EXECUTIVE SUMMARY

HIGHLIGHTS OF FINANCIAL OPERATIONS

For calendar year 2012, the Municipality of Kumalarang collected an income of P

68,495,410.33 . The source of income of the municipality are the following:

1. Local Taxes P 905,321.68

2. Internal Revenue Allotment 51,712,716.00
3. Permits and Licenses 416,598.19
4. Service Income 372,913.28
5. Business Income 5,426,663.24
6. Other Income 9.661,197.94
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TOTAL P 68,495,410.33
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Total Expenditures for the same period was P 47,534,312.36 resulting to a net income of
P 20,961,097.97.

The Municipality’s assets, liabilities and residual equity as of December 31, 2012 were P
186,379,288.43, P 58,967,282.92 and P 127,412,005.51.

Scope of Audit

An audit was conducted on the accounts and operations of the Municipality of

Kumalarang, Zamboanga del Sur for the year ended December 31, 2012. The audit was aimed at
ascertaining the reliability of financial reports and adequacy of accounting records. Our
examination was made in accordance with the generally accepted and prescribed government
auditing standards and included verifications, review and analysis of various accounts, selective
tests and such other procedures as we considered necessary under the circumstances.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Municipality of Kumalarang, Zamboanga del Sur for the calendar
year 2012, which are discussed in detail in the attached report.

SUMMARY OF SIGNAFICANT FINDINGS AND RECOMMENDATIONS

The following are the significant findings and the corresponding recommendations.
FINANCIAL AND COMPLIANCE AUDIT

1. Cash in vault amounting to P3,016,360.85 for all funds remained undeposited as of

year-end, as reflected in the financial statements in violation of Section 108 of the
Government Auditing and Accounting Manual, Volume I and Section 32 of NGAS.

We recommend that the Municipal Treasurer should deposit the collections intact and
regularly as prescribed to avoid misuse, theft or loss of funds pursuant to Section 108 of
GAAM and Section 32 of NGAS, Volume I.

2. Petty Cash Fund in the amount of P 303,165.43 remained unliquidated as of

December 31, 2012 in violation of Section 5.1.2 of COA Circular No. 97-002 dated
February 10, 1997.

We recommend that the Officials concerned should adhere strictly to the provisions of
Section 5.1.2 of COA Circular 97-002 and COA Circular 2012-4.

It is further recommended that if the liquidation is near to impossible, then reclassify

Petty Cash to Advances to Officers and Employees or Other Receivables if impossible.

3. Cash Advance for Payroll Fund in the amount of P 3,193,106.78 remained

unliquidated as of December 31, 2012, in violation of Section 5.1.1 of COA Circular
No. 97-002 dated February 10, 1997.

We recommend that the Accountable Officer/s should adhere strictly with the provisions
of Section 5.1.1 of COA Circular 97-002 dated February 1997 by submitting liquidations
within the reglamentary period.

4. Advances to Officers and Employees Account showed an unliquidated balance of P

499,274.44, in violation of the provisions of Section 89 of PD 1445 and Section 4.1.3
of COA Circular 97-002, which resulted to the overstatement of asset and
understatement of expense balance account.

We recommend that all official and employees of the Municipality with unliquidated cash
advances should comply with COA Circular No. 2012-004.

5. Disbursement Vouchers, Payrolls and Official Receipts including its supporting

documents were not submitted within the reglamentary period in violation to COA
Circular No. 95-006 dated May 18, 1995 and Section 122 of PD 1445, thus validity
and legality of the transactions cannot be ascertained.

We recommend to the Municipal Treasurer to submit on time the Disbursement

Vouchers, Payrolls and Official Receipts including its supporting documents to the
Accounting Office. The Municipal Accountant, on the other hand, shall also submit these
 reports within ten (10) days after receipt to the Office of the Auditor for verification and
post-audit.

6. Withheld Taxes in the amount of Php 3,201,520.50 remained unremitted as at year

end, in violation to existing Bureau of Internal Revenue (BIR) rules and regulations,
thus, exposing government funds to possible loss and/or misuse.

Require the Treasurer to remit immediately the Due to BIR balance as of December 31,
2012, and to remit thereafter the succeeding withheld taxes within the reglamentary
period as prescribed by existing BIR rules and regulations and to avoid penalties.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S RECOMMENDATIONS

The Municipality has nine (9) prior year’s audit recommendations, two (2) were partially
implemented and seven (7) were fully implemented. The details are stated in Part III of this
report.