Executive Summary

EXECUTIVE SUMMARY

INTRODUCTION

Lamitan was derived from the phrase Lami-Lamihan which means a blend of Merry Making and conference. The town was named by the first Spaniards from Isabela who exploded this area. When the Spaniards arrived the Yakans were celebrating the native festival. The explorers inquired the name of the place, the Yakans thought they were inquiring about what the merry making was all about and explained it was the festival of Lami-Lamihan, the Spaniards misunderstood their answer, thereafter called the place LAMITAN. Lamitan, was founded in 1886 by the legendary figure Pedro Javier Cuevas popularly known as Datu Halun. He was born in the town of Bacoor Cavite on June 9, 1846. During his reign he subjugated local Yakan Chieftains and consolidated their forces through his bravery and leadership. In an effort to uplift the status of Lamitan municipality into a city, Mayor Roderick H. Furigay through the help of former congressman Jerry Salapuddin revived and worked out the shelved cityhood application of Lamitan. Through sheer determination and resolve, Mayor Roderick H. Furigay succeeded in this undertaking. On July 24, 2006 the thirteenth congress began deliberating, the act known as RA. 9393 “An act converting the Municipality of Lamitan in the Province of Basilan into a component city to be known as the “City of Lamitan” passed the house of representative and senate on February 5, 2007 and February 6, 2007 respectively. On March 15, 2007 RA 9393, finally lapsed into law without the signature of the president in accordance with Article VI, Section 27 of the constitution, on June 18, 2007 a plebiscite as held and the YES vote won convincingly. After a series of petitions by the League of Cities of the Philippines which questioned the legality of the laws creating the sixteen (16) cities, and recall on the entry of judgement on December 21, 2009, an En Banc resolution was adopted by the Supreme Court on February 15, 2011 which declared the laws creating these cities constitutional. On June 28, 2011, the Cityhood law, Republic Act 9393 become final and executor and was recorded in the Book of Entries of Judgement.

Highlights of Financial Operation For the CY 2016, the City of Lamitan, Province of Basilan, received Internal Revenue Allotment Fund in the total amount of P 419,666,830.00 and generated total income P 26,060,068.87. Total appropriation for the CY 2016 amounted to P 701,000,141.20.

Scope of Audit A financial and compliance audit was conducted on the accounts and operation of City of Lamitan for the year then ended December 31, 2016, to ascertain the propriety of financial transactions and operations and compliance of the agency to prescribed rules and regulations. It was also made to ascertain the accuracy of financial records and reports as well as fairness in the presentation of financial statement

Auditor’s Opinion on the Financial Statements

The auditor rendered a qualified opinion on the fairness of the presentation of the financial statements for the period because of some deficiencies noted in audit. Details are discussed in Part II of these reports.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

1. The implementation process of the newly purchase generator set was not meticulously and judiciously planned by the City Government of Lamitan contrary to Section 7.1 of the Revised IRR of RA 9184 , the Government Procurement Reform Act.

We recommend the following:

Management must comply with all the requirements of RA 9184 and its implementing rules and regulation, also, all procurement should be diligently, meticulously and judiciously planned by the procuring entity to avoid transaction that are disadvantageous to the entity, and

Fast track the construction and preparation of the location site for the generator sets.

2. Advances to Officers and Employees amounting to P253,914.00, of which, P 158, 814.00 are aged 30 days and above, remained unliquidated as of December 31, 2016 and the granting of additional cash advance to official and employee with outstanding cash advances for 2016 violates Section 89 of PD 1445 and COA Circular No. 97 - 002 dated February 10, 1997.

We recommend the following:

Management requires the employees and Official concerned to immediately liquidate their cash advances. They should send follow-up and or demand letters requiring the personnel concerned to liquidate. Otherwise, the unliquidated cash advances should be deducted from their salaries and/or other benefits due them.

The accountant should not allow additional cash advance to any official or employee unless the previous cash advances given to them are first settled or a proper accounting thereof is made.

3. Non submission of the list of all on - going government Projects/Programs/Activities (PPA) and those that are to be implemented during the year contrary to Section 2.1 of COA Circular 2013 - 004.

We recommend that at the beginning of each year, the City Engineer submit the list of all on – going government projects/programs/activities and those that are to be implemented during the year of the agency, as stated in COA Circular 2013 – 004.

4. Non submission of the annual plan and quarterly report for the non- infrastructure project/program/activities (PPA) of the agency contrary to COA Circular 2013 - 004 on information and publicity of projects/program and activities of government agencies, dated January 30, 2013.

We recommend that the management submit its list of all non – infrastructure asset that are to be implemented during the year and also, submit a quarterly report of projects/program/activities for non – infrastructure PPA’s as stated in COA Circular 2013 – 004, section 2.1 and 2.2.4.

5. Cash advances transaction to Lamitan City National High School was conducted in a manner that deviates or departs from the rules and regulations set under COA Circular 97 - 002 and COA Circular 2012 - 001.

We recommend that the City Accountant:

Should send follow-up and or demand letters requiring the Lamitan City National High School to liquidate.

Should not allow additional cash advance to Lamitan City National High School unless the previous cash advances given to them are first settled or a proper accounting thereof is made.

6. The City of lamitan failed to open a separate depository account exclusively for the Local Disaster Risk Reduction Management Fund in accordance with Section 310 of RA 7160 and Section 3 of COA Circular 92 - 382.

We recommend that the management maintain separate depository account for each fund in their custody or administration in compliance with the law.

7. Portion of unexpended/unobligated balance of the QRF and the DRRMF- MOOE was not transferred to the Special Trust Fund under the account "Trust Liability-DRRM" in the Trust Fund books contrary to Section 21 of Republic Act 10121 and COA Circular 2012 - 002.

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We recommend that at the end of each year the City Accountant and the CDRRM officer transfer all the unexpended/unobligated balance of the QRF and the DRRMF - MOOE to the special trust fund under the account “Trust Liability - DRRM” and deposit the corresponding amount to the depository account exclusively for the City Disaster Risk Reduction Management fund.

8. Twenty Nine (29) Liquidation voucher of the City Government of lamitan for local travel transaction as of December of 2016 violates the rules and regulations for official travel of government employee, as stated in Section 4 of Executive order No. 298 and COA Circular 2012 – 001.

We recommend that the management strictly adhered with the rules and regulation stated in Executive Order 298 and COA Circular 2012 – 001 to avoid future disallowances and suspension. Meantime settle the current audit disallowance and submit the necessary documents to settle audit suspension.

9. The current portion of the P326,139,586.22 Loans Payable – Domestic was not reclassified as current liabilities of Long term debt contravening the presentation stated in Part 1 of Philippine Public Sector Accounting Standards (PPSAS) and Item b of Section 16 of Government Accounting Manual (GAM) for NGAS, thus affecting the fair presentation of the Loans Payable account in the Financial Statements (FS) as of December 31, 2016

We recommend that management direct the Accountant to reflect the current portion of Loans Payable separately from its long term debt in the FS, so that its users will be accordingly apprised of the status of its obligation.

10. Unserviceable Property, Plant and Equipment with total carrying amount of P453,800.00, were not derecognized from PPE account, contrary to Paragraph 82 of the Philippine Public Sector Accounting Standard (PPSAS) 17 Property, Plant and Equipment and Section 79 of PD 1445.

We recommend that the City Government of Lamitan:

Require the City Accountant to derecognize PPE with no future economic benefits or no service potential that is expected from its used.

Instruct the CGSO to exclude in the Report of Physical Count of Property, Plant and Equipment (RPCPPE) any obsolete and unserviceable properties; and

Prepare the Inventory and Inspection Report of Unserviceable property (IIRUP), copy furnished the city accounting office for derecognition of accounts, and the COA auditor for inspection and eventual appraisal and disposal.

11. The highest standard of honesty, objectivity and consistency was not observed by the City Government of Lamitan in the keeping of subsidiary ledger for accounts receivable and long term liability accounts contrary to Section 111 of PD 1445 and COA Circular 2010 - 001.

We recommend that the City Accountant submit a complete and extensive subsidiary ledger for accounts receivable and long term liabilities as required under Section 2.1 of COA Circular No. 2010-001and Section 111 of PD 1445.

Status of Implementation of Prior Year’s Audit Recommendations Out of Eleven (11) Audit Recommendations in prior year’s Annual Audit Report, Six (6) were implemented, four (4) was partially implemented and one (1) not implemented by the auditee.