Republic of the Philippines PROVINCE OF SURSUR PUBLIC FINANCIAL MANAGEMENT ASSESSMENT REPORT (PFMAR) FY 2011 1.

Executive Summary Basically, the year in review has exhibited a struggle for prosperity. Notwithstanding constraints, the Province nevertheless managed to pursue its plans by putting together available resources expected to provide a systematic approach towards better service delivery through an improved Public Financial Management (PFM) system. Based on the results of the assessment, the Province fared very well in the critical dimensions of Comprehensiveness and Transparency, and Citizens Participation. On the other hand, very low scores were obtained in the areas of Internal and External Audit, and Accounting, Recording and Reporting. Overall, the Province obtained a score of 2.311. This indicates that while elements of an open and orderly PFM system are not complete, the existing elements are nevertheless fully operational. It is recognized that the provincial government cannot go a long way in terms of better service delivery with a poorly managed financial system. Accordingly, appropriate measures should be adopted by the provincial government to complete and fully operationalize all the elements of an open and orderly PFM system. This can be accomplished by improving performance in all the critical dimensions of a sound PFM system. 2. Introduction The importance of good governance in the attainment of development goals cannot be understated. Part and parcel of good governance and the strengthening of public institutions is the continued improvement of the local PFM system. But for PFM improvements to be effectively undertaken, the LGU should be able to establish baseline information on the state of its PFM system. The issuance of the Public Financial Management Assessment Tool for Local Government Units (PFMAT for LGUs) is therefore timely as it serves as a mechanism by which the LGUs could measure their current PFM systems and determine which areas need improvement. This report embodies the results of the evaluation of this LGUs PFM system and shall serve as a jumping board for PFM improvement efforts. 3. Brief Profile of the Province Sursur is the 56th province in the Philippines created by virtue of RA 2786, which was enacted on June 19, 1960. It is located in the northeastern coast of Mindanao and is bounded on the Northwest by Surigao del Norte, in the south by Davao Oriental, in the East by the Pacific Ocean and on the West and Southwest by the Provinces of Agusan del Norte and Agusan del Sur. With two congressional districts, the province is composed of two cities and 17 municipalities mostly located along the coast with a total of 309 barangays and are delineated into three

alliances composed of clusters of municipalities each with identified growth center based on their common resource potentials, proximity and accessibility to common trade and service center. The three alliances are the CarCanMadCarlLanCorTan Alliance covering the northern municipalities of Carrascal, Cantilan, Madrid, Carmen, Lanuza, Cortes and the City of Tandag; the MaCaSaLTaBayaMi comprising the central municipalities of Marihatag, Cagwait, San Agustin, Lianga, Tago, Bayabas and San Miguel; and the BiBaHiLiTa Alliance composes the southern municipalities/City of Bislig, Barobo, Hinatuan Lingig and Tagbina. Its land area is 513,317.70 hectares or 5,137.70 sq. Kms. representing 26.84 percent of the total land area of Caraga Administrative Region and about 4.07 percent and 1.71 percent of the total land area of Mindanao and Philippines, respectively. It is elongated in shape and approximately 300 kms in length and 50 kms. In its widest stretch which runs from Cagwait to San Miguel. The climate is generally milder compared to other nearby provinces and its soils is favorable for the growth of tropical plants. It is endowed with sample resources such as wide agricultural lands planted to rice, corn, coconut and other cash crops; vast forest land with abundant commercial wood species like Red and White Lauan, Mayapis, Almon, Yakal, Apitong, Bagtikan, Tanguile, site of the worlds biggest iron deposits and other metallic and non-metallic minerals; presence of exotic and unique natural sceneries and tourist spots like beaches, waterfalls, caves, lagoons, island river; its long Pacific Coastlines and rich inland and aquamarine fishing grounds are potential for large scale fishing and production of prawns, lobsters, crabs and other exportable species, respectively. If these resources are properly managed, it can produce more than adequate for the normal needs of its constituents and even for the markets in Davao, Butuan, Cebu and other cities in the country. As of the 2007 census, its total population is 545,902 registering growth rate of 1.17 from 501,808 census count in 2000. It has adequate labor force and the people are generally hardworking. At the time of its inception, it was classified as 4th Class province with an annual income of over P300,000.00. Seven years later, because of rapid increase of revenue collection particularly from the logging ventures, it has been reclassified as 1st Class B and in 1980 as 1st Class A with an estimated annual income of around P13,000,000.00. Presently it is reclassified as 1st Class with a revenue adding up to P727,817,648.81. 4. Assessment of the Provinces Public Financial Management System Of the seven critical dimensions of an open and orderly PFM system, the Province was able to obtain the highest scores in Comprehensiveness and Transparency, and in Citizens Participation. It is noteworthy that the Province has been able to present all the required budget information in its Appropriation Ordinance covering the annual budget for the last three years. It is also able to substantially comply with the Full Disclosure Policy of the Department of the Interior and Local Government (DILG). On the average, the Province earned a score of 3.5 in Comprehensiveness and Transparency. As for the critical dimension Citizens Participation, the Province has accredited four Civil Society Organizations (CSOs), hence, it earned a score of 4 in terms of CSO accreditation by the Local Sanggunian. Moreover, the Province earned a score of 3 in terms of the degree of CSO participation in the budget process. Accredited CSOs in the Province actively participate in Budget Preparation and in monitoring and evaluating program/project implementation.

The lowest scores, on the other hand, were earned in the critical dimensions of Internal and External Audit, and in Accounting, Recording and Reporting. The lowest score of 1.65 was registered for Internal and External Audit. The Province has no established Internal Audit Service (IAS) although initial steps to establish the same have already been undertaken. With the absence of an operational IAS, there are of course no internal audit reports prepared, hence, no internal audit findings to act upon.

The next lowest score of 2.0 was earned for the dimension Accounting, Recording and Reporting. There are still delays in the preparation of bank reconciliation statements and in the liquidation of cash advances, hence, the scores of 2.0 in these indicators. Due to lack of accounting personnel, there are also delays in the preparation and submission of financial statements. The following table provides the details of the results of the assessment: Critical Dimension Indicator/s Score Average Score 1. Policy-based Budgeting 1. Multi-year perspective in fiscal planning and budgeting 3.0 2.075 2. 1.1 Linkage between PDPFP/CDP and LDIP 2.0 3. 1.2 Linkage between LDIP and AIP 3.0 4. 1.3 Linkage between AIP and Appropriation Ordinances covering the Budgets 4.0 2. PFM improvement policies are included in the budgets covered by Appropriation Ordinances 2.0 3. Orderliness of activities in the annual budget process 2.3 3.1 Adherence to a fixed calendar for budget preparation and authorization phases 2.0 3.2 Timely enactment and approval of the Appropriation Ordinance authorizing the Annual Budget 3.0

3.3 Timely submission of the Appropriation Ordinance authorizing the Annual Budget to the appropriate reviewing authority 2.0 4. Financial self-reliance of Local Economic Enterprises (LEEs) / Public Utilities (PUs) 1.0 2. Comprehen-siveness and Transparency 5. Comprehensiveness of budget information as prescribed in the Budget Operations Manual (BOM) for LGUs 4.0 3.5 6. Public access to key information 3.0 3. Credibility of the Budget 7. Actual local revenue collections compared with estimated revenues in the budget 3.0 3.0 8. Actual expenditure compared with appropriations by allotment class 3.0 8.1 Total allotments released compared with total appropriations 3.0 8.2 Total actual obligations compared with total allotments released 3.0 8.3 Total actual disbursements compared with total obligations 3.0 4. Predictability and Control in Budget Execution 9. Real Property Tax Accomplishment Rate 2.0 2.45 10. Effectiveness of tax enhancement measures 2.0 10.1 Computerized RPT database system linkages 3.0 10.2 Effectiveness of implementing tax collection strategies for delinquent Real Property Tax (RPT) 2.0

10.3 Effectiveness of civil remedies on tax payment (For provinces and cities only) 1.0 10.4 Planning and monitoring of tax mapping 2.0 11. Predictability in the availability of cash for commitment of expenditures 2.5 11.1 Cash availability to support budgeted program, projects and activities (PPAs), and liabilities 4.0 11.2 Preparation and updating of cash flow forecasts and cash flow analysis 1.0 12. Value for money controls of procurement 2.2 12.1 Use of public bidding for the procurement of goods (excluding common-use supplies and equipment), civil works and consulting services in accordance with R.A. No. 9184 and its IRR 2.0 12.2 Procurement of Common-Use Supplies and Equipment from DBM Procurement Service 2.0 12.3 Effectiveness of Procurement 2.0 12.4 Publication of procurement-related activities 2.0 12.5 Timeliness and compliance of delivery with the schedule of requirements and/or approved contracts 3.0 13. Effectiveness of payroll controls 4.0 14. Effectiveness of internal controls for non-Personal Services (PS) expenditures 2.0 5. Accounting, Recording and Reporting 15. Timeliness and regularity of accounts reconciliation 2.0

2.0 15.1 Regularity of bank reconciliation 2.0 15.2 Regularity of reconciliation and liquidation of cash advances 2.0 16. Quality and timeliness of regular financial reports and annual financial statements 2.0 6. Internal and External Audit 17. Effectiveness of internal audit 0.3 1.65 17.1 Existence of an operational Internal Audit Service (IAS) 1.0 17.2 Frequency and distribution of internal audit reports 0.0 17.3 Extent of management action on internal audit findings 0.0 18. Follow up on external audit 3.0 18.1 Compliance with audit recommendations 3.0 18.2 Extent of COA disallowances 3.0 18.3 Magnitude of COA disallowances settled 3.0 7. Citizens Participation 19. Civil Society Organizations (CSOs) accreditation by the Local Sanggunian 4.0 3.5 20. Degree of citizens participation in the budget process 3.0

TOTAL AVERAGE SCORE 2.311 5. Recommendations Improvement efforts should, foremost, be focused on the critical dimensions with the lowest scores. Accordingly, the Province should consider establishing and operationalizing its IAS. Moreover, it should also look into the staffing and training requirements of the Accounting Office. Failure to comply with the reglementary periods for the liquidation of cash advances, preparation and submission of financial statements appear to be caused by the Accounting Offices lack of personnel. Notwithstanding higher scores obtained for the rest of the critical dimensions, the Province should also consider the following: a. Pursuit of innovative local revenue raising measures to strengthen the provinces thrust of continuous delivery of quality services, particularly to the needy rural folks; b. Doubling the collection efforts as means of lessening the provinces dependence on the Internal Revenue Allotment (IRA) and realize its goal for an accelerated economic growth; c. Finalization of the Special projects in the General Revision of Assessments and Property Classification and Computerization of Assessments; and d. Focus on the computerization program on the Integrated Revenue Collection and Financial Management System.