EXECUTIVE SUMMARY

The Municipality of Sipocot was formerly a barrio of Lupi. It became a town in 1801. It
is situated 45 kilometers north of Naga City. It is bounded on the north by the Province of
Camarines Norte; on the south by the Municipality of Libmanan; on the east by the Municipality
of Cabusao and on the west by the Municipality of Lupi. It covers a land area of 24,371.60
hectares or approximately 4.018 percent of the land area of Camarines Sur.

The Municipality, consisting of 46 barangays, like other local government units pursuant
to RA 7160, otherwise known as the Local Government Code of 1991, enjoys the genuine local
autonomy to enable them to attain their fullest development as self-reliant communities and
make them more effective partners in the attainment of national goals. It exercises total
independence in managing, deciding and planning its own administrative, fiscal and social
growth and economic development, in line with the thrust of the National Government.

The Agency vision is to have a GOD-loving, empowered and progressive community

with a well-balance and sustained sectoral development responsive to the fundamental needs and
aspirations of the people.

Highlights of Financial Operation

For the year under review, the municipal administration lined up significant programs
and projects to accelerate its economic development and improve the quality of life of the
people. Post-audit of financial transactions was made on a test basis; however, time constraint
deterred validation and verification as to conformance to specifications and as to the existence of
some of the projects.

The following are the significant programs and projects undertaken by the municipal
government for calendar year 2012:

% of Completion
Programs/Projects/Activity Cost
Construction of Multi-purpose Hall P3,997,766.50 100%
Concreting of Barangays Roads:
1. GaonganCaima 1,994,833.10 100%
2. Talidong-Impig 996,929.75 100%
Rehabilitation/Construction of
Irrigation: Managle 299,468.00 100%
Construction of Footbridge Lubigan Sr. 497,479.34 100%

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 Total assets, liabilities, and residual equity as of year end 2012 amounted to
P109,392,606.41, P39,103,446.42 and P70,289,159.99, respectively, which correspondingly
increased by 1.17%, 9.67% from that of last year, while government equity decreased by 3.014%
over last year’s equity. The current ratio (current assets over current liabilities) is 2.22,
signifying liquidity. The debt – equity ratio (total liabilities to total residual equity) is .503
indicating low levels of indebtedness.

SCOPE OF AUDIT

A financial and compliance and value for money audit were conducted on the operations
of the Municipality of Sipocot, Camarines Sur for Calendar Year ended December 31, 2012.
The audit included, but not limited to, the analysis of financial and accounting records,
determination of the validity and propriety of the agency’s transactions. The audit thrust for
calendar year 2012 are the following: Cash accounts, Revenue, Special Education Fund, Priority
Development Fund (PDAF), Credit Financing, Gender and Development (GAD), Job Order
(JO)/Contractual and 20% Economic Development Fund.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the financial statements because the agency
was not able to conduct and submit report on the physical count of its Property, Plant and
Equipment valued in the books at P34.4M. The inadequacy of records did not permit us to apply
adequate alternative procedures to determine the validity of the balances of these accounts
although some of its major assets such as buildings, office equipment, furniture and fixtures,
machineries and equipment and transportation equipment exist and being used in its operations.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

For the exception cited above, the Auditor recommended the submission of complete
physical inventory report to the Auditor. In addition, the following are the other significant
findings and the corresponding recommendations.

1. Non-adherence to auditing rules and regulations governing the limitation of cash

advances resulted to unliquidated cash advance amounting to P118,427.38 as of
December 31, 2012, thereby exposing government resources to possible risk of loss or
misapplication. The unliquidated cash advance also resulted to overstatement of assets
and net income of the municipality.

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 We recommended that the Municipal Accountant and Treasurer should ensure that rules
and regulations on grant and utilization of cash advance be enforced strictly.

We also recommended that the Municipal Accountant should send demand letters to
officials and employees with outstanding cash advance as of December 31, 2012

Lastly, we also recommended for the filing of administrative remedial measures and/or
appropriate legal actions for the recovery/settlement of his/her unliquidated cash advance.
Failure of the Accountable Officer to liquidate their cash advance within the required
period shall constitute a valid cause for the withholding of his/her salaries.

2. A substantial portion of the P20,515,088.95 time deposit placement of the municipality

under the General Fund, Trust Fund and Special Education Fund cannot be considered as
idle funds as mentioned in Section 21 and 22 of COA Circular No. 92-382, but an
indication of under-utilization of funds intended for the implementation of various
programs and projects and delayed delivery of basic services to its constituents.

We recommended that management should hasten the implementation of

programs/project in order that the needed services to the constituents may not be delayed
or sacrificed in favor of earning interest in time deposits.

3. The Municipal Government of Sipocot, Camarines Sur could have avoided the payment
of interest/bank charges totaling P1,040,876.18 for the credit financing had it utilized its
idle fund of P20,515,088.95, invested in time deposits, for its various development
projects, instead of availing of loan from the Land Bank of the Philippines totaling
P3,380,873.00.

We recommended that management should evaluate the cost/benefit of credit

financing/loan and in maintaining time deposits, in line with Section 2 of PD 1445.

4. Additional income from market rentals in the amount of P412,623.10 could have been
realized had the provisions of Section 82(e) of Municipal Ordinance 2008-07 been
strictly enforced by the Local Government of Sipocot, Camarines Sur.

Strictly enforce the imposition of the twenty five (25%) percent penalty on late payment
of market rental and fees. This will enable the municipality to generate additional
income and persuade the stallholders to pay their market rentals or fees on time.

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 Likewise, the Local Government of Sipocot, through the Municipal Treasurer and the
Market Supervisor, is required to avail of the remedies or legal sanctions provided for
under the above-mentioned Municipal Ordinance in order to enforce payment from the
delinquent stall holder. Efficient and timely collection of market receipts contributes to
the effective realization of the agency’s mission and vision.

5. Copies of Contract of Service and Job Orders and its supporting documents for calendar
year 2012 were not submitted to the Auditor within five (5) days after its execution as
required under Section 3.1.1 of COA Circular No. 2009-001, thus precluded the Auditor
from conducting a prompt review and evaluation on the compliance with government
laws, rules and regulations, propriety and regularity of the procurement of service.

We recommended that the Personnel Officer-Designate should prepare and submit to the
Auditor copies of Job Order, MOA or any other contracts entered into by the
municipality and the workers and its supporting documents within five (5) days after its
execution in accordance with the above-mentioned regulation.

6. The municipality failed to have its GAD Plan approved and furnished to the National
Commission on the Role of Filipino Women (NCRFW) and Department of Budget and
Management, hence, there is no assurance if the programs/activities included in the
LGU’s GAD Plan have addressed the gender issues and women empowerment in
accordance with R.A. No. 7192 and the Philippine Plan for Gender-Responsive
Development (PPGD) for 1995-2025.

We recommended that the Honorable Mayor should require the GAD Focal Person to
submit the agency’s GAD Plan to the DBM and NCRFW for review and approval to
ensure that the programs/projects reflected in the GAD Plans are in accordance with the
existing regulations and guidelines. Likewise, GAD Focal Person shall furnish the
NCRFW and other regulating offices GAD Accomplishment Report for its monitoring
purposes.

7. The unexpended/unobligated balance of the Quick Response Fund (QRF) and the
Disaster Risk Reduction Management Fund (DRRMF)-Maintenance and Other Operating
Expenditures (MOOE) was not transferred to the Special Trust Fund under the account
“Trust Liability-DRRM” (438) in the Trust Fund books of the Municipality of Sipocot,
Camarines Sur at the end of the year, contrary to Section 5.1.10 of COA Circular No.
2012-002. Likewise, the Municipal Accountant failed to prepare the Report on Sources
and Utilization of Disaster Risk Reduction and Management Fund and no disclosure of
the amount and unexpended balance of the LDRRMF was discussed in the Notes to the
Financial Statements.
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 We recommended that the Local Government Unit of Sipocot, Camarines Sur to strictly
follow the accounting and reporting guidelines for the LDRRMF as provided for in COA
Cir No. 2012-002. The balance of P4,839,385.50 should be transferred to the Special
Trust Fund under the account “Trust Liability-DRRM (438) in the Trust Fund books.

We also recommended that the Honorable Mayor require the Municipal Accountant to
prepare the Report on Sources and Utilization of Disaster Risk Reduction and
Management Fund in accordance with the format prescribed by COA Circular No. 2012-
002 and the immediate submission of the LDRRMFIP, RUDRRMF and the RAAOs.

8. Of the total Priority Development Assistance Fund (PDAF) of P26,189,200.00 received

by LGU-Sipocot from 2004 to 2012, only the amount of P22,035,573.81 or 85.45 was
utilized/spent as of December 31, 2012, leaving P4,151,626.19 unutilized, indicating
inefficiencies in the utilization of available funds and/or delayed implementation of
programs/projects.

We recommended that management should facilitate or hasten the implementation of

programs/projects funded out of the Priority Development Assistance Fund (PDAF) and
to fully utilize the fund in accordance with the purpose for which it was given by the
grantor.

9. The Municipality of Sipocot, Camariness could have delivered optimum benefits to its
constituents, had they maximized the implementation of the various developmental
programs/projects/activities funded from the 20% Economic Development Fund.

We recommended to the Honorable Mayor that projects embodied in the 20% Economic
Development Plan should be implemented immediately considering there is a guaranteed
source of funds where these projects may be charged.

10. During the year, the Municipality of Sipocot, Camarines Sur fully complied with the
provisions of the National Internal Revenue Code, as amended and various issuances of
the Bureau of Internal Revenue, particularly on the withholding/deduction and remittance
of the required taxes from claims of various suppliers/contractors/other claimants
including those from salaries and other emoluments/income of employees.

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 Similarly, the agency religiously remitted to the Provincial Government of Camarines
Sur, the Real Property Tax due to the province as well as the share of the barangays.
Remittance to Government Insurance System (GSIS), Philhealth (PHIC) and Home
Development Fund (HDMF-Pag-ibig) were updated.

11. DILG Memorandum Circular No. 2010-83 as amended by Memorandum Circular No.
2011-134, entitled “Full Disclosure of Local Budget and Finances, and Bids and Public
Offering, which took immediately upon its issuance on August 31, 2010, mandates that
the following documents and transactions shall be posted in the website, in conspicuous
places within the local government-owned public buildings and in print media of
community or general circulation, viz:

a. Annual Budget Report

b. Quarterly Statement of Cash Flows
c. Statement of Receipts and Expenditures
d. Trust Fund (PDAF) Utilization
e. Quarterly Report of SEF Utilization
f. 20% Component of the IRA utilization
g. Annual GAD Accomplishment Report
h. Statement of Debt Service
i. Annual Procurement Plan or Procurement List
j. Items to Bid
k. Bid Results on Civil Works, and Goods and Services
l. Abstract of Bids as Calculated
m. Supplemental Procurement Plan, if any

We recommended to the Honorable Mayor to require concerned municipal officials to

comply with DILG Memorandum Circular No. 2010-83 as amended by Memorandum
Circular No. 2011-134, entitled “Full Disclosure of Local Budget and Finances, and Bids
and Public Offering.

The foregoing statements together with the other findings and recommendations
contained in this report were discussed with the concerned municipal officials and employees
during the exit conference. Management views and reactions were considered in this report
where appropriate.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATION

Of the five (5) prior year’s audit recommendations embodied in the 2011 Annual Audit
Report, one (1) was implemented, three (3) was partially implemented and one (1) was not
implemented.

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