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EXECUTIVE SUMMARY

A. Introduction

We conducted an audit on the Municipality of Bocaue, a first-class municipality of the Province of Bulacan. Bocaue is bounded by the Municipality of Balagtas in the north, the Municipality of Sta. Maria in the east, and the Municipality of Marilao in the south.

Our audit was made in accordance with Philippine Public Sector Standards on Auditing and we believe that it provided a reasonable basis for the audit results.

The audit covered the financial transactions and operations of the Municipality for the calendar year 2016. The objectives of the audit were (a) to ascertain the level of assurance that may be placed on management’s assertions on the financial statements; (b) recommend agency improvement opportunities; and (c) determine the extent of implementation of prior year’s audit recommendations.

B. Financial Highlights

The data on the financial condition, results of operation and sources and application of funds of the Municipality for CY 2016 as compared with CY 2015 are presented below:

(In Thousands)

 

2016

2015

Assets

₱ 348,822

₱ 302,840

Liabilities

118,403

110,196

Government Equity

230419

192,644

Revenue

275,661

254,287

Operating Expenses

233,888

232,659

Surplus (Deficit)

41,773

7,521

Appropriations/ Allotments

270,333

251,954

Obligations Incurred

241,133

234,799

Unobligated Balance

29,200

17,155

C. Auditor’s Opinion

We rendered a qualified opinion on the fairness of presentation of the financial statements owing to the following deficiencies, as stated below, together with the recommended courses of action to correct such deficiencies:

1. The existence, completeness and validity of Property, Plant and Equipment (PPE) balances of ₱171,869,615.19 remained doubtful due to a) non-conduct of the required physical inventory of PPE; b) unascertained ownership of the several parcels of lots booked at ₱25,147,274.34; and c) non-recording of several lots

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evidenced by land title under the custody of the Municipal Treasurer’s Office, contrary to existing accounting standards, rules and regulations.(Observation No. 5)

We reiterated our previous recommendations that Management (a) must implement the creation of an inventory committee to conduct the physical inventory taking of all its property, plant and equipment and shall prepare an inventory report thereon and should be reconciled with the records of the Accounting Office; and (b) direct the General Services Officer/Municipal Treasurer/Municipal Accountant/Municipal Assessor to exert extra effort in retrieving the supporting documents evidencing ownership of the recorded parcel of lands and facilitate the immediate registration and titling of the several lots in the name of the Municipality.

2.

The balances of the Inventory accounts in the amount of ₱4,708,478.75 as of December 31, 2016 remained unreliable and doubtful due to: a) incomplete physical inventory resulting in non-submission of complete Report on the Physical Count of Inventory (RPCI) and further resulting to non-validation of the physical existence of inventories amounting to ₱4,481,568.75; b) non-reconciliation of the general services and accounting records due to non-maintenance of inventory records. (Observation No. 4)

We reiterated our previous recommendations that Management (a) require the GSO and other custodians of supplies to undertake the actual physical inventory every semester and to submit inventory reports to the Auditor (b) enjoin all stock custodians and the Accounting Office to perform the reconciliation of the inventories with the recorded balances in the books; and (c) consider the establishment of a centrally managed storage under the accountability of the GSO.

D.

Summary of Significant Observations and Recommendations

Summarized below are the significant audit observations with their recommendations, the details of which are presented in Part II of this report. Management views and comments, including those offered during the exit conference were incorporated in the report, where appropriate.

1. Several Revenue Collection Clerks were detailed to different offices, thus, collection functions in the Market were allowed to be performed by job order personnel not covered with fidelity bond, thereby, exposing government funds to possible risk of loss/misuse. (Observation No. 1)

We recommended that Managements (a) stop designating Job Order personnel as collecting officers since the LGU has no employee-employer relationship with them; (b) recall all employees holding the Revenue Collection Clerk positions to discharge the collection functions in the market as part of the duties and responsibilities inherent to their positions; and (c) ensure strict adherence to existing

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regulations that all accountable officers/employees for the collections of revenues and receipts are properly bonded to properly safeguard government funds.

2. The fidelity bonds of Accountable Officers (AO) are insufficient since their accountabilities are higher than the applied maximum amount stated in the bond policy. As such, there is a risk that a government unit concerned will not be adequately indemnified in the event of embezzlement or other kind of losses of the AOs cash and accounts. (Observation No. 2)

We recommended that Management effect the increase of the fidelity bonds of the Municipality’s accountable officers commensurate to their accountabilities, in accordance with the Bureau of Treasury Circular No. 02-2009, in order to provide adequate protection on the Municipality’s resources.

3. Loose control in the maintenance of Petty Cash Fund (PCF) was evident by allowing five (5) personnel to handle PCFs accommodating payments of similar expenditures and without estimates as basis for the initial set-up of five (5) PCFs. As a result, excessive unused funds were left idle in the hands of the Accountable Officers. (Observation No. 3)

We recommended that Management (a) comply with the provisions set forth by COA Circular No. 2012-001 to ensure that the establishment and utilization of the PCF are in accordance with the approved estimates and expended in accordance with the nature of expenses intended for the fund; and (b) effect the maintenance of a centralized PCF to be handled by the Disbursing Officer under the supervision of the Municipal Treasurer.

4. Despite the receipt of the fund during the 1 st quarter of 2016, BUB project on Health Facility Enhancement amounting to ₱6,438,000.00 was not implemented, contrary to pertinent provision of JMC-DBM-DILG-NAPC No. 7, thus depriving constituents of the additional benefits of providing access to appropriate health facility. (Observation No. 6)

We recommended Management to strictly observe the pertinent provisions of DBM-DILG-DSWD-NAPC Joint Memorandum Circular No. 7 dated November 3, 2015 and fast tract the implementation of BUB projects to best serve the purpose of the program.

5. Out of the ₱33,666,795.60 appropriated amount for 20% Development fund, only ₱8,842,795.60 or 26.27% was utilized for capital outlay projects while ₱14,129,004.10 or 42.44% was used for non-capital expenditures, thus, the Municipality was still unable to maximize the utilization of the fund for long term development projects. Likewise, the fund was disbursed to expense items that are not related or connected in the implementation of development projects, thus defeating the purpose for which the fund was established. (Observation No. 7)

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We recommended that Management (a) prioritize the budget for 20% IRA on projects that would create greater impact in terms of sustainability; (b) advise the Local Development Council and the municipal officials concerned to prepare the development plan strictly in accordance with the guidelines of the DILG and carry out the targeted activities within the time frame; and (c) stop the payment of ineligible expenses that are not related or connected in the implementations of development projects.

6. The Municipality failed to comply with some provisions of COA Circular No. 2012-002 dated September 12, 2012 such as (a) non-compliance on the prescribed format of Local Disaster Risk Reduction and Management Fund Investment Plan (LDRRMFIP) (b) non-submission of the Monthly Report on Sources and Utilization of DRRMF; (c) failure to transfer the unexpended balance amounting to ₱6,427,160.90 at the end of the year to Special Trust Fund; and (d) Incomplete documentation on the disbursement made amounting to ₱1,976,280.00 for 30% Quick Response Fund. As a consequence, transparency and accountability in the utilization of LDRRMF were not achieved. (Observation No. 8)

We recommended that Management (a) comply with prescribed format on the LDRRMFIP to determine the sources and expected output of the programs/projects and activities of the LDRRMF; (b) prepare and submit a Monthly Report on Sources and Fund Utilization to the Audit Team for the timely review of the projects and activities undertaken thereon; (c) effect the cash transfer of the unspent amount of LDRRMF to the Trust Fund; and (d) submit a justification for Management’s failure to provide necessary documents to support the disbursement made on the 30% Quick Response Fund thereby, the validity of the undertaking could be determined.

7. The Municipality failed to abide some provisions of R.A No. 9003 known as Ecological Solid Waste Management Act due to a) non-enforcement of the ordinances on no littering, prohibiting the use of polyethylene plastic bags and mandatory segregation of wastes at source; and b) non-establishment of Materials Recovery Facility (MRF) for 11 out of 19 barangays for re-use, recycling and composting of wastes, thus, total protection of the environment and general welfare of the constituents were not fully attained. (Observation No. 9)

We recommended that Management (a) encourage active participation of barangay officials to support the solid waste management program of the government by educating their respective constituents on the proper segregation of reusable or recyclable materials from compostable wastes; (b) comply with the requirements of the law on waste segregation by placing trash bins with proper labels and by collecting only those garbage that are properly segregated; (c) ensure that the existing MRF are fully operational and provide necessary support in enjoining the remaining 11 barangays to establish their own MRF; (d) monitor and enforce the strict implementation of the Municipality’s ordinances regarding solid waste management; and (e) recommend to the Sangguniang Bayan (SB) policies and

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additional measures that will ensure full compliance on the provisions of R.A. No.

9003.

8. The Municipality continuously incurred inappropriate charges against the Special Education Fund (SEF) thereby utilizing ₱2,870,972.82 for expenditures found to be exclusions to the priority spending of SEF, contrary to the provisions of RA. 5447, Sections 100 and 272, RA 7160, Deped-DBM-DILG Joint Circular Nos. 01, s. 1998 dated April 14, 1998, No. 01-A, dated March 14, 2000, No. 01-B, dated June 25, 2001 and related DepEd issuances, thus the fund was not fully utilized to uphold or support the education department’s goal. (Observation No. 10)

We reiterated our recommendations that Management (a) refrain from accommodating expenditures on activities for which the DepEd has the direct mandate to execute; and (b) request the Local School Board to prepare a balanced budget with conscious and concerted efforts of observing compliance with the legal and regulatory requirements on SEF budgeting, allocation and utilization.

9. Significant delay in the submission of perfected contracts and related documents was incurred by the Bids and Awards Committee (BAC) which is contrary to COA Circular No. 2009-001, thus hampering the timely auditorial review of the contracts and preventing the audit team to conduct an ocular inspection at the most appropriate time and manner. (Observation No. 11)

We recommended that Management require the BAC to submit copies of the perfected contracts and supporting documents within the prescribed period in compliance with COA Circular 2009-001 dated February 12, 2009, for the timely conduct by the Audit Team of the contract review and other necessary audit procedures.

10. The Municipality continuously disbursed ₱672,000.00 for 2016 annual dues and contributions to authorized organization without corresponding official receipts (AF 51) as required by DILG Memorandum Circular No. 2003-105 dated May 23,2003. Likewise, ₱245,000.00 was allowed to be spent to National Movement of Young Legislator not covered by the provisions of Chapter 1 and 2, Title VI of R.A. 7160 or the Local Government Code. (Observation No. 12)

We reiterated our recommendations that the Local Chief Executive (a) require the Accountant and the Treasurer to stop the payment of annual dues to NMYL which was not in conformity with R.A. No. 7160 for lack of legal basis; (b) advise the Municipal Accountant to see to it that claims for the membership, dues, and contributions be substantiated with the approved plans and programs as basis for the amount to be paid; and (c) advise the Municipal Treasurer that payments for the purpose made to duly recognized leagues and federations under the law be acknowledged with the prescribed government Accountable Form No. 51 or official receipts duly registered with the Bureau of Internal Revenue.

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11.

Honoraria totaling ₱499,800.00 were paid to the members of Bids and Awards Committee (BAC), BAC Secretariat and Technical Working Group (TWG) without supporting documents required under COA Circular No. 2012-001 dated June 14, 2012. Likewise, the receipt of which is also in question due to inappropriate funding and incorrect rate of payment, contrary to DBM Circular No. 2004-5A and 2007-3. (Observation No. 13)

We recommended that Management (a) top the practice of paying of honoraria that are charged against the regular appropriations of the Municipality and require the use of proper account to record the payment; (b) comply with the guidelines on the grant of honoraria in accordance with DBM Circular No. 2004-5A; and (c) submit the afore-cited documents to validate the payments made and require the refund of the excess amount received.

12.

Proper information and publicity on Programs/Projects/Activities (PPAs) of the Municipality was not achieved due to non-submission of the list of on-going PPAs and unnecessary inclusions of the name and images of the local official on the billboards/signboards of the PPAs, which is contrary to COA Circular No. 2013- 004 dated January 30, 2013. (Observation No. 14)

We recommended that Management stop the practice of putting billboards/signboards bearing the name and images of the local official on PPAs and comply with the provisions of COA Circular No. 2013-004 to disclose all transactions involving PPAs for transparency and accountability.

E.

Summary of Total Suspensions, Disallowances and Charges at year-end

 

Suspensions, disallowances and charges as of December 31, 2016 stood at 44,007,617.17 2,636,662.05 and 0.00, respectively.

F.

Status

of

Implementation

of

Prior

Years’

Unimplemented

Audit

Recommendations

Of the forty six (46) audit recommendations in the previous year’s Annual Audit Reports, fourteen (14) were implemented, twenty seven (27) was partially implemented and five (5) remained unimplemented by the Municipality.

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