10-CebuCity2017 Part2-Findings and Recomm

PART II - AUDIT OBSERVATIONS AND RECOMMENDATIONS
We commend the officials and employees of LGU Cebu City on the following:
Financial Liabilities
1. Payment of loan amortization, interest and charges totaling ₱388,650,419.88 in

calendar year (CY) 2017 were paid on time and appropriation for debt servicing
was within the 20% debt ceiling prescribed in Republic Act (RA) 7160.
LGU-Cebu City was granted a loan by Japan International Cooperation Agency (JICA)
totaling ¥12,291,866,796 or ₱4,651,950,439.40 through Land Bank of the Philippines
(LBP).
Appropriation for Debt Servicing Within the 20% Debt Ceiling
Section 324(b) of RA 7160 provides that “… the amount of appropriations for debt
servicing shall not exceed twenty percent (20%) of the regular income of the local
government unit (LGU) concerned.”
Review of LGU-Cebu City’s Annual Budget for CY 2017 disclosed that

₱1,337,274,096.96 was appropriated for the payment of the above loans including
interest and charges as follows:
Particulars Amount
Loan payments ₱1,185,668,470.96
Interest expense 149,105,626.00
DST and other charges 2,500,000.00
Total ₱1,337,274,096.96
The ₱1,337,274,096.96 appropriated for debt servicing is within the ₱1,514,453,239.80

debt ceiling of the regular income of the LGU, as computed below:
Particulars
Amount
(based on the Annual Budget for CY 2017)
Tax revenue – GF Proper and SEF ₱4,762,000,000.00
Non-tax revenue – GF Proper and Special Accounts 1,004,700,000.00
(750,000,000.00+254,700,000.00)
External sources [e.g. share of Internal Revenue Allotment (IRA)] 1,805,566,199.00
TOTAL 7,572,266,199.00
x 20%
Debt servicing ceiling ₱1,514,453,239.80
Payments Made on Due Dates
As indicated in the Individual Loan Profile as of December 31, 2017 submitted by the
Accounting Department, the loan with outstanding balance of ¥4,796,800,000.00 or
₱2,121,624,640 will mature in 2025 and principal payments will be made semi-
annually every February 20 and August 20 of the year.
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Records obtained from electronic New Government Accounting System (e-NGAS)
showed that LGU-Cebu City paid its loan obligations totaling ₱388,650,419.88for
CY 2017 on time through debit from its Current Account No. 1452-1007-00.
Payment of obligations on due dates prevents payment of penalties.
We acknowledge and commend Management for strictly adhering and

observing laws, rules and regulations governing payment of loans payable.
The audit for calendar year 2017 on the transactions and accounts of LGU Cebu also
disclosed the following deficiencies:
A. Financial and Compliance Audit
Cash
1. The cash shortage of ₱1,900,902.01 discovered during the examination of the

cash and accounts of a Disbursing Officer is attributed to the failure of the City
to implement existing rules and regulations pertaining to the granting,
utilization and liquidation of cash advances of its employees as well as the weak
and/or absence of internal control system over its cash transactions.
The shortage was arrived at as follows:
Accountability as of October 19, 2017 ₱77,466,000.00

Cash and valid cash items produced by the AccountableOfficer (AO) 75,565,097.99
andcountedby theAuditor (in the presence of the AO)
Shortage ₱1,900,902.01
The shortage was incurred because cash and cash items under the accountability of
Ms. Maria AlmicarDiongzon was not complete when presented to the audit team as of
cash count date on October 19, 2017.
A letter of demand dated November 7, 2017 was issued to the Disbursing Officer
demanding her to produce immediately the cash shortage.
The AO, Ms. Diongzon, attached the copy of the following Official Receipts (ORs) as
payment of the above-stated shortage to her reply:
OR Date OR No. Payor Nature of Collection Amount

10/24/17 8647453 Ma. AlmicarDiongzon Liquidation of CA - PWD North ₱357,000.00
10/24/17 8647456 Ma. AlmicarDiongzon Liquidation of CA - Senior Citizen North 93,000.00
10/25/17 8647479 Ma. AlmicarDiongzon Liquidation of CA - Senior Citizen North 6,000.00
10/25/17 8647480 Ma. AlmicarDiongzon Liquidation of CA 1,000.00
Subtotal 457,000.00
10/24/17 8647455 Ma. AlmicarDiongzon Liquidation of CA - Senior Citizen South & 985,000.00
Bedridden
OR Date OR No. Payor Nature of Collection Amount
10/24/17 8647454 Ma. AlmicarDiongzon Liquidation of CA - PWD South 450,902.01
10/25/17 8647478 Ma. AlmicarDiongzon 69Liquidation of CA - Senior Citizen South 7,000.00
10/25/17 8647477 Ma. AlmicarDiongzon Liquidation of CA - PWD South 2,000.00
Subtotal 1,444,902.01
Grand Total 1,901,902.01
An interview conducted with Ms. Diongzon disclosed that the first four ORs with
numbers 8647453, 8647456, 8647479 and 8647480 totaling ₱457,000.00 were
refunds made by her for the shortage incurred being the Disbursing Officer for the
North District. Also by her own admission during the verbal interview conducted,
Ms. Diongzon revealed that the amount of ₱457,000.00 was personally used by her.
OR numbers 8647455, 8647454, 8647478 and 8647477 amounting to ₱1,444,902.01

represent the refunds of Ms. JonafenKalubiran which the latter also personally used.
The cash shortage incurred by Ms. Diongzon during the cash examination on October
19, 2017 is attributed to the failure of the City to implement existing rules and
regulations pertaining to the granting, utilization and liquidation of cash advances of
its employees and the City’s weak and/or absence of internal control system over its
cash transactions. These are enumerated as follows:
a. Irregular transfer of physical accountability of cash advance from Disbursing

Officer Almicar Diongzon to Sub-Disbursing Officer Jonafen Kalubiran, who is
not bonded
We recommend that Management immediately stop the practice of utilizing sub

collectors who are not bonded to deter the risk of loss, misuse and/or other forms
of irregularity. We also recommend that Management refrain from transferring
cash advance from one AO to another.
b. Cash vault of Ms. Kalubiran had no combination and could be accessed through
a mere key, thus, government funds were not safeguarded from risk of loss, misuse
and theft.
We recommend that Management ensure that government funds are placed in a

safe/cash vault secured with a combination. We also recommend that the City
Treasurer see to it that there is no sharing of number combination among its staff
to avoid unauthorized access to each cash vault. Moreso, it is also recommended
that Management stop the practice of giving access to any employee who is not
designated as an AO to a vault.
c. Accountabilities of the accountable officer were not strictly monitored. The

Disbursing Officer did not require her Sub-Disbursing Officer to turn-over
collections to her at the end of the day. She also failed to account the remittances
made by her sub-disbursing officers.
We recommend that the disbursing officer require the sub-disbursing officer to

turn-over all collections daily.
d. Disbursement Officers’ area was not secured and unauthorized personnel are
present in the Disbursement Officer’s Section
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We recommend that Management:
 provide the disbursement officers with cubicles to secure government funds
from risk of loss, thru theft;
 Instruct the City Treasurer to direct all personnel to transact business with
clients through the outside windows or designated areas to safeguard records,
documents, funds and equipment against theft or robbery in compliance with
sound security control; and
 Management to strictly prohibit unauthorized personnel on the disbursement
officers’ section and impose sanctions to AOs who shall violate this rule.
e. Non-implementation of the rules and regulations on the grant and liquidation of

cash advance and the laxity of the Management in its rules prescribing the
release and liquidation of cash advance on financial assistance to PWDs and
Senior Citizens
Cash advances of AOs were not liquidated even if the purpose for which it was
granted has been served contrary to Section 89 of PD 1445. Moreover, the laxity
of the City on the grant and accounting of funds distributed to PWDs and Senior
Citizens per City Ordinance no. 2453 and 2456 exposed government funds to risk
of misappropriation.

 conduct an investigation on the occurrence of cash shortage, file a case against
responsible officials and employees and impose the appropriate sanctions
against those personnel involved in the misuse of government funds;
 direct the Disbursing Officer to explain on the occurrence of such shortage
and relieve her from handling cash accountabilities;
 comply strictly with Section 89 of PD 1445 and Section 4.1.3 of COA
Circular 2009-002 and ensure the proper granting, utilization and liquidation
of cash advances;
 strictly observe the rules that all cash advances which are no longer needed
shall be returned to or deposited immediately with the proper collecting
officer or treasurer;
 revise its provision on its City ordinance, shortening the period of liquidation
of funds distributed to PWDs and Senior Citizens from fifteen (15) working
days to five (5) calendar days after the 10th day on the date of last release in
order to avoid the risk of misappropriation due to the length of time the funds
are in custody with the AO; and
 adhere to the guidelines on the granting and liquidations of cash advances and
adopt measures to strengthen its internal control on cash to prevent loss and
misuse of government funds.
This was relayed to Management through AOM No. 2017-043 dated December 18,
2017.
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Fund Transfer
2. Funds released to non-governmental organizations/people’s organizations

(NGOs/POs) totaling ₱50,021,806.39 remained unliquidated in the books of
accounts due to a)laxity of the City in the enforcement of the submission of the
liquidation/utilization reports; b)non-action by the implementing organizations
for the settlement of their suspended liquidation reports, and; c)pending
liquidation reports in the Pre-audit Section.
The Memoranda of Agreement (MOA) between the City and various NGOs/POs
generally provides that the first party (source agency/LGU-Cebu City) may resort to
and institute legal remedies and actions against the second party (implementing
NGOs/POs) in case it fails to complete the projects or for a material violation of the
provisions of the Agreement or COA Circular No. 2007-001 and any of these cases,
and subjects the NGO to disqualification from applying for another project in any
other government organizations.
Based on the records in the e-NGAS and the manual monitoring of the receivable
accounts by the Accounting Office, funds transferred to NGOs/POs still have a total
unliquidated balance of ₱50,021,806.39, to wit:
Fund Balance
General Fund 31,416,664.94
Special Education Fund (SEF) 2,913,818.00
Trust Fund 15,691,323.45
Total 50,021,806.39
Further review of the details of the above balances showed that various NGOs/POs
already submitted their liquidation reports but were suspended and returned, or
pending in the Pre-audit Section of the Accounting Office, thus remained unrecorded,
while more than 50% of these grants were still not submitted with liquidation reports
as further explained below:
a. Non-submission of liquidation reports
Fifty-nine percent (59%) or a total of ₱29,637,515.02 were still unliquidated due to

the non-submission of the utilization/liquidation reports by the implementing
NGOs/POs.Considering that the balances pertain to releases made in 2016 and earlier
years, the liquidation reports should have been submitted long ago and any unused
funds should have been returned to the City.
b. Suspended liquidation reports
Various liquidation reports totaling ₱10,927,861.02 or 22% of the total

receivables from NGOs/POs were suspended in the Pre-audit Section. These
liquidation documents were not yet recorded in PPSAS due to certain
deficiencies, or due to the non-submission of the lacking documents required to
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them. Considering the dates these documents were suspended, lacking reports
were still not submitted by the implementing NGOs/POs.
c. Liquidation reports pending in the Pre-audit Section
Further, liquidation reports totaling ₱29,637,515.02 were pending in the Pre-audit

Section. An Accounting Representative said that the assigned auditors did not
inform yet of the status of these liquidation reports. These have long been
assigned to these appointed auditors, thus, liquidations should have already been
suspended or recorded to prevent accumulation of unliquidated grants.
The above deficiencies resulted in the non-recording of expenditures in the books of

the City, and as a result, overstated the reported receivables and government equity
accounts.
This was relayed to Management through AOM No. 2018-010 (2017) dated February
20, 2018.
We recommend the following:

 institute action against the defaulting NGOs/POs pursuant to the provisions
of the Memorandum of Agreement and the COA Circular 2007-001;
 instruct the Accounting Office to send formal demand letters to NGOs/POs
with suspended liquidation reports requesting them to submit the required
documents or explain the deficiencies noted during pre-audit; and
 direct the Accounting Office to take action or process those liquidation
reports that are pending for audit and immediately inform in writing those
NGOs/POs with suspended liquidations, or prepare the necessary entries to
record those utilization reports without deficiencies for a fair presentation of
the accounts in the financial statements.
3. Expenses totaling ₱500,000.00 charged to the financial assistance granted by

the LGU-Cebu City to Zonta Club of Cebu II Foundations, Inc. were incurred:
a) before the MOA was approved, and; b) beyond the agreed period to
undertake the project, thus, appearing to be without authority.
AMOA was executed and entered into by and between the Cebu City Government
and Zonta Club of Cebu II Foundations, Inc., a NGO, to grant financial assistance to
the latter in the amount of ₱500,000.00 for the protection and rehabilitation of victims
and survivors of violence (women and children) and campaign against Violence
Against Women-Children (VAW-C) in the City of Cebu. Per MOA, the financial
assistance shall include medical and other assistance to the victims in the conduct of
interviews, medical examinations, psychometric test, counseling, legal and social
services, and other immediate services.
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Perusal of the MOA and the supporting documents on the liquidation of the above
financial assistance showed the following deficiencies:
a. Incurrence of expenses before the signing of MOA
Article IX on the Effectivity and Term of the MOA stated that, “The Contract
shall take effect after the requisite approvals from the authorized persons shall
have been secured.”
Representatives from the Cebu City Government and Zonta Club of Cebu II
Foundation, Inc. signed the MOA on January 25, 2016. However, various
expenses totaling ₱254,505.25 were already incurred even before both parties
had affixed their signatures, as detailed below:
Date Reference Particular Payee Amount
01/11/15 OR No. Rosos, Melcris – Sperm ID Test Vicente Sotto Memorial 100.00
1636439 Medical Center (VSMMC)
01/17/15 OR No. Hernani, Evamie – Sperm ID VSMMC 100.00
1641928 Test
01/18/15 OR No. Cagot, Manilyn – Sperm ID Test VSMMC 100.00
1642497
02/04/15 OR No. Ebrado, Trisha – Sperm ID Test VSMMC 100.00
1656138
02/14/15 OR No. Rigor, Jenerica – Sperm ID Test VSMMC 100.00
1664288
03/17/15 Voucher No. Honorarium for March 1-15, Eva Gascon 4,250.00
2015-03-002 2015
03/12/15 OR No. Badelles, Monica – Sperm ID VSMMC 100.00
1683868 Test
03/09/15 OR No. Librea,, Jane Antoniene – VSMMC 100.00
1680901 Sperm ID Test
02/28/15 OR No. 0305 Not stated in OR NYPD Print Depot 375.00
03/03/15 OR No. 0308 Not stated in OR NYPD Print Depot 1,175.00
03/11/15 OR No. 997 Ink refill Advance Ink and Toner 200.00
Solutions
02/13/15 OR No. DelaCerna, Joyce – Sperm ID VSMMC 100.00
1663557 Test
03/11/15 OR No. Malazarte, Jessell – Sperm ID VSMMC 100.00
1687290 Test
03/12/15 OR No. Atienza, Sarah Jane – Sperm ID VSMMC 100.00
1683981 Test
04/04/15 OR No. Paglalunan, Diana Jane – VSMMC 100.00
1699965 Sperm ID Test
03/17/15 Voucher No. Honorarium for March 16-31, Eva Gascon 4,250.00
2015-03-004 2015
04/15/15 Voucher No. Honorarium for April 1-15, Eva Gascon 4,250.00
2015-04-001 2015
04/25/15 OR No. Veloso, Vanessa – Sperm ID VSMMC 100.00
1717564 Test
04/19/15 OR No. Sumbilon, Jhasmine – Sperm VSMMC 50.00
1712167 ID Test
04/30/15 Voucher No. Honorarium for April 16-30, Eva Gascon 4,250.00
2015-04-002 2015
05/15/15 Voucher No. Honorarium for May 1-15, Eva Gascon 4,250.00
2015-05-001 2015
05/29/15 Voucher No. Honorarium for May 16-31, Eva Gascon 4,250.00
2015-05-002 2015
04/20/15 OR No. Abapo, Maria Stinalle – Sperm VSMMC 100.00
1712580 ID Test
06/09/15 Voucher No. Services rendered as resource WCPC Service Providers 125,000.00
2015-06-001 persons of various seminars
06/10/15 OR No. Amit, Marjorie – Sperm ID Test VSMMC 100.00
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1753984
06/13/15 OR No. Ancajas, Brigette – Sperm ID VSMMC 100.00
1756202 Test
06/17/15 Voucher No. Honorarium for June 1-15, Eva Gascon 4,250.00
2015-06-003 2015
06/30/15 Voucher No. Honorarium for June 16-30, Eva Gascon 4,250.00
2015-06-004 2015
07/15/15 Voucher No. Honorarium for July 1-15, Eva Gascon 4,250.00
2015-06-006 2015
07/31/15 Voucher No. Honorarium for July 16-31, Eva Gascon 4,250.00
2015-07-001 2015
08/01/15 OR No. 6220 Photocopy of documents for Cebu Navs Books and 168.00
liquidation Supplies
07/23/15 OR No. 1123 HP 21BK refill Advance Ink and Toner 200.00
Solutions
07/29/15 AR No. 001 Photocopy of project proposals Not provided 108.00
for CY 2015
07/28/15 OR No. 2094 Photocopy of project proposals Jem Copy Center 216.00
for CY 2015
08/20/15 OR No. 0158 Audit fee for liquidation of HermosadaBalucanPulvera& 5,675.00
WCPC funds for Cebu City and Co., CPA’s
Capitol
08/18/15 Voucher No. Honorarium for August 1-15, Eva Gascon 4,250.00
2015-08-002 2015
08/28/15 Voucher No. Honorarium for August 16-31, Eva Gascon 4,250.00
2015-08-003 2015
09/15/15 Voucher No. Honorarium for September 1- Eva Gascon 4,250.00
2015-08-005 15, 2015
09/30/15 Voucher No. Honorarium for September 16- Eva Gascon 4,250.00
2015-09-002 30, 2015
10/15/15 Voucher No. Honorarium for October 1-15, Eva Gascon 4,250.00
2015-10-001 2015
10/23/15 AR No. 002 Notarization Not Provided 100.00
10/15/15 OR No. 6901 Photocopy of documents and Cebu Navs Books and 188.25
purchase of 2 pcs. long Supplies
envelope
10/30/15 Voucher No. Honorarium for October 16- Eva Gascon 4,250.00
2015-10-002 31, 2015
11/14/15 OR No. 4356 Sponsorship for Child Protection Network 30,000.00
Cyberprotection of Children Foundation, Inc.
Conference at Marco Polo on
Dec. 1-2, 2015
11/15/15 Voucher No. Honorarium for November 1- Eva Gascon 4,250.00
2015-11-002 15, 2015
11/29/15 Voucher No. Honorarium for November 16- Eva Gascon 4,250.00
2015-11-004 30, 2015
11/16/15 OR No. Bedrijo, Jonalyn – TV8 VSMMC 150.00
1867637
11/17/15 OR No. Barazon, Elma – Water’s View VSMMC 150.00
1869999
12/15/15 Voucher No. Honorarium for December 1- Eva Gascon 4,250.00
2015-12-001 15, 2015
12/29/15 Voucher No. Honorarium for December 16- Eva Gascon 4,250.00
2015-12-003 31, 2015
01/15/16 Voucher No. Honorarium for January 1-15, Eva Gascon 4,250.00
2016-01-001 2016
Total 254,505.25
b. Non-conformity with the agreed period to undertake the project
Section 2 of Article III of the aforementioned MOA also stipulated the following:
75
“The SECOND PARTY (Zonta Club of Cebu II Foundations, Inc.) agrees to
undertake the PROJECT for the period: from January 1, 2015 to December 31,
2015. This period remains fixed unless additional time is allowed by the FIRST
PARTY (City Government of Cebu) to the SECOND PARTY in writing.”
However, review of the liquidation reports also showed that the following
expenses totaling ₱249,744.75 were incurred in CY 2016, which was beyond the
agreed period to undertake the project. No written authorization was executed to
allow Zonta Club of Cebu II Foundations, Inc. additional time to undertake the
project:
01/15/16* V. No. 2016-01- Honorarium for January 1-15, Eva Gascon*** 4,250.00
** 001*** 2016***
01/29/16 V. No. 2016-01- Honorarium for January 16-31, 2016 Eva Gascon 4,250.00
002
02/13/16 V. No. 2016-02- Honorarium for February 1-15, 2016 Eva Gascon 4,250.00
001
02/29/16 V. No. 2016-02- Honorarium for February 16-29, 2016 Eva Gascon 4,250.00
002
02/12/16 OR No. 004603 1 piece HP21BK Refill Advance Ink and 200.00
Toner Solutions
02/03/16 AR No. 003 Xerox copies of documents for Not provided 20.00
meeting
02/04/16 AR No. 004 Xerox copies of documents for Not provided 30.00
meeting
03/04/16 OR No. 20021 Tarpaulin BBC’s Print Stop 800.00
03/11/16 OR No. 0955 Partial payment for food for an event Karl’s Catering 35,000.00
on Mar. 10-11, 2016 (250 pax at Services
₱300.00/head)
03/10/16 OR No. 0954 Full payment for food for an event on Karl’s Catering 40,000.00
Mar. 10-11, 2016 (250 pax at Services
₱300.00/head)
02/11/16 S1 No. 31229 110 pieces of cheese bread Casilda R. de 660.00
Larrazabal
03/08/16 CS No. 92828 Print of programs with 220 sheets BBC’s Print Stop 1,100.00
03/11/16 OR No. 15591 Rent for projectors and screen Microdata 9,000.00
Systems and
Management
03/15/16 V. No. 2016-03- Honorarium for March 1-15, 2016 Eva Gascon 4,250.00
008
03/10/16 V. No. 2016-03- Honorarium as speaker on Laws Atty. Virginia 1,000.00
010 Affecting Women Santiago
03/11/16 V. No. 2016-03- Honorarium as speaker on Laws Atty. Virginia 1,000.00
011 Affecting Women Santiago
03/10/16 V. No. 2016- Honorarium as speaker on Police P/Insp. 1,000.00
003-012 Procedures in Reporting Incidents of AriezaOtida
Abuse
03/11/16 V. No. 2016- Honorarium as speaker on Police P/Insp. 1,000.00
003-013 Procedures in Reporting Incidents of AriezaOtida
Abuse
03/10/16 V. No. 2016- Honorarium as facilitator of Cheng Ye 1,000.00
003-014 Dangoyngoy Sa Kahilum Part 7
seminar-workshop
03/11/16 V. No. 2016- Honorarium as facilitator of Andy Basco 1,000.00
003-015 Dangoyngoy Sa Kahilum Part 7
seminar-workshop
03/19/16 SI No. Supplies National 430.00
12291892 Bookstore
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03/08/16 SI No. 473050 Supplies National 91.50
Bookstore
03/07/16 SI No. 4733674 Supplies National 105.00
Bookstore
02/22/16 SI 1171913 Supplies National 27.50
Bookstore
03/08/16 OR No. 8142 Photocopy of documents Cebu Navs Book 1,088.75
and Supplies
03/07/16 OR No. 8118 Photocopy of documents Cebu Navs Book 1,300.00
and Supplies
03/05/16 OR No. 49215 Printing of various documents Titus Café & 147.00
Internet Inc.
03/31/16 V. No. 2016-03- Honorarium for March 16-31, 2016 Eva Gascon 4,250.00
016
03/02/16 CR No. 2024 Various supplies Typematic 2,745.00
Philippines
04/30/16 V. No. 2016-04- Honorarium for April 1-30, 2016 Eva Gascon 8,500.00
005
No Date V. No. 2016-06- Honorarium for social services Rita Faelnar 15,000.00
001
No Date V. No. 2016-06- Honorarium for institutional Estela Rodriguez 5,000.00
002 strengthening services
No Date V. No. 2016-06- Honorarium for medical services Dr. Naomi Poca 12,000.00
003
No Date V. No. 2016-06- Honorarium on call community Virginia Burlas 5,000.00
004 services
No Date V. No. 2016-06- Honorarium on medical services Dr. Madeline 12,000.00
005 Amadora
No Date V. No. 2016-06- Honorarium on medical and stress Dr. Consuelo 5,000.00
006 debriefing Malaga
No Date V. No. 2016-06- Honorarium on psychological Rosemarie 10,000.00
007 services Gonato
No Date V. No. 2016-06- Honorarium on psychological AntonelaCodenie 5,000.00
008 services ra
No Date V. No. 2016-06- Honorarium on psychological Katrina Marie 20,000.00
009 services Lumali
No Date V. No. 2016-06- Honorarium on medical clerical Jennifer Osigan 18,000.00
010 services
No Date V. No. 2016-06- Honorarium on social services FloramicSuson 5,000.00
011
No Date V. No. 2016-06- Honorarium on social services KrisiaLagunda 5,000.00
012
249,744.7
Total
5
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***Expense also incurred before the signing of MOA
The above deficiencies rendered these expenses unauthorized, since expenses

relative hereto were incurred contrary to the agreed period as stipulated in the
MOA.
This was relayed to Management through AOM No. 2018-016 (2017) dated March
12, 2018.
Management Comment:
77
Per review of the documents on file by the Executive Chairperson of the Cebu City
Women and Family Affairs Commission, there was no written document found
testifying that the City Government issued authorization to Zonta Club of Cebu II
Foundation Inc. to extend their project beyond December 31, 2015. The City was
informed by the foundation that the in-charge of the paper works of the said project
was no longer alive.
Management will seek the opinion of the City Legal Office regarding this matter for
proper guidance.
We recommend that Management explain in writing the deficiencies noted on

the liquidation reports of Zonta Club of Cebu II Foundations, Inc. and
henceforth, we recommend that Management exercise due care in the execution
of MOAs.
Inventories
4. The existence, valuation and accuracy of the balances of Inventory accounts

totaling ₱421,571,508.57could not be ascertained due to a) unreconciled
difference between the balance of the general ledger (GL) and the physical
inventory report; b) non-submission of reports on the physical count of other
inventories and c) various inventories directly charged to expense.
Examination of the inventory accounts and the corresponding inventory reports as of

December 31, 2017 disclosed the following:
a. Unreconciled difference between the balance of the GL and the physical

inventory report
Review of Report of the Physical Count of Inventories (RPCI) s ubmitted by the GSO
against inventory account balances per books as of December 31, 2017 showed
the following:
Code Account Per FS Per RPCI Variance %

1040401 Office Supplies Inventory 42,654,864.6 2,532,128.45 40,122,736.2 94%
0 6 1
ss104040 Food Supplies Inventory 8,578,689.60 4,282,425.00 4,296,264.60 50%
50
1040406 Drugs and Medicines Inventory 57,336,767.7 586,738.88 56,750,028.9 99%
0 9 1
1040407 Medical, Dental and Laboratory Supplies 45,125,312.7 688,960.00 44,436,352.7 98%
0 Inventory 3 3
1040413 Construction Materials Inventory 71,242,792.4 1,980,246.20 69,262,546.2 97%
0 6 6
1040499 Other Supplies and Materials Inventory 86,016,670.0 14,187,502.1 71,829,167.9 84%
0 8 6 2
Total 310,955,097. 24,258,000.6 286,697,096. 92%
32 9 63
78
We recognized the efforts being done by the GSO in the physical count of
inventory items. However, the reconciliation of the inventory count has to be
undertaken, completed and documented not only to resolve discrepancies noted
but also to validate the correctness of accounting records. It was noted that
physical inventory reports from all offices and divisions were not consolidated
and that no one was assigned to keep track of all the inventory reports. Further,
physical inventory report of the Other Supplies and Materials Inventory includes
inventories that should have been classified to Fuel, Oil and Lubricants Inventory
due to non-adherence to Philippine Public Sector Accounting Standards (PPSAS)
Chart of Accounts upon submission of inventory reports. Thus, balances in the
RCPIs do not necessarily reflect the actual supplies and materials inventory.
Due to the efforts exerted by Accounting in coordination with GSO and other
departments in the City, partial adjustment of some accounts were effected in the
balances per books.
We have observed the difficulties encountered by Accounting in the reconciliation

of these accounts because of the transactions with incomplete details recorded in
the SLs upon adoption of e-NGAS and inactive and deceased accountable officers
making it hard to monitor inventory movements.
Review of Inventory Analysis of AOs submitted by Accounting Section as of

December 31, 2017 showed the following:
UnaccountedInventory
Per Monitoring Per Books
Balance
Total 344,887,660.66 421,571,508.57 76,683,847.91
The above unaccounted inventory balance per Accounting’s monitoring which

constituted 18% of the total inventories is still subject to further identification and
review. Further, review of the submitted inventory analysis showed balances
recorded under unidentified SLs with a total of ₱135,268,966.90 or 32% of the
total inventories pertaining to unreconciled beginning balances.
Considering that actual physical count showed material variances against balance
per books, there is a need to review the transactions, reconcile and prepare the
necessary adjusting entries to reflect the correct account balances.
b. Non-submission of reports on the physical count of other inventories
The RPCIs of the following inventory accounts were not submitted to the Audit
Team for verification:
Code Account GF SEF TF Total

1040101 Merchandise Inventory 42,962.84 - - 42,962.84
0
1040206 Agricultural Produce for Distribution 315,133.95 - - 315,133.95
79
Code Account GF SEF TF Total
0
1040402 Accountable Forms, Plates and 21,624,685. 83,377.45 138,450.00 21,846,512.
0 Stickers Inventory 23 68
1040404 Animal/ Zoological Supplies 1,141,516.0 - - 1,141,516.0
0 Inventory 0 0
1040408 Fuel, Oil and Lubricants Inventory 71,124,003. 41,109.40 10,888,277. 82,053,390.
0 25 77 42
1040409 Agricultural and Marine Supplies 3,887,060.3 107,835.0 - 3,994,895.3
0 Inventory 6 0 6
1040410 Textbooks and Instructional Materials 500,000.00 - - 500,000.00
00 Inventory
1040411 Military, Police and Traffic Supplies 722,000.00 - - 722,000.00
0 Inventory
Total 99,357,361. 232,321.8 11,026,727. 110,616,411
63 5 77 .25
It was also noted that balances pertaining to Merchandise Inventory and Military,
Police and Traffic Supplies Inventory were initially recorded as beginning
balances in the e-NGASSLs and that these accounts were no longer used.
Considering the substantial amount of inventory account balances as of December

31, 2017, actual count of supplies and materials should be executed to determine
if the balance per inventory count reconciled with the account balances per books.
c. Various inventories directly charged to expense
Section 114, Volume 1 of the Manual on NGAS provides that purchases of

supplies and materials for stock, regardless of whether or not they are consumed
within the accounting period, shall be recorded as inventory following the
perpetual inventory method. Regular purchases shall be coursed thru the
inventory account and issuances thereof shall be recorded as they take place,
except those purchases out of the petty cash fund, which shall be for immediate
use and for stock, in which case shall be charged immediately to the appropriate
expense accounts.
Interview with the GSO revealed that various procurement of supplies and
materials were not recorded under its appropriate inventory accounts but were
directly endorsed and recorded as expense. Utilization reports were already
prepared even prior to its use and submitted to the Accounting Section; however,
some of these supplies and materials were not necessarily utilized and still
undistributed to the corresponding offices thus still included in the physical
inventory report as of December 31, 2017.The prevailing condition contributed to
the difference between the balance per books and inventory reports since it would
appear that inventory balances of subject goods are nil. Further, control over the
recording, monitoring and issuance of these goods has been ineffective while the
appropriate inventory and expense accounts were understated and overstated,
respectively, for the cost of unused supply.
80
This was relayed to Management through AOM No. 2018-020 (2017) dated April 6,
2018.
Management Comments:
The Office of the City Accountant has already provided the DGS with a partial listing
of the details/composition of the said inventory accounts in order for them to
reconcile with their records. The former has also coordinated with the latter to
expedite the submission of utilization reports especially of those inventories which
have been in the “beginning balance” of the accounting records.
In addition, the DGS, the Internal Audit Service Office and the Office of the City
Accountant came up with the following courses of action:
 Policy on procurement planning for inventory and expense supplies with
categorization, AO duties and responsibilities on inventory set-up, utilization
reporting and physical count, uniform guidelines for set-up of inventory and for
direct expenses of supplies and centralized delivery of supplies except for food
and medicine items will be set-up.
 A special operation team for reconciliation of Purchase Order and items under the
12%, utilization of deceased AOs for supplies inventory part of the 88%
beginning balance and submission of utilization reports by offices of respective
retired/resigned AOs will be mobilized.
We therefore reiterate the following prior year’s recommendation for

Management to:
 require the DGS/concerned offices to conduct the physical inventory of
supplies and materials in accordance with existing rules and regulations to
verify the accuracy of reported balances;
 Instruct the Accounting Section, in coordination with the concerned offices,to
review the transactions, reconcile and prepare the necessary adjusting
entries to reflect the correct account balances; and
 Direct the GSO, Supply Offices and Accounting to revisit the manual which
details the procedures in the monitoring, controlling and recording of
acquisition and disposal of inventories.
5. The validity of the account balance under the temporary SL of some special
account balances as of December 31, 2016 totaling ₱21,697,701.50 cannot be
established due to the absence of details and reference documents.
The Revised Chart of Accounts for LGUs took effect on January 1, 2015, consistent
with the adoption of the PPSAS in the LGUs. COA Circular No. 2015-009 dated
81
December 1, 2015 promulgates and prescribes the use of the Revised Chart of
Accounts for LGUs. To facilitate the submission of the Financial Statements as of
December 31, 2017 in compliance with the Revised Chart of Accounts, the City
Accounting Office has assigned a temporary SL to some special account balances as
of December 31, 2016 as presented below:
Description
General Fund Trust Fund
(as reflected in the SL)
Ending Balance, 12/31/2016 (GF-Abattoir) 82,353.59 -
Ending Balance, 12/31/2016 (GF-Hospital) 20,318,657.09 -
Ending Balance, 12/31/2016 (GF-LDF) 889,136.79 -
Ending Balance, 12/31/2016 (TF-Barrio Fund) - 407,554.03
Total 21,290,147.47 407,554.03
Perusal of the individual SL of these special accounts under its description only states
the following:
“Beginning Balances – To set up beginning balances (special account) as of

December 31, 2016.”
In view of this, the audit team cannot validate the existence of a valid obligation and
propriety of these temporary SLs due to the absence of the details and reference
documents pertaining thereto.
The SL as book of final entry shall contain the details or breakdown of the balances
of the controlling account appearing in the GL. Postings to the SL generally come
from the source documents. The totals of the SL balances shall be reconciled to their
respective control accounts at the end of every month. Other pertinent information,
among others, is required to be reflected in the SL such as the following:
 Name of the individual/company/agency and office address of debtor/creditor. In
case of an agency/company, include the contact person and telephone number/e-
mail address, etc.
 Reference document such as the Statement of Account/JEV/OR/DV Number, etc.
 Other information or details pertaining to the transaction.
20, 2018.
Management Comment:
All SLs have already been posted to its proper SLs.

We recommend that Management instruct the City Accounting Office to
immediately post to its specific SL the amount of ₱21,697,701.50 to validate the
existence of a valid obligation and propriety of the SL balances.
Due from Officers and Employees
82
6. The Due from Officers and Employees account had a substantial balance of
₱42,336,034.73 of which 98% pertains to shortages consisting of
₱41,447,335.01, the subject of criminal cases that had already been decided by
proper courts and ₱888,699.72 representing receivable from employees due to
overpayment of compensation, lost items and under-remittance of collection of
taxes contrary to Section 15 of the NGAS Manual for LGUs, Volume 1 and
Section 69 of PD1445.
Analysis of the Due from Officers and Employees account as of December 31, 2017
disclosed the following composition:
Beg. Bal. Debit to Account Credit to

Fund Nature (2016 and in 2017 Account in 2017 Balance
prior) (receivable) (payment)
Shortages 37,157,617.45 9,620,035.32 9,604,655.50 37,172,997.27
General Lost Items (156,971.88) - 5,500.00 (162,471.88)
Fund Without Pay 119,150.30 - - 119,150.30
Others 162,512.11 20,041.00 14,282.30 168,270.81
Shortages 2,716,229.38 - - 2,716,229.38
SEF
Others 8,583.22 - - 8,583.22
Trust Shortages 2,311,269.22 0.70 - 2,311,269.92
Fund Others 2,005.71 - - 2,005.71
Total 42,320,395.51 9,640,077.02 9,624,437.80 42,336,034.73
Based on the above summary, the bulk of the balance pertains to prior years’
receivables of which ₱41,447,335.01 or 98% pertains to the shortages incurred by the
City’s accountable officers (AOs) who have been criminally convicted. The
collection of the said amount remains uncertain.
On the other hand, the remaining receivable of ₱888,699.72 pertains to lost items,
overpayment of salaries and accumulated shortages of collectors. Only ₱15,639.22 of
this balance pertains to 2017 transactions, the remaining balances are those from prior
years which remained unsettled for one (1) to ten (10) years.
The continued inaction of concerned AOs to settle their shortages immediately and
the lack of extra effort by officials to recover the amounts due to the City had
deprived the Cebu City Government from the use of such funds for other priority
projects.
A related finding is relayed in the Annual Audit Report of the City for the CY 2015.
2018.
Management Comment:
For the transactions in 2017, Report of Cash Shortages per month and the Schedule of
Due from Officers as of December 31, 2017 were already transmitted to the City
Treasurer’s Office.
83
The ₱41,447,335.01 which is subject of a criminal case had been forwarded by the
Office of the City Accountant to the City Legal Office for the appropriate action. The
other cash shortages are subjected to on-going reconciliation and are included in the
reports transmitted to the City Treasurer’s Office.
The concerned AOs with lost items and overpayment of salaries were found active.
Management assured that demand letters will be sent to these AOs. On-going
reconciliation is being made to account those with negative balances.
We recommend the following to Management:

 require the collecting officers to check diligently the amount remitted on the
daily collections and the liquidating officers to review properly the
transactions to stop the incurrence of shortages;
 immediately demand the settlement of shortages and other accountabilities
from the concerned officials and employees; and
 direct the City’s Legal Office to institute legal proceedings against the
properties of the defaulting employees who have been criminally convicted in
order to facilitate recovery of the amount malversed.
7. The reported balances of the Due from Officers and Employees account of
₱42,336,034.73 are unreliable due to negative balances noted in its SL.
Various negative balances were noted upon in the amount of ₱301,847.56 upon
review of the schedule of the Due from Officers and Employees account extracted
from e-NGAS.Analysis of the SL disclosed that there were: (1) payments charged to
the account without the corresponding set-up, (2) differences between the amount
setup and the amount charged; thus the negative balance.
The various abnormal credit balances in SL cast doubt on the reliability of the
account; thereby, affecting the fairness of the presentation of the financial statements.
2018.
Management Comment:
On-going reconciliation is being made to SLs with negative balances. Taking into
consideration the recommendation of reclassifying negative balances to other income
accounts, Management manifested to know of the threshold amount that could be
reclassified to other income account.
Auditor’s Rejoinder:
84
The Commission has no guidelines on the matter. It is up to the Management to
establish a threshold amount that they could use when reclassifying negative balances
to an income account. However, we would like to remind Management to carefully
analyze first the SLs with negative balances before reclassifying the negative balance
to an income account.
We recommend that the OIC-City Accountant post to the specific SL the

amounts assigned with temporary SLs to validate the existence of a valid
receivable and propriety of the SL balance.We also recommend that she
carefully analyze the entries posted under the SLs and prepare the necessary
adjusting entries to correct its negative balance and identify the overpayments
for reclassification to the other income accounts.
Receivables
8. LGU-Cebu City granted ₱6.7 million cash advances to various accountable

officers (AOs) despite unliquidated cash advance(s) contrary to COA Circular
No. 97-002 dated February 10, 1997 and PD 1445 dated June 11, 1978.
A review of the aging schedule of unliquidated cash advances totaling ₱6,705,935.72

granted to various AOs as of November 15, 2017 (latest report submitted by the
Accounting Section) disclosed that officials and employees were still allowed to get
new cash advances even if the previous ones were not yet settled, as shown below:
Nature of Cash Type of

Name of AO Date Granted Amount
Advanced Fund
1. Amaya, Ma. Luisa 10/24/17 Travel General Fund 5,970.00
11/14/17 Travel General Fund 12,000.00
2. Bartolome, Flora Natividad 03/03/17 Special Purpose General Fund 338,000.00
09/27/17 Special Purpose General Fund 736,000.00
3. Calvo, Mario Dennis 10/11/17 Travel General Fund 7,525.72
4. Castañ ares, Eirah Faye Flores 10/12/17 Special Purpose General Fund 2,597,000.00
5. Golosino, Julius 01/17/17 POEF General Fund 750,000.00
6. Guanzon, Jofrey Roble 10/05/17 Travel General Fund 10,920.00
7. Maribojoc, Jessica 10/20/17 Travel General Fund 15,000.00
8. Reyes, Maria Kristina 04/06/17 Special Purpose General Fund 107,900.00
9. Tribunalo, Apple 06/19/17 POEF General Fund 50,000.00
TOTAL 6,705,935.72
85
The nine AOs were still granted cash advances despite having previous unliquidated
cash advances within the year. Of the ₱6,705,935.72, ₱1.891,315.72 or 28% pertains
to the first cash advance granted per AO while the remaining ₱4,814,620.00 or 72%
were for the succeeding cash advances that were still granted even though previous
obligations to liquidate the ₱1,891,315.72 were still not settled as a pre-requisite for
granting further cash advances. The situation presents that Management has relaxed
internal control over the granting of cash advances contrary to Section 123 and 124 of
PD 1445.
The accumulation of the accountableofficers’ unliquidated cash advances exposed

government funds to risk of loss and misappropriation, if left uncheck.
Moreso, the failure to fully liquidate cash advances in accordance with the prescribed
rules and regulations resulted in the understatement of affected expense accounts and
the overstatement of asset accounts contrary to Section 111.2 of PD 1445: “Keeping
of accounts.The highest standards of honesty, objectivity and consistency shall be
observed in the keeping of accounts to safeguard against inaccurate or misleading
information.”
26, 2018.
Management Comment:
The cited officials and employees were still granted new cash advances since their
previous cash advances were either not yet due for liquidation or a proper accounting
or liquidation has been submitted for such.
We recommend that Management instruct the concerned accountable officers to

immediately settle their outstanding cash advances pursuant to COA Circular
No. 97-002 and to stop the practice of granting additional cash advances unless
previous ones are fully liquidated. Further, we recommend that the Local Chief
Executive and the City Accountant consider imposing the sanctions prescribed
in Section 5.1.3 of COA Circular No. 97-002 on the withholding of the salary of
the AOs.
9. The existence and reliability of Accounts Receivable totaling ₱2.7 million,

initially recorded as “for identification” in the e-NGAS SL as part of Current
Assets could not be established due to lack of details and non-reclassification of
these balances to their appropriate SL accounts in the absence of supporting
details.
86
In the implementation of the e-NGAS in February 2006, the City Accounting
Department set up the beginning balances of such account under JEV Nos. 2006-02-
000001, 2006-02-000001 and 2006-02-000002 for General Fund, SEF and Trust
Fund, respectively.
A review was done on the posting of such amounts to its appropriate GLs and
subsidiary ledgers (SLs). The review showed that these were posted correctly to the
GLs, however in the review of posting to the SLs, we noted that the concerned
amounts, in each fund, were recorded in the SL in a single consolidated account
named “For Identification”, therefore were not classified as to its proper
composition/payee concerned.
The existence and reliability of this account could not be established due to the
inability of the Accounting Section to provide the details to substantiate them as
required in Volume II of the NGAS Manual. Under Section 10 thereof, “The
Subsidiary Ledger (Annex 6) is a book of final entry containing the details or
breakdown of the balances of the controlling account appearing in the General
ledger. Postings to the subsidiary ledgers generally come from the source
documents. Examples of general ledger accounts which has subsidiary ledgers are
Cash – Disbursing Officers, Cash in Bank – Local Currency Current Accounts,
Accounts Receivable, Accounts Payable, Special Accounts in the General Fund, etc.
The totals of the subsidiary ledger balances shall be reconciled to their respective
control account at the end of every month.”
Also, comparison of beginning balances as of CY 2006 with “For Identification”

against account balances as of December 31, 2017 showed the following:
Accounts Receivable Account Ending Balance

Type Of Fund
Year
General Fund SEF Trust Fund Total
2006 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2007 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2008 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2009 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2010 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2011 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2012 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2013 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2014 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2015 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2016 1,487,738.93 746,996.99 511,028.00 2,745,763.92
2017 1,487,738.93 746,996.99 511,028.00 2,745,763.92
As shown in the above table, total receivable in the amount of ₱2,745,763.92

remained dormant from 2006 to 2017 or for more than 10 years, and showed no
movement at all. As defined under Section 21 of NGAS Manual for LGUs Volume
III,“Accounts Receivable. This account is used to record the amount due from
customers/clients resulting from services rendered, trading/business transactions or
87
sale of merchandise or property which are expected to be collected in the regular
course of business or over a definite period.”
In view of the impact of the beginning balances “For Identification” to the balance
of accounts as of December 31, 2017, a detailed reconciliation of accounts is to be
considered to be able to present fair and reliable Receivable account balances of the
Cebu City Government.
26, 2018.
Management Comment:
This pertains to dishonored checks set-up in February 2006 upon implementation of

the e-NGAS. Due to the lack of documentation prior to the said implementation, the
total amount was lumped into one SL with For Identification as its description. This
was also included in our Petition for Write-off in 2015.
We recommend that Management provide immediately the composition of the

consolidated SLs with markings “For Identification”, reclassify these
Receivable to its appropriate account(s) and prepare the necessary working
papers to validate the reliability and existence of the Receivable account
balances.
10. Cash advances totaling ₱3.1 million granted to various AOs in the SEF and
Trust Fund were still unliquidated as of December 31, 2017 contrary to COA
Circular No. 97-002 dated February 10, 1997 thus, resulting in the non-
recognition of these expenses in the period it was incurred and exposure of the
funds to possible loss and/or misappropriation in the hands of the AO.
A review of the SLs for cash advances granted to various AOs as of December 31,
2017 for SEF and Trust Fund disclosed an unliquidated balance of ₱3,146,593.77,
broken down as follows:
Account Name SEF Trust Fund Total

Advances to Officers and Employees 173,089.38 65,557.00 238,646.38
Advances to Special Disbursing Officers 590,411.17 2,317,536.22 2,907,947.39
Total 763,500.55 2,383,093.22 3,146,593.77
The ₱3,146,593.77 balance was net of the ₱12,735.32 negative balances of the
various AOs, thus, the actual unliquidated cash advances of AOs for both funds as of
December 31, 2017 is ₱3,159,329.09.
Further, review of the schedule also disclosed that ₱2,646,752.92or 84% of the
unliquidated cash advances have been outstanding for over a year. These were still
88
unliquidated even if the purpose for which these were granted have already been
served.
Aging Of Outstanding Cash Advances As Of December 31, 2017

Fund Less than Over 1 to Over 5 to Over Total
a Year 5 Years 10 Years 10 Years
SEF - 151,639.38 92,740.86 519,120.31 763,500.55
Trust Fund 499,840.85 801,648.52 326,174.27 755,429.58 2,383,093.22
Total 499,840.85 953,287.90 418,915.13 1,274,549.89 3,146,593.77
The failure to fully liquidate cash advances in accordance with the prescribed rules
and regulations resulted in the understatement of the affected expenses accounts and
the overstatement of asset accounts.
26, 2018.

 instruct the concerned AOs to immediately settle all their outstanding cash
advances pursuant to COA Circular No. 97-002;
 analyze the entries made on the accounts affected and prepare the necessary
adjusting entries to correct the abnormal account balances; and
 cause the withholding of the AOs salaries in accordance with paragraph 5.1.3
of the mentioned Circular.
Property, Plant and Equipment (PPE)
11. Disposal of unserviceable properties totaling ₱8,523,197.90 has not yet been
undertaken, thereby depriving the government of miscellaneous income that
could have been realized from the sale of these assets and may lead to further
deterioration of these properties.
The submitted Report on the Physical Count of PPE (RPCPPE) as of December

31, 2017 showed that there were unserviceable properties with acquisition costs
totaling ₱8,523,197.90, as summarized below:
Account Amount
Furniture & Fixtures 133,775.00
Information and Communication Technology Equipment 1,394,988.00
Office Equipment 915,615.00
Agricultural and Forestry Equipment 2,767,518.00
Communication Equipment 892,988.40
Disaster Response and Rescue Equipment 153,935.00
Medical Equipment 670,875.00
Medical Equipment 210,000.00
Sports Equipment 44,250.00
Other Machineries and Equipment 555,250.00
Other Transportation Equipment 39,706.00
89
Account Amount
Other Property, Plant and Equipment 744,297.50
Total 8,523,197.90
Three hundred seventeen (317) units of the above properties totaling ₱8,523,197.90
were already reported as unserviceable in the Agency’s RPCPPE as of December 31,
2017.
The delayed or non-disposal of these unserviceable properties resulted to its further

deterioration and reduction of its saleable value to the disadvantage of the
government.
28, 2018.
Management Comment:
The DGS was able to dispose these unserviceable properties as evidenced by Awards
Resolution No. 2017-13 and Notice of Award duly signed by the City Mayor.
We validated the supporting Inventory and Inspection Report of Unserviceable

Property as of May 30, 2017 submitted by the DGS and noted that only the portable
grinder with property number 123-0094 (1 out of the 317 unserviceable properties)
was included in the disposal.
We recommend that Management take immediate action on the

divestment/disposal of unserviceable properties pursuant to Section 79 of PD
1445 to avoid further deterioration and to generate additional income from their
disposal.
12. Accumulated depreciation for sampled properties (Building, Motor Vehicles,

Construction and Heavy Equipment and Office Equipment) amounting to
₱23,908,735.85 are understated by a month’s depreciation since initial
recognition of depreciation was first recorded after the second month only.
For the sampled items listed below, depreciation only started on the second month
thus understating the accumulated depreciation for the whole year by a month as a
result.
Date of Date of Date of Initial

Account Account No. Acquisiti Recording Recognition of Remarks
on in the Journal Depreciation
Building 10704010-003- 04/18/17 04/18/17 06/30/17 No Depreciation
2015-02-02-B0 for the month of
May
90
Date of Date of Date of Initial
Account Account No. Acquisiti Recording Recognition of Remarks
on in the Journal Depreciation
2016-05-52- for the month of
9A0-B May
2016-04-07-A7 for the month of
May
Motor Vehicles 10706010-001- 07/20/17 03/21/17 09/30/17 No Depreciation
4-0504818 for the month of
August
August
October
Construction 10705080-003- 07/21/17 06/14/17 09/30/17 No Depreciation
and Heavy 6080276 for the month of
Equipment August
Office 10705020-001- 07/20/17 02/23/17 09/30/17 No Depreciation
Equipment 4-2-6080005 for the month of
August
Office 10705020-001- 03/31/17 03/07/17 05/31/17 No Depreciation
Equipment 4-2-0444397 for the month of
April
Moreover, per interview with personnel responsible to PPE in the Accounting

Section, depreciation starts from the date of entry of the property in the journal and
not from the date the property was acquired. However, further investigation diclosed
that even the date of entry in the journal is sometimes ahead or late as compared to
when the item was acquired, as shown in items 4,5, 7, 8 and 9. Also, they only input
the necessary details regarding the PPE in the PPSAS and the former automatically
calculates the depreciation.
Data listed above was taken from PPSAS (PPE list and PPE Ledger Card).
28, 2018.
We recommend that Management direct the Accounting Section to review the

depreciation calculated for each PPE account in the PPSAS to further check the
accuracy.
13. The existence, valuation and accuracy of the balance of PPE totaling
₱10,357,729,495.13 remained uncertain due to a) Unreconciled difference of
₱840,268,196.84 between accounting and property records; b) Unaccounted
properties included in the RPCPPE; c) Motor vehicles not included in the
RPCPPE and not recorded in accounting; d) Duplicate items in the RPCCPE.
91
The reliability of the PPE account balances totaling ₱10,357,729,495.13 could not be
ascertained due to various significant deficiencies noted in the analysis of these
accounts as follows:
a. Unreconciled differences between the books and the RPCPPE submitted by

GSO
Audit disclosed that the balances of PPE accounts totaling ₱10,357,729,495.13 as

of December 31, 2017 pre-closing did not reconcile with the total balance
appearing in the physical inventory report on PPE in the total amount of
₱9,517,461,298.29, or a difference of ₱840,268,196.84:
Amount as per
PPE inventory Difference (FS
Balance as of
PPE report from GSO 2017 vs GSO
December 31, 2017
as of December PPE Report)
31, 2017
Land 5,782,039,582.61 5,782,039,582.61 -
Other Land Improvements 64,959,435.43 56,407,455.47 8,551,979.96
Buildings 1,075,484,840.71 957,764,464.69 117,720,376.02
School Buildings 477,791,977.81 439,011,052.99 38,780,924.82
Hospitals and Health Centers 31,773,968.16 31,773,968.16 -
Markets 198,684,249.00 201,418,891.07 (2,734,642.07)
Slaughterhouses 4,736,469.64 2,170,785.77 2,565,683.87
Other Structures 88,244,760.20 56,208,225.84 32,036,534.36
Machinery 7,017,350.08 - 7,017,350.08
Office Equipment 293,635,931.64 82,254,593.94 211,381,337.70
Information and Communication 247,750,157.88 215,816,124.42 31,934,033.46
Technology Equipment
Agricultural and Forestry Equipment 18,916,303.50 19,075,698.50 (159,395.00)
Communication Equipment 44,106,043.31 31,821,251.62 12,284,791.69
Construction and Heavy Equipment 211,075,892.59 114,837,214.00 96,238,678.59
Disaster Response and Rescue 231,102,050.51 170,952,420.25 60,149,630.26
Equipment
Military, Police and Security 7,512,207.42 7,512,207.42 -
Equipment
Medical Equipment 99,902,687.90 90,508,793.50 9,393,894.40
Sports Equipment 15,641,288.00 15,012,220.00 629,068.00
Technical and Scientific Equipment 88,728,927.84 9,440,227.50 79,288,700.34
Other Machinery and Equipment 53,150,198.20 44,161,937.09 8,988,261.11
Motor Vehicles 1,074,277,694.22 1,074,278,707.90 (1,013.68)
Watercrafts 4,261,885.00 2,352,200.00 1,909,685.00
Other Transportation Equipment 6,243,205.50 6,243,205.50 -
Furniture and Fixtures 75,708,746.78 44,146,416.21 31,562,330.57
Books 10,660,885.05 1,824,197.00 8,836,688.05
Leased Assets Improvements, 1,624,420.80 1,624,420.80 -
Buildings
Work/Zoo Animals 94,800.00 - 94,800.00
Other Property, Plant and Equipment 142,603,535.35 58,805,036.04 83,798,499.31
Land Improvements, Aquaculture - - -
Structures
Total 10,357,729,495.13 9,517,461,298.29 840,268,196.84
92
The RPCPPE submitted were the reconciled assets itemized in the books.
Significant parts of the difference were the unsubstantiated beginning balances of
PPE accounts totaling ₱7,622,555,409.96.
Moreover, there is one account whereby difference will close out if the CY 2006
beginning balance will be ignored.
Beginning Per Books less

Per Books Per Inventory Differen
PPE Balance - Beginning Balance -
(2017) Report (2017) ce
2006 2006
Sports
Equipment 15,641,288.00 629,068.00 15,012,220.00 15,012,220.00 0.00
b. Unaccounted properties included in the RPCPPE are still subject for

reconciliation and verification. Others were marked as “not reported” by the
office concerned or “not found”.
RPCPPE submitted as of December 31, 2017 could not be relied upon since a
total of 6,968 properties included therein totaling ₱152,478,479.08 were noted as
for reconciliation, verification, and not found.
Account No. Of Items Total

IT Equipment and Software 641 39,245,189.68
Furniture & Fixtures 1185 6,312,831.79
Office Equipment 839 17,051,859.61
Motor Vehicles 6 2,308,999.00
Agricultural, Fishery and Forestry Equipment 33 777,923.00
Communication Equipment 606 10,616,183.67
Construction and Heavy Equipment 9 17,828,600.00
Firefighting Equipment 1403 3,940,090.00
Hospital Equipment 611 3,285,511.00
Medical, Dental and laboratory Equipment 36 13,408,661.50
Sports Equipment 152 4,690,052.00
Technical and Scientific Equipment 60 1,194,467.00
Other Machineries and Equipment 209 6,517,821.72
Watercrafts 9 740,200.00
Other Transportation Equipment 114 2,639,644.00
Other Property, Plant and Equipment 1055 21,920,445.11
Total 6968 152,478,479.08
Not knowing the correct status makes no assurance that all properties recorded in
the books are still existing and serviceable and that properties existing are duly
recorded in the books, thus, increasing the risk of loss of these properties.
c. Six (6) City owned buses were not included in the RPCPPE as of December
31, 2017 and cannot be located in the books under the Motor Vehicle
account, (PPE list – PPSAS).
Description Plate No. Property No. Accounting PPE Inventory Report

Bus SJW136 033-1806 Doesn't Exist Doesn't Exist
93
Description Plate No. Property No. Accounting PPE Inventory Report
Bus SDC940 033-1419 Doesn't Exist Doesn't Exist
Bus SHU151 033-1775 Doesn't Exist Doesn't Exist
Bus SKC582 033-1792 Doesn't Exist Doesn't Exist
Verification disclosed that there were six buses that were not included in the
RPCPPE as of December 31, 2017 and also cannot be located in the books
(PPSAS) even though they have their property numbers from the GSO.
d. Duplicate items under Motor Vehicles account in the RPCPPE as of

December 31, 2017
Date
Property Artic Plate Unit
No. Description Acquire Storage
No. le No. Value
d
10 202-0048 Buses Canter - Mini-Bus 32-Seater SHX1 04/05/1 1,200,000. Serviceabl
Chass# Fe648e-531261 Eng# 4d35- 68 3 00 e
G22741
77 202-0048 Buses Fuso Canter 32 Seater Service Bus, SHX1 09/01/1 1,200,000. Serviceabl
Chassis # Fe648e-531261, Engine # 68 3 00 e
4d35-G22741
Two buses with the same property number and plate number were recorded in the
list of Motor Vehicles and were included in the RPCPPEas of December 31,
2017, thus overstating the PPE account by ₱1,200,000.00 and affecting the
accuracy of the said report.
28, 2018.
Management Comment:
The difference is down to 8% from 33% as cited previously under AOM No. 2016-
022 (2015). On-going efforts are being exerted by the DGS and the Office of the City
Accountant to reconcile both records.

 direct the Accountant and the GSO to reconcile the remaining difference of
₱840,268,196.84 and effect the necessary adjustments to present the correct
financial position of the agency.
 instruct the GSO to further investigate and report the correct status of those
items listed and remarked as for reconciliation, for verification, lost and not
reported by office concerned.
 direct the GSO and Accounting Section to further reconcile those buses that
were not yet recorded in the books and in the Annual PPE Inventory Report.
 review the RPCPPE as of December 31, 2017 and delete those duplicate
items.
94
14. The Transfer Certificate of Title (TCT) of one lot acquired by Cebu City
Government in the year 2017 in the amount of ₱753,300.00 with land area of
186 square meters is not yet with the GSO, contrary to Section 39(2) of PD 1445
thereby rendering ownership thereto uncertain and exposing the City
Government to risk of third party claims and illegal dispositions.
Review of the Annual Inventory Reports of lots owned by the Cebu City Government
as of December 31, 2017 disclosed that the City purchased road lots intended for
public purpose per Psd 07-100326 portion of lot MSI-V-45827 (E-V-109360) with an
area of 186 square meters located at Barangay Tejero in the amount of ₱753,300.00,
as shown below:
Accounti
Accounting Lot Land Locatio
No. Accounting Record ng TCT No.
Record No. Area n
Record
170 001-0004- Lots Intended For Public Purpose - 753,300.0 107- Lot 2 186 Tejero
0001-107- Road Lots - Lot # 2 Psd 07-100326 0 2017002000 (Road)
2017002000 Portion Of Lot Msi-V-45827(E-V-
109360) 186 Sq. M. Located At
BrgyVillagonzalo Ii
Verification with the GSO revealed that they still do not have a copy of the TCT of
the land. Althoughthe City’sRPCPPE as of December 31, 2017, showed TCT
Number 107-2017002000 for the said property.
Inquiry with the City Assessor’s office disclosed that they could not verify if indeed
the said TCT exist since there was no information regarding the tax declaration for
the said land.
A land title is the evidence of the right of the owner or the extent of his/her interest,
and by which means he/she can maintain control and as a rule, assert right to
exclusive possession and enjoyment of the property (Peña, Registration of Land Titles
and Deeds, Revised Edition, 1988). In the case of Cebu City, ownership of the land
could not be ascertained due to the absence of title. In addition, third parties may
claim ownership of the property which may adversely affect the delivery of services
of the City and the welfare of its constituents.
28, 2018.
Management Comment:
The DGS was able to secure the title of the cited lot (TCT No. 107-2017002000).
95
We recommend that Management direct the GSO to secure the title and provide
copies of it to concerned offices for recording and thereby establish the
ownership of the lot in order to protect the interest of the City Government.
15. Line materials, labor, transformer and bill deposits totaling ₱967,562.49 were
booked under Other Receivables (10306990) or Electricity Expenses (50204020)
accounts instead of Guaranty Deposits (10205020) account.
Post-audit of transactions charged under SEF disclosed that the City paid a total
amount of ₱967,562.49 for line materials, labor, transformer and bill deposits for the
electrical upgrade of selected schools as of November 30, 2017 (latest transactions
booked), as shown below:
Check Charged
School JEV No. Particulars Amount
Date No. Under
Talamban National High 04/21/1 106302 2017-04- Line materials, 489,922. Other
School 7 7 000346 labor & 17 Receivables
transformer
deposit
Guadalupe Elementary 08/29/1 106309 2017-08- Bill deposit 71,08 Electricity
School 7 6 000598 1.97 Expense
Tisa I National High 09/14/1 342510 2017-09- Bill deposit 38,808. Other
School 7 000647 00 Receivables
Babag Elementary 10/19/1 106312 2017-10- Bill deposit 48,960. Other
School 7 0 000668 00 Receivables
San Nicolas Elementary 10/19/1 106312 2017-10- Bill deposit 44,945. Other
Apas National High 10/20/1 106312 2017-10- Bill deposit 37,546. Other
Don Carlos Gothong 05/19/1 106305 2017-10- Bill deposit 90,336 Other
Memorial National High 7 2 000672 .71 Receivables
School
Sudlon II Integrated 09/28/1 342512 2017-10- Bill deposit 43,788.6 Other
School 7 000674 0* Receivables
Sudlon II Integrated 11/21/1 342516 2017-11- Bill deposit 43,788. Other
School 7 000700 60 Receivables
Sudlon II Integrated 11/27/1 342517 2017-11- Bill deposit 58,384. Other
School (high school) 7 000702 80 Receivables
Total 967,562.
49
* Overpayment of bill deposit; already refunded by CEBECO III in December 2017
As seen on the above table, these deposits, which per sampled Metered Service
Contract were required from each consumer to guarantee the payment of bills, were
either booked under “Other Receivables” or “Electricity Expenses” accounts instead
of “Guaranty Deposits” account pursuant to COA Circular No. 2015-009.
The above deficiency resulted in the overstatement of Other Receivables and

Electricity Expenses by ₱896,480.52 and ₱71,081.97, respectively, and
understatement of the Guaranty Deposits account by ₱967,562.49.
A similar finding was already cited in our Annual Audit Report for CY 2015.
96
In addition, the following payments of bill deposits were not supported with complete
documentation contrary to Section 4(6) of PD No. 1445, as follows:
Check
Particulars Amount Not Supported With
Date No.
08/29/17 1063096 Bill deposit 71,081.97 Letter from VECO informing the need to pay the bill
deposit and metered service contract
09/14/17 342510 Bill deposit 38,808.00 Metered service contract
10/19/17 1063121 Bill deposit 44,945.20 Letter from VECO informing the need to pay the bill
deposit
05/19/17 1063052 Bill deposit 90,336.71 Metered service contract
PD 1445 requires that “claims against government funds shall be supported with
complete documentation.”
23, 2018.
We reiterate our recommendation that the Local Chief Executive require the
City Accountant to observe strictly proper classification of transactions
pursuant to COA Circular No. 2015-009. We further recommend that
Management refrain from approving disbursements unless all the documentary
requirements are attached to the claim. We also request for the immediate
submission of the required supporting documents.
Bottom-up Budgeting (BuB)/ Grassroots Participatory Budgeting Programs

(GPBP)
16. Ten (10) projects amounting to ₱60,555,920.00 which were funded by

BuB/GPBP from 2015 to 2016 by various National Government Agencies
(NGAs) and the Cebu City Government, have not been implemented or
completed as of December 31, 2017, thereby delaying the timely delivery of
services to the constituents.
Data extracted from the report provided by the Cebu City Planning and Development
Office (CPDO) and inquiry with the Department of Engineering and Public Works
(DEPW) on the implementation of BUB/GPBP Projects as of December 31, 2017
disclosed that the followingprojects that were funded from various NGAs and the
City Government from CY 2015 to 2016 have not been completed or implemented:
Source Total
Name of Project Year Status Remarks
of Fund Project Cost
1 Core Local Road 2016 LGSF- 7,000,000 not yet started bidding scheduled last
Roads .00 11/21/17 and lowest
bidder's documents are
subject for evaluation
2 Construction of Evacuation 2016 LGU-Cebu 5,000,000 not yet started no site identified
Center with Kitchen and City .00
Comfort Rooms at Adlaon
3 Construction/Renovation of 2016 LGU-Cebu 15,000,000. not yet started awaiting resolution from
Cebu City Health Building City 00 CPDO in identifying the
97
Source Total
Name of Project Year Status Remarks
of Fund Project Cost
health centers covered by
the project
4 Establishing a Stimulation 2015 DSWD 1,800,000 ongoing waiting for legal action for
Therapeutic/Rehabilitation .00 the affected family of the
for PWDs; Sheltered project area
Workshop-Integration of
PWDs Livelihood (to cater
crutches, cane, wheelchair
repair, and prosthetic making
and repair); Capability
Training as Trainers for
PWDs (assigned for
Rehabilitation and Production
of needed equipment)
5 Purchase of Welding 2015 DSWD 2,000,000 ongoing to be purchased once
Machine Equipment, Cutting .00 livelihood center is
Equipment/Industrial constructed
6 Sustainable Livelihood 2015 DSWD 4,000,000 ongoing water pump and tilapia
Program for SCs-upland Fish .00 feeds recanvass due to
Culture above ABC
7 Patubig to MouintainSitios 2016 DILG 1,000,000 ongoing ending project
.00 implementation (water
pump testing )at the
DEPW
8 Flood Control Projects of 2015 DILG 5,600,000 ongoing revised POWE is being
SitioMahayahay, Brgy. Apas .00 prepared by DEPW
9 Health Facility Enhancement 2015 LGU-Cebu 13,500,000. not yet started bidding already done for
City 00 some projects
10 Road Concreting (network of 2015 LGU-Cebu 5,655,920.0 not yet started project site is still for
roads in upland barangays City 0 verification
Total 60,555,920.0
0
The delay in the completion/implementation of the above-stated projects deprived the

intended beneficiaries of the benefits that could have been derived therefrom.
This was relayed to Management through AOM No. 2018-009 (2015-2016) dated
February 22, 2018.
Management Comment:
The Office of the City Engineer submitted a report on the different projects
enumerating therein the source of funds, total project cost, status, remarks and the
management action thru the implementing agency.
We recommend that Management instruct the heads of implementing offices to

expedite the implementation of BuB projects to provide the expected benefits to
the intended beneficiaries on time and to act promptly on documents and
settlement of issues/constraints causing the delay of the implementation of the
BuB projects.
Local Disaster Risk Reduction and Management Fund (LDRRMF)
98
17. The City has made a partial transfer of ₱33,172,882.35 to the Trust Fund bank
account which is equivalent to only 14% of the ₱232,337,225.47 that
correspond to the total year-end unexpended/unobligated appropriation of
LDRRMF from CYs 2015 to 2017, except those for capital outlay, contrary to
COA Circular No. 2012-002 dated September 12, 2012.
The audit team issued AOM No. 2017-007(2016) dated February 1, 2017 which deals
on the non-transfer of the amount of ₱113,839,003.47 to the Trust Fund bank account
which correspond to the total unexpended/unobligated LDRRM appropriation for
2015 and 2016 (except for capital outlay).
COA Circular No. 2012-002 dated September 12, 2012 requires that transfer of
unexpended LDRRMF (MOOE) at the end of the year to the Trust Fund Bank
account should be in cash.
For CY 2017, based on the data submitted by the City Accounting Office, the City
has only transferred the amount of ₱33,172,882.35 to the Trust Fund bank account
which is only 14% of ₱232,337,225.47, thus, leaving a balance of ₱199,164,343.12.
Table below shows the data provided by the City Accounting Office.
Year-end Amount Transferred to Balance for Transfer to Trust

Year
Unexpended Balance Trust Fund Bank Account Fund Bank Account
2015 66,172,882.35 23,172,882.35 43,000,000.00
2016 47,666,121.12 10,000,000.00 37,666,121.12
2017 118,498,222.00 - 118,498,222.00
Total 232,337,225.47 33,172,882.35 199,164,343.12
COA Circular No. 2012-002 also provides the following provisions:

4.3 The unexpended LDRRMF shall accrue to a special trust fund solely for the
purpose of supporting disaster risk reduction and management activities of the
Local Disaster Risk Reduction Management Council (LDRRMC) within the
next five (5) years. The LDRRMCs shall decide on the use of the unexpended
balance of the LDRRMF which shall be incorporated in the Local Disaster
Risk Reduction Management Fund Investment Plan (LDRRMFIP).
5.1.10 All unexpended/unobligated balance of the Quick Response Funds (QRF) and
the Disaster Risk Reduction and Management Fund (DRRMF)-MOOE shall
be transferred to the Special Trust Fund under the account “Trust Liability-
DRRM” (Code 438) in the Trust Fund books.
5.1.11 All unexpended/unobligated balance of the LDRRMF for Capital Outlay shall
be made continuing in the General Fund books until the projects funded
therefore are completed and any savings shall be available for use in the
disaster risk reduction and management activities as provided in the
LDRRMFIP.
5.1.12 The account Trust Liability-DRRM in the Trust Fund books shall be used to
record transfers of the agency’s unutilized QRF and the DRRMF-MOOE of
the previous years, receipts of National Disaster Risk Reduction and
Management Fund (NDRRMF), DRRMF from other LGUs and other sources.
99
SLs shall be maintained for transfers of agency’s unutilized DRRMF to the
special trust fund by year of transfer, receipts of NDRRMF by transferring
agency, DRRMF from other LGUs by LGU and other sources by donor.
For CY 2015, the audit team issued AOM No. 2016-044(2015) which mentioned that
LGU-Cebu City has outstanding current and prior years’ obligations, remittances and
other trust liabilities of ₱10,608,766,353.47 as at year-end, ₱6,216,065,202.27 of
which is not backed up with available cash.
19, 2018.
Management Comment:
We are hoping that the following explanations are given favorable considerations:
 The annual target of collections were not met (please see table below).
Estimated Actual Net 5% LDRRMF
CY
Revenue Revenue Income Per Budget
2017 7,017,566,199.00 5,586,466,921.77 4,914,336,093.06 350,878,309.95
2016 6,000,380,642.00 8,133,402,047.62 4,778,173,421.62 761,286,232.15
2015 13,397,367,359.00 13,170,494,105.15 6,006,979,917.15 249,453,285.95
 Partial transfer as to the disbursement needed was made.
 The total amount of ₱29,164,343.12 as partial transfer is on process (please see
breakdown below).
3,000,000.00 4th partial transfer for 2015
7,666,121.12 2nd partial transfer for 2016
18,498,222.00 1st partial transfer for 2017
 Sufficient cash has been monitored for payment of all approved vouchers charged
to Trust Fund LDRRMF for years 2015 to 2017.
 Steps are taken as to the immediate transfer of the remaining balance to Trust
Fund LDRRMF account.
 Transfer of the 5% LDRRMF depends on cash availability of the actual
collections so that other priority project will not suffer.
We recommend that Management immediately transfer the total amount of

₱199,164,343.12 to the Trust Fund Bank account and submit an explanation
thereto.We also recommend that henceforth at the end of the year, Management
transfer to the Trust Fund bank account the amount corresponding to the
unutilized appropriation, except those for capital outlay, of the LDRRMF.
18. The LDRRMFIP of LGU-Cebu City did not include the list of projects and
activities charged to the unexpended/unutilized LDRRMF from CYs 2012 to
2016 of the Special Trust Fund totaling ₱371,419,954.04 contrary to COA
Circular No. 2012-002.
100
Perusal of the LDRRMFIP of LGU Cebu City shows the Program/Project/Activity
Description of the appropriation for CY 2017 only with a total of ₱350,878,309.95.
No list of projects and activitiesare incorporated for the use of the unexpended
balance of the LDRRMF in the preceding years, that is from CYs 2012 to 2016
amounting to ₱371,419,954.04. However, out of the ₱371,419,954.04 unexpended
balance, ₱257,580,950.57 of which are transferred to the Trust Fund bank account,
₱80,666,121.12 remained as payables of the General Fund to the Trust Fund account.
21, 2018.
We request Management to explain the non-inclusion to the LDRRMFIP of the

unexpended balance of the LDRRMF in the preceding years amounting to
₱371,419,954.04.We also recommend that henceforth, the LDRRMC shall decide
on the use of the unexpended balance of the LDRRMF which shall be
incorporated in the LDRRMFIP.
19. LGU-Cebu City still did not establish/create the four (4) statutory DRRM
positions for the Cebu City Disaster Risk Reduction and Management Office,
thus, may hinder the continuity of service and sustainability of the
programs/activities in the said office.
Perusal of the Personnel Schedule of the City for CY 2017 showed that the City still
did not create at least four (4) statutory DRRM positions as mandated under the
above-mentioned circular. We have previously issued AOM No. 2016-003(2016)
dated November 10, 2016 dealing on the creation of the four (4) mandatory positions
required under JMC No. 2014-1 dated April 4, 2014 for the Cebu City Disaster Risk
Reduction and Management Office.
However, Management designated only one OIC-CDRRM officer, with additional

tasks as Public Information Officer, Manager of South Road Properties and Protocol
Officer and assigned three (3) Mayor Management Team members to help run the
office of the Cebu City Disaster risk Reduction Management Office. Also, one (1)
regular employee from MICS was borrowed as Chief of Operation and another casual
of Cebu City Medical Center as head of ambulance services. The rest of the team
members are Job Order personnel. The existence of the office is just temporary.
Management on the other hand, has allocated the amount of ₱1,007,063.00 for
Personal Services for LDRRMF from August to December 2017 under Ordinance No.
2482 authorizing Supplemental Budget No. 1 series of 2017 for the General Fund
Proper.
The City has submitted the Disaster Risk Reduction Management Plan for 2018. The
plan states its situational analysis (Strength, Weaknesses, Opportunities and
Concerns/Challenges for two of the four thematic areas) to address the predicament of
101
the designated officer and staff of the existing Cebu City Risk Reduction and
Management Office as presented below:
Thematic Areas Weaknesses Concerns/Challenges

Disaster Prevention Non-institutionalization of the City The absence of permanent CDRRM
& Mitigation Disaster Risk Reduction Management office is a threat to the continuity of
Office is hindering the permanency and the disaster prevention efforts of the
sustainability of all the office programs city
Fast turn-over of human resources for It also hampers the effective
CDRRMO staff and responders are all implementation of the national and
Job Order personnel. Most personnel local initiatives
would resign after several months of
service to seek greener pasture abroad
Disaster It gives no direction of the office. Office The interim nature of the office is a
Preparedness is always short of everything due to lack big challenge for those assigned with
of permanent personnel the DRRMO. Sometimes, work are
not done or finished due to the
nature of job that is dealing with
emergencies
No permanent office for DRRMO. It is a big challenge for the DRRMO to
Everything is ad interim in nature, no convince the city policy makers to
permanency and accountability enact an ordinance creating the office.
No permanent depository of data for all Some programs especially on
hazard and risk data and other related technical matters like early warning
information related to disaster could not be implemented for lack of
management) competent staff.
DRRM needs permanent personnel that
implement the disaster preparedness
plans and activities. The five (5) office
staff is not sufficient to perform the vast
field of disaster management
28, 2018.
Management Comment:
The following four (4) statutory DRRM positions for the Cebu City Disaster Risk
Reduction and Management Office has already been created, funded and included in
the 2018 Personnel Schedule: 1 LDRRMO IV, 1 LDRRMO III, 1 LDRRMO II, 1
LDRRMO I and 1 LDRRMA.
Also, the above-mentioned vacant positions were already published in the Civil
Service Commission (CSC) and the process for hiring is currently undertaken.
Furthermore, the filling-up of the said vacant positions will be completed and the
appointment be issued after the election ban on May 13, 2018.
102
We recommend that Management create the four (4) mandatory DRRM
positions and fill-up the positions as mandated in JMC No.2014-1 of the National
Disaster Risk Reduction and Management Council, DILG, DBM and CSC dated
April 4, 2014.
20% Development Fund
20. Out of the identified 26 development projects for 2017 with a total cost of
₱557,831,071.13, only one (1) project with contract cost of ₱1,851,779.00 or
0.332% was implemented thus, depriving the City populace of a timely and
maximum use of the projects.
The Annual Budget of the City for CY 2017 includes appropriation amounting to
₱557,831,071.13 under the 20% Development Fund (Code 9999) and Local
Development Fund (LDF) charged to General Fund purportedly for the
implementation of twenty six (26) infrastructure projects.
Review of the Status of Project Implementation for CY 2017 prepared by the

Division Head, Planning and Programs Division of the City Engineer’s Office
disclosed that out of the 26 projects included in the Annual Investment Program
(AIP) for 2017 with an approved appropriation of ₱557,831,071.13, only one project
(Construction of 36” diameter reinforcement concrete pipe culvert-Alley 3, Borbajo
St.)with a contract cost of ₱1,851,779.00 or 0.3333% was implemented.
Details of the unimplemented projects and the reasons for the non-implementation of
the remaining twenty five (25) projects with a total project cost of ₱555,979,292.13
are shown below:
Estimated
Name of Proposed Project Reasons for Non-Implementation
Project Cost
2017 – General Fund
Renovation of Cebu City Condominium 26,812,547.00 Building recommended for
demolition
Construction of Portland Cement 14,393,100.00 For actual survey; processing of
Pavement-Campo-Country Mall locational clearance on hold
Construction of Portland Cement 2,172,460.00 Barangay to submit Deed of
Pavement-Lahug Road to Sugbo Homes Donation
Construction of Portland Cement 4,748,000.00 For re-inspection; actual location
Pavement-Lahug Road to Rotunda do not match with Program of
Works and Estimate (POWE)
Construction of Portland Cement 5,750,000.00 POWE for Mayor’s signature
Pavement-in front of Holiday SPA
Construction of Concrete Fence at 1.00 Allocated budget is too small
Osmeña Shrine
Inst. of guardrails-Brgy. Tejero 463,724.00 Scheduled bidding on hold
Inst. of new canopy for garage- Mabolo 1,178,339.00 Site for canopy is a road lot
Improvement of Dina Socialized Housing 5,678,129.00 Approved Budget for the Contract
at Brgy. Duljo Fatima (ABC) on process
Concrete Fencing-SRP 12,000,000.00 ABC on process
Repiping SRP Sugbu/BantayDagatetc 500,000.00
Sub-total 73,696,300.00
2017- 20% LDF
103
Estimated
Name of Proposed Project Reasons for Non-Implementation
Project Cost
Construction of New CCMC-Phase 2 300,000,000.00 POWE on hold for Phase 2; on-
going reconciliation of remaining
works for Phase 1
Renovation of Cebu City Operation 5,000,000.00 Plans submitted to Operation
Second Chance Second Chance for approval
Renovation of Evacuation Center-Lahug 998,772.00 Project Procurement Management
Plan (PPMP) on process
Improvement of Multi-Purpose Bldg.- 698,991.00 PPMP on process
Guadalupe
Construction of Concrete Lined Canal 326,445.00 PPMP on process
w/Cover-SitioGuardario, Guadalupe
Inayawan Landfill Rehab & Closure 85,000,000.00 Locational clearance and building
permit on process
Sub-total 392,024,208.00
2017- Supplemental Budget
Construction of Portland Cement 6,223,602.00 ABC on Process
Concrete Pavement-SRP-Cebu City-
Talisay U Turn Slot
Facelifting of Industrial Road (Sec 1& 2) 72,000,000.00 ABC on Process
Construction of Stone Masonry Slope 2,171,763.69 ABC on Process
Protection w/ Cross Drainage -
SitioTayabas
Protection w/ Cross Drainage -
SitioCantipla II
Construction of Stone Masonry –Highway 2,819,358.59 ABC on Process
77
Protection - SitioSangi
Construction of Slope Protection-Proper 2,274,161.15 Scheduled for bidding
Bonbon
Road Rehabilitation w/ Slope Protection 1,591,811.66 Awarded to E.V. Caballero Const.
at SitioTawagan Site 1 and Site 2
Sub-total 90,258,784.13
GRAND TOTAL 555,979,292.13
It can be gleaned from the foregoing that the Cebu City Government did not conduct
detailed engineering investigation, survey and design for the project prior to
implementation contrary to Annex A of the Revised Implementing Rules and
Regulations (IRR) of RA 9184. Further, they have not strictly followed the time
schedule for each procurement activity as indicated in the PPMP since some of the
projects are still scheduled for bidding. Moreover, effective monitoring systems that
keep track of the implementation were not also done.
The non-implementation of the 25 infrastructure projects deprived the intended

beneficiaries of the timely and maximum use of the projects and likewise hinders the
uplifting of the economic and social condition of its constituents.
23, 2018.
Management Comment:
104
The Office of the City Engineer had already submitted a report on the different
projects enumerating therein the action taken by the implementing agency.
We recommend that full implementation of projects be madeby conducting

detailed engineering investigation, survey and design for the project prior to
implementation pursuant to Annex A of the Revised Implementing Rules and
Regulations (IRR) of RA 9184 so that the desired services and benefits be
delivered to its beneficiaries on a timely manner.We further recommend that
regular monitoring mechanisms be employed in assessing the rate of progress of
project implementation in order to achieve the desired level of efficiency.
21. Advance payments/mobilization fee totaling P3,904,390.79 granted to various

contractors were not recovered by the City despite the cancellation/termination
of the projects.
Sections 4.3 of the Revised Implementing Rules and Regulation of R.A. 9184 set
forth the following guidelines on the advance payment to contractors, among others:
“The advance payment shall be repaid by the contractor by deducting fifteen percent
(15%) from his periodic progress payments a percentage equal to the percentage of
the total contract price used for the advance payment.”
Review of the subsidiary ledgers (SLs) of the Advance to Contractors account

revealed that advance payments totaling ₱3,904,390.79 from 2015 and 2016 were not
recouped by the City as of December 31, 2017. The said advance payments were
pertaining to the following projects which were cancelled/terminated as of the year-
end per verification with the status report submitted by the City Engineering Office.
Check Mobilization Accomplishment

Contractor Description/Project Remarks
No. Fee (%)
EM Cash Payment for Progress Billing 858668 134,073.01 0.00% Project was
Arante/Armed of Contractors for Public already
Builders Infrastructures - ARMED cancelled and
BUILDERS & SUPPLY Advance approved.
payment of 15% for the Project Deductive
Cluster 1: a) Improvement of cost from the
GSO Office and Warehousing clustered
Partitioning at GSO Office 7th project.
Floor Executive Bldg.
JEGMA Cash Payment for Progress Billing 1014565 126,156.91 0.00% TERMINAT
CONSTRUCT of Contractors for Public ED
ION & DEVT. Infrastructures - JEGMA CONST.
CORPORATI & DEV'T. CORP. Advance
ON payment of 15% for the Project
Cluster 1: A.) Construction of
Concrete Lined Canal with cover
@ Vonsan Property, Brgy. Basak
San Nicolas
105
Check Mobilization Accomplishment
Contractor Description/Project Remarks
No. Fee (%)
JO Cash Payment for Progress Billing 1061965 2,331,939.80 0.00% Final
BUILDERS of Contractors for Public Termination
Infrastructures - JO Builder - has been
Advance payment of 15% for the approved
Road Concreting with Drainage dated May 5,
System at Alaska Mambaling, 2017
Barangay Mambaling, Cebu City.
KENETO Cash Payment for Progress 1014274 664,470.86 0.00% Cancelled
CONTRAKS Billing of Contractor for approved last
INC. Construction for Agency Assets - August 14,
KENETO CONTRAKS, INC. TO 2015
ADVANCE PAYMENT OF 15%
FOR THE PROJECT CLUSTER
3: B. PROP. CONST. OF 3
SCHOOL BLDG.(ATTACHED
TO EXISTING 3S-9 CL) DON
VICENTE MEMORIAL HIGH
SCHOOL
KENETO Cash Payment for Progress 858797 458,555.21 0.00% Recommenda
CONTRAKS Billing of Contractor for tion for
INC. Construction for Agency Assets - project
KenetoContraks Inc. - Advance cancellation
payment of 15% for the project was already
cluster 3: a. DSWS - approved by
Renovation/repainting & Re- the City
roofing at Katipunan St. Brgy. Mayor.
Labangon, b. Prop. Const. o
RDY Cash Payment for Progress Billing 989237 189,195.00 0.00% Order of
CONSTRUCT of Contractors for Public termination
OR Infrastructures - RDY issued by
CONSTRUCTOR - advance Mayor
payment of 15% for the
construction of drainage system at
Duljo Integrated Neighborhood
Association, Brgy. Duljo-Fatima,
Cebu City.
Total 3,904,390.79
The failure of the City to recover the mobilization fee granted for the
abovementioned cancelled/terminated projects deprived the City of the use of the said
funds for other priority projects.
2018.
We recommend that the Management demand immediate refund of mobilization

fees given to contractors for the aforementioned cancelled/terminated projects.
Compliance with RA 9184
22. Certain provisions of the Revised IRR of RA 9184 were not adhered to by the
BAC-Goods when it conducted public bidding on procurement totaling
P10,068,740.30.
106
a. On the Procurement of Motorcyles (DV No. 9812 dated June 17, 2016)
On December 8, 2015, a public bidding on the procurement of 11 units brand new

motorcycle with side car was conducted. The said procurement was awarded to a
supplier for a contract cost of ₱1,179,200.00.
The motorcycles were inspected and accepted by the City per an undated and
unnumbered Acceptance and Inspection Report. On January 4, 2017, the City
issued Check No. 1108328 to the supplier as payment for the said procurement.
b. On the Procurement of Office Supplies and Other Items (DV Nos. 18333 dated
October 14, 2016 and 22994 dated December 1, 2016)
On March 29, 2016, a public bidding on the procurement of supply and delivery
of office supplies and other items for the 1 st and 2nd Quarter of 2016 (bulk
procurement) was conducted. The awarding of which was made in a lot basis per
category to wit:
Category ABC per Category
Office Supplies 5,913,743.80
Printing Services 646,625.00
IT Supplies 1,230,363.00
Janitorial Supplies 550,715.00
Total 8,341,446.80
c. Procurement of Janitorial Supplies
The procurement for the category janitorial supplies was awarded to Cebu D & F
Enterprises for a contract cost of ₱548,093.50. The janitorial supplies were
inspected and accepted by the City on August 24, 2016. On January 4, 2017, the
City issued check no. 1108327 to the supplier as payment for the said
procurement.
Review of the supporting documents submitted disclosed some of the following

observations:
Invitation of Observers
1) The BAC, through a letter dated February 17, 2016, invited the Chairman of
the Cebu City Employees Cooperative, Incorporated as one of the observers of
the regular meeting of the BAC. When verified with the latest master list of
Registered Cooperatives obtained from www.cda.gov.ph, the said cooperative
was not listed therein as registered.
Section 13.2 provides that the observer shall come from an organization duly
registered with the Securities and Exchange Commission (SEC) or the
Cooperative Development Authority (CDA).
Preparation and Advertisement of the Invitation to Bid
107
2) Information such as the source of funding and the delivery schedule of the
items procured were not provided in the Invitation to Bid.
Section 21.1 provides that the Invitation to Bid shall give prospective bidders
information such as source of funding and the contract duration or delivery
schedule, among others.
3) Certification that the Invitation to Bid was posted at any conspicuous place
reserved for the purpose made by the BAC Secretariat did not specify that the
invitation to bid was posted for seven calendar days. Also, it was indicated
in the said certification that invitation was posted in COA Office; however,
such office has no bulletin board for the said purpose.
Bid Evaluation
4) Sworn statement by the prospective bidder or its duly authorized
representative that it did not give or pay, directly or indirectly, any
commission, amount, fee, or any form of consideration, pecuniary or
otherwise, to any person or official, personnel or representative of the
government in relation to any procurement project or activity was not
submitted. This deficiency was not detected by the BAC during evaluation of
bid.
Section 25.2.b.iv of the RIRR of RA 9184 requires the first envelope to

contain technical information/documents such as the sworn statement cited
above.
Post-Qualification
5) Inspection and Acceptance Report or OR, as required in Section 12.1a.iii.6 of
the 5th edition of the Philippine Bidding Documents (PBDs) prescribed by
Government Procurement Policy Board (GPPB), supporting completion of the
contracts.
The BAC could not ascertain completion of the above projects/contracts

without the Inspection and Acceptance Report or OR; thus, raising doubt on
the conduct of post-qualification by the BAC.
Section 34.3 provides that “The post-qualification shall verify, validate, and
ascertain all statements made and documents submitted by the bidder with the
Lowest Calculated Bid…”
6) Notice to Proceed was not issued to the winning bidder.

Section 37.4.1 provides that “The procuring entity shall issue the Notice to
Proceed … to the successful bidder within three (3) calendar days from the
108
date of approval of the contract by the appropriate government approving
authority.”
7) Award and Implementation of the Contract
There was no evidence supporting the posting of the Notice of Award dated
April 8, 2016 in the PhilGEPS, the website of the procuring entity and any
conspicuous place in the premises of the procuring entity.
Section 37.1.6 provides that “The BAC, through the Secretariat, shall post,
within three (3) calendar days from its issuance, the Notice of Award in the
PhilGEPS, the website of the procuring entity, if any, and any conspicuous
place in the premises of the procuring entity.”
This was relayed to Management through AOM No. 2017-040A (2017) dated
September 28, 2017.
We recommend that Management direct the BAC to explain in writing the non-
compliance with the required procedures/ documents. Henceforth, we
recommend strict compliance to the RIRR of RA 9184.
23. Eighty four (84) consultants hired by the City for CY 2017 were not registered
with PhilGEPS and has no PhilGEPS registration number as a condition for
the award of the contract contrary to Section 54.6 of the 2016 RIRR of RA
9184.
The City hired the services of consultants thru negotiated procurement as allowed
under Section 53.7 of the same RIRR, which includes:
Highly Technical Consultants. In the case of individual consultants hired to do work

that is (i) highly technical or proprietary, or (ii) primarily confidential or policy
determining, where trust and confidence are the primary consideration for the hiring
of the consultant: Provided, however, That the term of the individual consultants,
shall at most, be on a six month basis, renewable at the option of the appointing
Head of the Procuring Entity, but in no case shall exceed the term of the latter.
In this instance, the City used alternative method of procurement which requires
consultants to register with PhilGEPS and provide a PhilGEPS Registration Number
as a condition for the award of the contract in lieu of the Certificate of Registration
and Membership (Platinum) required for competitive bidding. However, per inquiry
with the BAC Secretariat for Infrastructure and Consultancy Services, the consultants
hired for CY 2017 did not comply with the above requirements since the BAC
Secretariat was only informed regarding the revised ruling during their seminar
conducted by COA last October 2017.
109
19, 2018.
Management Comment:
The members of the BAC were divided and in doubt on whether the PhilGEPS
requirement for “Highly Technical Consultants” is also applicable to individual
consultants who are hired to do work that is “Primarily Confidential”.
Prior to the AOM, there was nothing that could enlighten on the correct interpretation
of the said rule.
Also, most of the members of the BAC, Technical Working Group (TWG) and
Secretariat have been recently appointed in July 2016. It was only in September
2017, when some BAC members attended a “Seminar on Law on Procurement”
conducted by the Commission that the attendees learned that the PhilGEPS
requirement is also applicable to “Primarily Confidential” consultants.
Moreover, the matter was elevated to the City Legal Office in which it held through a
Legal Opinion dated November 24, 2017 that registration with PhilGEPS and a
PhilGEPS registration number are conditions for the award of contract to “Highly
Technical Consultants” including those who are “Primarily Confidential”.
After the issuance of the above-mentioned Legal Opinion, we are already requiring
all our consultants to comply with the PhilGEPS requirement. Rest assured that the
recommendation shall be complied with.
We recommend that the City require all the consultants to register with
PhilGEPS and provide a PhilGEPS registration number prior to the
procurement of their services.
Local Council for the Protection of Children (LCPC)
24. The City’s budget allocation for Cebu City Commission for the Welfare and
Protection of Children (CCCWPC) was under-budgeted by ₱9,594,311.99
compared to the one percent (1%) of the City’s IRA as required by RA 9344.
Review of the annual budget for CY 2017 of Cebu City revealed that the City
allocated ₱7,311,350.00 for the strengthening and implementation of the programs,
projects and activities of the CCCWPC. Further checking into the sources of funds of
the City’s annual budget showed ₱1,690.566,199.00 came from IRA. At this
juncture, a deficiency of ₱9,594,311.99 was noted between the actual budget
allocated to CCCWPC compared to the supposed ₱16,905,661.99 which is
equivalent to 1% of the IRA of the City. This noted deficiency could have been used
to create more or improve the already existing programs of the CCCWPC.
110
19, 2018.
Management Comment:
The Cebu City Government has complied with the required 1% allocation for
CCCWPC under the CY 2017 Annual Budget as evidenced by the List of PPAS for
the LCPC amounting to ₱61,131,620.00 duly approved by the
SangguniangPanlungsod per Resolution No. 14-1494-2017 dated April 8, 2017. The
₱61,131,620.00 is way beyond the ₱16,905,661.99 requirement.
The List of PPAS approved by the SangguniangPanlungsod includes allocation for

the Cebu City Youth Development Commission and the Department of Social
Welfare and Services totaling ₱53,820,270.00. Based on the same list, allocation for
CCCWPC is only ₱7,311,350.00.
Thus, this office maintains its stand that Management did not allocate the amount
equivalent to 1% of its IRA to CCCWPC.
We recommend that Management allocate the amount equivalent to one percent

(1%) of the IRA of the city for the strengthening and implementation of the
programs, projects and activities of CCCWPC.
Revenue Audit
25. The Revised Omnibus Tax Ordinance of the City of Cebu was not updated since
1994, thus, a potential increase in revenue totaling ₱1,689,513,097.15 was not
collected depriving the constituents from more valuable projects that could have
been implemented.
In 1974, City Tax Ordinance No. 1 otherwise known as the “Omnibus Tax Ordinance
of the City of Cebu” was enacted. In June 1993, the SangguniangPanlungsod of the
City of Cebu, through Resolution No. 2480, approved the City Tax Ordinance No.
LXIX, “An Ordinance Revising the City Tax Ordinance No. 1 Otherwise Known as
the Omnibus Tax Ordinance of the City of Cebu as Amended” which took effect on
January 1, 1994.
111
Since 1994, there was no update on the tax rates provided in the said revised tax
ordinance. The tax rates could have been adjusted in 1999, 2004, 2009 and 2014
pursuant to Section 191 of RA 7160 which provides authority to LGUs to adjust rates
of tax ordinances as follows:
“Local units shall have the authority to adjust the tax rates as prescribed herein not
oftener than once every five (5) years, but in no case shall such adjustment exceed ten
percent (10%) of the rates fixed under this Code.”
Had the City updated its tax ordinance, a 10% potential increase from all local taxes
totaling ₱1,689,513,097.15 could have been collected as computed below:
Actual Collections for Local Potential Increase

Potential
Year Taxes (per Statement (10% of the Actual
Revenue Collection
of Performance) Collection)
2006 964,404,491.25 96,440,449.13 1,060,844,940.38
2007 1,135,709,156.15 113,570,915.62 1,249,280,071.77
2008 1,215,748,832.76 121,574,883.28 1,337,323,716.04
2009 1,266,807,305.78 126,680,730.58 1,393,488,036.36
2010 1,393,602,612.21 139,360,261.22 1,532,962,873.43
2011 1,518,400,047.34 151,840,004.73 1,670,240,052.07
2012 1,690,493,040.90 169,049,304.09 1,859,542,344.99
2013 1,744,592,304.18 174,459,230.42 1,919,051,534.60
2014 1,834,699,688.51 183,469,968.85 2,018,169,657.36
2015 1,996,028,717.50 199,602,871.75 2,195,631,589.25
2016 2,134,644,774.93 213,464,477.49 2,348,109,252.42
Total 16,895,130,971.51 1,689,513,097.15 18,584,644,068.66
Note: CY 1999 to CY 2005 excluded in the computation since data on actual collections
cannot be obtained in e-NGAS while data for CY 2017 is not available yet
The ₱1,689,513,097.15 potential increase of collections of ten percent (10%) from all
local taxes could have significantly increased the City’s cash availability which could
have been used to finance more valuable projects.
This was already cited in our Annual Audit Report in CY 2012.
15, 2018.
We reiterate our recommendation that Management update the 1994 Revised

Omnibus Tax Ordinance of the City pursuant to Section 191 of RA 7160 to
increase the revenue collection of local taxes that can be used to finance more
valuable projects of the City.
26. The CTO lacks assessment strategy to collect business taxes on contractors or
suppliers the City and its Barangays transact with and those doing business
within the City resulting in the under collection of business taxes.
112
Section 59 of City Tax Ordinance No. LXIX, “An Ordinance Revising the City Tax
Ordinance No. 1 otherwise known as The Omnibus Tax Ordinance of the City of
Cebu as Amended,” provides that no person shall engage in or operate any of the
businesses without first paying the corresponding annual graduated tax based on its
gross sales/receipts (GSR) for the preceding CY.
Records obtained from the Management Information and Computer Services (MICS)
and CTO on the sampled contractors or suppliers showed the following:
a. Thirty-two (32) contractors or suppliers declared a ₱158,253,095.46 combined

GSR in CY 2017, as shown in the table below. However, when these were
verified against the Report of Checks Issued of the City and certain Barangays of
Cebu City for CY 2016, GSR of these contractors or suppliers amounted to
₱328,451,117.23 resulting in a ₱170,198,021.77or 107.55% understatement of
the declared GSR. The ₱328,451,117.23 amount could have been the least
amount these contractors and suppliers would have declared since possible
transactions with other agencies or companies within Cebu City and outside Cebu
City could have taken place.
Paid
Under- Tax
Permit GSR Transactions
Contractor/Supplier declared Assessmen
No. Declared by City &
GSR t
Barangay
1 5G Galvez Construction 133573 1,500,000.00 2,592,760.83 (1,092,760.83) 19,541.00
2 Amara Chivalry Construction 116503 1,011,000.00 2,043,736.88 (1,032,736.88) 19,884.50
Inc.
3 Axelrian Food & Gen Mdse 139201 380,000.00 2,145,069.00 (1,765,069.00) 12,476.00
4 Braun & Chester Gen Mdse 130652 419,000.00 2,989,602.11 (2,570,602.11) 10,389.00
5 C.E Padilla Construction Inc. 117804 107,011,447.38 130,501,765.09 (23,490,317.71) 851,482.86
6 Cebu Artshoppe 140239 300,000.00 1,078,994.61 (778,994.61) 9,281.00
7 Colina Construction 122364 1,137,916.33 4,309,130.99 (3,171,214.66) 58,321.
99
8 DM Tot General Merchandise 122022 1,900,000.00 2,255,788.34 (355,788.34) 25,171.00
9 Emmans Meals & Snack 114371 1,300,000.00 4,756,511.31 (3,456,511.31) 28,260.00
House
10 Emmanuel Pharma Marketing 1101 701,000.00 1,612,457.77 (911,457.77) 14,604.78
11 FRT Express Net Services 112950 320,000.00 1,087,621.44 (767,621.44) 22,357.88
12 GH Falco Phils Inc. 104738 3,735,557.50 3,820,961.59 (85,404.09) 51,421.43
13 Golden Success College Inc. 95735 3,495,000.00 4,410,000.00 (915,000.00) 56,019.48
14 ITBS Information Tech. 132200 152,000.00 24,441,339.28 (24,289,339.28) 8,409.75
Business Corp.
15 Jacar Enterprises 146333 - 2,017,951.97 (2,017,951.97) 4,096.00
16 Kusina Ni Kissha 123623 1,400,000.00 3,885,226.90 (2,485,226.90) 18,786.00
17 Lola Mary’s Catering 92105 10,016,772.00 10,834,083.32 (817,311.32) 240,468.55
Services
18 Mama Dids Food Services 130580 176,000.00 1,993,385.00 (1,817,385.00) 6,773.00
19 NSEL Construction 126077 2,314,753.00 4,775,205.24 (2,460,452.24) 34,353.88
20 Pentax Hardware Inc. 104043 50,000.00 12,077,854.34 (12,027,854.34) 4,326.00
21 Phoenix Petroleum 125889 1,401,000.00 47,836,002.02 (46,435,002.02) 33,093.60
Philippines
22 R. Indiola Marketing 144071 100,000.00 2,977,908.01 (2,877,908.01) 4,280.80
23 Ranola Kitchenette 2094 910,000.00 1,104,888.64 (194,888.64) 34,242.35
24 Rizwoods Colleges 110541 2,000,000.00 11,642,400.00 (9,642,400.00) 23,974.00
25 RRN's Catering Services 138801 240,000.00 1,091,062.99 (851,062.99) 6,041.00
26 SC Teves Trading 130581 1,680,000.00 11,268,189.19 (9,588,189.19) 37,736.00
27 Square Cube Construction 118908 500,000.00 6,376,724.59 (5,876,724.59) 16,833.50
28 Rusayne J-Food Catering 130671 500,000.00 1,121,275.50 (621,275.50) 9,231.00
Serv.
29 Terracotta 7 Trading 93478 1,400,000.00 4,729,719.56 (3,329,719.56) 44,909.48
113
Paid
Under- Tax
Permit GSR Transactions
Contractor/Supplier declared Assessmen
No. Declared by City &
GSR t
Barangay
30 Tsarlys Café & Gen Mdse 114826 520,000.00 1,815,853.75 (1,295,853.75) 17,140.60
&
114826B
31 VJR & RTW Gen Mdse. 112728 3,555,000.00 3,937,617.56 (382,617.56) 55,635.93
32 Well Ann Marketing 116284 8,126,649.25 10,920,029.41 (2,793,380.16) 227,567.13
Total 158,253,095.46 328,451,117.23 (170,198,021.77 2,007,109.4
) 9
b. Fourteen (14) contractors or suppliers had ₱93,054,180.04 transactions with the

City and its Barangays even though their permits were not renewed or their
businesses were without record with CTO as presented in the table below.
Permit GSR Paid Transactions Tax

Taxpayer
No. Declared by City & Barangay Assessment
With Unrenewed Business Permit (based on Report from CTO)
1 AYL Trading 89794 - 5,266,445.97 -
2 Euro-Med Laboratories Phil. Inc. 56889 & - 1,281,994.98 -
56889B
3 Healthsolutions Enterprises 96114 - 1,836,071.43 -
4 Linde Philippines Inc. 1904 - 2,178,706.54 -
5 RPP Marketing 136650 - 3,262,167.84 -
6 Tiger Motor Sales Corp. 61072 - 43,918,171.03 -
7 M V Moreno Construction 138322 - 8,274,403.76 -
8 Meren Junk Shop & Gen Mdse 125156 - 2,434,970.82 -
9 Pedxing Builders 118771 - 4,378,073.68 -
10 Raccon Builders 121361 - 2,012,947.77 -
11 Rockworld Ind.& Const. Joint 93727 - 9,789,827.16 -
No Record with CTO (based on Report from CTO)
12 DKPJ Trading - - 5,911,755.22 -
13 Carworld Incorporated - - 1,323,238.72 -
14 Crisjayhanz Marketing - - 1,185,405.12 -
Total - 93,054,180.04 -
c. Nineteen (19) contractors or suppliers as shown in the table below, whose office addresses are not
within Cebu City but doing business within the City of Cebu and its Barangays were not subjected
to appropriate business taxes.
Paid Transactionsby City &
Taxpayer Office Address
Barangay
1 Asian Energysystem Corp. 32,531,586.56 Consolacion, Cebu
2 Aztecs & Son Trading Comp 2,744,642.86 Mandaue City
3 Cebu Autocentrate Corp. 15,500,796.43 Mandaue City
4 Cebu Horizon Trading 4,069,642.85 Mandaue City
5 Daddy Roger Marketing 1,016,020.08 Liloan, Cebu
6 Domain Ca Gen Merchandise 1,628,349.55 Albay
7 F. Cura Industries 22,700,089.28 Pasig
8 Geodata Systems Technologies Inc. 1,185,000.00 Pasig
9 Hi Power Corp. 3,038,678.56 Mandaue City
10 Hitech Lighting World Corp. 47,296,348.22 Mandaue City
11 LeonselPharma 1,057,142.64 Talisay City
12 JRA Surplus & Parts Supply 2,829,821.44 Mandaue City
13 Monark Equipment Corp. 1,384,256.99 Mandaue City
14 Newborn Screening Center Visayas 1,128,666.00 Iloilo City
15 PaleenoAp Inc. 2,845,825.00 Mandaue City
16 R.A. Seville Builder Inc./Resty A. Seville 2,953,352.84 Talisay City
17 RJN Tech Company 1,670,625.00 Mandaue City
18 Segma Trading Co. 6,424,565.88 Cavite
19 Toyota Mandaue South Cebu 10,277,116.72 Mandaue City
162,282,526.90
114
The City only assessed ₱2,007,109.49 business taxes due to the incorrect GSR
declared by contractors or suppliers, non-renewal of business permits and the lack of
ordinance governing collection of business taxes from temporary or transient
contractors or suppliers doing business in the City and its Barangays.
If the mentioned conditions were met, the City Government of Cebu could have
eventually collected more than the ₱2,007,109.49 assessment.
The CTO which is the appropriate office tasked to assess business taxes lacks
assessment strategy to collect business taxes on contractors or suppliers the City and
its Barangays transact with and those doing business within the City. Also, it was not
able to verify the propriety of GSR declared by the contractors or suppliers.
This was relayed to Management through AOM No. 2018-002 (2017) dated January
29, 2018.
We recommend that Management instruct the OIC-City Treasurer to collect

business taxes with appropriate penalties and surcharges from the concerned
contractors or suppliers by sending out notices of tax deficiencies with the
corresponding assessments. Also, we recommend that an ordinance on the
collection of appropriate business taxes from temporary or transient contractors
or suppliers doing business or exercising privileges within the City be passed to
generate more income.
Payment to Job Order
27. Compensation of several job order workers were not timely received by the latter
contrary to sound labor practice as provided in Section 103 of PD 442 otherwise
known as the Labor Code of the Philippines.
PD442 otherwise known as the Labor Code of the Philippines is a decree instituting a
labor code thereby revising and consolidating labor and social laws to afford
protection to labor, promote employment and human resources development and
insure industrial peace based on social justice.
Article 103 of the said code states that “Wages shall be paid at least once every two
(2) weeks or twice a month at intervals not exceeding sixteen (16) days. If on account
of force majeure or circumstances beyond the employer’s control, payment of wages
on or within the time herein provided cannot be made, the employer shall pay the
wages immediately after such force majeure or circumstances have ceased. No
employer shall make payment with less frequency than once a month.
The payment of wages of employees engaged to perform a task which cannot be

completed in two (2) weeks shall be subject to the following conditions, in the
115
absence of a collective bargaining agreement or arbitration award:(1) That payments
are made at intervals not exceeding sixteen (16) days, in proportion to the amount of
work completed;and(2) That final settlement is made upon completion of the work.”
Review of the transactions of the City revealed the following delays in the payment of
salaries and wages to job order personnel for 2017 based on sampled JEV:
Check Date
Should-be
Payroll Approved Obligation (presumably date of Days
Particulars date of
Period Payroll Request encashment/release Delayed
Payment
date
Job Order Payroll-Champ Oct. 2016 02/17/17 12/31/16 03/06/17 11/15/16 111
Feb.
Job Order Payroll-Parks 2017 04/18/17 04/03/17 04/28/17 03/15/17 44
Aug.
Job Order Payroll-Champ 2016 02/15/17 12/31/16 03/06/17 09/15/16 172
March
Job Order Payroll-Parks 2017 05/09/17 05/02/17 05/17/17 04/15/17 32
Nov.
Job Order Payroll-Parks Jan. 2017 04/03/17 04/03/17 05/04/17 02/15/17 78
March
Job Order Payroll-DSWS Feb. 05/23/17 05/02/17 06/15/17 03/15/17 92
PWDAO 2017
March
Feb.
Analysis of the sampled data revealed that salaries and wages of several job order
personnel particularly those assigned at Champ and Parks and Playground Office
were delayed by 44 to 172 days or a period of more than one month to more than five
months.
Interview with the Human Resource Office revealed that the usual cause of delay of
salary payment is the slow processing of documents in the respective department
where employees are assigned.
This delay in the payment of salaries may have an adverse effect on the workers since
some workers resort to availing of debt just to meet their daily needs.
While the City has not received any official complaints from its workers, it is still
responsible for paying its workers whether regular, casual or contractual timely of
their compensation as sound labor laws and practices dictate.
26, 2018.
Management Comment:
The processing of salaries of Job Orders is not lodged within the Human Resource
Development Office (HRDO). Each office is assigned to process the salaries of the
Job Orders under their account since salaries of Job Orders are not charged to
Personal Services but to MOOE.
116
However, Managementacknowledge the findings and HRDO will come up with
guidelines for the processing of salaries at the most reasonable time. As of this time,
HRDO will meet all employees assigned in the processing of salaries of Job Orders
and come up with centralized guidelines on the processing of their salaries.
Managementassured that they will address the finding and submit the centralized
guidelines in the processing of salaries of Job Orders to COA once these are finalized.
We recommend that Management devise measures that will protect its workers
against delayed payrolls that could cause demoralization of its employees, hence
workers’ performance will not be optimized.
Enforcement of COA Disallowances and Charges
28. The City of Cebu had effected only minimal settlement of ₱43,738.65 for all
disallowances and charges for CY2017 contrary to the provisions of COA
Circular No. 2009-006on the Rules and Regulations on the Settlement of
Accounts dated September 15, 2009.
Pertinent provisions of COA Circular 2009-006 dated September 15, 2009,

prescribing the Use of the Rules and Regulations on Settlement of Accounts state
that:
7.1.1 The head of the agency, who is primarily responsible for all government
funds and property pertaining to his agency, shall ensure that: (a) x xx;
(b) the settlement of disallowances and charges is made within the
prescribed period; (c) x xx; and (d) x xx.
7.1.2 The head of the Agency shall initiate the necessary administrative and/or
criminal action in case of unjustified failure/refusal to effect compliance
with the foregoing requirements by subordinate officials. Gross
negligence in disciplining subordinates who are the subject of repeated
adverse audit findings shall subject the officials concerned to disciplinary
action by the proper authorities as the evidence may warrant.
7.1.4 He shall ensure that all employees who are retiring or transferring to
other agencies shall first settle the disallowances and charges for which
they are liable.
10.4 The disallowance shall be settled within six (6) months from receipt of the
ND by the persons liable.
117
Review of the financial statements revealed substantial balances of the Receivables-
Disallowances/Charges (10306010) account totaling ₱70,628,109.83 as of December
31, 2017.
Verification of records as of December 31, 2017 disclosed that ₱70,598,764.72 or

99.96% of the unsettled disallowances of ₱70,628,109.83 were from CY 2006
beginning balance, when the City’s accounting system was converted to e-NGAS.
Yet, only ₱3,828,243.00 were collected during the period 2006-2016 and ₱43,738.65
for the year 2017. Overall, the City effected a settlement of only 5.20% of the total
disallowances/charges since the year 2006, as shown below:
Particulars GF SEF TF Total

Beginning Balance, February 2006 72,759,734.94 501,757.65 1,087,958.32 74,349,450.91
Add: Disallowances (CY 2006-2016) 149,345.11 - - 149,345.11
Less: Settlements/Adjustments (CY 2006- 3,821,296.24 2,615.94 4,330.82 3,828,243.00
2016)
Balance as of December 31, 2016 69,087,783.81 499,141.71 1,083,627.50 70,670,553.02
Add: Disallowances (CY 2017) - 1,295.46 - 1,295.46
Less: Settlements/Adjustments (CY 2017) 41,943.19 1,295.46 500.00 43,738.65
Balance as of December 31, 2017 69,045,840.62 499,141.71 1,083,127.50 70,628,109.83
% of Settlement over Disallowances (CY 2006-2017) 5.20%
The low settlement rate may be attributed to the failure of the City to require the individuals who
were accountable to settle their disallowances/charges.
2018.
Management Comment:
There had been payments made but booked under trust liability account pending
finality of the appeal of some disallowances, as follows:
Particulars Amount
COA Disallowance on Appeal (₱20,000.00) 13,462,061.22
COA Suspension (₱30,000.00) 30,000.00
COA Disallowance 2016-074 2,000.00
COA Disallowance (Teachers) 23,847,500.01
Barangay cash incentives 695,728.00
Total 38,037,289.23
Also, 99% of the balance as identified by COA was attributed to transactions before
September 15, 2009, which was the effectivity of COA Circular No. 2009-006.
Section 27 of the said circular provides that ND/NC/NS which have not been settled
as of effectivity of the rules therein shall be covered by a special report to be prepared
by the Auditor and submitted to his director, together with copies of the ND/NC/NS.
Lastly, the Office of the City Accountant requests COA to review and follow Sections
27 and 28 of COA Circular 2009-006.
118
The issued audit observation tackled the minimal settlement of disallowances booked
since 2006. Management reply should revolve around this issue and not on the
submission to the Director of the Commission of a special report prepared by the
Auditor.
We recommend that Management inform and require all persons held

responsible/liable to settle immediately their disallowances/charges as required
under COA Circular 2009-006. Further, we recommend that the head of the
agency exert extra effort in collecting the said receivables and initiate necessary
administrative and/or criminal action, as the case may be.
Compliance with Tax Laws and remittances to other Governmental Institutions:
29. Remittance of withheld monthly contributions and loan amortizations of

employees, as well as the City Government’s share, to Pag-IBIG and
PhilHealthwere delayed contrary to Section 3 of Rule VII of the IRRof RA 9679
(HDMFLaw of 2009) and Section 20 of the IRRof the National Health
Insurance Act of 1995 (RA 7875 as amended by RA 9241).
Post audit conducted and review of official receipts (ORs) ofPag-IBIG and
PhilHealthremittances for CY 2017 revealed that the City did not strictly implement
the timely withholding and remittance of its employees’ monthly contributions and
loan amortizations as various ORs were noted to have not complied with the above
provisions, shown as follows:
Delay of Withholding of Contributions Delay of Remittance of Contributions and

and Loan Payments Loan Payments Withheld
Nature of
Agency No. of No. of Days
Remittance No. of No. of Days
OR/PA Amount Delayed Amount
OR/PAR Delayed
R (Range)
Pag- Member's 336 4,028,798. 28 to 1,918 8 213,784.60 8
IBIG Contribution 55
Short-term 161 1,212,729. 28 to 1,645 2 4,858.87 8
Loan 18
PhilHeal Member's 83 3,030,675. 28 to 1,706 13 1,604,325.00 3
th Contribution 00
Out of the 687 Pag-IBIG Fund ORs reviewed, 336 pertained to employees’
contributions which were withheld late with an aggregate amount of ₱4,028,798.55
ranging from 28 to 1,918 days (more than 5 years) from the month the contribution is
due to the month it is withheld, 105 of which were monthly contributions from 2016
and prior years amounting to ₱612,250.36. In addition, 161 of the total Pag-IBIG
Fund Receipts pertained to loan amortizations which were also withheld late totaling
₱1,212,729.18 ranging from 28 to 1,645 days (more than four (4) years), 15 of which
were loan amortizations from 2016 and prior years amounting to ₱66,795.85.
119
Moreover, 10 of the total Pag-IBIG Fund Receipts were remitted late pertaining to
employees’ contributions amounting to ₱213,784.60 and loan amortizations
amounting to ₱4,858.87 identified as part of April 2017 deduction was remitted only
on May 23, 2017.
On the other hand, 83 of the 153Philhealth ORs/PARs reviewed were employees’

contributions which were withheld late with a total amount of ₱3,030,675.00 ranging
from 28 to 1,706 days (more than 4 years), 20 of which were monthly contributions
from 2016 and prior years amounting to ₱300,425.00. Furthermore, 13 of the total
Philhealth ORs/PARs reviewed were remitted late amounting to ₱1,604,325.00 which
pertains to employees’ contributions for September 2017 remitted only on October
18, 2017.
Per inquiry with the Remittances In-charge, the delay on the withholding and
remittance of monthly contributions and loan amortizations of employees was
primarily attributable to the long processing time of payroll transactions specifically
on the payroll processing of Job Order and prelisting employees. The other reason
was the delayedprocessing of pre-employment requirements of new hiree. The
practice of granting employees’ request to defer the deduction of their salary loan
amortizations was also mentioned during the discussion.
The delay on the withholding and remittance of themonthly contributions and loan
amortizations of employees, as well as the City Government’s share, to Pag-IBIG and
PhilHealthmay deprive employees of the benefits provided by those aforementioned
agencies like the availment of Pag-IBIG loans and PhilHealth deductions on hospital
bills. These delays also can incur penalties chargeable to the in-charge just like the
case ofPhilHealth In-charge who was charged with penalties amounting to
₱19,521.00due to the delayed remittance of PhilHealth contributions for the month of
December 2016.
2018.
We recommend that Management strictly enforce the timely withholding and

remittance of the monthly contributions and loan amortizations of employees, as
well as the City Government’s share, to Pag-IBIG and PhilHealth and
immediately stop the practice of granting employees’ request to defer the
deduction of monthly loan amortizations. Effective monitoring is also necessary
to ensure that all employees’ monthly contributions are withheld on the month it
is due and remitted immediately the following month.
30. Substantial balances of funds withheld for Due to BIR, Due to GSIS, Due to
Pag-IBIG and Due to Philhealth accounts with an aggregate amount of
₱35,098,064.52 remained unremitted as of December 31, 2017 thus may
hamper the government’s immediate use of the fund for various programs and
120
projects and subject the withheld amount to penalties and surcharges for
delayed remittances.
Review of the Inter-agency Payables as of December 31, 2017 revealed that

substantial balances amounting to ₱35,098,064.52 were still outstanding after
deducting the January 2018 remittances pertaining to taxes, contributions and loan
payments of employees withheld on December 2017.
In addition, comparison between unremitted balances as of December 31, 2017 and

unremitted balances as of December 31, 2016 (included in 2016 Audit Report)
showed a total increase in unremitted balance totaling ₱6,351,023.89 or a 22%
increase compared to 2016 unremitted balance. Please refer to the table below for the
details.
Remittance Unremitted Unremitted
Balance as of %
Account in January Balance as of Balance as of Increase
12/31/17 Increase
2018 12/31/17 12/31/16
Due to BIR 24,872,475.48 13,938,433.22 10,934,042.26 2,323,506.44 2,323,506.4 27
4
Due to GSIS 45,539,109.53 27,717,340.03 17,821,769.50 3,448,959.13 3,448,959.1 24
3
Due to Pag- 6,109,190.88 3,809,490.33, 2,299,700.55 243,982.39 243,982.39 12
IBIG
Due to 5,708,002.21 1,665,450.00 4,042,552.21 334,575.93 334,575.93 9
PhilHealth
Total 82,228,778.10 47,130,713.58 28,747,040.63 6,351,023.89 6,351,023.8 22
9
The non-remittance of the cited taxes, contributions and loan payments of employees
withheld deprived the national government of the income that could have been
generated therefrom and could have augmented the resources of the government to
finance its various projects. This practice may also result in the forfeiture of the
employees’ claims or benefits provided by those aforementioned agencies.
On the other hand, non-compliance of Management with the rules and regulations
subjects the City’s liable officials to penalties, surcharges and sanctions. In addition,
this practice exposes City funds which were already withheld to risk of loss or
misappropriation.
The issue on unremitted taxes and statutory contributions was raised in the Annual
Audit Report for CYs 2013, 2015 and 2016. Among the reasons cited by the City
were that the balances pertain to prior years and were the subject of on on-going
reconciliation; and due to lack of personnel, more time was requested to reconcile the
withheld and remitted taxes and other contributions.
2018.
We recommend that Management require the Accounting Section to:
121
 Explain the reason/s behind the increase in unremitted balances of the Inter-
Agency Payables as of December 31, 2017 compared to 2016 unremitted
balances.
 Strict compliance of the recommendation to speed up reconciliation of
accounts to determine correct balance or unremitted portion and present the
accounts correctly in the financial statements.
 Remit immediately the long outstanding balances and funds withheld to BIR,
GSIS, Pag-IBIG and PhilHealth to avoid paying penalties, surcharges and
interest arising from delayed remittances.
Trust Liabilities
31. Fees totaling ₱76,571,391.07 collected from the use of the Fort San Pedro
grounds and its facilities and the Cebu City Zoo were not utilized for the
regular maintenance and enhancement or development of the sites contrary to
COA Circular No. 2015-009 dated December 1, 2015 and City Ordinance No.
2201 dated August 12, 2009.
Verification of records disclosed that funds received from imposing entrance fees to
Cebu City Zoo and use of Fort San Pedro grounds and its facilities are recognized in
the books of account as Trust Liabilities under the General Fund. Prior years’
transactions (under e-NGAS) were recorded under the Other Payables account.
On the use of Fort San Pedro
The SangguniangPanlungsod has enacted Ordinance No. 2201 on August 12, 2009
which is quoted hereunder:
“An ordinance establishing the guidelines for the use of Fort San Pedro grounds and
its facilities, including the children’s playgrounds, the open space, and the parking
area in the vicinity of Fort San Pedro, imposing fees therefore, and for such other
purposes.”
Under section 2 of the same ordinance it also states that, “It is likewise the policy of
the Cebu City Government to impose fees for the use of some of the historical sites for
purposes of generating and providing adequate funds for its continuous maintenance,
enhancement and development in the preservation of the city’s cultural and historical
heritage.”
Section 6 further states that “Funds or fees collected for the use of Fort San Pedro
grounds and its facilities such as entrance/admission fee, parking fee, rental fee and
filming fee shall be deposited to the General Fund under a Special Account.”
Verification of records revealed that the total amount recorded from the use of Fort
San Pedro grounds and its facilities as of December 31, 2017 is ₱71,655,573.56.
122
Inquiry from the CTO personnel disclosed that collections from Fort San Pedro are
deposited under the General Fund Proper per LBP Account No. 1452-1007-00. It
was further learned that salaries of personnel assigned to maintain the historical site
were charged under the budget of the Office of the City Mayor.
Further, review of the SL for CY 2017 likewise showed that only ₱16,300.00 were
debited to the Trust Liability account for the refund of reservations on the venue of
five (5) wedding receptions. Debit entries in prior years were mostly refunds of the
rental fees except for the amount of ₱10,812,413.88 which recognized the reversion
of accounts payable per Ordinance No. 2281 dated September 7, 2011, under
Supplemental Budget No. 2 per JEV No. 2011-11-029803. No disbursements for its
continuous maintenance and development of the historical site were charged from its
collections contrary to Section 2 of Ordinance No. 2201. Moreover, collections were
not deposited under a Special Account of the General Fund contrary to Section 6 of
the above-mentioned City Ordinance.
On the use of the Cebu City Zoo
The SangguniangPanlungsod has enacted Ordinance No. 2173 on February 11, 2009
which is read as “An Ordinance Imposing Entrance Fee to the Cebu City Zoo.”
Under Section 3, the fees imposed under this ordinance shall cover only entrance fee
of the Cebu City Zoo.
Section 8 further stipulates that all fees collected shall be deposited to the Cebu City
Zoo Trust Fund. However, there were no stipulations as to the application of the
collections for entrance fees.
Total amount recorded as entrance fees from Cebu City Zoo as of December 31, 2017
amounted to ₱4,915,817.51.
There were no transactions registered for CY 2017 except for the setting-up of
beginning balances under GF-Proper as of December 31, 2016 with the same amount.
The forwarded balance (under e-NGAS) of ₱4,915,817.51 was recorded under the
Other Payables account under General Fund-Proper. Total prior years’ debits to the
account totaled ₱1,733,040.00. Review of the transactions debited in prior years
disclosed that the amount of ₱1,694,517.00 was recognized to take up the reversion of
accounts payable as per Ordinance No. 2281 dated September 7, 2011 included under
Supplemental Budget No. 2 per JEV No. 2011-11-029803. Other entries pertain to
adjustments taken up in the books in CY 2013 and recording of liquidation in CY
2010. Likewise, collections are deposited under the General Fund-Proper under LBP
Account No. 1452-1007-00 instead of a Cebu City Zoo-Trust Fund account, which
contradicts Section 8 of City Ordinance No. 2173 dated February 11, 2009.
The CTO started collecting entrance fees from Cebu City Zoo on May 2009 and on
January 2008 for the Fort San Pedro.
123
Based on the foregoing, fees collected from Fort San Pedro were not utilized for its
continuous maintenance, enhancement and development in the preservation of the
city’s cultural and historical heritage as stipulated in Section 2 of City Ordinance No.
2201 enacted on August 12, 2009 which provides that “. . . It is likewise the policy of
the Cebu City Government to impose fees for the use of some of the historical sites for
purposes of generating and providing adequate funds for its continuous maintenance,
enhancement and development in the preservation of the city’s cultural and historical
heritage.”
Moreover, City Ordinance No. 2173 passed on February 11, 2009 for the imposition
of entrance fees at Cebu City Zoo did not indicate the application of the funds
collected thereat. In the absence of any other City Ordinance enacted for the purpose
that it will be held in trust until compliance of condition/s, then it can be expended for
operational and maintenance requirements of the City.
22, 2018.
We recommend to Management the following:

 immediately analyze the proper classification of the fees collected from Fort
San Pedro and Cebu City Zoo in consideration of other City Ordinance
enacted for the purpose;
 take action to utilize the funds in the absence of other City Ordinance
authorized for the purpose; and
 direct the Accounting Section to effect the necessary adjusting entries for the
fair classification of the SL balance of collections from Fort San Pedro and
Cebu City Zoo.
B. Status of Audit Suspensions, Disallowances and Charges
Unsettled suspensions and disallowances as of December 31, 2017 amounted to

₱256,900,564.90and₱766,047,789.11, as follows:
Beginning Issued & Settled During the Year Ending Balance

Balance 2017 Dec. 31, 2017
Jan. 1, 2017 NS/ND/NC NSSDC
Suspension 154,451,395.17 108,770,346.93 6,321,177.20 256,900,564.90
Disallowance 766,047,789.11 1,295.46 1,295.46 766,047,789.11
C. Others Matters:
Audit areas identified as audit focus for CY 2017 have been included in the conduct of
audit during the year but the audit team was not able to obtain sufficient audit evidence to
support the issuance of an Audit Observation Memorandum.
124
125

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PART II - AUDIT OBSERVATIONS AND RECOMMENDATIONS

1. Payment of loan amortization, interest and charges totaling ₱388,650,419.88 in

Appropriation for Debt Servicing Within the 20% Debt Ceiling

Review of LGU-Cebu City’s Annual Budget for CY 2017 disclosed that

The ₱1,337,274,096.96 appropriated for debt servicing is within the ₱1,514,453,239.80

Payments Made on Due Dates

Payment of obligations on due dates prevents payment of penalties.

We acknowledge and commend Management for strictly adhering and

A. Financial and Compliance Audit

1. The cash shortage of ₱1,900,902.01 discovered during the examination of the

The shortage was arrived at as follows:

Accountability as of October 19, 2017 ₱77,466,000.00

OR Date OR No. Payor Nature of Collection Amount

OR numbers 8647455, 8647454, 8647478 and 8647477 amounting to ₱1,444,902.01

a. Irregular transfer of physical accountability of cash advance from Disbursing

We recommend that Management immediately stop the practice of utilizing sub

We recommend that Management ensure that government funds are placed in a

c. Accountabilities of the accountable officer were not strictly monitored. The

We recommend that the disbursing officer require the sub-disbursing officer to

e. Non-implementation of the rules and regulations on the grant and liquidation of

We recommend that Management:

2. Funds released to non-governmental organizations/people’s organizations

a. Non-submission of liquidation reports

Fifty-nine percent (59%) or a total of ₱29,637,515.02 were still unliquidated due to

b. Suspended liquidation reports

Various liquidation reports totaling ₱10,927,861.02 or 22% of the total

c. Liquidation reports pending in the Pre-audit Section

Further, liquidation reports totaling ₱29,637,515.02 were pending in the Pre-audit

The above deficiencies resulted in the non-recording of expenditures in the books of

We recommend the following:

3. Expenses totaling ₱500,000.00 charged to the financial assistance granted by

a. Incurrence of expenses before the signing of MOA

b. Non-conformity with the agreed period to undertake the project

The above deficiencies rendered these expenses unauthorized, since expenses

We recommend that Management explain in writing the deficiencies noted on

4. The existence, valuation and accuracy of the balances of Inventory accounts

Examination of the inventory accounts and the corresponding inventory reports as of

a. Unreconciled difference between the balance of the GL and the physical

Code Account Per FS Per RPCI Variance %

We have observed the difficulties encountered by Accounting in the reconciliation

Review of Inventory Analysis of AOs submitted by Accounting Section as of

The above unaccounted inventory balance per Accounting’s monitoring which

b. Non-submission of reports on the physical count of other inventories

Code Account GF SEF TF Total

Considering the substantial amount of inventory account balances as of December

c. Various inventories directly charged to expense

Section 114, Volume 1 of the Manual on NGAS provides that purchases of

We therefore reiterate the following prior year’s recommendation for

“Beginning Balances – To set up beginning balances (special account) as of

All SLs have already been posted to its proper SLs.

Due from Officers and Employees

Beg. Bal. Debit to Account Credit to

We recommend the following to Management:

We recommend that the OIC-City Accountant post to the specific SL the

8. LGU-Cebu City granted ₱6.7 million cash advances to various accountable

A review of the aging schedule of unliquidated cash advances totaling ₱6,705,935.72

Nature of Cash Type of

The accumulation of the accountableofficers’ unliquidated cash advances exposed

We recommend that Management instruct the concerned accountable officers to

9. The existence and reliability of Accounts Receivable totaling ₱2.7 million,

Also, comparison of beginning balances as of CY 2006 with “For Identification”

Accounts Receivable Account Ending Balance

As shown in the above table, total receivable in the amount of ₱2,745,763.92