EXECUTIVE SUMMARY

Highlights of Financial Operations

For the Calendar Year 2012, the municipality generated a total operating
income of P 41,820,708.77 which is lower by P 1,907,855.39 or 4.36% as compared
to CY 2011 operating income. This is mainly due to a decrease in Internal Revenue
Allotment (IRA). Total operating expenses of P 37,940,034.89 is higher by
P 309,696.04 or .82% compared to last year’s expenditures. Of this year’s total
expenditures, P 22,048,953.44 or 56.32% was spent for Personal Services and
P 17,099,290.45 or 43.68% for Maintenance and Other Operating Expenses.

Depicted in the pie chart below is the categorical presentation of the agency’s
revenues for CY 2012.

IRA 93.16%
Local Income 4.66%
Permits and Licenses 0.68%
Service Income 0.87%
Other Income 0.64%

Net Working Capital at the end of the year was P 13,523,700.36, an increase
of P 1,481,219.59 or 12.30% from last year’s P 12,042,480.77. A positive net
working capital shows that the municipality had enough resources to cover its
currently maturing debt.

Scope of Audit

The audit covered the accounts and operations of the Municipality of Sibunag,
Province of Guimaras for the year ended December 31, 2012. The audit was
conducted to determine the reliability of the LGU’s accounts in order to express an
opinion on the fairness of presentation of the financial statements as well as to
determine whether or not the LGU’s transactions were made in accordance with
existing laws, rules and regulations.
Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the Financial Statements of the

Municipality of Sibunag, Province of Guimaras as of December 31, 2012, due to
undeposited collection of P640,926.18, unliquidated Cash Advances for Payroll
amounting to P3,871,469.92 and Advances to Officers and Employees amounting to
P1,368,211.34 which exposes government funds to possible misuse, misappropriation
and loss; the non-preparation of monthly Bank Reconciliation Statements since CY
2000 which the correctness of the Cash in Bank Account of P36,001,271.04 is
doubtful and cannot be established; the failure of the Municipality to conduct physical
count of all the assets amounting to P50,462,251.86 rendering the PPE accounts
unreliable; and the validity of Accounts Payable totaling P7,971,380.99 which has
been outstanding for more than two (2 )years now.

Significant Findings and Recommendations

The following are the significant findings and their corresponding

recommendations.

I. Financial and Compliance Audit

1. The Municipal Treasurer failed to deposit her collections with the Authorized
Depository Bank daily and intact or not later than the following banking day
and keep the cash in her custody for long periods of time in violation of
Section 32 of the NGAS for LGUs, Volume I, thus exposes the government
fund for possible misuse, misappropriation and loss.

We recommended that the Municipal Treasurer deposit intact all her

collections with the Authorized Government Depositary Bank daily or not
later than the following banking day.

2. Petty Cash Fund amounting to P18,832.95 remain unliquidated since 2004

contrary to Section 48 of the Manual on New Government Accounting System
(MNGAS) for Local Government Units (LGUs) and Item 5.1.2 of COA
Circular No. 97-002 dated February 10, 1997.

We recommended that the Municipal Accountant expedite the retrieval of the

Journal Entry Voucher of the Petty Cash Fund so that full liquidation could be
effected.

3. Cash Advances for Payroll amounting to P3,871,469.92 for all funds remain
unliquidated as of the year-end in violation of Section 89 of Presidential
Decree No. 1445 and COA Circular No. 97-002 dated February 10, 1997, thus
exposing government funds to possible misappropriation, misuse and loss.
 We recommended that the Municipal Accountant record all liquidation
received by the Accounting Office and demand be issued for the immediate
liquidation of cash advances in accordance with provisions of Section 89 of
PD 1445 and COA Circular No. 97-002 dated February 10, 1997.

4. Monthly Bank Reconciliation Statements were not prepared and submitted to

the Auditor since CY 2000 in violation of Section 3.2 and 3.4 of COA
Circular No. 96-11 dated October 2, 1996, thus the correctness of the Cash in
Bank Account (111) as presented in the previous years’ financial statements
could not be established.

We recommended that the Municipal Accountant exert utmost effort to

prepare and update the monthly bank reconciliation statements so as to prove
the accuracy of the cash in bank account.

5. Advances to Officers and Employers (Account 148) amounting to

P1,368,211.34 were not liquidated as soon as the purpose to which they were
given have been served, and additional cash advances were granted contrary
to Section 89 of Presidential Decree No. 1445 and COA Circular No. 97-002
dated February 10, 1997, thus exposing government funds to possible
misappropriation, misuse and loss.

We recommended the Accountant to a) direct the concerned personnel to

submit a liquidation report and refund the unused cash immediately b)
monitor closely the liquidation of outstanding cash advances and send written
reminders on the submission of liquidation report within the prescribed period
and c) avoid granting additional cash advances to those who have unliquidated
balances.

6. Real Property Tax Receivable and Special Education Tax Receivable for
P 3,931589.88 and P 4,369,292.92, respectively, recorded at the beginning of
the year, were not based on a duly certified list showing the names of
taxpayers and the amount due and collectible for the year contrary to Section
20 of the MNGAS for LGUs, Volume I, thereby rendering the accuracy of the
amounts doubtful.

We recommended that the Municipal Treasurer prepare the duly certified lists
showing the name of taxpayers and the amount due and collectible for Fiscal
Year 2012 and furnish the same to the Municipal Accountant for the
immediate adjustment of the account. We further recommended that the
same procedure be done for the subsequent years.

7. Property, Plant and Equipment

7.1 Properties amounting to P 50,462,251.86 were not depreciated as required

under Section 04 of the MNGAS for LGUs, Volume I due to lack of
supporting documents thus, resulting in inaccurate valuation of Property, Plant
and Equipment accounts in the Financial Statements as of December 31, 2012.
7.2 Property, Plant and Equipment (PPE) Ledger Cards and Property Cards were
not maintained by the Accounting Office and the Supply and Property Unit,
respectively, as required by Section 13 and Section 45 of the MNGAS for
LGUs, Volume II, thus hindering the reconciliation of records between the
property unit and the accounting unit and affecting the accuracy of valuation
of PPE balances in the financial statements.

We recommended that the Municipal Accountant and the Municipal Property

Custodian exert effort to look for the supporting documents of the above-
mentioned PPEs in order to establish the basis for computing depreciation,
effect the necessary adjustments to correct the book values of each asset and
provide depreciation in accordance with Section 4 of the MNGAS for LGUs,
Volume I.

Likewise, require the Property and Accounting Units to maintain property

cards and property ledger cards for property, plant and equipment as provided
for in Section 13 and 45 of the MNGAS for LGUs, Volume II. Reconciliation
should be made between the accounting and property records and effect the
necessary adjustments, if any.

8. Accounts Payable (Account 401) amounting to P7,971,380.99 that were

outstanding for more than two (2) years have no available supporting
documents contrary to Section 4 of P.D. 1445, casting doubts as to their
validity and adversely affected the management’s assertion on “Existence.”

We recommended that the Accountant revert the accounts payable outstanding

for more than two (2) years that were not properly supported with complete
documentation.

9. Government Service Insurance System (GSIS) premiums and loans deducted

from the payroll were not remitted in full monthly to the GSIS contrary to the
provisions of RA 8291, thus, may result to penalties, surcharges and interests
at the disadvantages of the members.

We recommend that:

a. A Task Force be created to reconcile the records pertaining to

unremitted deductions and to effect immediately the remittance of long
overdue accounts.
b. Subsequently, the Municipal Accountant and Treasurer remit intact all
the GSIS premiums and loans deducted from the salaries on or before
the 10th day of the month pursuant to Section 6 of RA 8291.

10. PHILHEALTH contributions were not remitted intact and within the
prescribed period contrary to Section 69 of PD 1445 and Section 44 of
Republic Act No. 7875 which may result to non-availment of benefits due the
personnel during hospitalization.
 We recommended that:

a. A Task Force be created to reconcile the records pertaining to

unremitted deductions and to effect immediately the remittance of long
overdue accounts.

b. Subsequently, the Municipal Accountant and Treasurer remit intact all

the PHILHEALTH premiums deducted from the members within 30
days from the date they become due pursuant to Section 44 of RA
7875.

11. Monthly pre-closing trial balances for all funds and the quarterly/interim
financial reports were not submitted on time as required under Sections 70
and 73 of the Manual on New Government Accounting System (NGAS) for
Local Government Units (LGUs), Volume I, thus causing delay in the
verification of the accounts of the Municipality.

We recommended that the Municipal Accountant submit the monthly trial

balances and its supporting schedule, and financial reports/accounts within the
reglementary period as provided for in Section 70 and 73 of the NGAS for
LGUs.

12. The Municipality failed to conduct physical count of Inventories, Property,

Plant and Equipment in violation of Section 124 of the NGAS Manual,
Volume I, rendering the account balances of inventories and PPE unrealiable.

We recommended that the Municipal Mayor require the Municipal Inventory

Committee to conduct physical count of properties and submit to the Auditor
the updated inventory report on the physical count of the properties not later
than January 31 of each year pursuant to Section 124 of NGAS Manual,
Volume I.

13. Vouchers, Payrolls and Receipts were not submitted on time in violation of
Section 347 of the Local Government Code of 1991 and Section 7.2.1 (a) of
the 2009 Rules and Regulations of Settlement of Accounts, thus causing delay
in the audit of the accounts of the Municipality.

We recommended that the Municipal Accountant submit within the prescribed

period the accounts/reports of the Municipality to facilitate timely audit of its
financial transactions and operations.

14. Monthly Report of Accountability for Accountable Forms of the Municipality

were not submitted within the reglementary period thus, the accountability for
accountable forms could not be immediately established as of specific time
contrary to Sec. 445 of Government Accounting and Auditing Manual
(GAAM) Vol. II.
 We recommended that the Municipal Treasurer immediately submit the 2012
Monthly Report of Accountability for Accountable Forms to the Office of the
Auditor and thereafter submit subsequent Reports not later than the fifth (5th)
day of the following month.

15. Taxes withheld by the Municipality of Sibunag in behalf of the Bureau of

Internal Revenue were not remitted intact and within the reglementary period
contrary to Revenue Regulations 2-98 and Republic Act No, 8424, depriving
the government the implementation of the projects had it been remitted on
time.

We recommended that:

a. A Task Force be created to reconcile the records pertaining to

unremitted taxes withheld and to effect immediately the remittance of
long overdue accounts.

b. Subsequently, the Municipal Accountant and Treasurer remit the

withheld taxes immediately to the Bureau of Internal Revenue in
compliance to Revenue Regulations 2-98 and provisions of RA 8424.
Failure to do so may result to punishment as specified under Section
272 of the said Act.

16. Disallowances amounting to P 2,617,800.00 remain unsettled as of December

31, 2012 contrary to the provisions of Section 10.4 of COA Circular No.
2009-006 dated September 15, 2009.

We recommended that the Municipal Accountant enforce the settlement of the

disallowances amounting to P 2,617,800.00 in compliance to Section 10.4 of
COA Circular No. 2009-006 dated September 15, 2009.

Status of Implementation of Prior Year’s Audit Recommendations

Of the 18 audit recommendations embodied in the previous year’s annual audit

reports, 10 were fully implemented and eight (8) were not implemented.