EXECUTIVE SUMMARY

Introduction

The Municipality of Paranas was formerly called Wright, Samar. On November

4, 1988, by virtue of Republic Act No. 6681, the name Wright was changed to Paranas,
Samar. It is a second (2nd) class municipality composed of forty-four (44) barangays.

Under the administration of Honorable Mayor Eunice U. Babalcon, with the

legislative body composed of ten (10) Sangguniang Bayan Members headed by Vice-
Mayor Yolanda T. Tan, the Municipality continued to implement programs consistent
with its vision of providing delivery of basic services. The total work force of the
Municipality is 548, of which 12 are elected, 5 are co-terminous, 119 are permanent, and
412 are on Job Order status.

Audit Methodology and Scope of Audit

An audit was conducted on the accounts and operations of the Municipality for
CY 2022 in accordance with International Public Sector Standards on Auditing with
emphasis on the audit thrusts for the Local Government Audit Sector on the audit of
Financial Statements of the following accounts - Cash & Cash Equivalents, Property,
Plant and Equipment, Loans Payable, Due to NGAs/LGUs/GOCCs, Due from NGOs/
POs and Other LGUs; and Other Significant and Material accounts identified in the
Materiality Thresholds.

To determine the extent of implementation of the programs and projects,

compliance with the budget/allocation, procurement regulations, terms and conditions,
we likewise conducted a performance and compliance audit on the following:

1. Fund Transfers from NGAs to LGU

1.1. COVID-19 Vaccination Program
1.2. Fund Transfers from National Government Agencies
1.3. Fund Transfer to Non-Government Organizations/People’s
Organization (NGOs/POs and/ or Other LGUs)
1.4. Local Government Support Fund (LGSF)
2. Utilization of 20% Development Fund
3. Audit of Revenues
4. Utilization of LDRRMF
5. Payment to Casuals, Job Orders and consultants
6. Enforcement of COA Disallowances and Charges
7. Compliance with tax laws
8. Remittance of mandatory GSIS, HDMF, PhilHealth contributions and
remittance of loan amortizations
9. Compliance with PPAs on GAD
 The audit included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements; assessing the appropriateness of accounting
principles used and the reasonableness of accounting estimates made by management;
verification, reconciliation and analysis of financial accounts; as well as evaluating the
overall presentation of the financial statements. It also involved ocular inspection of
infrastructure projects undertaken; interview with officials and employees concerned; and
other audit procedures and techniques considered necessary under the circumstances.

Financial Highlights

The Municipality’s total assets, liabilities, equity, income, and expenses for the
current and previous year are as follows:

A comparison of the Municipality's total Assets, Liabilities, Equity, Income, and

Expenses for CY 2022 with the previous year revealed a growth in Assets, Liabilities,
and Equity, as shown in the graphical depiction. The considerable rise in Assets and
Equity account is attributable to a significant increase in cash provided by Operational,
Investing, and Financing Activities, an increase in capital outlays procured, and an
increase of Surplus for the period.
 The following graph also depicts the changes in Appropriations, Allotments and
Obligations during the year, demonstrating an increase in CY 2022 Appropriations,
Allotments and Obligations as compared to CY 2021 data.

Whereas the following graphical presentations illustrate the changes in

Appropriations and Commitments based on classes of expenditures for fiscal years 2022
and 2021.
 The increase in Capital Outlay under the obligations is due to the utilization of the
significant amount of appropriation for the year. Unexpended capital outlays of
Programs, Projects and Activities (PPAs) for CY 2022 will form part of the continuing
appropriations in CY 2023.

Significant Accomplishments

The significant PPAs accomplished by the Municipality in Calendar Year 2022

were reported and certified complete by the Management, to wit:

No. Project/Program/Activity Name Location Amount

INFRASTRUCTURE
Concreting and/or Upgrading of Brgy.
Brgy. Pabanog,
1 Pabanog - Brgy. Tigbawon Local Access ₱8,988,337.70
Brgy. Tigbawon
Road
Upgrading/Concreting of Barangay Road
2 Brgy. Pabanog 3,191,798.58
Purok 4, Brgy. Pabanog
Continuation of Upgrading/Concreting of
3 Brgy. Salay 4,992,961.84
Salay-Mangcal Road (Road Widening)
Continuation of Upgrading/Concreting of
4 Tabucan-Cantaguic Road (Road Brgy. Cantaguic 4,992,224.74
Widening)
Continuation of Upgrading/Concreting of
5 Junction Lipata-Minarog Road to Brgy. Cawayan 3,290,312.33
Cawayan (Road Widening)
No. Project/Program/Activity Name Location Amount

Upgrading/Concreting of Cawayan -
6 Bagsa Road (Road Widening- Brgy. Bagsa 2,792,496.87
Continuation)
Construction/Upgrading of Temporary
7 Paranas 2,991,951.81
Dry Public Market
Construction of Temporary Wet Public
8 Paranas 2,491,499.07
Market, Construction Projects
Construction/ Concreting of Access Road
9 Brgy. Pabanog 3,797,576.77
to Pabanog Intake Box (Intik)
Upgrading/ Concreting of Pagsaogan-
10 Brgy. Pagsaogan 1,766,391.34
Tigbawon Local Access Road
Upgrading/ Concreting of Barangay Road
11 Brgy. Buray 2,360,954.14
with closed canal along Brgy. Chapel
HEALTH
1 Purchase of 1-unit Rescue Ambulance Rural Health Unit ₱2,306,778.00
2 Fully Automated Hematology Analyzer Rural Health Unit 950,000.00
3 Semi Auto Clinical Blood Chemistry Rural Health Unit 578,000.00
DISASTER RISK, REDUCTION AND MANAGEMENT
Communication Equipment & Parts and
1 DRRM ₱894,000.00
Accessories
2 Purchase of 1-unit Rescue Vehicle DRRM 1,495,447.00
Construction of Double Barrel
3 Reinforced Concrete Box Culvert with Poblacion 5 3,039,958.52
PCCP
Construction of Standard Daycare Center,
4 Brgy. Casandig II 1,570,478.12
Sitio Cantipon, Brgy. Casandig II
SUSTAINED CAPABILITY BUILDING OF LGU AND BLGU
1 Completion of the Executive-Legislative Agenda 2022-2025
2 Completion of the MDRRM and DRRM-H Plan
INNOVATIVE PROGRAM
1 Nutri-Van and Exchange Your Eco-bricks Program
Kasilyas Program and Construction of Gender-Segregated Comfort Rooms in
2
Schools
3 Paranas EntrepreYouth Program
Assistance to Persons With Disability, Elderly Citizens, Solo-Parents, Lactating
4
and Pregnant Mothers, and Scholarships to College Students
5 Pamaskong Handog ng Local Government of Paranas Program
AWARDS AND RECOGNITION
1 2022 Seal of Good Local Governance given by the DILG
 No. Project/Program/Activity Name Location Amount

2 2022 Good Financial Housekeeping Passer

100% Functionality or National Award Recipient on Municipal Anti-Drug
3
Abuse Council (ADAC)
4 Regional Green Banner Award for Nutrition Programs
5 Child Friendly Local Governance Awardee
6 Peace and Order Council Awardee
7 Zero Open Defecation G1 Awardee Municipality

Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the combined financial statements of

the Municipality of Paranas, Province of Samar for the year ended December 31, 2022
due to the exceptions as stated in the Independent Auditor’s Report and as discussed in
Part II of the report.

Summary of Significant Observations and Recommendations

In addition to the exceptions cited, the significant observations and corresponding

recommendations were as follows:

1. The accuracy and reliability of the reported balances of the Cash in Bank –
Local Currency, Current Account (CIB-LCCA) of ₱191,684,300.84 could not
be ascertained due to the (a) existence of negative balance of two (2) bank
accounts under the General Fund aggregating ₱207,599.79; (b) non-
maintenance of Subsidiary Ledgers (SLs); and (c) delayed preparation and
incomplete submission of the monthly Bank Reconciliation Statements
(BRS), thereby casting doubt on the reliability of the balances as at year end.

We recommended, and the Mangement agreed that the Local Chief Executive
require the Municipal Accountant to:

1. Prepare the necessary reconciliation and adjusting journal entries

negative bank balances of the two (2) accounts amounting to
₱207,599.79;

2. Prepare and maintain SLs for all bank accounts and immediately
submit to the Audit Team the required subsidiary schedules of GL
balances of cash accounts for all funds and SLs per depository bank;
and
 3. Prepare and timely submit the monthly BRS for all accounts
maintained by the Municipality and ensure that balances reflected in
the BRS are reconciled with the balances as shown in the GL.

2. The accuracy and reliability of the reported balance of Advances for Payroll
Account amounting to ₱2,515,400.00 under the General Fund could not be
ascertained due to the non-reconciliation between Cashbook and General
Ledger (GL) balances with the beginning of the year variance of ₱167,270.00,
average monthly variance of ₱745,635.59 and year-end discrepancy of
₱29,300.00, thereby casting doubt on the reliability of the balances as at year
end and resulting in the overstatement of the said account by ₱29,300.00.

We recommended, and the management agreed, that the Local Chief Executive
require the Municipal Treasurer and Municipal Accountant to conduct regular
monthly reconciliation and immediately reconcile the cashbook balances with the
GL to ensure the accuracy of the reported outstanding cash advances and
corresponding expense account. Further to require the Municipal Accountant to
ensure the detailed and proper recording of the liquidation and refunds of cash
advances and to prepare the necessary adjusting journal entries for the
overstatement of the Advances for Payroll account amounting to ₱29,300.00.

3. The existence, validity, completeness and correctness of the reported balance

of the Property, Plant and Equipment (PPE) Account of ₱568,089,197.52
(excluding Construction in Progress Accounts), could not be ascertained due
to (a) non-reconciliation between the Report on the Physical Count of the
Property, Plant and Equipment (RPCPPE) and the accounting records with
a discrepancy totaling ₱475,955,350.76; (b) non-maintenance of Property
Equipment Ledger Card (PPELC) and Property Card (PC); and (c) items
are recorded as PPE despite not meeting the capitalization threshold of
₱50,000.00, thereby affecting the fair presentation of the financial
statements.

We recommended, and the Management agreed, that the Local Chief Executive
direct the:

a. The members of the Municipal Inventory Committee to reconcile their

RPCPPE with the records of the Municipal Accountant and include in the
report the physical inventory of Other Land Improvements, Infrastructure
Assets, and Buildings and Other Structures;

b. Municipal Accountant to:

1. Prepare the necessary correcting entry to adjust the erroneous booking

of PPE accounts, taking into consideration the capitalization threshold
of P50,000 for recognition as PPE as provided in Section 4 of the
Circular;
 2. Prepare and maintain Property Plant and Equipment Ledger Cards
(PPELC) to ensure completeness of information in the RCPPE and to
account for the shortage and overage per items in the PPE; and

c. The Municipal Treasurer as Property Officer to maintain Property Cards (PC)

as prescribed under the Manual as prescribed under MNGAS for LGUs.

4. Pertinent provisions for one-time cleansing of Property, Plant and

Equipment (PPE) as of December 31, 2022 were not observed by the LGU,
such as (a) absence of Executive Order (EO) on the creation of Inventory
Committee for the conduct of one-time cleansing of PPE; (b) non-submission
of the approved Physical Inventory Plan (PIP) to the Commission on Audit
(COA) Team (10) calendar days before the scheduled start of inventory
taking activities; (c) the inventory taking was not witnessed by the COA
Auditor; (d) the inventory taking activities were not executed in accordance
with the approved PIP; and (e) the Inventory Count Form (ICF) were not
properly accomplished and lacked information on the whereabouts and
conditions of PPE items. Hence, purpose of conduct of inventory taking for
the one-time cleansing of PPE was not met.

We recommended, and the Management agreed, that the Local Chief Executive
issue an Executive Order to:

a. Create an Inventory Committee, who are temporarily relieved of all their

regular duties, to complete the physical inventory in three (3) months or less
and ensure that at least one member each from the Accounting and Property
Division/Units is a member of the Inventory Committee;

b. Re-evaluate the submitted Physical Inventory Plan (PIP) and furnish COA the
copy of the approved PIP within 10 days before the scheduled inventory
taking activities;

c. Direct the Head of the Inventory Committee to:

1. Ensure that inventory taking activities are executed in accordance with

the approved PIP within the prescribed timeline and in case there are
planned activities/procedures that cannot be efficiently performed,
he/she shall keep record of the alternative activities/procedures
undertaken and the reasons for the deviation from the PIP; and

2. Ensure proper accomplishment of the required reports under the PIP.

5. The reported balance of the Financial Liabilities and Other Payables

Accounts of ₱13,456,117.76 could not be ascertained due to (a) inclusion of
long outstanding payables amounting to ₱1,126,238.57, aged more than two
(2) years; (b) erroneous recording of the restored stale checks amounting
 ₱771,851.23; and (c) misclassification of various transactions totaling
₱78,102.48, thereby casting doubt as to their accuracy, reliability and
validity.

We recommended, and the Management agreed, that the Local Chief Executive
direct the:

a. Municipal Treasurer and other concerned offices to coordinate with the

suppliers and employees to inform them of the unclaimed payables, otherwise
provide certification to the Municipal Accounting Office that there are no
valid claimants for the long outstanding payables to facilitate the appropriate
reversion of funds.

b. Municipal Accountant to:

1. Regularly check, monitor and keep the Payable accounts updated and
adequate;

2. Evaluate unclaimed obligations totaling ₱1,126,238.57 from the GF

and TF that remained outstanding for two years or more. In the event
that no actual claim has been filed, whether administrative or judicial
or payables are not covered by perfected contracts or records,
recommend for the reversion of the same; and

3. Effect the necessary adjusting entries for the erroneous and

misclassified accounts, if warranted, pursuant to Annex B of COA
Circular No. 2015-009 dated December 1, 2015.

6. Weak control in the receipt, handling, distribution and recording of the

donated vaccines such as used and discarded vials were not returned to the
PHO together with the Reverse Logistics Forms during CY 2022; non-
preparation Summary/List of Donations Received, Distributed and Balances
and its supporting documents and the Registry of Donated COVID-19
vaccines; failure to properly account for the donated COVID-19 vaccines and
ancillary supplies; and non-disclosure of the donations in the Notes to
Financial Statements, hence, may expose people to infectious waste and a
potential health risk and the risk of loss or improper disposition of the
vaccines.

We recommended, and the Management agreed, that the LCE direct the:

a. MHO to:

1. Assign the receipt, safekeeping and transfer to PHO of the used and
discarded vials functions to Sanitation Inspector (SI).
 2. Require SI to properly store and transfer the vials together with the
consolidated Form A – Reverse Logistic to PHO every Friday of the
vaccination week.

3. Record all donations-in-kind received by the RHU in the

Summary/List of Donations Received, Distributed and Balances, duly
supported with the (1) Acknowledgment Receipts, (2) proof of receipt
by and distribution to the beneficiaries not necessarily in the required
form, and (3) the inventory of remaining undistributed items, if any;
4. Submit a copy of the same to the Municipal Treasurer and the
Municipal Accountant.

b. Municipal Treasurer to:

1. Assist the MHO in the inspection and acceptance of all donations-in-

kind, and in the conduct of inventory of the remaining undistributed
items, if any;

2. Maintain copies of the Summary/List of Donations Received,

Distributed and Balances and its supporting documents; and
3. Prepare and maintain a Registry of Donated COVID-19 Vaccines

c. Municipal Accountant – Designate to:

1. Based on the Registry of Donated Relief Goods for DRRM, make a

disclosure in the Notes to FS as to the quantity of received, issued and
balance of all donation-in-kind received by the Municipality, with
categorization as to food items, medicines and medical supplies,
hygiene kits, and others.

7. Payment of One COVID-19 Allowance (OCA) to the Municipality’s Job

Order Personnel involved in COVID-19 response covering the period
January to April and June 2022 amounting to ₱198,000.00 were erroneously
recorded as Other Personnel Benefits instead of Other MOOE due to
misrepresentation of their employment status as Casual Employee in the
OCA Report, thus affecting the fair presentation of the financial statements.

We recommended, and the Management agreed, that the Local Chief Executive
require:

a. The Human Resource Management Officer (HRMO) and the Municipal

Health Officer (MHO) to make truthful representation of the employment
status of the Health Care Workers (HCW) and non-HCWs and other
information in the OCA Report in adherence to the signed Attestation Form;
and
 b. Require the Municipal Accountant to make necessary adjustment on the
misclassification of Other Personnel Benefits to Other MOOE accounts by
the same amount of ₱198,000.00 in the payments of OCA to JO personnel in
the CY 2022 Statement of Financial Performance.

8. Due to delayed procurement, two (2) projects appropriated under the 20%
Development Fund aggregating ₱22,168,559.60 or 62.45% of the total
appropriation were not implemented by the Municipality in CY 2022,
thereby depriving the constituents of the immediate benefits that could have
been obtained had the development PPAs been implemented.

We recommended, and the Management agreed, that the Municipal Mayor,

through the MPDC, provide specificity of schedules in the Annual Investment
Plan (AIP) and Annual Procurement Plan (APP) in the implementation of planned
PPAs from the start of the project until its completion dates to provide basis for
work plans and to serve as guide in procurement planning and to further ensure
that all planned PPAs will be implemented during the budget year.

9. Continuing Appropriations under the 20% Development Fund aggregating

₱8,547,706.83 remained unimplemented and were not re-programmed and
re-appropriated for other socio-economic and environmental projects,
amongst is a contract costing ₱5,784,140.00 awarded during CY 2021 with
the 15% mobilization fee of ₱867,621.00 already released to the contractor,
and despite the 326 CDs delay in its implementation, no termination of
contract, forfeiture of performance security and imposition of sanctions
thereto was made by the LGU, thereby depriving the constituents of the
benefits that could have been obtained had the economic development PPAs
been utilized and implemented.

We recommended, and the Management agreed, that the Local Chief Executive as
Head of the Procuring Entity to rescind the contract of JFR Construction Inc. for
the Site Development of Proposed New RHU, forfeit their performance security
and to demand for the immediate refund of the advance payment of ₱867,621.00.
Moreover, ensure the take-over the prosecution of the project or awarding of the
same to a qualified contractor through negotiated procurement.

Further, we recommend that the Local Chief Executive direct the:

a. Municipal Development Planning Coordinator to Strictly monitor the

implementation of the awarded projects and ensure that all planned PPAs
under the current and continuing appropriation are fully implemented;

b. Municipal Engineer to conduct regular monitoring and inspection on the

implementation of infrastructure projects and strict compliance of the
contractor to the terms of the contract and technical specifications of the
project;
 c. Members of the Bids and Awards Committee to conduct careful examination
of the contractor’s qualification during bid-evaluation and post-qualification
and take account for the delays and failure to implement projects previously
awarded; and

d. Local Development Council, Municipal Planning Coordinator and Local

Sanggunian to coordinate with the Municipal Accountant and Municipal
Budget Officer for the monitoring of the balances of continuing appropriation
under the 20% Development Fund that pertains to the savings from
completed and discontinued projects subject for reprogramming and
reappropriation to other priority socio-economic and environmental projects.

10. The Municipality incurred lapses in the appropriation, disbursement,

recording and reporting of the Local Disaster Risk Reduction and
Management Fund (LDRRMF) such as: (a) non-allocation for the Recovery
and Rehabilitation thematic area; (b) changes in the LDRRMIP were not
covered by an ordinance authorizing the Local Chief Executive (LCE) to
augment items in the approved annual budget which resulted to
disbursement in excess of the authorized appropriation amounting to
₱2,246,023.49 constituting an illegal disbursement; and (c) disbursement
charged to the Special Trust Fund (STF) amounting to ₱2,306,778.00 was
made despite the absence of LDRRMFIP for the STF totaling ₱5,136,599.67,
thereby affecting the agency’s readiness and preparedness in the event of the
actual occurrence of a disaster.

We recommended, and the Management agreed, that the Local Chief Executive
strictly adhere to the guidelines on the use of appropriated funds and savings
through augmentation and ensure that any changes in the Annual Budget are duly
authorized by the Local Sanggunian through enactment of an ordinance.

We further recommended to direct the:

a. Municipal Disaster Risk Reduction Management Officer-Designate to:

1. Allocate funds for Disaster Recovery and Rehabilitation area as this is

also important in disaster and risk management;

2. Ensure proper monitoring on the utilization of LDRRMF and

immediately communicate PPAs that are in need of funding;

3. Ensure the inclusion in the LDRRMFIP of the activities to be funded

from the unexpended QRF and DRRMF-MOOE from previous years
under the Special Trust Fund before the implementation of the project;
and
 4. Refrain from adjustment of appropriation per PPA in the LDRRMFIP
without legal basis or authority through enactment of ordinance by the
Local Sanggunian.

b. The Municipal Accountant and Municipal Budget Officer to ensure all

disbursement are in accordance with the approved Annual Budget together
with the LDRRMFIP and strictly monitor the availability of appropriation
before the approval of an obligation.

11. The collection rate of the Municipality on the levy of Real Property Tax
(RPT) is ₱2,873,160.40 or 31% only of the total receivable for CY 2022
amounting ₱9,385,123.46; and 22.87% only of the approved
BLGF/Provincial target collection totaling ₱12,564,171.41 due to low
collection efforts, not compliant to Section 247 of RA No. 7160, resulting to
the accumulation of delinquent real property taxes by ₱62,556,557.52 at the
end of the year.

We recommended, and the Management agreed, that the Local Chief Executive
direct the Municipal Treasurer to immediately send collection letters to the
delinquent tax payers and provide a copy of their payments to this Office; and

We likewise recommended that the legislative officials, in consultation with the

MT and other concerned officials to draw up plans to strategize and strengthen
collection drive beyond the required posting and sending of notices.

12. Twenty-five percent share of the barangays were not remitted on a quarterly
basis and the last quarter share for CY 2022 totaling ₱91,272.99 remained
unremitted to date, thereby depriving the constituents of the benefits they
could have enjoyed had the taxes been collected accurately and efficiently.

We recommended, and the Management agreed, that the Municipal Mayor direct
the Municipal Accountant and the Municipal Treasurer to regularly release the
respective barangay share.

13. The necessity, propriety and legality of hiring 412 Job Order (JO) personnel
or 302.94% of its 136 regular personnel with corresponding expenses
amounting to ₱28,895,780.50 could not be established due to the absence of
an individual contract containing the specific job description or well-defined
duties and responsibilities; certification and a detailed accomplishment
report of each personnel, and non-consideration of service requirement and
financial capability of the municipality in employing an excessive number of
JO personnel.

We recommended, and the Management agreed, that the Local Chief Executive
require the HRMO to:
 a. Prepare the Organizational Structure and Staffing Pattern Plan in order to
assess the required number of JO workers to be hired based on necessity and
financial capability of the municipality;

b. Coordinate with the heads of the departments and offices to prepare and
submit a notarized individual job order contract incorporating a well-defined
job description stating therein the specific work to be assigned to each JO
personnel; and

c. Submit a copy of Detailed Individual Accomplishment Reports to facilitate

comparison with the job description stated on their contracts, thereby,
ensuring the protection of government funds from unnecessary and excessive
expenditures.

Summary of Audit Suspensions, Disallowances and Charges (SASDC)

The balances for the audit suspensions, disallowances and charges as at December
31,2022 was ₱55,939.80; ₱7,730,200.00 and ₱00,00, respectively, or a total of
₱7,786,139.80 based on the Notice of Suspension (NS), Notice of Disallowance (ND),
and Notice of Charge (NC) issued by this Commission. While any NS, ND and NC for
CY 2022 post-audit of transactions are still to be issued.

Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the 65 audit recommendations contained in the 2021 Annual Audit Report, 22

were implemented and 43 were not implemented.