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Republic of the PhilippinesPROVINCE OF SURSURPUBLIC FINANCIAL MANAGEMENT ASSESSMENT REPORT (PFMAR)FY 2011

1. Executive SummaryBasically, the year in review has exhibited a struggle for prosperity. Notwithstanding constraints,the Province nevertheless managed to pursue its plans by putting together available resourcesexpected to provide a systematic approach towards better service delivery through an improvedPublic Financial Management (PFM) system.Based on the results of the assessment, the Province fared very well in the critical dimensions ofComprehensiveness and Transparency, and Citizens Participation. On the other hand, verylow scores were obtained in the areas of Internal and External Audit, and Accounting, Recordingand Reporting.

Overall, the Province obtained a score of 2.311. This indicates that while elements of an openand orderly PFM system are not complete, the existing elements are nevertheless fullyoperational.It is recognized that the provincial government cannot go a long way in terms of better servicedelivery with a poorly managed financial system.

Accordingly, appropriate measures should be adopted by the provincial government to completeand fully operationalize all the elements of an open and orderly PFM system. This can be

accomplished by improving performance in all the critical dimensions of a sound PFM system.

2. IntroductionThe importance of good governance in the attainment of development goals cannot beunderstated. Part and parcel of good governance and the strengthening of public institutions isthe continued improvement of the local PFM system.But for PFM improvements to be effectively undertaken, the LGU should be able to establishbaseline 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 timelyas it serves as a mechanism by which the LGUs could measure their current PFM systems anddetermine which areas need improvement.This report embodies the results of the evaluation of this LGUs PFM system and shall serve as a

jumping board for PFM improvement efforts.

3. Brief Profile of the ProvinceSursur is the 56th province in the Philippines created by virtue of RA 2786, which was enactedon June 19, 1960. It is located in the northeastern coast of Mindanao and is bounded on the

Northwest by Surigao del Norte, in the south by Davao Oriental, in the East by the Pacific Oceanand on the West and Southwest by the Provinces of Agusan del Norte and Agusan del Sur.With two congressional districts, the province is composed of two cities and 17 municipali tiesmostly located along the coast with a total of 309 barangays and are delineated into three

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alliances composed of clusters of municipalities each with identified growth center based on theircommon resource potentials, proximity and accessibility to common trade and service center.The three alliances are the CarCanMadCarlLanCorTan Alliance covering the northernmunicipali ties of Carrascal, Cantilan, Madrid, Carmen, Lanuza, Cortes and the City of Tandag;the MaCaSaLTaBayaMi comprising the central municipalities of Marihatag, Cagwait, San

Agustin, Lianga, Tago, Bayabas and San Miguel; and the BiBaHiLiTa Alliance composes thesouthern municipalities/City of Bislig, Barobo, Hinatuan Lingig and Tagbina.

Its land area is 513,317.70 hectares or 5,137.70 sq. Kms. representing 26.84 percent of the totalland area of Caraga Administrative Region and about 4.07 percent and 1.71 percent of the totalland area of Mindanao and Philippines, respectively. It is elongated in shape and approximately300 kms in length and 50 kms. In its widest stretch which runs from Cagwait to San Miguel.The climate is generally milder compared to other nearby provinces and its soils is favorable forthe growth of tropical plants.It is endowed with sample resources such as wide agricultural lands planted to rice, corn,coconut and other cash crops; vast forest land with abundant commercial wood species like Redand White Lauan, Mayapis, Almon, Yakal, Apitong, Bagtikan, Tanguile, site of the worlds biggest

iron deposits and other metallic and non-metallic minerals; presence of exotic and unique naturalsceneries and tourist spots like beaches, waterfalls, caves, lagoons, island river; its long PacificCoastlines and rich inland and aquamarine fishing grounds are potential for large scale fishingand production of prawns, lobsters, crabs and other exportable species, respectively.If these resources are properly managed, it can produce more than adequate for the normalneeds of its constituents and even for the markets in Davao, Butuan, Cebu and other cities in thecountry.

As of the 2007 census, its total population is 545,902 registering growth rate of 1.17 from 501,808census count in 2000. It has adequate labor force and the people are generally hardworking.

At the time of its inception, it was classified as 4th Class province with an annual income of overP300,000.00. Seven years later, because of rapid increase of revenue collection particularly fromthe logging ventures, it has been reclassified as 1st Class B and in 1980 as 1st Class A with anestimated annual income of around P13,000,000.00. Presently it is reclassified as 1st Class witha revenue adding up to P727,817,648.81.

4. Assessment of the Provinces Public Financial Management System

Of the seven critical dimensions of an open and orderly PFM system, the Province was able toobtain the highest scores in Comprehensiveness and Transparency, and in CitizensParticipation.It is noteworthy that the Province has been able to present all the required budget information inits Appropriation Ordinance covering the annual budget for the last three years. It is also able tosubstantially comply with the Full Disclosure Policy of the Department of the Interior and LocalGovernment (DILG). On the average, the Province earned a score of 3.5 in Comprehensivenessand Transparency.

As for the critical dimension Citizens Participation, the Province has accredited four Civil

Society Organizations (CSOs), hence, it earned a score of 4 in terms of CSO accreditation by theLocal Sanggunian. Moreover, the Province earned a score of 3 in terms of the degree of CSOparticipation in the budget process. Accredited CSOs in the Province actively participate inBudget Preparation and in monitoring and evaluating program/project implementation.

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The lowest scores, on the other hand, were earned in the critical dimensions of Internal andExternal Audit, and in Accounting, Recording and Reporting.The lowest score of 1.65 was registered for Internal and External Audit. The Province has noestablished Internal Audit Service (IAS) although initial steps to establish the same have alreadybeen undertaken. With the absence of an operational IAS, there are of course no internal auditreports prepared, hence, no internal audit findings to act upon.

The next lowest score of 2.0 was earned for the dimension Accounting, Recording andReporting. There are still delays in the preparation of bank reconciliation statements and in theliquidation of cash advances, hence, the scores of 2.0 in these indicators. Due to lack ofaccounting personnel, there are also delays in the preparation and submission of financialstatements.The following table provides the details of the results of the assessment:Critical Dimension

Indicator/sScore

Average Score1. Policy-based Budgeting1. Multi-year perspective in fiscal planning and budgeting3.02.0752.1.1 Linkage between PDPFP/CDP and LDIP2.03.1.2 Linkage between LDIP and AIP3.04.1.3 Linkage between AIP and Appropriation Ordinances covering the Budgets4.0

2. PFM improvement policies are included in the budgets covered by Appropriation Ordinances2.0

3. Orderliness of activities in the annual budget process2.3

3.1 Adherence to a fixed calendar for budget preparation and authorization phases2.0

3.2 Timely enactment and approval of the Appropriation Ordinance authorizing the AnnualBudget3.0

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3.3 Timely submission of the Appropriation Ordinance authorizing the Annual Budget to theappropriate reviewing authority2.0

4. Financial self-reliance of Local Economic Enterprises (LEEs) / Public Utilities (PUs)1.0

2. Comprehen-siveness and Transparency5. Comprehensiveness of budget information as prescribed in the Budget Operations Manual(BOM) for LGUs4.03.56. Public access to key information3.03. Credibility of the Budget

7. Actual local revenue collections compared with estimated revenues in the budget3.03.08. Actual expenditure compared with appropriations by allotment class3.0

8.1 Total allotments released compared with total appropriations3.0

8.2 Total actual obligations compared with total allotments released3.0

8.3 Total actual disbursements compared with total obligations3.04. Predictability and Control in Budget Execution9. Real Property Tax Accomplishment Rate

2.02.4510. Effectiveness of tax enhancement measures2.0

10.1 Computerized RPT database system linkages3.0

10.2 Effectiveness of implementing tax collection strategies for delinquent Real Property Tax(RPT)2.0

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10.3 Effectiveness of civil remedies on tax payment (For provinces and cities only)1.0

10.4 Planning and monitoring of tax mapping2.0

11. Predictability in the availability of cash for commitment of expenditures2.5

11.1 Cash availability to support budgeted program, projects and activities (PPAs), and liabil ities4.0

11.2 Preparation and updating of cash flow forecasts and cash flow analysis1.0

12. Value for money controls of procurement2.2

12.1 Use of public bidding for the procurement of goods (excluding common-use supplies andequipment), civil works and consulting services in accordance with R.A. No. 9184 and its IRR2.0

12.2 Procurement of Common-Use Supplies and Equipment from DBM Procurement Service2.0

12.3 Effectiveness of Procurement2.0

12.4 Publication of procurement-related activities2.0

12.5 Timeliness and compliance of delivery with the schedule of requirements and/or approvedcontracts3.0

13. Effectiveness of payroll controls4.0

14. Effectiveness of internal controls for non-Personal Services (PS) expenditures

2.05. Accounting, Recording and Reporting15. Timeliness and regularity of accounts reconciliation2.0

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2.015.1 Regularity of bank reconciliation2.0

15.2 Regularity of reconciliation and liquidation of cash advances2.0

16. Quality and timeliness of regular financial reports and annual financial statements2.06. Internal and External Audit17. Effectiveness of internal audit0.31.65

17.1 Existence of an operational Internal Audit Service (IAS)1.0

17.2 Frequency and distribution of internal audit reports0.0

17.3 Extent of management action on internal audit findings0.0

18. Follow up on external audit3.0

18.1 Compliance with audit recommendations3.0

18.2 Extent of COA disallowances

3.0

18.3 Magnitude of COA disallowances settled3.07. Citizens Participation19. Civil Society Organizations (CSOs) accreditation by the Local Sanggunian4.03.5

20. Degree of citizens participation in the budget process3.0

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TOTAL AVERAGE SCORE2.311

5. RecommendationsImprovement efforts should, foremost, be focused on the critical dimensions with the lowestscores.

Accordingly, the Province should consider establishing and operationalizing its IAS. Moreover, itshould also look into the staffing and training requirements of the Accounting Office. Failure tocomply with the reglementary periods for the liquidation of cash advances, preparation andsubmission of financial statements appear to be caused by the Accounting Offices lack ofpersonnel.

Notwithstanding higher scores obtained for the rest of the critical dimensions, the Provinceshould also consider the following:a. Pursuit of innovative local revenue raising measures to strengthen the provinces thrust of

continuous delivery of quality services, particularly to the needy rural folks;b. Doubling the collection efforts as means of lessening the provinces dependence on theInternal Revenue Allotment (IRA) and realize its goal for an accelerated economic growth;

c. Finalization of the Special projects in the General Revision of Assessments and PropertyClassification and Computerization of Assessments; and

d. Focus on the computerization program on the Integrated Revenue Collection and FinancialManagement System.