OBSERVATIONS AND RECOMMENDATIONS

As a result of the risk assessment conducted by the Local Government Audit Sector -
National Capital Region (NCR), audit thrust areas were identified for Calendar Year
(CY) 2021. The results of audit on these thrust areas as well as other significant
operational concerns that surfaced out of the Audit Group’s risk assessment, are
presented in the discussion that follows.

Deficiencies noted in audit that were not addressed by the City during the year, are
detailed in the following discussion:

FINANCIAL AND COMPLIANCE AUDIT

1. Inaccurate balances of the Cash in Bank (CIB) - Local Currency (LC), Current
Account (CA); LC, Savings Account (SA); and LC, Time Deposits (TD) affected
the reliability and existence of the CIB account balance as of December 31, 2021,
in the aggregate of P4.997 billion due to: (a) Unrecorded/unadjusted book
reconciling items of total additions of P0.201 million and total deductions of
P18.784 million, or a total of P18.985 million; (b) Negative balance of two bank
accounts amounting to P0.991 million; (c) Dormant balances of the CIB - LCCA
and LCSA totaling P260.075 million; (d) Non-existing account with the
Development Bank of the Philippines (DBP) that remained recorded in the
books as LCTD amounting to P30 million; (e) Closed accounts included in the
balance of CIB – LCCA amounting to P11.757 million; and (f) Non-preparation
of the Bank Reconciliation Statements (BRS) for 21 bank accounts. Moreover,
the City continues to maintain deposits with the Philippine National Bank
(PNB), which ceased to be an Authorized Government Depository Bank (AGDB)
amounting to P86.224 million, contrary to Department of Finance (DOF)
Circular No. 01-2017 dated May 11, 2017.

1.1 The CIB account registered an aggregate account balance of P4,996,657,275.28

as of December 31, 2021, with the details shown below:

Special Education
CIB Account/Bank General Fund Trust Fund Total
Fund
CIB - LCCA:
Philippine Veterans 200,431,877.38 336,871.54 5,751,037.64 206,519,786.56
Bank (PVB)- 10 bank
accounts
Land Bank of the 848,602,691.78 0.00 193,343,187.06
Philippines (LBP)- 14 1,041,945,878.84
bank accounts
Development Bank of 680,633,202.93 596,609,001.92 1,581,669,951.72
the Philippines- DBP– 304,427,746.87
11 bank accounts
PNB– 7 bank accounts 77,064,183.77 9,051,227.86 108,758.80 86,224,170.43
Sub-total 1,806,731,955.86 605,997,101.32 503,630,730.37 2,916,359,787.55

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 Special Education
CIB Account/Bank General Fund Trust Fund Total
Fund
CIB, LCSA:
LBP– 6 bank accounts 243,990,852.22 - 25,855.77 244,016,707.99
DBP– 1 bank account 1,806,280,779.74 - - 1,806,280,779.74
Sub-total 2,050,271,631.96 - 25,855.77 2,050,297,487.73
CIB - LCTD
DBP- 1 bank account 30,000,000.00 - - 30,000,000.00
Total Cash in Bank as of December 31, 2021 4,996,657,275.28

Unrecorded/unadjusted book reconciling items of total additions

of P0.201 million and total deductions of P18.784 million, or a
total of P18.985 million

1.2 Item 3.3 of COA Circular No. 96-011 dated October 2, 1996, provides:

The accountant shall draw journal vouchers to record all valid

reconciling items that require adjustment and correction in the
GL.

1.3 The Bank Reconciliation Statements (BRS) pertaining to the nine (9) bank
accounts maintained with the PVB, LBP and DBP disclosed various reconciling
items on unrecorded deposits and unrecorded interest income amounting to
P201,341.72 (additions) and P18,783,593.46, (deductions) consisting of
unverified reconciling items, unreconciled difference-prior years, returned
checks, debit memo and unidentified credit memos or an aggregate amount of
P18,984,935.18 covering CY 2021 and prior years that remain
unrecorded/unadjusted in the books.

1.4 Management explained that some of these reconciling items were from
unidentified/unverified CY 2011 and prior years’ transactions rendering
difficulty in the verification of these reconciling items.

1.5 This observation is a reiteration of a finding in the last year’s Annual Audit
Report. The non-recording of valid reconciling items resulted in the
overstatement of the CIB account and understatement of the related expense
and/or asset account by P18,582,251.74 (net amount). Such condition renders
the accuracy of the balances of affected accounts unreliable in the financial
statements as of year-end. Also, the non-recording of the reconciling items in
the books defeats the purpose of the preparation of the BRS.

1.6 We reiterated our recommendation to Management to require the City

Accounting Department (CAD) to:

a. Coordinate with the City Treasurer’s Office (CTO) to secure the

necessary documents or proof of transactions from the banks concerned
to support the recording of the reconciling items; and

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 b. Conduct immediate and thorough verification of all outstanding
reconciling items not yet taken up in the books to establish the correct
balances of the CIB accounts and thereafter furnish the City Auditor’s
Office with copies of Journal Entry Vouchers (JEVs) taking up the
adjustments.

Negative balance of two bank accounts - P0.991 million

1.7 The CIB accounts normally should have a debit balance. However,
verification of the Subsidiary Ledger (SL) of two CIB–LCCAs revealed that
two (2) bank accounts under the TF registered a negative balance amounting
to P328,554.65 and P662,614.40 or a total of P991,169.05.

1.8 Management explained that the negative balances for PVB xxx-xxx-001 was
due to unsettled reconciling items from CYs 1998 to 2011 and the account
was already closed in December 2015, while PNB xxx-xxx-5 was a forwarded
balance from CY 1995.

1.9 This is also a reiteration of the previous year’s observation, the existence of
the negative balance of the CIB-LCCA account under the TF understated the
Cash account balance by P991,169.05.

1.10 We reiterated our recommendation to the CAD and the CTO to exert full
efforts in identifying and analyzing the possible cause of negative
balances and effect the necessary adjusting journal entries in the books of
accounts.

Dormant balances of the CIB - LCCA and LCSA - P260.075 million

1.11 Sections 3.2 and 3.4 of Department of Finance (DOF), Department of Budget
and Management (DBM), and Commission on Audit (COA) Joint Circular
(JC) No. 4-2012 dated September 11, 2012, provides:

3.2 Dormant Accounts – refer to collections authorized by law

to be deposited with an AGDB but have remained inactive
for more than five (5) years.

3.4 Unnecessary special and trust funds – refer to authorized

special and trust funds maintained by government agencies
with AGDBs but which are no longer necessary for the
attainment of the purposes for which said funds were
established i.e. specific projects/programs, the
implementation of which have been completed or
abandoned.

1.12 Moreover, the Manual of Regulations for Banks defines dormant accounts as:
a) Current or checking accounts showing no deposit or withdrawals for a

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 period of one (1) year; and b) Savings account showing no deposit or
withdrawal for a period of two (2) years.

1.13 Analysis of the bank confirmation received from the banks revealed that some
accounts were inactive from two years to more than five years as follows:

Fund/Bank/
Account
Bank Balance per
No./Period Book Balance CAD/CTO Explanation Audit Issues/Remarks
Confirmation
Provided by
CAD
General Fund: CIB, LCCA
DBP-xxx- 20,958,508.21 20,958,508.21 This account pertains to the funds Although the account
xxxx-030/ from the Caloocan City Medical earned an interest income
2019 Center (CCMC) in the past where a of P16,991.10 for CY
single bank account was used for the 2021, the amount sourced
hospital fees and reimbursement from from CCMC’s operations
PhilHealth and other transactions that could have been used for
concerned the hospital. the delivery of services for
the benefit of the City and
CTO explained that the account its residents.
contained hospital fees deposited over
the counter when the process was still
under a manual system. However, this
account is not used anymore since the
hospital’s processes became
automated as the City has opened
another bank account for the trust
fund.

Regarding the PhilHealth

reimbursement, the CTO explained
that they were required by PhilHealth
to open an LBP account, thus, this
account was left unused.

CTO also stated that they will

investigate this account and further
verify if the same can be reclassified/
consolidated to the other account of
CCMC or the General Fund.
LBP-xxx- 84,153,248.92 84,817,493.01 This pertains to proceeds of loan
xxxx-16/ 2017 entered by the City with LBP. The
amount is reserved for the payment of
projects, programs, and activities
specified in the loan agreement by the
bank and the LGU. CTO also stated
that further verification as to its status
will be undertaken to specify the
reason as to why a balance remains
with the account as the loan was made
before the present administration.
The dormancy of this
account suggests that the
account is not properly
monitored. As the loan was
entered in the past
administration, the PPAs to
which the loan was
established/entered into
may have already been
completed and paid. Thus,
the CTO should reconcile
with CAD regarding the
status of the covered PPAs
and validate whether these
are already paid and make
the necessary adjustments.

This account earned an

interest of P34,120.18.

PVB-xxx- 2,479,492.25 58,522,033.40 The account is from 2012 and prior A difference of
xxxx-001/ years and is not supported by P56,042,541.15 was noted
2016 documents/ records. It was explained between the balance of the
that the difference noted pertains to bank and the books. This
reconciling items that lack supporting difference was already
documents, thus, there is difficulty in raised in the previous audit

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Fund/Bank/
Account
Bank Balance per
No./Period Book Balance CAD/CTO Explanation Audit Issues/Remarks
Confirmation
Provided by
CAD
verification/validation of the account. report.

The CTO also stated that a

confirmation request was made with
the bank, however, the bank was not
able to provide documents regarding
the account.
General Fund - CIB, LCSA
LBP-xxx- 10,121.67 10,117.59 This account was used to open an Per Bank Confirmation-
xxxx-06/ account with LBP in advance. declared as “Dormant”.
2021 However, subsequent expected In this regard, the account
deposits did not push through and the should be closed and
supporting documents cannot be transferred to an existing
found anymore. bank account so as not to
remain idle.
The CTO also explained that this
amount may have come from the
personal funds of someone in the
previous administration as the amount
was not recorded in the Cashbook.
Special Education Fund - CIB, LCCA
DBP-xxx- 9,341,115.27 9,341,115.27 This represents proceeds from loans As discussed earlier for the
xxxx-030/ that remained dormant under the SEF. GF-loan, the CTO should
2017 reconcile with CAD
The loan dated August 4, 2011 regarding the status of
amounted to P1,000,000,000.00. The these PPAs and validate
amount was for education-related whether these are already
PPAs, such as: a) property acquisition/ paid and make the
construction of buildings; b) repair necessary adjustments, as
and maintenance of buildings; and c) warranted.
acquisition of education-related This account earned an
equipment, furniture, fixtures, interest of P7,572.86 for
textbooks and, other materials, etc. CY 2021.
PVB-xxx- 119,939.09 119,939.09 An account under SEF that the City Since the City already
xxxx-002/ keeps for subsequent maintains an account used
2016 payment/expenses after the closing of for the disbursement of
books at year-end. SEF-related PPAs, this
account becomes
redundant and idle.

Trust Fund : CIB, LCCA

DBP-xxx- 7,330,123.86 7,330,123.86 These accounts are for The accounts earned
xxxx-030/ reclassification/ consolidation to other interest as follows:
2020 bank accounts in the TF with the same
PVB-xxx- 897,315.97 897,315.97 purpose/source of funding. DBP-0413-xx: P5,942.55
xxxx-006/ PVB-0066-xx: P80.84
Cannot be
ascertained
LBP-xxx- 34,786.66 34,786.66 LBP 2912-xx :P14.10
xxxx-00/
2020
DBP-xxx- 99,728.14 99,728.14 Funds transferred from National The rules and regulations
xxxx-030/ Government Agencies (NGAs) for provide that the balances
2019 projects, programs as follows: from projects that are
LBP-xxx- 38,152.31 161,888.16 completed/abandoned
xxxx-68/ a) DBP xxxx-xxxx-030 - This should be returned to the
Cannot be fund is from DOST for UCC Source Agencies and the
ascertained BS-Entrepreneurship students same should be eliminated
PVB-xxx- 631,165.28 612,340.25 in the City’s books.
xxxx-0/
Cannot be b) For LBP and the 2 PVB
ascertained accounts, they are for further
PVB-xxx- 108,180.33 108,180.33 verification and validation.
xxxx-002/

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 Fund/Bank/
Account
Bank Balance per
No./Period Book Balance CAD/CTO Explanation Audit Issues/Remarks
Confirmation
Provided by
CAD
Cannot be
ascertained
PNB Manila 77,061,865.21 CAD has exerted all efforts to locate
Savings the available records, it ascertained
(unknown)/ that the needed SLs of 2002 was not
2002 turned over in CY 2013
Total 126,201,877.96 260,075,435.15 A total difference of
P133,873,557.19 was
noted. This amount
pertains to the amount
identified above from
Account No. PVB-xxx-
xxxx-001 and the others
are reconciling items
discussed above

1.14 We further noted that although the above bank accounts were declared
dormant by the banks concerned, dormancy fees were not deducted from the
balances, while some of these accounts still earned interests.

1.15 It is also observed that the City maintains 50 bank accounts from different
AGDBs as follows: 22 accounts under the General Fund; 5 accounts under
SEF and 23 accounts under TF. As discussed above, some of the accounts
became dormant because these were overlooked/not monitored.

1.16 We recommended that the Management require the CTO and CAD to:

a. Exert efforts in the verification/validation of these dormant accounts

to see the possibility of closing these accounts and/or reclassifying
them to other bank accounts under the same fund. Consolidate the
balances with the bank accounts for the same purpose/source of
funding;

b. Reconcile the City’s records with the records of the Source Agencies
(SAs) regarding the dormant accounts under trust fund transferred
from NGAs to facilitate the return of the balances to the SAs
concerned; and

c. Effect the necessary adjustment/s in the book of accounts, as

warranted by transaction documents.

Management comments/actions:

1.17 The Management commented that after analyzing the transaction history of
the P84,817,493.01 under LBP xxx-xxxx-16, the CAD ascertained that it was
established in CY 2007 to receive the loan release of LBP to the City. CAD
discovered the reasons of the remaining balance are: a) payments of projects
under loan term in other City Bank accounts; b) withheld city taxes from

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 payments made under the account; and c) earned net interest income. The City
is finalizing the tracing of paid projects under these term loans using other
bank accounts in order to conclusively use the account for general purpose.

Non-existing account with DBP that remained recorded in the

books as LCTD amounting to P30.000 million

1.18 The bank confirmation from DBP disclosed that the time deposit account
recorded in the books amounting to P30,000,000.00 was not existing with the
bank. Further verification revealed that on April 12, 2019, the DBP has
already replied to the inquiry of the City Treasurer that there is no time
deposit with Account No. xxxx-xxxx-24 maintained by the bank in the name
of the City.

1.19 The CAD explained that they could not verify/reconcile this account because
of lack of documents to support the same. However, they will communicate
with the bank regarding the history of the account.

1.20 The inclusion of the account in the balance of the Cash in Bank account as of
December 31, 2021, renders the existence and accuracy of the cash account
balance doubtful.

1.21 We recommended that the CAD further review its records and
verify/reconcile with the bank regarding Account No. xxxx-xxxx-24 and
make the necessary adjustment/s in the books.

Management comment/action:

1.22 Management commented that the CAD, after revisiting the records of the
City’s TD account, was able to ascertain that it is not in DBP but with LBP.
With this new development, the CAD will communicate with the LBP for the
account’s history.

Closed accounts included in the balance of CIB – LCCA - P11.757 million

1.23 Three (3) bank accounts from the PVB amounting to P11,757,208.77 were not
included among those of the bank accounts confirmed by the bank.

1.24 Further verification of these accounts revealed that the same had already been
closed and/or have no balance as per bank confirmation made by the CTO
dated June 7, 2021. However, these accounts were still included in the
December 31, 2021 balance of the CIB-LCCA accounts, thus renders the
reliability of the balances of the Cash accounts in the financial statements
doubtful.

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1.25 The CTO explained that these accounts were unreconciled with the PVB and
until such time that the same is not reconciled, the balance will be maintained
in the cashbook.

1.26 We recommended that the Management require the CTD and the CAD to
exert full efforts in identifying and analyzing the cash balances and effect
the necessary adjusting journal entry in the books of accounts, as
warranted.

Management comment/action:

1.27 The CAD, in her Letter dated April 18, 2022, to the City Treasurer, requested
the details of the closed three bank accounts with PVB.

Non-preparation of BRS for 21 bank accounts

1.28 Sections 3.2 and 3.4 of COA Circular No. 96-011 dated October 12, 1996,
provide that the Accountant shall within ten (10) days from receipt of the
Bank Statements (BS), reconcile the same with the General Ledgers (GL) and
prepare the Bank Reconciliation Statements (BRS) in five (5) copies and
submit the duplicate and quadruplicate copies including the paid checks and
original copies of debit/credit memos (DM/CM) to the Auditor for verification
within ten (10) days after the end of each month.

1.29 The City maintains 50 bank accounts with an aggregate balance of

P4,996,657,275.28 for CIB–LCCA, LCSA, and LCTD under the General
Fund (GF), Special Education Fund (SEF), and Trust Fund (TF) accounts as
of December 31, 2021. Of these accounts, only 29 accounts with a total
balance of P4,807,998,469.06 were with BRSs submitted to the Audit Team
on
February 14, 2022, while the other 21 bank accounts with a total balance of
P188,658,806.22 had no submitted BRSs to date, details as follows:

Particulars Amount CAD Explanation

PNB – 4 accounts 77,064,183.77 No account number indicated on the Subsidiary
Ledger, therefore could not be traced
LBP - 3 accounts 44,980,255.28 No Bank Statements were received for the
PNB – 3 accounts previous years up to now. Of which, one account
DBP – 2 accounts with PNB has negative balance of P (662,614.40).
PVB – 2 accounts
1,005,496.30 Received bank statements up to July 2021, in
PVB – 2 accounts September 2021. (No Bank Statements were
received beyond the said date; the Bank Statement
received on April 2022 was only for the months
December 2019 to November 2020)
PVB – 1 account 7,078,520.58 Received the bank statement in April 2022, but no
year indicated in the said Bank Statement
PVB – 2 accounts 58,641,972.49 Received bank statement up to a certain period
only. No bank statements were received beyond

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 Particulars Amount CAD Explanation
the said period.
PVB – 2 accounts (111,622.20) The negative balance on Subsidiary Ledger; Fund
from this account had already been transferred
to Account No. xxxx-xxxxxx-002 on
December 4, 2015. It already had a zero balance in
bank statement as of January 29, 2016
Total 188,658,806.22

1.30 It can be gleaned from the explanation of the CAD that these accounts were
not prepared with BRS and therefore no submission to the City Auditor’s
Office as prescribed under item 3.4 of COA Circular No. 96-011, because of
the unavailability of Bank Statements for the reasons stated above. As a result,
the existence of the reported cash balances in the City’s books of accounts
could not be readily ascertained.

1.31 We recommended that the Management require the:

a. CAD to prepare the BRS for all bank accounts in compliance with
Sections 3.2 and 3.4 of COA Circular No. 96-011;

b. CTO to request from the banks concerned, copies of bank

statements of the City’s bank accounts; and

c. CAD and CTO to establish an effective coordination system so that

the City’s cash accounts are adequately backed-up with confirmed
bank balances and supported with appropriate documents.

Management comment/action:

1.32 Management informed that the CAD, in four different letters all dated April
2022, requested to LBP, DBP, and PVB for the transaction history of its
13 accounts, five accounts and eight accounts, respectively.

The City continues to maintain deposits with the PNB which has
ceased to be an AGDB contrary to DOF Circular No. 01-2017
dated May 11, 2017

1.33 Department Circular (DC) No. 01-2017 dated May 11, 2017, of the DOF,
amending DC No. 001-2015, which was subsequently adopted by the Bureau
of Local Government Finance (BLGF) by the issuance of BLGF
Memorandum Circular No. 07-01-2017 dated July 3, 2017, altogether states
that:

Section 2. Section 5.2 of Department Circular No. 001-2015 dated

June 1, 2015, as amended, is hereby amended to read as follows:
NGAs, GOCCs and LGUs, specifically allowed by law, rules and
regulations to retain income and/or for operations and/or working

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 balances, shall deposit and maintain Government Funds with any
of the following banks:

a. Land Bank of the Philippines;

b. Development Bank of the Philippines;
c. Philippine Postal Savings Bank;
d. Al Amanah Islamic Investment Bank of the Philippines;
e. United Coconut Planters Bank – x xx
f. Philippine Veterans Bank – x xx.

Section 3. Section 5.4 of Department Circular No. 001-2015 dated

June 1, 2015, as amended, is hereby amended to read as follows:
Deposits with banks other than those listed in Section 5.2 may be
allowed, only if any of the following circumstances exists:

5.4.1 The banks listed in Section 5.2 cannot provide

the required banking products and services;

5.4.2 The banks listed in Section 5.2, or their

collection facilities, are not accessible within a
twenty (20) kilometer radius; or

5.4.3 There are security and safety risks.

1.34 Further, Section 4 of DC No. 01-2017, amending Section 5.5 of DC

No. 001-2015 dated June 1, 2015, specifically stated that the requesting
agency, the City in this case, shall request prior approval from the BLGF to
open and maintain an account in banks other than AGDBs/GFIs.

1.35 Analysis of the CIB account disclosed that the City still maintains accounts
with PNB, a bank which has ceased to be an AGDB, shown as follows:

Fund/Bank/Account Audit
Book Balance CTO Explanation
No. Issues/Remarks
GF: CIB, LCCA
PNB - Manila City 1,268.74 These are balances Maintenance of
(unknown) forwarded in 2004 and bank accounts with
PNB Manila 797.82 prior years, however, the PNB was already
National (unknown) City opted not to close the subject of
PNB Manila Savings 252.00 these accounts because previous year’s
(unknown) there are still unreconciled observation. The
PNB Manila Savings 77,061,865.21 balances when compared continued
(unknown) to the balances per books. maintenance of the
SEF: CIB, LCCA Hence, the City plans to account with PNB,
PNB Acct. No. xxx- 9,051,227.86 keep the accounts open at which is no longer
xxxx-2 a level of deposit covered considered as
TF: CIB, LCCA by PDIC so that there will AGDB as provided
PNB Acct No. xxx- 771,373.20 be no loss to the City until under Sec. 5.2 of
xxxx-6 a bank reconciliation is the DOF circular, is

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 Fund/Bank/Account Audit
Book Balance CTO Explanation
No. Issues/Remarks
made. In the meantime, not allowed.
the CAD and the CTO are
exhausting all possible
means to locate the
relevant documents for the
analysis of these accounts.

PNB Acct. No. xxx- (662,614.40) This is also a

xxxx-5 finding for a
negative balance in
the CIB account.
Total 86,224,170.43

1.36 We recommended that the Management exert effort in the validation and
verification of these accounts and immediately transfer the bank account
deposits from PNB to any of the AGDBs or may opt to obtain
clearance/approval from the BLGF should the City wishes to retain
maintenance of their current deposits with PNB.

Management comments/actions:

1.37 Management informed that the CAD revisited the transaction history of the
P77,061,865.21 savings account in CY 2002 and has been dormant until now.
CAD has exerted all efforts to locate the available records, it ascertained that
the needed SLs of CY 2002 was not turned over in CY 2013.

2. The City continues to record reimbursements from PhilHealth for hospital

charges under “cash basis” accounting, instead of recognizing the revenue when
earned (“accrual basis” accounting), contrary to Paragraph 7 of the
International Public Sector Accounting Standards (IPSAS) 1. This incorrect
accounting practice, which was already pointed out in prior audit but still
persists, resulted in the understatement of the accounts: Due from GOCCs by
P34.909 million, Due to Officers and Employees by P9.689 million, Hospital Fees
by P47.691 million and Government Equity by P31.103 million; and
overstatement of the account Due to GOCCs by P53.573 million, as of December
31, 2021. Collectively, using the cash basis accounting distorts the fair
presentation of the City’s financial statements as of year-end of CY 2021. This
practice also deprived the City of a valuable revenue stream available for
budgeting by not recognizing claims for hospital charges, which could have been
used to provide better health care services to its constituency.

2.1 IPSAS 1, Paragraph 7 defines accrual basis as a basis of accounting where

transactions and other events are recognized when they occur, and not only
when cash or its equivalent is received or paid. Therefore, the transactions and
events are recorded in the accounting records and recognized in the financial

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 statements of the periods to which they relate. The elements recognized under
accrual accounting are assets, liabilities, net assets/equity, revenue and
expenses.

2.2 Section 21 of RA No. 11223, or otherwise known as an “Act Instituting the

Universal Health Care for All Filipinos, Prescribing Reforms in the Health
Care System and Appropriating Funds therefor,” states:

Income Derived from PhilHealth Payments. All income

derived from PhilHealth payments shall accrue to the Special
Health Fund to be allocated by the LGUs exclusively for the
improvement of the LGU health system: Provided, that
PhilHealth payments shall be credited to the annual regular
income (ARI) of the LGU. (Emphasis ours)

2.3 Accounts related to the reimbursement of PhilHealth claims show the

following account balances as of December 31, 2021:

Trust Fund books– Subsidiary Ledger Accounts Amount

Due to GOCCs - PhilHealth 53,573,412.24
Due to Officers and Employees – PhilHealth 5,854,400.07
Hospital Fees 34,634,703.82

2.4 Accounting records maintained by the Health Care Institutions (HCIs) of the
City: Caloocan City Medical Center (CCMC) and Caloocan City North
Medical City (CCNMC), show total claims for hospital charges of
P47,690,647.34 in CY 2021 and unpaid claims for professional fees of
P9,688,930.00 as of December 31, 2021. The details are shown below.

Particulars CCMC CCNMC Total

Hospital Charges (Hospital Fees)
Balance as of December 31, 2020 3,822,470.00 - 3,822,470.00
Add: Claims filed in 2021 40,452,393.34 7,238,254.00 47,690,647.34
Total Claims 44,274,863.34 7,238,254.00 51,513,117.34
Less: Claims Paid in 2021:
a. Total Claims Prior to 2021 980,070.00 754,940.00 1,735,010.00
b. For 2021 21,241,365.25 3,316,179.50 24,557,544.75
Total Claims Paid in 2021 22,221,435.25 4,071,119.50 26,292,554.75
Total Unpaid Claims as of 22,053,428.09 3,167,134.50 25,220,562.59
December 31, 2021

Professional Fees (Due to Officers and Employees – PhilHealth)

Balance as of December 31, 2020 1,877,760.00 603,974.00 2,481,734.00
Add: Claims filed in 2021 16,098,502.00 2,194,631.00 18,293,133.00
Total Claims 17,976,262.00 2,798,605.00 20,774,867.00
Less: Claims Paid in 2021:
a. Total Claims Prior to 2021 488,130.00 430,404.00 918,534.00
b. For 2021 8,910,150.00 1,257,253.00 10,167,403.00
Total Claims Paid in 2021 9,398,280.00 1,687,657.00 11,085,937.00

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 Particulars CCMC CCNMC Total
Total Unpaid Claims as of 8,577,982.00 1,110,948.00 9,688,930.00
December 31, 2021

2.5 The CAD adopted cash basis of accounting by recognizing payments made by
patients as revenue, but not hospital claims for reimbursements from
PhilHealth pertaining to deductions from patients’ statement of account.
IPSAS calls for revenue to be recognized when earned, not when paid
following the accrual basis of accounting.

2.6 The CAD records payments made by PhilHealth to CCMC and CCNMC, for
hospital charges as a liability in its Trust Fund books. This incorrect practice
by CAD was already raised as an audit observation in the past but remained in
place to this day. The City Accountant contended that reimbursements made
by PhilHealth were recorded as a liability in the Trust Fund books as required
by PhilHealth Circular No. 2017-2020 dated September 1, 2017, and that if
hospital charges paid by PhilHealth were to be recorded under the General
Fund, the revenue may be used for the City’s programmed projects and
operations costs other than for health services.

2.7 In addition, the head of the CCMC explained that at the beginning of each
year and as a requirement by PhilHealth, the Chief of Hospitals (CCMC and
CCNMC) and the City Mayor execute a Performance Commitment for HCI
(the Commitment sheet was provided by PhilHealth), with a stipulation as
follows:

14. That being a government-owned health care institution, we

shall maintain a trust fund for the PhilHealth reimbursements
in compliance to Section 34-A of Republic Act 10606 which
provides that “revenues shall be used to defray operating costs
other than salaries, to maintain or upgrade equipment, plant or
facility, and to maintain or improve the quality of care.

2.8 The aforementioned PhilHealth Circular prescribes the guidelines to

implement the Auto-Credit Payment Scheme, where HCI claims are paid
directly through its designated deposit account. This was intended to make
the claims process more efficient by automating PhilHealth’s settlement of
HCI claims. Section VI.A.2 of the Circular requires government HCIs to
maintain two deposit accounts as trust funds: one for HCI charges, and the
other for professional fees. Both bank accounts shall be treated as trust fund.
In addition, the Circular also requires the LGU to maintain a subsidiary
ledger for the account receivables from PhilHealth for each of the HCI, which
in this case would be the subsidiary ledger Due from GOCCs-PhilHealth
account.

2.9 The “trust funds” in the aforesaid PhilHealth Circular, ensures that the
PhilHealth payments for hospital fees and charges shall accrue to the Special

85
 Health Fund to be allocated by the LGUs exclusively for the improvement of
the LGU health system as stated in Section 21 of RA No. 11223, but does not
mean that it should be recorded in the Trust Fund books of the City. It bears to
stress that Section 21 of RA No. 11223 clearly states that PhilHealth
payments shall be credited to the annual regular income of the LGU. The
LGU, in turn, allocates a portion of its annual budget for the hospital
requirements submitted by the HCIs. The proper recording should still be in
the General Fund books under a subsidiary ledger-special account in trust for
PhilHealth remittances pursuant to Section 105 of the New Government
Accounting System Manual, which states:

Special Accounts in the General fund. – Local government units

shall maintain special accounts in the General Fund for public
utilities and other economic enterprises, loans, interest, bond
issued, and other contributions for specific purposes. Xxx.

2.10 Inherent in the Circular’s requirement that the two bank accounts be treated as
a “trust fund” is the notion that these funds may not be used for any purpose
other than what it was intended for: to reimburse the HCIs hospital charges
and the professional service providers. The Circular did not imply non-
recognition of revenue until the funds are received. The City Accountant may
have interpreted “trust fund” literally, but the intention of the Circular was
clear, recognize the revenue when earned, not when paid, hence the
requirement to maintain a subsidiary ledger for account receivables from
PhilHealth.

2.11 When an HCI files a claim, it implies services had been rendered and the
service provider is seeking reimbursement from PhilHealth. At this point, the
City is expected to recognize the receivable and revenue on its books, and the
claim will trigger PhilHealth to record its obligation to pay on its books. This
follows the application of accrual basis of accounting per IPSAS.

2.12 As a result of the non-recognition of revenue and corresponding receivables,

the City records the reimbursements from PhilHealth for hospital charges as a
liability on its books, distorting the financial statements to present a more
accurate picture of the City’s financial health, resulting in the understatement
of the accounts Due from GOCCs by P34,909,492.59, Due to Officers and
Employees by P9,688,930.00, Hospital Fees by P47,690,647.34, and
Government Equity by P31,103,297.49, and overstatement of the Due to
GOCCs account by P53,573,412.24. The Due to Officers and Employees
account is the City’s obligations to its professional service providers.

2.13 More importantly, the City is deprived of a valuable revenue stream for
appropriation purposes, by not recognizing hospital claims to be reimbursed
by PhilHealth, which could have been used to provide better health care
services to its constituency, particularly at a perilous time when there is so

86
much pressure on the City’s health care infrastructure to combat the global
health pandemic caused by the Coronavirus.

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 2.14 We recommended that Management require the:

a. The CAD to:

 Strictly adopt the accrual basis of accounting pursuant to IPSAS

1, which is the financial reporting framework adopted in
government;

 Review and analyze the claims and reimbursements to and by

PhilHealth on hospital fees and charges for CY 2021 and prior
years, and make the necessary adjusting journal entries, as
warranted; and

 Henceforth, strictly comply with Section 21 of RA No. 11223.

b. The CCMC and the CCNMC to furnish the CAD copies of the
hospital claims to PhilHealth for proper recording pursuant to and
IPSAS 1 and Section 21 of RA No. 11223.

Management comments/actions:

2.15 The Management, in its Letter dated May 4, 2022, commented that:

a. The CAD will follow the recommendation in recording the transactions

involving claims and reimbursements to and by PhilHealth on hospital
fees. The CAD will use the accrual basis by setting up receivables from
PhilHealth once the CAD records and Hospitals Records are reconciled;
and

b. They will monitor the compliance of CCMC and CCNMC in furnishing

copies to the CAD of the hospital claims to PhilHealth for proper
recording.

3. Cash advances (CAs) granted by the present (July 1, 2013 to CY 2021) and past
(June 30, 2013 and prior years) administrations amounting to P0.106 million and
P74.275 million, respectively, or a total of P74.381 million remained outstanding
as of December 31, 2021, contrary to COA Circular No. 97-002 dated
February 10, 1997. Thus, the non-liquidation of the CAs prevented Management
from ascertaining whether the CAs were appropriately utilized for the purpose
for which they were granted and overstated the balances of the Advances
accounts by P74.381 million and the Government Equity accounts for those
pertaining to prior period transactions in the amount of P74.3 million and
understated the related Expense accounts by P0.081 million.

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3.1 As of December 31, 2021, the consolidated Advances accounts totaled to
P74,380,865.26, details showing the balances granted by the present and past
administration:

General Fund Trust Fund Total

Account Administration
Present Past Total Past
Advances for Payroll 9,900.00 - 9,900.00 - 9,900.00
Advances to Special 60,7 44,778,4 44,839,1 1,363, 46,202,
Disbursing Officer 47.02 08.15 55.17 128.25 283.42
Advances for Officers 35,4 28,133,2 28,168,6 28,168,
and Employees 46.47 35.37 81.84 - 681.84
Total 106,093.49 72,911,643.52 73,017,737.01 1,363,128.25 74,380,865.26

Non-liquidation of advances despite the lapse of the period to

liquidate – P 30.106 million

3.2 Our analysis of the Schedule of Aging of Unliquidated CAs, Subsidiary

Ledgers (SLs) and other relevant documents showed that, out of the
outstanding balance of CAs as at December 31, 2021, the amount of
P106,093.49 and P30,000,000.00, which were granted in the present and past
administration, respectively, or a total of P30,106,093.49, was unliquidated
despite the lapse of the prescribed period, as presented below:

Present Administration Past Administration

Period Period
Account Title Amount Amount Total
Unliquidated Unliquidated 
Advances for 9,900.00 17 days 0.00 9,900.00
Payroll
Advances to Special 60,747.02 18 days 30,000,000.00 8 years 30,060,747.02
Disbursing Officer
Advances to 35,446.47 2 months to 6 35,446.47
Officers and years
Employees
Total 106,093.49 30,000,000.00 30,106,093.49

3.3 COA Circular No. 97-002 dated February 10, 1997, provides for the rules and
regulations on the grant, utilization and liquidation of CAs. The applicable
provisions on the liquidation of cash advances under each of the different
types of cash advances are provided in Section 5, and catch-all provision
under Section 5.8, which states:

All cash advances shall be fully liquidated at the end of each

year. Except for petty cash fund, the Accountable Officer shall
refund any unexpended balance to the Cashier/Collecting
Officer who will issue the necessary official receipt.

3.4 Review of records and other relevant documents on the CAs disclosed that the
P9,900.00 balance of Advances for Payrolls, which was granted on
December 24, 2021, was liquidated on January 10, 2022.

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3.5 The Advances to Special Disbursing Officers unliquidated amount of
P30,060,747.02 in the General Fund were granted by the present and past
administrations in the amounts of P60,747.02 and P30,000,000.00,
respectively. The CAs amounting to P60,747.02, which were granted to four
(4) AOs on various dates in CY 2021 for various purposes, were fully
liquidated in January and February 2022. The P30,000,000.00, on the other
hand, was granted on March 21, 2013, for intelligence and confidential
activities. The liquidation transaction was disallowed by the
Intelligence/Confidential Fund Audit Unit, Office of the Chairperson,
Commission on Audit on March 3, 2015, under Notice of Disallowance (ND)
No. 2015-03-008. A petition was filed on September 21, 2015 by the former
Mayor Enrico R. Echiverri at the Office of the Secretariat of the Commission
Proper, COA, for resolution.

3.6 The Advances to Officers and Employees of P35,446.47 granted to four (4)
AOs for various purposes remained unliquidated for two (2) months to six (6)
years. The two (2) AOs were already deceased and resigned, and those
employees who are still connected with the agency did not liquidate their cash
advances within the prescribed period. Out of the P35,446.47, the CAs
amounting to P4,900.00 were liquidated in January 2022.

3.7 The delayed liquidation of the CAs resulted in the late recording in the books
and further exposes unspent cash advance to the risk of loss or
misappropriation.

Dormant unliquidated cash advances totaling P44.275 million

3.8 Out of the total outstanding CAs of P 74,380,865.26 as of December 31, 2021,
CAs amounting to P44,274,771.77 granted under the past administration
remained dormant accounts of deceased, resigned and unidentified AOs, those
whose locations cannot be traced and were non-moving for sixteen (16) to
forty-one (41) years.

3.9 The City submitted a request for write-off for the P8,076,630.10 CA of a
deceased AO, however, the request was denied on April 27, 2017, under LGS-
OAC Decision No. 2017-04.

3.10 Management has the responsibility to exert all efforts to enforce the
liquidation of CAs within the prescribed period and to act on long overdue
and dormant accounts. The non-liquidation of the CAs prevented Management
from ascertaining whether the CAs were appropriately utilized for the purpose
for which they were granted and overstated the balances of the Advances
accounts by P74,380,865.26 and the Government Equity accounts for those
pertaining to prior period transactions in the amount of P74,300,071.77 and
understated the related Expense accounts by P80,793.49.

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91
3.11 We recommended that Management require:

a. The CAD to -

 Strictly enforce the liquidation of CAs granted to AOs within the

reglementary period and immediate refund of any unspent
amount;

 Submit to the City Legal Officer the cases of the deceased AOs
and those who have already resigned and whose location cannot
be traced for appropriate legal remedies;

b. The City Legal Officer to recommend to the City Mayor the

appropriate action to be done to recover the unliquidated cash
advances; and

3.12 We also recommended that Management initiate action to request the

write-off of the dormant CAs following the requirements and procedures
provided under COA Circular No. 2016-005.

Management comments/actions:

3.13 The Management, in its Letter dated April 18, 2022, commented:

 The amount of P5,065.97 pertains to lump-sum amount of accounting

errors in CYs 2018 and 2019 and adjusted on April 18, 2022, under JEV
GJ 100-22-04-00044;

 The amount of P42,554.17 was refunded in CY 2022.

 The CAD issued a Memorandum dated April 13, 2022, on the

Reglementary Period on the Liquidation of Cash Advances. The CAD
further informed that they will send a letter request for the dormant
accounts to be written off.

3.14 Management also informed that they have already sent a letter to City Legal
Officer asking for the appropriate action in recovering the unliquidated cash
advances of deceased officers.

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4. The existence, validity, accuracy and reliability of the Property, Plant and
Equipment (PPE) account balance with a carrying value of P11.38 billion as of
December 31, 2021, could not be ascertained due to the following:

(a) Unreconciled discrepancy of P2.528 billion between the accounting records

and the Report on the Physical Count of Property, Plant and Equipment
(RPCPPE);

(b) Unidentified items in 15 PPE accounts valued at P328.477 million and four
PPE accounts with negative balances totaling P62.678 million were
recorded in lump-sum amounts;

(c) Inaccurate computation of depreciation in the aggregate amount of

P583.865 million;

(d) Non-derecognition of: (i) undetermined value of replaced/removed materials

incident to the repairs, renovation and rehabilitation of 13 buildings and
structures amounting to P246.52 million; (ii) assets deemed unserviceable
worth P110.427 million remained in the books at year-end; and (iii) assets
no longer needed totaling P6.337 million and already transferred without
cost to other local and national government agencies in CY 2018 were still
included as PPE; and

(e) Absence of physical inventory taking of PPE under SEF.

Thus, contrary to Paragraph C.3, Chapter 5 of the Manual on Property

Custodianship, Paragraphs 43, 71, 82, 83 of IPSAS 17 on PPE and Paragraphs
5.1, 5.8 and 5.12 of COA Circular No. 2020-006 dated January 31, 2020.

Unreconciled discrepancy of P2.528 billion between the

accounting records and the Report on the Physical Count of
Property, Plant and Equipment (RPCPPE)

4.1 Paragraph C.3, Chapter 5 of the Manual on Property Custodianship provides

that after the physical inventory-taking, the Inventory Committee shall
reconcile the results of the count with the property and accounting records.
xxx. The inventory listing of the equipment shall be checked on the property
card as against the equipment ledger cards maintained by the accounting and
the total thereof shall be compared with those in the general ledger. All
discrepancies between the physical and the book inventories must be
investigated, cleared and reconciled immediately. If necessary, written
explanation shall be required.

4.2 As of December 31, 2021, the PPE accounts per GL, excluding that of the
Construction-in-Progress accounts, amounted to P19,531,927,859.00
(accumulated depreciation included), which is supported by the SL account
balances. The amount differed by P2,528,113,784.84 with the RPCPPE
93
 submitted by the General Services Department (CSD) with a total balance of
P18,529,319,168.34. The summary data is shown below and further discussed
in the succeeding paragraphs.

Accounts Per SL Per RPCPPE Difference

General Fund 17,375,868,036.20 16,405,966,962.51 2,494,974,952.99
Special Education Fund 2,156,059,822.80 2,123,352,205.75 33,138,831.85
Total GF and SEF 19,531,927,859.00 18,529,319,168.34 2,528,113,784.84

The Land account bore the highest discrepancy between the SL and the RPCPPE

4.3 Analysis of the SLs and the RPCPPE records revealed that the biggest
difference was registered in the Land account in the amount of
P1,266,006,789.16, equivalent to 48.49 percent of the total variance of
P2,528,113,784.84. The difference is broken down into P1,216,548,122.49 for
GF and P9,458,666.67 for SEF, as follows:

Accounts Per SL Per RPCPPE Difference

Land - GF 2,274,035,857.63 1,057,487,735.14 1,216,548,122.49
Land - SEF 40,036,689.67 30,578,023.00 9,458,666.67
Total 2,314,072,547.30 1,088,065,758.14 1,266,006,789.16

4.4 Review of the details of the Property Cards (PCs) and the RPCPPE for land
under the GF and the Schedule of Land supporting the SLs maintained by the
CAD revealed the following:

a. There were 15 land items amounting to P3,496,057.15 that were reported in

the PCs but not found in the Schedule of Land.

b. The PCs for Land do not tally with the RPCPPE. Inquiry with the GSD
disclosed that land titles are in their custody, but as of this Report, PCs
pertaining to the Land account are not yet updated while the details of the
Land account in the RPCPPE were incomplete.

4.5 According to the CAD, the amount of P1,550,779,703.00 in the Schedule of

Land for GF pertained to the forwarded beginning balance as of
December 31, 2003, with no details. This amount was reduced to
P1,220,047,551.59 on June 1, 2021 due to an adjustment made for the
reclassification of accounts in the amount of P330,732,151.41.

Some of the accounts showed higher values per RPCPPE than per SL with a
net difference of P762.656 million while the other accounts registered higher
amounts per SL over that of the RPCPPE figures

4.6 Review further disclosed that some of the PPE accounts per RPCPPE presented
higher amounts than per SL, while others registered higher amounts per SL
than the RPCPPE, as shown in the succeeding two tables.

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95
PPE accounts per RPCPPE with higher amounts than per SL

Account Per SL Per RPCPPE Difference

General Fund
Other Land Improvements 5,619,213,015.12 5,678,160,520.93 58,947,505.81
Flood Control Systems 49,516,940.00 55,193,199.00 5,676,259.00
Power Supply Systems 63,692,316.00 102,319,338.98 38,627,022.98
Other Infrastructure Assets 69,107,144.22 79,724,949.78 10,617,805.56
Buildings 1,208,699,813.42 1,471,224,934.92 262,525,121.50
Hospital and Health
Centers 713,067,940.81 753,176,015.88 40,108,075.07
Markets 266,850,717.20 274,107,142.77 7,256,425.57
Other Structures 2,747,674,763.06 3,086,197,019.07 338,522,256.01
Military, Police and 6,199,007. 6,359,350.0 160,342.
Security Equipment 09 0 91
Total 10,744,021,656.92 11,506,462,471.33 762,440,814.41
Special Education Fund
Other Structures 134,290,171.97 134,497,653.17 207,481.20
Information and 159,860,820.30 159,868,946.46 8,126.24
Communication
Technology Equipment
Total 294,150,992.27 294,366,599.63 215,607.44
Total GF and SEF 11,038,172,649.19 11,800,829,070.96 762,656,421.85

PPE accounts per SL with higher amounts than per RPCPPE

Accounts Per SL Per RPCPPE Difference
General Fund
Park, Plazas and 241,667,019.49 189,726,294.18 51,940,725.31
Monuments
School Buildings 909,585,492.17 600,103,711.95 309,674,030.70
Machinery 4,084,547.96 3,840,800.00 243,747.96
Office Equipment 153,411,852.95 145,565,683.05 7,846,169.90
Information and 647,621,352.72 630,507,849.78 17,113,502.94
Communication
Technology Equipment
Communication 91,508,637.97 81,690,368.56 9,818,269.41
Equipment
Disaster Response and 461,778,588.06 461,343,071.00 435,517.06
Rescue Equipment
Medical Equipment 520,189,230.69 510,037,742.83 10,151,487.86
Sports Equipment 5,158,523.00 1,384,445.00 3,774,078.00
Technical and Scientific 1,081,545.28 - 1,081,545.28
Equipment
Motor Vehicles 323,886,460.79 323,645,295.90 241,164.89
Watercrafts 6,751,280.00 1,743,560.00 5,007,720.00
Other Transportation 81,494,076.00 80,646,488.00 847,588.00
Equipment
Furniture and Fixtures 144,132,754.70 135,081,051.88 9,051,702.82
Books 9,665,185.88 6,951,253.40 2,713,932.48
Other Property, Plant and 372,911,041.14 286,866,207.66 86,044,833.48
Equipment
Total 3,974,927,588.80 3,549,133,823.19 515,986,016.09

96
 Accounts Per SL Per RPCPPE Difference
Special Education Fund
Other Land Improvements 105,830,199.43 92,312,734.28 13,517,465.15
School Buildings 1,377,765,431.58 1,377,573,181.10 192,250.48
Office Equipment 70,624,095.81 70,438,952.08 185,143.73
Disaster Response and
Rescue Equipment 900,403.00 - 900,403.00
Medical Equipment 18,620,356.66 18,597,533.32 22,823.34
Technical and Scientific
Equipment 6,423,872.25 2,000,000.00 4,423,872.25
Other Machinery 5,259,721.75 2,000,000.00 3,259,721.75
Equipment
Motor Vehicles 2,260,384.33 2,235,200.00 25,184.33
Furniture and Fixtures 143,321,426.70 142,888,539.67 432,887.03
Other Property, Plant and 90,866,249.35 90,361,442.67 504,806.68
Equipment
Total 1,821,872,140.86 1,798,407,583.12 23,464,557.74
Total (GF and SEF) 5,796,799,729.66 5,257,541,406.31 539,450,573.83

4.7 Interview with the GSD disclosed that the PPEs were recorded in the Property
Cards (PCs) upon receipt of the items delivered. On the other hand, the CAD
recorded the PPEs upon payment. The present set-up shows that the two
departments were not able to exercise proper coordination and reconciliation of
their records.

4.8 The noted variances between the records of the CAD and the GSD resulted in
doubtful existence of the PPE items and tainted the validity and reliability of
the total PPE account balance of P11,106,979,629.11.

4.9 We recommended that the GSD and the CAD, in coordination with other
departments/offices concerned, establish an effective process flow to
address the noted gaps and reconcile their records for the necessary
adjustments;

Management comments/actions:

4.10 The Management, in its Letter dated May 2, 2022, commented that to improve
the system of recording of the PPE accounts, the GSD and CAD will initiate to
rectify the unified classification of the items to ensure consistent take up of
similar items by the two departments.

4.11 The Management also commented that despite the earnest efforts exerted by
the committee during the actual conduct of the inventory of the reported land,
the same proved futile considering that most of the land accounts were not
even identified in the records by the street address which would supposedly
help the committee in locating the same. Nevertheless, they stated that the
GSD and the CAD are continuously working with each other to reconcile the
discrepancies between the SL and the RPCPPE.

97
Unidentified items in 15 PPE accounts per Schedule of PPE
valued at P328.477 million and four other PPE accounts with
negative balances totaling P62.678 million were recorded in
lump-sum amounts

4.12 Review of the SLs and related Schedule of PPE under the GF disclosed
unidentified items (difference of SL versus Schedule of PPE) in 15 PPE
accounts that were recorded in lump sum amount of P328,476,709.89. The
same is true with four (4) other PPE accounts which have negative balances
aggregating to P62,678,005.50.

4.13 The CAD informed that the items were forwarded balances in the books (GL
and SL) with no supporting documents, thus, the acquisition costs, serviceable
lives and descriptions of the properties could not be determined. As a result,
the PPE items were not computed with the corresponding depreciation
expense/accumulated depreciation, hence, the Assets and the Government
Equity accounts were overstated.

4.14 We recommended that the Management require the CAD to locate

documents relative to the unidentified PPE items to facilitate
reconstruction of the remaining balances of the said accounts.

4.15 We also recommended to Management, in the case of the unsettled PPE

discrepancies after all efforts done, to evaluate if their case would qualify
in the application for the One-Time Cleansing of PPE Account Balances
for Disposition of Non-Existing/Missing PPEs allowed under COA
Circular No. 2020-006 dated January 31, 2020, subject to full compliance
of the requirements under Item Nos. 7 and 8 thereof.

Management comments/actions:

4.16 Management informed that the CAD has made adjustment for reclassification
of various PPE accounts as a result of reconstruction of the City’s PPE SLs
from CYs 1989-2000 per Journal Entry Voucher (JEV) No. GJ 100-22-05-
000057 dated May 2, 2022, in the total amount of P60,751,369.03.

4.17 The Management also informed that they have started the planning phase of
the One-Time Cleansing of PPE under COA Circular No. 2020-006 by
establishing an Inventory Committee and conducting a sample dry run of
counting done by each office, as prescribed in Item 6.1.1 of the said Circular.
CAD has also prepared a separate and updated Property Ledger Card using the
data obtained from the conducted sample dry run as one of the initial sources
of concern to be used in planning.

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Carrying amounts of depreciable PPE accounts of P7.407 billion
under the GF are unreliable due to inaccurate computation of
depreciation in the aggregate amount of P583.86 million.

4.18 Paragraph 43 of IPSAS 17 on PPE, provides that after recognition, an item of

PPE shall be carried at its cost less any accumulated depreciation and any
accumulated impairment losses. Such is the definition of the Carrying Amount
as provided under Paragraph 13 of the same IPSAS.

 The computation of depreciation for PPEs amounting

to P2.694 billion acquired before CY 2015 is not
compliant with Paragraph 42 of IPSAS 3 which sets
the guidelines on change in accounting estimate

4.19 Paragraph 13 of IPSAS 17 on PPE defines Depreciation as the systematic

allocation of the Depreciable Amount of an asset over its useful life. Also,
Depreciable Amount is defined in the same paragraph as the cost of an asset, or
other amount substituted for cost, less its residual value. Finally, the Residual
Value of an asset is the estimated amount that an entity would currently obtain
from disposal of the asset, after deducting the estimated costs of disposal, if the
asset were already of the age and in the condition expected at the end of its
useful life.

4.20 PAG 6 to IPSAS 17 provides that a residual value equivalent to at least five
percent (5%) of the cost shall be adopted unless a more appropriate percentage
is determined by the agency based on their operation.

4.21 Paragraph 67 of IPSAS 17 also provides that the residual value and the useful
life of an asset shall be reviewed at least at each annual reporting date and, if
expectations differ from previous estimates, the change(s) shall be accounted
for as a change in an accounting estimate in accordance with IPSAS 3,
Accounting Policies, Changes in Accounting Estimates and Errors.

4.22 In CY 2015, with the implementation of IPSAS as the financial reporting

framework in government, the City changed the percentage for the residual
value of PPE from 10% to 5% of the acquisition cost. We observed, however,
that this change was not correctly applied by the CAD. The CAD did not make
an adjustment on the carrying amounts of the PPE acquired before 2015 as
basis of computation of depreciation starting CY 2015. Instead, it outrightly
applied the 5% residual value on all depreciable PPEs on record from CYs
2015 to 2021, regardless of whether the PPE was acquired before or after CY
2015, as if it was based on the 5% from the acquisition date of the PPE.

4.23 The computation done is in contrast to Paragraph 42 of IPSAS 3 which

provides that to the extent that a change in an accounting estimate gives rise to
changes in assets and liabilities, or relates to an item of net assets/equity, it

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 shall be recognized by adjusting the carrying amount of the related asset,
liability or net assets/equity item in the period of change.

4.24 For PPEs acquired before CY 2015, the CAD should have computed the new
amount of depreciation for CY 2015 and onwards, based on the new
depreciable amount, which is the Carrying Amount (CY 2014) less the New
Residual Value (5% of the Acquisition Cost) divided by the remaining life
(estimated useful life less the life used from date of acquisition to CY 2014).

4.25 Based on interview, the City Accountant informed that after the transition to
IPSAS, the CAD, in CY 2016, made the necessary adjustments following the
IPSAS provision, however, due to change of personnel who handled the PPE
accounts sometime between CYs 2017 to 2021, the errors noted in the
observation may have been inadvertently computed and forwarded as
depreciation within the period mentioned.

 Non-observance of Philippine Application Guidance

(PAG) 3, IPSAS 17 in computing the initial
recognition of depreciation of assets

4.26 PAG 3 to IPSAS 17 PPE provides that for simplicity and to avoid
proportionate computation, depreciation shall be for one month if the PPE is
available for use on or before the 15th of the month. However, if the PPE is
available for use after the 15th of the month, depreciation shall be for the
succeeding month.

4.27 We noted that the CAD was not compliant with PAG 3, IPSAS 17 depreciation
policy over PPE totaling P7,953,235,285.16, as follows:

a. Computed the initial depreciation of PPE with acquisition cost totaling

P4,162,901,626.02 uniformly on the month of acquisition, regardless of
the specific day within the month that said items were acquired and made
available for use.

b. Over depreciation of PPE with acquisition cost of P3,790,333,659.14

within the year of acquisition, some of which were computed month/s
before the date of acquisition of the PPE.

4.28 Interview with the City Accountant revealed that the abovementioned policy is
followed by the CAD, however, lapses in recording and computing for
depreciation may have had occurred that rendered the error in the initial
recognition for the depreciation of the noted PPEs. The City Accountant then
assured that verification and validation will be made for the PPE accounts and
necessary adjustments will be made.

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  Initial recording of depreciation of PPEs costing
P78.276 million were recognized several months
from the date of acquisition

4.29 Paragraph 71 of IPSAS 17 provides that depreciation of an asset begins when it

is available for use, i.e., when it is in the location and condition necessary for it
to be capable of operating in the manner intended by management.

4.30 It was noted that depreciation for 34 PPE items with acquisition cost of
P78,276,400.76 were not recognized on the month of acquisition and after
acceptance of the items for use, instead these were recognized several months
after the acquisition date. The City Accountant explained that the PPEs noted
in the observation were delivered to the end user before payment to the
supplier is made, thus, the delay in the computation of the initial depreciation
because the supporting documents of the said PPEs were not yet with the CAD.
These serve as basis for the recording of the PPE in the books and also the
initial recognition of depreciation.

4.31 The overall effect of the noted observations is an understatement of the

Accumulated Depreciation balance and overstatement of the Carrying Amount
of the PPE accounts by P583,864817.59.

4.32 We recommended that the Management require the CAD to:

a. Set up an effective review level within the CAD so as to detect errors,

inaccuracies and oversight in the accounting process, like the
completeness of agency assets that are subjected to depreciation, the
accuracy of information used, and the timing and computation of
depreciation;

b. Comply with Paragraph 42 of IPSAS 3 with regard to change in

accounting estimates;

c. Observe PAG 3 of IPSAS 17 in the initial recognition of depreciation

of PPE; and

d. Effect the necessary adjustments.

Management comments/actions:

4.33 The Management, in its Letter dated May 11, 2022, commented that upon
checking the lapsing schedules, the observations noted in audit occurred in the
3rd and 4th quarters of CY 2021, and prior to this, the CAD applied the
prospective provision of IPSAS 3 Paragraph 42. The said adjustment was
reflected in GJ 100-12-21-00207 dated December 31, 2021, in the amount of

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 P8,152,696.60. CAD is now in the process of finalizing the adjustments for this
error.

4.34 Management agreed with the observations and explained that another reason to
this is the delay in recording of the Accounts Payable. However, the CAD
made sure that the depreciation with regard to the PPEs were recorded at year-
end, thus keeping a correct record of depreciation for the newly acquired
properties. The Management informed that the CAD is now in the process of
establishing a system for recording the monthly AP in order to further
eliminate the months delay caused by this.

4.35 Further, the Management assured that the CAD will set-up an effective review
level to ensure that the errors, inaccuracies and oversight in the accounting
process will be detected and as much as possible be avoided. They also made
sure that the necessary adjustments will be applied adhering the standards of
timing and computation of depreciation and that the information used are
complete and accurate.

Non-derecognition of: (i) Undetermined value of

replaced/removed materials incident to the repairs, renovation
and rehabilitation of 13 buildings and structures amounting to
P246.520 million;
(ii) Assets deemed unserviceable worth P110.427 million; and
(iii) Assets no longer needed and transferred without cost to other
local and national government agencies totaling P6.337 million.

4.36 IPSAS 17, Paragraph 82 on Derecognition provides that the carrying amount
of an item of property, plant and equipment shall be derecognized: (a) [o]n
disposal; or (b) [w]hen no future economic benefits or service potential is
expected from its use or disposal.

i. Non-derecognition of the undetermined value of replaced/removed

materials incident to the repairs, renovation and rehabilitation of
13 buildings and structures amounting to P632.587 million as
required

4.37 Paragraph 85 of IPSAS 17 further provides that If, under the recognition
principle in paragraph 14, an entity recognizes in the carrying amount of an
item of property, plant and equipment the cost of a replacement for part of the
item, then it derecognizes the carrying amount of the replaced part regardless
of whether the replaced part had been depreciated separately. If it is not
practicable for an entity to determine the carrying amount of the replaced
part, it may use the cost of the replacement as an indication of what the cost of
the replaced part was at the time it was acquired or constructed. (Emphasis
ours)

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4.38 As of December 31, 2021, the City recorded Buildings and Other Structures,
except for Markets and Slaughterhouse, valued at P7,084,805,921.01. From
2002 until 2018, a total of 13 buildings and other structures constructed from
CYs 1995 to 2016 had been subjected to 23 incidents of repairs, renovations
and rehabilitations totaling P246,520,383.09. The City capitalized these
subsequent costs to the initial construction costs of the buildings amounting to
P386,066,309.61 bringing the aggregate amount to P632,586,692.70.
Although, the subsequent costs are indeed qualified to be capitalized, the costs
of materials or parts replaced or removed shall, nevertheless, be derecognized
from the books. However, this was not the case.

4.39 Our analysis of the lapsing schedule showed that there were no deductions or
adjustments made despite the occurrence of various repairs and renovations of
the 13 buildings and other structures.

4.40 Based on inquiry with the CAD, we were informed that they inadvertently
overlooked the requirement of the Standards to derecognize in the books, the
costs of replaced/removed materials incident to the repairs, renovations and
rehabilitations. As such, the total reported costs of buildings and other
structures continued to inflate over the period.

4.41 Consequently, the 13 buildings and other structures recorded in the books do
not actually reflect their true value and are overstated by an undetermined
amount corresponding to the value of the replaced/removed parts of the
buildings and structures.

4.42 In view of the foregoing, we recommended that Management:

a. Create a dedicated appraisal committee from the offices/departments

concerned to:

 Compute and determine the proper value of the removed/replaced

costs of parts/materials that need to be derecognized in the books
following the provisions of IPSAS and furnish COA a copy of the
committee’s appraisal report;

 Consider the use of the cost of the replacement as allowed in

Paragraph 85 of IPSAS 17, should it be impracticable to
determine the carrying amount of the replaced parts;

 Include as part of the standard operating procedure, the appraisal

of costs of replaced/removed materials whenever there are repairs,
renovations or rehabilitations made in any of the City’s buildings;
and

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 b. Require the CAD to derecognize in the books, the costs of
replaced/removed materials incident to the repairs, renovations and
rehabilitations made based on the report of the appraisal committee.
Management comments/actions:

4.43 The Management, in its letter dated April 25, 2022, commented that they are
now in the process of amending the duties and responsibilities of the City’s
Appraisal Committee in order to include in their tasks the appraisal of parts of
the City’s buildings and other structures that will be removed/destroyed.

4.44 Furthermore, the City Accountant, in her letter dated April 18, 2022, has
requested from the City Engineering Department (CED) the actual programs of
works of the capitalizable repairs, renovations and rehabilitations in order to
ascertain the cost of removed/replaced parts.

4.45 In compliance, the CED, in its letter dated April 21, 2022, furnished to the City
Accountant the copies of the available Programs of Works and Detailed
Estimate of the relevant projects. However, the records of the projects that
were implemented prior to June 31, 2013, after due diligence, cannot be
located.

ii. PPE account balances included assets worth P110.427 million

deemed unserviceable which remained in the books at year-end

4.46 There were identified unserviceable assets of P110,427,480.90 reported in the

RPCPPE under the GF and approved IIRUP for CY 2021, but remained
undisposed and still included in the PPE account balance as of year-end.

4.47 According to the Asset Management Division (AMD) - GSD, the assets were
not disposed of promptly and remained on the books, despite being identified
as unserviceable on the IIRUP as of October 31, 2021, because of the
following reasons:

 The disposal process took a long time to execute. The process includes:
(1) ascertaining the floor price of the fixed assets for public auction, after
determining that some assets may still have value; (2) posting public
auction notices; and (3) establishing the procedures and award
notification, among others.

 GSD-AMD made a thorough evaluation of unserviceable properties that

may be transferred without cost to other government agencies, therefore
would not be included in the public auction process. These assets were
covered in a separate IIRUP.

 The public auction took place on December 31, 2021, but the sale and
disposal of assets happened on January 21 and 27, 2022.

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4.48 The GSD-AMD added that unserviceable assets with approved IIRUP in
CY 2021 were properly disposed of, and related disposal documents were
submitted to the CAD on March 15, 2022, for de-recognition.
4.49 Retaining unserviceable fixed assets and not disposing of them immediately
may lead to further deterioration of the asset’s condition, affect the timing of
the asset’s de-recognition, and recording of its fair valuation on the books.

4.50 We recommended that the Management require the AMD–GSD to initiate

immediate disposal to ensure fair valuation of the assets on the books.

Management comments/action:

4.51 Management explained that it was highly unlikely for the GSD to catch up with
the dropping from the books of the unserviceable properties on the same day as
there are still periods to comply after the conduct of the public auction. After
the opening of the bids on December 31, 2021, the committee still needs at
least several days for the conduct and preparation of post qualification report,
and another period of days for the issuance of the Notice of Award and Notice
to Proceed. Nonetheless, on May 4, 2022, the unserviceable assets were
already dropped from the books.

4.52 The City Administrator during the exit conference on May 31, 2022, suggested
to the OIC, GSD to make the disposal of unserviceable properties earlier by
having a cut-off (i.e. 3rd quarter of the year), regardless of the nature of disposal
(i.e. public auction and transfer without cost), by which the OIC–GSD agreed.

iii. Assets no longer needed totaling P6.337 million were already

transferred to other local and national government agencies
without cost in CY 2018, but were not derecognized in the books

4.53 The approved IIRUP as of October 31, 2021, for the GF amounting to
P6,337,125.80 consists of assets no longer needed. Verification of pertinent
documents showed that these assets were already transferred without cost to
other local and national government agencies. The transfers were duly
supported with the Property Transfer Reports (PTRs) on various dates in CY
2018.

4.54 The AMD–GSD disclosed that they were not able to prepare and submit the
IIRUP in CY 2018 to the CAD for derecognition. The volume of transferred
assets resulted in the delay in the preparation of pertinent documents covering
the items until the pandemic struck.

4.55 The delay of reporting the disposed properties documented through the IIRUP,
which serves as basis of the CAD in recording in the books, resulted in the
non-derecognition of the transferred properties amounting to P6,337,125.80 as
of December 31, 2021.
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4.56 We recommend that Management require:

a. The Inventory Committee to immediately prepare the IIRUP for

approval of the City Mayor; and

b. The AMD–GSD to immediately submit to the CAD the approved

IIRUP supported with pertinent documents for derecognition in the
books.

Management comments/actions:

4.57 Management further commented that the delay in the preparation of the IIRUP
was also aggravated at the onset of the pandemic as the manpower was
substantially depleted due to work from home arrangement, COVID-19 illness
related and many of the staff were re-assigned to public health services of the
City to augment the need for frontliners at the height of the pandemic.

4.58 The GSD has already started to catch up with the derecognition of the
transferred properties without cost from the books.

Absence of physical inventory-taking of PPE under SEF

4.59 Paragraphs 5.1, 5.8 and 5.12 of COA Circular No. 2020-006 dated
January 31, 2020, on General Guidelines of inventory taking provides that:

Each government agency shall conduct physical count of all its

PPE, whether acquired through purchase or donation,
including those constructed by administration and found at
station. The inventory committee shall be responsible for the
actual count to ascertain the existence, completeness and
condition of all PPEs owned by the government agency.
Property records shall be updated based on the results of the
physical inventory and reconciled with accounting records to
come up with the reconciled balances of PPE accounts to be
considered as the correct balance of the agency’s PPEs.

4.60 Interview with the GSD revealed that the latest Annual Physical
Count/Inventory of Property and Condemnation of Equipment in Caloocan
City Schools was conducted on November 2019. The GSD requested to
conduct annual physical inventory of property for CY 2020 from the Division’s
Office on September 2020 but the school division superintendent deferred the
request due to the pandemic. For cyclical years 2020 to 2021, there have been
no physical inventories conducted. The basis of GSD in coming up with the
PPE account balance as of the year end of CYs 2020 and 2021 were through
accumulated Purchase Orders (POs) and Property Acknowledgment Receipts
(PARs) received under the Special Education Fund.

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 4.61 The conduct of physical inventory is one way of attesting the existence of the
PPE and serve as basis for preparing financial reports. Non-compliance or
absence of physical inventory of PPE constitutes the existence of discrepancies
in PPE account balance under SEF.

4.62 We recommended that Management require the Inventory Committee to

strictly conduct physical inventory of PPE pursuant to COA Circular
No. 2020-006 to come up with reliable PPE balances that are verifiable as
to existence, condition and accountability.

Management comments/actions:

4.63 The Management, in its Letter dated May 4, 2022, commented that prior to the
upsurge of COVID-19 pandemic, the GSD had regularly conducted its annual
inventory. The Management informed that the GSD and the School Division
Office are now in the process of coordinating with the Inter-Agency Task
Force (IATF) for the Management of Emerging Infectious Diseases (EID)
about the forthcoming inventory (with or without the clearance from IATF –
EID).

5. The correctness of the balance of the Construction in Progress (CIP) account in

the amount of P308.196 million could not be ascertained due to absence of
record/relevant documents to support the validity and reliability of unreconciled
prior period balances carried-forward up to December 31, 2021.

5.1 As of December 31, 2021, the balance of the CIP account amounted to
P308,196,202.41 supported by the SL balances for the GF of P255,690,028.71,
SEF of P15,957,699.91 and TF of P36,548,473.79. Meanwhile, the Schedule of
CIP as of December 31, 2021, submitted by the CAD disclosed additional
information pertaining to the CIP as follows:

Account Particulars Amount

Construction in Progress-
Buildings and Other Structures
General Fund Beginning Balance, 2003 P218,207,994.64
Special Education Fund Unreconciled Balance of 2013 15,957,699.91
Total P234,165,694.55
Other Infrastructure Assets
General Fund Beginning Balance, 2003 11,358,460.18
Total P245,524,154.73

5.2 Verification disclosed that the aggregate amount of the CIP–Building and Other
Structures of P241,964,489.30 includes unreconciled balances totaling
P234,165,694.55 brought forward from prior years described as “Beginning
Balance, 2003” for the GF and “Unreconciled Balance of 2013” for SEF. In
fact, the SEF reported balance of P15,957,699.91 is the carrying balance

108
 reported in the SL. In the same vein, the CIP-Other Infrastructure Assets (GF)
balance of P11,358,460.18 is also the same amount included in the SL balance.
5.3 The City Accountant explained that there are no available records/documents to
support the recorded CY 2013 and prior years’ CIP despite efforts to locate the
same in their custody. She further explained that she had already communicated
with the CED in her letter dated March 7, 2019 requesting the status of the
projects pertaining to CY 2013 and prior years. We noted, however, that in the
letter, the CAD requested the status of five (5) projects reported as CIP under
the Buildings and Other Structures account and one (1) project under the
Infrastructure Asset recorded in the books in CYs 2014 to 2017 and not in
CY 2013 and prior years. Hence, in its letter-response dated March 27, 2019,
the CED furnished the CAD with a list indicating the status/percentage of
completion of the requested projects covering the period indicated.

5.4 We noted the efforts so far done by the CAD, however, until the recorded CIPs
in CY 2013 and earlier are cleared which corresponds to 80% of the total
reported balance of the CIP account as of December 31, 2021, the validity and
reliability of the CIP account balance of P308,196,202.41 could not be
established.

5.5 We recommended that the CAD coordinate further with the CED to
identify the projects composing the unaccounted CIP accounts reported in
2013 and in prior years and locate the records/relevant documents
pertaining thereto in their custody so that necessary adjustment could be
made to the accounts affected.

Management comments/actions:

5.6 The Management, in its Letter dated May 2, 2022, commented that the CAD is
retrieving any useful data outside its office by requesting from the City Budget
Department and the CED the ALOBS for the City land improvements and
infrastructure projects and partially accomplished City projects from CY 2003
and prior, respectively.

5.7 Furthermore, the City Accountant, in Letters both dated April 18, 2022, to the
CED and City Budget Department, requested for the list of partially completed
City projects (per year) from CY 2003 and prior years and the list of issued
ALOBS for the City Land Improvements and Infrastructure projects from CY
2003 and prior years, respectively.

5.8 The City Accountant also pointed out that the account balance of the
CIP-Buildings and Other Structures under the SEF was the ending balance in
CY 2011.

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6. Fixed assets identified as unserviceable on the Inventory and Inspection Report
of Unserviceable Property (IIRUP) as of October 31, 2021, worth P46.488
million were not properly identified on the RPCPPE as of December 31, 2021,
and fixed assets worth P39.71 million were identified as “unserviceable” on the
RPCPPE but were not identified as such on the IIRUP, both contrary to
contrary to COA Circular No. 2020-006 dated January 31, 2020. Thus, casting
doubt as to accuracy, existence and validity of PPE under fixed assets account.

Fixed assets identified as unserviceable on the IIRUP as of

October 31, 2021, worth P46.488 million, were not properly
identified on the RPCPPE as of December 31, 2021.

6.1 COA Circular No. 2020-006 provides that properties of the City, whether
serviceable or not, shall be listed on the RPCPPE upon inventory, including
whereabouts and conditions of the asset in the “Remarks” column. The asset
condition classification includes “good condition, needing repair,
unserviceable, obsolete or no longer needed.

6.2 The IIRUP dated October 30, 2021, included properties worth P70,717,619.90,
of which P46,488,078.82 were not properly tagged with the asset’s condition
on the RPCPPE, as of December 31, 2021.

6.3 Randomly selected 20 PPEs consisting of motor vehicles and equipment

identified as “unserviceable” from the approved IIRUP: 11 assets were marked
“with property return slip (PRS); 7 marked as “serviceable,” 1 marked as
“condemned,” and 1 was not marked at all on the RPCPPE.

6.4 Seven (7) assets marked as “PRS” were returned to AMD for further
evaluation, i.e., needs repair or can be transferred without cost to other
agencies.

6.5 In addition, unserviceable Furniture and Fixtures were not properly tagged with
their condition; the assets were marked with actual users instead.

6.6 We were not able to reconcile the RPCPPE with the IIRUP due to incorrect
information of the asset conditions. The validity and accuracy of both reports,
therefore, cannot be relied upon, contrary to the prescribed guidelines of COA
Circular No. 2020-006.

Fixed assets worth P39.71 million were identified as

“unserviceable” on the RPCPPE but were not identified as such
on the IIRUP

6.7 Section 6.3.1(h) of COA Circular No. 2020-006 states that the Property Unit
shall prepare the IIRUP for all PPEs found unserviceable, obsolete and/or no
longer needed.

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6.8 The RPCPPE as of December 31, 2021, showed defective, broken, and
unserviceable properties worth P63,939,402.08. Of this amount,
P39,709,861.00 worth of assets were not covered with an IIRUP.

6.9 The AMD Office acknowledged that it was not able to prepare the requisite
IIRUP for all assets and committed to full compliance in the next disposal of
unserviceable assets.

6.10 We recommended that the Management requires the Inventory

Committee to:

a. Prepare complete physical count report using the RPCPPE for all
fixed assets, whether serviceable or not, and properly identify the
asset’s condition on the “remarks” column;

b. Prepare the IIRUP for all unserviceable properties; and

c. Henceforth, strictly comply with COA Circular No. 2020-006 dated

January 31, 2020.

Management comments/actions:

6.11 Management explained that the observation may be attributed to the details
stated in the column intended for remarks where the equipment was generally
identified as unserviceable but without IIRUP, and the equipment are still
repairable, hence the absence of IIRUP.

6.12 Nevertheless, Management further commented that the recommendation is

duly noted and the GSD will make the necessary adjustment and will prepare
the IIRUP for all unserviceable properties.

6.13 Management informed that the City will also resort to one time cleansing of the
PPE under COA Circular No. 2020-006 to correct the PPE balances except the
Land account. They will make sure that these concerns as observed will be
given appropriate actions from planning phase to execution.

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7. Taxes withheld in CY 2021 were not remitted in full as of December 31, 2021,
leaving an unremitted amount of P2.401 million, in breach of the Revenue
Memorandum Circular No. 23-2007, depriving the government of the immediate
use of the collections for authorized purposes and may cause the imposition of
unnecessary penalties against the City.

7.1 Paragraph 4 of Revenue Memorandum Circular No. 23-2007 dated

March 20, 2007, prescribes the period for remittance of taxes withheld, to wit:

The person-in-charge of withholding in each government agency

(Government offices, bureaus, agencies or instrumentalities, local
government units, GOCCs) shall xxx file the tax returns to the
appropriate BIR Collecting agents and pay the corresponding
withholding taxes due thereon, xxx.

7.2 Also, BIR forms provided under Paragraph 4 of the same circular states that:

Xxx to be filed on or before the 10th day of the month following the
month in which the withholding was made except for tax returns
covering transactions in December which shall be filed on or
before January 15 of the succeeding year, xxx.

7.3 Furthermore, Section 247 (b), Title X of the National Internal Revenue Code
of 1997, states:

If the withholding agent is the Government, or any of its agencies,

political subdivisions or instrumentalities, or a government-owned
and controlled corporation, the employee thereof responsible for
the withholding and remittance of the tax shall be personally liable
for the additions to the tax prescribed herein.

7.4 For CY 2021, the Due to BIR account has a year-end balance under the GF,
SEF, and TF amounting to P50,638,967.22, P6,281365.81 and P3,867,105.32,
respectively, or a total cumulative amount of P60,787,438.35, details are
shown below:

Particular GF SEF TF Total

Beginning balance - Jan 2021 83,605,347.06 6,996,858.87 7,311,428.52 97,913,634.45
Add: Withholdings/Adjustments
a. Tax withholdings from 268,248,877.0 7,547,971.00 6,511,167.02 282,308,015.1
Jan to Dec 2021 8 0
b. Credit Adjustments 28,177,296.85 81.09 642,522.41 28,819,900.35
from Jan to Dec 2021
296,426,173.9 7,548,052.09 7,153,689.43 311,127,915.4
Sub total
3 5
Total Withholdings for 380,031,520.9 14,544,910.9 14,465,117.9 409,041,549.9
Remittance in 2021 9 6 5 0
Less: Total remittance for CY 315,953,706.1 - 315,953,706.1
2021 3 - 3
 Balance 64,077,814.86 14,544,910.9 14,465,117.9 93,087,843.77

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 Particular GF SEF TF Total
6 5
Less: Adjustments/Refunds        
12,998,212.08 8,258,445.15 10,598,012.6 31,854,669.86
a. Adjustments
3
b. Refunds 440,635.56 5,100.00 - 445,735.56
13,438,847.64 8,263,545.15 10,598,012.6 32,300,405.42
Sub total
3
Balance as of December 31, 2021 50,638,967.22 6,281,365.81 3,867,105.32 60,787,438.35
Less: Taxes withheld in Dec. for 48,243,619.12 6,275,768.19 3,867,105.32 58,386,492.63
remittance on Jan 2022
Taxes Withheld Not Remitted in 2,395,348.10 5,597.62 0.00 2,400,945.72
2021

7.5 The above analysis disclosed that the City was not able to remit fully to the
BIR the total taxes withheld and due for remittance in CY 2021.

The inability to remit promptly and accurately the taxes withheld may result to
the imposition of surcharges, interests and penalties by the BIR.
7.6 We recommended that the Management require the CAD to remit the
P2,400,945.72 and comply strictly to Revenue Memorandum Circular
No. 23-2007, to avoid penalties that may be imposed by the BIR.
Otherwise, the responsible official shall be held liable for the payment of
penalties resulting from the delay as provided under the National
Internal Revenue Code of 1997.

Management comment/action:

7.7 The Management in its Letter dated May 6, 2022, commented that the CAD is
already finalizing the process for remittance of the remaining P2,400,945.72
from the ending balance of CY 2021.

8. Abnormal account balances of the Due to BIR account in the GF, SEF and TF
books caused by late recording/adjustment of the remittance of withheld taxes
initially charged in total amount in the GF books, including that of the taxes
withheld under the SEF and TF. This does not contribute to effective control
and monitoring of tax remittances.

8.1 The schedule of taxes for remittance in a given month is first uploaded thru
the Electronic Filing Payment System (eFPS) facility of the BIR. At present,
the CAD computes the total taxes withheld under the GF, SEF and TF books
and remits the total amount based on the uploaded schedule acknowledged by
the eFPS. The remittance of the total amount is charged against and recorded
only in the GF books instead of recognizing at the same time the
corresponding amounts attributable to the SEF and TF. The following entry is
done by the CAD:

In the books of GF:

To record tax remittance of the total taxes withheld under the GF,

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 SEF and TF
Due to BIR xxx
Cash in Bank xxx
8.2 Inquiry with the CAD disclosed that subsequent entries are being done to
recognize the adjustment in the books of the GF, SEF and TF, following the
pro-forma entries below.

In the books of GF:

To record the receivables from the SEF or TF of the tax
remittance charged to the GF
Due from Other Funds – SEF/TF xxx  
Due to BIR   xxx

In the books of SEF or TF:

To record SEF or TF counterpart of the GF tax remittance
Due to BIR xxx  
Due to Other Funds - GF   xxx

8.3 Based on our validation, while the above pro-forma entries will result in the
adjustment of the Due to BIR account balances in the GF, SEF and TF books,
we noted that the adjustments were not simultaneously effected on the date of
remittance but in subsequent months. This resulted in the abnormal monthly
balances in the GF, SEF and TF books.

8.4 While in totality the Due to BIR account balance at year-end is not affected,
the present practice which results in abnormal balances of the account in the
books of the GF, SEF and TF taken separately, do not contribute to effective
control and monitoring of tax remittances.

8.5 We recommended that the Management require the CAD to:

a. Ensure proper recording of the remittance of taxes withheld under

the GF, SEF and TF; and

b. Revisit the existing procedures with the end in view of addressing

the noted observations.

Management comment/action:

8.6 The Management commented that the CAD has implemented the appropriate
recording in the recording of tax remittance in the beginning of CY 2022 in
order to avoid the same mistake similar to prior years.

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9. The City allocated in its annual budget the amount of P342.788 million for
Disaster Risk Reduction and Management Fund (DRRMF) for CY 2021,
representing about 5% of its estimated revenue from regular sources. The
allocation for CY 2021 and in the past four years adhered to Section 21 of the
RA No. 10121.

9.1 Section 21 of RA No. 10121 or otherwise known as the Philippine Disaster

Risk Reduction and Management Act of 2010 provides that not less than five
percent (5%) of the estimated revenue from regular sources shall be set aside
as the Local Disaster Risk Reduction and Management Fund (LDRRMF) to
support disaster risk management activities.

9.2 Records disclosed the City’s DRRMF appropriations for the past five (5)
years (CYs 2017 to 2021) were correctly passed upon and computed in
accordance with RA No. 10121.

9.3 We enjoined the City to continue to fulfill its budgetary requirement in

appropriating necessary funds for DRRM, as prescribed under Section 21
of RA No. 10121.

Management comment/action:

9.4 The Management committed to adhere with the audit recommendation.

10. The year-end unexpended amounts of DRRMF from CYs 2017 to 2021 were
incorrectly computed, contrary to Section 21 of RA No. 10121, which resulted in
the net understatement of the recorded Trust Liabilities – DRRMF account by
P94.671 million, and misstated the related Asset, Liability, Expense and
Government Equity accounts.

10.1 Section 21 of RA No. 10121 states that:

Unexpended LDRRMF shall accrue to a special trust fund

solely for the purpose of supporting disaster risk reduction
and management activities of the LDRRMCs within the next
five (5) years. Any such amount still not fully utilized after
five (5) years shall revert back to the general fund and will
be available for other social services to be identified by the
local sanggunian. (Emphasis ours)

10.2 The accounting records from CYs 2017 to 2021 disclosed that the unexpended
balances transferred to the special trust fund under the Trust Liabilities –
DRRMF account were less than the aggregate amount of P94,670,584.36, that
should have been transferred at every year end, which is not in conformity
with Section 21 of RA No.10121.

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10.3 According to the City Accountant, the unexpended balances of the DRRMF
which were transferred to Trust Fund were computed based on the actual
revenue realized from regular sources and not from the approved
appropriations based on estimated revenue from regular sources. She further
explained that her concern was the cash availability to back-up the
unexpended balance to be transferred to Trust Fund considering that there was
shortfall of collections based on set targets for CYs 2017 to 2021.

10.4 The action of Management is not in conformity with the above-cited provision
of Section 21 of RA No. 10121, which clearly specified the estimated revenue
from regular sources as basis for the computation of DRRMF allocation. The
reason for the deviation in the computation of the transferred unexpended
balance has no leg to stand on considering that the estimated revenues to be
collected by the City are expected to have been the product of a documented
basis and well-informed decision.

10.5 As a result of the wrong basis of computation used by the CAD, the Trust
Liabilities–DRRM Fund and the related asset, liability, expense and
Government Equity accounts were misstated by P94,670,584.36 as of
December 31, 2021.

10.6 We recommended and Management agreed to require the CAD to:

a. Use the approved appropriations as the correct basis in calculating

the unexpended balance of DRRMF for transfer to the special trust
fund, pursuant to Section 21 of RA No. 10121; and

b. Effect the necessary adjustments in the GF and TF books and the

memorandum entries for the Subsidiary Ledger accounts.

Management comments/action:

10.7 The Management, in its Letter dated April 12, 2022, informed the following:

 They are in the process of preparing the available appropriation by

securing the available appropriation as prescribed under Section 344 of
RA No. 7160, for the additional amount of unexpended DRRMF from
CYs 2017 to 2021 amounting to P94,670,584.36, in order to effect the
adjustments in the books and the transfer from GF to TF; and

 They will immediately send the copies of documents of adjustments and

transfer to the City Auditor’s Office once accomplished.

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11. The City was not able to submit the annual progress report required by the
National Solid Waste Management (SWM) Commission in its Resolution on
the approval of the City’s 10-year SWM Plan. Further, the SWM Plan has not
been updated by the Caloocan City SWM Board since CY 2016 contrary to
Section 16 of RA No. 9003, hence, plans, policies and strategies may no longer
be relevant and in alignment to the present needs and circumstances of the
City and its constituents.

11.1 On March 29, 2016, the City’s 10-year SWMP covering the period CYs 2015
to 2024 was approved by the National SWM Commission under Resolution
No. 259, s. 2016. The Resolution provides, among others, that the City is
required to submit an annual progress report on the strategies implemented
and accomplishments to the NSWMC through its Secretariat pursuant to
Section 16 of RA No. 9003 which states:

xxx. Provided, finally, That it shall be reviewed and updated

every year by the provincial, city or municipal solid
management board. (Emphasis ours)

11.2 We noted that, as of December 31, 2021, the City was not able to prepare and
submit the City’s annual progress report on the strategies implemented and
accomplishments to the National SWM Commission, as required under
Resolution No. 259 of the said Commission. Moreover, the SWM Plan was
not updated since CY 2016 by the City SWM Board contrary to the provision
of Section 16 of RA 9003.

11.3 The representative of the Caloocan Environmental Management Department

(CEMD) explained the challenges that beset the CEMD, which did not allow
them to prepare the required reports, as follows:

a. In the past four years (CYs 2018 to 2021), three persons have been in-
charge of handling the data and preparing reports for the CEMD. The
abrupt/sudden change in personnel resulted in lack of proper transition and
turnover of documents.

b. Improper or inadequate storage of data (or archiving) due to lack of space

in the office, for physical data/materials, and lack of formal/standard
operating procedure in labeling/submitting of digital data/soft copies of
files/reports/inventories, etc.

c. The CEMD is divided into at least three (3) office locations (6th floor of
the new city hall, the old University of Caloocan City in Sangandaan and
the North City Hall), which contributes to delay in communication. This is
even aggravated by spotty internet connection that results into a
breakdown in communication, or at least cause difficulties, which in turn
adds to the delay in accomplishing tasks.

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11.4 Moreover, the CEMD disclosed that there was a plan to update the SWMP for
CYs 2019 and 2020 but it was put on hold because of the COVID-19
pandemic.

11.5 Summarizing of data in a report provides verifiable feedback and facilitates

visualizing the current state of the SWM. Without such tool may cause missed
opportunity to analyze the situation and apply appropriate and timely
solutions. Plans, policies and strategies need to be revisited and reevaluated,
otherwise, these may no longer be relevant and aligned to the present needs
and circumstances of the City and its constituents.

11.6 We recommended that the City requires the CCSWM Board to:

a. Prepare the annual progress report on the strategies implemented and

accomplishments and submit the report to the National SWM
Commission through its Secretariat; and

b. Update, on a yearly basis, the City’s SWM Plan in compliance with

Section 16 of Republic Act 9003.

Management comments/actions:

11.7 The Management, in its Letter dated April 25, 2022, commented that:

a. They are regularly submitting reports on a quarterly basis, regarding the

City’s solid waste management to the Environmental Management Bureau
(EMB) SWM Office, by sending an email to their office. Same is true with
the City Environmental Compliance Audit (ECA) to the DILG, through
the Manila Bayanihan Form 2.1 for the City ECA, and Manila Bayanihan
Form 2.2 for the Barangay level. The EMB serves as the Secretariat of the
National SWMC. The same report is being forwarded in the EMB to the
DENR-NCR as the chairman of the commission; and

b. They are currently coordinating with the Metropolitan Manila

Development Authority and the EMB-NCR for assistance in updating the
said plan.

Auditor’s rejoinder:

11.8 We noted this recent information regarding the quarterly reports being
submitted, which shall be subjected to our further evaluation. Our immediate
concern, however, is the City’s compliance on the express directive under the
Resolution regarding the submission of an annual progress report on strategies
implemented and accomplishments pursuant to Section 16 of RA No. 9003.

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119
12. Out of 188 barangays, 164 or 87% are reported to have established their
Materials Recovery Facility (MRF)/Materials Recovery System (MRS) which
is not in accordance with Section 32 of Republic Act No. 9003. As a result, the
drive for solid waste avoidance and volume reduction through source
reduction and waste minimization measures was not fully achieved at the
barangay level.

12.1 The long-term goal of the Ecological Solid Waste Management Act is to adopt
a systematic, comprehensive and ecological solid waste management program,
in which each local government unit should take part of. One important
component therein, as mentioned in Sections 32 of the law, is the requirement
about the establishment of MRF.

12.2 Section 32 of the RA No. 9003 defines MRF as a facility that includes a solid
waste transfer station or sorting station, drop-off center, a composting facility.
In addition, RA No. 9003 requires that:

There shall be established a Materials Recovery Facility

(MRF) in every barangay or cluster of barangays. The
facility shall be established in a barangay-owned or leased
land or any suitable open space to be determined by the
barangay through its Sanggunian. For this purpose, the
barangay or cluster of barangays shall allocate a certain
parcel of land for the MRF. The determination of site and
actual establishment of the facility shall likewise be subject
to the guidelines and criteria set pursuant to this Act. The
MRF shall receive mixed waste for final sorting, segregation,
composting, and recycling. The resulting residual wastes
shall be transferred to a long-term storage or disposal
facility or sanitary landfill.

12.3 Each barangay is required to have an MRF, which is a key to decentralizing

waste management. The barangay, the smallest unit of government, is put in
charge of teaching residents to segregate, collecting their trash and separating
reusable trash from residual trash.

12.4 In its approved 10-year CSWM Plan, the City contracted the citywide MRF to
International Solid Waste Integrated Management Specialist, Inc. and under
Joint Venture with ISWIMS Transport Hauling Services. The MRF was
conceptualized with the vision of maximizing waste diversion percentage in
compliance to Sections 20 and 32 of RA No. 9003.

12.5 The CEMD informed that there was a Memorandum of Agreement (MOA)
which provides that in the absence of identified sites for Barangay MRF, the
CEMD and the 188 barangays collectively agreed to undertake an agreement
with Junkshop owners operating in each barangay to name the latter as

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 accredited Junkshop cum MRF. The Junkshop cum MRF operating in each
barangay will accommodate all the recyclable materials segregated at source
(each household) utilizing the eco aides/collectors jointly identified by the
Barangay SWM Council and the Junkshop owners.

12.6 In 2021, out of the 188 barangays of Caloocan, the City has listed 1 MRF and
163 Materials Recovery Systems (MRSs) or a total of 164 barangays or 87%
compliance with the establishment of MRF. The number is quite remarkable
as it shows the efforts done, however, the City has not yet attained the full
requirement and vision of the law.

12.7 The CEMD disclosed that the diversion rate achieved of all solid wastes from
the MRF/MRSs by the City was 50% to 60% during the pre-pandemic period
but was reduced by 10% during the pandemic period. CEMD also explained
that the roadblock towards the complete implementation of the establishment
of MRF in each barangay/barangay cluster, is the insufficiency of space and
also the clearing operations done by the MMDA where some MRF/MRSs
were removed/displaced. But while the other barangays are without MRF at
the barangay-level, they perform other waste reduction activities, such as,
household composting and greening.

12.8 In the final analysis, the drive for solid waste avoidance and volume reduction
through source reduction and waste minimization measures, including
composting, recycling, re-use, recovery, and others, before collection,
treatment and disposal in appropriate and environmentally sound solid waste
management facilities in accordance with ecologically sustainable
development principles as envisioned in the Declaration of Policies of RA No.
9003 was not fully achieved at the barangay level. The inability to fulfill what
the law requires, inevitably impacts the effective realization of the very reason
and purpose of its enactment.

12.9 We recommended that the City, through the SWM Board, continue with
the proper implementation of the project by assisting each barangay or
cluster of barangays, specifically those with no MRF/MRSs yet, in
providing or establishing an MRF that is designed in accordance with the
requirements of RA No. 9003 to attain the maximized gain aimed to be
achieved by the law.

Management comments/actions:

12.10 Management further commented that:

 The City Environmental Management Department (CEMD) is strictly

implementing the establishment of MRF in every barangay; and

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  Assured that the City’s CEMD will continue to monitor the compliance,
full operation and establishment of MRF/MRS of all barangays in the
Caloocan City.

13. Planned project of P48 million was cancelled as the project proponents were
able to secure implementation of the project from different source, thus, the
allocation funded under the 20% Development Fund (DF) was not utilized, as
intended, a missed opportunity as this could have been used to fund another
priority project in the current year, and the project could be implemented
immediately without waiting for another enacted appropriation.

13.1 In response to the COVID-19 pandemic which brought the world down to
its knees, Presidential Proclamation No. 922 was issued on March 8, 2020,
to declare a State of Public Health Emergency nationwide. Subsequent
presidential proclamations were issued in 2020 and 2021, all of which
enjoined government agencies and LGUs to provide full assistance and
cooperation with each other, and mobilize necessary resources to undertake
critical, urgent, and appropriate measures to address and mitigate the threat
of the pandemic in a timely manner.

13.2 The DILG and the Department of Budget and Management (DBM) issued
Joint Memorandum Circular (JMC) No. 01 on March 27, 2020, to provide
additional guidelines to utilize the 20% DF. The JMC also empowers
LGUs, in cooperation with all government agencies, to perform critical,
urgent, and appropriate disaster response measures to help mitigate the
threat of the COVID-19 pandemic.

13.3 A different Circular, DILG-DBM JMC No. 01 dated February 22, 2017,
prescribes the guidelines for the appropriation and utilization of the 20%
DF, the allowable development projects that may be charged against the
fund, and the expenses that are prohibited to be funded. Paragraph 5.0 of the
JMC states that it is the responsibility of every local chief executive to
ensure that the 20% DF is optimally utilized to help achieve the desirable
economic development and environmental outcomes of the LGU.

13.4 For CY 2021, the 20% DF allocated programs, projects, and activities
(PPAs) under the social development, economic development, and
environmental management amounting to P682,581,385.60, and this budget
was intended to implement itemized development projects/PPAs contained
in the City’s Annual Investment Program, as per the approved Sangguniang
Panlungsod (SP) Resolution No. 3447, s. 2020, dated September 30, 2020.

13.5 Of the appropriated amount of P682,581,385.60, P454,695,306.17 was

allocated for vaccines (P229,241,052.16) and welfare goods
(P225,454,254.01), per Supplemental Budget (SB) Nos. 4 and 9 under SP
Appropriation Ordinance (AO) Nos. 0905 and 0921 dated January 27, 2021

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 and March 24, 2021, respectively. Subsequently, SP AO No. 0954 was
enacted on December 10, 2021 for SB No. 28, authorizing the reversion of
P274,695,992.81 in allocated funds, which consists of the full allocation for
vaccines (P229,241,052.16) and remaining welfare goods fund
(P45,454,960.65). These funds freed-up because of donations made by the
Department of Health (DOH). Thus, monies were re-allocated to fund 24
development projects/PPAs.

13.6 We identified 53 PPAs related to the annual appropriation and only 30

projects were implemented in CY 2021. Upon verification of records, we
ascertained that the remaining 23 projects were the realigned PPAs
authorized under SB No. 28 on December 10, 2022, and procurement
activities were all scheduled in the 1st quarter of 2022 (i.e., pre-bid
conference, conduct of bidding, bid evaluation, and post-qualification
processes). The contracts for 22 projects were already awarded, while the
remaining one – for Road and Drainage Improvement along LD Road of
Barangays 186 and 188 with a budget of P48,000,000.00 was cancelled.

13.7 Management explained that they are not aware of the ongoing road and
drainage improvement already being undertaken by the DPWH. The project
proponent, Punong Barangays, were able to request the implementation of
the project with funding from a different source (Congressional Fund).
While the P48,000,000.00 appropriation remained intact for re-appropriation
in the succeeding period, the fact remains that this project was prioritized by
the City in the late part of CY 2021, a missed opportunity as this could have
been used to fund another priority project in the current year and the project
could be implemented immediately without waiting for another enacted
appropriation.

13.8 We recommended that Management maintains a more effective

communication channel between project proponents and the City,
requiring the former to inform the latter of updates and changes in the
implementation of approved PPAs to forestall the cancellation of
planned projects and utilize optimally the 20% Development Fund.

Management comments/actions:

13.9 The Management, in its Letter dated May 4, 2022 commented that:

a. They will be requesting from the DPWH to send a complete list of its
annual planned projects in Caloocan City for the incoming year, for
budget planning for the following year. As of now, they received from
DPWH a status report of the newly completed, on-going, and started
projects under the jurisdiction of the city being implemented by the said
Office; and

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 b. City also sent a Memorandum to all the Punong Barangays directing
them to furnish a copy of their request letters for infrastructure projects
from other government agencies in order to monitor the projects that the
barangays are intending to implement in their respective jurisdictions,
with the assistance from other agencies.

14. The City allocated P365.625 million or 5.32%, out of their P6.781 billion
annual budget (AB) for GAD PPAs in compliance with the requirement of the
Magna Carta of Women.

14.1 Section 36 (a) of the RA No. 9710, otherwise known as the Magna Carta of
Women, provides that:

Planning, budgeting, monitoring and evaluation for GAD.

GAD programs addressing gender issues and concerns shall
be designed and implemented based on the mandate of
government agencies and local government units, xxx. The
cost of implementing GAD programs shall be at least five
percent (5%) of the agency’s or the local government unit’s
total budget appropriations.

14.2 For CY 2021, the City allocated the amount of P365,624,299.68 as their
budget for GAD to cover the PPAs addressing gender issues. The allocated
amount accounts to 5.32% of the City’s CY 2021 AB of P6,780,766,529.23,
an amount well-within the threshold set under RA No. 9710.

14.3 We recommended that the City continue its faithful observance of the
budgetary requirements for GAD and aim at escalating the GAD
allocation through attribution of mainstreamed PPAs.

Management comment/action:

14.4 The Management committed to adhere with the audit recommendation.

15. Sixteen, out of the 32 GAD PPAs inclusive of those re-programmed, with a
corresponding planned/re-programmed budget of P330.857 million or
equivalent to 90%, were fully implemented; Five (5) PPAs with a budget of
P9.037 million were partially implemented and 11 PPAs with a budget of
P25.958 million were not implemented due to restrictions and limitations
brought about by the pandemic.

15.1 For CY 2021, the City’s GAD Plan and Budget (GPB) in the amount of
P365,624,299.68 was allocated for PPAs which has been reviewed by the
DILG, National Capital Region on October 2, 2020, and found it fully

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 compliant in form and content with the provisions of Joint Memorandum
Circular No. 2013-01, which provides for the Guidelines on the Localization
of the Magna Carta of Women. The GPB composed of 32
programs/projects to be implemented through identified activities that are
categorized as client-focused and organization-focused.

15.2 Paragraph 2.1 of the Local Budget Circular (LBC) No. 124 dated March 26,
2020, provides that consistent with Section 3 of Proclamation No. 929, s.
2020, all provinces, cities, municipalities, and barangays are strongly
advised to provide funds for the implementation of PPAs to contain the
spread of COVID-19 and to provide basic services to the affected
population, including the necessary support to frontline workers.

15.3 Moreover, Section 4 (q) of RA No. 11494 or An Act Providing for COVID-
19 Response and Recovery Interventions and Providing Mechanisms to
Accelerate the Recovery and Bolster the Resiliency of the Philippine
Economy, Providing Funds Therefor, and for Other Purposes, provides that
notwithstanding any law to the contrary, the local chief executives of all
LGUs are hereby authorized to realign their respective local funds including,
but not limited to, their development fund, Gender and Development Fund,
Sangguniang Kabataan Fund, Special Education Fund, and other local
funds, including unutilized or unreleased subsidies and transfers in order to
address the COVID-19 pandemic.

15.4 On May 26, 2021, the City under SP Resolution No. 0928 upon the
recommendation of the GAD Focal Point System (GADFPS) under
Resolution No. 004 dated May 31, 2021, realigned the unutilized GAD
PPAs including the balances of the partially implemented PPAs for COVD-
19 related PPAs. It was done by virtue of the Supplemental Budget No. 13,
which re-appropriated the amount of P36,740,958.80 for the procurement of
drugs and medicines, medical dental and laboratory supplies and materials
and meals for the COVID-19 vaccination program and for quarantine
facilities. Due to the realignment, some of the appropriations under the
Client-Focused and the Attributed Programs were increased/decreased to
cover the COVID-19 expenses, details as follows:

Appropriations
Gender Issues Approved/
Qty Original
Re-Programmed
Client -Focused 9 135,938,341.18 53,104,400.00
Organization-Focused 8 8,993,302.00 5,830,523.36
Attributed Programs 15 220,692,656.50 306,916,858.30
Total 32 365,624,299.68 365,851,781.66

15.5 The City’s GAD Annual Accomplishment Report (GAAR) for CY 2021
reflects the status of the PPAs as Fully Implemented, Ongoing (Partial)
Implementation and Not Implemented. It also shows the actual results and

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 actual cost or expenditure per PPA, as well as the operating expenses and
attributed programs for the year.

15.6 The utilization of the GPB reflected in the GAAR for CY 2021 disclosed
that the City has utilized an aggregate of P330,857,282.97 or 90% of the
total GPB of P365,851,781.66, leaving P34,994,498.69 or about 10% as
either partially implemented or not implemented. The table below shows the
summary of utilization of the GPB for CY 2021.

Implementation of PPAs
Gender Issues Appropriation Fully Partially Not Implemented
Qty Amount Qty Amount Qty Amount
GAD related PPAs
Client-Focused 9 53,104,400.00 1 40,945,900.00 3 2,218,487.66 5 3,399,400.00
Organization- 8 5,830,523.36 2 2,600,758.98 2 312,829.00 4 2,618,114.00
Focused
10 271,050,899.50 9 262,175,944.7 - 249,494.00 1 8,625,460.76
Attributed Programs 4
COVID 19 related -
PPAs
Attributed Programs 5 35,865,958.80 4 25,134,679.25 - 6,256,176.00 1 4,475,103.55
Total 32 365,851,781.66 16 330,857,282.9 5 11 19,118,078.31
9,036,986.66
7
Percentage 50 90 16 3 34 5

15.7 The following are the GAD PPAs partially implemented (P9,036,986.66)
and not implemented (P19,118,078.31) totaling P28,155,064.97 or 8% of the
total GAD budget of P365,851,781.66, details as follows:

Implementing Office’s
PPAs Amount
Explanation
Partially Implemented
GAD related PPAs-Client Focused
9,106.00 Due to the ongoing IATF
Enhancement of Gender and Development
restrictions, face to face activities
Help Desk for Gender-Based Violence and
such as meetings and
Violence Against Women Victim
consultations were limited to
Survivors
zoom meetings.
Provision of canes and crutches
were based on request by Lolos
and Lolas as the targeted
Saklay at Tungkod Alay kay Lolo at Lola beneficiaries. There was almost
2,088,000.00
no request since the start of
lockdowns due to the pandemic
where they were prohibited from
going outside their place.
Care and Maintenance of Children in
Conflict with the Law (CICL) and drug
dependents referred to TRC-DOH, 121,381.66 Understaffed to implement the
Tagaytay; hospital bill sharing to DSWD PPA.
field office
GAD related PPAs-Organization Focused
Monitoring and Evaluation of VAWC 164,763 Limited beneficiaries/participants
Programs and Orientation on RA 9710 .00 due to COVID-19 restrictions.

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 Implementing Office’s
PPAs Amount
Explanation
National Women's Month Celebration 148,066. The imposition of another
00 lockdown affected the
implementation of symposiums
for Women's Month
Attributed Programs GAD related PPAs
Procurement and dispensing of medicines 249,494 Limited number of people
for People's Day for District 1 and 2 .00 allowed during People’s Day

Attributed Programs COVID-19 related

PPA
Procurement of Drugs and Medicines for Understaffed, the project was not
COVID-19 Vaccination Program and for able to maximize its total budget
Quarantine Facilities 6,256,176.00 during procurement stage before
and after monitoring of
quarantine facilities and
additional procurement of drugs
and medicines.
Total Partially Implemented 9,036,986.66
Not Implemented
GAD related PPAs-Client Focused
Awareness campaign on Danger of Few staff members to operate
Hospital Acquired Pneumonia to Geriatric 450,000.00 effectively to implement other
Patients projects
Construction/Renovation of Gender
200,000.00
Sensitive Toilets/Comfort Rooms Understaffed to monitor the
Construction of a Day Care Center construction projects
500,000.00
Relocation of ISFs Since the budget includes hot
250,000.00
meals for the relocatees, expenses
were not incurred
Ngiting Malapitan 1,999,400.00 Face to face with clients not
allowed
Organization-Focused GAD related PPAs
Profiling of ISFs living in danger areas Since the project involves
and those with threat of demolition or with conducting census to different
814,355.00
court order for the city's Gender- areas, the project was not able to
responsive Database and for possible push through because of the
housing or financial assistance ongoing pandemic restrictions.
Online Skills Training on Tourism Barangay Tourism officers
Souvenir Craft for the Barangay Tourism became inactive during the
Officers 100,000.00 preparation of the activities due
to the ongoing pandemic
restrictions on top of their duties
as frontliners.
Conduct of Planning Workshop Face to face trainings were not
1,203,759.00 allowed. Hence, budget expenses
allotted for food and venue were
not utilized.
Till Debt Do Us Part: Practical Steps to
Financial Freedom Among the Vulnerable 500,000.00 Face to face training not allowed
Women in Cooperatives

GAD Related- Attributed Programs

Various Activities for 1 PPA 8,625,460.76
GAD related PPAs-Attributed Programs
Various Activities for 1 PPA 4,475,103.55
Total Not Implemented 19,118,078.31 5%
Total Partially Implemented 9,036,986.66 3%
Balance of Fully Implemented PPAS 6,839,433.72 2%

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 Implementing Office’s
PPAs Amount
Explanation
Total Fully Implemented 330,857,282.97 90%
Total GPB 365,851,781.66 100%

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 15.8 We take positive note of the accomplishments of the City for fully
implementing 16 planned/reprogrammed PPAs with a total financial
delivery equal to 90% and on the proactive stance of the City in providing
the needed sustenance and protection of its contituents through those
accomplishments, despite the ongoing pandemic.

15.9 We however, recommended to the responsible officials, and

Management agreed, to continue the implementation of GAD PPAs that
directly address gender issues and concerns giving due regard to the
continuing challenges of the present times, to ensure that the benefits
and services envisioned for GAD-related PPAs are continuously
enjoyed and/or availed of by the constituents.

Management comment/action:

15.10 The Management committed to adhere with the audit recommendation.

16. The financial assistance of P1.343 billion was distributed to the 402,386
targeted low-income household beneficiaries or 1,342,714 individuals, within
the deadline set under the Joint Memorandum Circular (JMC) No. 3 issued by
the
DILG-DWSD-DND.

16.1 DILG-DWSD-DND issued JMC No. 3 dated August 9, 2021, laying-out the
guidelines for the distribution of financial assistance to cities and
municipalities in the National Capital Region that are placed under
Enhanced Community Quarantine (ECQ), and provides that the LGUs shall
manage and conduct the distribution of financial assistance within fifteen
calendar days from the start thereof but said period may be extended upon
request of the LGU. (Emphasis ours)

16.2 The City Government of Caloocan received P1,342,711,000.00 from the

Bureau of the Treasury on August 6, 2021, per SARO-OEC-21-0006236, to
fund the grants to the targeted beneficiaries of the financial assistance to
low-income households and other vulnerable groups who are physically
residing, permanently or temporarily, or present in the city or municipality
while the ECQ order was in effect. Each beneficiary would receive
P1,000.00 per individual, with a maximum of P4,000.00 per family. This
grant was part of the national government's response to the Coronavirus
pandemic by providing economic assistance to the public through its LGUs
in the NCR affected by the Inter-agency Task Force Resolution No. 130-A,
placing the whole NCR under ECQ.

16.3 The City Mayor, with authority vested by the Sangguniang Panlungsod
under Resolution No. 3580 August 4, 2021, negotiated, thru the Bids and

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 Awards Committee (BAC), with 3rd-party payment servicing companies to
facilitate and expedite the distribution of cash assistance to targeted
households in Caloocan City. The City Mayor, upon the BAC’s
recommendation (Resolution No. 2021-08-09-04 dated August 9, 2021),
awarded the contract amounting to P22,530,415.00 to Universal Storefront
Services Corporation (USSC) on August 9, 2021, through the Negotiated
Procurement process, per the Revised Implementing Rules and Regulations
of the RA No. 9184,
6 Edition, Section 53.
th

16.4 USSC was contractually obligated to: (1) undertake the validation of the
beneficiary database and identify and report to the City any issues on
duplicate names, ID numbers, invalid barangay codes, phone numbers
(missing digits), and invalid addresses, among others; and (2) complete the
distribution within 10 days, to ensure that the City complies with the 15-day
deadline as prescribed by JMC No. 3.

16.5 In addition, the City Mayor approved the Statement of Augmentation of

Appropriation (Ref. No. SAAS 2021-006 dated April 5, 2021), and use the
P27,700,000.00 originally allocated to support the “Balik-Eskwela
Assistance Program” chargeable against the Other Maintenance and
Operating Expenses account as the funding source for the procurement of
services in the distribution of financial assistance in the amount of
P25,000,000.00.

16.6 The City released P1,342,711,000.00 to USSC in three tranches through

bank transfers, details as follows:

Date DV Number Transfer Ref. No. Amount

August 9, 2021 300-21-08-00093 LBP 21-08.229 P320,000,000.00
August 11, 2021 300-21-08-00094 LBP 21-08.232 640,000,000.00
August 16, 2021 300-21-08-00097 LBP 21-08.237 382,711,000.00
Total P1,342,711,000.00

16.7 Out of 422,442 eligible households listed on the City’s database, a total of
402,836 households or 1,342,714 individuals received financial assistance.
Each recipient was vetted carefully and provided a valid identification card
(i.e., driver’s license, COMELEC registration, Philpost, BIR, SSS, UMID,
etc.), digital signature, and photo.

16.8 Our review disclosed that USSC distributed the financial assistance to
402,836 households, with 1 to 4 individual/s per family, or 1,342,714
individuals. USSC’s service fee was P22,061,240.00. Succeeding table
provides the breakdown of the financial assistance to the recipient
beneficiaries.

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 Total Charge on
No. of Total No. of Amount
Service Service Fees
Individual/ Individual Provided to
Amount Fee Per (No. of
Family Beneficiaries Individual/Family
Household Household
Beneficiaries Beneficiaries
*Service Fee)
16,366 P1,000 16,366 16,366,000 P 15 P 245,490
50,230 P2,000 100,460 100,460,000 25 1,255,750
119,072 P3,000 357,216 357,216,000 45 5,358,240
217,168 P4,000 868,672 868,672,000 70 15,201,760
402,836 1,342,714 1,342,714,000 22,061,240
Less: Overpayment (1
3,000 45 45
family for 3 individuals)
Total Amount Disbursed P 1,342,711,000 P 22,061,195

16.9 The total financial assistance distributed to the beneficiaries was

P1,342,714.00 or P3,000.00 more than the national grant. USSC overpaid
due to a system glitch and absorbed both the over-payment (P3,000.00) and
the related service fee (P45.00), according to CAD and the Caloocan City
Social Welfare Department (CCSWD).

16.10 While there were minor glitches and complaints during the process of
distribution (i.e., late arrival at the appointed time, not receiving text
message replies in 3 days, the cut-off of funds, etc.), CCSWD affirmed that
the entire disbursement process – from updating the database of
beneficiaries to the distribution of the cash benefits – was a resounding
success and satisfactory in the implementation and execution of the
program, and achieving its primary goal: provide economic assistance to
more than 1.3 million citizens in a swift and timely manner, meeting the
deadline to complete the task within 15 days. The program provided a great
relief to all concerned, at a time when the world was brought down to its
knees amid a global health pandemic, and the constituents appreciate it very
much.

16.11 We reviewed the terminal reports submitted by USSC which showed the
funds were distributed through mobile cash caravans on venues provided by
the City, i.e., covered courts in various barangays and public schools.
1,342,714 individuals got text messages from USSC informing them of the
date, time, venue, and a unique control number (SPCN) to claim the cash
benefit. Simultaneous pay-outs also took place in designated venues and
authorized outlets on August 11, 2021. The distribution was completed on
August 22, 2021, two days ahead of the deadline. See table below.

Date Released to USSC End date of Distribution by No. of Days Completed By the City
per DV USSC per Terminal Report per Terminal Report of USSC
August 9, 2021 August 22, 2021 Within 13 days
August 11, 2021 August 22, 2021 Within 11 days
August 16, 2021 August 22, 2021 Within 6 days

16.12 We randomly selected six individual recipients for each day of pay-out from
August 11 to 22, 2021, with a total of 72 individual recipients to confirm

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 receipt of the financial assistance, and out of this sampling, we made
inquiries to 25 recipients via calls or text messages; health protocols
precluded us from doing face-to-face verification. Out of the 25, 10
confirmed they have received financial assistance; 8 did not answer, and 7
rejected the voice call.

16.13 The City paid USSC P22,061,195.00 on September 28, 2021, for services
rendered to execute the City’s financial assistance program (DBP Check No.
763422; DV 100-21-09-03570).

16.14 We recognized and commended the City’s efforts in executing the

program and deploying much-needed financial assistance to its
constituents in a swift and timely manner, embracing technology to
provide effective delivery of services during these uncertain times amid
a global health pandemic. We also recommended and Management
agreed to continue leveraging information and digital technology, not
just for an extraordinary program like the financial assistance
program, but in other areas where applicable to better improve the
delivery of goods and services to its constituency.

Management comment/action:

16.15 The Management committed to adhere with the audit recommendation.

REMITTANCE OF MANDATORY GOVERNMENT SERVICE INSURANCE

SYSTEM (GSIS), PAG-IBIG AND PHILHEALTH

17. Remittances to GSIS, PhilHealth and Pag-IBIG were promptly made within
the prescribed periods; however, GSIS personnel loan repayments pertaining
to prior years totaling P4.701 million and contributions to Pag-IBIG and to
PhilHealth in the amounts of P0.737 million and P3.952 million, respectively,
were not fully remitted at year-end due to lack of pertinent records and non-
submission of the Member Identification Numbers of new employees, hence,
not in full compliance with Section 6 of Republic Act (RA) No. 8291, Section
3(a) of the IRR of RA No.9679 and Section 11 of the IRR of RA No.9241.

17.1 The following are the governing provisions on the remittance to the GSIS,
Pag-IBIG and PhilHealth:

Section 6 (b) of Republic Act (RA) No. 8291, otherwise known as

the GSIS Act, states that each employer shall remit directly to
the GSIS the employees’ and employers’ contributions within the
first ten (10) days of the calendar month following the month to
which the contributions apply.

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 RA No. 9679 is known as the Home Development Mutual Fund
(HDMF) Law of 2009 or otherwise known as Pag-IBIG
(Pagtutulungan sa kinabukasan: Ikaw, Bangko, Industriya at
Gobyerno) Fund. The Implementing Rules and Regulations
(IRR) of RA No. 9679 undter Rule VII – Collection and
Remittance, Section 3 (a) provides that all employers shall remit
to the Fund their contributions and the contributions of their
covered employees, as well as the latter’s loan amortization or
payments to the Fund, within 15 days from the date the same
were collected unless another period is previously agreed upon
between the employer and the Fund, or within such periods as
the Fund may prescribe.

17.2 Section 11 of PhilHealth’s IRR to RA No. 9241 states that failure to timely
remit the appropriate premium contributions shall be subject to interests and
penalties as prescribed by the Corporation without prejudice to other
applicable penalties provided.

17.3 Further, the PhilHealth’s New Payment Schedule is provided under

Advisory No. 04-04-2014, as follows:

• Employers with the PhilHealth Employers Number (PENs) ending in 0-4

– Every 11th to 15th day of the month following the applicable period.

• Employers with PENs ending 5 to 9 – every 16th to 20th day of the

month following applicable period.

17.4 As of December 31, 2021, the accounts Due to GSIS, Due to Pag- IBIG and
Due to PhilHealth had balances of P22,668,988.44, P2,118,121.26, and
P5,657,952.54 respectively, summarized as follows:

Particulars GSIS Pag-IBIG PhilHealth Total

Beginning Balance, January 1, 2021 17,257,912.74 2,225,187.36 5,283,577.39 24,766,677.49
Amount: Contributions/loan 214,189,727.85 17,104,617.12 21,415,309.4 252,709,654.41
repayments withheld January to 4
December 2021
231,447,640.59 19,329,804.48 26,698,886.8 277,476,331.90
Total for Remittance
3
208,778,652.15 17,211,683.22 21,040,934.2 247,031,269.66
Less: Remittance made CY 2021
9
Balance as of December 31, 2021 22,668,988.44 2,118,121.26 5,657,952.54 30,445,062.24
Less: Withheld in December 2021 17,968,220.28 1,381,195.50 1,705,552.34 21,054,968.12
for remittance on Jan. 2022
Unremitted Balance as of 4,700,768.16 736,925.76 3,952,400.20 9,390,094.12
December 31, 2021

Due to GSIS account

17.5 The account balance of Due to GSIS in the amount of P22,668,988.44

reconciled with the SLs. This balance includes prior years unremitted loan

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 repayments and contributions amounting to P4,700,768.16, which the CAD
was not able to facilitate release due to lack of pertinent records showing the
list of employees and their corresponding outstanding loans and
contributions. Nonetheless, remittances were timely made within set
deadlines.

17.6 Based on interview and analysis of data, we determined that the unremitted
loan repayments and contributions was affected by the changes in employee
salary rates, renewal of loan or matured employee’s loan, which were not
adjusted in the records.

17.7 The CAD has already sent a letter to GSIS requesting for the list of
personnel with outstanding loans. The individual names are needed to
generate the remittance schedule for the employees concerned. In its letter
on April 4, 2019, the GSIS informed that they are still in the process of
preparing the details needed. For its part, the City’s Human Resource
Management Office (HRMO) also received a letter dated December 23,
2021 from the CAD requesting HRMO to update its GSIS records thru the
online Agency Remittance Advice Form and upload to the GSIS Web MSP
facility.

Due to Pag-IBIG and Due to PhilHealth accounts

17.8 Remittances of contributions for Pag-IBIG and PhilHealth were within the
prescribed period, however, not the whole amount deducted from the
salaries of employees were remitted. This is due to non-submission of the
Pag-IBIG or PhilHealth Member Identification Numbers of new employees.

17.9 According to Management, these unremitted amounts will be added to

future remittances once the employees’ identification numbers are
submitted.

17.10 We noted Management’s action taken so far but we are concerned that the
delay on the unremitted employees’ loan repayments and contributions as of
year-end may cause issues and complications in the City personnel’s
availment of their entitlements and privileges under the programs of the
GSIS, Pag-IBIG and PhilHealth.

17.11 We recommend closer coordination with the agencies and personnel

concerned as regards the requirements on the unremitted amounts in
order to fully comply with RA No. 8291, RA No. 9679 and the IRR to
RA No. 9241, and for the full benefit of the City personnel.

17.12 We also recommend that an effective system be established regarding

the timely updating of personnel salary adjustments and submission of
Member Identification Numbers of new employees.

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135
18. Unsettled audit suspensions and disallowances amounted to P26.296 million
and P72.311 million respectively, at year-end.

18.1 As of December 31, 2021, unsettled suspensions and disallowances

amounted to P26,296,269.76 and P72,310,604.84 respectively, with details
shown below:

This Period
Beginning Ending Balance
January 1 to
Particulars Balance December 31,
December 31, 2021
January 1, 2021 2021
Issued Settled
Notice of Suspensions 26,296,269.76 - - 26,296,269.76
Notice of Disallowances 72,310,604.84 - - 72,310,604.84
Notice of Charge - - - -
Total P98, 606, 874.60 - - 98, 606, 874.60

18.2 During the year, there were no additional suspensions and charges issued
and no settlements or submission of required documents.

18.3 We recommended that the Local Chief Executive :

a. Strictly enforce compliance of audit suspensions and require

persons responsible to submit the complete documentary
requirements/justifications/explanations as required in the Notices
of Suspensions; and

b. Enforce the immediate settlement of the audit disallowances and

charges and initiate the necessary administrative and/or criminal
action in case of unjustified failure/refusal to effect the settlement
of disallowances and charges within the prescribed period in
accordance with COA Circular No. 2009-006.

Management comment/action:

18.4 The Management committed to adhere with the audit recommendation.

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