EXECUTIVE SUMMARY

A. Introduction

The Municipality of Talugtug got its name from its location. “Taluktuk” means “top”. It
was then a barrio of the Municipality of Cuyapo, then was took over by the Municipality
of Guimba. On the initiative of several outstanding men of the place through the insistence
of Mr. Romualdo Estillore, the creation of the municipality was seriously considered. After
formalities and technicalities, President Manuel Roxas signed Executive Order No. 113,
creating Talugtug as the 26th Municipality of the Province of Nueva Ecija. Talugtug
remained isolated until 1955 when the Talugtug-Guimba Road was opened and finished.
The town is more than 60 years old.

The Municipality of Talugtug is located in the northern portion of the region, 105
kilometers north of San Fernando, Pampanga, the seat of the regional offices. It is situated
173 kms. from the City of Manila and 56 kilometers from Cabanatuan City.

It is bounded in the southeast by the Science City of Muñoz, town of Lupao on the
northeast, on the west by the Municipality of Cuyapo and on the south by the Municipality
of Guimba all in the Province of Nueva Ecija, while on the north it is bounded by
Municipality of Umingan, Province of Pangasinan.

The total land area of the municipality is 10,039.78 hectares comprising of 28 barangays.
The latest census in year 2007 revealed that the Municipality of Talugtug had a population
of 20,952. It has an annual growth rate of 2.28 percent. The municipality is basically a
farming community so agriculture is the main source of income. About 80% of agricultural
land are planted with rice and the remaining 1.34% are planted with corns, vegetables,
onions, garlic, watermelon and root crops.

B. Financial Highlights

The Municipality’s financial condition, results of operations and sources and application
of funds for CY 2021 with comparative figures for CY 2020 are as follows:

Increase
2021 2020
(Decrease)
Financial Condition
Assets ₱ 365,185,831.74 ₱ 372,518,892.34 ₱ (7,333,060.60)
Liabilities 98,601,863.25 111,084,451.98 (12,482,588.73)
Government Equity 266,583,968.49 261,434,440.36 5,149,528.13
Results of Operation
Income 128,943,364.90 152,573,387.95 (23,630,023.05)
Expenses 116,140,488.13 138,477,188.08 (22,336,699.95)
Excess of income over
Expenses 12,802,876.77 14,096,199.87 (1,293,323.10)
Sources and Application
of Funds
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 Increase
2021 2020
(Decrease)
Appropriations 223,605,985.00 123,764,356.00 99,841,629.00
Allotments 223,605,985.00 123,764,356.00 99,841,629.00
Obligations 199,792,812.15 117,612,791.95 82,180,020.20
Balances 23,813,172.85 6,151,564.05 17,661,608.80

Financial Condition CY 2021

36%
50%

14%

Assets Liabilities Government Equity

Financial Performance CY 2021

5%

50%
45%

Income Expenses Excess of income over Expenses

C. Audit Scope

The audit covered the financial transactions and operations of the Municipality of Talugtug
for the year ended December 31, 2021. The objectives of the audit were to: (a) ascertain
the degree of reliance on the management’s assertions on the financial statements; (b)

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recommend agency improvement opportunities; and (c) determine the extent of
implementation of prior year’s audit recommendations.

In compliance with the Unnumbered Memorandum dated October 13, 2021 by the
Commission on Audit Assistant Commissioner for Local Government Sector (LGS) which
identified the CY 2021 audit foci, we covered in audit the Cash and Cash Equivalents,
Property, Plant and Equipment, Inventories, Local Disaster Risk Reduction Management
Fund (LDRRMF), 20% Development Fund, COVID-19 fund receipts, allocation and
utilization, Revenue-Generating Program, Programs and Projects related to Gender and
Development, Compliance to Tax Laws, Remittance of Mandatory Contributions (GSIS,
PhilHealth and Pag-ibig), and Status of Audit Suspensions, Disallowances and Charges.
Result of audit with significant observations was discussed in Part II of this report.

D. Independent Auditor’s Report

The combined financial statements of the Municipality of Talugtug, Nueva Ecija were
substantially prepared and presented in accordance with the International Public Sector
Accounting Standards (IPSASs). Thus, the Auditor rendered an Unmodified Opinion on
the fairness of presentation of the Municipality’s financial statements as of December 31,
2021.

E. Summary of Other Significant Audit Observations and Recommendations

For CY 2021, commendably we found the Municipality of Talugtug had achieved and even
surpassed its revenue collection targets for the year and compliant with laws, rules and
regulations on (a) Gender and Development (GAD); and (b) withholding and remittance of
(i) taxes to the Bureau of Internal Revenue, and (ii) contributions and loan amortizations
to the Philippine Health Insurance Corporation and the Home Development Mutual Fund.

On the other hand, the significant observations and recommendations requiring

management action are as follows:

1. Due to the absence of monitoring and supervision of collectors, real property tax
collections totaling ₱1,042,021.24 for the period CY 2015 to CY 2019 were reported only
in November 2021 in violation of Sections 63 and 64 of the Government Accounting
Manual (GAM) for LGUs, Volume I. Of the said amount, ₱485,026.26 remained
unremitted as at December 31, 2021. (Observation No. 1)

We recommended that the Local Chief Executive (a) require the Municipal Treasurer to
strengthen internal control on collections by (i) segregating incompatible functions in his
office; (ii) seeing to it that the Date column of the RCD is filled out to timely monitor the
actual collections and deposits; (iii) requiring submission of monthly RAAF; (iv) cause the
immediate restitution of the remaining unremitted collections; and (v) henceforth
strengthen internal control in the Treasury Office; and (b) file appropriate charges against
the former erring employees in accordance with existing laws, rules and regulations.

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2. The Municipality’s Property, Plant and Equipment (PPE) with a carrying value of
₱303,839,305.97 as at December 31, 2021 remained to be unreliable and inaccurate due to
the failure of the LGU to (a) complete its physical inventory; (b) update and complete its
property records; and (c) provide depreciation expenses to some of its PPE accounts
inconsistent with the provisions set forth under Sections 260, 266 and 269 of the
Government Accounting Manual (GAM) for LGUs Volume I. (Observation No. 2)

We recommended that the Local Chief Executive require the Municipal Accountant and
Property In-Charge to (a) consider hiring or designating additional staff focused on (i)
updating, reconciling and maintaining PPE inventory and records; and (ii) coordinating
with the concerned Municipal officials for the completion of the RPCPPE; and (b) cause
the necessary appraisal of the undocumented PPEs such that identification of the remaining
economic age and cost will be determined to provide for the required depreciation
expenses.

3. Drugs and Medicines Inventory amounting to ₱222,483.00 as at December 31, 2021 was
unreliable owing to the variance between the Subsidiary Ledger (SL) and the Report on
Physical Count of Inventories (RPCI) that resulted from (a) failure to recognize issued
items and supplies; (b) unreliable stock records; and (c) recording of purchased inventories
as outright expenses inconsistent with Sections 189 and 205 of the Government Accounting
Manual (GAM) for LGUs Volume I. (Observation No. 3)

We recommended that the Local Chief Executive instruct the Municipal Accountant,
Property-In Charge, and RHU officials to (a) designate or hire an additional staff who will
be responsible for preparing and updating inventory records and reports; and (b) coordinate
and make appropriate strategies and actions with regards to the proper accounting and
adequate safeguard of inventories to ensure the availability of medicines and medical
supplies in conformance with the rules, regulations and best practices in inventory
management.

4. In CY 2021, the Municipality registered a utilization rate of 77.86% equivalent to

₱16,403,184.47 of its 20% Development Fund (DF) of ₱21,067,571.00, and was able to
contribute in the realization of its socio-economic and environmental objectives
incorporated in its CY 2021 Annual Investment Plan, in consonance with Section 287 of
RA No. 7160, or the Local Government Code of 1990. (Observation No. 4)

We recommended that the Local Chief Executive instruct the Municipal Planning and
Development Officer in coordination with the Municipal Engineer to (a) endeavor to
further maximize the utilization of the 20% Development Fund; (b) regularly monitor
project implementation status for a timely intervention in case of delays or failure in
implementation; (c) henceforth, continuously assess new developments affecting the socio-
economic and environmental status of the community for a more responsive use of the
fund.

5. Pursuant to Joint Memorandum Circular No. 2013-01, the Municipality in CY 2021 met
the required minimum threshold of allocation for Local Disaster Risk Reduction and

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Management Fund (LDRRMF) of ₱5,885,118.00, which, together with the ₱400,000.00
Continuing Appropriation and ₱2,214,875.68 Special Trust Fund made up the funds
available of ₱8,499,993.68 during the year. Of the said amount, ₱6,753,020.89 or 79.4%
were utilized as at year end where ₱5,381,811.39 were dedicated for COVID-19 pandemic
response and the rest for regular disaster management activities thus, substantially met the
purpose of the fund. (Observation No. 5)

We recommended that the Local Chief Executive instruct the LDRRMO to (a) continue
implementing LDRRM programs and projects that are attuned to the call of the times; and
(b) ensure that the PPAs are accurately labeled to reflect the true intent of the activity and
thus preclude misinterpretation by the users of the Annual Investment Plan.

6. In CY 2021, the Municipality was generally compliant with the GSIS Act of 1997 and
was able to remit its employees’ mandatory premium contributions and loan amortizations
of ₱6,511,224.54 and ₱3,389,711.26, respectively, in adherence with the provisions of
Section 5(c) of the said law thus, allowing its personnel to timely avail the services and
benefits being provided by the System. (Observation No. 9)

We recommended that the Local Chief Executive instruct the Municipal Accountant to (a)
ensure the continuous deduction and timely remittance of employees’ premiums and loan
amortizations; and (b) continue coordinating with the GSIS for the reconciliation of their
records.

F. Status of Suspensions, Disallowances and Charges at Year-End

The Municipality’s summary of total Suspensions, Disallowances and Charges as of

December 31, 2021 are as follows:

This period Settlement this

Beginning
(January 1 to period (January 1 Ending Balance
Balance (as of
Notices December 31, to December 31, (As of December
December 31,
2021) 2021) 31, 2021)
2020)
NS/ND/NC NSSDC
Notice of
Suspension ₱ 1,588,167.24 ₱ 0.00 ₱ 1,588,167.24 ₱ 0.00
Notice of
Disallowance 612,901.58 0.00 0.00 612,901.58
Notice of Charge 0.00 0.00 0.00 0.00
Total ₱ 2,201,068.82 ₱ 0.00 ₱ 1,588,167.24 ₱ 612,901.58

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

Out of the 25 audit recommendations embodied in the 2020 Annual Audit Report, 17 or
68% were fully implemented, eight or 32% were partially implemented while none was
not implemented.