EXECUTIVE SUMMARY
A. Introduction
The Municipality of Roxas is a first-class municipality belonging to the 2nd
Congressional District of Isabela. Pursuant to Republic Act No.7160, the Municipality is
mandated to deliver essential services through the realization of its programs and projects to
enhance growth and development, and to promote the maintenance of peace and order in the
locality.
A financial, compliance and performance audit was conducted, on a test basis, on the
accounts and operations of the Municipality of Roxas, Isabela CY 2018 particularly on the
audit trust/areas to ascertain the propriety of financial transactions and compliance with
prescribed rules and regulations. It was also conducted to ascertain the accuracy of financial
records and reports, as well as the fairness of presentation of the financial statements.
Consistent with unnumbered memorandum dated July 19, 2018, the audit thrusts and
focus for the Local Government Sector were prioritized in 2018.
B. Financial and Operational Highlights
B.1. Financial Highlights
The highlights of the financial condition, results of operation, appropriations,
allotments and obligations of the Municipality of Roxas, Isabela for the year ended
December 31, 2018, with comparative figures for CY 2017, are as follows:
2018 2017 Increase
(Decrease)
Financial Condition
Assets 567,585,067.83 373,938,834.36 193,646,233.47
Liabilities 327,891,355.76 137,643,303.40 190,248,052.36
Net Assets/Equity 239,693,712.07 236,295,530.96 3,398,181.11
Results of Operation
Income 233,419,031.12 214,738,380.04 18,680,651.08
Expenses 237,755,617.59 196,135,416.19 41,620,201.40
Appropriation, Allotments and Obligations
Appropriations – Current 258,798,337.16 217,212,218.24 41,586,118.92
Appropriations – Continuing 0.00 0.00 0.00
Allotments – Current 258,004,814.25 217,212,218.24 40,792,596.01
Allotments – Continuing 0.00 0.00 0.00
Obligations – Current 254,838,558.32 205,329,829.16 49,508,729.16
Obligations – Continuing 0.00 0.00 0.00
B.2. Operational Highlights
The following projects, programs and activities were completed in 2018:
Projects,Programs and Activities Location Cost
Modernization Program of the Municipality of
Roxas Roxas, Isabela 15,760,066.00
Local Access Road-Rehab./ Improvement/
Concreting of Lucban to San Jose - San Luis
Farm to Market Road Roxas, Isabela 11,083,364.36
Concreting of Barangay Imbiao Main Road Imbiao, Roxas, Isabela 8,916,035.29
Concreting of Farm to Market Road @ Sitio San Antonio, Roxas,
Puragit Isabela 3,352,318.18
Construction One (1) Unit 3-C1 Standard
School Building with Comfort Room & Septic
Tank @ Lanting Integrated School Lanting, Roxas, Isabela 1,970,484.16
Concreting of Barangay Road Quiling, Roxas, Isabela 2,391,073.35
San Placido Roxas,
Concreting of Barangay Road Isabela 2,391,073.35
Concreting of Barangay Road Marcos, Roxas, Isabela 2,391,073.35
Concreting of Barangay Road Sinamar, Roxas, Isabela 2,391,073.35
Construction One (1) Unit 3-C1 Standard
School Building with Comfort Room & Septic
Tank @ Lanting Integrated School Lanting, Roxas, Isabela 1,970,484.16
Construction of 2-C1 Standard School Building
With Comfort Room & Septic Tank @ Matusalem, Roxas,
Matusalem Elementary School Isabela 1,379,011.55
Doña Concha, Roxas,
Concreting of Barangay Road Isabela 2,390,007.55
Villa Conception,
Concreting of Barangay Road Roxas, Isabela 2,390,007.55
San Pedro,Roxas,
Concreting of Barangay Road Isabela 2,390,007.55
San Pedro,Roxas,
Construction of Barangay Health Station Isabela 1,515,266.01
Construction of 2-C1 Standard School Building
With Comfort Room & Septic Tank @ Lucban-
Masigun Elementary School Lucban, Roxas, Isabela 1,379,245.09
Muñoz West, Roxas,
Concreting of Barangay Road Isabela 2,389,680.95
Muñoz East, Roxas,
Concreting of Barangay Road Isabela 2,389,650.95
San Rafael, Roxas,
Concreting of Barangay Road Isabela 2,389,800.95
Concreting of Barangay Road San Antonio, Roxas,
Isabela 2,389,869.05
Concreting of Barangay Road Lanting, Roxas, Isabela 2,390,760.95
Construction/ Rehabilitation of Concrete Floor
Slab (20.00m x 0.10m) @ Monico Rarama San Pedro,Roxas,
National High School Isabela 560,546.43
Concreting of Barangay Road Marcos, Roxas, Isabela 523,353.48
Concreting of Service Road Inside the Matusalem, Roxas,
Compound of Matusaem ISU Campus Isabela 1,907,698.64
Excavation, Pushing/ Spreading of Garbage
Material and Backfilling of Soil on Top of the San Placido Roxas,
Garbage @ New Sanitary Landfill Isabela 1,978,845.30
Simimbaan, Roxas,
Concreting of Barangay Road Isabela 2,387,968.35
Matusalem, Roxas,
Concreting of Barangay Road Isabela 2,389,120.35
Supply and Installationn of Four (4) Units
HVLS fan for the Ventilation and Cooling
System, Mounting of 450-Units Fiber Stadium
Chairs Roxas, Isabela 3,000,000.00
Upgrading/Construction of Reinforced
Concrete Pipe Drainage w/ Concrete Manhole
Cover @ Miguel St., Roxas, Isabela Luna, Roxas, Isabela 807,000.00
TOTAL 89,564,886.25
C. Independent Auditor’s Report on the Financial Statements
We were rendered a Modified Opinion on the fairness of presentation of the financial
statements due to the following:
1. The amount of P15.940 million recorded in the books of the Municipality and reflected in
its submitted year-end financial statements under the account Road Networks only
represents the cost incurred in the construction/rehabilitation of municipal roads in 2018,
hence recognition of the Local Road Network in the books of accounts was below the
required complete recognition target of at least 75% of the total value as of 2018 pursuant
to COA Circular No. 2015-008 dated November 23, 2015.
Provisions for depreciation for the road components of the recorded value of Road
Networks was not computed and provided, and the total road network system was not
disclosed in the Notes to Financial Statements of the Municipality as illustrated under
Annex B of COA Circular No. 2015-008.
2. The accuracy of the reported balances of the Inventory accounts totaling P 955,150.35
was doubtful due to (a) non-preparation and submission of the Report on the Physical
Count of Inventory (RCPI) and (b) non-reconciliation of balances between Accounting
and General Services Office (GSO) contrary to Section 114 and 124 of the New
Government Accounting System (NGAS) Manual for Local Government Units (LGUs),
Volume 1.
3. The accuracy of the Property, Plant and Equipment (PPE) account valued at
P139,445,894.10 remained doubtful due to failure of management to reconcile the
physical inventory balances with the subsidiary ledger balances.
D. Summary of Significant Findings and Recommendations
For the exceptions mentioned above, we recommended that:
1. The Municipal Engineer provides the Municipal Accountant and the General Services
Officer with the complete description and cost segregation of road components for road
projects.
2. The General Services Officer maintains a Local Road Inventory and Road Map and shall
keep a complete Local Road Network Property Card for all roads and its components.
3. The Municipal Accountant prepares the Journal Voucher to record the inventory of the
local road network and its components in the general ledger and the Local Road Network
Ledger Card. She shall keep and maintain subsidiary records for roads and road
components for every road network, and ensure that 100% of the value of road network
of the Municipality shall be booked-up in 2019 consistent with COA Circular No. 2015-
008. Full disclosure on road networks should be made in the Notes to the Financial
Statements of the Municipality.
4. Municipal General Services Officer conduct physical count of all inventories, prepare the
corresponding Report on the Physical Count of Inventories, and submit the same to the
Accounting Office for reconciliation with the reported balances in the books and to the
Office of the Auditor.
5. Municipal Accountant record the inventory following the Perpetual Inventory Method.
6. The Management through the Municipal Accountant and the GSO reconcile the listings
of physical count of property against the subsidiary ledgers, in case of
deficiencies/discrepancies, make the necessary adjustments/corrections of the accounts.
The other significant audit observations and recommendations are the following:
1. Cash deficit/overdraft of P20.718 million was incurred as at year-end 2018 which is
attributable to the huge amount of cash advances granted to municipal officials and
employees that remain unliquidated totaling P31.455 million.
We recommended that the municipal administrators discharge its duties and
responsibilities through efficient and effective management of the Municipality’s
finances to avoid incurrence of overdrafts.
2. Local Disaster Risk Reduction and Management Fund Investment Plan (LDRRMFIP) of
the Municipality for CY 2018 did not include the projects/activities charged to the
unexpended Local Disaster Risk Reduction and Management Fund (LDRRMF) of
previous years, as provided in Section 5.1.2 of COA Circular No. 2012-002 dated
September 12, 2012.
We recommended that the Local Chief Executive require the LDRRMO to incorporate in
the LDRRMFIP the detailed planned projects/programs/activities chargeable to the
unexpended LDRRMF of previous years in compliance with COA Circular NO. 2012-
002 dated September 12, 2012.
3. The Municipality appropriated P 9,687,950.80 or 5% of estimated revenue from regular
sources for the Local Disaster Risk Reduction Management Fund (LDRRMF)
programs/projects and activities. However, the Municipality erroneously charged the
amount of P 995,024.91 to the LDRRMF contrary to NDRRMC, DBM and DILG Joint
Memorandum Circular No. 2013-1 dated March 25, 2013, thus affecting the optimum
utilization of the fund that will benefit its constituents.
We recommended that the Management ensure that the LDRRMF be properly disburse
accordingly as prescribed under NDRRMC, DBM and DILG Joint Memorandum
Circular No. 2013-1 dated March 25, 2013.
4. Various projects funded by National Government Agencies (NGAs) were implemented
during the year, however, some programs/projects were still on-going and some are still
unimplemented as of the end of the year contrary to the provisions of the Memorandum
of Agreement between the NGAs and the Local Government Unit.
We recommended that the Management evaluate the status of the project implementation
and identify the reason for the delay in the completion of the projects funded by the
NGAs and to fast track the implementation of the programs/projects for the benefit of the
constituents.
5. The unexpended Priority Development Assistance Fund (PDAF) amounting to P 10.249
million were not remitted/return to the Department of Finance contrary to COA
Memorandum No. 2013-008 dated December 6, 2013 and Item 3(a) of COA
Unnumbered Memorandum dated March 26, 2014.
We recommended that the unexpended Priority Development Assistance Fund be
reverted to the unappropriated surplus of the general fund and subsequently
remitted/returned to the Department of Finance pursuant to COA Memorandum No.
2013-008 dated December 6, 2013 and Item 3(a) of COA Unnumbered Memorandum
dated March 26, 2014.
E. 20% Development Fund
The following were significant observations and recommendations with regards the
Municipality’s 20% Development Fund:
1. Various maintenance and other operating expenditures with an aggregate amount of
P2.743 million were charged against the 20% Economic Development Fund (EDF) of the
Municipality thus the intended purpose of the fund which is for development projects,
programs and activities was not optimized, contrary to DBM-DILG Joint Memorandum
Circular No. 2017-1 dated February 22, 2017.
We recommended that Management should ensure that the 20% EDF of the LGU be
allotted and used for priority development programs, projects and activities which shall
contribute to the attainment of desirable socio-economic, development and environmental
management as prescribe under DBM-DILG Joint Memorandum Circular No. 2017-1
dated February 22, 2017.
2. The Municipality appropriated P 29,906,719.20 or 20% of its annual Internal Revenue
Allotment (IRA) for 20% Development Fund. However, the optimum utilization of the
fund was not achieved leaving a balance of P 6,856,892.79 for on-going and
unimplemented programs/projects/activities set to the Municipalities Annual Investment
Plan which deprives its constituents the benefits they derive if these projects were
implemented within the time frame set by the Municipality.
We recommended that the Management limit its expenditures to what is appropriated.
The Municipal Budget Officer should maintain a registry to prevent the incurrence of
expenditures in excess of allotments.
3. Various projects/programs and activities under 20% Development Fund exceeded the
appropriations per approved annual budget by P 999,634.54 contrary to Section 305 (a)
of RA 7160 or the Local Government Code of the Philippines, which resulted to loss of
budget of other development projects of the Municipality.
We recommended that the Management monitor and ensure the full implementation and
completion of all the LGU’s programs, projects and activities funded under the 20%
Development Fund to immediately serve the intended purpose or use thereof to the
constituents.
F. Ecological Solid Waste Management
The Municipality is a compliant of RA 9003 or the Ecological Solid Waste Management.
The Municipal Sanitary Landfill was located at San Placido, Roxas, Isabela with a total
area of 10 hectares.
G. Gender and Development
The Municipality appropriated P 9,687,950.80 or 5% of Internal Revenue Allotment
(IRA) to its Gender and Development (GAD) programs/projects/activities. However, the
Municipality failed to monitor the proper utilization of the fund which exceeded the
appropriations per approved GAD Plan and Budget amounting to P 923,052.46 contrary
to Section 305 (a) of RA 7160 or the Local Government Code, thus resulted to loss of
budget to other GAD programs/projects/activities of the Municipality.
We recommended that the expenditures should be limited to what is appropriated. The
Municipal Budget Officer should maintain a registry to prevent the incurrence of
expenditures in excess of allotments.
H. Audit of Revenues
LGU Roxas, Isabela collected P 233,419,031.12 or 110.01% of the estimated revenues
from property taxes, fees and licenses, businesses and other sources for 2018.
I. Remittance of Mandatory Contributions/Premiums to GSIS, PAGIBIG and
PHILHEALTH
The Municipality failed to remit in full the GSIS and Pag-ibig premiums and loan
repayments totaling P 1,793,395.98 contrary to Section 69 of PD 1445, Section 6 (b) of
RA 8291 and RULE VII Section 3 of the IRR of RA 9679, thus officials and employees
concerned are deprived from the benefits that are due to them.
We recommended that the Management should reconcile the account to which the non-
remittance apply and immediately remit to the concerned agency the amount due and to
regularly remit the amounts due to BIR, GSIS, PAGIBIG and PhilHealth within 10 days
of each calendar month to avoid penalties pursuant to Section 69 of PD 1445 and Section
6(b) of RA 8291 and Rule VII Section 3 of IRR of RA 9679.
J. Compliance with Tax Laws
The Municipality withheld a total of P 14,166,680.65 due to BIR but only remitted a total
of P 11,601,165.08 leaving an unremitted balance of P 2,565,515.57 for the year 2018.
On January 2019, the Municipality remitted P 2,098,868.24. Therefore, the municipality
has an unremitted due to BIR amounting to P 466,647.33.
K. Summary of Total Suspensions, Disallowances and Charges
There were no unsettled Notice of Suspensions and no Notice of Disallowance and
Notice of Charges issued during the year.
L. Status of Implementation of Prior Year’s Audit Recommendations
Out of seven (7) audit recommendations embodied in the previous years’ Annual Audit Report,
two (2) were fully implemented, three (3) were partially implemented and two (2) was not
implemented.
