Taytay09 Audit Report

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
on the
Municipality of Taytay, Palawan
For the Year Ended December 31, 2009

COMMISSION ON AUDIT
Audit Group J
Office of the Supervising Auditor
Province of Palawan
July 30, 2010
Hon. Evelyn V. Rodriguez

Municipal Mayor
Municipal Government of Taytay
Province of Palawan
Dear Mayor Rodriguez:
Pursuant to Section 2, Article IX-D of the Philippine Constitution and Section 43 of Presidential
Decree No. 1445, we transmit herewith the report on the financial and compliance audits on the accounts
and operations of the Municipal Government of Taytay, Palawan for the year ended December 31, 2009.
The audit was conducted to ascertain the propriety of financial transactions, compliance with
prescribed rules and regulations and the economical, efficient and effective utilization of resources. It was
also made to ascertain the accuracy of financial records and reports, as well as the fairness of the
presentation of financial statements.
We request that the comments and observations contained in the said report be fully addressed
and we would appreciate being informed of the actions taken in this regard within 60 days from receipt
hereof.
We acknowledge the cooperation extended to the Audit Team by the officials and staff of the
agency.
Thank you.
Copy furnished:
- Regional Director
Department of Interior and Local Government
Region IV
- Regional Director
Department of Budget and Management
Region IV
- The Bureau Director
Bureau of Local Government Finance
Region IV
- Secretary to Sangguniang Bayan
Taytay, Palawan
- Roberto V. Rodriguez
Former Municipal Mayor
EXECUTIVE SUMMARY
HIGHLIGHTS OF FINANCIAL OPERATION
For CY 2009, the Municipal Government of Taytay generated a total income of

P158,814,653.17 from local taxes, permits and licenses, service and business income, and
internal revenue allotment. Current appropriations for the year totaled P 159,564,100.70 of which
P 126,893,596.64 was obligated.
SCOPE OF THE AUDIT
Financial, Compliance and Value for Money Audits were conducted on the accounts and
operations of the Municipal Government of Taytay for Calendar Year 2009. The audit was
conducted to ascertain the fairness of the presentation of the financial statements and compliance
of the agency to laws, rules and regulations as well as the economical, efficient and effective
utilization of resources.
AUDIT OPINION ON THE FINANCIAL STATEMENTS
The Audit Team rendered a qualified opinion on the fairness of presentation of the
financial statements of the Municipal Government of Taytay. As discussed in Part II of the Audit
Report, the validity, existence and accuracy of Property, Plant and Equipment account worth P
134,147,338.33 as of December 31, 2009 could not be ascertained due to the failure of
management to conduct physical inventory.
SIGNIFICANT FINDINGS AND RECOMMENDATIONS
The following is the summary of significant audit findings and recommendations in the
audit of the Municipal Government of Taytay for the year 2009:
1. The Municipal Government carried out reclamation projects at Bgy. Poblacion,
Taytay without first securing the approval of the Philippine Reclamation Authority
(PRA) contrary to the provisions of Presidential Decree No. 1084 as amended by
Executive Order No. 525 and Executive Order No. 543.
The audit team emphasized strict observance of the provisions of PRA Administrative
Order No. 2007-2 and Presidential Decree No. 1084 as amended by Executive Order No.
525 and Executive Order No. 543. The audit team also recommends stoppage of any
construction by private individuals in the reclaimed area without contract or agreement
with the Local Government Unit.
2. The Municipal Government of Taytay failed to prepare the Annual Procurement

Program (APP) and the related Project Procurement Management Plan (PPMP) for
Current Year 2009 contrary to Sections 7.1 to 7.5 of RA 9184.
The Audit Team recommended that, henceforth, at the start of every budget period, the
end-user units of the Municipal Government of Taytay shall prepare their respective
PPMP for their different programs, activities and projects (PAPs). The PPMP shall then
be submitted to the Budget Office who shall evaluate each end-user’s submitted PPMP
and, if warranted, include it in the budget proposal for approval. A copy of approved
budget proposal and the corresponding PPMPs shall be submitted to the BAC Secretariat
for its review and consolidation into the proposed APP. As soon as the Appropriation
Ordinance becomes final, the end-user units shall revise and adjust the PPMP to reflect
the budgetary allocation for their respective PAPs. The revised PPMP shall be submitted
to the BAC, through its Secretariat, for the finalization of the modes of procurement
under the proposed APP.
3. The validity and existence of the accounts Property, Plant and Equipment
amounting to P 134,147,338.33 could not be ascertained and relied upon due to
incomplete ledger cards and stock property cards, prepare reconciliation between
thereon as required under Section 124 Volume I of the Manual on the New
Government Accounting System for LGUs and the Manual on Property
Custodianship.
The Audit Team recommended that the GSO and the Accounting Office should assign
personnel to work on the reconciliation of the Property, Plant and Equipment balances to
reduce the deficiencies. We also suggest that the Supply Officer computerize the PPE
records, maintain the same in accordance with the NGAs Chart of Accounts and hasten
the conduct of the physical count of the municipality’s PPE as these activities are of value
to the reconciliation process.
4. Some of the projects implemented and charged to the 20% Development Fund were
not in accordance with the guidelines provided for under Joint Memorandum
Circular No. 1, Series of 2005 of the Department of Interior and Local Government
(DILG) and the Department of Budget and Management (DBM) dated September
20, 2005.
The Audit Team recommended that the local chief executive should see to it that
implementation of these projects must be in compliance with the guidelines provided for
under Joint Memorandum Circular No. 1, Series of 2005 of the DILG and the DBM dated
September 20, 2005. Compliance with Section 70 of Volume I, NGAS Manual for LGUs
must likewise be observed in the succeeding preparation and submission of the required
reports.
5. Delay in the submission of the required monthly Pre-Closing and Quarterly Trial
Balances, its supporting schedules and related financial statements by the
Accounting Office precluded the audit team to review them and detect errors and
discrepancies, if any, in violation of Section 70 & 73, Volume I, NGAS Manual for
LGUs.
The Audit Team recommended that the local chief executive should require the Municipal
Accountant to immediately submit the financial reports, other reports and accounts
already due for submission. Compliance with Section 70 of Volume I, NGAS Manual for
LGUs must be observed in the succeeding preparation and submission of the required
reports.
6. The Annual Budget for Gender and Development of the Municipality of Taytay for
CY 2009 was below the minimum 5% of total appropriations as mandated under
Section 4.4 of the DBM/NEDA/NCRFW Joint Circular No. 2004-1, thereby limiting
the programs, projects and activities that promote gender-responsive governance,
protect and fulfill women’s human rights, and promote women’s economic
empowerment.
Management was enjoined to comply with the provisions of DBM/NEDA/NCRFW Joint

Circular No. 2004-1 in the implementation of Gender and Development Program in the
ensuing year.
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS
Of the ten (10) audit recommendations embodied in the 2008 Annual Audit Report, eight
(8) were fully implemented, none were partially implemented while two (2) were not
implemented during the year.
TABLE OF CONTENTS
SUBJECT PAGE NO.
Part I - Audited Financial Statements
 Audit Certificate ………………………………………………………… 1

 Statement of Management Responsibility for Financial Statements …… 2
 Consolidated Balance Sheet ……………………………………………. 3
 Consolidated Statement of Income and Expenses ……………………… 6
 Consolidated Statement of Cash Flows ………………………………… 10
 Notes to Financial Statements ………………………………………….. 11
Part II - Detailed Findings and Recommendations
 Financial and Compliance Audit ……………………………………….. 19

 Value for Money Audit ……………………………………………….... 24
 Unsettled Suspensions, Disallowances and Charges …………………… 26
Part III - Status of Implementation of Prior Year’s Audit

Recommendations …………………………………………………………….. 27
Part IV - Annexes
 Annex A – Consolidated Balance Sheet ……………………………….. 32

 Annex B – Consolidated Statement of Income and Expenses ………..... 35
 Annex C – Consolidated Statement of Cash Flows ……………………. 39
 Annex D – Status of Appropriations, Allotments and Obligations
for Current Appropriations, 20% Development Fund
and Special Education Fund ……………………………….. 40
PART I – AUDITED FINANCIAL STATEMENTS

COMMISSION ON AUDIT
Office of the Audit Team Leader
Audit Team IV - Audit Group J
Province of Palawan
AUDIT CERTIFICATE
HON. ROBERTO V. RODRIGUEZ

Municipal Mayor
Taytay, Palawan
Pursuant to Section 2, Article IX-D of the Philippine Constitution and pertinent provisions of Presidential
Decree No. 1445, we have audited the accompanying Balance Sheet of the Municipal Government of Taytay,
Province of Palawan as of December 31, 2009, and the related Statement of Income and Expenses and Statement of
Cash Flows for the year then ended. These financial statements are the responsibility of the Municipal Government
of Taytay. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with laws and
generally accepted state auditing standards. These standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material misstatement/s. Our audit included,
examining on a test basis, evidence supporting the amount and disclosures in the financial statements. It also
included assessing the accounting principles used and review of significant estimates made by management as well
as evaluating the over-all financial statements presentation. We believe that our audit provides reasonable basis for
our opinion.
The validity and existence of the accounts Property, Plant and Equipment amounting P 134,147,338.33
could not be ascertained and relied upon due to incomplete physical count on these properties, failure to maintain
supply, property or equipment ledger cards and stock property cards, prepare reconciliation between Accounting
and General Services Offices, prepare and submit inventory reports thereon as required under Section 124
Volume I of the Manual on the New Government Accounting System for LGU’s and the Manual on Property
Custodianship.
In our opinion, except for the effects of such adjustment if any, as might have been determined
to be necessary had we been able to examine evidences regarding the matter discussed in the preceding
paragraph, the financial statements referred to above present fairly the financial position of the Municipal
Government of Taytay as of December 31, 2009 and the results of its operations and cash flows for the year
then ended in accordance with applicable laws, rules, and regulations and in conformity with generally accepted
accounting principles.
April 5, 2010
NOTES TO FINANCIAL STATEMENTS
1. General Agency Profile
1.1. From the Location Map of the Municipality of Taytay, one can easily deduce the
strategic importance of the municipality to the province of Palawan. Located on the
western portion of the Philippines, the Municipality of Taytay comprises one of the
northern towns of the Province of Palawan. It is bounded on the north by the
Municipality of El Nido, on the south by the Municipalities of Roxas and Dumaran
and on the southwest by the Municipality of San Vicente.
1.2. Specifically, its relative geographic location is 10 degrees and 30’ to 11 degrees and
5’ north latitude, and 119 degrees 10’ and 119 degrees 40’ east longitude. In terms
of natural boundaries, Taytay is bounded on the east by Taytay Bay and on the west
by South China Sea. The municipality is about 2 hours away from the Municipality
of Roxas, one of the major market centers in the northern portion of Palawan.
Puerto Princesa, the province’s premiere city and the largest market center in the
province is quite distant from the Municipality of Taytay. On an average daily trip
to the city, travel time ranges from seven hours (if weather cooperates) to 12 hours
during rainy season. This is the primary reason why economic activities in Taytay
have difficulty developing into mature and prosperous stage as access to markets is
hindered by poor road accessibility.
1.3. Taytay has total land area of 139,050 hectares. Barangays Abongan and Poblacion
have the largest land area with 9,975.5 and 9,275.8 hectares respectively. On the
other hand, Barangay Silangan on the northern part of the municipality has the least
land area with only 1,448.5 hectares followed by Barangay Tumbod with 1,511
hectares.
VISION STATEMENT
1.4 By 2010, all development programs formulated be implemented and sustained for
the transformation of Taytay as the hub of governance, socio-economic services,
and environmental management and protection in Northern Palawan under a
responsive leadership supported and appreciated by all the stakeholders,
complemented by a peaceful, just, environmentally conscious, economically
progressive and dynamic community of diverse characters, culture and traditions.
This means that:
Taytay as a hub of governance, socio-economic services and environmental

management and protection:
a. Center of government offices in Northern Palawan;

b. Infrastructure facilities and services are delivered timely, effectively and
efficiently;
c. Improved basic social and welfare services (e.g. education, health, & nutrition);
and
d. Enhanced agricultural production.
Taytay under responsive leadership will:
a. Promote active community participation;

b. Proactively respond to current and future needs of the community; and
c. Support and appreciate the community’s efforts.
MISSION STATEMENT
1.5 Deliver and provide adequate, equitable, timely, effective and efficient municipal
government services and facilities to empower Taytayanos and development
oriented stakeholders with enhanced and sustainable resources managed through
responsive and proactive leadership.
DEVELOPMENT GOALS & STRATEGIES
GOALS:
To attain the status of “La Estrella Del Norte” of Palawan where the empowered
community is peaceful and economically stable with high regard to the
environment through a responsive and proactive governance; where the services
and facilities lead to prominence of leadership on governance, socio-economic
services and environmental management and protection.
STRATEGIES:
To attain the status of the Estrella Del Norte, the municipal government shall
observe the following developmental strategies:
 responsive governance complemented with one revitalized & strengthened

bureaucracy;
 proactive response to current and future sectoral aspirations & needs;
 infra services & facilities leading to other sectoral development;
 modernized environment friendly local government machineries;
 active mobilization of healthy empowered community through advocacy and
local governance participation;
 foreign investment and financing for major development efforts;
 sharing and pooling of resources and efforts on the municipal corridors with
neighboring communities; and
 enhancement of agriculture & small scale to medium industry development
through exposures and formal technology transfers.
2. Summary of Significant Accounting Policies
2.1 Basis of Preparation
The accompanying consolidated financial statements are prepared in accordance

with generally accepted state accounting principle and standards. Circulars and
guidelines issued by the Commission on Audit, Department of Budget and
Management, Commission on Civil Service and other government agencies are
being followed.
The straight line method of depreciation was followed. No depreciation charged

to both public infrastructure and the infrastructure projects under construction.
For all assets subject to depreciation, it was computed on the month following the
acquisition date.
Expense method was used in recording purchases of office supplies and spare
parts of heavy equipments and motor vehicles due to unavailability of stockroom.
Property, Plant and Equipments are carried at historical cost. Infrastructures under
Construction in Progress are valued following the accrual method of accounting.
Some accounts in the previous year’s financial statement were classified to

confirm with the new chart of accounts used in the current period pursuant to
COA Circular No. 2008-01 dated January 29, 2008.
3. CASH P 45,214,149.20
This account consists of:
Cash in Vault. These are the collections made on the last week of December deposited on
the following month. Portion of this account is the collection of former Municipal Treasurer, Mr.
Cornelio Monserate, which he failed to turn over to incoming Treasurer, Mr. Daniel Baylosis, in
the amount of P 564,327.85.
Time Deposit. The amount in this account represents unimplemented infrastructure

projects and capital outlay from previous year with a 2% interest per annum.
4. RECEIVABLES P 39,042,221.01
This account includes amount due from officers and employees, advances to contractors
(mobilization), receivables from barangay and real property tax receivable.
5. INVENTORIES P 0.00

6. PREPAYMENTS P 119,302.44
7. PROPERTY, PLANT AND EQUIPMENT P 134,147,338.33

Increase in Construction in Progress account represents cost of materials and labor
incurred in the construction of several identified priority projects at different barangays of the
Municipality such as Barangay Halls, Elementary and National High School Buildings, Multi-
Purpose Buildings and Pavements. The Municipality undertakes projects by administration
except for the construction of the municipal building extension which is being undertaken by
contract.
Increase in Property, Plant and Equipment accounts other than Construction in Progress
represents acquisitions during the year.
8. OTHER ASSETS P 157,100.00
Work/Other Animals consist of carabaos being used in the demo farm administered by the
Office of the Municipal Agriculturist. Breeding Stocks consist of goats and boar also being
sheltered in the demo farm.
9. CURRENT LIABILITIES P 14,956,844.62
10. LONG TERM LIABILITIES P 0.00

11. DEFERRED CREDITS P 36,080,710.45

12. GOVERNMENT EQUITY P 167,642,555.91

PART II - DETAILED FINDINGS AND RECOMMENDATIONS
Detailed Findings and Recommendations
A. Financial and Compliance Audit
1. The Municipal Government carried out reclamation projects at Bgy. Poblacion,

Taytay without first securing the approval of the Philippine Reclamation
Authority (PRA) contrary to the provisions of Presidential Decree No. 1084 as
amended by Executive Order No. 525 and Executive Order No. 543.
It has come to the attention of the audit team that the reclaimed lands near the
New Public Market of Taytay and near the Fort Santa Isabel was undertaken without
the required permit from PRA. Upon inquiry of the audit team, the Municipal
Government indeed carried out the project without the required PRA permit and has
just started to apply for CENRO Certification as one of the requirements of the
DENR for Area Clearance. DENR Area Clearance is one of the pre- requisites in the
application for PRA permit as enumerated in PRA Administrative Order (AO) No.
2007-2 or the Implementing Rules and Regulations (IRR) of Executive Order No. 543
dated June 24, 2006.
It was also noted that there was no Sangguniang Bayan Resolution authorizing
the local government unit to file for permit application with the PRA.
Section 3 of AO No. 2007-2 explicitly provides that no reclamation projects

shall be undertaken without the prior permit and approval thereof by the PRA or the
President of the Philippines. Other than the PRA or the President, there is no other
government agency or local government units which are authorized to approve
reclamation projects.
Section 7 of AO No. 2007-2 further provides that reclamation projects

undertaken without the required approval of the PRA or the President of the
Philippines shall be considered illegal and shall be forfeited to the State pursuant to
Presidential Decree No. 3-A.
Recently, there is an on-going construction of stalls at the reclaimed lot near

the New Public Market allegedly being financed by private individuals. No Contract
of Lease or any Memorandum of Agreement was executed between these private
individuals and the Municipal Government prior to the start of the construction which
may result to loss of earnings on the space or structures and invite squatting in the
area. Further, said project was not included in the agency’s Annual Investment Plan.
Considering the above premises, still the Municipal Government failed to

execute any action to suspend or discontinue said construction, inadvertently,
violating the provisions of Section 4(2) PD 1445 which states that “Government
funds or property shall be spent or used solely for public purposes.”
The audit team emphasizes strict observance of the provisions of PRA
Administrative Order No. 2007-2 and Presidential Decree No. 1084 as amended by
Executive Order No. 525 and Executive Order No. 543. The audit team also
recommends stoppage of any construction by private individuals in the reclaimed area
unless covered by a contract or agreement with the Local Government Unit.
2. The Municipal Government of Taytay failed to prepare the Annual Procurement

Program (APP) and the related Project Procurement Management Plan (PPMP)
for Current Year 2009 contrary to Sections 7.1 to 7.5 of RA 9184.
The Audit Team requested for a copy of the CY 2009 Annual Procurement Plan
(APP) and related Project Procurement Management Plan (PPMP) but the Municipal
Government simply submitted a summary list of quantities, unit measure and
description of common-use office supplies and equipment titled as CY 2009 APP. It
was found out that there were no PPMP prepared for each individual project.
Rule II of the Implementing Rules and Regulations of Republic Act 9184 has
the following provisions pertaining to procurement planning:
“Section 7.1. No government procurement shall be undertaken unless it is in

accordance with an approved Annual Procurement Plan (APP).
Section 7.2. Each procuring entity shall judiciously prepare, maintain and
update an APP for all its procurement, that shall include, for each individual project, a
Project Procurement Management Plan (PPMP).
Section 7.3. The PPMP shall include: a) the type of contract to be employed;
b) the extent/size of contract scopes/packages; c) the procurement methods to be
adopted, and indicating if the procurement tasks are to be outsourced as provided in
Section 53(e) of IRR-A of RA 9184; d) the time schedule for each procurement
activity; and e) the estimated budget for the general components of the contract e.g.,
civil works, goods and consultancy services. The APP shall include provisions for
forseeable emergencies based on historical records xxx.
Section 7.4. The preparation and updating of the PPMPs shall be the
responsibility of the respective Project Management Offices (PMOs) or end-user units
of the procuring entities, while the consolidation of these PPMPs into an APP shall be
lodged with the BAC Secretariat of that procuring entity. These units may avail of the
services of technical experts to review the individual PPMPs.
Section 7.5. Updating of the individual PPMPs and the consolidated APP for
each procuring entity shall be undertaken every six (6) months or as often as may be
required by the head of the procuring entity. Implementation of any project not
included in the procuring entity’s APP shall not be allowed.
The foregoing provisions were sustained by the Revised Implementing Rules
and Regulations of Republic Act 9184 approved by the Government Procurement
Policy Board (GPPB) on July 22, 2009.
Further, Volume I of the Procurement Manual for Local Government Units

specifically provides that the APP shall contain the following information: a) name of
the project/procurement; b) end-user unit; c) general description of the
project/procurement; d) the procurement methods to be adopted, and indicating if the
procurement tasks are to be outsourced as provided in Section 53(e) of IRR-A of RA
9184; e) the time schedule for each procurement activity; and the Approved Budget
for the Contract (ABC).
As a result of these deficiencies in procurement planning and consistent with

last year’s audit findings, there were still cases in which the requisitioning department
basically submits a purchase request to the Municipal Government’s Bids and Awards
Committee (BAC) with a letter indicating therein that the requirement is urgent and
concurrently requests that such purchase be exempted from bidding. The BAC,
through a resolution, then recommends that said purchase is exempted from bidding
without citing any justification for the change in the mode of procurement to
shopping.
Proper planning ensures that only goods, infrastructure projects and consulting
services which have been included in the approved APP shall be procured thereby
precluding occasions for unnecessary government purchases and circumventions of
the prescribed procurement procedures such as unwarranted resort to alternative
methods of procurement.
The Audit Team recommended that at the start of every budget period, the
end-user units of the Municipal Government of Taytay shall prepare their respective
PPMP for their different programs, activities and projects (PAPs). The PPMP shall
then be submitted to the Budget Office who shall evaluate each end-user’s submitted
PPMP and, if warranted, include it in the budget proposal for approval. A copy of the
approved budget proposal and the corresponding PPMPs shall be submitted to the
BAC Secretariat for its review and consolidation into the proposed APP. As soon as
the Appropriation Ordinance becomes final, the end-user units shall revise and adjust
the PPMP to reflect the budgetary allocation for their respective PAPs. The revised
PPMP shall be submitted to the BAC, through its Secretariat, for the finalization of
the modes of procurement under the proposed APP.
3. The validity and existence of the accounts Property, Plant and Equipment
amounting P134,147,338.33 could not be ascertained and relied upon due to
incomplete physical count on these properties, failure to maintain supply,
property or equipment ledger cards and stock property cards, prepare
reconciliation between Accounting and General Service Offices, prepare and
submit inventory reports thereon as required under Section 124 Volume I of the
Manual on the New Government Accounting System for LGU’s and the Manual
on Property Custodianship.
Section 124, Volume I of the New Government Accounting System (NGAS)

for LGUs outline the procedures to be followed by local government units in the
inventory taking including the reports to be maintained and dates of submission.
Thus-
“The Local Chief Executive shall require periodic physical inventory of

supplies or property. Physical count of Inventory items by type shall be conducted
semestrally and reported in the Report of the Physical Count of Inventories (RPCI).
This shall be submitted to the Auditor concerned not later than July 31 and January
31 of each year for the first and second semesters, respectively.”
“Physical count of property, plant and equipment by type shall be made

annually and reported on the Report on the Physical Count of Property, Plant and
Equipment [RCPPE].This shall be submitted to the Auditor concerned not later than
January 31 of each year.”
The submission of Report of the Physical Count of Inventories (RPCI) and

Report on the Physical Count of Property, Plant and Equipment (RPCPPE) to the
Auditor concerned not later than January 31 of each year is very important to serve as
a basis in verifying the actual balance and existence of supplies and property
especially at year end.
Also, the Manual on Property Custodianship page 226 requires that:
“After the physical inventory taking, the Inventory Committee shall reconcile the
results of the count with the property and accounting records. The inventory listing
of the supplies and materials shall be checked against the stock cards maintained by
the Property Officer and the supplies ledger cards maintained by the accounting and
finally against the control accounts. On the other hand, the inventory listing of the
equipment shall be checked on the property card maintained by the Property officer
as against the equipment ledger cards maintained by the accounting and the total
thereof shall be compared with those in the general ledger. Likewise, the inventory
listing of the livestock shall be reconciled with the livestock ledger card. All
discrepancies cleared and reconciled immediately. If necessary, written explanation
shall be required from accountable and responsible person(s).”
It was noted during our audit that the agency failed to complete the inventory
taking of the Property, Plant and Equipment account valued in the books at P
P134,147,338.33 thus the corresponding annual physical inventory report was not
submitted as of January 31, 2010. Due to the incomplete inventory taking, we cannot
fully validate the actual existence and condition of these properties. There were also
no property or equipment ledger card and property cards maintained by the
Accounting and Supply/General Service Office. There were also no alternative
records or reports submitted by the agency that we can use as basis in validating the
existence and conditions of these properties except the general ledger balances,
Balance Sheet and the Trial Balances.
In view of the foregoing circumstances, the validity and existence of the

balance of Property, Plant and Equipment amounting P134,147,338.33 as presented in
the financial statements could not be ascertained at year end. This is a reiteration of
last year’s audit finding.
The Audit Team recommended that the GSO and the Accounting Office should
assign personnel to work on the reconciliation of the Property, Plant and Equipment
balances to reduce the deficiencies. We also suggest that the Supply Officer
computerize the PPE records, maintain the same in accordance with the NGAS Chart
of Accounts and hasten the conduct of the physical count of the municipality’s PPE as
these activities is of value to the reconciliation process.
4. Delay in the submission of the required monthly Pre-Closing and Quarterly

Trial balances, its supporting schedules and related financial statements by the
Accounting Office precluded the audit team to review them and detect errors
and discrepancies, if any, in violation of Section 70 & 73, Volume I, NGAS
Manual for LGUs.
Section 70 of Volume I, NGAS Manual for LGUs requires that monthly pre-
closing trial balance for each fund shall be submitted not later than 20th day after the
end of the month. It shall be supported by the status of Appropriations, Allotments
and Obligations, for both the current and continuing appropriation. The end of the
quarter shall also be supported by a schedule of subsidiary ledger balances and to be
submitted to the COA Regional Office thru the Unit Auditor.
Likewise, Sections 2 and 127 of PD 1445 emphasized the following

provisions:
Section 2 – Declaration of Policy. It is the declared policy of the State that all
resources of the government shall be managed, expended or utilized in accordance
with laws and regulations, and safeguard against loss or wastage through illegal or
improper disposition, with a view of ensuring efficiency, economy and effectiveness
in the operations of government. The responsibility to take care that such policy is
faithfully adhered to rests directly with the chief or head of the government agency
concerned.
Section 127 – Administrative disciplinary action – Subject to rules and

regulations as may be approved by the President (Prime Minister), any unjustified
failure by the public officer concerned to comply with any requirement imposed in
this Code shall constitute neglect of duty and shall be a ground for administrative
disciplinary action against the said public officer who, upon being found guilty
thereof after hearing, shall be meted out such penalty as is commensurate with the
degree of this guilt in accordance with the Civil Service Law. Repeated unjustified
failure to comply with the requirements imposed in this Code shall be conclusive
proof that the public officer concerned is notoriously undesirable.
Record of this office showed that the Municipal Accountant failed to submit its
monthly financial reports for the period April to December 2009. Failure of the
Municipal Accountant to submit the trial balances, financial statements and other
required reports and accounts within the prescribed period precluded the audit team
from reviewing them and detect errors or discrepancies, if any, and recommend
measures, if warranted, in violation of the afore-cited law and regulations.
The Audit Team recommended that the local chief executive should require the
Municipal Accountant to immediately submit the financial reports, other reports and
accounts already due for submission. Compliance with Section 70 of Volume I,
NGAS Manual for LGUs must be observed in the succeeding preparation and
submission of the required reports.
B. Value for Money Audit
5. Some of the projects implemented and charged to the 20% Development Fund
were not in accordance with the guidelines provided for under Joint
Memorandum Circular No.1, s. 2005 of the Department of Interior and Local
Government (DILG) and the Department of Budget and Management (DBM)
dated September 20, 2005.
Section 3.0 of the Joint Memorandum Circular No.1, s. 2005 of the

Department of Interior and Local Government (DILG) and the Department of Budget
and Management (DBM) dated September 20, 2005 provides that the 20% of the IRA
for development projects shall be utilized for the following:
3.1 Social Development

3.2 Economic Development
3.3 Environmental Management
Moreover, the specific related development projects are also enumerated in

the said joint memorandum circular.
However, in the audit of the 20% Development Fund, the audit team noted
that some of the projects implemented and charged to the fund were not in accordance
with the guidelines provided in the said Joint Memorandum Circular. These projects
include the following:
Name of Project Amount
Allocated
1. Maintenance of heavy equipment P 2,700,000
(Infrastructure Program)
2. Repair of Service Vehicle (Pick-up) 200,000
3. Repair and maintenance of heavy equipment
(Other Programs) 345,000
Total P 3,245,000
The Municipal Planning and Development Officer (MPDO) commented that

the Annual Investment Program of the Municipality of Taytay is a slice of the
different programs and projects identified and prioritized in the Local Development
Investment Program (LDIP) of the approved updated Municipal Development Plan
for 2005-2010. This is the guiding principle applied, as provided for under the Joint
Memorandum Circular issued by the DILG and DBM, in charging and utilizing funds
in implementing programs and projects of the provincial government.
The audit team believes that since there are an existing guidelines/ issuance
regarding the implementation of the 20% Development Fund, strict compliance with
the said Joint Memorandum should be strictly observed
It is suggested that the Municipal Planning and Development Officer should

see to it that all the projects to be implemented chargeable to 20% Development Fund
are in accordance with the guidelines provided for under Joint Memorandum Circular
No. 1, s. 2005 of the Development of Interior and Local Government (DILG) and the
Department of Budget and Management (DBM) dated September 20, 2005.
Gender and Development
6. The Annual Budget for Gender and Development of the Municipality of Taytay
for CY 2009 was below the minimum 5 % of total appropriations as mandated
under Section 4.4 of the DBM/NEDA/NCRFW Joint Circular No. 2004-1,
thereby limiting the programs, projects and activities that promote gender-
responsive governance, protect and fulfill women’s human rights, and promote
women’s economic empowerment.
DBM/NEDA/NCRFW Joint Circular No. 2004-1 states that:
Section 4.1 – “Agencies shall formulate their annual GAD plans and budgets
within the context of their mandate and overall plans and programs.xxx”
Section 4.4 – “Gender and Development (GAD) planning and budgeting shall
be observed annually and incorporated in all programming and budgeting exercises of
the agencies. The GAD activities in the GAD plan and budget must be included in
the agency budget proposal in accordance with the budget call. Agencies shall ensure
that the cost of implementing the GAD activities is part of their approved budget. At
least 5 % of the total agency budget appropriations as authorized under the General
Appropriations Act, shall correspond to activities supporting GAD. Agency heads
shall be responsible for ensuring that GAD activities are provided with adequate
resources.”
As mandated by the afore-cited circular, the municipality should have

appropriated at least P 8,004,580.04 or 5 % of P 160,091,600.70 total appropriations
of the municipality for the year 2009 for Gender and Development (GAD) for the
streamlining of programs, activities, and projects that promote gender-responsive
governance, protect and fulfill women’s human rights, and promote women’s
economic empowerment and gender equality in the locality. These were being
implemented under the Office of the Municipal Social Welfare and Development
Office under the 20 % Development Fund. Contrary to this, the municipality
appropriated P 1,964,400.00 for CY 2009, thus, GAD related programs, projects and
activities that were undertaken during the year were very limited. The success of
Gender and Development (GAD) mainstreaming effort depends to a large extent on
the resources allocated to it.
Furthermore, the municipality was not able to formulate/prepare the required

agency annual GAD plan as their guide in the implementation of the
programs/projects related to GAD.
Management is enjoined to comply with the provisions of

DBM/NEDA/NCRFW Joint Circular No. 2004-1 in the implementation of Gender
and Development Program in the ensuing year.
Compliance with Tax Laws, Rules and Regulations
The municipality observed due dates in the remittance of trust collections to

BIR, GSIS, PAG-IBIG & PHILHEALTH in the General Fund although collections
for certain months during the year were not remitted in full.
The above findings and recommendations were discussed with concerned

municipal officials and staff. Management’s views and reactions were considered in
the report, where appropriate.
C. Unsettled Suspensions, Disallowances and Charges
There were no unsettled suspensions, disallowances and charges noted as of

December 31, 2009.
PART III
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS
Status of Implementation of Prior Year’s Audit Recommendations
Audit Recommendation Management Status of Reason for

Observation Action Implementation Partial/Non
Implementation
1. The validity, The audit team No action Not Due to lack of
existence and accuracy recommends that the taken implemented personnel,
of the balance of Local Chief Executive however, they
Property, Plant and (LCE) should promise to
Equipment account immediately create an conduct the
totaling Inventory Committee to inventory this
P122,030,515.27 as of focus on the conduct of year 2010.
December 31, 2008 physical inventory and
could not be ascertained submission of
due to the inability of corresponding report
management to conduct thereafter. The LCE
physical count, submit a should likewise require
report thereon and the GSO, being the
reconcile records of the property custodian of
Municipal Accountant’s the agency, to maintain
Office and General property cards duly
Services Office, reconciled at least
contrary to Sections 119 quarterly with the
and 124 of the NGAS accounting records.
Manual Vol. I.
2. Monthly Bank The Municipal Fully

Reconciliation Accountant and implemented
Statements for Cash In Municipal Treasurer
Bank – Local Currency, should make periodic
Current Account were reconciliation of the
submitted altogether at Cash In Bank accounts
year-end contrary to with that of the bank
Section 3.4 of COA balances and make the
Circular No. 96-011 necessary adjustments to
dated October 2, 2996 provide a more accurate
and Section 74 of the and reliable financial
Government Auditing information. Likewise,
Code of the Philippines cashbooks must be
(PD 1445). Also, no always updated and
Bank Reconciliation reconciliation with the
Statement was general and subsidiary
submitted for Cash In ledgers should be
Bank – Local Currency, regularly made.
Time Deposits.
Correctness of its
December 31, 2008
balance of
P8,006,876.87 could not
be ascertained.
3. The Municipal To avoid the Fully

Government of Taytay abovementioned implemented
failed to remit intact, penalties, the Audit
within the prescribed Team recommends that
period, the taxes prompt filing of return
withheld to the Bureau and the payment thereof
of Internal Revenue. should be strictly
implemented by the
Municipality. Likewise,
the Municipal Mayor
should require the
Municipal Accountant to
maintain a Subsidiary
Ledger for each class of
tax withheld under the
Due to BIR account as
an effective tool for
monitoring taxes,
withholding and
remittances.
4. Procurement of The Local Chief Fully
supplies, materials and Executive should ensure implemented
equipment amounting to that the APP prepared by
P6,034,404.21 were the BAC, as a
made without public consolidation of the
bidding contrary to various Project
Section 48.2 of the Procurement
Implementing Rules and Management Plan
Regulations Part A (PPMP) submitted by
(IRRA-A) of the the different
Government departments of the
Procurement Reform Municipality, shall
Act or RA 9184, hence contain the following
raising doubts as to the information as provided
propriety, economy and in Section 7.3 of the
transparency in the IRR-A of RA 9184.
procurement process.
5. The Municipal The Office of the Fully
Government granted Municipal Accountant implemented
advance payment in the should also see to it that
total amount of transaction passed in
P600,000 on contracts pre-audit and thereafter
of janitorial services submitted to the Auditor
separately entered into for post audit are
with the BP General supported with complete
Services and Municipal documentary
Employees Multi- requirements in
Purpose Cooperative compliance with Section
contrary to the 4 of PD 1445.
provisions of Section
338 of RA7160 or the
Local Government Code
of 1991 and
Memorandum Order No.
172 of the Office of the
President. Bidding
documents were not
attached to the
Disbursement Vouchers
contrary to Section 4 of
PD 1445 precluding
determination of the
reasonableness of the
contract cost and
propriety of bidding
procedures.
6. Delayed submission
In consonance with the Not Due to location
of monthly financialprinciple of fiscal implemented of the
reports and accountsresponsibility, the Audit Municipality.
contrary to Section 70 of
Team hereby However, they
the Manual on New recommends that the will take-up
Government Accounting
Municipal Mayor, as the necessary
System (NGAS) Vol. Ione who is primarily measures to
and Sections 6.04 and
responsible for all submit the
6.05 of COA Circulargovernment funds and report as early
No. 95-006 precludedproperty pertaining to as possible this
the auditor and other
his agency, require the current year
end users of these Municipal Accountant to 2010.
financial statements
submit the required
with its timely
financial and other
evaluation and analysis
reports and supporting
for audit and decision-
documents in such form
making purposes. and within the period
prescribed by the
Commission.
7. Absence of well- The Audit Team Fully
defined policies and recommends for implemented
guidelines in the grant consideration that the
of donations and Municipal Government
financial assistance set a clear policy and
resulted in varying guideline for its program
criteria applied as well of granting donations,
as some questionable financial and other
qualifications of bene- forms of assistance
ficiaries and purpose/s through a municipal
for which the assistance legislation. The bene-
is given. ficiaries, amount, docu-
mentary requirements,
and the processing
office, among others,
should be well defined
to ensure that only the
intended beneficiaries
are assisted and that
grants are given only for
public and general
welfare purpose/s.
8. Grant of Aid to The Audit Team Fully
Municipal Employees recommends the implemented
Multi-Purpose management to refrain
Cooperative (MEMPC) from such practice and
in the amount of enjoins strict observance
P500,000 was made of the provisions of
without specific Section 305(a) of RA
appropriation in the 7160 and COA Circular
Annual Budget for 2008 No. 95-003 and 96-003
contrary to Section as amended by COA
305(a) of RA 7160 and Circular No. 2007-001
without observance of dated October 25, 2007.
the procedural and
documentation require-
ments in granting
subsidies to NGOs/Pos
as provided in COA
Circular No. 95-003 and
96-003 as amended by
COA Circular No. 2007-
001 dated October 25,
2007.
9. The Office of the The Office of the Fully
Municipal Engineer Municipal Accountant implemented
failed to prepare and should be furnished with
submit regularly Reports a copy of these Status
on the Status of Reports on time for
Implementation of recording and
Municipal Infrastructure reconciliation purposes.
Projects, thus, evalua- In addition, the
tion of project accom- Municipal Engineer may
plishment and opera- consider assigning
tional performance personnel to handle the
could not be timely monitoring and
conducted. supervision of activities
of the staff of the
Municipal Engineer’s
Office. Regular meeting
may also be conducted
in order that
information/problems/
concerns are timely
deliberated and courses
of actions are offered.
10. Shares of Provincial The Audit Team Fully
and Barangay recommends adherence implemented
Governments from to the provisions of
proceeds of the real Section 271[d] of RA
property taxes were not 7160 and Section 36 of
remitted intact within COA Circular No. 92-
the prescribed period to 382 of remitting intact
the concerned within five (5) days after
Treasurers contrary to the end of each quarter
Section 271[d] of RA to the concerned
7160 and Section 36 of Barangay Treasurers
COA Circular No. 92- their share from
382, thus depriving the proceeds of the Basic
beneficiaries the Real Property Tax and
immediate use of said of remitting intact, at
funds to finance their least once a week, to the
various projects/ concerned Provincial
activities. Treasurer its shares from
proceeds of the Real
Property Taxes, respect-
tively. Henceforth,
correct/complete sub-
sidiary ledgers of the
subject account must
always be maintained.
PART IV
ANNEXES
Municipality of Taytay
Status of Appropriations, Allotments and Obligations
(Current Legislative Appropriation)
As of December 31, 2009
Functions/Program Balances of
Project/Activity Code Appropriations Allotment Obligation Appropriations Allotments
Office of the Mayor 1011

Personal Services 100 P 9,611,663.40 P 9,611,663.40 P 9,386,872.45 P - P 224,790.95
Maintenance & Other Operating Expenses 200 9,559,709.93 9,559,709.93 9,048,050.45 - 511,659.48
Capital Outlay 300 7,770,000.00 7,770,000.00 22,180.00 - 7,747,820.00
Total 26,941,373.33 26,941,373.33 18,457,102.90 - 8,484,270.43
Public Market
Personal Services 100 346,788.00 346,788.00 329,765.52 - 17,022.48
Maintenance & Other Operating Expenses 200 340,000.00 340,000.00 155,408.70 - 184,591.30
Capital Outlay 300 80,000.00 80,000.00 30,000.00 - 50,000.00
Total 766,788.00 766,788.00 515,174.22 - 251,613.78
Port Operation
Capital Outlay 300 - - - - -
Total 220,640.00 220,640.00 210,785.04 - 9,854.96
Motorpool
Capital Outlay 300 527,500.00 527,500.00 - - 527,500.00
Total 2,849,117.00 2,849,117.00 2,183,861.57 - 1,192,755.43
Vice Mayor's Office

Personal Services 100 1,905,801.96 1,905,801.96 1,905,417.49 - 384.47
Capital Outlay 300 200,000.00 200,000.00 126,940.00 - 73,060.00
Total 4,495,801.96 4,495,801.96 4,391,999.88 - 103,802.08
Sangguniang Bayan
Personal Services 100 5,656,146.80 5,656,146.80 5,654,779.54 - 1,367.26
Capital Outlay 300 1,200,000.00 1,200,000.00 - - 1,200,000.00
Total 11,394,346.80 11,394,346.80 10,077,347.30 - 1,316,999.50
Support Services
Total 1,891,071.30 1,891,071.30 1,839,578.09 - 51,493.21
Administrative Office 1031

Total 2,287,701.60 2,287,701.60 2,223,612.29 - 64,089.31
HRM Office 1032

Capital Outlay 300 35,000.00 35,000.00 - - 35,000.00
Total 5,134,007.28 5,134,007.28 4,335,498.94 - 798,508.34
MPDC Office 1041

Capital Outlay 300 30,000.00 30,000.00 30,000.00 - -
Total 2,899,516.04 2,899,516.04 2,861,480.29 - 38,035.75
MCR Office 1051

Personal Services 100 1,475,183.76 1,475,183.76 1,475,183.76 - -
Capital Outlay 300 40,000.00 40,000.00 27,170.00 - 12,830.00
Total 1,834,163.76 1,834,163.76 1,817,649.11 - 16,514.65
MGSO Office 1061

Maintenance & Other Operating Expenses 200 9,163,980.00 9,163,980.00 8,154,207.46 - 1,009,772.54
Capital Outlay 300 146,000.00 146,000.00 71,000.00 - 75,000.00
Total 12,132,715.12 12,132,715.12 10,996,864.71 - 1,135,850.41
Budget Office 1071

Personal Services 100 1,323,477.88 1,323,477.88 1,323,477.88 - -
Capital Outlay 300 50,000.00 50,000.00 - - 50,000.00
Total 1,834,457.88 1,834,457.88 1,746,162.05 - 88,295.83
Accounting Office 1081

Capital Outlay 300 80,000.00 80,000.00 - - 80,000.00
Total 3,206,326.23 3,206,326.23 3,063,043.29 - 143,282.94
Treasurer's Office 1091

Capital Outlay 300 131,000.00 131,000.00 129,667.45 - 1,332.55
Total 5,287,029.96 5,287,029.96 5,112,369.34 - 174,660.62
Assessor's Office 1101

Capital Outlay 300 68,000.00 68,000.00 - - 68,000.00
Total 2,795,986.20 2,795,986.20 2,587,746.64 - 208,239.56
Municipal Health Office 4411

Capital Outlay 300 230,000.00 230,000.00 130,500.00 - 99,500.00
Total 11,905,088.28 11,905,088.28 11,347,036.08 - 558,052.20
-
MSWD Office 7611 -
Capital Outlay 300 100,000.00 100,000.00 90,000.00 - 10,000.00
Total 4,995,841.12 4,995,841.12 4,833,364.93 - 162,476.19
- -
Agriculture Office 8711 - -
Maintenance & Other Operating Expenses 200 1,044,980.00 1,044,980.00 948,440.61 - 96,539.39
Capital Outlay 300 - - - -
Total 3,449,030.92 3,449,030.92 3,348,066.64 - 100,964.28
EMPS Office 8731 - -

Capital Outlay 300 20,000.00 20,000.00 16,000.00 - 4,000.00
Total 1,308,377.88 1,308,377.88 1,233,560.68 - 74,817.20
- -
Engineering Office 8751 - -
Capital Outlay 300 140,000.00 140,000.00 90,000.00 - 50,000.00
Total 4,798,532.04 4,798,532.04 4,532,526.08 - 266,005.96
- -
Non - Office 9,796,560.00 9,796,560.00 8,858,485.50 - 938,074.50
20 % Development Fund 29,316,114.40 29,316,114.40 18,584,969.17 - 10,731,145.23
5 % Calamity fund 8,023,513.60 8,023,513.60 1,735,311.90 - 6,288,201.70
Total 47,136,188.00 47,136,188.00 29,178,766.57 - 17,957,421.43
GRAND TOTAL P 159,564,100.70 P 159,564,100.70 P 126,893,596.64 P - P 33,198,004.06

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Republic of the Philippines

ANNUAL AUDIT REPORT

Municipality of Taytay, Palawan

For the Year Ended December 31, 2009

July 30, 2010

Hon. Evelyn V. Rodriguez

Dear Mayor Rodriguez:

HIGHLIGHTS OF FINANCIAL OPERATION

For CY 2009, the Municipal Government of Taytay generated a total income of

SCOPE OF THE AUDIT

AUDIT OPINION ON THE FINANCIAL STATEMENTS

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

2. The Municipal Government of Taytay failed to prepare the Annual Procurement

Management was enjoined to comply with the provisions of DBM/NEDA/NCRFW Joint

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

SUBJECT PAGE NO.

Part I - Audited Financial Statements

 Audit Certificate ………………………………………………………… 1

Part II - Detailed Findings and Recommendations

 Financial and Compliance Audit ……………………………………….. 19

Part III - Status of Implementation of Prior Year’s Audit

 Annex A – Consolidated Balance Sheet ……………………………….. 32

PART I – AUDITED FINANCIAL STATEMENTS

HON. ROBERTO V. RODRIGUEZ

1. General Agency Profile

Taytay as a hub of governance, socio-economic services and environmental

a. Center of government offices in Northern Palawan;

Taytay under responsive leadership will:

a. Promote active community participation;

DEVELOPMENT GOALS & STRATEGIES

 responsive governance complemented with one revitalized & strengthened

2. Summary of Significant Accounting Policies

2.1 Basis of Preparation

The accompanying consolidated financial statements are prepared in accordance

The straight line method of depreciation was followed. No depreciation charged

Some accounts in the previous year’s financial statement were classified to

This account consists of:

Time Deposit. The amount in this account represents unimplemented infrastructure

This account consists of:

This account consists of:

This account consists of:

7. PROPERTY, PLANT AND EQUIPMENT P 134,147,338.33

This account consists of:

8. OTHER ASSETS P 157,100.00

This account consists of:

This account consists of:

10. LONG TERM LIABILITIES P 0.00

This account consists of:

This account consists of:

This account consists of:

A. Financial and Compliance Audit

1. The Municipal Government carried out reclamation projects at Bgy. Poblacion,

Section 3 of AO No. 2007-2 explicitly provides that no reclamation projects

Section 7 of AO No. 2007-2 further provides that reclamation projects

Recently, there is an on-going construction of stalls at the reclaimed lot near

Considering the above premises, still the Municipal Government failed to

2. The Municipal Government of Taytay failed to prepare the Annual Procurement

“Section 7.1. No government procurement shall be undertaken unless it is in

Further, Volume I of the Procurement Manual for Local Government Units