EXECUTIVE SUMMARY

A. Introduction

The Municipality of Concepcion is one of the 18 municipalities of the Province of

Tarlac. It is a first class municipality with 45 barangays and population of 139,832 based
on 2010 survey. It has an area of 24,570 hectares of which 15,817.99 hectares are for
agricultural, 45 hectares for commercial, 738 hectares for residential, 32 hectares are
industrial/agri-industrial and 7,937.01 hectares for other purposes, which include rivers,
creeks and lahar affected areas. The municipality lies on the southern tip of the province
bordered in the south by Pampanga, in the east by Nueva Ecija, in the northeast by the La
Paz, in the northwest by the City of Tarlac, in the west by Capas and in the southwest by
Bamban. The municipality is named in honor of their Patron Saint Immaculate
Concepcion. It is under the dynamic leadership of Honorable Mayor Andres D. Lacson
and ably supported by the Vice Mayor, Sangguniang Bayan members and other
municipal employees combined.

B. Financial Profile

For calendar year 2015, the assets, liabilities and government equity under the
General Fund, Special Education Fund and Trust Fund of the Municipality of Concepcion
are as follows:

Financial Position (in thousands of Pesos)

Total Assets 388,082
Liabilities 147,562
Assets/Equity 240,520
Total Liabilities and Net Assets/Equity 388,082

Details of the income and expenses of the municipality are as follows:

Financial Performance (in thousands of Pesos)

Total Revenue 268,917
Total Expenses 216,954
Surplus/(Deficit) from Current Operations 51,963

The allotments, obligations and balances for CY 2015 are as follows:

Sources and Application of Funds (in thousands of Pesos)

Allotments 288,164
Obligations 221,555
Balance 66,609

i
C. Operational Highlights

For CY 2015, Management implemented the following major programs, projects

and activities, among others:

1. Construction of RHU Birthing Station, San Nicolas, Concepcion

2. Procurement of Lying-in Medical Equipment
3. Procurement of one unit 4wd Farm Tractor with heavy duty trailing harrow
4. Procurement of Disaster Response and Rescue Equipment: one unit
Reconditioned Man Lift Truck and two units Water tank trailer
5. Purchase of Information and Communication Technology Equipment
6. Purchase of various communication equipment
7. Purchase of two units Construction and Heavy Equipment
8. Purchase of one unit Multi-utility vehicle, one unit Mobile clinic, one unit
motorcycle

D. Scope of Audit

The audit covered the financial transactions and operations of the Municipality of
Concepcion for CY 2015. The objectives of the audit were (a) to ascertain the degree of
reliance on management’s assertions on the financial statements; (b) to recommend
agency’s improvement opportunities; and (c) to determine the extent of implementation
of prior year’s audit recommendations.

E. State Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Municipality because several property items included in the
Report on the Physical Count of Property, Plant and Equipment for CY 2014, which was
submitted in March 2015, have no assigned value, contrary to Sec. 111, Presidential
Decree 1445, rendering difficult the verification of the correctness of property, plant and
equipment with carrying amount of P186,533,394.41 or 48% of the total assets in the
books of accounts of the Municipality. Also, the establishment of Real Property Tax
Receivables and Special Education Tax Receivables for CY 2015, both in the amount of
P9,510,601.30, were not based on Real Property Tax Account Register/Taxpayer’s index
card but on the total assessed value of properties in the Municipality as certified by the
Municipal Assessor due to the failure of the Treasury Office to prepare and furnish the
Accounting Office of a duly certified list of taxpayers and the amount due and collectible
for the year, contrary to Section 20, Volume I of the Manual on the New Government
Accounting System for Local Government Units, thus rendering the validity and
accuracy of the accounts’ total ending balance of P 57,626,010.27 doubtful. (Observation
Nos. 4 & 3)

For the above deficiencies, we recommended that:

a. the Local Chief Executive direct the Inventory Committee through the
Municipal General Services Officer to supply all the necessary information
needed in the report to come up with a more accurate and reliable report.

ii
 b. the Inventory Committee coordinate with the Accounting Office for those
items which the General Services Office does not have any information for an
accurate and complete report.

c. the Municipal Mayor instruct – (a) the Treasury Office to prepare and furnish
the Accounting Office the list required under Section 20 Volume I of the
Manual on the NGAS for LGUs; and (b) the Municipal Accountant to base the
establishment of RPT and SET receivables on the list submitted by the
Treasury Office for an accurate recognition of the said receivables.

F. Summary of Other Significant Observations and Recommendations

The significant observations and recommendations requiring immediate action are

as follows:

1. Cash advances totaling P3,482,820.00 under the General Fund (GF) and
P23,634.00 under the Special Education Fund (SEF) remained unsettled as of December
31, 2015 due to the failure to monitor liquidation of cash advances and the absence of
credit advice from COA Central Office for the Confidential Fund cash advances,
resulting in the non recording of expenses in the year they were incurred and
consequently, in the understatement of the expense account and the overstatement of the
asset and equity accounts. (Observation No. 1)

We recommended that management (a) comply with the guidelines on the

granting, utilization and liquidation of cash advances; (b) under no circumstance shall it
grant additional cash advances to any official or employee unless the previous cash
advance given him is first settled or a proper accounting thereof is made; (c) inquire from
the COA Central Office on the status of the liquidation of the Confidential Fund in order
to have a basis for closing the account; and (d) exert all efforts to enforce the settlement
of the unliquidated cash advances of DepEd employees so that the long outstanding cash
advances under SEF in the total amount of P23,634.00 be settled.

2. Loans receivables amounting to P330,000.00 remained long outstanding and

dormant in the books for more than five (5) years, resulting in the overstatement of the
Municipality’s assets due to the inclusion of account the collection of which was
doubtful. (Observation No. 2)

We recommended that the Local Chief Executive direct the Municipal Accountant
to:
a. Initiate/ cause the verification of the nature or purposes of the programs to
ascertain the propriety of the entry made. Adjust the account, if necessary;

b. Evaluate compliance of both Market Vendors Association on the obligations

and responsibilities stipulated in the MOA. Otherwise, require the refund of
the amount granted and the vehicle;

iii
 c. Determine the reason for the non-collection of the Self-Employment
Assistance;

d. Ascertain whether records pertaining to the granting of SEA are still

available, the debtors are still living and their whereabouts; and

e. Enforce collection by sending collection/ demand letters.

We also recommended that, if the above are not possible due to lack of
documents, the Municipal Accountant request from the Commission on Audit to write-off
the account the collection of which was doubtful by documenting the request for write-
off pursuant to Section 10 of COA Circular No. 97-001.

3. Equipment acquired in the amount of P4,730,000.00 was reported unserviceable

and now lay idle in the garage because due care was not exercised in its use and
safekeeping, contrary to Sec. 376 and 377 of Republic Act 7160 and Sec. 493 and 497,
Vol. 1, Government Accounting and Auditing Manual (GAAM), resulting to waste or
loss of money for keeping a very expensive equipment which did not serve its purpose.
(Observation No. 5)

We recommended that the accountable officer make representation with the

Office of the Mayor for the repair of the equipment so it could be used during rescue
operations. However, the cost of repair should not be more than 30% of the current
market price of the same or similar equipment.

We recommended also that the Local Chief Executive ascertain if due diligence
was exercised by the accountable officer when the boat was brought to Subic, Zambales
for testing/training. Otherwise, the accountable officer should be held liable for the
equipment.

4. Out of the P23,495,844.00 fund transfers received by the Municipality from

various national government agencies during the year which were booked under Trust
Fund, P13,214,951.25 or 56.24% were expended, leaving a balance of P10,280,892.75.
(Observation No. 6)

We recommended that the Municipal Accountant submit the accounts of the

municipality as required by pertinent regulations for timely evaluation and audit of the
transactions of the Municipality.

We also recommended that the Municipal Planning and Development Officer or

the department head concerned facilitate the implementation of various programs and
projects, the funds of which have already been transferred to the LGU in order for the
constituents to avail and use the benefits and services that could be derived therefrom at
the earliest possible time.

5. Driver’s Trip Tickets supporting the disbursements for fuel were not properly
accomplished and Monthly Reports on Fuel Consumption and of Official Travels

iv
prescribed under the Manual on Audit for Fuel Consumption of Government Motor
Vehicles were not submitted to the Auditor for verification, thus the reasonableness of the
gasoline consumed could not be ascertained. Likewise, plate numbers of some vehicles
issued with gasoline were not for government-owned vehicles, contrary to the provisions
of the same Manual, thereby increasing the expenditures of the municipality.
(Observation No. 7)

We recommended that management faithfully comply with the provisions of COA

Circular No. 77-61 to effectively control fuel, gasoline and oil expenditures to avoid
wasteful, excessive and unnecessary expenditures for fuel consumption by implementing
the following corrective measures:

a) Exercise tighter control over the use of government vehicles through properly
accomplished and duly approved serially numbered Driver’s Trip Tickets, a
summary of which shall be made at the end of the month in a Monthly Report
of Official Travels for audit purposes;

b) Management submit to the Auditor the Monthly Report of Fuel Consumption

and Monthly Report of Official Travels to the Auditor for verification
purposes to determine the reasonableness of fuel consumed during the period;
and

c) Stop giving fuel to privately owned motor vehicles; ensure that only
government-owned motor vehicles are issued gasoline for official business.

6. The minimum monthly net take home pay of Three Thousand Pesos (P3,000) as
mandated under Section 48 of the General Provisions of the General Appropriations Act
(GAA) of 2015 was not implemented and complied with by some employees of the
Municipality. (Observation No. 8)
We recommended that management comply with the minimum limit of P3,000.00
for employees’ monthly net take home pay pursuant to Section 48 of GAA 2015. We
likewise recommended that statutory deductions be given preference over other
deductions.

7. Projects and activities included in the Peace and Order Program (POP) of the
Municipality were not eligible to be included in the said program based on the description
of POP as provided for under paragraph 3.23 of the COA-DBM-DILG-GCG-DND Joint
Circular (JC) No. 2015-01, thus decreasing the chance of the Municipality to achieve the
aim to attain a safe, secure, peaceful and progressive community. As a result, the
Confidential/ Intelligence Fund of the Municipality exceeded the prescribed maximum
thirty percent (30%) of the total annual amount allocated for the Municipality’s POP.
(Observation No. 9)

We recommended that the Peace and Order Council be judicious in the

preparation and/or review of the POP of the Municipality.

v
8. a) A portion of the LDRRMF was utilized to pay honoraria of job orders which is
not among the items stated under Joint Memorandum Circular No. 2013-1 dated March
25, 2013; and (b) copy of the Report on the Utilization of Disaster Risk Reduction and
Management (DRRM) Fund was not submitted to the Office of the Auditor, as required
under Item 5.1.5 of COA Circular No. 2012-002 dated September 19, 2012. (Observation
No. 10)

We recommended that management be guided by Item 5 of JMC 2013-1 in the

allocation/ utilization of the LDRRMF with the goal and objective to strengthen the
capacities of the LGU, together with the different barangays, to build the disaster
resilience of communities, to institutionalize arrangements and measures for reducing
disaster risks, and enhancing disaster preparedness and response capabilities at all levels.

We recommended that management instruct the LDRRMO to strictly comply with

the reporting requirements stipulated in R.A. No. 10121 and COA Circular 2012-002.

9. The Civil Society Organizations (CSOs) and private sector members of the
Municipal Disaster Risk Reduction and Management Council (MDRRMC) were selected
not in accordance with the National Disaster Risk Reduction and Management Council
(NDRRMC) Memorandum Circular (M.C.) No. 03, series of 2012, Guidelines for the
selection of representative from the Civil Society Organizations (CSOs) to the Local
DRRM Councils, thus, defeating the purpose of engaging capable CSOs and private
sector in the government’s risk reduction programs towards complementation of
resources and effective delivery of services to the citizenry. (Observation No. 11)
We recommended that the Local Chief Executive (LCE), as chairman of the
MDRRMC, cause the selection and accreditation of CSOs in accordance with the
guidelines set forth in the aforementioned M.C.

10. The Municipality failed to fully implement all the projects it planned to
implement under the 20% Economic Development Fund for 2015 which may be
attributed to projects which are not needed and properly identified and lack of strategic
plan for the implementation of the projects to achieve its goal, contrary to Sec. 17 of
Republic Act No. 7160, otherwise known as the Local Government Code, depriving the
constituents of the most needed benefits that could be derived therefrom. (Observation
No. 12)

We recommended that the Local Chief Executive endeavor to maximize the use
of the 20% of the Internal Revenue Allotment for development projects and ensure that
the fund is optimally utilized to help achieve desirable socio-economic development and
environmental outcomes to uplift the well-being of the constituents.

We also recommended that the Local Chief Executive direct the Municipal
Planning and Development Officer to properly identify and carefully plan the projects
needed by the constituents to avoid reprogramming of projects and balances during the
year.

vi
11. The Special Education Fund was used for purposes other than those enumerated
under Section 1, Republic Act 5447, the law which created the Special Education Fund,
and Sections 100 (c) and 272 of R.A. 7160, otherwise known as the Local Government
Code of 1991, reducing the fund which could be used for priority projects. (Observation
No. 13)

We recommended that local officials ensure that projects and activities being paid
for out of the Special Education Fund are within the projects and activities contained
under R.A. 5447 and among the priority projects listed under Sec. 100(c), R.A. No.7160.

12. The municipality failed to create a Gender and Development (GAD) Focal Point
System or similar GAD mechanism to catalyze and accelerate gender mainstreaming
within the local government unit and enable the Municipality to effectively plan and
implement their programs on GAD, contrary to Section 36 of Republic Act 9710
otherwise known as the Magna Carta of Women and Philippine Commission on Women
Memorandum Circular No. 2011-01. (Observation No. 14)

We recommended that the Local Chief Executive initiate the creation of a GAD
Focal Point System in order to promote women’s human rights and eliminate gender
discrimination in the systems, structures, policies, programs, processes and procedures of
the Municipality, if any.

13. The Municipality scheduled and conducted biddings for purchases of equipment
and supplies and materials during the last days of December 2015, contrary to Sec. 427,
Vol. I, Government Accounting and Auditing Manual (GAAM), thereby not giving
ample time for the BAC and its secretariat to thoroughly examine the completeness of
supporting documents and the accuracy of the information appearing therein which might
result to the payment of expenses not properly incurred during the year and founded on
valid claims. (Observation No. 15)

We recommended that the Local Chief Executive direct the Municipal Planning
and Development Coordinator and all personnel involved in planning to carefully plan
the implementation of the municipal programs, projects and activities (PPA) by setting a
time frame or period within which the PPAs should be implemented so that before the
year ends, all projects have been bidded and implemented. In this manner, all expenses
incurred during the year could be taken up in the accounts of that year.

14. Purchases of common-use supplies and equipment of the Municipality were not
done from the Procurement Service (PS), in violation of Section 53.5 of the Revised
Implementing Rules and Regulations (IRR), Republic Act 9184 otherwise known as the
Government Procurement Reform Act. This practice did not promote the principles of
efficiency and economy in the procurement process of the government. (Observation No.
16)

We recommended that management comply with the provisions of R.A. 9184 and
its implementing rules and regulations specifically Section 53.5 of the revised IRR.

vii
15. The BAC/TWG failed to declare the bidder with the Lowest Calculated Bid that it
did not pass the criteria of post qualification in the bidding for the procurement of one (1)
unit Mobile Clinic thus emerging winner even though some of its eligibility requirements
have deficiencies, contrary to Section 23 of the Revised Implementing Rules and
Regulations of Republic Act No. 9184, otherwise known as the Government Procurement
Reform Act. (Observation No. 17)

We recommended that the Local Chief Executive direct the Bids and Awards
Committee and the Technical Working Group to carefully review during post-
qualification all documents submitted by the Lowest Calculated Bidders in the future
biddings of the Municipality to ensure that they comply with and are responsive to all
requirements and conditions of the biddings.

16. The financial reports for 2015 were not submitted on time by the Municipal
Accountant and Municipal Treasurer to the Audit Team, as required under Section 347 of
R.A. No. 7160 and COA Circular No. 2009-006 dated September 15, 2009. The non-
submission of accounts hindered the conduct of post-audit and the timely communication
to the management of any deficiencies and/or observations that may be noted.
(Observation No. 18)

We recommended that the Municipal Accountant and the Municipal Treasurer (a)
strictly comply with the regulation on the rendition of accounts and financial reports in
order not to delay the verification and post-audit activities; and (b) observe the due dates
of submission of the required financial reports and documents to the Audit Team.

17. The Municipal General Services Officer and the BAC Chairman/Secretariat failed
to submit the copies of approved purchase orders and perfected contracts and their
supporting documents of the Office of the Auditor as required under COA Circular No.
2009-001 dated February 12, 2009, thus, precluding the auditor to evaluate compliance
with applicable laws, rules and regulations and completeness of the documentary
requirements to ascertain that the terms and conditions of the contract are not
disadvantageous to the government. (Observation No. 19)

We recommended that the LGU officials comply with the provisions of COA
Circular No. 2009-001 to avoid suspension of the transactions and the penalty prescribed
by law under 4.1 of the circular.

18. The Municipality failed to adopt a systematic, comprehensive and ecological solid
waste management program that would ensure the proper segregation, collection,
transport, storage, treatment and disposal of solid waste, resulting in the failure to achieve
the primary objective of R.A. No. 9003, otherwise known as the Philippine Ecological
Solid Waste Management Act of 2000, to protect the Municipality’s environment and
public health from substantial present and potential hazards of solid wastes. (Observation
No. 20)

We recommended that the Local Chief Executive (a) coordinate the efforts of
the public and private sectors and implement the environmental laws on preserving and

viii
protecting the environment required under R.A. No. 9003; (b) work on the promulgation
and implementation of “No Littering” Ordinance; (c) maximize the operation of the MRF
and implement the Municipality’s plan of producing organic fertilizer from biodegradable
wastes and adopt specific revenue-generating measures to promote and ensure the
viability of its Solid Waste Management Plan; and (d) encourage the full participation of
the barangays in the implementation of the R.A. No. 9003.

G. Status of Implementation by Auditee of Prior Year’s Audit Recommendations

Evaluation of the extent of implementation of prior year’s audit recommendations

by management disclosed that of the 27 recommendations contained in the 2014 Annual
Audit Report, 15 were implemented, ten (10) were partially implemented and two (2)
were not implemented.

ix