EXECUTIVE SUMMARY

Introduction

The Municipality of General Luna, formerly a sitio of Macalelon, Quezon, was

created into a municipality on November 1, 1929 under Executive Order No. 207. It is
located along the coast of Tayabas Bay in the southwestern portion of Quezon Province
and is one of the 12 municipalities covered by Bondoc Peninsula with a total land area of
10,215.5857 hectares subdivided into 27 barangays. It is currently classified as a 4th class
municipality with farming and fishing as the two major economic activities and is
considered one of the food bowls of the Province due to its abundant supply of farm and
fishery products. Its most featured celebration is the Centurion Festival held during the
Lenten Season which has been a tourism attraction.

It maintains General Fund (GF), Special Education Fund (SEF) and Trust Fund
(TF) books.

The Organizational Structure of the Municipality is as follows:

Municipal Mayor - Jose Stevenson M. Sangalang

Municipal Vice Mayor - Jovito P. Red
Members of the
Sangguniang Bayan -
1. Melaica M. Batariano
2. Kristine Chernobyl V. Florido
3. Miguel R. Atienza
4. Miguel R. Salvo
5. Felipe T. Alvarez
6. Mercedita V. Manongsong
7. Manuel A. Abarquez
8. Lani O. Suarez
9. Tomas P. Odiame
Municipal Accountant - Madonna A. Suarez
Municipal Treasurer - Monaliza L. Plata

It was complemented with a total workforce of 124 personnel in 2015, with the
following details:

Elected - 11
Permanent - 62
Job Order - 51
Total 124
Financial Highlights

For Calendar Year (CY) 2015, the Municipality of General Luna generated a total
revenue of P70,171,133 from tax revenue, service and business income, share from
internal revenue collections and other income. The total funds utilized for the year
amounted to P63,474,660 out of the total appropriations of P73,373,457, leaving an
unexpended balance of P9,898,797.

The Municipality’s financial position and results of operations for CY 2015 are
summarized below and shown in detail in the attached audited financial statements.

Assets P 69,823,164
Liabilities 36,390,253
Net Assets/Equity 33,432,911
Income 70,171,133
Expenses 64,064,193

Scope of Audit

Financial and compliance and value for money audits were conducted on the
accounts and operations of the Municipality of General Luna for Calendar Year 2015 to
ascertain the fairness of the presentation of the financial statements and compliance of the
Municipality with laws, rules and regulations as well as the economical, efficient and
effective utilization of resources.

Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
consolidated financial statements of the Municipality of General Luna, Quezon due to
the following:

 The existence and valuation of the Property, Plant and Equipment (PPE) with a net
book value of P12,592,616.03 could not be ascertained due to the failure of the
Municipality to conduct physical inventory during the year as well as to prepare and
maintain property cards and subsidiary ledgers for each category of PPE.

 Five parcels of land recorded in the books at P3,091,310.00, based on acquisition

cost and market value, were not supported with Transfer Certificate of Title.

 The Real Property Tax/Special Education Tax Receivables as of December 31, 2015
of P10,621,520.73 each, or a total of P21,243,041.46 were unreliable due to the
inclusion of collectibles prior to 2002 and penalties for all unpaid property taxes.

 Causes or reasons for changes between the original and final budget and for material
differences between the budget and actual amounts were not disclosed on the face of
the Statement of Comparison of Budget and Actual Amounts (SCBAA) or in the
 notes to the financial statements (FS); and reconciliation of actual amounts per
SCBAA versus the actual amounts in the FS was likewise not disclosed, contrary to
Philippine Public Sector Accounting Standards (PPSAS) No. 24, thereby denying the
users of the financial statements of the chance to identify these variances and to
determine whether the Municipality had operated within its approved budgets for
which it is held publicly accountable.

Significant Observations and Recommendations

For the exceptions cited above, the Auditor recommended to the Municipal Mayor
the following courses of action:

 Require the Inventory Committee to conduct physical inventory of PPEs and prepare
and submit the inventory report within the prescribed period; and

Municipal Accountant and Municipal Treasurer to prepare and maintain complete and
updated PPE Ledger Cards and property cards, respectively, and require them to
reconcile these records regularly.

 Issue an office order designating a responsible person that will locate the copy of
Deed of Donation for the donated cemetery lot and will facilitate the transfer of title
of these five lots in the name of the Municipality to avoid contingent claims that may
arise in the future and in compliance with Section 148 of COA Circular No. 92-386;

Require the Municipal Treasurer to exert all efforts to collect the real property taxes
from the former owners of the four lots so as to transfer their Tax Declaration in the
name of the Municipality; and

Require the Municipal Budget Officer to provide appropriate funding for the said
undertaking.

 Require the Municipal Treasurer to prepare the report on property tax delinquencies
showing separately the collectibles from 2002-2014 and those prior to 2002; and

Require the Municipal Accountant to adjust the books for RPT/SET Receivables
based on the collectibles for 2002-2014 only.

Require the Municipal Treasurer to complete the list of taxpayers with corresponding
tax due from which set up will be based.

 Require the Municipal Accountant to see to it that the Notes to Financial Statements
includes disclosures showing the a) changes in budgets; b) material discrepancies
between the budget and actual amounts; and c) reconciliation of actual amounts per
SCBAA and per financial statements, to enhance the transparency of the
Municipality’s financial statements which will guide the users/readers in making
sound financial decision.
 The following are the other significant audit observations and recommendations
in the audit of the Municipality of General Luna for the year 2015:

1. The Municipal Treasurer did not deposit the municipal collections promptly and
intact, contrary to Section 32 of the Manual on New Government Accounting System,
exposing the funds to possible loss and/or misuse.

We recommended that the Municipal Mayor require the Municipal Treasurer to

strictly adhere with the above-cited regulations to deposit all municipal collections
promptly and intact in order to protect municipal funds against risk of loss and/or
misuse.

2. Immediate and full settlement of the short-term loans (micro-financing benefits) and
the disallowed Representation Allowance and Transportation Allowance (RATA) in
2006-2007, recorded in the Other Receivables account, was not enforced, thus,
unsettled balances of P117,089.68 and P4,861.00, respectively, remained as of year-
end, indicating laxity of concerned municipal officials in recovering the
improperly/illegally applied government funds, hence they might be held liable for
the amount still unrecovered pursuant to Section 342 of the Local Government Code
of 1991 and Section 7.1 of the 2009 Rules and Regulations on the Settlement of
Accounts.

We reiterated our recommendation that the Municipal Mayor require the:

 Municipal Accountant and Municipal Treasurer to implement the immediate

refund of the total amount of P121,950.68, otherwise, deduct it from salary or
from whatever money due the concerned municipal officials/employees. In case
the payees are no longer in the service, we further recommended to require the
Municipal Treasurer, the Municipal Accountant and other municipal officials who
signed their clearance from money accountability to personally pay the
unrecovered amount from these people; and

 Municipal Accountant to correct the account title used in recording the disallowed
RATA from Other Receivables to Receivables-Disallowances/Charges account
for proper and fair presentation of account balances in the financial statements.

3. Fully-depreciated and unserviceable properties totaling P183,734.50 were not

disposed of as required under Section 79 of PD No. 1445 and Section 125, Chapter 7,
Volume I of the Manual, thereby depriving the Municipality of the possible additional
income that can be derived therefrom.

We recommended that the Municipal Mayor instruct the General Services Officer to
prepare and submit the Inventory and Inspection Report of Unserviceable Property
and undertake the necessary action for the disposal of the said properties in
accordance with applicable rules and regulations.
4. The Municipality resorted to piecemeal procurement thru shopping as alternative
mode of procurement for various supplies and materials totaling P2,702,611.43 due to
non-consolidation of the Municipality’s Project Procurement Management Plan
(PPMP), in violation of Sections 10 and 7.3.4, Sections 48.2 and 52 of the
Implementing Rules and Regulations of Republic Act No. 9184 (IRR-RA9184),
hence it has not availed of savings in terms of lower cost and less time and efforts to
processing, inspection, acceptance and payment.

We recommended that the Municipal Mayor require the BAC Secretariat to

consolidate the Municipality’s PPMPs and to stop the practice of procuring supplies
and materials by piecemeal through shopping as alternative mode of procurement and
adopt Public Bidding as the primary mode of procurement in compliance with RA
No. 9184.

5. Payments totaling P1,277,537.83 for office supplies, other maintenance and operating
expenses, and various equipment were made thru reimbursement to the Municipal
Officials and Employees in violation of COA Circular No. 97-002 and Section 48 of
RA No. 9184, thus taxes totaling P26,802.79 were not withheld in violation of
Section 2 (a) of BIR Revenue Regulations No. 1-87 and deprived the government of
income due thereon.

We recommended that the Municipal Mayor:

 require the Municipal Treasurer to adhere strictly to the provision that all payment
should be made by check directly payable to the suppliers;

 stop granting reimbursement to all Municipal officials and employees;

 ensure that the proper procurement purchases are implemented by the Department
Head responsible for procurement; and

 refund the amount of P26,802.79 representing withholding tax not withheld, in

addition to the unremitted amount of P10,122.96 and P13,958.99 in CY 2014 and
2013, respectively.

6. Prepaid e-load/cellular card allowance, mobile post-paid plan and use of internet
totaling P1,010,595.96 were excessive, contrary to COA Circular No. 2012-003 and
were not supported with proper documentation, contrary to Section 4(6) of PD No.
1445, casting doubt in the reasonableness and regularity of the payments.

We recommended that the Municipal Mayor in coordination with the Sangguniang

Bayan, adopt and implement cost measures to observe economy in the telephone and
internet expenses:
 Consider the use of post-paid plan offered by telecommunications network from
P500.00 to P1,000.00 for head of offices and P2,000.00 to P2,500.00 per month
for Municipal Vice-Mayor and Mayor.

 Review the amounts of E-Load allowance in relation to the available /mobile

phones and internet connection and consider its reduction.

 Utilize alternatives modes of communication such as internet for long-distance

communication.

 Consider the features of communication networks of free long distance calls for
Smart to Smart or Globe to Globe phones.

 Set reasonable limits on use of mobile phones to the entitled officials. Any excess
on the limit set shall be for the personal account of the users.

We also recommended that if cell cards/E-Load shall be allowed, consider purchase

in bulk by the GSO, following the required procurement procedures and distribute the
same in accordance with the guidelines.

Further, we recommended to refund the total amount of:

 P145,769.57 representing the amount paid for the Globe post-paid plan as
second mobile phone provided to the Municipal Mayor; and

 P88,500.00 pertaining to the three months reimbursements for October to

December, 2014 charged to current appropriation.

We also recommended to require the Municipal Accountant to submit the following

documents:

 Official Receipts for the purchases of E-Load.

 Acknowledgement Receipt by the Department Heads for the receipt from the
Vice-Mayor of E-Load allowances.
 Canvass of prices for the purchases of E-Load.
 Proof or evidence that expenses were incurred for official functions.

We recommended the Municipal Mayor to:

 adopt and implement control measures to ensure that the amount granted for
cellphone allowance is reasonable and used for official business only; and

 consider requiring the concerned officials to apply for a minimum mobile plan
instead of granting cash for prepaid cellular cards and to fix the maximum amount
that each official could charged/reimbursed to avoid unnecessary/excessive
expenses.
 7. Eight projects with appropriation of P2,580,000.00 under the 20% Development Fund
were not implemented as of December 31, 2015, contrary to Section 4 of Joint
Memorandum Circular No. 1, s, 2005 dated September 20, 2005 of the Department of
the Interior and Local Government (DILG) and Department of Budget and
Management (DBM), thus depriving the intended beneficiaries of the maximum
benefits that could be derived from the projects.

We reiterated our recommendation that the Municipal Mayor require the Municipal
Planning and Development Coordinator to implement fully the projects under the
20% Development Fund to ensure that the intended beneficiaries can avail the
maximum benefits that may be derived from the projects.

8. The list of all on-going government projects/programs/activities (“PPA”) and those

that are to be implemented during the year and its monthly monitoring report were not
submitted to the Commission on Audit for review and validation within the
prescribed period, contrary to Sections 2.1, 3.1 and 3.2 of COA Circular No. 2013-
004 dated January 30, 2013.

We recommended that the Municipal Mayor submit the:

 List of all on-going government projects/programs/activities (“PPA”) and those

that are to be implemented during the year, as of January 1, 2015; and

 Monthly monitoring report in compliance with the above cited regulations.

9. Expenses incurred for vegetable production and training totalling P490,044.50

charged to the 20% Development Fund are not considered as investment and capital
expenditures, contrary to Joint Memorandum Circular No. 2011-1 dated April 13,
2011.

We recommended that the Municipal Mayor require the refund of the amount of
P490,044.50.

10. Expenses incurred totaling P1,735,191.87 for KALAHI-CIDSS Projects as LGU

counterpart to the project were charged to 20% Development Fund, contrary to the
intended development and priority projects under Joint Memorandum Circular No.
2011-1. Moreover, payment for salaries included therein of P1,233,000.00 for
KALAHI support staff were not supported with approved payrolls bearing the payees
signature, contrary to Section 4(6) of PD No. 1445.

We recommended that the Municipal Mayor require the Municipal Planning and
Development Officer to see to it that only projects that truly contribute to the
development of the Municipality are included in the 20% Development Fund.

We further recommended to refund the amount of P1,735,191.87.

11. Unnecessary and excessive traveling expenses were incurred, contrary to COA
Circular No. 2012-003 and claim for reimbursement of gasoline expenses were not
supported with complete and properly accomplished Driver’s Trip Tickets, contrary
to COA Circular No. 77-61 and Section 4(6) of PD No. 1445.

We recommended that the Municipal Mayor:

 refund the excess claims of per diems in the total amount of P163,680.00;

 assign a Liaison Officer who will be in charge for the submission of

documents/follow-ups of official matters;

 submit to the Audit Team for evaluation the properly accomplished Driver’s Trip
Tickets for reimbursement of gasoline totaling P172,087.11; and

 plan travels to attain economy in incurrence of traveling expenses.

12. The Municipality incurred expenses for meals and snacks of P391,840.00 for
programs and activities during town fiesta and Christmas celebration and
P1,765,504.43 for trainings/meetings or similar activities, or a total of
P2,157,344.43, contrary to Section 2 of PD No. 1445, Section 335 of RA No. 7160
and COA Circular No 2012-003, hence considered excessive and unnecessary
expenditures.

We recommended that the Municipal Mayor require the Municipal Budget Officer to
implement COA Circular No. 2012-003 to avoid incurrence of excessive, extravagant
and unnecessary expenditures.

We also recommended to refund the amount of P304,890.00 and P86,950.00

representing payment for meals and snack during town fiesta and Christmas
celebration, respectively, as this violate Section 335 of RA No. 7160.

13. Expenditures totaling P2,286,585.83 incurred in prior years were charged against the
current appropriations and paid in CY 2015, contrary to Sections 350 and 351 of RA
No. 7160 and Section 119 of PD No. 1445, hence considered unlawful expenditures.

We recommended the Municipal Mayor to:

 require the Municipal Budget Officer to stop the practice of charging prior years’
expenses against current appropriation; and

 refund the amount of P2,286,585.83.

14. Financial assistance totaling P241,856.00 under the Aid to Individual in Crisis
Situation (AICS) Program exceeding P3,000.00 each thru cash advance of the
Municipal Treasurer charged against Philippine Charity Sweepstake Office (PCSO)
 were released directly to the recipient, contrary to DSWD Department Order No. 22,
as amended by Administrative Order No. 5, Series of 2008 and were acknowledged
thru Reimbursement Expense Receipt (RER) only by the recipients, casting doubt
whether the financial assistance were received by the intended qualified beneficiaries.

We recommended that the Municipal Mayor require the:

 Municipal Social Welfare Officer to coordinate with the Municipal Treasurer and
Accountant to prepare checks payable directly to the accredited government
drugstores for medical assistance and funeral parlor for burial assistance; and

 Municipal Accountant to submit to the Auditor for evaluation the official receipts
for the payment made by the recipients to the funeral parlor for burial assistance
and official receipts issued by hospitals and drug stores for medical assistance.

The observations and recommendations were discussed with concerned

Management officials and staff on June 20, 2016 and their comments were incorporated
in the report, where appropriate.

Status of Implementation of Prior Year’s Audit Recommendations

Of the 44 prior year’s audit recommendations embodied in the 2014 Annual Audit
Report, 20 were fully implemented, 13 were partially implemented and 11 were not
implemented by the Municipality.