EXECUTIVE SUMMARY

A. Introduction
The Municipality of Alcala, claimed to be originally one of the bigger barangays of
Bayambang then referred to as “DANGLA,” was made a separate and official municipality of
Pangasinan by Royal Decree No. 682 issued by the Spanish authorities on September 20,
1875. The municipality is located at the central portion of the province of Pangasinan. It is
bounded on the north by the towns of Villasis and Malasiqui, on the south by the
municipalities of Bautista and San Manuel, Tarlac, on the east by the municipality of Sto.
Tomas and finally on the west by the municipality of Bayambang. It has a total land area of
5,583.7520 hectares. The Municipality is composed of twenty-one (21) barangays and inhabits
a population of 41,077 consisting of 9,134 households.
The audit covered the operations of the Municipality of Alcala, Pangasinan for the calendar
year 2016. The types of audit employed consist of financial and compliance audit to ascertain
the fairness of presentation of the financial statements of the Municipality in adherence to the
Philippine Public Sector Accounting Standards and to check agency’s compliance with
existing laws, rules and regulations. Likewise, a Value for Money Audit was conducted on
selected areas to ascertain whether management had attained its goals and objectives in an
economical, efficient and effective manner.

The audit included analysis of accounts, review of transactions, test of compliance with
existing laws, rules and regulations, review of operating procedures, inspection of programs
and projects, interview of officials and employees, and such other procedures considered
necessary under the circumstances.

The audit instructions and audit thrust areas provided in various COA Memoranda were also
observed and looked into in addition to the thrust areas identified in the audit team’s risk
assessment.

For the calendar year 2016, the major accomplishments of the local government unit are as
follows:

National Funded with LGU Counterpart Project Cost Status

1. Concrete Paving of Agno-Flood Control
P 7,867,692.38 Completed
Dike at Gualsic-Laoac Road
2. Concrete Paving of Palosapis Road at Brgy.
1,203,696.52 Completed
San Juan
3. Supply and Delivery of one unit Elf 820,000.00 Completed
4. Supply and Delivery of one unit Harvester
158,000.00 Completed
Trailer Carrier
5. Supply and Delivery of one unit Combine
1,854,000.00 Completed
Harvester
 6. Supply and Delivery of 2 units Mini-Dump
2,280,000.00 Completed
Truck
Sub-total 14,183,388.90

Tobacco Excise Tax

7. Supply and Delivery of 333 bags of BT
1,498,500.00 Completed
Glyphosate Tolerance (Hybrid Corn Seeds)
Grand Total P 15,681,888.90

B. Highlights of Financial Information

Presented below are the financial position, sources of funds, appropriations and obligations
of the local government unit during the calendar year 2016 as compared with the figures of
the previous year:

Increase
Particulars 2016 2015 %
(Decrease)

Assets P229,871,261.52 P167,508,121.40 P62,363,140.12 37.23

Liabilities 17,621,485.57 12,765,221.60 4,856,263.97 38.04
Government Equity 212,249,775.95 154,742,899.80 57,506,876.15 37.16
Income 153,411,282.53 91,956,242.38 61,455,040.15 66.83
Expenses 101,002,595.04 88,327,447.43 12,675,147.61 14.35
Appropriations 108,482,729.77 97,479,100.63 11,003,629.14 11.29
Obligations 85,924,417.83 90,895,397.95 (4,970,980.12) (5.47)

C. Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the financial statements due to
doubtful accuracy, validity and existence of the Property, Plant and Equipment with gross
value of P239,353,970.77. As discussed in Part II of the report, the balance of the Property,
Plant and Equipment (PPE) was not reconciled with the property records due to non-
submission of the Report on the Physical Count of Property, Plant and Equipment (RPCPPE)
and incomplete property cards, PPE ledger cards and real property ledger cards. The
inadequacy of records did not permit us to apply adequate alternative procedures to ascertain
the accuracy, validity and existence of the said assets.
D. Summary of Significant Observations and Recommendations

During the year 2016, the LGU received the Seal of Good Local Governance awarded by the
Department of Interior and Local Government. The municipality has met the three criteria for
the Core Components of the Seal which include Good Financial Housekeeping, Social
Protection, and Disaster Preparedness. It also managed to meet the three essential components
which include the Business-Friendliness and Competitiveness, Environmental Management,
and Peace and Order. Passing the Seal entitles the LGU to access the Performance Challenge
Fund for the year 2016 in the amount of Three Million Pesos (P 3,000,000.00).
In addition, the LGU is also the recipient of the National Quality Corn Achievers Award for
the CY 2016 awarded by the Department of Agriculture for its outstanding performance
towards the production of quality corn and the development of the corn industry.
On the other hand, we also observed some deficiencies affecting the operation of the agency
and discussed in detail below.

1. Conduct of market survey or research on the procurement of hybrid corn seeds as

provided in Volume II of GPPB Manual of Procedures for the Procurement of Goods
and Services was not made, thus the needs of local farmers were not carefully
evaluated and addressed thereby defeating the purpose to which the share of the
municipality from Tobacco Excise Tax is to be utilized as prescribed under Section
4.2 of Local Budget Memorandum No. 71 dated September 21, 2015.

We have recommended that the local government unit conduct market survey or
research relative to the procurement at hand as prescribed in Volume II of GPPB
Manual of Procedures for the Procurement of Goods and Services to evaluate the needs
of the intended beneficiaries. The LGU should also see to it that the fund from Tobacco
Excise Tax be utilized in pursuit of the objectives provided under Section 4.2 of Local
Budget Memorandum No. 71 dated September 21, 2015 and ensure that funds for
programs/projects/activities geared toward the welfare of its constituents would not be
sacrificed.

2. Organic Production Project of the local government unit funded out of Fund Transfer
from Department of Agriculture under Grassroots Participatory Budgeting Process for
F.Y 2014 was no longer operational thus rendering the livelihood project
unsustainable.

We have recommended that the local government unit exert all effort to ensure the
sustainability of the organic production project through a repayment or roll-over
scheme for the next in line beneficiaries in compliance with the provisions of the
Memorandum of Agreement and see to it that the constituents are not deprived of the
essential benefits that could be derived therefrom to promote efficient and effective
utilization of government resources.
3. Some of the insurable assets and properties of the local government unit were insured
with private insurance company while some remained uninsured which runs counter
to the provisions of Republic Act No. 656, otherwise known as the “Property Insurance
Law”, as amended by Presidential Decree No. 245 dated July 13, 1973 and
Administrative Order No. 33 dated August 25, 1987, thus exposing the LGU to
unnecessary losses in the event of damage to, or loss of, such assets and properties.

We have recommended that the local government unit ensure that all of its insurable
assets, properties and interests are insured with the General Insurance Fund (GIF)
administered by the Government Service Insurance System in compliance with
Republic Act No. 656, otherwise known as the “Property Insurance Law”, as amended
by Presidential Decree No. 245 dated July 13, 1973 and Administrative Order No. 33
dated August 25, 1987 by identifying all its insurable assets, submitting an inventory
report of insurable assets to the System, setting aside in its appropriation the amount
needed for premiums and remitting the premiums to the System within the prescribed
period to avoid unnecessary losses in the event of damage to, or loss of, assets and
properties brought by fortuitous events and guarantee immediate repair or replacement
and uninterrupted delivery of public service.

4. Government funds were used to pay legal services of private lawyer which was not in
conformity with the Revised Guidelines on the Deputation of Private Lawyers and
Special Attorneys prescribed in COA Memorandum No. 2016-010 dated December
15, 2015, thus may place the agency in disadvantageous situation.

We have recommended that the local government unit seek legal assistance from
Provincial Legal Office or Prosecutor’s Office in compliance with the provisions of
Section 481 of RA 7160 and Revised Guidelines on the Deputation of Private Lawyers
and Special Attorneys prescribed in COA Memorandum No. 2016-010 dated
December 15, 2015. We have further recommended that the LGU refrain from using
government funds to pay the services of private lawyer to avoid suspension or
disallowance in audit.

5. Advance payments or mobilization fund payments to contractors totaling

P1,593,488.55 for projects that were cancelled remained uncollected for almost seven
(7) years, thus prejudicial to the financial interest of the local government unit.

We have recommended that management exhaust all possible means to collect the
advance payments totaling P1,593,488.55 from the contractors so that funds could be
used to implement other priority development projects/programs/activities which are
beneficial to the constituents of the local government unit.

6. The municipality could have generated additional funds to support its operation and
implementation of more development programs and projects had intensified efforts
been exerted in the collection of past due accounts of local taxes and rentals on stalls
amounting to P575,477.78 and P471,752.50, respectively.
 We have reiterated our previous year’s audit recommendations that the concerned
LGU officials and employees exert extra effort to intensify collection of delinquent
accounts and adopt the procedures and remedies provided in Section 254 and 256 of
Republic Act No. 7160, otherwise known as the “Local Government Code of 1991, to
enable the collections of unpaid local taxes and employ all necessary measures to
enable collection of unpaid stall rentals. These will provide additional funds to support
the projected expenditure of the LGU which may be beneficial to its constituents.

7. Payment for Cultural and Athletic Incentive to officials and employees totaling
P201,000.00 appeared to be not in accordance with Section 48 of RA 10717 also
known as General Appropriations Act (GAA) for Fiscal Year 2016 and Section 10 of
COA Circular No. 2012-001, thus prejudicial to the financial interest of the local
government unit.

We have recommended that management strictly comply with the guidelines on the
disbursements related to cultural and athletic activities as prescribed in Section 48 of
RA 10717 also known as General Appropriations Act (GAA) for Fiscal Year 2016 and
Section 10 of COA Circular 2012-001 to avoid suspension or disallowance in audit.

The above audit observations and recommendations contained in the report were discussed
with municipal officials and employees through the issuance of Audit Observation
Memorandum and during the exit conference on February 23, 2017. Management views and
reactions were reflected in the report where appropriate.

Other audit observations and its corresponding remedial measures are discussed in detail in
Part II of this report.

E. Summary of Total Suspensions, Disallowances and Charges as of Year-

End

For the calendar year 2016, there were no unsettled suspension, disallowance and charges.

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

Out of the 23 audit recommendations embodied in the 2015 Annual Audit Report, 10 were
implemented by the municipality, 5 were partially implemented and 8 were not implemented
as of year-end.