YREPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
REGIONAL OFFICE NO. VIII
LGAS C – Leyte II and Biliran Province
Provincial Satellite Auditing Office (PSAO)
Baybay City, Leyte

Team R8-03, Baybay City

AOM No. 2024-001

Date: October 21, 2024

AUDIT OBSERVATION MEMORANDUM (AOM)

For: HON. MILA O. SORIA

Punong Barangay
Barangay Sto. Nino
Abuyog, Leyte

Attention: LIGAYA D. MOQUIA

Barangay Treasurer

MICHELLE L. EFREN
Municipal Accountant

We have audited some of the Barangay transactions for Calendar Years 2020,
2021 and 2022 and 2023 and observed the following deficiencies:

Property, Plant and Equipment

1. The accuracy, existence and valuation of all properties of the barangay under
Property, Plant and Equipment (PPE) amounting to ₱9,764,582.21 as of
December 31, 2023, continued to be unconfirmed due to a) non-conduct of
physical count of its properties for CY 2023 and non-maintenance of
Property Cards by the Designated Property Custodian, contrary to Item
7.2.5, Chapter VII of Manual on the Financial Management of Barangays
and other pertinent COA rules and regulations.

1.1. Chapter 7 of the Manual on the Financial Management of Barangays prescribes

the specific Policies and Procedures on Investment Property, Property, Plant and
Equipment, and Biological Asset. Items 7.1.18 and 7.1.19 of the Manual provides
that:

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 1 of 15

 xxx

Property, Plant and Equipment/Infrastructure Assets

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.

7.1.7 Property/Equipment Ledger Card (PELC) shall be maintained by

the C/M Accountant as subsidiary ledgers for all property and
equipment of the barangay.

1.2. Likewise, Item 2.1.6 of COA Circular No. 2010-001 requires the Accountants to
submit subsidiary schedules of general ledger accounts, on or before February 14
of each year.

1.3. The Statement of Financial Position for CY 2023 of Barangay Sto. Niño reflected
a total amount of ₱9,764,582.21 properties under Property, Plant and Equipment
(PPE) account. The details are shown in Table 1.

Table 1. Property, Plant and Equipment

PPE Amount
Other Land Improvements 452,490.23
Road Networks 1,861,038.40
Power Supply System 316,000.00
Buildings 6,293,435.18
School Buildings 835,075.18
Other Structures 2,547,292.00
Furniture & Fixtures 131,994.00
Total 12,437,324.99
Less: Accumulated
Depreciation 2,672,742.78
Net Amount 9,764,582.21

1.4. However, no inventory report has been provided to the Audit Team as of
December 2023. Only the inventory report as of December 2022 was submitted to
the audit Team as the Barangays are required to so submit such in the Bureau of
Treasury during the renewal of their fidelity bonds.

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 2 of 15

1.5. In addition, the Barangay Treasurer as the Designated property officer of the
barangay had not been preparing and maintaining Property Cards for every
Properties procured by the Barangay.

1.6. The RIPE is intended to confirm the existence of the reported assets in the books
of the Barangay and validate whether these assets are within the vicinity of the
same or in its designated location. Without the RIPE, the amount in the books
cannot be substantiated while the existence of the properties cannot be confirmed.
Losses, damages or unserviceable properties will not be detected and the persons
liable for such losses may not be held accountable thereof.

1.7. Due to the above mentioned deficiencies, the accuracy, existence and reliability of
the PPE accounts cannot be confirmed which will affect the fair presentation of
the Barangay’s assets in its Financial Statements.

1.8. We recommend that the Barangay Inventory Team conduct a complete

physical count of all properties of the barangay every year, prepare and
accomplish the Report on Inventory of Property and Equipment completely
when the physical count is concluded and submit to COA and the Municipal
Accountant.

1.9. We also recommend that the Barangay Treasurer as the Property Officer
Designate to maintain Property Cards for all properties of the Barangay.

1.10. Lastly, we recommend that the Barangay Treasurer as the Property Officer-
Designate and the Municipal Accountant should periodically reconcile their
respective records so as to establish a more reliable PPE balance.

Incomplete LDRRMF Investment Plan

2.0. Prior year’s unexpended DRRMF were not included in the LDRRMF
Investment Plan for CYs 2020, 2021, 2022 and 2023, contrary to Sections 4.4
and 5.1.2 of COA Circular 2012-002, thus, the funds were not used and left
idle in the bank.

2.1. Section 4.4 of COA Circular 2012-002 states “The unexpended LDRRMF shall
accrue to a special trust fund solely for the purpose of supporting disaster risk
reduction and management activities of the Local Disaster Risk Reduction
Management Council (LDRRMC) within the next five years. The LDRRMCs
shall decide on the use of the unexpended balance of LDRRMF which shall
be incorporated in the Local Disaster Risk Reduction Management Fund
Investment Plan.”

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 3 of 15

2.2. Whereas, Section 5.1.2 of the same circular states, “A LDRRMFIP for the DRRM
program shall be prepared annually. It shall present the 30% allocation for QRF
in lump sum and the allocation for disaster mitigation, prevention and
preparedness with details as to projects and activities to be funded. The
LDRRMFIP shall also include a separate caption, the list of projects and
activities charged to the unexpended LDRRMF of previous years.”

2.3. Verification of amounts presented in the Annual Budget and Supplemental

Budgets prepared for Calendar Years 2020, 2021, 2022 and 2023 disclosed that
the Barangay appropriated the amounts of ₱172,582.10, ₱184,660.85,
₱252,648.75 and ₱216,438.49, respectively. Moreover, Report showing the
balances and list of utilization made in CY 2020, 2021, 2022 and 2023 submitted
by the Barangay Bookkeeper based on the RAO of the Barangay, states that the
unexpended BDRRMF balance as of December 31, 2019 amounted to
₱456,405.90. Details are shown in Table 2.

Table 2. BDRRMF balance

Particulars CY 2020 CY 2021 CY 2022 CY 2023 TOTAL
Beginning Balance 456,405.90 141,188.00 325,848.85 578,497.60 456,405.90
Add: Current Appropriation
70% Mitigation 120,807.47 129,262.59 176,854.12 151,506.94 578,431.12
30% QRF 51,774.63 55,398.26 75,794.63 64,931.55 247,899.07
Total Current Appropriation 172,582.10 184,660.85 252,648.75 216,438.49 826,330.19
Less: Utilization 487,800.00 0.00 0.00 0.00 487,800.00
Balance as of year-end 141,188.00 325,848.85 578,497.60 794,936.09 794,936.09

2.4. Upon examination of the LDRRMF Investment Plan attached to the Annual
Budget, it was observed that the LDRRMF Investment Plan only included the
items/activities intended to be undertaken/procured out of the current year’s
budget.

2.5. Consequently, the unexpended balances of prior years’ cannot be used in the
absence of the LDRRMFIP which should have indicated the PPAs for which said
prior years’ balances will be used for.

2.6. While it is true that the BDRRM Council will decide on the use of the
unexpended balance of LDRRMF, the same should be reflected in the
LDRRMFIP. Moreover, the continued non-utilization of the unexpended
LDRRMF from previous years left the funds idle in the bank instead of using it to
improve the LGU’s capability on disaster mitigation, prevention and
preparedness.

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 4 of 15

2.7. We recommend that the Barangay Kagawad who is the Chairman of the
Committee on Appropriation (CCA), provide breakdown of the ₱503,093.08
BDRRM Fund unexpended balance as of December 31, 2023 which should
only include the unexpended balances for the past 5 years.

2.8. We also recommend that the Punong Barangay, as Chairman of the LDRRM
Council, identify the project/s to be funded from the unexpended BDRRM
Fund of previous years, incorporate the same in the LDRRMF Investment
Plan and implement the project/s to fully equip the Barangay and its
residents in times of disasters.

5% DRRMF Utilization

3.0. Only ₱487,800.00 or 40 % was utilized out of the LDRRMF available

appropriations in CYs 2020, 2021, 2022 and 2023 totaling ₱1,217,804.54,
contrary to COA Circular No. 2012-002 and Section 21 of RA No. 10211,
thereby limiting the Barangay’s capacity and readiness to effectively respond
to disasters and provide assistance to constituents during calamities.

3.1. COA Circular No. 2012-002 dated September 12, 2012 on Accounting and
Reporting Guidelines of the Local Disaster Risk Reduction and Management
Fund (LDRRMF) of Local Government Units provides:

3.2. A LDRRMFIP for the DRRM program shall be prepared annually. It shall
present the 30% allocation for QRF in lump-sum and the allocation for disaster
mitigation, prevention and preparedness with details as to projects and activities to
be funded. The LDRRMFIP shall also include under a separate caption, the list
of projects and activities charged to the unexpended LDRRMF of previous years.
xxx.

3.3. Section 21 of Republic Act No. 10211 provides, “The present Local Calamity
Fund shall henceforth be known as the Local Disaster Risk Reduction and
Management Fund. Not less than five percent (5%) of the estimated revenue from
regular sources shall be set aside as the LDRRMF to support disaster risk
management activities such as, but not limited to, pre-disaster preparedness
programs including training, purchasing life-saving rescue equipment, supplies
and medicines, for post-disaster activities, and for payment of premiums on
calamity insurance. The LDRRMC shall monitor and evaluate the use and
disbursement of the LDRRMF based on the LDRRMP as incorporated in the local
development plans and annual work and financial plan. …”

3.4. DILG Memorandum Circular No. 2012-73was issued to provide the list of early
warning systems, preparedness equipment and other equipage which may be
AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 5 of 15
 procured by the LGUs from the 70% Mitigation Fund of its LDRRMF, depending
on the kind of disaster. Among these the following items:

Flooding Earthquake
* Rubber boats with live vests, rescue * Fork lift
whistles and megaphones * Grader
* Inflatable Rafts/ Boats * Hack Saw
* Rain Gauges * Backhoe
* Breathing Apparatus * Chisel
* Portable Generator Set * Electric Drill
* Illuminated Jackets (Night Light) * Chain Saw Electric
* Warning Bella * Concrete Cutter
* Bolt Cutters * Jack Hammer
* Life Buoys * Megaphone w/ siren & rescue whistle
* Pulling and Lifting Machine * Flashlight with batteries
* Chain Saw Electric * Work Gloves
* Portable Tower Light * Ax- weighing at least 6 lbs.
* Hand Gloves * Shovel-both flat head& pointed
* Hydraulic Cutter Hydraulic Spreader * Coils of rope and wire
* Power Pack Pump * Compass
* Core Hose Pipe 20 m. long * crowbar/claw tool- 36'' or longer
* Foldable Stretcher Search Lights * Safety Full Body Harness
* Hi-power Torches * Tent- Family Sized
* Emergency Torches * Sleeping Bags
* Emergency Lights Raincoat * Bolt Cutters
* Grapnel with Poly polypropylene rope * 10 ton chain pulley block
* Body Bags * Pulling and Lifting Machine
* Aluminum Ladder 24 ft. * 1" Manila rope 100 meters roll
* Electric Drill * Portable Tower Light
* Snap Link * Hard hat
* Eye Googles * Search, emergency light
* Waterproof Tents * Foldable Stretcher
* First Aid Boxes Fire Extinguisher * First Aid Boxes (50pax/ per box)
* Fire Extinguisher * Chain Saw

Volcanic Eruption Landslide

* Grader * Dump Truck
* Backhoe * Grader
* Megaphone * Backhoe
* Rescue Whistle * Megaphone with serene
Rescue Whistle Search Foldable
* Warning Bells * Stretcher
* Forklift * Forklift
* Pulling and Lifting Machine * Pulling and Lifting Machine
* 10 Ton Chain Pulley Block * Electric Drill
* Crowbar/ Pickaxe/ Shovel * Shovel
* Portable Generator Set * 10 Ton Chain Pulley Block

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 6 of 15

 Volcanic Eruption Landslide
* Inflatable Flood Light AIT 4500 * Search Lights
* Grapnel with Poly polypropylene Rope * Hi power Torches
* Hard Hat * Emergency Lights
* Breathing Apparatus * Body Bag
* Safety Full body Harness * Compass
* Search Lights * Search Camera set/ victim location unit
* Hi-power Torches * Foldable Stretchers
* Emergency Lights * Snap link safety
* Search Camera Set/ Victim Location Unit * Full body Harness First Aid Boxes (50
* Ascending and Descending Device persons per box)
* Snap Link * Safe line Rescue Ropes

3.5. Based on existing regulations, the QRF shall be used only when there is a
declaration of a State of Calamity. If unused, the amount shall be transferred to a
Special Trust Fund on the succeeding year and such amount can be utilized for
other disaster-mitigation purposes. From the appropriations for QRF in Table 2,
finding No. 2 of this AOM, only the appropriation for CY 2023 cannot be used by
the Barangay unless there is a declaration of a State of Calamity on that year.
Thus, the total LDRRMF which the Barangay could have utilized for the 4-year
period amounted to ₱1,217,804.54, computed as follows:

Prior years Unexpended LDRRMF- as of January 1, 2020 ₱456,405.90

LDRRMF CY 2020 to CY 2023 826,330.19
Less: CY 2023 QRF (64,931.55)
Total Available LDRRMF ₱1,217,804.54

3.6. Based on the submitted report of utilization provided by the Barangay through the
Barangay Bookkeeper, only ₱487,800.00 (see Table 3) was utilized out
of the total ₱1,087,563.79 available appropriation in CYs 2020, 2021, 2022 and
2023 hence, the capability of the Barangay to respond effectively during disasters
were not greatly improved.

Table 3. Disbursements Charged to LDRRM Fund

Date Check No. Particulars Gross Amount
03/20/2020 67993082 Relief Goods (228 sacks of rice) 456,000.00
08/20/2020 71966927 Medical Supplies 31,800.00
Total 487,800.00

3.7. The occurrence of several typhoons, earthquake and flooding for the past years
and the crisis brought by the COVID-19 pandemic should have been enough
reason for the Barangay Officials to actively perform their various responsibilities
and initiate the implementation of disaster-prevention and mitigation activities.

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 7 of 15

3.8. The non-implementation of the other planned LDRRM activities per LDRRMFIP
did not improve the capability of the Barangay and its Officials to prepare,
manage and respond to disasters as well as its ability assist the constituents in
times of calamity.

3.9. We recommend that the Punong Barangay implement the projects outlined
in the LDRRMFIP for the year, in order to equip the Barangay Officials and
constituents with essential skills and knowledge necessary to effectively
prepare for and manage disasters.

20% Development Fund

4.0. The Barangay’s 20% Development Fund for CYs 2020 to 2023 totaling
₱4,259,115.60 was appropriated and utilized solely for developmental
projects, in compliance with Section 3.2 of the Joint Memorandum Circular
No. 1 by the Department of Budget and Management, Department of
Finance, and Department of Interior and Local Government (DBM-DOF-
DILG), wherein five projects identified in its Annual Investment Plan (AIP)
were implemented during the year, yielding an implementation rate of 100%,
thus, attaining the intended purpose and objectives of the current year’s
development fund.

4.1. Section 287 of Republic Act (RA) No. 7160 states that “Each local government
unit shall appropriate in its annual budget no less than twenty percent (20%) of
its annual internal revenue allotment for development projects. xxx.”

4.2. Item 3.2 of DOF-DILG-DBM Joint Memorandum Circular (JMC) No. 1 dated
November 04, 2020, on the “Revised Guidelines on the Appropriation and
Utilization of the Twenty Percent (20%) of the Annual Internal Revenue
Allotment for Development Projects”, provides that:

3.2.1 The 20% DF shall be utilized to finance the LGU’s priority

development as embodied in its duly approved local
development plans and Annual Investment Plan (AIP),
which should be directly supportive of the Philippine
Development and Public Investment Program.

3.2.2 The development projects that may be included under the

20% DF shall be those that are necessary, appropriate, or
incidental to efficient and effective local governance, and
those which are essential to the promotion of the general
welfare of the people.

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 3.2.3 The LGU’s shall ensure that the development projects to be
funded out of the 20% DF are well-planned and
procurement-and-implementation-ready.

3.2.4 xxx

3.2.5 The following expenditures items shall not be allowed to be

charged against the 20% DF:

3.2.5.1. Personal Services expenditures, such as salaries,

wages, overtime pay, and other personnel
benefits;

3.2.5.2. Administrative expenses, such as supplies, meals,

representation, communication, water and
electricity, petroleum products, and the like;

3.2.5.3. Traveling expenses, whether domestic or foreign;

3.2.5.4. Registration fees and other expenses related to the

conduct of and participation to trainings,
seminars, conferences or conventions;

3.2.5.5. Purchase, maintenance or repair of administrative

office, furniture, fixtures, equipment or
appliances; and

3.2.5.6. Purchase, maintenance or repair of motor vehicles

used for administrative purposes.

4.3. During the conduct of our audit, it was noted that the Barangay had appropriated
projects for 20% Development Fund totaling to ₱679,128.40, ₱727,243.40,
₱999,195.00 and ₱1,853,548.80for CY 2020, 2021, CY 2022 and CY 2023,
respectively. Details in Table 4.
Table 4. Development Projects from 20% Development Fund for CY 2022-2023
CY PPA Amount
*Rehab of Covered Court 200,000.00
2020 *Annual Budget *Drainage Canal w/cover Zone 1-4 279,128.40
*Const. of Pathway 200,000.00
subtotal 2020 679,128.40
2021 *Annual Budget * Rehab of Covered Court 727,243.40
Improvement of Multi-Purpose Building
2022 *Annual Budget Phase 3 (Reverted in CY 2023 999,195.0
Supplemental Budget No. 1) 0
AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 9 of 15
 CY PPA Amount
2023 *Annual Budget Rehab of covered court/MPBldg. 854,353.80
Supplemental Repair/Rehabilitation of Evacuation 999,195.0
Budget Center 0
subtotal 2023 1,853,548.80
Total 4,259,115.60
*unimplemented as of December 31, 2023

4.4. Analysis showed that the above PPAs are eligible to be charged under the 20%
Development Fund. The Development Plan did not include any expenditure items
that are not allowed to be charged against the Fund such as personal services,
administrative expenses, traveling expenses, training expenses, purchase,
maintenance or repair of administrative office’ equipment and motor vehicles for
administrative purposes.

4.5. Further verification of Disbursement Vouchers and supporting documents on the

utilization of 20% Development Fund revealed that four development projects
under the current appropriations were implemented. However, deficiencies were
noted for the following disbursements:

Table 5. Deficiencies on Disbursements Charged to 20% Development Fund

N Gross
o Development Projects Date Check No. Amount Audit Remarks
Not found in the
Improvement of Multi 1,023,50 Annual/Supplement
1 Purpose Bldg. Phase I 04/19/21 76106409 0.00 al Budgets
Construction/Expansion
of Multi-Purpose Not found in the
Building (Kitchen and 731,50 Annual/Supplement
2 Stockroom) 07/29/22 79429172 0.00 al Budgets
Rehabilitation of
Covered Court/Multi 853,00 From CY 2023
3 Purpose Building 07/21/23 86781705 0.00 Annual Budget
From CY 2023
Repair/Rehabilitation of 998,00 Supplemental
4 Evacuation Center 08/23/23 86781722 0.00 Budget
Total 3,606,000.00

4.6. The implementation of four identified development projects under the 20%
Development Fund in CYs 2020 to 2023 ensured that the desired socio-economic
development as identified in the Annual Investment Plan was maximized, thus,
the Barangay satisfactorily realized the intended purpose and objectives of the
fund. However, a total of ₱1,406,371.80 development projects were not
implemented as of December 31, 2023.

AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 10 of 15

4.7. We commend the efforts made by the Barangay in the efficient and effective
accomplishment of the identified priority development projects in CYs 20220
to 2023, especially that all expenditures charged to the 20% Development
Fund were not among the itemized disbursements prohibited in Section 3.2.5
of DBM-DOF-DILG JMC No. 1.

4.8. We recommend that the Punong Barangay and all personnel concerned fast
track the implementation of the remaining one unimplemented development
project and continuously adhere to the provisions of the aforementioned
DBM-DOF-DILG JMC, so that funds are utilized to its optimum to help
achieve the desirable socio-economic development and environmental
outcomes of the Barangay.

Delayed and Partial Deposit of Collections

5.0. The Barangay Treasurer did not deposit her collections regularly, intact and
on time, contrary to Section 69(1) of PD 1445, COA Circular No. 92-382 and
Section 2.1 of COA Circular No. 97-002 and the Manual on Financial
Management of Barangays, thus exposing barangay funds to the risk of loss,
misuse or misappropriation.

5.1. Section 69(1) of PD 1445 provides: “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 so received and collected by them to the treasury of
the agency concerned and credited to the particular accounts to which the said
moneys belong. The amount of the collections ultimately payable to other
agencies of the government shall thereafter be remitted to the respective
treasuries of these agencies.”

5.2. Section 8 of COA Circular No. 92-382 dated July 3, 1992 issued to implement the
provisions of Republic Act No. 7160 states that all collections shall be deposited
intact with authorized depositories. The practice of retaining part of the collections
as a cash reserve for cash disbursements shall be discontinued.

5.3. Section 2.1 of COA Circular No. 97-002 dated February 10, 1997 also requires
that daily receipts of collections must be deposited intact with the proper bank.

5.4. Section 4.1.13 of the Manual on Financial Management of Barangays states that:

4.1.13 Collections received by the BT as deputized collector of the

city/municipality shall be remitted intact to the treasurer of the
AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 11 of 15
 city/municipality concerned daily or once the collections reach
P5,000.00.

5.5. During the conduct of cash examination, it was noted that for the period
September 12, 2020 to December 31, 2023, the Barangay Treasurer (BT) did not
deposit her collections regularly. Moreover, comparison of the actual collections
and deposits disclosed that the collections were not deposited intact, as can be seen
in Table 6.

Table 6. Collections Which were Not Deposited Intact

Collections Amount
Total Cash on Amount
Month during the
Hand Deposited
Retained by
month BT
Balance last Cash Exam,
8/26/2020 807.00 807.00
August 27-31, 2020 - 807.00 - 807.00
September 2020 3,850.00 4,657.00 807.00 3,850.00
October 2020 4,880.00 8,730.00 3,623.00 5,107.00
November 2020 22,317.29 27,424.29 5,380.00 22,044.29
December 2020 3,990.00 26,034.29 21,317.29 4,717.00
January 2021 11,040.00 15,757.00 4,490.00 11,267.00
February 2021 11,220.00 22,487.00 16,560.00 5,927.00
March 2021 6,920.00 12,847.00 7,500.00 5,347.00
April 2021 12,000.00 17,347.00 17,040.00 307.00
May 2021 5,270.00 5,577.00 3,210.00 2,367.00
June 2021 7,280.00 9,647.00 7,770.00 1,877.00
July 2021 10,350.00 12,227.00 6,540.00 5,687.00
August 2021 6,940.00 12,627.00 9,910.00 2,717.00
September 2021 9,980.00 12,697.00 8,000.00 4,697.00
October 2021 4,050.00 8,747.00 6,400.00 2,347.00
November 2021 4,900.00 7,247.00 6,310.00 937.00
December 2021 4,000.00 4,937.00 4,000.00 937.00
January 2022 36,559.81 37,496.81 36,559.81 937.00
February 2022 6,900.00 7,837.00 7,380.00 457.00
March 2022 5,120.00 5,577.00 4,350.00 1,227.00
April 2022 175,742.34 176,969.34 173,462.34 3,507.00
May 2022 5,900.00 9,407.00 9,227.00 180.00
June 2022 6,760.00 6,940.00 6,180.00 760.00
July 2022 9,040.00 9,800.00 7,410.00 2,390.00
August 2022 12,430.00 14,820.00 8,150.00 6,670.00
September 2022 4,650.00 11,320.00 10,950.00 370.00
October 2022 6,190.00 6,560.00 6,150.00 410.00
November 2022 8,265.00 8,675.00 7,440.00 1,235.00
December 2022 3,730.00 4,965.00 4,965.00 -
January 2023 19,120.00 19,120.00 19,120.00 -
February 2023 13,210.00 13,210.00 13,210.00 -
March 2023 29,550.00 29,550.00 29,550.00 -
AOM No. 2024-001 Brgy. Sto. Niño, Abuyog, Leyte Page 12 of 15
 Collections Amount
Total Cash on Amount
Month during the
Hand Deposited
Retained by
month BT
April 2023 5,820.00 5,820.00 5,020.00 800.00
May 2023 8,010.00 8,810.00 7,980.00 830.00
June 2023 8,570.00 9,400.00 6,810.00 2,590.00
July 2023 7,460.00 10,050.00 9,040.00 1,010.00
August 2023 5,490.00 6,500.00 6,500.00 -
September 2023 2,580.00 2,580.00 1,830.00 750.00
October 2023 3,630.00 4,380.00 2,670.00 1,710.00
November 2023 5,750.00 7,460.00 7,280.00 180.00
December 2023 2,240.00 2,420.00 - 2,420.00

5.6. It can be seen in Table 4 that there is always an amount retained

in the custody of the Barangay Treasurer at the end of each
month. Also, in some months, no deposits were made by the
Barangay Treasurer despite existence of cash on hand. This
practice exposes government funds to the risk of loss, misuse or
misappropriation.

5.7. We recommend that the Barangay Treasurer deposit the full amount of
collections at the Barangay’s authorized government depository bank daily,
weekly or once the collections reach ₱5,000.00, whichever is applicable.

PS limitation

6.0. Appropriations in CY 2021 to CY 2023 and actual expenditures in CY 2020,

CY 2021 and CY 2022 on Personal Services (PS) exceeded the 55% PS
limitation contrary to Section 331 (b) of Republic Act No. 7160, thereby
incurring illegal disbursements and reducing the funds that could have been
allocated for other beneficial programs and development projects.

6.1. Section 331 (b) of Republic Act (RA) No. 7160 otherwise known as the Local
Government Code of 1991, states that “The total annual appropriations for
personal services of a barangay for one (1) fiscal year shall not exceed fifty-five
percent (55%) of the total annual income actually realized from local sources
during the next preceding fiscal year.”

6.2. DBM Local Budget Circular No. 98 issued on October 14, 2011, prescribed the
guidelines in determining compliance to the personal services (PS) limitation on
local government budgets. Section 4.2 thereof defines Personal Services (PS)
Limitation as the prohibition under Section 331 (b) of the Local Government
Code against appropriating funds for PS in excess of the limits set therein. It

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 provides further that PS Limitation refers to the amount beyond which no
additional appropriation for PS items is allowed.

6.3. Section 4.6 of the same Circular defines next preceding fiscal year as the fiscal
year that is two (2) years before a budget year. For example, if FY 2011 is the
budget year, the next preceding fiscal year is FY 2009.

6.4. Section 4.3 of the same Circular on the other hand provides items which are
waived in the determination of compliance to the PS limitation in LGU PS
budgets which includes payment of minimum Year-end Bonus of ₱1,000.00 for
the Punong Barangay and P600.00 for other mandatory barangay officials, and
their Cash Gifts.

6.5. Review of the annual budget of the barangay disclosed that appropriations for
Personal Services in CY 2021 to CY 2023 exceeded fifty-five percent (55%) of
the total annual income actually realized from local sources during the next
preceding fiscal year. The excess amount is computed in Table 7.

Table 7. Excess of Appropriation over PS Limitation

2023 2022 2021 2020
Total Actual Income (Next
Preceding Year)
2021/2020/2019/2018 3,711,528.00 3,454,231.29 3,117,795.05 2,794,029.70
PS Limitation 55% 2,041,340.40 1,899,827.21 1,714,787.28 1,536,716.34
Less: Appropriations
Annual Budget 2,096,876.73 1,951,199.75 1,769,776.72 1,536,676.72
Supplemental Budget No.1 172,000.00 340,159.61
Supplemental Budget No.2 110,000.00
Total Appropriations 2,096,876.73 2,233,199.75 2,109,936.33 1,536,676.72
Excess (55,536.33) (333,372.54) (395,149.05) 39.62

6.6. In addition, actual expenditures for CY 2020, CY 2021 and CY 2022 on personal
services also exceeded the ceiling for the reason that the budget itself for
provided a greater PS appropriation than what was required. Details on Table 8.
Table 8. Excess of Actual PS Expenditure over PS Limitation
2023 2022 2021 2020
PS Limitation 55% 2,041,340.40 1,899,827.21 1,714,787.28 1,536,716.34
Less: Actual PS Expenditures 2,056,136.00 2,200,421.00 2,015,254.69 1,756,156.00
Difference (14,795.60) (300,593.79) (300,467.41) (219,439.67)
Total PS cost for waived items 62,000.00 62,000.00 62,000.00 62,000.00
Excess (Difference less
waived items) 47,204.40 (238,593.79) (238,467.41) (157,439.67)

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6.7. The Barangay officials were under the notion that since the budget of the
barangay was already reviewed by the Budget Officer and approved by the
Sangguniang Bayan, their budget was already in consonance with the regulations.

6.8. Failure to observe the mandatory limit on PS resulted in illegal disbursements

totaling ₱634,500.87 and impaired the delivery of some basic services of the
barangay because the excess funds spent for Personal Services could have been
allocated for other beneficial programs and development projects. This is without
prejudice to the issuance of Notice of Disallowance.

6.9. We recommend that the Punong Barangay and Committee Chairman on

Appropriation limit the appropriations and expenditures for Personal
Services of the barangay strictly in accordance with Section 331 (b) of RA
7160 to avoid disallowances on irregular and excessive PS disbursements.

6.10. We further recommend that the barangay council should strive to find ways
to improve collection of revenues from local sources so that the Personal
Services ceiling will correspondingly increase.

May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.

ARNE S. CABIGAS
State Auditor II
OIC- Audit Team Leader

SANTIAGO P. SEÑASE
State Auditor V
Supervising Auditor

Proof of Receipt of AOM:

Date
Officer Name of Receiving Officer Signature
Received
Punong Barangay
Barangay Treasurer
Municipal Accountant

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