Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. III
Audit Group LGS - B – Province of Bataan
City of Balanga, Bataan

16 March 2015

HON. ANA D. SANTIAGO

Municipal Mayor
Municipality of Abucay, Bataan

Dear Mayor Santiago:

We are pleased to transmit the Annual Audit Report on the audit of the
Municipality of Abucay, Province of Bataan for the Calendar Year 2014 in compliance
with Section 43 of the Government Auditing Code of the Philippines (PD 1445).

The audit was conducted to (a) 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.

The attached report consists of the Independent Auditor’s Report, the Audited
Financial Statements, the Observations with the corresponding Recommendations, and
the Status of Implementation of Prior Years’ Unimplemented Audit Recommendations
which were discussed with officials and staff concerned.

We conducted our audit in accordance with Philippine Public Sector Standards on

Auditing and we believe that it provided a reasonable basis for the audit results. We
rendered a qualified opinion on the fairness of presentation of the financial statements of
the Municipality owing to the exceptions noted in the audit as stated in the Independent
Auditor’s Report in Part I of the report.

The significant observations requiring immediate action are as follows:

1. Due to the absence of knowledgeable personnel to maintain the computerized records

of taxpayers, the Treasury Department has continuously not provided the certified
List of Taxpayers and the amounts due and collectible as the basis of the Municipal
Accountant in setting up the RPT/SET Receivable at the beginning of the year and
the corresponding subsidiary ledgers were not maintained in violation of the Manual
on the New Government Accounting System for Local Government Units, thus the
accuracy and validity of the RPT Receivable and SET Receivable balances as of
December 31, 2014 in the amounts of P228,009.22 and P266,299.71, respectively,
could not be ascertained rendering the balances unreliable. (Observation No. 2)
 We recommended that a) management appoint support staff in the Accounting and
Treasury department who will maintain the records of taxpayers b) the Municipal
Treasurer prepare the Certified List of Taxpayers and submit it to the Accountant and
c) the Municipal Accountant, based on the list, take up in the books the RPT/SET
Receivable with the corresponding subsidiary ledgers (SL) that will monitor tax
collections and delinquencies.

2. The accuracy and valuation of property, plant and equipment (PPE) accounts with a
reported net book balance of P134,963,557.01 remained doubtful due to the absence
of personnel who will maintain and monitor the movements of PPE items in
subsidiary ledgers and property cards and non-creation of inventory team to conduct
annual physical inventory of all PPE items in violation of Sections 114, 120 and 124
of the Manual on NGAS Volume I thus the account balances are unreliable.
(Observation No. 3)

We recommended that a) the Municipal Accountant and the Municipal Treasurer, in

the absence of the General Services Office, maintain complete PPE ledger cards and
property cards, reconcile their records and effect the necessary adjustments to fairly
present the balances of the affected PPE items b) the Municipal Treasurer and the
created Inventory Committee conduct the physical inventory of all Property, Plant
and Equipment to establish their existence and prepare and submit a report thereon to
determine the accuracy and correctness of the recorded PPE items and
reconcile/investigate any discrepancy between the inventory report and accounting
records c) the Municipal Treasurer obtain copies of the tax declarations of all
properties declared in the name of the LGU, verify the inclusion of all land in the
inventory list against the tax declarations obtained and determine whether all lands
where the buildings/facilities owned by the LGU are built are titled to the
Municipality d) the Municipal Accountant to coordinate with the Municipal Treasurer
for recording the distinctiveness of each lot/land owned by the municipal government
and e) the Municipal Treasurer maintain a Summary List with costs of all the real
properties.

3. Because the management overlooked its being IRA dependent and had not anticipated
the decrease of the share for CY 2012, the 45% Personal Services limitation was
exceeded in the amount of P940,356.47 in violation of Section 325(a) of the Local
Government Code thus, the municipality deprived its constituents with the needed
basic services as mandated. (Observation No. 4)

We recommended that management a) strengthen its collection efficiency to increase

revenues and augment the amount of PS limitation in order to cope up with its
financial requirement and b) handle the utilization of its resources diligently for a
more equitable distribution of its limited resources.

4. Due to the late creation of a technical working group and the GAD focal point which
will facilitate the development of GAD information for gender analysis and review of
sex disaggregated data, and the institutionalization of gender mainstreaming,
 respectively, as required under Executive Order No. 273 mandating all government
agencies to incorporate GAD concerns in their planning, programming and budgeting
processes, gender issues and major final outputs were not properly identified resulting
in programs, projects and activities being implemented which are unfocussed to
management’s annual thrust and ultimately gender mainstreaming not accomplished.
Thus, potentials of women as well as men were not tapped depriving the community
of the local development that could have been derived thereto. (Observation No. 6)

We recommended that the technical working group and GAD focal point a) catalyze,
coordinate, provide directions and monitor the programs/projects on gender and
development concerns within the agency and its clientele b) develop or gather GAD
information such as gender statistics and sex-disaggregated data to serve as inputs for
planning, budgeting, programming and policy formulation and c) formulate a plan or
program specifically addressing gender gaps/issues working toward the targeted
outputs. We also recommended that management require the employees to undertake
orientations and capacity development on GAD including GAD-related laws and
commitments.

5. Due to the failure of the Local Development Council to provide list of projects in the
Annual Investment Program authorized by the Sanggunian, the lump sum
appropriation of P600,000.00 was utilized for the rehabilitation of local roads and
bridges without specifying the project location and cost for each project in violation
of Section 22(c ) of RA 7160 thus, resulting in unauthorized contracts covering each
specific project. (Observation No. 7)

We recommended that the Local Development Council submit the list of specific
projects with the corresponding amounts that were contemplated under the lump sum
appropriations for approval of the Sanggunian. We also recommended that the
Sanggunian a) stop approving lump sum appropriations and (b) ratify the contracts
already charged against the lump sum appropriation.

We request a status report, thru accomplishing the attached Agency Action Plan
and Status Implementation form, on the actions taken on the audit recommendations
within sixty days from receipt of this report, pursuant to Section 88 of the General
Provisions of the General Appropriations Act of 2014.

We appreciate the invaluable support and cooperation extended by the officials

and staff of the agency.

Very truly yours,

CARMELITA R. ALVAREZ
Supervising Auditor
cc: The Director, DILG, Regional Office No. III, City of San Fernando, Pampanga
The Director, BLGF, Regional Office No. III, City of San Fernando, Pampanga
The Director, DBM, Regional Office No. III, City of San Fernando, Pampanga
 Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. III
Audit Group LGS - B – Province of Bataan
City of Balanga, Bataan

16 March 2015

HON. MARIA KHRISTINE G. DELA FUENTE

Municipal Vice Mayor
Municipality of Abucay, Bataan

Dear Vice Mayor Dela Fuente:

We are pleased to transmit the Annual Audit Report on the audit of the
Municipality of Abucay, Province of Bataan for the Calendar Year 2014 in compliance
with Section 43 of the Government Auditing Code of the Philippines (PD 1445).

The audit was conducted to (a) 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.

The attached report consists of the Independent Auditor’s Report, the Audited
Financial Statements, the Observations with the corresponding Recommendations, and
the Status of Implementation of Prior Years’ Unimplemented Audit Recommendations
which were discussed with officials and staff concerned.

We conducted our audit in accordance with Philippine Public Sector Standards on

Auditing and we believe that it provided a reasonable basis for the audit results. We
rendered a qualified opinion on the fairness of presentation of the financial statements of
the Municipality owing to the exceptions noted in the audit as stated in the Independent
Auditor’s Report in Part I of the report.

The significant observations requiring immediate action are as follows:

1. Due to the absence of knowledgeable personnel to maintain the computerized records

of taxpayers, the Treasury Department has continuously not provided the certified
List of Taxpayers and the amounts due and collectible as the basis of the Municipal
Accountant in setting up the RPT/SET Receivable at the beginning of the year and
the corresponding subsidiary ledgers were not maintained in violation of the Manual
on the New Government Accounting System for Local Government Units, thus the
accuracy and validity of the RPT Receivable and SET Receivable balances as of
December 31, 2014 in the amounts of P228,009.22 and P266,299.71, respectively,
could not be ascertained rendering the balances unreliable. (Observation No. 2)
 We recommended that a) management appoint support staff in the Accounting and
Treasury department who will maintain the records of taxpayers b) the Municipal
Treasurer prepare the Certified List of Taxpayers and submit it to the Accountant and
c) the Municipal Accountant, based on the list, take up in the books the RPT/SET
Receivable with the corresponding subsidiary ledgers (SL) that will monitor tax
collections and delinquencies.

2. The accuracy and valuation of property, plant and equipment (PPE) accounts with a
reported net book balance of P134,963,557.01 remained doubtful due to the absence
of personnel who will maintain and monitor the movements of PPE items in
subsidiary ledgers and property cards and non-creation of inventory team to conduct
annual physical inventory of all PPE items in violation of Sections 114, 120 and 124
of the Manual on NGAS Volume I thus the account balances are unreliable.
(Observation No. 3)

We recommended that a) the Municipal Accountant and the Municipal Treasurer, in

the absence of the General Services Office, maintain complete PPE ledger cards and
property cards, reconcile their records and effect the necessary adjustments to fairly
present the balances of the affected PPE items b) the Municipal Treasurer and the
created Inventory Committee conduct the physical inventory of all Property, Plant
and Equipment to establish their existence and prepare and submit a report thereon to
determine the accuracy and correctness of the recorded PPE items and
reconcile/investigate any discrepancy between the inventory report and accounting
records c) the Municipal Treasurer obtain copies of the tax declarations of all
properties declared in the name of the LGU, verify the inclusion of all land in the
inventory list against the tax declarations obtained and determine whether all lands
where the buildings/facilities owned by the LGU are built are titled to the
Municipality d) the Municipal Accountant to coordinate with the Municipal Treasurer
for recording the distinctiveness of each lot/land owned by the municipal government
and e) the Municipal Treasurer maintain a Summary List with costs of all the real
properties.

3. Because the management overlooked its being IRA dependent and had not anticipated
the decrease of the share for CY 2012, the 45% Personal Services limitation was
exceeded in the amount of P940,356.47 in violation of Section 325(a) of the Local
Government Code thus, the municipality deprived its constituents with the needed
basic services as mandated. (Observation No. 4)

We recommended that management a) strengthen its collection efficiency to increase

revenues and augment the amount of PS limitation in order to cope up with its
financial requirement and b) handle the utilization of its resources diligently for a
more equitable distribution of its limited resources.

4. Due to the late creation of a technical working group and the GAD focal point which
will facilitate the development of GAD information for gender analysis and review of
sex disaggregated data, and the institutionalization of gender mainstreaming,
 respectively, as required under Executive Order No. 273 mandating all government
agencies to incorporate GAD concerns in their planning, programming and budgeting
processes, gender issues and major final outputs were not properly identified resulting
in programs, projects and activities being implemented which are unfocussed to
management’s annual thrust and ultimately gender mainstreaming not accomplished.
Thus, potentials of women as well as men were not tapped depriving the community
of the local development that could have been derived thereto. (Observation No. 6)

We recommended that the technical working group and GAD focal point a) catalyze,
coordinate, provide directions and monitor the programs/projects on gender and
development concerns within the agency and its clientele b) develop or gather GAD
information such as gender statistics and sex-disaggregated data to serve as inputs for
planning, budgeting, programming and policy formulation and c) formulate a plan or
program specifically addressing gender gaps/issues working toward the targeted
outputs. We also recommended that management require the employees to undertake
orientations and capacity development on GAD including GAD-related laws and
commitments.

5. Due to the failure of the Local Development Council to provide list of projects in the
Annual Investment Program authorized by the Sanggunian, the lump sum
appropriation of P600,000.00 was utilized for the rehabilitation of local roads and
bridges without specifying the project location and cost for each project in violation
of Section 22(c ) of RA 7160 thus, resulting in unauthorized contracts covering each
specific project. (Observation No. 7)

We recommended that the Local Development Council submit the list of specific
projects with the corresponding amounts that were contemplated under the lump sum
appropriations for approval of the Sanggunian. We also recommended that the
Sanggunian a) stop approving lump sum appropriations and (b) ratify the contracts
already charged against the lump sum appropriation.

We requested from management a status report on the actions taken on the audit
recommendations within sixty days from receipt of this report, pursuant to Section 88 of
the General Provisions of the General Appropriations Act of 2014.

We appreciate the invaluable support and cooperation extended by the officials

and staff of the agency.

Very truly yours,

CARMELITA R. ALVAREZ
Supervising Auditor
cc: The Director, DILG, Regional Office No. III, City of San Fernando, Pampanga
The Director, BLGF, Regional Office No. III, City of San Fernando, Pampanga
The Director, DBM, Regional Office No. III, City of San Fernando, Pampanga
 Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. III
Audit Group LGS – B – Province of Bataan
City of Balanga, Bataan

17 February 2015

MS. CARMELITA R. ALVAREZ

Supervising Auditor
Commission on Audit
Audit Group LGS – B- Province of Bataan

Madam:

In compliance with Section 2, Article IX-D of the Philippine Constitution and

Section 43 of Presidential Decree No. 1445, we conducted a financial and compliance
audit on the accounts and operations of the Municipality of Abucay, Bataan for the year
ended December 31, 2014.

The audit was conducted to ascertain the propriety of financial transactions and
compliance of the agency to 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 results of our audit are embodied in our attached report consisting of four
parts: Part I - Audited Financial Statements; Part II – Observations and
Recommendations; Part III - Status of Implementation of Prior Years’ Unimplemented
Audit Recommendations; and Part IV – Appendices. Our findings and recommendations
were discussed with concerned management officials and staff in an exit conference on
February 13, 2015.

We rendered a qualified opinion because the consolidated financial statements are

not free of material misstatements.

Our audit was conducted in accordance with the Philippine Public Sector
Standards on Auditing and we believe that it provides reasonable basis for the results of
audit.

We acknowledge the cooperation extended to us by the officials and staff of the

Municipality of Abucay, Bataan.

Very truly yours,

MA. MIGNON N. DE GUIA

Audit Team Leader