Executive Summary

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Executive Summary EXECUTIVE SUMMARY INTRODUCTION Cavinti is a town in the outskirt of the Province of Laguna and is situated in the foothills of Sierra Madre Mountain Ranges. It is bounded in the north and west by the Municipality of Lumban, on the south by the Municipality of Luisiana, on the east by Mauban, Quezon, and on the west side by the Municipality of Pagsanjan and has a land area of 126 sq. km. Cavinti is composed of 20 barangays. The town’s name came from a tagalog expression “kabitsabinti”. The Aetas, the early dwellers of the land, performed a wedding ritual, which have the groom runs after his bride to the riverbank. The groom will try to capture his bride to her legs (‘binti” in tagalog), with the witnesses shouting “kabitsabinti, kabitsabinti”. This phrase later became “Kabinti” hence the town’s name CAVINTI. On June 30, 2013, the leadership of the Municipality of Cavinti was transferred to the newly-elected Mayor Milbert L. Oliveros with the assistance of Vice-Mayor Danilo G. Arroyo and the Sangguniang Bayan. FINANCIAL HIGHLIGHTS For the Calendar Year2013, the Municipality of Cavinti had realized an income of P94,930,053 registering five percent increase from last year’s figure of P90,621,897. The Municipality appropriated the amount of P102,747,626.09 and obligated P90,853,720.90 with a balance of P11,893,905.19. The continuing appropriation of P30,000.00 remained unobligated at the end of the year. The total assets, liabilities, government equity, income and expenses for CY 2013compared with that of the preceding year are as follows: Increase 2013 2012 (Decrease) Total Assets P121,861,439 P118,543,410 P3,318,029 Total Liabilities 46,088,319 44,516,653 1,571,666 Total Equity 75,773,119 74,026,757 1,746,362 Total Income 94,930,053 90,621,897 4,308,156 Total Expenses 86,752,936 75,146,012 11,606,924 SCOPE OF AUDIT Financial and compliance audit was conducted on the accounts and operations of the Municipal Government of Cavinti for the Calendar Year 2013. The audit was conducted to ascertain the propriety of financial transactions, compliance with prescribed rules and regulations and the economical, efficient and effective utilization of resources. It was also made to ascertain the accuracy of financial records and reports, as well as the fairness of the presentation of financial transactions. AUDIT OPINION ON THE FINANCIAL STATEMENTS The Auditor rendered a qualified opinion on the fairness of the presentation of the financial statements of the Municipality of Cavinti, Laguna due to the unreliability and inaccuracy of the balance of the following accounts: a) Cash in Bank account’s balance of P22,161,100.60 as of December 31, 2013 is unreliable due to the difference of P10,000,619.12 compared to the balance of P12,160,481.48 per treasury records and non-reversion of staled checks totaling P594,848.60 to unappropriated surplus;and b) Property, Plant and Equipment (PPE) account’s balance of P86,663,544.47 due to the continuous failure of the General Services Officer to conduct actual physical count of the assets during the year and lack of inventory reports, property cards and subsidiary ledgers. SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS For the exception cited above, we recommended that the Municipal Mayor: On deficiencies of Cash in Bank Account • require the Municipal Accountant and the Municipal Treasurer to reconcile their records and make the necessary adjustments, where appropriate. Likewise, submit quarterly Treasury Reconciliation Statement for each depository account of the Municipality, jointly certified by them, within fifteen (15) days of the ensuing month of each quarter; and • require the Municipal Accountant to draw journal entry voucher to revert to unappropriated surplus the staled checks marked “cancelled” by the Municipal Treasurer. On deficiencies of PPE Account • creates an Inventory Committee comprising of the Municipal Administrator as chairman, the Municipal Accountant, the Municipal General Services Officer and the concerned department head as members, to conduct annual physical count of all the properties of the Municipality and submit the report thereof for approval; • requires the Municipal Accountant to maintain the perpetual inventory records (Property, Plant and Equipment Ledger Card) for each category of property, plant and equipment and to submit detailed schedule of depreciation allowance for each type of PPE; and • requires the Municipal General Service Officer to submit the approved Report on the Physical Count of PPE by category at end of the fiscal year not later than the 31st day of January of the following year. Other significant observations and recommendations are the following: 1. Real Property Tax Receivables and Special Education Tax Receivables were not set-up at the beginning of the year, contrary to Section 20 of the Manual on the New Government Accounting System (NGAS), Volume I. Moreover, payments made by taxpayers were directly credited to RPT/SEF Income hence, receivables from delinquent taxpayers totaling P3,753,299.81 were not recorded in the books of the agency thereby understating the asset account. We recommended that the Municipal Mayor instruct the Municipal Accountant to set-up Real Property Tax Receivable and Special Education Tax Receivable at the beginning of the year based on the duly certified list of taxpayers showing the amount due and collectible during the year to be prepared by the Municipal Treasurer. Moreover, draw a Journal Entry Voucher to record the amount due and collectible from delinquent taxpayers to come up with more reliable financial statements. 2. Cash advances totaling P726,312 were not liquidated at the end of the fiscal year, contrary to pertinent provisions of COA Cir. 97-002, hence, resulted in the overstatement of receivable account and understatement of expense account both by the same amount, and exposed government funds to possible misuse/loss. We recommended that the Municipal Mayor: ▪ sends letters to the concerned accountable persons demanding the immediate settlement of their outstanding cash advances; and ▪ directs the Municipal Accountant to submit, henceforth, the drafts of demand letters to the accountable officials/employees (AO) of the municipality who failed to settle their cash advances within the prescribed period and to issue immediately the approved demand letters to the concerned AOs. 3. The consolidated year-end balances of reciprocal accounts Due From Other Funds and Due To Other Funds still showed a difference of P211,821, contrary to the Revised Government Chart of Accounts prescribed under COA Cir. 2003-001, thus the balances of both accounts remain unreliable and inaccurate. We recommended that the Municipal Mayor requires the Municipal Accountant to determine the year of occurrence of the initial difference, review all the accounting entries that affected the accounts from the year of occurrence to the present to ascertain the causes of the difference, and, thereafter, to prepare the necessary adjusting/correcting entries. 4. Trial balances rendered to the Auditor were not supported with subsidiary schedules of general ledger account balances, contrary to Sections 70 and 72 of the Manual on NGAS Vol. I for LGUs, hence, resulted in time consuming and arduous analysis and verification of the accounts balances. We recommended that the Municipal Mayor obliges the Municipal Accountant to support the Auditor’s copies of the Municipality’s quarterly pre-closing and year- end post-closing trial balances for each fund with subsidiary schedule of general ledger account balances. 5. Some programs and activities charged against the 20% Development Fund totaling P1,517,619.00 were not in accordance with the Department of Interior and Local Government and Department of Budget and Management Joint Memorandum Circular No. 2011-1 dated April 13, 2011 hence, the desired optimal utilization of the fund to attain the desirable socio-economic development and environmental outcome were not achieved. We recommended that the Municipal Mayor require the Local Development Council to strictly comply with the requirements of the Joint Memorandum Circular No. 2011-1 of DILG and DBM and to prioritize developmental projects and programs identified during the year. 6. Collections due to other government agencies under Due to LGU account were not remitted intact by the Municipality, contrary to Section 271 (d) of the Local Government Code of 1991 and other pertinent rules and regulations, thereby exposing the funds to possible loss and/or misuse. We recommend that the Municipal Mayor requires the Municipal Accountant and the Municipal Treasurer to remit all funds due to other government agencies pursuant to pertinent rules and regulations. 7. Some expenses under Personal Services were overstated/understated due to erroneous recording, contrary to Section 111 (2) of Presidential Decree No. 1445, thus, affected accounts were not properly presented in the financial statements. We recommended that the Municipal Mayor requires the Municipal Accountant to practice diligence in the recording of accounts in the books of the Municipality. Unusual increase or decrease in the accounts should be given attention to determine the accuracy of recordings for proper presentation in the financial statements. Also, we recommended that the Municipal Mayor requires the Municipal Budget Officer to see to it that correct account codes were used in the preparation of Obligation Requests to prevent erroneous recording of accounts. 8. Details of Other Receipts and Other Disbursements in the Condensed Statement of Cash Flows amounting to P4,019,245.93and P12,162,535.35, respectively, were not disclosed in the Notes to Financial Statements, contrary to Section 111 of Presidential Decree No. 14445, casting doubt on the reliability of the statement. We recommended that the Municipal Mayor obliges the Municipal Accountant to provide in the Notes to Financial Statements the Details of Other Receipts and Other Disbursements appearing in the Statement of Cash Flows.
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