Republic of the Philippines

COMMISSION ON AUDIT
Local Government Sector
Nueva Ecija B – Audit Team No. 27
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AOM No. 2018- 001
Date: May 16, 2018

AUDIT OBSERVATION MEMORANDUM (AOM)

For: HON. GUILLERMO S. MARIANO

Punong Barangay
Brgy. Sagana, Laur, Nueva Ecija

Attention : ANGELITA L. DULLAS

Barangay Treasurer

We have audited the accounts and operations of the barangay for calendar years 2016 and
2017 and revealed the following deficiencies/lapses:

Non-compliance with P.D. No. 1445

1. Disbursement vouchers of the barangay totaling ₱ 758,167.00 were not supported with the
required documents in violation of Section 4(6) of P.D. No. 1445 rendering doubtful their
validity, propriety and correctness.

1.1 Section 4(6) of P.D. No. 1445 states that claims against government funds shall be
supported with complete documentation.

1.2 Also, Volume I of the Systems and Procedures Manual on the Management of Barangay
Funds and Property provides that: “Policies and Procedures. Existing rules and regulations
require that all disbursements of public funds be supported by documents necessary to prove
their validity, propriety and legality.”
1.3 Likewise, supporting documents are needed to prove the actual incurrence of expenses.
1.4 Audit of disbursements for CYs 2016 and 2017 disclosed that several vouchers of the
barangay were not supported with the required documents totaling to ₱ 758,167.00 as shown
in Annex A.

1.5 The Barangay Treasurer admitted such lapses owing to her inadequate orientation relative
thereto.

1.6 We recommend that the Barangay Treasurer and the Municipal Accountant comply
with Section 4(6) of the P.D. No. 1445 by checking the completeness of supporting
documents before any payment is effected.
Unreliable PPE balances

2. The reported balance of Property, Plant and Equipment of ₱3,291,551.18 of December 31,
2017 was unreliable due to the failure to conduct physical count of barangay property and
absence of property records to support the accounting and recording thereof contrary to
the Systems and Procedures Manual on the Management of Barangay Funds and
Property.
 2.1 Volume I of the Systems and Procedures Manual on the Management of
Barangay Funds and Property provides, among others, the following policies and
procedures on property management:

a) A physical count of all barangay property shall be conducted at least once a year
and result on the physical inventory shall be reported on the Report on the Physical
count of Property, Plant and Equipment (RPCPPE).
b) A Committee headed by the Barangay Treasurer or his authorized representative
shall conduct the physical count of PPE owned by the barangay; and
c) The report, approved by the Punong Barangay, shall be submitted to the Barangay
Record Keeper and the Municipal Accountant for reconciliation with the recorded
PPE.

2.2 Non-compliance with the foregoing requirements were already noted in the past
years’ audit, the officials concerned seemingly disregarded the prior year’s audit
recommendation to correct the said lapses. Verification of the PPE accounts disclosed
that the annual physical count of barangay property was not conducted, hence the
required Property, Plant and Equipment Register (PPEReg) was not prepared. Also, we
noted that the Inventory Committee that was supposed to undertake the count was still
not convened.

2.3 Further review of the property documents disclosed that Inspection and
Acceptance Reports (IAR) and Property Acknowledgement Receipts (PARs) which
should have been the basis for recording in the PPE Register were not kept properly and
completely maintained.

2.4 The barangay officials admitted that although they are aware of such regulations
they were still not able to conduct physical inventory of barangay properties due to the
failure of the barangay treasurer to update their PPE records.

2.5 Because of the foregoing conditions, the balances of Property, Plant and
Equipment worth ₱3,291,551.18 were unreliable which affected the fair presentation of
financial position of the barangay for the year then ended while accountability over said
government property could not be readily established.

2.6 We recommend that the Punong Barangay (a) create an Inventory

Committee that will (i) undertake the physical count of all barangay property (ii)
prepare the RPCPPE, (iii) reconcile results of physical verification with the
records maintained at the Accounting Office; and (iv) submit the RPCPPE to the
Auditor not later than the 10th day of January of the following year for
verification; and (b) instruct the Barangay Treasurer to maintain an updated file
of IAR.

Non-compliance with Government Procurement Reform Act

3. The Barangay did not prepare Annual Procurement Plan, hence, resorted mostly to
shopping and small value procurement in the purchases of goods and infrastructure
projects without reasonable assurance that the most advantageous prices and terms were
obtained for the government contrary to Revised Implementing Rules and Regulations
(RIRR) of RA No. 9184. Moreover, it was not PhilGEPS registered hence, was not able to
post the PhilGEPS website the required procurement documents for maximized
transparency of government procurements.

3.1 The governing principles on the procurement functions of government agencies

are prescribed under Republic Act No. 9184, the law enacted to modernize, standardize,
and regulate the procurement activities of the government. Basically, the procurement
 must be properly planned, transparent, competitive and, as a general rule, be conducted
through public bidding, except as otherwise provided for by law.

3.2 Review and examination of records and documents pertinent to the procurement
activities of the Barangay for CYs 2016 and 2017 showed its non-compliance with the
following basic principles of the Government Procurement Law:

Specific Laws and

Subject Provisions
Regulations
General Mode of Section 10 of RIRR All procurement shall be done through Competitive
Procurement- of RA No. 9184 Bidding, except as provided for in Article XVI of this
Public Bidding Act.

Alternative Mode of Section 48.1 of Subject to the prior approval of the Head of the
Procurement- RIRR of RA No. Procuring Entity, and whenever justified by the
9184 conditions provided in this Act, the procuring entity
may, in order to promote economy and efficiency
resort to any of the alternative methods of
procurement. In all instances, the procuring entity
shall ensure that the most advantageous price for the
Government is obtained.

Shopping may be resorted to when there is an

Shopping and unforeseen contingency requiring immediate
Small Value Section 52.1(a and purchases, and
Procurement b) of the RIRR of procurement of ordinary or regular office supplies and
No. RA 9184 equipment not available in the Procurement Service.

3.3 The following lapses were noted in audit

(a) Non -preparation of an Annual Procurement Plan

3.4 The Annual Procurement Plan (APP) is the document that consolidates the various
Program Project Management Plans (PPMPs) submitted by the various end-user units
within the LGU. It reflects the entirety of the procurement activities that will be
undertaken by the procuring entity within the calendar year (Government Procurement
Policy Board Cir. 02-2008). In the consolidation of PPMPs, the Bids and Award
Committee (BAC) may adopt a strategy through which similar items of procurement
are packaged into one procurement undertaking and under a single PPMP, in which
the original PPMPs shall be consolidated and revised. Also, during the review of the
PPMPs, the BAC shall determine the nature of the procurement, whether they be
procurement of goods, infrastructure or consulting services.

3.5 Our audit showed that the BAC failed to prepare the consolidated APP for CYs 2016
and 2017 which should have served as the basis for the planned procurement activities
of the Barangay for these years, thereby defeating the requirement of Section 7, Rule II
of RIRR No. 9184.

(b) Non-adoption of public bidding

3.6 Competitive bidding is a method of procurement which is open to any interested and
qualified party. This process treats bidders equitably and provides fair ground for
competition among them, thereby ensuring that no single bidder significantly influences
the outcome of the bidding. Competition among bidders will redound to the most
beneficial terms to the government.

3.7 Based on purchase requests and purchase orders (POs) examined for CYs 2016 and
2017, various supplies and construction materials were procured in piecemeal using
“shopping” and/or small value procurement, which entailed additional time and effort
because the disbursement vouchers and supporting documents were individually
prepared by the parties concerned. Also we observed that the small value procurement
 mode was resorted to although the requisites for its application were not present. Such
methods lacked the widest publicity needed for competition because the drawing of list
of participating suppliers/contractors was left to the discretion of the canvasser. In
effect, there was no assurance that only technically, financially and legally eligible or
capable suppliers or contractors were chosen for.

3.8 The foregoing conditions clearly showed that the provisions under Section 10 of RIRR
of RA No. 9184 of prescribing public bidding as the general mode of procurement was
disregarded by the Barangay in almost all of its procurement activities.

(c) Non-PhilGEPS registered

3.9 To promote transparency and efficiency, information and communications technology

shall be utilized in the conduct of procurement procedures. The Philippine Government
Electronic Procurement System or PhilGEPS shall serve as the primary and definitive
source of information on government procurement. (Sec. 8.1.1, Revised Implementing
Rules and Regulations of R.A. 9184)

3.10 Verification disclosed that the Barangay was not PhilGEPS registered, thus the
Barangay was not able to post Invitations to Bid, Notice of Award and Notice to
Proceed thereto, contrary to Section 8.3.1 of the Revised Implementing Rules and
Regulations (RIRR) of RA No. 9184. Consequently, the desirable level of transparency
and competitiveness in all procurements was not attained.

3.11 Upon inquiry of the audit team, it was disclosed that the said lapses were due to
lack of knowledge of the barangay officials with the provisions of procurement law,
thus it failed to observe and apply the same.

3.12 We recommend that the Punong Barangay: (a) direct the BAC to prepare a
complete Barangay Annual Procurement Plan containing all the requirements of the
Barangay, procurement schedule and mode of procurement; (b) instruct the BAC to
subject all procurements to public bidding unless the conditions are met for the use
of appropriate alternative mode of procurement; and (c) cause the registration of
the Barangay in the PhilGEPS so that the Invitations to Bid, Notice of Award and
Notice to Proceed shall be posted accordingly.

Gender and Development (GAD)

4. The Barangay failed to integrate the Gender and Development programs/projects in its
regular activities to pursue women’s empowerment and gender equality as required in
Joint Circular No. 2004-1 of the DBM, the NEDA and the National Commission on the
Role of Filipino Women, thus, gender issues within the community were not properly
addressed.

4.1 In line with the national goal of the Philippine Government to pursue women’s
empowerment and gender equality in the country, all heads of
Departments/Agencies/State Universities and Colleges and Other Offices of the
National Government, Government Owned and/or Controlled Corporations, and all
Others Concerned were tasked to implement Gender and Development plan. Relative
hereto, Joint Circular No. 2004-1 of the DBM, the NEDA and the National
Commission on the Role of Filipino Women was formulated to provide guidelines in
the implementation thereof, pertinent provisions are as follows:

Section 4. Agencies shall formulate their annual GAD plans and budgets within the context of
their mandate and overall plans and programs. The annual GAD plan and budget shall be geared
towards the achievement of the desired outcomes and goals as identified in the Framework Plan
for Women. The Philippine Plan for Gender-Responsive Development (PPGD), the Beijing
Platform for Action (BPA) and the Convention on the Elimination of All Forms of Discrimination
Against Women (CEDAW) shall serve as key documents to guide the preparation of the agency
annual GAD plan and budget.
 Section 2.4 Pursuant to the annual General Appropriations Act, agencies are tasked to
formulate a GAD plan and to implement the same by utilizing at least five percent (5%) of
their total budget appropriations.

Section 4. 8 Agencies shall prepare their annual GAD accomplishment reports for the
previous year that contain actual accomplishments vis-à-vis targets as well as the amounts
utilized for the achievement of such.

Section 4.10 The Department of Budget and Management (DBM) shall ensure that agencies
submit their annual GAD plans and budgets as incorporated in their agency budget
proposals, and GAD accomplishment reports. It shall also consider, in the conduct of Agency
Performance Review, the implementation of the GAD plan and budget. X xx…

4.2 Verification of the approved annual budget of the Barangay revealed that there
were no funds allocated for the implementation of the Gender and Development. Thus,
the management only identified programs, projects and activities which they attributed
to the 5% percent requirement. Hence, the requirement of the law to pursue women
empowerment and gender equality issues within the community were not properly
addressed.

4.3 Interview revealed that the Barangay officials concerned were not fully informed
of the above-mentioned Joint Circular.

4.4 We recommend that management comply with the provisions of Joint

Circular No. 2004-1 by allocating and utilizing at least 5% of their total budget
appropriations for GAD related programs/projects to be attributed from the
regular activities of the barangay.

Non-compliance with LDRRMF rules and regulations

5. The Barangay failed to comply with the accounting and reporting guidelines on the
preparation and submission of report on sources and utilization of the Local Disaster
and Risk Reduction Management Fund (LDRRMF) and to transfer
unexpended/unobligated balance of the said fund to a special trust fund, thereby
violating COA Circular No. 2012-002 dated September 12, 2012.

5.1 For CYs 2016 and 2017, the Audit team noted that the Barangay had failed to
prepare the monthly report on sources and utilization of Local Disaster Risk Reduction
Management Fund (LDRRMF), hence, submission of the said report to the COA office
was not met. This is not in compliance with paragraph 5.1.5 of COA Circular No. 2012-
002 which requires that “a report on sources and utilization of Disaster and Risk
Reduction Management Fund (DRRMF) shall be prepared and certified correct by the
Local Accountant. The Local Disaster and Risk Reduction Management Officer
(LDRRMO) shall submit the report on or before the 15th day after the end of each
month through the Local Disaster and Risk Reduction Management Council and Local
Development Council (LDC) to the COA Auditor of the LGU. Thus, releases and
utilization of the said fund was not monitored.

5.2 Likewise, albeit appropriating and disbursing the Calamity Fund for the current
year, review of the Statement of Financial Position disclosed that no Trust Liability
account for the unexpended balances of the LDRRMF for CYs 2016-2017 was shown
thereto, reflecting the failure of the Municipal Accountant to transfer the unspent
portion/balance of the said funds during the said years to the special trust fund in
violation of Paragraph 4.4 of COA Circular No. 2012-002 which provides that the
unexpended LDRRMF shall accrue to a special trust fund solely for the purpose of
supporting disaster risk reduction and management activities of the LDRRMC within
the next five (5) years. The Local Disaster Risk Reduction Management Council
(LDRRMC) shall decide on the use of the unexpended balance of the LDRRMF which
shall be incorporated in the Local Disaster Risk Reduction Management Fund
Investment Plan (LDRRMFIP).
 5.3 The barangay failed to transfer the unexpended amount to the special trust fund
resulting in the overstatement of the government equity account and the understatement
of the liability account in the books. The Municipal Accountant explained that they were
unable to transfer the unexpended balance because the barangay was not aware if they are
allowed to create a trust fund and a separate bank account for that purpose.

5.4 Significantly, we noted that there was no Barangay Disaster Risk Reduction and
Management Officer designated yet which should have been the focal person in the
planning, execution and reporting of disaster-related activities.

5.5 We recommend that the Punong Barangay (a) designate a Barangay Disaster
and Risk Reduction Management Officer who will be responsible in the preparation
of the report on the report on sources and utilization of LDRRMF and submission
of the same to COA office; and (b) require the Barangay Treasurer to transfer of
the unexpended balances of the DRRMF from CYs 2016-2017 to special trust funds.

Non-creation of Task Force on Youth Development and utilization of SK Fund

6. Owing to the lack of awareness of its officials, the Barangay failed to create a Task Force
on Youth Development that is mandated to formulate a Youth Development Plan and
ensure that programs and projects in the Plan are implemented in the Barangay and that
SK Fund is utilized solely for youth development, as required under the Implementing
Rules and Regulations (IRR) of Republic Act (R.A.) No. 10632, thus, resulted in the
utilization of SK Fund to non-youth-related development programs and projects.

6.1 Rule 6, Section 2 of the IRR of RA 10632, also known as “An Act to Postpone
the Sangguniang Kabataan (SK) Elections on October 28, 2013, amending for the
Purpose RA 9340, and for Other Purposes”, requires the creation of a Task Force on
Youth Development in every barangay nationwide composed of the Chairperson of the
Youth and Sports Development Committee and eight (8) members. The Task Force is
mandated to formulate a Youth Development Plan and ensure that programs and
projects in the Plan are implemented in the barangay and that SK funds are utilized
solely for youth development.

6.2 Furthermore, Rule 5, Section 2.a of the same IRR, states that the SK funds shall
be allocated to youth development programs and projects such as, but not limited to
following:

1. Capacity-Building
 Leadership Training/ Youth Camp Program
 Employability Skills Training
 Value Formation, Citizenship/ Nation-Building Seminar
2. Health Services and Adolescent Reproductive Health Program
3. Out of School Youth Programs
4. Socio-Cultural and Sports Development
5. Disaster Preparedness and Climate Change Adaptation
6. Other similar youth-related development programs and projects

6.3 Verification of related documents disclosed that the amounts of ₱173,915.40 and
₱ 176,065.20 were allocated for SK activity for CYs 2016 and 2017, respectively.
However, these were not in accordance with the aforementioned regulation since these
included activities other than those youth development programs and projects as stated
above. This was attributed to the non-creation of a Task Force on Youth Development
which is mandated to formulate a Youth Development Plan and ensure that programs
and projects in the Plan are implemented in the barangay and that SK funds are utilized
solely for youth development.
 6.4 Further review of disbursements revealed that SK fund totalling ₱ 406,317.93 of
the total appropriated budget for CYs 2016 and 2017 was utilized for the that were the
limited only to sports related activities. The amount was spent for the following:

Particulars Amount
2016
Sports Fest 307,744.00
Clean and Green 9,750.00
2017
Sports Fest 51,440.00
Payment for Electronic Score Board 37,383.93
Total 406,317.93

6.5 Although undeniably the activity is youth-oriented still the SK could have done
better by channelling their appropriated fund to other equally worthy activities that
have more lasting impacts to the youth in the likes of capacity building activities that
would prepare them to become able partners in barangay development.

6.6 The barangay officials explained that they were not aware of the regulations on
the creation of a Task Force and the priority youth development programs and projects.

6.7 We recommend that the Punong Barangay (a) create a Task Force on Youth
Development and thereafter, require it to formulate a Youth Development Plan in
accordance with the regulations and (b) utilize the SK fund for youth-related
programs and projects that are supportive of the objectives of developing youth
capabilities.

Non-compliance with Solid Waste Management Program

7. The Barangay failed to coordinate efforts with the Municipal Government of Laur for the
strict implementation of the Implementing Rules and Regulations of Republic Act No.
9003 or the Solid Waste Management Act of 2000; hence, the total protection of the
environment and general welfare of the constituents has not been substantially attained.

7.1 Provisions of Republic Act No. 9003 or Solid Waste Management Act of 2000
clearly states that all LGUs are mandated to adopt a systematic, comprehensive and
ecological solid waste management program which shall ensure protection of public
health and environment; utilize environmentally sound methods; set targets and
guidelines for solid waste avoidance and reduction; ensure proper segregation,
collection, transport and storage of solid waste.

7.2 The law requires that the City or Municipality and its component Barangay to
coordinate efforts with regards to its implementation. Furthermore, Section 17 (c) of the
act identifies the function of the each component Barangay in its effective
implementation:

Collection and Transfer - The plan shall take into account the geographic subdivisions
to define the coverage of the solid waste collection area in every barangay. The
barangay shall be responsible for ensuring that a 100% collection efficiency from
residential, commercial, industrial and agricultural sources, where necessary within its
area of coverage, is achieved. Toward this end, the plan shall define and identify the
specific strategies and activities to be undertaken by its component barangays, taking
into account the following concerns:

1. Availability and provision of properly designed containers or receptacles in

selected collection points for the temporary storage of solid waste while awaiting
collection and transfer to processing sites or to final disposal sites;
2. Segregation of different types of solid waste for re-use, recycling and
composting;
 3. Hauling and transfer of solid waste from source or collection points to
processing sites or final disposal sites;
4. Issuance and enforcement of ordinances to effectively implement a collection
system in the barangay; and
5. Provision of properly trained officers and workers to handle solid waste
disposal.

7.2 For CYs 2016 and 2017, verification of compliance with the above-mentioned
regulations disclosed the following deficiencies:

a. Programs/projects on the mandatory segregation of wastes at source were not done;

b. Funds were not allotted for the possible purchase of equipment for collection of
wastes/garbage materials, thus, collection and transporting to municipal dumpsite
were not done properly.

c. The barangay regulations on the proper garbage disposal with corresponding

penalties and surcharges for violator were not covered by an approved Barangay
Ordinance, hence, cannot be strictly enforced in the Barangay; and

d. No personnel had been trained or even assigned to properly handle solid waste
disposal.

7.3 We gathered in audit that the rules and regulations on environmental protection
particularly in waste segregation and collection were not given proper attention. The
policies were disseminated verbally to the constituents through meetings conducted by
Barangay officials; however, the traditional practices of garbage collections and disposal
were still carried out individually.

7.4 We recommend that the Punong Barangay prioritize the implementation of the
Solid Waste Management Act of 2000 or the IRR of Republic Act No. 9003 by: (a)
formulating programs/projects that would motivate the constituents to observe the
proper segregation of wastes; (b) allocating funds if available, for the purchase of
equipment which can be used in the collection of wastes/garbage; and (c) conducting
regular barangay meetings/trainings for solid waste management. We also
recommend that concerned Sangguniang Barangay enact the necessary Barangay
Ordinance on the implementation of the Solid Waste Management Act and Republic
Act No. 9003.
Inadequate collection of revenue from local sources

8. The Barangay did not exercise its taxing and revenue-raising powers to generate
additional income as authorized under Section 152 of R.A. No. 7160, rendering Barangay
to be mainly dependent on the internal revenue allotment to finance its operations and
depriving its constituents to further benefit therefrom.

8.1 Section 152 of R.A. No. 7160 provides that the barangay may levy the following taxes,
fees and charges which shall exclusively accrue to them:

a) Taxes on stores or retailers with fixed business establishments with gross sales or receipts
of the preceding calendar year of x x x and Thirty Thousand (P30,000.00) or less in the
case of municipalities at a rate not exceeding one percent (1%) on such gross sales or
receipts;

b) Services fees or charges for services rendered in connection with the regulation or the use
of barangay owned properties or service facilities such as palay, copra or tobacco dryers;

c) Barangay Clearance fee to the issuance of any municipal or city license or permit for any
business or activity in the barangay; and
 d) Other fees and charges on the following:
1. Commercial breeding of fighting cocks, cockfights and cockpits;
2. Place of recreation which charge admission fees, and
3. Billboards, signboards, neon signs, and outdoor advertisements.

8.2 Audit disclosed that out of the actual gross revenue of ₱ 2,669,021.50 of the barangay for
CY 2017, ₱ 2,586,052.00 or 97% was for its share on its Internal Revenue Allotment (IRA).
Consider the table below:

Particulars Amount
Real Property Tax ₱ 80,589.50
Internal Revenue Allotment 2,586,052.00
Permit and Licenses 680.00
Service Income 1,700.00
Total ₱ 2,669,021.50

8.3 As shown, other than the IRA as sources of revenue, there were small collections made
for taxes, services fees and barangay clearance and certification fees due to the failure of the
Sangguniang Barangay to enact revenue-generating measures and the barangay to
implement.

8.4 Interview with the barangay officials revealed that they opted not to collect charges or
fees because most of their clients are indigents.

8.5 The taxing power of the barangay under R.A. No. 7160 aims to collect other additional
sources of income so that it may become less dependent to the Internal Revenue Allotment
(IRA) provided by the National Government and thus have more financial flexibility in the
conduct of its mandate.
8.6 For not exercising their taxing power, the barangay officials were not able to augment
their budget for the implementation of more projects and delivery of basic services, the
benefits from which would redound to their constituents
We recommend that the Sangguniang barangay exercise its taxing power under Section
152 of R.A. No. 7160 to generate additional income for barangay development projects
and more extensive delivery of basic services.

Report of Accountability for Accountable Forms (RAAF)

9 The non-preparation of the required Report of Accountability for Accountable Forms for
receipts and deposits under the Systems and Procedures Manual on the Management of
Barangay Funds and Properties (SPMMBFP) hindered the monitoring and verification of
the accountability on collections and accountable forms (AFs) of the Barangay Treasurer.
9.1 SPMMBFP, among others, provides the following instructions:
a. The Barangay Treasurer shall prepare the Report of Accountability for Accountable
Forms (RAAF) under his custody;
b. The Barangay Treasurer (BT) shall submit the certified consolidated RAAF to the
Barangay Record Keeper; and
c. The Barangay Record Keeper shall submit the same to the City/Municipal Treasurer
on the first week of every month.

9.2 The RAAF is required to be accomplished monthly under the said Manual for the purpose
of monitoring the usage of each of the accountable forms under the accountability of the
Barangay Treasurer.

9.3 Verification showed that the BT did not prepare the required RAAF which resulted in the
difficulty of monitoring and verifying his accountability on collections and accountable
 forms (AFs). Furthermore, any error committed in the issuance of the accountable forms and
any act of fraud on the use thereof could not be timely detected.

9.4 We recommend that the Punong Barangay instruct the Barangay Treasurer to
prepare monthly Report of Accountability for Accountable Forms to facilitate
monitoring and verification of his accounatability.
Utilization of the 20% Development Fund

10. The Barangay disbursed its 20% Development Fund appropriations for CYs 2016 and
2017 totaling ₱ 440,845.20 for expenditures which partook the nature of investment or
capital expenditures pursuant to the policies and guidelines under the DILG-DBM
Joint Memorandum Circular No. 2017-001.

10.1 Section 287 of the Local Government Code provides that each local government unit
shall appropriate in its annual budget no less than twenty percent (20%) of its annual internal
revenue allotment for development projects.

10.2 Further, Joint Memorandum Circular No. 2017-1, 2011 of the DILG and DBM provides
the guidelines on the appropriation and utilization of no less than 20% of the Internal
Revenue Allotment (IRA) for development projects aimed at enhancing transparency and
accountability of Local Government Units in undertaking development in their respective
localities including projects for addressing and responding to natural and man-made disaster
and calamities.

10.3 Section 5 of the DILG and DBM Joint Circular Memorandum No. 2017-1 stipulates that
it is the responsibility of every Provincial Governor, City and Municipal Mayor and Punong
Barangay to ensure that the 20% of the IRA is optimally utilized to help achieve desirable
socio-economic development and environmental outcomes.

10.4 The utilization schedule of 20% Development Fund submitted to the Audit Team
reflected the following developmental projects/programs implemented for CYs 2016 and
2017, to wit:

Particulars Amount
2016
Repairs and Maintenance of Roads & Canals 30,240.00
Repair and Maintenance of Day Care Center 96,807.00
Drainage System 29,103.00
2017
Construction of Drainage System 250,687.20
Repair and Maintenance of Day Care Center 34,008.00
Total 440,845.20

10.5 We recommend that the management continue to finance its priority development
projects and programs and ensure that the 20% DF is appropriated for projects which
partake the nature of investment for the enjoyment and benefits of its constituents.

Land without title

11 Due to inaction of barangays officials and absence of complete transfer documents, the
land where barangays structures are erected is not yet registered in the name of the
Barangay, thus occupation and ownership may become the subject of legal controversy.

11.1 Section 148 of COA Circular No. 92-386 requires that every Local Chief
Executive (LCE) shall be immediately responsible for the proper and effective use and
management of real estates owned or titled in the name of the local government unit. He
 shall ensure that real estates under his responsibility are registered under the Torrens Title
System.

11.2 Inspection of properties, showed that the Barangay owned and maintained the
barangay hall, day care center, plaza and the basketball court. However, we noted that all of
these were constructed in a lot that is not yet registered in Barangay’s name. Furthermore,
examination of the books of the barangay disclosed that there was no lot or land recorded
therein.

11.3 Interview with the barangay officials disclosed that the subject lot was acquired
through donation and the donor allowed the Barangay to use the property. They explained
further that the documents transferred to them by the previous officials were incomplete to
perfect the registration. They did not even know that land has not yet been recorded in the
books.

11.4 The absence of documents pertaining to the legal ownership of the subject lot/land
and the inaction to register it under the Barangay’s name may place the barangay at risk of
losing claims on fixed assets therein should it found out later that the land/lot is not
transferable or the mode of acquisition thereof is invalid.

11.5 We recommend that the current officials of the barangay determine if it is the
rightful owner of the land/lot in question and stop constructing projects therein unless
the issue on ownership is settled. Take appropriate action to retain ownership for the
barangay on the structures built thereon.

Irregularities on the use of Motor Vehicles and Equipment

12. The Barangays’s Motor Vehicles were (a) not marked “For Official Use Only”; (c) not
registered with the Land Transportation Office (LTO); and (d) not insured with the
Government Service Insurance System (GSIS), contrary to existing rules and
regulations. Hence, may cast doubt on the ownership of the LGU on the subject
vehicles; and may result to possible abuse or unauthorized use.

12.1 Accountability, as defined in the Glossary of Terms for State Auditors, is “a

person’s obligations to carry out responsibility and be answerable for decisions and
activities.” One of the responsibilities of a government employee is to practice
accountability in safekeeping properties that are under his or her custody. Thus, Section
105 of PD 1445 expressly states that:

“Every public officer, whose duties permits or requires the possession or custody of
public funds and property, is accountable and responsible for the safekeeping thereof. He
is liable for all losses, damages or deterioration occasioned by negligence in the keeping
or use of the property, whether or not it be at the time in his actual custody.”

12.2 Further, COA Circular 92-386 prescribes the following rules and regulations on
property management particularly in the Local Governments Units:

Sec. 142. Primary and Secondary Accountability for Supplies or Property. –Every head
of department of office of a local government unit shall be primarily accountable for all
supplies or property assigned to his department or office. The person or persons
entrusted with the possession or custody of supplies or property under the primary
accountability of the head of a department or office shall be immediately accountable to
said officer.

Sec. 149. Measure of Liability of Persons Accountable for Supplies or Property. –The
person in possession of or having custody or control of supplies or property is
immediately accountable therefor and shall be liable for its money value in case of
illegal, improper or unauthorized use or misapplication thereof, by himself or any other
person for whose acts he may be responsible, and he also shall be liable for all loss,
 damage, or deterioration occasioned by negligence in the keeping or use of such
property.

12.3 On November 28, 2017, the Audit Team conducted an ocular inspection of the
Motor Vehicles, owned by the each Barangay and noted the following deficiencies:

a. Barangay owned motor vehicles and equipment were not properly marked “FOR
OFFICIAL USE ONLY”

Section 361, Item e.2 of GAAM Volume I and COA Circular No. 75-6 dated
November 7, 1975 provide that All motor vehicles owned by the government
should be plainly marked, “For Official Use Only”, under which should be written
the corresponding name of the Agency operating or using the same. The mark
should appear on each side of the motor vehicle. When there is no sufficient space
on each side, the same should appear at the back or the front just below the
windshield of the motor vehicles.

Inspection of motor vehicles and equipment revealed that except for the
ambulance, none was marked with “For official use only” contrary to the rules
and regulations, thus failing to impose deterrent from appropriating the said
vehicles for personal use.

b. Non-registration and non-renewal of registration of some vehicles with the LTO

and non-insurance thereof with the GSIS

Section 5 of Republic Act No. 4136 provides that no motor vehicle shall be used
or operated on or upon any public highway of the Philippines unless the same is
properly registered for the current year in accordance with the provisions of this
Act.

Republic Act No. 656 also known as the “Property Insurance Law” states that In
order to indemnify or compensate the Government as defined in this Act for any
damage to, or loss of, its properties due to fire, earthquake, storm, or other
casualty there is hereby established the “Property Insurance Fund”, which shall
consist of all moneys resulting from the liquidation of the insurance constituted in
section 340 of the Revised Administrative Code and from premiums and other
incomes.

Our verification of the documents maintained by the Treasurer disclosed some

lapses with regard to their registration and insurance. As noted, the LGU failed to
register the vehicle in the LTO, the agency failed to obtain insurance from the
GSIS contrary to the above cited provisions of the law.

12.4 Failure to register the government motor vehicle in LTO exposes the Barangay to
surcharges and penalties for late registration and undue risk of paying damages in case of
accidents as well as non-indemnification of property loss and injury that might arise from
any calamity, casualty, and other adverse contingency.

12.5 The Barangay Treasurer who is also the property custodian justified that she is not
well-informed on the aforecited regulations. She also commented that due to lack of
manpower to monitor the properties of the Municipality.

12.6 We recommend the Management direct the Barangay Treasurer to register all
LGU-owned motor vehicles with the LTO and insure the same with the GSIS as
required by law and existing regulation and mark the same “FOR OFFICIAL USE
ONLY”.

May we have your comments on the foregoing observation within fifteen (15) calendar
days from receipt hereof.
 HADIYAH A. ALIÑO
OIC-Audit Team Leader

VIRGINIA A. YACAT
OIC-Supervising Auditor

PROOF OF SERVICE OF COPIES OF AOM

Received by
Name Position/Office Date
(Signature )
1. Guillermo S. Mariano Punong Barangay
2. Angelita L. Dullas Brgy. Treasurer