EXECUTIVE SUMMARY

A. Introduction

The City of Pasig continues to transform and evolve to maintain her standing as one
of the premier cities in the country, centered on the need of the people for a peaceful,
clean, green and livable city. Accomplishments in CY 2018 were anchored on a
Comprehensive Development Plan covering different plans and programs of:

1. Education and Culture – ensuring quality education for stable and

productive lives in the future;

2. Livelihood and Employment – providing appropriate income-generating

opportunities to improve level of economic sufficiency;

3. Social Welfare Services – supporting the growing need of each

Pasigueño to safeguard and promote welfare of the vulnerable society;

4. Protective Services – managing offenders and protecting the public from

harm, create a fair and safe living working environment;

5. Transport Services – delivering efficient and well-maintained

transportation systems for accessible and safe travel in the city;

6. Environment Sector – maintaining a green city for a livable ecological

metropolis;

7. Economic Sector – reducing absolute level of poverty and enabling

consumers to enjoy more goods and services, better living standards to
arise in life expectancy;

8. Infrastructure Sector – building world class facilities for goods and

services leading to economic growth and resilient community; and

9. Institutional Sector – fostering organizational stability and permanence

and managing rigidity and resistance to change for a balance working
environment.

The City is headed by Mayor Robert C. Eusebio, with its Vice Mayor and
14 Councilors. It has one representative in the national congress. It has a total
personnel complement of 8,224 consisting of six co-terminus, 863 permanent,
4,906 casual, 2,393 job order employees, 21 consultants and 35 contractual teachers.

i
B. Financial Highlights

For CY 2018, the City’s appropriations, obligations and balances are tabulated
hereunder:

Fund Appropriations Obligations Balances

Current Appropriation
General Fund P11,030,375,806 P 8,526,436,924 P2,503,938,882
Special Education Fund 1,030,000,000 808,214,372 221,785,628
Subtotal 12,060,375,806 9,334,651,296 2,725,724,510
Continuing Appropriation
General Fund 1,921,706,855 846,719,160 1,074,987,695
Special Education Fund 211,089,414 - 211,089,414
Subtotal 2,132,796,269 846,719,160 1,286,077,109
Total P14,193,172,075 P10,181,370,456 P4,011,801,619

Changes in its Financial Position and Financial Performance are also summarized
below:

2018 2017 Increase

Assets P 38,985,146,289 P 33,703,823,758 P 5,281,322,531
Liabilities 4,800,331,351 3,655,860,924 1,144,470,427
Government Equity 34,184,814,938 30,047,962,834 4,136,852,104
Revenue 12,309,643,446 10,090,816,481 2,218,826,965
Expenses 6,989,811,798 6,334,930,714 654,881,084

C. Operational Highlights

In line with the City’s thrust for development, 80 programmed projects for CY 2018
were reported completed, to wit:

Projects Quantity Project Cost

Other Land Improvements 13 P 48,979,710
Roads, Highways and Bridges 10 17,502,851
Flood Control 30 30,118,937
Buildings/School Buildings 8 148,827,730
Hospitals and Health Centers 6 13,939,155
Other Structures 13 72,510,401
Total 80 P 331,878,784

ii
 In addition to the above accomplishments, the City has gained the following awards
as reported in 2018, among others:

 White Orchid Award - for implementing a 100 percent Tobacco-Free

Environment and following the World Health Organization “MPOWER”
framework.

 2018 Most Business Friendly LGU Award - for improving the business and
investment climate thru innovative governance resulting in the increase of
enterprise and significant increase in total investment generated in 2017 over
2016.

 Most Efficient in Nutrition Program Management

 Best in Eco Waste Management Implementor for implementing significant

innovation on Ecological Solid Waste Management.

 Dugong Makisig Award for conducting Mobile Blood Donation activities in

partnership with Rizal Medical Center.

 ISO 9001:2015 Certificates for its Business Permit and Licensing Services, its
Center for Dialysis, Healthy Lifestyle, Ambulatory Surgery, Maternity Clinic
and Newborn Care of Pasig City (CHAMP) and its Pasig City Children’s
Hospital (Child’s Hope), valid until August 28, 2020, June 4, 2020 and
September 11, 2020, respectively.

D. Scope and Objective of Audit

The audit covered the accounts and operations of the City of Pasig for the period
January to December 31, 2018. The objectives of the audit are to (a) be able to lend
credence to Management’s assertions on the financial statements; (b) recommend
agency improvement opportunities; (c) determine compliance with existing laws,
rules and regulations; and (d) determine the extent of implementation of prior years’
audit recommendations.

E. Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements due to exceptions of effects on the financial statements of audit
observations which are discussed in detail in Part II of the report and summarized as
follows:

1. The Land account balance of P1.024 billion does not reconcile with the Report on
the Physical Count of Property, Plant and Equipment (RPCPPE) amounting to

iii
 P205.573 million, showing a discrepancy of P818.159 million caused by some
items that are without cost in the RPCPPE. Real Property Ledger Cards (RPLC)
are maintained for 13 lots only totaling P33.692 million, while the description of
10 items totaling P15.012 million is more appropriately classified as Road
Networks.

We recommended that Management:

a. Require the City General Services Officer (CGSO) to exert more effort to
come up with a more reliable RPCPPE complete with specifications and land
use based on actual physical count and reconcile the same with the accounting
records including the acquisition cost or fair value whichever is applicable;
and

b. Direct the City Accountant to (a) maintain and update the Real Property
Ledger Cards; (b) coordinate with CGSO in reconciling the records with the
physical count; and (c) effect the necessary adjustments in the books so that
reliable balance of Land account is presented in the City’s financial
statements.

2. The P28.621 billion balance of the Property, Plant and Equipment (PPE)
accounts, except Land, could not be reliably established due to (a) the
non-reconciliation of property and accounting records with a total discrepancy of
P92.844 million; (b) misclassification of PPEs totaling P476.538 million;
(c) non-provision of depreciation for properties totaling P1.612 billion and
lapses/errors noted in the recording and in providing for depreciation, all contrary
to the applicable provisions of the New Government Accounting System (NGAS)
Manual for Local Government Units (LGUs), International Public Sector
Accounting Standards (IPSAS) and Government Accounting and Auditing
Manual (GAAM).

We recommended that:

a. The Inventory Committee –

 Conduct regular and complete physical count of all properties of the City;

 Prepare the corresponding RPCPPE in accordance with the prescribed

format indicating the whereabouts, condition and other relevant
information relative to the PPE;

 Submit the report within the prescribed period;

iv
 b. The City General Services Officer –

 Maintain properly accomplished property cards for each category of PPE

listed in the accounting records and ensure that the balances shown
thereon agree with the prepared RPCPPE and the book balances;

 Issue and update Property Acknowledgement Receipt (PAR) for all PPE
items, starting with the current and recent years’ acquisitions until all
items are covered with PAR and thereafter, renew/update the PAR every
three years or whenever there is transfer of accountability;

c. The City Accountant –

 Properly prepare and maintain the required Property, Plant and Equipment
Ledger Card (PPELC) for each class of PPE, listing therein the data as to
its acquisition, description, custody, useful life and other necessary
information;

 Coordinate with CGSO in the reconciliation of accounting records and

physical inventory;

 Capitalize costs directly attributable to the construction of the PPE items

and ensure that these are reflected as addition to the asset’s existing cost;

 Exercise extra care in the classification of agency assets and in providing

for depreciation to forestall errors and inconsistencies leading to
misstatements of the accounts;

 Reconcile the PPE subsidiary ledgers against the Schedule of Depreciation

(SOD) to properly monitor the completeness and correctness of assets
subjected to depreciation;

 Ensure that reclassifications/adjustments/additions are duly supported with

proper documents complete with references as to its originating account
and depreciation charges; and

 Prepare the SOD properly and ensure that the required information are
provided, such as the carrying value and the accumulated depreciation that
should agree with the controlling account balances so that discrepancies
could be readily identified and corrected.

3. The physical existence and validity of Inventories aggregating P1.464 billion

cannot be ascertained because (a) the Report on the Physical Count of Inventories
(RPCI) reflected a total inventory balance of P26.550 million only; (b) the non-
reconciliation of the balances per stock cards and supplies ledger cards due to the
improperly maintained and incomplete records of the Central Supply Office

v
 (CSO) and the City Accounting Office (CAO), respectively; and
(c) inconsistencies and delays in the recording of acquisitions and issuances of
supplies and materials, all contrary to the applicable provisions of the NGAS
Manual for LGUs.

We recommended that:

a. The Inventory Committee conduct a physical count of the supplies and

materials and prepare/submit the RPCI in the prescribed format;

b. The City General Services Officer and the City Accountant properly maintain
and update the stock cards and supplies ledger cards, respectively, and
reconcile these records regularly;

c. The City General Services Officer, the Central Supply Officer and the City
Accountant:

 Come up with a system that will ensure that all acquisitions and issuances
of supplies and materials are timely recorded in the books; and

 See to it that the required documents in the acquisition and issuance of the
inventories, such as the Inspection and Acceptance Reports (IAR),
Requisition and Issue Slip (RIS) and Summary of Supplies and Materials
Issued (SSMI), bear complete details as to the control number, dates and
signature of the accountable personnel.

F. Other Significant Audit Observations and Recommendations

1. The Accounts Payable (AP) balance of P1.240 billion is not reliable due to errors
in classification amounting to P1.133 million; settlements totaling
P29.249 million which were debited to the account although no payables were
set-up; and liabilities totaling P82.289 million which were not supported with
documents to prove the validity of these claims.

We recommended that the City Accountant:

a. Classify payables in their appropriate accounts according to the nature of

transactions;

b. Ensure that the Journal Entry Vouchers (JEVs) on the set up and settlements
of payables are supported with complete documentation and with information
on the details of the related transaction; and

c. Properly maintain the AP Aging Schedule with complete information as to the

age, status and other relevant information.

vi
2. Checks totaling P65.07 million, not yet released to payees as of year-end, were
not recorded in the books resulting in the understatement in assets and liabilities
by P44.61 million and P57.89 million, respectively and overstatement of the
equity by P13.28 million.

We recommended that the City Accountant record in the books all unreleased
checks at the end of the year, to ensure that the transactions and events covered by
these checks are recorded during the year when they were occurred and
recognized in the financial periods to which they relate.

3. The Other Prepayments account balance of P37.24 million as of December 31,

2018, is overstated by P24.894 million due to the non-submission by the CGSO of
the Acceptance and Inspection Report (AIR) for items delivered and Summary of
Supplies and Materials Issued (SSMI) for items issued to the City Accountant to
serve as basis in adjustments to the appropriate inventory or expense account.
Moreover, this account included items with incomplete details totaling
P2.824 million.

We recommended that:

a. The City General Services Officer –

 Advise the concerned parties that all procured items, including

accountable forms, paid in advance should be delivered to the CGSO for
proper documentation before they are issued to the end-users;

 Immediately furnish the City Accountant with copies of the

AIR/RIS/SSMI, whichever is applicable;

b. The City Accountant –

 See to it that charges to Other Prepayments account are in accordance with

the description contained in the Chart of Accounts for LGUs prescribed
under COA Circular No. 2016-004;

 Record immediately the deliveries based on the AIR/RIS/SSMI provided

by the CGSO-Central Supply Office (CSO) and in accordance with the
provisions of IPSAS 12;

 For accountable forms, recognize inventories based on AIRs and record

issuances/expenses based on the Treasurer’s Report of Accountability for
Accountable Forms;

 Coordinate with the CGSO in the retrieval of documents on subscription

of periodicals and printing of backpay certificate of indebtedness and,
once available, effect the necessary adjustment;

vii
  Review the documents supporting the payments made for gasoline used
during Typhoon Ompong for adjustment of the advance payment to the
appropriate account;

 Adjust the payment made to the Center for Health Development-NCR to

the appropriate expense account; and

 Exercise extra care in recording transactions so that reliable account

balances are presented in the financial statements.

4. The excessive procurement of supplies and materials resulted in the slow/non-

moving inventory items that may eventually go to waste due to obsolescence or
other forms of losses contrary to COA Circular No. 2012-003 dated October 29,
2012.

We recommended that Management strictly monitor the balances of inventories

and ensure that the procurement of supplies and materials is adequately planned
such that only those necessary in the operation of the requisitioning unit are
procured in appropriate quantities at the right time.

5. The insurance premium totaling P11.234 million paid by the City for the insured
assets of P2.590 billion or 14.14 percent only of its total insurable properties of
P18.323 billion is inadequate to indemnify the City against any damage to or loss
due to fire, earthquake, storm or other fortuitous events/casualty contrary to
Republic Act (RA) No. 656, otherwise, known as the Property Insurance Law.

We recommended that Management strictly comply with the provisions of

RA No. 656 and COA Circular No. 2018-002 dated May 31, 2018 for the
guidelines in the insurance of government properties with the General Insurance
Fund of the Government Security Insurance System (GSIS).

6. The loan availments of P53.95 million or 67.45 percent and P3.85 million or
67.89 percent out of the P80 million and P12 million appropriations for Easy
Pondong Pasigueño (EPP) and the Cooperative Development Loan Fund (CDLF),
respectively, indicate that the appropriation provided to the two programs is in
excess of the actual needs of the intended beneficiary, which could be used for
other programs/projects. Moreover, erroneous entries made resulted to excess in
cash transferred from the General Fund to the Trust Fund by P0.82 million and a
net discrepancy of P14,000 between the General Ledger (GL) and the Subsidiary
Ledger (SL) balances.

We recommended that:

a. The City Council revisit the ordinances and review the accomplishments for
possible adjustment in appropriation deemed excessive which can be

viii
 reprogrammed for other programs/projects or formulate new policies that will
maximize the fund utilization in favor of the target beneficiaries of the project;

b. The City Accountant locate the documents supporting the recorded

receivables to facilitate collection, identify the causes of the noted
discrepancies and effect adjustments where necessary to arrive at reliable
account balances; and

c. The responsible officers exert more effort to collect the outstanding accounts
and act fast on delinquencies to make the borrowers aware that the loans are
collectible when due and to discourage others from not paying their loans.

7. Taxes withheld from employees, supplier of goods and services amounting to

P296,814.90 were not remitted in full to the Bureau of Internal Revenue (BIR)
within the period prescribed by RA No. 8424, as amended by RA No. 10963.

We recommended that the City Accounting Office and HRMO coordinate closely
in working on the monthly withholding tax of employees and tax remittances to
the BIR, see to it that their respective personnel tasked to deduct and/or remit
taxes exercise care and diligence so that correct taxes are withheld and remitted
on time to avoid discrepancies and penalties for late remittances. The Accounting
personnel in charge of withholding taxes from suppliers/contractors, likewise,
ensure that appropriate types of taxes are withheld and remitted within the
prescribed period.

The aforementioned observations together with the corresponding recommendations

were discussed with Management officials concerned during the exit conference on
May 24, 2019. Management views and comments were incorporated in the report,
where appropriate.

G. Summary of Total Suspensions, Disallowances and Charges

The audit charges amounting to P10,015.00 was settled during the year while audit
suspension amounting to P231,791,487.36 was settled in the first quarter of 2019
upon submission of the required documents.

H. Status of Implementation of Prior Years’ Audit Recommendations

Of the 77 audit recommendations contained in the CYs 2016 and 2017 Annual Audit
Reports (AARs), 29 or 37.66 percent were fully implemented, 34 or 44.16 percent
were partially implemented and 14 or 18.18 percent were not implemented.

ix