COA Audit Report Highlights Issues with Financial Records and Accountabilities of Patnanungan Municipality

Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. IV-A
Commonwealth Avenue, Quezon City
June 13, 2019
Honorable RODERICK M. LARITA

Municipal Mayor
Patnanungan, Quezon
Dear Mayor Larita:
We are pleased to transmit the report on the results of the audit on the accounts and
operations of the Municipality of Patnanungan, Province of Quezon, for the Calendar Year
ended December 31, 2018, pursuant to Section 43 of Presidential Decree (PD) No. 1445,
otherwise known as the Government Auditing Code of the Philippines, and in line with the
Commission’s effort towards informing Management on how fiscal responsibility has been
discharged.
Our audit was conducted in accordance with International Standards of Supreme Audit
Institutions (ISSAIs), and we believe that it provided reasonable bases, for the results of the
audit.
The audit report was prepared by the Audit Team composed of Mr. Celerino C. Alviar, OIC-
Audit Team Leader, and Mesdames Ma. Agnes R. Latorre and Precious Karisma P.
Hernandez, Audit Team Members, under the supervision of Mr. Remigio A. Arzadon, Jr.,
Supervising Auditor. It consists of the Independent Auditor’s Report, the Audited Financial
Statements, the Observations and Recommendations, the Status of Implementation of Prior
Year’s Audit Recommendations, and the Annexes.
We did not express an opinion on the fairness of the presentation of the financial statements
of the Municipality of Patnanungan in view of the non-rendition of accounts and reports and
various unreliable accounts as stated in the Independent Auditor’s Report in Part I of this
report.
The significant observations and recommendations that need immediate action, among
others, are as follows:
1. The Balance Sheet accounts of the Municipality as of December 31, 2018 remain
unreliable because the Municipal Treasurer was unable to submit accounts, reports and
accounting records prior to August 2004, contrary to Section 122 of Presidential Decree
(PD) No. 1445.
We reiterated our recommendation that the Municipal Mayor oblige the Municipal
Treasurer to submit the accounts, reports and accounting records prior to August 2004
as basis to determine the correct balances of the accounts in the financial statements.
2. Non-rendition of the records and accountabilities resulted in the unreliability of
Receivables (Due from Officers and Employees), relieved Municipal Treasurer and the
previous Assistant Municipal Treasurer, amounting to P13,231,122.39 and P262,886.69,
respectively.
We reiterated our recommendation that the Municipal Mayor require the Municipal
Accountant to exert efforts in retrieving records and documents such as Check and Cash
Disbursement Journals, General Journals and other documents which were not
submitted by the previous Municipal Accountants in order to ascertain the real extent of
their accountabilities.
We also reiterated the recommendation that the Municipal Mayor oblige the Municipal
Treasurer and the previous Assistant Municipal Treasurer to submit the Disbursement
Vouchers and supporting documents and the Reports of Disbursements to facilitate
reconciliation and to be able to account, once and for all, the correct amount due from
them.
3. The Property, Plant and Equipment (PPE) presented in the Financial Statements totaling
P9,042,847.17 (excluding Land, Infrastructure Assets, MDRRMC Building, Senior
Citizen Building, Construction and Heavy Equipment and Construction in Progress) is
not reliable as to existence and valuation due to the non-submission of the Report on the
Physical Count of Property, Plant and Equipment (RPCPPE) and non-maintenance of
property cards and subsidiary ledgers in the Accounting Office, in violation of Sections
119, 120 and 124 of the Manual on the New Government Accounting System (MNGAS)
for Local Government Units (LGUs), Volume I.
We recommended that the Municipal Mayor require the GSO Designate to prepare and
submit immediately the pertinent inventory reports. Furthermore, require the Municipal
Accountant and the GSO Designate to prepare the corresponding subsidiary ledgers
and property cards, respectively, for all types of properties and reconcile the same to
establish the correct PPE balances and to investigate and adjust any discrepancy that
will be noted.
4. Supplies and Material Expenses reported in the Financial Statements totaling

P3,233,572.29 could not be ascertained due to non-maintenance of Supplies Ledger
Cards (SLC) and stock cards and non-submission of Summary of Supplies and Materials
Issued (SSMI), contrary to Sections 114, 119 to 121 of the MNGAS for LGUs, Volume I,
which were not made possible in the absence of storage facility, thus the supplies were
immediately issued to the end users upon receipt of deliveries.
We recommended that the Municipal Mayor instruct the:
a. GSO Designate to:
 maintain complete stock cards per type of supply; and
 submit to the Municipal Accountant the SSMI together with the original copy of
Requisition and Issue Slip
b. Municipal Accountant to prepare and maintain SLC

We also recommended that provision for storage room/stock room be considered in the
Municipal Hall for deliveries of inventories to be held in stock.
5. Collections totaling P1,415,552.31 remain undeposited as of December 31, 2018 since

the relieved Municipal Treasurer was unable to deposit his collections intact during his
incumbency, in violation of Section 69(4) of PD No. 1445 and Section 32 of the MNGAS
for LGUs, Volume I, thereby exposing government funds to risk of loss/misuse.
We reiterated our recommendation that the Municipal Mayor require the relieved
Municipal Treasurer to deposit intact with authorized government depository banks
(AGDBs) all undeposited collections as prescribed by Section 69(4) of PD No. 1445 and
Section 32 of the MNGAS for LGUs, Volume I.
The other audit observations, together with the recommended courses of action which were
discussed by the Audit Team with the concerned Municipal officials and staff during the exit
conference conducted on June 10, 2019, are discussed in detail in Part II of this Report.
We respectfully request that the recommendations contained in Part II of the Report be

implemented, and that this Commission be informed of the actions taken thereon by
accomplishing the Agency Action Plan and Status of Implementation (AAPSI) form
(copy attached), and returning the same within 60 days from the date of receipt hereof.
We acknowledge the support and cooperation that you and your staff extended to the Audit
Team, thus facilitating the submission of this report.
Very truly yours,

__________________________
Agency
AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION

Audit Observations and Recommendations
For the Calendar Year 2018
As of _______________________
Agency Action Plan

Reason for
Action
Audit Audit Status of Partial/Delay/Non-
Ref. Taken/Action
Observation Recommendation Implementation implementation, if
Target to be Taken
applicable
Action Person/Dept. Implementation
Plan Responsible Date
From To
Agency Signing Official:
________________________________ _______________
Name and Position of Agency Officer Date
Note: Status of Implementation may either be (a) Fully Implemented (FI), (b) Ongoing (O), (c) Not Implemented (NI), (d) Partially Implemented (PI), or
(e) Delayed (D)
EXECUTIVE SUMMARY
Introduction
The Municipality of Patnanungan is a 5th class municipality which comprises of six barangays
namely: Amaga, Busdak, Kilogan, Luod, Patnanungan Norte and Poblacion. It is about 300
kilometers away from Lucena City, the Provincial Capital. It is a part of Infanta-Polillo area in
the first Congressional District of the Province of Quezon, a shoe-shaped island bounded on
the north by the Pacific Ocean and by various islands and islets within the territorial jurisdiction
of Burdeos, Quezon and on the east by Jomalig Islands.
It maintains General Fund, Special Education Fund and Trust Fund.
The Organizational Structure of the Municipality is as follows:
a. Key Officials
Municipal Mayor Hon. Roderick M. Larita
Municipal Vice-Mayor Hon. Letecia G. Lopez
Members of the Sanggunian 1. Hon. Edwin R. Aguilar

2. Hon. Reynaldo A. Anonuevo
3. Hon. Samuel D. Asistin
4. Hon. Precilla G. Aquino
5. Hon. Mario C. Bantucan
6. Hon. Nelson G. Manlugon
7. Hon. Ariel C. Peñamante
8. Hon. Rodrigo B. Toledo
OIC – Municipal Treasurer Zobelle G. Abeja

Municipal Accountant Shirley H. Magno
b. No. of Personnel Complement
Permanent 46
Temporary 0
Elective Officials 12
Coterminous 2
Total Personnel Complement 60
Financial Highlights
For Calendar Year (CY) 2018, the Municipality of Patnanungan generated a total income of
P55,625,185.88 from local taxes, permits and licenses, service and other income and internal
revenue allotment.
i
The Municipality’s comparative financial condition and results of operations for CYs 2018 and
2017 are summarized below and shown in detail in the attached audited financial statements:
2018 2017 Increase/Decrease
Total Assets P106,496,135.25 P97,760,812.96 P8,735,322.29

Total Liabilities 65,474,928.18 54,220,382.22 11,254,545.96
Net Assets/Equity 41,021,207.07 43,540,430.74 (2,519,223.67)
Total Income 55,625,185.88 71,290,887.89 (15,665,702.01)
Personnel Services 32,984,455.43 29,987,262.85 2,997,192.58
Maintenance and
Other Operating
Expenses 19,428,357.28 20,438,818.22 (1,010,460.94)
Financial Expenses 33,930.00 29,967.05 3,962.95
Non-cash Expenses 2,685,544.23 2,553,487.21 132,057.02
Transfers, Assistance
and Subsidy From 0.00 1,785,785.22 (1,785,785.22)
Transfers, Assistance
and Subsidy To 2,938,246.70 17,766,717.00 (14,828,470.30)
Net Income (Loss) (2,445,347.76) 514,635.56 (2,959,983.32)
Scope of Audit
Financial and compliance audit were conducted on the accounts and operations of the
Municipality of Patnanungan for CY 2018. The audit was conducted to ascertain the propriety
of financial transactions and compliance of the Municipality with prescribed rules and
regulations. It was also made to ascertain the accuracy of financial records and reports, as
well as the fairness of the presentation of the financial statements. The audit consisted of
review of operating procedures, interview of concerned government officials and employees,
verification, reconciliation and analysis of accounts and such other procedures considered
necessary.
Independent Auditor’s Report on the Financial Statements
The Auditor did not render an opinion on the fairness of the presentation of the financial
statements as of December 31, 2018 of the Municipality of Patnanungan due to the following:
(PD) No. 1445;

respectively;
3. The Property, Plant and Equipment (PPE) presented in the Financial Statements totaling
P9,042,847.17 (excluding Land, Infrastructure Assets, MDRRMC Building, Senior Citizen
Building, Construction and Heavy Equipment and Construction in Progress) is not reliable
as to existence and valuation due to the non-submission of the Report on the Physical
Count of Property, Plant and Equipment (RPCPPE) and non-maintenance of property
ii
cards and subsidiary ledgers in the Accounting Office, in violation of Sections 119, 120
and 124 of the Manual on the New Government Accounting System (MNGAS) for Local
Government Units (LGUs), Volume I;

Issued (SSMI), contrary to Sections 114, 119 to 121 of the Manual on the New
Government Accounting System (MNGAS) for Local Government Units (LGUs), Volume
I, which were not made possible in the absence of storage facility, thus the supplies were
immediately issued to the end users upon receipt of deliveries;
5. Cash advances totaling P2,666,866.53 remain unliquidated as of December 31, 2018

which includes long outstanding cash advances, in violation of COA Circular No. 97-002,
due to granting of additional cash advances even though previous cash advances have
not been liquidated, thus exposing the fund to possible loss or misuse and understating
the expenses accounts and overstating the advances account by an amount equivalent to
the unreported disbursements;
6. The previous Municipal Accountant was unable to set up the Real Property Tax (RPT)
Receivable and Special Education Tax (SET) Receivable at the beginning of the year, in
violation of Section 20 of the Manual on the New Government Accounting System
(MNGAS) for Local Government Units (LGUs), Volume I, due to non-submission of the
certified list of taxpayers by the relieved Municipal Treasurer, hence the RPT and SET
Receivables accounts totaling P14,056,863.40 as of December 31, 2018 are unreliable;
7. The Municipal Accountant was unable to prepare the necessary adjusting entry on the
difference in the amount of P6,972,106.68 between the Due from Other Funds of
P4,469,356.91 and its reciprocal account Due to Other Funds of P11,441,463.59 as of
year-end, due to the non-verification of the cause/s in the unreconciled balances, thereby
casting doubts on the accuracy of the recorded transactions;
8. Unaccounted balance of P230,240.42 recorded under Due to NGAs account which have
been outstanding for more than two years were not reverted to the Unappropriated Surplus
of the General Fund, contrary to Section 98 of Presidential Decree (PD) No. 1445,
because the Municipal Mayor was unable to send confirmation letters to National
Government Agencies (NGAs), thus casting doubt on the validity and reliability of the
account balance presented in the financial statements; and
9. Receivables of P146,569.74 which were not supported with details and documentation
remain in the books of accounts as of December 31, 2018 and were not requested for
write-off, in violation of COA Circular No. 2016-005, since the Municipal Mayor was unable
to request the Sangguniang Bayan through a Resolution for his authority to file the request
for write-off of these uncollectible receivable accounts, thus rendering the account balance
unreliable and affecting its fair presentation in the financial statements.
For the exceptions cited above, we recommended that the Municipal Mayor:
 oblige the Municipal Treasurer to submit the accounts, reports and accounting records
prior to August 2004 as basis to determine the correct balances of the accounts in the
financial statements;
iii
 require the Municipal Accountant to exert efforts in retrieving records and documents such
as Check and Cash Disbursement Journals, General Journals and other documents which
were not submitted by the previous Municipal Accountants in order to ascertain the real
extent of their accountabilities;
 oblige the Municipal Treasurer and the previous Assistant Municipal Treasurer to submit
the Disbursement Vouchers and supporting documents and the Reports of Disbursements
to facilitate reconciliation and to be able to account, once and for all, the correct amount
due from them;
 require the GSO Designate to prepare and submit immediately the pertinent inventory
reports. Furthermore, require the Municipal Accountant and the GSO Designate to prepare
the corresponding subsidiary ledgers and property cards, respectively, for all types of
properties and reconcile the same to establish the correct PPE balances and to investigate
and adjust any discrepancy that will be noted;
 instruct the:
 submit to the Municipal Accountant the Summary of Supplies and Materials Issued
together with the original copy of Requisition and Issue Slip
b. Municipal Accountant to prepare and maintain Supplies Ledger Cards (SLC)
 provision for storage room/stock room be considered in the Municipal Hall for deliveries of
inventories to be held in stock
 require all the accountable officers to strictly comply with the provisions of COA Circular
No. 97-002 by immediately liquidating their cash advances and refund any unexpended
balance;
 instruct the Municipal Accountant to ensure that all cash advances are fully liquidated at
the end of the year and to allow the granting of succeeding cash advance only when the
previous one is fully liquidated; and
 instruct the OIC - Municipal Treasurer to withhold the payment of any money due to the
concerned accountable officers with long outstanding cash advances
 ensure the proper granting, utilization and liquidation of all cash advances within the
prescribed period in accordance with the existing rules and regulations
 require the current OIC - Municipal Treasurer to submit to the current Municipal
Accountant the certified list of taxpayers showing the amount due and collectible for the
year so that the RPT/SET Receivables can be adjusted to reflect the correct balances as
of December 31, 2018;
iv
 require the current Municipal Accountant to make a detailed review of the accounts to
determine the causes of the unreconciled balances and provide the necessary
adjustments in the books of accounts to present the correct balances of the affected
accounts;
 instruct the Municipal Accountant and OIC - Municipal Treasurer to revert to the
Unappropriated Surplus the unaccounted balance of Due to NGAs account of
P230,240.42 and submit to the Audit Team the proof of the liquidation of the unused
balance of DOH - TB DOTS of P470.09;
 request the:
 Sangguniang Bayan for a Resolution to authorize him to file the request for write-off of
uncollectible receivables of P146,569.74; and
 Municipal Accountant to support the request for authority to write-off uncollectible

receivables following the guidelines and procedures provided under COA Circular No.
2016-005.
Significant Audit Observations and Recommendations
The following is the summary of the other significant audit observations and recommendations
in the audit of the Municipality of Patnanungan for the year 2018:
1. Collections totaling P1,415,552.31 remain undeposited as of December 31, 2018 since

the relieved Municipal Treasurer was unable to deposit his collections intact during his
incumbency, in violation of Section 69(4) of PD No. 1445 and Section 32 of the MNGAS
for LGUs, Volume I, thereby exposing government funds to risk of loss/misuse.
We reiterated our recommendation that the Municipal Mayor require the relieved Municipal
Treasurer to deposit intact with authorized government depository banks (AGDBs) all
undeposited collections as prescribed by Section 69(4) of PD No. 1445 and Section 32 of
the MNGAS for LGUs, Volume I.
2. The year-end cash balances for Calendar Year (CY) 2018 totaling P35,760,615.34 were
insufficient to pay the current liabilities resulting in a significant cash overdraft of
P14,794,021.70, in violation with Section 4(3) of PD No. 1445 and the Local Budgeting
Manual, which was due to the utilization of the trust collections/receipts or funds belonging
to other government agencies for specific purposes, thus indicating poor cash
management by the Municipality.
We recommended the Municipal Mayor to require the:
a) Municipal Accountant to regularly monitor the available cash and to set aside the cash
pertaining to trust collections/receipts;
b) OIC - Municipal Treasurer to adopt strategies to intensify collections that would

improve the financial viability of the Municipality; and
v
c) the Municipal Budget Officer to use the Advice of Allotment (AA) in releasing the
allotment to serve as guide of concerned office/s as to the maximum amount it could
spend for the quarter and to coordinate with the Municipal Accountant and OIC -
Municipal Treasurer to determine the financial capability of the Municipality to ensure
that the issued AAs are covered by available cash and/or future collections to avoid
incurrence of cash deficit.
We further recommended to adopt austerity measures in order to reduce/trim down

the expenditures so as not to hamper the services and priority projects intended for
the constituents.
3. The list of all on-going government projects/programs/activities (PPAs) and those that are
to be implemented during the year and its monthly monitoring report were not submitted
to the Audit Team, in violation of COA Circular No. 2013-004 dated January 30, 2013 due
to the non-preparation of schedule by the Office of the Municipal Engineer, thus objectives
to promote good governance through transparency and accountability, encourage public
participation and secure the right of the people to information on matters of public concern
at the least possible cost on public funds or most economically effective means are not
met.
We recommended that the Municipal Mayor require the Municipal Engineer to prepare the
schedule which will serve as basis for the list of all on-going government
projects/programs/activities (PPAs) and those that are to be implemented during the year
for submission to the Audit Team. Likewise, submit the monthly monitoring report in
compliance with the existing regulations.
4. Due to non-completion of Community-Based Monitoring System (CBMS), the Municipality

was unable to establish and maintain a GAD Database as required under Sections 4.B
and 4.E of PCW-DILG-DBM-NEDA Joint Memorandum Circular (JMC) No. 2013-01, thus
GAD programs/activities that had been planned and implemented during the year totaling
P3,121,370.08 may not be responsive to the actual gender issues that need to be
addressed in the Municipality.
We recommended that the Municipal Mayor require the Municipal Planning and
Development Coordinator to expedite the completion of Community-Based Monitoring
System that will establish/create a GAD Database that will assist the gender-responsive
planning, programming and policy formulation of the Municipality.
5. Insurable properties of the Municipality were not covered with appropriate property
insurance with the Government Service Insurance System (GSIS) as required in COA
Circular No. 92-390 and Republic Act 656, due to the non-appropriation of funds under
the General Fund for CY 2018, thus leaving the properties at risk of total loss without the
right of indemnification.
We recommended that the Municipal Mayor request from the Sangguniang Bayan for the
appropriation of funds under the General Fund necessary for the payment of property
insurance with the GSIS. Thereafter, require the GSO Designate to ensure that all the
insurable properties of the Municipality are covered with appropriate insurance in
compliance with the provisions of COA Circular No. 92-390 and Republic Act No. 656.
vi
6. The Municipality was unable to optimally utilize P8,285,336.03 or 55.79 per cent of its total
appropriations of P14,850,640.29 for the 20% Development Fund in CY 2018, contrary to
Section 5 of Department of Interior and Local Government (DILG) and Department of
Budget and Management (DBM) Joint Memorandum Circular No. 2017-1 due to the
delayed implementation of the developmental projects since the bidding process started
only at the end of the year, hence depriving the constituents of the Municipality of the
maximum benefits that could be obtained therefrom.
We recommended that the Municipal Mayor continually work for the optimal utilization of
the 20% Development Fund through the implementation of the projects that will contribute
to the development of the Municipality which will be beneficial to its constituents.
7. Expenditures charged to the 70% of the 2018 Municipal Disaster Risk Reduction and
Management Fund (MDRRMF) totaling P10,998.72 were not in accordance with the
guidelines of the National Disaster Risk Reduction and Management Council (NDRRMC),
Department of Budget and Management (DBM) and Department of the Interior and Local
Government (DILG) Joint Memorandum Circular No. 2013-1, due to lack of proper
identification and classification of programs, projects and activities by the MDRRM Officer,
thus did not address the local needs for prevention, mitigation and preparedness.
We recommended that the Municipal Mayor instruct the MDRRM Officer to properly
identify and categorize programs, projects and activities that are to be charged to
MDRRMF and to utilize the fund strictly for calamity related activities and stop the
utilization of MDRRMF for activities other than those specified under NDRRMC, DBM and
DILG Joint Memorandum Circular.
The foregoing observations and recommendations contained in the Report were

communicated to the Municipal Mayor and other key officials under various Audit Observation
Memoranda and discussed in the exit conference conducted on June 10, 2019.
Management’s views and comments were considered in the Report, where appropriate.
Summary of Suspensions, Disallowances and Charges
As of December 31, 2018, the City had unsettled disallowances totaling P2,734,777.32, as
follows:
Balance as of Issued for Settled for Balance as of

December 31, 2017 CY 2018 CY 2018 December 31, 2018
Notice of Suspension P 612,611.64 P0.00 P0.00 P 612,611.64

Notice of Disallowance 2,122,165.68 0.00 0.00 2,122,165.68
Total P2,734,777.32 P0.00 P0.00 P2,734,777.32
The balance of Receivables - Disallowances and Charges of P627,121.73 under the General
Fund was incurred prior to the effectivity of the Rules and Regulations on Settlement of
Accounts (RRSA).
Status of Implementation of Prior Year’s Audit Recommendations
Of the 22 audit recommendations embodied in the Calendar Year (CY) 2017 Annual Audit
Report (AAR), two were fully implemented, five was partially implemented and 15 were not
implemented by the Municipality.
vii
TABLE OF CONTENTS
PART SUBJECT PAGE NO.
I AUDITED FINANCIAL STATEMENTS

 Independent Auditor’s Report 1
 Statement of Management’s Responsibility for Financial
Statements 4
 Statement of Financial Position 5
 Statement of Financial Performance 6
 Statement of Changes in Net Assets/Equity 7
 Statement of Cash Flows 8
 Statement of Comparative Budget and Actual Amounts 9
 Notes to Financial Statements 12
II AUDIT OBSERVATIONS AND RECOMMENDATIONS

A. Financial and Compliance Audit 28
B. Status of Suspensions, Disallowances and Charges 50
C. Compliance with Tax Laws 50
D. Gender and Development 50
E. Official Development Assistance (ODA) Funded Projects 52
F. Compliance with Government Service Insurance System
(GSIS) Rules and Regulations 52
G. 20% Development Fund 53
H. Local Disaster Risk Reduction and Management Fund 54
I. Solid Waste Management 55
III STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS 56
IV ANNEXES
1 Statement of Financial Position (By Fund)

2 Statement of Financial Performance (By Fund)
3 Statement of Changes in Net Assets/Equity (By Fund)
4 Statement of Cash Flows (By Fund)
PART I – AUDITED FINANCIAL STATEMENTS
Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. IV-A
Commonwealth Avenue, Quezon City
INDEPENDENT AUDITOR’S REPORT
Honorable RODERICK M. LARITA

Municipal Mayor
Patnanungan, Quezon
Disclaimer of Opinion
We have audited the financial statements of the Municipality of Patnanungan, Quezon, which
comprise the statement of financial position as at December 31, 2018, and the statement of
financial performance, statement of changes in net assets/equity, statement of cash flows and
statement of comparison of budget and actual amounts for the year then ended, and notes to
the financial statements, including a summary of significant accounting policies.
We do not express an opinion, the accompanying financial statements of the Municipality of

Patnanungan, Quezon. Because of the significance of the matters described in the Basis for
Disclaimer of Opinion section of our report, we have not been able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on these financial
statements.
Basis for Disclaimer of Opinion
As discussed in Part II, Observations and Recommendations portion of this Report, the
following matters were noted:
 The Balance Sheet accounts of the Municipality as of December 31, 2018 remain
(PD) No. 1445;
 Non-rendition of the records and accountabilities resulted in the unreliability of

respectively;
 The Property, Plant and Equipment (PPE) presented in the Financial Statements totaling
P9,042,847.17 (excluding Land, Infrastructure Assets, MDRRMC Building, Senior Citizen
Building, Construction and Heavy Equipment and Construction in Progress) is not reliable
as to existence and valuation due to the non-submission of the Report on the Physical
Count of Property, Plant and Equipment (RPCPPE) and non-maintenance of property
cards and subsidiary ledgers in the Accounting Office, in violation of Sections 119, 120
and 124 of the Manual on the New Government Accounting System (MNGAS) for Local
Government Units (LGUs), Volume I;
 Supplies and Material Expenses reported in the Financial Statements totaling

Issued (SSMI), contrary to Sections 114, 119 to 121 of the MNGAS for LGUs, Volume I,
which were not made possible in the absence of storage facility, thus the supplies were
immediately issued to the end users upon receipt of deliveries;
 Cash advances totaling P2,666,866.53 remain unliquidated as of December 31, 2018

which includes long outstanding cash advances, in violation of COA Circular No. 97-002,
due to granting of additional cash advances even though previous cash advances have
not been liquidated, thus exposing the fund to possible loss or misuse and understating
the expenses accounts and overstating the advances account by an amount equivalent to
the unreported disbursements;
 The previous Municipal Accountant was unable to set up the Real Property Tax (RPT)
Receivable and Special Education Tax (SET) Receivable at the beginning of the year, in
violation of Section 20 of the MNGAS for LGUs, Volume I, due to non-submission of the
certified list of taxpayers by the relieved Municipal Treasurer, hence the RPT and SET
Receivables accounts totaling P14,056,863.40 as of December 31, 2018 are unreliable;
 The Municipal Accountant was unable to prepare the necessary adjusting entry on the
difference in the amount of P6,972,106.68 between the Due from Other Funds of
P4,469,356.91 and its reciprocal account Due to Other Funds of P11,441,463.59 as of
year-end, due to the non-verification of the cause/s in the unreconciled balances, thereby
casting doubts on the accuracy of the recorded transactions;
 Unaccounted balance of P230,240.42 recorded under Due to NGAs account which have
been outstanding for more than two years were not reverted to the Unappropriated Surplus
of the General Fund, contrary to Section 98 of PD No. 1445, because the Municipal Mayor
was unable to send confirmation letters to National Government Agencies (NGAs), thus
casting doubt on the validity and reliability of the account balance presented in the financial
statements; and
 Receivables of P146,569.74 which were not supported with details and documentation
remain in the books of accounts as of December 31, 2018 and were not requested for
write-off, in violation of COA Circular No. 2016-005, since the Municipal Mayor was unable
to request the Sangguniang Bayan through a Resolution for his authority to file the request
for write-off of these uncollectible receivable accounts, thus rendering the account balance
unreliable and affecting its fair presentation in the financial statements.
We were unable to satisfy ourselves by alternative means concerning the presented accounts
in the financial statements. As a result of these matter, we were unable to determine the
fairness of presentation of the accounts making up the statement of financial position,
statement of financial performance, statement of changes in net assets/equity, statement of
cash flows and statement of comparison of budget and actual amounts for the year then
ended, and the notes to the financial statements.
Responsibilities of Management and those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with Philippine Public Sector Accounting Standards (PPSAS), and
for such internal control as management determines is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
Those charged with governance are responsible for overseeing the Municipality of
Patnanungan’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our responsibility is to conduct an audit of the Municipality of Patnanungan, Quezon financial

statements in accordance with the International Standards of Supreme Audit Institutions
(ISSAIs) and to issue an auditor’s report. However, because of the matters described in the
Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on these financial
statements.
We are independent of the Municipality of Patnanungan, Quezon in accordance with the

ethical requirements that are relevant to our audit of the financial statements, and we have
fulfilled our other ethical responsibilities in accordance to these requirements.
PATNANUNGAN, QUEZON
Statement of Financial Position
As at December 31, 2018
(With Comparative Figures for CY 2017)
Note 2018 2017

ASSETS
Current Assets
Cash and Cash Equivalents 4 P 36,666,726.72 P31,247,042.89
Receivables 5 40,632,353.53 47,572,467.39
Prepayments and Deferred Charges 811,503.37 310,729.68
Total Current Assets 78,110,583.62 79,130,239.96
Non-Current Assets
Property, Plant and Equipment 6 28,385,551.63 18,630,573.00
Total Non-Current Assets 28,385,551.63 18,630,573.00
Total Assets 106,496,135.25 97,760,812.96
LIABILITIES
Current Liabilities 7
Financial Liabilities 2,750,314.80 29,879.92
Inter-Agency Payables 25,757,156.27 18,834,381.63
Intra-Agency Payables 11,441,463.59 8,042,837.75
Trust Liabilities 11,344,172.67 12,190,738.58
Deferred Credits/Unearned Income 14,056,863.41 15,073,645.44
Total Current Liabilities 65,349,970.74 54,171,483.32
Non-Current Liabilities
Other Payables 7 124,957.44 48,898.90
Total Non-Current Liabilities 124,957.44 48,898.90
Total Liabilities 65,474,928.18 54,220,382.22
NET ASSETS/EQUITY
Equity 41,021,207.07 43,540,430.74
Total Liabilities and Net Assets/Equity P 106,496,135.25 P 97,760,812.96
(See accompanying Notes to Financial Statements)
5
PATNANUNGAN, QUEZON
Statement of Financial Performance
For the Year Ended December 31, 2018
Note 2018 2017

Revenue
Tax Revenue 8 P 692,179.46 P 1,253,325.80
Share from Internal Revenue Collections 54,399,816.75 67,586,091.00
Service and Business Income 9 408,547.98 492,958.67
Shares, Grants and Donations 93,273.44 90,093.63
Other Income 0.00 82,633.57
Total Revenue 55,593,817.63 69,505,102.67
Less: Current Operating Expenses

Personnel Services 10 32,984,455.43 29,987,262.85
Maintenance and Other Operating
Expenses 11-15 19,428,357.28 20,438,818.22
Financial Expenses 16 33,930.00 29,967.05
Non-cash Expenses 17 2,685,544.23 2,553,487.21
Current Operating Expenses 55,132,286.94 53,009,535.33
Surplus (Deficit) from Current

Operation 461,530.69 16,495,567.34
Add (Deduct):
Transfers, Assistance and Subsidy From 18 0.00 1,785,785.22
Transfers, Assistance and Subsidy To 19 (2,938,246.70) (17,766,717.00)
Miscellaneous Income 31,368.25 0.00
Surplus(Deficit) for the period P -2,445,347.76 P 514,635.56
6
PATNANUNGAN, QUEZON
Statement of Changes in Net Assets/Equity
2018 2017
Balance at January 1 P 43,540,430.74 P 41,985,012.81

Add (Deduct):
Change in Accounting Policy
Prior Period Errors -73,875.91 -59,217.63
Restated Balance 43,466,554.83 41,925,795.18
Add (Deduct): Changes in net assets/equity
during the year
Adjustment of net revenue recognized directly
in net assets/equity 0.00 1,100,000.00
Surplus (Deficit) for the period -2,445,347.76 514,635.56
Total changes during the year -2,445,347.76 1,614,635.56
Balance at December 31 P 41,021,207.07 P 43,540,430.74
7
PATNANUNGAN, QUEZON
Statement of Cash Flows
Note 2018 2017
Cash Flows from Operating

Activities
Cash Inflows
Collection from taxpayers P 783,788.65 P 1,253,325.80
Share from Internal Revenue
Allotment 54,399,816.75 67,586,091.00
Receipts from business/service
income 386,324.95 459,841.00
Interest Income 22,223.03 33,117.67
Other Receipts 51,598,657.46 22,690,826.48
Total Cash Inflows 107,190,810.84 92,023,201.95
Cash Outflows
Payments to suppliers and
creditors 27,666,537.96 18,196,891.63
Payments to employees 39,021,502.83 29,575,398.66
Interest Expense 0.00 11,867.05
Other Payments 22,545,203.06 34,385,717.97
Total Cash Outflows 89,233,243.85 82,169,875.31
Net Cash Flows from Operating
Activities 20 17,957,566.99 9,853,326.64
Cash Flows from Investing
Activities
Cash Outflow
Purchase/Construction of Property,
Plant and Equipment 12,537,883.16 12,719,070.10
Net Cash Flows from Investing
Activities -12,537,883.16 -12,719,070.10
Cash Flows from Financing
Activities
Cash Outflow
Payment of loan amortization 0.00 498,214.17
Total Cash Provided by Operating,
Investing and Financing
Activities 5,419,683.83 -3,363,957.63
Add: Cash at the Beginning of
the year 31,247,042.89 34,611,000.52
Cash Balance at the End of
the year P 36,666,726.72 P 31,247,042.89
8
PATNANUNGAN, QUEZON
Statement of Comparison of Budget and Actual Amounts
Budgeted Difference Actual Difference

Amounts Original and Amounts Final Budget
Particulars Original Final Final Budget and Actual
General Fund
Revenue
A. Local Sources
1. Tax Revenue
a. Tax Revenue - Property P 150,000.00 P 150,000.00 P 0.00 P 293,199.42 P -143,199.42
b. Tax Revenue - Goods and Services 200,000.00 200,000.00 0.00 104,687.34 95,312.66
c. Other Local Taxes 101,000.00 101,000.00 0.00 105,951.20 -4,951.20
Total Tax Revenue 451,000.00 451,000.00 0.00 503,837.96 -52,837.96
2. Non-Tax Revenue
a. Service Income 375,000.00 375,000.00 0.00 437,452.91 -62,452.91
b. Business Income 21,000.00 21,000.00 0.00 14,810.00 6,190.00
c. Other Income and Receipts 30,000.00 30,000.00 0.00 18,025.00 11,975.00
d. Miscellaneous Income 40,000.00 40,000.00 0.00 79,470.00 -39,470.00
Total Non-Tax Revenue 466,000.00 466,000.00 0.00 549,757.91 -44,287.91
B. External Sources
1. Share from the National Internal
Revenue Taxes (IRA) 67,586,091.00 72,533,088.00 -4,946,997.00 72,533,088.00 0.00
2. Share from GOCCs 40,000.00 40,000.00 0.00 93,273.44 -53,273.44
4. Other Receipts
a. Grants and Donations 10,000.00 10,000.00 0.00 4,250.00 5,750.00
Total Revenues and Receipts 68,553,091.00 73,500,088.00 -4,946,997.00 73,679,957.31 -144,649.31
Current Appropriations
Expenditures
General Public Services
Personnel Services 25,982,650.46 26,528,977.78 -546,327.32 26,075,929.43 453,048.35
Maintenance and Other Operating Expenses 11,103,499.33 15,527,266.97 -4,423,767.64 15,000,734.48 526,532.49
Capital Outlay 535,000.00 710,000.00 -175,000.00 326,806.11 383,193.89
Health, Nutrition and Population Control
Personnel Services 3,830,964.30 2,402,802.92 1,428,161.38 2,319,677.30 83,125.62
Maintenance and Other Operating Expenses 2,009,000.00 2,009,000.00 0.00 1,937,555.92 71,444.08
Capital Outlay 50,000.00 50,000.00 0.00 22,204.44 27,795.56
9
Social Services and Social Welfare
Personnel Services 2,068,489.12 1,362,092.07 706,397.05 1,332,179.87 29,912.20
Maintenance and Other Operating Expenses 1,724,330.91 1,754,330.91 -30,000.00 1,597,170.61 157,160.30
Capital Outlay 100,000.00 100,000.00 0.00 0.00 100,000.00
Economic Services
Personnel Services 2,214,527.04 2,615,652.73 -401,125.69 2,615,642.68 10.05
Maintenance and Other Operating Expenses 1,191,400.00 1,271,400.00 -80,000.00 1,254,072.35 17,327.65
Capital Outlay 90,000.00 90,000.00 0.00 86,513.20 3,486.80
LDRRMF
Personnel Services 2,706,837.70 2,954,185.90 -247,348.20 0.00 2,954,185.90
Capital Outlay 720,816.85 720,816.85 0.00 0.00 720,816.85
20% Development Fund
Maintenance and Other Operating Expenses 900,000.00 900,000.00 0.00 782,046.70 117,953.30
Capital Outlay 12,617,218.20 13,606,611.00 -989,392.80 3,881,066.75 9,725,544.25
Allocation for Senior Citizens and PWD
Maintenance and Other Operating Expenses 685,530.91 685,530.91 0.00 671,935.00 13,595.91
Others
Maintenance and Other Operating Expenses 22,826.18 22,826.18 0.00 0.00 22,826.18
Total Current Appropriations 68,553,091.00 73,311,494.22 -4,758,403.22 57,903,534.84 15,407,959.38
Continuing Appropriations
General Public Services
Capital Outlay 1,861,991.26 1,861,991.26 0.00 586,498.69 1,275,492.57
Health, Nutrition and Population Control
Capital Outlay 71,291.95 71,291.95 0.00 71,291.95 0.00
Social Services and Social Welfare
Capital Outlay 625,070.37 625,070.37 0.00 100,000.00 525,070.37
Other Purposes:
Capital Outlay 152,602.50 152,602.50 0.00 2,602.50 150,000.00
Total Continuing Approrpiations 2,710,956.08 2,710,956.08 0.00 760,393.14 1,950,562.94
Total Appropriations P 71,264,047.08 P 76,022,450.30 P -4,758,403.22 P 58,663,927.98 P 17,358,522.32
10
Special Education Fund
Revenue
1. Tax Revenue
a. Tax Revenue - Property P 142,343.36 P 272,879.04 P -130,535.68 P 371,129.96 P -98,250.92
Total Revenue and Receipts 142,343.36 272,879.04 -130,535.68 371,129.96 -98,250.92
Expenditures
Current appropriations
Education
Personnel Services 210,000.00 100,000.00 110,000.00 0.00 100,000.00
Maintenance and Other Operating Expenses 140,000.00 522,479.04 -382,479.04 332,112.00 190,367.04
Capital Outlay 89,000.00 89,000.00 0.00 241,558.00 -152,558.00
Total Current Approrpiations 439,000.00 711,479.04 -272,479.04 573,670.00 137,809.04
Continuing appropriations
Education
Capital Outlay 297,354.16 297,354.16 0.00 0.00 297,354.16
Total Continuing Approrpiations 297,354.16 297,354.16 0.00 0.00 297,354.16
Total Appropriations P 736,354.16 P 1,008,833.20 P -272,479.04 P 573,670.00 P 435,163.20
11
NOTES TO FINANCIAL STATEMENTS
(All amounts in Philippine Peso unless otherwise stated)
Note 1 - Profile
The Municipality of Patnanungan is a 5th class municipality which comprises of six barangays
namely: Amaga, Busdak, Kilogan, Luod, Patnanungan Norte and Poblacion. It is about 300
kilometers away from Lucena City, the Provincial Capital. It is a part of Infanta-Polillo area in
the first Congressional District of the Province of Quezon, a shoe-shape island bounded on
the north by the Pacific Ocean and by various islands and islets within the territorial jurisdiction
of Burdeos, Quezon and on the east by Jomalig Islands.
With the Municipal vision “Isang bayang mapayapa, may masaganang likas yaman, maunlad
na agrikultura, masiglang turismo na pinananahanan ng mga mamamayang maka-Diyos,
malusog, malikhain at mapagmahal sa kalikasan na aktibong nakikilahok gamit ang mataas
na antas ng karunungan at kasanayan tungo sa isang maunlad na Patnanungan.”
Note 2 - Presentation of Financial Statements
The financial statements of the Municipality have been prepared in accordance with and
comply with the Philippine Public Sector Accounting Standards (PPSASs). The financial
statements are presented in pesos, which is the functional and reporting currency of the
Municipality. The accounting policies have been applied starting the year 2015.
Note 3 - Summary of Significant Accounting Policies
3.1 Basis of accounting
The financial statements are prepared on an accrual basis in accordance with the PPSAS.
3.2 Consolidation
The controlled entities (funds) are all those over which the controlling entity has the power to
govern the financial and operating policies. Inter-group transaction, balances and unrealized
gains and losses on transactions between entities and funds are eliminated in full.
The Municipality maintains three funds namely: General, Special Education and Trust Funds.
3.3 Revenue Recognition
Revenue from Non-Exchange Transactions
Taxes, fees and fines
The Municipality recognizes revenues from taxes and fines when the event occurs and the
asset recognition criteria are met. To the extent that there is a related condition attached that
would give rise to a liability to repay the amount, liability is recognized instead of revenue.
Other non-exchange revenues are recognized when it is improbable that the future economic
benefit or service potential associated with the asset will flow to the entity and the fair value
of the asset can be measured reliably.
12
Transfers from Other Government Entities
Revenues from non-exchange transactions with other government entities are measured at
fair value and recognized on obtaining control of the asset (cash, goods, services and
property) if the transfer is free from conditions and it is probable that the economic benefits or
service potential related to the asset will flow to the Municipality and can be measured reliably.
The Municipality availed of the 5-year transitional provision for the recognition of Tax Revenue
- Real Property and Special Education Tax. For the first year, there will be no change in policy
for the recognition of the aforementioned tax revenue.
Revenue from Exchange Transactions
Rendering of Services
The Municipality recognizes revenue from rendering of services by reference to the stage of
completion when the outcome of the transaction can be estimated reliably. The stage of
completion is measured by reference to labor hours incurred to date as a percentage of total
estimated labor hours.
Where the contract outcome cannot be measured reliably, revenue is recognized only to the
extent the expenses are incurred.
Sale of Goods
Revenue from the sale of goods is recognized when the significant risks and rewards of
ownership have been transferred to the buyer, usually on delivery of the goods and when the
amount of revenue can be measured reliably and it is probable that the economic benefits or
service potential associated with the transaction will flow to the Municipality.
Interest Income
Interest income is accrued using the effective yield method. The effective yield discounts
estimated future cash receipts through the expected life of the financial asset to that asset’s
net carrying amount. The method applies this yield to the principal outstanding to determine
interest income each period.
Dividends
Dividends or similar distributions must be recognized when the shareholder’s or the

Municipality’s right to receive payment is established.
Rental Income
Rental income arising from operating leases on investment properties is accounted for on a
straight-line basis over the lease terms and included in revenue.
13
3.4 Property, Plant and Equipment
All Property, Plant and Equipment (PPE) are stated at cost less accumulated depreciation.
Cost includes expenditure that is directly attributable to the acquisition of the items. When
significant parts of property, plant and equipment are required to be replaced at intervals, the
Municipality recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is performed, its cost is
recognized in the carrying amount of the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair and maintenance costs are recognized in
surplus or deficit as incurred. Where an asset is acquired in a non-exchange transaction for
nil or nominal consideration the asset is initially measured at its fair value.
Useful Life
Particulars
(in years)
Land and Land Improvements 20
Buildings and Other Structures 20
Infrastructure Asset 20
Machinery and Equipment 10
Transportation Equipment 8
Other Property, Plant and Equipment 10
Furnitures and Fixtures 10
Depreciation on assets is charged on a straight-line basis over the useful life of the asset.
Depreciation is charged at rates calculated to allocate cost or valuation of the asset less any
estimated residual value over its remaining useful life.
Residual value is estimated at 5% of the acquisition cost for the newly acquired PPE and
5% of the net carrying amount as of December 31, 2018 of the PPE acquired effective
CY 2014 and prior years.
Leased assets may consist of vehicles and machinery. The assets’ residual values and useful
lives are reviewed, and adjusted prospectively, if appropriate, at the end of each reporting
period. An asset’s carrying amount written down immediately to its recoverable amount, or
recoverable service amount if the asset’s carrying amount is greater than its estimated
recoverable amount or recoverable service amount. The Municipality derecognizes items of
property, plant and equipment and/or any significant part of an asset upon disposal or when
no future economic benefits or service potential is expected from its continuing use. Any gain
or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit
when the asset is derecognized.
Public Infrastructures were not previously recognized in the books. The Municipality availed
of the 5–year transitional provision for the recognition of the Public Infrastructure. For the first
year of implementation of the PPSAS, the Municipality will not recognize the Public
Infrastructure in the books of accounts.
14
3.5 Leases
Municipality of Patnanungan as a Lessee
Operating lease is a lease that do not transfer substantially all the risks and benefits incidental
to ownership of the leased item to the Municipality. Operating lease payments are recognized
as an operating expense in surplus or deficit on a straight-line basis over the lease term.
3.6 Intangible Assets
Intangible assets acquired separately are initially recognized at cost. The cost of intangible
assets acquired in a non-exchange transaction is their fair value at the date of the exchange.
Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and expenditure is reflected in
surplus or deficit in the period in which the expenditure is incurred. The useful life of the
intangible assets is assessed as either finite or indefinite. Intangible assets with a finite life
are amortized over their useful life. Software is amortized for 10-20 years.
Intangible assets with a finite useful life are assessed for impairment whenever there is an
indication that the asset may be impaired. The amortization period and the amortization
method, for an intangible asset with a finite useful life, are reviewed at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are considered to modify the amortization
period or method, as appropriate, and are treated as changes in accounting estimates.
The amortization expense on an intangible asset with a finite life is recognized in surplus or
deficit as the expense category that is consistent with the nature of the intangible asset.
Gains or losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and are
recognized in the surplus or deficit when the asset is derecognized.
3.7 Financial Instruments
Financial Assets
Initial Recognition and Measurement
Financial assets are classified as financial assets at fair value through surplus or deficit, loans
and receivables, held-to-maturity investments or available-for-sale financial assets, as
appropriate. The Municipality determines the classification of its financial assets at initial
recognition.
The Municipality’s financial assets include: cash and short-term deposits; trade and other
receivables; loans and other receivables and quoted and unquoted financial instruments.
Subsequent Measurement
The subsequent measurement of financial assets depends on their classification.
15
Financial Assets at Fair Value through Surplus or Deficit
Financial assets at fair value through surplus or deficit include financial assets held for trading
and financial assets designated upon initial recognition at fair value through surplus and
deficit. Financial assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term. Financial assets at fair value through surplus or
deficit are carried in the statement of financial position at fair value with changes in fair value
recognized in surplus or deficit.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. After initial measurement, such financial
assets are subsequently measured at amortized cost using the effective interest method, less
impairment. Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective interest rate.
Financial Assets Carried at Amortized Cost
For financial assets carried at amortized cost, the Municipality first assesses whether objective
evidence of impairment exists individually for financial assets that are individually significant,
or collectively for financial assets that are not individually significant.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities within the scope of PPSAS 29 are classified as financial liabilities at fair
value through surplus or deficit or loans and borrowings, as appropriate. The Municipality
determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings.
The Municipality Group’s financial liabilities include trade and other payables.
Subsequent Measurement
The measurement of financial liabilities depends on their classification.
Financial Liabilities at Fair Value through Surplus or Deficit
Financial liabilities at fair value through surplus or deficit include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
surplus or deficit.
16
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the
consolidated statement of financial position if there is a currently enforceable legal right to
offset the recognized amounts, and there is an intention to settle on a net basis, or to realize
the assets and settle the liabilities simultaneously.
Fair Value of Financial Instruments
The fair value of financial instruments that are traded in active markets at each reporting date
is determined by reference to quoted market prices or dealer price quotations (bid price for
long positions and ask price for short positions), without any deduction for transaction costs.
3.8 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call and
highly liquid investments with an original maturity of three months or less, which are readily
convertible to known amounts of cash and are subject to insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents
consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
3.9 Changes in Accounting Policies and Estimates
The Municipality recognizes the effects of changes in accounting policy retrospectively.

The effects of changes in accounting policy are applied prospectively if retrospective
application is impractical.
The Municipality recognizes the effects of changes in accounting estimates prospectively by

including in surplus or deficit.
3.10 Related Parties
The Municipality regards a related party as a person or an entity with the ability to exert control
individually or jointly, or to exercise significant influence over the Municipality, or vice versa.
Members of key management are regarded as related parties and comprise the Mayor and
Vice-Mayor, Sanggunian Bayan Members, Committee Officials and Members, Accountant,
Treasurer, Budget Officer, General Services and all Chiefs of Departments/Divisions.
3.11 Budget Information
The annual budget is prepared on the modified cash basis, that is, all planned costs and
income are presented in a single statement to determine the needs of the Municipality. As a
result of the adoption of the modified cash basis for budgeting purposes, there are basis,
timing or entity differences that would require reconciliation between the actual comparable
amounts and the amounts presented as a separate additional financial statement in the
Statement of Comparison of Budget and Actual Amounts. Explanatory comments are
provided in the Notes to Financial Statements; first, the reasons for overall growth or decline
in the budget are stated, followed by details of overspending or under spending on line items.
17
3.12 Significant Judgments and Sources of Estimation Uncertainty
Judgments
In the process of applying the Municipality’s accounting policies, Management has made
judgments, which have the most significant effect on the amounts recognized in the
consolidated financial statements.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty
at the reporting date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are described below.
The Municipality based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. However, existing circumstances and
assumptions about future developments may change due to market changes or
circumstances arising beyond the control of the Municipality. Such changes are reflected in
the assumptions when they occur.
Useful Lives and Residual Values
The useful lives and residual values of assets are assessed using the following indicators to
inform potential future use and value from disposal:
a) The condition of the asset based on the assessment of experts employed by the
Municipality;
b) The nature of the asset, its susceptibility and adaptability to changes in technology and
processes;
c) The nature of the processes in which the asset is deployed; and
d) Changes in the market in relation to the asset.
Impairment of Non-Financial Assets - Non-Cash Generating Assets
The Municipality reviews and tests the carrying value of non-cash-generating assets when
events or changes in circumstances suggest that there may be a reduction in the future
service potential that can reasonably be expected to be derived from the asset. Where
indicators of possible impairment are present, the Municipality undertakes impairment tests,
which require the determination of the fair value of the asset and its recoverable service
amount. The estimation of these inputs into the calculation relies on the use estimates and
assumptions.
Any subsequent changes to the factors supporting these estimates and assumptions may
have an impact on the reported carrying amount of the related asset.
18
Note 4 - Cash and Cash Equivalents
2018 2017
Cash Local Treasury 1,415,552.31 2,753,514.22
Cash in Banks - Local Currency:
Current Account 35,251,174.41 28,493,528.67
Total 36,666,726.72 31,247,042.89
Cash Local Treasury account represents collections during the previous calendar years and
year 2018 reflected in the subsidiary ledger.
Cash in Bank - Local Currency, Current Account are deposits maintained in two depository
banks, namely: Land Bank of the Philippines (LBP) and Development Bank of the Philippines
(DBP), Lucena Branch. Accounts being maintained in LBP are collections from all sources
such as Internal Revenue Allotment (IRA), funds from National Government Agencies (NGAs)
and local collections are deposited intact and releases/transfers are originated, while DPB
current account is being maintained for other transactions held in trust.
Cash in banks earn interest based on the prevailing bank deposit rates. Short-term deposits
are made for varying periods, depending on the immediate cash requirements of the
Municipality and earn interest at the respective short-term deposit rate.
Note 5 - Receivables
2018 2017
Loans and Receivables:
Real Property Tax Receivables 7,028,431.70 7,523,066.68
Special Education Tax Receivables 7,028,431.70 7,550,578.75
Accounts Receivables 2,121.15 0.00
Loans Receivable - Others 66,500.00 66,500.00
Inter-Agency Receivables:
Due from National Government Agencies 300.00 0.00
Intra-Agency Receivables:
Due from Other Funds 4,469,356.91 12,680,640.41
Advances
Advances for Operating Expenses 146,789.76 10,000.00
Advances for Payroll 112,811.17 9,526.60
Advances to Special Disburing Officer 2,310,933.05 131,613.00
Advances to Officers and Employees 96,332.55 202,428.55
Other Receivables
Receivables-Disallowances/Charges 627,121.73 627,121.73
Due from Officers and Employees 18,673,582.15 18,705,201.13
Other Receivables 69,641.66 65,790.54
Total 40,632,353.53 47,572,467.39
19
As at December 31, 2018, the ageing analysis of current exchange receivable is as follows:
Neither past Past due not impaired
due nor
Receivables Total impaired <30 days 30-60 days >60 days
Real Property Tax Receivable 7,028,431.70 7,028,431.70
Special Education Tax Receivable 7,028,431.70 7,028,431.70
Accounts Receivable 2,121.15 2,121.15
Loans Receivable - Others 66,500.00 66,500.00
Due from NGAs 300.00 300.00
Due from Other Funds 4,469,356.91 4,469,356.91
Advances for Operating Expenses 146,789.76 146,789.76
Advances for Payroll 112,811.17 112,811.17
Advances to Special Disbursing Officer 2,310,933.05 2,310,933.05
Advances to Officers and Employees 96,332.55 96,332.55
Receivables-Disallowances/Charges 627,121.73 627,121.73
Due from Officers and Employees 18,673,582.15 18,673,582.15
Other Receivables 69,641.66 69,641.66
40,632,353.53 112,811.17 2,554,055.36 37,965,487.00
Note 6 - Property, Plant and Equipment

Balance Addition/ Balance
12/31/2017 (Reduction) 12/31/2018
General Fund
Land 311,520.00 0.00 311,520.00
Road Networks 1,425,281.28 0.00 1,425,281.28
Power Supply Systems 722,616.34 25,600.00 748,216.34
Seaport Systems 297,030.00 0.00 297,030.00
Buildings 3,852,764.27 0.00 3,852,764.27
School Buildings 2,180,655.44 0.00 2,180,655.44
Hospitals and Health Centers 207,447.76 0.00 207,447.76
Other Structures 237,527.00 0.00 237,527.00
Machinery 351,325.00 0.00 351,325.00
Office Equipment 2,940,577.21 362,911.17 3,303,488.38
Information and Communication
Technology Equipment 2,945,967.89 227,526.00 3,173,493.89
Communication Equipment 675,825.00 80,910.00 756,735.00
Construction and Heavy 0.00
Equipment 16,962,803.00 16,962,803.00
Medical Equipment 261,600.00 0.00 261,600.00
Technical and Scientific
Equipment 18,000.00 0.00 18,000.00
Printing Equipment 15,070.00 0.00 15,070.00
Other Machinery and Equipment 625,505.40 0.00 625,505.40
Motor Vehicles 1,158,714.18 0.00 1,158,714.18
Watercrafts 615,094.10 0.00 615,094.10
Other Transportation Equipment 66,588.00 0.00 66,588.00
Furniture and Fixtures 953,747.24 222,390.58 1,176,137.82
Other Property, Plant and
Equipment 48,210.00 0.00 48,210.00
Construction in Progress - Buildings and
Other Structures 0.00 746,085.00 746,085.00
Total 36,873,869.11 1,665,422.75 38,539,291.86
Less: Accumulated Depreciation 18,515,411.38 21,229,737.00
Net Book Value - General Fund 18,358,457.73 17,309,554.86
20
Balance Addition/ Balance
12/31/2017 (Reduction) 12/31/2018
Special Education Fund
Office Equipment 0.00 66,088.00 66,088.00
Furniture and Fixtures 16,497.00 5,600.00 22,097.00
Construction in Progress - Buildings
and Other Structures 0.00 169,870.00 169,870.00
Sports Equipment 61,452.44 0.00 61,452.44
Total 77,949.44 241,558.00 319,507.44
Less: Accumulated Depreciation 11,673.74 33,283.88
Net Book Value - Special Education
Fund 66,275.70 286,223.56
Trust Fund
Office Equipment 0.00 48,000.00 48,000.00
Construction in Progress -
Infrastructure Assets 27,514.47 9,342,921.94 9,370,436.41
Construction in Progress -
Buildings and Other Structures 178,325.10 1,193,011.70 1,371,336.80
Total 205,839.57 10,583,933.64 10,789,773.21
Less: Accumulated Depreciation 0.00 0.00
Net Book Value - Trust Fund 205,839.57 10,789.773.21
Total Net Book Value 18,630,573.00 28,385,551.63
The Municipality measured the residual value of all items of property, plant and equipment,
but does not expect a residual value of these assets, because these will be utilized for their
entire economic lives and do not have a significant scrap value. During the current financial
year, the Municipality reviewed the estimated useful lives and residual values of property,
plant and equipment, where appropriate.
Note 7 - Financial Liabilities
2018 2017
Accounts Payable 2,545,628.45 12,990.56
Due to Officers and Employees 204,686.35 16,889.36
Total 2,750,314.80 29,879.92
Inter-Agency Payables
2018 2017
Due to BIR 1,025,440.33 1,217,494.78
Due to GSIS 5,583.14 9,185.61
Due to Pag-IBIG 5,255.91 1,379.86
Due to PhilHealth 66,059.89 (3,360.46)
Due to NGAs 11,065,730.64 3,483,886.94
Due to LGUs 13,589,086.36 14,125,794.90
Total 25,757.156.27 18,834,381.63
The first four accounts represent the amounts deducted from the salaries of officials and
employees and were remitted to the respective government agencies immediately on the
month following the month for which these were deducted. While the remaining accounts
represent balances of funds received by the Municipality for specific purposes.
21
Intra-Agency Payables
2018 2017
Due to Other Funds 11,441,463.59 8,042,837.75
Trust Liabilities
2018 2017
Trust Liabilities 144,047.63 13,275.20
Trust Liabilities - Disaster Risk Reduction and
Management Fund 10,318,877.02 11,569,220.42
Guaranty/Security Deposits Payable 881,248.02 608,242.96
Total 11,344,172.67 12,190,738.58
Local Disaster Risk Reduction Management Fund (LDRRMF)
The LDRRMF represents the amount set aside by the Municipality to support its disaster risk
management activities pursuant to RA No. 10121, otherwise known as the “Philippine Disaster
Risk Reduction and Management Act of 2010”. The amount available and utilized during the
year totaled P15,244,223.18 and P5,173,849.14, respectively, broken down as follows:
Particulars Available Amount Utilized Balance

Current Year Appropriation
Quick Response Fund 1,102,500.83 0.00 1,102,500.83
Mitigation Fund 2,572,501.93 302,808.00 2,269,693.93
Total 3,675,002.76 302,808.00 3,372,194.76
Continuing Appropriation
Special Trust Fund
CY 2013 1,769,523.98 0.00 1,769,523.98
CY 2014 1,791,315.44 1,160,158.14 631,157.30
CY 2015 1,932,779.66 1,546,297.00 386,482.67
CY 2016 2,586,015.19 1,999,900.00 586,115.19
CY 2017 3,489,586.15 164,686.00 3,324,900.15
Total 11,569,220.42 4,871,041.14 6,698,179.29
Total 15,244,223.18 5,173,849.14 10,070,374.05
Deferred Credits/Unearned Income

2018 2017
Deferred Real Property Tax Income 7,028,431.71 7,523,066.69
Deferred Special Education Tax 7,028,431.70 7,550,578.75
Total 14,056,863.41 15,073,645.44
Other Payables
2018 2017
Other Payables 124,957.44 48,898.90
This account represents deductions from officials and employees’ salary for payment of loan
to various lending agencies such as Land Bank of the Philippines, United Coconut Planters
Bank (UCPB) and Rural Bank of Mabitac which were remitted on or before January 10, 2019.
22
Note 8 - Tax Revenue
2018 2017
Individual and Corporation
Professional Tax 300.00 550.00
Community Tax Property 56,613.10 98,073.52
Real Property Tax - Basic 165,977.00 343,192.97
Discount on Real Property Tax - Basic (1,994.90) (11,164.76)
Special Education Tax 310,538.93 410,631.26
Discount on Special Education Tax (3,206.66) (11,164.76)
Real Property Transfer Tax 10,264.46 3,291.75
Goods and Services
Business Tax 27,532.93 119,042.94
Fines and Penalties
Fines and Penalties - Property Taxes 126,154.60 300,872.88
Total 692,179.46 1,253,325.80
Note 9 - Services and Business Income
2018 2017
Service Income
Permit Fees 41,941.67 136,617.30
Registration Fees 161,013.54 119,055.40
Clearance and Certification Fees 73,037.74 85,013.03
Franchising and Licensing Fees 11,867.00 26,370.00
Fishery Rental Fees 41,390.00 28,447.20
Fines and Penalties - Service Income 22,470.00 32,500.00
Other Service Income 22,085.00 7,052.07
Business Income
Seminar/Training Fees 0.00 26.00
Rent Income 6,530.00 5,375.00
Garbage Fees 5,990.00 19,385.00
Interest Income 22,223.03 33,117.67
Total 408,547.98 492,958.67
Note 10 - Personnel Services
2018 2017
Salaries and Wages
Salaries and Wages - Regular 18,059,040.76 16,010,862.19
Salaries and Wages - Casual/Contractual 808,333.62 560,975.02
Other Compensation
Personnel Economic Relief Allowance (PERA) 1,452,909.09 1,429,000.00
Representation Allowance (RA) 1,379,000.00 1,307,075.00
Transportation Allowance (TA) 1,379,000.00 1,307,075.00
Clothing/Uniform Allowance 341,000.00 280,000.00
Subsistence Allowance 98,900.00 113,750.00
Laundry Allowance 13,761.60 15,711.60
Productivity Incentive Allowance 300,500.00 555,500.00
23
2018 2017
Honoraria 536,346.98 296,340.00
Hazard Pay 194,212.33 232,532.47
Longevity Pay 0.00 585,000.00
Overtime and Night Pay 13,078.00 0.00
Year End Bonus 1,521,272.00 1,329,786.10
Cash Gift 298,500.00 283,000.00
Other Bonuses and Allowance 1,403,834.62 1,489,063.00
Personnel Benefits Contributions
Life and Retirement Insurance Contributions 2,255,072.67 2,088,953.25
Pag-IBIG Contributions 71,793.73 78,712.50
Philhealth Contributions 224,008.59 133,039.50
ECC Contributions 62,712.51 66,229.69
Other Personnel Benefits
Terminal Leave Benefits 543,277.50 1,824,657.53
Other Personnel Benefits 2,027,901.43 0.00
Total 32,984,455.43 29,987,262.85
Note 11 - Maintenance and Other Operating Expenses
2018 2017
Traveling Expenses
Traveling Expenses - Local 4,698,498.10 4,513,295.70
Traveling Expenses - Foreign 23,000.00 0.00
Training and Scholarship Expenses
Training Expenses 1,115,787.75 1,483,883.13
Supplies and Material Expenses
Office Supplies Expenses 547,478.86 555,373.22
Accountable Forms Expenses 23,204.50 32,050.50
Non-Accountable Forms Expenses 0.00 317.00
Food Supplies Expenses 101,666.50 0.00
Drugs and Medicines Expenses 814,503.68 803,700.35
Medical, Dental and Laboratory Supplies Expenses 174,918.97 125,094.00
Fuel, Oil and Lubricants Expenses 373,080.23 522,767.93
Agricultural and Marine Supplies Expenses 498,836.40 297,481.00
Military, Police and Traffic Supplies Expenses 19,587.35 0.00
Other Supplies and Materials Expenses 680,295.80 1,375,697.99
Utility Expenses
Water Expenses 30,527.11 37,885.69
Electricity Expenses 436,418.55 832,785.20
Communication Expenses
Postage and Courier Service 1,432.00 0.00
Telephone Expenses 707,799.00 660,830.86
Internet Subscription Expenses 93,952.13 85,127.86
Cable, Satellite, Telegraph and Radio Expenses 4,890.00 2,830.00
Awards/Rewards and Prizes
Prizes 104,450.00 248,100.00
Confidential, Intelligence and Extraordinary Expenses
Intelligence Expenses 90,000.00 33,000.00
Extraordinary Miscellaneous Expense 55,800.01 319,362.01
Total 10,596,126.94 11,929,582.44
24
Note 12 - Contracted Services
2018 2017
Professional Services
Auditing Services 3,016.00 11,109.00
Other Professional Services 25,500.00 311,400.00
General Services
Environmental/Sanitary Services 0.00 3,000.00
Janitorial Services 173,070.00 368,166.00
Security Services 364,000.00 282,300.00
Other General Services 5,180,531.13 5,148,670.63
Total 5,746,117.13 6,124,645.63
Note 13 - Repairs and Maintenance
2018 2017
Repairs and Maintenance - Infrastructure Assets 0.00 10,476.58
Repairs and Maintenance - Buildings and Other
Structures 128,172.00 160,063.00
Repairs and Maintenance - Machinery and Equipment 37,392.00 73,935.21
Repairs and Maintenance - Transportation Equipment 18,614.56 34,325.00
Repairs and Maintenance - Furniture and Fixtures 1,890.00 0.00
Repairs and Maintenance - Other Property, Plant and
Equipment 33,197.00 0.00
Total 219,265.56 278,799.79
Note 14 - Taxes, Insurance Premiums and Other Fees
2018 2017
Taxes, Duties and Licenses 2,629.06 9,195.93
Fidelity Bond Premiums 34,807.50 41,253.75
Insurance Expenses 0.00 19,962.38
Total 37,436.56 70,412.06
Note 15 - Other Maintenance and Operating Expenses
2018 2017
Advertising Expenses 400.00 0.00
Printing and Publication Expenses 12,091.00 15,869.50
Representation Expenses 3,850.00 159,198.00
Transportation and Delivery Expenses 25,320.00 74,417.05
Rent Expenses 162,400.00 106,415.00
Membership Dues and Contributions to Organization 357,000.00 56,660.00
Subscriptions Expenses 0.00 630.00
Donations 458,361.50 476,505.00
Other Maintenance and Operating Expenses 1,809,988.59 1,145,683.75
Total 2,829,411.09 2,035,378.30
25
Note 16 - Financial Expenses
2018 2017
Interest Expenses 0.00 11,867.05
Bank Charges 33,930.00 18,100.00
Total 33,930.00 29,967.05
Note 17 - Non-Cash Expenses

2018 2017
Depreciation - Buildings and Other Structures 228,728.12 214,577.35
Depreciation - Machinery and Equipment 2,152,071.74 2,051,362.03
Depreciation - Transportation Equipment 191,377.06 191,377.06
Depreciation - Furniture, Fixtures and Books 109,603.51 92,406.97
Depreciation - Other Property, Plant and Equipment 3,763.80 3,763.80
Total 2,685,544.23 2,553,487.21
Note 18 - Transfers, Assistance/Subsidy From
2018 2017
Financial Assistance/Subsidy From
Subsidy from Local Government Unit 0.00 20,000.00
Transfers From
Transfers from General Fund of LGU
Counterpart/Equity Share 0.00 510,081.22
Transfers from General Fund of Unspent DRRMF 0.00 1,255,704.00
Total 0.00 1,785,785.22
Note 19 - Transfers, Assistance and Subsidy To
2018 2017
Financial Assistance/Subsidy To
Subsidy to NGAs 130,350.00 140,880.00
Subsidy to Other LGUs 818.14 0.00
Subsidy to Other Funds 50,000.00 0.00
Subsidies - Others 2,561,902.56 729,315.00
Total 2,743,070.70 870,195.00
Transfers To
Transfers of Unspent Current Year DRRM
Funds to the Trust Fund 0.00 0.00
Transfers for Project Equity Share/LGU Counterpart 195,176.00 16,896,522.00
Total 195,176.00 16,896,522.00
26
Note 20 - Reconciliation of Net Cash Flows from Operating Activities to Surplus/(Deficit)
2018 2017
Net Income (2,445,347.76) 514,635.56
Add: Depreciation Expense 2,685,544.23 2,553,487.21
Prior Period adjustments affecting cash 23,484.39 (59,217.63)
(Increase)/Decrease in Receivables 6,940,113.86 943,130.34
(Increase)/Decrease in Current Assets (500,773.69) 1,520,144.29
Increase/(Decrease) in Payables 11,254,545.96 4,381,146.87
Net Cash Flow Provided by (Used In)
Operating Activities 17,957,566.99 9,853,326.64
Note 21 – Reconciliation between Actual Amounts on a Comparable Basis as Presented

in the Statement of Comparison of Budget and Actual Amounts and in the
Statement of Financial Performance
Maintenance
and Other
Personal Operating Financial
Income Services Expenses Expenses Capital Outlay
Comparison Statement of Budget and Actual 73,684,207.31 32,343,429.28 20,461,468.36 0.00 1,195,916.89
Entity Differences
Basis Differences
Income not considered budgetary items
Transfers (18,437,467.68)
Budgetary items not considered as expenses
Capital Expenditures
Expenses not considered as budgetary items 735,328.06
Transfers (2,752,646.70)
Interest Expenses capitalized
Capital Expenditures (1,665,422.75)
Timing Differences 1,676,073.62 469,505.86
Consumed Inventories and deferred charges
charged to prior period appropriations
Previous year's unliquidated cash advances
included in current year expenses
Unliquidated cash advances charged to
current appropriations (94,301.91) (103,050.00)
Per Statement of Financial Performance 55,246,739.63 32,984,455.43 19,281,845.28 0.00 0.00
Maintenance
and Other
Personal Operating Financial
Special Education Fund Income Services Expenses Expenses Capital Outlay
Comparison Statement of Budget and Actual 371,900.83 0.00 332,112.00 0.00 241,558.00
Entity Differences
Basis Differences 6,545.42
Income not considered budgetary items
Transfers
Budgetary items not considered as expenses
Capital Expenditures
Expenses not considered as budgetary items
Transfers (185,600.00)
Interest Expenses capitalized
Capital Expenditures (241,558.00)
Timing Differences
Previous year's unliquidated cash advances
included in current year expenses
Unliquidated cash advances charged to
current appropriations
Per Statement of Financial Performance 378,446.25 0.00 146,512.00 0.00 0.00
27
PART II – AUDIT OBSERVATIONS AND
RECOMMENDATIONS
AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. Financial and Compliance Audit
unreliable because the Municipal Treasurer was unable to submit accounts,
reports and accounting records prior to August 2004, contrary to Section 122 of
Presidential Decree (PD) No. 1445.
Section 122 of PD No. 1445 provides that “Whenever deemed necessary in the
exigencies of the service, the Commission may under regulations issued by it require
the agency heads, chief accountants, budget officers, cashiers, disbursing officers …
to submit trial balances, physical inventory reports, … and such other reports as may
be necessary for the exercise of its functions”.
The corresponding penal provision for the above law was stated under Article 218 of
the Revised Penal Code, thus: “Any public officer, whether in the service or separated
therefrom by resignation or any other cause, who is required by law or regulation to
render account to the Auditor General or to a provincial auditor and who fails to do so
for a period of two months after such accounts should be rendered, shall be punished
by prison correctional in its minimum period, or by a fine ranging from P200.00 to
P6,000.00 or both.”
The Municipality of Patnanungan, Quezon has been known to have incomplete

accounting records and reports since the former Municipal Treasurer and the Assistant
Municipal Treasurer failed to render accounts and records of transactions covering the
period July 1999 to July 2004. The Management had in their possession, records
beginning from August 2004 only. Audit recommendations have always been centered
on the possible recovery of records and the institution of legal action against the erring
officials.
For the period July 1999 to July 2004, the following are the only available records and
documents:
Documents/Records Period Covered Date Submitted to COA

Disbursement Vouchers January to May 2002 February 5, 2003
Disbursement Vouchers June to August 2002 February 17, 2003
Payrolls January to June 2002 February 17, 2003
Consequently, assets, liability and equity account balances presented in the

Statement of Financial Position as of December 31, 2018, totaling P106,496,135.25,
P65,474,928.18 and P41,021,207.07, respectively, are not reliable since the bases of
the beginning balances were doubtful as also noted in the previous years’ Annual Audit
Reports (AARs).
During the exit conference for Calendar Year (CY) 2016 audit of accounts conducted
on June 9, 2017, the Municipal Treasurer reiterated the dismissal of the Criminal Case
No. 2937 charged against him for Violation of Article 218 of the Revised Penal Code
or Failure of Accountable Officer to render accounts, granting the demurrer to
evidence.
28
Relative to the comments of the Municipal Treasurer, the Audit Team emphasized that
the audit observation cannot be a subject for dismissal since it requires specific action
from the Management. The Commission on Audit or its representative, may require
disbursing officers, among others, to submit reports as may be necessary for the
exercise of its functions as stated in Section 122 of PD No. 1445. As such, the above
observation stays until the required accounts, reports and accounting records prior to
August 2004 have been provided/submitted by the Municipal Treasurer.
It was learned through the Municipal Accountant that a follow-up letter was sent to the
relieved Municipal Treasurer by the Municipal Mayor on November 16, 2018 requiring
him to submit the documents evidencing municipal transactions prior to August 2004,
however the concerned accountable officer has not yet replied.
The lack of cooperation among management officials has caused significant delay in
retrieving and/or reconstructing, if possible, the missing records and documents as
previously recommended by the Audit Team.
Although the Municipal Accountant prepared and submitted the Statement of Financial
Position as of December 31, 2018, the Audit Team could not rely on the correctness
of the balances as these continue to change while reconciliation progressed. Due to
such circumstance, we could not render an opinion on the fairness of the presentation
of the Statement of Financial Position and the Statement of Cash Flows for the year
ending December 31, 2018.
We reiterated our recommendation that the Municipal Mayor oblige the

Municipal Treasurer to submit the accounts, reports and accounting records
prior to August 2004 as basis to determine the correct balances of the accounts
in the financial statements.
Management’s Comment:
The Municipal Mayor committed to furnish the Audit Team with a copy of the follow-up
letter sent to the relieved Municipal Treasurer requiring the submission of the
necessary accounts and accounting records.
Auditor’s Rejoinder:
Management’s comments were duly noted. However, we shall be following up the

status of the implementation to ensure compliance with the audit recommendation.

Receivables (Due from Officers and Employees), relieved Municipal Treasurer
and the previous Assistant Municipal Treasurer, amounting to P13,231,122.39
and P262,886.69, respectively.
As reported in the previous Annual Audit Reports (AARs), the relieved Municipal
Treasurer and the previous Assistant Municipal Treasurer were found to be negligent
in their work, leaving behind considerable amount of unaccounted government funds.
29
Part of the unaccounted public funds was accounts receivable from the two
accountable officers, as follows:
1. Mr. Leovino V. Ayuma (relieved Municipal Treasurer)

Undocumented disbursements P 9,067,978.32
Unremitted GSIS premiums 4,163,144.07
Total P13,231,122.39
2. Ms. Nemia Alpuerto (previous Asst. Municipal Treasurer)

Unremitted withholding taxes P 262,886.89
The computation of undocumented disbursements was referred from the AAR for the
year ending December 31, 2005, to wit:
Internal Revenue Allotment P10,346,237.77

Add: Unpaid salaries of employees
January to June 2004 295,498.15
Total Accountability 10,641,735.92
Less: Documented disbursements
February to June 2004 1,573,757.60
Balance of Accountability, Dec. 31, 2004 P9,067,978.32
The balance of unremitted Government Service and Insurance System (GSIS) and
withholding taxes due from them was computed from GSIS and the Bureau of Internal
Revenue (BIR) latest billings with penalties as of December 31, 2006. For the year
2007 to date, the Municipality was able to remit to the GSIS its obligations.
The Treasury and Accounting officials still continue to retrieve and reconcile the
records left behind by the two accountable officers. However, it was noted that the
aforementioned accountabilities are not exactly the true and actual representation of
their accountabilities as accounting records during their incumbencies as Municipal
Treasurer and Asst. Municipal Treasurer of the Municipality (since July 1999) are not
complete.
It was embodied in the AAR for CY 2016 that the Municipal Treasurer questioned the
undocumented disbursements disclosed in the Audit Observation Memorandum
(AOM). He informed the Team with the following:
1. Receivables were recorded without adhering to the proper procedures; and
2. There are disbursements/encashments made without his knowledge during the

period he was relieved from Office.
He also informed the Audit Team that he sent a letter dated October 15, 2015 to the
previous Municipal Accountant requesting to effect necessary adjusting entries to drop
the receivables amounting to P13,231,122.39. The then OIC – Municipal Accountant
answered through letter dated November 23, 2015, informing that she cannot
immediately effect necessary adjusting entries because it involves a significant
amount and will be referred to the Commission on Audit. This was also his response
30
to the Memorandum dated June 29, 2015 issued by the previous Municipal Mayor
requiring him and Ms. Nemia Alpuerto to submit the Disbursement Vouchers with
supporting documents, Reports of Disbursements and all available records prior to
August 2004 transactions.
In response to the comments of the Municipal Treasurer, the Audit Team clarified that
contrary to the statement of the Municipal Treasurer, various disbursements were
made without proper documentation which have been the bases of the previous
Municipal Accountant to set up these receivables from the Municipal Treasurer.
The Audit Team emphasized that the audit recommendation does not demand any
payment from the Municipal Treasurer for his outstanding receivables but for him to
provide the documents needed to support the said disbursements in order to settle the
receivables, otherwise he will be obliged to pay in view of the absence of documents
to support the disbursements.
It is worthy to note that Mr. Leovino Ayuma, Municipal Treasurer, was relieved from
his duties per Regional Special Personnel Order (RSPO) No. 13-18 dated February 8,
2018, thus Ms. Zobelle Abeja was designated as the OIC – Municipal Treasurer.
Further, on January 14, 2019, the Regional Director, Bureau of Local Government
Finance (BLGF), issued RSPO No. 07-19 designating Mr. Roberto V. Elisan Jr., as
OIC – Municipal Treasurer of the Municipality.
Validation of the implementation of the prior years’ recommendations revealed that a

follow-up letter dated November 16, 2018 was sent by the Municipal Mayor to the
relieved Municipal Treasurer requiring the submission of the disbursement vouchers
and/or supporting documents to facilitate the reconciliation and to be able to account
the correct amount due from them. However, as of this writing, the Municipal Mayor
has not received any reply from the relieved Municipal Treasurer.
The Audit Team noted the continuous disregard of the concerned accountable officers
to provide the documents needed to support the said disbursements in order to settle
the receivables, thus balance of Due from Officers and Employees account still remain
unreliable as of December 31, 2018.
It may be mentioned that the two accountable officers were found guilty of fourteen
(14) counts of violation of Section 52(c) of Republic Act (RA) No. 8291 otherwise
known as the The Government Service Insurance System Act of 1997, and each of
the accused was sentenced to pay a fine of P5,000.00 for each count or a total of
P70,000.00 for all the fourteen cases as well as the costs of the suit. Partial payments
of the fine amounting to P60,000.00 each were made by the two accountable officers
on August 21, 2008.
We reiterated our recommendation that the Municipal Mayor require the

Municipal Accountant to exert efforts in retrieving records and documents such
as Check and Cash Disbursement Journals, General Journals and other
documents which were not submitted by the previous Municipal Accountants in
order to ascertain the real extent of their accountabilities.
31
We also reiterated the recommendation that the Municipal Mayor oblige the
Municipal Treasurer and the previous Assistant Municipal Treasurer to submit
the Disbursement Vouchers and supporting documents and the Reports of
Disbursements to facilitate reconciliation and to be able to account, once and
for all, the correct amount due from them.
letter sent to the relieved Municipal Treasurer instructing the submission of the
required documents and reports.
The Audit Team will continue to follow-up the status of the implementation to ensure
compliance with the audit recommendation.
3. The Property, Plant and Equipment (PPE) presented in the Financial Statements
totaling P9,042,847.17 (excluding Land, Infrastructure Assets, MDRRMC
Building, Senior Citizen Building, Construction and Heavy Equipment and
Construction in Progress) is not reliable as to existence and valuation due to
the non-submission of the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE) and non-maintenance of property cards and subsidiary
ledgers in the Accounting Office, in violation of Sections 119, 120 and 124 of the
Manual on the New Government Accounting System (MNGAS) for Local
Government Units (LGUs), Volume I.
The MNGAS for LGUs, Volume I, provides, among others, guidelines on the supply
and property management cited below:
“Section 119 – Property Records to be Maintained. – The General

Service Officer or the Local Treasurer, as the case maybe, shall
number each type of supplies and maintain Stock Cards per stock
number. He shall likewise maintain Property Cards per category of
property, plant and equipment.
Section 120 – Recording of Deliveries of Supplies or Property in the

Books of Accounts. – The Chief Accountant shall maintain Supplies
Ledger Cards per stock number; Property, Plant and Equipment Ledger
Cards for each category of assets; Real Property Ledger Cards for land.
Section 124 - The Local Chief Executive shall require periodic physical
inventory of supplies or property. Physical count of property, plant and
equipment by type shall be made annually and reported on the Report
on the Physical Count of Property, Plant and Equipment (RPCPPE).
This shall be submitted to the Auditor concerned not later than January
31 of each year.” (underscoring for emphasis)
32
The Municipality has a recorded PPE totaling P9,042,847.17 (excluding Land,
Infrastructure Assets, MDRRMC Building, Senior Citizen Building, Construction and
Heavy Equipment and Construction in Progress) with details as follows:
Type of Property, Plant and Equipment Amount

BUILDINGS AND OTHER STRUCTURES
Buildings P1,766,619.24
School Buildings 1,699,469.48
Hospitals and Health Centers 172,700.25
Other Structures 120,722.42
MACHINERY AND EQUIPMENT
Machinery 35,132.50
Office Equipment 2,286,924.34
Information and Communication Technology Equipment 1,192,949.84
Communication Equipment 279,405.67
Medical Equipment 173,376.00
Printing Equipment 15,070.00
Sports Equipment 47,625.64
Technical and Scientific Equipment 3,015.00
Other Machinery and Equipment 285,701.63
TRANSPORTATION EQUIPMENT
Motor Vehicles 160,099.84
Watercrafts 152,108.94
Other Transportation Equipment 37,549.41
FURNITURE, FIXTURES AND BOOKS
Furniture and Fixtures 605,792.18
OTHER PROPERTY, PLANT AND EQUIPMENT
Other Property, Plant and Equipment 8,584.79
TOTAL P9,042,847.17
In Calendar Year (CY) 2018, it was noted that the Municipality was able to conduct a
physical count of the properties, however the related RPCPPE was not submitted by
the General Services Office (GSO) Designate to the Audit Team. In addition, the GSO
Designate and the Municipal Accountant did not prepare the property cards and
subsidiary ledgers, respectively, thus rendering the above PPE account balances
unreliable as to existence and valuation.
The current Municipal Accountant informed that she has yet to prepare the required
Subsidiary Ledgers since she just assumed Office in December 2018. It was observed
that a lapsing schedule for PPE is being used in the Accounting Office as basis for
computing the depreciation.
We recommended that the Municipal Mayor require the GSO Designate to

prepare and submit immediately the pertinent inventory reports. Furthermore,
require the Municipal Accountant and the GSO Designate to prepare the
corresponding subsidiary ledgers and property cards, respectively, for all types
of properties and reconcile the same to establish the correct PPE balances and
to investigate and adjust any discrepancy that will be noted.
33
The GSO Designate committed to submit the inventory report as of December 31,
2018 to the Audit Team on June 13, 2019. Further, he requested from the Municipal
Mayor for an additional staff who will assist in the preparation of the property cards.
Management’s comments were duly noted. However, the Audit Team will continue to
follow-up the status of the implementation to ensure compliance with the audit
recommendations.

P3,233,572.29 could not be ascertained due to non-maintenance of Supplies
Ledger Cards (SLC) and stock cards and non-submission of Summary of
Supplies and Materials Issued (SSMI), contrary to Sections 114, 119 to 121 of the
Manual on the New Government Accounting System (MNGAS) for Local
Government Units (LGUs), Volume I, which were not made possible in the
absence of storage facility, thus the supplies were immediately issued to the
end users upon receipt of deliveries.
The pertinent provisions of the MNGAS for LGUs, Volume I for the accounting of
property provide:
“Section 114 - Perpetual Inventory Method - The Chief Accountant shall

maintain the perpetual inventory records comprising of Supplies Ledger
Cards (SLC) for each commodity/stock.
The General Services Officer or the Municipal Treasurer, as the case

maybe shall likewise maintain stock cards and property cards for
supplies; property, plant and equipment; and work animals in their
custody to account for the receipt and disposition of the same. The
balance per stock card/property cards should always reconcile with the
ledger cards of the accounting unit.
Section 119 - Property Records to be Maintained. - The General

Services Officer or the Local Treasurer, as the case maybe, shall
number each type of supplies and maintain Stock Cards per stock
number. He shall likewise maintain Property Cards per category of
property, plant and equipment.
Section 120 - Recording of Deliveries of Supplies or Property in the

Books of Accounts. - The Chief Accountant shall maintain Supplies
Ledger Cards per stock number; Property, Plant and Equipment Ledger
Cards for each category of assets; and Real Property Ledger Cards for
land.
Section 121 - Reporting on Issuance of Supplies/materials - The

General Services Officer or the Local Treasurer, as the case maybe,
shall consolidate weekly the RIS for which supplies and materials were
issued using the Summary of Supplies and Materials Issued (SSMI).
34
The SSMI together with the original copy of the RIS shall be submitted
to the Chief Accountant, who shall compute cost of supplies issued and
ending inventory using the moving average method. Based on the
SSMI, a JEV shall be prepared to record the expenditures using
appropriate expenditure accounts.”
The General Ledger showed the following supplies and materials expenses at year-
end:
Office Supplies Expenses P547,478.86

Accountable Forms Expenses 23,204.50
Food Supplies Expenses 101,666.50
Drugs and Medicines Expenses 814,503.68
Medical, Dental and Laboratory Supplies Expenses 174,918.97
Fuel, Oil and Lubrication Expenses 373,080.23
Agricultural and Marine Supplies Expenses 498,836.40
Military and Police Supplies Expenses 19,587.35
Other Supplies and Materials Expenses 680,295.80
P3,233,572.29
Validation of the previous year’s recommendation revealed that the stock cards and
SLCs were still not prepared and maintained by the GSO Designate and Municipal
Accountant, respectively. It can be noted that in the Annual Audit Report (AAR) for
CY 2017, they requested for an additional staff from the Municipal Mayor who will
perform such tasks, however their request was not yet acted upon.
Likewise, the GSO Designate was not able to provide the Municipal Accountant with
SSMI together with the original copy of the Requisition Issue Slip (RIS) which will be
the basis in recording the cost of supplies used during the year.
It was learned that the other reason for the non-implementation of the
recommendations is the lack of storage facility, thus supplies were immediately issued
to the end users upon receipt of deliveries.
In view of the conditions mentioned, the GSO Designate and the Municipal Accountant
were not able to implement the prior year’s recommendations, thus the supplies and
materials expenses reported in the Financial Statements totaling P3,233,572.29 could
not be ascertained.
We recommended that the Municipal Mayor instruct the:
 submit to the Municipal Accountant the Summary of Supplies and

Materials Issued together with the original copy of Requisition and
Issue Slip
b. Municipal Accountant to prepare and maintain Supplies Ledger Cards

(SLC)
35
We also recommended that provision for storage room/stock room be
considered in the Municipal Hall for deliveries of inventories to be held in stock.
The GSO Designate informed that he was provided with an additional staff last
January 2019, however the same was transferred to another Office and therefore, the
preparation of the stock cards for each type of supply did not push through.
He added that during a meeting with other department heads, he suggested that the
recording and monitoring of stock cards be made in each department which will be
consolidated and submitted to the Accounting Office.
The Municipal Mayor committed that an additional staff will be temporarily provided
while he requests for the creation of the GSO through the Sangguniang Bayan.
We retain our recommendations. Moreover, we emphasized the regulations

prescribing the use of perpetual inventory method in LGUs instead of the expense
method.
5. Cash advances totaling P2,666,866.53 remain unliquidated as of December 31,

2018 which includes long outstanding cash advances, in violation of COA
Circular No. 97-002, due to granting of additional cash advances even though
previous cash advances have not been liquidated, thus exposing the fund to
possible loss or misuse and understating the expenses accounts and
overstating the advances account by an amount equivalent to the unreported
disbursements.
Item 5.8 of COA Circular No. 97-002 dated February 10, 1997 provides that “All cash
advances shall be fully liquidated at the end of each year. Except for petty cash fund,
the AO shall refund any unexpended balance to the Cashier/Collecting Officer who will
issue the necessary official receipt.”
Item 8 of the same COA Circular further provides that, “It shall be the responsibility of
the Head of the Agency to ensure the proper granting, utilization and liquidation of all
cash advances in accordance with these rules and regulations”.
Review of the Financial Statements showed the following cash advances accounts
which were not liquidated as of December 31, 2018, although the purposes for which
these were granted had already been served:
General Fund SEF Trust Fund Total

Advances for Operating
Expenses P 45,625.76 P98,880.00 P2,284.00 P146,789.76
Advances for Payroll 112,811.17 0.00 0.00 112,811.17
Advances to Special
Disbursing Officer 1,096,198.05 0.00 1,214,735.00 2,310,933.05
Advances to Officers and
Employees 79,021.55 2,101.00 15,210.00 96,332.55
P1,333,656.53 P100,981.00 P1,232,229.00 P2,666,866.53
36
With reference to the Annual Audit Report (AAR) for CY 2017, it was observed that
there was a significant increase in the unliquidated cash advances of the Municipality
from P353,568.15 in CY 2017 to P2,666,866.53 in CY 2018.
Further verification of the account balances revealed that the reason for the noted
increase are the cash advances granted to the Special Disbursing Officer during the
year in the total amount of P2,310,933.05. These pertains to Social Pension of indigent
Senior Citizens of the Municipality and subsidy to Barangay Tanod which were only
liquidated in CY 2019.
Moreover, the remaining unliquidated cash advances of P355,933.48 refer to traveling

expenses of municipal employees, salaries and wages, labor expenses for various
infrastructure projects and long outstanding cash advances. It is worth-mentioning that
the Audit Team had sent demand letters dated January 24, 2019 to various municipal
employees with outstanding cash advances aged one to six years as of December 31,
2018, in compliance with Item 9.3.1 of COA Circular No. 97-002. To date, any proof of
liquidation or explanation from the concerned accountable officers was not yet
received by the Audit Team.
The grant of additional cash advances to various employees despite non-settlement

of their previous cash advances is not in accordance with the existing rules and
regulations, thus exposing the funds to possible loss or misuse and understating the
expenses accounts and overstating the advances account by an amount equivalent to
the unreported disbursements.
We recommended that the Municipal Mayor:
 require all the accountable officers to strictly comply with the provisions
of COA Circular No. 97-002 by immediately liquidating their cash
advances and refund any unexpended balance;
 instruct the Municipal Accountant to ensure that all cash advances are
fully liquidated at the end of the year and to allow the granting of
succeeding cash advance only when the previous one is fully liquidated;
and
 instruct the OIC - Municipal Treasurer to withhold the payment of any

money due to the concerned accountable officers with long outstanding
cash advances.
Henceforth, ensure the proper granting, utilization and liquidation of all cash
advances within the prescribed period in accordance with the existing rules and
regulations.
The Municipal Mayor committed to issue a Memorandum to concerned municipal

officials and employees with outstanding cash advances.
In addition, the Municipal Accountant committed to furnish the Audit Team with the
updated schedule of unliquidated cash advances.
37
Management’s comments were duly noted. However, the actual implementation of

what were committed to be undertaken will be monitored by the Audit Team.
6. The previous Municipal Accountant was unable to set up the Real Property Tax
(RPT) Receivable and Special Education Tax (SET) Receivable at the beginning
of the year, in violation of Section 20 of the Manual on the New Government
Accounting System (MNGAS) for Local Government Units (LGUs), Volume I,
due to non-submission of the certified list of taxpayers by the relieved Municipal
Treasurer, hence the RPT and SET Receivables accounts totaling
P14,056,863.40 as of December 31, 2018 are unreliable.
Section 20 of the MNGAS for LGUs, Volume I states that “RPT/SET Receivables shall
be established at the beginning of the year based on Real Property Tax Account
Register (RPTAR)/Taxpayer Index Card. At the beginning of the year, the Treasurer
shall furnish the Chief Accountant of a duly certified list showing the name of the
taxpayers and the amount due and collectible for the year. Based on the list, the Chief
Accountant shall draw Journal Entry Vouchers (JEV) to record the debit to RPT/SET
Receivables and crediting to Deferred RPT/SET Income.”
In the audit of prior years’ accounts, it was observed that the previous Municipal
Accountant was not able to set up the RPT and SET Receivables regularly due to the
non-submission of certified list of taxpayers by the Municipal Treasurer.
In this year’s audit for CY 2018 Annual Audit Report (AAR), it was learned that the
previous Municipal Accountant was not furnished again at the beginning of the year
with the certified list of taxpayers showing the amount due and collectible by the
relieved Municipal Treasurer, hence the balances of RPT and SET Receivables
accounts are unreliable as of December 31, 2018.
It is worthy to note that Mr. Leovino Ayuma, Municipal Treasurer, was relieved from
his duties per Regional Special Personnel Order (RSPO) No. 13-18 dated February 8,
2018, thus Ms. Zobelle Abeja was designated as the OIC - Municipal Treasurer.
During the exit conference conducted on May 21, 2018, the then OIC - Municipal
Treasurer informed the Audit Team that she had already submitted to the previous
Municipal Accountant on May 16, 2018 the required certified list of taxpayers.
However, verification of the submitted list of taxpayers disclosed that it only pertains
to CY 2017 data and does not include the total amount due and collectible for the year
2018.
We recommended that the Municipal Mayor require the current OIC - Municipal
Treasurer to submit to the current Municipal Accountant the certified list of
taxpayers showing the amount due and collectible for the year so that the
RPT/SET Receivables can be adjusted to reflect the correct balances as of
December 31, 2018.
38
The current OIC - Municipal Treasurer informed the Audit Team that he has already
submitted the certified list of taxpayers as of December 31, 2018 to the Accounting
Office last January 2019. He stated that it has been their practice to prepare the said
list at the end of the year reflecting the remaining balance of receivables which will be
forwarded to the Accounting Office.
Management’s comments were duly noted. The Audit Team reminded Management
of the proper procedures in establishing the correct RPT/SET Receivables at the
beginning of the year.
7. The Municipal Accountant was unable to prepare the necessary adjusting entry
on the difference in the amount of P6,972,106.68 between the Due from Other
Funds of P4,469,356.91 and its reciprocal account Due to Other Funds of
P11,441,463.59 as of year-end, due to the non-verification of the cause/s in the
unreconciled balances, thereby casting doubts on the accuracy of the recorded
transactions.
Section 112 of PD No. 1445 or the State Audit Code of the Philippines provides that:
“Each government agency shall record its financial transactions and

operations in conformity with the generally accepted Accounting
principles and in accordance with pertinent laws and regulations.”
Due from Other Funds and Due to Other Funds are reciprocal accounts that a debit
and credit to one account reciprocally requires corresponding debit and credit to the
other account.
Likewise, sound internal control dictates that the recording of transactions should be
subject to review systems to include the periodic reconciliation of accounts to ensure
accuracy of one set of records as against an independent set of documents.
Moreover, it is essential that accounting records are kept current, accurate and reliable
as they provide basis in the presentation of financial statements of the Municipality
needed for effective control of transactions and as a guide in management’s decision
process.
Analysis of the accounts as of December 31, 2018 disclosed a material discrepancy

of P6,972,106.68 between the Due from and Due to Other Funds, to wit:
Special
Education
Account General Fund Fund Trust Fund Total
Due from Other Funds P2,649,078.78 P163,533.00 P1,656,745.13 P4,469,356.91
Due to Other Funds 9,122,079.25 640,977.58 1,678,406.76 11,441,463.59
Difference P6,972,106.68
39
It was reported in the Annual Audit Report (AAR) for Calendar Year (CY) 2017 that the
Due from/Due to Other Funds reciprocal accounts and the Real Property Tax (RPT)
and Special Education Tax (SET) Receivables had a discrepancy of P4,637,802.66
and P27,512.07, respectively, in its year-end balances.
In CY 2018, it can be observed that the balance of RPT Receivable was already
reconciled with SET Receivable as the previous Municipal Accountant was able to
effect the necessary adjustments in the said balances. However, the Due from/Due to
Other Funds accounts remain unreconciled.
Interview with the current Municipal Accountant revealed that she has yet to perform
a detailed review to verify the causes of the discrepancy between the Due from/Due
to Other Funds due to time constraint since she just assumed office in December 2018.
She prioritized the closing of CY 2018 accounts and the preparation of the
corresponding Financial Statements. For this reason, the discrepancy was not
provided with necessary adjusting journal entries, thus affecting the accuracy and
reliability of the account balances.
We recommended that the Municipal Mayor require the current Municipal

Accountant to make a detailed review of the accounts to determine the causes
of the unreconciled balances and provide the necessary adjustments in the
books of accounts to present the correct balances of the affected accounts.
The Municipal Accountant concurred with the recommendation and committed to verify
the causes of the unreconciled balances and effect the adjustments on or before
August 31, 2019.
We requested that the Audit Team be furnished with a copy of the Journal Entry
Voucher (JEV) for the adjustments for our validation.
8. Unaccounted balance of P230,240.42 recorded under Due to NGAs account

which have been outstanding for more than two years were not reverted to the
Unappropriated Surplus of the General Fund, contrary to Section 98 of
Presidential Decree (PD) No. 1445, because the Municipal Mayor was unable to
send confirmation letters to National Government Agencies (NGAs), thus
casting doubt on the validity and reliability of the account balance presented in
the financial statements.
Section 98 of PD No. 1445 provides that payables outstanding for two years or more
and against no actual claim, administrative or judicial, has been filed or which is not
covered by perfected contracts on records may be reverted to Unappropriated
Surplus.
With reference to the previous years’ Annual Audit Report (AAR), the Due to NGAs
account under the Trust Fund still included an unaccounted balance of P230,240.42
representing untraceable balance which has been outstanding for more than two
years. The Municipal Mayor was not able to send confirmation letters to NGAs in order
40
to verify any unliquidated balances from the funds transferred to the Municipality which
he previously committed during the exit conference last May 21, 2018. As a result, the
unaccounted balance was not reverted to the Unappropriated Surplus of the General
Fund, thus casting doubt on the validity and reliability of the account balance presented
Due to the passage of time, legitimacy of the claims is questionable since NGAs or
any other source agency was unable to demand any claim or liquidation of the fund
and allowed the Municipality to be negligent in the performance of its duty to pay or
liquidate.
As regards prior year’s recommendation on the reversion of the unused balance of

Department of Health (DOH) - Tuberculosis Directly Observed Treatment,
Short-course (TB DOTS) in the amount of P470.09, the Municipal Nurse claimed that
the fund was already liquidated since the Municipality will not be granted with any
additional fund unless the previous transfer was liquidated. Further, she committed to
verify the Statement of Receipts and Disbursements and report to the Audit Team any
unliquidated balance. To date, the results thereof were not communicated to the Audit
Team.
We reiterated our recommendation that the Municipal Mayor instruct the

Municipal Accountant and OIC - Municipal Treasurer to revert to the
Unappropriated Surplus the unaccounted balance of Due to NGAs account of
P230,240.42 and submit to the Audit Team the proof of the liquidation of the
unused balance of DOH - TB DOTS of P470.09.
The Municipal Accountant and the OIC - Municipal Treasurer committed to revert to
the Unappropriated Surplus the amount of P230,240.42 on or before June 14, 2019.
We requested that a copy of the Journal Entry Voucher (JEV) be furnished to the Audit
Team for our validation.
9. Receivables of P146,569.74 which were not supported with details and

documentation remain in the books of accounts as of December 31, 2018 and
were not requested for write-off, in violation of COA Circular No. 2016-005, since
the Municipal Mayor was unable to request the Sangguniang Bayan through a
Resolution for his authority to file the request for write-off of these uncollectible
receivable accounts, thus rendering the account balance unreliable and
affecting its fair presentation in the financial statements.
COA Circular No. 2016-005 dated December 19, 2016 provides for the guidelines and
procedures on the write-off of dormant receivable accounts for fair presentation of
accounts in the Financial Statements, among them are as follows:
“8.2 The Head of the government entity shall file the request for
authority to write-off dormant receivable accounts, unliquidated
41
cash advances and fund transfers to the COA Audit Team Leader
(ATL) and/or Supervising Auditor (SA). No filing fee is required.
8.3 The request shall be supported by the following documents:
a. Schedule of dormant accounts by accountable

officer/debtor/government entity and by account, certified by
the accountant and approved by the Head of the government
entity.
b. Certified relevant documents validating the existence of the

conditions, as applicable, such as:
b.8 Certification by the responsible officials of the entity to the

effect that there are no records/documents available to
validate claim
b.9 Other justifications, like in the case of request for write-off due
to loss of documents, the circumstances of the loss should be
stated in the letter-request.”
Verification of the Financial Statements as of December 31, 2018 showed the following
balances of receivables:
Receivables
Loans Receivables - Others P66,500.00
Due from Other Funds - SEF 80,069.74
P146,569.74
As discussed in prior years’ Annual Audit Reports (AAR), these receivables were not
supported with details because the previous Municipal Accountants were unable to
prepare and maintain complete subsidiary ledgers during their term of office.
The absence of records and supporting documents that should have been turned-over
by the previous Municipal Accountants hindered the incumbent Municipal Accountants
in verifying the nature of the receivables. Likewise, the possibility that the said records
can be located is remote, thus the probability of collecting the receivables is nil as
there are no identified debtors from whom to collect the said amount.
In the Calendar Year (CY) 2017 AAR, the Municipal Mayor commented that he will
discuss with the Sangguniang Bayan the request for write-off of the uncollectible
receivables. A validation was made and it was noted that the Municipal Mayor was not
able to file the request for authority to write-off uncollectible receivable accounts which
rendered the Receivables of P146,569.74 unreliable and affecting its fair presentation
We recommended that the Municipal Mayor request the:
 Sangguniang Bayan for a Resolution to authorize him to file the request

for write-off of uncollectible receivables of P146,569.74; and
42
 Municipal Accountant to support the request for authority to write-off
uncollectible receivables following the guidelines and procedures
provided under COA Circular No. 2016-005.
The Municipal Mayor committed that they will file a request for write-off of the
uncollectible receivables with the COA.
The Audit Team shall be following up the status of the implementation to ensure
10. Collections totaling P1,415,552.31 remain undeposited as of December 31, 2018

since the relieved Municipal Treasurer was unable to deposit his collections
intact during his incumbency, in violation of Section 69(4) of Presidential Decree
(PD) No. 1445 and Section 32 of the Manual on the New Government Accounting
System (MNGAS) for Local Government Units (LGUs), Volume I, thereby
exposing government funds to risk of loss/misuse.
Section 69(4) of PD No. 1445 in consonance with Section 32 of the MNGAS for LGUs,
Volume I, provides that “The Treasurer/Cashier shall deposit intact all his collections
as well as all collections turned over to him by the collectors/tellers with the authorized
depository bank daily or not later than the next banking day.”
Under the Revised Rules on Administrative Cases in the Civil Service (RRACCS),
Simple Neglect of Duty is considered a less grave offense punishable by suspension
of one (1) month and one (1) day to six (6) months for first offense; and dismissal for
second offense.
The Financial Statements as of December 31, 2018 showed the following balances of
outstanding collections:
Fund Amount
General Fund P1,054,208.84
Special Education Fund 290,343.29
Trust Fund 71,000.18
P1,415,552.31
It was in the Annual Audit Report (AAR) for Calendar Year (CY) 2012 that an audit
observation relative to the undeposited collections was raised, however the relieved
Municipal Treasurer still was unable to deposit his collections with the authorized
depository bank, thus resulted to an accumulated undeposited collections at year-end
in the total amount of P1,415,552.31, details as follows:
Undeposited Collections, December 31, 2012 P3,020,940.30

CY 2013
Total Collections P5,175,586.92
Less: Deposits 4,365,527.52 810,059.40
43
CY 2014
Total Collections 3,891,297.09
Less: Deposits 2,306,244.88 1,585,052.21
Undeposited Collections, December 31, 2014 5,416,051.91
CY 2015
Less: Deposits 6,027,642.22
Adjustments 12,958.20 561,451.06
CY 2016
Less: Deposits 6,216,547.70 338,426.44
Less: Recorded cash shortage, May 14, 2014 4,462,467.39
Undeposited Collections, May 15, 2014 to
1,853,462.02
December 31, 2016
CY 2017
Less: Deposits 8,443,586.54 900,052.20
January 1, 2018 to February 28, 2018
Total Collections 0.00
Less: Deposits 550,695.50 (550,695.50)
Undeposited Collections, February 28, 2018 2,202,818.72
March 7, 2018 to December 31, 2018
Less: Deposits 15,235,797.18 (787,266.41)
Undeposited Collections, December 31, 2018 P1,415,552.31
On May 14, 2014, the previous Audit Team conducted an examination of the cash and
accounts of Mr. Leovino Ayuma, Municipal Treasurer, and Ms. Nemia Alpuerto,
Asst. Municipal Treasurer, and arrived at a shortage amounting to:
Nemia
Particulars Leovino Ayuma Alpuerto Total
Balance of accountability, May 14,
2014 P5,198,958.96 P956,901.97 P6,155,860.93
Cash and valid cash items 304,379.24 871,551.97 1,175,931.21
Shortage P4,894,579.72 P85,350.00 P4,979,929.72
The shortage of Mr. Leovino Ayuma included undeposited collections of

P4,462,467.39, details as follows:
Particulars Collections Cash Advances Total

Balance of accountability as shown
per cashbook on May 14, 2014 P4,522,730.85 P676,228.11 P5,198,958.96
Cash and valid cash items 60,263.46 244,115.78 304,379.24
Shortage P4,462,467.39 P432,112.33 P4,894,579.72
The Audit Team together with the municipal officials concerned, were furnished with a
copy of the Cash Examination Report last October 17, 2016 duly reviewed by the
Commission on Audit Regional Office No. IV-A, thereby effecting the recording of the
shortage by the OIC - Municipal Accountant.
44
It is worthy to note that the following developments happened over the years in
connection with the noted undeposited collections by the relieved Municipal Treasurer:
a. On September 8, 2014, the Office of the Deputy Ombudsman for Luzon issued a
Decision in OMB-L-A-13-0412 for a case filed by the Municipal Vice-Mayor and
members of the Sangguniang Bayan against Mr. Leovino V. Ayuma, regarding the
undeposited collections as of December 31, 2012 totaling P3,020,940.30,
rendering Mr. Ayuma guilty of Simple Neglect of Duty and meting the penalty of
suspension from office without pay for six (6) months pursuant to Section 10,
Rule II, Administrative Order No. 07, as amended by Administrative Order No. 17,
in relation to Section 25 of Republic Act (RA) No. 6770. As a result, Ms. Ana
Evangelista assumed office as the ICO - Municipal Treasurer from May 19, 2015
to November 19, 2015.
b. On December 28, 2015, a letter was sent by Mr. Romeo B. Limarag, former Audit
Team Leader, to Hon. Danteo M. Eusebio, former Municipal Mayor, recommending
for the immediate relief of Mr. Ayuma from his duties as the Municipal Treasurer.
However, no action was taken by the Municipality.
c. On October 3, 2016, letters addressed to Hon. Roderick M. Larita, Municipal

Mayor, Dir. Eduardo L. Del Rosario, Regional Director of Bureau of Local
Government Finance (BLGF) Region 4-A, and Ms. Marilou Manzano-Uy,
Provincial Treasurer, were sent by Dir. Janet D. Nacion, former Regional Director
of the Commission on Audit (COA) Regional Office No. IV-A, informing the
shortage on the accountabilities of the Municipal Treasurer and Asst. Municipal
Treasurer and requesting information on the action taken by their respective
Offices on the recommendation for relief from duties of the said accountable
officers.
d. On November 3, 2016, a letter was sent by Dir. Del Rosario in response to the
preceding letter dated October 3, 2016, furnishing copies of various
communications concerning the actions that were taken by his Office relative to
the cash shortage in the accountabilities of Mr. Ayuma. It was then answered by
Dir. Nacion through letter dated December 23, 2016, informing that the conduct of
cash examination of the cash and accounts of Mr. Ayuma was pursuant to the
provisions of Section 26 of PD No. 1445 and Item C of COA Memorandum
No. 2013-004, thus the audit findings pertaining to the cash shortage is not subject
for validation by Management since the Commission has the exclusive and final
authority to audit all claims due from or owing to the Government. Also, the Director
of the COA further informed that a referral was made to the Office of the Honorable
Deputy Ombudsman for Luzon recommending the filing of criminal and
administrative charges against Mr. Ayuma and Ms. Alpuerto.
e. On May 16, 2017, a letter was sent to Municipal Mayor Larita by Dir. Mario G.
Lipana, Officer-in-Charge of COA Regional Office No. IV-A, requesting for a written
explanation for the failure of the Municipality to implement the recommendation of
the Commission and for any update/development on the actions taken by the
Municipality.
45
f. On February 8, 2018, a Regional Special Personnel Order (RSPO) No. 13-18 was
issued by Dir. Del Rosario designating Ms. Zobelle Abeja, Local Treasury
Operations Officer III, Office of the Provincial Treasurer as Officer-In-Charge (OIC)
of the Office of the Municipal Treasurer and to transfer Office and accountabilities
of the regular Municipal Treasurer, in compliance with the recommendation of
Mr. Limarag, former Audit Team Leader on the relief of Mr. Ayuma from his duties
as the Municipal Treasurer. However, the said transfer was postponed due to the
non-appearance of Mr. Ayuma at the Municipal Treasury of Patnanungan, Quezon.
This resulted to issuance of another letter dated February 23, 2018 by the
Provincial Treasurer requesting for a representative from the COA to witness the
transfer of Office and accountabilities on March 6-9, 2018.
g. On March 7, 2018, the Provincial Treasurer’s Office (PTO) Team and the Audit
Team were informed by Mr. Manuel Dy, RCC II and Mr. Roberto Elisan Jr., RCC I/
Designate Disbursing Officer I, that Mr. Ayuma will not appear in the Office of the
Municipal Treasurer due to his pending protest on the RSPO. The PTO Team still
proceeded with the turn-over per instruction of the Provincial Treasurer. With this,
the Audit Team, in compliance with the Cash Examination Manual sealed the
room/premises of Mr. Leovino Ayuma as witnessed by the PTO Team, municipal
employees and a PNP representative.
In this year’s audit, it was observed that during the term of Ms. Abeja as the OIC -
Municipal Treasurer there was a significant decrease in the undeposited collections
from P2,753,514.22 in CY 2017 to P1,415,552.31 in CY 2018 since the total deposits
was greater by P787,266.41 compared to the total collections. Further analysis is yet
to be conducted pending the submission of additional documents to the Audit Team.
Moreover, as part of the Municipality’s effort to comply with last year’s

recommendation, the Municipal Mayor sent a letter dated November 16, 2018 to the
relieved Municipal Treasurer directing him to deposit all undeposited collections with
the authorized government depository bank. However, as of this writing, any reply has
not been received from the relieved Municipal Treasurer.
The continuous failure of the relieved Municipal Treasurer to deposit his collections
intact resulted in the exposure of government funds to risk of loss/misuse.
We reiterated our recommendation that the Municipal Mayor require the relieved
Municipal Treasurer to deposit intact with authorized government depository
banks (AGDBs) all undeposited collections as prescribed by Section 69(4) of
PD No. 1445 and Section 32 of the MNGAS for LGUs, Volume I.
letter instructing the relieved Municipal Treasurer to deposit immediately all
undeposited collections.
Management’s comments were duly noted. However, we shall be following up the

46
11. The year-end cash balances for Calendar Year (CY) 2018 totaling P35,760,615.34
were insufficient to pay the current liabilities resulting in a significant cash
overdraft of P14,794,021.70, in violation with Section 4(3) of Presidential Decree
(PD) No. 1445 and the Local Budgeting Manual, which was due to the utilization
of the trust collections/receipts or funds belonging to other government
agencies for specific purposes, thus indicating poor cash management by the
Municipality.
Section 4(3) of PD No. 1445 provides that, “Trust Funds shall be available and may
be spent only for the specific purpose for which the trust was created or the funds
received.”
As provided in the Local Budgeting Manual:
“xxx Cash programming must be able to:
a. facilitate the management of cash such that is available when it

is needed for payment of obligations and at the same time
optimize its utilization;
b. ensure that released advices of allotment are safely covered by

available cash and/or future collections; and
c. provide information to facilitate control of expenditures and

future planning of activities.” (underscoring supplied for
emphasis)
As of December 31, 2018, the cash accounts of the General Fund (GF) and Trust Fund
(TF) showed the balances of P14,822,613.87 and P20,938,001.47, respectively, or a
total of P35,760,615.34 which, per analysis, is very deficient to cover the total liabilities
at year-end of P50,554,637.04. Per computation, the Municipality incurred a total cash
deficit of P14,794,021.70, details as follows:
GF TF Total
Cash Local Treasury P1,054,208.84 P71,000.18 P1,125,209.02
Cash in Bank 13,768,405.03 20,867,001.29 34,635,406.32
Total Cash Available 14,822,613.87 20,938,001.47 35,760,615.34
Less: Current Liabilities
Financial Liabilities 2,749,354.80 960.00 2,750,314.80
Inter-Agency Payables 3,041,114.24 22,618,549.32 25,659,663.56
Intra-Agency Payables 9,122,079.25 1,678,406.76 10,800,486.01
Trust Liabilities 60,356.40 11,283,816.27 11,344,172.67
Total 14,972,904.69 35,581,732.35 50,554,637.04
Cash overdraft P(150,290.82) P(14,643,730.88) P(14,794,021.70)
Based on the above data, it is apparent that the Municipality had expended more than
its income during the year, thus, funds belonging to other government agencies and/or
funds received and set aside for specific purposes as listed above were utilized by the
Municipality for other purposes, contrary to the above-cited regulations.
47
In addition, the Municipality did not use the Advice of Allotment during CY 2018 which
is supposed to be the guide of concerned office/s as to the maximum amount it could
spend for each quarter, contrary to Section 8 of the New Government Accounting
System Manual which provides that:
“Accounting for Allotments. – Allotment is the authorization issued

by the Local Chief Executive (LCE) to a department/office of the
LGU, which allows it to incur obligations, for specified amounts,
within the appropriation ordinance. Allotments are released
quarterly based on the Work and Financial Plan and Request for
Release of Allotment. The Accountant, upon receipt of the Advice
of Allotment, shall enter the allotment in the RAAOs.”
Had the Municipality adopted an effective system of cash monitoring and

programming, this cash deficit could have been avoided.
We recommended the Municipal Mayor to require the:
a) Municipal Accountant to regularly monitor the available cash and to set

aside the cash pertaining to trust collections/receipts;
b) OIC - Municipal Treasurer to adopt strategies to intensify collections that

would improve the financial viability of the Municipality; and
c) the Municipal Budget Officer to use the Advice of Allotment (AA) in

releasing the allotment to serve as guide of concerned office/s as to the
maximum amount it could spend for the quarter and to coordinate with
the Municipal Accountant and OIC - Municipal Treasurer to determine the
financial capability of the Municipality to ensure that the issued AAs are
covered by available cash and/or future collections to avoid incurrence
of cash deficit.
We further recommended to adopt austerity measures in order to reduce/trim

down the expenditures so as not to hamper the services and priority projects
intended for the constituents.
While the Municipal Budget Officer explicated that the estimated income for CY 2018
was realized and it also corresponded the amounts appropriated for the year and the
OIC - Municipal Treasurer indicated that the Municipality has available cash, the
Municipal Budget Officer, the OIC – Municipal Treasurer and the Municipal Accountant
still committed to the Audit Team that they will reconcile their records and identify the
causes of the cash overdraft in the total amount of P14,794,021.70.
Management’s comments were duly noted. However, the Audit Team requested to be
provided with a copy of the reconciliation for review/audit and evaluation.
48
12. The list of all on-going government projects/programs/activities (PPAs) and
those that are to be implemented during the year and its monthly monitoring
report were not submitted to the Audit Team, in violation of COA Circular
No. 2013-004 dated January 30, 2013 due to the non-preparation of schedule by
the Office of the Municipal Engineer, thus objectives to promote good
governance through transparency and accountability, encourage public
participation and secure the right of the people to information on matters of
public concern at the least possible cost on public funds or most economically
effective means are not met.
COA Circular No. 2013-004 provides for the General Guidelines on the Information
and Publicity on Programs/Projects/Activities of Government Agencies.
Section 2.1. “At the beginning of the year, all government agencies shall
provide their respective assigned Supervising Auditors (SAs) and Audit
Team Leaders (ATLs) with a list of all on-going government
projects/programs/activities (“PPA”) and those that are to be
implemented during the year. The list shall include the project name;
implementing unit, office or division if it is not the agency as a whole;
brief description of the PPA; contractor or supplier, if any; mode of
procurements; funding source; cost or approved budget; project duration
including start and completion dates; and location. Other information on
the PPA may be requested by the SA or ATL anytime for audit
purposes.”
Also, Sections 3.1 and 3.2 of the same Circular states that:
“The Head of Agency shall inform its SA and ATL within ten days (10)
after the award of the infrastructure project or before the start of the
program/activity that the appropriate project signboards and/or public
notices are already posted, and the SA and ATL shall validate the
same.
Based on the data sourced from the monthly monitoring report

prepared by the agency and verified by the Technical Audit Specialist
of this Commission, the Project Status (in Annex “A”) should be
maintained as current as possible and updated…”
In the Annual Audit Report (AAR) for CY 2017, the Municipal Engineer committed to
immediately submit the reports to the Audit Team, however the same was not done.
In CY 2018, records showed that the Audit Team was still not provided with the list of
all on-going government PPA and those that are to be implemented during the year
as well as the monthly monitoring report due to the non-preparation of the schedule
by the Office of the Municipal Engineer, which is not in accordance with the existing
regulations, thus objectives to promote good governance through transparency and
accountability, encourage public participation and secure the right of the people to
information on matters of public concern at the least possible cost on public funds or
most economically effective means are not met.
49
Likewise, the Municipal Mayor was not able to inform the Auditors that the appropriate
project signboards and/or public notices were already posted within the prescribed
period for the validation of the latter.
We recommended that the Municipal Mayor require the Municipal Engineer to

prepare the schedule which will serve as basis for the list of all on-going
government projects/programs/activities (PPAs) and those that are to be
implemented during the year for submission to the Audit Team. Likewise, submit
the monthly monitoring report in compliance with the existing regulations.
The Municipal Engineer submitted the list of all on-going government

projects/programs/ activities for the 1st Quarter of CY 2019. He further committed to
submit the same regularly to the Audit Team.
The Audit Team shall be monitoring the status of the implementation to ensure
B. Status of Suspensions, Disallowances and Charges
As of December 31, 2018, the City had unsettled disallowances totaling P2,734,777.32,
as follows:
Balance as of Issued for Settled for Balance as of

December 31, CY 2018 CY 2018 December 31,
2017 2018
Notice of Suspension P 612,611.64 P0.00 P0.00 P 612,611.64
Notice of Disallowance 2,122,165.68 0.00 0.00 2,122,165.68
Total P2,734,777.32 P0.00 P0.00 P2,734,777.32
The balance of Receivables – Disallowances and Charges of P627,121.73 under the

General Fund was incurred prior to the effectivity of the RRSA.
C. Compliance with Tax Laws and Regulations
Tax laws and regulations were observed strictly by the Municipal Accountant. Records
showed that out of the total withheld taxes of P4,880,735.39, P3,855,295.06 were remitted
to the Bureau of Internal Revenue (BIR) during the year, and leaving an unremitted
amount of P1,025,440.33.
50
D. Gender and Development
13. Due to non-completion of Community-Based Monitoring System (CBMS),

the Municipality was unable to establish and maintain a GAD Database as
required under Sections 4.B and 4.E of PCW-DILG-DBM-NEDA Joint
Memorandum Circular (JMC) No. 2013-01, thus GAD programs/activities that
had been planned and implemented during the year totaling P3,121,370.08 may
not be responsive to the actual gender issues that need to be addressed in the
Municipality.
Section 4.B of PCW-DILG-DBM-NEDA JMC No. 2013-01 requires that LGUs, through
their Local Planning and Development Office (LPDO) shall spearhead the setting up
and maintenance of the GAD database to serve as basis for gender-responsive
planning, programming and policy formulation. The GAD Database, which can either
be manually operated or developed through software, shall form part of the overall
management information system (MIS) of the LGUs.
A Gender and Development (GAD) Database is a system that contains all sex-
disaggregated data and gender statistics derived from the ecological profile of the LGU
covering all aspects of local governance areas. The results of the Community Based
Monitoring System, the National Household Targeting System for Poverty Reduction
(NHTS-PR) and Local Governance Performance Management System (LGMPS) of
the LGU may form part of the GAD database. The LGU GAD Database should contain
the minimum GAD indicators matched with biophysical, socioeconomic, cultural and
built environment of the LGU Ecological Profile.
It was learned through an interview with the Municipal GAD Focal Person that the
Municipality was unable to establish the required GAD Database during CY 2018.
She informed the Audit Team that the Municipal Planning and Development
Coordinator (MPDC) is currently conducting a Community-Based Monitoring System
(CBMS) in partnership with the Department of the Interior and Local Government
(DILG) which will be used as GAD Database upon its completion. To date, they are
already finished with Module 1 of their CBMS which consists of four modules. For the
time being, they are using the sex-disaggregated data from the Municipal Social
Welfare and Development Office (MSWDO) and profile from the Rural Health Unit
(RHU) as GAD Database while waiting for the completion of their CBMS.
The establishment of a GAD Database is an important mechanism for effective

implementation of Magna Carta of Women as well as gender mainstreaming. In the
absence of this, strengthening of efforts through local ordinances in promoting
empowerment and gender responsive governance towards attainment of gender
equality cannot be fully attained. Similarly, GAD projects/activities that had been
planned and implemented during the year totaling P3,121,370.08 may not be
responsive to the actual gender issues that need to be addressed in the locality as
these were not properly identified.
We recommended that the Municipal Mayor require the Municipal Planning and
Development Coordinator to expedite the completion of Community-Based
Monitoring System that will establish/create a GAD Database that will assist the
gender-responsive planning, programming and policy formulation of the
Municipality.
51
The Municipal Mayor committed to furnish the Audit Team with a Memorandum
ordering the MPDC to comply with the recommendation.
The MPDC stated that a letter was sent to the Regional Director requesting for
technical assistance in the preparation of the CBMS, however any reply has not yet
been received.
Management’s comments were duly noted. The Audit Team requested to be furnished
with a copy of the said letter-request. We shall be following up the status of the
implementation to ensure compliance with the audit recommendations.
E. Official Development Assistance (ODA) Funded Projects
The Municipality was not a recipient of funds from Official Development Assistance.
F. Compliance with Government Service Insurance System (GSIS) Rules and

Regulations
14. Insurable properties of the Municipality were not covered with appropriate
property insurance with the Government Service Insurance System (GSIS) as
required in COA Circular No. 92-390 and Republic Act 656, due to the non-
appropriation of funds under the General Fund for CY 2018, thus leaving the
properties at risk of total loss without the right of indemnification.
Item 1.1.2 of COA Circular No. 92-390 dated November 17, 1992 provides that:
[A]ll insurable assets and properties of the Government are

adequately covered/insured with the General Insurance Fund of the
GSIS.
Item 3.1 of the same Circular provides that:
All Heads of national agencies, local government units and

government owned or controlled corporations shall be responsible
for the preparation and submission of the inventory of all insurable
physical assets.
Republic Act 656, otherwise known as the Property Insurance Law provides that:
Section 2. In order to indemnify or compensate the Government as

defined in this Act for any damage to, or loss of, its properties due
to fire, earthquake, storm, or other casualty there is hereby
established the “Property Insurance Fund”, which shall consist of all
moneys resulting from the liquidation of the insurance constituted
in section three hundred forty of the Revised Administrative Code
and from premiums and other incomes.
52
Section 4(c). “Property” includes vessels and craft, motor vehicles,
machineries, permanent buildings, properties stored therein, or in
buildings rented by the Government, or properties in transit.
Audit disclosed that insurable assets, such as buildings, machineries, equipment and
other property, plant and equipment were not covered with appropriate property
insurance with the GSIS.
The GSO Designate admitted that they were unable to apply for the property insurance
since the funds for the payment of such expense were not yet appropriated by the
Municipality during the year.
The above-stated condition exposes the Municipality’s properties to risk of loss or

damage in the event of fire, earthquake, floods or other fortuitous events without the
right of indemnification.
We recommended that the Municipal Mayor request from the Sangguniang

Bayan for the appropriation of funds under the General Fund necessary for the
payment of property insurance with the GSIS. Thereafter, require the GSO
Designate to ensure that all the insurable properties of the Municipality are
covered with appropriate insurance in compliance with the provisions of COA
Circular No. 92-390 and Republic Act No. 656.
The GSO Designate stated that he will request that funds be appropriated for the
payment of property insurance with the GSIS.
The Audit Team will monitor the implementation of the audit recommendation.
G. 20% Development Fund
15. The Municipality was unable to optimally utilize P8,285,336.03 or 55.79 per cent
of its total appropriations of P14,850,640.29 for the 20% Development Fund in
CY 2018, contrary to Section 5 of Department of Interior and Local Government
(DILG) and Department of Budget and Management (DBM) Joint Memorandum
Circular No. 2017-1 due to the delayed implementation of the developmental
projects since the bidding process started only at the end of the year, hence
depriving the constituents of the Municipality of the maximum benefits that
could be obtained therefrom.
Section 5 of the Joint Memorandum Circular No. 2017-1 of the DILG and DBM
provides that it is the responsibility of every local chief executive to ensure that the
20% Development Fund is optimally utilized to help achieve desirable socio-economic
development and environmental outcomes of the LGU.
In CY 2018, the Municipality of Patnanungan appropriated the total amount of

P14,850,640.29 for the 20% Development Fund.
53
Audit of the 20% Development Fund showed that only P6,565,304.26 or 44.21 per
cent of the total appropriations was utilized for the year, thus leaving a significant
unused amount of P8,285,336.03 or 55.79 per cent.
Interview with the Municipal Engineer disclosed that the Municipality was unable to
optimally utilize the 20% Development Fund for CY 2018 due to the delayed
implementation of the developmental projects since the bidding process started only
at the end of the year. He further stated that as of CY 2019, four out of seven projects
were already completed.
It was also reported in the Annual Audit Report (AAR) for CY 2017 that the unutilized
portion of the 20% Development Fund were CY 2015 projects that were not yet fully
completed due to the following reasons:
 retention fees were not yet claimed by contractors; and
 some projects were found to have unaccomplished portions upon inspection

by the Municipality’s Inspectorate Team and these remain unacted by the
contractors.
Verification revealed that these projects remain unfinished and are still part of the
unimplemented portion of the Continuing Appropriation under the development fund
as of December 31, 2018.
In view thereof, the constituents of the Municipality were deprived of the maximum
benefits or services that could have been obtained from the said development fund.
Likewise, economic development was hampered because this was not optimally
utilized by the Municipality for socio-economic development projects.
We recommended that the Municipal Mayor continually work for the optimal
utilization of the 20% Development Fund through the implementation of the
projects that will contribute to the development of the Municipality which will be
beneficial to its constituents.
The Municipal Engineer mentioned that the remaining projects under the Current
Appropriations of the 20% Development Fund are already being implemented and
scheduled to be completed before the end of the CY 2019.
Management’s comments were duly noted. The Audit Team shall be following up the
54
H. Local Disaster Risk Reduction and Management Fund
16. Expenditures charged to the 70% of the 2018 Municipal Disaster Risk Reduction
and Management Fund (MDRRMF) totaling P10,998.72 were not in accordance
with the guidelines of the National Disaster Risk Reduction and Management
Council (NDRRMC), Department of Budget and Management (DBM) and
Department of the Interior and Local Government (DILG) Joint Memorandum
Circular No. 2013-1, due to lack of proper identification and classification of
programs, projects and activities by the MDRRM Officer, thus did not address
the local needs for prevention, mitigation and preparedness.
Item 5 of the National Disaster Risk Reduction and Management Council (NDRRMC),
Department of Budget and Management (DBM) and Department of the Interior and
Local Government (DILG) Joint Memorandum Circular No. 2013-1 dated March 25,
2013 provides for the list of Projects and Activities for the Utilization of the LDRRMF.
Audit of the disbursements under the MDRRMF for CY 2018 disclosed that the total
amount of P10,998.72 pertaining to the payment of goods and gasoline used during
the Municipality’s Oplan Undas was not among those projects and activities allowed
to be charged against the 70% allocation of the MDRRMF.
It was observed that the lack of proper identification and classification of programs,
projects and activities to be charged under the calamity fund by the MDRRM Officer
caused the inclusion of non-calamity related activities, thus this did not address the
local needs for prevention, mitigation and preparedness.
We recommended that the Municipal Mayor instruct the MDRRM Officer to

properly identify and categorize programs, projects and activities that are to be
charged to MDRRMF and to utilize the fund strictly for calamity related activities
and stop the utilization of MDRRMF for activities other than those specified
under NDRRMC, DBM and DILG Joint Memorandum Circular.
The MDRRM Officer concurred with the recommendation and committed to utilize the
fund for calamity related activities.
The Municipal Budget Officer committed that the activities for Oplan Undas will be
funded under the General Fund – MOOE of the Office of the MDRRM.
Management’s comments were duly noted. However, the status of the implementation
of the recommendation will be monitored by the Audit Team.
I. Solid Waste Management
The Municipality implemented various ordinances on Solid Waste Management Program.

These ordinances include the regulation on prescribing penalties on the use and sale of
all single-use plastic bags in groceries, bakeries, eateries and others within the territorial
jurisdiction of the Municipality. Also, an ordinance requiring the segregation at source of
all household, institutional, industrial, and commercial waste and/or garbage into
biodegradable and non-biodegradable was implemented.
55
PART III – STATUS OF IMPLEMENTATION OF
PRIOR YEAR’S AUDIT RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS
As of December 31, 2018
Of the 22 audit recommendations embodied in the Calendar Year (CY) 2017 Annual Audit Report (AAR), two were fully implemented,
five was partially implemented and 15 were not implemented by the Municipality.
REASON FOR
MANAGEMENT’S STATUS OF PARTIAL/NON-
REFERENCE OBSERVATION RECOMMENDATIONS ACTION IMPLEMENTATION IMPLEMENTATION
2017 AAR, 1. Non-rendition of We reiterated our Not Implemented The continuous
Observation the records and recommendation that disregard of the
No. 1, page accountabilities the Municipal Mayor concerned
29 resulted in the require the Municipal accountable officers
unreliability of Accountant to exert in providing the
Receivables (Due efforts in retrieving documents needed
from Officers and records and documents to support the
Employees), such as Check and disbursements in
Municipal Cash Disbursement order to settle the
Treasurer and the Journals, General receivables.
former Assistant Journals and other
Municipal documents which were
Treasurer, not submitted by the
amounting to previous Municipal
P13,231,122.39 Accountants in order to
and P262,886.69, ascertain the real extent
respectively. of their accountabilities.
We also reiterated the Not Implemented Reiterated in Audit

recommendation that Observation No. 2,
the Municipal Mayor Page No. 29
oblige the Municipal
Treasurer and the
previous Assistant
Municipal Treasurer to
56
REASON FOR
submit the
Disbursement Vouchers
and supporting
documents and the
Reports of
Disbursements to
facilitate reconciliation
and to be able to
account, once and for
all, the correct amount
due from them.
2017 AAR, 2. The Balance We reiterated our Not Implemented The lack of
Observation Sheet accounts recommendation that cooperation among
No. 2, page of the the Municipal Mayor the management
31 Municipality as of oblige the Municipal officials.
December 31, Treasurer to submit the
2017 remained accounts, reports and Reiterated in Audit
unreliable due to accounting records prior Observation No. 1,
the failure of the to August 2004 as basis Page No. 28
Municipal to determine the correct
Treasurer to balances of the
submit accounts, accounts in the financial
reports and statements.
accounting
records prior to
August 2004,
contrary to
Section 122 of
Presidential
57
REASON FOR
Decree (PD) No.
1445.
2017 AAR, 3. The Property, We reiterated our Partially The GSO Designate
Observation Plant and recommendation that Implemented was not able to
No. 3, page Equipment the Municipal Mayor submit the Report on
33 presented in the require the General the Physical Count of
Financial Services Officer to Property, Plant and
Statements conduct physical Equipment.
totaling inventory of properties
P9,217,935.00 is and ensure that report
not reliable as to thereon is prepared and
existence and submitted.
valuation due to
failure of the Furthermore, require the Not Implemented With this new
Municipality to Municipal Accountant development, the
conduct physical and General Services Audit Observation is
inventory per type Officer to prepare the updated and
of property and corresponding presented anew in
use of lapsing subsidiary ledgers and Audit Observation
schedule instead property cards, No. 3, Page No. 32
of maintaining respectively, for all types
Subsidiary of properties and
Ledgers in the reconcile the same to
Accounting establish the correct
Office, in violation PPE balances and to
of Sections 119, investigate and adjust
120 and 124 of any discrepancy that will
the Manual on the be noted.
New Government
58
REASON FOR
Accounting
System
(MNGAS) for
Local
Government
Units (LGUs),
Volume I.
2017 AAR, 4. Cash advances We reiterated our

Observation totaling recommendation that
No. 4, page P353,568.15 the Municipal Mayor:
35 remained
unliquidated as of  require all the Not Implemented The granting of
December 31, accountable officers additional cash
2017, which to strictly comply with advances even
includes the provisions of though previous
unexpended COA Circular No. 97- cash advance have
balances of 002 by immediately not been liquidated
P65,959.60, in liquidating their cash resulted in the
violation of advances and refund unliquidated cash
Commission on any unexpended advances totaling
Audit (COA) balance; and P2,666,866.53 as of
Circular No. 97- December 31, 2018.
002, thus
exposing the fund  instruct the Municipal Not Implemented With this new
to possible loss or Accountant to ensure development, the
misuse and that all cash Audit Observation is
understating the advances are fully updated and
expenses liquidated at the end presented anew in
accounts and of the year and to
59
REASON FOR
overstating the allow the granting of Audit Observation
advances succeeding cash No. 5, Page No. 36
account by an advance only when
amount the previous one is
equivalent to the fully liquidated.
unreported
disbursements.
2017 AAR, 5. The Municipal We reiterated our Not Implemented The relieved
Observation Accountant failed recommendation that Municipal Treasurer
No. 5, page to set up Real the Municipal Mayor was unable to submit
36 Property Tax require the OIC - to the previous
(RPT) Receivable Municipal Treasurer to Municipal
and Special submit to the Municipal Accountant the list of
Education Tax Accountant the certified certified taxpayers
(SET) Receivable list of taxpayers showing with the amount due
due to non- the amount due and and collectible for
submission of the collectible for the year so CY 2018 at the
certified list of that the RPT/SET beginning of the
taxpayers by the Receivables can be year.
Municipal adjusted to reflect the
Treasurer, in correct balances as of With this new
violation of December 31, 2017. development, the
Section 20 of the Audit Observation is
MNGAS for updated and
LGUs, Volume I, presented anew in
hence the RPT Audit Observation
and SET No. 6, Page No. 38
Receivables
totaling
60
REASON FOR
P15,073,645.43
as of December
31, 2017 was
unreliable.
2017 AAR, 6. Supplies and We reiterated our

Observation Materials recommendation that
No. 6, page expenses for the Municipal Mayor
37 Calendar Year instruct the:
2017 totaling
P3,712,481.99 a. Municipal General
could not be Services Officer
ascertained due (MGSO) to:
to non-
maintenance of  maintain Not Implemented The MGSO and
supplies ledger complete stock Municipal
cards and stock cards per type of Accountant was
cards and non- supply; and unable to prepare
submission of and maintain stock
Summary of  submit to the Not Implemented cards and SLC, and
Supplies and Municipal non-submission of
Materials Issued Accountant the SSMI by the MGSO
(SSMI), contrary Summary of to the Municipal
to Sections 114, Supplies and Accountant due to
119 to 121 of the Materials Issued lack of storage
MNGAS for together with the facility resulting to
LGUs, Volume I. original copy of immediate issuance
Requisition and of supplies to the end
Issue Slip users upon receipt of
deliveries.
61
REASON FOR
b. Municipal Not Implemented With this new
Accountant to development, the
prepare and maintain Audit Observation is
Supplies Ledger updated and
Cards presented anew in
Audit Observation
No. 4, Page No. 34
2017 AAR, 7. Receivables of We reiterated our Not Implemented The Municipal Mayor
Observation P146,569.74 recommendation that was unable to
No. 7, page were not the Municipality request request from the
39 supported with for write-off of the Sangguniang Bayan
details and uncollectible receivables for his authority to file
documentation totaling P146,569.74 the request for write-
due to absence of from the Commission on off of the
records, contrary Audit in accordance with uncollectible
to Section 111(1) COA Circular No. 2016- receivables.
of Presidential 005 dated December 19,
Decree (PD) No. 2016. With this new
1445, casting development, the
doubt on the Audit Observation is
validity of the updated and
account balances presented anew in
as well as its Audit Observation
collectibility. No. 9, Page No. 41
2017 AAR, 8. Unaccounted We reiterated our Not Implemented The Municipal Mayor
Observation balance of recommendation that was unable to send
No. 8, page P230,240.42 the Municipal Mayor confirmation letters
40 recorded under instruct the Municipal to National
62
REASON FOR
Due to NGAs Accountant and OIC - Government
account which Municipal Treasurer to Agencies (NGAs).
have been revert to the National Likwise, the results
outstanding for Treasury the of verification for the
more than two unaccounted balance of unused balance of
years were not Due to NGAs account of P470.09 was not
reverted to the P230,240.42 and submitted to the
Unappropriated unused balance of DOH Audit Team.
Surplus of the - TB DOTS of P470.09.
National Reiterated in Audit
Treasury, Observation No. 8,
contrary to Page No. 40
Section 98 of
PD No. 1445,
thus these may
no longer
represent valid
claims and the
validity, existence
and correctness
of the balance of
the account
cannot be relied
upon.
2017 AAR, 9. Collections We reiterated our Not Implemented The continuous

Observation totaling recommendation that failure of the relieved
No. 9, page P2,753,514.22 the Municipal Mayor Municipal Treasurer
41 remained require the relieved to deposit his
undeposited as of Municipal Treasurer to remaining
63
REASON FOR
December 31, deposit intact with undeposited
2017 due to the authorized government collections.
continuous failure depository banks
of the relieved (AGDBs) all Reiterated in Audit
Municipal undeposited collections Observation No. 10,
Treasurer to as prescribed by Section Page No. 43
deposit his 69(4) of PD No. 1445
collections intact, and Section 32 of the
in violation of MNGAS for LGUs,
Section 69(4) of Volume I.
PD No. 1445 and
Section 32 of the
MNGAS for
LGUs, Volume I,
thereby exposing
government
funds to risk of
loss/misuse.
2017 AAR, 10. The year-end We recommended that The previous Partially The non-verification
Observation balance of the the Municipal Mayor Municipal Implemented of the cause/s in the
No. 10, page Real Property require the Municipal Accountant was unreconciled
46 Tax Receivable Accountant to reconcile able to effect balances by the
of P7,523,066.68 the balances of Real necessary current Municipal
showed Property Tax/Special adjustments for Accountant between
discrepancy of Education Tax Real Property Tax/ the Due from Other
P27,512.07 Receivables with the Special Education Funds and Due to
compared to the Taxpayer’s Index Card Tax Receivables Other Funds
Special and the Due from Other accounts. reciprocal accounts
Education Fund Funds with its reciprocal since she assumed
64
REASON FOR
of P7,550,578.75. account Due to Other office only in
Likewise, Due Funds and prepare the December 2018.
from Other Funds necessary adjusting
of entries to reflect the With this new
P12,680,640.41 correct balances of the development, the
does not accounts in the financial Audit Observation is
reconcile with its statements. updated and
reciprocal presented anew in
account Due to Audit Observation
Other Funds of No. 7, Page No. 39
P8,042,837.75 or
a difference of
P4,637,802.66,
thereby casted
doubts on the
accuracy of the
recorded
transactions.
2017 AAR, 11. Provincial and We reiterated our The OIC - Partially The remaining
Observation barangay shares recommendation that Municipal Implemented shares from RPT
No. 11, page from Real the Municipal Mayor Treasurer remitted and SET collections
47 Property Tax and instruct the the total amount of were remitted by the
Special OIC - Municipal P538,107.41 OIC - Municipal
Education Tax Treasurer and the during the year. Treasurer in January
collections Municipal Accountant to 2019.
totaling remit immediately to the
P671,961.85 as Provincial Government
of December 31, of Quezon and to the six
2017 were not
65
REASON FOR
remitted promptly barangays the year-end
to the Provincial balance of P671,961.85.
Government of
Quezon and to
the six barangays
of the
Municipality,
contrary to
Section 271(d) of
RA No. 7160 and
Section 36 of
COA Circular No.
92-382, depriving
the concerned
local government
units of the use of
said funds to
finance their
priority projects/
activities.
2017 AAR, 12. Cash advances We recommended that The Municipality Fully Implemented
Observation were granted to the Municipality stop the ensure that cash
No. 12, page an elected official granting of cash advances granted
48 for purposes advances to elected to elected officials
other than for officials for purpose are only for official
official traveling other than their official traveling
expenses totaling traveling expenses to expenses.
P60,609.32, in adhere strictly to the
violation of rules and regulations as
66
REASON FOR
Section 339 of required under Section
RA No. 7160 and 339 of RA No.
Items 4.1.4 and 8 7160 and Items 4.1.4
of COA Circular and 8 of COA Circular
No. 97-002, No. 97-002.
hence exposing
government
funds to risk of
loss or
misappropriation.
2017 AAR, 13. Only 42.63 We reiterated our Not Implemented The Municipality was
Observation percent or recommendation for the unable to optimally
No. 13, page P16,778,249.17 full utilization of the utilize the 20%
49 of the total 20% Development Fund Development Fund
appropriations of through the for CY 2018 due to
P39,358,761.40 implementation of the the delayed
for 20% projects that will implementation of
Development contribute to the the developmental
Fund was utilized development of the projects since the
in Calendar Year Municipality which will bidding process
2017, contrary to be beneficial to its started only at the
Department of constituents. end of the year.
Interior and Local
Government With this new
(DILG) and development, the
Department of Audit Observation is
Budget and updated and
Management presented anew in
(DBM) Joint
67
REASON FOR
Memorandum Audit Observation
Circular (JMC) No.15, Page No. 53
No. 2017-1,
hence depriving
the constituents
of the
Municipality of
the maximum
benefits that
could be obtained
therefrom.
2017 AAR, 14. The Municipality We reiterated our

Observation was not fully recommendation that
No. 14, page compliant with the Municipal Mayor:
51 the five basic
environmental  provide the The Municipality Fully Implemented
laws on necessary support in was able to
preserving and enjoining the facilitate the
protecting the barangays to construction of its
environment establish their own MRF during the
required under MRF; year.
RA No. 9003, the
Solid Waste  develop and operate Partially The Municipality
Management Act a sanitary landfill as Implemented awaits for the
of 2000 due to disposal site for approval of its
lack of wastes of the Environmental
awareness and Municipality; and Compliance
participation of Certificate (ECC) in
citizens, and lack order to start the
68
REASON FOR
of funds, thus development of the
may result in sanitary landfill.
negative impact
on the  strictly comply with Partially The Municipality has
environment and all other prescribed Implemented already submitted its
health of its procedures and 10-year Solid Waste
citizens. guidelines under RA Management Plan to
No. 9003. the Department of
Environment and
Natural Resources
(DENR), subject for
approval.
2017 AAR, 15. List of all on- We reiterated our Not Implemented The Office of the
Observation going recommendation that Municipal Engineer
No. 15, page government the Municipal Mayor was unable to
53 projects/ require the Municipal prepare the schedule
programs/ Engineer to submit the will serve as the
activities (PPA) list of all on-going basis for the list of all
for the 3rd and 4th government projects/ on-going
quarters of CY programs/activities government projects/
2017 and those (PPA) and those that are programs/activities
that are to be to be implemented and submit the same
implemented during the year. to the Audit Team.
during the year Likewise, submit the
and its monthly monthly monitoring With this new
monitoring report report in compliance development, the
were not with the existing Audit Observation is
submitted to the regulations. updated and
Audit Team, in presented anew in
69
REASON FOR
violation of COA Audit Observation
Circular No. No. 12, Page No. 49
2013-004 dated
January 30,
2013, thus
objectives to
promote good
governance
through
transparency and
accountability,
encourage public
participation and
secure the right
of the people to
information on
matters of public
concern at the
least possible
cost on public
funds or most
economically
effective means
are not met.
70
PART IV – ANNEXES
Annex 1
AAR page No. 5
Patnanungan, Quezon
Statement of Financial Position (By Fund)
As of December 31, 2018
Special
Total General Fund Education Fund Trust Fund
ASSETS
Current Assets
Cash and Cash Equivalents
Cash on Hand
Cash Local Treasury P 1,415,552.31 P 1,054,208.84 P 290,343.29 P 71,000.18
Cash in Bank-Local Currency
Cash in Bank -Local Currency, Current Account 35,251,174.41 13,768,405.03 615,768.09 20,867,001.29
Total Cash and Cash Equivalent 36,666,726.72 14,822,613.87 906,111.38 20,938,001.47
Receivables
Loans and Receivable Accounts
Accounts Receivable 2,121.15 2,121.15 0.00 0.00
Allowance for Impairment - Accounts Receivable 0.00 0.00 0.00 0.00
Real Property Tax Receivable 7,028,431.70 7,028,431.70 0.00 0.00
Allowance for Impairment - RPT Receivable 0.00 0.00 0.00 0.00
Special Education Tax Receivable 7,028,431.70 0.00 7,028,431.70 0.00
Allowance for Impairment - SET Receivable 0.00 0.00 0.00 0.00
Loans Receivables-Others 66,500.00 0.00 0.00 66,500.00
Allowance for Impairment - Loans Receivable-Others 0.00 0.00 0.00 0.00
Inter-Agency Receivables
Due from NGAs 300.00 300.00 0.00 0.00
Allowance for Impairment - Due from NGAs 0.00 0.00 0.00 0.00
Intra-Agency Receivables
Due from Other Funds 4,469,356.91 2,649,078.78 163,533.00 1,656,745.13
Advances
Advances for Operating Expenses 146,789.76 45,625.76 98,880.00 2,284.00
Advances for Payroll 112,811.17 112,811.17 0.00 0.00
Advances to Special Disbursing Officer 2,310,933.05 1,096,198.05 0.00 1,214,735.00
Advances to Officers and Employees 96,332.55 79,021.55 2,101.00 15,210.00
Other Receivables
Receivables - Disallowances/Charges 627,121.73 627,121.73 0.00 0.00
Due from Officers and Employees 18,673,582.15 17,709,306.63 613,397.69 350,877.83
Other Receivables 69,641.66 61,721.77 0.00 7,919.89
Total Receivables 40,632,353.53 29,411,738.29 7,906,343.39 3,314,271.85
Prepayments and Deferred Charges
Prepayments
Advances to Contractors 811,503.37 208,902.20 0.00 602,601.17
Total Prepayments and Deferred Charges 811,503.37 208,902.20 0.00 602,601.17
Total Current Assets 78,110,583.62 44,443,254.36 8,812,454.77 24,854,874.49
Non-Current Assets
Property, Plant and Equipment
Land
Land 311,520.00 311,520.00 0.00 0.00
Infrastructure Assets
Road Networks 1,425,281.28 1,425,281.28 0.00 0.00
Power Supply Systems 144,869.54 144,869.54 0.00 0.00
Seaport Systems 297,030.00 297,030.00 0.00 0.00
Buildings and Other Structures
Buildings 3,053,019.93 3,053,019.93 0.00 0.00
School Buildings 1,699,469.48 1,699,469.48 0.00 0.00
Hospitals and Health Centers 172,700.25 172,700.25 0.00 0.00
Other Structures 120,722.42 120,722.42 0.00 0.00
Machinery and Equipment
Machinery 35,132.50 35,132.50 0.00 0.00
Office Equipment 2,286,924.34 2,178,482.48 60,441.86 48,000.00
Information and Communication Technology Equipment 1,192,949.84 1,192,949.84 0.00 0.00
Communication Equipment 279,405.67 279,405.67 0.00 0.00
Construction and Heavy Equipment 4,219,874.74 4,219,874.74 0.00 0.00
Medical Equipment 173,376.00 173,376.00 0.00 0.00
Printing Equipment 15,070.00 15,070.00 0.00 0.00
Sports Equipment 47,625.64 0.00 47,625.64 0.00
Technical and Scientific Equipment 3,015.00 3,015.00 0.00 0.00
Other Machinery and Equipment 285,701.63 285,701.63 0.00 0.00
Transportation Equipment
Motor Vehicles 160,099.84 160,099.84 0.00 0.00
Watercrafts 152,108.94 152,108.94 0.00 0.00
Other Transportation Equipment 37,549.41 37,549.41 0.00 0.00
Special
Total General Fund Education Fund Trust Fund
Furniture, Fixtures and Books
Furniture and Fixtures 605,792.18 597,506.12 8,286.06 0.00
Construction in Progress
Construction in Progress - Infrastructures Assets 9,370,436.41 0.00 0.00 9,370,436.41
Construction in Progress - Buildings and Other Structures 2,287,291.80 746,085.00 169,870.00 1,371,336.80
Other Property, Plant and Equipment
Other Property, Plant and Equipment 8,584.79 8,584.79 0.00 0.00
Total Property, Plant and Equipment 28,385,551.63 17,309,554.86 286,223.56 10,789,773.21
Total Non-Current Assets 28,385,551.63 17,309,554.86 286,223.56 0.00
TOTAL ASSETS P 106,496,135.25 P 61,752,809.22 P 9,098,678.33 P 35,644,647.70
LIABILITIES
Current Liabilities
Payables
Accounts Payable P 2,545,628.45 P 2,545,628.45 P 0.00 P 0.00
Due to Officers and Employees 204,686.35 203,726.35 0.00 960.00
Total Payables 2,750,314.80 2,749,354.80 0.00 960.00
Total Financial Liabilities 2,750,314.80 2,749,354.80 0.00 960.00
Inter-Agency Payables
Due to BIR 1,025,440.33 716,813.00 31,060.11 277,567.22
Due to GSIS 5,583.14 5,583.14 0.00 0.00
Due to PAG-IBIG 5,255.91 5,255.91 0.00 0.00
Due to PHILHEALTH 66,059.89 61,759.89 0.00 4,300.00
Due to NGAs 11,065,730.64 2,184,280.46 0.00 8,881,450.18
Due to LGUs 13,589,086.36 67,421.84 66,432.60 13,455,231.92
Total Inter-Agency Payables 25,757,156.27 3,041,114.24 97,492.71 22,618,549.32
Intra-Agency Payables
Due to Other Funds 11,441,463.59 9,122,079.25 640,977.58 1,678,406.76
Total Intra-Agency Payables 11,441,463.59 9,122,079.25 640,977.58 1,678,406.76
Trust Liabilities
Trust Liabilities 144,047.63 13,275.20 0.00 130,772.43
Trust Liabilities - Disaster Risk Reduction and Management Fund 10,318,877.02 0.00 0.00 10,318,877.02
Guaranty/Security Deposits Payable 881,248.02 47,081.20 0.00 834,166.82
Total Trust Liabilities 11,344,172.67 60,356.40 0.00 11,283,816.27
Deferred Credits/Unearned Income
Deferred Real Property Tax 7,028,431.71 7,028,431.71 0.00 0.00
Deferred Special Education Tax 7,028,431.70 0.00 7,028,431.70 0.00
Total Deferred Credits/Unearned Income 14,056,863.41 7,028,431.71 7,028,431.70 0.00
Total Current Liabilities 65,349,970.74 22,001,336.40 7,766,901.99 35,581,732.35
Non-Current Liabilities
Other Payables
Other Payables 124,957.44 61,242.09 800.00 62,915.35
TOTAL LIABILITIES 65,474,928.18 22,062,578.49 7,767,701.99 35,644,647.70
NET ASSETS/EQUITY
Government Equity 41,021,207.07 39,690,230.73 1,330,976.34 0.00
TOTAL LIABILITIES AND NET ASSETS/EQUITY P 106,496,135.25 P 61,752,809.22 P 9,098,678.33 P 35,644,647.70

Annex 2
AAR page No. 6
Patnanungan, Quezon
Statement of Financial Performance (By Fund)
Special
TOTAL General Fund Education Fund
REVENUE
TAX REVENUE
Individual and Corporation
Professional Tax P 300.00 P 300.00 P 0.00
Community Tax 56,613.10 56,613.10 0.00
Property
Real Property Tax - Basic 165,977.00 165,977.00 0.00
Less: Discount on Real Property Tax - Basic -1,994.90 -1,994.90 0.00
Special Education Tax 310,538.93 0.00 310,538.93
Less: Discount on Special Education Tax -3,206.66 0.00 -3,206.66
Real Property Transfer Tax 10,264.46 10,264.46 0.00
Goods and Services
Business Tax 27,532.93 27,532.93 0.00
Fines and Penalties
Tax Revenue-Fines and Penalties-Property Taxes 126,154.60 55,811.49 70,343.11
Tax Revenue-Fines and Penalties-Goods and Services 0.00 0.00 0.00
Tax Revenue-Fines and Penalties-Other Taxes 0.00 0.00 0.00
Total Tax Revenues 692,179.46 314,504.08 377,675.38
SHARE FROM NATIONAL TAXES
Share from Internal Revenue Collections (IRA) 54,399,816.75 54,399,816.75 0.00
BUSINESS AND SERVICE INCOME
Service Income
Permit Fees 41,941.67 41,941.67 0.00
Registration Fees 161,013.54 161,013.54 0.00
Clearance and Certification Fees 73,037.74 73,037.74 0.00
Inspection Fees 11,867.00 11,867.00 0.00
Fishery Rentals, Fees and Charges 41,390.00 41,390.00 0.00
Fines and Penalties-Sevice Income 22,470.00 22,470.00 0.00
Other Service Income 22,085.00 22,085.00 0.00
Business Income
Rent Income 6,530.00 6,530.00 0.00
Sales Revenue
Cost of Sales
Garbage Fees 5,990.00 5,990.00 0.00
Interest Income 22,223.03 21,452.16 770.87
Total Service and Business Income 408,547.98 407,777.11 770.87
SHARES, GRANTS AND DONATIONS
Shares
Share from PCSO 93,273.44 93,273.44 0.00
TOTAL REVENUE 55,593,817.63 55,215,371.38 378,446.25
LESS: CURRENT OPERATING EXPENSES
PERSONNEL SERVICES
Salaries and Wages
Salaries and Wages - Regular 18,059,040.76 18,059,040.76 0.00
Salaries and Wages - Casual/Contractual 808,333.62 808,333.62 0.00
Other Compensation
Personnel Economic Relief Allowance (PERA) 1,452,909.09 1,452,909.09 0.00
Representation Allowance (RA) 1,379,000.00 1,379,000.00 0.00
Transportation Allowance (TA) 1,379,000.00 1,379,000.00 0.00
Clothing/Uniform Allowance 341,000.00 341,000.00 0.00
Subsistence Allowance 98,900.00 98,900.00 0.00
Special
Laundry Allowance 13,761.60 13,761.60 0.00
Productivity Incentive Allowance 300,500.00 300,500.00 0.00
Honoraria 536,346.98 536,346.98 0.00
Hazard Pay 194,212.33 194,212.33 0.00
Overtime and Night Pay 13,078.00 13,078.00 0.00
Year End Bonus 1,521,272.00 1,521,272.00 0.00
Cash Gift 298,500.00 298,500.00 0.00
Other Bonuses and Allowances 1,403,834.62 1,403,834.62 0.00
Personnel Benefits Contributions
Life and Retirement Insurance Contributions 2,255,072.67 2,255,072.67 0.00
Pag-IBIG Contributions 71,793.73 71,793.73 0.00
Philhealth Contributions 224,008.59 224,008.59 0.00
Employees Compensation Insurance Premiums 62,712.51 62,712.51 0.00
Other Personnel Benefits
Terminal Leave Benefits 543,277.50 543,277.50 0.00
Other Personnel Benefits 2,027,901.43 2,027,901.43 0.00
Total Personnel Services 32,984,455.43 32,984,455.43 0.00
MAINTENANCE AND OTHER OPERATING
EXPENSES
Travelling Expenses
Travelling Expenses - Local 4,698,498.10 4,698,498.10 0.00
Travelling Expenses - Foreign 23,000.00 23,000.00 0.00
Training and Scholarship Expenses
Training Expenses 1,115,787.75 1,115,787.75 0.00
Supplies and Material Expenses
Office Supplies Expense 547,478.86 547,478.86 0.00
Accountable Forms Expenses 23,204.50 23,204.50 0.00
Food Supplies Expenses 101,666.50 101,666.50 0.00
Drugs and Medicines Expenses 814,503.68 814,503.68 0.00
Medical, Dental and Laboratory Supplies Expenses 174,918.97 174,918.97 0.00
Fuel, Oil and Lubrication Expenses 373,080.23 373,080.23 0.00
Agricultural and Marine Supplies Expenses 498,836.40 498,836.40 0.00
Military and Police Supplies Expenses 19,587.35 19,587.35 0.00
Other Supplies Expenses 680,295.80 680,295.80 0.00
Utility Expenses
Water Expenses 30,527.11 30,527.11 0.00
Electricity Expenses 436,418.55 436,418.55 0.00
Communication Expenses
Postage and Courier Service 1,432.00 1,432.00 0.00
Telephone Expenses 707,799.00 707,799.00 0.00
Internet Subscription Expenses 93,952.13 93,952.13 0.00
Cable, Satellite, Telegraph and Radio Expenses 4,890.00 4,890.00 0.00
Awards/Rewards and Prizes
Prizes 104,450.00 104,450.00 0.00
Confidential, Intelligence, Extraordinary and
Miscellaneous Expenses
Confidential Expenses 90,000.00 90,000.00 0.00
Extraordinary Miscellaneous Expenses 55,800.01 55,800.01 0.00
Professional Services
Auditing Services 3,016.00 3,016.00 0.00
Other Professional Services 25,500.00 25,500.00 0.00
General Services
Janitorial Services 173,070.00 173,070.00 0.00
Security Services 364,000.00 364,000.00 0.00
Other General Services 5,180,531.13 5,073,991.13 106,540.00
Repairs and Maintenance
Repairs and Maintenance - Building and Other Structures 128,172.00 88,200.00 39,972.00
Repairs and Maintenance - Machinery and Equipment 37,392.00 37,392.00 0.00
Special
Repairs and Maintenance - Transportation Equipment 18,614.56 18,614.56 0.00
Repairs and Maintenance - Furniture and Fixtures 1,890.00 1,890.00 0.00
Repairs and Maintenance - Other Property, Plant and Equipment33,197.00 33,197.00 0.00
Taxes, Insurance Premiums and Other Fees
Taxes, Duties and Licenses 2,629.06 2,629.06 0.00
Fidelity Bond Premiums 34,807.50 34,807.50 0.00
Other Maintenance and Operating Expenses
Advertising Expenses 400.00 400.00 0.00
Printing and Publication Expenses 12,091.00 12,091.00 0.00
Representation Expenses 3,850.00 3,850.00 0.00
Transportation and Delivery Expenses 25,320.00 25,320.00 0.00
Rent Expenses 162,400.00 162,400.00 0.00
Membership Dues and Contributions to Organizations 357,000.00 357,000.00 0.00
Donations 458,361.50 458,361.50 0.00
Other Maintenance and Operating Expenses 1,809,988.59 1,809,988.59 0.00
Total Maintenance and Operating Expenses 19,428,357.28 19,281,845.28 146,512.00
Financial Expenses
Bank Charges 33,930.00 33,930.00 0.00
Non-Cash Expenses
Depreciation
Depreciation - Buildings and Structures 228,728.12 228,728.12 0.00
Depreciation - Machinery Equipment 2,152,071.74 2,135,364.16 16,707.58
Depreciation - Transportation Equipment 191,377.06 191,377.06 0.00
Depreciation - Furniture, Fixtures and Books 109,603.51 107,466.31 2,137.20
Depreciation - Other Property, Plant and Equipment 3,763.80 3,763.80 0.00
Total Non-Cash Expenses 2,685,544.23 2,666,699.45 18,844.78
TOTAL CURRENT OPERATING EXPENSES 55,132,286.94 54,966,930.16 165,356.78
SURPLUS(DEFICIT) FROM CURRENT OPERATIONS 461,530.69 248,441.22 213,089.47
ADD(DEDUCT): TRANSFERS, ASSISTANCE AND
SUBSIDY
Financial Assistance/Subsidy to
Subsidy to National Government Agencies 130,350.00 130,350.00 0.00
Subsidy to Other Local Government Units 818.14 818.14 0.00
Subsidy to Other Funds 50,000.00 50,000.00 0.00
Subsidies-Others 2,561,902.56 2,376,302.56 185,600.00
Transfers to
Transfers for Project Equity Share/LGU Counterpart 195,176.00 195,176.00 0.00
Total Transfers, Assistance and Subsidy to 2,938,246.70 2,752,646.70 185,600.00
NET FINANCIAL ASSISTANCE/SUBSIDY -2,938,246.70 -2,752,646.70 -185,600.00
Other Non-Operating Income
Miscellaneous Income
Miscellaneous Income 31,368.25 31,368.25 0.00
SURPLUS(DEFICIT) FOR THE PERIOD P -2,445,347.76 P -2,472,837.23 P 27,489.47
Annex 3
AAR page No. 7
Patnanungan, Quezon
Statement of Changes in Net Assets/Equity (By Fund)
Special
Balance at January 1 P 43,540,430.74 P 42,234,178.51 P 1,306,252.23
Add (Deduct)
Prior Period Errors -73,875.91 -71,110.55 -2,765.36
Restated Balance 43,466,554.83 42,163,067.96 1,303,486.87
Add (Deduct) Changes in net assets/equity during the year
Surplus (Deficit) for the period -2,445,347.76 -2,472,837.23 27,489.47
Total changes during the year -2,445,347.76 -2,472,837.23 27,489.47
Balance at December 31 P 41,021,207.07 P 39,690,230.73 P 1,330,976.34
Annex 4
AAR page No. 8
Patnanungan, Quezon
Statement of Cash Flows (By Fund)
Special
TOTAL General Fund Education Fund Trust Fund
Cash Flows from Operating Activities
Cash Inflows
Collection from taxpayers P 783,788.65 P 320,678.44 P 463,110.21 P 0.00
Share from Internal Revenue Allotment 54,399,816.75 54,399,816.75 0.00 0.00
Receipts from business/service income 386,324.95 386,324.95 0.00 0.00
Interest Income 22,223.03 19,359.69 770.87 2,092.47
Other Receipts 51,598,657.46 26,854,135.18 244,501.26 24,500,021.02
Total Cash Inflows 107,190,810.84 81,980,315.01 708,382.34 24,502,113.49
Cash Outflows
Payment to suppliers and creditors 27,666,537.96 14,387,983.59 333,955.20 12,944,599.17
Payment to employees 39,021,502.83 38,954,302.83 0.00 67,200.00
Other Payments 22,545,203.06 22,082,577.01 452,896.05 9,730.00
Total Cash Outflows 89,233,243.85 75,424,863.43 786,851.25 13,021,529.17
Net Cash Flows from Operating Activities 17,957,566.99 6,555,451.58 -78,468.91 11,480,584.32
Cash Flows From Investing Activities
Cash Outflow
Purchase/Construction of Property, Plant and
Equipment 12,537,883.16 1,712,391.52 241,558.00 10,583,933.64
Net Cash Flows from Investing Activities -12,537,883.16 (1,712,391.52) -241,558.00 -10,583,933.64
Total Cash Provided by Operating, Investing and 5,419,683.83 4,843,060.06 -320,026.91 896,650.68
Financing Activities
Add : Cash at the Beginning of the year 31,247,042.89 9,979,553.81 1,226,138.29 20,041,350.79
Cash Balance at the End of the year P 36,666,726.72 P 14,822,613.87 P 906,111.38 P 20,938,001.47

COA Audit Report Highlights Issues with Financial Records and Accountabilities of Patnanungan Municipality

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COA Audit Report Highlights Issues with Financial Records and Accountabilities of Patnanungan Municipality

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Republic of the Philippines

June 13, 2019

Honorable RODERICK M. LARITA

Dear Mayor Larita:

4. Supplies and Material Expenses reported in the Financial Statements totaling

We recommended that the Municipal Mayor instruct the:

a. GSO Designate to:

 maintain complete stock cards per type of supply; and

b. Municipal Accountant to prepare and maintain SLC

5. Collections totaling P1,415,552.31 remain undeposited as of December 31, 2018 since

We respectfully request that the recommendations contained in Part II of the Report be

Very truly yours,

AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION

Agency Action Plan

Agency Signing Official:

It maintains General Fund, Special Education Fund and Trust Fund.

The Organizational Structure of the Municipality is as follows:

Municipal Mayor Hon. Roderick M. Larita

Municipal Vice-Mayor Hon. Letecia G. Lopez

Members of the Sanggunian 1. Hon. Edwin R. Aguilar

OIC – Municipal Treasurer Zobelle G. Abeja

b. No. of Personnel Complement

2018 2017 Increase/Decrease

Total Assets P106,496,135.25 P97,760,812.96 P8,735,322.29

Independent Auditor’s Report on the Financial Statements

2. Non-rendition of the records and accountabilities resulted in the unreliability of

4. Supplies and Material Expenses reported in the Financial Statements totaling

5. Cash advances totaling P2,666,866.53 remain unliquidated as of December 31, 2018

a. GSO Designate to:

 maintain complete stock cards per type of supply; and

b. Municipal Accountant to prepare and maintain Supplies Ledger Cards (SLC)

 Municipal Accountant to support the request for authority to write-off uncollectible

Significant Audit Observations and Recommendations

1. Collections totaling P1,415,552.31 remain undeposited as of December 31, 2018 since

We recommended the Municipal Mayor to require the:

b) OIC - Municipal Treasurer to adopt strategies to intensify collections that would

We further recommended to adopt austerity measures in order to reduce/trim down

4. Due to non-completion of Community-Based Monitoring System (CBMS), the Municipality

The foregoing observations and recommendations contained in the Report were

Summary of Suspensions, Disallowances and Charges

Balance as of Issued for Settled for Balance as of

Notice of Suspension P 612,611.64 P0.00 P0.00 P 612,611.64

Status of Implementation of Prior Year’s Audit Recommendations

PART SUBJECT PAGE NO.

I AUDITED FINANCIAL STATEMENTS

II AUDIT OBSERVATIONS AND RECOMMENDATIONS

III STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

1 Statement of Financial Position (By Fund)

INDEPENDENT AUDITOR’S REPORT

Honorable RODERICK M. LARITA

We do not express an opinion, the accompanying financial statements of the Municipality of

Basis for Disclaimer of Opinion

 Non-rendition of the records and accountabilities resulted in the unreliability of

 Supplies and Material Expenses reported in the Financial Statements totaling

 Cash advances totaling P2,666,866.53 remain unliquidated as of December 31, 2018

Our responsibility is to conduct an audit of the Municipality of Patnanungan, Quezon financial

We are independent of the Municipality of Patnanungan, Quezon in accordance with the

Note 2018 2017

Total Assets 106,496,135.25 97,760,812.96

Total Liabilities 65,474,928.18 54,220,382.22

Total Liabilities and Net Assets/Equity P 106,496,135.25 P 97,760,812.96

(See accompanying Notes to Financial Statements)