Republic of the Philippines

COMMISSION ON AUDIT
Audit Team R8-06, LGS-D – Province of Northern Samar
Provincial Satellite Auditing Office
Brgy. Dalakit, Catarman, Northern Samar

AUDIT OBSERVATION MEMORANDUM (AOM)

AOM No. 2019-01-(2015-2018)

October 22, 2019

For : Hon. CHANDO T. PAJARES

Punong Barangay
Barangay Manaybanay
Mapanas, Northern Samar

Attention: Nestor B. Tejano – Barangay Treasurer

Niño L. Bandilla - Municipal Accountant

We have audited the accounts and operation of the barangay for CYs 2015-2018 and
observed the following deficiencies and/or errors:

1. Barangay Financial Statements and schedules for CYs 2015-2018 remained not
submitted contrary to Accounting Circular No. 2006-002 dated December 19, 2006,
thus, depriving management of information on its financial position and results of
operations.

Accounting Circular No. 2006-002 dated December 19, 2006 prescribed the use
of the Systems and Procedures Manual on the Management of Barangay Funds and
Property and Accounting System Manual for Barangays under the New Government
Accounting System (NGAS).

Item No. 21. – General Accounting Policies, Volume 4 or the Accounting

Systems Manual for Barangays requires the city or Municipal Accountant to prepare the
financial statements and schedules for each barangay, as follows:

a. Detailed and Condensed Balance Sheet

b. Detailed and Condensed Statement of Income and Expenses
c. Statement of Cash Flows
d. Statement of Changes in Government Equity
e. Schedule of Infrastructure Projects and Reforestation Projects (if
applicable)
f. Schedule of Accounts Receivable
g. Schedule of Accounts Payable
h. Notes to Financial Statements
i. Statement of Management Responsibility for Financial Statements
 On the other hand, Item No. 22 thereof directs the accountant to submit
consolidated financial statements and schedules of all barangays within 60 days after
December 31 of each year.

The Municipal Accountant failed to prepare the Financial Statements and

schedules for CYs 2015-2018 due to the delayed submission by the former Barangay
Treasurer of the documents and records pertaining to the barangay financial transactions
for the CYs 2015-2017 and non-submission for the period January to July 25, 2018.
Also, the barangay bookkeeper did not submit the registries/reports that would be the
basis of the Municipal Accountant in drawing the Journal Entry Voucher to come up with
accounts balances in the Financial Statements.

It was observed that the PBC with its related Disbursement Vouchers and
supporting documents for July 2015 to December 2016 were only submitted on January
2017, while, the accounts for CY 2017 were submitted on February 2018. It was also on
October 2, 2019, during the conduct of the Cash Examination of the barangay treasurer,
that the accounts of the barangay for the period July 26 to December 31, 2018 were
submitted by the current barangay treasurer to the Municipal Accountant.

Verification of the bank statement for the period July to December 2018 showed
that six (6) checks totaling ₱458,917.88 were presented and debited to the bank account
of the barangay but remained unsubmitted by the current barangay treasurer, as follows:

Date Check No. Amount

7/26/2018 1737712 ₱13,000.00
8/20/2018 1737715 22,000.00
10/25/2018 1737732 2,317.88
11/4/2018 1737737 290,000.00
11/4/2018 1737739 2,000.00
11/26/2018 1737741 129,600.00
Total ₱445917.88

Consequently, the Barangay Record Keeper did not prepare the Journal Entry
Vouchers and the different registries to record the receipt of IRA and any obligation that
the barangay may have incurred in CYs 2015-2018. Thus, the Municipal Accountant did
not prepare the financial statements and schedules for CYs 2015-2018.

Absence of financial statements for CY 2015-2018 hindered the audit team to

render an opinion for the period. Likewise, management and stakeholders were deprived
of information on the financial position and the results of its operations for the period
ended.

We recommend that the Punong Barangay require the Barangay Treasurer

to submit the disbursement vouchers and supporting documents for the six (6)
checks and observe the timely submission of accounts so that Municipal Accountant
and the concerned barangay bookkeeper could prepare and submit the financial
statements and schedules as required in Accounting Circular No. 2006-002 dated
December 19, 2006. Likewise, exhaust all remedies to demand the submission of the

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 accounts for the period January to July 25, 2018 from the previous barangay
treasurer.

2. The former barangay officials were not required to account and report their
accountability prior to the assumption of their successors, contrary to Sections 77
and 80 of PD 1445 and DILG Memorandum Circular No. 2018-12, hence,
accountabilities of previous set of officials were not determined.

Section 77 of PD 1445, or the Government Auditing Code of the Philippines,

provides that, “When government funds or property are transferred from one accountable
officer to another, or from an outgoing officer to his successor, it shall be done upon
properly itemized invoice and receipt which shall invariably support the clearance to be
issued to the relieved or out-going officer, subject to regulations of the Commission.

Furthermore, Section 80 thereof states that an accountable officer, upon ceasing to

act in his official capacity as such, shall submit to the auditor a report of his
accountability and any remaining balance of such accountability shall be deposited in the
proper treasury without unnecessary delay.

DILG MC No. 2018-12 dated February 1, 2018 mandates all Punong Barangays to
convene and create their respective Barangay Inventory Team (BIT), through an
Executive Order, who shall be responsible for the conduct of inventory and turnover of
Barangay Properties, Financial Records, Documents (BPFRDs) and money
accountabilities; and ensure an orderly and smooth transition of barangay governance to
the newly elected or re-elected incoming barangay officials. The results of the conduct of
inventory should be reported in the Initial and Final Inventory and Turnover of Barangay
Properties, Financial Records and Documents (BFRDPs) and Money Accountabilities.
The initial report must be furnished to the Municipal Accountant, COA, and MLGOO not
later than March 12, 2018, while, the final report not later than June 3, 2018.

Contrary to the Memorandum Circular issued, the outgoing barangay officials

were not required to submit the list of all barangay properties entrusted to each barangay
official and liquidate or settle all money accountabilities. Consequently, the Initial and
Final Reports were not furnished to the COA which resulted to non-submission of the
DVs and supporting documents for the period January 1 to June 30, 2018, by the previous
barangay treasurer.

Likewise, the previous barangay treasurer did not render a properly itemized
invoice and receipt of barangay properties, such as all financial records; copies of issued
accountable forms (like official receipts, cancelled checks, etc.); cash in her possession;
and equipment, furniture and fixtures. Also, she did not submit a report of her
accountability to the auditor when she ceased to perform her functions. Hence,
whereabouts of the barangay-owned properties and accountabilities of each official, were
not determined.

These procedures would have cleared the accountability of the outgoing treasurer
and Punong Barangay and likewise, served as basis of turnover of accountabilities
between the outgoing and incoming officials.

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 We recommend that the former barangay officials be required to turn-over
all barangay properties entrusted to them and settle any monetary accountabilities
as required by DILG Memorandum Circular No. 2018-12. Furthermore, require
the former Barangay Treasurer to submit a properly itemized invoice and receipt of
barangay properties and all financial records, and report of her accountability as of
extinguishment of her function as barangay treasurer pursuant to Sections 77 and
80 of PD 1445.

3. Purchase of goods for distribution to the constituents under the “Pamaskong

Handog Program” of the barangay amounting to ₱100,000.00 was paid in advance,
in contradiction to Section 88 of P.D. 1445, while, absence of delivery receipt and
itemized list of the quantity of goods received by the beneficiaries, raised doubt on
the actual delivery of goods.

Pertinent provisions of Presidential Decree 1445, otherwise known as the “State

Audit Code of the Philippines” provide:

Section 88. Prohibition against advance payment on government contracts.

Except with the prior approval of the President the government shall not be
obliged to make an advance payment for services not yet rendered or for supplies
and materials not yet delivered under any contract therefor. No payment, partial
or final, shall be made on any such contract except upon a certification by the
head of the agency concerned to the effect that the services or supplies and
materials have been rendered or delivered in accordance with the terms of the
contract and have been duly inspected and accepted.

Verification of the disbursements for January to December 31, 2018 revealed that
the barangay purchased the following goods for the “Pamaskong Handog” program of the
barangay on December 18, 2018 under Check Number 1737752:

40 sacks commercial rice 81,200.00

10 cartons Sallenas 14,900.00
13 bundles egg noodles 3,900.00
Total ₱100000.00

Audit of these disbursements revealed that the procurement of the goods was
supported with Appropriation Ordinance No. 03 series of 2018 appropriating an amount
of ₱100,000.00 from the MOOE. The ordinance was concurred by the council and
approved by the Punong Barangay on December 17, 2018.

It was also observed that the claim was supported with Purchase Request, Canvass
from Hennie Store, Purchase Order, Inspection and Acceptance Report and Official
Receipt from the supplier. These documents were all dated December 22, 2018.
However, the check was prepared and dated on December 18, 2018 for payment to
Cynthia P. Limbaga, hence, it was prepared 4 days in advance. The contract was awarded
to Hennie Store, and executed the Purchase Order on December 22, 2018.

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 Clearly, there was an indication that the barangay paid in advance to the supplier
and procurement process were not strictly followed by the barangay. Moreover, the
distribution list which shows 120 people who received the goods did not clearly indicate
the quantity of goods received by each beneficiary, notwithstanding the absence of
pictures evidencing the actual distribution made by the barangay.

Hence, validity and regularity of the transaction and actual distribution of goods
cannot be ascertained due to lack of complete documentation, and absence of monitoring
tool in the distribution or use of consumable goods.

We recommend the Punong Barangay to avoid paying the suppliers in

advance and submit to the audit team the distribution list evidencing the quantities
received by each beneficiary.

4. Delayed and irregular deposit of collection contrary to Section 69 of P.D. 1445,

thereby exposing government funds to misappropriation and rendering the
correctness of the balance of the account doubtful.

Pertinent provisions of Presidential Decree 1445, otherwise known as the “State

Audit Code of the Philippines” provide:

Section 69. Public officers authorized to receive and collect moneys arising from taxes,
revenues, or receipts of any kind shall remit or deposit intact the full amounts
received and collected to the treasury of the agency concerned and credited to
the particular accounts to which the said moneys belong. xxx.

Evaluation of collections and deposits for the period of July 2018 to September
2019 revealed that collections were not deposited intact the following day or as soon as
collections reach the amount of Five Thousand Pesos (P 5,000.00), resulting to
accumulated amount of collection remaining in the possession of the Barangay treasurer.
The table below illustrates the practice of partial deposits of collection by the Barangay
Treasurer:

Total Amount Cumulative

Date of Deposit Amount
Period Covered Collected for Undeposited
to ADB Deposited
the Month Collection
Jul-18 ₱1,680.00 03/04/2019 ₱717.50 ₱962.50
Aug-18 2,730.00 - 3,692.50
Sep-18 350.00 - 4,042.50
Oct-18 500,500.00 10/26/18 500,000.00 4,542.50
Nov-18 1,846.80 11/14/18 496.80 5,892.50
Dec-18 500.00 12/19/18 4,150.00 2,242.50
Jan-19 7,059.85 2/14/19 5,609.85 3,692.50
Feb-19 2,730.00 9/16/19 790.00 5,632.50
Mar-19 1,200.00 - 6,832.50
Apr-19 850.00 - 7,682.50
May-19 850.00 - 8,532.50
Jun-19 10,600.00 07/04/2019 10,000.00 9,132.50

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 Total Amount Cumulative
Date of Deposit Amount
Period Covered Collected for Undeposited
to ADB Deposited
the Month Collection
Jul-19 1,041.60 8/22/2019 441.60 9,732.50
Aug-19 750.00 - 10,482.50
Sep-19 2,700.00 10/10/2019 700.00 ₱12,482.50

As presented above, collections are not deposited intact to the Authorized

Depository Bank (ADB). Hence, the partial deposits of collection by the Barangay
Treasurer resulted to the accumulation of undeposited collection of ₱12,482.50 as of
September 30, 2019.

Delayed and irregular deposit of collection resulted to accumulation of

undeposited collection in the possession of the Barangay treasurer. Further, these
government funds were exposed to risk of loss and misappropriation.

We recommend that the Punong Barangay, require the Barangay Treasurer

to strictly deposit the amount of collections on hand or in vault as prescribed.

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof.

JOCELYN L. MARCELINO
OIC-Audit Team Leader

MA. NINEVEH C. DUARTE

OIC-Supervising Auditor

Proof of Receipt of AOM No. 2019-01

dated October 22, 2019

Name Designation Date Received Signature

1. Chando T. Pajares Punong Barangay

2. Nestor B. Tejano Brgy. Treasurer

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3. Niño L. Bandilla Mun. Accountant

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