EXECUTIVE SUMMARY

A. Introduction

The Municipality of Mayantoc is situated in the westernmost part of Tarlac

Province and consists of 24 barangays with a total land area of 31,142 hectares, of which
65 percent is classified as forest lands while the rest are alienable and disposable lands and
rivers and creeks. It is bounded on the west by the Zambales Mountain Ranges, on the
south by the Municipality of San Jose, on the north by the towns of San Clemente and
Camiling, and on the west by Sta. Ignacia.

The municipality was previously a barangay of Camiling and was inaugurated as a

separate town through the promulgation of Executive Order No. 96 on December 1916
creating Mayantoc as the 16th town of Tarlac and was formally inaugurated on January 1,
1917.

B. Financial highlights

The following comparative data show the financial condition and results of
operations of the Municipality of Mayantoc for the calendar years 2022 and 2021.

% of
Increase
Particulars 2022 2021 Increase
(Decrease)
(Decrease)
Financial Position
Assets ₱ 467,064,662.30 ₱ 377,338,134.87 ₱89,726,527.43 23.78%
Liabilities 97,137,025.18 49,581,418.33 47,555,606.85 95.91%
Net Assets/Equity ₱ 369,927,637.12 ₱ 327,756,716.54 ₱42,170,920.58 12.87%

Results of Operations
Income ₱ 239,221,290.14 ₱ 181,163,831.69 ₱58,057,458.45 32.05%
Expense 202,803,753.14 159,121,078.29 43,682,674.85 27.45%
Surplus (Deficit) ₱ 36,417,537.00 ₱ 22,042,753.40 ₱14,374,783.60 65.21%

C. Scope of audit

The audit covered the financial transactions and operations of the Municipality of
Mayantoc for the year ended December 31, 2022. The objectives of the audit were to (a)
ascertain the level of assurance that may be placed on management’s assertions on the
financial statements; (b) determine compliance of management with laws, rules and
regulations on the pre-identified audit thrusts/areas and recommend agency improvement
opportunities thereon; and (c) determine the extent of implementation of prior year’s audit
recommendations.

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 Specifically, the audit focused on the thrust areas for CY 2022 pursuant to COA
Memorandum dated September 14, 2022 of the COA Local Government Sector Assistant
Commissioner, exceptions of which are reported on Part II of this Report.

D. Independent auditor’s report on the Financial Statements

As discussed in Part II of this report, we rendered a qualified opinion on the fairness

of presentation of the financial statements of the Municipality because of the significant
accounting errors and deficiencies noted as follows: (a) unrecorded unexpired Prepaid
Insurance - ₱206,268.79 and erroneous charges to Insurance Expense – ₱218,292.18; (b)
Unreliable balances of Real Property Tax (RPT) and Special Education Tax
(SET)Receivables - ₱780,005.85 and ₱780,655.81; (c) unaccounted and undocumented
receivables – ₱39,500.00; (d) unreliable account balances of PPE and inventories in the
amount of ₱377,609,191.60 and ₱517,174.44, respectively, as there was no sufficient
appropriate audit evidence available about the composition of the said balances; and (e)
various accounting errors and/or omissions in the amount of ₱4,580,761.87 due to
misclassification of proper expense accounts.

For the deficiencies cited above, the audit recommendations are as follows:

a) For the unrecorded unexpired Prepaid Insurance and erroneous charges to

Insurance Expense, we recommended that the Accounting Office: (i) make the necessary
adjusting entries for the prepayments amounting to ₱206,268.79, with the corresponding
adjustment to Insurance Expense/ Accumulated Surplus/(Deficit) account; (ii) remove
from the Insurance Expense the erroneous charges of ₱218,292.18 and record them instead
to Taxes, Duties, and Licenses and Other MOOE; and (iii) observe the proper accounting
treatment for prepayments by making adjustments at the end of accounting period to
recognize the unexpired portion of every prepayment;

b) For the unreliable balances of Real Property Tax (RPT) and Special Education Tax
(SET)Receivables, we recommended to instruct the (a) Municipal Treasurer to (i) furnish
the Municipal Accountant an updated RPTAR/ Taxpayer’s index card every beginning of
the year for recording purposes; (ii) intensify and strategize tax collection efforts to include
deployment of demand letters, posting of notice of delinquency in conspicuous places and
tapping the assistance of the barangay officials for tax campaign to reach out to a larger
area; and (b) Municipal Accountant to establish RPT and SET receivables based on the list
duly certified by the Treasury Office at the beginning of the year;

c) For the unaccounted and undocumented receivables, we recommended to enjoin

the Municipal Accountant to continue to (i) exhaust all remedies to gather the supporting
documents needed for the receivables noted; (ii) recognize only the final and executory
audit disallowances and charged in the account, Receivables – Disallowances/Charges; (iii)
update the records on the account Receivables – Disallowances/Charges and reconcile with
the Audit Team’s records in order to make the necessary adjustment in the Agency’s books;
(iv) continue identifying the reconciling items between the reciprocal accounts Due from/to

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Other Funds and effect the adjustments in the accounting records, as necessary; and (v)
improve the monitoring of these reciprocal accounts by ensuring that entries made/posted
from one account have a corresponding counterpart entries to the other;

d) For the unreliable account balances of PPE and inventories, we recommended to

require the Accounting Office and the Property Officer/Municipal Treasurer, as the case
may be, to: i) create an Inventory Committee and conduct a complete annual physical count
of PPEs and Inventories to come up with the RPCPPE and RPCI with its related
reconciliation as required by Section 124 of MNGAS for LGUs; ii) maintain the
Supplies/Property Ledger Cards and SCs/PCs, respectively, for all LGU properties; and iii)
observe the periodic reconciliation of the two records to properly monitor agency assets;
and

e) For various accounting errors and/or omissions, we recommended to instruct the

(a) Municipal Accountant to (i) prepare the corresponding adjusting entries to reflect the
correct balance of the affected accounts; (ii) record transactions based on its
nature/substance and according to the definition of accounts under the RCALGU; and (b)
Municipal Budget Officer to further classify/break-down each Special Purpose
Appropriation into different accounts based on the nature of the goods/services to be
procured for each program, project and activity (PPA).

E. Summary of Other Significant Observations and Recommendations

Summarized below are the other significant audit observations noted during the
audit and the corresponding recommendations which are discussed in detail in Part II of
this Report.

1. Procurement of inventory supplies worth ₱14,276,611.55 for CY 2022 was

recorded as an outright expense, contrary to Section 114 of the MNGAS for LGUs.
(Observation No. 5)

We recommended that the LCE instruct the Accounting Office to immediately stop the
erroneous practice of recognizing outright expense for inventory items procured by the
agency and use the appropriate inventory account in recording said stocks, subject to
adjustment at year-end should physical stock take showed inventories on hand.

2. Subsidiary ledgers (SLs) for the payable accounts were not maintained, contrary to
Sections 112 and 114 of P.D. No. 1445, thus, the accuracy and reliability of the payable
accounts of the Municipality as of December 31, 2022 cannot be ascertained. Moreover,
dormant and unsettled liabilities aged more than two years with no actual claims were not
requested for write-off nor reverted to the Accumulated Surplus/(Deficit), respectively,
contrary to Commission on Audit (COA)-Department of Budget and Management (DBM)
Joint Circular (JC) No. 1, s. 2021 and COA Circular No. 2016-005. (Observation No. 6)

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We recommended that the LCE enjoin the Municipal Accountant to (i) prepare and
maintain SLs per creditor as necessary to support the balances presented in the GL and FS;
and (ii) exhaust all remedies to gather the details and supporting documents needed for the
identification of the amounts of dormant and long-outstanding payables to facilitate the
reversion and/or write-off of such in accordance with the provisions of COA-DBM JC No.
1, s. 2021 and COA Circular No. 2016-005.

3. Not all programmed deliverables/output of the Municipality of Mayantoc from its

20% Local Development Fund (LDF) for CY 2022 were accomplished. The Municipality
only registered a financial utilization rate of 36.74% or ₱16,533,020.46 of the appropriated
budget of ₱45,000,000.00 for the economic development fund in CY 2022. The fund
utilization was attributed to the Construction of two Barangay covered courts and the
procurement of two brand-new dump trucks. (Observation No. 8)

We recommended that the LCE direct the Municipal Planning and Development Office
(MPDO) and other related offices to i) ensure that planned programs and activities which
are identified as priorities are implemented by having fallback/contingency plans so as not
to derail/defer related programs and activities; ii) conduct adequate monitoring of projects
so as to ensure timely bidding of projects and implementation thereof, thus, improving the
DF utilization; and iii) henceforth, maximize the utilization of the 20 percent DF by fully
implementing priority development projects identified pursuant to DBM-DOF-DILG JMC
No. 1 dated November 4, 2020.

4. From the observations in the previous years, we reiterated the procurement process
deficiencies and errors on submitted forms in the bidding process for projects funded by
the 20% DF in areas affecting the following: (i) absence of the duly signed Approved
Budget for the Contract (ABC) as required by Department of Public Works and Highways
(DPWH) Department Order (D.O.) No. 197 series of 2016; (ii) preparation of post-
qualification evaluation reports; (iii) posting of performance bond and warranty security;
(iii) preparation of net financial contracting capacity (NFCC) of bidders and statement of
all ongoing projects; and (iv) documentation requirements, contrary to R.A. No. 9184 of
the Government Procurement Act and its Revised implementing rules and regulations
(IRR). Furthermore, limited information was observed in the project signboards posted on
site of the ongoing/completed projects, contrary to the requirement in COA Circular No.
2013-004 dated January 30, 2013. (Observation No. 9)

We recommended that the LCE require the (a) BAC and TWG to submit the lacking
documents as enumerated; (b) Engineering Office to (i) prepare the ABC in standard form
in accordance with DPWH D.O. No. 197 series of 2016; (ii) demand from the contractors
Warranty Security before issuance of Certificate of Final Acceptance; (iii) ensure that
project contractors observe the proper size and details to be provided on project signboards
including the update thereof to reflect the actual project status in accordance with COA
Circular No. 2013-004 dated January 30, 2013 and; (c) Accounting Office to check and
ensure the completeness of documents before effecting payment.

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5. The Municipality remained incompliant with the proper planning, accounting, and
reporting of Local Disaster Risk Reduction and Management Fund (LDRRMF) as required
under COA Circular Nos. 2012-002, 2014-002 dated September 12, 2012 and April 15,
2014, respectively and National Disaster Risk Reduction and Management Council
(NDRRMC)-DBM-DILG JMC No. 2013-1 dated March 25, 2013, which gave rise to the
following deficiencies noted during the course of audit: (a) failure to prepare a
comprehensive LDRRMF Investment Plan (LDRRMFIP); (b) improper recording,
inventory and monitoring of procured relief goods and DRRM supplies; and (c) non-
inclusion of the required minimum disclosure in the NFS, thus, exhibited insufficient
planning, monitoring, evaluation, and information dissemination on fund utilization.
(Observation No. 10)

We recommended that the LCE instruct the: a) LDRRM Officer to prepare LDRRMFIP
annually in its prescribed format which includes specific PPAs funded from LDRRMF; b)
Municipal Accountant to (i) make necessary corrections/adjustments in affected inventory
and expense accounts; (ii) observe the perpetual method in recognizing inventory and avoid
recording outright expense when accounting for relief goods and DRRM supplies; and (iii)
discuss and present the minimum required disclosure in the NFS as specified in COA
Circular No. 2014-002; c) MBO to maintain separate RAAO for DRRMF; and d) Supply
Officer, in coordination with concerned offices, to maintain Stock Cards and prepare and
submit the SSMI and Inventory List of Items for DRRM to the Municipal Accountant for
recording and adjusting related expense and inventory accounts.

6. Consistent with that of last year, the strategies and activities included in the LGU’s
10-year Solid Waste Management (SWM) Plan were not religiously performed due to (a)
partially implemented Annual Work and Financial Plan; (b) unaligned Annual SWM
Budget with SWMP; (c) lack of Barangay Coordination - Improperly segregated wastes at
source and Material Recovery Facility (MRF); and (d) operation of MRF not maximized.
Under these circumstances, the expected results/targets of the LGU for solid waste
diversion and volume reduction cannot be determined. (Observation No. 11)

We recommended that the LCE (a) direct the MSWMB to (i) review every two years or as
the need arises, the SWMP for the purpose of ensuring its sustainability, viability, and
effectiveness; (ii) prepare an Annual Work Plan and Budget showing the SWM activities
to be implemented and the financial counterpart for each SWM activity, taking into
consideration the initiatives identified in the 10-year SWM Plan; and (iii) continue to
improve the work of the monitoring and evaluation team and require them to prepare
Progress Reports in line with the Annual Work Plan and the SWMP; (b) consider
reinforcing the MENRO to carve out more progress in the implementation of SWMP; and
(c) require the cooperation of the Barangays in the implementation of Solid Waste
Management particularly the establishment of functional MRF and campaign for proper
waste segregation.

7. The Gender and Development (GAD) Fund requirement was satisfactorily met by
the Municipality, allocating ₱20,527,000.96 or 8.58% of the Agency’s budget for GAD
PPAs in CY 2022. Further, the Municipality mounted 88.89% utilization rate from the

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budgeted fund for GAD as reported in its GAD Accomplishment Report (AR). On the other
hand, the entity-wide GAD mechanism and processes that need to be installed and
enhanced were not observed, thus, the following issues still persisted: (a) no sex-
disaggregation of data provided in the GAD Plan and Budget (GPB) and AR; and (b) non-
execution of the prescribed assessment tools such as the Gender-Responsive LGU (GeRL)
and/or Harmonized Gender and Development Guidelines (HGDG) in conducting gender
analysis of PPAs. (Observation No. 12)

We recommended and the LCE agreed to (a) continue to capacitate the GFPS and
concerned officials with the mechanisms and processes in mainstreaming GAD
perspective in the LGU through trainings, conferences, symposia administered by the
PCW, DILG, or other NGAs directly involved in GAD concerns; (b) direct the GFPS to (i)
continuously update the GAD database; (ii) enhance the GPB and AR by completely filling
out the data on sex-disaggregation pursuant to MCW, as necessary; and (iii) equip
themselves with the GeRL/HGDG tool and PIMME to determine how much of the
Agency’s actual disbursements for implementing its major programs can be attributed to
GAD.

8. The Municipality received funding from various NGAs for the implementation of
four program and projects. All of these were fully implemented; however, the procured
Rice for families affected by COVID-19 funded by the Office of the President (OP) under
the Socio-Civic Project Fund of the National Government was not fully distributed. The
undistributed cavans of rice were kept in an unsecured place and exposed to dirt, rodents,
insects, and pilferage. Moreover, lapses/deficiencies in the documentation and
procurement procedures in the bidding process of implemented projects were noted,
contrary to R.A. No. 9184. (Observation No. 13)

We recommended that the LCE direct the a) Officers and employees in charge of the
implementation of projects funded by other agencies to (i) continue the timely
implementation of projects based on the terms and conditions of the SAs to ensure the
efficient delivery of public service to the intended beneficiaries; (ii) provide full accounting
on the procured 2,100 cavans of rice including the list and quantity received per beneficiary
during the distribution; (iii) secure the remaining packs of rice to safeguard the stocks
against spoilage and pilferage; and b) Municipal Accountant and Budget Officer to (i)
maintain the good practice of prompt liquidation of fund transfers including the immediate
refund of unutilized balance of the said funds; and (ii) update the records of all fund
transfers from different agencies for proper monitoring and to establish the reliability of
the year-end balance of the accounts.

9. The officials and employees of the Municipality, including the members of the
Sangguniang Bayan (SB), were granted a total of ₱935,709.71 for
telephone/communication expenses in CY 2022 without approved formal guidelines and
criteria on the provision thereof. Further, the amount spent per month for each claimant,
which ranges from ₱799.00 to ₱5,998.00, was not accompanied by sufficient supporting
documents, making the said transactions unauthorized and/or excessive, which is not in

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consonance with COA Circular No. 2012-001 dated January 30, 2013, COA Circular No.
2012-003 and Section 2 of P.D. No. 1445. (Observation No. 14)

We recommended that the LCE (a) in coordination with the Sanggunian Bayan, (i) formally
constitute clear guidelines and criteria concerning the provision of reasonable
communication expenses to qualified officials and employees by providing qualifications
on who is entitled to claim, setting a limit on the allowable monthly communication
expenses to be claimed; (ii) consider extending the communication expense to
Department/Section Heads; and (iii) provide provision on the ownership of mobile units in
favor of the LGU on post-paid plans. For the expense cap, the limit should be carefully
reviewed and should be based on all available plans offered by the telecommunication
companies choosing the most economical and efficient plan. The table presentation in the
discussion paragraph may be used as a reference; and (b) direct the concerned officials to
(i) provide certifications that all NDD, National Operated Assisted Calls and International
Operated Calls are official calls by the qualified officials/employees; and (ii) submit
Invoice/ Official Receipt or machine-validated statement of account.

10. For CY 2022, the Municipality of Mayantoc spent a total of ₱13,660,040.39 for
Fuel due to unsuppressed issuance of gas slips despite an inexplicable daily consumption
of fuel per vehicle, trip tickets with no specific purpose and destination, no details as to the
odometer of vehicle before and after the trip, rubber stamped approval from authorized
personnel and no Monthly Report of Fuel Consumption of government motor
transportation. These are all contrary to the Manual on Audit for Fuel Consumption of
Government Motor Vehicles, thus the reasonableness and validity of the gasoline
consumed could not be ascertained. (Observation No. 15)

We recommended that the LCE enjoin the (a) approving officers of gas/vale slips to (i)
strictly monitor the issuance of trip tickets and that trip tickets should provide details as to
the odometer, estimated gas before refueling and remained in the fuel tank after the
intended trip in compliance with the provisions of COA Circular No. 77-61 including the
Summary of Monthly Report of Official Travels before effecting payments; and (ii) submit
the lacking documents as mentioned in this report; and (b) Property Officer to (i) explain
why multiple vale slips with consecutive numbers were issued on a single vehicle in a
single day; and (ii) provide concrete and relevant information why these transactions
should not be disallowed in audit.

11. Majority of the Municipality’s insurable properties were not insured, thus exposed
the Municipality to the risk of indemnification loss arising from sustained damages due to
occurrence of fortuitous events such as natural calamities. (Observation No. 16)

We recommended that the LCE direct the concerned agency officials to allocate budget for
insurance policies covering all insurable properties of the Municipality and to secure said
policies from the GSIS or other reputable insurance companies so that the agency is
protected and indemnified should calamities arise.

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F. Summary of Total Suspension, Disallowances and Charges as of December
31, 2022

Suspensions, disallowances, and charges as of December 31, 2022 stood at ₱0.00,

₱23,082,730.15, and ₱0.00, respectively.

G. Status of Implementation of Prior Year’s Unimplemented Audit

Recommendations

Evaluation of the extent of implementation by management of audit

recommendations contained in the 2021 Annual Audit Report disclosed that of the 74 audit
recommendations, 28 were implemented, 23 were partially implemented, and 23 were not
implemented.

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