EXECUTIVE SUMMARY

A. Introduction

The Provincial Government of Nueva Vizcaya came into existence by virtue of

the Royal Decree of Spain dated April 10, 1841. The Province comprises an
aggregate land area of 437,880 hectares and classified as a second class Province
with 15 municipalities.

A financial and compliance audit was conducted on the accounts and operations
of the Province of Nueva Vizcaya. The audit objectives were to ascertain the
propriety of disbursements, the reliability of financial reports, the adequacy of
accounting records, compliance with laws, rules and regulations as well as adherence
to prescribed policies and procedures. Likewise, the audit was conducted to
determine whether plans, programs, projects and activities for the year were attained
in an efficient, economic and effective manner.

B. Highlights of Financial Operation

The financial position, financial performance, appropriations and obligations of

the Province of Nueva Vizcaya for CYs 2020 and 2019 are as follows:

Increase/(Decrease)
Particular 2020 2019
Amount %
Assets ₱ 5,641,871,021.04 ₱ 5,677,212,421.05 ₱ (35,341,400.01) (0.62%)
Liabilities 676,861,045.02 1,188,944,883.76 (512,083,838.74) (43.07%)
Government Equity 4,965,009,976.02 4,488,267,537.29 476,742,438.73 10.62%
Revenue 1,846,676,549.36 1,728,387,843.64 118,288,705.72 6.84%
Expenses 1,297,383,122.84 1,251,828,314.17 45,554,808.67 3.64%
Surplus (Deficit) 549,293,426.52 476,559,529.47 72,733,897.05 15.26%
Current Year
1,982,551,706.15 1,747,508,072.43 235,043,633.72 13.45%
Appropriation
Continuing
438,297,857.73 480,240,756.39 (41,942,898.66) (8.73%)
Appropriation
Current Obligations 1,517,826,324.07 1,349,661,722.60 168,164,601.47 12.46%
Continuing
123,622,092.83 131,774,738.09 (8,152,645.26) (6.19%)
Obligations

During the calendar year 2020, there were decrease in total assets and liabilities
amounting to ₱35,341,400.01 and ₱512,083,838.74, respectively, thus resulting to a
net increase of ₱476,742,438.73 on government equity. The decrease in liabilities and
increase in government equity were mainly due to the decrease on Intra-Agency
Payables, Financial Liabilities and Trust Liabilities. Moreover, there was an increase
 in the Share from Internal Revenue Collection of the Province which caused the
increase in surplus by 15.26%.

On the other hand, Current Year Appropriation increased up to 13.45% while

Continuing Appropriation decreased up to 8.73%. Likewise, there were also increase
in Current Obligations of 12.46% and a decrease in Continuing Obligations of
6.19%.

Comparative Statement of Funds Transfer to and from NGAs, GOCCs, LGUs,

NGOs and POs:

Increase /
Account Title 2020 2019
(Decrease)
Fund Received from Other Agencies:
Due from NGAs ₱ 48,910,724.83 ₱ 38,852,378.60 ₱ 10,058,346.23
Due from GOCCs 0.00 0.00 0.00
Due from LGUs 210,645,368.60 118,537,546.47 92,107,822.13
Due from NGOs/POs 54,586,047.68 34,338,203.13 20,247,844.55
TOTAL ₱ 314,142,141.11 ₱ 191,728,128.20 ₱ 122,414,012.91
Fund Transferred to Other Agencies:
Due to NGAs ₱ 142,876,855.29 ₱ 153,058,683.64 ₱ (10,181,828.35)
Due to GOCCs 1,017,004.03 303,033.56 713,970.47
Due to LGUs 21,941,840.12 13,397,721.26 8,544,118.86
Due to NGOs/POs 0.00 0.00 0.00
TOTAL ₱ 165,835,699.44 ₱ 166,759,438.46 ₱ (923,739.02)

C. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Provincial Government of Nueva Vizcaya for CY 2020 for
the following reasons:

(a) Reliability of the year-end balances of Cash account and other affected accounts
are doubtful and misstated due to unrecorded transactions in the books of the
Provincial Local Government Unit amounting to ₱18,057,819.20;
(b) Erroneous treatment of the Bayanihan Grant to the Province (BGP) as part of the
Share from Internal Revenue Collections (IRA) instead of Due to NGAs resulted
in the overstatement of government equity and understatement of liability
amounting to ₱3,098,003.05 for the unutilized year-end balance;
(c) Submitted Report on Physical Count of Property, Plant and Equipment
(RPCPPE) as of December 31, 2020 of the Province of Nueva Vizcaya totaling
₱2,569,076,805.09 could not be relied upon since important information such as
(a) Balance on Hand Per Count; (b) Shortage / Overage; and (c) Remarks on
State, Whereabouts, Conditions, etc. were not indicated. Moreover, reconciliation
 of the balances of the completed inventory count with the recorded balance in the
financial statements was not done periodically after each physical inventory
conducted to ensure correctness and establishing reliability of the reported PPE
balances. Likewise, verification done with the schedule of the PPE in the E-
NGAS showed inclusion of items that should have been considered Inventory,
resulting to the overstatement of the balance of the PPE.
(d) Advances to/Due from Officers and Employees totaling ₱24,916,171.93
remained unliquidated as at December 31, 2020, as a result, expense accounts are
understated and asset accounts are overstated, if demand for liquidation will not
be issued to the concerned officers and employees of the province.
(e) The Provincial Local Government Unit did not strictly enforce the liquidation of
fund transfers to Non-Government Organizations / People's Organizations
(NGOs/POs), thus accumulating the Due from NGOs/POs account balance to
₱54,586,047.68 as at December 31, 2020, consequently, expense accounts are
understated while asset accounts are overstated.

D. Significant Findings and Recommendations

The findings and recommendations were communicated with management

through the issuance of an Audit Observation Memoranda (AOMs) and management
comments were incorporated in the final report, where appropriate. We were not able
to discuss with Management the findings and recommendations in an exit conference,
as a matter of procedure, in view of the Coronavirus Disease 2019 (COVID 19)
Outbreak in adherence to Proclamation No. 929 issued by the President of the
Philippines. The most significant findings and recommendations are as follows:

1. Four (4) checks totaling ₱101,175.76 were issued to the payees without approved
disbursement vouchers while forty-eight (48) checks totaling ₱9,741,191.73 were
signed in advance by concerned signatories prior to the approved disbursement
vouchers, contrary to Section 79, Volume I of Government Accounting Manual
for Local Government Units (GAM for LGUs) and Section 4 of Presidential
Decree No. 1445, which may result to the loss of government funds.

We recommended that the Provincial Administrator and the Provincial Treasurer

stop the practice of signing and countersigning of checks, which are not supported
with duly approved disbursement vouchers in compliance with Section 79,
Volume I of Government Accounting Manual for Local Government Units (GAM
for LGUs) of COA Circular No. 2020-004 and Section 4 of Presidential Decree
No. 1445.

2. Reliability of the year-end balances of Cash account and other affected accounts
are doubtful and misstated due to unrecorded transactions in the books of the
Provincial Local Government Unit amounting to ₱18,057,819.20, contrary with
Section 4(b), of COA Circular No. 2020-004 and Section 111 of PD No. 1445.
 We recommended that management direct the Provincial Treasurer to always
observe timeliness in the monthly submission of the paid disbursement
transactions to the accounting for proper recording in the books. The Provincial
Accounting Office should monitor the submission of the paid disbursement
monthly prior its final preparation of the monthly Trial Balances to ensure
completeness in recording of Province’s financial transactions. Make the
necessary adjusting entries for the noted unrecorded disbursements and observe
sound internal control over disbursements.

3. Erroneous treatment of the Bayanihan Grant to the Province (BGP) as part of the
Share from Internal Revenue Collections (IRA) instead of Due to NGAs resulted
in the overstatement of government equity and understatement of liability
amounting to ₱3,098,003.05 for the unutilized year-end balance, contrary to
Section 5, Chapter 3 of the Government Accounting Manual for Local
Government Units Volume III (GAM for LGUs), COA Circular No. 2020-004
dated January 31, 2020.

We recommended management that the Provincial Accountant should prepare

adjusting journal entry to take up the unutilized balance by debiting Prior Year
Adjustments and crediting the Due to NGAS account as required in the
aforementioned Circular. Henceforth, succeeding receipts of the fund, if any, shall
be recorded as liability under Due to NGAs in conformity with GAM for LGU.

4. Advances to/Due from Officers and Employees totaling ₱24,916,171.93 remained

unliquidated as at December 31, 2020 which is not in compliance with Section 89
of PD 1445 and Sections 4 and 5 of COA Circular No. 97-002. As a result,
expense accounts are understated and asset accounts are overstated.

We reiterated our recommendation that the rules on proper granting and

liquidation of cash advances shall be strictly implemented in accordance with the
provisions of COA Circular No. 97-002 and Section 89 of PD 1445 to avoid
accumulation of long outstanding balances, otherwise administrative and criminal
charges may be filed against officials / employees with unliquidated cash
advances.

Management should:
a. Properly monitor the liquidation of cash advances and due from
officials/employees;
b. Make sure that all cash advances should be liquidated or refunded at the end
of each year;
c. Issue demand letters to officials/employees with overdue accounts, copy
furnish the audit team;
d. Enforce pertinent sanctions like withholding of salaries or any money due to
the concerned officials and employees as provided for under COA Circular
97-002; and
 e. Exert all possible means to trace back the records/documents relative to the
dormant accounts and conduct in-depth analysis thereon. If the
analysis/review of the accounts is not possible due to the absence of
records/documents, or the collection of such is not possible due to the death of
the accountable officers, management may request for write-off as prescribed
under Section 8 of COA Circular No. 2016-005.

5. The Provincial Local Government Unit did not strictly enforce the liquidation of
fund transfers to Non-Government Organizations / People’s Organizations
(NGOs/POs), thus accumulating the Due from NGOs/POs account balance to
₱54,586,047.68 as at December 31, 2020 which is not in compliance with Item
5.4 of COA Circular No. 2007-001 and Item 2.0 of COA Circular 2012-001.
Consequently, expense accounts are understated while asset accounts are
overstated.

We reiterated our recommendation that the rules on proper granting and

liquidation of fund transfers to NGOs/POs shall be strictly implemented in
accordance with the provisions of COA Circular No. 2007-001 and Item 2.0 of
COA Circular No. 2012-001 to avoid accumulation of long outstanding balances.

Likewise, management should:

a. regularly monitor the liquidation of fund transfers to NGOs/POs;
b. make sure that all fund transfers should be disbursed in accordance with the
purpose it was intended;
c. issue demand letters to the organizations with overdue accounts, copy furnish
the audit team;
d. transmit all the liquidation reports of the NGOs/POs to support the journal
entries made by the management on its book of accounts; and
e. stop granting financial assistance to NGOs/POs who have previous
unliquidated or unsettled balances to avoid accumulation thereof.

6. Submitted Report on Physical Count of Property, Plant and Equipment (RPCPPE)

as of December 31, 2020 of the Province of Nueva Vizcaya totaling
₱2,569,076,805.09 could not be relied upon since important information such as
(a) Balance on Hand Per Count; (b) Shortage / Overage; and (c) Remarks on
State, Whereabouts, Conditions, etc. were not indicated, contrary to Section 266
of the Government Accounting Manual for Local Government Units. Moreover,
reconciliation of the balances of the completed inventory count with the recorded
balance in the financial statements was not done periodically after each physical
inventory conducted to ensure correctness and establishing reliability of the
reported PPE balances. Likewise, verification done with the schedule of the PPE
in the E-NGAS showed inclusion of items that should have been considered
Inventory as provided under COA Circular 2005-002, resulting to the
overstatement of the balance of the PPE.
 We recommended that management require the Inventory Committee to conduct
a complete physical count of all PPE items and submit the RPCPPE in the
prescribed format to include information on the condition of each item under
“Remarks” column, whether the PPE are serviceable, unserviceable, for repair, or
beyond repair, etc. Reconciliation with the recorded PPE in the financial records
of the Province with that of the result of the physical count completed should be
done periodically to ensure that the balance of the PPE presented in the financial
statements are accurate and can be relied upon. Items which are considered as
inventory in compliance with COA Circular 2005-002 should be properly
adjusted or reclassified as inventory for an accurate and fair presentation of the
PPE account balances.

7. The PLGU appropriated and disbursed to the provincial officials and employees
the amount of ₱40,750,500.00 for payment of CREA without any legal basis or
not expressly authorized by law in violations of the provisions of COA Circular
2013-003, hence, provincial funds were utilized without prudent discretion.

We recommended that the Provincial Government submit their legal basis in their
grant of the CREA, otherwise, said grants of benefits shall be returned back or be
refunded by the recipients to the government coffers for illegal payments of the
benefit in violation of above-mentioned government laws, rules and regulations.
The Province is also advised to refrain from granting the same nature of benefits
in the future operations of the Province without legal basis.

8. Payrolls for Special Risk Allowance (SRA) for the period of an Enhanced
Community Quarantine (ECQ) relative to the Covid-19 outbreak totaling
₱1,854,874.07 were not supported with documents clearly defining the
entitlement of some employees to receive the allowance while a total of
₱1,371,179.68 were granted to unqualified employees, hence the disbursement is
irregular and invalid because it has not complied with the conditions provided
under Sections 1 and 2.a of the Administrative Order (AO) No. 28 issued by the
President of the Philippines.

We recommended that management:

a. Comply and adhere with the documentary requirements of granting Covid-19
SRA as specified in AO 28;
b. Submit to the Office of the Auditor the documents clearly defining the
entitlement of some employees, other than medical specialists and drivers, to
receive such allowance;
c. Submit documents pertaining to the assignments of medical staffs of the
hospitals who were assigned to directly cater COVID – 19 patients from time
to time; and
d. Require the refund of the disbursements totaling ₱1,371,179.68 from the
concerned employees who are given but not entitled to receive Covid-19 SRA,
otherwise, notice of disallowance shall be issued to the corresponding
accountable recipient.
9. Purchase of Personal Protective Equipment (PPEs), Thermal Scanners and
Isopropyl Alcohol were beyond the reasonable price by at least ₱2,061,812.50 as
compared to the price freeze set by Department of Health (DOH) Department
Circulars Nos. 2020-0157 and 2020-0186, dated March 24, 2020 and April 15,
2020, respectively.

We recommended that management take into consideration the Circulars issued

by the Department of Health on the price freeze of essential emergency medicines
and medical devices for the LGU to avail of reasonable prices on future
purchases.

10. Five Thousand (5,000) pieces IgG / IgM Detected Rapid Antibody Test Kits
totaling ₱3,750,000.00, were purchased from an unauthorized seller contrary to
Philippine Food and Drug Administration (FDA) Circular No. 2020-004 dated
March 12, 2020, hence results from the purchased test kits were uncertain of its
accuracy and unreliable.

We recommended that management explain / justify the purchase of COVID-19

test kits from unauthorized FDA supplier. Moreover, management should ensure
that the purchase of COVID-19 test kits be made directly from duly authorized
suppliers to guarantee the accuracy and reliability of COVID-19 test results.

11. Inadequate detailed engineering and monitoring in the implementation of the

project Design and Build for the Establishment of Nueva Vizcaya Convention
Center Phase I resulted in delayed completion of the said Convention Center,
while improper coordination between the Province and contractor caused the
building and replacement of some items of work and extended the working time
from 330 days to 670 days.

We recommended management that a thorough review and evaluation of the

Program of Works should be done to ensure that project designs and estimates are
properly prepared and ensure that all phases of the projects are covered to
minimize variation orders and time extensions which often resulted to the delayed
completion of the infrastructure projects.

Require the immediate repair of the defects /damages of the Convention Center by
the contractor as discussed under finding no. 31 of AAR CY 2019.

Adherence to the provisions of the RIRR of RA 9184 on the engineering activities

is enjoined to deliver timely completion of a project.

12. The Province did not initiate appropriate sanctions against Power K Construction
and Supply Services which incurred delays in the completion of the project
Completion of NV Convention and Sports Center (Convention Center Phase II) in
 violation of the provisions of R.A. 9184. Forfeiture of the Performance Bond and
Liquidated Damages amounting to ₱2,723,900.00 was not imposed on the erring
contractor while overpayment of ₱1,314,481.80 was found from the reported
completed and paid item of work.

We recommended that management demand and ensure the refund of the

overpayment of ₱1,314,481.80 made to the contractor in the fourth partial
payment for the item or work SPL (6). Forfeit the performance bond for this
project for the delay of the contractor in the performance of his obligation as
stipulated in the Indemnification Agreement.

Impose to the contractor the corresponding Liquidated Damages of ₱2,723,900.00

for their failure to comply with the agreement of the contract, as provided for
under Section 68 of the IRR of R.A. 9184.

See to it that all the agreement and conditions in all the documents pertaining to
the project are observed with by both parties. Adherence to the provisions of
R.A. 9184 is enjoined.

13. The Province failed to impose liquidated damages to the contractor for the project
Establishment of Nueva Vizcaya Conference Center (Construction of Building)
amounting to ₱3,790,000.00. Moreover, the un-recouped portion of the 15%
advance payment was not demanded from the contractor and returned to the
Province, while performance bond was not forfeited in favor of the Provincial
Government.

We recommended that management impose on the contractor DWD the

corresponding liquidated damages of ₱3,790,000.00 for their failure to comply
with the agreement of the contract, as provided for under Section 68 of the IRR of
R.A. 9184.

Demand the refund of the un-recouped portion of the 15 % advance payment from
DWD and when necessary file appropriate charges against this erring contractor
for failure to return the un-recouped portion of the advance payment. Investigate
who are the liable personnel who failed to demand earlier from DWD the 15%
advance payment prior to the rescission of the contract and to forfeit the
performance bond in favor of the Provincial Government.

See to it that all the agreement and conditions in all the documents pertaining to
the project are observed with by both parties. Adherence to the provisions of
R.A. 9184 is enjoined.

14. Liquidated Damages of ₱1,407,038.70 was not imposed to Sharysu Builders for
the delay in completing the project Improvement of Capitol Building Phase 2 for
904 days, while the performance bond for the said project was not forfeited in
 favour of the Provincial Government in violation of Section 39.3 of the Revised
IRR of R.A. 9184.

We recommended management to impose to the contractor Sharysu Builders the

corresponding Liquidated Damages of ₱1,407,038.70 for their failure to comply
with the agreement of the contract, as provided for under Section 68 of the IRR of
R.A. 9184.

Performance bond should be monitored and assure compliance with the

provisions of Section 39 of the same mentioned IRR for all infrastructure projects
of the Province.

See to it that all the agreement and conditions in all the documents pertaining to
the project are observed with, by both parties. Adherence to the provisions of
R.A. 9184 is enjoined.

15. Contracts executed and other relative documents did not provide the necessary
information for the protection of the government, despite of the materiality of the
contract amount. Performance bonds were not extended / renewed despite the
approval of extensions and variation orders for the projects in violation of the
provisions of R.A. 9184. Un-recouped advance payment amounting to
₱5,431,448.05 remained in the books for over a year for abandoned projects
and/or uncompleted projects giving an unwarranted advantage for the contractor
to utilize government funds.

We recommended that management immediately impose the necessary liquidated

damages to the erring contractors as recommended in each of the audit
observation incorporated in this CY 2020 Annual Audit Report. Demand from
the concerned contractors the refund of the un-recouped portion of the 15%
mobilization or advance payment. In addition, exert effort to claim the necessary
forfeiture of the contractor’s performance security for the interest of the
Provincial Government. Otherwise, investigate the liable person for his/her failure
to monitor and require the extension of the performance security in case of
approved extensions / change in the original contract time, as required in
R.A.9184. File appropriate charges to these erring contractors for the assurance of
collecting the damages they caused the Province of NV.

See to it that all documentary forms of the government for approval and to
support government transactions are fully accomplished to be binding for the
benefit and security of the government. Adherence to provisions of R.A. 9184 is
enjoined for all transactions of the Provincial Government of Nueva Vizcaya.

16. The PLGU failed to enforce the immediate repair on the deficiencies noted by the
Technical Audit Specialist on the inspection of completed “Concreting of CVR-
 Kinacao-Kurasay-Kinalabasa Road Project” with a project cost of
₱88,395,520.27, thus government funds were put to high risk of loss and wastage.

We recommended that management, thru the Provincial Engineer, should submit

the updated report on the completion of the corrective measures that were
undertaken on the deficiencies noted to the project; and ensure compliance with
DPWH Standard Specifications for Highways, Bridges and Airports to avoid
future occurrence of the same deficiency.

17. The delivery of one (1) unit delivery truck for the Proponent Group of the
Philippine Rural Development Project (PRDP) does not conform with their
submitted and approved business plan hence, intended use of the vehicle cannot
be fully optimized. In addition, inconsistencies and irregularities were observed
in the procurement and delivery of the vehicle in violation of the provisions of
R.A. 9184. As a result, the most advantageous price for the government was not
obtained.

We recommended that management see to it that provisions of R.A. 9184 are

being adhered to. Submission of the financial documents and other supporting
documents evaluated by the BAC, as their basis for the Bid Evaluation Report, is
necessary and should be attached in the disbursement vouchers. Non-submission
of these documents will be our basis for the issuance of the Notice of Suspension.
Management should likewise require Provincial Cooperative Affairs Office
(PCAO) to duly registered the vehicle and if necessary demand from the supplier
the submission of the corresponding registration of the vehicle.

Demand explanation from MLG Greenhouse Pharmaceutical Trading, the reason

for not registering the vehicle supplied to the Province with the LTO. If
necessary, investigate the reason for not been able to register this vehicle with the
LTO and determine persons responsible for this irregularity.

E. Summary of Total Suspensions, Disallowances and Charges as of year-end

Particulars Beginning Issued During Settlement Ending % of

Balance the Year During the Year Balance Settlement
Suspensions
Prior Years 6,614,595.90 0.00 0.00 6,614,595.90 0.00%
Current Year 0.00 0.00 0.00 0.00 0.00%
Total 6,614,595.90 0.00 0.00 6,614,595.90 0.00%

Disallowances
Prior Years 33,584,735.52 0.00 27,161,861.96 6,422,873.56 80.88%
Current Year 0.00 1,249,707.19 0.00 1,249,707.19 0.00%
Total 33,584,735.52 1,249,707.19 27,161,861.96 7,672,580.75 77.97%

Charges
Prior Years 0.00 0.00 0.00 0.00 0.00%
Current Year 0.00 0.00 0.00 0.00 0.00%
Total 0.00 0.00 0.00 0.00 0.00%
 The prior years’ audit suspension totaling P6,614,595.90 were not settled within
the prescriptive period, thus, Notice of Disallowance will be issued.

During the year the audit team issued an audit disallowance dated November 26,
2020 amounting to ₱1,249,707.19 for the uncollected liquidated damages from the
contractor of the Improvement/Expansion of Capitol Building (Phase I) Project.
While, a total amount of ₱27,161,861.96 audit disallowance was lifted in CY 2020,
thus the issuance of Notice of Settlement. Additionally, out of the beginning balance
of the prior years’ disallowances, a total of ₱860,045.00 were appealed to the
Commission Proper (CP).

F. Status of Implementation of Prior Year’s Audit Recommendations

Out of the thirty-two (32) audit recommendations contained in the Annual Audit
Report for CY 2019, thirteen (13) were fully implemented, thirteen (13) were
partially implemented while the remaining six (6) were not implemented.

The compliance of the LGU in the implementation of the prior year’s audit
recommendations signifies their adherence to existing laws, rules and regulations.