EXECUTIVE SUMMARY

A. Introduction

The Province of Aurora was created by virtue of Batas Pambansa Blg. 7, enacted on
August 13, 1979, establishing an independent Province of Aurora, a coastal province
located in the northeastern part of the country. The Province of Aurora formerly belonged
to Region IV until Executive Order No. 103 dated May 17, 2002 was enacted transferring
the Province to Region III.

The principal objective of the present dispensation under the leadership of Governor
Gerardo A. Noveras is the continuance of the Province’s economic growth and making it
a sub-center for maritime resources and agri-based industries. The Province’s mission is
to realize an integrated and sustainable agro-industrial development by bringing action to
the community through people empowerment and good governance.

B. Financial Highlights

The following comparative data show the financial condition and results of operation for
the calendar years 2021 and 2020.

Statement of Financial Position

(in Millions of Pesos)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
Assets Liabilities Equity
2021 2020

Increase/
Financial Position 2021 2020
(Decrease)
Assets ₱3,816,606,654.43 ₱3,073,488,712.87 ₱ 743,117,941.56
Liabilities ₱3,816,606,654.43
388,019,524.54 544,084,480.46 (156,064,955.92)
Government Equity 3,428,587,129.89 2,529,404,232.41 899,182,897.48

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 Statement of Financial Performance
(in Millions of Pesos)
1,400

1,200

1,000

800

600

400

200

0
Income Expenses Surplus (Deficit)

2021 2020

Increase/
Financial Performance 2021 2020
(Decrease)

Income ₱1,176,341,177.32 ₱1,140,486,852.4 ₱35,854,324.88

Expenses 940,161,896.44 822,137,119.254 118,024,777.19
Surplus (Deficit) for the
236,179,280.88 318,349,733.19 (82,170,452.31)
period

C. Scope of Audit

The audit covered the financial transactions and operations of the Province of Aurora for
the year ended December 31, 2021. The objectives of the audit were to (a) ascertain the
degree of reliance on Management’s assertions on the financial statements; (b)
recommend agency improvement opportunities; and (c) determine the extent of
implementation of prior years’ audit recommendations.

In compliance with the Unnumbered Memorandum dated October 13, 2021 by the
Commission on Audit Assistant Commissioner for Local Government Sector (LGS) and
in pursuance of COA Memorandum No. 2016-023 dated November 14, 2016, which
identify the CY 2021 audit foci, we covered in audit the COVID-19 Financial Assistance
to LGUs in the Bayanihan to Recover as One Act RA 11494 (Trust Fund), Cash and Cash
Equivalents, Property, Plant and Equipment, Fund Transfers, Utilization of 20%
Development Fund, Utilization of Local Disaster Risk Reduction and Management Fund
(LDRRMF), Other Accounts based on agency risk assessment, Enforcement of COA
Disallowances and Charges, Compliance to Tax Laws, Remittance of Mandatory
Contributions (GSIS, Philhealth and Pag-IBIG), and Compliance with Programs and

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Projects related to Gender and Development. Results of audit with significant
observations were discussed in Part II of this Report.

D. Independent Auditor’s Opinion

The combined financial statements of the Provincial Government of Aurora were

substantially prepared and presented in accordance with the International Public Sector
Accounting Standards (IPSASs). Thus, the Auditor rendered an Unmodified Opinion on
the fairness of presentation of the Provinces’ financial statements as at December 31,
2021.

E. Summary of Other Significant Audit Observations and Recommendations

The Provincial Government of Aurora was consistently compliant with the laws, rules
and regulations on the withholding and remittance of (a) taxes to the Bureau of Internal
Revenue, (b) contributions and loan amortizations to the Government Service Insurance
System and Home Development and Mutual Fund, and (c) compulsory PhilHealth
contributions for the year in accordance with the provisions of Republic Act No. 7875 or
the National Health Insurance Act of 1995.

On the other hand, the significant observations and recommendations requiring

immediate actions are as follows:

1. The disbursements of ₱3,672,456.75 on financial assistance and procurement of

rapid antigen test kits and food subsidy in relation to COVID-19 were undertaken in a
manner inconsistent with the Revised IRR (RIRR) of Republic Act (R.A.) No. 9184 and
Executive Order No. 19-0008, series of 2019 issued by the Provincial Governor,
respectively, thus raising doubt on the regularity of the payments made while failing to
prove the efficiency of fund use, which was not aligned with Section 2 of Presidential
Decree (P.D.) No. 1445, or the State Audit Code of the Philippines. (Observation No. 1)

We recommended that the Local Chief Executive (LCE) direct the (a) Bids and Awards
Committee (BAC), including the BAC Secretariat, to (i) explain the use of Small Value
Procurement (SVP) in the purchase of rapid antigen test kits and submit the requisite
BAC resolution recommending the use of said mode; (ii) justify why the payment should
not be considered splitting of procurement; (iii) recommend appropriate mode of
procurement for future purchases of meals intended for whatever purpose; (iv) properly
plan procurements; and (v) henceforth, follow strictly the rules on procurement provided
in the Revised IRR of R.A. No. 9184; (b) Provincial Social Welfare and Development
Officer (PSWDO) to (i) observe the requirements and procedures on the grant of
Assistance to Individuals in Crisis Situations (AICS) set forth in Executive Order No. 19-
0008; and (ii) refrain from doing disbursement functions in the implementation of
PSWDO’s activities; (c) OIC-Provincial Accountant to (i) ensure that all payments of
financial assistance are supported with complete/proper documentation; (ii) see to it that
payments are made directly to the creditors to whom these are due; (iii) withhold the
corresponding taxes from procurements; and (iv) secure that the modes of payments
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applied in government disbursements are in accordance with COA Circular No. 97-002;
and (d) staff in-charge of processing financial assistance at the Provincial Governor’s
Office to coordinate with PSWDO to ensure observance of applicable rules and
procedures.

2. Over the year, the Province reduced to ₱50,000.00 or by 99.78% the variance of
₱23,133,920.66 in prior year’s balances of reciprocal accounts of Due from Other Funds
and Due to Other Funds, a very satisfactory compliance with Sections 28 and 152 of the
Manual on the New Government Accounting System for Local Government Units
(NGAS), Volume III, which contributed in the reliability of the Statement of Financial
Position as at December 31, 2021. (Observation No. 2)

We recommended that the LCE instruct the OIC-Provincial Accountant to continue

reconciling reciprocal accounts and to promote the Province’s commitment towards fair
reporting of financial transactions.

3. Long outstanding Advances to Contractors of ₱3,808,014.17 with age ranging

from two to eight years remained unrecouped as at December 31, 2021, inconsistent with
the guidelines set forth in Paragraph 4.3 of Annex E of the Revised Implementing Rules
and Regulations of Republic Act No. 9184 thus putting to a disadvantage the interest of
the Province. Moreover, abnormal balances of ₱521,217.51 countered Management’s
assertion on the correctness of the account’s balance of ₱9,086,493.71 as at December
31, 2021. (Observation No. 3)

We recommended that the LCE instruct the OIC-Provincial Accountant and the
Provincial Engineer to (a) exert extra efforts in the proper disposition of the unrecouped
balances in accordance with prescribed procedures; (b) facilitate the refund of excessive
recoupment made on the two identified contractors; and (c) henceforth, coordinate
regularly for the timely recovery of advances made to contractors.

4. Management’s assertions on the correctness, existence and valuation of its

Property, Plant and Equipment (PPE) totaling ₱2,552,653,251.01 as at December 31,
2021 were not validated in audit due to incomplete and unupdated information generated
from the Property and Management Supply Management System and led to unidentified
variance of ₱1,418,083,988.53 between the accounting and property records, inconsistent
with Section 124 of the NGAS for Local Government Units (LGUs) and COA Circular
No. 2020-006 dated January 31, 2020. Meanwhile, a lapse on the use and management of
government vehicles was noted, which could expose said assets to abuse or misuse and
the Province to public criticism. (Observation No. 4)

We recommended that the LCE direct the (a) Provincial General Services Office (PGSO)
and Inventory Committee to (i) ensure that the PPE items are properly labelled either
before its issuance to end-user or during the conduct of inventory count; (ii) complete the
conduct of physical inventory count and reconcile its result with both accounting and
property records; (iii) submit the RPCPPE to the Audit Team; and (b) PGSO to (i)
properly instruct the designated Property Officers of their duties relative to the said
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designation; (ii) set the timeline for the uploading of data in the system; and (iii) cause
the marking of all vehicles of the Province, in the manner prescribed by law and
regulations.

5. The balance of Breeding Stocks account of ₱8,878,050.00 as at December 31, 2021

was unreliable due to (a) inconsistent valuation basis used; (b) variance of ₱8,848,050.00
between the data generated from the Property and Supply Management Information
System of PGSO and the accounting balance as at same year end; and (c) lack of
subsidiary record for the said asset, inconsistent with Section 111 of Presidential Decree
(P.D.) No. 1445, Item No. 16 of International Public Sector Accounting Standards
(IPSAS) 27, and Section 114 of Manual on New Government Accounting System
(NGAS). Moreover, Government Equity as at same year-end was misstated by
undetermined amount due to non-recognition of gain or loss, if any, on initial recognition
of the breeding stocks and as at end of every reporting period, which was not harmonized
with Item No. 30 of the same international accounting standard. (Observation No. 5)

We recommended that the LCE instruct the: (a) Provincial Veterinarian to (i) require the
custodian to prepare and maintain the Work, Other Animals and Breeding Stocks
Property Card (WOABSPC) with details as to quantity, description of animals, cost, and
fair market value as at reporting date; (ii) ensure that offspring and disposals are
completely recognized; (iii) regularly review the custodian’s record and submit the
corresponding monitoring and inventory report to the PGSO, Accounting Unit and Office
of the Auditor; and (iv) henceforth conduct regular monitoring and reporting on breeding
stocks; (b) OIC-Provincial Accountant, ProVet Officer and the PGSO officer to prepare
and maintain the required records for breeding stocks and continuously reconcile the
same; and (c) OIC-Provincial Accountant to consistently and timely apply the prescribed
valuation basis for breeding stocks.

6. Submissions to the Office of the Auditor of the financial reports/statements,

disbursement vouchers (DVs) and report of collections and deposits with supporting
documents were consistently delayed by a number of days ranging from six to 50 days,
which is not in accordance with Section 347 of RA No. 7160 and COA Circular No.
2009-006, which hampered the timely audit of the Province’s operations and
communication to Management of any improvement opportunities that may be
found/warranted. (Observation No. 6)

We recommended that the LCE instruct the OIC-Provincial Accountant and Provincial
Treasurer to (a) devise measures on how to ensure continuity of office work amidst the
restrictions of the COVID-19 pandemic; and (b) henceforth continue to work on the
timely submission to the Office of the Auditor of the Province’s accounts and financial
reports.

7. Management satisfactorily utilized its 20% Development Fund on 49 or 80.33%

of the 61 development projects for CY 2021. Nonetheless, it was not able to consider
some project implementation issues during project planning thus, resulting in the non-
execution of 12 projects with a total budget cost of ₱48,800,000.00. Moreover, visible

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physical defects and deficiencies on a bridge project were noted, which could negatively
impact the efficient and economical use of the fund, inconsistent with the Department of
Budget and Management (DBM) – Department of Finance (DOF) – Department of
Interior and Local Government (DILG) Joint Memorandum Circular (JMC) No. 1 dated
November 4, 2020 or Revised Guidelines on the Appropriation and Utilization of the
20% DF. (Observation No. 7)

We recommended that the LCE instruct the (a) Provincial Planning and Development
Office in coordination with all Provincial Offices concerned to (i) judiciously plan for
development projects in coordination with other line agencies of the government with the
end view of timely execution of adequately funded projects; and (ii) ensure that the 20%
DF or any other government fund for that matter, are optimally used; (b) Provincial
Engineer to coordinate with the (i) OIC-Provincial Accountant for the accurate reporting
of accomplishments and fund utilization; (ii) Bids and Awards Committee for the
synchronization of procurement processes with the implementation targets of the
projects; and (c) Field or Project Engineers for the regular monitoring of infrastructure
projects, aimed at making timely interventions in case of lapses in implementation.

8. In CY 2021, although the Province was able to increase the utilization of its
LDRRMF by 13.86% over the year, the desired efficiency in fund use was still not
attained whereby ₱58,860,057.79 or only 40.58% of the ₱145,042,578.41 fund allocated
was applied as at year end, inconsistent with R.A. No. 10121, otherwise known as the
Philippine Disaster Risk Reduction and Management Act (PDRRMA) of 2010.
Meanwhile, the regularity of related payments totaling ₱4,346,815.00 was not ascertained
due to incomplete support documents, which was not harmonized with COA Circular No.
2012-001 dated June 14, 2012. Finally, the accounting for Special Trust Fund-LDRRMF
and inventories was not aligned with COA Circular No. 2012-002 dated September 12,
2012 and Section 114 of the Manual on the NGAS for LGUs, Volume I, respectively,
thereby overstating the Trust Liability-LDRRMF by ₱921,208.63 and understating the
affected inventory and equity accounts in amounts equivalent to any unissued inventories
as at said year-end. (Observation No. 8)

We recommended that the LCE direct the (a) PDRRMC, in coordination with the
Provincial Budget Officer, Municipal Mayors and other offices concerned, to (i) identify
DRRM-related PPAs based on a robust assessment of actual needs of the province and its
component municipalities vis-à-vis available funds; and (ii) settle existing and foreseen
implementation issues before the said PPAs are submitted for funding; (b) Provincial
Budget Officer and OIC-Provincial Accountant to monitor and regularly reconcile
records of continuing appropriations for LDRRMF; and (c) OIC-Provincial Accountant
(i) to cause the immediate transfer to the General Fund of Special Trust Fund that
remained unused for five years; (ii) request from the offices concerned report on the
physical inventory of welfare goods and drugs and medicines as at December 31, 2021
and recognize the same, if any, in the books under their respective inventory accounts;
(iii) henceforth, recognize inventories using the Perpetual Inventory System; (iv) provide
the lacking support documents on the identified disbursements; and (v) ensure that future

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distributions of assistance in-kind are supported with the distribution list or similar
documents.

9. Due to the proponent group’s (PG) lengthy delay in the delivery of its
commitments, an I-REAP subproject with a total cost of ₱4,120,000.00 remained not
operational four years after its completion, and possibly rendering the same and its
counterpart I-BUILD subproject, costing ₱7,179,359.00 as ineffective. Likewise,
although officially not yet operating, a portion of the completed facility was used in a
manner not consistent with the enterprise agreement, which could be ground for the
cancellation of the said agreement. (Observation No.9)

We recommended that the LCE and the PPMIU to (a) Coordinate with the project
proponent to ensure compliance with the Enterprise Investment Agreement, and other
pertinent rules and regulations in the subproject implementation; (b) Oblige the project
proponent to immediately address the existing condition, deviations and deficiencies of
the I-Reap and I-Build subproject vis-à-vis the enterprise agreement; and (c) Thereafter,
avoid fund wastage by diligently screening the capability and sincerity of potential/future
project proponent groups of PRDP I-REAP subprojects or similar livelihood projects of
the Province in ensuring the success of the undertaking, and that it would timely and truly
benefit the targeted beneficiaries.

10. The Province submitted its CY 2021 Gender and Development Plan and Budget
(GPB) and Accomplishment Report (AR) in accordance with Philippine Commission on
Women (PCW)-DILG-DBM- National Economic and Development Authority (NEDA)
JMC Nos. 2013-01 dated July 18, 2013 or Guidelines on the Localization of the Magna
Carta for Women. However, the responsiveness to gender issues of the GAD Plan was
doubtful, the plan having been not based on an updated GAD Database, inconsistent with
Magna Carta for Women (MCW) as amended by PCW-DILG-DBM-NEDA JMC Nos.
2016-01 dated January 12, 2016. Moreover, the correctness of attributions of
₱47,642,266.54 as GAD accomplishments was not ascertained due to the absence of
accomplished HGDG Checklist for programs/activities/projects (PAPs) assessments.
(Observation No. 10)

We recommended that the LCE instruct the GAD Focal System to (a) facilitate the
updating of GAD database; (b) coordinate with the Philippine Statistics Office for the
updating of the CBMS; and (c) submit to the Audit Team a copy of the HGDG checklist
on PAPs assessment for the Team’s review and reference.

11. For the CY 2021, the Province assisted all its eight component municipalities in
the formulation, finalization, approval, and implementation of the Ten-Year Solid Waste
Management Plan to complement the National Solid Waste Management Framework,
thereby strengthening the campaign in adopting systematic, comprehensive and
ecological solid waste management program. (Observation No. 11)

We commended Management on its substantial compliance with R.A. No. 9003. Thus,
we recommended the LCE to instruct the champion offices in the implementation of

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ESWM to continue implementing responsive SWM programs with the end view of
promoting the intents of R.A. No. 9003.

F. Summary of Total Suspensions and Disallowances as of December 31, 2021

As at year end, audit disallowances of ₱131,339.70 with COA Order of Execution (COE)
and audit suspensions of ₱68,301,299.70 remained unsettled as at year-end which was
not in consonance with Section 23 of the COA 2009 Rules and Regulations on the
Settlement of Accounts (RRSA). Meanwhile, total disallowances of ₱25,739,198.42
were the subject of pending appeals before COA Regional Office No. 3 and Commission
Proper.

G. Status of Implementation of Prior Years’ Unimplemented Audit

Recommendations

Out of the 43 audit recommendations contained in our prior years’ audit reports, 22 or
51.16% were fully implemented, 13 or 30.23% were partially implemented and eight or
18.61% were not implemented.

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