EXECUTIVE SUMMARY

A. INTRODUCTION

1. The Auditee

City of Koronadal is a component City by virtue of Republic Act No. 8803 dated
August 16, 2000 ratified by its people on October 8, 2000. It is located within the
northeastern part of South Cotabato Province and comprises approximately 27,700
hectares of land, 49.26% of which is devoted to agricultural land area. It is also the capital
of South Cotabato and the administration seat of Region XII pursuant to the Executive
Order No. 304 issued by then President Gloria Macapagal Arroyo which reinforced the
former issuance of Executive Order No. 429 of the then President Corazon C. Aquino on
October 12, 1990 designating the then Municipality of Koronadal as Regional Center. It
is composed of twenty-seven (27) barangays of which eight (8) are urban areas while the
remaining nineteen (19) are rural areas.

2. Audit Methodology

The audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatements of
financial statements, whether due to fraud or error. The 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.

3. Scope of Audit

Financial and compliance audit was conducted on the accounts and operations of
the City Government of Koronadal for the Calendar Year ended December 31, 2019. It
was aimed at determining the validity and propriety of transactions, accuracy and reliability
of account presentation and compliance with laws, rules and regulations. A value for
money audit was also conducted to determine economy, efficiency and effectiveness of its
operations.

B. FINANCIAL HIGHLIGHTS

In CY 2019, the City collected and realized a net income in the amount of
₱171,400,677.24 for General Fund and incurred a net income of ₱6,766,040.27 for Special
Education Fund or a total income of ₱178,166,717.51

The City’s total assets amounted to ₱2,427,756,500.39 while total liabilities and
government equity amounted to ₱381,849,580.40 and ₱2,045,906,919.99, respectively.

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 1. Financial Condition

2,500,000,000.00
2,000,000,000.00
1,500,000,000.00
1,000,000,000.00 2018
500,000,000.00
2019
-
Assets Liabilities Net Assets
2019 2,427,756,500 381,849,580.4 2,045,906,919
2018 2,205,382,270 343,967,576.5 1,861,414,693

2. Sources and Application of Funds

1,200,000,000.00
1,000,000,000.00
800,000,000.00
600,000,000.00
400,000,000.00
200,000,000.00
- 2018
2019

2019 2018

Income and expenses include transfers, assistance and subsidies from/to

C. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the fairness of the presentation of the financial
statements of City Government of Koronadal as of December 31, 2019 in view of the inaccuracy
of the Cash and Cash equivalents amounting to P478.8M due to the erroneous recording of cash-
local treasury; partial preparation of bank reconciliation statement arising to untraced discrepancy
between the bank and book cash in bank balances; lack of review on the validity of long
outstanding reconciling items in the bank reconciliation statements; and the existence of negative
cash in bank balance of some funds. Moreover, the correctness of the recorded long
outstanding/dormant receivable accounts amounting to P35.9M is uncertain due to the insufficient
conduct of regular and periodic verification, analysis and validation of the existence of the
receivable accounts. In addition, the existence of non-moving payables for more than two (2)
years totaling P25.8M is not reliable as bonafide obligations of the City due to erroneous recording;

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want of documents and absence of valid claimants. Finally, the validity, existence and accuracy
of the P1,834.4M property, plant and equipment, net of depreciation, are not certain due to the
difference between the accounting records and physical count of equipments, excluding
construction in progress accounts; undocumented equipment for reconciliation; non-provision of
depreciation on not fully depreciated equipments; capitalization of small tangible items and the
inclusion of semi-expendable items costing P10,000.00 1 and below categorized as furniture,
fixtures, equipment, work animals and books; inclusion of completed and non-moving projects
under construction-in-progress thus not provided with depreciation; negative balances of
construction-in-progress and dual entry of the same; and non-recording of completed and on-going
projects, all amounting to P476.1M.

D. SUMMARY OF SIGNIFICANT AUDIT OBSERVATIONS AND

RECOMMENDATIONS

The following are the other significant audit observations together with the corresponding
recommendations:

1. Continuing appropriations, completed, on-going and for implementation projects of the

City for CY 2019 were not completely reported in the Publicized Report on Government
Projects/Programs/Activities (PPAs) which is not in consonance to rules and regulations
set forth under COA Circular No. 2013-004 dated January 30, 2013 thus defeats the
purpose of full transparency and full disclosure.

Moreover, accurateness of the Accomplishment Report on the Utilization of the 20%

Development Fund prepared by the monitoring team under the City Planning and
Development Office (CPDO) did not tally with the accounting records thus rendering the
report to be uncertain

We recommended and management agreed to ensure the inclusion of all the on-going as well
as all projects that are to be implemented and are yet to be implemented for the reporting year
in consideration with the actual amounts incurred to warrant transparency and provide
auditable information that could be verified by all stakeholders of the LGU for sound decision-
making and to reconcile the amounts incurred with the records of the Accounting Office.

2. The CY 2019 Reports on Sources and Utilization of Disaster Risk Reduction

Management Fund (DRRMF) were not prepared and submitted on or before the 15th
day after the end of each month, thus timely review of charges made against the fund
cannot be undertaken, contrary to the provisions provided in COA Circular No. 2012-
002.

We recommended and management agreed that the City Accountant will prepare the Sources
and Utilization of DRRMF on a monthly basis. While the CDRRMO shall submit the report

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Capitalization threshold increased to P15,000.00 per item ee, Chapter 2, Volume I of Government Accounting
Manual for Local Government Units as prescribed under COA Circular 2020-004 effective January 31, 2020.

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 on or before the 15th day after the end of each month through the LDRRMC and Local
Development Council (LDC).

3. Sixteen (16) Programs/Projects/Activities (PPAs) under the 20% Development Fund for
CY 2019 amounting to P45,880,000.00 as well as twenty-five (25) projects with a total
balance of P24,406,144.96 from continuing appropriation were not substantially
implemented/completed and/or utilized that could have contributed to the socio,
economic and environmental well-being of the constituents pursuant to Joint
Memorandum Circular No. 2017-1 of the Department of Interior and Local Government
and Department of Budget and Management dated February 22, 2017.

Moreover, inadequate planning of PPAs resulted to abandonment of projects thus

realigned and existence of idle savings which could have been programmed to identified
priority projects to ensure optimal utilization of the fund for its purpose

We recommended and management agreed to enhance utilization of the 20% Development

Fund by closely monitoring the utilization and implementation of priority projects for the
attainment of desirable socio-economic development and environmental management
outcomes and to maximize the usage of the fund; reprogram savings out of the completed
projects (both from continuing and current appropriation); evaluate projects before
presentation to the Local Development Council to minimize number of abandoned projects
and fast track the implementation based on the scheduled time frames indicated in the AIP to
achieve the desired management outcomes

4. Eight (8) Programs, Projects and Activities (PPAs) with a total appropriation of
P17,815,000.00 were not among the list of PPAS under the Local Development
Investment Program (LDIP) for CY 2019-2022 while there are remaining numbers of
PPAs in the LDIP that were not yet accounted in the Annual Investment Plan (AIP) for
CY 2019 contrary to existing rules and regulations indicating poor planning and
evaluation of prioritizing PPAs for LDRRMF utilization.

We recommended and management agreed to ensure that only the PPAs culled from the Local
Development Investment Plan are included in the Annual Investment Plan to ensure that the
implemented PPAs contributed to the achievement of long-term goals in managing hazard
vulnerabilities and risks; revisit PPAs in the LDIP; conduct thorough situational analysis
(research and development) of the City to understand risk information and harmonize local
planning, investment programming, revenue administration, budgeting, and expenditure
management guidelines prescribed in the DBM-NEDA-DILG-DOF Joint Memorandum
Circular No. 1, series of 2007 dated March 8, 2007.

5. The 2019 DRRM AIP contained ten (10) Programs, Projects and Activities (PPAs) not
aligned to the PPAs allowable under the DRRM Fund amounting to P1,538,650.00 due
to insufficiency of DRRM Office’s general fund including the P100,000.00 honorarium of
the rescuers to encourage volunteers in times of needs/calamities, contrary to applicable
rules and regulations, thereby reducing the amount intended for disaster related
activities.

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 We recommended and management agreed to allocate enough funds from the General Fund
(GF) to subsidize the maintenance and other operating expenses (MOOE) of the CDRRM
Office, in order not to lessen the fund intended for disaster related activities; revisit the
CDRRM Plan and make the necessary adjustments to ensure alignment of PPAs with rules and
regulations. Henceforth, stop granting honorarium to volunteers/responders in the delivery of
disaster risk reduction programs and activities.

6. Unexpended balance in the Special Trust Fund (STF) and CY 2019 - 70% Mitigation
Fund (MF) were not optimally utilized. Savings were noted in substantial amounts which
could have been used to other prioritized projects. Also, 18 PPAs funded from the
Continuing Appropriations and Capital Outlay from CYs 2015 to 2019 remained not
completely implemented.

We recommended and management agreed to closely monitor the undertaking of proposed

projects funded out of LDRRMF to avoid/minimize disaster projected and unexpected risks,
and enhance disaster preparedness and response capabilities at all levels; utilize the
unexpended portion of the Trust Fund of DRRMF and prepare a comprehensive CDRRMF
Plan to include both the current appropriations and unexpended balance in the Special Trust
Fund. Additionally, for the City Mayor to augment manpower needs of the City Engineering
Office to fast track the implementation of PPAs.

E. SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES & CHARGES

The total audit suspension, disallowances and charges found in the audit of various
transactions of the agency for CY 2019 is P3,222,737.32, based on the Notice of Suspension
(NS)/Notice of Disallowance (ND)/Notice of Charge (NC) issued by this Commission, as follows:

Beginning For the period

Ending Balance
Balance (January 1 to December 31, 2019)
Particulars (As of December
(As of December
NS/ND/NC NSSDC 31, 2019)
31, 2018)
Suspensions P 0.00 0.00 0.00 P 0.00
Disallowances 3,222,737.32 0.00 0.00 3,222,737.32
Charges 0.00 0.00 0.00 0.00
Total P 3,222,737.32 0.00 0.00 P 3,222,737.32

F. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ UNIMPLEMENTED AUDIT

RECOMMENDATIONS

We made a follow-up on the action taken by the City Government of Koronadal to

implement the fifty-seven (57) audit recommendations of prior years and we had noted that
nineteen (19) were fully implemented, thirty-three (33) were partially implemented, and five (5)
were not implemented.