EXECUTIVE SUMMARY

A. Introduction

The town of Meycauayan came into existence during the Spanish era. It was established in
1578 by Father Oropesa, seven years later after Manila was founded. According to the book
“The Philippine’s Islands”, its territorial limits extended beyond its present boundary
having under its jurisdiction, the towns of San Jose del Monte, Valenzuela, Obando, Pandi
and Marilao. That is why the province of Bulacan was formerly Province of Meycauayan.
This town has a total land area of 3,210 hectares, encompassing 26 barangays. With several
minutes away from Metro Manila, Meycauayan is a favorite haven for many investors so
much so that numerous businesses and industries have flourished in the area making it one
of the busiest towns in the Province of Bulacan.

At present, Meycauayan is classified as a Component City after the ratification by the

people of Meycauayan on December 10, 2006 of Republic Act No. 9356 “An Act
Converting the Municipality of Meycauayan in the Province of Bulacan into a Component
City to be known as the City of Meycauayan” marks a milestone to attain genuine
sustainable development.

The City maintains three funds namely: General Fund, Special Education Fund, and Trust
Fund.

B. Financial Highlights

The comparative data on the financial condition, results of operation and sources and
application of funds of the City for the years 2019 and 2018 are presented below:

Amounts in Thousands of Pesos

Increase (Decrease)
2019 2018 Amount %
Financial Condition
Total Assets 4,433,828 3,497,655 936,173 27
Total Liabilities 1,009,137 821,186 187,951 23
Total Equity 3,424,691 2,676,469 748,222 28
Results of Operations
Total Revenues 1,523,956 1,333,664 190,292 14
Total Expenses 872,651 915,829 (43,178) (5)
Surplus 651,305 417,835 233,470 56

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C. Scope of Audit

Our audit was made in accordance with International Standards of Supreme Audit
Institutions (ISSAIs) and we believe that it provided a reasonable basis for the audit results.
The objectives of the audit were to (a) ascertain the level of assurance that may be placed
on management’s assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior years’
audit recommendations.

The audit covered the financial transactions and operations of the City of Meycauayan for
the calendar year 2019, specifically the 2019 audit focus and thrusts for Local Government
Sector in compliance with the unnumbered Memorandum dated July 3, 2019 by the
Commission on Audit Assistant Commissioner Joseph B. Anacay and in pursuance of COA
Memorandum No. 2016-023 dated November 14, 2016, as follows:

1. Financial Audit

Audit of Financial Statements:

a. Cash accounts and Financial Liabilities

b. Due from NGOs/POs and Other LGUs

2. Performance and Compliance Audit

a. Fund Transfers from National Government Agencies (NGAs) to Local

Government Units (LGUs)
b. 20% Development Fund
c. Local Disaster Risk Reduction Management Fund (LDRRMF) on Disaster
Preparedness thematic area
d. Solid Waste Management

3. Audit of Revenue-Generating Programs

4. Inclusion of evaluation/audit observation on the following audit areas:

a. Payment to casuals, job orders, contractual and consultants pursuant to COA

Memorandum No. 2012-010 dated October 17, 2012, regardless of fund source and
account charged;
b. Enforcement of COA Disallowances and Charges as prescribed in COA
Memorandum No. 2009-084 dated November 16, 2009;
c. Compliance with tax laws;
d. Remittance of mandatory GSIS, PhilHealth, and HDMF contributions and
remittance of loan amortization; and
e. Compliance with Programs and Projects related to Gender and Development.

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D. State Auditor’s Report

We conducted our audit in accordance with International Standards of Supreme

Audit Institutions (ISSAIs) and we believe that it provided a reasonable basis for the audit
results. We rendered a qualified opinion for the City of Meycauayan. The Qualified
Opinion for the City of Meycauayan is based on the following errors and deficiencies: (a)
Cash advances totaling ₱89,923.36 aged over one to three months under the General Fund
(GF) remained unliquidated as of December 31, 2019, thus delaying the recognition of
expenses thereon; (b) The Real Property Tax (RPT) and Special Education Tax (SET)
Receivable accounts totaling to ₱26,038,989.07 and ₱26,039,089.07, respectively were
recorded based on the Assessment Roll, instead of using the Certified List of
Taxpayers/Real Property Tax Account Registry (RPTAR)/Taxpayers’ Index Card, thus
affected the fair presentation of the accounts in the financial statements at year-end; and
(c) The year-end balance of the account Disaster Response and Rescue Equipment (DRRE)
amounting to ₱46,377,543.96 did not tally with its schedule of ₱54,357,296.17 or a
difference of ₱7,979,752.00 due to (a) non-maintenance of subsidiary records; and (b) non-
reconciliation of accounting and property records, contrary to P.D. No.1445, raising doubt
on the reliability of the accuracy of the account balance.

For the above noted exceptions, we recommended:

(a) for Unliquidated Cash Advances, the City Accountant to (a) submit to the Audit
Team (AT) the disbursement voucher on the cash advance granted to the City Councilor in
the amount of ₱10,923.00 for review; (b) follow up the submission of the liquidation
reports and supporting documents of the remaining three employees; (c) strictly monitor
the timely settlement of cash advances; and (d) review the supporting documents of the
liquidation reports of the three employees already submitted to the City Accounting Office
and immediately recognize their liquidation in the books of accounts.

(b) for RPT/SET Receivables recognized based on assessment roll, (a) the City
Treasurer to (i) expedite the preparation of the certified list of RPT taxpayers which shall
become the basis for the setting up of RPT and SET receivables by the City Accountant;
(ii) exert vigorous effort to update the posting of real property tax payments in the RPTAR
and index cards; and (iii) consider augmenting personnel at the CTO for the updating of
postings to RPTAR/index cards of taxpayers; and (b) the City Accountant to use as basis
in the setting up of receivable accounts for RPT and SET the updated certified list of
taxpayers from the City Treasurer instead of the Assessment Roll.

(c) for Unreconciled Balances, the (a) CAO and the OIC- CDRRMO to conduct regular
reconciliation of DRRE records; (b) CAO to prepare and maintain the subsidiary records
for DRRE and make the necessary adjustments to settle the variance noted amounting to
₱7,979,752.00.

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 The other significant observations and recommendations that need immediate
action are as follows:

1. The ₱100,000.00Petty Cash Fund (PCF) allocated by the Sangguniang Panlungsod

(SP) for the Drop-in Center and the cash advances of ₱150,000.00 actually drawn for the
operation of the Bahay Pagbabago Reformation Center were in excess of their one-month
operating expenses. Also, City employees were allowed to perform disbursing functions
without proper designation as accountable officers and without a fidelity bond contrary to
Sections 4.1.5 and 4.3.1 of COA Circular No. 97-002 dated February 10, 1997 and Section
101(2) of Presidential Decree (P.D.) No. 1445, thus, exposing excess funds to risk of loss
and misappropriation. (Observation No. 1)

We recommended that the Local Chief Executive (LCE) (a) make representations with the
SP to consider reducing the amount allocated for the PCF of the Drop-in Center so that
the excess fund may not be withdrawn as additional cash advances by the AOs; (b) reduce
the amount of the Petty Cash Fund to an amount sufficient to defray recurring expenses for
one month to avoid idle/unused funds in the custody of the two PCCs for both the Drop-
in Center and the Bahay Pagbabago Reformation Center; (c) require the City Treasurer to
secure fidelity bond for the Administrative Aide I and the Social Welfare Officer IV of the
City Social Welfare and Development Office (CSWDO; (d) revisit the SP Resolution and
make the necessary amendments for the inconsistencies noted in accordance with the
original purpose and objective of the fund; and (e) direct the City Treasurer to stop the
practice of allowing employees to perform disbursing functions or act as PCF Custodian
unless they are duly designated as accountable officers and properly bonded in accordance
with the existing laws, rules and regulations.

2. There were unimplemented projects under the 20% Development Fund (DF)
resulting in a fund utilization rate of only 73.67 % for CY 2019, which is not in conformity
with the planned projects contained in the 2019 Annual Investment Plan (AIP) for 20%
DF, thereby depriving the constituents of availing the intended benefits of the projects at
the earliest possible time. (Observation No. 7)

We recommended that the LCE require the (a) head of the City Urban Planning and
Development Office (CUPDO) as the lead office to oversee/monitor/consolidate the
progress of implementation of PPAs included in the AIP; (b) head of CENRO to closely
coordinate with CUPDO and submit the accomplishment report on PPAs under the 20%
DF for consolidation of CUPDO; and (c) heads of departments with PPAs funded by 20%
DF to coordinate with the (i) CUPDO for proper monitoring of implementation; and (ii)
General Services Office and Bids and Awards Committee to plan and implement in a
timely fashion the procurement process so as to deliver the PPAs within the timeframe
indicated in the AIP.

3. Several lapses and deficiencies were observed in the audit of the project,
Construction of a New Roofing System at Meycauayan City Hall Roof Deck with total
project cost of ₱9,373,612.18 and counterpart funding from the Local Disaster Risk
Reduction and Management Fund (LDRRMF) of ₱6,000,000.00 such as (a) unrelated and
improper charges to the Fund, contrary to the CY 2019 Annual Investment Plan for

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LDRRMF thus reducing the fund intended for disaster-related projects; (b) non imposition
of liquidated damages despite delays in project completion contrary to the provisions of
RA No. 9184; and (c) the non-use of personal protective equipment at the construction
site prescribed by the Department of Labor and Employment D.O. No.13 series of 1998,
which resulted in a freak accident and endangered the life of one of the workers, thus
deprived him of occupational safety in the workplace and adversely affected his own
health and the finances of his family. (Observation No. 8)

We recommended that the LCE require (a) the City Engineering Office, budget and
accounting offices to properly plan programs and projects, to use the proper and
appropriate budgetary and financial accounts and the correct project name or title of
programs and projects for a more reliable information and reporting in the financial
statements to avoid unrelated and improper charges to the LDRRMF; (b) the CDRRMO
to ensure that programmed projects in the AIP for LDRRMF are strictly implemented
within the project’s specified contract time; (c) the City Engineer to compute for the
liquidated damages (LD) for every day of delay; (d) the City Accountant to obtain from
the City Engineer the computed amount of LD for proper action in the next billing of the
contractor; (e) the City Engineer to monitor execution/implementation of every line item
included in the project cost such as the safety and health and cause the refund of the cost
of safety and health from the Contractor; and (f) the City Engineer to inquire on the health
status of the injured laborer for medical assistance and conduct further investigation on the
accident for immediate proper action.
4. Completed projects funded by the LDRRMF as of December 31, 2019 registered
only a 72.79% accomplishment rate of the CY 2019 Annual Investment Plan for LDRRMF
thereby depriving the users of the projects of their intended benefits at the earliest possible
time. (Observation No. 9)

We recommended that the LCE require the (a) CEO to conduct strict supervision on the
on-going projects for the timely completion of projects in accordance with the timeframe
in the AIP; and (b) CDRRMO to closely monitor/ oversee all projects funded by the
LDRRMF to achieve a 100% implementation rate using the fund for disaster related
projects.
5. Lapses in internal control over the safekeeping of accountable forms (AF) were
observed at the City Treasurer’s Office (CTO) such as: (a)access key to the Main Vault
was shared with other staff; (b) several boxes of unused accountable forms were not kept
inside the Main Vault; and (c) physical arrangement of the Main vault’s contents was not
organized and in order contrary to sound internal control and exposing the AF to improper
use which may result in loss of government funds; and (d) the Ticket Checker (i) had full
control over AF and took charge in recording receipt, issuance and custody; (ii) acted as a
collecting officer; and (iii) took records of collection, deposit/disbursement in the
Cashbooks. (Observation No. 10)

We recommended that the LCE require the City Treasurer to (a) change the combination
lock of the Main Vault and ensure that access thereon is strictly limited to the City
Treasurer to establish proper accountability and responsibility; (b) limit the contents of the

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Main Vault to unused accountable forms and critical accountability or treasury records; (c)
transfer the unused Official Receipts (ORs) stacked in the City Treasurer’s room to the
Main Vault; (d) request for a suitable cabinet for the office supplies; and (e) prepare the
request form for a new vault to be used by the disbursing officer and properly turnover the
damaged vault to the GSO for proper disposal procedure.
6. Various deficiencies were observed in the operation/monitoring of the Revenue
Generating Projects (RGP) of the City such as Common Transport Terminal (CTT), City
of Meycauayan Convention Center (CMCC), and City Cemetery, contrary to the City’s
New Revenue Code and Section 124 of P.D. No. 1445 thereby hampering the City’s efforts
of generating much higher income. (Observation No. 11)

We recommended that the LCE (a) direct strict compliance with the rules and procedures
governing the operation of the RGPs such as (i) issuance of a departure ticket to vehicle
drivers for every trip made and copy furnished the Treasurer’s Office; (ii) wearing of
Identification Cards (ID) to establish the proper identity of the dispatchers; and (iii)
forging of a Memorandum of Agreement (MOA) between the City Government of
Meycauayan and the UV Express, jeepneys’ and tricycles group using the CTT for the
assignment of bays and as basis for paying the corresponding fees to CTO; and (b) direct
the CEEMO Head to stop performing collection functions and the City Treasurer’s Office
to perform its mandated functions of taking charge of the collections of receipts and
revenues of the three RGPs pursuant to Section 170 of RA No. 7160 and Sections 366
and 4 of City Ordinances 219 and 221.
7. The City’s actual expenditures for the implementation of the GAD Plan and Budget
(GPB) in CY 2019 totaled to ₱52,287,569.30, which exceeded the budget allocated of at
least five percent (5%) of the total LGU budget of ₱49,080,396.00 by ₱3,207,173.30.
Moreover, the GAD database was not fully established and maintained as prescribed in
Philippine Commission on Women (PCW), Department of the Interior and Local
Government (DILG), Department of Budget and Management, (DBM) and National
Economic and Development Authority (NEDA) Joint Memorandum Circular 2013-01.
(Observation No. 12)

We recommended that the LCE require the (a) GAD Focal Person to: (i) implement GAD
projects according to the GPB; (ii) establish a GAD monitoring and evaluation system to
provide the details of accomplishment reports together with the supporting documents for
proper validation of expenses attributable to the GAD fund; (iii) coordinate with all
concerned offices with regard to the utilization of the GAD fund; and (iv) set up/validate
and maintain an updated GAD database which will serve as basis for planning, formulating
policies, identifying, monitoring and evaluating GAD responsive projects, programs and
activities; and (b) City Accounting Office to continue the preparation of subsidiary ledgers
for the utilization of the GAD Fund.
8. Job Order (JO) personnel were given tasks not related to the functions of their
respective offices contrary to Section 77 of R. A. No. 7160, thereby incurring additional
government expenditures for unrelated services. (Observation No. 13)

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We recommended that the LCE through the CHRMO: (a) require the JOs and CoS
personnel to submit their job description, duties and project assignment duly aligned with
the function of their respective offices, signed by the Head of Offices and duly approved
by the Local Chief Executive; (b) ensure close monitoring of their accomplishments based
on the expected outputs in their job description; and (c) consider reducing the number of
JOs and CoS by objectively assessing the need of each office vis-a-vis the performance of
JOs and CoS in order to effectively and efficiently achieve the LGU’s mandate and
function.
9. Disbursement and collection reports for calendar year 2019 were not submitted
completely by the Treasury to the Accounting Office while other financial reports were not
submitted to the Audit Team (AT) within the prescribed period contrary to P.D. No. 1445
and COA Circular No. 2009-006 dated September 15, 2009, thus hindered the timely
verification of accounts and reports. (Observation No. 14)

We recommended that the LCE require the (a) City Treasurer to prepare and submit to the
Audit Team the Report of Checks Issued (RCI) on a daily basis and likewise, submit all
the paid vouchers, payrolls and other financial documents and reports to the Accounting
Office on a timely basis; (b) City Accountant to strictly comply with the submission of
accounts and financial reports within the deadline set under Section 7.2.1 of COA Circular
No. 2009-006 and Section 122 of P.D. No.1445; and (c) City Human Resource
Management Office to study the present manning at the CAO and CTO, if warranted and
if the budget permits, employ additional personnel for these offices to carry-out their
functions effectively.
10. Several deficiencies were still noted in the solid management practices employed
by the City due to (a) the establishment of Materials Recovery Facility (MRF) by all
barangays in the City and segregation of solid wastes at source were not fully
implemented;( b) idle/ defective MRF equipment resulted in manual sorting of garbage;
and (c) plate number of one unauthorized/unlisted truck hauler existed between the records
of the CENRO, the private hauler and International Solid Waste Integrated Management
Specialist Incorporated(ISWIMS), the private owner of the final disposal facility, which
is not in conformity with R.A. No. 9003 and resulted in high cost of environment and
sanitary expenses and compromised the health of the personnel assigned at the City’s
MRF. (Observation No. 15)

We recommended that the LCE require the head of the CENRO to (a) install effective
control measures to properly monitor compliance of barangays with R.A. No. 9003
particularly the establishment of MRF and segregation of solid wastes at source to
minimize cost of tipping fees; (b) strictly monitor the departure time of hauler’s trucks from
the MRF and reconcile the discrepancy in the list of accredited trucks or authorized
vehicles to haul garbage from the City’s MRF to its final disposal facility; (c) avoid manual
sorting of wastes by the JO personnel and utilize all machines and equipment at the MRF
to the maximum; and (d) draft a proposal for approval of the agency head considering the
use of the City’s own garbage trucks for the hauling and final disposal to ISWIMS to save
on hauling cost.

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E. Summary of Total Suspensions, Disallowances and Charges at year-end

Suspensions, disallowances and charges as of December 31, 2019 amounted to ₱0.00,

₱65,181,278.31 and ₱0.00, respectively. The disallowances were issued by the COA Fraud
Audit Office as a result of the Special Audit conducted for the CYs 2005-2008 transactions.
The persons liable filed an Appeal Memorandum dated August 27, 2016 to the Commission
Proper, Commission on Audit, Commonwealth Avenue, Quezon City in the amount of
₱3,537,378.98 as part of the total disallowed amount of ₱15,217,150.70 under N.D. No.
2015-12-026 dated December 23, 2015. The outcome of the appeal is still pending with
the COA Central Office. For the unappealed portion of the total disallowance, the COA
Fraud Audit Office has not issued any finality of decision as of audit date.

F. Status of Implementation of Prior Year’s Unimplemented Audit

Recommendations

Out of the 75 unimplemented recommendations embodied in the 2018 AAR, 46 were

implemented, 25 were partially implemented and four were not implemented.

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