Annual Audit Report on the Marikina City for CY 2010 appropriate PPE account. ... contrary to COA...

EXECUTIVE SUMMARY

A. Highlights of Financial Operation

For the CY 2010, the appropriations of the City Government of Marikina for the

General and the Special Education Funds totaled P 1.76 billion. Obligations charged

against these appropriations amounted to P 1.39 billion.

Fund Appropriation Obligation

General Fund P 1,565,179,677 P 1,216,526,588

Special Education Fund 194,197,129 171,911,424

Total P 1,759,376,806 P 1,388,438,012

The operating income of P 1.52 billion collected during the year was sourced

from the following:

Particulars

General Fund

Special

Education Fund

Total

Local Taxes P 569,820,960 P 137,747,650 P 707,568,610

Internal Revenue

Allotment

538,719,829

538,719,829

Permit & Licenses 20,375,504 20,375,504

Service Income 81,062,034 81,062,034

Business Income 101,988,081 101,988,081

Other Income 69,699,362 4,360,010 74,059,372

Total Operating

Income

P1,381,665,770

P 142,107,660

P1,523,773,430

B. Scope of the Audit

The audit covered the accounts and operations of the City for the year 2010 and

was aimed at determining whether management presented fairly the financial statements

of the City in adherence to generally accepted accounting principles; whether prevailing

laws, rules and regulations have been complied with and whether funds were utilized in

the most efficient, effective and economical manner. Financial, compliance, and value

for money (VFM) audits were conducted to achieve these audit objectives.

C. Auditor’s Opinion on the Financial Statements

The Supervising Auditor rendered a qualified opinion on the fairness of the

presentation of the financial statements due to the significant effects of the findings on

the balances of some accounts, as discussed in Part II of the report.

D. Significant Audit Findings and Recommendations

The following are the significant findings and recommendations in the audit of the

City Government of Marikina for the year 2010:

1. There was a difference of P691.09 million between the Property, Plant and

Equipments (PPE) balance per books and the physical inventory, thus rendering

the said amount doubtful. This was due to the failure of the General Services

Office (GSO) and the Accounting Office to reconcile the Inventory Report with

the accounting and property records, contrary to Section C.3, Chapter V of the

Manual on Property Custodianship. (Finding No. 1.1, page 26)

We strongly recommend that the City Accountant, in coordination with

the GSO, fast-track the reconciliation of the Inventory Report with the accounting

and property records. It is also recommended that for those properties whose

values cannot be determined, their estimated values as well as their remaining

useful life may be assigned by an appraisal committee.

2. The Construction in Progress (CIP) accounts were overstated by P328.72

million because the completed projects of prior years were not fully transferred to

their appropriate PPE account. (Finding No. 2.1, page 28)

We recommend the review of the CIP accounts so that all completed

projects could be transferred to PPE. Further, it is recommended that the Status

Report of Projects Undertaken by the Engineering Office be submitted quarterly

to the City Accountant so that there will be a basis for the preparation of the

Journal Entry Voucher (JEV) that will record the transfer.

3. Unpaid obligations in CY 2007 and prior years amounting to P6.78

million, which did not have any supporting documents to prove validity and

existence, were still recorded under Accounts Payable (401), contrary to Section

4(s), Volume I of the New Government Accounting System (NGAS) Manual.

(Finding No. 1.2, page 27)

We advise the City Accountant to immediately revert these undocumented

accounts payable to the Government Equity account as required under Section 98

of PD 1445.

4. Wages, allowances and benefits of volunteers and non-regular employees

totaling P20.50 million were erroneously charged against the allotment for

Personal Services (PS), thereby overstating PS and understating Maintenance and

Other Operating Expenses (MOOE). On the other hand, various expenses such as,

traveling/training, intelligence/confidential expenses and Other MOOE amounting

to P8.66 million were erroneously recorded as Extraordinary Expenses (883),

contrary to COA Circular No. 2004-008 dated September 20, 2004, thus

overstating said account by the same amount and understating the appropriate

expense accounts. (Finding No. 3.1, page 30)

We recommend that the practice of utilizing the allotment for Personal

Services for payment of expenses other than those for personal services be

discontinued. It is further recommended that the City Accountant and the City

Budget Officer should be extra careful in the budget utilization and in recording

and classifying expenses.

5. Supplemental budgets were not supported by new revenue sources

contrary to Section 321 of RA 7160. Likewise, the budget for Continuing

Appropriations were realigned to other projects and to MOOE in violation of

Section 336 of the same Act. (Finding No. 4.1, page 31)

We recommend that supplemental budgets be backed-up with new

revenue source/s, and duly certified as such by the City Treasurer. On the other

hand, realignments should only be made within the same allotment class.

6. Of the P 135.63 million appropriation for the 20% Development Fund,

P20.63 million or 15.21% was utilized for purposes other than those provided

under Department of Budget and Management (DBM) and Department of the

Interior and Local Government (DILG) Joint Memorandum Circular No. 1, series

of 2005, dated September 20, 2005. (Finding No. 4.2, page 34)

We reiterate our recommendation that the 20% Development Fund be

utilized only for the purposes for which it was intended and for the City

Development Council to prepare an Annual Development Plan that is in line with

the above-mentioned Joint Circular.

7. The Annual Procurement Plan (APP) that supported the approved Annual

Budget for the procurement of goods and infrastructure projects did not contain

the detailed list of goods and infrastructure projects to be procured during the

year, contrary to Section 7 of RA 9184. (Finding No. 4.3, page 35)

It is recommended that department heads be required to submit to the Bids

and Awards Committee (BAC) Secretariat their individual Project Procurement

Management Plans (PPMPs) showing the detailed list of goods and infrastructure

projects to be procured during the year. These PPMPs shall be consolidated by

the BAC Secretariat into an Annual Procurement Plan to support the appropriated

amount in the approved Annual Budget.

8. The City has yet to come up with a clear-cut policy and detailed guidelines

in the grant of financial assistance to qualified constituents and to People’s and

Non-governmental organizations in accordance with Sections 36 and 458(5)(xi)

and (xiv) of RA 7160. (Finding No. 4.4, page 36)

It is recommended that policy guidelines in the grant of financial

assistance conform with the above-stated sections of RA 7160.

9. The Marikina Revenue Code of 1995 has yet to be updated to conform

with the Local Government Code, hence, the City’s revenue raising power has not

been maximized. (Finding No. 4.5, page 38)

We reiterate our previous recommendation that the City Mayor coordinate

with the Sangguniang Panlungsod for the codification of all revenue ordinances.

Existing ordinances should likewise be reviewed to determine conformity with the

Local Government Code. In the review and in subsequent enactments, due

consideration should be given to legislation that would maximize revenues.

10. Submission of copies of contracts, job orders, and purchase orders were

delayed by a period ranging from 12 to 100 days, while copies of delivery

documents were likewise delayed by a period ranging from 35 to 64 days,

contrary to COA Circular No. 2009-002 dated May 18, 2009. Hence, timely

review and inspection could not be undertaken and any defects/deficiencies noted

could not be communicated immediately to the management. (Finding No. 4.6,

page 40)

We recommend that the General Services Office be required to submit to

the City Auditor’s Office copies of purchase orders, job orders, letter orders and

contracts within five days from perfection and for notices of deliveries to be

submitted within twenty-four hours from acceptance.

11. The City’s continuous failure to establish a written, comprehensive, and

tested disaster recovery and business continuity plan; and formal policies and

procedures to perform backup and to provide offsite servers/storage of data files,

databases, programs and documentation, may result in Information Technology

(IT) losses. (Finding No. 4.7, page 41)

We recommend that management prioritize and carefully study the

contingency plan presented to them by the Office of the Marikina Information

System and Call Center (MISCC) in order to prevent the risks of loss of or

damage to data files, hence, ensuring the continuous operation of the management

information system.

12. Other Receivables representing dishonored checks for the years 1981 to

1987 totaling P1.03 million remained in the books for 23 to 29 years despite the

absence of documents to enforce collection. (Finding No. 5.1, page 41)

We advise the City Accountant to follow-up with the Office of the City

Mayor the request for authority to write-off the dishonored checks based on the

verification made by the City Treasurer’s Office. The request for write-off shall

be filed with the Commission Proper of the Commission on Audit, thru the City

Auditor’s Office.

E. Status of Implementation of Prior Year’s Audit Recommendations

Of the 17 audit recommendations contained in the previous year’s Annual Audit

Report, nine (9) were fully implemented, four (4) were partially implemented and four

(4) were not acted upon by the agency.

TABLE OF CONTENTS

PART

SUBJECT

PAGE

NO.

I

AUDITED FINANCIAL STATEMENTS

Audit Certificate

1

Statement of Management Responsibility for Financial

Statements

3

Consolidated Balance Sheet 4

Consolidated Statement of Income and Expenses 8

Consolidated Statement of Cash Flows 13

Notes to Consolidated Financial Statements 14

II

DETAILED AUDIT FINDINGS AND RECOMMENDATIONS

Financial and Compliance Audit

26

III

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

43

IV

ANNEXES

Annex A

Consolidated Balance Sheet (By Fund)

49

Annex B Consolidated Statement of Income and Expenses (By Fund) 52

Annex C Consolidated Statement of Cash Flows (By Fund) 57

Annex D Statement of Appropriations, Allotments, Obligations and

Balances

58

Annex E Comparison of the Balances of Property, Plant and

Equipment (PPE)Account per Books and per Report on

Physical Count of PPE

65

Annex F Schedule of Expenses Charged Against Other Personnel

Benefits (749)

67

Annex G Sample of Late Submitted Contracts/Notice of Delivery 68

PART I

AUDITED FINANCIAL STATEMENTS

1

Republic of the Philippines

COMMISSION ON AUDIT

City Auditor’s Office

Marikina City, Metropolitan Manila

AUDIT CERTIFICATE

HON. DEL R. DE GUZMAN

City Mayor

City of Marikina

We have audited the accompanying financial statements of the City of Marikina,

which comprise the Balance Sheet as of December 31, 2010, and the Statements of

Income and Expenses and Cash Flows for the year then ended, and the summary of

significant policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these

financial statements in accordance with Generally Accepted Accounting Principles. This

responsibility includes: designing, implementing and maintaining internal control

relevant to the preparation and fair presentation of financial statements that are free from

material misstatement.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on

our audit. We conducted our audit in accordance with the Generally Accepted Auditing

Standards. These standards require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance whether the financial statements are

free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the

amounts and disclosures in the financial statements. The procedures selected depend on

the auditor’s judgment, including the assessment of the risks of material misstatement of

the financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s preparation and fair

presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances. An audit also includes assessing the accounting

principles used and the reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

2

3

4

Marikina City

Consolidated Balance Sheet

As of December 31, 2010

(Pages 4-7)

8

Marikina City

Consolidated Statement of Income and Expenses

For the Year Ended December 31, 2010

(Pages 8-12)

13

Marikina City

Consolidated Statement of Cash Flows

For the Year Ended December 31, 2010

(Page 13)

14

NOTES TO FINANCIAL STATEMENTS (With Comparative Figures for CY 2009)

Note 1. General/Agency Profile

The City of Marikina was created on July 20, l996 by virtue of Republic Act No.

8223. The City is now comprised of sixteen (16) barangays and two (2) Congressional

Districts with the passage of Republic Act No. 9364.

The City’s development momentum was temporarily disrupted by the onslaught

of “Ondoy” in September 2009. While the calamity resulted in an unprecedented loss of

lives and property, it significantly revealed a priceless gem: Marikeños’ competence to

rise above any challenge and their capacity to unite and help one another in times of

need. While full recovery takes time and entails precise programs and undertakings, the

City Officials and employees did not allow the tragedy to get in the way of the city’s

development, a positive mindset has once again played a pivotal role, cementing

Marikina’s reputation as a courageous and resilient community.

For Calendar Year 2010, the City of Marikina is poised to roll out a number of

important projects, to include the following:

Continuing relocation of residents in flood-prone areas to safer grounds

within or outside Marikina

Purchase of calamity-related rescue operations equipment

Improvement of citywide calamity alarm system

Updating of the Disaster Management handbook to be disseminated to all

households in the city

Upgrading of existing parks to include the provision of playground amenities

Expansion of the beneficiaries of Philhealth

Establishment of the Marikina Control Facility (a central monitoring and

dispatch center to include the installation of a surveillance system in major

intersections and at the River Park for improved monitoring, crime

prevention, and crime solution)

Installation of two or more sewage treatment plant facilities in partnership

with the Manila Water Company

Continuing advocacy for discipline as a platform for growth and

transformation

Marikina City continually thrives because of political leadership. The transition

from Mayor Maria Lourdes C. Fernando to Mayor Del R. de Guzman has been pivotal in

sustaining the gains of collective hard toil. The City Government has to live up to the

expectations not only for its constituents but also of Filipinos in general who hold the

City in high esteem and are benchmarking with Marikenian practices. Change has

become not a campaign phrase in Marikina - but a reality.

15

The focal point of Mayor de Guzman’s governance is people, the status of living

of people, particularly the vulnerable members of society, efforts are geared toward

human upliftment. The present administration has adopted its governance philosophy,

“Tunay na Kaunlaran, Tao Naman”. Simply put, Marikina residents will feel secure

because they know and feel that the city government is working with them in mind and

their interests at heart.

The 7K program of the city translates this philosophy into concrete action and

results in the areas of Health (Kalusugan), Education (Karunungan), Peace and Order

(Kapayapaan at Kaayusan), Livelihood (Kabuhayan), Environment (Kalikasan), Housing

(Katiyakan sa Paninirahan), and Good Governance (Katapatan at Makataong

Paglilingkod).

The City maintains three funds: the General, Special Education and Trust Funds.

Likewise, special accounts are maintained under the General Fund books for the 20%

Development Fund and the operation of economic enterprises, namely: Marikina Hotel,

Pamantasan ng Lungsod ng Marikina (PLMAR), and Marikina Sports Park (MSP).

Note 2. Basis of Financial Statement Presentation

2.1 The consolidated financial statements have been prepared in accordance with the

Generally Accepted State Accounting Principles and Standards.

Note 3. Summary of Significant Accounting Policies

3.1 The agency uses accrual basis of accounting for expenses. Under this method,

all expenses are recognized when incurred and reported in the period to which

they relate. The agency adopts the modified accrual method of accounting for

Real Property Taxes. Other taxes, fees and charges and other revenues, as well

as Internal Revenue Allotments, are accounted on cash basis.

3.2 Separate registries are maintained to monitor appropriations, allotments and

obligations.

3.3 Infrastructures under construction are valued following the construction period

theory.

3.4 The costs of public infrastructures, such as roads, bridges and other

infrastructures for general public use are excluded from the Property, Plant and

Equipment account and recorded in the Registry of Public Infrastructures.

3.5 Property, plant and equipment are carried at cost less accumulated depreciation.

3.6 The straight-line method of depreciation is used in depreciating property, plant

and equipment with estimated useful lives ranging from five to fifty years. A

16

residual value equivalent to ten percent of the cost of asset is set and

depreciation starts on the following month after purchase/construction.

3.7 Payable accounts are recognized and recorded in the books of accounts only

upon acceptance of the goods/inventory and rendition of services to the agency.

3.8 Financial expenses such as interest expense are separately classified from

maintenance and other operating expenses.

Note 4. Cash

This account is broken down as follows:

CY PY

General Fund

Cash in Vault P 1,849,429 P 14,338,537

Cash Disbursing Officers 43,706 792,360

Petty Cash Fund - 50,000

Cash in Bank-Local Currency, Current Account 630,115,980 580,075,900

Cash in Bank-Local Currency, Time Deposits 291,853,181 91,880,520

Sub-total P 923,862,296 P 687,137,317

Special Education Fund

Cash in Vault P 585,252 P 6,794,854



Sub-total P 84,886,829 P 147,553,200

Trust Fund

Cash in Vault P 118,989 P 4,663,572



Sub-total P 106,922,946 P 156,913,115

Grand Total P 1,115,672,072 P 991,603,632

The Cash in Vault account consists of collections from real property taxes, fees,

charges and other revenues at year end which were deposited from January 3 to February

7, 2011.

Cash-Disbursing Officers account consists of the cash advances of Ricardo L.

Castro in the amount of P2,080 granted on June 25, 2010, for the renewal of permit to

carry firearms, Evelina Elen for the renewal of permit to carry and surety bond of

firearms amounting to P40,639 and the amount of P987 from Analiza Valdemoro is due

for refund.

Cash in Bank-Local Currency, Current Account represents bank deposits under

interest-bearing current account for the General, Special Education and Trust Funds.

17

Cash in Bank-Local Currency, Time Deposit account consists of idle funds and

funds withdrawn from the Treasury Bills account and placed with the Philippine Veterans

Bank and Land Bank of the Philippines-Marcos Highway Branch.

Note 5. Receivables

This account includes the following

CY PY

General Fund

Due from Officers and Employees P 151,846 P 86,508

Loans Receivable-Others 329,458 340,749

Real Property Tax Receivable 236,965,372 212,605,127

Due from NGAS 44,141,242 56,834,098

Due from Other Funds - 15,000

Receivables- Disallowances/Charges - 3,600

Other Receivables 7,326,327 6,462,609

Sub-Total P 288,914,244 P 276,347,692


Special Education Tax Receivable P 128,004,946 P 137,876,911

Other Receivables 504,985 503,971

Sub-total P 128,509,931 P 138,380,882

Trust Fund

Due from Officers and Employees P 49,621 P 34,621 Loans Receivables-Others 35,500 35,500

Due from NGAS 5,232 -

Other Receivables 1,324,000 1,000,000

Sub-total P 1,414,353 P 1,070,121

Grand Total P 418,838,528 P 415,798,694

Other Receivables include dishonored checks in the amount of P1,027,806 from

payment of real property taxes in prior years which are uncollectible due to the absence of

documents. The increase of P1,188,732 represents amounts due from interest free loan,

business property taxes and bidders bond in the amount of P803,892, P 60,840 and

P324,000, respectively.

The account Loans Receivable - Others represents loan assistance to the

community under the Community Mortgage Program, as per Sangguniang Panlungsod

Resolution No. 2000, series of 2003. The assistance is extended to qualified borrowers

who are residents of the City, payable in six months with an interest of 5% per annum.

Also included in this account is the Livelihood Loan assistance under the “Isang Bayan,

Isang Produkto, Isang Milyong Piso Programa” of former Pres. Gloria M. Arroyo.

18

The Due from Officers and Employees account consists of bike loans under the

Bike Loan Program for City employees payable in six months as salary deduction

amounting to P91,987, cash advances for training and seminars of various employees in

the amount of P66,864 and amounts due from employees for lost PPE under their

accountability totaling P42,616.

Included in the account Due from NGAs is the Internal Revenue Allotment

(IRA) differential from the Department of Budget and Management (DBM) for CY 2000

and 2001 and for CY 2001 and 2004 in the amount of P20,448,450 and P23,417,843

respectively, and the over-remittance to the Bureau of Internal Revenue amounting to

P175,716 which will be deducted from the January 2011 remittance and undelivered

supplies by DBM procurement service amounting to P104,465.

Note 6. Inventories

This account consists of the following:

CY PY

General Fund

Office Supplies Inventory P 6,425,654 P 2,870,255

Accountable Forms Inventory 265,574 408,142

Drugs and Medicine Inventory 2,772,056 2,566,134

Medical, Dental and Lab. Supplies Inventory 1,807,528 1,518,846

Other Supplies Inventory 1,374,291 1,438,721

Construction Materials Inventory 39,579,532 29,115,679

Total P 52,224,636 P 37,917,776

Office Supplies inventory amounting P6,425,654 represents supplies and

materials in stock for use in various offices.

Accountable Forms Inventory includes official receipts and other accountable

forms for use by the City Treasurer’s Office.

Drugs and Medicines Inventory amounting to P2,772,056 represents drugs and

medicines for use in government operations.

Medical, Dental and Laboratory Supplies Inventory amounting to P1,807,528

represents medical dental and laboratory supplies for distribution to the different

barangays in the City for use in government operations/projects.

The Construction Materials Inventory consists of construction materials for use

in the repair and maintenance, and the construction of agency assets by administration.

Inventories increased by 37.73% or P14,306,860 over last year’s balance due to

acquisition of inventories in the last quarter of the year.

19

Note 7. Prepayments

The account consists of the following:

CY PY

General Fund

Prepaid Insurance P 692,402 P 588,500

Advances to Contractors 1,756,549 1,533,735

Sub-Total P 2,448,951 P 2,122,235


Advances to Contractors P 78,976 P -

Sub-Total P 78,976 P -

Total P 2,527,927 P 2,122,235

The Prepaid Insurance represents the unexpired portion of prepaid insurance for

property, plant and equipment of the City.

Advances to Contractors account represents the 15% mobilization fee granted to

Square Meter Trading and Construction for the construction of Marikina Sports Park

Building and Upgrading of Jogging/Bicycle Lane at Park Creek of Simeona Creek,

Construction of Three Storey School Building at Rainbow St., SSS Village; to Nippon

Formworks & Construction Corp for the Construction of 16 classroom and Four-Storey

School Building at St. Mary School, Nangka and to Juan Sajid for the installation of the

Lady Sculpture Artwork at the DOJ Building.

Note 8. Investments in Securities


CY PY

General Fund

Investment in Treasury Bills P - P 140,850,721

Investment in Stocks 1,198,020 1,195,600

Sub-Total P 1,198,020 P 142,046,321


Investment in Treasury Bills P - P 23,197,197

Investments in Stocks 320,540 320,540

Sub-Total P 320,540 P 23,517,737

Grand Total P 1,518,560 P 165,564,058

Investments in Stocks represent the 151,614 preferred shares with Meralco at

P10.00/share.

20

Investment in Securities decreased by 99.08% or P164,045,498 over last year’s

balance due to maturity of Treasury Bills on General Fund and SEF dated October 13,

2010 and December 8, 2010, respectively.

Note 9. Property, Plant and Equipment


CY PY

General Fund

Land P 1,069,224,717 P 1,062,640,549

Land Improvements 231,269,297 231,269,297

Buildings 1,067,843,359 955,751,924

Office Equipment, Furniture and Fixtures 81,948,690 116,644,186

Machineries and Equipment 106,963,140 85,352,467

Transportation Equipment 130,583,484 121,640,041

Other Property, Plant and Equipment 76,797,613 82,299,115

Construction in Progress P 266,480,335 P 1,076,124,380

Total 3,031,110,636 3,731,721,960

Accumulated Depreciation 200,250,754 151,734,940

Net Amount P 2,830,859,882 P 3,579,987,020


Buildings P 636,549,318 P 583,458,014

Office Equipment Furniture and Fixtures 18,487,110 13,085,020

Machineries and Equipment 25,214,321 741,738

Transportation Equipment 3,105,000 3,105,000

Other Property, Plant and Equipment 23,282,192 19,650,972

Public Infrastructures 2,491,736 2,491,736

Construction in Progress 83,212,058 83,555,821

Total P 792,341,735 P 706,088,301

Accumulated Depreciation 28,595,917 17,809,174

Net Amount P 763,745,818 P 688,279,127

Trust Fund

Office Equipment, Furniture and Fixtures P 261,215 P 261,215

Machineries and Equipment 73,115 73,115

Transportation Equipment 286,720 286,720

Other Property, Plant and Equipment 283,831 283,831

Public Infrastructures 61,497,617 61,497,617

Construction in Progress 5,448,699 4,765,636

Total P 67,851,197 P 67,168,134

Accumulated Depreciation 700,525 520,424

Net Amount P 67,150,672 P 66,647,711

Total Net Amount P 3,661,756,372 P 4,334,913,858

Most of the property, plant and equipment were acquired prior to CY 2002. The

depreciation reflected in the books pertains to assets which were acquired by the City from

CY 2002 to present. For assets acquired prior to CY 2002, appraisal of PPEs will

be undertaken to serve as basis for the computation of depreciation. The amount of

21

P56,168,005 representing property, plant and equipment damaged by Typhoon Ondoy

was deducted from the books as per COA Decision Number 2010-006 dated July 06, 2010,

approving the relief from property accountability.

Land represents the value of lot located at Barangay Sta. Elena, Marikina City

where the City Hall is located and other lots acquired by the agency.

The decrease of P809,304,744 in the balance of the Construction in Progress

account represents finished projects reclassified to Public Infrastructures account.

Note 10. Other Assets

CY PY

General Fund P 49,506,209 P 57,661,205

This account consists of obsolete and unserviceable property of the agency. The

decrease of P8,154,996 pertains to the sale of Other Assets.

Note 11. Current Liabilities

This account is broken down as follows:

CY PY

General Fund

Accounts Payable P 151,789,176 P 206,735,705

Due to Officers and Employees 15,563,891 20,580,590

Due to BIR 3,861,724 8,329,946

Due to GSIS 10,580,780 12,780,065

Due to PAG-IBIG 1,581,993 1,496,755

Due to PHILHEALTH 596,041 585,411 Due to Other NGAS 54,957,696 61,786,893

Due to LGUs 30,850,486 39,677,333

Due to Other Funds 655 -

Guaranty Deposits Payable 1,129,721 1,129,721

Performance/Bidders/Bail Bonds Payable 16,200

Other Payables 33,812,934 33,449,776

Sub-Total P 304,725,097 P 386,568,393


Accounts Payable P 26,639,709 P 11,101,513 Due to Officers and Employees 15,805 7,669 Due to BIR 27,574 1,133,671

Due to GSIS 135,002 117,394

Due to PAG-IBIG 29,447 40,851

Due to PHILHEALTH 28,779 28,565

Guaranty Deposits Payable 178,685 178,685

Other Payables 11,760 21,540 Sub-Total P 27,066,761 P 12,629,887

22

CY PY

Trust Fund

Due to National Treasury P - P 7,279

Due to BIR 4,766 1,140

Due to Other NGAS 11,782,821 21,534,565

Due to LGUs 21,660,751 86,340,282

Guaranty Deposits Payable 106,020 106,020

Performance/Bidders/Bail Bonds Payable 7,688,689 5,299,932

Other Payable 55,032,145 37,635,096

Sub-Total P 96,275,191 P 150,924,314

Grand Total P 428,067,050 P 550,122,595

The Accounts Payable represents the amount due to suppliers and contractors for

the delivery of goods and services for the year 2010 and prior years.

The Due to Officers and Employees account represents unclaimed salaries and

terminal leave pay of city employees.

The Due to BIR, GSIS, PAG-IBIG and PHILHEALTH are the amounts payable

for withheld taxes, premiums and loan payments. Of the amounts due to national

government agencies and government-owned and/or controlled corporations, the

following remittances were made in January 10, 12, 18 and 26, 2011:

Bureau of Internal Revenue P 3,808,930

Service Insurance System 9,664,480

Home Development Mutual Fund 648,295

Philhealth Insurance Corporation 463,126

Total P 14,584,831

The Due to Other NGAs represents the 5% contribution of the City to the Metro

Manila Development Authority and Priority Development Assistance Fund of various

senators and congressmen.

The Due to LGUs represents payable to various barangays as part of their Real

Property Tax and Community Tax shares for CY 2010, counterpart share for various

projects to be implemented by the City and payment of streetlights and interest earned

from savings/current and special savings deposit.

The Guaranty Deposits Payable pertains to the 10% retention fee from

contractors for various projects implemented by the City.

The Performance/Bidders/Bail Bonds Payable are liabilities arising from the

receipt of cash to guarantee the performance of contract/court order.

23

The Other Payables account includes collection for the account of housing

beneficiaries under the Emergency Relocation Center and account of private entities or

institutions as bond for existing projects of contractors, supervision and restoration

deposits of the Philippine Long Distance Telephone (PLDT), Manila Water Sewerage

System (MWSS) and other contractors. Included in the Other Payables are the interest

free loan granted to employees and employees welfare fund amounting to P258,668.

Note 12. Long-Term Liabilities

CY PY

General Fund P 173,393,121 P 318,447,667

This account consists of the balance of loan availments/drawdowns from the

Philippine Veterans Bank (PVB). The loan was approved thru Sangguniang Resolution

No. 59 dated April 5, 2006 for various infrastructure projects of the City.

Long-Term Liabilities decreased by 45.55% or P145,054,546 over last year’s

balance due to payment of loan for the year.

Note 13. Deferred Credits

This account consists of:

CY PY

General Fund

Deferred Real Property Tax Income P 236,965,372 P 212,605,127

Other Deferred Credits 15,578,630 17,687,718

Sub-Total P 252,544,001 P 230,292,845


Deferred Special Education Tax Income P 128,004,946 P 137,876,911

Other Deferred Credits 17,853,124 16,035,791

Sub-Total P 145,858,070 P 153,912,702

Grand Total P 398,402,071 P 384,205,547

Other Deferred Credits account consists of real property tax payments which are

under protest due to the increase in real property taxes that took effect in Calendar Year

2002, interest free loan and advance payment of real property taxes for 2011 in the

amounts of P20,996,886; P803,892 and P11,630,975, respectively.

24

Note 14. Government Equity

The change in the balance of Government Equity is as follows:

CY PY

Government Equity, Beginning P 4,754,105,546 P 4,567,518,213

Adjustment to Beginning Balance 5,435,289 3,222,915

Add:

Net Income 302,924,514 468,669,382

Total P 5,062,465,349 P 5,039,410,510

Add( Deduct) Prior Years' Adjustments

a. Additions -

Interest Earned P P 3,572,745

Refund of Salaries 32,962 27,516

Reversion of Accounts Payable 76,325,547 137,299

Reclassification of Account 2,470,220

Reversion of Bank Charges 21,577

Management Fee 60,300

Collection (Disallowances) 64,357

Reversion of Expense 4,650,710 38,104

Overpayment to Suppliers 50,572 2,000

Lost of PPE 3,038

Returned bond 1,013,496

Internal Revenue Allotment 7,963,429 34,080,750

Reversion of paid under protest 6,051,482

Unrecorded Income 16,620

Interfund transfer 1,966,668 5,736,917

Double Entry 136,600 186,000

Adjustment on PPE 2,779,000 103,457,307 43,930,603

b.Reduction -

Liquidation of Cash Advance P 15,500 P

Refund of collection 246,246

Payment of Salaries 719,348 1,209,188

Depreciation - Marikina Hotel

Other MOOE 151,800 472,997

Reversion of Accounts Payable 7,642,250 62,537

Disposal of Assets 10,151,544

Adjustment of Bank Premium 18,273,797

Repairs and Maintenance 131,789 19,958

Management Fee 54,231

Refund of collection 824

Reversion of Income 8,000

Refund of collection 15,000

Unrecorded Issuance of Inventory 352,616

Double Entry 1,935,644

Depreciation expense 336,375

Supplies Expense 1,383,172

Communication Expense 594

25

CY PY

Interfund transfer 16,514,044

Reclassification of Account 2,962,552

Adjustment of PPE 3,062,606 33,166,276 32,556,337

P 5,132,756,380 P 5,050,784,777

Adjusted Balance

Add: Receipt of PPE/Public Infrastructures 7,401,074

Completed Infrastructures 600,671

Less: Transfers to Registry

Roads, Highways and Bridges 689,560,176 96,418,520

Parks, Plazas and Monuments 14,889,965

Irrigation, Canals and Laterals 65,265,991 171,862,893

Other Public Infrastructures 67,560,035 (829,274,423) 28,397,818 (296,679,231)

Government Equity, End P 4,303,481,958 P 4,754,105,546

Note 15. Operating Income P 1,523,773,430

The City realized an aggregate income of P1.52 billion or a decrease of P109.92

million or 6.73 percent from last years income of P1.63 billion.

Operating Income consisted of Tax Revenue of P707.57 million and General

Income of P816.20 million. Both showed decreases in the amount of P51.73 million or

6.81 percent and P58.19 million or 3.56 percent, respectively. Share in the Internal

Revenue Allotment rose by P28.65 million or 5.61 percent.

Note 16. Expenses P 1,192,186,212

Total operating and financial expenses of P1.19 billion registered an increase of

P46.47 million or 4.06 percent from last years P1.14 billion.

The expenses were classified as follows: Current Operating Expenses, P1.18

billion, Financial expenses, P11.24 million, Subsidies, donations and Extraordinary

Expenses, P28.66 million.

PART II

DETAILED AUDIT FINDINGS

AND RECOMMENDATIONS

26

DETAILED AUDIT FINDINGS AND RECOMMENDATIONS

I. Financial and Compliance Audit

1. Doubtful validity of account balances

1.1 There was a difference of P691.09 million between the Property, Plant

and Equipment (PPE) balance per books and physical inventory, thus

rendering the said amount doubtful. This was due to the failure of the

General Services Office (GSO) and the Accounting Office to reconcile the

Inventory Report with the accounting and property records.

Section 124, Volume I of the New Government Accounting System

(NGAS) Manual provides that:

“Physical count of property, plant and equipment by type shall

be made annually and reported on the Report on the Physical

Count of Property, Plant and Equipment (RPCPPE). This shall

be submitted to the Auditor concerned not later than January

31 of each year.”

Moreover, Section C.3, Chapter V of the Manual on Property

Custodianship states that:

“After the physical inventory taking, the Inventory Committee

shall reconcile the results of the count with the property and

accounting records. The inventory listing of the supplies and

materials shall be checked against the stock cards maintained

by the Property and supply ledger cards maintained by the

Accounting and finally against the control accounts. On the

other hand, the inventory listing of equipment shall be checked

with the property card maintained by the Property as against

the equipment ledger cards maintained by the Accounting and

the total thereof shall be compared with those in the general

ledger.”

As of year end, the balances of the accounts Land and Land

Improvements, Buildings, Office Equipment, Furniture and Fixtures,

Machineries and Equipment, Transportation Equipment and Other Property,

Plant and Equipment per books totaled P3,472,173,126 while the Inventory

Report presented a total of only P2,781,085,190 or a difference of

P691,087,936 (Annex E). Although the Inventory Report submitted by

General Services Department (GSD) was as of June 30, 2010 only, this was

adjusted by adding purchases from July to December to make the period of

the two records comparable.

27

The existence, validity and accuracy of PPE (201-250) accounts

amounting to P691,087,936 could not be validated and verified due to the

failure of the management to reconcile the physical inventory report with the

balance per books and property records, contrary to the above-mentioned

provisions. Moreover, absence of pertinent records to determine the value of a

property hinders the necessary reconciliation of PPE.

Physical inventory taking is necessary to check the existence,

condition and accuracy of the balance of the PPE. It will also aid the Property

Officer in identifying obsolete and unserviceable PPE that should be dropped

from the books of accounts and thereby present the true value of the PPE

account in the financial statement. The reliability of the ledger balance for the

PPE account can only be established after the actual inventory taking and

reconciliation with property records. Physical inventory taking also attests to

the integrity of property custodianship and accountability.

The General Services Officer (GSO) informed this Office that they are

presently conducting physical count of properties, however, they are

encountering some problems in the valuation of properties due to the absence

of records brought about by typhoon “Ondoy”.

However, a copy of the year-end physical inventory report was

submitted by the GSO after the exit conference in March 2011. Although

assurance to update the records has always been made, strict implementation

thereof is not being monitored.

We strongly recommend that the City Accountant, in coordination

with the GSO, fast-track the reconciliation of the Inventory Report with the

balance per books and property records. It is also recommended that for those

properties whose values cannot be determined, their estimated values as well

as their remaining useful life may be assigned by an appraisal committee.

1.2 Unpaid obligations in CY 2007 and prior years amounting to P6.78

million, which did not have any supporting documents to prove validity

and existence, were still recorded under Accounts Payable (401).

Section 4(s), Volume I of the NGAS Manual states that liability shall

be recognized at the time goods and services are accepted or rendered and

supplier/creditor bills are received. Any unliquidated balance of accounts

payable in the books maybe reverted to the unappropriated surplus of the

General Fund, provided that these have been outstanding for two years or

more and no claim has been filed for the payment of the account pursuant to

Section 98 of PD 1445.

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As of December 31, 2010, Accounts Payable (401) under the General

Fund (GF) and Special Education Fund (SEF) presented a balance of

P178,428,886.

Our review of the subsidiary records revealed the following

deficiencies:

a) The account balances included financial assistance pertaining to

CYs 2006 to 2009 amounting to P478,239 and the named claimants were the

Office of the City Mayor, the Office of the City Vice-Mayor and the Social

Welfare Development Office. Financial assistance refers to “support” or

“aid” to indigent constituents, thus, claimants should not be the City offices.

Moreover, financial assistance should not be considered as a liability because

it does not in any way involve services rendered, as referred to under Section

4(s), Volume I of the NGAS Manual.

b) Unpaid claims for CYs 2004 to 2007 totaling P6,279,229 lacks the

necessary documents to support the claim and are due for reversion to the

government equity as they remained outstanding for more than two years and

no claim for payment has been filed. Aging of account payables was not

undertaken as monitoring control particularly to determine claims that have

been outstanding for two or more years, and the basis for reversion.

The City Accountant manifested that the recommendation is duly

noted and that the accounts payable which remained outstanding for more

than two years will be analyzed and those found without valid claims or

without any available supporting documents shall be appropriately adjusted or

reverted.

We advise the City Accountant to immediately revert these

undocumented accounts payable to the Government Equity account as

required under Section 98 of PD 1445.

2. Overstatement/Understatement of account balances

2.1 The Construction in Progress (CIP) accounts were overstated by P328.72

million because the completed projects of prior years were not fully

transferred to their appropriate PPE account.

Accuracy in the financial reports and records is essential in the

management and implementation of the agency programs and projects. For

infrastructure projects, there is a need for the record to be accurate and

updated as this serves as an essential source of information for government

managers and a tool in the discharge of their functions as implementors and

29

decision-makers, particularly in the development of a locality. Inaccurate

financial reports and records will consequently result in inaccurate decision.

As of December 31, 2010, Construction in Progress accounts

presented the following balances in the General Ledger of the General Fund:

Construction in Progress – Agency Assets -264 P 237,760,792

-do- Roads, Highways, Bridges -266 49,241,072

-do- Parks, Plazas, Monuments -267 547,623

-do- Irrigation, Canals and Laterals-270 20,210,130

-do- Waterways, Aqueducts, etc -272 15,807,896

-do- Other Public Infrastructures -273 31,573,579

Total P 355,141,092

Verification of samples of the projects reported as in-progress revealed

that the balances appearing in the subsidiary ledgers pertained mostly to the

first payments made on the prior years’ projects. Apparently, these remaining

amount in the CIP accounts were part of the project cost of the previously

booked-up completed projects.

On the other hand, the Status Report of Projects as of December 31,

2010 submitted by the City Engineer’s Office showed that on-going projects

amounted only to P 26,424,534, as follows:

Account

Name of Project Location Code Project Cost

Projects by Contract:

Proposed Talipapa Market Balubad, Nangka 264 P 5,260,480

Improvement of Parck Creek Concepcion 1 270 14,100,623

Sub-total P 19,361,102

Projects "by Administration":

Repairs of sidewalk/manhole various streets 270 P 2,000,090

Repair of Exist, Damaged Pavement Jacamar 270 2,636,459

Road and Roadside Improvement San Roque 270 214,345

Repair of Exist, Dilapidated Pavement Various 273 2,212,537

Sub-total P 7,063,431

Grand Total P 26,424,534

The failure of the Accounting Office to transfer the entire cost of the

completed projects to the appropriate PPE account and the inability of the

Engineering Office to regularly submit project status report and to reconcile

the same with that of the records maintained by the Accounting Office

resulted in the overstatement of the Construction in Progress account and the

understatement of the corresponding Property, Plant and Equipment accounts

both by P328,716,558.

30

The City Engineer assured that monthly accomplishment/project status

report will be submitted to the Accounting Office for proper recording and

reconciliation with the accounting records.

We recommend the review of the CIP accounts so that all completed

projects could be transferred to PPE. Further, it is recommended that the

Status Report of Projects Undertaken by the Engineering Office be submitted

quarterly to the City Accountant so that there will be a basis for the

preparation of the Journal Entry Voucher (JEV) that will record the transfer.

3. Erroneous classification of accounts

3.1 Wages, allowances and benefits of volunteers and non-regular employees

totaling P20.50 million were erroneously charged against the allotment

for Personal Services (PS), thereby overstating the PS and understating

the Maintenance and Other Operating Expenses (MOOE). On the other

hand, various expenses such as traveling/training,

intelligence/confidential expenses and Other MOOE amounting to P8.66

million were erroneously recorded as Extraordinary Expenses (883), thus

overstating said account by the same amount and understating the

appropriate expense accounts.

COA Circular No. 2004-008 dated September 20, 2004, provides the

updated description of accounts under the NGAS to facilitate identification of

transactions which fall under the specific accounts.

Audit of the Other Personnel Benefits (749) account under the

allotment for Personal Services disclosed total charges of P24,630,058 as of

December 31, 2010. Of this amount, P20,504,665 or 83.25% were salaries

and benefits of non-regular employees, RATA of Rural Health Workers of the

City government and health insurance of 204 indigent families (Annex F).

The recipients/payee of the salaries and benefits were not regular

employees of the City Government, thus, these expenses should not be

charged against the account, Other Personnel Benefits as provided under

Section 7(a), Volume III of the NGAS Manual which provides that:

“Personal Services (PS) – This account classification includes

basic pay, allowances, bonus, cash gifts, incentives and

benefits and other personnel benefits of officers and employees

of the government.”

The payments for the salaries and benefits of non-regular employees

should have been charged to the Other Maintenance and Operating Expenses

(969) account, the RATA of the Rural Health Physicians to the

31

Representation Allowance (713) and Transportation Allowance (714)

accounts, and the health insurance of 204 indigent families to the

Extraordinary Expenses (883) account.

Moreover, analysis of the Extraordinary Expenses (883) account

disclosed that the amount of P3,009,680 representing expenses for Lakbay

Aral travel/seminar, P654,512 for financial assistance and P5 million cash

advance for intelligence/confidential operation, for a total of P8,664,292,

were erroneously charged against the said account, contrary to the provisions

of COA Circular No. 2004-008 dated September 20, 2004.

Accordingly, the erroneous charging to the Extraordinary Expenses

account overstated the said account by P8,664,292 and understated the

Traveling/Training Expenses, Intelligence/Confidential Expenses and Other

MOOE accounts by P3,009,680, P5,000,000 and P654,512, respectively.

Further, employees of the city maybe deprived of other benefits that may be

due them if the appropriation for Personal Services will be used for MOOE.

The City Budget Officer informed us that the budget for Other

Personnel Benefits includes the appropriations for the above-cited expenses,

however, she assured us that necessary and proper classification and charging

of accounts will be considered in the preparation of the ensuing year’s annual

budget.

Management gave the assurance that the recommended courses of

action to correct the deficiencies will be implemented immediately.

We recommend that the practice of utilizing the allotment for Personal

Services for payment of expenses other than those for personal services be

discontinued. It is further recommended that the City Accountant and the City

Budget Officer should be extra careful in the budget utilization and in

recording and classifying expenses.

4. Compliance with laws, rules and regulations

4.1 Supplemental Budgets were not supported by new revenue sources.

Likewise, the budget for Continuing Appropriations were realigned to

other projects and to MOOE.

Section 321 of RA 7160 states that, no ordinance providing for a

supplemental budget shall be enacted, except when supported by funds

actually available as certified by the local treasurer or by new revenue

sources.

32

Section 336 of RA 7160, on the use of appropriated funds and savings,

states that, funds shall be available exclusively for the specific purposes for

which they have been appropriated. No ordinance shall be passed authorizing

any transfer of appropriation from one item to another. However, the Local

Chief Executive (LCE) or the presiding officer of the Sanggunian concerned

may by ordinance, be authorized to augment any item in the approved annual

budget for their respective offices from savings in other items within the same

expense class of their appropriation.

During CY 2010, the approved Annual Budget amounted to

P1,495,901,195. During same period changes in the approved budget were

made as follows:

Particulars Date Source

Annual Budget P 1,495,901,195

Supplemental Budgets

No. 1 - Ordinance No. 44 3/22/2010 Savings P 15,000,000

No. 1 - Ordinance No. 49 3/19/2010 Surplus 50,000,000

No. 2 - Ordinance No. 75 6/8/2010 GF - 2010 600,000.00



No. 5 - Ordinance No. 103 6/23/2010 Trust Fund 2,946,482

Total Supplemental Budgets P 69,278,482

Total Budget for CY 2010 P 1,565,179,677

Amount

In the review of the budget, we noted the following deficiencies:

4.1.1 Supplemental Budgets under City Ordinance Nos. 44, 49, 75,

76 and 77 were passed without the required Certification by the

City Treasurer that funds are actually available.

Despite our written and verbal requests to the City Budget

Officer to furnish us a list of the sources of fund that has been

the basis for the enactment of the supplemental budget, still the

same has not been submitted to date. As such this is contrary

to the provisions set under Section 321 of RA 7160

4.1.2 Supplemental budgets passed under City Ordinance Nos. 44,

49 and 103 indicated the funding source as from “savings”,

“surplus”, “general fund for 2010” and “Trust Fund Account”.

There were no specifics given on where these savings/surplus

came from. Likewise, the “general fund for 2010” could not be

considered a valid funding source for the supplemental budgets

under City Ordinance Nos. 75, 76 and 77 because the “general

33

fund for 2010” is part of the approved Annual Budget, and not

a new revenue source as provided under Section 321 of RA

7160.

4.1.3 Funds from Continuing Appropriations for Capital Outlay –

Infrastructure projects totaling P70,690,887 were

realigned/transferred under City Ordinance No. 63 dated May

30, 2010, to the following:

Land acquisition for the City

Employees’ Housing Project

P 65,000,000

Garbage Hauling 4,000,000

DSWD Social Services __ 1,690,887

Total P 70,690,887

Said ordinance was based on a certification, dated March 26,

2010, issued by the City Engineer, that the following

programmed/proposed projects were no longer the priority of

the City Government, to wit:

Reference No. Particulars Obligations

EA-2010-04-005 Proposed Multi-Purpose Covered Court

at Calumpang Elem. School

P 12,996,110

EA-2010-04-0034 Proposed Multi-Purpose Covered Court

at Calumpang Elem. School

4,901,866

EA-2010-04-0037 Proposed Quonset Roofing at

Calumpang Elem. School

1,814,296

EA-2010-04-0038 Legislative Building-Sta. Elena 17,396,023

EA-2010-04-0045 Legislative Building-Sta. Elena 19,603,977

EA-2010-04-0052 Proposed CHB Wall Fence Road

Dike/Patrol Road, Malanday

9,579,572

EA-2010-04-0056 Proposed Quonset Roofing at

Laredo St., Rancho Estate Ph3

1,407,000

EA-2010-04-0057 Proposed Completion of Multi-Purpose

Covered Gym, Laredo St. Rancho

Estate, Ph3

3,022,043

Total P 70,720,887

It could be gleaned that the transfer included garbage hauling

and DSWD social services which are both current operating

expenditures, thus, not in conformity with Section 336 of RA

7160 which allows realignment within the same expense class.

Further, this transfer was not submitted to the Department of

Budget and Management (DBM) for review, as required.

This realignment was resorted to in order to finance the

purchase of 30 parcels of land amounting to P64,149,000 at

34

Provident Village for the housing project for city employees.

The Deed of Sale is dated May 31, 2010, was signed by the

former City Mayor, on the basis of the authority granted her

under City Ordinance No. 45 dated March 17, 2010.

Moreover, it has been noted that Continuing Appropriations

reported at the end every year were not supported with the list

of projects/activities for which these were intended, thus,

changes can easily effected and the priorities that were set at

the time of budgeting were disregarded.

The City Budget Officer and the City Treasurer gave the assurance

that the recommended courses of action will be taken into consideration to

correct the deficiencies noted.

We recommend that supplemental budgets be backed-up with new

revenue source/s, and duly certified as such by the City Treasurer. On the

other hand, realignments should only be made within the same allotment class

and Continuing Appropriations should be supported with the list of projects

for implementation to ensure that it is utilized for the purpose for which it was

intended.

4.2 Of the P 135.63 million appropriation for the 20% Development Fund,

P20.63 million or 15.21% was utilized for purposes other than those

provided under Department of Budget and Management (DBM) and

Department of the Interior and Local Government (DILG) Joint

Memorandum Circular No. 1, series of 2005, dated September 20, 2005.

Programs, projects or activities that are to be funded out of the 20%

Development Fund were enumerated in Section 3.0 of the DBM and the DILG

Joint Memorandum Circular No. 1 dated September 20, 2005. These include

social and economic development and environmental management.

For the year 2010, the City Government, in its annual budget,

appropriated the amount of P 135,633,298 for the 20% Development Fund.

Of this amount P20,632,198 or 15.21% was utilized for purposes other than

those provided in the said Joint Circular, as follows:

Maintenance and Other Operating Expenses P 16,626,198

Capital Outlay 4,006,000

Total P 20,632,198

The failure of the City to prepare an Annual Development Plan

precluded the proper utilization of the fund, thus, intended beneficiaries were

deprived of the benefits that could have been derived therefrom.

35

The City Planning Officer and the Budget Officer have taken note of

our observation and assured us of the immediate compliance with the audit

recommendation.

We reiterate our recommendation that the 20% Development Fund be

utilized only for the purposes for which it was intended and for the City

Development Council to prepare an Annual Development Plan that is in line

with the above-mentioned Joint Circular.

4.3 The Annual Procurement Plan (APP) that supported the approved

Annual Budget for the procurement of goods and infrastructure projects

did not contain the detailed list of goods and infrastructure projects to be

procured during the year, contrary to Section 7 of RA 9184.

Section 7 of RA 9184 states that, all procurement should be within the

approved budget of the procuring entity and should be meticulously and

judiciously planned by the procuring entity concerned. No government

procurement shall be undertaken unless it is in accordance with an approved

Annual Procurement Plan. In case of projects funded from lump-sum

appropriations, the head of the procuring entity shall immediately update the

APP to include such projects or contracts.

We have reviewed the procurement of goods and infrastructure project

by the City of Marikina for the year 2010. As of December 31, 2010, the

reported amount of obligations incurred for capital outlay amounted to

P112,792,456, however, we noted that the required APP that should serve as

basis in the procurement of the items had not been correctly prepared.

Transaction documents, particularly those submitted for pre-audit, included

either the Project Procurement Management Plan (PPMP) or the APP which

only contained the item/s purchased per Disbursement Voucher. The APP as

used by the City was prepared on a per transaction basis, contrary to the

requirement of Section 7, RA 9184. Further, the contents of the submitted

APP were not in conformity with the said provision of RA 9184. The APP

was presented on a per Department/Office and erroneously included items,

such as, Travel Expense, Donations, Rent, Subscription Fee, etc., including

Intelligence/Confidential Expenses, with no particular items stated to be

procured. Moreover, these expense items are not within the coverage of RA

9184. The amount presented for each Department did not match the approved

Annual Budget. For instance, in the Annual Budget the amount appropriated

for the 20% Development Fund is P135,633,298. However, the amount

presented in the submitted APP for the said Fund is P151,900,615, or a

discrepancy of P16,267,317.

Our interview with the GSO staff revealed that, the APP was not

prepared during the annual budget preparation period. We were informed that

the Planning and Management Office (PMO) instructed all department heads

36

to submit their respective PPMP in the 1st quarter of CY 2010, when the

Annual Budget has already been approved. Despite the delay however, not all

the department heads submitted their PPMPs for consolidation by the BAC

Secretariat. As required under Section 7 of RA 9184, the approved Annual

Budget for infrastructure, supplies and equipment and services should be

supported by an approved APP, showing the breakdown of the projects,

supplies, materials, equipment and services to be procured during the year.

It is recommended that department heads be required to submit to the

Bids and Awards Committee (BAC) Secretariat their individual Project

Procurement Management Plans (PPMPs) showing the detailed list of goods

and infrastructure projects to be procured during the year. These PPMPs shall

be consolidated by the BAC Secretariat into an Annual Procurement Plan to

support the appropriated amount in the approved Annual Budget.

4.4 The City has yet to come up with a clear-cut policy and detailed

guidelines in the grant of financial assistance to qualified constituents and

to People’s and Non-governmental organizations.

The City Government of Marikina appropriated in CY 2010 the

amount of P17,005,000 for Donations. During the year, the supplemental

budget amounting to P 67,946,482, for educational assistance and donation

was passed. As of December 31, 2010, Donations released amounted to

P21,253,145. The grant of these financial assistance/donations, however, was

undertaken without specific guidelines. These were granted to community

organizations and individuals including those who were not indigents. Further

verification disclosed the following deficiencies:

a) The policy and appropriate mechanism on the grant of financial

assistance were not in conformity with Section 36 and pertinent portions of

Section 458(5) of RA 7160. Section 36 of RA 7160 states that, “A local

government unit may through its local chief executive and with the

concurrence of the sanggunian concerned, provide assistance, financial or

otherwise, to such people’s and non-governmental organizations for

economic, socially oriented, environmental, or cultural projects to be

implemented within its jurisdiction”. Section 458(5) states that the

Sangguniang Panglungsod shall “approve ordinances which shall ensure the

efficient and effective delivery of the basic services and facilities as provided

for under Section 17 of this Code and in addition to said services and facilities

shall:

“(i) x x x

(xi) Establish a scholarship fund for poor but deserving

students in schools located within its jurisdiction or for

students residing within the city;

37

(xii) x x x

(xiv) Provide for the care of disabled persons, paupers, the

aged, the sick, persons of unsound mind, abandoned

minors, juvenile delinquents, drug dependents, abused

children and other needy and disadvantaged persons,

particularly children and youth below 18 years of age;

and, subject to availability of funds, establish and provide

for the operation of centers and facilities for said needy

and disadvantaged persons;

(xv) x x x “ among others.

Disbursement documents for the financial assistance granted in CY

2010 showed that these were given to private organizations and individuals

who were not indigent. Likewise, these were granted without having passed

the appropriate review and evaluation by the Social Welfare and Development

Office (SWDO), which is the office tasked to undertake the financial

assistance activities, as stated in the Executive Budget.

Other deficiencies noted on the grant of financial assistance in the first

semester disbursements, were as follows:

These were made thru reimbursements.

These were granted in the form of goods and appliances to various

community organizations/neighborhood associations for purposes

of raffle prizes;

In February 2010, five months after typhoon Ondoy happened in

September 2009, a cash advance for financial assistance amounting

to P418,000 was granted thru the Office of the Vice-Mayor

reportedly for the victims of the typhoon in Barangay Fortune and

Nangka. However, there were no relocation centers at that time for

victims of typhoon Ondoy in Marikina to justify the need for said

cash donations.

In June 2010, payment amounting to P1,900,000 was made for the

purchase of 10,000 pcs. of basketballs reportedly for donation to

various organizations. The 10,000 pcs. of basketball were

reportedly given to the 10,000 target participants of the planned

sports fest mentioned in the letter-request dated February 20, 2010

signed by 12 organizations.

Our interview with some basketball players revealed that the

required number of players in a basketball team is 12, and the

38

needed number of basketballs for a team in the entire period of

practice is 3 at the most. Hence, if there are 10,000 participants,

the number of teams would be 833. For these number of teams

with 3 required basketballs per team, the total requirement would

only be 2,500 basketballs. The purchase therefore of 10,000

basketballs for the 10,000 target participants, or one for each

participant is not justifiable. Had the donation been made

judiciously, the City Government could have only purchased 2,500

basketballs and expended P475,000, instead of P1,900,000. The

items purchased were not included in the final APP.

b) A payment of P1,000,000 was made in June 2010 for the purchase

of 10,000 leadership medals, reportedly for donation. In the evaluation of the

disbursement, the following deficiencies were noted:

There were no documents attached to the voucher to serve as basis

for the purchase of the medals. Likewise, there were no leadership

medals listed in the Annual Procurement Plan.

The item specifications were not stated in the Purchase Request

and Purchase Order. This is necessary to ensure correctness of the

delivered items and for use in the evaluation of price

reasonableness.

The purpose of extending financial assistance to the less privileged

constituents of the City is primarily to alleviate the burden and difficulties

encountered in life. However, the assistance extended and granted did not

pass through a screening and no controls were in place to ensure that only the

deserving are benefited.

During the last quarter of the year, the City government formulated

guidelines in the grant of financial assistance, however, it lacked some

policies that will ensure that the recipients will be those who are really in need

of assistance.

Management manifested that the recommendation is duly noted and

necessary revisions on the guidelines in the grant of financial assistance will

be made to ensure that only the qualified indigent families will be benefited.

It is recommended that policy guidelines in the grant of financial

assistance conform with the above-stated sections of RA 7160.

4.5 The Marikina Revenue Code of 1995 has yet to be updated to conform

with the Local Government Code, hence, the City’s revenue raising

power has not been maximized.

39

Section 151 of RA 7160 provides that the city may levy the taxes, fees

and charges which the province or municipality may impose. The rates of

taxes that the city may levy may exceed the maximum rates allowed for the

province and municipality by not more than fifty percent (50%) except the

rates of professional and amusement taxes.

The following deficiencies that were noted last year in the City’s

revenue generation still existed:

The Ordinances are in loose forms and not consolidated or codified

to come up with the Revenue Code of the City Government that

would be readily available for reference and guidance, and fit for

its present status as a highly urbanized city.

The real property taxes imposed in CYs 2009 and 2010 were based

on the rates provided under Ordinance 223 of CY 2001 while

business taxes were still based on rates under the Marikina

Revenue Code of 1995 when Marikina was still a municipality,

which rates are no longer attuned to the present financial and

economic development of the City.

Ordinance No. 223 adopting a new schedule of Fair Market Value

for Land, Buildings and Other Structures was passed in CY 2001.

However, the corresponding Ordinance fixing the rate of

assessment levels to be applied to the new schedule of Fair Market

Value to determine the assessed valued has not been issued,

contrary to Section 218 of RA 7160. The absence of an enabling

Ordinance results in the risk that the determination of assessed

value may not be uniform for each property classification, and

would consequently result in financial losses.

Miscellaneous fees and charges such as Permit Fees, Certification

Fees and some others were still based on ordinances of 1995.

Management through its present Sanggunian informed that, “… the

enactment of a new Marikina City Revenue Code will be part of the

legislative agenda of this 6th City Council for Calendar Year 2011. The City

Council, specifically the Council Committee on Ways and Means and the

Committee on Appropriation, will be handling this matter immediately upon

completion of the Council’s CY 2011 internal reorganization”.

We reiterate our previous recommendation that the City Mayor

coordinate with the Sangguniang Panlungsod for the codification of all

revenue ordinances. Existing ordinances should likewise be reviewed to

determine conformity with the Local Government Code. In the review and in

40

subsequent enactments, due consideration should be given to legislation that

would maximize revenues.

4.6 Submission of copies of contracts, job orders, and purchase orders were

delayed by a period ranging from 12 to 100 days, while copies of delivery

documents were likewise delayed by a period ranging from 35 to 64 days.

Section 6 of COA Circular No. 2009-002 dated May 18, 2009 provides

the following duties and responsibilities of agency officials:

“Section 6.6 Submit to the SA/TL concerned copies of

contracts, purchase/letter orders, loan agreements, bond

floatation/certificates of indebtedness, whether domestic or

foreign and appraisal of property for disposal including all

supporting documents required in COA Circular No. 2009-001

dated February 12, 2009 and its annexes, for review, within

five (5) days from their perfection.”

“Section 6.9 Furnish the auditor copies of delivery documents

within twenty-four hours after acceptance of deliveries of

goods and services regardless of whether or not the

transaction is subject to pre-audit.”

It has been observed that copies of purchase orders, job orders, and

contracts and notice of deliveries were submitted to the City Auditor’s Office

only when the contractors/suppliers were about to file their claims for

payment, thus, submission was delayed for a period ranging from 12 to 100

days after the perfection of contract and from 12 to 100 days after the delivery

(Annex G), contrary to the provisions of the above-cited circular.

This practice hindered the conduct of timely review, evaluation and

determination of reasonableness of price and inspection of projects at the most

opportune time, thus, any defects/deficiencies noted thereon could not be

communicated immediately to the management. Also, claims that are

presented for pre-audit could not be immediately acted upon due to the

absence of contract/price evaluation and review report as well as the

corresponding inspection report.

The City General Services Officer informed us that he has already

instructed and reiterated the previous memorandum he issued to the

Procurement Division relative to the compliance to the said COA Circular.

We recommend that the General Services Office be required to submit

to the City Auditor’s Office copies of purchase orders, job orders, letter orders

41

and contracts within five days from perfection and for notices of deliveries to

be submitted within twenty-four hours from acceptance.

4.7 The City’s continuous failure to establish a written, comprehensive, and

tested disaster recovery and business continuity plan; and formal policies

and procedures to perform backup and to provide offsite servers/storage

of data files, databases, programs and documentation, may result in

Information Technology (IT) losses.

The need for providing continuous IT services requires developing,

maintaining and testing IT continuity plans, utilizing offsite backup storage

and providing periodic continuity plan training. An effective service process

minimizes the probability and impact of a major IT service interruption on key

business functions and processes.

This is a reiteration of our previous year’s audit observation and

recommendation since the city has not yet established a written,

comprehensive and tested disaster IT recovery program.

The handbook developed by the Office of the Marikina Information

System and Call Center (MISCC) which provides for the contingency plan in

case disaster occurs and the immediate realization of the Remote Contingency

Servers to be located at the 6th Floor of the new Marikina Sports Center has

been presented by the said Office to the management but it has not yet been

approved.

The City Administrator during the exit conference gave the assurance

that the recommended action will be taken into consideration.

We recommend that management prioritize and carefully study the

contingency plan presented to them by the MISCC in order to prevent the

risks of loss of or damage to data files, hence, ensuring the continuous

operation of the management information system.

5. Dormant Account

5.1 Other Receivables representing dishonored checks for the years 1981 to

1987 totaling P1.03 million remained in the books for 23 to 29 years

despite the absence of documents to enforce collection.

COA Resolution No. 2003-002 dated January 30, 2003 provides that:

“x x x

42

WHEREAS, this Commission in the exercise of this authority

has authorized the writing-off of unliquidated cash advances,

dormant and uncollectible accounts of government agencies

the existence of which in the books continue to affect the true

financial condition of the government;

WHEREAS, the New Civil Code provides that the right of

action upon a written contract, upon an obligation created by

law, or upon a judgment prescribes in ten (10) years (Article

114).”

The Other Receivables account in the total amount of P9,155,312 as of

December 31, 2010, pertains to claims for dishonored checks representing

payment of real property taxes for the years 1981 to present.

Of the said amount, P1,027,806 or 11.23% have been outstanding for a

period ranging from 23 to 29 years. The account is merely supported by a list

of dishonored checks. Per verification made, the names of the payees no

longer exist in the tax roll. Documents, such as dishonored checks, cancelled

official receipts and debit memoranda that would support the claim are no

longer available since there was no proper turnover from the previous

treasurer. Considering that the transactions occurred over twenty years ago,

management finds the recovery/settlement of the accounts improbable.

The request for authority to write-off was submitted to the Office of

the City Mayor as per recommendation by the City Treasurer, however, the

City Mayor, who is newly elected, still has to study the matter.

We advise the City Accountant to follow-up with the Office of the

City Mayor the request for authority to write-off dishonored checks based on

the verification made by the City Treasurer’s Office. The request for write-off

shall be filed with the Commission Proper of the Commission on Audit, thru

the City Auditor’s Office.

III. Settlement of Audit Suspensions, Disallowances and Charges

As reported in the Statement of Audit Suspensions, Disallowances and

Charges (SASDC) as of the last quarter of CY 2010, there were no suspensions,

disallowances and charges as of December 2010.

PART III

STATUS OF IMPLEMENTATION OF

PRIOR YEAR’S AUDIT RECOMMENDATIONS

43

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S

AUDIT RECOMMENDATIONS

Of the 17 audit recommendations contained in the previous year’s Annual Audit Report, nine (9)

were fully implemented, four (4) were partially implemented and four (4) were not acted upon by the

agency.

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

1. The Construction in Progress account

was overstated by P1.11 billion, while the related Expenses and Agency

Assets/Public Infrastructures accounts

were understated by P3.17million and P1.10 billion, respectively, due to the

failure of the Engineering Office to

furnish the Accounting Office with the Report on the Status of the Projects.

We recommend that the

Engineering Office be required to submit monthly to the

Accounting Office the Report on

the Status of the Projects undertaken. This will serve as

the basis of the latter in

preparing the necessary adjusting entries to the

Construction in Progress

account. Further, the Accounting Office should

conduct periodic review of the

same to ensure fair presentation of its balance.

CY 2009

AAR

Not implemented

Reiterated in

Finding No. 2.1

The necessary

adjusting entries regarding the

construction-in-

progress account was not prepared due to

the failure of the

Engineering Office to submit necessary

reports to the

Accounting Office.

2. Receipts of Priority Development

Assistance Fund (PDAF) were

inconsistently treated in the books of accounts either as trust liability under

the General Fund or as liability to Other

NGAs under the Trust Fund, contrary to National Budget Circular No. 476 dated

September 20, 2001.

Require the Accounting Office

to prepare a JEV to reclassify

the PDAF erroneously recorded under the General Fund to the

Trust Fund books. The City

Accountant should closely supervise and require the person

responsible to consistently

record all PDAF under the Trust Fund in compliance with the

provisions of the National

Budget Circular.

CY 2009

AAR

All PDAF

recorded as Trust

Liabilities under the General Fund

were already

transferred to the Trust Fund as per

JEV Nos. 2010-

06-004015 and 2010-06-005001.

Fully

Implemented

3. The failure of the City to establish a

written, comprehensive, and tested disaster recovery and business

continuity plan, and formal policies and

procedures to perform backup and provide offsite servers/storage of data

files, databases, programs and documentation, resulted in Information

Technology (IT) losses and financial

statements of doubtful reliability.

The City should formulate

written policies and procedures on Disaster Recovery and

Contingency Plan to prevent the

risks of loss or damage of data files and for the continuous

operation of information systems processing. Likewise,

we suggest that management

should provide funds for an offsite location to house a

backup remote server.

CY 2009

AAR

A Handbook on

the said Plan has been submitted by

the MISCC to the

management for approval.

Not Implemented

Reiterated in

Finding No. 4.7

The new

administration has not yet approved the

submitted proposal.

4. Contract agreements with El Cielito

Tourist Inn, Inc. and with Rosario Brothers Company, Inc. were entered

into without observing the processes,

procedures and requirements provided under Section 2, Rule 1 of the Revised

Implementing Rules and Regulations of

Republic Act No. 9184.

Require that contracts entered

into be in accordance with the aforementioned provisions of

the Revised IRR of RA No.

9184. Further, the bidding and contract/project documents

should be submitted as required

under COA Circular No. 2009-001.

CY 2009

AAR

Contract

agreement with El Cielito Tourist

Inn, Inc. has

already been terminated. The

required

documents have already been

submitted by

Rosario Brothers Company, Inc.

Fully

Implemented

44

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

5. The Construction Materials Inventory as

of December 31, 2009 which amounted to P 29.12 million exceeded the

materials required for the completion of

the reported on-going projects implemented by administration as of

the same period due to the non-

preparation of programs of work for all construction and repair of infrastructure

projects.

It is required that purchases of

construction materials be controlled. Those submitted for

bidding should be reviewed and

checked against those in the warehouse, and that only those

not available shall be purchased.

Require that the detailed report of inventory of construction

materials be kept updated and

always available for the guidance of the concerned city

officials, particularly the BAC

and Engineering personnel.

In addition, purchase of

construction materials should only be made on the basis of

programs of work of all

construction and repair of infrastructure projects that is

duly approved by the City Engineer.

CY 2009

AAR

The agency in

their letter dated December 18,

2009, informed us

that the stocks in the warehouse

were savings from

elimination of pilferage and

wastage via

centralized warehousing.

Materials for the up coming

projects that are

available in stock are no longer

included in the

materials to be procured.

Partially

Implemented

Program of Work for

the repairs and maintenance works

were not approved by

the City Engineer.

6. The shares of the 16 barangays from the Real Property Tax (RPT) and

Community Tax (CT) collections were

not automatically released to them, contrary to Section 271(d) of RA 7160.

We recommend that the share of barangays from RPT and CT

collections be automatically

released to them on a quarterly basis in compliance with Section

271 (d) of RA 7160.

CY 2009 AAR

The shares due to all barangays have

been transferred

last May 2010.

Fully Implemented

7. The Marikina Revenue Code of 1995

was no longer reflective of its being a highly urbanized City hence, its

revenue raising power has not been

maximized.

We recommend that the City

Mayor coordinate with the Sangguniang Panlungsod for the

codification of the revenue

legislations as ready reference for the tax collectors, users, and

taxpayers. Likewise, the

existing ordinances should be reviewed to determine

conformity with the Local

Government Code. In the review of ordinances and in

subsequent enactments, due

consideration should be given to legislations that would

maximize the

collection/generation of revenues.

CY 2009

AAR

Not Implemented

Reiterated in

Finding No. 4.5

The enactment of a

new Marikina City Revenue Code will be

part of the legislative

agenda of the 6th City Council for Calendar

Year 2011.

8. Of the P109.54 million appropriated for

the 20% Development Fund,

P49.436,815.58 or 45.13 percent was utilized for purposes other than those

provided under DILG Circular No. 97-

30 dated February 10, 2007, because the City Government overlooked the

preparation of an Annual Development

Plan (APP), hence, intended beneficiaries were deprived of the

benefits that could have been derived

therefrom.


Development Council prepare

an Annual Development Plan that is in line with DILG

Circular No. 97-30 to ensure

that the objectives of the 20% Development Fund is served.

CY 2009

AAR

Not Implemented

Reiterated in Finding No. 4.2

The City

Development Council

has not yet come up with an annual

development plan that

is in line with the objectives of the fund

as embodied in the

DILG Circular.

45

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

9. Taxes totaling P7.35 million which

were withheld from the claims of contractors and suppliers in prior years

have not been fully remitted to the

Bureau of Internal Revenue (BIR) in violation of Section 2.5 of Revenue

Regulations No. 2-98 due to poor

monitoring in the remittance of the same.

Require the City Accountant to

see to it that taxes withheld are fully remitted to the BIR within

the prescribed period.

CY 2009

AAR

Withheld taxes

that were retained

were already remitted under

Check Nos. 57971

to 57973 all dated July 7, 2010.

Fully

Implemented

10. Other Receivables representing dishonored checks for the years 1981

to 1987 totaling P1.03 million

remained in the books for 20 to 27 years due to the absence of documents

to enforce collection.

We advise the City Accountant to follow-up with the Office of

the City Mayor the request for

authority to write-off dishonored checks amounting to P1,03

million based on the

verification made by the City Treasurer’s Office. The request

for write-off should be filed with

the Commission Proper of the Commission on Audit, thru the

City Auditor’s Office.

CY 2009 AAR

Resolution No. 39, Series of 2010

(authorizing the

Mayor to write-off dishonored checks

from CY 1981-

1987) was passed last 04 November

2010.

Partially Implemented

Reiterated in finding 5.1

The agency failed to submit to the

Commission Proper

thru the City Auditor’s Office the pertinent

documents relative to

the request for write-off.

11. Unpaid obligations in Calendar Year

2004 and earlier which were not supported with sales invoices/creditors’

bills amounting to P3.94 million in the

Special Education Fund (SEF) and an undeterminable amount in the General

Fund (GF) were still recorded under

Accounts Payable. As a result, Accounts Payable was overstated and

Government Equity was understated by

at least P3.94 million.


Accountant review and analyze the details of the payable

accounts and effect adjustments

to revert all prior years’ Accounts Payable with no actual

administrative or judicial claim

on file. Henceforth, the City Accountant is advised to

recognize liability only when

goods and services are accepted and rendered and

supplier/creditor bills are

received in compliance with Section 4(s), Volume I of the

NGAS Manual.

CY 2009

AAR

JEV No. 2010-01-

00028 dated January 29, 2010

was prepared to

revert the payables in the amount of

P3.94 million

under the SEF.

Fully

Implemented

12. Bank debit/credit discrepancies made

by the Philippine Veterans Bank (PVB), and the failure of the

Accountable Officer to undertake

regular review and monitoring of cash with the depository banks exposed

funds to the risk of financial loss.

Further, the City maintained deposit accounts with the PVB, in spite of the

nearby branches of the Land Bank of the Philippines and the Development

Bank of the Philippines, contrary to

Department Order No. 27-05 dated December 9, 2005 of the Department

of Finance.

Considering the significance of

the deficiencies noted, it is required that the PVB be made

to immediately effect the

necessary corrections. Require the Cashier/Accountable Officer

and the City Treasurer to

conduct prompt/timely review and monitoring of all accounts

maintained with the bank to avoid the occurrence of bank

errors which remain uncorrected

for a long time.

We advise the City Accountant

to update the preparation of the Bank Reconciliation Statements

and make the necessary

adjustments and to communicate to the City Treasurer the

differences/discrepancies noted.

The City Treasurer should secure Department of Finance

CY 2009

AAR

A Letter seeking

approval to maintain

depository account

with PVB has been sent to the

Department of

Finance by the Local Chief

Executive, pursuant to

Department Order

No. 27-05 dated December 9,

2005.

Necessary

adjustments have

been made by the bank on the

discrepancies

noted.

Partially

Implemented

The City Accountant

has yet to update the preparation of Bank

Reconciliation.

46

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

approval if the City chooses to

maintain depository accounts

with the PVB.

The City

Accountant exerted effort to

come up with an

updated bank reconciliation

statement.

13. The City has no clear-cut policy for the granting of financial assistance to

its constituents thus, reimbursements

of various amounts, nature and purposes were all accommodated by

the officials of the City.

We recommend the following remedial measures to regulate

the giving of financial assistance

by the City:

Management should formulate a policy for the

granting of financial

assistance to its constituents and the various

organizations/neighborhood

associations taking into consideration the need and

budget for the year.

Beneficiaries should be properly screened giving

priority to the less

privileged constituents and assistance should be

extended only once to the

same persons/organizations, neighborhood associations.

The City Budget Office should refrain from

charging financial assistance against Other

Maintenance and Operating

Expenses account because this practice depletes the

budget for the intended

activities.

The City Officials should

coordinate with the City Social Welfare and

Development Office to

assess requests for medical and hospitalization

assistance by way of Social

Case Study Reports so that

only the deserving

indigents are assisted and served. Adhere strictly to

Sections 335 and 343 of

RA 7160.

Procurement of appliances

and other supplies for donation to private

individuals, neighborhood

associations should be stopped.

CY 2009 AAR

Reimbursements of various

amounts for

financial assistance have

been stopped.

An Executive

Order itemizing

the requirements and procedures in

the granting of

financial assistance was

issued by the

Office of the Mayor, however,

it still lacks some

conditions that are necessary for the

proper granting of

financial assistance.

Partially Implemented

Reiterated in Finding No. 4.4

The agency has yet to come up with a clear

cut policy for the

granting of financial assistance.

47

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

Traveling expenses of

personnel of the National Government Agencies

assigned in the City

should be granted strictly in the form of cash

advance to establish

accountability. A certification from the

proper official of their

respective head office should be required to

ensure that a single claim

of travel allowance and other incidental expenses

is paid.

14.The Priority Development Assistance

Fund (PDAF) granted by the national government as financial assistance to

LGUs purposely for specific

development programs and projects has not been fully utilized for the

intended purpose due to poor

monitoring. Moreover, disbursements were made through reimbursement for

expenses not related to specific

priority development projects.

Require that PDAF be fully

utilized for the pro-poor programs of government, as

required by RA 9498, the

National Budget Appropriations Law. Likewise, management

should monitor the utilization of

the fund to ensure that programs/projects as indicated

in the Special Allotment Release

Order (SARO) are implemented. Disbursement procedures should

be done thru direct payment to

the intended parties or thru cash advances to the disbursing

officer of the implementing

agency.

CY 2009

AAR

The agency sees to

it that the expenses incurred

under the said

fund are in accordance with

that stated in the

SARO. Likewise, proper monitoring

has also been

observed.

Fully

Implemented

15. Efficiency in implementation and

effectiveness of the completed

projects/activities under Gender and Development could not be determined

due to the absence of specific gender-

responsive plans, policies and strategies.

Require that the gender issues

and concerns prevailing among

the women constituency be identified. Map out the GAD

projects/activities for the year

and the corresponding specific strategies to address the issues.

The Accomplishment Report

should be prepared using the required form, to document the

extent of implementation, the

efficiency and the effectiveness of the GAD projects and

activities.

CY 2009

AAR

The GAD

Accomplishment

Report has been submitted.

Projects and activities for the

year and the

corresponding strategies has been

defined to address

the GAD issues identified.

Fully

Implemented

16. The City government availed of credit

financing in spite of the availability of funds placed in time deposits thus, the

city unnecessarily incurred interest

expense totaling P25.65 million.

In order not to incur additional

expenses that tend to deplete the resources of the City, it is

suggested that management

should maximize the use of its available resources in the

implementation of its programs

and projects before availing of credit financing.

CY 2009

AAR

The management

informed us that the loans has been

almost paid up and

the funds placed in time deposits that

served as

collateral, are funds allocated for

trust liabilities like

barangay share on RPT and amount

due to BIR which

Fully

Implemented

48

Audit

Observation

Recommendation

Ref.

Management

Action

Status of

Implementation

Reason for

Partial/Non

Implementation

has already been

remitted

accordingly.

17. The amount of P3.29 million could have been saved from the construction

of the project, Concreting of

Parking/Terminal (Phase I), had this been undertaken “by Contract” instead

of “by Administration”.

Projects “by Administration” should conform with the

conditions/requirements set

under RA 9184 and GPBB Resolution No. 018-2006-

Revised Guidelines For the

Implementation of Infrastructure Projects By Administration.

CY 2009 AAR

The conditions set under RA 9184 for

the

implementation of Infrastructure

projects by

administration are now being

observed.

Fully Implemented

PART IV

ANNEXES

Marikina City

Part IV – Annexes A - G

(Pages 49 – 68)

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