REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
Regional Office No. VII, Cebu City

ANNUAL AUDIT REPORT

ON

BARANGAY AWIHAO
TOLEDO CITY, CEBU

For the Years Ended December 31, 2016 and 2017

 Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. VII
Cebu City

June 29, 2018

Honorable Leonita C. Birao

Punong Barangay
Barangay Awihao
Toledo City

Dear Punong Barangay Birao:

We are pleased to transmit the Annual Audit Report on the audit of the Barangay of Awihao,
Toledo City Province of Cebu for Calendar Years 2016 and 2017, prepared by our Audit Team
headed by Ms. Esperanza L. Obatay as Team Leader, in compliance with Section 2, Article IX-D
of the Philippine Constitution and Section 43 of Presidential Decree No. 1445, otherwise known
as the Government Auditing Code of the Philippines.

Our audit was made to (a) ascertain the level of assurance that may be placed on management
assertions on the financial statements; (b) recommend agency improvement opportunities; and
(c) determine the extent of implementation of prior years’ unimplemented audit
recommendations.

We expressed a qualified opinion on the fairness of the presentation of the financial statements of
Barangay Awihao for the years ended 2016 and 2017 due to the following as discussed in Part II
and III of this report:

1. Unreliable balance of the Property, Plant and Equipment (PPE) accounts for CY 2016 and
2017 amounting to P1,170,706.01 and P1,167,713.41, respectively, due to the non-
conduct of physical inventory, non-preparation of Subsidiary Ledgers by the Accounting
Section; and no turn-over of property records from the previous to the current officials.

2. Unreliable Cash in Bank account balance owing to the difference of P10,000.00 between
the balances of the accounting record and the bank as of December 31, 2017 due to
delayed submission of the monthly Bank Reconciliation Statements (BRS) of the
Barangay to the Auditor within the prescribed period.

The above and other audit observations, together with the recommended courses of action which
were communicated to you and your Staff through Audit Observation Memoranda are discussed
in detail on Part II and III of the report.

We request that the recommended remedial measures be immediately implemented and we will
appreciate being informed of the action(s) taken thereon by submitting the duly accomplished
Agency Action Plan and Status of Implementation (form attached) within 60 days upon receipt
hereof.

We acknowledge the support and cooperation that you and your Staff extended to the Audit Team
which facilitated the completion of this Report.

Very truly yours,

CYMBELINE CELIA CHIONG-UY

Supervising Auditor

Copy furnished:

1. The City Mayor

2. Sangguniang Barangay
3. Bureau of Local Government Finance
4. The National Library (soft copy)
5. The University of the Philippines, Law Center (soft copy)
6. COA Commission Central Library (soft copy)
 EXECUTIVE SUMMARY

INTRODUCTION

Barangay Awihao, which name was derived from a tree, is one of the midland barangays
of Toledo City. This can be reached by two feeder roads from the national highway: the
Bato-Awihao road, which was built before the outbreak of the Second World War; and the
Awihao-Cabitoonan road. Both roads have an average distance of not less than 4
kilometers starting from the hearth of the barangay down to either two end places of the
coastal barangays of Bato and Cabitoonan.

Organizational Set-up:

Barangay Awihao, Toledo City has a total personnel of Ten (10) as of December 31, 2017,
broken down as follows:

Nature of Appointment to
Quantity
Office
Elective Officials 8
Appointive Officials 2

FINANCIAL HIGHLIGHTS

Comparative analysis of the Balance Sheet as graphically illustrated showed an increase

in its Assets, Liabilities and Equity. On the other hand, the Statement of Income and
Expenses exhibit an increase in income and a decrease in expenses. For the year 2017,
Barangay Awihao generated a total income of P4,309,288.05, an increase of P757,000.42
compared to prior year’s income of P3,552,287.63 from all sources.

i
The following graph illustrates the increase of Appropriations, Allotments and and a
decrease in Expenditures during the year:

SCOPE OF AUDIT

A financial and compliance audit was conducted on the accounts of Barangay Awihao,
Toledo City for the calendar years 2016 and 2017. The objectives of the audit were to
ascertain the fairness of presentation and reliability of the financial reports, financial
position and results of operations, to determine whether the programs, projects and
activities for the year were attained in an efficient, economical and effective manner. We
also conducted compliance audit to check the validity and propriety of the transactions
and adherence to pertinent laws, rules and regulations.

AUDITOR'S OPINION ON THE FINANCIAL STATEMENTS

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

of Barangay Awihao for the years ended 2016 and 2017 due to the following as discussed
in Part II and III of this report:

1. Unreliable balance of the Property, Plant and Equipment (PPE) accounts for CY
2016 and 2017 amounting to P1,170,706.01 and P1,187,713.41, respectively, due
to the non-conduct of physical inventory, non preparation of Subsidiary Ledgers
by the Accounting Section; and no turn-over of property records from the
previous to the current officials.

ii
 2. Unreliable Cash in Bank account balance owing to the difference of P10,000.00
between the balances of the accounting record and the bank as of December 31,
2017 due to delayed submission of the monthly Bank Reconciliation Statements
(BRS) of the Barangay to the Auditor within the prescribed period.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

The following are the summary of significant observations and recommendations in the
audit and/or evaluation of the operations of Barangay Awihao for the years ended 2016
and 2017. These and other observations are fully discussed in Part II of this report:

1. The unexpended balance of Local Disaster Risk Reduction and Management

Fund (LDRRMF) amounting to P182,724.75 was not transferred to the special
trust fund in CY 2017, contrary to Section 21 of Republic Act (R.A.) No. 10121
dated July 2009, known as the Philippine Disaster Risk Reduction and
Management Act of 2010, thus, funds for the purpose of disaster risk reduction
and management activities of the Local Disaster Risk Reduction and Management
Council (LDRRMC) within the next five years were not retained.

We recommend that the Barangay transfer the unexpended balance of Local

Disaster Risk Reduction and Management Fund to the Special Trust Fund solely
for the purpose of supporting disaster risk reduction and management activities of
the LDRRMCs within the next five (5) years pursuant to Section 21 of Republic
Act No. 10121.

2. Cash advances amounting to P23,680.00 remained unliquidated as of December

31, 2017 due to non-liquidation of cash advances within the prescribed period
and the absence of a proper turnover from the former accountable officer to the
new Barangay Treasurer (BT). Also, the barangay did not institute sanctions
provided for under COA Circular No. 97-002 or implement other measures to
require settlement thereof.

We recommend that the Punong Barangay:

1) Ensure that the accountable officer as well as the other officials of the
barangay liquidate cash advances granted within the prescribed period as
stated in COA Circular No. 97-002 and Section 89 of P.D. No. 1445;

2) Enforce proper turnover when there are transfer of accountabilities of

Accountable Officers to properly safeguard the assets of the barangay; and

3) Notify the previous BT through the issuance of demand letters for the
liquidation or settlement of his/her obligations with the barangay. File

iii
 appropriate legal action, if warranted after exhausting all appropriate means
to recover the resources of the barangay and no liquidation is effected.

4) Furnish our office of the copy of the demand letters sent to the accountable
officer/s with unliquidated cash advances.

3. The existence and correctness of the recorded fixed assets with a net book value
of P1,170,706.01 could not be ascertained as the Barangay did not to conduct the
physical inventory of its properties as required under Item 3 of the policies and
procedures on Supplies and Materials, Property, Plant and Equipment, Public
Infrastructure and Reforestation Projects of the Systems and Procedures Manual
on the Management of Barangay Funds and Property, Volume I.

We recommend that the barangay inventory committee conduct the physical

inventory-taking of all barangay properties as of the year-end and submit the
required inventory report pursuant to Item 3 of the Policies and Procedures on
Supplies and Materials, Property, Plant and Equipment, Public Infrastructures and
Reforestation Projects of the Systems and Procedures Manual on the Management
of Barangay Funds and Property, Volume I, to ascertain the correctness, validity
and existence of the recorded fixed assets.

4. Properties of the barangay with insurable risk totaling P2,895,906.39 are not
insured with the Property Insurance Fund of the Government Service Insurance
System (GSIS) contrary to the provision of the Systems and Procedures Manual
on the Management of Barangay Funds and Property, thus the barangay will not
be indemnified of the value of the properties in case of loss due to fire and other
fortuitous events.

We recommend that the barangay allocate funds for the insurance of their
properties with insurable risks and insure these properties with the Property
Insurance Fund of the Government Service Insurance System (GSIS).

SETTLEMENT OF ACCOUNTS

There were no suspensions and disallowances that remained unsettled as of December 31,
2017.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S RECOMMENDATIONS

Of the twelve (12) audit recommendations embodied in the 2012 Barangay Annual Audit
Report, one (1) was fully implemented and eleven (11) were not.

iv
 TABLE OF CONTENTS

Part Page
I Audit Financial Statements
-Independent Auditor's Report 1-2
-Statement of Management's Responsibility
For the year ended December 31, 2017 3.1
For the year ended December 31, 2016 3.2
-Financial Statements
- Comparative Balance Sheet for the years ended
December 31, 2017 and 2016 4-5
- Comparative Statement of Income and Expenses for
the years ended December 31, 2016 and 2017 6-7
- Comparative Statement of Changes in Government
Equity for the years ended December 31, 2017 and 8
2016
- Comparative Statement of Cash flows for the years
9
ended December 31, 2016 and 2017
- Notes to Financial Statements 10-13
II Detailed Observations and Recommendations 14-26

Status of Implementation by the Auditee of Prior Years Audit

III 27-33
Recommendations
 Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City

INDEPENDENT AUDITOR’S REPORT

Honorable Leonita C. Birao

Punong Barangay
Barangay Awihao, Toledo City

Report on the Financial Statements

We have audited the accompanying financial statements of Barangay Awihao, Toledo

City which comprise the Balance Sheet as at December 31, 2017 and 2016, and the
Statement of Income and Expenses, Statement of Cash Flow and Statement of Changes in
Government Equity for the years then ended, and a summary of significant accounting
policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The management of the Barangay Awihao, Toledo City is responsible for the preparation
and fair presentation of these financial statements in accordance with state accounting
principles, 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our

audit. We conducted our audit in accordance with the state auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of

1
accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

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

statements of Barangay Awihao for the years ended 2017 and 2016 due to the following
as discussed in Part II and III of this report:

1. Unreliable balance of the Property, Plant and Equipment (PPE) accounts for CY
2017 and 2016 amounting to P1,170,706.01 and P1,167,713.41, respectively, due
to the non-conduct of physical inventory, non preparation of Subsidiary Ledgers
by the Accounting Section; and no turn-over of property records from the
previous to the current officials.

2. Unreliable Cash in Bank account balance owing to the difference of P10,000.00

between the balances of the accounting record and the bank as of December 31,
2017 due to delayed submission of the monthly Bank Reconciliation Statements
(BRS) of the Barangay to the Auditor within the prescribed period.

Qualified Opinion

In our opinion, except for the effects or possible effects of matter described in the Basis
for Qualified Opinion paragraph, the financial statements present fairly, in all material
respects, the financial position of Barangay Awihao, Toledo City as at December 31, 2017
and 2016, and its financial performance and its cash flows for the years then ended in
accordance with State accounting principles.

COMMISSION ON AUDIT

By:

ESPERANZA L. OBATAY
State Auditor IV
Audit Team Leader

June 29, 2018

Date

2
 NOTES TO FINANCIAL STATEMENTS

Note 1 – Agency Profile

Barangay Awihao, which name was derived from a tree, is one of the midland
barangays of Toledo City. This can be reached by two feeder roads from the
national highway: the Bato-Awihao road, which was built before the outbreak of
the Second World War; and the Awihao-Cabitoonan road. Both roads have an
average distance of not less than 4 kilometers starting from the hearth of the
barangay down to either two end places of the coastal barangays of Bato and
Cabitoonan.

Note 2 - Summary of Significant Accounting Policies

The Financial Statements have been prepared in accordance with the generally
accepted state accounting principles and standards. Systems and procedures Manual
on the Management of Barangay Funds and Property (Volume I, II and III),
Accounting System Manual for Barangay (Volume IV) and COA Circular No. 2010
dated March 2, 2010 were also observed in the preparation of the financial reports.

Barangay transactions were analyzed and journalized in the Journal Entry Voucher
(JEV) which will be compiled at the General Journal and posted in the General
Ledger, Philippine Peso is the monetary denomination used in recording.

Fundamental errors of prior year’s corrected using the Prior Year’s Adjustment
account, while errors affecting the current year’s operation are affected in the
current year accounts.

Cash

Imprest system has been observed in the handling of the cash. All collections were
deposited to the bank intact and all payments were made of checks.

Receivables

Advances to the Officers and Employees represents cash advaces granted to

barangay officials.

Due from the Local Government Unit represents barangay share in Real Property
Tax (RPT) and Community Tax and Community Tax which is still in the city awaits
for remittance to the barangay. RPT income is recognize d when it is collected.

Inventories

27
All requisitions are released directly to the requesting offices.

Prepayments

The barangays does not practice prepayments to suppliers or contractors. It will be

paid only if the supplies have been received or construction of work has been done.

Property Plant and Equipment

All cost incidental to the acquisition of property are considered part of the cost of
the property. The barangay does not provide depreciation for construction in
progress. However, straight-line method of depreciation has been applied in the
computation of the depreciation for all depreciable assets. Computation of
depreciation will commence on the month following of purchase.

Liabilities

Financial assistance received from Local/ National Government is considered

liability until it has been liquidated. Withholding taxes (Due to BIR) were remitted
on or before the 10th day of the following month of withholding. Performance bond
deposited by the contractor will be released only after the expiration of warranty
periods and proper presentation of receipt and demand for payment.

Government Equity

Current year’s result of operations (income/loss) and Prior Year’s Adjustments are
closed to government equity account. Public Infrastructure and reforestation
projects during the year were transfer to respective registry which cause a reduction
in Government Equity account.

Income and Expenses

Modified accrual is applied in the recognition of income and expenses. But most of
the time, it was on cash basis.

Note 3 – Cash

2017 2016
Cash in Vault P- P360.00
Cash in Bank 3,625,360.87 2,921,240.41
Total Cash P3,625,360.87 P2,921,600.41

Cash in Bank – Local Currency in the amount of P3,625,360.87 represents current

account deposit at the Land Bank of the Philippines (LBP) Toledo Branch which
bears Current Account Number 3642-1006-44.

28
Note 4 – Receivables

2017 2016
Accounts Receivables P2,200.00 P2,200.00
Due from LGUs 1,278.79 1,278.79
Advances to Officers & Employees 23,680.00 2,680.00
Other Receivables 62.08 62.08
Total Receivables P27,220.87 P27,220.87

Accounts Receivables in the amount of P2,200.00 represents service charge from

the depository bank.

Due from LGUs in the amount of P1,278.79 represents barangay share in Real
Property Tax and Community Tax which is still in the City awaits for remittance to
the barangay.

The barangay has no receivables pledge of assigned as security for liabilities and no
write-off during the year.

Advances to Officers and Employees represents unliquidated cash advances of

barangay officials.

Note 5 – Property, Plant and Equipment

2017 2016
Land P377,000.00 P377,000.00
Land Improvements 65,509.86 78,755.25
Electrification, Power & Energy 159,689.86 215,416.29
Structures
Office Buildings 68,414.43 83,112.01
Other Structures 106,818.18 124,651.02
Office Equipment 8,777.00 8,777.00
Furniture & Fixtures 190,344.62 161,151.58
IT Equipment and Software 52,313.66 59,786.58
Library Books 4,190.00 4,190.00
Communication Equipment 9,588.08 15,653.54
Motor Vehicles 18,550.00 18,550.00
Other Transportation Equipment 629.70 629.70
Other Property, Plant and Equipment 108,880.62 40,040.44
Total Property, Plant and Equipment P 1,170,706.01 P 1,187,713.41

Straight-line method of depreciation is being applied. No depreciation is charged to

Construction-in-Progress. Likewise, computation of depreciation will commence
the following month after asset acquisition.

Note 6 – Current Liabilities

29
 2017 2016
Accounts Payable P47,571.12 P47,571.12
Due to BIR 2,670.75 898.16
Due to LGUs 384,159.64 372,359.64
Other Payables 3,638.27 3,638.27
Total Current Liabilities P438,039.78 P424,467.19

Accounts Payable in the amount of P47,571.12 represents unpaid obligation of the

barnagay at the end of the year.

Due to LGUs in the amount of P384,159.64 represents unliquidated financial

assistance from the Local Government Unit.

Other Payables in the amount of P3,638.27 represents the under payment to

supplier.

Due to BIR in the amount of P2,670.75 represents tax withheld to be remitted on

the following month.

Withholding Tax is computed as follows:

Beginning balance P898.16

Documentary Stamp Tax (DST) 1,515.00
Withholding tax 257.59
Total P2,670.75

Note 7 – Government Equity

2017 2016
Government Equity, beginning P3,712,067.50 P1,701,318.08
Retaining Operating Surplus
Net Income 673,180.47 929,088.35
Prior Years’ Adjustments - -
Total 4,385,247.97 3,859,995.50
Transfer from/ (to)
Projects to Registry Public Infrastructures - -
Irrigation, Canals and Laterals - (99,070.00)
Waterways, Aqueducts and Seawalls - (48,858.00)
Government Equity, end P4,385,247.97 P3,712,067.50

30
 PART II

DETAILED OBSERVATIONS AND RECOMMENDATIONS

FINANCIAL AND COMPLIANCE

1. The unexpended balance of Local Disaster Risk Reduction and Management

Fund (LDRRMF) amounting to P182,724.75 was not transferred to the special
trust fund in CY 2017, contrary to Section 21 of Republic Act (R.A.) No. 10121
dated July 2009, known as the Philippine Disaster Risk Reduction and
Management Act of 2010, thus, funds for the purpose of disaster risk reduction
and management activities of the Local Disaster Risk Reduction and
Management Council (LDRRMC) within the next five years were not retained.

Section 21 of R.A. No. 10121 states, among others, that:

“The present of Local Calamity Fund shall henceforht be known as the Local
Disaster Risk Reduction and Management Fund (LDRRMF). Not less than five percent
(5%) of the estimated revenue from regular sources shall be set aside as the LDRRMF to
support disaster risk management activities such as, but not limited to, pre-disaster
preparedness programs including training, purchasing life-saving rescue equipment,
supplies and medicines, for post-disaster activities, and for the payment of premiums on
calamity insurance. Xxx...

Of the amount appropriated for LDRRMF, thirty percent (30%) shall be allocated
as Quick Response Fund (QRF) or stand-by fund for relief and recovery programs in
order that situation and living conditions of people in communities or areas stricken by
disasters, calamities, epidemics, or complex emergencies, may be normalized as quickly
as possible.

Unexpended LDRRMF shall accrue to a special trust fund solely for the purpose of
supporting disaster risk reduction and management activities of the LDRRMC within the
next five (5) years. Any such amount still not fully utilized after five (5) years shall revert
back to the general fund and will be available for other social services identified by the
local sanggunian.”

Examination of the annual budget of the barangay disclose that they have
appropriated the amount of P182,724.75 for Disaster Risk Reduction and Management
for CY 2017, as shown below:

Appropriated
Program/Project/Activity
Fund
A. Disaster Prevention and Mitigation
Program 60,000.00

31
 Appropriated
Program/Project/Activity
Fund
Command center office equipment or 20
uniforms ,000.00
20
Rescue Training
,000.00
10
Contingency Planning
,000.00
10
Information Driving
,000.00
B. Risk Reduction & Climate Change
Adoptation 60,000.00
15
Greening Program
,000.00
15
Planting of Trees
,000.00
30
Integrated Open Drainage Rehabilitation
,000.00
C. Disaster Preparedness, Response &
Recovery Program 62,724.75
20
Relief / Operation Supplies
,000.00
10
Communication System Installation
,000.00
Establish Post Damage Analysis Need 2
Assessment and Feedback ,724.75
Mobilizationm of all operation team, medical, 20
search & rescue, relief & law enforcement ,000.00
10
Maintenance of emergency equipment
,000.00
1
Total
82,724.75

The amount set up as LDRRMF complied with the requirement of Section 21 of R.A.
10121 of not less than 5% of the estimated revenue from regular sources, as shown
below:

Total Estimated Revenue from Regular 3,654,495.00

Sources
5%
Required appropriation 182,724.75
Appropriated Amount 182,724.75
Difference -

32
 Review of the Status of Appropriations, Commitments and Balances (SACB) for
CY 2017 showed that there was only one commitments charged to the above
appropriations, thus said big portion of the appropriation remained unexpended as of
December 31, 2017. However, the said amount was not transferred to a Special Trust
Fund (STF) as required in R.A. 10121.

Further, under the Manual on Financial Management for Barangays which was
prescribed to be used by COA Circular No. 2015-011 dated December 1, 2015 provides
under Chapter IX, Item No. 11.1.5 thereof that, “any unspent balance from the
appropriation for the current year appropriation of LDRRMF shall at the end of the year
be transferred to the STF”.

We recommend that the Barangay transfer the unexpended balance of Local

Disaster Risk Reduction and Management Fund to the Special Trust Fund solely for
the purpose of supporting disaster risk reduction and management activities of the
LDRRMCs within the next five (5) years pursuant to Section 21 of Republic Act No.
10121.

2. Cash advances amounting to P23,680.00 remained unliquidated as of

December 31, 2017 due to non-liquidation of cash advances within the
prescribed period and the absence of a proper turnover from the former
accountable officer to the new Barangay Treasurer (BT). Also, the barangay
did not institute sanctions provided for under COA Circular No. 97-002 or
implement other measures to require settlement thereof.

P.D. No. 1445 otherwise known as The State Audit Code of the Philippines
provides:

“Section 89.Limitation on cash advance. No cash advance shall be given unless

for a legally authorized specific purpose. A cash advance shall be reported on and
liquidated as soon as the purpose for which it was given has been served. No additional
cash advance shall be allowed to any official or employee unless the previous cash
advance given to him is first settled or a proper accounting thereof is made.”

Item 5.1, COA Circular No. 97-002 dated February 10, 1997 states that the
prescribed periods that an accountable officer shall liquidate his cash advance depending
on the nature and purpose as follows:

“5.1.1 Salaries, Wages, etc. – within five days after each fifteen (15)
day/end of the month pay period.

5.1.2 Petty Operating Expenses and Field Operating Expenses – within

twenty (20) days after the end of the year.

33
 5.1.3 Official Travel – within 60 days after return to the Philippines in the
case of foreign travel or within 30 days after return to his permanent official
station in the case of local travel.

Failure of the AO to liquidate his cash advance within the prescribed period
shall constitute a valid cause for withholding of his salary and the
instruction of other sanctions as provided for under paragraphs 9.2 and 9.3
hereof.”

Meanwhile, COA Circular No. 2012-004 dated November 28, 2012 was issued
requiring the Agency Officials to demand the immediate liquidation and settlement of all
cash advances as of December 31, 2011 as provided for under Item 6.0 of said Circular.

Further, Item 2.0 of said Circular provides:

“A cash advance is settled and liquidated either by returning the money

advanced if unspent, or by the presentation of regularly accomplished
vouchers, giving satisfactorily detail of the items thereon paid which must be
in accordance with the purpose for which the cash advance was granted,
and further supported by proper receipts and other evidence of payment.”

Also provided in the Barangay Manual are the following procedures when there
are transfers of accountabilities:

1) All cash held shall be refunded/account closed and any unused accountable
forms shall be surrendered and property accountabilities returned;

2) The Property Acknowledgement Receipt (PAR) and Inventory Custodian Slip

(ICS) shall be cancelled by the BT upon return of the items;

3) The AOs shall likewise transfer/submit/surrender all documents supporting the

entries in the registers submitted to the City/Municipal Accountant and any
records in their possession to the incoming officers;

4) All AOs shall seek clearance from the Punong Barangay (PB);

5) The PB shall seek clearance from the City/Municipal Mayor; and

6) The approved clearance shall serve as one of the supporting documents to the
last claim for salaries/honoraria of the officials.

34
 Financial statements showed that as of December 31, 2017 the balance of
Advances to Officers and Employees (Code 148) stands at P23,680.00 which represents
unliquidated cash advances as follows:

Name of Date Check Amou

Debtor Granted # nt Purpose

Jacinta 02/11/2 3954 4,000. Prizes for Socio-Cultural

Letegio 013 1 00 Activities

Jacinta 02/11/2 3954 4,000. Prizes for Socio-Cultural

Letegio 013 2 00 Activities

Jacinta 02/11/2 3954 5,000. Prizes for Socio-Cultural

Letegio 013 3 00 Activities

Jacinta 02/14/2 3955 3,000. Prizes for Socio-Cultural

Letegio 013 0 00 Activities-PWD

Jacinta 09/24/2 5893 3,840.

Letegio 013 6 00 Year-End Evaluation

Gina 09/24/2 5893 3,840.

Gacang 013 7 00 Year-End Evaluation
23,68
TOTAL 0.00

It is evident that concerned barangay officials did not strictly monitor whether the
existing regulation on the liquidation of cash advance are faithfully complied with as
evidenced by the accumulated cash advances of the previous BT which remains
unliquidated to date, exposing barangay funds to misapplication/misappropriation.
On the other hand, the procedures when there are transfers of accountabilities
outlined in the barangay manual were not also adhered to resulting to the unliquidated
cash advances of the previous BT. The liquidation/settlement of said advances could not
be immediately required since the accountable officer is no longer connected with
barangay operations.

We recommend that the Punong Barangay:

1) Ensure that the accountable officer as well as the other officials of the
barangay liquidate cash advances granted within the prescribed period
as stated in COA Circular No. 97-002 and Section 89 of P.D. No. 1445;

2) Enforce proper turnover when there are transfer of accountabilities of

Accountable Officers to properly safeguard the assets of the barangay;
and

35
 3) Notify the previous BT through the issuance of demand letters for the
liquidation or settlement of his/her obligations with the barangay. File
appropriate legal action, if warranted after exhausting all appropriate
means to recover the resources of the barangay and no liquidation is
effected.

4) Furnish our office of the copy of the demand letters sent to the
accountable officer/s with unliquidated cash advances.

3. The existence and correctness of the recorded fixed assets with a net book value
of P1,170,706.01 could not be ascertained as the Barangay did not to conduct
the physical inventory of its properties as required under Item 3 of the policies
and procedures on Supplies and Materials, Property, Plant and Equipment,
Public Infrastructure and Reforestation Projects of the Systems and Procedures
Manual on the Management of Barangay Funds and Property, Volume I.

Item 3 of the Policies and Procedures on Supplies and Materials, Property, Plant
and Equipment (PPE), Public Infrastructures and Reforestation Projects of the Systems
and Procedures Manual on the Management of Barangay Funds and Property, Volume I
provides the following:

3. Physical Count of Property, Plant and Equipment

a) A physical inventory of all Barangay property shall be conducted at least

once a year and the result on the physical inventory shall be reported in
the Report on the Physical Count of Property, Plant and Equipment
(RPCPPE);

b) A Committee headed by the Barangay Treasurer (BT) or his authorized

representative shall conduct the physical count of PPE owned by the
Barangay;

c) The report approved by the Punong Barangay shall be submitted to the

Barangay Record Keeper (BRK) and the City/Municipal Accountant for
reconciliation with the recorded PPE;

d) Any unrecorded PPE shall be booked up at appraised cost; and

e) Any unaccounted PPE shall be verified and in case of loss, the AO shall
be held accountable.

As of December 31, 2017, the Balance Sheet of the Barangay showed Fixed
Assets with a net book value of P1,170,706.01. However, physical existence, valuation as
well as correctness of the account balances could not be ascertained because the

36
Barangay Treasurer did not to conduct the physical count of all Barangay properties,
much less submit the required inventory report and reconcile with the records of the City
Accountant as of December 31, 2017 as follows:

Accum. Net Book

Account Title Cost Depreciation Value
Land 377 37
,000.00 - 7,000.00
Land 147 6
Improvements ,171.00 81,661.14 5,509.86
Electrification, 619 45 15
Power & Energy ,182.57 9,492.71 9,689.86
Office Buildings 489 42 6
,919.33 1,504.90 8,414.43
Other Structures 594 48 10
,428.09 7,609.91 6,818.18
Office Equipment 8
7,770.00 78,993.00 8,777.00
Furniture and 350 15 19
Fixtures ,143.20 9,798.58 0,344.62
IT Equipment and 9 5
Software 9,638.80 47,325.14 2,313.66
Library Books 4
1,900.00 37,710.00 4,190.00
Communication 6
Equipment 7,394.00 57,805.92 9,588.08
Motor Vehicles 185 16 1
,500.00 6,950.00 8,550.00
Other
Transportation
Equipment 6,297.00 5,667.30 629.70
Other Property,
Plant and 392 28 10
Equipment ,062.40 3,181.78 8,880.62
3,45 2,2 1,1
Totals 8,406.39 87,700.38 70,706.01

The Systems and Procedures Manual on the Management of Barangay Funds and
Property, provides that a physical count of all Property, Plant and Equipment (PPE) shall
be conducted by an inventory committee headed by the Punong Barangay (PB) as
chairman or his authorized representative and Barangay Treasurer (BT) as member at
least once a year. Upon completion of the physical inventory, a Report on the Physical
Count of Property, Plant and Equipment (RPCPPE) shall be prepared by the inventory
team. The report shall be submitted to the Barangay Record Keeper and the City
Accountant for reconciliation with the recorded Property, Plant and Equipment.

37
 The inventory-taking is an indispensable procedure for checking the integrity of
property custodianship. The non-conduct of an inventory on properties caused difficulty
in ascertaining the correctness and existence of the assets taken up in the Barangay books
kept by the City Accounting Office, as well as in determining their physical condition and
whereabouts. Any addition, which may be through donations, etc., or loss thereof could
not be detected; hence appropriate action thereon could not be acted upon immediately.

The barangay did not submit a report of physical count of PPE due to non-
conduct of physical inventory of PPE items owned by the barangay contrary to the
stipulations set forth in the barangay and NGAS manuals.

We recommend that the barangay inventory committee conduct the physical

inventory-taking of all barangay properties as of the year-end and submit the
required inventory report pursuant to Item 3 of the Policies and Procedures on
Supplies and Materials, Property, Plant and Equipment, Public Infrastructures and
Reforestation Projects of the Systems and Procedures Manual on the Management
of Barangay Funds and Property, Volume I, to ascertain the correctness, validity
and existence of the recorded fixed assets.

4. Properties of the barangay with insurable risk totaling P2,895,906.39 are not
insured with the Property Insurance Fund of the Government Service
Insurance System (GSIS) contrary to the provision of the Systems and
Procedures Manual on the Management of Barangay Funds and Property, thus
the barangay will not be indemnified of the value of the properties in case of
loss due to fire and other fortuitous events.

Item 6 of the Policies and Procedures on Supplies and Materials, Property, Plant
and Equipment, Public Infrastructures and Reforestation Projects of the Systems and
Procedures Manual on the Management of Barangay Funds and Property, Volume 1
provides the following:

“All PPE with insurable risk shall be insured with the Property Insurance
Fund of the Government Service Insurance System (GSIS).”

As of December 31, 2017 the barangay did not insure the buildings and other
physical assets of the totaling 2,895,906.39 with the Property Insurance Fund of the
Government Service Insurance System (GSIS) as enumerated below:

Account Title Amount

Land Improvements 147,171.00
Electrification, Power & Energy 619,182.57
Office Buildings 489,919.33
Other Structures 594,428.09

38
 Account Title Amount
Office Equipment 87,770.00
Furniture and Fixtures 350,143.20
IT Equipment and Software 99,638.80
Library Books 41,900.00
Communication Equipment 67,394.00
Other Transportation Equipment 6,297.00
Other Property, Plant and Equipment 392,062.40
Totals 2,895,906.39

The non-compliance with the requirement denies the government adequate and
reliable protection against damage to or loss of its properties or assets and interests due to
fire, earthquake, storm, or other fortuitous events/casualty.

We recommend that the barangay allocate funds for the insurance of their
properties with insurable risks and insure these properties with the Property
Insurance Fund of the Government Service Insurance System (GSIS).

5. The barangay did not utilize the seventy percent (70%) component of the Local
Disaster Risk Reduction and Management Fund (LDRRMF) amounting to
P127,907.33 for disaster preparedness defeating the purpose of establishing the
fund as set under Section 1 and 2 of Rule 18 of RA 10121 or the Philippine
Disaster Risk Reduction and Management Act of 2010, thereby depriving the
barangay of the strengthened capacity in addressing disaster risk to the
detriment of its constituents.

Rule 18 of the Implementing Rules and Regulations of Republic Act 10121

provides as follows:

Section 1. Utilization of the LDRRMF – “The present Local Calamity Fund

shall henceforth be known as the Local Disaster Risk Reduction and
Management Fund (LDRRMF). Not less than five percent (5%) of the
estimated revenue from regular sources shall be set aside as the LDRRMF
to support disaster risk management activities, such as but not limited to,
pre-disaster preparedness programs including training, purchasing life-
saving rescue equipment, supplies and medicines, for post-disaster
activities, for the payment of premiums on calamity insurance and
construction of evacuation centers. . .”

Section 2. Quick Response Fund – Of the amount appropriated for

LDRRMF, thirty percent (30%) shall be allocated as Quick Response Fund
(QRF) or standby fund for relief and recovery programs in order that
situation and living conditions of people in communities or areas stricken by

39
 disasters, calamities, epidemics or complex emergencies, may be normalized
as quick as possible.

Verification of the Barangay Budget for the CY 2017 disclosed that the barangay
has appropriated P182,724.75 for LDRRMF. The requirement set forth under Section 1,
Rule 18 of Republic Act 10121 that “not less than five percent (5%) of the estimated
revenue from regular sources shall be set aside as the LDRRMF to support disaster risk
management activities” was found to have been complied with. Of this amount,
P54,817.42 or 30% is necessarily allocated as the Quick Response Fund (QRF) pursuant
to Section 2, Rule 18 of the Implementing Rules and Regulations of Republic Act 10121
while P127,907.33 or 70% is for the implementation of disaster preparedness programs.

However, examination of the Status of Appropriations, Commitments and

Balances (SACB) for CY 2017 revealed that the management failed to utilize the fund for
the implementation of disaster preparedness programs.

Section 3 of the Implementing Rules and Regulations of Republic Act 10121

states that:

Declaration of Policy – It is the policy of the State to:

(k) Recognize the local risk patterns across the country and strengthen the
capacity of LGUs for disaster risk reduction and management through
decentralized powers, responsibilities and resources at the regional and
local levels;

(l) Recognize and strengthen the capacities of LGUs and communities in

mitigating and preparing for, responding to, and recovering from the impact
of disasters;

As declared in the foregoing policies, one of the objectives of the State in

establishing the LDRRMF is increased capacities of LGUs in mitigating and preparing
for disasters. However, with the non-utilization of the funds allocated for disaster
mitigation and preparation in CY 2017, the purpose of its establishment was defeated to
the detriment of the barangay and its constituents.

We recommend that management should optimally utilize the 70% allocation

for disaster preparedness of the LDRRMF through the timely implementation of the
projects and programs covered by the fund.

6. The Local Disaster Risk Reduction and Management Fund Investment Plan
(LDRRMFIP) and the Report on Sources and Utilization of Disaster Risk
Reduction and Management Fund (DRRMF) for as of December 31, 2017 were
not prepared and submitted by the Barangay contrary to the provision of COA

40
 Circular No. 2012-002 dated September 12, 2012, thus, projects/activities
funded by LDRRMF could not be evaluated and monitored.

Section 5.1.2 of COA Circular No. 2012-002 dated September 12, 2012 provides
that Local Disaster Risk Reduction and Management Fund Investment Plan
(LDRRMFIP) shall be prepared annually. It shall present the 30% allocation for QRF in
lump-sum and the allocation for disaster mitigation, prevention and preparedness with
details as to projects and activities to be funded. The LDRRMFIP shall also include under
a separate caption, the list of projects and activities charged to the unexpended LDRRMF
of previous years. A sample format of the LDRRMFIP as provided in the said COA
Circular is shown in Annex A.

Further, Section 5.1.5 of the same circular requires the Local Accountant to
prepare a Report on Sources and Utilization of DRRMF using the format in Annex B.
The Local Disaster Risk Reduction and Management Officer (LDRRMO) shall submit
the report on or before the 15th day after the end of each month through the LDRRMC
and Local Development Council to the COA auditor of the LGU.

The LDRRMFIP and the Report on Sources and Utilization of DRRMF shall also
be submitted to the Office of the Civil Defense (OCD) and the Department of Interior and
Local Government – Local Government Operations Office (DILG-LGOO) as per Section
5.1.6 of the above-cited circular.

Records showed that the Barangay did not prepare and submit the LDRRMFIP
and the Report on Sources and Utilization of DRRMF as of December 31, 2017 which
precluded us from determining whether or not the projects/activities funded by LDRRMF
were carried out as programmed.

We recommend that the management prepare and submit the Local Disaster
Risk Reduction and Management Fund Investment (LDRRMFP) as required under
COA Circular No. 2012-002 dated September 12, 2012 indicating the 30% allocation
of QRF and the allocation for disaster mitigation, prevention and preparedness with
details as projects and activities to be funded.

Likewise, we recommend that the Barangay through the City Accountant to

prepare the Report on Sources and Utilization of DRRMF using the prescribed
format in COA Circular No. 2012-002 on a monthly basis and require the Local
Disaster Risk Reduction and Management Officer (LDRRMO) to submit such
report on or before the 15th day after the end of each month through the LDRRMC
and the Local Development Council to the COA Auditor.

7. Out of eleven (11) Projects/Programs/Activities embodied in the Annual

Investment Plan of Barangay Awihao for CY 2017 totaling P660,699.00, only
six (6) projects costing P242,537.25 were implemented hence, its intended
recipients were not fully benefited.

41
 Section 287 of RA 7160 states that “Local Development Projects – Each local
government unit shall appropriate in its annual budget no less than twenty percent (20%)
of its annual internal revenue allotment for development projects”

As general policies, it is the responsibility of every local government units to

ensure that the 20% of the IRA is optimally utilized to help achieve desirable socio-
economic development and environmental outcomes.

The Barangay Awihao allocated P660,699.00 in its local development fund to

deliver services to the constituents that would redound with their socio economic and
environmental activities. However, Barangay’s CY 2017 Annual Investment Plan failed
to categorize the proposed developmental projects into three (3) major components
pursuant to DILG and DBM Joint Memorandum Circular (JMC) No 1, s. 2005, namely:

a. Social Development
b. Economic Development
c. Environmental Management

Review of the programs/projects/activities embodied in the Annual Investment

Plan disclosed that only six (6) of these projects was implemented for CY 2017 thus
depriving its target beneficiaries of these plans, programs and projects. It was revealed
that the reason for this non-implemented P/P/A is attributed to the lack of specific plan
and Program of Works (POWs) to execute them on time. The Chairman, Committee of
the Infrastructure of the barangay is responsible to overview that the programmed
project/programs funded from 20% Development Fund (LDF) are implemented during
the year, as follows:

Appropriat Commit Balanc

Program/Project/Activity
ed Fund ments e
Renovation of street light wirings at 50 49,7 30
ADA & Lower Awihao ,000.00 00.00 0.00
Renovation of street light wirings at 50 49,7 30
Proper Awihao ,000.00 00.00 0.00
Renovation of street light wirings at 50 28, 21,90
RANA and Mojon ,000.00 100.00 0.00
Drainage (marfe Macalos-Lower 50 50,00
Awihao ,000.00 0.00
50 50,00
Hanging Bridge at Sitio Mojon
,000.00 0.00
50 49,9 5
Open Canal (Ditch Orge Residence)
,000.00 48.00 2.00
Open Canal (William Rosalit-Lower 50 49,9 2
Awihao) ,000.00 78.00 2.00
200, 200,00
Spillway at Lower Awihao
000.00 0.00
Repair Waiting Shed at Sitio Mojon 40 15, 24,88

42
 Appropriat Commit Balanc
Program/Project/Activity
ed Fund ments e
,000.00 111.25 8.75
Extension Water System at Sitio 40 40,00
Sun-ok ,000.00 0.00
30,69
Landscaping at Awihao Brgy. Hall
30,699.00 9.00
660, 242,5 418,1
Total
699.00 37.25 61.75

The non-implementation of appropriated and programmed projects/programs

embodied in approved Annual Investment Plan (AIP) deprived the intended beneficiaries
of the benefits that can be derived from its implementation thereof.

We recommend that the barangay implement the projects embodied in the

AIP and identify the reasons for the non-implementation of the programs and
consequently make the necessary actions to facilitate the implementation of the
programs/projects/ activities.

8. The unexpended balance of Due to LGU’s (418) representing unused balances

of aid and financial assistance from different local government agencies
totaling P384,159.64 remained in the Barangay Book as of December 31, 2017
due to the failure of the management to assess any further need of these funds.
These were not implemented nor remitted to source agency and no request for
their subsequent use was initiated by the Barangay, contrary to COA Circular
94-013 dated December 13, 1994.

COA Circular No. 94-013 dated December 13, 1994 was issued to ensure that:

 the transfer of funds is properly taken up in the books of both agencies;

 the transferred funds are used only for the intended purpose; and
 proper accounting and reporting is made on the utilization of funds.

Paragraph 6.7 of the above mentioned circular which prescribed the rules,
regulations in the grant, utilization and liquidation of funds transferred to Implementing
Agencies (IA) provides that the IA shall return to the Source Agency (SA) any unused
balance and refund of disallowance upon completion of the project.

Audit as of December 31, 2017 disclosed that the Barangay still has an
outstanding balance in the Due to LGUs account (Code 418) totaling P384,159.64 for
various projects as shown below.

Moreso, this practice also deprives the City and other source agency on the use of
the remaining balance of the financial assistance for other priority projects of the local
government. Furthermore, the Barangay will be deprived on the grant of additional

43
financial assistance by the City Government and other source agency for other projects
unless the previous cash advance granted are first settled.

Likewise, Section 122 of GAAM, Volume I stipulates that unexpended balances

of cash proceeds of trust receipts not required by law or contractual agreement to be
returned to the trustor of or after completion of the projects/purpose for which said trusts
were received, shall be reverted to the Unapproriated Surplus of the General Fund.

We recommend that the barangay officials should immediately implement

projects funded from fund transfer of other local government units. Further,
evaluate the need for these unexpended balances of aid/ financial assistance from
different other local government agencies. Should these funds prove to be no
longer needed, the funds therefore, should be remitted back to source agencies as
required under COA Circular No. 94-013 or revert to the Unappropriated Surplus
of the General Fund if the financial assistance is not required by law by
contractual agreement to be returned to the source agency as provided Section 122
of GAAM, Volume I. If needed, management, however, should request approval
from the source agency to use the money for other projects or purpose of the
barangay.

9. Accounts Payable (401) totaling P47,571,12 were not supported with list of
valid claimants and remained outstanding for five years but were not reverted
to the Unappropriated Surplus, contrary to Section 98 of P.D. 1445 and
paragraphs 3.1 and 3.3 of DBM-COA Circular No. 99-6, thus the validity,
existence and correctness of the balance cannot be relied upon.

Section 98 of P.D. 1445 provides, Reversion of unliquidated balances of accounts

payable. The Commission, upon notice to the head of the agency concerned, may revert
to the unappropriated surplus of the general fund of the x x x x x x x x, any unliquidated
balance of accounts payable in the books x x x x x x which has been outstanding for two
years or more and against which no actual claim, administrative or judicial, has been filed
or which is not covered by perfected contracts on record. This section shall not apply to
unliquidated balances of accounts payable in trust funds as long as the purposes for which
the funds were created have not been accomplished.

Moreover, paragraph 3.1 of DBM-COA Joint Circular No. 99-6 provides that all
documented Accounts Payable which remain outstanding for two (2) years shall be
reverted to the Cumulative Result of Operations – Unappropriated (CROU), except
ongoing capital outlays projects. Paragraph 3.3 thereof provides that all undocumented
Accounts Payable, regardless of the year they were incurred shall immediately be
reverted to CROU.

Further, paragraph 2, Section 111 of Presidential Decree No. 1445 provides that:

44
 “The highest standards of honesty, objectivity and consistency shall be observed
in the keeping of accounts to safeguard inaccurate or misleading information.”

The Trial Balance for CY 2013 – 2017 showed that the Accounts Payable account
(Code 401) amounting to P47,571.12 remained unchanged for the period of five years
and were not supported with complete list of creditors for which the payables are due.

We recommend that the barangay observe strictly the pertinent provisions of

the NGAS Manual with regards to recognition, monitoring and control of payable
accounts.

We further recommend that the barangay instruct the City Accountant to

effect the necessary accounting entries to revert prior years’ accounts payable where
no actual claims, whether administrative or judicial, has been filed. No obligation
should be certified to accounts payable unless it is funded on a valid claim that is
properly supported by sufficient evidence and unless there is proper authority for its
incurrence pursuant to Section 4(s) Volume 1 of NGAS Manual and Section 157
Volume 1 of the GAAM.

10. Due to BIR (Code 412) totaling P2,670,75 cannot be relied upon due to some
over/underremittance recorded during the year amounting P3,680.17, thus
affecting the fairness of the financial statements.

Section 111 of Presidential Decree (P.D.) 1445 otherwise known as the

Government Auditing Code of the Philippines provides that “the highest standards of
honesty, objectivity and consistency shall be observed in the keeping of accounts to
safeguard against inaccurate or misleading information.”

Review of the tax withheld and remitted for each month showed the following:

Month Compens Supplie Remitt

Withheld ation rs DST Total ed Balance
-
CY 2016 3,099. 2,201.0
Balance 898.16 18 2
7,585. 1,725. 12,902. 12,902
January 3,591.64 86 00 50 .50 0.00
1,215. 5,062.3 5,077.
February 3,591.64 255.73 00 7 37 -15.00
4,528. 1,545. 9,665.1 9,665.
March 3,591.64 49 00 3 13 0.00
1,061. 1,065. 5,718.1 5,718.
April 3,591.64 50 00 4 14 0.00
-
2,183. 1,665. 7,439.7 8,859. 1,419.9
May 3,591.64 12 00 6 71 5

45
 3,332. 1,290. 8,214.1 8,259.
June 3,591.64 55 00 9 19 -45.00
6,457. 1,605. 11,653. 11,653
July 3,591.64 05 00 69 .69 0.00
6,191. 1,200. 10,983. 10,983
August 3,591.64 97 00 61 .61 0.00
2,606. 1,275. 7,473.2 7,472.
September 3,591.64 63 00 7 47 0.80
2,944. 1,290. 7,826.4 7,826.
October 3,591.64 76 00 0 40 0.00
1,950. 1,215. 6,757.0 6,757.
November 3,591.64 41 00 5 05 0.00
1,799. 6,350.9 6,350.9
December 3,591.64 28 960.00 2 0.00 2
43,099.6 40,89 16,05 100,94 98,27 2,670.7
Totals 8 7.35 0.00 5.19 4.44 5

As can be gleaned from the above there were over/underremittance in the

following months which causes the tax withheld in the month of December to be reduced
by P3,680.17 as shown below:
CY 2016 Balance (2,201.02)
February (15.00)
May (1,419.95)
June (45.00)
September 0.80
Total (Over)/Underremittance (3,680.17)
December 6,350.92
Balance shown in the FS 2,670.75

The above listed discrepancies are very substantial which need to be seriously
addressed to identify cause/s thereof as these may affect adversely the fairness of the
financial statements of the barangay.

We recommend that the barangay investigate the cause of these

over/underremittance of the tax withheld and install proper control to prevent these
from recurring.

11. The balance of Cash in Bank account (Code 111) per Financial Statement
differs by P10,000.00 from the Bank Statement thus casting doubt on the
accuracy, validity and existence of the said balance contrary to Section III of
Presidential Decree (P.D.) No. 1445.

Section III of Presidential Decree (P.D.) No. 1445 provides:

46
 Keeping of Accounts:

1. The accounts of an Agency shall be kept in such details as necessary to meet

needs of the Agency and at the same time be adequate to furnish
information needed by fiscal or control agencies of the government.

2. The highest standards of honesty, objectivity and consistency shall be

observed in the keeping of accounts to safeguard against inaccurate or
misleading information.

Review of the Trial Balance showed a Cash in Bank balance of P3,625,360.87

while perusal of the Bank Statement from Land Bank of the Philippines showed a balance
as of December 31, 2017 of P3,615,360.87 resuting in a variance of P10,000.00.

Further, it was also noted that balance per Bank Reconciliation Statement was
P3,614,609.72 which have added to its unreliability.

We recommend that the City Accountant be directed to reconcile the said

difference between the balance per bank records and the balance per accounting
records to prevent presenting inaccurate or misleading information in the financial
statements.

12. The concerned Barangay Officials did not observe strictly the conduct of
Inventory and Turn-over of all Barangay Properties, Financial Records,
Documents (BPFRDs) and Money Accountabilities within the timelines
contrary to DILG Memorandum Circular No. 2018-12 dated February 1, 2018
which could affect the realization of systematic transition from the outgoing
barangay officials to the incoming newly elected barangay officials.

DILG Memorandum Circular No. 2018-12 dated February 1, 2018 provides the
following:

1. “xxxx all Punong Barangays and concerned barangay officials ar required to

prepare the necessary documents, to include inventory of all barangay
financial records, reports, finances and properties that were issued, assigned,
entrusted or under the custody of all concerned barangay officials from the
start of their terms of office up to the present.

2. To sustain transparent and accountable local governance at the barangay

level, and to further ensure that all concerned barangay officials exercise
due diligence as regards proper use, care utilization and safekeeping of all
government properties, barangay funds, financial records and documents.

47
 3. It provides specific activities and timelines to be undertaken by concerned
local officials in the conduct of inventory and turnover of all BPFRDs and
money accountabilities.

4. Creation of Barangay Inventory Team (BIT).

Duties and Functions – The Punong Barangay / BIT shall undertake the following
activities within the prescribed period such as:

Activity OPR Timeline

1. Issue an Executive Order on Punong Not later than
the creation of BIT Barangay February 23, 2018
2. Convene members of the BIT (PB)

3. Furnish the DILG City Director BIT Not later than

of the City/Municipal Local February 26, 2018
Government Operations
Officer a copy of the
Executive Order
4. Conduct and Initial BIT Not later than March
Inventory of all BPFRDs 9, 2018
using Inventory and Turnover
Form No. 1
5. Furnish the the City/Municipal BIT Not later than March
Accountant; local COA and 12, 2018
the concerned DILG
CD/C/MLGOO copy of the
Inventory and Turnover Form
No. 1
6. Conduct the final inventory of BIT Not later than May 30,
BPFRDs and Money 2018
Accountabilities using
Inventory and Turnover Form
No. 2
7. Furnish the City/Municipal BIT Not later than June 3,
Accountant; local COA; and 2018
the concerned DILG
CD/C/MLGOO copy of the
Inventory and Turnover Form
No. 2
8. Post the Final Inventory and PB Upon approval of the
Turnover Form No. 2 C/MATT
approved by the C/MATT in
three (3) conspicuous places
within the barangay premises
and/or in the barangay’s
official website or facebook
account, if any, and shall
always be made available to

48
 the public.
9. Plan and organize the PB Not later than 12
conduct of formal Turnover noon of June 30, 2018
Ceremony
10.Notify the City/Municipal
Mayor, local officials; local
COA; the DILG City Director
or C/MLGOO; and the newly
elected barangay officials for
the conduct of turnover
ceremony.
11.Conduct the Turnover
Ceremony

5. Ensure the completeness of all BPFRDs, to include legislative and

administrative records, transcript or minutes of meetings, list and status of
complaints filed before the Lupong Tagapamayapa, updated Registry of
Barangay Inhabitants (RBIs), list of inventory of current local or
international development assisted projects, if any, and all other documents
and/or logbooks containing barangay transactions, and

6. See to it that all properties of the barangay, supplies, finances/money that

are in actual possession or entrusted to the concerned barangay officials and
employees, including reports on damaged or lost items or repairs made to
properties are properly accounted, turned over and listed in the prescribed
Inventory and Turnover Forms.

Per our monitoring, the timelines required in the above-mentioned activities from
Activity 1 to 7 were not strictly observed by the Punong Barangay and the BIT. Thus, the
required accomplished Inventory and Turnover Reports using the prescribed forms were
not provided / submitted to COA office. Further, the expected systematic transition from
the outgoing barangay officials to the incoming newly elected barangay officials could
not be attained.

We recommend that the concerned barangay officials should fast tract the
conduct of inventory and turnover of all barangay properties, financial records,
documents (BPRDs) and money accountabilities to avoid legal consequences thereof
pursuant to DILG Memorandum Circular No. 2018-12 dated February 1, 2018.

PART III - STATUS OF IMPLEMENTATION BY THE AUDITEE OF PRIOR

YEARS’ AUDIT RECOMMENDATIONS

AUDITOR’S
AUDIT OBSERVATIONS AND ACTION TAKEN BY
REF. VALIDATION
RECOMMENDATIONS MANAGEMENT
RESULTS
Fully Implemented
1. Purchase Orders for supplies and BAAR

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RECOMMENDATIONS MANAGEMENT
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materials lacked 2012
important/necessary information
such as date, number, and
term/conditions as prescribed
under the Systems and Procedures
Manual on the Management of
Barangay Funds and Property thus
delayed deliveries of items
purchased could not be
ascertained.

Instruct the barangay treasurer to

indicate or fill-up all desired
information in the issuance of
purchase order. Require the
treasurer to strictly follow the
provisions of the Systems and
Procedures Manual on the
Management of Barangay Funds
and Property.
2. The treasurer failed to BAAR
deposit/remit collections 2012
amounting to P36,659.11,
contrary to Section 69 of PD
1445, Section 21 of NGAS
Manual Volume I and Section
2(a) on Policies and Procedures
for the receipts and deposits of
collections of the System and
Procedures Manual on the
Management of Barangay Funds
Volume I, thus exposing the funds
to possible loss and/ or misuse.

Require the treasurer to

deposit/remit his collections with
the authorized government
depository bank intact daily or
not later than the next banking
day and or as prescribed under
section 2(a) of the Systems and
Procedures Manual on the
Management of Barangay Funds
Volume 1.

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3. The City Accountant did not BAAR
submit all the Financial 2012
Statements and schedules
required under Accounting
System Manual for Barangay,
Volume IV, thus all necessary
financial information were not
disseminated to the users of the
financial statements.

Require the City Accountant to

submit all the required Financial
Statements and schedules as
enumerated in Accounting
System Manual for Barangay.
4. The barangay incurred expenses BAAR
for land improvements, 2012
electrification, power and energy,
office buildings and other
structures despite the doubtful
existence and ownership of land.
Losses may be incurred by the
government if ownership of the
land where the improvements and
building were situated, remain
unresolved.
Secure the necessary documents
that legalize ownership by the
barangay of the lot where the
improvements and building were
situated. In case of donation, the
appraisal value of the lot shall be
recorded in the books and the
following entries shall be made:

Land xxx
Income from Grants and
And Donations Or Prior
xxx
Year’s Adjustment (as the
case may be)
5. The City Accountant did not BAAR
transfer at the end of the year the 2012
Public Infrastructures account to
the respective Registry of Public
Infrastructure contrary to the

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 AUDITOR’S
AUDIT OBSERVATIONS AND ACTION TAKEN BY
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RECOMMENDATIONS MANAGEMENT
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provision of the Systems and
Procedures Manual on the
Management of Barangay Funds
and Property, Volume IV, thus
resulted to the overstatement of the
total asset and understatement of
Government Equity by
P125,470.00, adversely affecting
the fair presentation in the
Balance Sheet.

Transfer the completed public

infrastructures and reforestation
projects during the year to their
respective registries at yearend.

Not Implemented
1. The existence of the PPE accounts BAAR
amounting to P1,136,44.27 could 2012
not be ascertained due to the non- 2015
conduct of physical inventory,
non-preparation of Subsidiary
Ledgers by the Accounting
Section; and no turn-over of
property records from the
previous to the current officials.

We recommend that the custodian

adhere to the guidelines on the
Operating Procedures on the
Management of Barangay Funds
and Property, Volume I and
conduct the actual physical
inventory and submit the report
thereon.

We recommend that the City

Accounting Office maintain
subsidiary property ledger cards,
duly supported with complete
documents, for all PPE and Other
Supplies Inventory accounts to
substantiate balances in the
financial statement and to
facilitate reconciliation of
balances between accounting and
barangay records.

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Further, we recommend that the

Barangay require the turn-over of
all records on cash and property
everytime there is a turn-over of
accountabilities from the outgoing
to an incoming official pursuant to
the policies and procedures on the
transfer of accountabilities in the
Systems and Procedures Manual
on the Management of Barangay
Funds and Property, Volume I.
2. Procurement of goods totaling BAAR
P180,744.30 made under the 2015
alternative mode of procurement
were paid without proper
documentation.

We recommend that the Punong

Barangay direct the Barangay
Treasurer for the immediate
submission of the required
supporting documents otherwise
all those who authorized the
payment thereof shall be held
personally liable for the amount
paid.
3. Properties of the barangay with BAAR
insurable risk totaling 2012
P911,197.50 are not insured with
the Property Insurance Fund of
the Government Service
Insurance System (GSIS)
contrary to the provision of the
Systems and Procedures Manual
on the Management of Barangay
Funds and Property, thus the
barangay will not be indemnified
of the value of the properties in
case of loss due to fire and other
fortuitous events.
Allocate funds for the insurance
of their properties with insurable
risks and insure these properties
with the Property Insurance Fund
of the Government Service
Insurance System (GSIS).

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AUDIT OBSERVATIONS AND ACTION TAKEN BY
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RECOMMENDATIONS MANAGEMENT
RESULTS
4. Cash advances amounting to BAAR
P23,680.00 remained 2015
unliquidated as of December 31,
2015 due to the non-liquidation
of cash advances by the
accountable officer within the
prescribed period and the
absence of a proper turnover
from the former to the current
Barangay Treasurer (BT). Also,
the barangay did not institute
sanctions provided for under
COA Circular No. 97-002 or
implement other measures to
require settlement thereof.

We recommend that the Punong

Barangay ensure that the
accountable officer as well as the
other officials of the barangay
liquidate cash advances granted
within the prescribed period as
stated in COA Circular No. 97-
002 and Section 89 of P.D. No.
1445. Also, enforce proper
turnover when there are transfer
of accountabilities of Accountable
Officers to properly safeguard the
assets of the barangay;and notify
the previous BT through the
issuance of demand letters for the
liquidation or settlement of
his/her obligations with the
barangay. File appropriate legal
action, if warranted after
exhausting all appropriate means
to recover the resources of the
barangay and no liquidation is
effected.
5. Balances totaling P95,250.00 of BAAR
completed projects from various 2015
financial assistance received by
the Barangay were not returned
to the source agency, the City of
Toledo.

We recommend that the Punong

Barangay require the concerned

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RECOMMENDATIONS MANAGEMENT
RESULTS
officials to submit the required
documents to establish the
validity and regularity of the
funds transferred and their
adherence to the provision of
COA circular 94-013.

We recommend that the City

Accountant and Barangay
Bookkeeper reconcile their
records and effect the necessary
adjustments thus present the
correct financial condition of the
agency.

Likewise, strict compliance with

the guidelines on the granting,
utilization and liquidation of
financial assistance pursuant to
COA Circular No. 94-013 is
hereby enjoined.
6. Out of sixteen (16) BAAR
Projects/Programs/Activities 2015
embodied in the Annual
Investment Plan of Barangay
Awihao for CY 2015 totaling
P523,291.40, only two (2)
projects costing P57,870.00 were
implemented hence, its intended
recipients were not fully
benefited.

We recommend that the barangay

implement the projects embodied
in the AIP and identify the
reasons for the non-
implementation of the programs
and consequently make the
necessary actions to facilitate the
implementation of the
programs/projects/ activities.
7. The year-end financial statements BAAR
of the Barangay were not timely 2015
submitted to the Auditor due to
the delayed or non-submission of
registers, disbursement vouchers
and supporting documents by the

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 AUDITOR’S
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RECOMMENDATIONS MANAGEMENT
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Barangay to the City Accounting
Office.

We recommend that Management

submit the required registers,
reports, disbursement vouchers
and supporting documents within
the prescribed period stated in the
Accounting System Manual for
Barangays and COA Circular No.
2012-005. Otherwise, we
recommend that salaries of
responsible officials be withheld
pursuant to Section 127 of P.D.
1445.

We also recommend that

henceforth, the financial reports
and related reports/ documents be
submitted to COA within 60 days
after the 31st of December.
8. Copies of perfected contracts, BAAR
purchase orders and their 2015
supporting documents and
notices of Deliveries/ Inspection
and Acceptance Reports were not
submitted to the Auditor within
five (5) working days from its
issuance and within twenty-four
(24) hours from receipt of goods,
respectively, thereby preventing
the immediate review thereof and
the Barangay for acting on any
deficiency that may be noted.

Likewise, we recommend that the

Barangay Officials comply with
the requirement on the
submission of perfected contracts
and purchase orders irrespective
of amount and their supporting
documents within five (5)
working days from issuance
thereof pursuant to COA Circular
Nos. 2009-001 and 2009-002 for
validation and appropriate action.

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9. The Monthly Report of BAAR
Accountability for Accountable 2015
Forms (RAAF) were not prepared
and submitted by the Barangay,
thus information as to inventory,
receipts and issuances of
accountable forms at any given
month could not be immediately
ascertained.

We recommend that management

direct the collecting officer to
prepare the Monthly Report of
Accountability for Accountable
Forms (RAAFs) to facilitate
reconciliation and to monitor the
movement of the accountable
forms in the hands of the
accountable officer.

10. The preparation and submission BAAR

of the Barangay’s GAD Plan and 2015
GAD Accomplishment Report
were not in conformity with
Joint Memorandum Circular
(JMC) No. 2013-01 of Philippine
Commission on Women (PCW),
Department of the Interior and
Local Government (DILG),
Department of Budget and
Management (DBM) and
National Economic and
Development Authority (NEDA).
Likewise, there was a delay in the
submission of a copy of GAD
Plan and the corresponding
Accomplishment Report to the
Audit Team.

We recommend that management

require the Barangay GAD Focal
Point System (GFPS) to
spearhead the preparation and
submission of the annual and
performance based GAD Plan and
Budget (GPB) as well as the
corresponding GAD

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RECOMMENDATIONS MANAGEMENT
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Accomplishment Report (GAD
AR) following the prescribed
form and procedures pursuant
Joint Memorandum Circular No.
2013-01.

11. Disbursement vouchers and BAAR

payrolls together with its 2012
supporting documents were not
marked/stamped “PAID’ upon
payment in violation of COA
Circular No. 92-389 dated
November 3, 1992 and Section
124 of P.D. 1445, thus subjecting
them to possible re-use or double
payment.

Require the disbursing officer and

cashier to mark/stamp “PAID” on
the face of all paid
vouchers/payrolls and its
supporting documents to prevent
possible re-use of the same in
consonance with COA Circular
No. 92-389 and Section 124 of
PD 1445.
12. Contrary to the provisions of the BAAR
Accounting System Manual for 2012
Barangay, Vol IV Bank
Reconciliation Statements were
not submitted to the COA Auditor
for verification within the
prescribed period thus accuracy
of the monthly balances of the
Cash In Bank account could not
be readily ascertained.
Reconciliation of the cash balance
per books and per bank is done
only at the end of the year thus
reconciling items could not be
promptly acted

Direct the barangay bookkeeper

and the city accountant to
regularly secure bank statements,
prepare and expedite the

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AUDIT OBSERVATIONS AND ACTION TAKEN BY
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RECOMMENDATIONS MANAGEMENT
RESULTS
reconciliation of balances
between the books and the bank
accounts monthly and submit the
monthly bank reconciliation
statements promptly together with
the pertinent documents relative
thereto. Further require the city
accountant to record in the books
all reconciling items so as to
present accurate Cash in Bank
account balance.
13. Delayed remittance of taxes BAAR
withheld to the Bureau of Internal 2012
Revenue amounting to P5,332.63
was contrary to Section 29 (1) of
P.D. 1445 and the rules and
regulations of the National
Internal Revenue Code, and
exposed the fund to possible
mismanagement.

Immediately remit all taxes

withheld to avoid unnecessary
penalties.

Strictly comply with all BIR

Regulations on the remittance of
withholding taxes.

Monitor the due dates of these

remittances to avoid penalties.

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