Republic of the Philippines

COMMISSION ON AUDIT
Office of the Audit Team Leader
Team 2- Audit Group
Province of South Cotabato

AOM No. 00-000-0000

Date: Oct.17, 2013

AUDIT OBSERVATION MEMORANDUM (AOM)

For

: Hon. Municipal Mayor

Municipality of ABC
Province of South Cotabato
Attention: Municipal Development Council
Municipal Planning and Development Coordinator

We have audited the financial transactions of the Municipal Government of ABC and observed the
following deficiency:
The Municipal Government of ABC failed to follow some of the guidelines in the utilization of the 20%
Local Development Fund contrary to Joint Memorandum Circular No. 2011-1 of the Department of Interior
and Local Governments and Department of Budget and Management dated April 13, 2011.

Joint Memorandum Circular No. 2011-1 of the Department of Interior and Local
Government and Department of Budget and Management dated April 13, 2011 provided the
following guidelines for the utilization of the 20% Local Development Fund:

Section2.2;Itmaybeutilizedtofinancetheprioritydevelopmentprojectsandprograms,as
embodiedinthedulyapprovedlocaldevelopmentplanthatdirectlysupportthePhilippine
developmentPlan,theMedium-TermPublicinvestmentProgramandtheAnnualInvestment
Program.

Section2.3;Allprojectstobefundedshallcontributetotheattainmentofdesirablesocioeconomicdevelopmentandenvironmentalmanagementoutcomes and shall partake the

nature of investment or capital expenditures.

Section3.1SocialDevelopment

3.1.1Constructionorrehabilitationofhealthcenters,ruralhealthunitsor hospitals,and
purchaseofmedicalequipment;

3.1.2Constructionorrehabilitationoflocalgovernment-ownedpotablewatersupplysystem;

3.1.3EstablishmentorrehabilitationofManpowerDevelopmentCenters;

3.1.4Constructionorrehabilitationofevacuationcenters;

3.1.5Purchaseorrepairofarea-widecalamityrelatedalarmorwarningsystem;

3.1.6Rehabilitationofcultural/historicalsites;

3.1.7Purchaseorrepairofappropriatecalamity-relatedrescueoperationsequipmentssuchas
inflatableboats,breathingapparatus,extractiontools,safelinerescueropes,fireextinguishers,
chainsaws,two(2)wayhandheldradiosandthelike;

3.1.8Purchaseanddevelopmentoflandfortherelocationofinformalsettlersandrelocationof
victimsofcalamities;

3.1.9Constructionandrehabilitationoffacilitiessuchasmulti-purposehallintendedtocaterout-ofschoolyouths,women,seniorcitizens,minors,displacedfamilies,indigenouspeopleanddifferently-abled
persons;and

3.1.10Installationandmaintenanceofstreetlightingsystemexceptpaymentofelectricbills.

3.2EconomicDevelopment

3.2.1Constructionorrehabilitationofcommunalirrigationorwaterimpounding
systemandpurchaseofpostharvestfacilitiessuchasfarmorhandtractorwithtrailer,
thresherandmedicaldriers;

3.2.2Constructionorrehabilitationoflocalroadsorbridgesandpurchaseof
appropriateengineeringequipmentsuchasdumptrucks,gradersandpayloaders;

3.2.3CapitalExpendituresrelatedtotheimplementationoflivelihoodor
entrepreneurship/localeconomicdevelopmentprojects;and

3.3EnvironmentalManagement

3.3.1Reforestationandurbangreening;

3.3.2Constructionorrehabilitationsofsanitarylandfills,materialrecoveryfacilities
andpurchaseofgarbagetrucksandrelatedequipment;

3.3.3Implementationoffloodanderosioncontrolprojectssuchasrehabilitationand
constructionofdrainagesystems,de-siltingofrivers,de-cloggingofcanals;and

3.3.4Otherenvironmentalmanagementprojectsthatpromoteairandwaterquality,aswellas
productivityofthecoastalorfreshwaterhabitat,agriculturallandandforestland.

4.0ExpenditureItemsNotcovered

Thefollowingexpenseitemsthatarenotrelatedtoand/ornotconnectedwiththeimplementationof
developmentprojects,programsandactivitiesshallnotbepaidoutofthe20%developmentfund:

4.1Administrativeexpensessuchascashgifts,bonuses,foodallowance,medicalassistance,
uniforms,meetings,communication,waterandlight,petroleumproductsandthelike;

4.2Salaries,wagesorovertimepay;

4.3Travellingexpenses,whetherdomesticorforeign;

4.4Registrationorparticipationfeesintraining,seminars,conferencesorconventions;

4.5Construction,repairorrefinishingofadministrativeoffices;

4.6Purchaseofadministrativeofficefurniture,fixtures,equipmentorappliances;and

4.7Purchase,maintenanceorrepairofmotorvehiclesormotorcycles.

5.0ResponsibilityoftheLocalChiefExecutive

ItistheresponsibilityofeveryProvincialGovernor,CityandMunicipal
MayorandPunongBarangaytoensurethatthe20%oftheIRAisoptimally
utilizedtohelpachievedesirablesocio-economicdevelopmentand
environmentaloutcomes.Theappropriationsfordevelopmentprojectsshall
notincludetheitemsforpersonalservicesandthosementionedinthe
immediatelyprecedingItemNo.4hereof.Further,allconcernedlocalchief
executivesareherebyremindedthatutilizingsuchfund,whetherwilfullyor
thoroughnegligence,foranypurposebeyondthoseexpresslyprescribedby
laworpublicpolicyshallbesubjecttothesanctionsprovidedunderthe
LocalGovernmentCodeandundersuchotherapplicablelaws.

The total Internal Revenue Allotment (IRA) received by the Municipality

of ABC for CY 2013 was P xxxxx. The Municipality appropriated and
committed the 20% for CY 2013 Annual Investment Plan (AIP)
presented as follows:

Program/Project/Activity
GENERAL PUBLIC SERVICES (10)

AMOUNT

a. Completion
of
the
Municipal Comprehensive
Land
Use
Plan
with
Integration of Disaster
Risk Reduction / Climate
Change
Adaption
(DRR/CCA)

P
100,000.00

b.
Construction Repair/
Rehabilitation of
Different Projects in all
Barangays
c. Implementation of Local
Governance
Performance
Management
System
(LGPMS)

P
500,000.00

P30,000.00

d. Repair and Maintenance

of
Barangay
Projects
(Barangay
Development
Fund)

P
600,000.00

e. Updating
Development
Integrating
Reduction
/
Adaption

of

Comprehensive
Plan
(CDP)
Disaster
Risk
Climate
Change

P 50,000.00

SOCIAL SERVICES (30)

a. Amortization and Interest on
Loan of Heavy Equipment

P
5,571,555.0
0

b. Clean and Green Program

c. Completion of Covered Area at

Balayon Elementary School

100,000.00
P 30,000.00

d. Completion of Public Pavilion at

Rizal Park

e. Computer Literacy Program for

Elementary Schools

f. Construction and Installation of

Street Lights at Major Thorough
Fare

P
150,000.00
P 80,000.00

P
250,000.00

g. Construction and Installation of Street Signs

P 50,000.00

h.
Construction
and
Installation
of
Transparency Board
i. Construction and Installation of Water
Supply in Different Barangays

P 50,000.00

P 200,000.00

j. Construction and Installation of Drainage

Canal (Sampaguita St., Ledesma St. & J. P.
Rizal St.) Barangay Poblacion

P 400,000.00

k. Construction of Revsidual Containment Area

(RCA) and Water Disposal Facility

P 50,000.00

l. Construction of Stage at Barangay Matapol

P30,000.00

m. Construction of TB DOTS Center

P 200,000.00

n. Construction of Waiting Shed at Purok

Kapol, Barangay Simsiman

P 15,000.00

of

P
200,000.00

p. Development of Municipal
Plaza (Rizal Park)
q.
Electrification
Program
in
Different Barangays
r. Establishment of Web Site
Development Program
s. Implementation of Integrated
Solid
Waste
Management
Program
t. Improvement of Day Care
Center
at
Purok
Del
Pilar,
Barangay Kibid
u. Installation of Water Supply at
Municipal Plaza and Parks

P
200,000.00
P
200,000.00
P30,000.00

P350,000.0
0

P 20,000.00

P 50,000.00

v. Municipal Counterpart to Allah

Valley Landscape Development
Alliance (AVLADA)
w.
Municipal
Counterpart
to
Special Projects
x.
Procurement
of
Lot
for
Dumping
Site/
Residual
containment Area (RCA)

P
200,000.00

P563,220.0
0
P
200,000.00

o. Development/Construction
Community e Center (CeC)

y. Promotion and Development of Tourism

Program

P 100,000.00

z. Purchase of 4 unit Weighing Scale (adult)

Detecto with Equilibrium Scale

P 56,000.00

aa. Purchase of 4 unit Vaccine Refrigerator

P 40,000.00

bb. Purchase of Grass Cutter

P 40,000.00

cc. Repair and Maintenance of Street Ligths

P 150,000.00

dd. Repair of Perimenter Fence at Municipal

Gym

P 150,000.00

ee. Repair of Perimenter Fence at Municipal

Hall

P 100,000.00

ff. Road Side Development along General

Paulino Santos Avenue

P 100,000.00

gg. Socio-Cultural Development Program

P 100,000.00

ECONOMIC SERVICES (80)

P
20,000.00

P30,000.00

P
50,000.00

P
270,000.00

a. Agribusiness and Marketing

Assistance Program

b.
Agricultural
Extension
Services
c. Animal Health Care and
Development
Management
Program
d. Community Based Training on
Enterprise Livelihood Projects
for Development

e. Concreting of Road at Paulino

Santos Avenue Corner Burgos
Street Approaching Bridge at
Public Market

f.
Cooperative
Program

Development

P
100,000.00

P30,000.00

g.Corn Development Program

P20,000.00

h. Development of New Cemetery

P500,000.00

i. Farm Home Resources Management

Program
j. Farm Youth Development Program

P30,000.00

P30,000.00

k.
Fishery
and
Aquaculture
Development Program
l. Gulayan Kag Prutasan sa Ugsaran
Program
m. High Value Commercial Crops
Program
n. Improvement of Old Cemetery

P30,000.00

P50,000.00

P80,000.00

P200,000.00

o. Improvement of Public Terminal at

Public Market

P200,000.00

p. Improvement of Slaughterhouse

P200,000.00

q. Promotion and Development of

Organic Agriculture Progam

P30,000.00

r. Repair and Maintenance of Heavy

Equipment
s. Repair and Maintenance of Roads
and Streets
t. Vermi-culture Production

P300,000.00

P400,000.00

P30,000.00

Review of the Annual Investment Plan of the Municipal Government of ABC

disclosed that there were several Programs/ Projects/ Activities which were presented
in accordance with the guidelines. These were determined to have long impact on the
lives of the constituents of the municipality. However, there were also Programs/
Projects/ Activities which were presented in generic terms making it appear that these
were lump sum appropriations.
In a dialogue with the concerned Municipal Officials, it was admitted that the
framers of the Annual Investment Plan for the year 2013 found it difficult to give
specific project names and activities due to the unique nature of the needs of the
people of the Municipality. They further explained that several items in the AIP were
actually procurement of supplies and materials to be distributed to households
requesting the same.
Based on the explanations by the Municipal Officials it was noted that some of
the disbursements from the 20% Local Development Fund were made for the benefit
of specific households and not to the general constituency of the Municipality
contrary to the principle that all projects to be funded shall contribute to the
attainment of desirable socio economic development and environmental management
outcomes and shall partake the nature of investment or capital expenditures .
Another observation on the formulation of the AIP was the inclusion of splintered
programs and activities which were not provided sufficient funding thereby making
them unsustainable (ANNEX A).

The guidelines provided by the joint circular aimed that the disbursements from
the 20% Local Development Fund shall result to projects which would have long
impact on the lives of the constituents. The Programs/ Projects/ Activities to be
included in the formulation of the AIP should have been carefully selected and
ensured their sustainability by providing sufficient funding .
May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.
NORBERTO V. MANANSALA
State Auditor IV
Audit Team Leader

CRISTINA V. FIGUERAS
State Auditor V
Supervising Auditor

ANNEX A

List of Programs/Projects/ Activities which were unsustainable due to

insufficient budget
HIGH VALUE COMMERCIAL CROP
DEVELOPMENT PROGRAM
Purchase of Assorted Fruits Seeds
Purchase of Forest Trees Seeds
Purchase of Assorted Veg. Seeds
Conduct Training and Technology Updating
Hosting of Municipal HVCC Meeting
Attendance to Congress

AMOUNT

FARM YOUTH DEVELOPMENT PROGRAM

Leadership/ Mgt. Training
Entrepreneurial Skills Training
Enhancement/Training on Vegetables
Production
Gulayan ng Kabataan

GULAYAN KAG PRUTASAN SA UGSARAN

PROGRAM
Briefing Orientation Activities

P3,000.00
P 5,000.00
P2,000.00

P 5,000.00
P3,400.00
P 14,000.00
P 9,000.00
P5,400.00
P1,200.00

P7,000.00

P 5,000.00

FARM HOME RESOURCES MANAGEMENT PROGRAM

Food utilization/Processing

P4,500.00

Handicraft/RTWs

P4,500.00

Packaging/Labeling

P2,000.00

Community/Gulayan ng Kababaihan

P6,000.00

Project Monitoring/Evaluation

P2,000.00

Municipal

P3,000.00

Province
National

P3,000.00
P 5,000.00

COOPERATIVE DEVELOPMENT PROGRAM

Conduct Municipal Cooperative Development Council

Regular Monthly Meeting

P 5,000.00

Conflict Management

P 5,000.00

Parliamentary Procedures

P 5,000.00

Strategic Planning

P 5,000.00

Participate to Cooperative Team shop , Summit,

Congress Cooperative Month Celebration & Other
Trainings

P 10,000.00

AGRICULTURAL EXTENSION SERVICE

PROGRAM

Participate to Bantay Peste Congress, Training

Seminar

FISHERY AND AQUACULTURE DEVELOPMENT

PROGRAM
Hosting of Different Municipal
Coordinators/Updating
Attendance to Fish Con./Congress

AGRIBUSINESS AND MARKETING ASSISTANCE

PROGRAM
Conduct Training on Agribusiness Enterprise
Development/Investment Opportunity Seminar
Service
Conduct of Commodity Market
Linkages/Agribusiness Investment
Clinique/Business Forum
Participate to Trade fairs/Conventions/Congress

CORN DEVELOPMENT PROGRAM

Conduct Training/Technical Updating on Corn
Latest Technology
Established of White Corn Seed Production
Participate To Annual Corn Trade
Fairs/Convention/Congress

P 5,000.00

P 5,000.00
P 5,000.00

P 5,000.00

P 5,000.00

P 10,000.00

P 5,000.00
P 10,000.00
P 5,000.00