EXECUTIVE SUMMARY

A. Introduction
The Municipality of Nabas, Aklan located along the winding coastline and about 12
kilometers away to Boracay Island, a world premier tourist destination, is a 4th class
municipality with a total land area of 9,862 hectares. It has a population of 25,014 as per
local census having 4,761 numbers of households with 4.87 as an average number of
persons per household.

A financial and compliance audit were conducted on the accounts and operations of the
Municipality of Nabas for CY 2019.

Last March 16, 2020, the whole country was put into Enhanced Community Quarantine
(ECQ) as recognized in Proclamation No. 929 dated March 16, 2020 declaring a State of
Calamity throughout the Philippines due to Corona Virus Disease 2019 (COVID 19). Amidst
the pandemic, COA Memoranda dated March 17,2020 and April 26, 2020 declared the
suspension of work at COA Auditing Units among others until May 16, 2020. Then, COA
Memorandum dated May 15, 2020 issued the adoption of Alternative Work Arrangement
and other precautionary measures in light of COVID 19 outbreaks. Due to limited time and
health protocols to be observed for the safety of the audit team, and the unavailability of
some documents and records to the audit team, the audit team was not able to apply or in
some cases with limitation in the application of audit procedures such as inspection of the
Municipal’s programs and projects, interviews of concerned government officials and
employees, verification or records, and such other procedures considered necessary under
the circumstances.

B. Financial Highlights

B.1.Comparative Financial Position

The Municipality’s assets, liabilities and government equity as of December 31, 2019 were
₱326.598 million, ₱84.304million and ₱242.294million, respectively.It were correspondingly
increased by24.06, 76.20 and 12.48percent,respectively over that of last year’s.

Percent of
2019 2018 Inc.(Dec.)
change
Assets ₱326,597,633.93 ₱ 263,257,022.61 ₱63,340,611.32 24.06%
Liabilities 84,303,956.39 47,844,909.90 36,459,046.49 76.20%
Gov’t. Equity 242,293,677.54 215,412,112.71 26,881,564.83 12.48%

B.2. Sources and Application of Funds

For the year 2019, the Municipality collected P137.319 million which is 10.77
percenthigherthan that of last year’s income of ₱123.967million. Such collection is higher
than the estimated income of ₱136.134 million by ₱1.185 million.

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Revenue: 2019 2018 Inc.(Dec.) Percent
of change
General Fund ₱ 131,134,533.59 ₱ 118,438,696.67 ₱12,695,836.92 10.72%
Special Educ.
11.87%
6,184,575.78 5,528,354.22 656,221.56
Total ₱ 137,319,109.37 ₱ 123,967,050.89 ₱13,352,058.48 10.77%

During the year, the municipality’s total expenditures is ₱110.665 million which is 8.35
percent higher than of last year’s.

Expenses: 2019 2018 Inc.(Dec.) Percent of

change
General Fund ₱107,703,382.31 ₱ 99,995,012.33 ₱7,708,369.98 7.71%
Special Edu. 2,961,664.03 2,138,489.70 823,174.33 38.49%
Total ₱110,665,046.34 ₱102,133,502.03 ₱8,531,544.31 8.35%

B.3. Comparative Presentation of Appropriations/Allotments/Obligations

For Calendar Year 2019, the municipality had a total appropriations of ₱134.633 million of
which ₱115.075 million was obligated leaving an unexpended balance of ₱19.557 million.
As discussed in Part II of this report, the Municipality incurred an overdraft in appropriation
in Personal Services and Financial Expenses amounting to ₱3.240 million and ₱14,400.00,
respectively.

Expenditure Class Appropriation Obligations Unexpended

Balance
Personal Services
₱57,185,567.71 ₱57,425,410.56 ₱(3,239,842.85)
Maintenance and Other
Operating Expenses 53,154,974.26 50,413,571.75 2.741,402.51
Financial Expenses 14,400.00 (14,400.00)
Capital Outlay 27,292,522.34 7,222,086.89 20,070,435.45
Total ₱134,633,064.31 ₱115,075,469.20 ₱19,557,595.11

C. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a modified opinion on the fairness of presentation of the financial
statements of the Municipality for the year 2019, due to the deficiencies enumerated below:

1. The existence, validity, accuracy and condition of the Property, Plant and Equipment
(PPE) amounting to ₱79.021 million could not be ascertained since the agency was not
able to conduct physical inventory taking nor the Report on the Physical Count of
Property, Plant and Equipment (RPCPPE) was prepared and submitted.

2. Four Ambulances donated by the Philippine Charity Sweepstakes, PetroWind Energy,

Inc., and San Miguel Corporations to the Municipality were not recorded in the books of
accounts of the Municipality.

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3. Year-end balances of Real Property Tax (RPT) and Special Education Tax (SET)
Receivables were overstated by ₱9.316 million and ₱13.343 million, respectively.

4. Income amounting to ₱2.556 million accruing to the Special Education Fund (SEF) was
deposited in the General Fund (GF) bank depository account, thus, resulted to a cash
overdraft/deficit in Cash in Local Treasury account - GF and overstatement of Cash in
Local Treasury account in SEF.

5. Due from Other Funds and Due to Other Funds with balance of ₱19.136 million and
₱8.608 million, respectively, or a difference of ₱10.528 million were not reconciled nor a
subsidiary ledgers were maintained.
6. Depreciable Property, Plant and Equipment (PPE) amounting to ₱12.920 million were
not provided with depreciation.
7. Advances for Payroll and for Officers and Employees amounting to ₱351,597.22 and
₱127,582.00, respectivelyremained unliquidated at the end of the year.
8. Stale checks totaled ₱459,664.80 were not canceled that understated both Cash in
Bank, LCCA and Accounts Payable accounts

D. Significant Observations and Recommendations

In addition to the above, the following are our significant observations and recommendations
in the audit/or observations of the operations of the Municipality of Nabas for the year 2019.
These and other audit observations are fully discussed in Part II of this report:

1. Control measures in the use of government vehicles and issuances of fuel were not
strictly imposed, thus, exposing the Municipality to risk of losses due to misuse of
vehicles and fuel consumption.

a. Trip tickets and Monthly Report of Official Travels used by the agency are not in
consonance with the required forms provided in the Manual.

b. Requisition and Issue Voucher (RIV)/ Purchase Request (PR) were not prepared by
the requesting official before procuring gasoline and oil.

c. Monthly Reports of Fuel Consumption prepared by the agency were not in

accordance with the form required by the Manual.

d. Evaluation on the reasonableness of the rate of fuel consumption exceeded the 10

percent prescribed tolerable allowance in the total of 12,251 liters.

We recommended that management strictly follow the Manual on Audit for Fuel
Consumption of Government Motor Vehicles prescribed under COA Circular No. 77-61
dated September 26, 1977, as amended by COA Circular No. 92-61A dated April 2,
1992, as follows:

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 a. Require all drivers to prepare a Driver’s Trip Ticket with all information required
properly supplied and a Monthly Report of Official Travels for each vehicle by
summarizing in chronological order of his trips for the month. Trip Tickets must be
duly signed by the authorized passenger/s after each trip;

b. See to it that requisitioning officer must accomplished and duly approved RIV or
equivalent (PR) as the basis of procuring gasoline and oil from a gasoline service
station;

c. Prepare and submit a monthly fuel consumption report showing among others, the
different types of motor vehicles utilized by the agency during the month, total
distance traveled, total fuel used and the normal fuel consumption for each vehicle,
pursuant to COA Circulars 75-6 dated November 7, 1975 and 77-61 dated
September 26, 1977.

d. Investigate responsible officials that cause excessive procurement of gasoline based

on Normal Travel, 4-5 km per liter as per COA Memo No. 76-23 and if unjustified
shall be disallowed in audit.

2. Municipal Treasurer did not enforced collections on Service/Rent income for the use of
Municipal Ambulance depriving the agency of gaining an additional income of
₱211,100.00
We recommended to enforce collection of Rental and Service fee for the use of
Municipal Ambulance as required in the Municipal Tax Ordinance No 2009-01 of the
Municipality.
3. Honoraria paid to chair and members of the Bids and Awards Committee (BAC) and the
Technical Working Group (TWG) exceeded the total collection from the sale of bid
documents and other fees, hence, resulted to a negative balance in the Accounts
Payable account in the amount of ₱77,880.00.

We recommended that the Management require the Municipal Accountant to see to it

that honoraria paid to BAC and the TWG must not exceed to the total proceeds collected
from sale of bid documents and other fees as require in DBM Budget Circular No. 2004-
5A. Also, require concerned officials to refund the amount of ₱77,880.00.

4. The management was not able to enforce the settlement of suspended and disallowed
transactions amounting to ₱3.001 million and ₱1.442 million respectively, thus, accounts
that remained unsettled within the required time frame will become disallowance.

We recommendedthe following:

a. Management to strictly enforce settlement by persons’ liable of the suspension within

the prescribed period pursuant to Section 82 of PD 1445;

b. Require persons liable to settle immediately the audit disallowances. Audit

disallowances not appealed within six months from receipt hereof shall become final
and executory as prescribed under Sections 48 and 51 of PD 1445. and

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 c. Municipal Accountant to check the completeness of supporting documents before
signing the DVs and to monitor settlement of NS to avoid accumulation of unsettled
suspensions or disallowances.

5. Low accomplishment rate or P21.070 million various program/projects programmed

under 20 percent Development Fund were not implemented, thus, deprived the
beneficiaries of the benefits they may receive therefrom.

We recommended that the Municipal Engineer implement the programmed projects and
close monitoring be made to make sure that they are implemented within the planned
timeframe.

6. The Municipal Accountant was not able to submit the financial reports for all funds of
the Municipality within the prescribed period thereby, affecting the timely review and
verification of the accounts and correctness of the financial statements.

We recommended that Municipal Accountant exert effort to prepare and submit the
complete and correct financial reports and supporting schedules on time pursuant to
NGAS Manual for LGS.

7. Prior years mandatory and loan deductions from the salaries of employees, government
share and taxes withheld from suppliers were not remitted intact to concerned agencies
as required under Revenue Memorandum Circular No. 23-007 dated March 20, 2007,
Section 6(b) Rule II of RA 8291, RA No. 7742 and Section 20(b) Rule III of RA No. 7875
leaving an unremitted balance of ₱1.839 million in General Fund as of year-end, thus
depriving the government of revenues needed to finance its priorityprojects.
We recommended that Management to remit regularly and within the prescribed period
all the withheld trust funds due to the BIR, GSIS, HDMF and PhilHealth.
8. Procurement of one unit Motor Vehicle amounting to ₱1.985 million charged against the
Municipal Disaster Risk Reduction and Management Fund was used for purposes other
than rescue and response activities, giving doubts to the propriety of disbursement and
usage.

We recommended that the Municipality stop using the vehicle for purposes other than
that required by DILG Memorandum Circular No. 2014-155.

9. The Municipality was not able to submit the monthly Report on Sources and Utilization of
Disaster Risk Reduction and Management Fund (DRRMF), thus, correctness and
validity of the charges to the fund cannot be monitored and verified.
We recommended that the Municipal Accountant submit the above stated report within
the deadline set as required by the above mentioned Circular.
10. Non compliance of the Municipality on the government requirements pertaining to the
implementation of Gender and Development (GAD) project resulted to various
deficiencies, thus, making it difficult to check the appropriateness of the projects,
programs and activities charged to GAD Fund.

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 a. The agency was not able to develop and maintain a Gender and Development
(GAD) database for gender statistics and sex-disaggregation data, thus, planning,
programming and policy formulation of gender issues were not addressed.
We recommended that the agency develop and maintain a Gender and Development
data base for gender statistics and sex-disaggregated data for planning,
programming and policy formulation.

b. The Municipality did not comply with the recommendations of the GAD Provincial
Focal Person on their GAD Plan and Budget, therefore the complete appropriateness
of their identified PPAs could not be ascertained.
We recommended that for the next calendar year’s GPB, the GAD Focal Person
should comply with all the recommendations of the Provincial DILG’s Office to make
sure that the Municipality’s GAD PPAs are completely appropriate and responsive to
the GAD issues of the Municipality.
c. The municipality attributed P3.695 million to the GAD Fund without subjecting the
project to the Harmonized Gender and Development Guidelines (HGDG) test at the
end of project implementation to determine the extent that the targeted HGDG score
is attained.
We recommended that;
1. Management conduct the HGDG test at the end of project implementation and
incorporate the results in determining the percentage of PPA expenditures
attributable to GAD.
2. Make sure that the PPAs identified in the GAD AR are also those identified in the
planning phase or the GPB.

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

As of December 31, 2019, total unsettled suspensions amounted to P4.448million.

Beginning This Period Settlement this Ending

Balance (As (January 1 to Dec. Period(Jan 1 to Balance (As of
Particulars of 12/31/18) 31, 2019) Dec 31, 2019) Dec 31, 2019)
NS/ND/NCNSSDC NS/ND/NCNSSDC
Notice of ₱ 2,354,902.47 ₱2,093,307.00 ₱1,441,624.07 ₱3,006,585.40
Suspension
Notice of 00.00 1,441,624.07 1,441,624.07
Disallowance
Notice of
Charge
Total ₱2,354,902.47 ₱3,534,931.07 ₱1,441,624.07 ₱4,448,209.47

F. Summary on the Quantity/Number of Prior Year’s Audit Recommendations

Of the 40 recommendations embodied in the Annual Audit Report six were implemented,
11 were partially implemented and 23 remained not implemented.

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