EXECUTIVE SUMMARY

Introduction

The Municipality of San Jose was created in 1965 and its existence started when
its set of appointed municipal officials assumed office in the same year.

The municipality’s vision is to be “a progressive, highly secured, well-

maintained, disaster-resilient island municipality, with an international airport as the
gateway to a sustainable eco-tourism development geared towards the upliftment of the
quality of life of the morality upright, healthy and educated citizenry guided by good
governance.”

Financial Highlights

The municipal government generated a surplus of P9,210,658 for CY 2021,

higher by P2,408,783 or by 35.41 percent compared with last year’s surplus of
P6,801,875. The Internal Revenue Allotment (IRA) of P65,575,827 represents 79.14
percent of the total income.

The total assets, liabilities, government equity, income, and expenses for CY 2021
compared with that of the preceding year are as follows:

CY 2021 CY 2020 Increase/(Decrease)

Total Assets P190,442,750 P181,627,780 P8,814,970

Total Liabilities 44,137,465 63,284,640 (19,147,175)
Total Equity 146,305,285 118,343,140 27,962,145
Total Income 82,858,899 78,490,767 4,368,132
Total Expenses 73,648,241 71,688,892 1,959,349

Scope of Audit

The Audit Team conducted financial and compliance audits on the accounts and
operations of the Municipality of San Jose, Romblon for CY 2021. The audit was aimed
to (a) ascertain the level of assurance that may be placed on management’s assertions on
the financial statements; (b) evaluate the extent of compliance with laws and regulations
as well as the propriety and validity of transactions; and (c) determine the extent of
implementation of prior years’ audit recommendations.

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Audit Opinion on the Financial Statements

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

financial statements of the Municipality of San Jose, Romblon due to the following:

1. The Property, Plant and Equipment (PPE) accounts carried at P71,249,111, net of
Construction in Progress and accumulated depreciation, as at year-end were
overstated by at least P598,855 due to adjustments made without any supporting
documents and the non-provision of allowance for depreciation for the
depreciable amount of P5,406,327 thus, constituted a departure from Paragraph 71
of IPSAS 17 – PPE.

2. The transfer from General Fund of Unspent DRRMF and the related expense
accounts were understated by P363,350 for the year ended because the
expenditures charged against the special trust fund were debited outright to the
Trust Liability – DRRMF account instead of recognizing first the proper expense
and transfer accounts thus, constituted a departure from Paragraph 27 of IPSAS 1
– Presentation of Financial Statements (FS).

3. The Real Property Tax and Special Education Tax Receivables carried at
P218,598 and P96,818, respectively, as at year-end were both understated due to
failure to set receivable account in prior years and the inappropriate application of
the deferred Government Accounting Manual for Local Government Units
(LGUs) inconsistent with Section 20 of the Manual on the New Government
Accounting System (MNGAS) for LGUs, Item 2 of COA Circular No. 2021-007
dated September 6, 2021 and thus, constituted a departure from Paragraph 27 of
IPSAS 1 – Presentation of FS.

4. The forwarded balances of all accounts in the financial statements were unreliable
since these are not supported with financial reports pertaining to years 1994 to
2002 due to unavailability of related documents necessary for the preparation of
reports.

Significant Observations and Recommendations

For the exceptions cited above, we recommended that the Municipal Mayor:

1. Require the Municipal Accountant to constantly (i) review and monitor the
lapsing schedule of the PPE and ensure the accuracy of data like the date of
acquisition, cost, and estimated useful life for the computation of depreciation
expense; and (ii) ensure that all PPEs subject for depreciation are provided with
correct depreciation expense.

2. Require the Municipal Accountant to correct the misstatement by presenting in

the FS the appropriate expense and income or transfer account for the utilized
special trust fund.

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 3. Instruct the Municipal Accountant to revisit and adjust the RPT and SET
Receivable and its related accounts (i.e., deferred revenue, income, and discount)
in order to reflect the correct and fair amount of tax due and collectible from the
taxpayers.

4. Require the Municipal Accountant and the Municipal Treasurer, in coordination

with other concerned municipal employees such as the former Municipal
Accountant – Designee, to continue exerting efforts in digging up records in order
to render the actual and true status of the financial accounts of the municipality
for the years 1994 to 2002.

For calendar year 2021, the significant audit observations and recommendations
are the following:

1. Collections during the year totaling P338,440 were not deposited intact and timely
in contravention of Section 69 of the Presidential Decree (P.D.) No. 1445 and
Section 32 of the MNGAS for LGUs, Volume I thereby exposing the funds to risk
of loss and misuse.

We recommended that the Municipal Mayor:

a) Require the Acting Municipal Treasurer to make sure henceforth that the
collections are deposited intact and timely; and

b) Require the Municipal Treasurer together with the Municipal Accountant to

exert extra effort in substantiating the supposed receipt of funds amounting
to P691,519 so that the fair and correct balance of the Cash Local Treasury
account would be presented in the Statement of Financial Position.

2. Advances accounts of P20,749,214 as at year-end were unreliable due to the

inclusion of unaccounted cash advances totaling P19,091,720, which were non-
moving for more than ten years and without sufficient documents to validate the
same, thus affecting the fair presentation of said accounts in the financial
statements.

Moreover, the rules and regulations on the grant and liquidation of cash advances
pursuant to COA Circular No. 97-002 dated February 10, 1997 were not strictly
observed that resulted in the accumulation of unliquidated amount of P277,133
with age of ten months to six years as at year-end, thereby exposing the
government funds to risk of loss and misuse.

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 We recommended that the Municipal Mayor instruct the Municipal Accountant
to:

a) Exhaust all means to retrieve records or documents to support/establish the

claim of the municipal government against the accountable persons with
long outstanding cash advances;

b) If not possible, avail of the remedies set forth by COA on the guidelines and
procedures on the write-off of accounts as prescribed under COA Circular
No. 2016-005 dated December 19, 2016;

c) Direct the concerned accountable officers and employees, through a demand

letter and copy furnished the audit team, to liquidate or settle immediately
all outstanding cash advances; and

d) Undertake measures to strengthen the internal control on the grant and

liquidation of cash advances by adhering to pertinent provisions of COA
Circular No. 97-002 dated February 10, 1997.

3. The Approved Budget for the Contracts (ABC) and Contract Costs for the
(i) Upgrading/Expansion of San Jose Water System Level III, Phase 3 in
Barangay Poblacion, Pinamihagan, Combot and Busay and (ii) the
Improvement/Rehabilitation of Potable Water System Level II/III at Barangay
Lanas, Busay, Pinamihagan and Combot, San Jose, Romblon totaling
P19,103,124 and P18,935,563, respectively, were found excessive by P878,058
and P710,497 compared to the allowable COA Cost Estimates due to excessive
unit costs and quantities thus, the municipality was not ensured of the most
advantageous price for the said projects.

Moreover, the municipality failed to submit the required documents for the
Design and Build for the Construction of Local Disaster Risk and Reduction
Operation Center, San Jose, Romblon contrary to COA Circular No. 2012-001
dated June 14, 2012 and Annex D of COA Circular No. 2009-001 dated February
12, 2009 thus, the evaluation and determination of the reasonableness of the ABC
and the Contract Cost of the said project was held in abeyance.

We recommended that the Municipal Mayor require the Municipal Engineer to:

a) Properly observe the provisions of DPWH D.O. No. 197 dated October 7,
2016 in the preparation of the ABC of future infrastructure projects;

b) Review thoroughly the ABC, Program of Works, and Detailed Engineering

Estimates to ensure that the basis and ceiling of bid prices are
acceptable/reasonable and advantageous to the government;

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 c) Ensure that details of each item of works are complete pursuant to Annex A
of the 2016 Revised Implementing Rules and Regulations (IRR) of Republic
Act (R.A.) No. 9184;

d) Submit the above-mentioned lacking documents for proper evaluation of the

COA TAS; and

e) Submit written explanations on the variances to the contract cost noted by

the COA TAS otherwise, deduct from the succeeding claims of the
contractor.

4. Nine infrastructure projects totaling P9,092,768 were noted with documentary

deficiencies and delays thereby casting doubt on the efficiency and effectiveness
of the procurement planning and execution conducted by the management and the
procurement activities by the Bids and Awards Committee (BAC) inconsistent
with Sections 7.1 and 34, Rule X of the 2016 Revised IRR of RA No. 9184.

Moreover, we noted repetitive request for time extensions for ten projects thereby
delaying the commencement of the civil works and the completion of the
infrastructure projects to the disadvantage of the municipality.

We recommended that the Municipal Mayor:

a) Require the BAC and Municipal Engineer to (i) submit the approved Plans
and Drawings and other noted lacking documents; (ii) explain the noted
deficiencies; and (iii) ensure henceforth that the required postings and
submissions are done on time; and

b) Instruct the Municipal Engineer to be circumspect in evaluating the

contractor’s request for extensions and be guided with Item 11 of Annex E
of the 2016 Revised IRR of R.A. No. 9184, as updated as of March 21,
2021.

5. Three programs, projects and activities (PPAs) with total appropriations of

P2,750,000 under the current year 20 percent Development Fund (DF) and the
five PPAs totaling P4,112,598 under the continuing appropriations were not
implemented as at year-end contrary to Item 4 of the DBM-DOF-DILG Joint
Memorandum Circular (JMC) No. 1, s. 2020 dated November 4, 2020 thereby
depriving the constituents of the timely and maximum benefits that could be
derived therefrom.

The unutilized COVID-19 Fund in CY 2020 amounting to P147,493 was

improperly deemed as continuing appropriation thereby resulting in failure of the
management to prepare a Supplemental Budget and to secure the approval of the
local sanggunian for the utilization of P129,877, in circumvention of Section 321
of Republic Act No. 7160.

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 We recommended that the Municipal Mayor:

a) Together with the Municipal Engineer, fast track the implementation of the
identified PPAs under the 20 percent DF and henceforth see to it that all
PPAs are started immediately after the issuance of Notice to Proceed and
completed timely or within the targeted date of completion;

b) Together with the Municipal Budget Officer and Municipal Planning and
Development Coordinator, explain and provide the basis for treating the
2020 savings (which became funds actually available in 2021) as continuing
appropriations; and

c) Instruct the Municipal Accountant to carefully examine the vouchers for the
above projects and ensure that liquidated damages are imposed over the
delayed projects.

6. The Gender and Development (GAD) Plan and Budget (GPB) and GAD
Accomplishment Report (GAR) for CY 2021 were noted with deficiencies, errors,
and delays thereby casting doubt on the reliability and accuracy of the submitted
reports in contravention of pertinent provisions of the COA Circular No. 2014-
001 dated March 18, 2014 and the PCW-DBM-DILG-NEDA JMC Nos. 2013-1
and 2016-01.

Moreover, six GAD-related PPAs were not implemented as at year-end in

contradiction of Item 4.1.A.5 of the PCW-DILG-DBM-NEDA JMC No. 2013-01
dated July 18, 2013 thereby depriving the intended beneficiaries of the maximum
benefits that could be derived from gender-responsive PPAs.

Further, the GAD Focal Point System (GFPS) has yet to accomplish the GAD
Agenda and Gender Mainstreaming Evaluation Framework (GMEF)
Organizational Assessment Questionnaire in non-compliance with Item 4.1.C.2.1
of the PCW-DILG-DBM-NEDA JMC No. 2013-01 dated July 18, 2013 thereby
precluding them from tracking the progress of their GAD mainstreaming efforts.

We recommended that the Municipal Mayor:

a) Instruct the GFPS to (i) make sure that the GPB and GAR are properly
accomplished and supported with complete documents such as, but not
limited to, HGDG Checklists, project proposals and narrative reports; (ii)
ensure the timely submission of the approved GPB and GAR to the audit
team; and (iii) accomplish the GAD Agenda and GMEF Organizational
Questionnaire; and

b) Together with the GFPS, apprise the audit team of the management’s plan
on the unexpended funds of the unimplemented PPAs and ensure henceforth
that all GAD-related PPAs are implemented effectively and efficiently.

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 Other Observations are presented in Part II of the Report.

The above, together with the other observations and recommendations as

contained in the report, were discussed with concerned municipal officials and staff
during the exit conference on June 17, 2022. When appropriate, management’s views and
reactions were considered in the report.

Summary of total Suspensions, Disallowances and Charges

The unsettled audit disallowances of the Municipality of San Jose, Romblon

amounted to P391,000.00 as at December 31, 2021, as summarized below:

Beginning Balance From January 1 to Ending Balance

(January 1, 2021) December 31, 2021 (December 31, 2021)
NS/ND/NC NSSDC
Notice of Suspension P 0.00 P 0.00 P 0.00 P 0.00
Notice of Disallowances 391,000.00 0.00 0.00 391,000.00
Notice of Charge 0.00 0.00 0.00 0.00
Total P 391,000.00 P 0.00 P 0.00 P 391,000.00

Status of Implementation of Prior Years’ Audit Recommendations

Of the 46 audit recommendations contained in the Annual Audit Report (AAR) of

the Municipality of San Jose, Province of Romblon for the year ended December 31,
2020, 23 were fully implemented, 16 were partially implemented, and seven were not
implemented.

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