EXECUTIVE SUMMARY

A. Financial Highlights

Presented below is the comparative information of the financial condition and

operation of the City of Ilagan, Isabela for calendar years 2012 and 2011, as follows:

Increase/
2012 2011 (Decrease)
Assets 423,338,605.25 437,351,838.82 (14,013,233.57)
Liabilities 236,890,468.19 241,208,105.45 (4,317,637.26)
Government
Equity 186,448,137.06 196,143,733.37 (9,695,596.31)

Income 348,124,646.67 423,008,166.38 (74,883,519.71)

Expenses 365,780,513.80 348,717,314.36 17,063,199.44
Net Income (17,655,867.13) 74,290,852.02 (91,946,719.15)

The Appropriations, Obligations and Expenditures are also presented below:

Increase/
General Fund 2012 2011 (Decrease)

Appropriations 407,693,166.32 389,959,805.89 17,733,360.43

Obligations 372,562,610.54 360,427,561.58 12,135,048.96
Expenditures 305,551,192.39 293,420,412.69 12,130,779.70

B. Operational Highlights

Among the major accomplishments of the Local Government of Ilagan based on

the outlined projects and programs under the 20% Economic Development Fund (EDF)
for the calendar year 2012, were as follows:
Status /
Plans/Programs Amount %
Completion
ECONOMIC DEVELOPMENT
1. Infrastructure
• Maintenance of Barangay Roads P 1,800,000.00 100%
• Maintenance of City Hall 500,000.00 100%
• Construction of covered court
Bagumbayan 1,000,000.00 90.94%
Baculod 500,000.00 100%
• Construction of River Control (Phase II) 600,000.00 100%
 2. Maintenance of Gov’t Structure-Gasoline 1,800,000.00 97.39%
Station/Central terminal

3. Purchase of Equipment/Vehicle
• One (1) unit Compactor 500,000.00 100%
• One (1) Unit Dumptruck 1,500,000.00 100%
• One (1) Unit Backhoe 1,200,000.00 100%
• One (1) Unit Grader 1,000,000.00 100%

4. Municipal Breeding Station 546,000.00 95.51%

5. Development of Ilagan Sanctuary 1,000,000.00 100%

6. Gandang Ilagan Program 600,000.00 100%

7. Street Lights 2,500,000.00 100%

SOCIAL DEVELOPMENT
1. Gender and Development Program
• Center for woman & Development (CEWOOD) 300,000.00 100%
• Dulog at Dinig Program 1,600,000.00 99.92%
• Handog Pagmamahal 400,000.00 100%
• Senior Citizen Welfare Program 150,000.00 100%
• Mobile Clinic 1,000,000.00 100%

2. Millennium Development Goal

• Child Friendly Movement 400,000.00 100%

3. Aid to Individual in Crisis Situation 800,000.00 100%

4. Housing Shelter program/Emergency Shelter 800,000.00 100%

assistance

5. Tourism, Cultural and Foundation Activities 3,500,000.00 100%

6. Sports Program
• Assistance to CAVRAA Athletes Officials 330,000.00 100%
• Summer Sports Program 300,000.00 100%
• Provincial Meet 700,000.00 100%
C. Scope of Audit

A Financial and Compliance audit was conducted on the accounts and operations of
the City of Ilagan, Isabela from January 1, 2012 to December 31, 2012. The audit
aimed to ascertain the propriety of disbursements, the reliability of financial reports
and the adequacy of accounting records.

The audit was focused on audit thrust for 2012 particularly on cash management,
cash advances, credit/debt financing and compliance with laws and regulations and
other issuances.

D. Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements as of December 31, 2012 due to the effects of the noted deficiencies
on the balances of some accounts, as summarized in the succeeding paragraphs and as
discussed in detail in Part II of the Report.

E. Significant Findings and Recommendations

The following is the summary of significant findings and recommendations in the

audit of the accounts and operations of the City of Ilagan for the year 2012:

1. Cash per book do not reconcile with cash per bank due to unrecorded
adjustments in the accounting records as of December 31, 2012

We recommended that the Accountant should regularly record all valid

reconciling items that require adjustments and corrections in the General ledger
to ascertain Cash in Bank balance at a given time.

2. Eleven (11) revenue/market collectors were not properly bonded with the
Bureau of the Treasury Fidelity Bond Division in violation of Section 305 (f) of
R.A. 7160, thus exposing the fund in their possession for possible loss or
misuse of government funds.

We recommended that the City Treasurer should require all accountable

officers whose duties permit or require the possession of local funds and whose
accountability exceeded the amount of P2,000.00 to be properly bonded in
accordance with Section 305 (f) of R.A. 7160 and Section 182 (a) of the
GAAM in order to protect the interest of the agency.

3. Monthly Reports of Accountability for Accountable Forms were not prepared

by the accountable officers and submitted to the Auditor for verification as
required under Section 98 of the GAAM.
 We recommended that the accountable officers who are entrusted with or in
possession of accountable forms with or without money value on account of their
duties and functions to prepare a Report of Accountability for Accountable Forms
at the end of each month to be consolidated by the City Treasurer and submitted
monthly to the Auditor’s office for verification.

4. Management failed to observe the provisions of COA Circular No. 97-002

dated February 10, 1997 in the grant and liquidation of cash advances, hence,
Advances to Officers and Employees amounting to P10,661.836.79 remained
unliquidated at year end.

We recommended that the Municipal Accountant should strictly monitor the

settlement of unliquidated cash advances and to discontinue granting additional
cash advances unless all outstanding cash advances have been liquidated. We also
recommend that management should exert extra effort and strictly comply with
COA Circular 2012-004 dated November 28, 2012. Subsequently, officials and
employees with outstanding cash advances who get separated from the service
should not be cleared from money/property accountability unless liquidations are
made.

5. The City Government of Ilagan failed to comply with Section 53(e) of the
Implementing Rules and Regulations-A (IRR-A) of Republic Act No. 9184
which require the purchase of commonly used goods from the Procurement
Service, Department of Budget and Management.

We recommended strict with compliance to Section 53 (e) of IRR-A of

R.A. 9184 on the purchase of commonly used goods from the Procurement Service,
Department of Budget and Management

Moreover, we recommended that procurement activities should be

centralized at the General Services Office in order to attain efficiency and economy
on procurement. This could be undertaken through the consolidation of the
Approved Procurement Plan submitted by each department so that appropriate
funds could be allocated based on the programmed procurement which should be
done on a monthly or quarterly basis charged against the respective budgets of each
department/office.

6. Several repairs and maintenance of motor vehicles and other transportation

equipment amounting to P1,630,435.00 were undertaken without undergoing
pre-repair inspection, hence, the veracity of the transaction could not be
ascertained.

We recommended that the General Services Officer and other officials who
are in custody of service vehicles require proper evaluation and inspection of
vehicle/equipment before undergoing any repair or replacement of spare parts.
Also, other requirements in accordance with COA Circular No. 2012-01 dated June
14, 2012 should be complied in order to avoid suspension or disallowance in audit.
 7. Management’s failure to submit copies of contracts, purchase/job orders and
notices of deliveries as prescribed under COA Circular Nos. 2009-001 and 96-
010 dated February 12, 2009 and August 15, 1996, respectively, deprived the
Auditor to conduct timely review and evaluation of stipulations in the contract
and purchase/job orders and the inspection of deliveries to establish the
existence of procured items.

In view of the foregoing observations, we recommended the following:

a. Require the BAC Chairman to submit copies of contracts and POs

irrespective of amount and all related documents forming part thereof to
COA within (5) working days upon perfection of contract and issuance
of POs.
b. Instruct the Supply Office to notify the Auditor’s Office within 24 hours
from acceptance of deliveries as per COA Cir No. 96-010 to enable the
Auditor to conduct its inspection
c. Monitor strict compliance to said regulations and enforce sanctions for
non-compliance, if necessary.

8. Financial assistance from other national government agencies to implement

various projects of the City Government amounting to P14,533,172.00 were
recorded under the account Subsidy from Other Funds instead of crediting it to
the account Subsidy from Other National Government Agencies, thus affecting
the reliability and correctness of the account presented in the financial
statement.

We recommended that the City Accountant should draw a Journal Entry

Voucher to reclassify the amount of P14,533,172.00 by debiting the account
Subsidy From Other Funds and crediting the account Subsidy from Other
National Government Agencies in order to reflect the correct presentation of the
accounts in the financial statements.

9. The City Government is not maintaining special accounts in the General Fund
for its economic enterprises, contrary to Sections 105 and 107 of the New
Government Accounting System (NGAS) Manual for LGUs.

We recommended that the City Accountant should maintain a Special

Account in the General Fund on its economic enterprises in conformity with
Sections 105 and 107 of the NGAS Manual for LGUs.

F. Status of Implementation of Prior Year’s Audit Recommendations

Of the eight (8) Prior Year’s Audit Recommendations embodied in the 2011
Annual Audit Report, three (3) were implemented, three (3) were partially implemented
and two (2) were ongoing implementation.