FAQ: Municipality of Basey COA audit report (CY 2024)

The Municipality of Basey was founded and created by virtue of a Royal Spanish proclamation. It is politically subdivided into fifty-one (51) barangays and is officially classified as a 1st class municipality. It serves primarily as a general-purpose local government unit responsible for delivering basic, regular, and direct services and providing effective governance to the constituents within its territorial jurisdiction.

The Auditor rendered a Qualified Opinion on the combined financial statements of the Municipality of Basey for the year ended December 31, 2024.

The qualified opinion was issued due to six (6) major financial reporting deficiencies:

1. 1.Insufficient Disclosures in Notes to Financial Statements: Inadequate disclosures on Receivables, Inventories, Property, Plant and Equipment (PPE), and Biological Asset accounts totaling ₱1,012,776,538.24, along with the omission of required reconciliation statements.
2. 2.Omission in Statement of Comparison of Budget and Actual Amounts (SCBAA): Failure to reflect data in the Continuing Appropriations section of the SCBAA.
3. 3.Unascertained Accuracy of Cash in Bank: Unreverted 19 unreleased checks totaling ₱2,294,313.33 and 3 cancelled checks totaling ₱20,125.00 in the Cash in Bank - Local Currency Current Account (CIB-LCAA) balance of ₱111,348,807.21.
4. 4.Non-Reclassification of Completed Construction in Progress (CIP): Retention of completed Rice Processing I Building (₱2,712,092.67) and Rice Mill (₱1,105,500.00) in CIP due to an unpaid balance of ₱246,411.15, omitting depreciation and accounts payable.
5. 5.Misclassification of Livelihood Assistance: Outright expensing of ₱1,500,000.00 in livelihood assistance sourced from the 20% Development Fund as “Donations” without submission of liquidation reports instead of recording it under “Due from NGO/PO”.
6. 6.Unliquidated National Government Transfers: Unliquidated fund transfers from the Department of Tourism (DOT) Regional Office No. VIII amounting to ₱1,848,820.00, overstating the Due to NGAs account.

The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and International Public Sector Standards on Auditing. It evaluated the accounts and operations of the Municipality for CY 2024 with emphasis on priority audit thrusts for the Local Government Sector, including: Cash & Cash Equivalents, Advances for Payroll, Property, Plant and Equipment (PPE), Prepaid Insurance, Due to NGAs, Due to BIR, Due to PhilHealth, Pag-IBIG, and GSIS, Consultancy Services, and Other General Services.

The audit methodology included:

• Examining evidence supporting amounts and disclosures on a test basis;
• Assessing accounting principles used and reasonableness of management’s estimates;
• Verification, reconciliation, and analysis of financial accounts;
• Ocular inspection of infrastructure projects;
• Interviews with municipal officials and employees; and
• Performance and compliance audits on special funds (LGSF-SBDP / NTF-ELCAC, 20% Development Fund, LDRRMF, and GAD Fund).

As of December 31, 2024, the combined financial position of the Municipality of Basey stood as follows:

• Total Assets: ₱1,130,821,080.03
• Total Liabilities: ₱254,519,709.46
• Total Net Assets/Equity: ₱876,301,370.57

A comparative analysis reveals an increase in Assets and Equity, alongside a decrease in Liabilities:

Total Current Assets amounted to ₱246,210,507.61 (compared to ₱362,047,098.26 in CY 2023), composed of:

• Cash and Cash Equivalents (Note 4): ₱119,601,319.84

  • Cash - Local Treasury: ₱466,912.41
  • Petty Cash: ₱0.00
  • Cash in Bank - Local Currency Current Account: ₱119,134,407.44
• Investments (Note 5): ₱1,600.00 (Guaranty Deposits)
• Receivables (Note 6): ₱111,505,379.05

  • Loans & Receivable Accounts: ₱68,995,280.68 (Real Property Tax: ₱31,323,611.32; Special Education Tax: ₱30,213,883.53; Accounts Receivable: ₱1,603,000.00; Loans Receivable - others: ₱5,854,785.83)
  • Inter-Agency Receivables: ₱775,483.12 (Due from NGAs: ₱237,405.02; Due from LGUs: ₱538,078.10)
  • Intra-Agency Receivables (Due from Other Funds): ₱10,369,309.50
  • Advances: ₱28,535,199.26 (Advances for Payroll: ₱20,260,406.92; Advances to SDO: ₱2,028,047.07; Advances for Officers and Employees: ₱6,246,745.27)
  • Other Receivables: ₱2,830,106.50 (Receivables - Disallowances/Charges: ₱78,158.43; Due from Officers and Employees: ₱1,317,379.14; Due from NGO/POs: ₱1,000,000.00; Other Receivables: ₱434,568.93)
• Inventories (Note 7): ₱12,413,996.39

  • Food Supplies for Distribution: ₱6,144,235.80
  • Drugs and Medicines for Distribution: ₱4,628,621.09
  • Welfare Goods for Distribution: ₱648,223.00
  • Other Supplies and Materials Inventory: ₱464,224.00
  • Medical, Dental and Lab Supplies: ₱234,730.00
  • Agricultural and Marine Supplies: ₱206,430.00
  • Drugs and Medicines Inventory: ₱68,252.50
  • Accountable Forms, Plates, and Stickers: ₱19,280.00
• Prepayments and Deferred Charges (Note 8): ₱2,688,212.32

  • Advances to Contractors: ₱2,196,175.16
  • Prepaid Insurance: ₱459,019.95
  • Prepaid Registration: ₱33,017.21

Total Non-Current Assets amounted to ₱884,610,572.42 (compared to ₱743,276,415.14 in CY 2023), composed of:

• Property, Plant and Equipment (Net) (Note 9): ₱881,193,508.92

  • Infrastructure Assets: ₱440,680,040.52 (Road Networks: ₱350,028,968.01; Power Supply: ₱26,153,836.52; Parks, Plazas: ₱17,971,058.30; Flood Control: ₱14,706,652.54; Seaport Systems: ₱14,064,825.18; Water Supply: ₱13,985,928.95; Other Infra: ₱3,768,771.02)
  • Buildings and Structures: ₱280,052,587.55 (Buildings: ₱155,790,368.19; Other Structures: ₱62,447,029.04; Slaughterhouses: ₱23,278,749.68; Hospitals & Health Centers: ₱18,760,980.03; School Buildings: ₱16,948,327.95; Markets: ₱2,827,132.66)
  • Transportation Equipment: ₱45,985,726.77 (Motor Vehicles: ₱43,679,613.57; Other Transportation: ₱1,858,041.78; Watercrafts: ₱448,071.42)
  • Construction in Progress (CIP): ₱44,330,186.31 (CIP - Infra: ₱36,914,017.36; CIP - Buildings & Structures: ₱7,416,168.95)
  • Land and Land Improvements: ₱29,537,742.17 (Land: ₱26,744,745.27; Other Land Improvements: ₱2,792,996.90)
  • Machinery and Equipment: ₱24,729,030.46 (Agricultural/Forestry: ₱13,926,113.69; ICT Equipment: ₱6,685,479.59; Disaster Response & Rescue: ₱2,379,225.33; Construction/Heavy Equipment: ₱1,640,468.90; Medical Equipment: ₱1,028,524.93; Other Machinery: ₱427,604.45; Machinery: ₱86,351.02; Technical/Scientific: (₱1,768.46); Communication: (₱8,288.87); Office Equipment: (₱1,434,680.12))
  • Other Property, Plant and Equipment: ₱11,005,995.57
  • Furniture, Fixtures and Books: ₱4,872,199.57
• Biological Assets (Note 10): ₱3,417,063.50 (Breeding Stocks)

Total Liabilities amounted to ₱254,519,709.46, broken down into:

• Current Liabilities (Note 11): ₱190,985,413.72

  • Inter-Agency Payables: ₱139,906,703.29 (Due to NGAs: ₱126,050,870.18; Due to LGUs: ₱7,877,146.69; Due to GSIS: ₱3,569,233.59; Due to GOCCs: ₱1,652,724.26; Due to PAG-IBIG: ₱663,025.01; Due to BIR: ₱75,988.34; Due to PhilHealth: ₱17,715.22)
  • Trust Liabilities: ₱30,142,364.95 (Trust Liabilities - DRRMF: ₱20,080,267.89; Trust Liabilities: ₱7,248,058.01; Guaranty/Security Deposits Payable: ₱2,814,039.05)
  • Financial Liabilities: ₱18,443,078.29 (Accounts Payable: ₱15,755,198.76; Due to Officers and Employees: ₱2,687,879.53)
  • Intra-Agency Payables: ₱2,493,267.19 (Due to Other Funds: ₱2,343,635.39; Due to Economic Enterprises: ₱81,891.55; Due to Special Accounts: ₱67,740.25)
• Non-Current Liabilities (Note 12): ₱63,534,295.74

  • Deferred Credits/Unearned Income: ₱61,552,264.88 (Deferred Real Property Tax: ₱31,338,381.37; Deferred Special Education Tax: ₱30,213,883.52)
  • Other Payables: ₱1,982,030.86

In CY 2024, the Municipality earned a total revenue of ₱318,908,845.40 (an increase of 6.64% from ₱299,055,159.15 in CY 2023).

Details of Tax and Service/Business Income:

• Tax Revenue Breakdown (Note 13): Business Tax: ₱2,934,206.43; Special Education Tax: ₱787,066.84 (less Discount: (₱64,310.62)); Community Tax: ₱636,603.74; Real Property Tax Basic: ₱629,653.47 (less Discount: (₱51,448.50)); Fines and Penalties: ₱355,573.40 (Property: ₱277,637.03; Other: ₱68,344.77; Individual/Corp: ₱9,591.61).
• Service & Business Income Breakdown (Note 14): Permit Fees: ₱1,336,943.72; Clearance & Certification Fees: ₱1,289,591.88; Fishery Rental Fees: ₱988,486.00; Registration Fees: ₱942,775.00; Other Business Income: ₱894,848.24; Garbage Fees: ₱284,880.00; Registration Plates/Tags/Stickers: ₱275,045.00; Fines & Penalties: ₱154,030.67; Processing Fees: ₱135,221.18; Other Service Income: ₱126,290.00; Interest Income: ₱77,528.43; Rent Income: ₱69,800.00; Slaughterhouse Operation: ₱64,276.00; Inspection Fees: ₱17,000.00.

Total current operating expenses for CY 2024 stood at ₱286,990,919.35 (compared to ₱250,036,312.80 in CY 2023), distributed as follows:

MOOE Breakdown Highlights:

• Contracted Services (Note 19): ₱44,943,082.64 (Other General Services: ₱41,434,361.26; Environment/Sanitary Services: ₱3,508,721.38)
• Other MOOE (Note 24): ₱27,978,367.29 (Other MOOE: ₱16,904,353.54; Donations: ₱10,592,783.75; Rent: ₱361,200.00; Membership Dues: ₱113,200.00; Advertising: ₱6,830.00)
• Supplies & Materials (Note 18): ₱24,881,652.81 (Food Supplies: ₱8,547,557.00; Fuel, Oil & Lubricants: ₱6,313,076.86; Drugs & Medicines: ₱5,578,954.75; Other Supplies: ₱5,126,903.10; Office Supplies: ₱3,004,030.74; Ag/Marine: ₱1,038,408.00; Medical/Lab: ₱307,864.11; Accountable Forms: ₱292,820.00)
• Training and Scholarship (Note 18): ₱16,676,164.67 (Scholarship Grants: ₱11,713,000.00; Training: ₱4,963,164.67)
• Professional Services (Note 20): ₱10,995,000.00 (Consultancy Services)
• Travelling Expenses - Local (Note 18): ₱7,145,624.35
• Utility Expenses (Note 18): ₱3,843,162.43 (Electricity: ₱3,723,355.58; Water: ₱119,806.85)
• Repairs and Maintenance (Note 21): ₱3,311,544.16 (Buildings: ₱1,513,636.68; Transportation Eqpt: ₱1,043,457.48; Machinery & Eqpt: ₱487,335.00; Infra: ₱150,470.00; Furniture: ₱116,645.00)
• Transfers (Note 22): ₱3,142,831.83 (Transfers of Unspent DRRM Funds to Trust: ₱2,942,831.83; LGU Equity Share: ₱200,000.00)
• Taxes, Insurance Premiums & Fees (Note 23): ₱2,827,459.30 (Insurance: ₱2,644,535.86; Fidelity Bonds: ₱139,662.75; Taxes & Licenses: ₱43,260.69)
• Communication Expenses (Note 18): ₱1,734,343.02 (Telephone: ₱1,075,754.96; Internet: ₱658,588.06)

The Municipality generated a Surplus from Operations of ₱31,917,926.05. After deducting Transfers, Assistance and Subsidy To of ₱3,142,831.83, the net Surplus for the Period was ₱28,775,094.22 (compared to ₱58,768,987.78 in CY 2023).

• Original Budget / Appropriation: ₱315,522,645.00
• Final Budget / Appropriation: ₱347,760,319.21 (an augmentation/increase of ₱32,237,674.21)
• Actual Obligations Incurred: ₱315,098,778.18
• Unobligated Balance: ₱32,661,541.03
• Overall Budget Utilization Rate: 90.61%

Based on the Statement of Comparison of Budget and Actual Amounts (SCBAA) and expenditure summaries:

Note: Minor decimal variations appear between the SCBAA functional totals on pp. 10-12 and the summary chart on p. 3 of the Executive Summary, which displays Final Appropriations of PS ₱120,949,361.10, MOOE ₱153,806,518.90, CO ₱73,004,439.04, Total ₱347,762,343.20; and Obligations of PS ₱120,038,108.97, MOOE ₱143,181,971.96, CO ₱51,878,697.25, Total ₱315,100,802.18.

Budget & Utilization:

• Total 20% DF Appropriation: ₱61,404,529.00 (MOOE: ₱4,600,000.00; Capital Outlay: ₱56,804,529.00).
• Total Obligations: ₱50,265,060.91 (MOOE: ₱3,399,800.00; Capital Outlay: ₱46,865,260.91).
• Unobligated Balance: ₱11,139,468.09 (MOOE: ₱1,200,200.00; Capital Outlay: ₱9,939,268.09).
• Utilization Rate: 81.86%.

Key Deficiencies (Observations 5 & 9):

1. 1.Livelihood Financial Assistance (Obs. 9): The Municipality appropriated ₱4,000,000.00 and obligated ₱1,260,000.00 (and distributed ₱20,000.00 checks per organization) for livelihood financial assistance to accredited associations without ensuring that projects were well-planned, procurement-and-implementation ready, and without complete documentation/evaluation required under COA Circular No. 2007-001 and DBM-DOF-DILG JMC No. 1, s. 2020.
2. 2.Erroneous Accounting (Obs. 5): ₱1,500,000.00 of livelihood assistance from the 20% DF was expensed outright as “Donations” instead of being recorded as a receivable (“Due from NGO/PO”) pending submission of required Fund Utilization/Liquidation Reports.

Total Funds Available in CY 2024: ₱37,342,155.42

• CY 2024 Current Appropriations: ₱15,776,132.25

  • Quick Response Fund (QRF - 30%): ₱4,732,839.68
  • Mitigation Fund (MF - 70%): ₱11,043,292.57
• Special Trust Fund (STF - Prior Years’ Unexpended Balances): ₱21,566,023.17

  • 2023 STF: ₱4,518,308.43
  • 2022 STF: ₱7,036,736.15
  • 2021 STF: ₱6,084,110.20
  • 2020 STF: ₱114,542.20
  • 2019 STF: ₱1,996,337.94
  • 2018 STF: ₱1,815,988.25

• Actual Utilization: ₱8,501,635.23 (Utilized entirely from the 2024 Mitigation Fund; ₱0.00 spent from QRF or STF).
• Unutilized Balance as of Year-End: ₱28,840,520.18

Audit Findings (Observation 11):

1. 1.Unauthorized Fund Augmentation: Two PPAs under the current budget exceeded their appropriation (e.g., Declogging of drainage exceeded by ₱1,073,973.71; IEC materials exceeded by ₱22,950.00). The funds were augmented from MOOE to Capital Outlay without an authorizing ordinance from the Sangguniang Bayan, contrary to RA No. 7160.
2. 2.Illegal General Fund Charging of STF Projects: Payments totaling ₱12,847,022.52 for 2023 Supplemental LDRRMFIP projects (rescue vehicle, evacuation centers, resettlement lot) were disbursed using General Fund cash instead of the Special Trust Fund bank account.

• Appropriation: ₱23,142,064.25 (Client-Focused: ₱17,244,000.00; Organization-Focused: ₱5,898,064.25).
• Utilization: ₱23,142,064.25 (100% utilization rate).

Audit Findings (Observation 12):

• While the 100% utilization was commended, the GAD Accomplishment Report was not aligned with the approved GAD Plan and Budget (GPB).
• Funds totaling ₱9,550,000.00 across four (4) GAD activities had unauthorized budget variances totaling ₱750,000.00 compared to the GPB (₱10,400,000.00), including unapproved reallocations (e.g., GAD Planning & Budgeting was increased from ₱300,000.00 to ₱500,000.00; Child Care facility construction was reduced from ₱400,000.00 to ₱100,000.00).
• Reallocations and transfers were done without prior written notice to DILG and without an ordinance authorizing the Local Chief Executive to augment budget items.

1. 1.Department of Labor and Employment (DOLE) (Observation 10): Fund transfer from DOLE RO VIII amounting to ₱3,734,458.00 for livelihood projects (Buri & Tikog Plantation and Processing) was distributed to fifteen (15) workers’ associations despite missing mandatory attachments (e.g., approved project proposal, DOLE Certificates of Registration, Beneficiary Profile Forms, Certificates of Completion of Procurement, Katunayan sa Pagtanggap, and Deeds of Donation).
2. 2.Department of Tourism (DOT) (Observation 6): Fund transfers covering CY 2017-2019 totaling ₱1,848,820.00 for the Yolanda Comprehensive Rehabilitation and Recovery Project (YCRRP) were not liquidated, overstating Due to NGAs. An unutilized balance of ₱423,245.00 remained unrefunded to the source agency.
3. 3.LGSF-SBDP / NTF-ELCAC (Part III, AAR 2023-5): For prior year balances, the Municipality remitted the unutilized fund balance of ₱11,618,096.44 to the National Treasury and recovered/refunded the ₱36,623.79 unauthorized honoraria paid to the project monitoring committee. However, processing of land titles for project sites and securing approved building permits remained pending.

1. 1.Notes to Financial Statements Deficiencies (Observation 1): Insufficient breakdown, missing aging analysis of Receivables (₱111,505,379.05), missing inventory locations/write-downs (₱12,413,996.39), missing PPE continuity schedules (₱885,440,099.30), and Biological Assets details (₱3,417,063.50), totaling ₱1,012,776,538.24, plus non-disclosure of Statement of Cash Flows and SCBAA reconciliations.
2. 2.Omission of Continuing Appropriations (Observation 2): Complete omission of continuing appropriations data in the SCBAA.
3. 3.Cash in Bank Discrepancies (Observation 3): Understatement of cash due to failure to adjust 19 unreleased checks totaling ₱2,294,313.33 and 3 cancelled checks totaling ₱20,125.00.
4. 4.Retained Construction in Progress (Observation 4): Retaining a completed ₱2,712,092.67 Rice Processing Building and ₱1,105,500.00 Rice Mill in CIP since December 2023 due to an unpaid contractor retention balance of ₱246,411.15.
5. 5.Insurable Properties Uninsured (Observation 8): Insurable municipal assets valued at ₱258,233,195.28 were not covered under the General Insurance Fund (GIF) of the GSIS due to incomplete physical counts and incomplete Property Inventory Forms (PIF).
6. 6.Unremitted GSIS & Pag-IBIG Deductions (Observation 13): Failure to remit intact statutory employee deductions, incurring a net under-remittance of ₱1,599,753.97 in CY 2024, resulting in a total unremitted balance of ₱4,172,561.47 (GSIS: ₱3,569,233.59; Pag-IBIG: ₱603,327.88).
7. 7.Unremitted BIR Withholding Taxes (Observation 14): Total unremitted taxes of ₱75,988.34 as of December 31, 2024 (CY 2024: ₱28,895.13; Prior Years: ₱47,093.21).

1. 1.
   Irregular Overtime Pay to Department Heads (Observation 15): Overtime services pay totaling ₱255,135.22 was paid to 8 Municipal Department Head I personnel (Salary Grade 24). Under CSC-DBM Joint Circular No. 02, s. 2015, positions higher than Division Chief (SG 22/24 equivalent to Director I) are strictly non-eligible for overtime compensation with pay. Individual names are redacted for privacy. See the official COA report for the complete roster.

   • Municipal Treasurer (Department Head I): ₱67,978.11
   • Board Secretary V (Department Head I): ₱46,076.41
   • Municipal Budget Officer (Department Head I): ₱37,725.43
   • MDRRMO (Department Head I): ₱37,008.20
   • Municipal Accountant (Department Head I): ₱26,474.98
   • MSWDO (Department Head I): ₱21,945.72
   • Municipal Tourism Officer (Department Head I): ₱9,414.02
   • Municipal Engineer (Department Head I): ₱8,512.35
2. 2.
   Accumulation of Unliquidated Travel Cash Advances (Observation 7): Unliquidated travel cash advances accumulated to ₱4,158,275.54 across 84 personnel.

   • 38 employees were granted additional cash advances despite having outstanding unliquidated advances (violating COA Circular 97-002).
   • 11 personnel had advances outstanding for 3 years or longer.
   • The highest single individual accumulation was ₱281,157.00 (across 10 separate cash advances).

• For Accounting Disclosures and SCBAA: Direct the Municipal Accountant to provide complete notes, required reconciliation statements, and update the SCBAA with continuing appropriations data (Obs. 1 & 2).
• For Cash and Bank Accounts: Record adjusting entries to restore unreleased checks (₱2,294,313.33) and cancelled checks (₱20,125.00) back to Cash in Bank (Obs. 3).
• For CIP & Assets: Reclassify the completed Rice Processing Facility to Buildings/Structures, recognize ₱246,411.15 accounts payable, and calculate depreciation (Obs. 4).
• For Livelihood Assistance & Donations: Reclassify ₱1,500,000.00 from “Donations” to “Due from NGO/PO”, strictly enforce accreditation guidelines per COA Circular 2007-001, and demand liquidation reports (Obs. 5, 9, 10).
• For Travel Advances: Cease granting new advances to personnel with unsettled balances, issue demand letters, and enforce withholding of salaries (Obs. 7).
• For Property Insurance: Complete physical asset count, update the Property Inventory Form (PIF) by April 30, and insure all insurable properties with GSIS GIF (Obs. 8).
• For LDRRMF & GAD Funds: Adhere strictly to investment plans, discontinue unauthorized augmentations without Sanggunian ordinances, and transfer ₱12,847,022.52 from the Special Trust Fund to the General Fund (Obs. 11 & 12).
• For Statutory Deductions: Reconcile and immediately remit all withheld GSIS/Pag-IBIG balances (₱4,172,561.47) and BIR taxes (₱75,988.34) (Obs. 13 & 14).
• For Overtime Services: Immediately cease paying overtime to department heads and issue notices of disallowance (Obs. 15).

The total unsettled audit suspensions, disallowances, and charges as of December 31, 2024, stood at ₱14,726,562.97.

There were no new issuances (NS/ND/NC) and no settlements (NSSDC) recorded during CY 2024:

Audit Note on SASDC Records: All suspensions and disallowances pertain to previous municipal administrations. Furthermore, ₱4,493,566.69 of the suspensions and ₱71,588.00 of the disallowances were not supported by physical copies of disbursement vouchers or notices, as they were not turned over by the previous audit team leader.

Out of the sixty-two (62) audit recommendations embodied in the CY 2023 and prior years’ Annual Audit Reports:

• Fully Implemented: 29 recommendations
• Not Implemented / Not Acted Upon: 33 recommendations
• Implementation Success Rate: 46.77%

The primary reasons cited by management in Part III include:

1. 1.Lack of Manpower: Frequently cited for non-completion of physical asset counts (RPCPPE), non-maintenance of Property/PPE Ledger Cards, and delayed RPT/SET assessment roll reconciliations.
2. 2.Adjustments and Disclosures Not Prioritized: Failure to adjust properties below the ₱50,000.00 capitalization threshold and lack of notes disclosure.
3. 3.Recommendation Not Given Preferential Attention: Occurred with Job Order contracts/certifications, non-reconciliation of supplies inventory ledger cards, and general ledger controlling accounts.
4. 4.On-going Legal / Administrative Processing: Transfer of land titles for cemetery lots and SBDP project sites remaining in progress.