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EXECUTIVE SUMMARY

INTRODUCTION

The Provincial Government of Bataan (PGB) was created by virtue of Republic Act No.
2711, Chapter 2, Article I dated March 10, 1917. It strategically lies in the southwestern
part of Central Luzon. Majority of its municipalities are within the coastline, with Manila
Bay in the east and West Philippine Sea in the West and South. Except for its
northeastern portions which are bounded by Zambales and Pampanga, the Province is
virtually surrounded by waters. It is comprised of one component city, 11 municipalities
and 237 barangays, subdivided into two congressional districts, with a total land area of
137,296 hectares. Its present population was reported at 687,482 at the end of 2010.

Bataan rings a chord in the heart of every Filipino. It is a symbol of democracy and
freedom – a memorial to the gallant Filipino – American defenders of Bataan who fought
decisive battles that delayed the timetable of the well-equipped and better trained
Japanese Imperial forces, and changed the course of history in the Pacific.

Under the dynamic and able leadership of Governor Albert Raymond S. Garcia, the
provincial government aims to continue the reforms that have been carried out since he
assumed the governorship so that government operations will be competent, upright,
responsive, responsible and accountable.

The PGB is envisioned to be a model for academic excellence, public health and safety,
environmental preservation and good governance, providing equal opportunity for all its
constituents in a peaceful, friendly atmosphere through a God-centered leadership of the
incumbent elected officials.

The PGB is currently implementing the Performance Governance System (PGS) which
enables public offices, professional associations and academic institutions to articulate
long-term development goals, organization and community-wide accountabilities and
transparency through sustainable governance mechanisms. It has four stages: initiation,
compliance, proficiency and institutionalization. PGB is the first provincial government
which undergoes PGS. The PGB has successfully attained the proficiency status of the
PGS and received a Silver Trailblazer Award during the Public Governance Forum
organized by the Institute for Solidarity in Asia (ISA) at the Philippine International
Convention Center (PICC) on May 4, 2015. It is presently on its fourth stage.

The audit covers the examination of financial transactions and operations of the PGB for
the year ended December 31, 2015 in accordance with the Philippine Public Sector
Standards on Auditing. It also aimed to ascertain the propriety, correctness and validity of
financial transactions and accounting reports, the compliance by the auditee to prescribed
laws, rules and regulations as well as the fairness of the presentation of the financial
statements.

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FINANCIAL HIGHLIGHTS

Increase
Particulars 2015 2014
(Decrease)
Sources and Application of Funds
Allotment ₱1,758,380,203.35 ₱1,866,806,278.85 ₱108,426,075.50)
Obligations 1,510,932,596.19 1,589,785,541.87 (78,852,945.68)
Unobligated Balance 247,447,607.16 277,020,736.98 (29,573,129.82)
Financial Position
Assets 4,295,885,695.76 3,592,590,519.50 703,295,176.26
Liabilities 1,184,561,522.87 1,053,358,675.41 131,202,847.46
Government Equity 3,111,324,172.89 2,539,231,844.09 572,092,328.80
Financial Performance
Income 1,705,942,065.34 1,607,871,454.46 98,070,610.88
Expenses 1,041,988,689.36 924,679,878.95 117,308,810.41
Excess of Income
over Expenses ₱ 663,953,375.98 ₱ 683,191,575.51 ₱(19,238,199.53)

INDEPENDENT AUDITOR’S REPORT

We rendered a qualified opinion on the fairness of the presentation of the financial


statements of the PGB for the year ended December 31, 2015 as the existence, accuracy
and correctness of the reported balances of Property, Plant and Equipment (PPE)
accounts as of year-end could not be established due to (a) the non-submission of the
Report on the Physical Count of Property, Plant and Equipment (RPCPPE) for the
Special Education Fund (SEF); (b) non-reconciliation of records between the Offices of
the Provincial Accountant and Provincial General Services; and (c) the absence of
detailed records to support the PPE transactions prior to July 2014. In addition, due to
non-submission of billings and other related documents such as certificate of final
acceptance by the Local Chief Executive (LCE) and certificate of 100% accomplishment
by the Provincial Engineer’s Office (PEO) for the final payment of various infrastructure
projects remained under Construction-in-Progress account totaling ₱18,530,990.03
although the assets have long been completed and already made available for public use.

For the above error, we recommended that the (a) Inventory Committee submit the
RPCPPE for Special Education Fund (SEF); (b) Provincial Accountant and the Chief of
the Provincial General Services Office (PGSO) or their authorized representative/staff
reconcile the balances of the PPE accounts per RPCPPE with the accounting records to
determine the causes of disparity, if any, for proper disposition; (c) the Provincial
Engineer closely verify and report the status of infrastructure projects included in the list
of CIP accounts to the Accounting Department; and (d) the Provincial Accountant and
the Provincial Engineer (i) remind the concerned contractors on the filing of claims for
final billings so as to effect the transfer of the costs of completed projects to the

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appropriate asset accounts; and (ii) reconcile their records based on the actual condition
of the infrastructure projects.

OTHER SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

1. Due to unresolved legal issues on shares from the Real Property Tax (RPT) and
Special Education Tax (SET) collections of the Province for the City of Balanga (COB)
as provided for in Republic Act (RA) No. 7160 or the Local Government Code of 1991,
the validity and collectibility of the year-end balances of receivables from the COB
amounting to ₱66,783,046.87 remained doubtful. (Observation No. 1)

We recommended that the Provincial Legal Officer exert effort to determine the current
status of the unresolved legal issues to settle the dispute for proper treatment of the
receivables from the COB accounts.

2. The grant of cash incentives of ₱29,287,500.00 to the employees/personnel of the


PGB, regardless of their status, and to its consultants in December 2015 was considered
irregular disbursements in the absence of legal basis for such grant in violation of COA
Circular Nos. 2012-003 dated October 29, 2012 and 2013-003 dated January 30, 2013.
(Observation No. 4)

We reiterated our recommendation that Local Chief Executive (LCE) (a) refrain from
granting YEI without legal basis; and (b) require the persons liable therefor to refund the
amount received by them.

3. From CYs 2009 to 2015, the Province purchased accountable forms totaling
₱7,925,750.00 from a private printer based on the Bureau of Local Government Finance
(BLGF) Memorandum Circular 13-2009 dated May 20, 2009 in violation of
Memorandum Circular No. 180, s. 2009 issued by the Office of the President on August
13, 2009 rendering the transactions irregular. (Observation No. 5)

We recommended that the PGB discontinue the purchase of accountable forms from
Ready Form, Inc. (RFI) and strictly comply with Office of the President of the
Philippines Memorandum Circular No. 180, s. 2009.

4. Several deficiencies were noted in the utilization of SEF totaling ₱15,607,271.69


contrary to the provisions of RA No. 5447, an Act Creating SEF, Sections 100 and 272 of
RA No. 7160, RA No. 9184, The Government Procurement Reform Act and its Revised
Implementing Rules and Regulations (IRR), Letter of Instructions (LOI) No. 1462 issued
by the Office of the President, various Department of Education (DepEd)-Department of
Budget and Management (DBM)-Department of Interior and Local Government (DILG)
Joint Circulars and COA Circular 2012-001 dated June 14, 2012 which defeated the
intended purposes of the Fund. (Observation No. 6)

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We recommended that the (a) Members of the Provincial School Board (i) refrain from
accommodating expenditures for activities for which the DepEd has the direct mandate to
execute; (ii) request for inputs from the DepEd official/School Division Superintendent in
the prioritization of SEF projects and expenditures in accordance with the DepEd criteria
and with due regard to the provisions of laws and regulations prescribing the limitations
on the use of the fund; and (iii) maximize the utilization of SEF to attain its objectives;
(b) the Provincial Engineer/Chief of the PGSO monitor the implementation of the PPAs
funded by SEF; (c) Provincial Accountant ensure the submission of lacking documents;
and (d) Members of the BAC scrutinize the performance bond posted by the winning
bidders if in accordance with the requirements of the Revised IRR of RA No. 9184 as to
its form, content, amount and validity.

5. As of December 31, 2015, the PGB audit disallowance of ₱4,369,680.00 which


comprised of meal expenses and incentive allowances for current and prior years while
the audit suspensions of ₱1,859,492.80 which referred to expenses charged under the
Priority Development Assistance Fund (PDAF) of a legislative official of the 1st district
of Bataan were not yet settled as of year-end which was not in consonance with COA
Circular No. 2009-006 dated September 15, 2009. The disallowances of ₱2,737,680.00
for prior years were still under appeal. (Observation No. 17)

We recommended that the Provincial Governor, through the Provincial Legal Officer,
take necessary actions for the settlement of the audit disallowances and suspensions of
₱6,229,172.80.

6. The Bataan Transport Mall (BTM), envisioned as a common transport terminal


for public utility vehicles, which was funded through a bank loan of ₱166,176,000.00,
remained as a non-profitable, self-sustaining endeavor from CY 2001, the start of its
operation, to CY 2015. (Observation No. 18)

We recommended that the Provincial Governor, through the Provincial Legal Officer,
initiate legal actions against the LKY Corporation for breach of the terms and conditions
of the project agreement.

The details and other findings are included in Part II of this report.

SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES

As of December 31, 2015, the PGB audit disallowance of ₱4,369,680.00 which


comprised of meal expenses and incentive allowances for current and prior years while
the audit suspensions of ₱1,859,492.80 which referred to expenses charged under the
Priority Development Assistance Fund (PDAF) of a legislative official of the 1st district
of Bataan were not yet settled as of year-end which was not in consonance with COA
Circular No. 2009-006 dated September 15, 2009. The disallowances of ₱2,737,680.00
for prior years were still under appeal.

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STATUS OF IMPLEMENTATION OF PRIOR YEAR’S UNIMPLEMENTED
AUDIT RECOMMENDATIONS

Of the sixteen recommendations embodied in the CY 2014 Annual Audit Report, five
were implemented, nine were partially implemented and two were not implemented.

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