EXECUTIVE SUMMARY

A.INTRODUCTION

The name Sultan Kudarat given to the Province was derived from a Muslim
Ruler, Sultan Muhammad Dipatuan Kudarat who begun to assert his leadership in the
year 1619 and reigned the Sultanate of Maguindanao from 1625 to 1671. He is
considered a national hero, and in his honour the province was named after him.

Sultan Kudarat is basically and primarily an agricultural province. Endowed with

rich and vast agricultural potentials and advantages, the province grows and could
produce relatively all kinds of agricultural commodities with comparatively higher level
of productivity. This makes the province not only self-sufficient, but a leading
agricultural producer in the region.

Mineral reserves are abundant also in the province making it one of the potentials
for investment in Southern Mindanao. Metallic minerals are found mostly in the
mountainous areas of Isulan, Bagumbayan, Sen. Ninoy Aquino, Palimbang and
Columbio. These minerals include copper, gold and silver.

The Province of Sultan Kudarat climbed 14 notches to Top 6 this CY 2016 from
20th place on 2015 for the most competitive provinces by the National Competitiveness
Council. The index measures the province performance on the economic dynamism,
infrastructure, and governance.

B. FINANCIAL HIGHLIGHTS

Comparative presentation of Total Assets, Liabilities, Equity, Income and Expenses

Increase (Decrease)
Accounts 2016 2015
Amount %

Total Assets 2,456,112,188.44 2,231,062,572.30 225,049,616.14 10.09%

Total Liabilities 459,928,762.19 440,157,084.74 19,771,677.45 4.49%

Net Assets/Equity 1,996,183,426.25 1,790,905,487.56 205,277,938.69 11.46%

Income 1,261,473,033.29 1,148,568,260.28 112,904,773.01 9.83%

Expenses 1,057,371,826.34 979,955,804.67 77,416,021.67 7.90%

Surplus/(Deficit) 204,101,206.95 155,294,104.30 48,807,102.65 31.43%

Comparative presentation of sources and application of funds

Increase
Particulars 2016 2015
(Decrease)
Sources:
Tax Revenue 34,914,569.82 31,063,754.01 3,850,815.81
Share from Internal
1,216,785,255.90 1,108,239,836.00 108,545,419.90
Revenue Collections
Service and Business
9,376,272.68 7,678,279.12 1,697,993.56
Income
Share, Grants and
188,085.45 152,808.50 35,276.95
Donations
Other Income 208,849.44 1,433,582.65 (1,224,733.21)
Total 1,261,473,033.29 1,148,568,260.28 112,904,773.01
Application:
Personnel Services 371,994,475.53 344,365,040.73 27,629,434.80
MOOE 597,452,002.68 598,913,729.95 (1,461,727.27)
Financial Expenses 15,550,887.90 17,719,660.65 (2,168,772.75)
Non-Cash Expenses 23,876,241.78 18,957,373.34 4,918,868.44
Total 72,094,068.02 74,856,458.54 28,917,803.22
Deduct: Subsidy to 48,498,218.45 13,318,351.31 35,179,867.14

Surplus/(Deficit) 204,101,206.95 155,294,104.30 48,807,102.65

C.OPERATIONAL HIGHLIGHTS

The province’s significant accomplishments on its activities and projects undertaken

during the year include, among others, the following:

I. Health Services

 Awarded a Plaque of Recognition as Best Local Health Iniatives in

Family Planning Program in Region XII last February 26, 2016 at
Davao City.
 Awarded a Plaque of Achievement Award by Zuellig Family
Foundation for being an Outstanding province whose leaders applied
Bridging Leadership Principles in strengthening and developing
responsive health system which resulted to a Contraceptive Prevalence
Rate (CPR) of 68% thus achieving the National Target CPR in 2016
through the Provincial Leadership and Governance Program given
 during the ZFF-UNFPA Colloquium last November 10,2016 at Luxent
Hotel, Quezon City.
 Progmmatic Management of Drug Resistant TB (PMDT) Treatment
Center-Sultan Kudarat Provincial Hospital was awarded 2nd place
(Mindanao-Wide) on case finding of Multi-Drug resistant TB cases,
July 21,2016.
 100% of all RHU Health Facilities certified as TB DOTS Facility.
 Given an award on September 2,2016 at General Santos City for
performing the core process of disease surveillance as expected to a
disease reporting units (DSU).

II. Education
 Provided a counterpart fund for the construction of DepEd MP Building
in the amount of P 1,800,000 at Kenram, Isulan, Sultan Kudarat.
 Provided fund support for education and scholarship program for P
8,000,000.
 Provided support fund for the Skills Training and Livelihood program
for P10,000,000

III. Social Welfare Services

 Provided fund of:

o P10 M for Mobile Hospital Operations

o P10M for the acquisition of CT Scan Machine
o P24M for Social Reform Agenda
o P6M for acquisition of additional Mobile Hospital
 Construction of Laboratory Building at SKPH Compound funded under
DOH-HFEP for P10M.
 Construction of KALEPA Hospital Building funded under DOH for
P23M.
 Acquired two units Dental Bus with complete accessories from DOH
Manila.

IV. Economic Services

 Provided counterpart fund with a total of P20M for development
programs, projects and activities under the DA programs wherein the
farmer-recipients cannot afford to share financial counterpart.

V. Governance
 Issued with Certification by CIPI as 9001:2008 ISO certified Provincial
Government last November 21,2016.
 Funded the purchase of 2 units service vehicles in support to the
National Government Program on Anti-Illegal Drugs Campaign with a
total amount of P2.9M
 VI. Civil Works
Funded the concreting of Tibpuan Lebak Road for P3M
Provided financial counterpart for the concreting of Road/FMR along
Columbio-Lutayan Koronadal Road (Blingkong-Palavilla Section)
under the DA-Food Security Program.
Implemented the Asphalting of Dukay-Laguilayan Road for P10M
Implemented the Asphalting of Hwy-Jct Cemetery Road phase 2 funded
under SLRF program for P10M.

D. SCOPE OF AUDIT

A financial and compliance audit was conducted on the accounts and operations
of the Provincial Government of Sultan Kudarat for the calendar year 2016.

The audit consisted of the review and verification of the province’s operating
procedures, interview with concerned officials, and examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements to ascertain the
validity of financial transactions and accuracy of financial reports and accounting records
in accordance with generally accepted accounting and auditing standards and adherence
to laws, rules and regulations.

The observations and recommendations were discussed with the concerned

university officials and employees during the exit conference on March 07, 2017 whose
comments were incorporated in the report, where appropriate.

E. INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements for the year then ended due to the effects of observation nos. 3, 7, 8,
and 9 on the financial statements. The non-implementation of prior years’
recommendation relative to non-reconciliation of property, plant and equipment and non-
provision of depreciation, affects also the fair presentation of the financial statements.

F. SUMMARY OF SIGNIFICANT OBSERVATIONS AND

RECOMMENDATIONS

The following are the deficiencies that constituted drawbacks in the overall
operations requiring immediate remedial measures by management to further improve its
operations.

1. The utilization of the Local Disaster Risk Management Fund could not be verified
and determined the validity and correctness of its charges contrary to the relevant
provisions of Republic Act (RA) 10121 and its Implementing Rules and Regulations
(IRR), thus setting limits in the full attainment of the objectives of the fund.
 We recommended the Management to require the LDRRMO submit the Annual LDRRMFIP
and the monthly Report of Sources and Utilization of DRRMF duly certified correct by the
Municipal Accountant on or before the 15th day after the end of each month.

2. The collections by some Collecting Officers were not turned over/ deposited to the
treasurer/authorized depository bank within the period stated on the provisions of
Manual on New Government Accounting System (NGAS) and COA Revised Cash
Examination Manual thereby exposing government funds to risk of loss or
misappropriation.

We recommended that Management: a) instruct all Collecting Officers to deposit

intact all their collections daily or not later than the next banking day with the
AGDBs. In cases where collections are minimal and daily deposit thereof becomes
costly and impractical, deposit can be made at least once a week, or as soon as their
collections reach P10,000. b) establish a reasonable amount of Petty Cash Fund for
petty operational expenses.

3. The year-end balances of Real Property Tax (RPT) Receivable and Special Education
Tax (SET) Receivable of P3,081,429.46 and P868,812.50 respectively do not tally
with their corresponding reciprocal accounts Deferred RPT Income and Deferred SET
Income with a balances of P52,524.93 and P868,849.87 respectively, as required
under the Manual on NGAs thus causing doubt on the correctness of these balances in
the financial statements.

We recommended the Management to: a) Direct the Provincial Assessor’s Office to

prepare and submit to the Provincial Treasurer’s Office, on or before the thirty-first
(31st) day of December each year, an assessment roll containing a list of all real
properties have been newly assessed or reassessed and the values of such properties;
b) Require the Provincial Treasurer’s Office to furnish the Provincial Accountant’s
Office of a duly certified list showing the amount due and collectible for the year at
the beginning of the year for each respective taxpayers as basis to draw a Journal
Entry Voucher (JEV) to record the debit to Real Property Tax Receivable/Special
Education Tax Receivable and crediting to Deferred Real Property Tax
Income/Deferred Special Education Tax Income; c) Call the attention of the
Provincial Accountant’s Office to take extra care in the recording of transactions
affecting RPT/SET Receivables and Deferred RPT/SET income. The balances of the
four (4) accounts should be reconciled and adjustments should be made to present
fairly the financial statements.

4. Various procurements of goods and supplies were not posted in the PhilGEPS website
contrary to the requirement stated under RA 9184 and its IRR-A; thus, resulting to
non-promotion of transparency and efficiency in government procurements.

We recommended that Management: a) Post all procurement opportunities to the

PhilGEPS bulletin board as well as to the agency’s own website, if any, and any
 conspicuous place in the premises of the Procuring entity. This may be ignored for
the unforeseen contingency requiring immediate purchase within P100,000 and
procurements equal to P50,000 and below; b) Adhere to the requirements prescribed
by IRR-A of RA 9184.

5. The optimum utilization of the 20% Development Fund in C.Y. 2016 for intended
development projects were not achieved, considering that the
Programs/Activities/Projects under this fund should have been completed and/or
nearing their expected completion contrary to Item No. 5 of DILG-DBM Joint
Circular No. 2011-1 dated April 13,2011.

We recommended that Management: a) See to it that the 20% Development Fund be

optimally utilized to help achieve desirable socio-economic development and
environmental outcomes; b) Address the factors hampering the project
implementation such as poor synchronization, peace & order problem, conflicts, weak
coordination/timing of projects. With this, have a contingency plan to cope with the
said aggravating factors; c) Improve the project monitoring and evaluation system
which has the potential of mitigating delays in project implementation arising from
those mentioned factors.

6. Several general provisions on the implementation and enforcement of Ecological

Solid Waste Management Program under RA No. 9003 and its implementing Rules
and Regulations were not fully complied with.

This is a reiterated finding, thus we recommended the Management for strict

compliance to wit: a) Consolidate immediately all the submitted SWM Plan to arrive
at an initial Provincial SWM Plan, in compliance with RA 9003 and its IRR; b)
Coordinate with SWM Board of the municipalities with respect to the evaluations
made by the regional office of the environment management bureau to expedite the
preparation and submission of the PSWMP; c) If possible, implement immediately
the general program of action to achieve the government’s policy specifically to
ensure the protection of public health and environment.

7. The true cost or booked value of Road Asset Networks in the financial statements
cannot be ascertained due to the non-maintenance of subsidiary ledgers and non-
recognition of depreciation/impairments on the books of accounts. Moreover, the
regular maintenance for the upkeep of the road network system was not properly
charged under COA Circular No. 2015-008 dated November 23, 2015.

We recommend that Management to: a) Address the Accounting Division/Unit to :

i) Maintain subsidiary records for roads and road components for every road network;
ii) Prepare a lapsing schedule for the computation of the depreciation for each
component at the end of the year; iii) The total road network system shall be
disclosed in the Notes to the Financial Statements (Annex B); iv) Prepare the Report
on the Physical Count of the Road Network System (Annex C); v) Prepare the Local
 Road Network Ledger Card (Annex D); vi) Ensure the proper accounting of the
repairs and maintenance of the roads. b) Require the General Services Office to:
Maintain a Local Road Inventory and Road Map; Keep a complete Local Road
Network Property Card for all roads and its components (Annex E). c) Direct the
Provincial Engineers Office to: Provide the accounting office and the general service
office with the complete description and cost segregation of road
components.Honoraria for teaching overload totaling paid P 134,000 were paid
without a budget to fund the claims and supporting documents were of dubious nature
qualifying the transaction as irregular.

8. The amount of P12,594,007.05 representing Advances to Officers and Employees for

travel and other time-bound undertakings remained unliquidated as of December
31,2016, in violation to Section 89 of PD 1445 and several deficiencies noted in the
grant, liquidations and monitoring of cash advances contrary to COA Circular No. 97-
002 dated February 10,1997.

We recommended management the following courses of action: a) Require the

Accounting Office to regularly perform the following: - Require certification on the
face of the cash advance voucher that an official/employee has no previous
unliquidated cash advance, as an added control. - Suspend salaries if the
official/employee failed to liquidate the cash advance within the prescribed period. -
Prepare and submit a Monthly Status of Cash Advances to the Audit Team for
monitoring purposes. b) On the unliquidated travel expense: send within 10 days
before the expiration of the 30 days after the return from travel & impose strictly the
sanctions of withholding the salary upon failure to liquidate. c) Desist from issuing
clearance from money accountabilities to the concerned accountable officers who
were about to retire or separate from the service until they have fully settled their
money accountabilities. d) On the part of the outstanding cash advances of
accountable officers who were already separated from this office, exert extra effort to
locate their whereabouts to send demand letters and secure necessary documents
needed to support the request for write-off.

9. Semi-expendable properties amounting to P3,784,188.40 were still accounted as part

of the Property, Plant and Equipment accounts contrary to Chapter 9 and 10, Volume
I of Government Accounting Manual.

We recommended the management: a) To instruct the Accounting Office to prioritize

the reclassification of properties below the P15,000.00 threshold to Semi-expendable
accounts to reflect the true balances of accounts in the Financial Statements. b)
Instruct the Property Officer to issue ICS to all end-users of semi-expendable items
and cancel those previously issued PAR on some items.

Audit observations and recommendations are discussed in detail in Part II of the

report.
G. STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES

  Beginning  January 1 – December 31, 2016  Ending Balance 

Balance (as of      (as of December 
Dec 31, 2015)  NS / ND / NC  NSSDC  31, 2016) 
         
NS / ND / NC  P 323,280.00 P 595,439.83  P193,080  P725,639.83 

H. STATUS OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Out of the twenty (20) audit recommendations contained in the 2015 Annual Audit
Reports, two (4) were fully implemented, fourteen (14) were partially implemented, and
two (2) were not implemented.