EXECUTIVE SUMMARY Introduction The Municipality of Mauban is a first class municipality that lies along the mountainous side of Sierra Madre surrounded by the towns of Sampaloc, Tayabas and the seasides of Atimonan. It was founded on December 15, 1853, composed of 40 barangays, one of which is Barangay Cagsiay I where the Quezon Power Plant is located. The Municipality maintains General Fund, Special Education Fund and Trust Fund. The Organizational Structure of the Municipality is as follows: a. Key Officials Mayor
Fernando Q. Llamas
Leonchito A. Gapasangra
Members of the Sangguniang Bayan: 1. 2. 3. 4. 5. 6. 7. 8. Municipal Accountant Municipal Treasurer
Mark Raymond M. Llamas Marivel M. Trinidad Cesar D. Pasamba Edgardo C. Astoveza Rodante G. Almacen Misael V. Pastrana Rico Apordo Romeo C. Mandrique : Zarah T. Aman : May L. Daran
b. No. of Personnel Complement Elective Permanent Coterminous Casual Job Order Total
11 173 6 155 559 904
Financial Highlights For Calendar Year (CY) 2016, the Municipality generated a total income of P401,847,353.00, P156,124,825.00 of which represents Share from Internal Revenue Collection while P243,299,493.00 was derived from local taxes, service and business income and other income. The Municipality’s comparative financial condition and results of operations for Calendar Years (CYs) 2016 and 2015 are summarized below and shown in detail in the attached audited financial statements.
Total Assets Total Liabilities Total Equity Total Income Total Expenses
2016 P803,269,366 284,702,465 518,566,901 401,847,353 311,708,697
2015 P651,073,885 226,988,811 424,085,074 367,043,788 352,472,204
Increase/Decrease P152,195,481 57,713,654 94,481,827 34,803,565 (40,763,507)
Scope of Audit Financial and compliance audit was conducted on the accounts and operations of the Municipality for CY 2016. The audit was conducted to ascertain the propriety of financial transactions and compliance of the Municipality with prescribed rules and regulations. It was also made to ascertain the accuracy of financial records and reports, as well as the fairness of the presentation of the financial statements. The audit consisted of review of operating procedures, interview of concerned government officials and employees, verification, reconciliation and analysis of accounts and such other procedures considered necessary. Auditor’s Opinion on the Financial Statements The Auditor rendered a qualified opinion on the fairness of the presentation of the financial statements of the Municipality due to the following:
The Property, Plant and Equipment (PPE) account in the Financial Statements totaling P599,085,982.13 is not reliable as to existence and valuation due to nonreconciliation of the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) and records of the Accounting Office, contrary to Section 114 of the Manual on the New Government Accounting System (MNGAS), Volume I.
Land account recorded in the books at P86,646,258.14 includes nineteen (19) parcels of land valued at P16,715,580.00 that were not supported with Transfer Certificate of Title in the name of the Municipality, contrary to Section 39(2) of
Presidential Decree (P.D.) No. 1445 and Section 148 of COA Circular No. 92386, thus exposing the subject lots to possible third party claims.
Cash Advances totaling P1,573,708.58 remain unliquidated as at year-end which include balances of P90,000.00 and P98,000.00 for intelligence and confidential expenses, respectively, in violation of the COA-DBM-DILG-GCG-DND Joint Memorandum Circular No. 2015-01, Item 5.8 of COA Circular No. 97-002 and Section 89 of Presidential Decree (PD) No. 1445, due to non-monitoring of cash advances granted to Special Disbursing Officers, thus exposing the funds to possible loss or misuse and resulting to overstatement of the asset account and the understatement of related expenses equivalent to the amount of unreported disbursements.
Purchase of agricultural supplies, animal/zoological supplies, books, welfare goods, medical equipment and medical supplies intended for the installation of medical equipment were recorded as an outright expense, contrary to paragraphs 9, 11 and 44 of Philippine Public Sector Accounting Standards (PPSAS) 12 and paragraphs 30 and 31 of PPSAS 17, thus, understating various inventory accounts and Medical Equipment account by P1,317,086.50 and P161,255.00 respectively, and overstating various expenses accounts by P1,478,341.50.
Loans Receivables-Others from various debtors totalingP14,901,167.00 remain uncollected for several years, due to lack of efforts to enforce the repayment scheme, and to monitor the status/payment of the project contrary to Sections 2 and 111 of Presidential Decree (P.D.) No. 1445, thereby exposing the livelihood projects/programs to sustainability risk and may further result in the loss of government funds.
For the exceptions cited above, the Auditor recommended that the Municipal Mayor to:
require the General Services Officer to coordinate with the Municipal Accountant for the reconciliation of records of the PPE;
require the General Services Officer to exert extra effort to facilitate the immediate titling of the subject lots in the name of the Municipality to avoid contingent claims that may arise in the future and in compliance with Section 39(2) of PD No. 1445 and Section 148 of COA Circular No. 92-386.
attend to the liquidation of the outstanding cash advance for intelligence and confidential expenses;
require all accountable officers to liquidate immediately their cash advances;
instruct the Municipal Accountant to ensure that all cash advances are fully liquidated at the end of the year and to allow the granting of succeeding cash advance only when the previous one is fully liquidated.
ensure the proper granting, utilization and liquidation of all cash advances within the prescribed period in accordance with the above-cited law, rules and regulation.
require the Municipal Accountant to follow the guidelines set forth in PPSAS 12 and 17 for the proper recognition of inventories, property, plant and equipment, and expenses.
require the Municipal Social Welfare and Development Officer (MSWDO), Municipal Agriculturist, Municipal Tourism Officer, Municipal Environment and Natural Resources Officer to conduct visitorial and monitoring of the projects and exert all effort to collect the said receivables from the concerned beneficiaries;
require the Municipal Treasurer to prepare schedule of beneficiaries of livelihood projects and payment thereof per program/projects basis and account the nature of livelihood collections totaling P314,760.00 previously recorded as Miscellaneous Income and adopt efficient collection strategies to enforce collection from the concerned beneficiaries to ensure the recovery of the amount released to the beneficiaries.
require the Municipal Accountant to reconcile the records with the Municipal Treasurer’s Office.
adopt programs the sustainability of which is ensured.
Significant Observations and Recommendations The following are the other significant observations and the corresponding recommendations in the audit of the Municipality of Mauban for the year 2016 are as follows:
The cashbooks maintained by the Municipal Treasurer were not updated and not reconciled with the Accounting records with a total material difference of P100,131,186.01, contrary to Section181(c) Volume I of the Government Accounting and Auditing Manual (GAAM) and Sections 26 and 27 of the Manual on New Government Accounting System (MNGAS) Volume II, hence cashbook balances were not reliable. We recommended that the Municipal Mayor require the Municipal Treasurer to maintain the cashbooks and observe the following suggested measures:
a) update the cashbooks daily based on the submitted Reports of Collections and Deposits; b) closely monitor and ensure the accuracy and physical existence of cash on hand by reconciling the cash on hand with the cash balance in the cashbook; c) at the end of each month, rule and foot the cashbooks and accomplish the necessary certification; and d) reconcile the cashbook balances with the accounting records every end of the month and take up immediately the necessary corrections/adjustments.
Due from Officers and Employees totaling P65,550.76 represents salary, honorarium and excess cash advances subject to refund which remain uncollected at year-end, in violation of Section 2 of Presidential Decree (PD) 1445, thus may further result in the loss of government funds. We reiterated our recommendation that the Municipal Mayor require the officers and employees to settle immediately their outstanding accounts, otherwise require the withholding of their salaries to be applied to their obligations, if warranted. Also, we recommended the filing of appropriate charges against them for continued disregard of the law.
Payment for Scholarship Expenses granted to Binibining Mauban 2013 Winners totaling P81,000.00 which were not included in the list of SEF priority spending, were paid out of the Special Education Fund, contrary to Section 272 of RA No. 7160 as implemented by DepEd-DBM-DILG Joint Circular Nos. 01, s. 1998, No. 01-A, s. 2000 and No. 01-B, s. 2001, thus funds for priority items were depleted. We recommended that the Municipal Mayor require the Local School Board to observe the provisions of Section 272 of Republic Act (RA) 7160 and DepEdDBM-DILG Joint Circular Nos. 01, s. 1998, No. 01-A, March 14, 2000, No. 01Bin the preparation and utilization of the SEF budget. Also, we recommended to refund the amount of P81,000.00.
Proof of eligibility of beneficiaries of financial assistance for Self – Employment Assistance Kaunlaran (SEA – K) Program totaling P400,000.00 were not submitted to the Audit Team or attached to the Disbursement Vouchers, contrary to the guidelines on the Livelihood Program and Section 2 of Presidential Decree (P.D.) No. 1445, thus, casting doubt whether the assistance was given to qualified beneficiaries. Also, Project Proposal lacks the means on how the project will be monitored and evaluated to determine the effectiveness of the outcome based on
the set objectives. Moreover, the records maintained for Loans Receivable by the Accounting Office and the Treasury did not reconcile. We reiterated our recommendation that the Municipal Mayor require the: Municipal Accountant to submit the duly accomplished Application Forms for the program and the proof that the borrowers are eligible for the assistance Project Development Officer to ensure that only eligible borrowers are granted assistance. Municipal Social Welfare Development Officer to revise the Project Proposal to include the means of monitoring and evaluating the project to determine the effectiveness of the outcome based on the set objectives. Municipal Accountant and the Municipal Treasurer to reconcile their records.
Payment made to Philippine First Insurance Co. Inc. in the amount of P412,856.25 for the insurance of members of Barangay Peacekeeping Action Team (BPATs) were not supported with an approved Sangguniang Bayan resolution and ordinance and other necessary supporting documents, contrary to Section 447 of Republic Act (R.A.) No. 7160 of the Local Government Code of the Philippines, hence the transaction was found not in order. We recommended that the Municipal Mayor require the Municipal Accountant and the Sangguniang Bayan or ordinance to submit to the Audit Team the approved Sangguniang Bayan resolution relative to the insurance coverage with private insurance company, if there is any, and the other necessary supporting documents at the soonest possible time, otherwise the transaction may be disallowed in audit for lack of authorization. Also, we recommended the Municipality to refrain from giving insurance coverage without approved Sangguniang Bayan resolution or ordinance.
Payment for the purchase of two (2) motor vehicles totaling P2,544,001.48 and various equipment and supplies in the total amount of P4,127,115.50 were not supported with proper and complete documentation, contrary to Section 4(6) of Presidential Decree (P.D.) No. 1445 and COA Circular No. 2012-001, thus casting doubt on the propriety, legality, and validity of the transactions. We recommended that the Municipal Mayor require the Municipal Accountant to submit to the Audit Team all the required supporting documents for evaluation.
The Municipality failed to utilize P19,929,294.14 or 60% of its total appropriations of P32,957,439.05 for the 20% Development Fund in CY 2016, contrary to Section 5 of Department of Interior and Local Government (DILG)Department of Budget and Management (DBM) Joint Memorandum Circular No. 2011-1, thus depriving the intended beneficiaries of the maximum benefits that could be derived from the development projects. We recommended that the Municipal Mayor: require the Municipal Planning and Development Coordinator (MPDC) to ensure that the mandatory Development Fund appropriated out of the Internal Revenue Allotment be fully utilized to implement prioritized identified programs, projects and activities to help achieve the desirable outcome on socio-economic development and environmental Management outlined in the DILG-DBM Joint Memorandum Circular No. 2011-1. install regular monitoring mechanism to assess the progress of project implementation so that all its programmed development projects are implemented as programmed to ensure that intended beneficiaries avail of the maximum benefits that will be derived therefrom. ensure that a closer coordination among the officials involved in planning, execution and monitoring is enhanced to achieve the desired level of efficiency.
Collection of market fees could not be enforced due to the absence of lease contract between the Municipal Government and the booth/stallholders, contrary to Section 2 of Presidential Decree (PD) No. 1445 and Section 24 of Municipal Ordinance No. 05-2014 otherwise known as the Market Code of Mauban, thus exposing the amount due from delinquent stallholders totaling P757,333.00 to possible loss. Also, the revision of the Municipal Revenue Code which imposes realistic rates on taxpayers was not effected contrary to Section 191 of Republic Act (RA) 7160, thus depriving the Municipality of the opportunity to increase its revenues for the delivery of basic services that will benefit the constituents. We reiterated our recommendation that the Municipal Mayor require the Municipal Treasurer to exert effort to collect from delinquent stallholders the amount of P757,333.00. We also recommended that the Municipal Mayor request the Sangguniang Bayan to effect the revision of the Local Revenue Code to attain realistic rates of taxes and enhance collection. We further recommended that the Municipal Mayor require the Municipal Treasurer and the Market Supervisor to:
serve the lease contracts as soon as the revision of the Local Revenue Code was effected in order to protect the interest of the Municipality against illegal users of municipal amenities. adopt efficient collection strategies to enforce collection from the concerned stallholders.
The non-operation of the Municipal Asphalt Plant which was entered into by the Municipal Government of Mauban with the Professional Asphalt Pavers Enterprise (PROASPA) under a Joint Venture Agreement (JVA) on February 18, 2009, deprived the Municipality of the income and benefits that may be derived from it since the JVA is not yet terminated, hence the Municipality is entitled to exercise its rights as provided in the JVA including the enforcement of the provisions of the contract to which the PROASPA is bound to oblige. We reiterated our recommendation that the Municipal Mayor take the appropriate action/s under the circumstances to protect the interest of Municipality and to avoid incurrence of wastage of resources which may include following up the appeal filed and inquiring from the Provincial Fiscal other possible legal remedies
Assessments of Business Taxes were not supported with Sworn Statement of Gross Receipts or Sales and Income Tax Revenue (ITR) contrary to Section 2C.04 of the Municipal Revenue Code, hence it could not be ascertained whether the assessed business taxes due for the year totaling P116,277,937.02 was correct and same was collected. Moreover, the Abstract of Collectibles from individual taxpayers were not updated. We reiterated our recommendation that the Municipal Mayor instruct the Municipal Treasurer to secure/keep the documents supporting the Gross Receipts for business tax purposes and update the Abstract of Collections from individual taxpayers.
The Municipality’s appropriation for Gender and Development (GAD) amounting to P5,000,000.00, excluding mainstreamed appropriation, was below five percent (5%) of the total Annual Budget of P333,728,063.89, contrary to Section 43 of Republic Act (R.A) No. 9710 and Item 5.C.1.1 and 5.C.3.1of Joint Memorandum Circular No. 2013-01 of PCW-DILG-DBM and NEDA, thus the intent of GAD in promoting gender-responsive governance, protecting and fulfilling women’s human rights, and promoting women’s empowerment was not fully achieved. Also, mainstreamed appropriation in the total amount of P60,054,914.27 was fully appropriated in the budget of various offices, hence inconsistent with the reporting of the GAD Budget. We recommended that the Municipal Mayor require the Municipal Budget Officer and the GAD Focal person to strictly adhere to the provisions of Section 43 of
Republic Act (R.A) No. 9710 and Joint Memorandum Circular No. 2013-01 of PCW-DILG-DBM and NEDA to best serve the intent of GAD on promoting gender-responsive governance, protecting and fulfilling women’s human rights, and promoting women’s empowerment. The above observations and recommendations contained in the report were communicated to the Municipal Mayor and other Key officials under various Audit Observation Memoranda and discussed in the exit conference on August 14, 2017. Management’s views and comments were considered in the report, where appropriate. Status of Implementation of Prior Year’s Audit Recommendations Of the 38 prior year’s recommendations embodied in the CY 2015 Annual Audit Report, fourteen (14) were fully implemented, twenty-two (22) were partially implemented and two (2) were not implemented by the Municipality.