ANNUAL AUDIT REPORT ON THE

CITY OF HIMAMAYLAN
PROVINCE OF NEGROS OCCIDENTAL

FOR THE YEAR ENDED DECEMBER 31, 2009

EXECUTIVE SUMMARY Highlights of Financial Operation a. Sources and Application of Funds Actual operating income realized during the year at P 374,723,138.83, is P 57,806,485.12 or 18.24% higher than last years income P 316,916,653.71. The increase is attributed to the increase in IRA. Total operating expenditures incurred during the year at P 224,938,191.39 is P 28,317,670.10 or 14.40% higher than last years expenses at P 196,620,521.29. b. Appropriations Total appropriation for the year at P 517,166,015.41, is 16.10% higher than last years appropriation at P445,467,182.20, as shown below: Inc./(Dec.) Fund GF SEF Total 2009 P 512,659,133.14 4,506,882.27 -----------------P 517,166,015.41 ============ 2008 P 440,232,263.77 5,234,918.43 -----------------P 445,467,182.20 =========== Amount P 72,426,869.37 (728,036.16) ---------------------P 71,698,833.21 ============

c. Obligations

Of the total obligation incurred during the year at P 369,653,314.20, P342,920,598.35 pertained to Current Appropriations, consisting of P 338,882,808.21 from the General Fund and P4,037,790.14 from the Special Education Fund. The amount of P26,732,715.85 pertained to Continuing Appropriations, consisting of P26,732,715.85 from the General Fund and P6,000.00 from the Special Education Fund.

d. Financial Ratios 2009 Current Assets Ratio Net Working Capital Quick Ratio Debt Ratio Debt Equity Ratio 16.53:1 P422,888,803.26 16.46:1 0.20:1 0.06:1 2008 16.35:1 P376,268,598.64 16.27:1 0.25:1 0.09:1 Increase/ (Decrease) 0.18 P46,620,204.62 0.19 (0.05) (0.03)

Scope of the Audit A financial and compliance audit was conducted on the accounts and operations of the City Government of Himamaylan, Negros Occidental for the year ended December 31, 2009. The audit was conducted to ascertain the propriety of financial transactions and compliance of the agency to prescribed laws, 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. A value for money audit was also conducted to ensure economy, efficiency and effectiveness in the carrying out of the Citys plans and targets and/or in the management of its resources. Auditors Opinion on the Financial Statements

The auditor, taking exception on the effect of any adjustments which might have been made had the city reconciled its Motor Vehicles account amounting to P18,031,472.62, and the required adjustments on the overstatement of cash in bank, and loans payable-domestic accounts of P6,039,982.38, rendered an unqualified opinion on the accompanying financial statements as they present fairly, in all material respects, the financial position of the City of Himamaylan, Negros Occidental, as of December 31, 2009, and the results of its operations and cash flows for the year then ended in conformity with the generally accepted accounting principles.

Significant Findings and Recommendations 1. Of the P40,770,886.37 balance for Motor Vehicles account as of December 31, 2009, P18,031,472.62 of which is unreconciled figure. This is due to some motor vehicles were recorded in the books even without Certificate of Registration, while others that have Certificate of Registration were not recorded as part of the agencys asset. The General Services Office and the Accounting Department should initiate appropriate reconciliation of the various Motor Vehicles with Certificates of Registration but were not recorded in the books, and those motor vehicles which were recorded in the books of the agency but have no CR. Considering that the individual costing of some motor vehicles is not available, we recommend to the local chief executive to create an appraisal committee for the purpose of appraising the cost of these vehicles. Thereafter, the Accounting Department shall prepare the necessary adjustments to record the cost of unrecorded motor vehicles as part of the agencys assets. 2. Disbursements for the repair and maintenance of motor vehicles for CY 2009 in the aggregate amount of P8,749,824.35 were processed and paid despite deficiencies or lack of supporting documents, in violation of section 4 (6) of PD 1445, thus veracity of the amount is unreliable. We recommend that the local chief executive shall designate technically skilled personnel to conduct the pre-repair evaluation for all the motor vehicles, before the same is subjected to repair/overhauling and or replacement of parts. It is likewise recommended that the City Accountant and the City Treasurer shall not certify and pay the transactions unless the pre-repair inspection report prepared by the duly designated personnel has been conducted and attach to the claim, and the supporting documents are complete. 3. Net reconciling items for book balance amounting to P6,039,982.38 for the General Fund with Land Bank of the Philippines remained unadjusted making the cash in bank account overstated. We recommend that the BRS for the General Fund, the Special Education Fund, and the Trust Fund with the Philippine Postal Savings Bank shall be submitted immediately in order to determine all valid reconciling items, so that appropriate adjustments can be taken up in the respective books of account.

We further recommend that the amounts of loan amortization which were auto-debited by the bank from the agency cash in bank balance shall be properly recorded in the book. 4. The City failed to implement a general revision of real property assessment, as required under Section 219 of Republic Act 7160 (RA 7160), thus depriving the local government unit of additional revenues which may be used to finance priority projects that will benefit the constituents. We recommend that the City Assessor shall comply the provision of Section 219 of RA 7160. General revision of assessments and property classification shall be done with urgency to augment revenues of the city which may be used to finance priority projects that will benefit its constituents. 5. Reports of monthly fuel consumption of government motor vehicles were not prepared and submitted to the Office of the Auditor in violation of the pertinent provisions of Section 361 of the Government Accounting and Auditing Manual (GAAM) Volume I and COA Circular 77-61. We recommend that the Office of the General Services shall cause the accomplishment and submission of the Monthly Report of Fuel Consumption and computation of gasoline consumption in compliance with the provision of Section 361 Volume I of the GAAM and COA Circular No. 77-61 to enhance management information for effective conservation and proper utilization thereof. 6. Contracts, Purchase Orders and the like are not furnished to the Auditor, within five (5) working days from its execution, contrary to Commission On Audit Circular No. 2009001 dated February 12, 2009, thereby forfeiting its purpose of implementing a systematic and effective review process with a view of generating timely and relevant audit results. The City Mayor as Head of Local Government Unit should require concerned officials and employees to strictly comply with the requirements to avoid sanctions provided in (a) Section 127 of Presidential Decree No. 1445; (b) Section 55, Title I-B Book V of the Revised Administrative Code of 1987; and (c) Section 11 of Republic Act No. 6713.

Status of Implementation of Prior Years Audit Recommendations Of the four (4) recommendations advanced in prior years report, one (1) was fully implemented, and three (3) were not implemented.

TABLE OF CONTENTS

Part I Audit Certificate Statement of Management Responsibility for Financial Statements Financial Statements a. Consolidated Balance Sheet b. Consolidated Statement of Income and Expenses c. Consolidated Statement of Cash Flows Notes to the Financial Statements Part II Detailed Findings and Recommendations Financial and Compliance Audit Part III Status of Implementations of Prior Years Audit Recommendations Part IV Annexes a. Financial Statements by Funds b. Status of Appropriations, Allotments and Obligations c. Others

Page No. 1 3

4 5 6 7

16

23

33

Consolidated Balance Sheet As of December 31, 2008 and 2009

Consolidated Statement of Income and Expenses For the Years Ended, December 31, 2008 and 2009

Consolidated Cash Flow Statement For the Periods Ended, December 31, 2008 and 2009

Notes to Financial Statements 1. General/Agency Profile The City of Himamaylan was made among the sub-division of the Province of Negros Occidental thru Act 2657 dated February 24, 1916 as found under Section 43 of Administrative Code of the Philippine Island. It was reclassified from fourth class to third class municipality on July 1, 1993 in accordance with the provision of section 8 of the 1991 Local Government Code. In 1997, Himamaylan was again reclassified from third class to first class municipality, pursuant to Department Order No. 97-3 (48) dated May 16, 1997 of the Department of Finance. On February 17, 2000, the public hearing was held on House Bill No. 6237 introduced by Congressman Jose Apolinario I. Lozada, Jr., converting the Municipality into a Component City of the Province of Negros Occidental. Finally, on March 5, 2001, Republic Act 9028 was signed into law converting the Municipality of Himamaylan to City of Himamaylan. Funds Maintained The financial statements presented and reported are those of the City Government of Himamaylan, a component City in the Province of Negros Occidental, consisting of the Statement of Income and Expenses, Balance Sheet and Statements of Cash Flows. These financial statements are presented separately for the account of General Fund, the Special Education Fund and Trust Fund with separate books of accounts as required under Section 308 and 309 of the Local Government Code. The statements have been prepared in accordance with the generally accepted state accounting principles and standards under the New Government Accounting System (NGAS) for the Local Government Units. 2. Basis of Financial Statements Presentation The Statements have been prepared in accordance with generally accepted state accounting principles and standards as prescribed under the New Government Accounting System (NGAS) for the Local Government Units. 3. Summary of Significant Accounting Policies 3.1 A modified accrual basis of accounting is used. Expenses are recorded when incurred and reported in the financial statement in the period to which they relate. Income is on accrual basis except for transactions when accrual basis is impractical or when other methods are required by law. Properties of the Government when used by the general public are accounted for under the Public Infrastructure/Reforestation Projects.
2

3.2

3.3

The Straight Line Method of Depreciation is used in depreciating the Property, Plant and Equipment with estimated useful lives ranging from 5 to 40 years. A residual value computed at 10% of the cost of asset is set and depreciated starts on the second month after the purchase. Payable accounts are recognized and recorded in the books of accounts only upon acceptance of the goods inventory/other assets and rendition of services to the LGU. The agency is adopting the electronic New Government Accounting System (eNGAS) Chart of Accounts.

3.4

3.5

4. Correction of Fundamental Errors Fundamental errors of prior years are corrected using the prior years adjustments account, while errors affecting current years operation are charged to the current years account. 5. Cash and Other Cash Accounts This account consists of: 2009 Cash in Vault Cash-Disbursing Officer Cash in Bank-Local Currency-Current Acct. Cash in Bank-Local Currency- Savings Dep. Cash in Bank-Local Currency-Time Deposit Total 6. Receivables This account consists of: 2009 Loan Receivables-GOCCs Loan Receivables-Others Real Property Tax Receivables Due from NGSs Due from GOCCs Due from LGU Due from NGOs/POs Due from Other Funds Advances to Officers & Employees Other Receivables Total
3

2008 412,690.33 20,030.50 85,939,425.47 33,196,319.02 2,747,518.55 122,315,983.87

1,144,476.80 13,566.00 114,793,541.32 33,196,319.02 2,747,518.55 151,895,421.69

2008 3,151,700.00 3,429,239.63 172,488,402.65 549,624.76 3,916.60 227,308.99 13,395,080.51 68,767,315.37 3,499,543.94 1,874,823.78 267,386,956.23

3,151,700.00 3,429,239.63 189,455,875.05 549,624.76 3,916.60 227,308.99 15,340,775.94 68,767,315.37 4,262,463.07 1,956,068.06 287,144,287.47

7. Inventories This account consists of: 2009 Accountable Forms Inventory 8. Prepayments This account consists of: 2009 Deposits on Letter of Credits 9. Property, Plant and Equipment This account consists of: Balance Dec. 31, 2008 Land Land Improvements Less: Accum. Depr. Net Book Value Buildings Less: Accum. Depr. Net Book Value Office Equip. Fur. & Fixt. Less: Accum. Depr. Net Book Value Machineries & Equipment Less: Accum. Depr. Net Book Value 63,828,118.29 23,487,417.62 636,358.40 22,851,059.22 45,100,912.13 2,990,998.70 42,109,913.43 38,670,483.75 8,597,638.51 30,072,845.24 60,810,981.15 23,001,762.67 37,809,218.48 Net Addition (Reduction) 13,790,940.20 4,040,094.96 Balance Dec. 31, 2009 77,619,058.49 27,527,512.58 880,112.19 26,647,400.39 54,335,282.35 4,558,062.64 49,777,219.71 44,828,304.84 12,882,007.37 31,946,297.47 62,647,661.05 29,631,772.07 33,015,888.98 9,164,434.32 2008 9,164,434.32 1,914,955.00 2008 1,914,955.00

9,234,370.22

6,157,821.09

1,836,679.90

Transportation Equipment Less: Accum. Depr. Net Book Value

40,849,145.75 9,602,474.44 31,246,671.31

3,921,768.75

44,770,914.50 11,883,705.61 32,887,208.89

Other Prop., Plant & Equip Less: Accum. Depr. Net Book Value Public Infrastructures Construction in Progress Total Net Book Value 10. Other assets This account consists of:

7,160,357.22 907,303.00 6,253,054.22 3,336,240.68 358,144,946.48 595,652,067.35

282,437.50

7,442,794.72 1,279,520.17 6,163,274.55 23,746,856.55 406,878,154.79 688,681,359.82

20,410,615.87 48,733,208.31 108,407,936.80

2009 Work/Other Animals Breeding Stocks Other Assets Total 11. Current Liabilities This account consists of: 2009 Accounts Payable Due to Officers & Employees Due to BIR Due to GSIS Due to PAG-IBIG Due to Philhealth Due to Other NGAs Due to GOCCs Due to LGUs Due to Other Funds Guaranty Deposits Payable Performance/Bidders/Bail Bonds Payable Other Payables Total 8,872,399.00 103,027.02 1,079,330.09 1,739,510.45 (23,316.86) 16,319.66 1,880,324.55 250,872.65 6,948,329.41 537,041.47 4,724,860.74 1,739,698.02 (638,100.98) 27,230,295.22 121,180.00 134,200.00 13,029,916.42 13,285,296.42

2008 96,680.00 134,200.00 13,029,916.42 13,260,796.42

2008 8,318,902.95 90,010.00 514,594.74 2,505,576.85 162,021.82 87,087.00 1,394,085.60 251,371.62 6,086,751.48 577,918.73 3,184,027.51 1,508,957.31 (167,574.83) 24,513,730.78

Due to Other Funds includes accumulated collections remitted to Trust Fund for transfer to General Fund.
5

12. Long Term Liabilities This account consists of: 2009 Himamaylan Public Market (LBP) LOGO-FIND (MDFund Office-DOF) Total 34,030,636.63 21,923,417.46 55,954,054.09 2008 40,141,747.75 25,941,741.31 66,083,489.06

Loans from LOGOFIND (Municipal Development Office) will be paid starting Year 2007 to 2021 with the interest of 12% per annum. 13. Other Deferred Credits This account consists of: 2009 Deferred Real Property Tax/SET Income Other Deferred Credits Total 14. Government Equity The changes in government equity is provided below: 2009 Government Equity, Beg. Add/(Deduct): Retained Operating Surplus Prior Years Adjustments Transferred to Registry Government Equity, End Prior Years Adjustm. consists of: Liquidation of travelling and other expenses Payment of Trust Liab. (Due from Philhealth) Reissuance of Staled Checks Collection-Prior Years Underposted Payment-Long Term Loans (Dir. ded. by bank) Total
6

2008 174,878,655.73 1,914,955.00 176,793,610.73

191,364,611.16 1,914,955.00 193,276,655.16

2008 633,250,644.45 112,707,169.69 (3,107,725.12) (545,726.40) 742,304,362.62

742,304,362.62 133,958,541.34 (641,064.71) 0.00 875,621,839.25

449,386.72 191,677.99 0.00 0.00 0.00 641,064.71

447,332.20 0.00 (198,704.24) (519,031.88) 3,378,129.04 3,107,725.12

15. Income Accounts 2009 Professional Tax Amusement Tax Business Taxes Community Tax Occupation Tax Property Transfer Tax Real Property Tax Tax on Sand, Gravel & Other Quarry Prod. Fines and Penalties-Local Taxes Fees on Weights and Measures Fishery Rental Franchising and Licensing Fees Permit Fees Registration Fees Clearance and Certificate Fees Garbage Fees Income from Cemetery Operations Income from Markets Income from Slaughterhouses Rent Income Fines & Penalties-Business Income Income from Grants and Donations Interest Income Internal Revenue Allotment Share from PAGCOR/PCSO Miscellaneous Income Other Fines and Penalties Gain/Loss on Sale of Asset Total 16. Expenditure Accounts 2009 Salaries and Wages - Regular Salaries and Wages Casual Personnel Econ. Relief Allow. Addtl. Compensation (ADCOM) Representation Allowance (RA)
7

2008 16,355.60 46,480.00 2,415,323.55 492,360.28 1,910.00 158,595.15 5,923,744.65 17,020.00 1,170,728.94 10,142.00 380.00 207,849.55 936,090.45 181,725.30 262,850.00 33,460.00 211,059.00 620,167.80 40,673.80 940,293.85 113,167.48 19,117,038.16 66,500.00 282,580,993.23 568,506.97 775,107.05 817.50 7,313.40 316,916,653.71

12,000.00 213,983.28 1,835,418.25 521,100.11 0.00 287,349.30 8,538,792.20 8,212.50 2,135,569.04 7,865.00 0.00 217,880.50 1,330,039.29 168,096.60 414,543.59 34,390.00 287,916.00 614,344.00 48,950.40 872,739.90 91,959.95 2,618,956.76 81,000.00 353,832,443.00 346,258.55 87,619.24 0.00 115,711.37 374,723,138.83

2008 33,086,646.44 229,245.00 1,453,625.00 4,561,375.00 1,494,515.00

36,086,670.00 15,130.50 1,508,101.69 4,754,827.76 1,743,500.00

Transportation Allowance (TA) Clothing/Uniform Allowance Subsistence, Laundry and Quarter Allow. Productivity Incentive Allowance Other Bonuses and Allowances Honoraria Hazard Pay Overtime and Night Pay Cash Gift Year End Bonus Life and Retirement Ins. Contr. Pag-ibig Contributions Philhealth Contributions ECC Contributions Terminal Leave Benefits Other Personnel Benefits Trtavelling Expenses-Local Training Expenses Scholarship Expenses Office Supplies Expenses Accountable Forms Expenses Food Supplies Expenses Drugs and Medicines Expenses Medical, Dental & Lab. Supplies Exp. Gasoline, Oil and Lubricants Expenses Agricultural Supplies Expenses Other Supplies Expenses Water Expenses Electricity Expenses Cooking Gas Expenses Postage and Deliveries Telephon Expenses-Landline Telephone Expenses Mobile Membership Dues and Contr. to Org. Advertising Expenses Transportation & Delivery Expenses Rent Expenses Subscriptions Expenses Legal Fees Consultancy Services Environment/Sanitary Services Security Services Other Professional Services Rep. & Maint.-Elect., Power & Ener. Str. Repairs & Maint.-Office Buildings
8

1,647,595.00 1,068,000.00 1,151,758.48 472,000.00 825,002.82 56,100.00 1,400,851.70 1,922,881.11 1,343,500.00 3,055,411.00 4,298,178.47 545,620.60 433,816.67 271,070.90 105,824.39 9,328,273.61 5,139,551.12 3,311,237.35 1,746,720.00 3,643,888.21 28,250.00 1,619,100.00 2,060,607.03 776,986.62 9,674,398.70 1,652,655.55 8,567,232.54 2,558,511.44 13,153,478.17 2,196.00 9,780.00 607,562.52 295,172.00 279,000.00 141,552.00 0.00 3,700.00 49,628.00 0.00 119,800.00 16,500.00 400,714.29 111,000.00 4,752,879.20 1,686,236.27

1,367,429.05 1,028,400.00 898,791.25 396,000.00 982,091.73 68,800.00 1,454,122.60 1,641,144.33 7,140,719.50 2,920,244.50 3,970,094.44 660,631.21 398,646.94 254,578.84 86,582.58 2,485,163.65 3,864,900.40 2,512,332.20 1,253,687.00 3,585,805.54 10,125.00 0.00 791,541.98 1,064,711.90 11,648,761.63 624,010.50 7,610,022.88 2,066,995.74 12,446,499.68 2,236.00 31,419.00 557,376.97 326,224.90 309,000.00 53,176.00 12,042.00 0.00 62,643.00 38,200.00 19,000.00 0.00 269,116.07 114,300.00 4,028,954.83 2,035,477.38

Repairs & Maint.-School Buildings Rep. & Maint.-Hosp. & Health Centers Rep. & Maint.-Markets & Slaughterhouses Repairs & Maint.-Other Structures Repairs & Maint.-Office Equipment Repairs & Maint.-Furn. and Fixtures Repairs & Maint.-IT Equip. & Software Repairs & Maint.-Comm. Equipment Rep. & Maint.-Const. & Heavy Equip. Rep. & Maint.-Other Mach. & Equip. Repairs & Maint.-Motor Vehicles Repairs & Maint.-Watercrafts Rep. & Maint.-Other Prop., Plant & Equip. Rep.& Maint.-Roads, Highways & Bridges Rep. & Maint.-Parks, Plazas & Monuments Rep. & Maint.-Art. Wells, Res., PS & Cond. Repairs & Maint.-Irrig., Canals & Laterals Repairs & Maint.-Flood Controls Rep. & Maint.-Waterways, Aqued, & Others Repairs & Maint.-Other Public Infrastr. Donations Intelligence Expenses Miscellaneous Expenses Taxes, Duties and Licenses Fidelity Bond Premiums Insurance Expenses Depreciation-Land Improvements Depr.-Elect., Power & Energy Struct. Depreciation-Office Buildings Depreciation-School Buildings Depr.-Hospital and Health Centers Depr.-Market and Slaughterhouses Depreciation-Other Structures Depreciation-Office Equipment Depreciation-Furniture and Fixtures Depreciation-IT Equipment Depreciation-Library Books Depreciation-Machineries Depreciation-Comm. Equipment Depr.-Const. & Heavy Equipment Depr.-Firefighting Equip. & Acc. Depr.-Medical, Dental & Lab. Equip. Depr.-Military and Police Equipment Depreciation-Sports Equipment Depr.-Tech. & Scientific Equipment
9

1,183,801.42 255,681.60 731,567.90 3,342,215.99 238,130.00 34,812.00 232,439.00 63,759.00 3,632,169.00 50,275.00 8,749,824.35 48,403.00 23,776.00 5,033,337.54 1,411,727.25 672,189.48 1,302,600.40 11,220.00 0.00 60,470.00 0.00 150,000.00 0.00 2,229.06 58,332.50 933,323.66 144,203.16 99,550.63 187,634.44 835,682.08 63,500.64 359,297.40 120,949.38 1,314,827.03 987,696.28 1,625,093.12 356,752.43 153,364.44 751,060.10 4,624,553.56 187,586.87 335,894.77 4,151.58 41,983.11 42,195.96

2,424,708.46 25,459.00 512,231.73 1,993,707.11 228,127.00 115,770.00 275,394.80 56,711.50 2,583,464.50 56,407.50 8,713,006.70 9,960.00 7,925.00 2,766,860.86 552,446.40 187,534.45 0.00 136,070.30 146,550.65 96,212.75 5,035,804.53 50,000.00 5,160.00 525,628.12 50,332.50 948,600.31 132,186.23 82,849.14 179,986.87 745,094.15 58,208.92 328,961.35 103,840.21 905,260.09 582,286.60 1,263,845.44 258,937.12 140,584.07 543,840.21 4,152,614.53 118,605.63 206,621.23 0.00 30,587.41 11,425.65

Depr.-Other Machineries & Equipment Depreciation-Motor Vehicles Depr.-Other Transportation Equipment Depr.-Other Prop., Plant & Equipment Discount on Real Property Taxes Other Maint.& Other Oper. Expenses Documentary Stamps Expenses Interests Expenses Total

489,219.01 2,261,977.65 19,253.52 372,217.17 683,342.29 42,669,658.19 0.00 3,541,810.72 224,938,191.39

419,566.40 1,594,703.80 16,044.60 310,514.33 568,430.96 30,440,942.25 5,000.00 3,998,102.27 196,620,521.29

17. Subsidies to 2009 Subsidy to Local Government Unit Subsidy to GOCC Subsidy to NGOs/POs Subsidy to Other Funds Donations Total 7,652,782.80 0.00 50,000.00 20,000.00 8,103,623.30 15,826,406.10 2008 7,483,962.73 105,000.00 0.00 0.00 0.00 7,588,962.73

10

PART II FINDINGS AND RECOMMENDATIONS

1. Of the P40,770,886.37 balance for Motor Vehicles account as of December 31, 2009, P18,031,472.62 of which is unreconciled figure. This is due to some motor vehicles were recorded in the books even without Certificate of Registration, while others that have Certificates of Registration were not recorded as part of the agencys asset. Of the P40,770,886.37 balance for Motor Vehicles account as of December 31, 2009, P18,031,472.62 of which is unreconciled figure. Reconciliation made between the records of the General Services Office (GSO) and the Accounting Department showed that there were seventy-two (72) Certificates of Registration (CR) of motor vehicles in the name of the City of Himamaylan which are on file with the GSO; while as per record of the Accounting Department, only sixty-two (62) motor vehicles were taken up in the book as part of the Property, Plant, and Equipment of the agency. (Annex 1 & 2) Our audit further disclosed that out of the 62 motor vehicles which were recorded in the books, only thirteen (13) are supported with the CR. While, of the seventy-two (72) Certificates of Registration filed with the GSO, fifty-nine (59) of which were not recorded in the books as part of the agencys asset. (Annex 3) The incomplete/non- recording of these motor vehicles in the books of the agency is one of the reasons why the amount P18,031,472.62 remained unreconciled as of December 31, 2009. Likewise, it understates the asset and government equity accounts, making the financial statements misleading. During the exit conference, the General Services Officer and the City Accountant assured the audit team to comply with our recommendations. Recommendations The General Services Office and the Accounting Department should initiate appropriate reconciliation of the various Motor Vehicles with Certificates of Registration but were not recorded in the books, and those motor vehicles which were recorded in the books of the agency but have no CR. Considering that the individual costing of some motor vehicles is not available, we recommend to the local chief executive to create an appraisal committee for the purpose of appraising the cost of these vehicles. Thereafter, the Accounting Department
2

shall prepare the necessary adjustments to record the cost of unrecorded motor vehicles as part of the agencys assets. With regards to the unregistered vehicles, the General Services Officer shall initiate any legal acts to have the vehicles registered in the name of the City with the appropriate government agency in order to protect the interest of the government. 2. Disbursements for the repair and maintenance of motor vehicles for CY 2009 in the aggregate amount of P8,749,824.35 were processed and paid despite deficiencies or lack of supporting documents, in violation of section 4 (6) of PD 1445, thus veracity of the amount is unreliable. Section 4(6) of PD 1445 provides that, Claims against government funds shall be supported with complete documentation. Audit of sampled transactions for the repair and maintenance of motor vehicles disclosed that claims were processed and paid despite the lack of complete and valid documentation to support the disbursements. In many instances, the following common observations were noted: 1. No pre-repair inspection was conducted 2. Purchase Requests (PRs) and Purchase Orders (Pos) were not completely and properly accomplished. 3. Price Quotations were not properly filled up as to date 4. Some Delivery Receipts were not dated as to date of delivery. 5. Inspection and Acceptance Reports were not properly accomplished as to date of inspection and acceptance. 6. In some cases, the date of the delivery receipts is ahead than the date of the Purchase Order 7. No Report of Waste Materials for parts replaced/pulled-out. 8. No scope and duration of work stated in the labor contract. 9. There were no plans and specifications for the body repair, painting and reupholstery of car seats. The absence of complete documents for the payment of repair and maintenance of motor vehicle cast doubt in the veracity of the disbursements, hence cannot be relied on. We were informed during the exit conference that due to the volume of repairs undertaken on the various motor vehicles of the city, and the absence of personnel who maintain the records, this problem cannot be remedied immediately. However, the management assured the audit team that they will exert efforts to comply with the recommendations.
3

Recommendations We recommend that the local chief executive shall designate technically skilled personnel to conduct the pre-repair evaluation for all the motor vehicles, before the same is subjected to repair/overhauling and or replacement of parts. It is likewise recommended that the City Accountant and the City Treasurer shall not certify and pay the transactions unless the pre-repair inspection report prepared by the duly designated personnel has been conducted and attach to the claim, and the supporting documents are complete. 3. Net reconciling items for book balance amounting to P6,039,982.38 for the General Fund with Land Bank of the Philippines remained unadjusted making the cash in bank account overstated. The Bank Reconciliation Statement (BRS) prepared and submitted by the agency was only for the General Fund (GF) as of July 30, 2009, maintained with the Land Bank of the Philippines, Kabankalan City Branch. For the accounts maintained at Philippine Postal Savings Bank, no BRS were submitted to date. Our verification of the BRS submitted for the General Fund showed that a net reconciling credit amount of P6,039,982.38 remained unadjusted with the book balance as of December 31, 2009. (Annex 4) As noted, the reconciling items taken up as unrecorded disbursements in the amount of P329,631.42, represent ten (10) checks which were drawn and paid by the bank against the account from 2007 up to 2008. Among the checks, five (5) of them were accounted during verification, as follows: 1. Check No. 402498 amounting to P12,871.43 There was an over posting of P728.57 made by the book. Per Book Should be Over posting 13,600.00 12,871.43 728.57 =======

2. Check No. 444113 in the amount of P7,496.16 There was an error made by the book. Per Book Should be Over posting 7,728.00 7,496.16 231.84 ======= 3. Check No. 474627 in the amount of P400.00 Recorded in the book on December 26, 2007 4. Check No. 477170 in the amount of P11,167.85 Recorded in the book on November 1, 2008 5. Check No. 509900 in the amount of P17,850 Recorded in the book on December 24, 2008 On the other hand, the two (2) debit memoranda amounting to P2,969,412.21 and P3,094,412.44 dated February 29, 2008, and February 24, 2009, respectively, represent the loan amortization of the city which the bank charged against the agencys cash in bank balance. Since these represent payment of loans payable that were not taken up in the books, this likewise overstates the book balance of loan payable by the same amount. Failure of the agency to record in the book the identified valid reconciling items results to the inaccuracy of the balance of the Cash in Bank account, and the Loans Payable Domestic account, making the financial statements misleading. The City Accountant commented that he will comply with the audit teams recommendations. Recommendations We recommend that the BRS for the General Fund, the Special Education Fund, and the Trust Fund with the Philippine Postal Savings Bank shall be submitted immediately in order to determine all valid reconciling items, so that appropriate adjustments can be taken up in the respective books of account.

We further recommend that the amounts of loan amortization which were autodebited by the bank from the agency cash in bank balance shall be properly recorded in the book.

4. The City failed to implement a general revision of real property assessment, as required under Section 219 of Republic Act 7160 (RA 7160), thus depriving the local government unit of additional revenues which may be used to finance priority projects that will benefit the constituents. Section 219 of RA 7160, otherwise known as The Local Government Code of 1991 provides, thus: Sec. 219. General Revision of Assessments and Property Classification. The Provincial, City or municipal assessor shall undertake a general revision of real property assessments within two (2) years after the effectivity of this Code and every three (3) years thereafter. Verification and inquiry made with the Office of the City Assessor, disclosed that the latest general revision of assessment and property classification by the said office was in 2003, and to effect in 2004. Revision of assessments of real properties is done to update fair market values of properties. This means increase in the fair market value (FMV) which will ultimately result in the increase of real property tax, considering that the FMV is the tax base in the real property tax assessment. Based on the records of the Assessors Office, this condition deprived the City Government of Himamaylan of additional revenues for the past six (6) years already, since that last revision was done in 2003. The City Assessor informed the audit team of the difficulties encountered by his office in the general revision of assessments and property classification, saying that despite of it, he will still work on it. Recommendation We recommend that the City Assessor shall comply the provision of Section 219 of RA 7160. General revision of assessments and property classification shall be done with urgency to augment revenues of the city which may be used to finance priority projects that will benefit its constituents.

5. Reports of monthly fuel consumption of government motor vehicles were not prepared and submitted to the Office of the Auditor in violation of the pertinent provisions of Section 361 of the Government Accounting and Auditing Manual (GAAM) Volume I and COA Circular 77-61.

Section 361 of GAAM Vol. I provides Monthly Report of Fuel Consumption of government motor transportation shall be submitted to the auditor within the first ten (10) days of the succeeding month by the Chief, General Services Division or equivalent. Also, COA Circular No. 77-61 states: F. Fuel consumption of motor transportation shall be properly controlled and accounted for through approval requisition and issue voucher or its equivalent. G. Monthly report of fuel consumption of government motor transportation shall be submitted to the Auditor within the first ten days of the succeeding month by the chief general services division of its equivalent. Audit revealed that the city incurred gasoline, oil and lubricants expenses for CY 2009 in the total amount of P9,674,398.70. These expenses however, were not supported with monthly reports of fuel consumption as required under existing regulations. One of the objectives of the Manual of Audit for Fuel Consumption of Government Motor Vehicles is to ascertain that wasteful, excessive and unnecessary expenditures for fuel consumption are minimized, effectively controlled and properly accounted for. During the exit conference, the audit team was assured by the City Administrator Office, who is in charge of fuel issuances, to comply with the recommendation. Recommendation We recommend that the Office of the General Services shall cause the accomplishment and submission of the Monthly Report of Fuel Consumption and computation of gasoline consumption in compliance with the provision of Section 361 Volume I of the GAAM and COA Circular No. 77-61 to enhance management information for effective conservation and proper utilization thereof.
7

6. Contracts, Purchase Orders and the like are not furnished to the Auditor, within five (5) working days from its execution, contrary to Commission On Audit Circular No. 2009-001 dated February 12, 2009, thereby forfeiting its purpose of implementing a systematic and effective review process with a view of generating timely and relevant audit results. Section 3.0 of COA Circular No. 2009-001 dated February 12, 2009, regarding submission and review process of government contracts and purchase orders, specifically sections 3.1.1 and 3.2.1 state: 3.1.1 Within five (5) working days from the execution of a contract by the government or any of its subdivisions, agencies or instrumentalities, including government-owned and controlled corporations and subsidiaries, a copy of said contract and each of all the documents forming part thereof by reference or incorporation shall be furnished to the Auditor of the agency concerned. In case of agencies audited on an engagement basis, submission of a copy of the contract and its supporting documents shall be to the Auditor of the mother agency or parent company, as the case maybe. 3.2.1 A copy of any purchase order irrespective of amount, and each and every supporting document, shall, within five (5) working days from issuance thereof, be submitted to the Auditor concerned. Within the same period, the Auditor shall review and point out to management defects and/or deficiencies, if any, in the same manner provided in the second and third sentences of item 3.1.4 hereof. Post audit of the last quarter transactions of Himamaylan City disclosed that copy of government contracts and purchase orders were furnished only to the Auditor monthly, and not within five (5) working days from its execution as required under COA Circular No. 2009-001 dated February 12, 2009, thus forfeiting the purpose of implementing a systematic and effective review process with a view of generating timely and relevant audit results. This is not withstanding the delayed in the conduct of pre-audit on transactions covered by it. As provided under section 4.1 of the said circular, any unjustified failure of the officials and employees concerned to comply with the requirements herein imposed shall be subject to the administrative disciplinary action provided in (a) Section 127 of Presidential Decree No. 1445; (b) Section 55, Title I-B, Book V of the Revised Administrative nCode of 1987; and (c) Section 11 of Republic Act No. 67.13. During the exit conference, the audit team was assured of the agency compliance to this recommendation.
8

Recommendation The City Mayor as Head of Local Government Unit should require concerned officials and employees to strictly comply with the requirements of furnishing the Auditor a copy of government contracts, purchase orders and their supporting documents within five (5) working days from its execution to avoid sanctions provided under COA Circular No. 2009-001 dated February 12, 2009.

PART III - Status of Prior Years Recommendations Status of Implementation Reason for Partial/ NonImplementation

Audit Observation

Recommendation

Ref

Management Action

1. The balances of Property, Plant and Equipment (PPE) accounts totaling P105,381,789.25 remained doubtful due to the inability of the management to conduct physical inventory, maintain property ledger/cards and reconcile records of the City Accountants Office and General Services Office, contrary to Sections 119, 120 and 124 of NGAS Manual, Vol. 1.

We recommend that the City Mayor issue an Executive Order creating an inventory committee, instructing them to conduct the physical inventory taking of the properties owned by the city. The inventory taking shall be made as of December 31 and an inventory report shall be prepared in General Form 41(A) and submitted to Auditor not later than January 31 of each year. The General Services Office and the

AAR 2008

Inventory Report Not for CY 2009 is Implemented. not yet submitted.

Still in the complying.

process

of

10

Accounting Office shall religiously maintain property cards and property ledger cards, respectively. Both records shall be reconciled by them. 2. Ownership title for the lot purchased with an area of 5,000 square meters situated at Barangay To-oy which the city paid an advance payment of P200,000.00 representing 40% of the cost of lot, was not transferred in the name of the City and the procedures in the acquisition of real property was not observed in violation of Section 449 of the Government We recommend that the city stop making any advance payment for purchases of lot unless the Transfer Certificate of Title (TCT) has been transferred in the name of the government. To protect the interest of the government, we recommend that the local chief executive immediately demand from the vendor the delivery of the TCT already registered in the name of the City
11

AAR 2008

Refund of the Impleme amount paid as nted. advance payment was sought.

Refunded under Official Receipt No. 0153933, dated Sept. 10, 2009.

Accounting and Auditing Manual Volume (GAAM, Vol. 1), Section 23(2) Title I-B Book V of the 1987 Administrative Code, and Section 88 of PD 1445; hence, the interest of the government was not protected, exposing them to possible loss of rights over the asset.

of Himamaylan and pay the corresponding balance of the cost; otherwise, recover from the vendor the amount of P200,000.00 including the supposed interest earned from the bank had the amount not withdrawn from the depository account of the city. The interest earned shall be computed based on the prevailing interest rate of the depository bank at the transaction date until date of refund.

In the event that the vendor failed to deliver the TCT upon demand or refunded
12

the amount, the city shall resort to appropriate legal remedies to protect the interest of the government. 3. There are transactions paid and posted in which the amount were higher than that of the Obligation Requests generated for the purpose. We recommend that the accounting personnel in charge in recording the transactions carefully check the amount of ObRs attached to the claims before the same shall be carried. No transactions with amount more than the amount of the ObR shall be posted. Likewise, the City Accountant shall also carefully review the transactions before the same shall be approved. AAR 2008 Management Implemented. checked/reviewed the transactions before approving the same. Some errors is traceable with the system itself.

4. Four (4) lots We recommend that purchased by the government

AAR

Except for the lot Implemented. purchased for

13

City for P7,722,062.00 did not serve the purpose for which they were acquired, depriving the recipients of the intended benefits.

programs/projects be prioritized in accordance with its urgency and necessity so that fund allocation can be done wisely.

2008

The LGU shall utilize the lots purchased in accordance to the purpose they were acquired the soonest in order that the intended beneficiaries will be benefited and to realize the result of the program.

Barangay To-oy, of which the advance payment of P200,000.00 was refunded to the City, the three (3) other lots intended for the relocation site were utilized.

5. The agency still failed to conduct physical inventory of its property, plant and equipment at year end for its movable assets valued in the books at

We recommend that the City Mayor issue an Executive Order to the inventory committee instructing them to conduct the physical inventory

AAR 2007

The Office of the Partially General Services Implemented. submitted only a copy of Inventory Report as of December 31, 2007 which was
14

The inventory report submitted is only partial inventory list of properties owned by the City. For CY 2008, the City failed to submit the updated report.

P104,008,297.31, and render a report thereon, contrary to Section 124 of NGAS Manual, Vol. 1, thus, the existence, propriety and validity of the account is doubtful.

taking of the properties owned by the agency. The inventory taking shall be made as of December 31 and an inventory report prepared in General Form 41(A) and submitted to Auditor not later than January 31. This should be completed in CY 2008. This report should also be reconciled with accounting records to ensure the correctness of the fixed asset account in the financial statements.

received by Ms. Guillerma G. De Paula dated July 10, 2008.

Due to lack of manpower in the General Services Office, this cause the delay in the preparation and submission of updated inventory report.

6. Cash Advances We recommend that totaling the City Mayor shall P2,605,234.00 were require all accountable not fully liquidated

AAR 2007

A Memorandum Partially Personnel with outstanding cash was issued to the Implemented. advances were not given additional cash advances, yet
15

at year end contrary to the provisions Civil Service Commission (CSC) Resolution No. 040676 dated June 17, 2004.

officers to liquidate their outstanding cash advances, especially those which remained outstanding for over one (1) year, and to enforce strictly the stated provisions of law.

City Accountant.

cash advance were not fully liquidated as of year-end.

We likewise recommend that management shall cause the immediate and full settlement of prior years cash advances and ensure that the salaries of these accountable officers are withheld when no liquidation is made after January 20, 2008 to conform to Section 5.9 of COA Circular No. 97-002, as stated.
16

We further recommend that the Accountant submit the Liquidation Vouchers together with the Report of Disbursements and its supporting documents necessary for us to complete the audit of prior years and current cash advances pursuant to the provisions of the above stated circular, and We also recommend that the Accountant should make a formal demand to the concerned officials or employees pursuant to Section 3, Rule of CSC Resolution No. 04-0676 dated June 17, 2004.

17

7. Allocation for the Integrated Solid Waste Management Program (ISWMP) under the 20% Development Fund did not identify specific projects and activities contrary to DILG Memorandum Circular No. 99-66 dated April 23, 1999 thus resulting in disallowance of P380,791.02 due to the indiscriminate construction/repair of structures at the Eco Center.

We recommend that erring officials and employees should refund the amount disallowed without prejudice to the filing of a criminal/administrativ e case against them for fraud/negligence in the performance of their official functions. We recommend that the City Planning Development Office shall prepare an Annual Investment Plan that clearly specifies the programs, projects and activities to be undertaken for the calendar year. Such AIP shall be consistent with the

AAR 2007

A request for Not reconsideration Implemented. has been made by the erring official.

18

Regional Development Investment Plan and with the Medium Term Philippine Development Plan. The Local Finance Committee should also ensure that budgetary allocations are also itemized and in harmony with the AIP.

8. The agency failed to conduct physical inventory of its property, plant and equipment at year end for its movable assets valued in the books at P107,741,396.16, and render a report thereon, contrary to Section 124 of NGAS, Vol. 1 thus, the existence, propriety and

We recommend that the Mayor create an inventory committee with the department head of the General Services Office as chairman. We recommend that each department make a physical count of its properties and submit the corresponding report to the Inventory

AAR 2006

The management Partially requested for the Implemented re-inspection of the project after implementing the deficiencies noted in the Inspection Report of the Technical Service Office, COA, Region VI.

Report of Property Inventory has not been prepared to date.

The GSO reported that one of the difficulties it has encountered which resulted to the non-completion thereof on time, is the lack of enough manpower (regular employees), given the fact some of the properties to be inventoried are

19

validity of the Committee. These account is doubtful. reports shall serve as guides in the physical counting of properties. These inventory lists however, shall still be subject for validation by the Inventory Committee. Subsequently, the required RCPPE should be prepared, reconciled with accounting records and submitted to the Auditor. 9. The payment made to the contractor in the amount of P63,226,611.09 for the construction of the new public market was not in accordance with the build and transfer contract and grossly disadvantageous to the agency. Require the LBP management to explain the unauthorized debit from the account of the City of the amount automatically credited to the account of Dynamic Builders and Construction Co. The computed interest as AAR 2006 Management had Partially already created Implemented an Inventory Committee, with the General Services Office as Chairman. Reports by the GSO has it that committee has started, but was
20

situated in barangays.

The Management justified that they were only implementing the policy adopted by or actions of the Sangguniang Panlungsod, in the matter of making payments to the contractor.

of December 31, 2006 corresponding to the amount debited should also be charged against that erring bank personnel. It is also recommended that negotiation should be made with LBP for the change in the loan proviso pertaining to interest charges. Considering that this is a capital investment, it is more financially rational that a fixed rate of interest be solicited.

not able to inventory Committee to conduct, if possible, an Inventory on a six (6) months basis. The Management will require each department to make a physical count of the properties assigned or issued to it for submission and verification by the Inventory Committee.

Management got the confirmation that 2% rebate would apply only against the interest rate imposable if payments were made by installments. Since no interests were imposed on installment payments by the contractor, a rebate cannot also be claimed by the City, according to said Committee Chairman.

The amount of rebate equivalent to 2% of the payment made should be collected from the contractor.

Management sought confirmation from the previous chairman of the Committee on

21

Otherwise, the amount shall be jointly and severally charged against the Local Chief Executive, City Accountant, City Treasurer and City Engineer as liable persons.

Laws, Rules and Legal Matters of the Sangguniang Panlungsod regarding the proper construction of 20% rebate provided for in the contract.

The City Planning and Development Officer failed to submit APP and PPMP.

The LGU shall strictly conform to the stipulations in the contract. Henceforth, the Local Chief Executive shall make sure that, prior to payments for infrastructure projects, a review be made to ensure that all contract provisions are complied.

The City Development Officer had been instructed to submit the approved APP together with PPMP for each individual projects implemented.

We recommend that

Management likewise directed

22

the City Development Officer submit the approved Revised APP, if any, together with the PPMP for each individual projects implemented.

the City Engineer to implement only projects that are included in the approved APP.

It is likewise recommended that the City Engineer should only implement projects that are included in the approved APP pursuant to Sections 7.1, 7.2 and 7.5 of R.A. 9184.

10. The Animal Dispersal Program of the City may not be effectively implemented due to the absence of

The Mayor constitutes a committee, which shall establish policies and guidelines for animal dispersal

AAR 2005

Partially Implemented

A review of the past Animal Dispersal Program had been conducted. The errors in the program were identified especially on the matters of

23

policies and program. procedures pertaining thereto. The Office of the City Agriculturist or Veterinarian is tasked to collect all data pertaining to beneficiaries to this program and monitor their compliance in terms of payment stated in the MAO.

monitoring, control and the responsibilities of the beneficiaries.

11. Guidelines for the Swine Dispersal City Wide Program were not instituted, thus dispersals could not be properly monitored and accountabilities determined.

Formulate a guideline for the project with specific on the qualifications of beneficiaries, terms of repayment and responsibilities of both beneficiaries and department tasked to oversee the project.

AAR 2005

Partially Implemented

Upon finalization of the revised or new dispersal program, its implementation shall be strictly checked or monitored.

The Revised or New Dispersal Program is not finalized. An inventory of the subjects of Animal Dispersal Program is being undertaken. The availability or existence of the
24

An inventory be conducted on the swine that have already been dispersed and the corresponding MAO accomplished.

listed beneficiaries is being verified.

12. Properties amounting to more than P37 Million were not insured with Government Service Insurance System.

We recommend that all buildings owned by the City should be insured with Government Service Insurance System pursuant to R.A 656, as amended.

AAR 2003

During the year Partially the city only insured the main Implemented city hall building and four units LOGOFIND school buildings.

The city does not have enough appropriation for insurance to cover the whole building owned by the it.

25

PART IV ANNEXES

A. Financial Statements by Fund General Fund Balance Sheet Statement of Income and Expenses Statement of Cash Flows Special Education Fund Balance Sheet Statement of Income and Expenses Statement of Cash Flows Trust Fund Balance Sheet Statement of Cash Flows B. Status of Appropriations, Allotments and Obligations General Fund Special Education Fund C. Others List of Motor Vehicles With Certificate of Registration With the General Services Office Property, Plant and Equipment Schedule List of Motor Vehicles With Certificate of Registration That were not Recorded as Asset Annex B-1 Annex B-2 Annex.A-3 Annex A-3.1 Annex.A-2 Annex A-2.1 Annex A-2.2 Annex A-1 Annex A-1.1 Annex A-1.2

Annex C Annex D

Annex E

26