EXECUTIVE SUMMARY

I. Introduction
The City of Masbate was created on September 30, 2000, through a Referendum,
pursuant to Republic Act (RA) No. 8807 converting the then Municipality of Masbate into
a Component City of the Province of Masbate.

Financial and compliance audit was conducted on the transactions and operations of
the City of Masbate for calendar year (CY) 2022 to ascertain the propriety and validity of its
disbursements, the reliability of the accounts presented in the financial statements and
whether fiscal responsibility that rests directly with the agency head had been properly
discharged.

Our audit focused on the following areas:

1. Cash and Cash Equivalents

2. Property, Plant and Equipment
3. Fund Transfers from National Government Agencies
4. Utilization of COVID-19 Funds
5. Financial Liabilities – Accounts Payable
6. Revenues
7. COVID Vaccination Program
8. 20% Development Fund
9. GAD
10. LDRRMF
11. Submission of Accounts and other Required Reports
12. Compliance with Tax Laws

For CY 2022, the significant project accomplishments reported under the 20%
Development Fund are presented in Annex L. However, the aforementioned projects were
not yet validated by the Audit Team/Technical Audit Group (TAG) due to the delayed
submission of the perfected contracts and other required supporting documents by the
agency officials concerned.

II. Financial Highlights

The Agency’s total assets, liabilities and equity for CY 2022 with comparative
figures for CY 2021 are as follows:

Sources CY 2022 CY 2021 Increase/(Decrease)

Total Assets ₱ 2,127,905,707.68 ₱ 1,863,209,565.92 ₱ 264,696,141.76
Total Liabilities 694,715,021.73 630,017,983.49 64,697,038.24
Total Gov't Equity 1,433,190,685.95 1,233,191,582.43 199,999,103.52

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 For the year 2022, the City of Masbate projected an aggregate total income of
₱1,035,570,456.00 from the General Fund and Special Education Fund to be collected from
various sources such as Tax Revenues, Fees and Charges and Shares from Internal Revenue
Allotment (IRA).

The total income generated from the General and Special Education Funds amounted
to ₱1,009,179,869.91, showing an increase of ₱257,836,761.62 or 34.32 per cent compared
with the preceding year’s income of ₱751,343,108.29, presented as follows:

Increase/
Revenue Sources CY 2022 CY 2021
(Decrease)

Local Taxes ₱ 60,654,185.43 ₱ 57,529,114.06 ₱ 3,125,071.37

Internal Revenue
Allotment 900,430,003.00 651,171,905.00 249,258,098.00
Service Income 17,148,845.55 16,217,511.10 931,334.45
Business Income 30,888,862.28 25,745,866.41 5,142,995.87
Other Income 57,973.65 678,711.72 (620,738.07)
Total ₱ 1,009,179,869.91 ₱ 751,343,108.29 ₱ 257,836,761.62

The total appropriations amounting to ₱1,035,570,456.00 provided by the Agency in

support for its programs, projects and activities for CY 2022 are broken down as follows:

Object of Increase/
CY 2022 CY 2021
Expenditures (Decrease)

Personal Services ₱ 389,923,661.00 ₱ 321,611,770.00 ₱ 68,311,891.00

MOOE 360,569,817.80 283,100,311.00 77,469,506.80
Capital Outlay 282,783,072.20 178,409,318.00 104,373,754.20
Financial Expenses 2,293,905.00 2,350,248.00 (56,343.00)
Total ₱ 1,035,570,456.00 ₱ 785,471,647.00 ₱ 250,098,809.00

The obligations incurred by the Agency for its operations during the year based on
the Statement of Appropriations, Allotments and Obligations prepared by the City Budget
Officer, both for General and Special Education Funds, amounted to ₱985,140,499.55
registering an increase of ₱212,067,585.13 or 27.43 per cent from that of the preceding
year’s obligations of ₱773,072,914.42 as shown in the next page:

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 Object of Increase/
CY 2022 CY 2021
Expenditures (Decrease)
Personal Services ₱ 383,618,714.63 ₱ 318,120,939.86 ₱ 65,497,774.77
MOOE 354,789,227.49 277,223,326.17 77,565,901.32
Capital Outlay 244,439,721.96 175,379,799.08 69,059,922.88
Financial Expenses 2,292,835.47 2,348,849.31 (56,013.84)
Total ₱ 985,140,499.55 ₱ 773,072,914.42 ₱ 212,067,585.13

At the end of CY 2022, the results of operations of the City Government registered
a total amount of ₱169,974,929.14, higher by ₱158,611,659.82 as compared to the 2021
figure of ₱11,363,269.32, details are shown below:

Increase/
Item CY 2022 CY 2021
(Decrease)

Total Income ₱ 1,009,179,869.91 ₱ 751,343,108.29 ₱ 257,836,761.62

Total Expenditures
Personal Services ₱ 384,175,910.13 341,721,941.51 42,453,968.62
MOOE 298,826,218.56 263,023,233.91 35,802,984.65
Financial Expenses 26,728,581.07 20,408,168.97 6,320,412.10
Non-Cash Items 127,883,458.01 109,045,302.97 18,838,155.04
Total ₱ 837,614,167.77 ₱ 734,198,647.36 ₱ 103,415,520.41
Excess of Income over
Expenditures ₱ 171,565,702.14 ₱ 17,144,460.93 ₱ 154,421,241.21
Deduct: Transfers ₱ 1,590,773.00 ₱ 5,781,191.61 ₱ (4,190,418.61)
Net Profit ₱ 169,974,929.14 ₱ 11,363,269.32 ₱ 158,611,659.82

III. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements because of the inability of the Agency to complete the reconciliation of
accounts on its Property, Plant and Equipment (PPE), thus, the correctness of PPE items
worth ₱264,687,924.44, which represents 12.44 per cent of the total PPE, was unreliable.
Also, reconciling items amounting to ₱18,145,099.76 remain unadjusted in the books of the
City Government, thus, the validity of the Cash in Bank account as of year-end could not be
ascertained. Moreover, the validity of the balance of Accounts Payable worth
₱15,209,580.18 is doubtful due to the absence of proofs that these are valid liabilities for the
year and the Due to NGAs account includes balances of fund transfers amounting to
₱7,079,554.42 which were already implemented and fully utilized but were inadvertently
not recorded in the books. The inadequacy of records did not permit us to apply alternative
audit procedures to determine the validity, accuracy and correctness of these accounts.

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IV. Significant Audit Observations and Recommendations
For the exceptions cited, the Auditor recommended that the Local Chief Executive
(LCE) require the responsible City Officials to prioritize the reconciliation process and
ensure that the discrepancies noted are immediately investigated and adjusted in the books
accordingly. Also, that the LCE direct the Office of the City Accountant to thoroughly
review the identified reconciling items in the bank reconciliation statement (BRS) and the
necessary journal entries must be made in order to present the correct balance of the affected
accounts in the financial statement. It was likewise recommended that the City Accountant
exclude from Accounts Payable those items without valid proofs and to make adjusting
entries to correct the balance of this account in the financial statements. Furthermore, it was
recommended that the City Accountant record/deduct from the balance of Due to NGAs
account those fund transfers that were already utilized and liquidation reports that had been
already submitted to source agencies.

Moreover, the following are the other significant observations and the corresponding
recommendations:

1. Cash advances amounting to ₱2,532,594.21 remained unsettled/unliquidated as of

December 31, 2022.

We recommended that Management require all Accountable Officers (AOs)/concerned

LGU employees and officials to settle their respective cash advances at the end of the
year to reflect the correct balances of the accounts in the books of accounts of the
Agency. Henceforth, avoid granting subsequent cash advances to AOs with outstanding
cash advances and withhold the salaries and/or any amount due those AOs who were
unable to comply with pertinent rules and regulations on cash advances in accordance
with the above-cited law and regulations. Adhere strictly to the guidelines in the
granting, utilization and settlement of cash advances as enunciated in COA Circular No.
97-002 dated February 10, 1997.

2. Cash from collections amounting to ₱18,227,083.53 remained undeposited as of

December 31, 2022

We recommended that the Local Chief Executive instruct the City Treasurer to deposit
intact all collections and not to allow delayed and partial remittances from collectors as
required by rules and regulations to prevent possible misappropriation, theft, and loss of
funds. Impose administrative sanctions if warranted.

3. The Liquidating Officers were unable to thoroughly verify the Report of Collection
and Deposit (RCD) of the Collecting Officers.

We recommended that Management require the Liquidating Officers to thoroughly

verify the RCD of the Collecting Officers. Henceforth, the prescribed guidelines of
collections and deposit per Sections 31 and 35 of the MNGAS must be strictly followed.

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4. The collection efficiency on Real Property Tax (RPT) and Special Education Tax
(SET) income for CYs 2021 and 2022 was low, ranging from 16.61 percent to 55.67
percent.

We recommended that the City Treasurer conduct intensive tax campaign, employ
collection strategies, and institute legal remedies pursuant to the pertinent provisions of
RA No. 7160 in order to persuade the taxpayers to pay their tax on time.

V. Summary of Audit Suspensions, Disallowances and Charges as of Year-

End
Presented below is the table showing the status of audit suspensions, disallowances
and charges as of year-end.

Issued this
Settlement
Beg. Balance Period Ending Balance
(January 1 to
Particulars (January 1, (January 1 to (As of December
December 31,
2022) December 31, 31, 2022)
2022)
2022)
Notice of
Suspension ₱ 1,308,750.00 ₱ 0.00 ₱ 110,750.00 ₱ 1,198,000.00
Notice of
Disallowance 0.00 0.00 0.00 0.00
Notice of Charge 0.00 0.00 0.00 0.00
Total ₱ 1,308,750.00 ₱ 0.00 ₱ 110,750.00 ₱ 1,198,000.00

VI. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 45 audit recommendations, 16 were fully implemented, 20 were partially
implemented and nine were not implemented as of December 31, 2022.