EXECUTIVE SUMMARY

Introduction

The Municipality of San Vicente is a 6th class municipality situated in the

northwest section of Northern Samar and has a total land area of 1,860 hectares. It was
created into a municipality by virtue of Republic Act No. 4761 on June 18, 1966. The
municipality is composed of seven (7) barangays and thirteen (13) operating offices. The
present personnel complement is composed of thirty-seven (37) permanent employees,
two (2) co-terminus and twelve (12) elective officials.

At present, the municipality is under the leadership of Honorable Mayor Tito M.

Luñeza, together with the Municipal Vice-Mayor Edgar T. Catarongan, Jr. and the nine
members of the Sangguniang Bayan.

Audit Scope

A financial, compliance and performance audit was conducted on the accounts

and operations of the Municipality of San Vicente, Northern Samar, for the calendar year
2020, with emphasis on the audit thrusts provided for the Local Government Units such
as cash; inventories; property,plant and equipment accounts; the receipt allocation and
utilization of COVID-19 funds; and the allocation and utilization of the 20%
Development Fund (DF) and Local Disaster Risk Reduction Management Fund
(LDDRMF), among others.

Audit Objectives and Methodology

The audit was conducted in accordance with the International Public Sector
Accounting Standards on Auditing and aimed to obtain reasonable assurance about
whether the financial statements are free from material misstatements. It was also
undertaken to determine the propriety of financial transactions, the accuracy of financial
records and reports as well as the LGU’s compliance with prescribed rules and
regulations on government financial transactions, and to determine whether programs, as
envisioned, were attained in economical, efficient and effective manner.

The audit consisted of post-audit of transactions, review of operating procedures,

interview with concerned officials and employees, verification and analysis of accounts,
and such other procedures considered necessary under the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.

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Financial Highlights

The financial position and financial performance of the Municipality of San

Vicente, Northern Samar for the current and previous year are presented below:

Increase (Decrease)
Account CY 2020 CY 2019
Amount Percent
Assets ₱166,924,518.70 ₱129,780,269.82 ₱37,144,248.88 28.62
Liabilities 48,721,751.87 31,047,808.32 17,673,943.55 56.92
Equity 118,202,766.83 98,732,461.50 19,470,305.33 19.72
Income 56,104,347.93 50,152,271.37 5,952,076.56 11.87
Expenses 33,496,820.17 32,703,222.58 793,597.59 2.43

Income

The Municipality collected a total income of ₱56,104,347.93 from various

sources. This year’s collection shows an increase of ₱5,952,076.56 or 11.87% from that
of 2019, as follows:

Increase (Decrease)
Sources 2020 2019
Amount Percent
Tax Revenue ₱734,290.49 ₱608,706.38 ₱125,584.11 20.63
Internal Revenue 54,458,190.00 48,538,212.00 5,919,978.00 12.20
Allotment
Share from 0.00 4,920.00 (4,920.00) (100.00)
National Wealth
Service and 911,867.44 757,503.95 154,363.49 20.38
Business Income
Shares, Grants and 0.00 242,929.04 (242,929.04) (100.00)
Donations
Total Revenue ₱56,104,347.93 ₱50,152,271.37 ₱5,952,076.56 11.87

Appropriations and Expenditures

Appropriations

Total appropriations for Calendar Year 2020 amounted to ₱39,058,867.45 a

decrease of ₱10,707,077.25 or 21.51% from last year’s appropriations of ₱49,765,944.70.
The table below shows the breakdown, with comparative figures for 2019.

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 Increase (Decrease)
Allotment Class CY 2020 CY 2019
Amount Percent
Personnel Services ₱26,396,767.45 ₱25,138,439.90 ₱1,258,327.55 5.01
Maintenance & 12,086,100.00 23,972,504.80 (11,886,404.80) (49.58)
Other Operating
Expenses
Capital Outlay 576,000.00 655,000.00 (79,000.00) (12.06)
Financial Expenses 0.00 0.00 0.00 0.00
TOTAL ₱39,058,867.45 ₱49,765,944.70 ₱10,707,077.25 (21.51)

Expenditures

Expenditures incurred out of current appropriations amounted to ₱33,536,158.17.

There was an increase of ₱195,719.27 or 0.59% from last year’s ₱33,340,438.90, shown
as follows:

Increase (Decrease)
Allotment Class CY 2020 CY 2019
Amount Percent
Personnel Services ₱26,163,419.10 ₱23,884,265.49 ₱2,279,153.61 9.54
Maintenance & 7,333,401.07 8,818,957.09 (1,485,556.02) (16.85)
Other Operating
Expenses
Capital Outlay 39,338.00 637,216.32 (597,878.32) (93.83)
Financial Expenses 0.00 0.00 0.00 0.00
TOTAL ₱33,536,158.17 ₱33,340,438.90 ₱195,719.27 0.59

Independent Auditor’s Report

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

financial statements as of December 31, 2020 because of the following:

1) Collections were not recorded and reported as they occur, such that prior year’s
collections amounting to ₱50,950.25 were reported only in January 2020 while
collections in December 2020 amounting to ₱141,826.29 were not reported as at
year end;

2) The Cash in Bank–Local Currency, Current Account balance as of December 31,

2020 could not be relied upon due to: (a) non-maintenance of subsidiary ledgers
per bank account; (b) non-preparation of Bank Reconciliation Statement (BRS)
per bank account; (c) unacted prior years’ observation and recommendation on
unaccounted discrepancies totaling ₱707,768.12; (d) unadjusted stale checks of
₱236,589.45; and (e) one account not reported in the books with a year-end bank
balance of ₱28,589.97, thereby, affecting the fair presentation of the account in
the financial statements;

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 3) The accuracy of Inventory account balance of ₱4,102,035.26 as of December 31,
2020 was doubtful due to the inclusion of a) non-moving balance of
₱2,769,038.45; and b) Inventory items totaling ₱1,296,773.19 which remained in
the books of the LGU despite the distributions of these inventories to the intended
beneficiaries/recipients;

4) Depreciable assets amounting to ₱47,948,556.18 in CY 2020 were not provided

with depreciation, thereby overstating the Asset and Government Equity accounts
due to understatement of Depreciation Expenses and Accumulated Depreciation
in the financial statements;

5) Due to the failure to create a special account in the General Fund, the Bayanihan
Grant to Cities/Municipalities (BGCM) released to the Local Government Unit of
San Vicente in the amount of ₱4,538,138.00 was recorded as Due to National
Government Agencies instead of Trust Liability under the Special Account in the
General Fund, thus the unexpended balance amounting to ₱1,567,215.26 was not
properly presented in the SFPos, thereby understating the Trust Liability and
overstating the Due to National Government Agencies account by the same
amount as of December 31, 2020; and

6) Paid purchases totaling ₱1,826,560.00 charged to the Bayanihan Grant to Cities

and Municipalities (BGCM) Fund were recorded as Accounts Payable (AP) while
obligations incurred during the year amounting to ₱30,755.00 were not booked up
as Accounts Payable at year end, resulting to a net overstatement of the said
account by ₱1,795,805.00 and understatement of expense by ₱30,755.00.

Summary of Significant Audit Observations and Recommendations Other than the

Basis for Qualified Opinion

Performance and Compliance Audit –

1. The reporting requirement of the Report on Fund Utilization and Status of

Program/Project/Activity (PPA) for the Bayanihan Grant Fund to Cities/
Municipalities was not complied with thus, the accountability and transparency in the
receipt and utilization of the fund were not attained.

We recommended that the Local Chief Executive require the LFC to strictly
observe the reportorial and posting requirement on Fund Utilization and
Status of PPA Implementation of the Bayanihan Fund Grant to Municipalities
as prescribed in LBC No. 125 dated April 13, 2020.

Further, we recommended that Fund Utilization Report and the Status of

Implementation of the Bayanihan Grant Fund shall include local funds
augmented for the COVID 19 PPAs that would reflect the accurate balance
of the fund as of December 31, 2020, duly signed by the Local Finance
Committee.

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2. The Municipality failed to prepare and submit the Summary/List of Donations
Received, Distributed and Balances for in-kind donations, thus monitoring and
evaluation on the receipt and distribution of the relief goods/COVID 19 fund was not
facilitated.

We recommended that the Local Chief Executive require the MSWDO who
is in charge of the receipts and distribution to prepare the (1) Summary/List
of Donations Received, Distributed and Balances for In-Kind Donations; (2)
Report on the Receipt and Distribution/Issuance of Donated Relief Goods;
and furnish the same to the NDRRMC, through the OCD, copy furnished the
Audit Team within ten working days after the end of each quarter pursuant
to COA Circular 2014-002 and 2020-009. Henceforth, the said reports
should be prepared and submitted for in-kind donations in the future.

3. BGCM Fund expenses for Food Assistance to LSIs and Returning Residents
amounting to ₱225,200.00 were processed and paid notwithstanding the incomplete
supporting documents; Traveling Expenses amounting to ₱8,950.00 and Electricity
Expenses of ₱2,964.41 which are ineligible were charged to the fund, while the
reasonableness of the procurement of Testing Kits amounting to ₱53,460.00 could
not be validly verified due to non-submission of the covering Disbursement Voucher,
thus casting doubt on the validity of the transactions.

We recommended that the Local Chief Executive direct the:

a. BAC or MDRRMO to submit the complete required procurement

documents as enumerated in COA Circular 2012-001;

b. Submit the Disbursement Voucher pertaining to the purchase of Testing

Kits and require the supplier to deliver completely or require the refund
of the amount corresponding to the undelivered items;

c. Submit explanation on the varied cost granted to the LSIs or returning

residents.

4. The Bids and Awards Committee (BAC) fall short in the screening of the supplier’s
eligibility in the procurement of 350 folding beds amounting to ₱831,250.00 out of
the BGCM fund being purchased from Archvishop Printing Shop instead of, from
legally, technically and financially capable supplier, while the MDRRMO failed to
exercise prudence in the determination of the quantity of the folding beds purchased
resulting to overstocking, thus a possible wastage of government resources.

We recommended that the Local Chief Executive direct the BAC, TWG and
the Requesting Officer to:

a. Perform the duties and functions in accordance with RA 9184;

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 b. Evaluate all technical and financial documents submitted and follow the
basic steps in the procurement regardless of the mode of procurement;
and

c. Requisition as to quantity and items to be procured should be deliberated

by a committee before purchasing to safeguard the funds from possible
wastage due to overstocking of items.

5. The Financial Statements for the Bayanihan Grant to Cities and Municipalities
(BGCM) was not prepared hence information on the fund and its use were not
presented, and transparency and accountability were not attained.

We recommended that the Municipal Accountant prepare and submit the

year end trial balance and financial statement for the SAGF-BGCM in
compliance with the rules and regulations set under Section 110 of Chapter
6, Volume I of the Manual on the NGAS for LGUs for fair presentation,
transparency and accountability of the funds utilized. Likewise, subsidiary
ledgers be prepared pursuant to Section 107 of Chapter 6, Volume I, of the
NGAS for LGUs.

6. The Revenue Collecting Clerks and the Municipal Treasurer did not comply with the
prescribed period of remittance and deposit of their collections, with a holding period
of 1 day to 477 days; subsidiary record for each collector were not maintained; and
the cashbook and ledger balances between the Municipal Treasurer and the
accounting office, were not reconciled, thus cast doubt on the reliability of reported
collections for the period under audit and exposed the funds to possible loss or
misuse.

We recommended, that Management direct the Municipal Treasurer and the

designated RCLO to:

a. Update the cashbook daily based on the Report of Collections and

Deposits submitted by the deputized collectors;

b. Close the cashbooks at the end of the month, double rule and foot the
totals;

c. Reconcile the cashbook balance with the accounting records at least on a

quarterly basis;

d. Maintain subsidiary record for each deputized collector supported with

files of the RCDs submitted to facilitate easy retrieval of records for
validation and verification purposes; and

e. Require the RCCs and BTs to remit their collections within the
prescribed period

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7. The designated Revenue Collecting/Liquidating Officer (RCLO) and the Municipal
Treasurer were lax in the release of accountable forms to the collectors and that they
failed to review the Report of Collections and Deposits (RCD) as to issued
accountable forms, serial numbers, dates, total amount collected, and the
unissued/balance on hand by each Revenue Collecting Clerks (RCC) and Barangay
Treasurers(BT) before posting to their cashbooks and submission to the Accounting
Office, thereby resulted to non-discovery of delayed remittances of their collections
and the disorderly issuance of accountable forms, thus, balances of collections on the
hands of individual collectors could not be determined at any given time.

In view of the above deficiencies and in order to strengthen the controls in

the handling of collections we recommended that the Municipal Mayor
require the Municipal Treasurer and RCLO to:

a. Verify the Report of Collections and Deposits submitted by deputized

collectors; check the statement of accountable forms as to beginning
balances, receipts, issuances and ending balances; make a physical count
of the accountable forms remaining in the custody of the collector/teller
and check the same against the new balances on hand. The RCLO’s
signature at the back of the triplicate copy of the last official receipt
issued is an indication of her verification. The RCLO should count the
money turned over to her by the deputy collectors and sign the
certification and the receipt portion of all copies of RCD;

b. Prepare the Report of Accountability of Accountable Forms with or

without money value on monthly basis duly supported with the
requisitioned issue slip by each accountable officer and a copy of the RCD
to give an idea as to the serial numbers and the quantity reported on
hand.

c. Stop the practice of releasing new booklets to the collectors unless the
previous ORs were all issued and remitted intact.

8. Due to failure to file an application for its disposal, unserviceable properties were not
disposed to date, which resulted to further deterioration and devaluation, congestion
of space, and deprivation of opportunity to earn additional revenue from its sale.

We recommended that the Local Chief Executive create an Inventory

Committee to conduct physical count on PPEs and prepare RPCPPE and
IRRUP and create a Committee on Awards that will be responsible to ultimately
dispose all unserviceable properties at the earliest possible time pursuant to
Section 79 of PD 1445, Sections 379-381 of RA 7160 and in accordance with the
procedures cited in COA Circular No. 92-386.

9. Warranty securities posted and submitted by the contractor for four completed and
fully paid Infrastructure Projects with contract amount aggregating to ₱23,221,258.40
were insufficient, , thereby exposing the LGU to possible difficulty in imposing the
contractor’s responsibility on Structural Defects/Failures, which may arise due to

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 faults attributable to improper construction, use of inferior quality/substandard
materials, and possible violation of the contract plans and specifications.

We recommended that the Local Chief Executive direct the Municipal

Accountant to require the contractors concerned to post the subject warranty
securities.

Henceforth, the LGU should strictly enforce compliance with the pertinent
provisions of RA No. 9184 and its RIRR, and Section 9.1.1.4 of COA Circular
No. 2012-001 in the implementation of infrastructure projects, particularly on
the posting of warranty securities before final payment.

10. Medicines approximately valued at ₱34,024.64 have expired in the custody of the
Rural Health Unit (RHU) due to inadequate monitoring thereof thus, depriving the
intended beneficiaries of the highest quality of health care services and implied
wastage of government funds.

We recommended that the Local Chief Executive require the Municipal Health
Officer to:

a. Formulate internal control policies necessary to minimized the occurrence of

expired medicines such as establishing adequate control on stock level
monitoring through the maintenance of inventory database to facilitate
retrieval of data on inventory balances, actual condition of stocks; and

b. Prepare an inventory report of fast moving and slow moving medicines to

gauge the BAC in the procurement of medicines for prepositioning on their
subsequent transactions.

11. The budget allocation for the 20% Development Fund of ₱10,745,734.40 for CY
2020 is less than twenty percent (20%) of the Internal Revenue Allotment (IRA) of
₱54,728,672.00, thus, the appropriation was short by ₱200,000.00, while, only two
infrastructure projects were started during the year and low utilization rate of the fund
was noted as only ₱929,638.41 or 8.65% of ₱10.7M was paid as of December 31,
2020.
We recommended that the Local Chief Executive direct the:

a. Local Finance Committee to appropriate no less than 20% from its IRA for
priority development projects of the LGU; and to coordinate with the
Municipal Planning and Development Coordinator (MPDC) to ensure that
the PPAs are identified/specified in terms of the name of the project and the
amount allocated; and

b. MPDC to coordinate with the Municipal Engineering Office and/or offices

concerned to monitor the immediate implementation of development
projects.

12. Out of ₱2,766,433.60 Local Disaster Risk Reduction Management Fund (LDRRMF)
appropriated in CY 2020, only ₱132,512.73 or 4.74% were utilized, hence disaster

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preparedness and response capabilities of the Municipality were not enhanced while
quick response fund was not optimally utilized, depriving benefits to the constituents
during the pandemic. Moreover, utilization could not be validated due to non-
compliance to certain accounting and auditing guidelines thus the propriety and
validity of the disbursements and the proper use of the fund could not be ascertained.

We recommended that the Local Chief Executive require:

a. The MDRRMO to prepare the LDRRMFIP; monitor and implement

programmed Projects/Programs/Activities in order to effectively increase the
level of preparedness on time of occurrence of natural calamities and
mitigate the risk of damage in case of disaster, and prepare a monthly
Report on Sources and Utilization following the prescribed format.
Moreover, require him to efficiently utilize the Quick Response Fund to
alleviate difficulties of the constituents during calamities and pandemic.

b. The Municipal Accountant and MDRRMO to strictly follow the accounting

and reporting guidelines for Local Disaster Risk Reduction and
Management Fund (LDRRMF) of the Local Government Units provided in
COA Circular No. 2012-002 dated September 12, 2012.

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