Municipality of

San Luis

Exit Conference
June 26, 2019
CONTEN
TS
 CY 2018 Financial
Highlights
Assets, Liabilities, Government Equity,
Income and Expenses
CY 2018 Awards, Citations and
Accomplishments
 Good Financial Housekeeping Passer -
DILG
 Top Performing Local Chief Executive
from CALABARZON – DOH Center for
Health Development CALABARZON
 Top Performing LGU in the Province of
Batangas – DOH/Provincial Government
of Batangas
 2018 Best in Innovation Migration and
Development Program Implementer –
Provincial Government of Batangas
CY 2018 Audit Observations and
Recommendations
Audit Thrusts
•Financial Statement Accounts
•LDRRMF
•20% Development Fund
•Others
 Financial Statements
Financial Statement
Disclosures
• Disclosure requirements in the
Financial Statements under the
Philippine Public Sector Accounting
Standards (PPSASs) and the required
pro-forma Notes to Financial
Statements were not fully observed
 Financial Statement
Recommendation
Disclosures
s
We recommend that the Municipal Mayor
instruct the Municipal Accountant to
observe the disclosure requirements in
the preparation of the financial
statements in accordance with the PPSASs
and Section 3.4 of COA Circular No. 2016-
004.
 Financial Statements
Unreleased and Stale Checks
• Unreleased checks as of December
31, 2018 totaling ₱311,097.49 were
considered paid and deducted from
the cash and liability accounts and
stale checks totaling ₱86,294.90
remained bank reconciling items for
LBP Account No. 160-1602-1003-80
thereby misstating the Cash in Bank
and related payable account balances
in the financial statements as of
 Unreleased Checks
Recommendation
Recommendation
s
We recommend that the Municipal Mayor
instruct:
• the Municipal Treasurer to:
a) prepare and submit to the Municipal
Accounting Office the List of Unreleased
Checks to enable the reversion back to
cash in bank and payable accounts of the
amount of unreleased checks; and
b) for the checks which have become
stale, send written notice to the payees for
the existence of checks and require
 Unreleased Checks
Recommendation
s
• the Municipal Accountant to effect the
necessary adjustments of reconciling
items determined during the
preparation of the Monthly Bank
Reconciliation Statements on a timely
basis.
 LDRRMF
Disaster preparedness programs and
projects planned for 2018 were not
implemented on time, while available funds
from Continuing Appropriations and prior
year’s unexpended balances in the Trust
Fund books were not maximized.
 LDRRMF
Ineligible expenses amounting to
₱88,199.77 were charged to the Local
Disaster Risk Reduction and
Management Fund.
 LDRRMF
Moreover, inconsistencies were noted
in the records of LDRRM funds,
subsidiary ledgers were not
maintained for transfers of agency’s
unutilized LDRRMF to the special trust
fund by year of transfer and the Local
Disaster Risk Reduction Management
Officer did not submit regularly copy
of Report on Sources and Utilization of
the LDRRM Fund to the Commission.
 LDRRMF
Recommendation
s We recommend that the Municipal Mayor:
• Instruct the Municipal Engineer and Bids
and Awards Committee to expedite the
implementation of planned infrastructure
projects and procurement of equipment
necessary to mitigate the disaster risk
related to such projects. Direct the LDRRMO
to incorporate in planning for the utilization
of LDRRM Fund the savings from completed
Capital Outlay in the LDRRM Investment Plan.
 LDRRMF
Recommendation
s• Direct the Municipal Budget Officer,
Municipal Accountant and LDRRMO to charge
only eligible items against the fund.
• Require the LDRRMO to prepare and
submit the annual LDRRMF Investment Plan
specifying in detail the list of programs,
activities and projects which include under a
separate caption those projects and
programs charged to the unexpended
LDRRMF of previous years, and implement
such projects at the intended period of its
implementation.
 LDRRMF
Recommendation
s• Submit regularly or within the
prescribed period the Report on Sources and
Utilization of LDRRMF to the Commission and
maintain the prescribed subsidiary ledgers
for transfers of the agency’s unutilized
LDRRMF to the special trust fund by year of
transfer.
 20% Development
Fund
• Only ₱5,491,921.47 or 31.84% of the
₱17,246,384.20 total appropriations for
the 20% Development Fund was
expended for development projects.
 20% Development
Fund
• Moreover, materials and labor for the
improvement of the barangay multi-
purpose halls totaling ₱597,631.50 was
charged against the 20% Development
Fund, hence, depleting funds intended for
development projects.
 20% Development
Fund
• ₱1,378,800.00 was charged against the
20% Development Fund for the purchase
of 10 drums of degassing and odor
control agent for the Municipal dumpsite.
However, purchase of consumable items
contradicts the purpose of development
as they do not fall within the purview of
investment nor capital expenditures.
 20% Development Fund
Recommendation
Recommendation
s
We recommend that Municipal Mayor:

•Require the Municipal Planning and

Development Officer to justify the
delayed/non-implementation of projects listed
in the 20% Development Plan, including
continuing projects, despite the availability of
funds. Likewise, we recommend that the
Municipal Development Council to evaluate
and study the feasibility of the projects
especially those with continuing
 20% Development Fund
Recommendation
Recommendation
s
• Direct the Municipal Engineer to cause
the immediate implementation of the
projects that had been allocated funds
in order to fully attain the purpose and
intent for establishing the fund at the
soonest possible time, thereby,
maximizing the real value of the money
on hand.
 20% Development Fund
Recommendation
Recommendation
s
• Ensure that only programs and projects
geared towards the attainment of socio-
economic development and
environmental management outcomes
that partake the nature of investment or
capital expenditures, as mandated by
law, will be given allocation under the
20% Development Fund.
 20% Development Fund
Recommendation
Recommendation
s
• Instruct the Municipal Accountant to
draw the Journal Entry Vouchers to
effect the necessary adjustments in the
PPE accounts for fair presentation of the
Statement of Financial Position.
 Remittances
• Payments for GSIS, Pag-IBIG/HDMF, and
PhilHealth contributions of Municipal
government’s employees disclosed an
unreconciled balance in the Due to GSIS
account amounting to ₱750,153.68 and
unremitted balances of Due to Pag-IBIG
and Due to PhilHealth accounts

• Delayed remittance of GSIS premiums was

observed, thus incurring penalties and
possibly depriving member beneficiaries
of the availment of benefits due them. 
 Remittances
• Likewise, there were cases that
remittances to concerned government
agencies exceeded the amount deducted
from payroll on some employees thus,
casting doubts on the reliability of the
deductions and payments made by the
Municipality. 
 Remittances
Recommendations
We recommend that the Municipal Mayor:

• enjoin the Municipal Treasurer and

Municipal Accountant to (a) reconcile
employees’ records at GSIS, PhilHealth and
Pag-IBIG to identify the affected employees
on the unremitted balances and immediately
remit the amounts due to these agencies;
and, (b) ensure that mandatory contributions
are remitted within the prescribed period.
 Remittances
Recommendations
We recommend that the Municipal Mayor:

• • require the Municipal Accountant to

(a) identify the cause/s of under and over
remittance for some accounts; (b) reconcile
the amount of contributions actually remitted
with the year-end balances of Due to GSIS,
Due to Pag-IBIG and Due to PhilHealth
reported in the financial statements, and
adjust the records accordingly.
 Supplies Procurement
Deviations from prescribed
procurement procedures such that
alternative methods of procurement
are resorted to without compliance
with requirements. Ordinary and
regular office supplies available from
the Procurement Service of the
Department of Budget and
Management (DBM) were obtained
from private suppliers.  
 Supplies Procurement
Moreover, purchase of various goods
totaling P1,292,046.55 which were paid
to same suppliers, were divided into
two or more Purchase Requests despite
similar item specifications, nature or
descriptions, contrary to the prohibition
on splitting of purchases.
 Supplies Procurement
Recommendations
We recommend that the Municipal Mayor:

Direct the General Services Officer to refrain

from purchasing common-use supplies
through shopping, unless the procurement is
emergency in nature or the items being
purchased are not available in the
Procurement Service of the Department of
Budget and Management (DBM-PS).
Common-use supplies not available in the
DBM-PS purchased through shopping should
 Supplies Procurement
Recommendations
Strictly observe the pertinent provisions of
R.A. No 9184 and its IRR, especially on the
conduct of public bidding for the acquisition
of goods and services exceeding P100,000.00
and on the prohibition on splitting of
contracts in order to avail of the most
advantageous price for all procurement
transactions.
 Taxes on Honoraria
Taxes on honoraria totalling
₱276,000.00 paid to National
Government Agency employees, and
₱480,027.42 paid to municipal
employees were not withheld by the
Municipality, thereby depriving the
national government of income due
thereon.
 Taxes on Honoraria
Recommendations
We recommend that the Municipal
Accountant properly withhold creditable
income taxes of 5% or 10%, whichever is
applicable, from the honoraria paid to
employees of national government
agencies and remit the same to the BIR
through BIR Form No. 0605 on a monthly
basis and BIR Form No. 1601-EQ on a
quarterly basis, to help the government
accelerate the collection of income.
 Taxes on Honoraria
Recommendations
We also recommend that the Municipal
Accountant subject the honoraria paid to
employees of the municipal government to
withholding tax on compensation, in
accordance with the prescribed rates
under RMC No. 105-2017, and remit the
same to the BIR through the monthly BIR
Form No. 1601-C.
 Property, Plant and
The Equipment
Municipality was unable to substantially
address prior years’ issues on Property, Plant
and Equipment (PPE), such as prioritization of
a complete physical count of Municipal
properties, inaccurate PPE account balances
and non-compliance with accounting and
reporting guidelines on the local roads asset
management system.
 Property, Plant and
Equipment
Balance of PPE, per Financial ₱133,601,026
Statements .80
Balance of PPE, per Physical 93,190,874.8
Count 1
Variance ₱39,446,634.
41*
*The variance increased by
₱9,584,055.91, or 31.09% from
prior year’s variance of
₱30,286,096.08
 Property, Plant and
Equipment
Recommendations
We recommended that the Municipal Mayor:

• direct the Inventory Committee to

conduct a complete inventory of all the
Municipality’s properties and prepare the
Report on the Physical Count of Property,
Plant and Equipment to be submitted to the
Auditor concerned not later than January 31 of
each year;
 Property, Plant and
Equipment
Recommendations
• require the Municipal Accountant and
GSO/Property Officer to maintain complete
and updated PPE Ledger Cards and Property
Cards, respectively, immediately reconcile the
results of inventory per PPE account and
accordingly effect adjustments.
 Property, Plant and
Equipment
Recommendations
• Municipal Accountant to review the
balances of the reported Property, Plant and
Equipment in view of the discrepancy of
₱13,631,703.50 between the reported
purchase and construction of PPE in the Cash
Flow Statement and the total additions to PPE
in the Notes to Financial Statements in CY
2018; and,

• Immediately comply with the accounting

and reporting guidelines for local road assets
 RPT and SET Receivables
The Municipality’s financial statement balance
of Real Property Tax (RPT) Receivable and
Special Education Tax (SET) Receivable
totaling ₱3,134,415.54 were not reconciled
with the delinquent taxes per Treasury records
amounting to ₱10,456,498.97 as of December
31, 2018, thereby incurring a total difference
of ₱7,332,083.43, thus affecting the fair
presentation of the financial statements.
 RPT and SET Receivables
Likewise, Report of RPT Delinquency as of
December 31, 2018 showed an ending
balance of ₱10,456,498.97, contrary to
Section 258 and 269 of Republic Act (R.A.) No.
7160, thereby showing weakness on the
internal control of the Municipality in enforcing
its collections.
 RPT and SET Receivables
Further, analysis of the accounts revealed that
collections of delinquent basic RPT and SET
receivables amounting to ₱455,660.17 each,
were recorded in the books as direct credits to
the Real Property Tax Income/Special
Education Tax Income, instead of the
corresponding RPT and SET Receivable
accounts. As a result, the debits to the
Deferred RPT and SET Revenue accounts were
also not recorded. Thus, overstating the
Deferred Real Property Tax, Real Property Tax
Receivable, Deferred Special Education Tax,
 RPT and SET Receivables
Recommendations
We recommend that the Municipal Mayor:

• Instruct the Municipal Treasurer to prepare and

submit to the Municipal Accounting Office the
Certified List of Delinquent Taxpayers as of year-end
in time for the closing of the books. Likewise, submit
to the Sangguniang Bayan the certified list of all real
property tax delinquencies which remained
uncollected or unpaid for at least one (1) year and a
statement of the reason or reasons for non-collection
or non-payment on or before December 31 of the
year immediately succeeding the year in which the
delinquencies were incurred, with a request for
 RPT and SET Receivables
Recommendations
• Direct the Municipal Accountant to
conduct a detailed review of the RPT and SET
Receivables accounts and investigate the
cause of the differences between the
accounts. Thereafter, require the Municipal
Accountant and Municipal Treasurer to
reconcile their records and adjust accordingly
based on determined disparities between the
set-up, payments, and any other adjustments
made in both records;
 RPT and SET Receivables
Recommendations
• Instruct the Municipal Accountant to take
up the necessary adjusting entries in the
books for the collection of delinquent RPT and
SET Receivables. Subsequently, follow the
prescribed accounting entries for the set-up of
RPT and SET receivables, receipt of payment
and distribution of RPT and SET collections;
and,
• Coordinate with the Sangguniang Bayan
Members and adopt measures to collect from
delinquent taxpayers, and strengthen and
 Solid Waste Management
The Municipality was unable to substantially
comply with provisions of the Ecological Solid
Waste Management Act of 2000 as manifested
by: (a) non-segregation of waste at source,
improper disposal of waste and non-
establishment of sanitary landfill; (b) failure to
consistently monitor the implementation of
solid waste at barangay level owing to the
absence of a dedicated Municipal Environment
and Natural Resources Office (MENRO); and,
(c) absence of Materials Recovery Facility in
every barangay. Hence, the protection of
 Solid Waste Management
Recommendations
We recommend that the Municipal Mayor:

•Coordinate with the Solid Waste Management

Board (SWMB) and prioritize the creation of
Municipal Environment and Natural Resources
Office (MENRO). Strictly impose the “no
segregation, no collection policy”, especially
at the barangay level.
•Prioritize and expedite the establishment of
an operational MRF in every barangay or
cluster of barangays in the Municipality.
 Solid Waste Management
Recommendations
•Enjoin Municipal officials to consider
developing concrete programs and projects
that are supportive of proper solid waste
management and reduction of waste at
source, e.g. reusing, reducing and recycling of
non-biodegradable materials. Conduct
information and education campaigns on the
hazards of open burning and strictly monitor
compliance thereof.
 Prior Year’s Audit
Observations and
Recommendations
 Audit Observation Recommendations Status of
Implementatio
n

The newly created San We recommended that

Luis Batangas Lying – In the Municipality duly
Center was declared as a consider the instructive
local economic guidelines on the
enterprise (LEE) even creation or
without conducting the establishment of the
feasibility study and the local economic
preparation of the five enterprise provided in
(5) year business plan the Manual on Setting
contrary to Sections 4.2 Up and Operation of
and 4.6 of the Manual on Local Economic
Setting Up and Enterprises for Local
Operation of Local Government Units 2016
Economic Enterprise for of the DBM. As such, it
Local Government Units must be designed, set
of the Department of up, operated, and
Budget and managed in accordance
Management. with a well-prepared
feasibility study and a
 Audit Observation Recommendations Status of
Implementatio
n

Financial Statements We recommended that

were not prepared and the Municipal Accountant
complete subsidiary provide and maintain a
ledgers were not complete set of
maintained for special subsidiary ledgers for
accounts in the General special accounts and
Fund of the Municipality prepare and submit
contrary to Section 313 financial statements as
of Republic Act No. 7160 required in Section 313
and Sections 107 to 110 of RA 7160 and Sections
of the New Government 107 and 110 of the NGAS
Accounting System Manual for LGUs, Volume
Manual for LGUs, Volume I.
I, thus, deprived other
LGU officials and other
stakeholders and its
constituents of vital
financial information on
its operation.
 Audit Observation Recommendations Status of
Implementatio
n

The Municipality of San We recommended that

Luis provided the the Municipal Mayor and
auditing unit with an the honorable members
office space but without of the Sanggunian
a storeroom to store the include among its top
vouchers and related priorities the
documents for the construction of a
preservation period of building for the
ten (10) years contrary safekeeping and
to Section 20 and 26 of accommodation of the
the P.D. No. 1445 or the increasing volume of
Government Auditing documents generated by
Code of the Philippines, the various
thus, would prevent the departments/offices of
audit team and the the Municipality,
Municipality full particularly those for
protection against submission to the audit
possible loss, team, with consideration
manipulation, on the preservation
 Audit Observation Recommendations Status of
Implementati
on
Failure of the We recommended that the
Municipality to formulate LCE formulate implementing
implementing guidelines guidelines and clear-cut
and clear-cut policies on policies on the
the implementation of implementation of the
the Iskolar ng Bayan Iskolar ng Bayan Program,
Program as well as the
specifying among others, the
absence of the required
creation and composition of
educational institution in
the locality cast doubts the Scholarship
on the effective and Board/Committee, the
efficient implementation eligibility requirements,
of the scholarship qualifying maximum family
program. income level of applicants to
ensure that only poor
students, in addition to other
requirements such as the
minimum grade, the specific
degree courses, the