EXECUTIVE SUMMARY

A. Introduction

The Municipality of Iba, the capital town of the Province of Zambales, was founded by the
Recollect Priests in 1611. It is the seat of the provincial government and provincial offices
of national government agencies.

The town of Iba is a second-class municipality comprising of 14 barangays. Six of these

barangays are located in the area delineated for urban land (poblacion) while the rest are in
the rural areas.

The Local Government Unit (LGU) of Iba, in its pursuit towards efficient and effective
governance, maintains one executive office, one legislative body, and eleven
departments/offices. These offices are instrumental in the promotion of general welfare,
upgrading the quality of life for the people, and accelerating development in the
community.

At present, it is under the leadership of Honorable Irenea M. Binan who is ably supported
by Vice Mayor Joan Ballesteros, eight Sangguniang Bayan (SB) regular members, and the
ABC President, as an ex-oficio member.

B. Financial Highlights

The following comparative data show the financial condition, results of operation, and
sources and application of funds of the Municipality of Iba for calendar years 2021 and
2022:

Increase/
Particulars 2022 2021
(Decrease)
Financial Condition
Assets ₱967,383,911.63 ₱902,081,231.27 ₱65,302,680.36
Liabilities 534,991,639.32 542,036,550.49 (7,044,911.17)
Equity 432,392,272.31 360,044,680.78 72,347,591.53
Results of Operation
Income 320,507,532.99 247,765,559.63 72,741,973.36
Expenses 251,670,959.66 186,575,753.28 65,095,206.38
Surplus (Deficit) 68,836,573.33 61,189,806.35 7,646,766.98
Sources and Application of Funds-General Fund and Special Education Fund
Budget Actual Difference
Revenues/Receipts 504,806,978.94 320,507,532.99 184,299,445.95
Appropriations/
504,806,978.94 289,805,601.58 215,001,377.36
Expenditures
Balances ₱ 0.00 ₱ 30,701,931.41 (₱30,701,931.41)

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C. Scope of Audit

We conducted our audit in accordance with the International Standards of Supreme Audit
Institutions and we believe that it provided a reasonable basis for the audit results. The
audit covered the financial transactions and operations of the Municipality of Iba, Zambales
for CY 2022. The audit included the examination of supporting documents, on a sampling
basis, of pre-selected accounts and thrust areas based on the audit instructions under
Unnumbered Commission on Audit (COA) Memoranda dated September 14, 2022,
January 26 and February 27, 2023. Audit procedures and techniques were employed such
as analysis of accounts and such other procedures considered necessary. All exceptions
noted in the audit are discussed in Part II of the report.

The audit was aimed to (a) ascertain the level of assurance that may be placed on
management’s assertion on the financial statements; (b) recommend agency improvement
opportunities; and (c) determine the extent of implementation of the prior year’s audit
recommendations.

D. Independent Auditor’s Report

As discussed in Part II of the Report, a qualified opinion on the fairness of presentation of

the financial statements was rendered attributed to the (a) understatement of Cash in Bank
(CIB) and the appropriate Liability accounts by ₱4,190,337.25 due to inability of the
Municipal Accounting Office (MAO) to make the necessary adjusting entries for the
unreleased and unclaimed checks as at year-end contrary to International Public Sector
Accounting Standard (IPSAS) 1; (b) overstatement of Property, Plant, and Equipment
(PPE) and Government Equity accounts by ₱16,313,493.30 due to (i) capitalization of
borrowing costs aggregating to ₱20,676,622.17 beyond the allowed capitalization period;
(ii) erroneous and inaccurate computation of depreciation expenses for some items of PPE
totaling ₱1,522,178.71; and (iii) non-derecognition of donated land with a recorded book
value of ₱391,885.41 in the books of accounts inconsistent with IPSAS 5 and Philippine
Application Guidance 3 to 6 of IPSAS 17; (c) understatement of Subsidy from National
Government and the appropriate Expense accounts by ₱7,442,972.50 due to the outright
derecognition of Due to National Government Agencies (NGAs) account amounting to
₱14,376,562.48 in the Trust Fund (TF) books upon (i) transfer of completed assets to the
General Fund (GF) books; and (ii) payment/accrual of related expenses, instead of first
recognizing a corresponding revenue which runs counter to IPSAS 23; and (d)
understatement of Trust Liabilities-Disaster Risk Reduction and Management Fund
(DRRMF) and overstatement of Government Equity accounts by ₱52,653.00 due to non-
transfer of unexpected/unobligated balance of Quick Response Fund and DRRMF-
Maintenance and Other Operating Expenses derived from a Supplemental Budget enacted
during the year to the TF books disregarding COA Circular No. 2012-002 dated September
12, 2012, and IPSAS 1.

For the above accounting errors, we recommended that Management instruct the Municipal
Accountant to undertake the following remedial measures:

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a. For the understatement of CIB and the appropriate Liability accounts –

▪ make the necessary adjustments for the restoration of unreleased and unclaimed
checks to their respective CIB accounts based on the schedule of unreleased and
unclaimed checks submitted by the OIC-Municipal Treasurer at the end of the year
to arrive at the correct balance of Cash and other related accounts.

b. For the overstatement of PPE and Government Equity accounts –

▪ take up the necessary correcting/adjusting entries to (i) decapitalize borrowing costs

and (ii) rectify erroneous and inaccurate provision of depreciation expenses to some
items of PPE;

▪ review and monitor the lapsing schedule of PPE and evaluate the correctness of the
data using the underlying provisions and basis of computation provided under the
existing rules and regulations; and

▪ derecognize/drop the recorded book value of donated land in the books of accounts
of the Municipality to ensure the fair presentation of Land and Government Equity
accounts at year-end.

c. For the understatement of Subsidy from National Government and the appropriate
Expense accounts –

▪ account the revenues from NGAs in the TF books by recognizing Subsidy from
National Government after the fulfillment of the conditions or purpose stipulated
in the agreement; and

▪ restate the Comparative Statement of Financial Performance of the ensuing year to

reflect the recognition of revenues and the payment/accrual of expenses involving
non-capital outlay fund transfers.

d. For the understatement of Trust Liabilities-DRRMF and overstatement of Government

Equity accounts –

▪ draw adjusting journal entries to correct the misstatements in Trust Liabilities and
Government Equity accounts; and

▪ regularly review and reconcile records and registries with the Municipal Budget
Officer and make the necessary adjustment to correct the errors.

E. Summary of Other Significant Observations and Recommendations

Summarized as follows are the significant observations and corresponding

recommendations that are discussed in detail in Part II of this report.

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1. The recorded balances of the Real Property Tax (RPT) and Special Education Tax
(SET) Receivables amounting to ₱185,742,383.79 and ₱108,954,810.95, respectively, as
of December 31, 2022, were unreliable due to (a) erroneous adjustments totaling
₱76,038,948.46 in the beginning balances of RPT and SET Receivable accounts; and (b)
inaccurate RPT and SET Receivables set up of ₱49,699,001.00 contrary to the pertinent
provisions of IPSAS 1, Republic Act (R.A.) No. 7160, Manual on Real Property Appraisal
and Assessment Operations (MRPAAO), Manual on the New Government Accounting
System (MNGAS) for LGUs, Volume I. Furthermore, the Municipality only registered a
53.86% collection efficiency or ₱23,987,966.69 out of the ₱44,539,519.52 approved target
collection of the Bureau of Local Government Finance for RPT and SET in CY 2022.
Moreso, compared with the total RPT and SET collectibles of the Municipality for CY
2022 of ₱193,619,576.30, a significant amount of uncollected taxes totaling
₱169,631,609.61 or 87.61% was noted, thereby indicative of the Municipality’s inability
to enforce stringent collection strategies inconsistent with Presidential Decree (P.D.) No.
464 and R.A. No. 7160. (Observation No. 2)

We recommended that the Municipal Mayor (a) instruct the OIC-Municipal Treasurer to
(i) intensify collections by undertaking effective revenue collection strategies such as
periodic sending of the notices of delinquency and tax bills either in person or via mail
service and coordination with barangay officials and national and local offices that have
access to the addresses of delinquent taxpayers; and (ii) avail of all legal and administrative
remedies allowed under R.A. No. 7160; and (b) require the Municipal Accountant, the
Municipal Assessor, and the OIC-Municipal Treasurer to maintain close coordination with
each other in order to come up with the basis for accurate and reliable amounts of RPT and
SET Receivables.

2. The 20% Development Fund (DF) of the Municipality totaling ₱47,450,455.00 was
appropriated and utilized for eligible development projects and no expenditure items under
Item 3.2.5 of Department of Budget and Management-Department of Finance-Department
of the Interior and Local Government (DBM-DOF-DILG) Joint Memorandum Circular
(JMC) No. 1 dated November 4, 2020 were charged against the Fund. However, various
lapses were observed in the planning, coordination, monitoring, and control of the 20% DF
such as (a) the absence of a specific target date of the implementation of programs, projects,
and activities (PPAs) enumerated under the current year 20% Development Plan and
Annual Investment Plan and inclusion of not procurement-and-implementation-ready
projects that resulted to non-implementation of two development projects with a total
allotted cost of ₱10,552,000.00 inconsistent with the provisions of the same JMC and R.A.
No. 9184; and (b) incomplete display of information on project signboards contrary to the
requirements of COA Circular No. 2013-004 dated January 30, 2013, thereby defeating
transparency in project implementation. (Observation No. 6)

We recommended that the Municipal Mayor (a) direct the Municipal Engineer to (i)
prepare the plans and programs in advance or before the implementation year taking into
account the provisions of the IRR of R.A. No. 9184 on the conduct of pre-engineering
study before undergoing the detailed engineering to ensure the viability of the proposed
projects, thereby preventing constant revision or re-programming of the approved plans

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and programs; (ii) adopt well-defined strategies in order to enhance the present monitoring
and review activities during the implementation and program evaluation phase, in order for
the planners, implementers, as well as evaluators to continuously monitor the timely
implementation of PPAs, and so that immediate appropriate and corrective actions could
be done on noted gaps; (iii) coordinate with the contractors to comply with the required
posting of information and publicity on PPAs of government agencies; and (iv) inform the
Audit Team within ten (10) days after the award of the project or before the start of the
PPAs that the appropriate project signboards and/or public notices are already posted at the
project sites; (b) instruct the Municipal Planning and Development Coordinator to indicate
in the 20% Development Plan the timelines for the implementation of development PPAs;
and (c) require the Bids and Awards Committee to align the timing of procurement
processes with the timelines set in the 20% Development Plan.

3. The Municipality substantially complied with the guidelines of the Philippine

National Deployment and Vaccination Plan for Corona Virus Disease 2019 (COVID-19)
Vaccines and the pertinent issuances of the Department of Health (DOH) in the conduct of
the vaccination program resulting in a reported 53,564 fully vaccinated individuals or
95.15% of the total target population of 56,297 and administering 12,913 or 24.11% and
2,441 or 4.56% first and second booster shots, respectively, of the entire fully vaccinated
residents as of December 31, 2022, hence, lowering the likelihood of COVID-19 severe
cases and deaths in the locality. However, discrepancies were noted in the number of fully
vaccinated and boostered individuals as indicated in the CY 2022 COVID-19 Vaccination
Report vis-à-vis the number of vaccine/booster doses used per stock cards
submitted/maintained by the Municipal Health Office (MHO), thereby casting doubts on
the reliability of data reporting that might ultimately affect the decision-making of the users
of these reports. Furthermore, lapses in inventory control procedures over the receipts and
issuances of vaccines/boosters were observed contrary to the pertinent rules and regulations
provided under P.D. No. 1445, COA Circular No. 2015-009 dated December 1, 2015, and
the MNGAS for LGUs, Volume 1, thus, unnecessarily exposed the vaccines/boosters to
risk of loss, improper disposition, and unmonitored utilization. (Observation No. 7)

We recommended that the Municipal Mayor instruct the MHO to (a) provide
justification/explanation, together with corroboratory and substantial reports and
documents to support the same, relative to the discrepancies noted in the reporting of the
COVID-19 Vaccination Program (b) submit the pertinent documents/records to the
General Services Officer and MAO to facilitate the evaluation of the receipts and
issuances/utilization of COVID-19 vaccines/boosters and ancillary supplies and the
recording of the remaining balances of unused inventories in the books and property
records; (c) coordinate with the Provincial Health Office to secure the documents that
contain the costs of the items donated as needed for the recording thereof; and (d) ensure
to align the inventory procedures with the existing rules and regulations.

4. The Municipality satisfactorily complied with the proper accounting, recording,

and utilization of fund transfer received from the DOH for the payment of One COVID-19
Allowance (OCA) to healthcare workers (HCWs) and non-HCWs totaling ₱6,218,437.50.
However, several deficiencies were noted such as (a) the list of eligible HCWs and non-

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HCWs not certified and determined by the Local Health Board (LHB); and (b)
accomplishments of four HCWs/non-HCWs not related to COVID-19 response contrary
to DOH Administrative Order No. 2022-0001 dated January 14, 2022, and DBM and DOH
Joint Circular (JC) No. 2022-0001 dated February 10, 2022; thus, resulted in excessive
payment amounting to ₱130,500.00 and rendered no assurance that recipients were granted
the exact amount of benefits. (Observation No. 8)

We recommended that the Municipal Mayor instruct the (a) LHB and the concerned
officials to submit a written explanation on (i) the non-certification of the list of public
HCWs and non-HCWs who were eligible to receive OCA; and (ii) the internal arrangement
of sharing the OCA among HCWs and non-HCWs who were not on the official list
submitted to the DOH and the reason for not including the said personnel to the list
submitted if they were indeed eligible to receive the benefits; (b) concerned HCWs/non-
HCWs to provide valid proofs that they had physically reported for work and had provided
direct health care support as well as the actual and detailed accomplishment reports (ARs)
relative thereto; and (c) MHO or concerned supervisor, being the head of the health facility,
to ensure that ARs involved in COVID-19 response are in line with the prevention,
detection, isolation, treatment, rehabilitation, and vaccination strategy.

5. The necessity, propriety, and legality of hiring 32 casual and 223 job order (JO)
personnel, or a total of 255 individuals, could not be established due to the (a) absence of
policy guidelines on screening and hiring/recruitment; (b) some hired personnel performed
functions of regular employees; (c) the purpose of hiring JO personnel in certain cases was
to augment the Municipality’s regular workforce and not for the implementation of local
projects; and (d) non-filling-up of six plantilla vacant positions with total appropriations of
₱1,279,080.00 contrary to Section 2, Rule IX of the Revised Omnibus Rules Implementing
Book V of Executive Order No. 292, Section 1 of Civil Service Commission Resolution
No. 020790 dated June 5, 2002, and Sections 76 and 77 of R.A. No. 7160. Furthermore,
weakness in the implementation of controls over payroll disbursements thru the Authority
to Debit Account (ADA) was observed as manifested by non-preparation of disbursement
vouchers (DVs) contrary to the fundamental principle of financial transactions and
operations provided under Section 4 of P.D. No. 1445, thus, leaving no proof that the
procedural requirements provided under the pertinent provisions of R.A. No. 7160 relevant
to the disbursement of money were all complied with prior to the approval of payments.
(Observation No. 9)

We recommended that the Municipal Mayor (a) require the Human Resource and
Management Officer to (i) prepare and issue policy guidelines to address the issues on the
necessity and propriety of hiring casual and JO personnel in order to limit expenditures to
programs/projects where their services are actually needed; (ii) avoid the hiring of casual
and JO personnel whose functions overlap or duplicate those of the regular employees of
the Municipality; (iii) hire JO personnel based on necessity and skills/competencies
specifically required in the local projects; and (iv) re-evaluate the personnel complements
to fill-up the vacancies; and (b) instruct the MAO to use DV in all disbursements involving
ADA to ensure that all payments of the Municipality were duly approved in accordance
with the procedural requirements provided under existing laws and regulations.

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6. In CY 2022, the Municipality was able to implement various PPAs costing
₱4,862,123.57 that were found responsive to the existing health emergency and anticipated
disaster risks, consistent with JMC No. 2013-1 of the National Disaster Risk Reduction
and Management Council, DBM, and DILG dated March 25, 2013. However, the Special
Trust Fund (STF)-Local Disaster Risk Reduction and Management Fund (LDRRMF) of
₱6,568,991.65 had not been committed to any disaster-related PPAs, indicating the
Municipality’s inability to leverage available resources in further enhancing the people’s
resilience towards existing and emerging calamities, inconsistent with the pertinent
sections of R.A. No. 10121 or the Act Strengthening the Philippine Disaster Risk
Reduction and Management System and COA Circular No. 2012-002 dated September 12,
2012. (Observation No. 10)

We recommended that the Municipal Mayor require the Municipal Disaster Risk Reduction
and Management Council to (a) properly plan for the inclusion/integration of activities to
be funded from the unexpended balances of the LDRRMF into the LDRRMF Investment
Plan based on an extensive evaluation of the vulnerability of the Municipality to natural or
man-made disaster risks to rationalize the use of the STF; (b) henceforth ensure that the
LDRRMF is optimally utilized; and (c) sustain the current effective responses to disasters
and its attendant risks.

7. The Municipality failed anew to submit paid DVs, payrolls, official receipts (ORs),
and other required accounting and financial reports within the prescribed period; thus,
precluded the timely audit of accounts and financial transactions, early detection of
deficiencies, and timely reporting of the audit results to the Management contrary to
Section 122 of P.D. No. 1445 and COA Circular Nos. 2009-006 and 2013-004 dated
September 15, 2009, and January 13, 2013, respectively. (Observation No. 11)

We recommended that the Municipal Mayor instruct the Municipal Accountant and the
OIC-Municipal Treasurer including all Accountable Officers to (a) immediately transmit
to the Audit Team the unsubmitted accounts and financial reports; and (b) strictly observe
the timeframes on the submission of accounts and financial reports pursuant to COA
Circular No. 2009-006.

8. The Municipality substantially complied with the existing rules and regulations on
the proper withholding and remittance of employees’ contributions and loan amortizations
for Government Service Insurance System (GSIS) , Home Development Mutual Fund or
also known as Pag-IBIG, and Philippine Health Insurance Corporation or otherwise known
as PhilHealth. However, the balances of Due to GSIS, Due to Pag-IBIG, and Due to
PhilHealth accounts as reflected in general ledger and its subsidiary ledgers (SLs) were not
reconciled contrary to Sections 114 and 121 of P.D. No. 1445 and Generally Accepted
Accounting Principles; thereby, resulting in discrepancies amounting to ₱176,619.38,
₱49,435.22, and ₱12,591.72, respectively, and rendering the accuracy and reliability of
these accounts doubtful as at year-end. (Observation No. 12)

We recommended that the Municipal Mayor instruct the Municipal Accountant to (a)
carefully review the entries in the SLs and make the necessary adjusting entries to correct

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the balances of affected accounts; and (b) henceforth, ensure to thoroughly analyze the
journal entries made before posting the same in the SLs to ensure accurate and complete
recording of transactions and reliable balances of accounts.

9. The Municipality complied with the formulation and submission of the Gender and
Development (GAD) Plan and Budget (GPB) and AR and registered a high GAD
accomplishment rate of 96.30% during the year. However, the correctness of the gender
issues and concerns identified, the responsiveness of the corresponding PPAs as well as
the reasonableness of the attributed costs were not ascertained due to (a) non-creation of a
sex-disaggregated database; and (b) non-adaption of Harmonized Gender and
Development Guidelines (HGDG) during the cost attribution contrary to Philippine
Commission on Women-DILG-DBM-and National Economic and Development Authority
(PCW-DILG-DBM-NEDA) JMC No. 2013-01 dated July 18, 2013, or the Guidelines on
the Localization of the Magna Carta of Women, as amended by PCW-DILG-DBM-NEDA
JMC No. 2016-01 dated January 12, 2016, and Undated PCW-NEDA-DBM JC No. 2012-
01; thus, resulted in doubtful accuracy and effectiveness of the reported GAD
accomplishments. (Observation No. 13)

We recommended that the Municipal Mayor instruct the GFPS to (a) strictly comply with
the allocation of the prescribed budget for GAD pursuant to pertinent laws and regulations;
(b) update the GAD database to include sex-disaggregated data; (c) administer the HGDG
test whenever it uses attribution in the budgeting phase and AR preparation; and (d) seek
help from experts and include HGDG training in the budget to ensure the correctness of
the GAD issues identified and the responsiveness of the corresponding GAD PPAs.

F. Summary of Total Suspensions, Disallowances and Charges as of Year-End

As shown in the Statement of Audit Suspensions, Disallowances, and Charges (SASDC)

for the period January 1, 2022 to December 31, 2022 on file, no suspensions,
disallowances, and charges were issued to the Municipality during the year under audit.

G. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 48 unimplemented audit recommendations contained in our previous year’s

Annual Audit Report, 20 or 41.67% were fully implemented, 16 or 33.33% were partially
implemented, and 12 or 25.00% were not implemented at all.

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