EXECUTIVE SUMMARY

Introduction

Tacloban city is a Highly Urbanized City through Presidential Proclamation No. 1637
and ratified by the constituents on December 18, 2008. The City is divided into 138 barangays,
of which 124 are located within the city and 14 are in the northern rural part of the city.

In Calendar Year (CY) 2018, the Local Chief Executive (LCE) in the person of
Honorable Cristina G. Romualdez continued to implement programs, projects and activities
consistent with the Twelve-Point Agenda for Tacloban City under her term.

A financial and compliance audit was conducted on the City’s accounts and operations
for the CY 2018. The audit was aimed to ascertain the propriety and validity of the
disbursements and receipts, and to obtain reasonable assurance about whether the financial
statements are free from material misstatements. The audit likewise, included a review of
operating procedures; vouching of transactions such as disbursement vouchers, payrolls and
receipts; interview with management officials and employees concerned; reconciliation and
analysis of account; ocular inspection of infrastructure projects undertaken; and such other audit
techniques considered necessary under the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.

Financial Highlights

The City’s total assets, liabilities, equity, income and expenses for CY 2018, and the
immediately preceding year are as follows:

Accounts CY 2018 CY 2017

Assets ₱3,490,947,310.91 ₱3,001,713,124.07
Liabilities 1,406,394,820.07 912,046,316.10
Equity 2,084,552,490.84 2,089,666,807.97
Income 1,203,423,008.51 1,092,031,704.64
Expenses 1,161,085,331.48 972,337,342.05

Its appropriation/allotment/obligation for current year, including funds received from,

and transferred to, other agencies and non-government and people’s organizations (NGOs/POs)
are as follows:

Accounts CY 2018 CY 2017

Allotments/Appropriations ₱1,360,475,307.23 ₱1,568,733,071.50
Obligations 1,088,800,200.99 1,027,752,032.24
Funds received from National 55,100,965.88 ˗
Government Agencies (NGAs)
Funds transferred to NGOs/POs 6,591,360.00 ˗

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Independent Auditor’s Report

The Auditor rendered a qualified opinion on the City’s Combined Financial Statements
for CY 2018, for the following reasons:

1. The validity and accuracy of the Property, Plant, and Equipment totaling
₱2.08Billion, excluding Land and Construction in Progress totaling ₱577.89Million,
could not be ascertained because of the: (i) disparity of the account balance at year-
end as against the Report on the Physical Count on Property, Land, and Equipment
and the lapsing schedule totaling ₱1.82Billion and ₱23.72Million, respectively, for
the same period; (ii) misclassification of accounts that overstated the Property, Plant,
and Equipment by ₱2.60Million; and (iii) the failure of the City to comply with the
accounting and reporting requirements for Road Networks with a balance at year-end
totaling ₱137.16Million.

2. The Accounts Payable totaling ₱260.91Million was overstated by ₱28.93Million due

to: (i) inclusion of obligations totaling ₱21.32Million that were already paid; (ii)
misclassification of accounts totaling ₱6.86Million; and (iii) inclusion of payables
amounting to ₱739,355.10 aging two years or more which are not covered by
perfected contracts, representing balances of completed projects, the corresponding
funds of which are subject for return to the source agency.

3. The Loans Receivable- Others account totaling ₱10.84Million had remained

outstanding and non-moving for the past three years, and no allowance for
impairment was provided for losses which may arise from its non-collection.

Summary of Significant Observations and Recommendations

1. Revenue generation was not maximized due to non-updated revenue code of the City
resulting in unrealized income from local sources by ₱237Million or 34% short of
the targeted amount of ₱682.26Million for the year.

We recommended for update and/or general revision of the existing Revenue

Code of the City.

2. Despite the absence of policies on the free use of the convention center, some
government and private requestors were accommodated free of charge, thereby
depriving the City from generating additional income of ₱1.41Million that would
have been used to finance the operation of the Tacloban City Convention Center.

We recommended that the City stop the granting of privilege to use the
Tacloban City Convention Center for free outside the activities of the City and
collect fees for the use of the Tacloban City Convention Center strictly in
accordance with the rates prescribed in the ordinance to cover the maintenance
and operating expenses of the convention center.

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3. Programs/projects totaling ₱93.8Million under the 20% Development Fund were
presented in lumpsum in the Annual Investment Plan, and the City had not improved
the utilization of such fund because only ₱240.08Million or 52% of the total
appropriation of ₱457.74Million for CY 2018 was used as at December 31, 2018,
thus, the desired socio-economic and environmental benefits due to the constituents
were not achieved.

We recommended that the City Mayor shall henceforth direct the offices
concerned to:

a) Provide in the Annual Investment Plan sufficient details of the

programs, projects, and activities (PPAs) to be funded out of the
Development Fund;
b) Expedite the implementation of prior and current year’s development
projects so that more desired benefits could be enjoyed by the
constituents as early as possible; and
c) Review unimplemented PPAs in CY 2018 and prior years and
ascertain viability of implementation for the ensuing year, otherwise,
reprogram for a more viable and significant PPAs in accordance to
the socio-economic development and environmental management
requirements.

4. The payments for Collective Negotiation Agreement (CNA) Incentive totaling

₱19.11Million were charged to Personnel Services, not to the allowable Maintenance
and Other Operating Expenses allotments in the year under review, thus, casting
doubt that savings were actually generated as a result of the implementation of cost-
cutting and systems improvement measures undertaken by the City and its personnel
as identified in their existing CNA and supplements thereof.

We recommended that the City Accountant and Budget Officer as well as other
officers concerned, including the President/Chairperson of the Employees’
Organization-Management Consultative Committee be required to submit
documents proving that the City was able to accomplish, as of September 30,
2018, at least an average of 70% of all the targets under their PPAs approved in
the City Budget for CY 2018. Henceforth, ensure that the City has sufficient
fund under the allowable Maintenance and Other Operating Expenses
allotments to cover payment of CNA Incentives; and that,
conditions/requirements for the grant of CNA Incentive are complied with.

5. The deployment of 193 Job Order Workers to the different Sangguniang Panlungsod
members to do clerical and/or janitorial services, which obliged the City to pay
₱10.93Million as of September 2018, resulted in redundancy of duties and
assignments and was deemed unnecessary considering the legislative function of the
Sangguniang Panlungsod which do not involve implementation or execution of
programs and/or projects.

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 We recommended that the City exercise prudence in the hiring of Job Order
workers and require the Human Resource Management Office to review
support staff functions in order to determine the appropriate manpower
complement of an office.

6. Cash advances totaling ₱6.57Million or more were granted to Special Disbursing

Officers (SDOs) for payment of pre-determined expenditures which should have
been paid directly to the creditors, thus, exposed the government funds to the risk of
misuse or loss. Likewise, additional cash advances were granted to SDOs even if the
previous cash advances were not yet liquidated, thus, there were a number of
instances that the total cash accountability of the SDOs had already exceeded the
maximum amount covered/allowed by the fidelity bond.

We recommended that the City stop the granting of cash advances for pre-
determined expenditures where direct payment to creditors is possible, and that
no additional cash advances shall be granted unless the previous ones have been
liquidated.

7. Disbursements totaling ₱4.93Million were charged to the Local Disaster Risk

Reduction and Management (LDRRM) Fund even if the same were not related to the
four thematic areas of disaster risk reduction and management.

We recommended that the City discontinue utilizing its LDRRM Fund for
items/activities that are not related with the four thematic areas of disaster risk
reduction and management.

8. Sixteen PPAs with an allocated budget of ₱2.59Million were not implemented, thus,
defeating the intent of the program to pursue women’s empowerment and gender
equality. Moreover, expenditures incurred for six PPAs had exceeded the amount
authorized per Gender and Development (GAD) Plan and Budget by ₱2.25Million.

We recommended that the GAD Focal Point System Executive Committee or

City GAD Focal Person be required to regularly monitor the implementation of
the GAD Plan and Budget to ensure that GAD PPAs are effectively and
efficiently implemented as per GAD Plan and Budget to attain the GAD
objectives. Likewise, they should ensure that GAD Budget is judiciously
utilized to avoid the incurrence of expenditures in excess of what is authorized.

Compliance with Tax Laws

Rules and Regulations on withholding of taxes due from the purchase of goods and
services, including infrastructure projects were complied with during the year. Total taxes
withheld during the year amounted to ₱63,045,955.46, and total remittances made on the same
period amounted to ₱57,576,101.66. Consolidated Year-end balance of Due to BIR account
(2.02.01.010) totaled ₱8,075,689.10 showed an increase of ₱5,469,853.80 as compared to CY
2017 balance of ₱2,329,860.29.

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Summary of Audit Suspensions, Disallowances and Charges
The total audit suspensions and disallowances issued in the audit of various transactions
of the City Government of Tacloban as of December 31, 2018 amounted to ₱216,660,838.68 and
₱38,051,790.52 respectively, based on the Notice of Suspension (NS), Notice of Disallowance
(ND) and Notice of Settlement of Suspension, Disallowances, and Charges (NSSDC) issued by
this Commission. Moreover, the aforementioned amounts exclude the disallowances which were
issued prior to the effectivity of the Revised Rules on Settlement of Accounts (RRSA).

Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the thirty audit recommendations embodied in CY 2017 and Prior Years’ Annual
Audit Report (AAR), eight were fully implemented, eight partially implemented, eight were not
acted upon by management, five reiterated in Part II of this report, and one was superseded by
events.