EXECUTIVE SUMMARY

A. Introduction

The Municipality of Santa Ignacia was previously a barangay of Camiling and it

was converted into a municipality by virtue of a Board Resolution in 1914. It is now a
second class municipality and composed of 24 barangays. It has a total land area of
14,507, of which 13,780.95 hectares or 95 percent of its area is devoted to crop
production. The Municipality has a total population of 52,369 as of the latest census in
2012.

The local government administration is being led by its elected mayor, Hon. Nora
T. Modomo, with the fourteen department heads.

B. Financial Highlights

The following comparative data show the financial condition, results of

operations and resources and applications of fund of the Municipality of Santa Ignacia for
the calendar years 2017 and 2016.

%age of
Account CY 2017 CY 2016 Difference Increase
(Decrease)
Financial Conditions
Assets 291,081,650.99 239,646,442.29 51,435,208.70 21.46%
Liabilities 60,720,951.68 69,752,306.04 (9,031,354.36) -12.95%
Government Equity 230,360,699.31 169,894,136.25 60,466,563.06 35.59%

Results of Operations
Income 154,672,513.30 122,751,674.47 31,920,838.83 26.00%
Expenses 101,335,920.16 91,447,306.12 9,888,614.04 10.81%
Excess of Income
53,336,593.14 31,304,368.35 22,032,224.79 70.38%
over Expenses

Sources and Application of Funds

Allotment 137,167,661.76 173,966,052.43 (36,798,390.67) -21.15%
Obligations 126,085,382.10 160,134,232.69 (34,048,850.59) -21.26%
Balances 11,082,279.66 13,831,819.74 (2,749,540.08) -19.88%

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C. Scope of Audit

The audit covered the financial transactions and operations of the Municipality of
Santa Ignacia 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 assertions on the
financial statements; (b) determine compliance of management with laws, rules and
regulations on the pre-identified audit thrusts/areas and recommend agency improvement
opportunities thereon; and (c) determine the extent of implementation of prior year’s
audit recommendations.

Specifically, the audit focused on the thrust areas for CY 2017 pursuant to COA
Memorandum dated October 12, 2017 of the COA Local Government Sector Assistant
Commissioner, exceptions of which are reported on Part II of this Report.

D. Independent Auditor’s Report on the Financial Statements

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

financial statements due to deficiencies that misstated the affected account balances.
Discussion of which are included in detail in Part II of this report and summarized as
follows:

1. The Municipality did not maintain property records and conduct complete
physical count of its Property, Plant and Equipment with net carrying value of
₱183,582,041.90 as of December 31, 2017 contrary to Sections 119 and 124 of the New
Government Accounting System (NGAS) Manual for Local Government Units (LGUs),
Volume I, thus the correctness and existence of the PPE could not be ascertained
rendering the reliability of the balance of PPE account doubtful. (Observation No. 1)

We reiterated our recommendation that the Municipal Mayor require the General Services
Officer to (i) conduct complete physical count of all the PPE of the Municipality; (ii)
complete the preparation of RPCPPE and submit copy to the Audit Team; and (iii)
maintain property records such as Property Cards for proper monitoring of properties
purchased, donated, transferred or disposed of so that reconciliation with accounting
records will be made.

2. The inadequacy of the supporting documents of the beginning balances as well as

the amounts established during the year of the Real Property Tax and Special Education
Tax Receivables cast doubt on the validity, accuracy and completeness of the accounts’
total ending balance of ₱36,934,324.71 contrary to Section 248 of the Local Government
Code of 1991 and Section 20, Volume I, Manual on the NGAS. Also, the absence of
adequate documents denied the Municipality to determine and monitor tax delinquency
and as basis in applying proper statutory remedies in case such delinquency exists.
(Observation No. 2)

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We reiterated our recommendation that the Municipal Treasurer furnish the Municipal
Accountant a duly certified list showing the name of taxpayers and the amount due and
collectible for the year as basis for recording the Real Property Tax/Special Education
Tax Receivable.

E. Summary of Other Significant Observations and Recommendations

Summarized below are significant audit observations with their recommendations,

the details of which are presented in Part II of this report. Management views and
comments, including those offered during the exit conference were incorporated in the
report, where appropriate.

1. Despite the availability of Automated Teller Machine (ATM) payroll system, cash
advances for payroll were granted and payments to employees were still paid through
cash by the Municipal Treasurer indicating weakness of internal safeguards in the
management of cash contrary to Section 124 of PD 1445 and COA Circular 76-26.
(Observation No. 3)

We recommended that the Management consider the negotiation with government bank
to enroll in the Automated Teller Machine (ATM) payroll system to lessen the risks of
loss, strengthen controls in handling cash for payroll, and improve efficiency in treasury
operations.

2. The reasonableness of fixed communication allowances/reimbursements recorded

as Telephone Expenses-Mobile was doubtful due to absence of complete evidence or
documents supporting or justifying the actual usage or consumption. (Observation No. 4)

We recommended that Management (i) stop the practice of paying fixed amount for
communication without the submission of proof on the incurrence of expense showing or
justifying the actual usage or consumption by the concerned officials and employees; and
(ii) consider the availment of monthly contract subscriptions with telephone companies
offering discounts or services promotions.

3. The erroneous inclusion of appropriations of different Public Safety Programs and

Statutory Obligations totaling ₱2,595,000.00 in the Peace and Order Program (POP)
projects and activities as well as in the computation of allotted Confidential Fund (CF)
resulted in the overstatement thereof by ₱755,000.00 contrary to COA-DBM-DILG-
GCG-DND Joint Circular (JC) No. 2015-01 dated January 8, 2015. (Observation No. 5)

We recommended that the Municipal Mayor, Municipal Budget Officer, and the
Municipal Accountant comply with the provisions of COA-DBM-DILG-GCG-DND
Joint Circular (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, and use of the confidential funds.

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4. The Municipal Local School Board (MLSB) did not prepare the Special
Education Fund (SEF) budget for CY 2017 with indicative timeline as prescribed by
DepEd-DBM-DILG Joint Circular No. 1, s. 2017 dated January 19, 2017 or the Revised
Guidelines on the Use of Special Education Fund (SEF). Moreover, Quarterly Reports of
SEF Utilization were not prepared, thus compliance thereof in order to promote and
enhance transparency and accountability in the allocation of SEF was not fully observed.
(Observation No. 6)

We recommended that Management (i) require the LSB to follow and perform the
activities in the preparation and approval of the SEF Budget with indicative timelines as
prescribed by DepEd-DBM-DILG Joint Circular No. 1, s. 2017 dated January 19, 2017 or
the Revised Guidelines on the Use of Special Education Fund (SEF); and (ii) require the
Municipal Accountant to prepare the Report of SEF Utilization quarterly and annually
using the prescribed form for submission to appropriate offices.

5. Deficiencies in the planning and implementation of local development fund were

noted, thus the Municipality did not fully attain the purpose of undertaking desirable
socio-economic development and environmental management outcomes. (Observation
No. 7)

We recommended that Management exercise judicious planning on their identified

priority projects/programs/activities prior to allocating resources thereto and integrating it
in the AIP; maximize the use of funds and implement fully the priority programs and
projects; and ensure that utilization of 20 percent development fund is in accordance with
DILG-DBM Joint Memorandum Circular No. 2017-1.

6. 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 four projects under the Assistance to Disadvantaged
Municipalities (ADM) Program for CY 2017. (Observation No. 8)

We recommended that Management (i) consider the timelines of project and improve its
monitoring functions or supervision for projects being implemented to avoid incurrence
of delays; (ii) 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 (iii) ensure that
the Construction Safety and Health Program is approved by DOLE wherein its cost is
embedded in the project’s cost and ultimately in the contract or agreement between the
LGU and the contractor.

7. Deficiencies in the planning, implementation and reporting of local disaster fund

were noted, thus the Municipality did not fully contribute on enhancing the transparency
and accountability in the use of Local Disaster Risk Reduction and Management Fund
(LDRRMF) and strengthening the capacities of Local Government Unit and communities
relative to disaster preparedness. (Observation No. 9)

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We recommended that (i) the required LDRRMFIP and Monthly Report of Utilization be
prepared and submitted on a regular basis; and (ii) the LDRRMC prioritize the
implementation of projects, activities and programs on disaster prevention, mitigation and
preparedness to strengthen the capacity of the Municipality to reduce risk at the
municipal level and enhance disaster preparedness and response capabilities at all times.

We also recommended that the Municipality (i) refrain from charging against LDRRMF
expenses which are not in accordance with the purposes declared on the above-cited law;
(ii) consider filling-up the vacant MDRMM Staff/Officer plantilla positions and employ
able/competent individuals who will assist the Head of the MDRRMO in carrying out
disaster risk management programs; and (iii) comply with the minimum standards on
disaster preparedness.

8. The Municipality remained incompliant with the basic provisions of R.A. No.
9003 including the proper formulation of 10-year Solid Waste Management Plan and
provision of Materials Recovery Facilities (MRFs), thus it was short of efforts to adopt
and implement a systematic ecological solid waste management program that ensure the
protection of public health and environment. (Observation No. 10)

We recommended that the Local Chief Executive exert best effort to (i) complete the
necessary revisions or updating and resubmit the revised 10-year plan to EMB and
NSWMC satisfying all the requirements and comments; and (ii) cause the construction of
a functional and operational central MRF.

9. The Municipality substantially complied with the provisions of the Republic Act
(RA) No. 9710 otherwise known as the Magna Carta of Women (MCW) and the
guidelines on the localization of MCW under PCW-DILG-DBM-NEDA Joint
Memorandum Circular (JMC) No. 2013-01; however, it remained to be non-compliant
with the establishment and maintenance of GAD database. Moreover, four GAD projects,
programs and activities were not implemented, thus related gender issues were not
properly addressed. Lastly, copies of the Annual GAD Plan and Budget as well as GAD
Accomplishment Report were not submitted within the prescribed period to the Audit
Team contrary to COA Circular No. 2014-01 dated March 18, 2014. (Observation No.
11)

We recommended that the Local Chief Executive (LCE) instruct the members of the
GAD Focal Point System Executive Committee and TWG to (i) allot time and resources
for the full establishment or completion of the GAD database; (ii) ensure the
implementation of the entire GAD PPAs so that desired results are achieved and the GAD
issues are properly addressed; and (iii) submit copies of Annual GAD Plan and Budget
and GAD Accomplishment Report to the Audit Team within the time prescribed.

10. The delays in the submission of accounts to the Audit Team were in violation of
Section 347 of RA No. 7160 and COA Circular No. 2009-006 dated September 15, 2009
which hindered the conduct of post-audit and the timely communication to the

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management of any deficiencies and/or observations that may result therefrom.
(Observation No. 12)

We recommended that the Municipal Accountant and Municipal Treasurer (i) strictly
comply with the regulation on the rendition of accounts and financial reports in order not
to delay the verification and post-audit activities; and (ii) ensure that required financial
reports and documents are submitted to the Audit Team within the prescribed period.

11. Special accounts for three economic enterprises were not maintained in the
General Fund, thus the Management and other stakeholders were deprived of information
relevant to their operations which is vital for monitoring and decision-making. Moreover,
the Municipality deviated from the material provisions of the Market Code, thereby
resulting in improper management of the market and laxity in the enforcement of the
local ordinance. (Observation No. 16)

We recommended that the Municipal Mayor (i) require the Municipal Accountant to
maintain special accounts in the General Fund; (ii) observe the provisions of the Market
Code on the execution of contracts between the Municipality and market stallholders; and
(iii) enforce the “one person, one business” policy in the concept of fairness and
transparency.

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

31, 2017

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

₱55,620.00, ₱198,800.00 and ₱0, respectively.

G. Status of Implementation of Prior Year’s Unimplemented Audit

Recommendations

Evaluation of the extent of implementation by management of audit

recommendations in the 2016 Annual Audit Report disclosed that out of the 21 audit
recommendations, 11 were implemented, one was partially implemented and the
remaining nine were not implemented. Those having material effect on the fairness of the
financial statement presentation were reiterated in this report.

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