EXECUTIVE SUMMARY

A. Introduction

It was in 1879 that Bamban became a separate parish. About five years after,
Bamban was made part of Tarlac Province. The town was formerly a barrio of Mabalacat,
Pampanga. Presently, it is classified as a second class municipality with a total land area
of 25,198 hectares and population of 61,644 based on 2008 census, comprising of 15
barangays.

The Municipality is under the leadership of Honorable Mayor Jose Antonio T.

Feliciano and supported by Vice Mayor William P. Cura and eight Sangguniang Bayan
members, pursuant to Section 46(A) of RA. 7160.

B. Financial Highlights

The following comparative data show the financial position and results of
operations of the Municipality of Bamban:

Financial Condition CY 2017 CY 2016

Assets ₱442,924,929.55 ₱384,433,206.15

Liabilities 229,416,095.89 200,845,719.50
Equity 213,508,833.66 183,587,486.65

Results of Operation
Income ₱185,384,873.08 ₱163,026,115.60
Expenses 144,659,021.08 136,909,241.86
Surplus/(Deficit) for the
40,725,852.00 26,116,873.74
Period

C. Scope of Audit

The audit covered the financial transactions and operations of the Municipality of
Bamban for the year ended December 31, 2017. The objectives of the audit were 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 prior year’s audit recommendations.

i
D. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements. As discussed in Part II of this report, the reported account balance
of Property, Plant and Equipment (net of accumulated depreciation) as of December 31,
2017 in the amount of ₱318,649,149.28 or 71.94% of the total assets is unreliable due to
the (a) non-maintenance of complete property records by the Municipality; (b) failure to
conduct inventory taking of all PPE; and (c) non-provision of allowance for depreciation
for infrastructure assets. Likewise, the validity and accuracy of the total ending balance
of P1,102,979.79 of the Real Property Tax Receivables and Special Education Tax
Receivables were unreliable because the establishment of the receivables for CY 2017,
both in the amount of P6,039,474.50, were based on the Statement of Real Property Tax
Collectibles/Targets for the year 2017 contrary to Section 20, Volume I of the Manual on
the New Government Accounting System for Local Government Units.

For the deficiencies cited above, we reiterated our recommendations: (a) that the
Municipal Accountant (i) maintain complete PPELC for each class of property to record
the acquisition, adjustments and disposal thereof; and (ii) provide appropriate
depreciation of all PPE; (b) that the Municipal Treasurer prepare PC of all PPE including
properties acquired from previous years.; and (c) that Management reorganize its
Municipal Inventory Committee and direct it to conduct physical count of property, plant,
and equipment by type annually and submit to the Auditor concerned the RPCPPE not
later than January 31 of each year. Furthermore, we reiterated our recommendations that
the Municipal Mayor instruct: (a) the Treasury Office to update the RPTARs/ Taxpayers’
Index Card and subsequently, prepare and furnish the Accounting Office the list required
under Section 20 Volume I of the Manual on the NGAS for LGUs; and (b) the Municipal
Accountant to base the establishment of RPT and SET receivables on the list submitted
by the Treasury Office for an accurate recognition of the said receivables.

E. Other Significant Observations and Recommendations

1. Due to the non-observance of due diligence by those involved in the processing of

payment vouchers of the Municipality, disbursements were not supported with complete
and/or proper documentation contrary to Section 4(6) of PD 1445 and COA Circular No.
2012-001 dated June 14, 2012, thus, cast doubt on the legality, validity, and propriety of
the transactions. (Observation No. 3)

We recommended that the Local Chief Executive instruct the BAC and its
Secretariat, the Accounting Office and the Engineering Office to exercise due diligence in
preparing documents and processing disbursements and to ensure that required supporting
documents are properly accomplished and attached to the disbursement vouchers.
Furthermore, we recommended that the deficiencies noted in Annex A be submitted or
settled immediately.

2. The procurements of goods and services in significant amounts aggregating

P1,512,600.76 were made thru reimbursement scheme, in violation of the provision of

ii
P.D. No. 1445, avoiding the Municipality to obtain the most advantageous price. Also,
disbursements were not supported with complete required supporting documents, contrary
to Section 4, Presidential Decree No. 1445 and COA Circular No. 2012-001 that hindered
the proper evaluation of the transactions and rendered the transactions doubtful.
Moreover, taxes were not withheld for reimbursement contrary to Section 1 of the
Republic Act (RA) No. 1051 which may deprive the Government from the collection of
required taxes arising from these transactions. (Observation No. 4)

We recommended that the Management: (a) stop the practice of procuring goods
and services thru reimbursement unless the item/service is petty in nature, which in that
case, should be charge to Petty Cash Fund; (b) comply strictly with Section 93 of PD No.
1445 and the guidelines and principles of an imprest fund wherein regular, recurring and
non-petty expenses should all be paid in check in the name of the supplier for internal
control purposes; and (c) submit the lacking documents above mentioned and support
future disbursements with complete required supporting documents, to enable the proper
evaluation of the transactions. We recommended further that management comply with
the provisions of Republic Act No. 1051 in withholding the required taxes due to the
Government.

3. The monthly net take home pay of some employees was determined to be below
the minimum amount of P4,000.00 as mandated under Section 47 of the General
Provisions of the General Appropriations Act (GAA) of 2017 due to the unwarranted
accommodation of payroll deduction for employees’ loan obligations. (Observation No.
5)

We reiterated our recommendations that the Management ensure that an

employee’s net take home pay shall not be less than the minimum allowed by the existing
law (GAA provision) and avoid the issuance of certification allowing the acquisition of
loans for employees and subsequently rendering their net pay to fall below the minimum.
Further, we recommended that payroll deductions shall be limited following the order of
preference provided in the GAA.

4. Although the Municipality continuously exerts efforts to adhere with Republic Act
No. 9003, otherwise known as the Ecological Solid Waste Management Act of 2000,
certain provisions thereof were still unfulfilled, thus, exposed its residents to potential
health hazards. (Observation No. 6)

We recommended that the Local Chief Executive: (a) properly establish an MRF
based on the guidelines set forth in Sections 32 and 33 of the RA No. 9003 and dispose
the accumulated waste in a duly authorized landfill; (b) intensify further the conduct of
Information and Education Campaigns to educate and make the residents aware of the
existing environmental laws and policies with their corresponding fines and penalties; (c)
instruct the designated enforcers to impose the corresponding fines and penalties against
violators to lessen the commission of prohibited acts such as littering, opening burning,
and collection of non-segregated or unsorted waste; and (d) instruct the solid waste
management board to continue to i) team up with the Sangguniang Bayan to be able to

iii
formulate or adopt more effective measures and policies in solid waste management, and
ii) frequently monitor the effective implementation of the Municipal Solid Waste
Management Plan.

5. With the continued collective efforts of its GAD Focal Point System (GFPS) and
municipal personnel involved in gender mainstreaming, the Municipality’s Gender and
Development (GAD) compliance has improved in terms of local policy-making, planning,
programming and budgeting. However, the Municipality did not fully implement all
formulated GAD programs, thus, gender issues were not completely addressed.
(Observation No. 7)

We recommended that the Municipal GFPS: (a) ensure that all the activities
included in its GAD Plan are implemented to be able to attain their corresponding GAD
Objectives; and (b) continue to comply with all GAD rules and regulations to promote
gender mainstreaming.

6. Attributed to lack of adequate monitoring and supervision, several deficiencies

were noted in the implementation of 5 projects totaling P43,017,692.21 under Assistance
to Disadvantaged Municipalities (ADM) Program, Bottom-Up Budgeting (BUB), and
NHA Housing Project for CY 2017, thus delays were incurred deferring the fulfillment of
the ultimate objective of the program. Moreover, the Municipality did not observe
pertinent provisions of Republic Act (RA) No. 9184 and its Revised Implementing Rules
and Regulations (RIRR) and Department of Labor and Employment (DOLE) Department
Order (DO) No. 13, series of 1998 in the procurement process of the related infrastructure
projects. (Observation No. 8)

We recommended that Management: (a) consider the timeliness of project

implementation and improve its monitoring functions or supervision for projects being
implemented to avoid the incurrence of delays; (b) direct the Bids and Awards
Committee to strictly adhere to the above-cited provisions of RA No.9184 and its IRR in
the procurement activities and provide justification on the deficiencies noted and
immediately submit the lacking documents enumerated in the Table 2 above; and (c)
ensure that the Construction Safety and Health Program is embedded in the project’s cost
and ultimately in the contract or agreement between the LGU and the contractor.

7. The erroneous inclusion of appropriations for the Peace and Order Program (POP)
projects and activities under the 20% Development Fund and Local Council for
Protection of Children (LCPC) Fund totaling P 3,593,800.00 in the computation of
allotted Confidential Fund (CF) resulted in the overstatement thereof by P 297,740.00,
contrary to paragraph 5.1.3.1 of the COA-DBM-DILG-GCG-DND Joint Circular (JC)
No. 2015-01 dated January 8, 2015. Moreover, Municipal Accountant failed to comply
with pertinent guidelines in reporting the grant and liquidation of cash advance for CF.
(Observation No. 9)

We that the Municipal Mayor, Municipal Budget Officer, and the Municipal
Accountant comply with the provisions of COA-DBM-DILG-GCG-DND Joint Circular

iv
(JC) No. 2015-01 and Advisory No. 2016-02 dated November 25, 2016 of the Interim
National Peace and Order Council Secretariat of DILG relevant to appropriation,
entitlement, release, use and reporting of the confidential funds.

8. The balances for Due to BIR, Due to GSIS, Due to Pag-ibig and Due to Philhealth
accounts with aggregated amount of P633,764.93 remained unremitted due to
Municipality’s non-maintenance of proper records detailing the composition of the
balances, thus rendering the accuracy of the inter-agency payables accounts as at year-end
doubtful. (Observation No. 10)

We recommended that the Local Chief Executive direct the Municipal

Accountant, Municipal Treasurer and Human Resource and Management Officer to (a)
gather all pertinent documents and analyze the subject accounts to establish the accuracy
of the undocumented balance of Due to BIR, GSIS, Pag-IBIG and PHILHEALTH
accounts of P68,023.12, P-409,048.90, P27,792.07 and P60,974.75, respectively; (b)
remit all the due taxes and premiums immediately, when evidence warrants; (c) reconcile
the withheld deductions before remitting the same to ensure that all deductions are
remitted intact and on time.

9. Several deficiencies were noted in the hiring and payment of wages of Job Order
(JO) workers in contravention of related laws, rules and regulations, thus, casting doubt
on the validity, propriety and legality of the contract and the corresponding payment of
services rendered. (Observation No. 11)

We recommended that the Municipal Mayor instruct the: a) Human Resources and
Management Officer to i) comply with the provisions of Sections 4 and 9 of CSC
Resolution No. 021480 by adopting the use of suggested pro-forma for job order
contracts; ii) ensure the correctness and completeness of details in the DTRs of JOs; and
iii) assess the Municipality’s existing organizational structure and observe prudence in
procuring manpower requirements so that the ideal number of personnel could be
established, thereby, avoiding the hiring excessive number of JO workers; and b)
Municipal Treasury and Municipal Accountant to i) comply with the provisions of COA
Circular No. 2012-001 specifically on the required documents before drawing cash
advance; and ii) refrain from incurring advance payment.

F. Summary of Total Suspension, Disallowances, and Charges as of December

31, 2017

Suspensions, disallowances, and charges as of December 31, 2017 stood at

₱702,733.69, ₱780,650.00, and ₱0.00, respectively.

v
G. Status of Implementation of Prior Year’s Audit Recommendations

Evaluation of the extent of implementation by management of the audit

recommendations contained in the 2016 Annual Audit Reports disclosed that out of 44
audit recommendations, 14 were fully implemented, 23 were partially implemented and
seven have not been implemented.

vi