EXECUTIVE SUMMARY

Introduction

The Municipality of Surallah was created by virtue of Republic Act No. 3420
approved on June 15, 1961 but later it was amended by Republic Act 3664 on June 22, 1963.
It is a first class municipality with seventeen (17) barangays located in Upper Valley of South
Cotabato, the gateway of several surrounding municipalities. It comprised approximately
31,200 hectares of land mostly devoted to agriculture wherein it was declared as the
Provincial Agri-industrial Center and at the same time, Alternate Urban and Trading Center of
the Province of South Cotabato having explored it vast potential for progress.

Recognized as the champion-advocate of the Clean and Green Program, Surallah

envisions the integral development of the municipality and the people. Through the Kasadya
Surallah Program, a multi-sectoral approach to addressing the main thrust of its people,
Surallah is certain to be the next leading agri-industrial zone in the province of South
Cotabato

The Municipal Government of Surallah is headed by Honorable Mayor Atty. Antonio

O. Bendita and supported by the members of the legislative body, which is headed by
Honorable Vice Mayor Pinky U. Divinagracia, and the various department heads of the Local
Government Unit.

Audit Methodology and Scope of Audit

A financial and compliance audit was conducted on the accounts and operations of the
Municipality of Surallah for the period January 1 to December 31, 2020. Through sampling,
the audit was made to ascertain the validity and propriety of financial transactions and
compliance of the agency to prescribed laws, rules and regulations. Further, it also evaluated
the appropriateness of application of accounting policies and its overall presentation in the
financial statements. It also included review and validation of the implementation of various
programs, projects and activities to ascertain whether desired results were achieved in an
efficient, economical and effective manner.

In addition to the audit of accounts which were determined as a result of the risk
assessment conducted in the Province of South Cotabato, the Audit Team looked into the
different audit thrusts issued by the Local Government Sector of the Commission.
Deficiencies observed in the course of the audit were earlier communicated through the
issuance of Audit Observation Memoranda (AOMs) and discussed with the concerned
officials and personnel of the province whose comments were incorporated in this report.

I. Financial Highlights

The financial position and performance of the Municipal Government of Surallah for
calendar year 2020 compared to the previous year 2019 are presented in Figure 1. Also,

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comparison of budget and actual amounts of revenue and expenses for the same periods are
illustrated in Figure 2.
Figure 1 – Comparative Financial Position and Results of Operations, CYs 2019 and 2020 (in thousands)
1,200,000.00

1,000,000.00

800,000.00

600,000.00

400,000.00

200,000.00

-
Assets Liabilities Equity Income Expenses Net Income
CY 2020 981,625.92 341,689.87 639,936.05 436,164.53 320,554.17 115,610.36
CY 2019 843,915.29 316,766.59 527,148.70 367,595.64 280,651.56 86,944.07

Figure 2 - Comparison of Budget and Actual Amounts, GF & SEF, CYs 2019 and 2020 (in thousands)
500,000.00

400,000.00

300,000.00

200,000.00

100,000.00

-
Budgeted Budgeted Actual
Actual Receipts
Receipts Expenditures Expenditures
CY 2020 410,235.21 469,349.04 487,276.25 384,467.52
CY 2019 349,184.63 422,131.80 430,740.41 372,679.06

II. Opinion of the Auditor on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Municipality of Surallah as of December 31, 2020 in view of the
in view of the effects of material exceptions in Property, Plant and Equipment accounts in an
aggregate amount of ₱400M; Construction in Progress accounts totaling ₱2.74M and cash
accounts amounting to ₱.34M; which rendered the balances of said accounts to be unreliable
and inaccurate as at yearend. Said exceptions are discussed in detail under Part II of the same
report.

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Summary of Other Significant Observations and Recommendations

The following are the summary of significant observations and recommendations other than
the bases for the qualified opinion that need immediate attention and action by the
management. Details hereof are also discussed in Part II of the Audit Report.

1. Deficient controls over cash accounts due to dormant and below minimum balance
status of some depository accounts and incurred cash deficit to support public
terminal operations.

We recommended and the management agreed that the Municipal Treasurer to close
depository accounts in which the purpose had already been satisfied to avoid either
dormancy charges below or below maintaining balance bank charges and henceforth,
concerned offices to monitor regularly the status of all cash in bank accounts. With
regards to incurred cash deficiency, the concerned offices to monitor cash balances on a
periodic basis to ensure that restricted funds of each special account are backed up by
cash and to prepare a periodic cash flow forecast to address immediately any noted
deficiencies in cash and in order to allocate sufficient subsidies related thereto.

2. Some deviations from existing rules and regulations in the granting, liquidation and
recording of cash advances for payroll

We recommended and it was agreed that the Municipal Treasurer to instruct designated
Disbursing Officer/s to timely and regularly update his cashbook, observe complete
reporting of all cash disbursements or payments made during the period and certify and
foot the balances at the end of the month or when required to do so by proper competent
authority. We also reiterate the recommendation that the Local Chief Executive to direct
the Municipal Treasurer and the Municipal Accountant to stop granting additional cash
advances to the Disbursing Officer until the previous ones have been fully liquidated
and/or settled. Also, the designated Disbursing Officer to settle/liquidate his cash
advances immediately upon serving its purpose and to timely submit complete
liquidation documents to the accounting officer, who shall acknowledge and record
immediately the liquidation documents before closing the books of accounts at year-end.

3. Some Property, Plant and Equipment (PPE) accounts were erroneously or inappropriately
classified based on the Revised Chart of Accounts for LGUs.

We recommended and it was agreed that the Accounting Department and General
Service Department to observe proper accounting and treatment of all procured PPEs per
Revised Chart of Accounts for Local Government Units as prescribed under COA
Circular 2015-009 dated December 01, 2015. Both offices shall also identify the
misclassifications among the PPE accounts and record necessary adjustment in their
respective reports.

4. Several lapses in the recording and utilization of COVID-19 fund receipts resulting
to reporting deficiencies, lack of control and documentation on receipt and
distribution of donated goods and granting of financial assistance.

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 We recommended and the management agreed that the concerned departments to
institute controls in the receipt, recording, inventory, storage and distribution of all
donations and to submit the required reports together with the supporting documents
pursuant to reporting guidelines on COVID-19 funds. Also, close coordination among
offices shall be employed in order to provide the proper account identification of various
goods intended to be issued/distributed to people affected by calamities/disasters such as
in the case of COVID-19 response. Finally, it was resolved that the MDRRM Council
through the DRRM Officer to provide a written justification on the noted deficiencies on
the grant of financial assistance along with the submission relevant documents to support
the disbursement out of the allocation provided for COVID-19-related PPAs.

5. Allocation and utilization of the 20% Local Development Fund showed some
deficiencies and deviations from applicable rules and regulations.

We recommended and it was agreed that the Local Development Council to refrain from
including program, projects and activities that do not partake the nature of investments
and capital expenditures in the annual or supplemental investment programs except those
previously allowed by specific rules and regulations and analyze every project to identify
and provide appropriate account classification of the expenses allocated thereto. We also
reiterated the recommendation that the implementing departments to prioritize the
implementation of development projects, ensure that allocated funds are timely and
optimally utilized, determine the status of its implementation and consider reversion of
the savings from continuing appropriations to be made available for other priority
development projects which shall be derived from the local development plan.

6. Some deficiencies in reporting and utilization as well as in the planning and

monitoring of the programs and projects of the Disaster Risk Reduction and
Management (DRRM) Fund

We recommended and the management agreed that the Accounting Department to

maintain separate subsidiary ledgers for transfers of municipality’s unutilized DRRMF to
the special trust fund as well as other receipts such as prizes or incentives or cash
donations in order to ensure proper planning, monitoring and utilization of available
funds. With regard to errors in recording, the Municipal Treasurer to coordinate and
submit the supporting documents to the Accounting Department to reconcile the
unadjusted cancelled check and to take up necessary adjustments. Finally, we reiterated
the recommendation that the MDRRM Council through the DRRM Officer to
periodically analyze the remaining balances of DRRM Fund and its related PPAs for
immediate planning and allocation to other priority DRRM-PPAs.

7. Funds received or collected for specific purpose were still not maximized, remained
unutilized or not properly disposed of.

We reiterated the agreed-upon recommendations that the Local Chief Executive shall
require the Municipal Treasurer to have immediate and full remittance of all collections
accruing to the national government and to provide specific identification of fund
transfers and collections upon issuance of receipt. The Accounting Department, on the
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 other hand, to monitor and analyze the records in the ledger and provide specific
identification of those transfers and collections while the implementing offices to ensure
that an approved work and financial plan are available for every transfer and collection
held in trust. For idle or dormant inter-agency transfers, evaluate existence of available
funds and if verified to be unutilized, perform proper disposition thereof as provided by
applicable rules and regulations. Finally, we reiterate that the implementing departments
shall execute without delay the intended programs, projects and activities of the fund
transfers and other specific-purpose collections.

8. Withheld taxes were not fully remitted within the prescribed period as provided in tax
laws, rules and regulations.

We recommended and it was agreed that the Municipal Mayor to direct the Municipal
Accountant and the Municipal Treasurer to timely and accurately remit all the taxes withheld by
the municipal government. With regard to those taxes previously withheld but were not remitted
due to lack of information, exert diligent efforts to have it available for immediate remittance
thereof. Henceforth, institute relevant controls in order to gather the necessary and required
information pertaining to withholding taxes previously made.

III. Summary of total suspensions, disallowances and charges

Beginning Balance Ending Balance

Particulars Issued Settled
December 31, 2019 December 31, 2020
Suspensions P 9,910,000.00 - ₱9,910,000.00 P -
Disallowances 27,259.01 9,503,746.16 - 9,531,005.17
Charges - - - -
TOTAL P 9,937,259.01 9,503,746.16 9,910,000.00 P 9,531,005.17

IV. Status of Implementation of Prior Years Unimplemented Audit Recommendations

In the Annual Audit Report for the year ended December 31, 2019, there were 21 partially
implemented recommendations from prior years. In addition, there were 39 recommendations
during the audit year, 10 of which were reiterations from prior years and 29 were new
recommendations. Hence, for this audit year, implementation of a total of 50
unimplemented/partially implemented recommendations was validated.

Out of the fifty (50) recommendations in prior years, twenty-eight (28) were fully implemented
and twenty-two (22) were partially implemented.

Total Recommendations Fully Implemented Partially Implemented Not Implemented

50 28 22 0
100% 56.00% 44.00% 0.00%