DETAILED FINDINGS AND RECOMMENDATIONS

I. Financial and Compliance

1. Doubtful validity of account balance

1.1 The validity and accuracy of property, plant and equipment (PPE)
aggregating P13.61 billion cannot be ascertained due to the failure of
management to strictly comply with the prescribed policies and procedures in
the recording, reporting and maintaining of records for the said accounts.

The City Mayor, in his effort to meet and satisfy the standard requirements
for an efficient and effective property and supply management, issued Executive
Order No. 13, series of 2010 reconstituting the Inventory Committee of the City of
Manila. The Committee, headed by the City Legal Officer together with the City
General Services Officer (CGSO), the City Accountant and the respective
Accountable Officer of each department/office who acted as members, started the
annual physical count of the property, plant and equipment of the City on August 2,
2010. An authorized representative from the City Auditors Office witnessed the
physical inventory taking.

Although the inventory reports for each office/department were prepared at

the end of the year, the validity and accuracy of the PPE accounts presented in the
financial statements could still not be determined due to the following:

a. The Inventory Committee was unable to conduct the reconciliation of

the inventory list with the property records being maintained by the
City Accountant and the CGSO.

Review of the accounting records disclosed that the total PPE of the
City amounted to P13.61 billion at year-end. Per inventory reports,
however, the total inventory items counted amounted to P1.07 billion only,
or a difference of P 12.54 billion. We also noted that the inventory items
were not presented in accordance with their proper account classifications.

Due to the inadequacy of property records, such as, property ledger

cards and subsidiary ledgers, the Inventory Committee was not able to
reconcile the results of the inventory count with the property and
accounting records, contrary to the following provision of Section C.3,
Chapter V of the Manual on Property Custodianship which requires 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 stockcards maintained by the Accounting and

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 finally against the control accounts. On the other hand, the inventory
listing of the equipment shall be checked with the property card
maintained by the Property as against the equipment ledger cards
maintained by the Accounting and total therefore shall be compared
with those in the general ledger.

Failure of the Inventory Committee to reconcile the results of the

inventory count with the property and accounting records rendered the PPE
account balances at year-end unreliable.

b. Several unserviceable and obsolete properties amounting to P25.04

million were not reclassified to the Other Assets account.

Section 04 (p), Chapter 2, Volume I of the New Government

Accounting System (NGAS) Manual provides the following:

Assets declared by proper authorities as obsolete and unserviceable,

including assets of the agency no longer used, shall be reclassified to
Other Assets account from the corresponding inventory and property,
plant and equipment accounts.

Verification disclosed that several unserviceable and obsolete

properties amounting to P25,040,766 ( Annex 6) that were identified by the
Inventory Committee were still not reclassified to the Other Assets account.

The representative of the CGSO explained that their Office has not
received the Inventory and Inspection Reports of Unserviceable Property
(IIRUP) pertaining to the above-mentioned property from the concerned
offices/department, thus proper disposal thereof was not yet initiated.
Likewise, the City Accountant was not provided with the IIRUP to be used
as basis to reclassify the unserviceable and obsolete properties to the Other
Assets account. This resulted in the overstatement and understatement of
the PPE and Other Assets accounts, respectively, both by P25,040,766.

c. Several tangible assets with estimated serviceable life of more than one
year but small enough to be considered as PPE in the total amount
of P81.91 million were included in the inventory report and still
classified in the books of accounts as PPE.

COA Circular No. 2005-002 dated April 14, 2005 provides the list of
small tangible assets with corresponding estimated useful life which should
be recorded as inventories upon acquisition and expense upon issuance.

Audit revealed that several tangible assets with estimated serviceable

life of more than one year but small enough to be considered as PPE in
the total amount of P 81,905,593 (Annex 7) were included in the
inventory report and still classified in the books of accounts as PPE.

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 Failure to take up the correct classification of the said items
overstated the PPE, the related accumulated depreciation and the
Government Equity accounts by P 81,905,593, P 69,463,234 and
P12,442,359, respectively.

Management made positive reaction on our observations and agreed to

implement our recommendation in the ensuing year.

We offer the following recommendations:

a. The Inventory Committee should prioritize the reconciliation of the

results of the inventory count with the property and accounting
records. Likewise, the City Accountant and the CGSO should maintain
complete PPE ledger cards and property cards, respectively.

b. The office/department head concerned and the CGSO should facilitate

the preparation of the Inventory and Inspection Report of
Unserviceable Property for those items identified and declared as
unserviceable or obsolete and to furnish the City Accountant a copy
thereof as her basis in the preparation of reclassifying entries.

c. For tangible assets with estimated useful life of more than one year but
small enough to be considered as property, plant and equipment, the
City Accountant should effect the necessary adjusting entries to reflect
the correct balance of the affected accounts.

2. Unreconciled account balances

2.1 The accuracy and reliability of Cash in Bank-Local Currency, Current Account
amounting to P 958.10 million cannot be established.

Section 3.2 and 3.3 of COA Circular No. 96-011 dated October 2, 1996,
provides that the Local Accountant shall within ten (10) days from receipt of the
bank statements, reconcile the same with the general ledger and prepare the bank
reconciliation statements. Likewise, journal vouchers shall be drawn to record all
valid reconciling items that require adjustment and correction in the general ledger.

Over the years, the Citys reconciling items for its depository accounts had
accumulated to P17,349,781 under the General, Special Education, and Trust Fund
books, and remained unadjusted due to the inability of the City Accountant to
determine the nature of the transactions and to secure proper documentation as basis
in the preparation of adjusting entries in the books of accounts, contrary to the
above cited regulation. As a result, the accuracy and reliability of the Cash in Bank
Local Currency, Current Account amounting to P391,227,116, P14,531,580, and

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 P552,341,371 under the General, Special Education, and Trust Funds, respectively,
as of December 31, 2010 have remained doubtful.

Review of the Bank Reconciliation Statements for the General Fund under
LBP-Current Account No. 1982-1003-44 as of September 30, 2010, Special
Education Fund under LBP-Current Account No. 1982-1003-52 as of August 31,
2010, and Trust Fund under LBP-Current Account No. 1982-1003-36 as of
December 31, 2010, disclosed the following summary of reconciling items, to wit:

Reconciling Items GF SEF TF Total

Bank Credit Memos P 23,074,350 P 434,377 P 809,972 P 24,318,698

Bank Debit Memos (10,428,431) (5,577,652) (15,666,350) (31,672,433)
Unrecorded Deposits 4,290,295 4,130 442,930 4,737,354
Unrecorded Disbursements (2,130,284) - (11,525,032) (13,655,315)
Overstatement in Recording Deposits (104,061) (40,636) (25,663,944) (25,808,640)
Understatement in Recording Deposits 86 1 5,404,033 5,404,121
Overstatement in Recording Disbursements 22,062 257,973 1,061,341 1,341,376
Understatement in Recording Disbursements (3,968,397) (46,101) (1,247,319) (5,261,817)
Other Reconciling Items 9,066,705 2,207,290 11,972,880 23,246,875

Total P 19,822,325 (P 2,760,618) (P 34,411,489) (P 17,349,781)

Bank Credit and Debit Memoranda amounting to P24,318,698 and

P31,672,433, respectively were not supported with copies of debit and credit
advices and related documents to serve as bases for recording in the books.

Cash and check deposits totaling P4,737,354 and disbursements of

P13,655,315 made in prior years remained unrecorded due to the missing
documents as bases in taking up the transactions in the books of accounts.

Overstatement/understatement in recording deposits and disbursements as

shown in the table likewise remained unadjusted in the books because the related
bank statements, deposit slips, and bank debit/credit advices pertaining to the prior
years transactions could not be retrieved.

Other reconciling items in the aggregate amount of P23,246,875 included

deposits and disbursements pertaining to one fund but erroneously recorded in the
books of another fund of the City, settlement of dishonored checks recorded twice
in the books, error in recording proceeds of preterminated High Yield Savings
Deposit (HYSD) accounts and other unaccounted reconciling items which remained
unadjusted in the books.

Due to the failure of the City Accountant to update the preparation of Bank
Reconciliation Statements, for Cash in Bank Local Currency, Current Account for
all funds and to effect the necessary adjustment and correction in the accounting
records, the year-end balance of Cash in Bank Local Currency Account of
P958,100,067 could not be relied upon.

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 The City Accountant justified that the delay in the preparation of bank
reconciliation statements was due to inadequate number of personnel who are
performing the task. However, she told us that several journal entry vouchers for the
adjustment in the books of reconciling items with supporting documents are now
being processed and will be submitted to the Office of the Auditor.

The City Accountant is advised to assign additional personnel, as necessary,

to update the preparation of the bank reconciliation statements for all the depository
accounts of the City. Extra effort should likewise be exerted to locate the necessary
documents to support the adjustment of the identified reconciling items.

2.2 The reconciliation of records being maintained by the City Accountant and
the City General Services Officer for the Work/Other Animals (281) account
was not conducted, thus the discrepancy of P14.03 million remained
unadjusted.

The City Parks Development Officer in coordination with the City General
Services Officer has conducted a physical count of the animals at the Manila
Zoological and Botanical Garden and came up with an inventory report as of
December 31, 2010. Based on the said inventory report, the animals being
maintained at the Zoo are as follows:

Classification Quantity Amount

Mammals 93 P10,772,900
Avian 271 2,733,650
Reptiles 297 477,500
Aquatic 26 63,650

Total P14,047,700

Per accounting records, on the other hand, the year-end balance of

Work/Other Animals account amounted only to P20,900. The said balance has
remained dormant for more than ten (10) years. However, no reconciliation of
records was made during the year between the offices of the City Accountant and
the CGSO, in the absence of Work, Other Animals and Breeding Stock Ledger
Cards (WOABSLC) and property cards, contrary to Section 114, Volume I of the
NGAS Manual which provides the following:

xxx. The Chief Accountant shall maintain the perpetual inventory

records comprising of Supplies Ledger Cards (SLC) for each
commodity/stock, Property, Plant and Equipment Ledger Card
(PPELC) for each category of plant, property and equipment and Work,
Other Animals and Breeding Stocks Ledger Card (WOABSLC) for each
type of livestock. Such ledger cards shall contain the details of the
property, plant and equipment and livestock account in the inventory
control account in the general ledger.

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 The General Services Officer or the Municipal Treasurer, as the case
maybe shall likewise maintain stock cards and property cards for
supplies; property, plant and equipment; and work animals in their
custody to account for the receipt and disposition of the same. The
balance per stock card/property card should always reconcile with the
ledger cards of the accounting unit. They should also reconcile with
other property records like Acknowledgement Receipt for Equipment
(ARE).

Due to the failure to conduct the required reconciliation between the

records of the City Accountant with that of the CGSO the discrepancy noted
amounting P14,026,800 remained unadjusted and rendered the balance of
Work/Other Animals at year-end unreliable.

The City Accountant and the City General Services Officer gave an
assurance that reconciliation of their records will be conducted and the necessary
adjustment will be effected in the ensuing year.

We reiterate our audit recommendation that the City General Services

Officer furnish the City Accountant with the result of the physical count of animals
at the Manila Zoo. Reconciliation of their respective records should be conducted
and adjustments be effected in the books of accounts, as necessary.

3. Inaccurate basis in setting-up of receivables

3.1 The year-end balances of Real Property Tax (RPT) (127) and Special Education
Tax (SET) Receivables (128) as well as their contra accounts amounting to
P700.30 million and P52.68 million, respectively, cannot be relied upon.

In the analysis of the accounts, we noted that the existing practice of the
agency in the taking up of RPT and SET Receivables was not in consonance with
the following provision of the NGAS Manual, Volume I which prescribes that:

Section 20. Basis of Recording Real Property Tax / Special Education

Tax. Real Property Tax Receivables/Special Education Tax
Receivables shall be established at the beginning of the year based on
the Real Property Tax Account Register/Taxpayers index card. At the
beginning of the year, the Treasurer shall furnish the Chief Accountant
of a duly certified list showing the name of taxpayers and the amount
due and collectible for the year. Based on the list, the Chief Accountant
shall draw a Journal Entry Voucher (JEV) to record the debit to the
Real Property Tax Receivable/Special Education Tax Receivable and
crediting to Deferred Real Property Tax Income/Deferred Special
Education Tax Income. xxx.

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 The City Treasurer was not able to furnish the City Accountant with the
required certified list of taxpayers and the amount of tax due and collectible for the
year as basis in setting-up the RPT Receivable and SET Receivable as well as their
contra accounts at the beginning of the year. She informed us that the existing Real
Property Tax System (RPTS) could not generate the said list but enhancement of the
same is now on-going to resolve the predicament. Consequently, the amounts taken
up in the books as beginning balances for RPT and SET Receivables totaling
P2,174,639,145 and P1,205,170,616, respectively, were based on previous years
collections, thus, the validity and accuracy of the balances of the said accounts as
of December 31, 2010 amounting to P700,300,669 and P52,680,397 could not be
ascertained.

The City Treasurer informed us that with the on-going enhancement of the
RPTS of the City, she expects to be able to come up with an updated database of
real property units starting CY 2011 that will serve as the basis for the preparation
of the list of taxpayers and the amount of taxes due and collectible.

We advise management to facilitate the enhancement of the RPTS to

expedite the preparation of a certified list of taxpayers showing the correct amount
of tax due and collectible so that there will be a valid basis for the setting-up.

4. Compliance with laws, rules and regulations

4.1 The existence and validity of the year-end balance of the inventory accounts
under the General Fund totaling P786.10 million cannot be ascertained.

As in the previous year, we observed that the inventory accounts under the
General Fund had a considerable year-end balance of P786,098,195. The quarterly
analysis of the inventory accounts presented as Annex 8 showed that the balances
of some accounts have been increasing even as the calendar year had almost come
to a close. There were also items amounting to P6,716,653 which remained dormant
and unadjusted for more than three years as shown in Annex 9.

Further verification disclosed that due to the neglect of the Property

Custodians of various departments/offices to regularly submit their respective
Summary of Supplies and Materials Issued (SSMI), to the CGSO, the latter was
prevented to consolidate and to submit the same to the City Accountant as her basis
in recording utilization of inventories.

We also found out that the CGSO failed to conduct the required physical
inventory of supplies in stock, and to submit a Report on the Physical Count of
Inventories to this Office for the first and second semesters of the year. The said
inventory report could have been used as a tool in determining the existence and
validity of the inventory account balances appearing in the financial statements.

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 The above practice is contrary to the following rules and regulations and
rendered the year-end balances of the inventory accounts unreliable:

The General Services Officer and the Local Treasurer, as the case maybe,
shall consolidate weekly the Requisition and Issue Slip (RIS) for which the
supplies and materials were issued using the Summary of Supplies and
Materials Issued (SSMI). The SSMI together with the original copy of the
RIS shall be submitted to the Chief Accountant, who shall compute the cost
of supplies and materials issued and the ending inventory using the moving
average method. Based on the SSMI, a Journal Entry Voucher (JEV) shall
be prepared to record the expenditures using appropriate expenditure
accounts. (Section 121, Volume I of the NGAS Manual)

The local chief executive shall require periodic physical inventory of

supplies or property. Physical count of inventory items by type shall be
conducted semestrally and reported in the Report of Physical Count of
Inventories (RPCI). This shall be submitted to the Auditor concerned not
later than July 31, and January 31 of each year for the first and second
semesters, respectively. 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. (Section 124, Volume I of the NGAS Manual).

Our recommendation was well taken by the CGSO and he committed to

implement the same immediately.

We advise management to require the Property Custodians of all

requisitioning departments/offices to prepare their respective SSMIs weekly for
submission to the CGSO who shall consolidate the same as basis of the City
Accountant to record the supplies and materials issued/consumed. The CGSO
should also conduct the physical inventory of supplies and materials and to submit a
Report on the Physical Count of Inventories semestrally.

4.2 Cash advances accumulated to P 105.93 million at year-end.

Despite our constant reminder to the management to strictly implement the

rules and regulations on the grant, utilization and liquidation of cash advances, we
observed that the following provisions were still not complied with, to wit:

Section 4.2.1 Cash advance shall be equal to the net amount of

the payroll for a pay period.

Section 4.1.2 No additional cash advances shall be allowed to

any official or employee unless the previous cash
advance given to him is first settled or a proper
accounting thereof is made.

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 Section 5.1.1 Cash advances for payroll shall be liquidated
within five (5) days after the fifteenth day/end of
the month pay period.

Section 5.1.2 Cash advances for petty operating expenses and

field operating expenses shall be liquidated within
twenty (20) days after the end of the year.

Section 5.1.3 Cash advances for official travel shall be

liquidated within sixty (60) days in the case of
foreign travel or within thirty (30) days in the case
of local travel.

In the verification of the financial reports of the City for the Petty Cash
(104), Payroll Fund (105) and Advances to Officers and Employees (135) accounts,
we noted that the number of officers and employees with long overdue cash
advances ranging from one year to fifteen years increased and cash advances
accumulated to P 105,934,391. (Annex 10) The accounts were still considered and
presented in the Financial Statements as part of the Cash account, while the
corresponding expenses remained unrecorded, resulting in the misstatement of both
accounts.

Moreover, through the demand letters issued to concerned officers and

employees with outstanding cash advances, we found out that the whereabouts of
several accountable officers could not be traced and some of them were no longer
connected with the City Government. Since their cash advances were still reflected
in the accounting records, settlement thereof could not be ascertained.

In the periodic monitoring of cash advances and liquidation of disbursing

officers/paymasters, we noted that several cash advances were still over and above
the net amount of payroll for a certain pay period, and additional cash advances
were granted although their previous cash advances were not yet liquidated (Annex
11). These practices opens opportunity to commit fraud and misappropriation of
funds because the excess amount of cash advance and the additional cash advance
may be used to cover up shortages, personal borrowings and losses.

Further, we observed that the disbursing officers customarily made one set
of liquidation for several cash advances. As a consequence, settlement of each cash
advance cannot be immediately determined and erroneous posting or recording of
liquidations cannot easily be detected.

Management assured us that our recommendation shall be implemented

immediately.

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 We reiterate our previous years recommendation for management to strictly
monitor and cause the liquidation of long outstanding cash advances to preclude
loss or misuse of government funds. The accountable officers concerned should be
warned that failure to liquidate their cash advances within the prescribed period
shall constitute valid cause for the withholding of their salaries and allowances.
Likewise, cash advance for salaries and wages should be limited to the net amount
of the payroll for a pay period.

4.3 The cash available at the end of the year totaling P1.08 billion was insufficient to
cover the Citys trust liabilities of P1.26 billion and other current liabilities of
P2.96 billion or a total cash insufficiency of P3.14 billion.

Section 308 (b) of RA 7160 provides that:

Trust funds which shall consist of private and public monies

which have officially come into the possession of the local government or
of a local government official as trustee, agent or administrator, or which
have been received as a guaranty for the fulfillment of some obligation. A
trust fund shall only be used for the specific purpose for which it was
created or for which it came into the possession of the local government
unit.

Likewise, Section 122, Volume I of the Government Accounting and Auditing

Manual (GAAM) states that:

Receipts from non-tax sources authorized by law for specific

purposes which are collected/received by a government office or agency
acting as trustee, agent or administrator, or which have been received as
guaranty for the fulfillment of an obligation, and all other collections
classified by law or regulations as trust receipts shall be treated as trust
liability of the agency concerned xxx. Payment out of such funds shall be
made in accordance with the purpose for which the fund is created xxx

Analysis of the year-end trial balance for all funds revealed that trust and other
current liabilities cannot be fully paid out of the available cash as shown below (See
details in Annex 12):
General Fund SEF Trust Fund Total

Cash (net of restrictions) P 288,371,938 P 14,531,580 P 778,173,235 P 1,081,076,752

Less: Trust Liabilities 378,768,568 14,192,782 862,216,353 1,255,177,704
Total Cash Available for Operation P (90.396,630) P 338,797 P (84,043,119) P (174,100,952)
Less: Other Current Liabilities P 2,781,870,856 176,818,182 3,644,353 2,962,333,390
Cash Available/(Insufficiency) P (2,872,267,486) P (176,479,384) P (87,687,472) P (3,136,434,342)

The above table clearly shows that the available cash of the City at year-end in the
General and Trust Funds were not sufficient to cover its trust liabilities by P90,396,630
and P84,043,119, respectively. This means that the cash corresponding to the trust

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liabilities were used in the payment of the other obligations of the City, contrary to the
cited law and regulation. The cash insufficiency further increased to P2,872,267,486;
P176,479,384; and P87,687,472 for the General, Special Education and Trust Funds,
respectively, or a total of P3,136,434,342 when compared to the other current liabilities.
This condition indicates that the officials concerned failed to determine the capability of
the City to finance obligations, hence, corrective actions to ensure the adequacy of cash
were not implemented by management.

Management made an assurance that coordinated efforts shall be exerted in the

next calendar year to intensify collection of revenue and implement cost-cutting measures
so that the cash deficit incurred at the end of the year may be offset.

We advise the Local Finance Committee and the officials concerned to use the
Cash Flow Analysis in monitoring cash inflows against outflows to ensure that trust
liabilities are used only for its intended purpose and that sufficient cash is available to
settle all obligations as they fall due. Further, cost-cutting measures and strategies to
improve cash position should be adopted to rectify the situation.

4.4 The remittance of the thirty percent (30%) share of the barangays from the
basic Real Property Tax collections were delayed for periods ranging from 24
days to more than two months. This hampered the delivery of basic services
and the implementation of the proposed development programs and projects of
the barangays.

Verification of the Due to LGUs (418) account disclosed that the thirty
percent (30%) share of the barangays from the basic real property tax collections of
the City were delayed for a period ranging from 24 days to more than two months
(Annex 13), contrary to Section 271 (d) of R.A. 7160 which states that:

The share of each barangay shall be released without need of any

further action, directly to the barangay treasurer on a quarterly basis
within five (5) days after the end of each quarter and shall not be subject
to any lien or holdback for whatever purpose.

Since the major source of income of the barangays is their share from RPT
collections of the City, the continued delay in the remittance thereof hampered the
delivery of basic services to their constituents and the implementation of the
proposed economic and social development programs, projects and activities for the
period due to unavailability of funds.

The City Accountant justified that due to heavy workload and limited
number of personnel, her Office was not able to update the recording of real
property tax receipts. Hence, the delay in the computation of the individual share of
the 896 barangays, as basis of the City Treasurer in the preparation of remittances,
could not be avoided. However, she made an assurance that addressing this issue
shall be their priority concern in the ensuing year.

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 We reiterate our recommendation that the City Accountant expedite the
computation of the share of each barangay from real property tax collections to
ensure the timely distribution thereof pursuant to Section 271 (d) of RA 7160.

4.5 The remitance of the amounts withheld by the City for the BIR, the GSIS, the
Pag-ibig Fund and the Philippine Health Insurance Corporation were delayed
for period ranging from two months to more than one year.

BIR Regulation No. 2-098 as amended, dated May 17, 1998, requires the
remittance of all withheld taxes on the 10 th day of the month following the
collection month.

Section 6 (b) of the Government Service Insurance System (GSIS) Act

mandates that each employer shall remit directly to the GSIS the employer and
employees contributions within the first ten (10) days of the calendar month
following the month to which the contribution applies.

On the other hand, RA 7742 known as the Pag-ibig Fund, provides for the
schedule of remittances for company-members as follows:

First Letter of the Company Name Remittance Schedule

A to D 10th to the 14th day of the month
E to L 15th to the 19th day of the month
M to Q 20th to the 24th day of the month
R to Z 25th to the end of the month

Further, Section 20 (b) of the Implementing Rules and Regulations of R.A.

7875, otherwise known as the National Health Insurance Act states that the monthly
contributions of the employed members shall be remitted by the employer on or
before the tenth (10th) calendar day of the month following the applicable month for
which the payment is due and applicable.

Analysis of the financial statements of the City for all funds showed that as
of December 31, 2010, the following withholding taxes/contributions totaling
P264,502,447 were not yet remitted as required by the abovementioned laws, rules
and regulations:

BIR P 206,917,514
GSIS 42,829,162
Pag-ibig 1,218,536
Philhealth 13,537,235
Total P 264,502,447

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 Failure of management to strictly observe the regulatory requirements in the
remittance of taxes and contributions would result in penalties particularly on
withholding taxes due the BIR, and may adversely affect the claims/benefits
accruing to the City employees.

Further verification disclosed that the monthly taxes/contributions deducted

from salaries and wages of City personnel were not remitted in full to the respective
agencies due to the failure of the concerned personnel in the City Accountants
Office to prepare the complete list of taxes withheld monthly to support
remittances. The delay in the remittances of the remaining taxes/contributions
withheld ranged from two months to more than one year (Annex 14).

We were assured by the City Accountant and the City Treasurer that close
monitoring of remittances will be made in the ensuing year to prevent the
incurrence of penalties on withholding taxes and delay in the processing of claims
or benefits of the employees of the City.

The City Accountant and the City Treasurer are advised to facilitate the full
remittance of all BIR, GSIS, Pag-ibig and Philhealth contributions particularly
those pertaining to prior years. Any penalty arising from the delay shall be the
personal liability of both and other officials concerned.

4.6 Copies of perfected contracts and purchase orders including their supporting
documents were not furnished the Auditor within five (5) days upon approval,
hence, timely review and evaluation of the same could not be conducted.

Item 3.1.1 of COA Circular No. 2009-001 dated February 12, 2009 states
that:

Within five (5) working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities,
including government-owned and controlled corporations and their
subsidiaries, a copy of the said contracts and each of all the documents
forming part thereof by reference or incorporation shall be furnished to
the Auditor of the agency concerned. xxxxx

In the review of contracts and purchase orders covering the transactions

subject to pre-audit, we observed that in most cases, copies of the perfected
contracts and purchase orders were submitted beyond one month after its approval
due to the negligence of the concerned personnel in the CGSO and City Engineers
Office to abide with the above stated regulation. Further, the lack of essential
supporting documents for the said contracts and purchase orders was always the
reason for the delay in the review process.

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 Failure of management to submit within the prescribed period, copies of
perfected contracts and purchase orders with complete supporting documents to the
Office of the City Auditor hindered the conduct of auditorial as well as technical
review of the same which in turn caused unnecessary delay in the processing of
claims for payment.

The CGSO and the City Engineer took note of our observation and made an
assurance that our recommendation shall be implemented immediately.

We recommend that the City Engineers Office and the CGSO strictly
comply with the regulations on the submission of the copies of approved contracts
and purchase orders including their respective supporting documents within the
period prescribed under COA Circular No. 2009-001.

4.7 The warranty provision for the procurement of goods/equipment and

infrastructure projects was not included in the contracts, thus, the City had no
assurance that manufacturing and construction defects discovered after
implementation will be corrected by the concerned suppliers/contractors.

In the course of audit of transactions, we noted that the suppliers for the
procured goods as well as the contractors for infrastructure projects were not
required to submit warranty security after the final acceptance by the agency/end-
users. Further verification disclosed that the concerned City Officials failed to
include the warranty provision in the contract, hence, the agency had no assurance
that manufacturing and construction defects after the implementation of the contract
will be corrected by the concerned suppliers/contractors, contrary to the following
provisions of the Revised Implementing Rules and Regulations of Republic Act
9184:

62.1. For the procurement of goods, in order to assure that manufacturing defects
shall be corrected by the supplier, a warranty security shall be required from
the contract awardee for a minimum of three (3) months, in case of
Expendable Supplies, or a minimum period of one (1) year, in the case of
Non-expendable Supplies, after acceptance by the procuring entity of the
delivered supplies.

The obligation for the warranty shall be covered by either retention money in
an amount equivalent to at least ten percent (10%) of every progress payment,
or a special bank guarantee equivalent to at least ten percent (10%) of the
total contract price. xxx.

62.2.2 One (1) year from project completion up to final acceptance or the defects
liability period.

62.2.2.2 The defects liability shall be covered by the Performance Security of the
contractor required in Section 39.1 of the IRR, which shall guarantee that the
contractor performs his responsibilities stated in the immediately preceding
Section. xxx.

43
 Management reacted favorably on our observation and gave an assurance
that our recommendation will be implemented immediately.

The City officials concerned are enjoined to strictly include the warranty
provision in the contracts.

4.8 The Manila Gender and Development Executive Committee failed to formulate
a Gender and Development (GAD) Plan for the current year and to allocate
5% of the total budget appropriations for the implementation of the programs,
projects and activities to address the identified gender issues and concerns
within the City.

On March 18, 2003, the City Mayor of Manila issued Executive Order No.
4, series of 2003, creating the Manila Gender and Development Executive
Committee headed by the City Administrator as its Chairman. Under Section 1 of
the said Executive Order, the following functions of the Committee were defined:

a. Prepare, formulate and implement policies, rules and regulations

for the protection of women against discrimination with respect
to terms and conditions of employment solely on account of her
sex;

b. b. Prepare an over-all Gender and Development plan and work

program;

c. Exercise general supervision of policies, programs and project

implementation;

d. Identify, prepare and recommend structural support mechanism

to ensure the full operation of the program; and,

e. Establish linkages and networking initiatives with other

organizations and institutions for the support of its programs.

We observed that the above functions were not fully accomplished by the
GAD Executive Committee. As in the previous year, the required GAD Plan which
should have been designed to address the specific gender issues and concerns
within the City was not developed. We were informed by the City Budget Officer,
who is also a member of the Executive Committee, that in the absence of the said
plan, the proposed gender related programs, projects and activities of the City were
integrated in the annual budget of each office/department and implemented using
the departments appropriations.

Review of the Citys annual budget, however disclosed that the specific
programs, projects or activities to address the gender issues and concerns for the
current year and their estimated costs could not be identified therein.

44
 The above practice is contrary to R.A. No. 7192, The Women in
Development and Nation Building Act, which mandates government to incorporate
womens gender concerns in the development agenda by enjoining all government
agencies to ensure that women benefit equally and participate directly in national
development. By this token, each agency is advised to identify its gender issues
from its areas of concerns and subsequently design sets of interventions to address
them.

Likewise, paragraph 2.4 of Joint Circular No. 2004-1 of the Department of

Budget and Management (DBM), National Economic Development Authority
(NEDA) and National Commission on the Role of Filipino Women (NCRFW)
which prescribes the guidelines and procedures for the formulation and submission
of agency GAD plans, budget and GAD accomplishment reports, provides:
pursuant to the annual General Appropriations act, agencies are tasked to
formulate GAD plans and to implement the same by utilizing at least five percent
(5%) of their total budget appropriations.

Due to the failure of the GAD Executive Committee to formulate the

specific gender and development programs and projects and to earmark at least 5%
of the Citys total budget appropriations for their implementation, the extent of the
agencys compliance with the above regulations could not determined.

The City Administrator and the City Budget Officer committed to submit the
GAD Plan and budget identifying the projects, programs and activities including the
estimated costs to implement the same.

We reiterate our advice to management that the GAD Executive Committee

be directed to diligently perform its functions and duties as mandated under the City
Mayors Executive Order No. 4, series of 2003. Further, the Committee should be
required to prepare the annual GAD Plan and budget which shall include specific
programs, projects and activities with the corresponding estimated cost needed to
address gender issues within the City.

5. Deficiencies in income generation

5.1 The City was unable to maximize the collection of RPT and SET due to the
failure of management to formulate the strategies to improve revenue
collection and strictly enforce the mandatory procedures provided under the
Local Government Code in addressing tax delinquencies.

a. The Schedule of Fair Market Value (SFMV) being used as basis for the
computation of RPT and SET was not updated, contrary to the provisions of
Sections 212 and 219 of RA 7160.

45
 Under Section 219 of RA 7160, the assessors are authorized to undertake
revision of real property assessments within two (2) years after the effectivity of the
Code in 1991 and every three (3) years thereafter. Further, Section 212 of the same
law requires the assessors to prepare SFMV of the different classes of real property
within their jurisdiction.

Records of the City revealed that the agency was able to undertake the first
general revision of its real property assessments in 1996 and was subsequently
updated in CY 2005. However, due to the economic condition, the proposed
general revision of the SFMV in CY 2008 or after three (3) years as required by the
above provision was deferred. As such, the bases for computing the RPT and SET
are no longer reflective of the current value of properties, thus the actual taxes due
the City are not fully collected.

b. Delinquent realty taxes totaling P764.91 million remained uncollected because

the remedies provided under Section 256 of RA 7160 were not strictly enforced.

Section 256 of R.A. 7160 provides that For the collection of the basic real
property tax and any other tax levied, the local government unit concerned may
avail of the remedies by administrative action thru levy on real property or by
judicial action.

The real property tax is the main source of revenue of the City to finance its
projects, programs and activities, and for the payment of its obligations. Thus,
intensified revenue generation through efficient tax collection is expected from
management.

However, per latest Summary Schedule of Delinquent Real Property Taxes a

total of P764,909,955 million (Annex 15) was reported by the City Treasurer as tax
delinquency for real properties located in the 896 barangays of the City which
includes tax dues and penalties. Verification disclosed that there were delinquent
taxes which have been outstanding since 1974 or more than twenty (20) years
uncollected. The accumulation of these accounts is an indication that serious efforts
were not exerted by the concerned City officials in the handling of tax
delinquencies. Further verification disclosed that due to the inefficiency of the
existing RPTS of the City, other procedures under the above cited law for the
collection of delinquent taxes, such as posting of the notices of delinquency in
publicly accessible and conspicuous places or publication of the same in a local
newspaper of general circulation were not undertaken.

We were informed that the tax delinquencies were extracted manually from
the system, hence, extensive efforts, time and manpower are required to gather data
needed in sending the required notices to the concerned real property tax owners.

In addition, we found out that the delinquency module of the RPTS could
generate delinquencies for the current year only. The concerned personnel from the

46
 City Treasurers Office justified that the not responding status of the prior years
delinquency module was due to the bulk of real property units (RPUs) to be
processed and the enhancement of the system is still on-going.

c. The tax relief granted by the City Treasurers Office to the property owners to
enhance the collection of RPT delinquency was not authorized by the
Sangguniang Panlungsod through an approved ordinance, contrary to Section
192 of RA 7160.

Section 192 of RA 7160 provides that Local government units may,

through ordinances duly approved, grant tax exemption, incentives or relief under
such terms and conditions as they may deem necessary.

Verification of RPT receipts for the years 2008 to 2010 revealed that several
taxpayers paid their delinquent taxes on installment bases by entering into a
compromise agreement with the City Treasurers Office.

It was found out, however that the City has no approved ordinance
authorizing the City Treasurer or her representative to enter into a compromise
agreement with the delinquent real property owners as remedy to collect their long
overdue taxes. Management failed to seek the approval of the City Council prior to
the implementation of the said tax relief measure, contrary to the above provision of
law.

Management reacted favorably on our observation and committed to

implement our recommendations immediately.

We recommend the following:

a. The general revision of property assessments be made pursuant to

Section 219 of R.A. 7160.

b. Strictly implement the tax remedies provided under Section 256 of

R.A. 7160 to pursue the delinquent taxpayers.

c. Make representation with the City Council for the passage of an

ordinance authorizing the City Treasurer to enter into compromise
agreements with delinquent taxpayers, stating clearly the following for
proper implementation:

The coverage of the tax relief;

the percentage of the total delinquency to be paid upon signing of
the compromise agreement;
the period of availment;
the procedures to be followed;
the exemption, if any; and

47
 the validity period of the ordinance.

d. Fast-track the enhancement of the Real Property Tax System to

expedite the generation of the necessary reports required for the
efficient collection of taxes.

e. Once the authority to the City Treasurer to enter into compromise

agreement with the delinquent real property owners is approved by the
City Council, the compromise module under the RPTS should be
utilized to minimize errors in the computation of unpaid taxes and
penalties.

5.2 The uncollected rent and interests due from the Associated Development
Corporation (ADC) accumulated to P91.55 million due to the inability/leniency
of management to enforce collection and the absence of a formal turnover of
documents to and from the different offices handling the patrimonial property
portfolio of the City.

Paragraph 4 of the supplementary contract dated August 1, 2003, by and

between the Associated Development Corporation (ADC) and Tourist Trade and
Travel Corporation (TTTC) provides that:

Immediately upon ratification of this agreement, the LESSEE

hereby assigns to the LESSOR all rights pertaining to it in its
own right as LESSEE or SUB-LESSOR over the areas mentioned
in paragraph one (1) hereof including all receivables due to it as
a result of existing sub-lease agreement entered into by the
LESSEE and recognized by the LESSOR. In this connection the
necessary conformity of the sub-lessees particularly LIMAR
DEVELOPMENT CORPORATION shall be secured by the
LESSEE and submitted to the LESSOR upon execution of this
agreement.

In connection with the assignment by the LESSEE of all its sub-

lease rights, the LESSOR hereby agrees to recognize and grant a
PRESENT VALUE to the LEASEHOLD rights of the LESSEE in
accordance with accepted financing and accounting principles
over the Century Park Hotel (Lot 2) and the Jai-Alai Building
(Lot 6). The PRESENT VALUE as computed and agreed upon
by the PARTIES appear in detail in the herein attached ANNEX
E which value the PARTIES agree will be applied and
considered as part payment of the obligations of the LESSEE
mentioned in paragraph (6) hereof.

Verification of the rental due the City revealed that despite of our previous
years recommendation, no payment was collected by the City from ADC for its
monthly rental of P500,000 per month since the start of the assignment of the

48
 leasehold rights on Jai-Alai Fronton Building by the previous lessee, TTTC and
Limar Development Corporation (LDC), contrary to paragraph 4 of the
supplementary contract on leased property dated August 1, 2003. Since there has
been a change of administration from the time the contract was executed, nobody
could answer why the unpaid rentals accumulated.

In addition to the unpaid rental, interest of 2% per month but not to exceed
36 months should be imposed for delays in the payment pursuant to Section 169 of
RA 7160 and Section 42 of Ordinance No. 7794, the Revenue Code of the City of
Manila.

Failure to update rental collection due to the inability/leniency of

management to enforce collection and the absence of formal turnover of documents
to and from the different offices handling the patrimonial property portfolio of the
City resulted in uncollected rentals and interests on leased property totaling
P91,552,000 (Annex 16).

Management took note of our recommendation and committed to implement

the same in the ensuing year.

We reiterate our recommendation that management enjoin the concerned

City officials to enforce the collection of unpaid rentals of ADC including interest.
In case of non-settlement by ADC, exhaust all legal remedies to protect the interest
of the City.

5.3 Tax discounts of P 40.81 million granted to owners of business establishments,

who paid their business taxes, fees and other charges within the extension
period authorized under City Council Resolution No. 10, Series of 2010, was
without legal basis.

On January 14, 2010, the City Council of Manila adopted the Resolution
No. 1, Series of 2010 extending the deadline for the filing and processing of
renewal of permits as well as the payment of business taxes, fees and other charges
from January 20 to February 26, 2010. During the extension period, the owners of
business establishments operating within the City were allowed to settle their
business tax dues without penalty, surcharges and interest. This scheme was
likewise adopted by the City to intensify its revenue collection campaign.

Review of tax receipts for the same period, however, disclosed that
penalties, surcharges and interests were not only waived but the concerned
taxpayers were even granted tax discounts, contrary to the aforementioned City
Council Resolution. The concerned officials at the License Division of the City
Treasurers Office failed to review the assessments made during the extension
period, hence, the errors in the computation of tax dues were not detected. As a

49
 result, the income collected from business taxes during the said period totaling
P314.64 million was below the amount that should have been paid to the City
Government by P 40.81 million representing discounts granted without legal basis
(Annex 17). Had the same amount been collected, it could have been appropriated
to finance other priority programs and projects of the City during the year.

Management reacted favorably on our observation and assured us that

appropriate action shall made to recover the uncollected income.

We recommend that the Chief, License Division and the In-Charge of

Office, City Treasurers Office be directed to include the amount of unpaid business
taxes in the computation of the future tax obligations of the concerned business
owners to recover the discounts granted to them which were without legal basis.

6. Dormant Accounts

6.1 Priority Development Assistance Funds (PDAF) amounting to P41.20 million

remained unutilized.

The Priority Development Assistance Fund (PDAF) in the form of Financial

Subsidy to Local Government Units (LGUs) is part of the lump-sum appropriation
in the annual General Appropriation Act to finance programs and projects of the
priority sectors of legislative districts in the LGUs. For the City of Manila, the
receipt of the said allocation is taken up in the books as Due to Other NGAs (416)
account under the Trust Fund.

Verification of the said account at the end of the year, however, disclosed
unutilized PDAF allocations amounting to P41,202,670 to the City, thus defeating
the socio-economic benefits that could be derived therefrom. We noted that the
following amounts which were extended to the City with no specific objectives and
intended beneficiaries had been unexpended and carried in the books for the last
four (4) years:

Particulars Amount
Various Projects Cong. Ocampo P 2,060,000.00
Various Projects Cong. Ocampo 527,753.80
PDAF Various Projects 31,646,321.64
Priority Devt. Programs & Projects - Various 6,968,594.51
TOTAL P41,202,669.95
Inquiries made to determine the reason for non-utilization thereof revealed
that the City had not entered into any specific agreement with the concerned grantor
relative to projects/programs/activities that will be financed by the grants. Also,
based on the documents supporting the receipt of the grants, the City was not given
time frames within which to implement the selected project, programs or activities
or advised to revert the unused fund in favor of the national government/source

50
 agency in case of non-implementation of any program/project. As such,
management deferred the use of the said grants, thus the socio-economic benefit
that could have been derived therefrom by the Citys constituents were delayed.

Our recommendation was well taken by the City officials and they agreed to
take appropriate action immediately.

We recommend that all projects funded out of the PDAF be implemented

without delay.

II. Value for Money Audit

7.1 The City incurred electricity expenses for CY 2010 amounting to P432.73
million which was 40.33% higher than the previous years consumption.

Our review of the Citys electric consumption/expenses for the past three (3)
years disclosed the following information/data:

PERIOD INCREASE
COVERED AMOUNT AMOUNT PERCENTAGE

CY - 2008 P 260,721,641
CY - 2009 308,358,082 P 47,636,441 18.27%
CY - 2010 432,728,379 124,370,296
40.33%

While the increase in power consumption may be attributed to the laudable

investment on health services by the City of Manila for the construction of
additional two (2) hospitals in the 3rd and 5th Districts, and the installation of
additional lighting facilities within City limits, the significant increase was also due
to the reported pilferage and/or illegal wire tapping by various scrupulous
individuals, and poor maintenance of the lighting facilities.

We have also observed that street lights in most areas of the City remained
lighted day in and day out causing not only higher electricity charges but more
maintenance costs, such as, for the replacement of bulbs that get busted too soon.

Due to non-implementation of cost-saving measures and non-monitoring of

consumption, the City incurred additional electricity costs which in turn resulted in
the waste of funds.

The City Engineer informed us that electricity cost-saving measures are

now being observed in the different offices/departments of the City as well as in the
operation of street lights.

51
 We recommend that:

a. The City Engineering Office and other departments/offices concerned

conduct appropriate action to address the reported pilferage and/or
illegal wire tapping that caused the electricity charges of the City to
increase.

b. Electricity cost-saving measures be implemented in all offices,

hospitals and other areas under the jurisdiction of the City.

7.2 Continuous and speedy delivery of basic health services to the Citys residents
may not be successfully pursued due to inadequate financial resources and the
failure of management to formulate standards and guidelines in the operation
and maintenance of its six (6) hospitals.

The operation and maintenance of City hospitals are in line with the health
security program under the eleven (11) major development programs and activities
conceptualized by the City of Manila in its Medium-Term Development Plan for
CY 2007 to 2010. This program aims to intensify efforts in the speedy delivery of
basic health services to the Citys residents, particularly the underprivileged or less
fortunate constituents in the different depressed communities.

Based on the ocular visit/inspection conducted by this Office on November

9, 2010 of the three (3) hospitals, namely: Justice Jose Abad Santos Mother and
Child Hospital (JJASMCH), Gat Andres Bonifacio Memorial Medical Center
(GABMMC) and the Ospital ng Tondo II, we observed that these hospitals are of
big help to the residents of Manila as well as to those coming from nearby cities as
evidenced by the influx of patients waiting to be served and treated of their medical
problems.

Verification of accounting records showed that as of December 31, 2010, the

City has released a total of P1,557,562,631 to the six hospitals for their operational
requirements, as follows:

Name of Hospital PS MOOE Total

GABMMC P183,232,466 P 98,817,576 P 282,050,042
Ospital ng Tondo II 62,124,200 26,495,200 88,619,400
JJAMCH 178,541,830 71,865,000 250,406,830
Ospital ng Maynila 243,354,598 128,426,436 371,781,034

52
Sta Ana Hospital 157,599,188 322,899,121 480,498,309
Ospital ng Sampaloc 69,629,016 14,578,000 84,207,016
Totals P894,481,298 P663,081,333 P1,557,562,631

However, further verification disclosed the following:

a. Medical treatment and medicines were provided free of charge by the

hospitals to their patients. These services, however, are extended to
patients who are non-residents of the City.

b. The operations and maintenance of the hospitals are wholly dependent

on the financial assistance/subsidy extended by the City Government
and they do not have any other source of revenue to augment their
limited finances.

c. The maintenance/janitorial personnel doing the cleaning/mopping of

floors and collecting of garbage are not enough to cope with such daily
activities because only one or two personnel are assigned in every
floor of the hospitals. Thus, the observance of standard hygiene and
sanitation could not be assured.

In view of the above conditions and due to the inadequate financial

resources, the City may not be able to sustain the financial requirements in
providing continuous and speedy delivery of basic health services to the public
through its hospitals.

Management has taken note of our observation and gave assurance that
appropriate action shall be taken.

We recommend the following remedial measures:

a. Management is encouraged to revisit the operations of its hospitals in

the six (6) districts and to explore the possibility of collecting minimal
service charge from its patients, particularly those who are gainfully
employed and/or non-residents of the City. The income to be generated
may be appropriated for the maintenance of the hospital facilities,
thereby ensuring the continuous and up-to-date delivery of medical
services.

b. The concerned hospital officials should also consider the possibility of

securing financial assistance or donation from other levels of the
government, from private enterprises, from non-governmental
organizations (NGOs) and from lawmakers to support the operation
of the hospitals .

53
 c. The Local Chief Executive and the Heads of the City hospitals are
advised to conduct a study on the alternative means of securing the
services of a duly licensed and experienced Janitorial and Allied
Services provider to ensure proper hygiene and sanitation at all times,
which are primordial in hospital operations.

7.3 Failure of management to formulate a comprehensive modernization plan and

to employ an effective preventive maintenance system for the Vitas
Slaughterhouse resulted in the increase in maintenance costs and the continuous
deterioration of its equipment and facilities.

The Vitas Slaughterhouse which is being operated by the Citys Veterinary

Inspection Board implements the proper slaughtering of livestock for human
consumption and assists in maintaining the supply of meat through mechanized and
sanitary processes.

Review of the accounting records showed that the income of the

slaughterhouse for the current year had increased compared to its previous recorded
income. However, the current expenditures for manpower and maintenance of the
facilities had also increased, thus the net income derived from its operation exhibited
no improvement as shown below:

Year Income Expenses Difference

2008 P 14,173,654 P 28,423,052 (P 14,249,398)

2009 19,011,476 52,107,554 (33,096,078)
2010 22,014,673 34,272,567 (5,018,244)

As an economic enterprise, the City is still infusing funds to keep it

operational. As can be seen from the table, expenses were more than the income
generated from its operation.

Moreover, upon inspection of the facilities of the slaughterhouse, we

observed that the meat processing equipment at the second floor of the building
was not being utilized for its intended purpose and was not properly maintained
resulting to its continued deterioration.

Management showed favorable reaction to our observation and assured us

that our recommendations shall be considered to improve the operations of
the City-owned slaughterhouse.

We recommend that management adopt the following remedial measures:

a. Formulate a comprehensive modernization plan including a preventive

maintenance system for the Vitas Slaughterhouse, using the advances

54
 in technology, to ensure a sustainable income-generating project for
the City; and

b. See to it that the meat processing equipment are properly utilized and
maintained.

III. Settlement of Suspensions, Disallowances and Charges

8.1 Appropriate actions were not taken by management to enforce the settlement
of the deficiencies noted in audit as contained in the Notices of Suspensions,
Disallowances and Charges, thereby resulting in their accumulation to P38.97
million, P343.35 million and P2.36 million, respectively.

The Rules and Regulations on the Settlement of Accounts provide the following:

Section 13.1.1 A suspension shall be settled by the submission of

the justification/explanation and/or
documentation required under an NS and after the
Auditor becomes satisfied that the transaction is
regular/legal/proper and that no loss was suffered
by the government. If the Auditor is not satisfied
with the justification/explanation and/or
documentation submitted, he shall issue the
corresponding ND/NC.

Section 13.1.2 A disallowance or charge shall be settled by

payment of the amount disallowed or by such
other applicable modes of extinguishment of
obligation as provided by law. In the case of the
latter modes, the Auditor may refer to the General
Counsel, for evaluation and advice, the propriety
of the settlement.

Section 13.1.3 Settlement of disallowance or charge may also

result from a decision of the Director,
Adjudication and Settlement Board or the
Commission Proper, lifting the disallowance or
charge.

The audit suspensions, disallowances and charges found in the examination

of various transactions for all funds of the City of Manila and the corresponding
settlements made by management are as follows:

Amount Settlement Balance

CY 2010
Suspension P 41,681,720 P 2,708,204 P 38,973,516

55
Disallowances 227,690 - 227,690
Charges 2,357,110 - 2,357,110

CY 2009 and Prior Years

Disallowances 343,121,113 - 343,121,113

As can be gleaned from the above schedule, that a very minimal amount of
suspended transactions was settles during the year, hence, it may be concluded that
management failed to exercise serious efforts to monitor and to enforce settlement
of the suspended/disallowed/charged transactions.

We reiterate our advice that the concerned City officials and employees be
required to comply within 90 days with the requirements of the transactions
suspended in audit. Settlement of audit disallowances and charges should be
immediately enforced by withholding the salaries or other claims due the persons
liable, in satisfaction of the amounts disallowed or charged. On the otherhand, legal
remedies should be employed by management to ensure the settlement of the
liabilities of those officials and employees who are already separated from the
government service.

56