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    Cagwait Executive Summary 2022

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    renelynarbis

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    Cagwait Executive Summary 2022

    Uploaded by

    renelynarbis
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    18 views5 pages

    Cagwait Executive Summary 2022

    Uploaded by

    renelynarbis

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    EXECUTIVE SUMMARY

    A. Introduction

    1. The Local Government Unit of Cagwait, Surigao del Sur was created by virtue
    of Republic Act No. 559 on January 20, 1953. It is presently categorized as a fourth-
    class Municipality. It has 11 barangays within its territorial jurisdictions.

    2. The main thrust of the Municipality of Cagwait is to enhance its services


    towards prioritized programs and projects on health sanitation, social welfare, and
    maintenance of peace and order.

    3. The Municipal Government maintained three funds in the books of accounts,


    namely, General Fund, Special Education Fund, and Trust Fund. Likewise, special
    accounts in the general fund for economic enterprises are also maintained. These
    economic enterprises are the water work system, market operation, slaughterhouse,
    cemeteries, bus terminal, stall rentals, and Cagwait White Beach Resort.

    4. The audit was conducted in accordance with applicable legal and regulatory
    requirements and the Philippine Public Sector Standards on Auditing. Those standards
    require that we plan and perform the audit to obtain a reasonable basis for our
    conclusions.

    5. Financial and compliance audits were conducted on the accounts and


    operations of the Municipal Government of Cagwait, Surigao del Sur, for the year
    2022. The objectives of the audit were to ascertain the fairness and reliability of the
    presentation of the municipality’s financial position and the results of its operations. It
    also aimed to determine whether applicable laws, rules and regulations were strictly
    adhered to in the utilization of public funds.

    B. Financial Highlights

    • Comparative Financial Position and Results of Operations

    Increase/
    Particulars 2022 2021
    Decrease
    Assets ₱644,666,655.71 ₱476,113,307.62 ₱168,553,348.09
    Liabilities 133,704,905.79 105,520,350.47 28,184,555.32
    Government Equity 510,961,749.92 370,592,957.15 140,368,792.77
    Revenue 211,223,914.94 152,141,964.93 59,081,950.01
    Expenses 175,631.980.09 142,033,463.98 33,598,516.11
    Subsidies/Grants 1,860,016.38 1,765,230.41 94,785.97
    Net Income ₱ 37,451,951.23 ₱ 11,873,731.36 ₱ 25,578,219.87
    C. Audit Opinion

    6. The audit team rendered a qualified opinion on the fairness of the presentation
    of the financial statements of the Municipality of Cagwait for CY 2022 due to:

    i. The Municipality of Cagwait’s Loans Payable, aggregating ₱81.06 million


    as of December 31, 2022, were not fairly presented in the Combined
    Statement of Financial Position, and there was no disclosure in the Notes
    to the Financial Statements as to details of the loans, which is not in
    consonance with the International Public Sector Accounting Standards
    (IPSAS), thus affecting the reliability, proper classification of items in the
    financial statement;

    ii. Overstatement of ₱3.83 million in Trust Liability-DRRM account and Due


    From Other Fund under the Trust Fund as of December 31, 2022, due to
    improper inclusion of the unexpended balance of Quick Response and
    Mitigation Fund from prior years without cash back up, which was based
    on estimates and not on actual recurring income realized by the
    Municipality on that year.

    D. Summary of Significant Observations and Recommendations

    7. For the above-mentioned audit observation, which has caused the issuance of a
    qualified opinion, we recommended, and Management agreed to require the
    Municipal Accountant to:

    i. To observe the proper presentation of its outstanding Loans Payable


    Account and disclose the necessary loan details in the Notes to Financial
    Statements to provide users with fairly presented financial statements;

    ii. Recognize the transfer of the unexpended balance of Quick Response and
    Mitigation Funds – MOOE from LDRRMF-GF to the LDRRMF-STF at
    year-end only if there is actual cash backup. Adjust the appropriation for
    LDRRMF at year-end using the actual recurring income realized by the
    LGU as the basis for computing the unexpended balance. Prepare the
    adjusting entry to the correct journal entries made.

    8. The other significant audit observations and recommendations are as follows:

    a. Property, Plant, and Equipment (PPEs) recognized in the Special Trust


    Fund - DRRMF (STF-DRRMF) totaling ₱2.095 million was not
    transferred to the General Fund (GF) upon completion or issuance,
    contrary to Section 5.1.14 of COA Circular No. 2012-002.

    We recommended and Management agreed to record the transfer of the cost


    and accumulated depreciation of PPEs under the STF-DRRMF to the GF.

    Below are the Audit Team’s proposed adjusting entries:


    Particulars LGU Books
    Trust Fund General Fund
    To transfer the Dr. Trust Liabilities - Dr. Other Land
    cost of PPEs DRRMF – ₱ 2,095,062.00 Improvements –
    recognized in the Cr. Other Land 943,460.00
    DRRMF-STF to Improvements – Dr. Disaster Response and
    the GF 943,460.00 Rescue Equipment –
    Cr. Disaster Response and 559,102.00
    Rescue Equipment – Dr. Other Machinery and
    559,102.00 Equipment – 592,500.00
    Cr. Other Machinery and Cr. Government Equity -
    Equipment – 592,500.00 2,095,062.00

    To transfer the Dr. Acc. Dep. – DRR Eqpt Dr. Government Equity –
    accumulated – 318,688.14 487,549.14
    depreciation of Dr. Acc. Dep. – Other Cr. Acc. Dep. – DRR Eqpt
    PPEs recognized Machinery and Equipment – 318,688.14
    in the DRRMF- – 168,861.00 Cr. Acc. Dep. – Other
    STF to the GF Cr. Trust Liabilities - Machinery and Equipment
    DRRMF – 487,549.14 – 168,861.00

    b. An amount of ₱538,193.12 was transferred to LDRRMF-STF as


    partial payment for the prior year’s unexpended balance of LDRRMF
    recognized as receivable due to no cashback, not in accordance with
    Section 4(1) of PD 1445 resulting in improper usage of cash.

    We recommended and Management agreed to direct the Municipal


    Accounting Office to revert the amount of ₱538,193.12 from LDRRMF-STF
    to the General Fund and stop the practice of transferring cash without proper
    authority or basis.

    c. The Municipal Disaster Risk Reduction and Management Office


    (MDRRMO) was not compliant with Item 5.2 of DILG-DBM-CS JMC
    No. 2014-1, thus, may not assure the continuity of the implementation of
    DRRM plans and its realization in the long run.

    We recommended and Management agreed to comply with the required


    mandatory positions set in the NDRRMC-DILG-DBM-CS Joint Memorandum
    Circular (JMC) 2014-1 dated April 4, 2014, to institutionalize the
    MDRRMO’s organizational structure and manpower to carry out the DRRM
    plans and programs in the long run.
    d. The Warranty Security for Structural Defects required under 62.2
    of the Revised IRR of RA 9184 was not posted by the contractors on the
    completed, accepted, and final payments infrastructure projects during
    the calendar year 2022. Thus, it exposes the LGU to the risk of
    unguaranteed performance by the contractor of his responsibilities for
    structural defects arising from improper construction, use of inferior
    quality/substandard materials, and any violation of the contract plans
    and specifications.

    We recommended and Management agreed to strictly observe and enforce the


    provisions required by RA 9184 and its IRR, specifically its requirements for
    posting warranty securities.

    e. Unspent balances of fund transfers with the total amount of


    ₱.797million from national government agencies were not returned to the
    source agencies despite the completion of the projects and lapse of
    allowable time to disburse the funds, which is not in accordance with
    Items 4.9 and 6.7 of COA Circular No. 94-013, dated December 13, 1994
    and Local Budget Circulars, thus depriving the government of the
    immediate use of funds for other vital projects.

    We recommended and Management agreed to instruct the Municipal


    Accountant to fast-track the preparation of liquidation reports and return the
    excess funds to source agencies.

    f. Programs/Projects funded out of the CY 2022 20% Development


    Fund (DF) were not well-planned and procurement-and implementation-
    ready, thus not implemented as of December 31, 2022; hence, intended
    beneficiaries were deprived of the benefits and vital services that are
    expected from the projects.

    We recommended and Management agreed to optimize the utilization and


    implementation of the 20% Development Fund through proper planning and
    identification of priority development projects that are procurement-and-
    implementation-ready before the budget year starts.

    g. Delay and/or non-submission of copies of government contracts


    and their supporting documents to the Office of the Auditor within the
    prescribed period contravene the provisions under COA Circular No.
    2009-001 dated February 12, 2009, thus preventing the Auditor from the
    timely evaluation of the contract.

    We recommended and Management agreed to fast-tract the submission of


    copies of contracts and relevant supporting documents for the remaining
    projects in CY 2022. Furthermore, we recommended additional staff to assist
    the BAC Secretariat in performing the tasks, mainly in the monitoring and
    submission of contracts to the Office of the Auditor.
    E. Summary of Total Suspensions, Disallowances and Charges

    As of year-end, there were no suspensions, disallowances and charges


    issuances, or unsettled accounts for the Municipal Government of Cagwait.

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

    Monitoring of the implementation of 20 prior years’ audit


    recommendations revealed that five were fully implemented, 14 were partially
    implemented and one was not implemented.

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