EXECUTIVE SUMMARY

INTRODUCTION

The municipality of Daanbantayan derives its name from the Cebuano words “daan”
which means “old” and “bantayan” which refers to a watch tower that looks out for Moro
raiders before Spain took control of the Philippines.It is a first class municipality located
in the northernmost part of the Province of Cebu and comprises 20 barangays.

The islands of Daanbantayan had been the frequent destination of local and foreign divers
due to its vast corals and abundant sea life. Also an added attraction is the Haladaya
Festival celebrated every August of the year.

The May, 2016 local election had officially proclaimed a new local chief executive.
Below is a list of the elective officials of the municipality.

Name of Official Designation

Vicente A. Loot Mayor
Gilbert M. Arrabis, Jr. Vice-Mayor
Ever Ali B. Abucay Councilor
Chona R. De Leon Councilor
Renato R. Te Councilor
Emmanuel C. Benatiro Councilor
Bernardito A. Luche, Jr. Councilor
Renillo P. Gullem Councilor
Samuel P. Moralde Councilor
Maria Bregidorietta M. Tancwan Councilor
Rex M. Novabos Councilor

For the year 2017, the municipality had received funds from various national and local
government agencies to address the developmental, economic and social needs of the
people. Some of the implemented projects are as follows:

Program/Project Location Utilization

Construction of Evacuation Center Brgy Pajo, Daanbantayan P3,973,076.41
Construction of Faculty Room Tapilon Central School, 1,321,664.52
Tapilon
Construction of Library Daanbantayan National 1,309,451.02
High School, Poblacion
Construction of Multi-Purpose Building (P-1) Calape 1,500,000.00
Construction of Multi-Purpose 1,630,946.12
Hall/Ecumenical Chapel Bitoon
Concreting of Road Bitoon 1,120,000.00
Construction of Tourism Information Center RORO Port, Maya 1,454,812.49

During the year, the Municipality realized a total income of P189,170,231.71 compared
to last year’s income of P160,030,676.08. There is an increase of P29,139,555.63 or

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15.40. The current appropriations in the general fund as approved is P205,353,353.90
compared to last year’s P196,908,250.46, or an increase of P8,445,103.44 or 4.11%.

On the other hand, Surplus/(Deficit) for the period (figures from statement of Financial
Performance) amounted to P49,544,429.41, showing an increase of P15,649,173.34 or
31.58% compared to last year’s surplus of P33,895,256.07. They are broken down as
follows:

200,000,000.00

180,000,000.00

160,000,000.00

140,000,000.00

120,000,000.00
in pesos

100,000,000.00

80,000,000.00

60,000,000.00

40,000,000.00

20,000,000.00

0.00
2017 2016
Income 189,170,231.71 160,030,676.08
Expenses 161,526,501.32 127,822,819.41
Subsidy 21,900,699.02 1,687,399.40
Surplus/(Deficit) from Current Operation 49,544,429.41 33,895,256.07

Expenses totaling P161,526,501.32 had increased by P33,703,681.91 or 20.86% as

compared to last year’s P127,822,819.41. The Transfer, Assistance and Subsidy from
totaling P24,257,844.89 had increased by P5,846,950.97 or 19,42% in comparison to last
year’s P30,104,835.86. Also Transfer, Assistance and Subsidy to totaling P2,357,185.87
had decreased by P24,793,127.62 or 91.31% in comparison to last year’s P27,357,185.87.

Comparison of the Municipality’s assets, liabilities and equity between 2017 and 2016
balances show the following:

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 Municipality of Daanbantayan
Assets, Liablities & Equity
500,000,000.00
450,000,000.00
400,000,000.00
350,000,000.00
IN PESOS

300,000,000.00
250,000,000.00
200,000,000.00
150,000,000.00
100,000,000.00
50,000,000.00
0.00
2017 2016
ASSETS 450,814,643.03 362,684,557.75
LIABILITIES 95,024,826.49 72,705,231.18
EQUITY 355,789,816.54 289,979,326.57

SCOPE OF AUDIT

The audit covered the operations of the Municipality of Daanbantayan for the year ended
December 31, 2017. The objectives of the audit were to ascertain the fairness of
presentation and reliability of the Municipality’s financial position and results of
operations, to determine whether the programs, projects and activities for the year were
attained in an efficient, economical and effective manner. We also conducted compliance
audit to check the validity and propriety of the transactions and adherence to pertinent
laws, rules and regulations. Our audit included examining on a test basis the
completeness of the documents supporting the disbursements, legality and validity of
claims against government funds, interview with concerned local government officials
and evaluating the presentation of the financial statements.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements since the validity, existence and correctness of Property, Plant & Equipment
accounts amounting to P178,918,623.11 could not be ascertained due to the non-
reconciliation of records between the General Services Office and the Accounting Office
and the non-submission of a report on the physical inventory of the agency’s assets.
Inadequacy of the records did not permit us to apply adequate alternative audit
procedures.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

The following are the summary of significant observations and recommendations in the
audit and/or evaluation of the operations of the Municipality for the year 2017. These and
other audit observations are fully discussed in Part II of this report.

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1. The Treasurer did not deposit intact all her collections turned over to her by the
Collectors/Liquidating Officer with the authorized depository bank daily or not later
than the next banking day contrary to Section 28 of COA Circular No. 92-382
resulting to the accumulation of big balances of the Cash on Hand thereby exposing
the funds to misappropriation and theft if not deposited.

We recommend that all collections should be remitted and deposited intact with the
Government Depository Bank.

We also recommend to strictly comply with the provisions of COA Circular No. 92-
382 to prevent the accumulation of big balances of the Cash on Hand thereby
exposing the funds to misappropriation and theft if not deposited.

2. Disbursements totaling P164,416.75 were made out of the collections in the Trust
Fund that should have been part of the unappropriated surplus in the General Fund
and subject to budget contrary to Sections 4, 65 and 66 of P.D. 1445.

We recommend that management submit authority to collect and set aside the
enumerated collections otherwise the amount of P465,383.83 be transferred to the
General Fund and form part unappropriated surplus of the municipality.

We also recommend that expenditures should be in accordance with the fundamental

principles of disbursements as enumerated in Section 4 of P.D. 1445.

3. Cash collected in the Trust Fund representing market stalls and office space rentals
totaling P783,347.15 as of August 31, 2017 were recorded as Guaranty/Security
Deposits Payable instead of Customers’ Deposits.

We recommend that a journal entry voucher be prepared to adjust and correct the
erroneous entry made in accordance with the Revised Chart of Accounts.

4. Financial Assistance from the National Government Unit for specific projects
totaling P50,316,465.00 had remained unimplemented during the year 2017 thereby
depriving the intended beneficiaries of the benefits that could have been derived from
the completed projects.

We recommend that the projects outlined from funds of various national government
agencies be fully implemented so that the intended beneficiaries be able to utilize the
project and it’s purpose and objective be attained.

5. Payrolls totaling P719,983.00 for projects outlined in the budget for the 20%
Development Fund were charged to the Maintenance and Other Operating Expenses
and not capitalized contrary to the provisions of DILG-DBM Joint Circular No.
2017-1. Also the chief executive failed to optimally utilize the 20% Development
Fund totaling P86,469,806.60 (P34,104,569.40-current & P52,365,237.20-

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 continuing) of which only P18,198,001.79 or 21.04% was expended, deprived the
beneficiaries of the socio-economic development and environmental benefits that
could have been derived from the completed projects.

We recommend that all projects to be funded out of the Fund should contribute to the
attainment of desirable socio-economic development and environmental
management outcomes and shall partake the nature of investment or capital
expenditures.

We also recommend that the chief executive ensure the optimal utilization of the
20% Development Fund to be able to achieve the desirable outcomes for which the
fund was created and to implement the sanctions provided in DILG-DBM Joint
Memorandum provisions of Joint Circular 1-11 for the programming of development
projects.

6. A number of job order workers were distributed to the different offices of the
Municipality and charged to the General Services (Environment/Sanitary Services;
Janitorial Services; Security Services and Other General Services) totaling
P20,419,920.29 representing 22.22% of the total MOOE contrary to the limitations
set in the hiring of job order workers in CSC-COA-DBM Joint Circular No.1, 2.
2017.

We recommend that the hiring of the job order workers be limited to emergency or
intermittent work and should not, in any case, be made to perform functions which
are part of the job description of the agency’s existing regular employees.

We also recommend that CSC-COA-DBM Joint Circular No.1, 2. 2017 be strictly

followed specially the transitory provisions otherwise the sanction provided therein
shall be meted.

7. Irregular balances and charges in the Trust Fund such as Time Deposit amounting to
P1,743,987.47, interest income earned from two bank accounts totaling P83,382.28
and bank surcharges paid for the maintenance of bank balance below the required
amount totaling P390.04 is contrary to Section 3 of P.D. 1445.

We recommend that authority for the municipality to open a Time Deposit Account
be submitted otherwise the amount of P1,743,987.47 be returned to the source were it
was taken.

We also recommend that the accumulated interest income existing in the Trust Fund
be transferred to the General Fund and be available for budget.

We further recommend that funds received in the Trust Fund should always be made
available for the purpose it was received.

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8. Absence of the plan, policy and 1% of the IRA as the Budget Allocation and the
quarterly regular and special meetings had prevented the full operation and
functionality of the Local Council for the Protection of Children (LCPC) as
mandated in DILG Memoranda Circular Nos. 2012-120 and 2008-126 pursuant to
Republic Act No. 9344.

We recommend that the Municipality set aside 1% of the IRA in the Annual Budget
for the strengthening of the LCPC. Also plans and policies should be formulated on
child survival, development protection and participation. Meetings should regularly
be conducted duly supported with the Minutes of the Meeting.

We further recommend for the strict compliance to the mandate of Memoranda

Circular Nos. 2012-120 and 2008-126 for the full functionality of the LCPC.

9. The open dumpsite for solid waste was not totally closed but was still used by the
municipality while awaiting for the acquisition of a lot for the site of the sanitary
landfill contrary to the provisions of RA 9003 or the Ecological Solid Waste
Management Act of 2000 dated January 26, 2001.

We recommend that the municipality should comply with all applicable rules and
regulations of Republic Act No.9003 or the Ecological Solid Waste Management Act
of 2000 to ensure protection of public health and environment by closing the open
dump sites and operating a sanitary landfill.

We also recommend that the municipality should prioritize expenses in the Solid
Waste Management plan to ensure the efficient management of solid waste generated
within its jurisdiction thus putting an end to the continued existence of open dump
sites.

UNSETTLED SUSPENSIONS, DISALLOWANCES AND CHARGES

Beg. Balance Issuance Settlement Balance

Notice of 1/1/2017 Jan.-Dec., 2017 Jan.-Dec., 2017 12/31/2017
Suspension -0- -0- -0- -0-
Disallowance -0- -0- -0- -0-
Charge -0- -0- -0- -0-
Total -0- -0- -0- -0-

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ UNIMPLEMENTED

AUDIT RECOMMENDATIONS

Of the thirteen (13) audit recommendations embodied in the 2016 Annual Audit Report,
three (3) were fully implemented, five (5) were partially implemented, and five (5) were
not implemented.

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