LGU- JAGNA, BOHOL

PUBLIC FINANCIAL MANAGEMENT ASSESSMENT REPORT (PFM-AR)

Covering Fiscal Years 2010-2012

[The PFM-AR is a concise document containing the following: 1. Executive Summary providing a snapshot of the scores obtained by the LGU in each of the critical dimension of an open and orderly PFM system and quick analysis of the scores. 2. Introduction presenting the context and process of conducting the PFM assessment and preparation of the report. 3. Background Information on the LGU that will be necessary in understanding the indicator-led and overall assessment of the PFM systems in the LGU. Such information may include a brief description of the LGU’s economic conditions, the legal and institutional framework for its PFM system, and the current state of its PFM systems. 4. Assessment of the LGU’s PFM Systems which evaluates in detail the performance of the LGU’s current PFM systems, processes and institutions based on the indicators. It should also describe ongoing PFM reforms in the LGU. 5. Recommendations to improve PFM systems in the LGU.

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Republic of the Philippines Province of Bohol

MUNICIPALITY OF JAGNA

PUBLIC FINANCIAL MANAGEMENT ASSESSMENT REPORT

(PFMAR)

Covering FYs 2010-2012

Table of Contents

PUBLIC FINANCIAL MANAGEMENT ASSESSMENT REPORT (PFMAR) ............................................... 1

Covering FYs 2010-2012 ............................................................................................................... 1

Executive Summary ...................................................................................................................... 2

PFM Areas Where the Municipality is Strong ..................................................................................... 4

PFM Areas to be Strengthened ........................................................................................................... 5

Introduction ................................................................................................................................. 5

Background Information ............................................................................................................... 6

Fiscal Performance: ............................................................................................................................. 7

Allocation of Resources: ..................................................................................................................... 7

Assessment of the Municipality’s Public Financial Management System ........................................ 8

PFM Areas Where the Municipality is Strong ..................................................................................... 8

PFM Areas to be Strengthened ........................................................................................................... 8

Recommendations ..................................................................................................................... 18

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Executive Summary

The Municipality of Jagna adheres the key principle that local government must have an

adequate financial resources to fulfill its mandate and ensure significant autonomy in resource

allocation and mobilization. The Local Government Unit of Jagna is always experience tight

financial resources but such does not hamper its public servants instead scarce resources were

put to the most effective use and judiciously using the resources in a transparent and

accountable way.

Based on the results of the Public Financial Management Assessment Tool, the Municipality of

Jagna garnered a high rating score in accounting, recording and reporting, credibility of the

budget, predictability and control in budget execution and comprehensiveness and

transparency while low scores can be gleaned to policy-based budgeting. An average score

rating on citizens’ participation and internal and external audit. The total average description

rating tells that elements of an open and orderly PFM system are complete but not fully

operational. The LGU needs to formulate measures to fully operationalized all the elements of

an open and orderly PFM system by improving performance on all the critical dimensions.

Using the assessment framework provided by the Public Financial Management Assessment

Tool for Local Government Units (PFMAT for LGUs), and taking into weight the information

contained in official records and reports for fiscal years 2010 to 2012, the Municipality of Jagna

obtained an overall average score of 3.06. This indicates that while elements of an open and

orderly PFM system are complete, the existing elements are nevertheless not fully operational.

The score of 3.06 is the average of the following scores obtained in the seven critical

dimensions of an open and orderly PFM system:

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0

1

2

3

4

Score

Score

PFM Areas Where the Municipality is Strong

It should be noted that the LGU obtained the highest scores in Critical Dimensions 5,3,4

and 2, which are Accounting, Recording and Reporting, Credibility of Budget,

Predictability and Control in Budget Execution and Comprehensiveness and

Transparency, respectively.

The Municipality was able to ensure that for FYs 2010-2012, the Municipal Accountant

Office had complied regularly financial reports and annual financial statements and

accounts reconciliation. Actual revenue collection also exceeded compared to the

estimated revenues in the budget and actual expenditures compared with

appropriations by allotment. So with the effectiveness of the tax enhancement

measures, payroll controls, availability of cash for commitment of expenditures and

internal controls for non-personal services expenditures.

Moreover, it was able to substantially comply with the Full Disclosure Policy of the

Department of the Interior and Local Government (DILG), particularly by optimizing the

use of the internet and the government domain hosting the LGU’s official website.

The relatively high scores in these twelve (12) Indicators resulted to be one of the

Regional Awardee in the Gawad Pamana ng Lahi across the Region 7 and even topping

to national level Gawad Pamana ng Lahi Award 2012.

Critical Dimensions:

1 Policy-based Budgeting

2 Comprehensiveness and

Transparency

3 Credibility of the Budget

4 Predictability and Control in

the Budget

5 Accounting, Recording and

Reporting

6 Internal and External Audit

7 Citizens’ Participation

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PFM Areas to be Strengthened

Meanwhile, the LGU obtained the lowest scores in the critical dimensions of Policy-

based Budgeting.

Budget process based on the fixed budget calendar was not strictly followed due to

routinely practice and schedule of budget preparation and authorization phases headed

by the Local Finance Committee.

For Annual Budget CY 2012, approval of the appropriation ordinance with vetoed items

was enacted on March 14, 2012.

It is recognized that poor performance in Policy-based Budgeting, it will adversely

impact the total average rating score of the LGU.

With high hopes that the Municipality of Jagna can fast tract its approval of the General Appropriation Ordinance after having been thoroughly deliberated the executive budget and that budget review at the Sangguniang Bayan can now be hastened.

Introduction

The importance of good governance in the attainment of development goals cannot be

understated. Part and parcel of good governance and the strengthening of public

institutions is the continued improvement of the local PFM system.

But for PFM improvements to be effectively undertaken, the LGU should be able to

establish baseline information on the state of its PFM system. The issuance of the Public

Financial Management Assessment Tool for Local Government Units (PFMAT for LGUs)

is therefore timely as it serves as a mechanism by which the LGUs could measure their

current PFM system and determine which areas need improvement.

The PFM assessment was undertaken over the course of two weeks and primarily

involved the following Offices, the Heads of which form part of the LGU’s PFM Team:

1. Planning and Development;

2. Budget;

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3. Treasury;

4. General Services / Engineering / BAC; and

5. Accounting.

The Office of the Municipal Mayor is also represented in the PFM Team.

The assessment covered the LGU’s total budgets for 2010 to 2012, and entailed looking

into the LGU’s local revenue raising capacity also for the last three years.

This report embodies the results of the evaluation of this LGU’s PFM system, which, in

turn, are envisaged to serve as springboard for the more important undertaking of

identifying and implementing PFM improvement measures.

Background Information

Jagna is a 3rd class municipality of the Province of Bohol. It is located 63 kilometers

southeast part of the island.

According to the latest census, it has 32,034 people in 5,957 households. Between 2000

and 2007, it registered a 0.61% growth rate in population.

The Municipality has 33 barangays distributed over a land area of 12, 063 hectares.

While it is already considered as the major agricultural and commercial center of

eastern coast of Bohol, the LGU is endeavoring to become a the leading center of trade,

sustainable agro-processing and eco-tourism in southeastern Bohol.

Just like every LGU in the country, the Municipality of Jagna seeks to “to improve the

socio-economic condition of its population through sustainable development and

responsive management of its resources in active partnership with all concerned

sectors.”

Its declaration on responsive and participatory management of its resources as means

of attaining socio-economic development sets the tone for the LGU’s PFM reforms. The

declaration bespeaks of the local government’s commitment to advance sound PFM

practices so it can further improve on the following:

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Fiscal Performance:

PARTICULARS 2010 2011 2012

Revenues 62,947,000 67,630,000 69,225,058

Local Sources 6,155,000 10,990,000 10,879,500

External Sources 47,792,000 56,640,000 58,345,558

Expenditures

PS 25,073,700 28,958,733.04 30,479,604.56

MOOE 10,880,000 23,558,766.96 21,623,814.44

CO 37,313,400 15,112,500.00 14,240,519

SPAs

Aggregate Savings / Deficit

Allocation of Resources:

SECTOR ACTUAL BUDGETARY ALLOCATION

2010 2011 2012

General Public Services 33,224,210.81 31,889,968.16 30,425,853.84

Social Service Sector 8,705,507.97 9,745,850.65 10,284,242.12

Economic Service Sector 4,208,420.55 9,745,850.65 10,284,242.12

Economic Enterprises 10,791,776.70 12,710,421.28 10,879,500.00

Other Services (Special projects) 12,264,594.00 12,271,845.66 14,187,597.00

Health 6,197,007.00 6,029,909.22 6,437,159.32

Education 548,728.72 1,164,587.00 1,510,445.00

Agriculture 2,992,926.44 2,151,305.83 2,192,211.76

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Assessment of the Municipality’s Public Financial Management System

PFM Areas Where the Municipality is Strong

Of the seven critical dimensions of an open and orderly PFM system, the LGU was able

to obtain the highest scores namely in Accounting, Recording and Reporting, Credibility

of Budget, Predictability and Control in Budget Execution and Comprehensiveness and

Transparency.

It is noteworthy that the Municipal Government was able to present all the required

budget information in its Appropriation Ordinance covering the annual budget for the

last three years. It was also able to substantially comply with the Full Disclosure Policy

of the Department of the Interior and Local Government (DILG). On the total average,

the municipality earned a score of 3.10 which means elements of an open and orderly

PFM system are complete but are not fully operational.

PFM Areas to be Strengthened

The lowest scores, on the other hand, were earned in the critical dimensions on Policy-

based Budgeting. In spite of the calendar on budget preparation and authorization

activities mandated in by the DBM, the Local Finance Committee now PFMAT finds it

hard to follow the suggested schedule due to the various equally important activities in

the LGU and because of the routinely done mostly in the month of August to October. It

is also a fact that we cannot force how long the budget review by the Sangguniang

Bayan last.

In CY 2012 Annual Budget , there are vetoed items like the “Legislative Assistance” and

“Local Development Assistance under the Sangguniang Bayan Budget and was overrided

by the Sangguniang Bayan.

The table on the next page provides the details of the results of the assessment:

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Critical Dimension Indicator/s Score Average

Score REMARKS

1. Policy-based

Budgeting

1. Multi-year perspective in

fiscal planning and budgeting 3.0

1.83

The LGU operates in a highly changeable environment. The priorities of the local

government constantly shift in order to be responsive to the needs of the people.

Comprehensive Land Use Plan and Development Plan is now updated. Executive-

Legislative Agenda and Capacity Development Agenda is also in-placed. The Local

Finance Committee will strictly enforce that PPAs not identified in the approved

plans will not be priority in the allocations of budgets.

This is the first year of the LGU to adopt and enforce the Public Financial Assessment

Tool. Over the last three years, the municipality had compliant to the Full Disclosure

Policy of the DILG and uploading of the required reports at the LGU website and

posts to conspicuous places. A planning to plan by the Top Management Committee

to create and establish an Internal Monitoring and Audit Committee.

The preparation of the FY 2012 AIP was only completed approved on August 22,

2011. Moreover, the different Departments were only able to submit their budget

proposal on August 30, 2011. Consequently, the budget hearings could only be

completed September 20, 2011, which is way beyond the deadline of August 31.

1.1 Linkage between

PDPFP/CDP and LDIP

1.2 Linkage between LDIP

and AIP

1.3 Linkage between AIP

and Appropriation

Ordinances covering

the Budgets

2. PFM improvement policies

are included in the budgets

covered by Appropriation

Ordinances

0.0

3. Orderliness of activities in the

annual budget process 2.33

3.1 Adherence to a fixed

calendar for budget

preparation and

authorization phases

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Critical Dimension Indicator/s Score Average

Score REMARKS

3.2 Timely enactment and

approval of the

Appropriation Ordinance

authorizing the Annual

Budget

The LGU was able to enact and approve the Appropriation Ordinance covering the

Annual Budget on March 5, 2012.

Over the last three years, the Secretary to the Sanggunian was able to submit the

Appropriation Ordinance (AO) to the Sanggunian Panlalawigan only once within the

reglementary period. That Office may have to look into the internal procedures for

logging in and out of transactions to ensure that upon approval of the AO, the same

is immediately transmitted to the Secretary to the Sanggunian for submission to the

appropriate reviewing authority.

The LGU has four LEEs namely Jagna Public Market, Jagna Waterworks System,

Slaughter House and Integrated Solid Waste Management Syste all of which have

been operating for more than five years. The income of the waterworks system is

break-even to its expenditures while income of the market operation subsidies to

the payment of the monthly amortization of the Landbank of the Philippines Loans.

Slaughter and ISWM has an income but the LGU has to subsidies for its operation

3.3 Timely submission of the

Appropriation Ordinance

authorizing the Annual

Budget to the

appropriate reviewing

authority

4. Financial self-reliance of Local

Economic Enterprises (LEEs) /

Public Utilities (PUs)

2.0

2. Comprehen-

siveness and

Transparency 5. Comprehensiveness of

budget information

contained in the

Appropriation Ordinance

covering the Annual Budget

2.0 3.0

With the strong support and technical assistance from the Provincial Budget Office

and DBM Regional Office, the LGU, through its Municipal Budget Office, has

consistently ensured that budget information in the AO covering the Annual Budget

was complete and in prescribed form over the last three years.

Also with the resolute policy direction provided by the DILG and the LGU’s

leadership, the LGU was also able to substantially comply with the Full Disclosure

Policy. This was facilitated with the LGU optimizing the benefits of the internet and

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Critical Dimension Indicator/s Score Average

Score REMARKS

6. Public access to key

information 4.0

the government domain hosting the LGU’s website.

3. Credibility of the

Budget 7. Actual local revenue

collections compared with

estimated revenues in the

budget

4.0

3.67

Once in the last three years, the actual local revenue collections fell below 90% of

the estimates in the budget. The variance stemmed from the discrepancies in the

bases for estimating local revenues for budgeting purposes and for SRE preparation.

It should be noted that the BLGF usually provides inputs on the revenue estimates of

the LGU, which usually differ from revenue estimates reflected in the budget.

Once in the last three years, expenditures and disbursements fell below 90% of

spending authorities. This took place in 2010, which was an election year, hence

obligations and payments were somehow limited by the imposition of election bans.

8. Actual expenditure compared

with appropriations by

allotment class

3.33

8.1 Total allotments

released compared with

total appropriations

4.0

8.2 Total actual obligations

compared with total

allotments released

2.0

8.3 Total actual

disbursements

compared with total

obligations

4.0

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Critical Dimension Indicator/s Score Average

Score REMARKS

4. Predictability

and Control in

Budget

Execution

9. Real Property Tax

Accomplishment Rate

4.0

3.64

Real Property Tax accomplishment ranks 2nd in the collection efficiency in the year

2011. However, the ordinance approving the Municipal revenue Code was not

immediately approved. Accordingly, collections were still based on the current

assessed values of real properties in the Municipality.

With the strong support from the Local Legislative Body, which issued a Resolution

supporting the Computerization of the LGU’s RPT Database, the LGU was able to

establish a computerized database that is currently linked between the offices of the

Local Assessor and Local Treasurer. The LGU is working on expanding the linkages of

the database.

The issuance of notices of delinquencies only resulted to a 12% increase in collection

of delinquent accounts, hence, the score of 2 in this sub-indicator. No other

collection strategies are implemented as of this time, hence, the relatively low

increase in the collection of delinquent accounts.

There was an auction conducted by the MTO office for RPT delinquents though this

is the undertaking of the provincial government but successfully conducted. This

was implemented by sending demand letters, compromise agreements, closure, etc.

10. Effectiveness of tax

enhancement measures 3.33

10.1 Computerized RPT

database system

linkages

10.2 Effectiveness of

implementing tax

collection strategies for

delinquent Real Property

Tax (RPT)

10.3 Effectiveness of civil

remedies on tax

payment (For provinces

and cities only)

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Critical Dimension Indicator/s Score Average

Score REMARKS

10.4 Planning and monitoring

of tax mapping

Updating of the tax map was undertaken along with the updating of the SMV. The

updating, however, was undertaken not earlier than five years from the last update

to the tax map, hence, the score of 2 in the sub-indicator.

11. Predictability in the

availability of cash for

commitment of expenditures

4.0

In all the last three years, cash programming was very good thereby ensuring that all

allotments, including liabilities, have available cash.

A cash flow forecast was prepared at the beginning of the year but no cash flow

analysis was made and the cash flow forecast was not updated due to the

magnitude of reports already being prepared by the Treasurer’s Office.

11.1 Cash availability to

support budgeted

program, projects and

activities (PPAs), and

liabilities

11.2 Preparation and

updating of cash flow

forecasts and cash flow

analysis

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Critical Dimension Indicator/s Score Average

Score REMARKS

12. Value for money controls of

procurement 2.5

Only 40% of procurement activities were awarded through public bidding. The

remaining 60% were completed using alternative modes of procurement as allowed

under R.A. No. 9184.

Part also of the process is the consultation to the SB Committee on Public Works and

Infrastructures as an oversight body of the LGU making sure that all infrastructure

projects is reviewed by the committee.

Only 80% of the LGU’s CSE purchases were covered by APRs submitted to the PS.

The remaining 20% were nevertheless purchased using alternative methods

sanctioned by law. The said amount of CSE purchases were purchased through

shopping under emergency / urgent circumstances.

Deviations were made from the approved Annual/Supplemental Procurement Plans

due to the implementation of activities which were not in the Office’s approved

work plans. The deviations from the A/S PP represent the LGU’s “emergency

procurement activities.”

Some procurement activities were not posted in the PhilGEPS. In 2011, the BAC and

its Secretariat were reconstituted. Since the new Secretariat was still learning the

12.1 Use of public bidding for

the procurement of

goods (excluding

common-use supplies

and equipment), civil

works and consulting

services in accordance

with R.A. No. 9184 and

its IRR

12.2 Procurement of

Common-Use Supplies

and Equipment from

DBM – Procurement

Service

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Critical Dimension Indicator/s Score Average

Score REMARKS

12.3 Effectiveness of

Procurement

ropes, some procurement activities requiring posting in the PhilGEPs were not

posted in the said website.

Only 80% of procurement contracts were completed / delivered on time. The 20%

deviation represents civil works which were not completed according to the planned

completion dates. The implementation of these civil works were delayed by

inclement weather and early onset of the rainy season.

Sometimes, approval from the SB Committee on Public Works and Infrastructure

may cause the delay in the implementation because it takes time to review and call

the attention of the proponent of the project most especially when the schedules is

always hectic.

12.4 Publication of

procurement-related

activities

12.5 Timeliness of completed

procurement activities

13. Effectiveness of payroll

controls 4.0

Based on the 2011 COA AAR, there were no adverse findings on PS expenditures.

There were, however, adverse findings on about 15% of non-PS expenditures. It

should be noted that a substantial part of these expenditures pertain to items

procured without being posted in the PhilGEPS.

14. Effectiveness of internal

controls for non-Personal

Services (PS) expenditures

4.0

5. Accounting,

Recording and 15. Timeliness and regularity of

accounts reconciliation 3.5

3.75 There is a general delay in the reconciliation of bank accounts due to the volume of

transactions being currently handled by a very limited number of accounting

personnel.

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Critical Dimension Indicator/s Score Average

Score REMARKS

Reporting 15.1 Regularity of bank

reconciliation

The timeliness of reconciliation and liquidation of cash advances on the other hand

is adversely affected by failure on the part of employees granted cash advances for

travel to immediately submit their liquidation reports.

There are also adverse findings on the LGU’s financial reports and statements,

particularly, on the timelines of their submission. The financial reports and

statements are submitted beyond deadlines set by COA due to the limited

accounting personnel and the volume of transactions currently handled by these

personnel.

15.2 Regularity of

reconciliation and

liquidation of cash

advances

16. Quality and timeliness of

regular financial reports and

annual financial statements

4.0

6. Internal and

External Audit

17. Effectiveness of internal audit 1.33 2.50

The amount of disallowances/suspensions that remain unsettled as of assessment

date pertain to accounts which can still be settled by the LGU.

The municipality has a plan to create an internal control system (ICS) which includes

also the internal audit activities with reports to be submitted to the local chief

executive.

17.1 Existence of an

operational Internal

Audit Service (IAS)

17.2 Frequency and

distribution of internal

audit reports

17.3 Extent of management

action on internal audit

findings

18. Follow up on external audit 3.67

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Critical Dimension Indicator/s Score Average

Score REMARKS

18.1 Compliance with audit

recommendations

Audit recommendation usually applied after the detailed deliberation and

explanation of the accountant. In some cases, there was a disallowance of PEI in

2013 where the source of funds is taken from the CNA without proper due but COA

recommendation to refund the amount is accepted by the employees. There were

no any adverse COA findings within the period.

18.2 Extent of COA

disallowances

18.3 Magnitude of COA

disallowances settled

7. Citizens’

Participation

19. Civil Society Organizations

(CSOs) accreditation by the

Local Sanggunian

4.0

3.0

The LGU has a well-established CSO accreditation system. There are currently

thirteen (13) CSO accredited, hence, the high score in Indicator 19.

With the thrust towards participatory and transparent governance, the LGU was

able to engage the CSOs in the budget preparation. 20. Degree of citizens’

participation in the budget

process

2.0

TOTAL AVERAGE SCORE 3.06

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Recommendations

Improvement efforts should, foremost, be focused on the critical dimensions with the

lowest scores.

While the municipality has its updated CLUP/CDP/LDIP and linkage between these

mandated and thematic plans still there has to be linkage in the appropriation

ordinances. The LGU needs to follow the orderliness of activities in the annual budget

preparation and authorization phases as mandated in the fixed calendar.

Good governance entails the existence of efficient and accountable institutions and

systems and entrenched rules that promote development and ensure that people are

free to participate in.

Accordingly, the municipality should consider establishing and operationalizing its ICS.

Internal audit is a key part of internal control, which provides the foundation for and

strengthens accountability and good governance in public service organizations. The

importance of having an ICS cannot therefore be understated. Follow up action on the

study for options on the ICS must be undertaken.

The results of the assessment conducted in LGU Jagna reflects that there are critical

dimensions needs to improved and strengthened.

Notwithstanding higher scores obtained for the rest of the critical dimensions, the

Municipality should also consider the following:

a. Citizens must be given roles in the budget process which will lead to more

accountability and responsiveness.

b. Pursuit of innovative local revenue raising measures to strengthen the LGU’s thrust

of continuous delivery of quality services, particularly to the needy rural folks;

c. Focus on the computerization program on the Integrated Revenue Collection and

Financial Management System.

Thus, let convergence and participatory approaches be the mission of LGU Jagna to help

foster transparency, effectiveness and efficiency in government operations.