EXECUTIVE SUMMARY A. Introduction

B. Financial Highlights The financial condition and results of operations of the Municipality as compared with previous year is detailed as follows:...

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EXECUTIVE SUMMARY A. Introduction The Municipality of Luna came into existence by virtue of Executive Order No. 200 dated October 16, 1929 issued by the late Governor General Leonard Wood upon the petition of early settlers of the Municipality. Pursuant to the said order, the newly created municipal district had as its first name ‘Macatel”, which means “itchy water”. Luna as it is now called derived its name in honor of the late Filipino hero, General Antonio Luna, one of the greatest Ilocano patriots. The Municipality is classified as a second class municipality located in the northern part of the Province of Apayao. It is approximately 1,475 kilometers direct distance from Pamplona, Cagayan in the northwest, on the south by the Abulug River and by the unknown creeks below the steep side of Cordillera on the West. The Municipality is divided into twenty two (22) regular barangays and one (1) administrative barangay. The Municipal Government had a total workforce of 154 personnel as of December 31, 2015, composed of 100 permanent positions, 10 elective, 2 appointive, 1 co-terminous, 31 Job Order Employees and 10 Local School Board Teachers deployed in different elementary and secondary schools. For CY 2015, the Municipality programmed 58 projects under the 20% Municipal Development Fund (MDF), of which, 31 were fully completed totaling ₱7,860,684.52 which contributed to the economic and social development. (Annex E) Audit Methodology and Scope of Audit A financial and compliance audit was conducted to ascertain the propriety of the financial transactions and observance of the agency with prescribed rules and regulations. A value for money audit was likewise conducted to determine whether the programs, projects and activities for the year were implemented in an efficient, economical and effective manner. The audit was focused on the various audit thrusts/issues issued by the Local Government Sector of the Commission on Audit. Walk through, analysis of data, interview with concerned officials and employees, and other audit techniques that were necessary were employed in the conduct of audit.

B. Financial Highlights The financial condition and results of operations of the Municipality as compared with previous year is detailed as follows: . Particulars 2015 2014 Increase(Decrease) A. Financial Condition Assets ₱222,755,308.86 ₱225,994,190.47 (3,238,881.61) Liabilities 68,889,637.84 94,273,473.23 (25,383,835.39) Government Equity 153,865,671.02 131,720,717.24 22,144,953.78 B. Result of Operations Income 110,654,225.59 103,951,901.50 6,692,324.09 Expenses 88,726,576.12 115,743,436.74 (27,016,860.62) Excess of Income 21,927,649.47 ₱(11,791,535.24) ₱33,709,184.71 Likewise, the total appropriations and obligation for the year as compared to the previous year are as follows: Particulars A. Sources of Funds (Appropriation) Personal Services MOOE Capital Outlay Total B. Application of Fund (Obligation) Personal Services MOOE Capital Outlay Total

2015

2014

Increase(Decrease)

₱45,863,192.19 55,822,035.48 39,091,058.40 ₱140,776,286.07

₱40,490,681.11 51,319,535.73 10,935,818.10 ₱102,746,034.94

₱5,372,511.08 4,502,499.75 28,155,240.30 ₱38,030,251.13

₱45,059,327.63 30,303,864.85 12,808,687.88 ₱88,171,880.36

₱40,487,484.00 35,606,827.56 9,759,912.02 ₱85,854,223.58

₱4,571,843.63 (5,302,962.71) 3,048,775.86 ₱2,317,656.78

C. Auditor’s Opinion on the Financial Statements The auditor rendered a qualified opinion on the fairness of presentation of the financial statements of the Municipality due to the doubtful validity of Payables totaling ₱55,423,922.04 and the understatement of assets and government equity account in the amount of ₱8,921,890.12.

D. Summary of Significant Observations and Recommendations The following significant observations were noted during the year and corresponding measures were recommended:

1

Payables totaling ₱55,423,922.04 were not properly documented casting doubt on the validity of the financial claims. We recommended that the Municipal Accountant analyze the composition of the balance of the Accounts Payable and those without binding claims have to be reverted to the net asset/equity of the LGU.

2

Completed and on-going infrastructure projects are classified and recorded as Other Maintenance and Operating Expenses (MOOE) instead of Property, Plant and Equipment contrary to International Public Sector Accounting Standards 1 and Philippine Public Sector Accounting Standards 17, resulting in the understatement of assets and net assets/equity by ₱8,921,890.20. We recommended that Management, through the Municipal Accountant, make the necessary adjusting entry as follows: Account Name Road Networks Flood Control System Other Structures CIP-Infrastructure Assets CIP-Buildings and Other Structures Government Equity Total

Debit 3,653,900.07 2,410,555.85 994,549.00 1,436,802.20 426,083.00

8,921,890.12

Credit

8,921,890.12 8,921,890.12

We further recommended that the Accountant adopt the pertinent standards prescribed in the PPSA to ensure fair presentation of the financial statements. 3

Monetary rewards for extraordinary or superior accomplishments granted to officials and employees amounting to ₱3,968,662.00 did not meet the requirements of CSC Resolution No. 010112 dated January 10, 2001 and CSC MC No. 01 series of 2001, casting doubts on the propriety of the expenditures. We recommended that management refrain from granting monetary incentives to the officers and employees without the necessary requirements or other compensation/allowances not otherwise specified by law.

4

Development projects funded for CYs 2010-2015 were not optimally implemented or accomplished, thereby depriving the constituents of the immediate benefits that could be derived therefrom.

We recommended that: a. Management, through the Municipal Engineer and Municipal Planning and Development Coordinator, accelerate the implementation of projects programmed yearly for the benefit of the citizenry; and b. Evaluate projects funded under MDF 2010-2014 if implementable, otherwise, revert funds for re-appropriation. 5

still

Utilization of various equipment for the Apayao Vendors Association was not maximized, thus defeating the intended purpose of the livelihood projects funded by DOLE-CAR in the amount of ₱500,000.00. We recommended that Management: a. demand the concerned beneficiaries to return the equipment and materials intended for their livelihood projects; and b. monitor regularly the implementation of the projects to ensure compliance with the terms and conditions of the Agreement.

E. Settlement of Suspensions, Disallowances and Charges The balance of suspension, disallowances and charges as summarized in the Statement of Audit Suspensions, Disallowances and Charges (SASDC) as of Dece Issued Beginning Total Issued Total Ending Balance, mber Balance (Jan 1, for CY 2015 Settlements Dec 31, 2015 31, 2015) for CY 2015 2015 Notice of are Suspension ₱2,597,192.37 596,000.00 -0₱3,193,192.37 as Notice of Disallowance 5,953.25 8,290.091.40 8,000.00 8,288,044.65 follo Notice of Charge -0-0-0-0ws: Total

₱2,603,145.62

₱8,886,091.40

₱8,000.00

₱11,481,237.02

In addition, booked disallowances in the amount of ₱513.25 pertaining to those issued prior to the 2009 Rules and Regulations on the Settlement of Accounts (RRSA) remained unsettled. We recommended that management require the concerned officials and employees to settle promptly their suspensions and disallowances.

F. Status of Implementation of Prior Years’ Audit Recommendations Out of the 25 audit recommendations embodied in the CY 2014 Annual Audit Report, eight were fully implemented, seven were partially implemented and ten were not implemented.