EXECUTIVE SUMMARY

Introduction

The Municipality of Sto. Tomas is a First-Class Municipality composed of 30

barangays. It is located in the northeastern portion of the Province of Batangas,
bounded on the north by the City of Calamba; on the northeast by the
Municipalities of Los Baños, Bay and Alaminos; on the west portion of Tanauan
City. It has a distance of 60 kilometers from Manila and 45 kilometers from
Batangas City, the provincial capital. Sto. Tomas is within the 3 rd District of
Batangas and serves as a gateway to the Province of Batangas and other
southern provinces like Mindoro, Quezon and Bicol. Likewise, it is also the entry of
the Southern Tagalog Access Road (STAR) that goes to Batangas City and the
modern Batangas International Port

The Municipality of Sto Tomas continue to pursue the journey to cityhood through
the House Bill (HB) No. 5160 otherwise known as “An act of converting the
Municipality of Sto. Tomas into a component City to be known as City of Sto.
Tomas.”

On October 5, 2018, President Rodrigo Roa Duterte signed Republic Act (RA) No.
11086, “An Act of Converting the Municipality of Sto. Tomas in the Province
of Batangas into component City to be known as the City of Sto. Tomas.”

The organizational structure of the Municipal Government of Sto. Tomas is as follows:

a. Key Officials

Municipal Mayor Edna P. Sanchez

Municipal Vice Mayor Armenius Silva

Members of the Sanggunian Florence M. Mabilangan

Catherine J. Perez
Renante V. Arcillas
Leovino M. Villegas
Gerardo M. Malijan
Cresenciano E. Ramos, Jr.
Arlene F. Mañebo
Peter Thomas R. Reyes
Hilario M. Pangilinan
(ABC President)
Mico Bathan
(SK Federation – President)

Municipal Accountant Neil P. Panganiban

Municipal Treasurer Dorothy M. Malasique

i
b. Number of Personnel Complement

Permanent 361
Casual 37
Elective Officials 12
Coterminous 18
Temporary 7
Job Order 300
Total 735

Scope of Audit

Financial and compliance audits were conducted on the accounts and operations of the
Municipal Government of Sto. Tomas for Calendar Year 2018. The audit was conducted to
ascertain the adequacy and reliability of the books of accounts and financial reports,
fairness of the presentation of the financial statements and Municipality’s compliance with
applicable laws, rules and regulations as well as adherence to prescribed policies in
handling its finances and its operations in general.

Financial Highlights

For the Calendar Year (CY) 2018, the Municipal Government of Sto. Tomas generated
revenue of ₽809,094,316.07 sourced from local taxes, Internal Revenue Allotment (IRA),
service, business and other sources of income. Total appropriations/allotments was
₽1,149,442,356.97, of which ₽700,594,581.42 or 60.95 per cent was obligated during the
year, thus leaving an unexpended balance of ₽448,847,775.55 or 39.05 per cent.

The total assets, liabilities, equity, income and expenses of the Municipality for CYs 2018
and 2017 are as follows:

2018 2017 Increase/

(Decrease)

Assets P2,566,065,970.57 P2,149,737,047.65 P416,328,922.92

Liabilities 714,234,067.72 566,530,274.01 147,703,793.71
Equity 1,851,831,902.85 1,583,206,773.64 268,625,129.21
Income 809,094,316.07 721,243,816.86 87,850,499.21
Expenses 520,087,894.93 464,999,561.80 55,088,333.13,

Independent Auditor’s Report on the Financial Statements

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

statements of the Municipal Government of Sto. Tomas as of December 31, 2018 due to the
following:

1. The accuracy and physical existence of the net balance of Property, Plant and
Equipment (PPE) of P812,672,585.26 representing 47.21 per cent of the total assets

ii
 is unreliable due to (a) inclusion of small value items; (b) presence of undisposed
properties and (c) unreconciled records, thus contravene to COA Circular No. 2005-
002, Section 79 of Presidential Decree (PD) No. 1445, Section Nos. 73(a) and 124 of
the Manual on the New Government Accounting System (MNGAS), Volume I.

2. The Road Networks ledger and property cards for all roads and its components were
not prepared and maintained by the Accounting Office and the General Service Office
(GSO), respectively, due to the non-submission of the complete description and cost
segregation of road components for road projects by the Engineering Office, thus
casting doubts on the validity, accuracy and existence of the recorded Road
Networks of P33,330,675.51, net of depreciation as of year-end. The account Road
Networks was also not properly disclosed in the Notes to Financial Statements as
required under Annex B of COA Circular No. 2015-008 dated November 25, 2015.

3. Various Cash Advances amounting to P1,513,383.13 were not liquidated at year-end or

settled within the period prescribed under Section 89 of Presidential Decree (PD) No.
1445, COA Circular No. 97-002 dated February 10, 1997, thus understating the
expense account and overstating the Due from Officers and Employees account and
exposing government funds to possible loss or misuse.

4. The Municipality has unremitted GSIS contributions of P2,498,692.26 as of December

31, 2018 and unreconciled in-default loan accounts and unpaid premiums in the total
amount of P443,652.89 per GSIS records, contrary to Republic Act (RA) No. 8291 and
its Implementing Rules and Regulations (IRR), thereby casting doubt on the reliability of
the Due to GSIS account and detrimental to the GSIS members-employees of the LGU.

5. Various expenses charged to the Representation Expenses account amounting to

P777,430.00 for the year 2018 did not fall within the purview of official
meetings/conferences/entertainments and were not charged to their proper account,
resulting in the misstatement of the account, contrary to the COA Circular No. 2004-008
and to the Revised Chart of Accounts for Local Government Units as prescribed under
COA Circular No. 2015-009 dated December 01, 2015, thus overstating the said
account and affecting the reliability and accuracy of the presentation of the financial
statements.

6. Advances to Officers and Employees accounts with the recorded balances of

P621,498.00 was misclassified due to use of inappropriate accounts, contrary to the
Revised Chart of Accounts for Local Government Units as prescribed under COA
Circular No. 2015-009 dated December 01, 2015 thus affecting the reliability and
presentation of the financial statements.

Significant Audit Observations and Recommendations

For the exceptions cited above, the Audit Team recommended that the Municipal Mayor
require the:

1. a. Municipal Accountant to ensure that all small value assets with useful life of more
than one year but costing less than P10,000.00 are properly classified and
recorded accordingly and to prepare journal entries and effect the necessary
adjustments on the PPE, Accumulated Depreciation and Government Equity
accounts for a fair presentation of the accounts in the financial statements;

iii
 b. General Services Officer (GSO) to issue the corresponding Inventory Custodian
Slip (ICS) to all the end-users of the small tangible items and to cancel the
Acknowledgement Receipt for Equipment (ARE) previously issued;

c. GSO to take immediate action to facilitate the appraisal and disposal of the
abovementioned unserviceable properties as required by Presidential Decree
(PD) No. 1445 to prevent exposure to different elements and further deterioration
of its values;

d. creation of a Committee to reconcile the result of the physical count of all PPE
with the property and accounting records.

2. a. General Services Officer (GSO) to prepare and maintain Road Networks property
cards;

b. Municipal Engineer to provide the Municipal Accountant and the GSO with the
complete description and cost segregation of road components for road projects;
and

c. Municipal Accountant to prepare and maintain property ledger cards for Local
Road Networks and disclose the information for the said property in the Notes to
Financial Statements in accordance with the prescribed format as provided under
COA Circular No. 2015-008 dated November 25, 2015.

3. a. Accountable Officers who were given cash advances to liquidate the same within
the prescribed period and to refund or return any unexpended balance to the
Cashier/Collecting Office who will issue the necessary official receipt.

b. Henceforth, ensure the proper granting, utilization and liquidation of all cash
advances within the prescribed period in accordance with the above-cited rules
and regulations.

4. The Municipal Accountant in coordination with Municipal Human Resource and

Management (HRM) Office to:

a. continue the reconciliation of the balances in the accounting records with the
records of the GSIS in order to ascertain the reliability of the amount Due to GSIS
in the financial statements; and

b. effect timely and accurate remittance of GSIS premiums, loans and contributions.

5. Municipal Accountant to make the necessary reclassification and adjustments in the

book for the transactions pertaining to the misclassified accounts in order to fairly
present the financial statements.

6. Municipal Accountant to make the necessary reclassification and adjustments in

order to correct the misclassification of the affected accounts.

iv
In addition, the following are some of the significant findings and recommendations:

1. Procurement of drugs and medicines P44,582,736.13 were made without strictly

observing the provisions of Executive No. 49, Department of Health (DOH)
Administrative Order No. 163 series of 2002, Republic Act (RA) No. 9502 and COA
Circular No. 2012-001, thereby disregarding the required assurance of potency, safety
and quality of delivered drugs and medicines as well as the validity and propriety of the
payments made.

We recommended that the Municipal Mayor Municipal Health Officer to:

a) consider the use of the Philippine Drug Price Reference Index (DPRI) to serve as a
guide in the efficient and sourcing of pharmaceutical products;

b) certify drugs and medicines being procured as to its conformity with the essential
drugs list as contained in the Philippines National Drug Formulary (PNDF) to ensure
delivery of effective medicines to the general public;

c) purchase medicines that are within the Philippine National Drug Formulary (PNDF)
Volume I, current edition; provide complete product specifications for the drugs and
medicines requested to be procured and be reminded that these items should be in
their generic names, not brand names; and

d) submit the Project Procurement Management Plan (PPMP) or the complete technical
specifications of the drugs and medicines to be bid out for these procurements which
were used as basis by the Bids and Awards Committee to come up with the ABC.

e) Municipal Accountant to ensure that the required documentary requirements

supporting all purchases especially for medicines are present.

f) BAC to submit the detailed breakdown of the ABC containing the Schedule of Prices
and the detailed financial component of the bids, to establish the correct calculated
prices of the bids, which was their basis for the evaluation of bids and awarding of
contract to bidder.

2. The Municipality of Sto. Tomas procured various goods totaling P39,609,635.50 without
strictly observing the provisions of the 2016 Revised IRR of RA No. 9184 and
Presidential Decree (PD) No. 1445 thus, affects the promotion of transparency,
efficiency and accountability in the use of government resources as well as the validity
and propriety of the payments made.

We recommended that the Municipal Mayor direct the:

a. Bids and Awards Committee (BAC), Municipal Planning and Development Officer
(MPDO), Municipal General Services Officer (GSO), Municipal Budget Officer and
Municipal Accountant to ensure the conduct of pre-procurement conference before
the Procuring Entity start with the procurement process;

b. BAC to strictly comply with the provision of Section 20.2 of the 2016 Revised IRR of
RA No. 9184; and

v
 c. Municipal Accountant to:

- ensure the completeness of the supporting documents as required under Section

4 (6) of PD No. 1445 and COA Circular No. 2012-001 before processing the
payment; and

- submit to the Office of the Auditor the: (a) Distribution lists duly signed by the
actual recipients/beneficiaries as well as evidences to support the actual
distribution of gamit eskwela, books, rice, grocery items and books; (b) Activity
Design/Schedule of Activities and photos or any documents to support the
conduct of the Year-end Assessment; and (c) pictures of the purchased four (4)
units of Toyota Innova.

3. Procurement of 26 infrastructure projects funded from the 20% Development Fund with
total contract amount of P38,987,351.95 were made by the Municipality without strictly
observing the provisions of the 2016 Revised IRR of RA No. 9184, COA Circular No.
2012-001 and BIR Memorandum Circular No. 2-2014 thus, affects the promotion of
transparency, efficiency and accountability in the use of government resources as well
as the validity and propriety of the payments made.

We recommended that the Municipal Mayor directs the:

a. Bids and Awards Committee (BAC):

- to ensure at all times that winning bidders post performance securities within
the prescribed period to make certain that the interests of the government is
adequately covered in the event it is established that a winning bidder fails to
perform any of its obligations under the contract;

- to require the winning bidders to submit performance securities with a validity

period up to final acceptance or after the defects liability period, and if there
are contract time extensions, require the contractor to submit the
corresponding extension of the security’s validity period.

b. Municipal Treasurer to inform the respective contractors to issue Official Receipts for
the following projects:

- Site Development of New Municipal Cemetery at San Roque;

- Completion of Multi-Purpose Covered Court at San Bartolome;
- Construction of Multi-Purpose Covered Court (Phase 2) at Sta. Cruz;
- Full payment for the Completion of Multi-Purpose Covered Court at San Juan,
Sto. Tomas, Batangas;
- Completion of Multi-Purpose Hall at Brgy. Sta. Ana;
- Completion of Climate Resilient Multi-Purpose Covered at Sta. Anastacia;
- Improvement and renovation of Multi-Purpose Hall at San Agustin; and
- Construction of Climate Resilient Canal and Canal Cover at Poblacion I.

c. BAC Secretariat/TWG to be more cautious in evaluating the legal, technical and

financial documents submitted by bidders during preliminary evaluation and post-
qualification and submit all the lacking documents; and

vi
 d. Municipal Accountant to ensure the completeness of the supporting documents as
required under Section 4 (6) of PD No. 1445 and COA Circular No. 2012-001 before
processing the payment.

4. Evaluation of bids and post qualification of bidders were not efficiently done to 18
infrastructure contracts amounting to P25,625,749.96 resulting to two (2) to six (6)
projects with the same or overlapping implementation period awarded to the same
contractors, contrary to Sections 34.1 and 34.3 of the 2016 Revised IRR of RA No.
9184, thus exposing the government to various risks such as delay in project
accomplishment and/or substandard quality of work.

We recommended that the Municipal Mayor direct the Bids and Awards Committee
(BAC) and Technical Working Group (TWG) to:

a. scrutinize the sufficiency of the winning bidder’s manpower and equipment on all the
projects to be awarded and not on an individual project only in cases where the latter
is the lowest bidder in several projects which have similar or overlapping
implementation period. This is to oblige the winning contractor to supplement its
manpower and/or equipment to be utilized in the projects awarded to it or to
disqualify it from obtaining several awards or contracts in conformity with the
provisions of Sections 34.1 and 34.3 of the 2016 Revised IRR of RA No. 9184; and

b. monitor contractors with on-going projects with other government agencies and to
coordinate with those involved in implementing infrastructure projects not disclosed
in the Statement of On-going and Completed projects to avoid overlapping and delay
in project accomplishment and/or substandard quality of work.

We also recommended that the Municipal Mayor instruct the Municipal Engineer and
Municipal Planning and Development Officer to strictly and closely monitor all projects
simultaneously implemented by the contractors and prepare an individual status report
per project to be submitted to the Honorable Municipal Mayor for monitoring purposes
and in order to check, verify and evaluate the quality of work and efficiency of the said
contractors.

5. The Municipality failed to optimally utilize and to implement projects, programs and
activities under the 20% Development Funds in accordance with the guidelines provided
under DILG-DBM Joint Memorandum Circular No. 2017-1 dated February 22, 2017,
hence the Municipality’s constituents were deprived of long-term benefits which capital
expenditures projects could provide.

We recommended that the management comply strictly with the abovementioned

provisions, maximize the utilization of the 20% Development Fund allocated for the
implementation of various projects, programs and activities so that the desired services
and benefits which go with these projects be delivered to the constituents of the
Municipality without unnecessary delay and optimally utilize the 20% Development Fund
to help achieve desirable socio-economic development and environmental outcomes.

6. The Municipality of Sto. Tomas granted several monetary incentives to Municipal

officials and employees totaling to P32,961,516.00 under the Program on Awards and
Incentives for Service Excellence (PRAISE) although not substantiated with the required

vii
 documents contrary to the provisions of Presidential Decree (PD) No. 1445 and Civil
Service Commission (CSC) Memorandum Circular No. 01, s. 2001 and 06, s. 2002, and
PRAISE guidelines of the Municipality of Sto. Tomas.

We recommended that the Municipality of Sto. Tomas PRAISE Committee submit

immediately the following documents in order to validate that the Municipal officials and
employees have met all the requirements warranting the grant of the abovementioned
PRAISE incentives:

a. Employees’ individual appraisal/ Evaluation reports or any documentation

recognizing suggestions, inventions, superior accomplishments and other personal
efforts which resulted in monetary savings making the Municipal officials and
employees eligible for PRAISE award; and

b. Report detailing the savings generated during CY 2018 which prompted the grant of
these incentives and other relevant supporting documents.

We further recommended that the Municipality of Sto. Tomas PRAISE Committee refrain
from granting 14th Month Incentive Bonus, Rice Allowance and Grocery Allowance to
officials and employees of the Municipality unless supported with legal basis. Otherwise,
the same will be disallowed in audit.

We recommended that Management revisit the indicated monetary incentives in their

LGU PRAISE and carefully evaluate the validity of giving out these incentives, especially
the basis thereof and whether those personnel who were granted are qualified to receive
the same. Likewise, comply with the existing rules and regulations of governing bodies
like COA, DBM, and CSC and others in the utilization of government resources.

7. The Municipality incurred expenditures for meals and snacks provided during meetings,
events/gatherings in the total amount of P7,763,512.67 and expended the amount of
P3,408,938.00 andP402,680.00, in connection with the celebration of Mahaguyog
Festival and Teacher’s Day, respectively, which are deemed excessive and
unnecessary as defined under COA Circular No. 2012-003 dated October 29, 2012 and
contrary to P.D. 1445 and Sections 305, 335 and 343 of Republic Act (RA) 7160.
Moreover, these were not supported with complete documentations, thus casting doubt
on the propriety of transactions.

We recommended the Management to:

a. exercise prudence in the utilization of resources intended for meals and snack during
regular meetings with local officials, employees, member organization attended by
various LGU officials and all other gatherings and activities;

b. observe the limitations or prohibitions and undertake austerity measures for such
expenditures;

c. evaluate those request from offices/organization and judiciously plan the program
and activities that are vital in the operational mandate of the municipality and those
that are beneficial to the public; and

viii
 d. submit justification on the incurrence of excessive amount for meals, financial
assistance and other expenditures.

We also recommended that the Municipal Accountant check the completeness, validity
and propriety of supporting documents before processing claims for payment.

8. The agency’s liquidation for the Supplemental Feeding Program is not in compliance
with the provisions of Administrative Order No. 04, s. 2016 or the Amended Omnibus
Guidelines in the Implementation of the Supplementary Feeding Program, and Item 9.1
of COA Circular No. 2012-001 thereby effectiveness of the program could not be
ascertained.

We recommended that the Municipal Social Welfare and Development Officer

(MSWDO), the Municipal Accountant and Bids and Awards Committee (BAC) to strictly
comply with the aforementioned laws, rules and regulations, specifically:

a. Follow strictly the Agreement of the Supplemental Feeding Program and secure daily
attendance list with photographs duly certified by the Day Care Worker In-charge in
the conduct of supplemental feeding as well as nutritional status reports and attach
the same to the Liquidation Report to establish propriety of the claims;

b. Immediate submission of the lacking documents discussed above to the Audit Team
for review and evaluation; and

c. Cause the opening of a bank account for the transfer of funds for DWSD Programs
which includes, among others, the Supplementary Feeding Program.

We further recommended that the MSWDO prepare its procurement plan for the SFP
according to the prescribed menu by the nutritionist or the DSWD to serve as basis for
the food purchases.

9. Additional cash advances were granted to Accountable Officers (AOs) even if the
previous cash advances are not yet settled contrary to Section 89 of Presidential
Decree (PD) No. 1445. Moreover, cash advances were not supported with Certification
from the Accountant that the previous cash advance has been liquidated and accounted
for in the books as provided under COA Circular No. 2012-001 dated June 14, 2012.

We recommended that the Municipal Mayor to:

a. enforce the immediate settlement or liquidation of outstanding cash advances; and

b. instruct the Municipal Accountant to strictly monitor the granting of cash advances
and ensure that no additional cash advances be drawn or granted unless the
previous ones are liquidated/settled.

10. Cash advances of P10,098,000.00 were granted to the accountable officer in excess of
her maximum bond cash accountabilities as well as insufficiency of fidelity bond applied
for by the Municipal Treasurer contrary to pertinent provisions of Presidential Decree
(PD) No. 1445, COA Circular No. 97-002 and Treasury Circular No. 02-2009, thereby
putting government funds at risk in case of loss, theft and/or embezzlement.

ix
 We recommended that the Municipal Mayor instruct the Accountant to ensure that the
cash advances granted to officers and employees do not exceed their maximum cash
accountability.

We also recommended that the amount of bond of the Municipal Treasurer be adjusted
corresponding to their total maximum accountability in the succeeding renewal of their
bond in accordance with the rates provided in the Revised Schedule of Premium Rates
(Annex C) of Treasury Circular No. 2-2009 dated August 6, 2009.

11. Cash Advance amounting to P26,400.00 was granted to non-organic personnel of the
Municipality which was not in consonance with COA Circular No. 97-002 dated February
10, 1997. Moreover, liquidation report for the said cash advance was not submitted to
the Office of the Auditor for audit to determine whether funds were utilized for the
intended purpose.

We recommended that the Municipal Mayor adhere strictly with the provisions of COA
Circular No. 97-002 on the grant and utilization of cash advances and stop the practice
of granting cash advance to non municipal officials/employees.

We further recommended that the Municipal Mayor require the Municipal Accountant to
submit the liquidation report and its supporting documents to the Office of the Auditor for
proper evaluation and audit otherwise, the transactions will be suspended/disallowed in
audit.

12. The LDRRMF Management/Investment Plan prepared by the Management was not in
accordance with Section 6.2 of NDRRMC, DBM and DILG Joint Circular No. 2013-1 and
Section 5.1.2 of COA Circular No. 2012-002. Moreover, only six or 37.5 percent of the
programmed projects, out of the sixteen (16) disaster prevention, mitigation, response
and preparedness programs/projects/activities were implemented during the year thus,
affecting the full and effective implementation of the disaster risk reduction and
management programs.

We recommended that the Municipal Mayor require the MDRRMO to:

a. ensure that the allocation for disaster, mitigation, prevention and preparedness as
resented in the LDRRMFIP contains the details of the projects and activities to be
funded, including those planned for the utilization of the previous year’s LDRRMF as
required under Section 6.2 of NDRRMC, DBM and DILG Joint Circular No. 2013-1
and Items 5.1.2 of COA Circular No. 2012-002;

b. meticulously plan the specific programs and projects necessary in the prevention,
mitigation and preparedness of the Municipality in case of calamity and ensure the
immediate implementation; and

c. coordinate with other concerned Municipal Offices such as the Bids and Awards
Committee (BAC) and Municipal Engineering Office for the proper and timely
implementation of scheduled projects, programs and activities.

13. Various expenses totaling P9,574,391.68 were utilized for non-GAD activities, thus
depleting the fund for more gender responsive activities.

x
 We recommended that the Municipal Mayor direct the GAD Focal Point Person to
properly monitor and report regularly the status of implementation of the activities stated
in the Gender and Development Plan in order to address the gender issues. Ensure that
the programs and projects included in the GAD Plan are gender responsive processes,
procedures are properly followed and other factors that would affect the implementation
must be considered to avoid problems when it comes to implementation. Likewise, utilize
the fund solely for GAD related activities or to specific programs that are gender-
responsive and are aligned to the GAD mandate.

The foregoing observations and recommendations in Part II of this Report, were discussed
in an exit conference conducted with the concerned Municipal officials and employees on
June 24, 2019. Management’s views and comments were considered in the report, where
appropriate.

Status of Implementation of Prior Years’ Audit Recommendations

Of the 29 audit recommendations embodied in CY 2017 and prior years’ Annual Audit
Report, 14 were fully implemented, nine were partially implemented and the remaining six
were not implemented.

xi