445 hectares.

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing. Those
standards require that we plan and perform the audit to obtain a reasonable basis for
our conclusions.

3. The audit covered the accounts and operations of the municipal government
for the year 2019 and was aimed at ascertaining the propriety of financial
transactions, management’s compliance to prescribed rules and regulations and the
fairness of the presentation of the financial statements. Value for money audit was
also conducted on the selection and implementation of projects funded out of the
20% Development Fund and Trust Fund, with the objective to determine whether
the purposes of the projects were attained in the most efficient, effective and
economical manner.

B. Financial Highlights

a) Financial Position and Results of Operations

Particulars 2019 2018

Assets 191,290,062.37 171,866,392.94
Liabilities 62,397,166.97 58,473,267.14
Government Equity 128,892,895.40 113,393,125.80
Income 114,156,545.50 96,642,950.92
Expenses 102,749,005.99 81,521,722.34
Net Income 11,407,539.51 15,121,228.58

b) Sources and Applications of Funds

Particulars 2019 2018

Appropriations 110,858,282.60 103,892,999.50
Allotment 110,789,374.60 103,892,999.50
Obligations 93,111,533.00 84,384,978.26
 Funds received from 9,814,287.37 6,189,949.00
other agencies
Funds received from - -
NGOs/Pos
Funds transferred to 9,032,054.34 1,463,900.00
other agencies
Funds transferred to - -
NGOs/Pos

C. Audit Opinion

4. The Audit Team rendered a qualified opinion on the fairness of presentation

of the financial statements of the Municipality of Socorro for CY 2019 because of
the following reasons:

i. Unreconciled balances in the Report of Physical Count of Property, Plant

and Equipment (RPCPPE) amounting to P2,829,721.52 casted doubt on the
accuracy of the reported Property, Plant and Equipment (PPE) account as of
December 31, 2019, thereby affecting the fair presentation of the Financial
Statements; and

ii. The Municipality failed to record in the books of accounts the unused
portion of the employees earned leave credits amounting to P14,202,034.78 as
of December 31, 2019 contrary to Paragraph 11 of the Philippine Accounting
Standards (PAS) 19 and no fund was set-up for the same thereby may affect
the timely and expeditious release of the retirement pay and other benefits of
all retiring employees of the Municipality as required in Section 1 of Republic
Act No. 101541.

D. Summary of Significant Observations and Recommendations

5. For the above-mentioned audit observations which have caused the issuance
of a qualified opinion, we recommended the following:

i. Direct the Municipal Accountant and General Services Officer

(GSO)/personnel appointed/designated by the Management to make the
necessary adjustments and reconciliations pertaining to the unreconciled
balances of particular PPE items to bring the Accounting records and
RPCPPE into agreement and to continue adherence to the provisions on
supply and property management set forth in Section 124 of the NGAS
Manual Volume I and other pertinent laws, rules and regulations; and
 iii. The Management:

a. Instruct the Accounting Unit to prepare the adjusting journal entries

as follows:

Dr: Prior Year Adjustment P14,202,034.78

Cr: Leave Benefits payable P14,202,034.78

b. Gradually set up the necessary funds for terminal leave benefits of

employees by accruing the monthly actual earned leave benefits of its
personnel.

c. Henceforth, instruct the Accounting Unit to periodically record in

the books of accounts the compensated absences earned and ensure that
funds is set up for the timely and expeditious release of the retirement
pay in accordance with Paragraph 11 of the Philippine Accounting
Standards (PAS) 19 and Section 1 of Republic Act No. 101541
respectively.

6. The other significant audit observations and recommendations are as follows:

i. The Municipality was not able to administer the Harmonized Gender and
Development Guidelines (HGDG) tool in the conduct of gender analysis on
its program, projects and activities (PPAs) contrary to Section 3.1 (a) of
PCW-DILG- DBM-NEDA Joint Memorandum Circular No. 2016-01 dated
January 12, 2016, thus, casting doubts on the propriety of LGU’s programs
and projects that the LGU attributed to the GAD Budget.

We recommended and the Management agreed to administer the HGDG

in the preparation of GAD Plan and Budget, and GAD Accomplishment
Report.

ii. Collections were not recorded daily in the cashbooks. Recording was
made only upon remittance which is not in compliant with Section 181 of
Government Accounting and Auditing Manual (GAAM) Vol. I, Handling,
custody and disposition of the cashbook.

We recommended and the Revenue Collection Clerks agreed to record

the transactions in the prescribed cashbook daily, reconcile the book balance
with the cash on hand and ensure strict compliance with the provisions of
Section 181 of GAAM Vol. I on the handling, custody and disposition of the
cashbooks.

iii. Infrastructure projects inspected did not have the prescribed signboards
containing the necessary information and specifications pursuant to COA
Circular No. 2013-004 dated January 30, 2013, thus, promotion of good
 governance through transparency and accountability, and to secure the right
of the people to information of matters of public concern was not optimally
delivered to the general public.

We recommended and the Municipal Engineering Office agreed to

ensure that signboards are displayed on project location for all government
Program, Projects, and Activities regardless of source of funds pursuant to
COA Circular No. 2013-004 dated January 30, 2013 in order to promote good
governance through transparency and accountability and to secure the right of
the people to information of matters of public concern.

iv. Unimplemented or delayed implementation of eighteen programs and

projects appropriated under 20% Development Fund (DF) totaling
P13,153,117.00 deprived the constituents of the timely socio-economic and
environmental benefits, thus, adversely affecting the efficiency of the local
government.

We recommended and the Management agreed to see to it that Programs,

Activities, and Projects proposed to be undertaken are implemented or
completed as planned in order to attain its objective in providing timely
socio-economic benefits to its constituents, effect implementation timelines
considering the available resources to serve as guide in monitoring the status
of each project and enhance monitoring activities in order to achieve the
desired results/ outputs at different stages of project implementation.

E. Summary of total Suspensions, Disallowances, and Charges

7. Audit suspensions and disallowances amounting to P3,874,279.56 and

P9,621.71, respectively, remained unsettled as of December 31, 2019 contrary to
Sections 5.4 and 7.1.1 of COA Circular No. 2009-006 dated September 15, 2009.

F. Statement on the quantity/number of recommendations implemented, partially

implemented and not implemented for the current year.

8. Monitoring of the implementation of nine (9) recommendations contained in

CY 2018 Annual Audit Report revealed that five (5) were fully implemented, three
(3) were partially implemented and one (1) was not implemented. Moreover, of 40
recommendations contained in CYs 2013-2017 AAR, 32 were fully implemented
while eight (8) remained unimplemented.