EXECUTIVE SUMMARY

A. Introduction

Municipality of Sta. Monica

1. The Municipality of Sta. Monica was created under House Bill No. 7233 Republic
Act No. 4998 on September 9, 1967. It is composed of eleven barangays with a
vision-mission to continue discharge the functions of promoting health and safety,
improving morals, maintaining peace and order and such other functions, which
will be carried out through the support of its municipal officials and employees
responsible in delivering the basic, social economic, legislative and administrative
services to the community.

Scope and Objectives of the Audit

2. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the Philippine Public Sector Standards on Auditing. Those
standards require that we plan and perform the audit to obtain a reasonable basis
for our conclusions.

3. The audit covered the accounts and operations of the municipal government for
the year 2016 and was aimed at ascertaining the propriety of financial transactions
management’s compliance to prescribed rules and regulations and the fairness of
the presentation of the financial statements.

B. Financial Highlights

a) Comparative Financial Position and Results of Operations

Particulars 2016 2015 Increase

(Decrease)
Assets 92,997,071.77 77,721,082.71 15,275,989.06
Liabilities 17,690,269.27 16,513,420.33 1,176,848.94
Net Assets / Equity 75,306,802.50 61,207,662.38 14,099.140.12
Income 48,439,570.27 40,576,345.67 7,863,224.60
Expenses 34,340,430.15 35,128,776.21 (788,346.06)
Net Income 14,099,140.12 5,447,569.46 8,651,570.66

b. Comparative Sources and Application of Funds

Particulars 2016 2015 Increase

(Decrease)
Appropriation 45,525,918.48 41,807,563.00 3,718,355.48
Allotment 45,525,918.48 41,807,563.00 3,718,355.48
 Particulars 2016 2015 Increase
(Decrease)
Obligations 36,005,511.93 40,297,864.72 (4,292,352.79)
Funds received from other
agencies 3,701,639.50 13,187,016.43 (9,485,376.93)
Transfers to NGO 15,000.00 (15,000.00)

C. Audit Opinion

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

financial statements of the Municipality of Sta. Monica for CY 2016 because of the:

Property, plant and equipment (PPE) which are stated in the statement of
financial position at a carrying amount of Php 56,405,536.90 as of December 31,
2016 could not be validated because of the absence of updated inventory reports,
lapsing schedule and other pertinent information on the items comprising the
PPE accounts. We were unable to obtain sufficient appropriate audit evidence
about the carrying amount of the properties by other alternative procedures
because of the inadequacy of the accounting records. Consequently, we were
unable to determine whether any adjustment to the reported amount was
necessary.

D. Summary of Significant Observations and Recommendations

For the above-mentioned audit observation which have caused the issuance of a
qualified opinion, we recommend that the Management:

Create an Inventory Committee and conduct a complete physical inventory of all

properties owned by the Municipality and prepare a report thereon in accordance
with Section 124 of NGAS Manual for LGUs, Volume I to determine the
existence and accuracy of the PPE owned by the LGU. Moreover, direct the
Municipal Treasurer to maintain property cards and issue Acknowledgement
Receipt for Equipment, and the Municipal Accountant to maintain PPE Ledger
Cards as required in Section 114 of the same Manual.

In addition to the above audit observation considered in the expression of the

auditor’s opinion, we invite your attention to the other significant audit observations
and Recommendations are as follows:

1. Cash advances granted in CY 2016 and prior years amounting to

Php 2,105,163.02 as of December 31, 2016 excluding intelligence fund in the
amount of Php 700,000.00, remained unsettled in violation of COA Circular
No. 2012-004, Sections 5.1 of COA Circular No. 97-002 and Section 89 of
Presidential Decree No. 1445. Thereby, it may result to understatement of
related expenses and overstatement of receivables accounts. Moreover, cash
advances granted during CY 2016 were not supported with a certification
 from the Accountant that the previous cash advances have been liquidated
and accounted for in the books contrary to Items 1.1 and 1.1.4.1 of COA
Circular No. 2012-001.

We recommended Management that the Local Chief Executive ensure the

proper granting and utilization of all cash advances as provided in Section 8 of
COA Circular No. 97-002; by requiring the accountable officers concerned to
immediately liquidate and/ or settle their overdue outstanding cash advances.
Otherwise, such failure shall constitute a valid cause for the withholding of
their salaries and the instruction of other sanctions. Moreover, direct the
Municipal Accountant to require her to attach a certification that the previous
cash advances have been liquidated and accounted for in the books before
granting another cash advance.

2. Failure of the Local School Board to appropriate budget for Special Education
Fund (SEF) for Calendar Year 2016 wherein disbursements of Php 146,493.00
were made for CY 2016 violated Section 4 (1) of Presidential Decree No.
1445. Moreover, the expenses totaling Php 84,493.00 were not among those
explicitly authorized violated Section 272 of Republic Act (RA) 7160 and
Joint Circular No. 01 series of 1998 of DECS, DBM and DILG.

We recommended Management that the Municipal Local School Board

prepare Annual School Board Budget for the SEF and include in the Annual
Budget those prioritize programs, projects and activities pursuant to R.A No.
5447, Section 272 of RA 7160 and Joint Circular No. 01 series of 1998 of
DECS, DBM and DILG. Stop using the SEF for expenditures not within the
list of priority expenses as provided in the aforementioned law and regulation.
Further, Direct the Municipal Accountant, Municipal Budget Officer and
Municipal Treasurer to stop disbursing without approved appropriation
pursuant to Section 4 (1) of Presidential Decree No. 1445.

3. Special Education Fund was not fully utilized in accordance with the
provision of Section 1 of Republic Act No. 5447 dated September 25, 1968
and Letter of Instruction (LOI) No. 1462 dated May 31, 1985. Thus, the
deficiency of school buildings/classrooms and instruction materials which
could improve the quality education in the local public schools have not been
properly addressed by the Local School Board.

In view of the above, we recommended Management that the Local School

Board maximize the utilization of SEF based on RA 5447 as well as Section
272 of RA 7160 and LOI 1462 for the benefits of its intended beneficiaries.
Further, we recommend that the Local School Board initiate the inventory of
local school buildings that need urgent construction/repairs, operation of such
number of extension classes as may be needed to accommodate all children of
school and other school needs like books, science and mathematics aids, and
 simple laboratory devices to help identify priority programs, projects and
activities.

4. The Municipality had no Approved 10-year Solid Waste Management Plan by

the National Solid Waste Management Commission contrary to Section 16 of
Republic Act 9003 dated January 26, 2001 also known as the Ecological and
Solid Waste Management Act of 2000.

We recommended that Management strictly adhere RA 9003 to adopt a

systematic, comprehensive and ecological solid waste management programs.
Further, effect required rectification and submit the 10-year Solid Waste
Management Plan consistent with the National Solid Waste Management for
approval of the National Solid Waste Management Commission to have
efficient and effective implementation.

5. Out of the Municipality’s appropriation of Php 8,317,909.60 for 20%

Development Fund, only Php 3,944,054.27 or 47.42% was utilized during CY
2016 contrary to the General Policies of Section 2 of DILG-DBM Joint
Memorandum Circular No. 2011-1 dated April 13, 2011. Moreover, it was
used to expenditures not within the priority programs contrary to Section 4.0
of the same Joint Memorandum Circular. Thus, it deprived its constituents of
the intended benefits that could have been derived therefrom.

We recommended that Management:

1. Require the Municipal Planning and Development Officer to strictly

adhere the provisions of DILG-DBM Joint Circular No. 2011-1 dated
April 13, 2011;

2. Ensure that 20% Development Fund be fully utilized to achieve the

optimum desirable socio-economic and environmental development;

Further, ensure that the 20% DF counterpart to KALAHII is properly included

in the cost of the project rather than using the counterpart in the administrative
expenses contrary to Section 4 in an item not among the priority programs and
projects of the same Joint Circular.

6. Local Disaster Risk Reduction and Management Fund Investment Plan

(LDRRMFIP) was not prepared by the Agency and the Monthly Reports on
the Sources and Utilization of the Local Disaster Risk Reduction and
Management Fund (LDRRMF) for CY 2016 were not submitted to the
Auditor by the Local Disaster Risk Reduction and Management Council
(LDRRMC) and Local Development Council (LDC) due to the failure of the
Municipal Accountant to prepare, certify and submit the same to the
LDRRMO, contrary to Section 5.1.2, 5.1.3.2 and Section 5.1.5 of COA
Circular No. 2012-002 dated September 12, 2012.
 We recommended that Management:

a. Prepare LDRRMFIP for the DRRM program annually in the prescribed

format required under COA Circular No. 2012-002;

b. Direct the concerned officer to prepare and submit the Report on

Sources and Utilization of DRRMF certified correct by the Municipal
Accountant in prescribed form on or before the 15th day after the end of
each month, through the LDRRMC and LDC, to the COA Auditor of the
municipality.

7. The Municipality’s appropriation of Php 2,480,000.00 for Gender and

Development (GAD) was not covered by a GAD Plan and Budget (GPB) duly
reviewed and approved by the DILG Regional Office contrary to Section
4.1.C.6.2 of PCW-DILG-DBM-NEDA Joint Circular No. 2013-01. Hence, the
programs, activities and projects (PPAs) may not address gender issues.

We recommended that Management require the GAD Focal Person to prepare

the Annual GPB using the prescribed form and in coordination with the
Municipal Budget Officer, submit it to the Provincial Planning and
Development Office then to the DILG Regional Office for review and
approval. Further, develops GAD PAPs to strengthen the Municipality’s
gender-responsive governance and ensure that GAD Fund is utilized in align
with the PCW-DILG-DBM-NEDA Joint Circular No. 2013-01.

8. Failure of the Municipal Treasurer to update and balance daily all financial
transactions in the Cashbooks is contrary to Sections 26, 27 and 28 of the
NGAS Manual for LGUs, Volume II and Section 63 (D) of the Local Treasury
Operations Manual (LTOM). Moreover, there were no cashbooks maintained
by the Liquidating Officer and Collectors contrary to Section 63 (B and C) of
LTOM. Thus, we could not determine and establish whether all cash receipts,
remittances/deposits, cash advances/ disbursements and adjusting entries are
properly and correctly recorded in the said Cashbooks.

We recommended that Management require the Municipal Treasurer to record

the financial transactions of the Municipality daily pursuant to Sections 26, 27
and 28 of the NGAS Manual for LGUs, Volume II. Likewise, direct her to
update and balance all the transactions and reconcile the same with the cash
on hand as provided in Section 63 (D) of LTOM. Moreover, direct the
Liquidating Officer to maintain Liquidating Officer’s Cashbook for each fund
and shall be updated and balanced daily as provided for in Section 63 (B) of
LTOM and compel all the Revenue Collectors to maintain Teller’s/
Collector’s to record all collections received and all remittances to the
designated Liquidating Officer in accordance with Section 63 (C) of LTOM.
 9. The LGU-Sta. Monica failed to prepare Local Development Plan for Children
(LDPC) and Local Investment Plan for Children (LIPC) in violation to
Section II.1b and 1c thus, the substance of the Local Council for Protection of
Children (LCPC) in the institutionalization to advocates child rights, plans and
initiates/recommends interventions and monitors children’s programs and
projects in the locality might not been achieved.

We recommended that Management direct the members of the LCPC to

prepare Local Development Plan for Children and Local Investment Plan for
Children, and maximize utilization of the allocated LCPC Fund to identified
PPAs provided for in DILG MC No 2012-120 dated July 4, 2012 to ensure
full strengthening and implementation of the LCPC. Inform the Sanggunian
Bayan Members on the PPAs that can be funded by the 1% IRA for the
strengthening of LCPC.

10. Project Procurement Management Plan (PPMP) and Annual Procurement Plan
(APP) were not prepared and maintained by the Agency for their different
programs, activities, and projects (PAPs) as required under Section 7, Rule II
of the Revised Implementing Rules and Regulations (IRR) of R.A. No. 9184.

We recommended that Management strictly adhere Section 7, Rule II of the

Revised IRR of R.A. No. 9184 and prepare PPMP and consolidate APP.
Require the Bids and Award Committee to furnish the Office of the Auditor of
the updated PPMP and APP yearly for validation and assurance that all
procurement undertaken by the LGU were based on the approved annual
procurement plan.

E. Summary of total Suspensions, Disallowances and Charges

Audit suspensions amounting to P732,590.60 remained unsettled contrary to Section

5.4 and 7.1.1 of COA Circular No. 2009-006 dated September 15, 2009.

F. Statement on the quantity/number of recommendations implemented, partially

implemented and not implemented for the current year.

Out of the 20 audit recommendations embodied in the 2015 Annual Audit Report,
4 were implemented, 3 were partially implemented, 13 were not implemented.
Moreover, out of 9 audit recommendations embodied in the CY 2014 Annual Audit
Report, 6 were fully implemented and 3 were not implemented.