EXECUTIVE SUMMARY

Highlights of Financial Operations

For CY 2010, the appropriations of the City Government of Caloocan for the
General and Special Education Funds totaled P5.43 billion. Obligations charged
against these appropriations amounted to P3.18 billion.

Fund Appropriation Obligation

General Fund P 5,100,000,000 P 2,939,451,716

Special Education Fund 330,000,000 243,959,154
Total P 5,430,000,000 P 3,183,410,870

The operating income of P3.10 billion collected during the year was sourced
from the following:

Particulars General Fund Special Total

Education Fund

Local Taxes P 992,585,201 P 271,497,251 P 1,264,082,452

Internal Revenue
Allotment 1,440,932,490 1440,932,490
Permits and
Licenses 133,679,514 133,679,514
Service Income 127,117,349 127,117,349
Business Income 76,583,860 76,583,860
Other Income 58,911,363 497,626 59,408,989
Total Operating
Income P 2,829,809,777 P 271,994,877 P 3,101,804,654

Scope of 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 the 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.

Audit Opinion on the Financial Statements

We rendered a qualified opinion on the fairness of the presentation of the

financial statements due to the effects of the noted deficiencies on the balances of some
accounts as discussed in detail in Part II of this Report.
some accounts as discussed in detail in Part II of this Report.

Significant Findings and Recommendations

The following are the significant findings and recommendations in the audit
of the City Government of Caloocan for the year 2010:

1. Cash in Bank, Local Currency, Current Account balances for eight (8) depository
accounts were materially bigger by P278.49 million over the confirmed bank
balances. On the other hand, seven (7) depository accounts had book balances
which were P13.06 million less than the corresponding bank balances. These
instances rendered the reliability of the cash account balance of P413.45 million
doubtful. The inadequacy of records brought about these unreconciled differences
between the book and the bank balances. (Finding No. 2.1, Page 23)

We advise Management to make strong representation with the Philippine

National Bank to secure the needed bank statements in order to reconcile and
adjust the balances appearing in the books. We also recommend that bank
reconciliation statements be prepared for the dormant accounts with the Land
Bank of the Philippines pursuant to COA Circular No. 96-011. A staff from the
Accounting Office should be assigned on a full-time basis to handle the monthly
preparation of the bank reconciliation statements.

2. The inadequacy of documents and property/ledger cards that would establish the
individual historical costs of Buildings acquired by the City prior to June 30, 2004
in the total amount of P 1.45 billion resulted in managements inability to provide
for depreciation as required under Section 4, par. (o), Volume I of the NGAS
Manual. Thus, the corresponding depreciation expense and accumulated
depreciation accounts were both understated by an undetermined amount.
(Finding No. 1.1, Page 19)

We advise Management to exert efforts to locate the documents relative to

the costs of the buildings so that the corresponding depreciation expenses could
be computed and taken-up in the books. If it is no longer possible to get the
historical values, require the City Appraisal Committee to determine the appraised
values of the buildings and their remaining useful lives to serve as basis in
updating the property cards and property ledger cards and ultimately in providing
for depreciation costs.

3. The expenses related to the Katipunan Bond transactions (CY 2001 to 2007) in
the amount of P38.86 million were not recognized in the books of accounts,
thereby overstating the Cash in Bank, LCCA-Trustee Bank account by P38.86
million and the Government Equity account by P 0.17 million and understating
the related asset account by P38.69 million. (Finding No. 1.2, Page 20)
 We recommend that a representative from the City Accountants Office
personally coordinate with the trustee bank, Philippine National Bank, to secure
documents necessary to substantiate the subject P38.86 million expenses related
to the Katipunan Bonds so that these would be taken-up in the books of accounts.

4. Cash Advances totaling to P237.31 million remained unliquidated as of year-end

due to the inability of accountable officers to settle their accountabilities contrary
to COA Circular No. 97-002 dated February 10, 1997. Of this amount, P81.76
million or 34% had been outstanding for over one to 29 years. The non-
liquidation resulted in the non-recognition of expenses in the years these were
incurred and therefore affected the correctness of the Cash and the Government
Equity accounts. (Finding No. 4.1, Page 32)

We recommend strict compliance with the general guidelines in the

liquidation/settlement of cash advances provided under Sections 4.1.3 and 5.8 of
COA Circular No. 97-002 dated February 10, 1997.

We also recommend that the City Accountant and the City Treasurer
monitor the liquidation of cash advances by sending demand letters regularly,
particularly to accountable officers and employees who are still in active service
and the withholding of the payment of any money due them in case of failure to
liquidate/settle.

We likewise recommend that cash advances which had been long

outstanding, particularly those with considerable amounts, should be referred to
the City Legal Officer for appropriate action. Clearances of retiring officers or
employees who have outstanding cash advances should not be given unless these
are settled or liquidated.

Finally, cash advances of former officials who are now deceased and
where the Citys effort to collect or to settle is futile may be written-off upon
proper authorization from the Commission on Audit.

5. Earnings from the operation of the citys waterworks system totaling P89.35
million for the years 2006 to 2010 did not sufficiently meet its operating expenses
for the same period owing to the inability of the City to generate the needed
revenue that will sustain operations. (VFM Finding No. 1, Page 38)

We advise the City officials concerned to review the operations of

Serbisyong Patubig ng Pamahalaang Caloocan (SPPC) and exert efforts to ensure
its viability.

6. The correctness of the amounts payable to the GSIS and the BIR totaling to
P81.75 million and P81.87 million, respectively, could not be established due to
the non-completion of the reconciliation of the records of the City and those of the
GSIS and the BIR. (Finding No. 4.2, Page 34)
 We recommend that management finish the reconciliation of the balances
in question to establish the accuracy of the amounts due these government
agencies.

Henceforth, Management should comply with the legal deadline on the

remittance of the amounts due the GSIS, the BIR and other government agencies
in order to avoid penalties and/or surcharges.

7. The City could have earned P76.56 million had it adopted in its Revenue Code
Sections 236 and 237 of R.A. 7160 which allows additional taxation on idle real
property units. (Finding No. 3.1, Page 27)

We recommend that Management visit the provisions on taxation of idle

lands and look into the possible incorporation of this in the Revenue Code of the
City. On the other hand, the City Assessors Office should facilitate the
identification and completion of the list of idle lands.

8. Had the City directly managed the operations of the Maypajo market and leased
out the unoccupied areas to its optimum capacity, pursuant to Sections 260 to 265,
Chapter III of the Revenue Code of the City, it could have earned additional
revenue of P37.18 million per year. (VFM Finding No. 2, Page 40)

We recommend that the available spaces in the second and third floors be
advertised so that these could generate additional revenue. We further
recommend that demand letters be issued to defaulting lessees and be required to
vacate the premises should they fail to settle so that interested parties may be
given the opportunity to lease. Seek legal action if demands remain unheeded.

9. The reciprocal accounts Due to Other Funds (424) and Due from Other Funds
(144) were both understated by P45.03 million and P19.34 million, respectively,
because interfund transactions were not recorded in the corresponding books.
(Finding No. 1.3, Page 22)

We recommend that the City Accountant effect the necessary correcting

entries to adjust the balances of the accounts. Henceforth, interfund transfers
should be stopped.

10. Funds received from the National Government for various specific purposes had
remaining book balances totaling P3.60 million, although the purposes for which
these have been received were already attained. (Finding No. 2.2, Page 26)

Remit to the National Treasury the unutilized portion of the fund transfers.

11. The absence of a specific policy requiring the submission of audited financial
statements and/or quarterly income tax returns as basis in the computation of
business taxes as well as tax enforcement through the examination of the books of
accounts of business establishments led to the understatement of the declared
 annual gross receipts and consequently the under-collection of said taxes.
(Finding No. 3.2, Page 28)

We recommend that in the assessment of business taxes, Management

should require from business establishments the submission of a copy of their
audited financial statements and/or quarterly income tax returns in the preceding
year, duly received by the Bureau of Internal Revenue. Any discrepancy between
the declared revenue and the financial statements will be assessed accordingly.

We also recommend that the City Treasurer exercise the power to examine
the Books of Accounts and pertinent records of business establishments to
confirm the accuracy of gross receipts declared in the application for renewal of
business taxes and licenses for the given year.

12. The City Building Official failed to issue occupancy permits for 532 Real
Property Units (buildings and improvements) constructed in years 2008 and 2009.
Thus, the Office of the City Assessor had no basis to assess and issue tax
declarations thereon. Hence, the appropriate property taxes pertaining to these
property units were not collected on time. (Finding No. 3.3, Page 30)

The Office of the Building Official is advised to submit monthly to the

Office of the City Assessor, for assessment purposes, a report on certificates of
occupancy and other documents for completed structures/improvements. We
further recommend that the Office of the City Assessor conduct immediate
inspection and assess said property units for the issuance of the corresponding tax
declaration to ensure the timely collection of RPT as provided under Section 221
of RA 7160.

13. The share of each of the Citys 188 barangays from Real Property Taxes (RPT) in
the total amount of P168.45 million, covering 2010 and prior years, has yet to be
released due to the absence of individual subsidiary ledger records for the account
Due to Local Government Units (LGUs) Barangay. (Finding No. 4.3, Page 35)

The City should immediately release the long overdue barangay shares
from RPT in accordance with the provision of Section 271 (d) of RA 7160
particularly on the distribution of RPT proceeds.

14. Lots donated by the National Housing Authority (NHA) for the Citys socialized
housing program have yet to be transferred to target-beneficiaries because the
revision of the subdivision plan is still to be undertaken. Further, the guidelines on
the disposition of said lots still needed the approval of the Local Inter-Agency
Committee (LIAC). As a result of the delay, informal settlers were able to occupy
the property. (Finding No. 4.4, Page 37)

We recommend that the necessary survey fund be provided by the City for
the revision of the subdivision plan. Further, we reiterate our previous
recommendation that the Local Inter-Agency Committee facilitate the submission
 of procedures and guidelines governing the disposition of the socialized lots to
support Sangguniang Panlunsod Resolution No. 1777, series of 2006, authorizing
the City Mayor to facilitate the disposition of Camarin I and II projects.

Status of Implementation of Prior Years Audit Recommendations

Of the ten (10) audit recommendations contained in the CY 2009 Annual

Audit Report (AAR), one (1) was partially implemented while the remaining nine (9)
were not acted upon during the year. The nine (9) unimplemented recommendations
are reiterated in this report.