EXECUTIVE SUMMARY

Introduction

The Municipality of Aleosan in the Province of Cotabato was created by virtue of

Batas Pambansa Bilang 206 dated April 6, 1982 out of the mother Municipality Pikit. The
name of Aleosan is an acronym derived from tree flourishing towns in Iloilo. A is for
Alimodian, LEO for Leon and SAN for San Miguel, where majority of the early
Christian settlers came from. Aleosan’s vast area of plains, valleys, hills and mountains is
composed of 19 small political units called barangays. It is classified as third class
municipality.

Pursuant to R.A. 7160, known as the Local Government Code of 1991, the
municipality, like any other local government units, enjoys total independence in
managing, deciding, and planning its town administrative, fiscal and development affairs
in conformity with the national government’s thrust for sustainable social and economic
growth.

Presently, the three (3) – year term period for local governance of the
municipality is headed by Municipal Mayor Vicente C. Sorupia, Jr. and Vice Mayor
Eduardo C. Cabaya. The local government has manning complements of 68permanent
employees, 11elective officials, 9 coterminous personnel and 48 job order individuals.

Audit Methodology

The audit was done on a sampling basis and used various audit techniques like
verification/confirmation, observation, interview with concerned officials and employees,
and other auditing procedures and methods considered necessary under the
circumstances.

The audit was focused on the different audit thrusts/areas issued by the Local
Government Sector of the Commission on Audit.

Scope of Audit

A financial and Compliance Audit was conducted on the accounts and operations
of the Municipality of Aleosan for the Calendar Year Ended December 31, 2019. The
audit was aimed to ascertain the agency’s compliance with laws, rules and regulations.
Also, a Value for Money Audit was conducted to determine whether government
operations were discharged effectively, efficiently and economically in attaining its goals
and objectives.
 Financial Highlights

Financial Condition

As of December 31, 2019, the consolidated assets, liabilities and equity of the
Municipality of Aleosan is shown as follows:

220,515,572.08
450,000,000.00

202,517,940.73

185,194,845.15

168,822,659.42
400,000,000.00
350,000,000.00
300,000,000.00

389,338,231.50
387,712,785.88
250,000,000.00
200,000,000.00
150,000,000.00
100,000,000.00
50,000,000.00
0.00
ASSETS LIABILITIES NET ASSETS

2019 2018

Accounts CY 2019 CY 2018 Increase/(Decrease) %

Assets 387,712,785.88 389,338,231.50 (1,625,445.62) -.4%
Liabilities 202,517,940.73 220,515,572.08 (17,997,631.35) -8.2%
Equity 185,194,845.15 168,822,659.42 16,372,185.73 9.7%

Results of Operation

For the Year Ended December 31, 2019, the Aleosan LGU registered the
following income and expenses:

160,000,000.00
140,000,000.00
120,000,000.00
20,917,073.39

100,000,000.00
19,891,825.36
143,581,320.56
131,536,890.99

9,318,978.70
48,084,449.59

80,000,000.00
8,450,039.70
55,276,154.80

-4,366,489.83
3,383,532.12
48,971,916.83
55,285,581.55

1,772,169.68

600,000.00

60,000,000.00
40,000,000.00
20,000,000.00
0.00
REVENUES PS MOOE FINANCIAL NON-CASH SUBSIDY SURPLUS
-20,000,000.00

2019 2018
 Particulars 2019 2018 Increase/ %
Decrease
Revenue 143,581,320.56 131,536,890.99 11,716,122.03 8.9%
Personal Services 55,276,154.80 48,084,449.59 7,191,705.21 15%
MOOE 55,285,581.55 48,971,916.83 6,313,664.72 13%
Financial Expenses 3,383,532.12 1,772,169.68 1,611,362.44 91%
Non-Cash Expenses 9,318,978.70 8,450,039.70 868,939.00 10%
Subsidy 600,000.00 (4,366,489.83) -4,966,489.83 -114%
Surplus (Deficit) 20,917,073.39 19,891,825.36 1,025,248.03 5.2%

The sources and application of funds of the Municipality is shown below:

APPROPRIATION
PERSONAL SERVICES 55,323,092.36
47,829,455.64

36,924,279.51
MOOE
35,886,507.10

615,000.00
CAPITAL OUTLAY
7,011,000.00

NON - OFFICE 15,353,630.03

11,759,504.09

20% DEVELOPMENT 27,035,593.20

FUND 24,569,175.00

LDRRM 6,972,978.30
6,294,048.75

2019 2018
 OBLIGATION
53,918,941.19
PERSONAL SERVICES
46,832,411.59

36,495,637.90
MOOE
34,774,639.37

408,801.87
CAPITAL OUTLAY
3,240,153.00

13,905,023.58
NON OFFICE
11,426,608.64

20,264,940.89
20% DEVELOPMENT FUND
21,010,151.52

3,594,740.98
LDRRM
2,430,428.68

2019 2018

FUNCTION/PROGRAM/ Appropriation Obligation

PROJECT/ACTIVITY 2019 2018 2019 2018
Office – Personal Services 55,323,092.36 47,829,455.64 53,918,941.19 46,832,411.59
Office – Maintenance and Other 36,924,279.51 35,886,507.10 36,495,637.90 34,774,639.37
Operating Expenditures
Office – Capital Outlay 615,000.00 7,011,000.00 408,801.87 3,240,153.00
Non – Office 15,353,630.03 11,759,504.09 13,905,023.58 11,426,608.64
20% Development Fund 27,035,593.20 24,569,175.00 20,264,940.89 21,010,151.52
Local Disaster Risk & Reduction 6,972,978.30 6,294,048.75 3,594,740.98 2,430,428.68
Management

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion due to (a) various deficiencies in the
accounting and reporting of road network; (b) the total balances of Property, Plant &
Equipment per Report on the Physical Count of Property, Plant, & Equipment (RPCPPE)
amounting to P81,06,834.62 did not reconcile with the balance per general ledger of
P200,415,743.36, resulting to unaccounted difference of P118,908,908.74; and (c) the
balances of Inventory accounts in the amount of P777,080.00 as of December 31, 2019
remained unreliable and doubtful due to incomplete physical inventory.

Summary of Significant Observations and Recommendations

1. Various deficiencies were noted in the accounting and reporting of Road

Networks Account with value stated at P57,712,276.78, contrary to pertinent
provisions of COA Circular No. 2015-008, thereby affecting the fair
presentation of the accounts in the financial statements.
 We recommended that the Management require the Municipal Accountant to
recognize all completed Road Network Assets on cost or fair value whichever is
applicable and provide the appropriate depreciation for the depreciable
component of the road network following the straight line method without
provision for residual value;

Require the Municipal Accountant to recompute the accumulated depreciation of

the completed Road Network Assets and to prepare Journal Entry Voucher
recognizing correction or adjustments for the understatement thereof; and

Further for the Management to direct the Municipal Accountant, the MGSO, and
the Municipal Engineer and the Inventory Committee to strictly perform their
duties and responsibilities in the accounting and reporting of Local Road Network
as mandated under COA Circular No. 2015-008 and submit to the Auditor not
later than January 31 of the ensuing year the required inventory reports duly
reconciled with the Accounting records particularly the Report on Local Road
Network (RLRN) and Report on the Physical Count of the Local Road Network
(RPCLRN).

2. Total balances of Property, Plant & Equipment per Report on the Physical
Count of Property, Plant, & Equipment (RPCPPE) amounting to
P81,506,834.62 did not reconcile with the balance per general ledger of
P200,415,743.36, resulting to unaccounted difference of P118,908,908.74,
contrary to pertinent provisions of Section C.3, Chapter V of the Manual on
Property Custodianship, Chapter 5 of the COA Handbook on Property and
Supply Management and Manual on the New Government Accounting
System (NGAS) for Local Government Units (LGU), Volume I, thus
management’s assertion on the accuracy and completeness of the balances of
the account could not be relied on, affecting their fair presentation in the
financial statements.

We recommended for the Local Chief Executive Officer, as head of the agency to:

1. Require the Accountant and the Property Officer to maintain complete

property plant and equipment ledger cards as required under Sec. 43 of
NGAS, Volume I & Sec. C.3, Chapter V of the Manual on Property
Custodianship;

2. Require the Inventory Committee to conduct year-end physical inventory

on Property, Plant and Equipment, including the Land, Land
Improvements, Buildings, Heavy Equipment and completed
Infrastructures Projects and submit it to the Accounting for reconciliation
of balances as a requirement to Sec. 57 of the NGAS Manual, Volume I to
ensure correctness and reliability of the PPE account balances;

3. Require the Accountant and the General Services Officer to analyze the
discrepancy between the balances in the books and per physical count of
the PPE Accounts and to make the necessary adjustments in their records
 to take up the noted differences affecting current year’s transactions. Also,
locate the missing/unreconciled properties;

4. Require the GSO to annually provide a copy of the reconciled RCPPPE to

the COA, not later than the 31st day of January of ensuing year, showing
therein the proper classification of PPE a shown in PPSAS accounts, Also,
prepare Inventory and Inspection Report of Unserviceable Properties.
These unserviceable properties may still have been included in the total
PPEs subject for reconciliation.

3. The balances of Inventory accounts in the amount of P777,080.00 as of

December 31, 2019 remained unreliable and doubtful due to incomplete
physical inventory resulting in non-submission of complete Report on the
Physical Count of Inventory (RPCI) and non-reconciliation of the general
services and accounting records due to non-maintenance of inventory
records contrary to pertinent provisions of MNGAS for LGUs.

We recommended that Management require the GSO and other custodians of

supplies to undertake the actual physical inventory every semester, reconcile
the same with the accounting records and to submit inventory reports to the
Auditor within prescribed dates.

4. Collection Receipts were issued by various suppliers/contractors in the

procurement of goods amounting to P37,800,357.14 contrary to Revenue
Memorandum Circular No. 2-2014; hence not evidence of receipts in the
payments made thereof.

We recommended that management require the suppliers/contractors to issue

Sales Invoice and/or Official Receipts on various procurement of goods made
in compliance with Revenue Memorandum Circular No. 2-2014 dated January
13, 2014 and likewise, strictly observe said regulations on future
disbursements to be made.

5. Overtime services in the total amount of P255,000.00 were granted to

employees without the required supporting documents, thus, the validity
of claims for overtime services could not be determined and is not in
conformity with section 4(6) of Presidential Decree No. 1445, CSC-DBM
Joint Circular No.1 s. 2015 and Section 5.10 of COA Circular NO. 2012-
001.

We recommended that management limit the grant of overtime services only

when supported with proper documents in accordance with CSC-DBM Joint
Circular No. 1 s 2015 on the policies and guideline on overtime services of
government personnel, Section 4(6) of PD 1445 and Section 5.10 of COA
Circular No. 2012-001 for its basic documentary requirements. Please submit
the required documents to the Auditor immediately.
Notice of Suspensions, Disallowances and Charges

There was no issued suspensions and disallowances for the calendar year 2019.

Status of Implementation Prior Years’ Audit Recommendations

A follow-up on the action taken by the Municipality of Aleosan to implement the

audit recommendations of prior years was made and noted the following

Status of Implementation Qty. %

Fully Implemented 17 48.6
Partially Implemented 16 45.7
Not Implemented 2 5.7
Total 35 100

The results of the validation of the implementation of the prior years’ audit
recommendations are presented in Part III of this report.