EXECUTIVE SUMMARY

A. Introduction

The Bureau of Local Government Finance (BLGF) under the Department of Finance
is the focal agency and an authority in local finance that aims to be at the forefront of
local economic growth leading the way towards national development.

Under Executive Order (EO) No. 127, the BLGF is mandated to perform the
following functions:

a. Assist in the formulation and implementation of policies on local government

revenue administration and fund management;
b. Exercise administrative, technical supervision and coordination over the treasury
and assessment operation of local government;
c. Develop or implement plans and programs for the improvement of resource
management system, collection enforcement mechanisms and credit utilization
schemes at the local levels;
d. Provide consultative services and technical assistance to the local government
and the general public on local taxation, real property assessment and other
related matters; and
e. Exercise line supervision over its Regional Offices (ROs) and the local treasury
and assessment and other related matters.

The BLGF is headed by Executive Director Niño Raymond B. Alvina, who is assisted
by Deputy Executive Directors for Administration and for Operations.

The Bureau has an authorized total personnel complement of 408 with 248 filled up
permanent positions and 37 coterminous incumbents that assist in the different
responsibility centers with 15 ROs nationwide as of December 31, 2019.

B. Financial Highlights

The BLGF’s financial position, financial performance, and the sources and
application of funds for Calendar Year (CY) 2019 with corresponding figures for CY
2018 are summarized below:

Increase/
Particulars 2019 2018
(Decrease)
Financial Position
Assets P149,518,272.46 P132,835,260.75 P16,683,011.71
Liabilities 11,239,145.54 8,223,221.92 3,015,923.62
Net Assets/Equity 138,279,126.92 124,612,038.83 13,667,088.09
Financial Performance
Revenue 7,107,236.03 14,742,197.67 (7,634,961.64)
Net Financial Assistance/Subsidy 292,779,256.61 302,485,516.92 (9,706,260.31)
Expenses 285,785,423.03 288,670,098.17 (2,884,675.14)

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 Increase/
Particulars 2019 2018
(Decrease)
Non-Operating Income
Gains/(Losses) P 85,176.55 P 2,144.00 P 83,032.55
Surplus/(Deficit) for the Period 14,186,246.16 28,559,760.42 (14,373,514.26)
Appropriations, Allotments, Obligations and Balances
Appropriations (RA 11260) 300,455,814.74 336,608,448.00 (36,152,633.26)
Allotments 300,455,814.74 319,041,244.00 (18,585,429.26)
Obligations Incurred 286,368,450.63 301,888,234.65 (15,519,784.02)
Unobligated Allotments 14,087,364.11 17,153,009.35 (3,065,645.24)

The Statement of Appropriations, Allotments, Obligations, Disbursements, and

Balances as at December 31, 2019 is shown in Appendix A.

C. Scope and Objectives of Audit

The audit covered the financial accounts and operations of the BLGF CO and its ROs
for CY 2019. The audit was conducted to: (a) verify the level of assurance that may
be placed on management’s assertion on the financial statements (FSs); (b)
recommend agency improvement opportunities; (c) determine the agency’s
compliance with laws, rules, and regulations; and, (d) determine the extent of
implementation of prior year’s audit recommendations.

D. Audit Methodology

We adopted a risk-based approach in the audit of the FSs of the BLGF and in the
review of compliance with laws, rules, and regulations. The Audit Team which
carried out the audit, among others: (i) examined financial and accounting procedures
adopted by the BLGF and other relevant documentation; (ii) assessed internal
controls regulating financial operations; (iii) conducted substantive testing of a
representative sample of selected transactions; (iv) carried out review, on test check
basis, of a number of contracts and transactions related to movements in balances of
assets, liabilities, revenues, and expenses; and, (v) conducted interviews and held
discussions with the concerned officials and staff in the agency.

The results of the audit were communicated to the Head of the Agency and the
concerned officials through the issuance of Audit Observation Memoranda (AOM).

E. Independent Auditor’s Report on the Financial Statements

A qualified opinion was rendered on the fairness of presentation of the FSs of BLGF
for CY 2019 due to material accounting errors and omissions that affected the
balances of accounts reported in the FSs and non-restatement of FSs, which is not in
consonance with Management representation in Note 3.6 to the FSs, as discussed in
the Independent Auditor’s Report and Part II - Observations and Recommendations.

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F. Summary of Significant Audit Observations and Recommendations

Among the audit observations and corresponding recommendations discussed in Part

II of this report, the significant observations are summarized as follows:

1. Non-/late submission of financial, budgetary, and other reports/documents by the

CO and ROs I, III, V, VI, VII, VIII, XI, and XIII affected the timely conduct of
audit of the agencies’ operations and transactions.

We recommended and Management agreed to require, among others: (a)

the CO- Officer-in-Charge (OIC) Chief, Financial Management Division
(FMD), to submit to the Audit Team the required financial reports,
including the supporting documents, within the period prescribed under the
Government Accounting Manual for National Government Agencies; and,
(b) the CO-OIC Chief, FMD, and the Budget Officer to prepare and submit
the consolidated and the CO Budget and Financial Accountability Reports
(BFARs) within the period prescribed in Section 4.3 of COA-DBM Joint
Circular No. 2019-1; and, (c) the RO XIII Supply/Property Officer to
furnish copies of POs and all supporting documents to the Auditor within
five working days from issuance.

We also recommended and Management agreed to remind all concerned

BLGF officers and employees of the penalty clauses in the COA-DBM Joint
Circular No. 2019-1 and COA Circular 2009-001, citing relevant
administrative disciplinary actions in PD No. 1445 and EO No. 292 or the
Revised Administrative Code of 1987.

2. Non-preparation and submission of procurement monitoring report (PMR) by

the CO- Bids and Awards Committee (BAC) to the Government Procurement
Policy Board (GPPB) every semester had not facilitated the monitoring and
evaluation of procurement activities in the approved Annual Procurement Plan
(APP), among others.

We recommended that Management require the: (a) the BAC Secretariat to

prepare the PMR to cover all procurement activities specified in the APP to
facilitate monitoring and evaluation of procurement activities; and, (b) the
Head of Procuring Entity to submit approved PMR to the GPPB in printed
and electronic format within 14 calendar days after end of each semester.

3. Non-maintenance of accounting and property records, and non-preparation of

reports and forms for PPE and inventory in ROs II, III, V, VI, VII and X had not
provided supporting details to the book balances of affected accounts and bases
for reconciliation between the accounting and property records to ensure the
completeness, existence, and accuracy of related account balances at year-end.

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 We recommended and Management agreed to require the OIC Chief, FMD,
and the Supply Officer/Property Custodian of the concerned ROs to
prepare and maintain the required accounting and property records, forms,
and reports to facilitate the reconciliation process.

4. LOGOFIND accounts were consolidated and included in the FSs for All Funds
without the related books, FSs, and records, thus, affecting the completeness,
accuracy, and existence of the balances of the related accounts in the FSs for All
Funds as of December 31, 2019.

We recommended that Management instruct the LOGOFIND former

Accountant and project personnel to coordinate with the OIC Chief, FMD,
and the Property Officer to locate/retrieve the project’s books of accounts,
FSs, and records, and account for all properties thereof to provide bases for
the consolidation of project accounts with BLGF’s other funds and inclusion
in the FSs for All Funds.

5. In RO VI, Office Equipment of P360,092.96 reported in the Inventory and

Inspection Report of Unserviceable Property (IIRUP) were not presented and
were not found in station during physical count, thus, their existence and actual
condition were not established.

We recommended that Management require the RO VI Property Custodian

to: (a) present the office equipment totalling P360,092.96 and/or the turn-
over receipts or memorandum receipts of transferred properties; and, (b)
settle the depreciable replacement cost of the missing properties, if
properties could no longer be located or relevant documents on the transfer
could not be presented within a given period.

6. Unserviceable properties in the custody of RO XIII of P441,259.71 reflected in

the IIRUP which were determined to be without economic benefit or service
potential were not disposed, resulting in the properties’ balances to be carried in
the books affecting the year-end balances of the affected accounts.

We recommended and Management agreed to: (a) dispose immediately the

unserviceable properties so the same can be dropped from the books being
of no economic benefit or service potential; and, (b) require the Property
Officer to submit fully accomplished IIRUP to the Accountant after disposal
of the properties for derecognition of the same in the books.

7. Interest earned from Assessment Loan Revolving Fund bank account of

P109,449.71 for CYs 2013 to 2019 were retained instead of being remitted to
the Bureau of the Treasury, thus, resulted in the interest income being carried in
the books at year-end although the agency has no right over the said income.

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 We recommended and Management agreed to remit the interest income
earned of P109,449.71 and succeeding interests to be earned, to the BTr,
quarterly as required.

The results of our audit discussed herein were communicated to Management through
AOM and issuance of exit conference agenda, summary of audit observations and
recommendations for CY 2019, and summary of unimplemented recommendations
in prior years. Comments from Management were received on October 14, 2020 and
their views and comments were incorporated in the report, where appropriate.

G. Status of Audit Suspensions, Disallowances, and Charges

The balances of Notice of Suspensions (NSs), Disallowances (NDs), and Charges as

of year-end are summarized below:

Beginning Balance Issued/Settled Ending Balance

Particular December 31, 2018 January 01 –December 31 December 31, 2019
NS/ND/NC NSSDC
NS P 416,561.12 P5,606,028.42 P 132,733.54 P 5,889,856.00
ND 13,314,184.69 17,128.00 1,808,174.20 11,523,138.49
NC 0.00 0.00 0.00 0.00
Total P13,730,745.81 P5,623,156.42 P1,940,907.74 P17,412,994.49

H. Status of Implementation of Prior Years’ Audit Recommendations

Of the 33 prior year’s audit recommendations, 11 or 33 per cent were implemented

and the remaining 22 or 67 per cent were not implemented. The details are discussed
in Part III of this report.

We enjoin Management to ensure full implementation of all audit

recommendations to improve the financial and operational efficiency of the
agency.