EXECUTIVE SUMMARY

Introduction

The Municipality of San Miguel was once a part of the Municipality of Leon. However,
due to the efforts of the then Town Head and at the same time Councilor Inspector of
San Miguel, Damiano S. Saclauso, on January 16, 1916 it became a separate
Municipality. It is bounded on the north by the Municipalities of Cabatuan and Maasin, on
the east by the City of Iloilo, on the south by the Municipality of Oton, and on the west by
the Municipalities of Leon and Alimodian. It is 17 kilometers away from Iloilo City. It has
a land area of 3,197 hectares. It is classified as a 4th class Municipality.

Highlights of Financial Operation

The municipality’s assets, liabilities and residual equity as of year-end are presented
below:

2018 2017 Increase/

Decrease
Assets 348,970,392.74 296,783,166.53 52,187,226.21
Liabilities 102,640,156.85 85,968,254.01 16,671,902.84
Equity 246,330,235.89 210,814,912.52 35,515,323.37

The municipality collected the following:

2018 2017 Increase/

Decrease
Tax Revenue 19,063,692.72 19,069,335.85 (5,643.13)
Share from Internal Revenue
Collections 76,525,080.00 71,345,160.00 5,179,920.00
Other Share from National Taxes 0.00 0.00 0.00
Service and Business Income 6,969,326.65 6,097,194.04 872,132.61
Other Income 0.00 0.00 0.00
Total Collections 102,558,099.37 96,511,689.89 6,046,409.48

Total expenditures is shown below:

2018 2017 Increase/

Decrease
Personal Services 39,293,362,.09 32,909,107.12 6,384,254.97
Maintenance and Other
Operating Expenses 26,981,658.49 27,926,810.39 (945,151.90)
Non – Cash Expenses 1,024,745.26 0.00 1,024,745.26
Financial Expenses 311,803.04 0.00 311,803.04
Total Expenses 67,611,568.88 60,835.917.51 6,775,651.37

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Scope of Audit

The audit covered the accounts and operations of the Municipality of San Miguel,
Province of Iloilo for the year ended December 31, 2018. The audit was conducted to
determine the reliability of the LGUs accounts in order to express an opinion on the
fairness of presentation of the financial statements, as well as, to determine whether or
not the LGU’s transactions were made in accordance with existing laws, rules and
regulations in the utilization of resources.

Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements due to the effects of the inability of the agency to conduct physical inventory
of all its property and non-submission of the report thereon as of year-end for assets
valued at P158,897,313.40 and non-maintenance of the required Property, Plant and
Equipment Ledger Cards (PPELC) and depreciation was not taken up for properties
amounting P33,981,487.20, the non-submission of the Bank Reconciliation Statements
to show that monthly reconciliation between the balance per bank and balance found in
the books were made for Cash in Bank- LCCA and the non-submission of disbursement
vouchers totaling P2,765,124.28, contrary to concerned regulations.

Significant Audit Observations and Recommendations

For the above-mentioned exceptions, we recommended that the Local Chief Executive and
officials concerned take the following courses of actions:

1. Create a new set inventory committee considering that there were members who
already had retired from service in the existing inventory committee under EO No. 2
series of 2010.

2. Require the created inventory committee to conduct physical count of all the
property, plant and equipment owned by the municipality to facilitate the completion
of inventory of PPE and prepare the Report on the Physical Count of Property, Plant
and Equipment.

3. Maintain the prescribed PPELC which should be reconciled with the RPCPPE to
establish the correctness of the PPE accounts amounting to
P158,897,313.40.

4. We recommended that the Municipal Mayor direct the Municipal Accountant to

prepare and submit the bank reconciliation statements for calendar years 2011 to
2016 and 2018 and to record immediately any book reconciling items that require
adjustments and corrections in the general ledger pursuant to Section 74 of PD 1445
and Sections 3.2 3.3 and 3.4 of COA Circular No. 96-011 to prove the correctness
and existence of the cash in bank balances as of year-end.

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6. We strongly recommended that the Municipal Mayor require/instruct the Municipal
Accountant and Municipal Treasurer to submit immediately the disbursement
vouchers for post-audit.

We likewise recommended that internal control be strengthened by ensuring that the

municipality strictly comply with the afore-cited implementing laws, rules and
regulations.

The other significant audit observations are presented below together with the
recommendation/s.

1. The municipality failed to implement the rules and regulations governing the grant and
liquidation of cash advances as provided under Section 89 of PD 1445 and COA
Circular No. 97-002 dated February 10, 1997 which resulted to unliquidated cash
advances amounting to P5,810,882.23 as of December 31, 2018, thereby
continuously exposed the resources to risk of misuse and/or misappropriations.

We recommended that the Municipal Mayor:

1. Strictly enforce the settlement of unliquidated cash advances as of November 30,

2018 and thereafter;

2. Stop granting additional cash advance to officers and employees unless the
previous one had been fully liquidated to avoid accumulation of the same;

3. Initiate appropriate actions against erring officials and employees, if warranted;

4. Require the Municipal Accountant to send written demand letter to

officers/employees with accountability that is no longer connected with the
municipality.

2. Taxes withheld from the payments of purchases and salaries and wages in the
amount of P697,132.23 remained unremitted to the Bureau of Internal Revenue (BIR)
as of year-end, in violation of Section 4.114-2 of BIR Revenue Regulation No. 16-
2005 dated September 1, 2005 thus, exposing the government funds to possible
misuse or misapplication.

We recommended that the Municipal Mayor direct the Municipal Accountant and
Municipal Treasurer to remit immediately the amount of P697,132.23 to the Bureau of
Internal Revenue.

Henceforth, taxes withheld from payments to suppliers and salaries of employees be

remitted promptly and regularly in accordance with the provisions of BIR Revenue
Regulation No. 16-2005.

3. The Local Disaster Risk Reduction and Management Fund Investment Plan
(LDRRMFIP) of the municipality was still not prepared in accordance to COA Circular
No. 2012-002 dated September 12, 2012 and NDRRMC, DBM and DILG Joint
Memorandum Circular No. 2013-1 dated March 25, 2013 and DILG Memorandum
Circular No. 2012-73 dated April 17, 2012 thereby, the programs/projects/activities
related to LDRRM were not properly presented in accordance with the four thematic

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 areas of the National Disaster Risk Reduction and Management Plan (NDRRMP),
hence disaster risk may not be adequately addressed.

We recommended that the Local Chief Executive and LDRRM Officer - Designate
follow the four (4) thematic areas reflected in the National DRRM Plan in the
preparation of the LDRRMFIP of the municipality so that disaster risk will be
adequately addressed.

We also recommended that the LDRRM Officer-Designate include the two thematic
areas namely Disaster Response and Disaster Rehabilitation and Recovery in the
programs/projects/activities stated in the LDRRMFIP in accordance with the National
DRRM Plan.

4. There is a risk that response to disaster may not be effective in terms of disaster
preparedness due to lack of capacity and technical expertise, technical mechanisms
and public awareness on the threats and impacts of all types of hazards, contrary to
the provisions of Republic Act No. 10121, thus exposing the lives of its constituents to
imminent danger when disasters and calamities occurs.

We recommended that the Municipal Mayor and Municipal Officials must work closely
with the MDRRMO to ensure effective formulation, implementation, monitoring and
evaluation of the Local DRRM Plan and the LDRRM Fund Investment Plan.

We also recommended that the MDRRMO include in their plan projects, programs
and activities relative to the above mentioned standards especially those on not yet
conducted, available, existing and operational in the municipality to ensure disaster
preparedness.

5. The Municipal Solid Waste Management Board failed to prepare a budget proposal
intended for the siting of sanitary landfill for inclusion in the
Program/Projects/Activities (PPAs) of the Annual Investment Plan (AIP) for CY 2018
contrary to Section 2 of RA 9003 thus, exposing the constituents of the Municipality to
health, sanitation and environmental hazards.

We recommended that the Municipal Solid Waste Management Board prepare a

budget proposal for the siting of sanitary landfill and see to it that PPAs relative
thereto be provided with a budget and included in the succeeding year’s annual
budget for proper implementation.

6. Internal Revenue Allotment (IRA) of 1% or equivalent to P765,250.80 was disbursed

to Projects, Programs and Activities (PPAs) not related to the strengthening of Local
Councils for the Protection of Children (LCPC) as prescribed under DILG
Memorandum Circular No. 2012-120, due to the failure of the Municipal Council for
the Protection of Children (MCPC) to perform its duties and functions specifically the
preparation of plans in accordance to Executive Order No. 18 series of 2018, thus
defeating the purpose of the government to promote and protect the children’s
physical, moral, spiritual, intellectual and social well-being.

We strongly recommended that the Municipal Mayor direct the MCPC to enforce the
formulation of Council’s Annual Work and Financial Plan; Local Development Plan for

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 Children (LDPC) and the Local Investment Plan for Children (LIPC) to ensure that
PPAs relative thereto are properly funded and implemented.

Summary of Total Suspensions, Disallowances, and Charges

Total suspensions, disallowance and charges as of December 31, 2018 are summarized
below:
Beginning January 1, 2018 to Ending
Balance As of December 31, Balance As of
January 01, 2018 December 31,
2018 NS/ND/N NSS 2018
C DC
Notice of Suspensions 1,690,289.06 0.00 0.00 1,690,289.06
Notice of Disallowances 3,245,260.00 0.00 3,245,260.00
Notice of Charges 0.00 0.00 0.00 0.00
Total 4,935,549.06 0.00 0.00 4,935,549.06

Status of Implementation of Prior Years’ Audit Recommendations

Of the eighty six (86) audit recommendations embodied in the previous year’s annual
audit report, 30 were fully implemented, 25 were partially implemented and 31 remained
unimplemented.