EXECUTIVE SUMMARY

A. INTRODUCTION

The Municipality of Bato belongs to Fourth Congressional District and is rated as

a “Third Class” Municipality. It comprises 33 barangays. It occupies a total land area of
107.12 square kilometer and has a population of 52,137 people based on 2015 census.

The Municipality is presently administered under the leadership of Hon. Frank B.

Bernaldez as the Municipal Mayor and Hon. Victorio Ramos as the Municipal Vice-
Mayor. The municipal government is composed of thirteen (13) departments/offices that
serve as the implementing arm of the various programs, projects and activities of the
agency towards a common vision and goal for the good and welfare of the constituents.

Audit Methodology and Scope of Audit

The Financial, Compliance and Value for Money (VFM) audits conducted
covered the accounts and operations of the Municipality of Bato for all funds for the
period from January 1 to December 31, 2019.

In addition to the actual examination of the accounts using a sampling scheme,

other various techniques were used such as observation, interview with the concerned
officials and employees and other auditing procedures considered necessary under the
circumstances.

The audit was focused on the different audit thrusts prescribed by the Local
Government Sector of the Commission on Audit.

B. FINANCIAL HIGHLIGHTS

B.1. Financial Position and Performance

In Philippine Peso % of
Particulars Increase/ Increase/
CY 2019 CY 2018
(Decrease) (Decrease)
Financial Position
Total Assets 371,257,213.82 390,661,143.76 (19,403,929.94) (4.97)
Total Liabilities 229,703,467.05 217,526,306.39 12,177,160.66 5.60
Government Equity 141,553,746.77 173,134,837.37 (31,581,090.60) (18.24)
Financial Performance
Total Income 146,157,630.84 130,938,492.41 15,219,138.43 11.62
Total Expenses 138,202,198.87 118,872,961.46 19,329,237.41 16.27
Net Surplus 7,955,431.97 12,065,530.95 (4,110,098.98) (34.06)

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 B.2. Sources and Application of Funds

In Philippine Peso % of
Particulars Increase/ Increase/
CY 2019 CY 2018
(Decrease) (Decrease)
General Fund
Allotments 152,688,159.37 127,510,623.10 25,177,536.27 19.75
Obligations 136,179,199.04 105,000,652.96 31,178,546.08 22.89
Balance 16,508,960.33 22,509,970.14 (6,001,009.81) (26.66)
Special Education Fund
Allotments 400,000.00 331,879.28 68,120.72 20.53
Obligations 347,722.00 220,621.83 127,100.17 57.61
Balance 52,278.00 111,257.45 (58,979.45) (53.01)

B.3. Major Program/Projects/Activities undertaken in CY 2019

Project/Program/Activity Cost (₱)

Concreting of Masoli-Niño Jesus Road at Barangays Masoli and
995,668.80
Niño, Bato, Camarines Sur
Concreting of Road leading to Evacuation Center, Barangay Agos,
397,595.07
Bato, Camarines Sur
Construction of Slope Protection at Rinaga Creek, Barangay Sta.
297,772.72
Cruz, Bato, Camarines Sur
Concreting of Intia Street, Barangay Sta. Cruz, Bato, Camarines
397,554.08
Sur
Construction and Rehabilitation of drainage infront of LCC
397,212.48
Supermarket, Barangay Sta. Cruz, Bato, Camarines Sur
Concreting of Macaangay Road, Barangay San Miguel, Bato,
399,296.26
Camarines Sur
Construction of Vegetable Stall at Market Site, Barangay Sta.
298,024.14
Cruz, Bato, Camarines Sur
Construction of Zone 4 Drainage at Barangay Sta. Cruz, Bato,
497,128.80
Camarines Sur
Concreting of Line Canal from Coralde Street to Rinaga at
396,545.45
Barangay Sta. Cruz, Bato, Camarines Sur
Closure and Rehabilitation of Open Dumpsite, Barangay Agos,
2,490,591.47
Bato, Camarines Sur
Total 6,567,389.27

The Audit Team verified the existence and conformance to specifications of the
foregoing implemented projects. Also, post-audit of financial transactions relative to the
cited projects were made on a test basis.

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C. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Municipality of Bato, Camarines Sur for CY 2019 due to the
following:

(a) The existence and reliability of the inventory account balance of ₱3.715 million
as of December 31, 2019 could not be ascertained due to non-conduct of physical
count and non-maintenance of supplies ledger cards and stock cards; and

(b) The accuracy, existence and reliability of the Property, Plant and Equipment
(PPE) account in the gross amount of ₱204 million for all funds as of December
31, 2019 could not be ascertained due to variance of ₱27.687 million between the
report of physical count and general ledger balances.

D. SUMMARY OF SIGNIFICANT OBSERVATIONS AND

RECOMMENDATIONS

For the exceptions cited, we recommended that Management:

(a) create an Inventory Committee which will conduct the actual count of all supplies
and materials on stock; submit to the Commission on Audit the properly
accomplished RPCI not later than July 31 and January 31 of each year for the first
and second semesters, respectively; require the Municipal Accountant and
Municipal Treasurer to maintain SLCs and stock cards, respectively, for all
receipts and issuances of supplies/goods; and reconcile the Inventory Accounts
per books with the actual supplies at hand.

(b) instruct the Inventory Committee to include all properties in physical count and
submit an updated and properly accomplished RPCPPE with all the needed
information; direct the Property Officer to keep property cards for each category
of PPE for control purposes; and see to it that this record contains adequate
details/description of the properties such as model, serial number, location, cost
and other information necessary to facilitate identification and reconciliation; and
require both the Accounting Division and Property Section to exert all efforts to
reconcile their records on a regular basis so that discrepancies thereon are
immediately corrected.

The Audit Team has communicated the observations and recommendations with
the Management through the issuance of Audit Observation Memorandum (AOM) and
discussed them with the concerned officials and employees during the exit conference
conducted on March 3, 2020 in which the latter’s comments were incorporated in the
report, where appropriate. The following are the significant observations together with
the corresponding recommendations:

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1. Cash advances totaling ₱0.558 million for Clothing Allowance were recorded as
Office Supplies Expenses (5-02-03-010) instead of Clothing/Uniform Allowance
(5-01-02-040), thus the validity, propriety and legality of said expenditure cannot
be ascertained.

We recommended that Management require the Municipal Accountant to: (a)

ensure that clothing allowance be appropriated as an item under Personal Services
(PS) subject to the PS limitations in LGU budgets pursuant to Sections 325(a) and
331(b) of R.A. No. 7160 of the “Local Government Code of 1991”; (b) strictly
comply with the rules and regulations on the grant of Clothing Allowance; and (c)
stop the practice of utilizing the budget for office supplies for employees’ clothing
allowance.

2. Traveling and training expenses increased by ₱4.867 million or 137 percent in CY

2019 due to lack of prudence in disbursements of funds.

We recommended that Management ensure that in the conduct of meetings,

trainings or seminars for employees, prudence and economy be observed in
choosing venues that are nearest to the official station of employees or preferably
in facilities owned by the LGU to save travelling and accommodation costs.

3. Claims for travel totaling ₱1.26 million were made by several officials and
employees for the attendance to one and the same seminar/training without regard
to economy and prudent use of funds thus, rendering the expenditures as
unnecessary.

We recommended that Management ensure that attendance to seminars or

trainings be attended by only one or two officials/employees to effectively
manage the meager resources of the Municipality particularly the budgeted
amount for travel or training.

4. The Municipality did not observe the allowable per diem charges and cost of
participation of government officials during seminars, trainings, conventions and
conferences due to excessive per diem charges totaling ₱38,576.25 and excessive
registration fees claimed totaling to ₱164,600.00. The excessive monies spent
could have been expended to maintenance and other operating expenses for the
delivery of basic services to its constituents.

We recommended that Management: (a) observe prudence in the disbursements of

the government funds. The corresponding cost of meal should no longer be paid if
the registration fee already covers for it; (b) strictly adhere to the allowable
charges of per diem and costs of participation to seminars, conventions, etc. as
prescribed under EO No. 77 and NBC No. 563, respectively; and (c) require all
concerned officials and employees to refund claims which are excessive.

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 5. Government funds were disbursed even if the claims lacked the necessary
supporting documents thus, the validity, propriety and legality of the expenditures
totaling ₱8.018 million cannot be ascertained.

We recommended that Management require the Municipal Accountant to examine

the completeness of the supporting documents to ensure their validity, propriety
and legality and avoid suspension of disbursements in audit.

6. The Municipality was unable to fully implement 17 projects budgeted at ₱8.30

million or 47% of the total number of priority development projects under the
20% Development Fund (DF) for CY 2019.

We recommended that Management: (a) fully implement all uncompleted projects

as of December 31, 2019; (b) execute all projects within the time frame
programmed for their completion to effectively and timely extend to the
constituents the benefits of the agency’s development projects.

E. SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND

CHARGES

CY 2019
Balances as of Balances as of
Particulars Settled/Matured
12/31/2018 Issued 12/31/2019
into ND
Notice of Suspension ₱ 97,867,849.67 ₱ 0.00 ₱ 31,930,723.71 ₱ 65,937,125.96
Notice of Disallowance 2,179,058.12 29,614,691.51 79,360.00 31,714,389.63
Notice of Charge 0.00 0.00 0.00 0.00
Total ₱ 100,046,907.79 ₱ 29,614,691.51 ₱32,010,083.71 ₱ 97,651,515.59

F. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Out of the twenty-six (26) audit recommendations embodied in the previous

Annual Audit Report, three (3) were fully implemented, eighteen (18) were partially
implemented and five (5) were not implemented as of December 31, 2019.