EXECUTIVE SUMMARY

A. Introduction

Dinalupihan, previously an old barrio of Hermosa, founded by the Dominican friars on

May 8, 1756, is now one of the eleven municipalities comprising the Province of Bataan
and composed of 46 barangays. It is a first-class municipality with a population of
118,591 as of year 2022.

Under the dynamic and able leadership of Honorable Mayor German M. Santos, through
the support of Honorable Vice Mayor, members of the Sanggunian Bayan and Local
Government Unit’s department heads and personnel, the Municipality aims to uplift the
quality of life of Dinalupiheños by practicing good governance that will result to
enhanced municipal services and sound policies that create a business and eco-friendly
environment. The LGU is also envisioned to become the premier Agropolis in Central
Luzon characterized by God-loving, well informed, resilient and thriving citizenry living
in sustainable, balanced and safe environment with competitive, diversified and
environment-friendly economy governed by leaders committed to progress and good
governance by year 2028.

B. Scope and Objectives of Audit

The audit was conducted in accordance with the International Standards of Supreme
Audit Institutions (ISSAIs). It covers the financial transactions and operations of the
Municipality of Dinalupihan, Province of Bataan for CY 2023 particularly those
contained in the Unnumbered Memorandum dated October 9, 2023 of the COA Local
Government Audit Sector Assistant Commissioner. It included the examination of
supporting documents of pre-selected accounts and areas, employing audit procedures
and techniques such as analysis of accounts and such other procedures considered
necessary. The audit was conducted to (a) ascertain the level of assurance that may be
placed on management’s assertions on the financial statements; (b) determine compliance
of management with the laws, rules and regulations on the identified audit thrusts/areas
and recommend agency improvement opportunities thereon; and (c) determine the extent
of implementation of prior year’s audit recommendations.

C. Financial Highlights

Comparative analysis of the Statement of Financial Position showed increases in both

Assets and Liabilities resulting to decrease in Government Equity. On the other hand, the
Statement of Financial Performance exhibited decreases in both Revenues and Expenses,
thus, resulted in net decrease in Net Income by ₱15,550,956.90.

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 Increase
Particulars 2023 2022
(Decrease)
Financial Position
Total Assets ₱ 470,802,427.83 ₱ 442,412,889.16 ₱ 28,389,538.67
Total Liabilities 199,382,314.44 163,428,973.96 35,953,340.48
Total Equity ₱ 271,420,113.39 ₱ 278,983,915.20 ₱ (7,563,801.81)
Financial Performance
Total Revenues ₱ 474,578,472.86 ₱ 512,973,720.76 ₱ (38,395,247.90)
Total Expenses 439,136,687.98 461,980,978.98 (22,844,291.00)
Net Income(Loss) ₱ 35,441,784.88 ₱ 50,992,741.78 ₱ (15,550,956.90)
Sources and Applications of Funds
Appropriations ₱ 441,117,959.12 ₱ 418,175,804.85 ₱ 22,942,154.27
Obligations 398,427,286.53 368,390,488.81 30,036,797.72
Balance ₱ 42,690,672.59 ₱ 49,785,316.04 ₱ (7,094,643.45)

D. Independent Auditor’s Report on the Financial Statements

As discussed in Part II of the report, a qualified opinion on the fairness of presentation of

the financial statements was rendered due to a) non-adjustment of unreleased checks
totaling ₱7,135,111.89 at year-end; b) unrecorded inventories received through
transfers/donations totaling ₱1,142,530.55; c) inclusion of distributed inventories of
₱7,058,174.05 in the inventory accounts; and d) unrecorded properties received through
donations totaling ₱503,536.00, thereby affecting the fair presentation of the accounts.

Aside from the foregoing, the auditor was unable to obtain sufficient appropriate
evidence to serve as bases for the opinion on the following accounts, but the auditor
concludes that the possible effects on the FS of undetected misstatements, if any, could
be material:

a. RPT/ SET Receivables – The non-reconciliation of records and non-preparation

of subsidiary ledgers for Real Property Tax (RPT) and Special Education Tax
(SET) Receivables resulted in a variance of ₱75,186,593.68 inconsistent with the
Manual on the New Government Accounting System (NGAS) for Local
Government Units (LGUs), thereby affecting the reliability of the balances of the
RPT and SET Receivable accounts reported in the Financial Statements as of
December 31, 2023. (Observation No. 2)

b. Inventories – The Municipality's inability to observe provisions of the Manual on

the NGAS for LGUs on the accounting for Inventory due to a) non-conduct of the
semi-annual physical count of inventories and non-submission of the
corresponding Report on the Physical Count of Inventories (RPCI); b) non-
compliance with Moving Average Method of costing the inventory; and c) non-
compliance with the accrual method of accounting on the distribution of
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 inventories to end-users, rendered the accuracy and existence of the year-end
balances of the inventory accounts unreliable. (Observation No. 3)

c. Property, Plant and Equipment – The existence, correctness, and completeness of

Property, Plant and Equipment (PPE) account balance of ₱205,435,221.53 as of
year-end could not be ascertained due to a) non-submission of Report on Physical
Count of PPE (RPCPPE) and non-performance of one-time cleansing; b)
incomplete property records of both General Services Office (GSO) and
Accounting Office; and c) failure to dispose obsolete and unserviceable PPEs
which opposes COA Circular No. 2020-006 dated January 31, 2020, COA
Circular 2014-002 dated April 15, 2014, New Government Accounting System
(NGAS) for Local Government Units (LGUs), and Presidential Decree (PD) No.
1445. (Observation No. 4)

d. Accounts Payable – The reliability and correctness of the reported Accounts

Payable of the Municipality totaling ₱57,433,889.62 could not be ascertained due
to Management's non-recording of Accounts Payable upon receipt of goods and
services on credit, and non-reversion of balances which remained outstanding for
over two years contrary to Section nos. 119-120 and 126 of Chapter 7 of Manual
on the NGAS for LGUs and Section 98 of Presidential Decree No. 1445,
respectively, hence, may affect the liquidity and financial stability of the
Municipality. (Observation No. 5)

The auditor was unable to perform alternative audit procedures hence hindered
the gathering of sufficient appropriate evidence thereby limitations on the scope
of the audit were identified. The inability to obtain sufficient appropriate audit
evidence resulted further to issuance of a qualified opinion.

E. Summary of Significant Observations and Recommendations

1. Procurement of goods and services and infrastructure projects with an approved

budget for the contract (ABC) totaling ₱170,594,075.83 were procured through
competitive bidding representing 62% of the total Indicative Annual Procurement Plan
(APP) of the Municipality for CY 2023. However, full compliance with the Revised IRR
of R.A. No. 9184 could not be ascertained due to various deficiencies noted such as: a)
Final APP and Project Procurement Management Plan (PPMP) were not submitted; b)
partial posting of Notice of Award and Notice to Proceed; and c) non-preparation of
Procurement Monitoring Report (PMR), thus defeating the purpose of the Revised IRR of
R.A. No. 9184 on its adherence to the principles of transparency, accountability, equity,
efficiency, and economy in the procurement process. (Observation No. 6)

We recommended and Management agreed to –

a) direct all personnel concerned to prepare APP and PPMP in accordance with
Section 7 of IRR of R.A. No. 9184;

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 b) require the BAC Secretariat to retrieve and submit to the GPPB and audit team the
final APP and PPMP for CY 2023;

c) instruct the BAC Secretariat to post all the awarded contract’s Notice of Award
(NOA) and Notice to Proceed (NTP) on the municipality’s website; and

d) direct the BAC to prepare the Procurement Monitoring Report (PMR) within 14
calendar days after the end of each semester and submit it to GPBB, copy furnish
the Audit Team.

2. Machineries and equipment totaling ₱94,899,854.80 were not properly insured

contrary to Republic Act (RA) No. 656 or the Property Insurance Law, exposing
government properties to risk of not being indemnified for damages or losses due to
fortuitous events. In addition, Property Inventory Form was not prepared by the
Municipality due to unfamiliarity of COA Circular No. 2018-002 dated May 31, 2018.
(Observation No. 7)

We recommended and Management agreed to direct the General Services Officer to (i)
review the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) for
CY 2023 to ascertain that all insurable government properties physically identified are
insured with the GSIS; and (ii) submit the Property Inventory Form (PIF) to the Audit
Team not later than April 30 of each year.

3. Government projects undertaken by the Municipality in CY 2023 whether funded

from their local budget or financial assistance or grants from other national agencies were
not properly reported to the Audit Team as required in Sections 2.1 and 3.1 of COA
Circular No. 2013-004 dated January 30, 2013, thus impeding proper monitoring and
validation of the projects implemented. (Observation No. 8)

We recommended and Management agreed to require the Municipal Engineer and other
concerned officials to provide the Audit Team at the beginning of the year with the list of
all ongoing projects/programs/activities (PPA) and those that are to be implemented
during the year with the required details. Submit also to the Audit Team information and
evidence that appropriate signboards and/or public notices were already posted 10 days
after the award of the infrastructure project or before the start of PPA.

4. The non-compliance of the Municipality of Dinalupihan with COA Circular No.

2009-001, Section 6 of COA Circular No. 2009-002, and Section 9 of COA Circular
2023-004 to enforce the submission of perfected contracts, purchase orders, and notice of
deliveries to the Auditor’s Office hindered the timely review, evaluation, and conduct of
inspection to determine the validity and propriety of the transactions. (Observation No.
9)

We recommended and Management agreed to require the Bids and Awards Committee
and General Services Office to submit all copies of perfected contracts with all the

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required supporting documents within five days from perfection and all documents
pertaining to delivery and acceptance of procured items.

5. The contracts of 25 infrastructure projects implemented by the Municipality of

Dinalupihan totaling ₱59,830,542.40 for CY 2023 were supported by the Construction
Safety and Health Program (CSHP) approved by the Department of Labor and
Employment (DOLE), as stated in DOLE Department Order (DO) No. 13, series of 1998
and Section 37.2.3 of the Revised Implementing Rules and Regulations (IRR) of
Republic Act (RA) No. 9184, however, full compliance with the CSHP could not be
ascertained due to noted deficiencies, hence compromised the contractor’s commitment
in ensuring the safety of its workers and the public in general, while the project is being
implemented. (Observation No. 10)

We recommended and Management agreed to direct the Municipal Engineer to strictly

monitor the compliance of the contractors with the Construction Safety and Health
Program in the implementation of government projects specifically the actual presence of
the safety officer and first aider throughout the project duration and the proper
declaration of the heavy equipment in the DOLE-approved CSHP to be utilized in the
project to enhance safety, efficiency, and compliance with laws, rules, and regulations.

6. Out of the Mitigation Fund totaling ₱21,120,999.08, 71.39 percent or

₱15,078,736.58 was utilized during the year, thus the objectives of strengthening the
Municipality’s capacity for disaster risk reduction and management were reasonably
achieved. However, various deficiencies were noted inconsistent with the pertinent
provisions of Republic Act No. 10121 or the “Philippine Disaster Risk Reduction and
Management Act of 2010”, COA Circular No. 2012-002 dated September 12, 2012, and
National Disaster Reduction and Management Council-Department of Budget and
Management-Department of Interior and Local Government (NDRRMC-DBM-DILG)
Joint Memorandum Circular (JMC) No. 2013-1 dated March 25, 2013. (Observation No.
11)

We recommended and Management agreed to direct the –

a. Municipal Disaster Risk Reduction and Management Officer (MDRRMO) to (i)

include the special trust fund in the Local Disaster Risk Reduction Management
Fund Investment Plan (LDRRMFIP); and (ii) prioritize the installation of CCTV
cameras for disaster preparedness;

b. Municipal Social Welfare and Development Officer (MSWDO) to submit the

distribution list duly received by the recipients/proof of acknowledgement, or any
equivalent documents for goods already distributed amounting to ₱800,000.00;

c. MDRRMO in coordination with the Municipal Budget Officer to provide

justification on the distribution of standby goods as “Christmas Package”
procured from QRF amounting to ₱5,542,064.00 contrary to pertinent laws, rules
and regulations; and

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 d. Municipal Accountant to deduct warranty security/retention money for the
payment of goods or require a special bank guarantee, pursuant to Section 62 of
the Revised IRR of R.A. No.9184.

7. Out of ₱19,820,646.51 fund transfers from Local Government Support Fund-

Support to the Barangay Development Program of the National Task Force to End Local
Communist Armed Conflict FY 2023, RA No. 11936, ₱19,787,391.81 or 99.80 percent
was utilized for three (3) identified priority projects in accordance with Local Budget
Circular No. 151 dated March 30, 2023, thereby aiding the mitigation of the existing
issues and development gaps at the barangay level. However, minor lapses were found in
the posting and reporting requirements. (Observation No. 12)

We commended the Municipality for the timely implementation of the projects for the
benefit of its constituents. Likewise, we recommended and Management agreed to direct
the Budget Officer to be informed from time to time about the latest Local Budget
Circular related to the transfer of funds received by the Municipality to ensure its proper
implementation specifically the posting and reporting requirements.

8. The Barangay Health Station in Barangay Kataasan, Dinalupihan which was

constructed under the Municipality’s 20% Development Fund for ₱1,990,257.72
remained idle six months from the date of its completion contrary to Item 3.2.3 of
Department of Budget and Management- Department of Finance- Department of Interior
and Local Government (DBM-DOF-DILG) Joint Memorandum Circular (JMC) No. 1
dated November 4, 2020, hence, depriving the beneficiaries of the health benefits that
may be derived therefrom. Moreover, environmental management programs such as
hauling of residual wastes and garbage collection services totaling ₱19,697,285.00,
although necessary, were not included in the priority development projects embodied in
the Municipality’s Comprehensive Development Plan, inconsistent with Item 3.2.1 of the
same Joint Circular, thereby reducing the available fund for other social, economic, and
environmental development projects with long-term benefits. (Observation No. 13)

We recommended and Management agreed to comply with Items 3.2.1 and 3.2.3 of
DBM-DOF-DILG JMC No. 1 dated November 4, 2020, and instruct the –

a. Municipal Engineering Office to address the concerns of the Municipal Health

Officer (MHO) in the construction of the Barangay Health Station located in
Barangay Kataasan, Dinalupihan with total cost of ₱1,990,257.72 to start its
operations; and

b. Municipal Planning and Development and Municipal Budget Offices ensure that
the 20% Development Fund will be utilized for the priority development projects
embodied in the Municipality’s Comprehensive Development Plan.

We also reiterated the prior year’s audit recommendation and Management agreed to
consider performing a cost-benefit analysis to determine the development projects that
would provide long-term and optimum benefits to its constituents.

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9. The Municipality’s vouchers on the grant of cash advances for Confidential Fund
(CF) totaling ₱6,570,000.00 for CY 2023 were submitted on time and with complete
supporting documents in accordance with Item 6.1 of Commission on Audit- Department
of Budget and Management- Department of Interior and Local Government- Governance
Commission on GOCCs- Department of National Defense (COA-DBM-DILG-GCG-
DND) Joint Circular No. 2015-01 dated January 8, 2015, which resulted to timely and
effective audit thereof. However, long-outstanding cash advances for CF totaling
₱6,100,000.00 remained in the books of accounts, while cash advance for the 4th quarter
of CY 2023 amounting to ₱1,685,000.00 was not liquidated at year-end inconsistent with
Item 6.2.2.7 of same Joint Circular. (Observation No. 14)

We commended Management through the Municipal Accounting Office for their

compliance with Item 6.1 of COA-DBM-DILG-GCG-DND Joint Circular 2015-01 dated
January 8, 2015, on the grant of cash advances for Confidential Fund for CY 2023.

We recommended and Management agreed to instruct the Municipal Accountant to –

a. ensure that all cash advances for Confidential Fund (CF) covered by the current
Joint Circular shall be liquidated at year-end; and

b. communicate with the COA-ICFAO on the updated status of the liquidation of the
long-outstanding cash advances for CF totaling ₱6,100,000.00, follow-up the
issuance of credit advice if found in order, otherwise comply with the deficiencies
noted by the COA-ICFAO in coordination with the Accountable Officers.

10. The Municipality substantially accomplished and implemented its planned Gender
and Development (GAD) programs registering an 81.20 percent accomplishment rate,
however, the accuracy of the actual results and expenditure costing ₱34,917,757.20 could
not be validated due to the non-availability of supporting documents necessary to comply
with Annex E of the JMC, thus may affect the efficiency and effectiveness of
Municipality’s GAD programs in addressing gender issues towards gender equality and
women empowerment. (Observation No. 15)

We recommended and Management agreed to: a) direct the personnel concerned to

closely coordinate with the service provider the complete turnover of their CBMS to gain
full access to the system to be used in the future formulation of plans and programs of the
Municipality; and b) instruct the GFPS to (i) submit the GPB to the Audit Team within
the prescribed period for proper evaluation thereof; and (ii) ensure that the supporting
documents of the recorded actual results in the GAD AR are readily available for
validation including the breakdown of actual expenditure.

11. The Municipality’s Revenue Code has been outdated for 17 years inconsistent
with Section 191 of the Local Government Code, hence potential revenues in business tax
computed at ₱22,511,555.25 were not realized depriving the constituents of additional
programs, projects, and activities (PPAs) that could have been implemented. Moreover,
the accuracy of business tax for CY 2023 totaling ₱32,435,310.79 could not be

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ascertained due to the non-submission of income tax returns of various taxpayers and
non-examination of their books of accounts and pertinent records by the Municipal
Treasurer’s Office. (Observation No. 16)

We recommended and Management agreed to undertake the following courses of action –

a) Continuously coordinate with the Bureau of Local Government Finance (BLGF)

on the schedule of orientation/workshop regarding the possible revision of the
Municipal Revenue Code pursuant to Section 191 of the Local Government Code
(LGC);

b) Instruct the Business Permit and Licensing Office (BPLO) and Municipal
Treasurer’s Office to remind the businesses/taxpayers on the submission of
certified photocopies of their income tax returns (ITR) on or before April 30 of
each year, as required by the Municipal Revenue Code; and

c) Direct the Municipal Treasurer’s Office to conduct the examination of books of

accounts and pertinent records in accordance with Section 171 of the LGC,
especially businesses/taxpayers who failed to submit their ITR.

F. Summary of total suspensions, disallowances and charges as of year-end

The Statement of Audit Suspensions, Disallowances and Charges (SASDC) of the agency
as of December 31, 2023 reflected outstanding balance of ₱87,363,970.47. This amount
comprises of disallowed transactions of (i) excess claims of municipal social workers -
₱3,780.00; (ii) Priority Development Assistance Fund (PDAF) disbursed to Non-
Government Organizations (NGOs) relative to violations of Republic Act (RA) No. 9184
- ₱53,000,000.00; (iii) hardship and incentive allowances charged to Special Education
Fund (SEF) - ₱758,856.50; (iv) rehabilitation of the Dinalupihan Public Market -
₱27,398,833.97; and (v) cash incentives to all regular, job order, consultants, Nurse
Deployment Project (NDP) nurses and detailed regular and job order employees -
₱6,202,500.00.

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

Of the 40 recommendations embodied in the previous year’s audit report, 14 were

implemented and 26 were not implemented.

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