REGIONAL OFFICE NO.

II
PROVINCE OF NUEVA VIZCAYA
PROVINCIAL SATELLITE AUDITING OFFICE
Bayombong, Nueva Vizcaya

Office of the Auditor – Audit Team No. R2-03

AOM No: 2022-001(21-22)

Date: June 06, 2023

AUDIT OBSERVATION MEMORANDUM (AOM)

For: HON. ALVIN T. PADILLA

Punong Barangay
San Leonardo, Bambang, Nueva Vizcaya

Attention: MS. MAY FRANIELYNE R. BOTE- Municipal Accountant

MS. LOREN MEI A. SAMPAGA - Barangay Bookkeeper
MS. NENITA V. RAMIREZ - Barangay Treasurer
The Chair, Committee on Appropriation
The SK Chairperson
The Barangay Bids and Awards Committee (BAC)

We have reviewed the accounts and transactions of the Barangay for the two-
year period ended December 31, 2022 and observed the following deficiencies:

1. The completeness, existence, accuracy and condition of the reported

Property, Plant and Equipment (PPE) with a carrying amount of
P5,902,060.38 as at December 31, 2021 are doubtful due to the continued
non-conduct of physical inventory of its PPE by the Inventory Committee
headed by the Punong Barangay as required under Section 124, Volume I of
the MNGAS for LGUs and Sections 7.1.18 and 7.1.19, Chapter VII of the
Manual on the Financial Management of Barangays.

1.1 Section 124, Volume I of the Manual on the New Government Accounting
System (MNGAS) for LGUs provides that:

Physical count of property, plant and equipment shall be made annually and
reported in the Report of the Physical Count of Property, Plant and
Equipment which shall be submitted to the Auditor concerned not later than
January 31 of each year.

1.2 Moreover, Sections 7.1.18 and 7.1.19, Chapter VII, of the Manual on the
Financial Management of Barangays provide the following:
 The Barangay Treasurer (BT) shall act as the Property Officer of the
barangay and shall be responsible for the receipt, custody, issuance and
physical inventory of barangay property, except for the buildings and other
physical structures which shall be under the accountability and
responsibility of the Punong Barangay (PB)…

7.1.18 The barangay shall conduct an annual physical inventory of all

supplies, property and equipment of the barangay.

7.1.19 Report on the results of physical inventory of property/equipment

shall be reconciled with the accounting records.

1.3 Inquiry from the concerned barangay officials disclosed that they did not
conduct the required annual physical count of Property, Plant and Equipment
thus, the corresponding inventory report were not prepared and no basis for
reconciliation with accounting records. This is despite the consistent
issuance of audit observation by the Audit Team on the matter and prior
years’ recommendations.

1.4 The conduct of physical inventory of PPEs is an indispensable procedure to

ensure that adequate control is adapted in the safeguarding of assets and that
the integrity of property custodianship is ensured. The continued inability of
the concerned barangay officials to conduct physical inventory impairs the
Management’s assertion on the completeness, existence, accuracy and
condition of said barangay properties.

1.5 We recommend that Management strictly adhere to the pertinent

provisions of COA Circular No. 2015-011 dated December 1, 2015 and
cause the following:

1. create an inventory Committee to be headed by the Punong

Barangay or his authorized representative and the Barangay
Treasurer as his member, which shall conduct the inventory of all
the PPE accounts of the barangay at least once a year;

2. immediately conduct the physical count of barangay properties and

submit to the Office of the Auditor the Report on Inventory of
Property and Equipment (RIPE) as of December 31, 2021;

3. reconcile any discrepancies between the accounted barangay

properties with the subsidiary ledgers in order that the financial
statements reflect the more accurate value of existing barangay
properties at hand as at year-end; and

4. unserviceable properties of the barangay should be disposed or sold

at public auction, if any, subject to applicable rules and regulations,
to prevent further deterioration and obsolescence.

2. Procurement of construction contract amounting to P955,797.61 was debited

as Due to LGUs account instead of debiting Other Structures which
 understated the Other Structures account by P955,797.61 and the
corresponding Government Equity account by P955,797.61, as well as the
related depreciation account and accumulated depreciation accounts were
understated contrary to Government Accounting Manual for Local
Government Units.

2.1 The Charts of Accounts of Government Accounting Manual for Local

Government Units provides:

Account title Other Structures

Account Number 10604990
Normal Balance Debit

Description This account is used to recognize the cost incurred in the purchase
or construction or fair value, if acquired through donation or
transfers without cost, of other structures for use in government 75
operations or for income generating purposes. Credit this account
for disposal or derecognition of the carrying amount of the
replaced portion in major repairs.
Account title Due to LGUs
Account Number 20201070
Normal Balance Credit

Description This account is used to recognize the receipt of funds from LGUs
for delivery of goods/services as authorized by law, fund transfers
for the implementation of specific programs or projects and other
inter-agency transactions. Debit this account for delivery of
goods/services, liquidation of funds received and settlement of
liabilities.

2.2 Review of disbursement vouchers of the BLGU revealed that procurement of

construction project Improvement of Multi-purpose Building amounting to
P955,797.61 was debited to Due to LGUs account instead of the appropriate
asset account as presented below

Entries made:

Due to LGUs 740,372.97

Cash in Bank 694,099.66
Due to BIR 46, 273.31
To record payment of 1 billing
st

Due to LGUs 215,424.64

Cash in Bank 201,960.60
Due to BIR 13,464.04
To record payment of 2 billing
nd

Should be entries:

Construction in Progress 740,372.97

Guaranty/Security Deposits Payable 74,037.30
Due to BIR 13,464.04
 Cash in Bank 652,871.63
To record payment of 1st billing

Construction in Progress 215,424.64

Guaranty/Security Deposits Payable 21,542.64
Due to BIR 13,464.04
Cash in Bank 180,417.96
To record payment of 2nd billing

Other Structures 955,797.61

Construction in Progress 955,797.61
To record transfer of completed infrastructure projects to
appropriate asset account

Due to LGUs 955,797.61

Government Equity 955,797.61
To record full liquidation of fund transfer form LGU Province
of Nueva Vizcaya

2.3 Interview with the Barangay Bookkeeper disclosed that the fund used to
finance the project came from financial assistance of the PLGU Province of
Nueva Vizcaya through it grants and donations. Since the fund was intended
for specific purpose only, the transfer of the fund from said PLGU is
accounted for as a credit to Due to LGUs account pending the liquidation of
the said fund. However, the recording of the asset is with the Barangay books
as it is a valid financial assistance with absolute transfer of the control of the
asset from PLGU to the Barangay. It follows, then, that the asset should be
recorded in the books of Barangay, However, based on the above entries
made, the asset was not recognized in the books as disbursements for the
project were accounted for as debit to Due to LGUs account instead of
debiting it initially in the Construction in Progress account, then, finally upon
completion to Other Structures account.

2.4 Consequently, the erroneous entries understated the Other Structures account
by P955,797.61 and the corresponding Government Equity account by
P955,797.61. In effect, the related depreciation account and accumulated
depreciation accounts were understated as well.

2.5 We recommend the following adjusting entries:

Adjusting entries:

Other Structures 955,797.61

Government Equity 955,797.61

Depreciation Expense xxx

Accumulated Depreciation-Other Structures xxx

3. Cash advances totaling P230,262.06 remained unliquidated at year-end

contrary to Section 89 of Presidential Decree (P.D.) No. 1445 and the
guidelines in the granting, liquidation and utilization of cash advances set
forth under COA Circular No. 97-002 dated February 10, 1997.

3.1 Section 89 of PD No. 1445 provides the following:

Limitations of 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.

3.2 Moreover, pertinent provisions of COA Circular 97-002 dated February 10,
1997 provide the following guidelines in the granting, utilization and
liquidation of cash advances:

4.1.2 No additional cash advances shall be allowed to any official or

employee unless the previous cash advance given to him is first
settled or proper accounting thereof is made.

4.1.3 A cash advance shall be reported as soon as the purpose for which it
was given has been served.

5.1 The Accountable Officer shall liquidate his cash advance as follows:

5.1.1 Salaries, Wages, etc. – within 5 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; subject to
replenishment as frequently as necessary during the year.

5.1.3 Official Travel – within sixty (60) days after return to the
Philippines in case of foreign travel or within thirty (30) days
after return to his permanent official station in the case of local
travel, as provided for in EO 248 and COA Circular No. 96-
004.

Failure of the AO to liquidate his cash advance within the

prescribed period shall constitute a valid cause for the
withholding of his salary … (emphasis supplied)

5.7 When a cash advance is no longer needed or has not been used for a
period of two months, it must be returned or refunded immediately to
the Collecting Officer.

5.8. All cash advances shall be fully liquidated at the end of each year.
Except for petty cash fund, the Accountable Officer shall refund any
unexpended balance to the Cashier/Collecting Officer who will issue
the necessary official receipt. (emphasis supplied)
 3.3 Review of the Notes to Financial Statements of the barangay disclosed
outstanding cash advances totaling P230,262.06 as at year-end hence, it can
be construed that Management has not strictly complied with the above-
cited regulation thereby exposing the limited funds of the Barangay to the
risk of misappropriation. Details are as follows:

Check
Date Names Particulars Amount Deficiencies/Remarks
No.
Advances to Officers and Employees
tev 1050 & reg fee 650
LUCENA
5/7/09 291619 seminar workshop of 1,300.00 no liquidation
REMOLAZO
Day Care Worker
JOSEPHINE C. Cash adv-purchase of 1
3/13/13 410047 500.00 for refund
FANG unit engine of multicab
JOSEPHINE C. Cash adv-meals &
4/7/14 528244 400.00 no liquidation
FANG snacks panggayjaya
JOSEPHINE C. Cash adv-vegetable
10/15/14 528286 85.00 no liquidation
FANG seeds
JOSEPHINE C.
5/8/15 561149 electric bill 28.00 for refund
FANG
JOSEPHINE C.
5/21/15 561150 Cash advance-Snacks 65.00 for refund
FANG
JOSEPHINE C. Cash advance-
7/13/15 561178 50.00 for refund
FANG reconnection fee
JOSEPHINE C. Cash advance-meals &
7/28/15 561184 292.00 for refund
FANG snacks
JOSEPHINE C. Cash advance-exp for
3/16/16 619458 10.00 for refund
FANG SK night
JOSEPHINE C.
8/25/17 655094 Cash advance 3,714.00 for refund
FANG
JOSEPHINE C. monthly expenses for
9/28/17 655100 506.00 no OR
FANG immunization
Cash advance-meals &
JOSEPHINE C. 828.50 for refund/pr/po iar1969.50
11/9/17 733817 snacks-gradering of 2,798.00
FANG no OR
brgy road
ROLANDO P. CASH ADV-
7/23/18 766727 111.00 for refund
AGUADA OATHTAKING
FINANCIAL
SAGUDAY V.
8/10/18 766731 ASSISTANCE TO 3,000.00 OR
PERALTA
IRRIGATORS
TEV & REG FEE
ALVIN T.
8/22/18 766735 SEMINAR ON BNEO 6,740.00 for refund
PADILLA
AT BAGUIO CITY
electric bill-
ROLANDO P.
10/11/18 766750 RECONNECTION 50.00 for refund
AGUADA
FEE
PR/PO/IAR/
LIVELIHOOD
ABIGAIL C. ACKNOWLEDGEMENT
10/11/18 766753 PROGRAM 7 22,000.00
PADILLA RECEIPT SHOULD BE
PIGLETS
NOTARIZED
electric bill-
ROLANDO P.
10/15/18 766754 RECONNECTION 50.00 for refund
AGUADA
FEE
cash adv-materials
ROLANDO P.
10/29/18 766756 improvement of brgy 942.22 for refund
AGUADA
hall
electric bill-
ROLANDO P.
11/14/18 766761 RECONNECTION 100.00 for refund
AGUADA
FEE
12/11/18 766778 ROLANDO P. cash adv-labor & 985.00 for refund
 Check
Date Names Particulars Amount Deficiencies/Remarks
No.
materials multipurpose
AGUADA
bldg
ABIGAIL C.
12/13/18 766779 TEV -CBYDP 4,060.00 for refund
PADILLA
CASH ADV-
ROLANDO P. CHRISTMAS
12/18/18 766787 20,869.75 NO LIQUIDATION
AGUADA PROGRAM MASS
WEDDING
ROLANDO P.
12/21/18 766792 cash adv-prizes 78.00 for refund
AGUADA
ROLANDO P.
1/28/19 766799 Cash advances 3,536.09 for refund
AGUADA
Cash advance-TEV
ALVIN T.
2/1/19 816602 and Reg fee seminar at 10,660.00 NO LIQUIDATION
PADILLA
Baguio City
FLORENDA P. Christmas program
2/20/19 816605 5,000.00 NO LIQUIDATION
AMIRI Purok
Cash Advance for Ms.
REYNOLFO
2/21/19 816612 Little Valentine Purok 5,000.00 NO LIQUIDATION
DAWAN
2
ROLANDO P. Reg fee at Leyte
2/26/19 816617 12,000.00 OR of ref fee
AGUADA Seminar by PB & BT
Additional Cash
ROLANDO P.
2/26/19 816619 Advance-TEV seminar 15,000.00 NO LIQUIDATION
AGUADA
at Leyte
Additional Cash
ABIGAIL C.
2/28/19 816620 Advance-TEV seminar 5,000.00 NO LIQUIDATION
PADILLA
at Leyte
FLORENDA P. Materials-const of
3/12/19 816624 3,820.00 NO LIQUIDATION
AMIRI childrens park
FINANCIAL
ROSES A. ASSISTANCE -
3/12/19 816626 949.00 OR
REMOLAZO GRADUATION
Activity
MEALS & SNACKS-
NIENITA V.
5/10/19 816636 VCM National 300.00 for refund
RAMIREZ
elections
NIENITA V. MEALS & SNACKS-
9/18/19 816739 500.00 OR
RAMIREZ immunization day
NIENITA V.
9/18/19 816740 TEV of PB 170.00 for refund double claim of TEV
RAMIREZ
TEV of PB seminar on
ALVIN T.
9/30/19 816754 Brgy Congress at 3,750.00 cert of training
PADILLA
Baguio City
NIENITA V. Cash advances-prizes
10/25/19 816796 10,000.00 NO LIQUIDATION
RAMIREZ for zumba hataw
NIENITA V. TEV of Bruno
12/10/19 863423 225.00 for refund double claim of TEV
RAMIREZ Gamponia
NIENITA V.
12/10/19 863425 TEV of PB & BT 635.00 for refund double claim of TEV
RAMIREZ
NIENITA V.
12/19/19 863446 notarial services 150.00 OR
RAMIREZ
CASH ADV.
Liquidation Report, Travel Order,
REGISTRATION
NIENITA V. Ticket, Cert. of Appearance, Cert
3/5/20 863489 FOR 30,000.00
RAMIREZ of Training, Certificate of Travel
TRAINING/SEMINA
Completed
R (BAGUIO City)
REIM. COST OF
MEALS & SNACKS
NIENITA V. DURING Insufficient OR 1000, Quotation of
3/18/20 863513 1,000.00
RAMIREZ PREGNANT & Prices, Abstarct of Quotation
IMMUNIZATION
DAY (MARCH 2020)
 Check
Date Names Particulars Amount Deficiencies/Remarks
No.
REIM. COST OF
NIENITA V. Insufficient OR-323, Quotation of
7/14/20 863575 VARIOUS 323.00
RAMIREZ Prices, Abstract of Quotation
EXPENSES
REIMBURSEMENT
NIENITA V.
12/18/20 863667 TEV OF SEC. AND 600.00 Insufficient itinerary of travel
RAMIREZ
PB
NIENITA V.
10/1/21   collection -1,310.00  
RAMIREZ
NIENITA V. Meals & Snacks-
10/29/21 909195 680.00 insufficient OR
RAMIREZ survey of land
Training & Seminar
ALVIN T. Expenses- IEC
9/1/22 973909 2,000.00 no AR for van for hired
PADILLA Convention Center
Cebu
Sub-Total 178,722.06  
Advances for Payroll
JOSEPHINE C.
5/8/17 655055 Honorarium 5,900.00 no signature of recipients
FANG
JOSEPHINE C.
5/31/17 655067 Honorarium-June 800.00 no signature of recipients
FANG
ROLANDO P.
9/17/18 766745 Honorarium-Sept 100.00 excess of honorarium
AGUADA
ROLANDO P.
10/2/18 766748 Honorarium-Oct 100.00 excess of honorarium
AGUADA
ROLANDO P.
10/29/18 766755 Honorarium-Nov 100.00 excess of honorarium
AGUADA
ROLANDO P.
1/7/19 766793 Additional Incentives 40.00 for refund
AGUADA
ROLANDO P.
1/9/19 766797 Honorarium-Jan 2,200.00 no payroll
AGUADA

ROLANDO P. 12850 no signature of recipients/

2/26/19 816618 Honorarium-Mar 14,350.00
AGUADA 1500 excess of honorarium

NENITA V.
7/3/19 816686 Honorarium-Aug 1,050.00  
RAMIREZ
labor-concreting of
NENITA V.
9/24/19 816753 FMR & Rent of bagget 1,000.00 OR/PR/PO/AIR
RAMIREZ
mixer
NENITA V.
4/14/21 909110 Honorarium-April 8,400.00 no signature of recipients
RAMIREZ
NENITA V.
10/12/21 909192 Honorarium-Oct 1,100.00 no signature of recipients
RAMIREZ
NENITA V.
1/24/22 909272 Honorarium-Jan 2,400.00 no signature of recipients
RAMIREZ
Erlinda Honorarium IPMR-Jan
3/22/22 973812 14,000.00 no signature of recipients
Cardenas to Feb
Sub-Total 51,540.00  
Total 230,262.06  

3.4 We recommend that Management strictly observe the rules on proper

granting and liquidation of cash advances and henceforth require the
full liquidation of cash advances at the end of each year as set out in
COA Circular No. 97-002 dated February 10, 1997 and Section 89 of
PD 1445.

4. Current receivables balance of P43,829.39 have remained uncollected as at

December 31, 2022, thereby depriving the LGU of government moneys which
 could have been otherwise used in its operations, contrary to Section 2 of P.D.
1445.
3
4
5
4.1 Section 2 of Presidential Decree (P.D.) 1445 provides that:

Declaration of Policy. It is the declared policy of the State that all resources
of the government shall be managed, expended or utilized in accordance
with law and regulations, and safeguarded against loss or wastage through
illegal or improper disposition, with a view to ensuring efficiency, economy
and effectiveness in the operations of government. The responsibility to take
care that such policy is faithfully adhered to rests directly with the chief or
head of the government agency concerned.

1.
2.
3.
4.
5.
5.1
4.2 Relative to this, COA Circular No. 2016-005 dated December 19, 2016 was
issued to provide the Guidelines and Procedures on the Write-off of Dormant
Receivable Accounts, Unliquidated Cash Advances, and Fund Transfers.
Sections 8.2 and 8.3 of the said Circular provide that:

8.2 The Head of the government entity shall file the request for
authority to write-off dormant receivable accounts… to the COA
Audit Team Leader (ATL) and/or Supervising Auditor (SA). No
filing fee is required.

4.3 Review of the Notes to Financial Statements of the barangay disclosed the
following balances of current receivables as at December 31, 2022:

Account Title 2021

Receivables
Due from Local Government Units 21,320.18
Other Receivables 22,509.21
Total 43,829.39

4.4 We recommend that Management prepare the necessary documents to

support the validity of its claim and require the collection of receivables
from the concerned agencies and individuals, otherwise initiate the filing
of request for the write off of dormant receivable accounts by securing
the necessary documents as per Section 8 of COA Circular No. 2016-005
dated December 19, 2016.

5. The validity, accuracy and existence of the reported balance of Construction

in Progress accounts in the amount of P3,878,691.82 as of December 31, 2021
 could not be established due to non-submission of Project Status Reports
and non-monitoring of the implementation of these projects.

3.
4.
5.
6.
5.1 Section 27 of International Public Sector Accounting Standards (IPSAS 1)
provides that, “Financial statements shall present fairly the financial
position, financial performance and cash flows of an entity. Fair
presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, revenue, and expenses set out
in IPSASs.”

5.2 Moreover, Section 111 of P.D. 1445 provides that the accounts of the agency
shall be kept in such details as necessary to meet the needs of the agency and
at the same time be adequate to furnish the information needed by the fiscal
or control agencies of the government.

5.3 In relation, Paragraph 14 of IPSAS 17 provides that the cost of an item of

property, plant and equipment shall be recognized as an asset if, and only if:
(a) It is probable that future economic benefits or service potential associated
with the item will flow to the entity; and (b) The cost or fair value of the item
can be measured reliably.

5.4 Furthermore, COA Circular No. 2015-009 dated December 1, 2015

prescribes the adoption of the Revised Chart of Accounts (RCP) for Local
Government Units. Page 45, Annex B of the Circular provides the use of the
following accounts:

Account Title Construction in Progress - Land Improvements

Account Code 1-07-10-010
Normal Balance Debit
Description This account is used to record the accumulated cost or
other appropriate value of land improvements still in
the process of construction or development. Credit this
account for reclassification to the appropriate Land
Improvement account upon completion.

Account Title Construction in Progress - Infrastructure Assets

Account Code 1-07-10-020
Normal Balance Debit
Description This account is used to record the accumulated cost or
other appropriate value of infrastructure assets which
are still in the process of construction or acquisition.
Credit this account for reclassification to the
appropriate Infrastructure Asset account upon
completion.
 Account Title Construction in Progress - Buildings and Other
Structures
Account Code 1-07-10-030
Normal Balance Debit
Description This account is used to record the accumulated cost or
other appropriate value of buildings and other
structures which are still in the process of construction
or development. Credit this account for reclassification
to the appropriate Buildings and Other Structures
account upon completion.

1.
2.
3.
4.
5.
6.
6.1.
6.2.
6.3.
6.4.
5.5 Review of the detailed Statement of Financial Position for the year ended
December 31, 2022 disclosed that the Barangay reported Construction in
Progress - Land Improvements, Construction in Progress - Infrastructure
Assets and Construction in Progress- Buildings and Other Structures
amounting to P124,355.00 P801,924.33 and P2,952,412.49, respectively. It
was noted however that the balances were reported not decreased for Land
Improvements, Infrastructure Assets and Buildings and Structures accounts,
thus no progress or status update was reported for the year. These amounts
could not be ascertained by the Audit Team because there were no readily
available documents or reports pertaining thereto such as Monthly Project
Status Report or Subsidiary Ledgers.

5.6 We recommend that Management, through the Municipal Accountant

and the Barangay Bookkeeper, immediately evaluate the details and
status of these projects and effect the necessary adjustments to come up
with more reliable information in the financial statements.

6. The completeness and existence of the balance of Inventories accounts of

P3,677,361.93 as at December 31, 2022 cannot be ascertained due to the non-
conduct of physical count on inventories by the Inventory Committee headed
by the Punong Barangay and non-submission of the Report on Inventory of
Supplies and Materials (RISM) as required under Section 6.2.3, Chapter VI
of the Manual on the Financial Management of Barangays.

1.
2.
3.
4.
 6.1 Section 6.23, Chapter VI, of the Manual on the Financial Management of
Barangays provide the following:

Inventory taking and Reconciliation

a. The Inventory Committee headed by the PB or his authorized

representative and the BT as his member shall conduct a physical
count of all the supplies and inventory of the barangay at least
once a year.

b. The Inventory Committee, upon the completion of the physical

count, shall prepare three copies of Report on Inventory of
Supplies and Materials (RISM), as shown in Annex 31 and shall
be approved by the PB. The RISM shall be distributed as follows:

Original – to COA Auditor through C/M Accountant

Duplicate copy – to the C/M Accountant
Triplicate copy – to the BT

The RISM shall be the basis of the C/M Accountant for reconciling
the inventory accounts.

6.2 Inquiry from the concerned barangay officials disclosed that they did not
conduct the required annual physical count of Inventories thus, the
corresponding report was not prepared and no basis for reconciliation with
accounting records.

6.3 We recommend that the Inventory Committee headed by the Punong

Barangay immediately conduct physical count of the Inventories and
henceforth submit the required RISM to the Audit Team within the
prescribed deadline in strict adherence with Section 6.2.3, Chapter VI of
the Manual on the Financial Management of Barangays.

7. Cash on Hand balance of P22,204.20 remained undeposited at year end

contrary to Section 4.1.12 of Manual on the Financial Management of
Barangays, hence government moneys were exposed to unnecessary risk of
loss or misuse.

7.1 Section 4.1.12 of the Manual on the Financial Management of Barangays

provides that:

Collections accruing to the barangay shall be deposited intact daily. Where

travel time to the depository bank is more than one day, deposit shall be
made at least once a week or as soon as the collections reach P5,000.00.

7.2 Review of financial statements of the BLGU disclosed that Cash on Hand
account balance totaling P22,204.20 remained undeposited at year end. The
above cited Manual purports to protect the cash, the most liquid asset, from
potential risks of loss or misuse. Hence, the cash of the Barangay which
represents collections must be deposited.
 7.3 We recommend that the Barangay Treasurer deposit intact her
collections within the period set forth by regulation to amply protect the
barangay cash and to prevent the possible loss or misuse thereof.

8. The Barangay did not maintain Registry of Trust Fund as required under
Section 1.2, Chapter I of the Manual on the Financial Management of
Barangays hence, trust liability accounts are not separately recognized in the
books of the barangay.
8.1 Section 1.2, Chapter I of the Manual on the Financial Management of
Barangays provides the following general policies to be observed in
accounting for barangay funds and property as follows:

1.2.6 Funds granted to barangays for specific purpose shall be recognized

as Special Trust Fund (STF).

1.2.7 Subsidies and grants for specific purpose shall be accounted for as
Trust Liability. Once conditions are met, the portion of the grant
corresponding to the expenditure incurred shall be recognized as
income and the expenditure as expense or asset as the case may be.

1.2.8 Unspent Local Disaster Risk Reduction and Management Fund

(LDRRMF) and the share of the Sangguniang Kabataan (SK) shall
be recorded as STF.

1.2.9 Registry of Special Trust Fund (RSTF) shall be maintained for each
STF.

8.2 As per existing records, the Municipal Accountant through the Barangay
Bookkeeper did not maintain Registry of Special Trust Fund such as those
enumerated above. Consequently, prompt verification of the transactions
cannot be conveniently made and trust liability accounts are not separately
recognized in the books of the barangay.
8.3 We recommend that the Barangay Treasurer and the Municipal
Accountant create and maintain Registry of Special Trust Fund on the
unspent budgetary items of 5% Calamity Fund, 10% SK Fund, and
other trust fund accounts as required under the Manual on the Financial
Management of Barangays and properly recognize the balances as Trust
Liabilities in the books of the barangay.
9. The Barangay did not submit the monthly Report on Sources and Utilization
of BDRRMF which is not in accordance with Section 5.1.5 of COA Circular
No. 2012-002 dated September 12, 2012 thus, monthly monitoring of
transactions undertaken was not attained.

9.1 Section 5.1.5 of COA Circular No. 2012-002 provides that, “A Report on
Sources and Utilization of DRRMF using the format in Annex B shall be
 prepared and certified correct by the Local Accountant. 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 (LDC) to the COA auditor of
the LGU.”
9.2 Review of the accounts of the barangay disclosed that the BLGU failed to
submit monthly Report on the Sources and Utilization of the BDRRMF.
This required report serves as a monitoring tool on the charges against the
BDRRMF thus, the non-submission of which precluded monthly review of
the utilization of the fund.
9.3 In the case of the Barangay, the Report on Sources and Utilization of
DRRMF shall be prepared by the Barangay Treasurer and certified correct
by the Punong Barangay. Such report shall be submitted by the designated
LDRRMO which is usually the Punong Barangay or any other official duly
designated thereto, on or before the 15th day after the end of each month to
the COA Auditor of the Barangay.
9.4 We recommend that Management require all concerned officials to
comply with the monthly submission of Report on Sources and
Utilization of DRRMF using the format prescribed under COA
Circular No. 2012-002.
10. Disbursements charged against the 20% Development Fund, 5% Gender
and Development, and 5% LDRRMF could not be readily evaluated due to
incomplete submission of needed documents.

10.1 Section 106, of the New Local Government Code provides that each Local
Government Unit shall have a comprehensive Multi-Sectoral development
plan to be initiated by its development council and approved by its
Sanggunian.

10.2 In the case of the barangay, the Barangay Development Council shall be
headed by the Punong Barangay, the Sangguniang Barangay, where the SK
Chairman serves as an ex-officio member, NGO representative operating in
the barangay, and a representative of the Congressman as members.

10.3 Review of submitted accounts disclosed that the barangay have

disbursements that could be attributed to 20% development fund, 5% GAD
fund, and 5% LDRRMF.

10.4 Projects under the 20% Development Fund, 5% LDRRMF and 5% GAD
Fund, however, could not be readily evaluated due to the incomplete
submission of the needed documents, as follows:

a. Annual barangay budget;

b. Annual Investment Plan;
c. Registries to show if expenses still fall within the allowed amount and if
these are in-line as programmed in the Annual Investment Plan;
 d. Accomplishment Report pertaining to 20% Development Plan and 5%
LDRRMF;and
e. GAD Plan and GAD Accomplishment Report.

10.5 We recommend that the Punong Barangay, as the Chief Executive of

the BLGU, enforce the implementation of all projects and activities
that were approved by the Barangay Development Council and assure
that these are in line with the rules and regulations set forth for the
said programs. Further, we required the Barangay to furnish all
needed reports (Budgets, AIP, PPMP and others) to the Office of the
Audit Team Leader for appropriate review and evaluation.

11. The unexpended balance of the LGU’s Local Disaster Risk Reduction
Management Fund (LDRRMF) as at year – end was not recognized as Trust-
Liability as well as the details of the unutilized fund were not disclosed in the
Notes to the Financial Statements contrary to Section 5.1.16 of COA
Circular No. 2012 – 12 dated September 12, 2012, thus rendering incomplete
and insubstantial information in the financial reports.

11.1 Section 5.1.10 of COA Circular No. 2012 – 12 states that –

All unexpended/unobligated balance of the QRF and the DRRMF-MOOE

shall be transferred to the Special Trust Fund under the account “Trust
Liability-DRRM” (Code 438) in the Trust Fund books.

All unexpended/unobligated balance of the LDRRMF for CO shall be made

continuing in the General Fund books until the projects funded therefore
are completed and any savings shall be available for use in the disaster
risk reduction and management activities as provided in the LDRRMFIP.

11.2 Section 5.1.16 of the same COA Circular states that –

The amount and details of the unexpended balance of the LDRRMF shall
be discussed in the Notes to the Financial Statements. (xxx) (underscoring
supplied)

11.3 Review of the financial statements and other pertinent reports submitted by
the LGU disclosed that the balance of LDRRMF was not recognized in as
Special Trust Fund and the related disclosure was not presented in the
Notes to the Financial Statements which is not in consonance with Section
5.1.10 and 5.1.16 of COA Circular No. 2012 – 12 dated September 12,
2012. The said Circular requires not only the amount but also the details of
the unexpended balance of the LDRRMF in the manner provided and
prescribed in the pro – forma of the Notes to the Financial Statements.

11.4 The non-recognition of the unexpended balance of the DRRM Fund to a

Special Trust Fund and the non – disclosure in the Notes to Financial
Statements during the year renders incomplete and insubstantial
information in the financial reports of the LGU.
 11.5 We recommend that management adequately record in the books the
unexpended balance of the DRRM Fund as Special Trust Fund and
disclose in the Notes to Financial Statements the details of the
unexpended

12. Timely submission of barangay accounts and other pertinent records was
not strictly adhered to contrary to Section 12.5, Chapter 12 of the Manual on
the Financial Management of Barangays, thus causing delay in the audit and
verification of financial transactions by the Audit Team.

12.1Section 12.5, Chapter 12 of the Manual on Financial Management for

Barangays provides the following rules on the rendition of accounts:

12.5.1 The PB and BT shall be responsible for the timely submission of the
reports and accounts to the C/M Accountant. Observance to the
provision of Article 218 of the Revised Penal Code which states that
“Any public officer, whether in the service or separated there from
by resignation or any other cause, who is required by law or
regulations to render account to the Insular Auditor,* or to a
Provincial Auditor and who fails to do so for a period of two months
after such account shall be rendered shall be punished by prison
correccional in its minimum period, or by a fine ranging from 200 to
6,000, or both”. (*now Commission on Audit)

12.5.2 The BT shall submit the RCDs, LR, ORs/DVs/Payrolls and Monthly
RAAF to the C/M Accountant on or before the 5th day of the
succeeding month.

12.5.3 The C/M Accountant shall submit to the COA Auditor concerned the
collections and disbursements accounts of each month on or before
the 10th working day of the succeeding month.

12.2 Monitoring of submission of barangay accounts disclosed that disbursements

vouchers were not submitted on time despite our prior years’ issuance of
similar audit findings, contrary to the above-cited regulations

12.3 The non-submission of disbursement vouchers within the prescribed period

precludes the conduct of timely review and audit thereof.

12.4 We recommend that the Barangay Treasurer submit all barangay

accounts and other pertinent records to the Barangay Bookkeeper for
recording and the Office of the Auditor for review and evaluation within
the period prescribed under the Manual on Financial Management for
Barangays to enable timely and more effective review of the Barangay’s
financial transactions and evaluation of its operations.

13. Disbursement vouchers and its supporting documents were not stamped
“PAID” upon payment, contrary to Section 2.Q of COA Circular No. 92-389
dated November 3, 1992, hence exposing the corresponding documents for
possible reuse.
 13.1 Section 2.Q of COA Circular No. 92-389 dated November 3, 1992 provides
that, “Paid vouchers including its supporting documents shall be perforated
and conspicuously stamped “PAID” by the Cashier.”
13.2 Review of disbursement vouchers (DVs) of the barangay as well as
inspection of its supporting documents disclosed that these were not stamped
“PAID” by the Barangay Treasurer after the payment was made.
13.3 The non-stamping of documents or non-marking of checks and supporting
documents immediately after it was paid provides a way of reusing the same,
thereby posing the possibility of double payment.
13.4 We recommend that the Barangay Treasurer henceforth stamp “PAID”
all payrolls, DVs and its supporting documents after payment is made to
prevent the possible re-use of the same on similar future transactions in
line with COA Circular No. 92-389 dated November 3, 1992.
14. The propriety and regularity of barangay transactions totaling
P2,849,268.32 undertaken by the Barangay could not be readily established
because necessary supporting documents were not duly submitted contrary
to Section 4(6) of Presidential Decree (PD) No. 1445 otherwise known as the
State Audit Code of the Philippines.

14.1 Section 4(6) of PD No. 1445 requires that: “Claims against government
funds shall be supported with complete documentation.”
14.2 In relation, COA Circular No. 2012-001 dated June 14, 2012 enumerates,
among others, the revised guidelines and basic documentary requirements for
common government transactions including procurement through alternative
modes.
14.3Audit disclosed that the Barangay disbursed a total of P1,481,561.60 for
various transactions, the propriety and regularity of which could not be
readily established in audit because the necessary supporting documents
were not duly submitted. The lacking documents are enumerated as follows:
Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
02/02/22 909274 Benson’s 74K Supplies and materials 39,430.00 -No Requisition and Issue Slip
Construction for construction of
Supply retaining wall (P-3)
02/04/22 909277 Ferdinand W. Rice 48,960.00 -No Requisition and Issue Slip
Angco -Rice given to actual recipient totaled
only to 266 sacks as reflected in the
Acknowledgement Receipt while 272
sacks were actually procured, thereby
excessive by 6 sacks
-Transaction was supported by Delivery
Receipt only without the valid Sales
Invoice or Official Receipt
 Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
02/11/22 909278 LDC Lumber Construction supplies 40,635.00 -No Requisition and Issue Slip
and Hardware for the improvement of
MP hall (Purok 3)
02/11/22 909279 LDC Lumber Construction supplies 21,150.00 -No Requisition and Issue Slip
and Hardware for the improvement of
MP hall (Purok 3):
Sanitary Waterline
02/11/22 909280 LDC Lumber Construction supplies 17,737.00 -No Requisition and Issue Slip
and Hardware for the improvement of
MP hall (Purok 3)
02/11/22 909281 LDC Lumber Construction supplies 32,205.00 -No Requisition and Issue Slip
and Hardware for the improvement of
MP hall (Purok 3)
02/11/22 909282 Arnel I. Construction supplies 40,680.00 -No Requisition and Issue Slip
Agustin for the construction of -Received box was not marked in the
concrete perimeter Acceptance and Inspection Report
fence (SLES) Purok 1
02/11/22 909283 Arnel I. Construction supplies 16,917.00 -No Requisition and Issue Slip
Agustin for the construction of
concrete perimeter
fence (SLES) Purok 1
02/24/22 909288 Melanie De Assorted goods for 10,000.00 -No Requisition and Issue Slip
Guzman PWD

02/24/22 909289 Lubong Gas Fuel 3,001.14 -Collection Receipt issued was expired
Station and valid only until 08/02/21
02/24/22 909290 Lubong Gas Fuel 2,420.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
05/17/22 973839 Aurilia G. Tanod uniforms 18,000.00 -No Requisition and Issue Slip
Salinas

05/17/22 997840 Melanie G. De Assorted goods 9,970.00 -No Requisition and Issue Slip
Guzman

05/17/22 973842 Lubong Gas Fuel 4,300.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
05/19/22 973845 Japarts Auto Spare parts for dump 12,000.00 -No Waste Material Report
Supply truck -No pre and post repair inspection report

05/26/22 973846 Sayfren G. Copier Machine 20,370.00 -No Requisition and Issue Slip
Ordonio
05/26/22 973847 Lubong Gas Fuel 2,700.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
05/26/22 973848 Lubong Gas Fuel 3,245.71 -Collection Receipt issued was expired
Station and valid only until 08/02/21
05/26/22 973850 Ricardo A. Spare parts 2,165.00 -No Waste Material Report
Ramirez -No pre and post repair inspection report
05/26/22 973851 Bert M. Gravelling 2,000.00 -No Purchase Request
Castillo -No Purchase Order
-No Program of Works
-No Canvass
-No Acceptance and Inspection Report
4/13/22 973828 RDJD Payment of 1st billing- 740,372.97 -No Notice to Proceed
Construction Improvement of Multi- -No Performance Bond
purpose Building -No Warranty Security
 Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
05/04/22 973836 Payment of final 215,424.64 -No Certification of Final Acceptance of
billing- Improvement End User
of Multi-purpose -No Plan, Schedule of Completion or
Building PERT/CPM
-No Technical and Financial Bid
Documents

04/27/22 973829 Lubong Gas Fuel 4,875.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
03/11/22 973805 Buildhaus Construction supplies 26,950.00 -No Requisition and Issue Slip
Centre for the improvement of
Incorporation Brgy Multi-Purpose
(P-3)
06/24/22 973862 Sayfren G. Weighing scale 2,500.00 -No Requisition and Issue Slip
Ordonio
06/29/22 973872 Benson’s 74K Pipe class 4,800.00 -No Requisition and Issue Slip
Construction
Supply
06/29/22 973873 Lucas Spare parts water 2,789.00 -No Requisition and Issue Slip
Ventures pump
Bambang Co.
07/20/22 973886 Lubong Gas Fuel 3,950.85 -Collection Receipt issued was expired
Station and valid only until 08/02/21
07/20/22 973887 Sayfren G. Sprayer 5,000.00 -No Requisition and Issue Slip
Ordonio
07/20/22 973888 Sayfren G. Disaster Equipment 34,950.00 -No Requisition and Issue Slip
Ordonio
07/26/22 973890 Japarts Auto Spare parts for dump 12,400.00 -No Waste Material Report
Supply truck -No pre and post repair inspection report
07/26/22 973891 Sayfren G. Office supplies 8,780.00 -No Requisition and Issue Slip
Ordonio
08/26/22 973900 Sayfren G. Garbage bins 15,000.00 -No Requisition and Issue Slip
Ordonio
08/26/22 973901 LDC Lumber Materials and supplies 31,788.95 -No Requisition and Issue Slip
and Hardware for the improvement of
MP-Hall (P-3)
Installation of Roofing
08/26/22 973904 Sayfren G. Portable folding table 49,000.00 -No Requisition and Issue Slip
Ordonio
08/31/22 973908 Sayfren G. Office supllies 12,563.00 -No Requisition and Issue Slip
Ordonio
09/06/22 973917 Japarts Auto Spare parts for dump 3,000.00 -No Waste Material Report
Supply truck -No pre and post repair inspection report

09/06/22 973918 Sayfren G. Digital Thermal 5,000.00 -No Requisition and Issue Slip
Ordonio Scanner
09/08/22 973921 Arnel I. Construction Supplies 39,695.00 -No Requisition and Issue Slip
Agustin for the Improvement of
Brgy. MP Hall
09/22/22 973926 Clemen S. Office Tables 44,000.00 -No Requisition and Issue Slip
Dawan
09/12/22 973927 Sayfren G. Portable folding table 5,000.00 -No Requisition and Issue Slip
Ordonio
09/12/22 973928 PCNET Laptop 30,000.00 -No Requisition and Issue Slip
Computer
 Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
Trading and
Services
09/22/22 973934 Aurilia G. T-Shirt 13,000.00 -No Requisition and Issue Slip
Salinas
09/22/22 973935 Melanie G. De Assorted goods for 28,228.00 -No Program/Activity Design
Guzman BDRRM -No Requisition and Issue Slip
Training/Seminar
10/04/22 973939 Lubong Gas Fuel 9,420.24 -Collection Receipt issued was expired
Station and valid only until 08/02/21
10/04/22 973941 Lubong Gas Fuel 7,135.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
10/05/22 973946 Lubong Gas Fuel used for the 15,697.00 -Debited to Fuel, Oil and Lubricants
Station rehabilitation of FMR instead of Land Improvements
(Purok 1)
11/07/22 973968 Melanie G. De Goods for the victim 20,786.00 -No Requisition and Issue Slip
Guzman due to Typhoon Paeng
11/17/22 973973 Lubong Gas Fuel 11,841.11 -Collection Receipt issued was expired
Station and valid only until 08/02/21
11/18/22 973977 Arnel T. Construction Supplies 38,500.00 -No Requisition and Issue Slip
Agustin for the Improvement of
Health Center
11/18/22 973980 Lubong Gas Fuel 1,559.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
12/12/22 973995 Sayfren G. Curtain and tablecloth 10,000.00 -No Requisition and Issue Slip
Ordonio
12/20/22 103220 Melanie G. De Assorted goods during 29,092.00 -No Requisition and Issue Slip
1 Guzman ecumenical service of -No Attendance
brgy
12/20/22 103320 Myra B. Fruit Bearing Trees 20,000.00 -No Requisition and Issue Slip
2 Sadian
12/23/22 103220 Melanie G. De Assorted goods 10,000.00 -No Requisition and Issue Slip
3 Guzman distributed to senior
citizen
12/23/22 103220 Melanie G. De Assorted goods used 33,510.00 -No Requisition and Issue Slip
6 Guzman during Christmas
Program
12/28/22 103221 Lubong Gas Diesel and LPG 10,035.54 -Collection Receipt issued was expired
9 Station and valid only until 08/02/21
03/24/21 863697 LDC Lumber Jetmatic Pump 4,500.00 -No Requisition and Issue Slip
and Hardware -Box on receipt portion of Acceptance
and Inspection Report was not marked
04/13/21 909108 JDG Sidecars Motor vehicle 17,800.00 -No Requisition and Issue Slip
Manufacturing accessories -No Inventory Custodian Slip
05/19/21 909123 Bambang Materials for the 49,030.00 -No Requisition and Issue Slip
Glass improvement of Brgy.
Aluminum MP Hall (P-3)
Supply
05/21/21 909125 Jumong Electric fan 3,716.00 -No Requisition and Issue Slip
Electronics
Center
05/21/21 909126 Lubong Gas Fuel 4,924.04 -Collection Receipt issued was expired
Station and valid only until 08/02/21
06/16/21 909137 Aurilia G. Tanod Uniform 17,600.00 -No Requisition and Issue Slip
Salinas
 Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
06/16/21 909138 Sayfren G. Printer 9,500.00 -No Requisition and Issue Slip
Ordonio
06/29/21 909149 Aurilia G. Personnel uniforms 15,600.00 -No Requisition and Issue Slip
Salinas
07/09/21 909156 Lubong Gas Fuel 4,410.00 -Collection Receipt issued was expired
Station and valid only until 08/02/21
08/27/21 909171 Benson’s 74K Materials for the 136,533.33 -No performance security
Construction Construction of
Supply Retaining Wall (Purok
3)
09/07/21 909174 Joel D. Table Shield 25,948.80 -No Requisition and Issue Slip
Saquing
09/07/21 909176 Willy S. Uniform-Lupong 4,800.00 -No Requisition and Issue Slip
Mamaril Tagapamayapa
09/07/21 909177 Willy S. Uniform 6,050.00 -No Requisition and Issue Slip
Mamaril
09/17/21 909182 Dennis T. Rescue Equipment 20,050.00 -No Requisition and Issue Slip
Castillo
09/17/21 909183 Dennis T. PPE 5,400.00 -No Requisition and Issue Slip
Castillo
10/29/21 909197 Cagayan Table and chairs 25,000.00 -No Requisition and Issue Slip
Appliance
Center
11/05/21 909200 Dennis T. Desktop, printer 40,000.00 -No Requisition and Issue Slip
Castillo
11/05/21 909201 Dennis T. Water dispencer, 48,000.00 -No Requisition and Issue Slip
Castillo aircon
11/05/21 909205 Paper Central Office supplies 9,756.00 -No Requisition and Issue Slip
General
Merchandise
11/05/21 909205 Paper Central Laptop Table for 46,000.00 -No Requisition and Issue Slip
General distribution
Merchandise
11/05/21 909207 Paper Central School supplies for 49,000.00 -No Requisition and Issue Slip
General distribution -No list of recipients
Merchandise
11/05/21 909208 Aurilia G. Uniforms of SK 18,000.00 -No Requisition and Issue Slip
Salinas
11/19/21 909217 Carlo A. Solar Streetlights 35,940.00 -No Requisition and Issue Slip
Gapuz
11/22/21 909221 Carlo A. Solar Streetlights 35,940.00 -No Requisition and Issue Slip
Gapuz
12/14/21 909243 Andy C. Fiberglass board 49,500.00 -No Requisition and Issue Slip
Antonio
12/14/21 909247 Melanie G. De Assorted goods for 9,890.00 -No Requisition and Issue Slip
Guzman PWD
12/14/21 909248 Ferdinand W. Rice 49,200.00 -No Requisition and Issue Slip
Angco
12/14/21 909249 Melanie G. De Assorted goods for 9,919.00 -No Requisition and Issue Slip
Guzman Senior Citizen
12/14/21 909251 Melanie G. De Assorted goods for 49,995.00 -No Requisition and Issue Slip
Guzman Distribution
12/07/21 909233 Benson’s 74K Supplies and materials 30,374.00 -No Requisition and Issue Slip
Construction for the construction of
 Check Gross
Date Supplier Particulars Remarks/Deficiencies
No. Amount
Supply box culvert (Purok-3)
12/07/21 909234 Benson’s 74K Supplies and materials 33,896.00 -No Requisition and Issue Slip
Construction for the construction of
Supply box culvert (Purok-3)
12/07/21 909235 Andy C. Fiber Glass board 49,500.00 -No Requisition and Issue Slip
Antonio
12/07/21 90239 Benson’s 74K Supplies and materials 28,967.00 -No Requisition and Issue Slip
Construction for the construction of
Supply irrigation canal (Purok
1)
Total 2,849,268.32

14.4 We recommend that Management immediately submit the identified

lacking documents to prevent the issuance of audit suspensions and/or
disallowances and henceforth ensure that transactions are supported by
complete documentation in line with Section 4(6) of PD No. 1445.

15. Honoraria of the barangay officials and employees were not supported by
complete documentation contrary to Section 5.1.2 of the Manual on
Financial Management of Barangays (MFMB), Department of the Interior
and Local Government (DILG) Opinion No. 16, s. 2007, hence, validity of the
claim was not established and actual rendered services were not considered.

15.1 Section 5.1.2 of the MFMB provides that: “All claims against government
funds shall be supported with compete documentation.”

15.2 Paragraph 3, Page 2 of the DILG Opinion No. 16, s. 2007, states that:
“Accordingly, other than other certain factors, the most convenient way of
measuring the services actually rendered by a Sanggunian Barangay
Member is attendance in sessions …”

15.3 Payments of the honoraria of the barangay officials and employees in CYs
2019-2021 were only supported by a copy of checks, disbursement
vouchers and payrolls which contravenes the afore-cited provision.

15.4 Documentary requirements such as Daily Time Record (DTR) and some
report of attendance for members of the Sanggunian Barangay were not
attached for the honoraria for the month. As a result, the validity of the
claim and the accuracy of the amount were not established which is
unfavorable to the government coffers.

15.5 It is noteworthy that honorarium is defined by the Government Accounting

and Auditing Manual as the remuneration given to a public official for
services actually rendered. Actual rendered services of the barangay
officials and employees do not commensurate with the honoraria received
whether they incur absences, hence the requirement of report of attendance
in the barangay sessions to be attached in the payment of honorarium.

15.6 We recommend that the Management always submit all the necessary
documents in support to all claims against the government funds and
 consider the actual rendered services on compensating the officials and
employees of the barangay in compliance with all the provisions of laws
and regulations cited above.

16. Indirect cost were included in the Program of Works (POWs) of

construction projects implemented by administration which amount of
P88,093.02 could have been programmed or augmented for other program,
projects and activities (PPAs). Moreover, the procured construction
materials aggregating to P177,168.33 exceeded the estimated materials cost
reflected in the Program of Work (POW) by P18,491.33 contrary to
provisions of Manual of Procedures for the Procurement of Goods and
Services.

16.1 It must be noted that it is the practice of BLGU San Leonardo to implement
infrastructure projects by administration hence, only the construction
materials are procured through alternative modes of procurement while the
labor is undertaken through the employ of its own workforce. The cost
components of the project are computed and shown in detail in the Program
of Work (POW) usually prepared by the Municipal Engineering Office.
Usually, only the material and labor costs are the components of the POW
of construction projects implemented by administration with no mark up on
those costs components for indirect costs.

16.2 Audit of disbursements of the BLGU disclosed that indirect costs were
included in the POW of constructions projects implemented by
administration as disclosed below:

Per Program of Work (POW) Actual Payment

Actual Appropriati
Particulars Actual Remarks
Material Labor Tool/ Indirect Total Per Labor on
Material Total
Cost Cost Equipment Cost POW Cost
Paid
paid
2022 PPAs                    
-Amount
planned per
Construction
POW
of Retaining
exceeded
Wall (Phase 40,700.00 20,200.00 800.00 7,404.00 69,104.00 39,430.00 20,200.00 59,630.00 69,000.00
the
3) San
Appropriati
Leonardo
on by
P104.00
-Actual
Improvement materials
of Multi- paid
Purpose Hall exceeded
(Purok-3) the amount
35,590.00 16,400.00 4,150.00 6,736.80 62,876.80 40,635.00 16,400.00 57,035.00 63,000.00
Excavation planned for
and materials as
Concreting per POW
Works by
P5,045.00
Improvement
of Multi-
Purpose Hall
35,050.00 8,400.00 - 5,214.00 48,664.00 21,150.00 8,400.00 29,550.00 49,000.00  
(Purok-3)
Sanitary and
Waterline
Improvement
of Multi-
24,414.00 31,800.00 - 6,745.68 62,959.68 17,737.00 31,800.00 49,537.00 63,000.00  
Purpose Hall
(Purok-3)
 Per Program of Work (POW) Actual Payment
Actual Appropriati
Particulars Actual Remarks
Material Labor Tool/ Indirect Total Per Labor on
Material Total
Cost Cost Equipment Cost POW Cost
Paid
paid
Masonry
Works
Improvement
of Multi-
Purpose Hall
37,894.00 12,900.00 - 6,095.28 56,889.28 32,205.00 12,900.00 45,105.00 57,000.00  
(Purok-3)
Electrical
Works
Improvement
of Multi- 27,330.00 16,400.00 - 5,247.60 48,977.60 26,950.00 16,400.00 43,350.00 49,000.00  
Purpose Hall
-Actual
materials
paid
exceeded
the amount
Improvement planned for
of Health materials as
Center per POW
Excavation, by P936.00
11,339.00 6,400.00 - 2,128.68 19,867.68 12,275.00 6,400.00 18,675.00 19,450.00
Concreting of
Foundation -Amount
Wall Footing planned per
and Columns POW
exceeded
the
Appropriati
on by
P104.00
Improvement -Amount
of Health planned per
Center POW
Excavation, exceeded
27,317.50 17,200.00 - 5,342.10 49,859.60 12,800.00 10,800.00 23,600.00 49,000.00
Concreting of the
Foundation Appropriati
Wall Footing on by
and Columns P859.60
2021 PPAs            
Construction
of box culvert 30,680.00 19,200.00 - 6,357.60 56,237.60 30,374.00 19,200.00 49,574.00 60,000.00  
(Phase 1)
Construction
of box culvert 34,260.00 16,000.00 3,100.00 6,403.20 59,763.20 33,896.00 16,000.00 49,896.00 60,000.00  
(Purok-3)
Construction
of irrigation 49,997.00 16,800.00 - 8,015.64 74,812.64 28,967.00 16,800.00 45,767.00 75,000.00  
canal
-Actual
materials
paid
Construction exceeded
of Retaining the amount
123,087.00 55,600.00 8,000.00 22,402.44 209,089.44 136,533.33 55,400.00 191,933.33 209,126.00
Wall (Purok- planned for
3) materials as
per POW
by
P13,446.33
Total 477,658.50 237,300.00 16,050.00 88,093.02 819,101.52 432,952.33 230,700.00 663,652.33 822,576.00  

16.3 As gleaned from the above-presented table, indirect costs were considered
in the computation of the construction projects’ POW despite that the same
were implemented by administration. The indirect costs were computed at
the rate of 12% of the sum of direct costs comprising materials, labor and
tool or equipment totaling P88,093.02. Be it noted that the marked up for
indirect costs is only applicable for construction projects implemented by
 straight contracts. However, it is noteworthy that in the actual
implementation of the above-cited projects, the amount allotted for indirect
costs were not utilized or disbursed. Despite this, the amount programmed
for indirect costs could have been programmed and utilized for other PPAs
for more efficient and effective delivery of public service.

16.4 Also, as presented in the foregoing, the procured construction materials

aggregating to P177,168.33 exceeded the estimated materials cost reflected
in the Program of Work (POW) by P18,491.33. The amount is attributable
to the project Improvement of Multi-Purpose Hall (Purok-3) Excavation
and Concreting Works where the amount of materials paid totaled
P40,635.00 while compared to the materials cost reflected in the POW at
P35,590.00. Same is true with the project Construction of Retaining Wall
(Purok-3) where the amount paid for materials was P136,533.33 compared
to the materials cost reflected in the POW at P123,087.00.

16.5 We recommend that the Management of the BLGU:

a. refuse to accept from the Municipal Engineering Office POWs

which contain indirect cost for construction projects to be
implemented by administration; and
b. comply strictly with the programmed costs for materials and labor
in the POWs.

17. The BLGU did not withhold the mandatory retention money equivalent to
ten percent (10%) on each progress payment of a construction project
costing P955,797.61 which exposed the BLGU of not covering uncorrected
discovered defects and third party liabilities contrary to Annex E of the
2016 Revised Implementing Rules and Regulations.

17.1 Annex E of the 2016 Revised Implementing Rules and Regulations of RA

9184 provides the following:

6. RETENTION MONEY

6.1. Progress payments are subject to retention of ten percent (10%) referred to as
the "retention money." Such retention shall be based on the total amount due to
the contractor prior to any deduction and shall be retained from every progress
payment until fifty percent (50%) of the value of works, as determined by the
procuring entity, are completed. If, after fifty percent (50%) completion, the
work is satisfactorily done and on schedule, no additional retention shall be
made; otherwise, the ten percent (10%) retention shall be imposed.

6.2. The total "retention money" shall be due for release upon final acceptance of the
works. The contractor may, however, request the substitution of the retention
money for each progress billing with irrevocable standby letters of credit of from
a commercial bank, bank guarantees or surety bonds callable on demand, of
amounts equivalent to the retention money substituted for and acceptable to
Government, provided that the project is on schedule and is satisfactorily
undertaken. Otherwise, the ten percent (10%) retention shall be made. Said
irrevocable standby letters of credit, bank guarantees and/or surety bonds, to be
 posted in favor of the Government shall be valid for a duration to be determined
by the concerned implementing office/agency or procuring entity and will
answer for the purpose for which the ten percent (10%) retention is intended,
i.e., to cover uncorrected discovered defects and third party liabilities.

17.2 Post audit of vouchers disclosed that the BLGU did not withhold the
mandatory retention money equivalent to ten percent (10%) on each
progress payment of a construction project Improvement of Multi-purpose
Building costing P955,797.61. Details of the transaction are disclosed
below:

Date Particulars Progress Payment Retention Money

04/13/2022 First Billing 740,372.97 74,037.30
05/04/2022 Final Billing 215,424.64 21,542.46
Total 955,797.61 95,579.76

17.3 As shown above, no retention money was withheld totaling P95,579.76 or

ten percent (10%) of P955,797.61. This retention money is intended to
cover costs of uncorrected discovered defects and third party liabilities.
Consequently, the BLGU was exposed to risk not covering uncorrected
discovered defects and third party liabilities contrary to above-mentioned
regulations.

17.4 We recommend that the Management of the BLGU withhold ten

percent of the progress payment to cover possible uncorrected
discovered defects and third party liabilities

May we have your written comments on the foregoing observations within

five (5) calendar days from receipt hereof.

In case of your failure to reply within the herein specified period, our audit
observation shall be deemed accepted, and we shall re-evaluate the transactions based
on the available documents/information submitted to us.

ARNEL B. PABLO
Audit Team Leader

REGINALDO G. MALAMUG
OIC-Supervising Auditor

rgm/abp/gda
AOM No. 2022-001(19-21) Brgy. San Leonardo, Bambang
Proof of Receipt of AOM:
Name and Position Received
 Signature Date
HON. ALVIN T. PADILLA - Punong Barangay
MS. MAY FRANIELYNE R. BOTE - Municipal Accountant
LOREN MEI A. SAMPAGA - Barangay Bookkeeper
MS. NENITA V. RAMIREZ - Barangay Treasurer
THE CHAIR, COMMITTEE ON APPROPRIATION
The SK Chairperson
The Barangay Bids and Awards Committee (BAC)