EXECUTIVE SUMMARY

Introduction

The Municipality came into existence by the passage of a law, Batas Pambansa Blg.
386 dated April 14, 1983 which took effect on January 4, 1984 duly enacted by the then
Batasang Pambansa or the National Assembly and was named as the Municipality of
Marcos. The place was then a part of the Municipality of Quezon, its mother
Municipality.

In 1986, a bill was filed in Congress by the then Speaker of the House of
Representatives and Congressman of the lone district of Palawan, Hon. Ramon V. Mitra,
Jr., changing the name of the Municipality to Dr. Jose P. Rizal, the bill became a law and
known as Republic Act (RA) No. 6652 which took effect on April 17, 1988.

The Municipality is bounded on the East by the Municipality of Brooke’s Point; on

the South by the Municipality of Bataraza; on the North by the Municipality of Quezon;
and on the West by the West Philippine Sea.

It has a total land area of 125,915.45 hectares and composed of 11 barangays. It has
a total population of 50,096 according to the 2015 census.

Financial Highlights

For CY 2020, the Municipality realized a total income of ₱411,477,499.36 from

internal revenue allotment, local taxes and other income.

The total assets, liabilities, government equity, income and expenses for CY 2020
compared with that of the preceding year are as follows:

CY 2020 CY 2019 Increase/ (Decrease)

Total Assets ₱863,804,551.63 ₱640,534,581.11 ₱223,269,970.52
Total Liabilities 293,837,947.08 172,067,988.18 121,769,958.90
Total Equity 569,966,604.55 468,466,592.93 101,500,011.62
Total Income 411,477,499.36 344,397,354.11 67,080,145.25
Total Expenses 315,706,735.15 258,023,384.38 57,683,350.77

Scope of Audit

The Audit Team conducted financial and compliance audits on the accounts,
transactions and operations of the Municipality of Dr. Jose P. Rizal, Palawan for CY
2020. The audit consisted of review of operating procedures, inspection and evaluation of
the Municipality’s programs and projects, interview with concerned municipal
government officials, verification, confirmation, reconciliation and analysis of accounts
on a test basis and such other procedures considered necessary under the circumstances.

The objectives of the audit are to (a) ascertain the level of assurance that may be
placed on Management’s assertions in the financial statements; (b) evaluate the extent of
compliance with laws and regulations as well as the propriety and validity of
transactions; (c) recommend measures to improve the efficiency and effectiveness of the
agency’s operations; and (d) determine the extent of implementation of prior years’
recommendations.

Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements due to: a) unaccounted and unrecorded book reconciling items
totaling ₱60,051,658.53 in the Cash in Bank – Local Currency, Current Account (CIB-
LCCA), as reflected in the Bank Reconciliation Statements (BRS) as at December 31,
2020; b) understatement of the Receivables-Disallowances and Charges account balance
by ₱22,467,600.95 due to non-recording of various Notices of Disallowances (NDs)
which had become final and executory; and c) non-reconciliation of complete physical
inventory report and detailed subsidiary records against the recorded Property, Plant and
Equipment (PPE), as discussed in detail in Part II of the Report. The inadequacy of
reliable records did not permit us to apply alternative procedures to determine accuracy,
existence and completeness of the account balance.

Significant Observations and Recommendations

For the first exception cited above, we recommended that the Municipal Mayor:

a. Require the Municipal Treasurer, the Municipal Accountant and other officials
concerned to make representations with the bank to furnish the Municipality with
copies of debit and credit memos to facilitate recording of reconciling items in the
book of accounts for the fair presentation of the CIB-LCCA account in the
financial statements;

b. Direct the Municipal Accountant to record all valid reconciling items immediately
after the preparation of the BRS pursuant to Section 3.3 of COA Circular No. 96-
011 to forestall the accumulation of unadjusted reconciling items;

c. Submit the disbursement voucher or payroll and its supporting documents

pertaining to the debit memorandum of ₱293,820.00 for CY 2020 for recording in
the books, otherwise, the transaction shall be suspended in audit; and
 d. Thereafter, instruct the Municipal Treasurer to adequately support all transactions
in the Report of Collections and Deposits before its submission to the Municipal
Accountant for proper recording in the books.

For the second exception cited earlier, we recommended that the Municipal
Accountant record in the books of accounts the NDs which had become final and
executory totaling ₱22,467,600.95 in compliance with Section 22.6 of RRSA. The
Municipal Mayor and the Municipal Treasurer are likewise advised to strictly enforce all
COEs by withholding any amount due to all concerned persons liable, otherwise, the
Audit Team will be compelled to report the matter through the Regional Director, to the
General Counsel for further legal action.

For the last exception, we recommended that the Municipal Mayor reconstitute
the Inventory Committee composed of adequate number of members to be able to
complete the physical inventory in three months or less, with at least one member each
from the Municipal Accountant’s Office and the General Services Office, and
temporarily relieve the members from their regular duties to devote their full time in the
conduct of the physical inventory taking until the same is completed.

The Inventory Committee, in coordination with the General Services Office,

should be required to prepare a Physical Inventory Plan (PIP) containing, at least, the
specific assignments/duties of the members, the cut-off date, and a schedule specifying
the dates and locations of the inventory taking activities from start up to the targeted
completion of the physical inventory, and to be approved by the Municipal Mayor, for
submission to the Audit Team at least ten calendar days before the scheduled start of
inventory taking activities.

We also recommended that the Municipal Mayor designate a regular employee

who will monitor compliance by the Inventory Committee, the OIC-General Services
Officer (GSO), and the Municipal Accountant in compliance with the provisions of COA
Circular No. 2020-006 on the procedural guidelines for the one-time cleansing of PPE
account balances.

After the cut-off date set by the Inventory Committee in the PIP, the Municipal
Accountant and the OIC-GSO should ensure that the proper accounting and reporting
procedures for all acquisition/receipt/issue/transfer/disposal of PPE pursuant to the
relevant laws, rules and regulations on property and supply management are strictly
followed. Thereafter, the Municipal Mayor should ensure that physical inventory is
undertaken annually and the reports thereon are submitted accordingly.

For CY 2020, the following are the other significant audit observations and
recommendations:

1. Unliquidated cash advances accumulated to ₱17,062,742.51 as at December 31,

2020 due to non-compliance with the pertinent provisions of COA Circular No.
 97-002 dated February 10, 1997, thereby exposing the funds to possible abuse or
misuse.

We recommended that the Municipal Mayor (a) thru, the Municipal Accountant,
regularly serve written notice to concerned accountable officers (AOs) to demand
settlement of their outstanding cash advances; (b) consider withholding the
salaries of AOs still connected with the Municipality who refuse to settle their
accounts without justifiable reason; and (c) institute the necessary legal action
against those who continuously failed to settle their accountabilities despite
demand, if warranted.

The Municipal Accountant exert efforts to locate documents and previous records
to facilitate reconciliation and/or determination of the causes of the unreconciled
and negative cash advance balances of various AOs and thereafter effect the
necessary adjustment in the books of accounts, as appropriate.

In all instances, the Municipal Mayor and the Municipal Accountant must ensure
that the provisions of COA Circular No. 97-002 are strictly observed in the
granting and liquidation of cash advances and see that all cash advances are fully
liquidated at the end of the year.

2. The reliability and accuracy of the Land account totaling ₱5,692,568.81 as at

December 31, 2020 could not be ascertained due to a) non-maintenance of
detailed subsidiary records, contrary to Section 114(2) of the Presidential Decree
(PD) No. 1445; and b) unidentified balance of ₱3,163,035.87 which was not
supported by a report on land ownership. Moreover, parcels of land totaling
₱2,529,532.94 were not covered with Transfer Certificate of Title in the name of
the Municipality contrary to Section 23(2), Title 1-B, Book V, of the 1987
Administrative Code, thereby exposing ownership over the real property to third
party claims.

We recommended that the Municipal Accountant support the general ledger

controlling account with complete and updated subsidiary records to effectively
control and monitor any movement in the Land account. Moreover, the Municipal
Accountant and the Municipal Assessor should review the discrepancies in their
records for its reconciliation. We also recommended that the Municipal Mayor
facilitate the immediate titling of real properties owned by the Municipality.

3. The Municipality failed to transfer 100% of the Local Road and Road Network
System recorded in the Registry of Public Infrastructures (RPI) to the Road
Networks account, contrary to COA Circular No. 2015-008 dated November 23,
2015, thus the Road Networks account valued at ₱55,190,554.90 was misstated in
the Financial Statements as at December 31, 2020.

We recommended that the Municipal Mayor a) create or reconstitute the

Inventory Committee who will conduct inventory of the local roads within the
 Municipality and submit the corresponding reports to the Audit Team for
evaluation and verification; and b) enjoin the concerned Department Heads’
compliance with the requirements of COA Circular No. 2015-008 to facilitate the
transfer of the local roads accounts from the RPI to the books of accounts.

4. The Municipality failed to provide the complete information pertaining to all on-
going government projects/programs/activities (PPAs) and those to be
implemented during the year, as well as the monthly monitoring report, contrary
to the provisions of COA Circular No. 2013-004 dated January 30, 2013, thus
prevented the timely verification/validation of reported project accomplishments
and the extent of its implementation vis-a-vis Annual Investment Plan (AIP) and
deprived the constituents of the opportunity to participate and be duly informed
on matters of public concern.

We recommended that the Municipal Mayor require the Municipal Engineer and
the Municipal Planning and Development Coordinator (MPDC) to:

a. comply with the required posting of information and publicity of government

PPAs in the municipal premises and at the projects’ sites;

b. provide the Audit Team with the list of government PPAs to be implemented
for at the beginning of the year with the complete information such as: project
name; implementing unit; office or division if it is not the agency as a whole;
brief description of the PPAs; contractor or supplier, if any; mode of
procurement; funding source; cost or approved budget; project duration
including start and completion dates; and location;

c. inform the Audit Team within ten days after the award of the projects or
before the start of the PPAs that the appropriate project signboards and/or
public notices are already posted at the agency premises and at the project
sites; and

d. submit monthly monitoring report on the implementation of all Municipality’s

PPAs in accordance with COA Circular No. 2013-004 and ensure that the cost
incurred to date indicated in the report reconcile with the records of the
Municipal Accountant.

5. Sixty priority development projects totaling ₱79,701,728.00 budgeted for CYs

2015 to 2020 were not yet completed, of which 25 are still on-going, while 35 are
not yet even started as of December 31, 2020 manifesting deficiency in the
implementation and monitoring of contracted projects contrary to the provisions
of the Department of Interior and Local Government (DILG) and the Department
of Budget and Management (DBM) Joint Memorandum Circular (JMC) No.
2017-1 dated February 22, 2017 and certain provisions of Republic Act (RA) No.
7160, otherwise known as the “Local Government Code of 1991.”
 We reiterated our previous audit recommendations that the:

a. Municipal Mayor (i) ensure the optimum utilization of the 20% Development
Fund (DF) by promptly implementing the priority development projects as
reflected in its duly approved local development plans and AIP, in accordance
with Section 5 of DILG-DBM JMC No. 2017-1; (ii) ensure the effective and
efficient implementation of the projects to maximize the developmental
benefits to the intended beneficiaries; and (iii) consider realigning or
reprogramming the unutilized/unimplemented PPAs to other viable
development projects;

b. Municipal Engineer (i) require the project engineer, officers and employees
concerned to be prudent in overseeing the timely implementation of PPAs
under their responsibility; (ii) assist the MPDC in identifying those projects
not yet completed or started subject for possible realignment or
reprogramming; (iii) provide complete information on the status of the
projects funded by the 20% DF together with all the necessary details; and (iv)
provide satisfactory explanation as to why the projects were not yet completed
or implemented despite the considerable lapse of time; and

c. MPDC (i) ensure close coordination with the Municipal Engineer and the
Municipal Accountant for proper monitoring of the implementation of the
projects funded by the 20% DF and provide all the necessary information
regarding the status of project implementation for timely preparation and
submission of the Status Report of Government PPAs to the Audit Team; (ii)
ensure that the information provided in the Status Report of Government
PPAs are complete before submitting it to the Audit Team; (iii) conduct
intensive review of the continuing projects funded under the 20% DF to
determine whether the PPAs are still part of the vital needs of the
Municipality otherwise reprogram them to other priority PPAs; and (iv)
continue to identify development projects that are doable and more beneficial
to the constituents.

6. The Municipality’s existing system and facilities for disaster preparedness are not
fully compliant to the minimum standards prescribed by the National Disaster
Risk Reduction and Management Council (NDRRMC) such as a) partial
establishment of the Local Disaster Risk Reduction and Management (LDRRM)
Office contrary to Section 12 of RA No. 10121 and Sections 4.1 to 4.3 of the
NDRRMC-DILG-DBM-CSC JMC No. 2014-1 dated April 04, 2014; b) lack of
warehouse for relief goods; c) absence of Business Continuity Plan; d) lack of
equipage for early warning and communication, medical health, water and
sanitation, and response; and e) lacking facilities in the evacuation centers,
thereby delimiting the Municipality’s full potential to become a disaster ready and
equipped Local Government Unit (LGU).
 We recommended that the Municipal Mayor prioritize the creation of plantilla
positions for the LDRRM Office and thereafter, instruct the Human Resource and
Management Officer (HRMO) to facilitate the immediate hiring of LDRRM
personnel in compliance with Section 12 of RA No. 10121 and NDRRMC-DILG-
DBM-CSC JMC No. 2014-1 dated April 04, 2014.

We also recommended that the Municipal Mayor direct the MDRRMC, the
MDRRMO and other personnel concerned to update the DRRM Plan with the
inclusion of a Business Continuity Plan, and explore feasible means, in view of
funding constraints, to include in the LDRRM Fund Investment Plan the
procurement of the aforementioned lacking equipment and tools, construction of
warehouse, and provision of adequate facilities for all evacuation centers to
comply with the minimum standards on disaster preparedness.

7. Lapses noted in the utilization of the Municipality’s Bayanihan Grant include: (a)
incomplete details on the Purchase Orders (POs) for the procurement of welfare
goods and food supplies totaling ₱22,918,617.00 contrary to COA Circular No.
96-010 dated August 15, 1996; (b) high price of procured commercial rice
compared with the weekly prevailing wholesale and retail prices of rice monitored
by the Philippines Statistics Authority (PSA); (c) incomplete list of rice
beneficiaries and failure to provide proof of receipt and distribution to intended
beneficiaries; (d) failure to include Item Nos. 4 to 6 in the Omnibus Sworn
Statement (OSS) of suppliers, contrary to Appendix 1 of Government
Procurement Policy Board (GPPB) Circular No. 01-2020 dated April 6, 2020; (d)
incomplete documentary requirements, contrary to Section 4.1 of GPPB Circular
No. 01-2020; (e) costs of medical supplies were higher by ₱486,104.00 compared
with the suggested retail price (SRP) per Department of Health (DOH)
Memorandum No. 2020-0144-A dated April 14, 2020; (f) non-submission to the
Audit Team of the monthly fund utilization and status of implementation of PPAs;
and (g) non-posting of the updated Annual Procurement Plan (APP), Notice of
Award (NOA) and other information relative to the procurement activities
undertaken through Negotiated Procurement in the GPPB Online Portal for
Emergency Procurement under the Bayanihan Act.

We recommended that the Municipal Mayor require:

a. The members of the BAC and the requesting unit concerned to provide the
kind of rice procured in PO Nos. 200-20-05-5-02-03-060-01 and 200-20-05-5-
02-03-050-09, and explanation/justification on the high price of rice and
various medical supplies procured. Moreover, the members of the BAC must
ensure that the complete and detailed item description is included in the PO, in
accordance with the provisions of COA Circular No. 96-010, and comply with
the posting requirements of GPPB Circular 2020-001 for information
purposes and transparency. Henceforth, the members of the BAC are advised
to be updated and adhere to the relevant laws, rules and regulations on
procurement;
 b. The Local Finance Committee, in coordination with the Municipal Accountant
and the Municipal Engineer, if necessary, to regularly prepare and submit the
Monthly Reports on Fund Utilization and Status of Implementation of PPAs
of the Bayanihan Grant to Cities and Municipalities (BGCM) pursuant to
Section 4.2 of DBM Local Budget Circular (LBC) No. 125; and

c. The Municipal Accountant, the members of the BAC, and other offices
concerned to submit the lacking required documents and rice distribution list
to the Audit Team for further evaluation of the transactions pursuant to
Section 4 (6) of PD No. 1445. The Municipal Accountant was also reminded
to diligently review the disbursements, as part of the Accounting Office’s
internal audit function.

8. Several lapses were noted in the utilization and reporting of Corona Virus Disease
2019 (COVID-19) funds such as: (a) incomplete details on the POs for the
procurement of food supplies expenses totaling ₱510,000.00 contrary to COA
Circular No. 96-010 dated August 15, 1996, thereby hindering validation of the
reasonableness of the prices of the goods; and (b) non-posting of the updated
APP, NOA and other information relative to the procurement activities
undertaken through Negotiated Procurement in the GPPB Online Portal for
Emergency Procurement under the Bayanihan Act.

We recommended that the Municipal Mayor require the members of the BAC and
the requesting unit concerned to provide information on the kind of rice procured
in the said POs for further evaluation of the transactions.

Moreover, the members of the BAC must ensure that the complete and detailed
item description is included in the PO, in accordance with the provisions of COA
Circular No. 96-010, and comply with the posting requirements of GPPB Circular
2020-001 for information purposes and transparency.

9. The Municipality has not institutionalized the mechanisms in the implementation

of the Magna Carta of Women due to a) non-maintenance of complete sex-
disaggregated data or Gender and Development (GAD) database; and b) non-
formulation of the GAD Code, contrary to the provisions of the Philippine
Commission on Women (PCW), the DILG, the DBM, and the National Economic
and Development Authority (NEDA) JMC No. 2013-01 dated July 18, 2013, thus
gender issues and concerns identified in the GAD Plan and Budget may not be
fully addressed towards the attainment of gender equality and
women’sempowerment.

We recommended that the Municipal Mayor instruct the:

a. MPDC, with the assistance of the GAD Focal Point System (GFPS), to
establish a complete and updated GAD database, and conduct gender analysis
 to serve as a basis for addressing gender issues and concerns in GAD planning
and budgeting for the ensuing years; and

b. Local Sanggunian to formulate GAD Code or ordinances that will support the
Municipality’s efforts in promoting, protecting and fulfilling women’s human
rights, economic empowerment and gender-responsive governance towards
the attainment of gender equality and women’s empowerment.

Status of Implementation of Prior Year’s Audit Recommendations

Of the seven (7) audit recommendations contained in the 2019 Annual Audit
Report, two (2) were fully implemented, three (3) were partially implemented and two (2)
were not implemented by the Management during the year.