INTRODUCTION

Masbate was established as the capital town of the Province of Masbate shortly before the declaration of the Philippine Independence in 1946 by President Emilio Aguinaldo. It remained to be a second class municipality by virtue of the Department of Finance Memorandum Circular No. 97-33 (44) dated May 16, 1997.

Pursuant to Republic Act No. 8807, the Municipality of Masbate was converted into a component city of the Province of Masbate to be known as the City of Masbate. This legislation took effect on October 1, 2000.

For the year 2000, the Municipality continued with its mandated functions consistent with the national government’s thrust for social and economic growth, which were focused towards the following:

1. to enhance the socio-economic condition of the constituents through the implementation of programmed projects that will greatly improve mobility

2. to deliver speedy basic, regular and direct services to their constituents
3. to provide essential health services
4. to improve LGU’s financial position through revenue collection

In line with the above-cited objectives as well as to accelerate the social and economic development of the municipality , the major plans and targets to be undertaken vis-à-vis accomplishments were as follows:

Only few of the foregoing projects were validated by the Auditor as to physical existence for failure of the local officials concerned to submit on time the accomplishment report and the complete documentation of other accomplished projects.

The Municipality’s assets, liabilities and residual equity were P66,022,828.00, P16,214,257.00 and P49,808,573.00, respectively. Its current ratio was 1.78:1 while its debt equity ratio was 0.32:1.

During the year, the agency collected the total income of P63,288,776.00 registering an increase of P19,438,687.00 or 44.33% over that of last year’s income of P43,850,089.00. Its total appropriations for the year amounted P64,148,846.00 while its actual expenditures was P58,484,073.00 showing a balance of P5,664,773.00.

SCOPE OF AUDIT

We have conducted an audit on a selective basis on the accounts, transactions and operations of the Municipality of Masbate for calendar year 2000. Our Audit was made in pursuance of the Audit Thrusts for Local Government Sector. However, due to some constraints, our audit was limited only to the following areas, namely:

1. Financial and Compliance Audit
• Cash Accounts
• Fixed Assets Accounts
2. Revenue Audit
• Collection Efficiency

Likewise, we conducted Value for Money Audit but results thereon shall be reported separately.

OPINION ON THE STATE AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

The Auditor rendered a qualified opinion on the fairness of the financial statements of the Municipality of Masbate due to the failure of the Municipal Accountant to prepare and submit the required Bank Reconciliation Statements which renders the Cash in Bank Account of P3,244,219.85 unreliable and inaccurate; and failure to conduct the physical inventory of Fixed Assets amounting to P48,913,152.00 whose validity, existence and correctness cannot be ascertained. The inadequacy of its records did not permit us to determine the validity of these accounts.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

For the exceptions cited above the management should prepare and submit to the Office of the Provincial Auditor the Bank Reconciliation Statements. Also, the Auditor recommended the conduct of physical inventory of all fixed assets and submission of the corresponding report to the Provincial Auditors’ Office. In addition, the following are the significant findings and recommendations:

1. Delayed submission of monthly accounts and other reports by the agency contrary to the provisions of Revised Manual on Certificate of Settlement and Balances and COA Circular No. 91-368 precluded the Auditor of the timely evaluation of the financial condition and results of operations thereby depriving the management of valuable information necessary for decision making.

Require the Acting City Treasurer and Acting City Accountant to submit and render reports regularly and strictly in accordance with the prescribed existing auditing rules and regulations set forth under COA Circular No. 91-368 and Manual on Certificate of Settlement and Balances in order to maintain the relevance and value of the information to agency management in controlling operations and making decisions.

2. Non-adherence to the rules and regulations on custodianship, use and reporting of Accountable Forms contrary to COA Circular No. 92-382 deprived the Auditor to immediately determine the correctness of its balance at any given date.

Direct the Acting City Treasurer to prepare and submit the Monthly Report of Accountable Forms to facilitate early determination of its balances during cash examination. Likewise, cause the verification of the Accountable Forms issued to collecting clerks to forestall the commission of irregularities. Strict adherence to Sections 25, 27 and 37 of COA Circular No. 92-382 is enjoined.

3. Failure to enforce regular turnover and deposit of collections in violation of Sections 6,26 and 28 of COA Circular No. 92-382 contributed to the accumulation of undeposited collections in the total amount of P P733,935.16 thereby exposing the government funds to possible loss/misuse.

Require all collectors to turnover intact the full amount of their daily collections to the liquidating officer in order to safeguard government funds from possible loss or misuse. Likewise, direct the liquidating officer and Acting City Treasurer to deposit intact all their collections with the authorized depository bank.

4. Cash Advances for local travel granted to agency officials and employees were erroneously recorded in the books of accounts as direct charged to appropriations, contrary to the provisions of COA Circular No. 96-004 hence, resulted in the understatement of asset and overstatement of expense accounts.

Require the Acting City Accountant to record the cash advances for local travel in the Cash Advances–Officers & Employees (8-70-500) Account as set forth under COA Circular No. 96-004 to reflect the correct balances of Assets and Liabilities accounts.

5. The agency failed to strictly monitor the regular collections from rentals on bus/jeepney terminals thereby depriving the agency of the possible additional income that maybe utilized to finance other development projects thus, resulted in the undercollection of income by P75,000.00.

Require the Acting City Treasurer to closely monitor and enforce the collections from rentals of bus/jeepney terminals to present/reflect the actual collections thereon. See to it that the rental rate per lease contract should be realized.

We have discussed our findings and recommendations with concerned officials during our exit conference. The Auditee’s comments and reactions were solicited and incorporated in this report.

STATUS OF IMPLEMENTATION BY THE AUDITEE OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Out of thirteen (13) recommendations, four (4) were implemented, four (4) were partially implemented and five (5) were not implemented.