EXECUTIVE SUMMARY

INTRODUCTION

The coastal Municipality of Nasugbu is bounded on the north by the

Municipalities of Maragondon, Magallanes and Alfonso (Cavite); on the east by the
Municipalities of Laurel, Calaca and Balayan (Batangas); on the south by the
Municipalities of Lian and Tuy (Batangas); and on the West by China Sea. Nasugbu has
a total land area of 27,633 hectares subdivided into 42 barangays, including the 12
barangays of Poblacion which were formally organized under Presidential Decree No. 87
and approved in 1972. The rest of the 30 barangays of Nasugbu were formally organized
on June 1, 1963, the date of approval of Republic Act No. 3590 (Revised Barrio Charter)
mandating their organization.

Nasugbu is a first class municipality that continuously gains its prominence

through the development of various popular tourist attractions since its declaration as one
of the tourist town of the country by mandate of Presidential Proclamation No. 1520.

The Organizational Structure of the Municipality is as follows:

a. Key Officials
Municipal Mayor Rosario M. Apacible
Municipal Vice-Mayor Larry D. Albanio
Members of the Sanggunian:

1 Antonio A. Barcelon
2 Mildred B. Sanchez
3 Wilfredo V. Limboc
4 Arlene R. Chuidian
5 Ramoncito B. Baylosis
6 Cindy P. Chua
7 Roderick S. Cabral
8 Dionisio B. Botobara
9 Leon R. Esguerra (ABC)

Municipal Accountant Arnold R. Chuidian

Municipal Treasurer Rosauro O. Salac

b. No. of Personnel Complement

Permanent 249
Temporary 18
Casual 56
Contractual 554
Elective Officials 11
Co-terminus 9
Total 897
FINANCIAL HIGHLIGHTS

The funds of the Municipality of Nasugbu, Batangas for CY 2015 were sourced
from its share in the Internal Revenue Allotment (IRA) and Real Property Taxes,
collections of local taxes, permits and licenses and business income that are largely from
its operations of the market/slaughterhouse.

Of the total current year’s allotments of ₱327,411,626.57, ₱314,874,491.17 was

obligated leaving an unexpended allotment of ₱12,537,135.40. Continuing
Appropriations at the beginning of the year amounted to ₱7,060,690.04, of which,
₱4,234,499.31 was expended.

The total assets, liabilities, equity, income and expenses for CY 2015 compared
with that of the preceding year are as follows:

CY 2015 CY 2014 Increase/

(Decrease)

Assets ₱ 718,564,878.39 ₱719,883,292.65 ₱ (1,318,412.96)

Liabilities 347,357,496.78 398,065,447.31 (50,707,950.53)
Equity 371,207,381.61 321,817,845.34 49,389,536.27
Income 337,042,557.63 293,445,388.92 43,597,168.71
Expenses 255,904,881.21 245,326,929.44 10,577,951.77

SCOPE OF AUDIT

Financial, compliance and value for money audits were conducted on the
accounts, transactions and operations of the Municipality of Nasugbu, Batangas for
Calendar Year 2015. The audit was conducted to ascertain the fairness of the
presentation of the financial statements and compliance of the agency to laws, rules and
regulations as well as the economical, efficient and effective utilization of resources.

AUDIT OPINION

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

financial statements due to the following:

1. The Property, Plant and Equipment accounts amounting to ₱355,994,223.38,

net of depreciation, has a reported discrepancy of ₱77,816,264.04 between the
latest physical count and financial statement balances due to incomplete
inventory taking and absence of reconciliation of accounting and property
records, thereby affecting the fair presentation of PPE accounts in the
financial statements.
 2. A discrepancy of ₱108,961,784.70 was noted between the year end balances
of Real Property Tax Receivable (RPT) and Special Education Tax
Receivable (SET) amounting to ₱47,283,291.06 and ₱156,245,075.76,
respectively. Likewise, the total Delinquent Accounts are only
₱18,722,416.13 which is ₱184,805,950.69 lower than the total RPT and SET
Receivables of ₱203,528,366.82, thus casted doubt on the accuracy and
validity of the reported receivable account balances.

3. Purchase of one (1) unit Komatsu Bulldozer amounting to ₱2,700,000.00

under the Local Disaster Risk Reduction and Management Fund (LDRRMF)
was short in appropriation by ₱900,000.00 and improperly charged to Other
Maintenance and Operating Expenses contrary to Articles 405(f) resulting in
understatement of PPE account and overstatement of expense account, thus
affects the fair presentation of accounts in the financial statements.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

For the exceptions cited above, the Audit Team recommended the following:

1. a) The Inventory Committee conduct complete inventory taking of all the

Municipal properties particularly on those not included in the last year and
prepare the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE) and the Report of Unserviceable Property for
submission to the Municipal Accountant and Auditor concerned not later
than January 31 of every year.

b) The General Services Officer reconcile Inventory Report and Property

records with that of the Accounting records. Exert extra efforts to
identify/account the properties acquired prior to 2002 in lump sum amount
based on available records of both offices. Require person
responsible/accountable to request for relief from accountability to the
Commission Proper for those properties that are missing and could not be
accounted for; and

c) The Municipal Accountant and the GSO/Property Officer maintain

complete and updated PPE Ledger Cards and Property Cards, respectively,
to facilitate the reconciliation of both records.

2. We recommended that the Municipal Accountant and the Municipal Treasurer

reconcile their records. Make the necessary adjustments in the books for the
difference of ₱108,961,784.70 for real property and special education tax
receivables to reflect the adjusted balances in the financial statements.
Likewise, ensure the Municipal Treasurer to exert extra effort for the correct
amount of the delinquencies.
3. We recommended that the Municipal Mayor and other local officials
concerned submit justification for the procurement of one unit bulldozer
 without sufficient fund for the purpose and the improper charging of the
budget deficit to Maintenance and Other Operating Expense instead of
Capital Outlay. Make certain that the appropriated funds be utilized solely
for the specific purpose. Refund the amount of ₱900,000.00 disbursed
without corresponding appropriation for capital outlay.
In addition, the following are the audit issues and concerns, together with our
recommended remedial courses of actions:

1. The annual budget for the General Fund amounting to ₱297,200,000.00

included numerous lump sum appropriations of P46,149,757.58 that were not
clearly identified in the Annual Investment Plan and some were disbursed
without Sanggguniang Bayan Resolutions, thus reflecting unsound
procurement planning and budgeting. Likewise, several realignments under
the General Funds, 20%Development Fund and Zero Waste Management
Program, etc. were prevalent casting doubts whether the municipality’s
programs/projects/activities and the overall goals were achieved
economically, efficiently and effectively.

We recommended that the Municipality enjoins proper planning and

budgeting in the procurement of various programs, projects and activities to
ensure the overall achievement in an efficient and effective manner. Ensure
that utilization of appropriations and all disbursements are properly authorized
by SB Resolutions/Ordinances.

We recommended further that SB Officials take appropriate action on several

disbursements of which appropriations or portion of it were utilized without
seeking first the approval of SB through Sanggunian Bayan
Resolutions/Ordinances.

2. The regularity of bidding process conducted by the Bids and Awards

Committee is doubtful due to numerous violations and lapses in the
procurement process of infrastructure projects of the municipality contrary to
the pertinent provisions of RA 9184, its Implementing Rules and Regulations
and other existing regulations, thus, the objectives of competition, economy,
efficiency and transparency were not achieved.

We recommended that:

a) The BAC post/advertise/disseminate ITB correctly to obtain widest

publicity possible and ensure competitiveness of public bidding.

b) The BAC determine if each prospective bidder is eligible to participate in

the bidding by examining the completeness of each prospective bidder’s
eligibility requirements or statements against a checklist of requirements,
using a non-discretionary “pass/fail” criteria, as stated in the IAEB, and
should be determined as either “eligible” or “ineligible”.
 c) The Municipal Accountant ensure completeness of all documents before
processing the claims. Stop from processing claims without complete
documentation.

3. The municipality disbursed Performance - Based Bonus (PBB) for CY 2015

for a total amount of ₱5,935,000.00 to its officials and employees in spite of
lack of the pertinent guidelines/criteria issued by the Department of the
Interior and Local Government (DILG), in coordination with the A025
Technical Working Group contrary to Inter-Agency Task Force Memorandum
Circular No. 2015- 1.

We recommended that the Human Resource Management Officer coordinate

and secure copy of the approved guidelines for the grant of PBB from the
Department of Interior and Local Government and submit the same to the
Audit Team for evaluation, otherwise, cause the refund of the amount paid to
its officials and employees amounting to ₱5,935,000.00. Failure of the
concerned officials and employees to refund, the amount disallowed will
automatically become the personal and joint liability of the persons who
authorized such payment.
4. At least 25 new positions were created of which 12 items were filled up by the
Municipality despite the absence of SB Resolution and the excess in PS Cap
limitation by ₱6,192,011.70 contrary to Section 325 of RA 7160, hence total
payment of ₱1,654,481.00 was disallowed in audit.

We recommended that the Municipal Mayor and all other municipal officials
concerned strictly adhere to the provisions Section 325 (a) of RA 7160
specifically on the Personal Services cap limitation Refrain from incurring
additional Personal Services and require the approving authority and all
concerned officials and employees to refund the total disallowed amount.
5. The Municipality of Nasugbu operates and maintains a controlled dump
facility in violation of Section 37 of RA 9003 while its 10-year Solid Waste
Management Plan is not yet in place pending approval by the National Solid
Waste Management Commission (NSWMC) hence its solid waste
management program was not fully and effectively implemented.

We recommended that the Municipal Mayor and other officials:

a) Strictly implement and cause the immediate and effective rehabilitation of

the controlled dumpsite and eventually the construction and maintenance
of sanitary landfill in accordance with RA 9003; and

b) Expedite and exert more efforts for the approval of the 10 year Solid
Waste Management Plan and its implementation.
6. The Municipality failed to conduct gender mainstreaming or self-assessment,
formulate GAD Code and submit to the Department of the Interior and Local
Government its GAD plan and budget for review and approval contrary to the
provisions of COA Circular No. 2014-001 and PCW-DILG-DBM-NEDA
Joint Circular No. 2013-001. Likewise, a total of ₱6,041,296.26 or 41% of the
total GAD budget were disbursed for programs, activities and projects which
were not linked or related to gender issues and concerns thus, the objectives of
the GAD were not fully achieved.

We recommended strict compliance with the provisions of PCW-DILG-DBM-

NEDA-Joint Memorandum Circular No. 2013-01 or Guidelines on the
Localization of the Magna Carta of Women and COA Circular 2014-001.
Revert to GAD Fund the total amount of ₱6,041,296.46 expended for non-
GAD related activities.
7. Three (3) infrastructure projects in the total amount of ₱6,661,200.00 were not
supported with complete technical documentary requirements in contravention
to COA Memorandum No. 2005-027, thus, deterring the complete technical
evaluation of the contract.

We recommended that the Municipal Engineer require the contractor to

submit the lacking documents so that a complete technical review and
evaluation of the contracts and reported work accomplishments be conducted
by the COA-Technical Audit Specialist on time. Non-compliance thereof
would result to issuance of Notice of Suspension/Notice of Disallowance.
8. Prior year’s obligations of ₱2,810,062.65 for MOOE were paid out of the
current year’s appropriation in violation of Section 4 of Presidential Decree
No. 1445, and Section 336 of RA 7160.

We recommended that the Municipal Mayor, Sangguniang Bayan and the

Municipal Budget Officer consider in the preparation and approval of Annual
Budget the mandatory obligations such as Electric power utilities based on
average monthly consumption and limit other expenses within the available
appropriation in order to avoid disallowance in audit. Require all other
concerned officers to refund the amount of ₱2,810,062.65 for disbursements
without appropriations.
9. The Municipality procured 24 units of Galvanized Waste Segregation
Disposal Container for the Materials Recovery Facilities amounting to
₱2,292,000.00 for 21 barangays of which 22 units were not optimally utilized,
such that 8 were found not operational, 12 were not properly utilized and
maintained and 2 were not in a strategic location resulting to wastage of
government resources.

We recommended that the Municipality (a) undertake cost-benefit analysis of

the project to avoid a possible wastage of government funds; (b) Coordinate
 with the barangay officials for the strict implementation of proper waste
segregation; (c) Devise a plan, program or strategy among the barangay
officials to fully maximize the use of the waste segregation container; (d)
Consider the provision of mini- garbage truck for each barangay to help
increase the frequency of garbage collection.

10. Expenses amounting to ₱2,141,012.00 for Lakbay Aral of the Municipal

Employees and Public School Teachers, respectively, lacks the required
authorization from the DILG Regional Director nor an approved LGU
Capacity Development Agenda. Further, all expenses were charged to the
lump sum appropriation of Zero Waste Management Program despite a SB
resolution authorizing the same.

We recommended the concerned Municipal Officials submit the authority to

travel from the DILG Regional Director, approved LGU Capacity
Development Agenda and the Sangguniang Bayan Resolution otherwise,
refund the total amount for lack of authorization.
11. Projects with contract cost of ₱4,117,984.50 and ₱4,382,843.40 were found
deficient and excessive by ₱941,364.20 and ₱630,717.74, respectively.

We recommended the Honorable Mayor enjoin the Municipal Engineer to:

a) Require the contractor to conduct necessary corrective measures on the
deficiencies noted by the COA TAS, in order to improve the quality of
completed projects;

b) Submit core bore test for project 2 – Asphalt Overlay in Barangays IV, V,
VII, VIII, IX, X and XI;

c) Submit the lacking documentary requirements for

Construction/Repair/Rehabilitation of interconnecting Barangay Road in
Barangay Maugat-Catandaan-Malapad na Bato enumerated per Annual
Audit Report of CY 2014; and

d) Exercise prudence in the preparation of work program of infrastructure

projects to ensure efficiency, economy and effectiveness in the
implementation of infrastructure projects.

Also, we further recommended that the contractor refund the excessive

contract cost in the amount of ₱941,364.20 and ₱630,717.74, respectively.
12. The Agreement entered into by the Municipal Government of Nasugbu and
the Coral Triangle Conservancy (CTC) Inc., amounting to ₱1,500,000.00 for
the active coral restoration services is ambiguous in terms and conditions.
Procurement process showed lapses. Disbursement was not supported with
complete and proper documentation, rendering the transaction of doubtful
 validity and regularity, and the same was charged outright to expense
understating the asset account particularly Property, Plant and Equipment,
thus, affects the fair presentation of the financial statements.

We recommended that the BAC Chairman and other municipal officials

concerned submit explanation and justification on the deficiencies. Likewise,
record the project in the books of accounts for fair presentation of financial
statements and submit the lacking documents to the Audit Team for further
evaluation.
13. The Municipality paid Fortune Life Insurance Co. Inc. the amount of
₱1,178,400.00 from lump sum appropriation of Peace and Order – OMOE as
payment for death insurance of 982 individuals without an approved
Sangguniang Bayan resolution and ordinance contrary to Section 447 of RA
7160 the Local Government Code of the Philippines, hence the transaction is
unauthorized.

We recommended that the Municipality refrain from giving insurance

coverage without Sangguniang Bayan resolution. Refund the total amount of
₱1,178,400.00 for lack of authorization.
14. The Hematology Analyzer in the amount of ₱1,100,000.00 was not utilized
for more than 8 months after its acquisition due to the failure to provide
supply of reagents which resulted to abandonment of use, hence may result to
loss or wastage of government funds.

We recommended that the Rural Health Unit Officer coordinate with the
General Services Officer for the purchase of reagents and ensure its
availability at all times. Undertake the necessary action/maintenance of the
equipment to maximize its use by keeping the equipment in good running
condition to obtain the desired results therefrom.
15. The disbursement totaling ₱921,593.20 for foreign travel of eleven delegates
in attendance to the 6th Annual Women’s Leadership and Empowerment
Conference at Bangkok, Thailand lacks exigency and extreme necessity, and
were incurred without approval and clearance from the Secretary of the
Department of Interior and Local Government and Office of the President,
respectively, in violation of Section 8 of Executive Order No. 248.

We recommended that the concerned officials and employees submit

Authority to Travel and clearance from the Department of the Interior and
Local Government and Office of the President. Submit the other lacking
documents as herein required. Non submission will result to issuance of
Notice of Suspension and Notice of Disallowance.
16. Thirty five (35) of the Municipality’s motor vehicle registrations were not
renewed with the Land Transportation Office (LTO) while sixteen (16) of
which were not insured with the Property Insurance Fund of the Government
 Service Insurance System (GSIS) contrary to Section 5 of Republic Act (RA)
4136 and Section 1.1.2 of COA Circular No. 92-390, respectively, thus placed
the municipality and the users of the service vehicle to undue risk and penalty
charges for late registration. Likewise, one (1) motor vehicle was not yet
transferred under the name of the Municipality while four (4) still bear private
plates.

We recommended that the Municipal Officials allocate funds for the yearly
registration and insurance of the motor vehicles with the LTO and GSIS,
respectively, to conform with government rules and regulations and ensure
recovery of costs from insurance in case of any untoward incident happened.
The above observations and recommendations were discussed with concerned
Municipal officials and employees in an exit conference conducted on June 10, 2016.
Their views and reactions were considered in the report, where appropriate.

Other observations and recommendations are discussed in detail in Part II of this

Report.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS

Of the 57 audit recommendations embodied in the 2014 Annual Audit Report, 19

were fully implemented, 12 were partially implemented and 26 were not implemented.