Republic of the Philippines

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
===============================================================

June 11, 2018

Hon. Roderick A. Alcala

City Mayor
City of Lucena
Province of Quezon

Dear Mayor Alcala:

We are pleased to transmit the report on the results of the audit on the accounts and operations
of the City of Lucena, Province of Quezon for the Calendar Year ended December 31, 2017,
pursuant to Section 43 of Presidential Decree No. 1445, otherwise known as the Government
Auditing Code of the Philippines, and in line with the Commission’s effort towards informing
Management on how fiscal responsibility has been discharged.

Our audit was conducted in accordance with Philippine Public Sector Standards on Auditing,
and we believe that it provided reasonable basis, for the results of the audit.

The audit report was prepared by the Audit Team composed of Ms. Jocelyn J. Loren, OIC-
Audit Team Leader, Ms.Ruffa E. Celis and Mr. Fernando T. Barretto, both Audit Team
Members, under the supervision of Mr. Remigio A. Arzadon, Jr., Supervising Auditor. It
consists of the Independent Auditor’s Report, the Audited Financial Statements, the
Observations and Recommendations, the Status of Implementation of Prior Year’s Audit
Recommendations, and the Annexes.

We expressed a qualified opinion on the fairness of the presentation of the financial statements
of the Cityof Lucena in view of the exceptions noted in audit as stated in the Independent
Auditor’s Report in Part I of this report.

The significant observations and recommendations that need immediate action, among others,
are as follows:

1. The valuation and existence of Property, Plant and Equipment (PPE) with a reported net
book value of P1,268,815,791.69 representing 69% of the total assets could not be
ascertained due to incomplete details on the Report on the Physical Count of Property, Plant
and Equipment (RPCPPE) and inclusion of unserviceable properties costing
P12,132,668.23 despite its disposal, contrary to Sections 114, 124 and 125, of the Manual
on the New Government Accounting System(MNGAS), Volume I for Local Government
Units (LGUs) and Sections 79 and 111 of Presidential Decree (PD)No. 1445.
 We recommended that the City Mayor require the OIC-General Services Officer(GSO) to
complete the details of properties in the RPCPPE by securing copies of Acknowledgement
Receiptfor Equipment (ARE) and comply with the procedural and documentary
requirements for property disposal.

2. Other Receivables totaling P2,646,436.38 out of the balance of P2,705,542.55 as of

December 31, 2017 are dormant, thus unreliable and affecting its fair presentation in the
financial statements, contrary to Paragraph 27 of the Philippine Public Sector Accounting
Standards (PPSAS) 1.

We reiterated our recommendation that the City Mayor require the OIC-City Accountant to
prepare the request for authority to write-off dormant receivables following the guidelines
and procedures provided under COA Circular No. 2016-005 and file the same to the
Commission on Audit.

3. Guaranty/Security Deposits Payable of P2,855,111.27 which have been outstanding for

more than two years were not reverted to the Unappropriated Surplus of the General Fund,
contrary to Section 98 of PD No. 1445, thus casting doubt on the validity and reliability of
the account balance presented in the financial statements.

We reiterated our recommendation that the City Mayor instruct the OIC-City Accountant to
revert the account to the Unappropriated Surplus of the General Fund pursuant to the
provisions of Section 98 of PD No. 1445, subject to the authority from the
SangguniangPanlungsod (SP) with a condition that appropriation shall be made available in
the event that claim arises in the future.

4. Excess collections from the sale of bidding documents amounting to P583,712.75 remained
in the Trust Fund books, contrary to DBM Budget Circular No. 2004-5A, thus overstating
the Trust Liabilities account and understating the affected income account by the same
amount.

We recommended that the City Mayor require the OIC-City Accountant to transfer the
amount of P583,712.75 to the General Fund and henceforth, comply with DBM Budget
Circular No. 2004-5A.

5. The non-segregation of special accounts in the General Fund (GF) resulted to in an

abnormal balance of P72,536,883.11 in the subsidiary ledgers for Cash in Bank, Local
Currency, Current Account (LCCA) of the GF-Proper, Auction Market and Transportation
System, contrary to Sections 123 and 124 of Presidential Decree(PD) No. 1445 and Section
105 of the MNGAS, Volume I for LGUs.

We recommended that the City Mayor require the OIC-City Accountant to review the SLs
of Cash in Bank-Local Currency, Current Account by tracing the cause/s of abnormal
balances totaling P72,536,883.11 and the City Treasurer to maintain separate account for
each special account to facilitate monitoring of the cash balance.

6. Funds totaling P4,250,000.00 from National Government Agencies (NGAs) remained

unutilized due to non-implementation of the projects while unexpended balance of
P1,322,455.14 from completed projects remained idle because these were not returned to
 the source agencies, contrary to COA Circular No. 94-013, thus depriving the intended
beneficiaries of immediate use and enjoyment of the project and the source agencies of
resources that could be used in other projects or by other agencies needing assistance.

We recommended that the City Mayor instruct the City Planning and Development
Coordinator and OIC-City Engineer to coordinate with the source agency for the immediate
implementation of the projects.

We also recommended to return immediately the excess funds of P1,322,455.14 to the

source agencies and the fund of P1,000,000.00 for cancelled project to the Bureau of the
Treasury so that it could be used in other projects or by other agencies needing assistance.

The other audit observations, together with the recommended courses of action which were
discussed by the Audit Team with the concerned Management officials and staff during the exit
conference conducted on April 24, 2018, are discussed in detail in Part II of this report.

We respectfully request that the recommendations contained in Part II of the report be

implemented and that this Commission be informed of the actions taken thereon by
accomplishing the Agency Action Plan and Status of Implementation (AAPSI) form (copy
attached) and returning the same within 60 days from the date of receipt hereof.

We acknowledge the support and cooperation that you and your staff extended to the Audit
Team, thus facilitating the submission of this report.

Very truly yours,

COMMISSION ON AUDIT

By:

MARIO G. LIPANA
Director III
Officer-in-Charge

Copy furnished:

- The Regional Director

Department of the Interior and Local Government, Region IV-A
-The Regional Director
Department of Budget and Management, Region IV-A
- The Regional Director
Bureau of Local Government Finance, Region IV-A
- The Secretary
SangguniangPanlungsod, City of Lucena
 City of Lucena
AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 2017
As of _______________________

Agency Action Plan

Reason for
Target Action
Audit Audit Status of Partial/Delay/Non-
Ref. Action Person/Dept. Implementation Taken/Action
Observation Recommendation Implementation Implementation, if
Plan Responsible Date to be Taken
applicable
From To

________________________________ _______________
Name and Position of Agency Officer Date

Note: Status of Implementation may either be (a) Fully Implemented (FI), (b) Ongoing (O), (c) Not Implemented (NI), (d) Partially Implemented (PI), or (e)
Delayed (D)