INTRODUCTION

The Philippine Commission Act No.105, enacted on March 18, 1901, under the American Government combined the former districts of Burias, Masbate and Ticao, to form the new Province of Masbate.

In 1901, a very strong typhoon hit Masbate badly and seriously crippled its economy when coconut plantations, forests, as well as 90% of the houses were severely devastated. Because of the miserable condition of the Province, the then Governor Henry C. Ide issued an Executive Order annexing Masbate to the Province of Sorsogon under the authority of Philippine Commission Act 1413 enacted on November 23, 1905 which took effect on January 1, 1906.

While Masbate remained a sub-province, it was governed by a Lieutenant Governor who was elected simultaneously with the Provincial Governor of Sorsogon.

The Philippine Legislative Act 2934, approved on December 5, 1920, implemented by Executive Order No. 3, dated January 9, 1921 and was made effective on February 15, 1921, mandated the separation of Masbate from Sorsogon as a separate Province.

Since then, Masbate Province, on its own, came into being.

Generally, the Provincial Government of Masbate is tasked with the following:

1. Effective and efficient governance of the inhabitants within its territorial jurisdiction;

2. Enhance, develop, rehabilitate and institute measures to improved the socio-economic aspect and the fiscal and administration capabilities of the province;

3. Maximize delivery of basic services;

4. Maximize inter-agency coordination in planning and implementation of local and national government programs/projects/activities; and

5. Ensure effective and efficient operations of the component municipalities.

OPERATIONAL HIGHLIGHTS

The Provincial Government of Masbate appropriated the total amount of P64,676,102.00 for the Economic Development Fund Projects.

The Provincial Planning and Development Office (PPDO) has submitted its report pertaining to the 20% EDF, presented as Annex "A" of this report. Likewise, the Provincial Engineering Office has furnished us its Accomplishment Report (Presented as Annex "B") which disclosed a 100% accomplishment on activities undertaken for CY 2000.

However, validation of the reported accomplishments could not be made due to the absence of the required documents and failure of the concerned personnel to report the same on time.

FINANCIAL PROFILE

For Calendar Year 2000, the provincial government collected P339,653,734.01 showing a remarkable increase of P49,949,313.57 over last year’s income of P289,704,420.44. However, estimated collection exceeded the actual income resulting in the undercollection of P37,424,610.99 for the year 2000. Presented as Annexes "C", "D" and "E" showing details thereof.

Total appropriation amounted to P380,597,856.02 of which the total amount of P328,957,190.51 and P3,059,737.64 were expended during the year out of the Current Appropriation and Continuing Appropriation respectively.

The Total Assets amounted to P552,421,238.50 while its Total Liabilities amounted to P226,067,638.59, thus registering a Residual Equity of P326,353,599.91 which is P78,427,419.28 or 31.63% higher than the Residual Equity of P247,926,180.63 in 1999. Current Ratio and Debt-equity Ratio is P1.07: P1.00 and P .69: P1.00 respectively for the Calendar Year 2000.

SCOPE AUDIT

An audit was conducted with emphasis on the Financial and Compliance Audit.

The audit covered the review of selected transactions particularly on the internal control on cash and collections, preparation of bank reconciliation statement/inventory report and on the unliquidated cash advances. The audit included the review of some operating procedures, verification, reconciliation/analysis of accounts and such other procedures considered necessary thereof.

However, results of the Value For Money (VFM) audit conducted shall be in a separate report.

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

The auditor rendered a disclaimer of opinion on the financial statements due to the following conditions prevailing in the auditee’s operation as of December 31, 2000 :

1. Failure to conduct physical inventory of Fixed Assets/Inventories Accounts amounting to P332,531,014.64, thus, its validity, existence & correctness as recorded in the books of accounts could not be ascertained.

2. Increasing balances of unliquidated cash advances every year-end. As of December 31, 2000, total cash advances not settled amounted to P26,182,702.04 .

3. Failure of the agency to prepare and submit the required Bank Reconciliation Statements which renders the Cash in Bank accounts amounting to P56,190,216.44 unreliable.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

For the exceptions cited above, the management should conduct physical inventory of Fixed Assets/Inventories and furnish copy of report to the auditing unit; enforce strict adherence to COA Circular No. 97-002 governing cash advances; and require the Provincial Accountant to prepare the Bank Reconciliation Statements to validate/confirm the recorded Cash in Bank amounts in the books of accounts.

In addition, the following are the other significant findings and recommendations:

1. Weak internal control over the management of cash and collections resulting in the exposure of government funds to possible loss.

Require all concerned employees to strictly observe the regulations on the remittances of collections in accordance with Sections 6, 26 and 28 of COA Circular No. 92-382.

2. Failure of the agency to provide the auditing unit with copies of documents or notify him early of the agency’s forthcoming activities, as required under COA Circular No. 95-006, prevented the latter to undertake an independent validation of some projects and activities.

Direct the personnel concerned to comply the required documents and necessary notification to the auditor for proper scheduling of audit activities and to prevent possible audit disallowances/suspensions.

3. No physical inventory was conducted on properties valued at P332,531,014.64 rendered its validity, condition and existence to be doubtful.

Require the GSO and other concerned officials of the LGU to conduct physical inventory of all supplies/materials and fixed assets of the Provincial Government of Masbate in accordance with Section 156 of COA Circular No. 92-386.

We discussed the abovementioned findings and recommendations with the agency officials concerned. Reactions and comments thereon were incorporated in this report.

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

Out of the twelve (12) audit recommendations offered in the last three (3) consecutive years, only three (3) were fully complied with, five (5) were partially complied with and four (4) were not implemented at all.