EXECUTIVE SUMMARY

A. Introduction

Navotas was once part of the Municipality of Malabon until January 16, 1906, when
it became independent through the enforcement of the Philippine Commission Act
No. 142. It became a highly urbanized city on June 24, 2007, through Republic Act
No. 9387 dated March 10, 2007, or an Act converting the Municipality of Navotas
into a highly urbanized city to be known as the City of Navotas. It is part of
Metropolitan Manila, particularly of the National Capital Region, together with the
other 15 cities and one municipality (Pateros), and of the informal sub-region called
CAMANAVA. This sub-region, represents the cities of Caloocan, Malabon, Navotas
and Valenzuela.

Navotas City is best known for its seafood products, with a land area distinctly
surrounded by bodies of water. In Metro Manila, Navotas is the only city where the
fishport is located, thus it is known as the Fishing Capital of the Philippines. The
City has the third largest fish port in Asia and the largest in the Southeast Asia.

According to the 2015 census, it has a population of 249,463 people (Source:

Philippine Statistics Authority) and current estimated population for Calendar Year
(CY) 2019 of 250,000 people (Source: City Planning and Development Office).
Navotas has a total land area of 10.69 square kilometers. It i s geographically
located on the extreme northwestern shore of Metro Manila and is politically
subdivided into two districts with a total of 18 barangays, 11 of which are located
along its coast. The mission of the City is to harness all resources to serve the needs of
its constituency towards industrialization through dedicated and accountable public
officials and an empowered citizenry.

The City is governed by Mayor Tobias Reynald “Toby” M. Tiangco who was
elected in the May 2019 mid-term elections, together with Vice Mayor Clint
Nicholas B. Geronimo, who is also the presiding officer of the Sangguniang
Panlungsod, the 12 regular sanggunian members, and two ex-officio members from
the president of the city chapter of the Liga ng mga Barangay and the president of
the panlungsod na pederasyon ng mga Sangguniang Kabataan. The City is
represented by Congressman John Reynald M. Tiangco in its lone congressional
district seat in the House of Representatives of the Philippines.

As of December 31, 2019, the City has a total personnel complement of 1,740
consisting of:
Elective Officials 16
Permanent 426
Co-Terminous 81
Casual 13
Job Order/Contract of Service 1,204
Total 1,740

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B. Financial Highlights

For CY 2019, the City’s assets, liabilities and equity for the year were P4.214 billion,
P0.999 billion and P3.215 billion, respectively. The said accounts have increased by
P0.531 billion, P0.231 billion and P0.299 billion, respectively in CY 2019, details as
follows:

Increase
2019 2018
(Decrease)
Assets P 4,214,421,350 P 3,683,300,711 P 531,120,639
Liabilities 999,145,538 767,718,041 231,427,497
Equity 3,215,275,812 2,915,582,670 299,693,142
Revenue 1,684,479,859 1,520,266,310 164,213,549
Expenses 1,407,925,790 1,152,623,506 255,302,284
Net Income 276,554,069 367,642,804 (91,088,735)

For CY 2019, the appropriations of Navotas City for the General Fund and Special
Education Fund totaled P1.962 billion, as shown below:

Fund Appropriations Budget Obligations

General Fund P 1,838,261,229 P 1,330,381,490
Special Education Fund 124,650,112 74,874,355
Total P 1,962,911,341 P 1,405,255,845

C. Operational Highlights

Among the most significant accomplishments reported by the City for CY 2019 are
as follows:

1. Establishment of the Social Services One Stop Shop (SSOSS) which facilitates
the various social services of the City;

2. Creation of the Internal Audit Unit through City Ordinance No. 2019-24;

3. Increased collections from Local Revenue Sources by 10.03 percent from the CY
2018 figures;

4. Inauguration of three new building facilities for Navotas Vocational Training and
Assessment (Navotaas) Institute which serve as conducive venues for Technical
Education and Skills Development Authority - based assessment, hands-on
trainings, lectures, seminars and business start-ups;

5. The City Engineering Office (CEO) completed six projects for rehabilitation and
improvements of public roads and drainages, seven projects for the installation of
streetlighting systems, 13 projects for school repair and improvements, and 10
projects for the improvement of public structures and open spaces;

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6. Navotaas Homes II, an in-city housing facility located at Barangay Tanza 2,
became fully operational with all 408 units occupied by qualified housing
beneficiaries; and

7. Completion of in-city housing facilities at Barangays North Bay Boulevard South

(NBBS) - Dagat-dagatan, NBBS-Kaunlaran and San Roque which were fully
occupied by the intended beneficiaries.

For CY 2019, the City is a recipient of the following awards and citations:

 Seal of Good Local Governance (SGLG) from the Department of the Interior and
Local Government (DILG). The SGLG originated from the Seal of Good
Housekeeping (SGH) and assessment covers all provinces, cities, and
municipalities across the country. It is the DILG’s response to the clamor of the
people for integrity and performance in public service. SGLG therefore, challenge
local governments to continue good governance practices while providing better
public services. Thus, the SGLG symbolizes integrity and good performance of
local governments;

 Seal of Child-Friendly Local Governance from the Regional Committee for the
Welfare of Children for its sustainable programs and projects for the welfare of
children. The city government passed the Child-Friendly Local Governance Audit
conducted by the Inter-Agency Monitoring Task Force;

 Wealth Center Award from the 2019 Philippine Model Cities and Municipalities
forum and awards event. It is given to the city with a commendable investment
and tax collection program. Navotas was recognized for the growth of its tax
collections which was anchored on the implementation of the City’s 2018 Revised
Revenue Code. The City implemented a staggered collection of real property
taxes for industrial and commercial assets for three years. Meanwhile, business
tax rates remained the same;

 Seal of Good Education Governance (SGEG) from the Synergeia Foundation,

with the support of United States Agency for International Development and in
partnership with Philippine Long Distance Telephone Company and Smart.
SGEG measures how local governments provide children with equal access to
good education. To qualify for the Seal, the locality must have a high cohort-
survival rate, that is, grade one students must at least finish grade six and the
performance of the children in the national achievement test must also be steadily
improving. The Special Education Fund must be used on activities that promote
learning;

 Public Health Awards which includes Best in Oral Health Programs, Best in
Tuberculosis Control Program, and Best Lifestyle-Related Disease Prevention and
Control Program;

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  Strong Partner in Health Service Delivery - The City has been recognized for its
outstanding health services. The Navotas City Hospital (NCH) received a citation
from the Philippine Health Insurance Corporation (PhilHealth) for being a
“Strong Partner in Health Service Delivery.” Navotas was selected based on its
sustainable and progressive health initiatives since 2005. For 2019, the city
opened the 25th Malasakit Center at NCH and the Navotas Wellness and Medical
Center;

 Navotas City Hospital - winner of the Trailblazer Award;

 Best in Nutrition Program Effectiveness;

 Ideal Functionality Rating in the 2018 National Anti-Drug Abuse Council

Performance Audit for Highly Urbanized Cities -Navotas received a perfect score
from the DILG - National Capital Region for its exemplary performance in
addressing the problem of illegal drugs. Navotas has a Bidahan community-based
rehabilitation program where drug users attend a 3-day retreat and eventually
undergo six- or 18-months counselling. It also offers faith-based interventions
such as Simula ng Pag-asa and Katatagan Kontra Droga sa Komunidad. Other
programs to boost the City’s anti-drug campaign include drug awareness and
prevention lectures to Grade 6 pupils; year-round Navotaas Sports Camp; random
and mandatory drug testing for city hall employees, program beneficiaries and
others; and drug-clearing of barangays. Out of 18, Navotas now has 11 barangays
declared drug-cleared by the Philippine Drug Enforcement Agency; and

 Unmodified Opinion as embodied in the Independent Auditor’s Report of the

Annual Audit Report for CY 2018 - Commission on Audit (COA).

D. Scope and Objective of Audit

The audit covered the accounts and operations of the City of Navotas for the period
January to December 31, 2019. The objectives of the audit are to (a) be able to lend
credence to Management’s assertions on the financial statements; (b) recommend
agency improvement opportunities; (c) determine compliance with existing laws,
rules and regulations; and (d) determine the extent of implementation of prior years’
audit recommendations.

E. Auditor’s Opinion on the Financial Statements

The Auditor rendered an unmodified opinion on the fairness of presentation of the

financial statements of the City of Navotas for CY 2019.

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F. Summary of Other Significant Audit Observations and Recommendations

1. Account balances of several Property, Plant and Equipment (PPE) are unreliable
due to the a) unreconciled variance between the books and the Report on the
Physical Count of PPE (RPCPPE) totaling P182.236 million; b) undetermined
beginning balances recorded both in the books and RPCPPE in the amounts of
P5.859 million and P0.512 million, respectively; and c) PPE items that are
recorded in general terms with no particulars or specific details with a total cost
and carrying value of P16.732 million and P1.792 million respectively; d) non-
application of recognition and derecognition principle for the capitalized costs of
improvements and cost of removal/replacement; and e) misclassification and non-
recording of PPE items in both RPCPPE and Lapsing Schedule, which is not in
accord with the Revised Chart of Accounts prescribed under COA Circular 2015-
009.

We recommended that:

a. The Inventory Committee reconcile the results of the inventory count with the
property and accounting records after the conduct of the physical count. The
inventory listing of the equipment should be checked with the property card
maintained by the City General Services Office as against the equipment
ledger cards maintained by the City Accountant’s Office (CAO) and total
thereof shall be compared with those in the general ledger;

b. The CAO –

 Continue validation of the reconciling items in the PPE account and

accordingly prepare adjusting journal entries to reflect the correct balances
of the affected accounts;

 Sort/present the proper details of PPE according to its nature and capitalize
additional cost of rehabilitation, repairs and improvements to the specific
property and deduct the cost for the portion of the property which was
already dropped or demolished; and

 Exert extra effort to determine the details of property items without

description/breakdown and lumped as beginning balances and all PPEs
without details/breakdown.

c. The City General Service Officer include only in the RPCPPE the property
items actually counted, seen and found during the conduct of the physical
count. Significant discrepancies noted during the count should be immediately
investigated and explained, and reconciled with the CAO.

2. The propriety in the valuation of the Investment account of the City amounting to
P20.235 million could not be established due to the absence of sufficient proof of

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 ownerships or instruments of investment as required in the documentation of
accountability of local treasurers under Bureau of Local Government Finance
Memorandum Circular No. 003-2207.

We recommended that:

a. The CAO –

 Request for copies of the certificates on investments recorded in the books

and henceforth, to retain copies or proofs of ownership at all times as part
of the City’s permanent file; and

 Confirm the investments/guaranty deposits with the Investee/Company

concerned and complete the details in the Subsidiary Ledger.
Adjust/Correct those that are already been derecognized or applied in
previous payments.

b. The City Treasurer’s Office (CTO) to secure at all times, all Investment
certificates, like time deposits, treasury bills and stock certificates, which shall
be inventoried showing their serial numbers, amounts and type of investments
for the purpose of turn over or transfer of accountability per Sections 116
and 117 of the Local Treasury Operations Manual.

3. Unreliable receivables account balance, excluding Real Property Taxes (RPT)/

Special Education Tax (SET) receivables, amounting to P11.452 million due to
unsupported/undocumented dormant accounts which have long been outstanding,
deprived the City of funds for its operations and affected the fair presentation of
the accounts in the Financial Statements.

We recommended that the CAO:

a. Exert efforts to locate the deliquent borrowers who availed of the long
outstanding livelihood loans assistance by sending demand letters, or refer the
matter to the City Legal Office for any appropriate legal action that may be
taken;

b. Adjust the entries made for the amount of utility expenses consumed (electric
and water bills) paid by the contractors during the completion of the
projects/programs in the City of Navotas; and

c. Reclassify into proper accounts the noted misclassified accounts in the books.

4. Reconciling items had remained unrecorded/unadjusted in the books as of

December 31, 2019, contrary to Item 3.3 of COA Circular No. 96-011 dated
October 2, 1996, resulting to the understatement of Cash in Bank - Local
Currency, Current Account (CIB - LCCA) in the total amount of P1.100 million

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 and understatement of Hospital Fees and Due to Officers and Employees by
P0.759 million and P0.342 million, respectively.

We recommended that the CAO:

a. Obtain from the bank and the CTO all the necessary documents needed to
support the identified reconciling items; and

b. Record the identified reconciling items in the books for fair presentation of the
Cash in Bank-Local Currency - Current Account, Hospital Fees and Due to
Officers and Employees.

5. Disbursements for programs/projects/activities (PPAs) totaling P22.092 million

were charged to the unexpended Local Disaster Risk Reduction and Management
Fund (LDRRMF) of previous years that had already accrued to the Special Trust
Fund without the approved LDRRMF Investment Plan (LDRRMFIP), contrary to
COA Circular No. 2012-02.

We recommended that the City DRRMC prepare the LDRRMFIP annually to

support the utilization of the Trust Fund, duly approved by the LDRRM Council
and the Local Chief Executive as provided in COA Circular 2012-002.

6. The City appropriated and incurred P75.289 million and P75.016 million,
respectively, out of the 20% Development Fund, for the construction of its various
infrastructure projects. However, inadequate planning and monitoring have
resulted to the repetition of projects and additional cost for repairs for those
inefficiently executed.

We recommended that:

a. The City Engineering Office to –

 Effect a system to properly identify and/or account each streetlight in order

that such as date of installation, contractor/supplier, schedule of
repairs/maintenance and the like are easily accessible; and

 Conduct regular inspection as well as periodic repairs and maintenance, in

order that the Road Lighting infrastructure may provide better and safer
night-time environment on the roads, streets and parks of the City and that
socio-economic benefits thereon may be derived.

b. The General Services Office to maintain the necessary property cards for
monitoring, showing the historical records of each infrastructure projects-
streetlights, which include among others the complete description, exact
locations and other necessary details, considering that projects funded from

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 the 20% Development Fund partake the nature of investment or capital
expenditures.

7. Certain PPAs necessary in the operation and maintenance of public schools were
not included in the Special Education Fund (SEF) appropriation of P100.000
million in the annual budget, but were only incorporated in the mid-year
supplemental budget. Further, total appropriations exceeded total projected SEF
collections for CY 2019, thereby incurring an unfavorable variance of P5.930
million. Lastly, expenditure items charged against the SEF in the total amount of
P1.493 million were not among those explicitly authorized under Sections 272 of
RA No. 7160 and Department of Education-DILG-DBM Joint Circular No. 01,
series of 2017.

We recommended that the City School Board to:

a. Refund the amount of P1,492,650.00 for the payment of seminars/trainings

attended by school officials/teachers which are not allowed to be charged
against the SEF;

b. Refrain from charging expenses against the SEF unless authorized by the law,
rules and regulations; and

c. Henceforth, ensure that PPAs to be financed by the SEF are priority programs
and authorized projects identified in relevant law, rules and regulations to
benefit the operation and maintenance of public elementary and secondary
schools.

8. Unreliable balances of assets accounts - RPT and SET Receivables amounting to

P100.622 million and P62.907 million, respectively, as well as the corresponding
liability accounts - Deferred RPT and Deferred SET accounts with the same
amounts, due to the following: (a) Variances between the books of accounts and
the CTO on the RPT Receivables/Deferred RPT and SET Receivables/Deferred
SET in the amounts of P15.459 million and P5.774 million, respectively; and
(b) the propriety of the tax exempt properties in the City’s Assessment Roll with a
fair market value totaling P1.232 billion for the 4,753 real property units (RPUs,)
could not be ascertained due to lack of sufficient supporting documents as
required under Section 206 of the Local Government Code (LGC) of 1991.

We recommended for the CAO and CTO to –

a. Account for the variances noted in the RPT/SET Receivable and Deferred
RPT/SET between the CAO books of accounts and the Delinquency Listing of
Real Property Taxes record of the CTO; and

b. Reconcile the variances and reflect/adjust accordingly the correct balances of

the RPT/SET Receivable and the Deferred RPT/SET.

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9. The City granted Tax exemptions from RPT on various land, improvements and
machineries owned by private persons totaling 4,753 RPUs consisting of 11
industrial, 16 commercial, and 4,726 residential properties despite the lack of
supporting documents.

We recommended that the City through the City Assessor:

a. Secure sworn declaration of real property of the owners/administrators of

industrial, commercial and residential properties that are listed as exempted
from taxes as required in Section 202 of the LGC for the proper determination
of the assessment values and appropriate application on assessment levels;

b. Require the submission/filing of sufficient documentary evidence from the

owners/administrator who claimed tax exemption for property as required
under Section 206 of the LGC. If the required proof has not been submitted,
the property should be listed as taxable in the assessment roll;

c. Re-assess the property with market values of P175,000.00 and below that
were previously exempted from the RPT and impose the corresponding tax
level and tax rate for RPT and SET; and

d. Undertake a general revision of assessment and property classification as

provided in Sections 219 and 220 of the LGC.

10. Out of the City’s 18 Barangays, only three or 17 percent had their own Materials
Recovery Facility (MRF), while the remaining 15 Barangays or 83 percent had
engaged the services of private junkshops. Further, the City has not yet developed
an alternative centralized MRF for highly built-up areas as provided in its Ten-
Year Solid Waste Management (SWM) Plan.

We recommended that the SWM Board:

a. Adopt measures to promote and ensure the viability and effective

implementation of RA No. 9003 by establishing MRFs in every Barangay, or
clusters of Barangays;

b. Establish a centralized MRF as provided in the City’s Ten-Year Plan;

c. Provide the necessary support to component barangays either financially,

technically or in any other manner deemed necessary in order to achieve the
waste diversion goal of RA No. 9003; and

d. Revisit the City’s Ten-Year SWM Plan for proper updates or modifications
upon proper consultations with the various sectors of the community to ensure
its sustainability, relevance and effectiveness and submit to the National
SWM Commission for concurrence and approval.

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 The aforementioned observations together with the corresponding recommendations
were discussed with Management officials concerned during the exit conference held
on August 27, 2020. Management views and comments were incorporated in the
report, where appropriate.

G. Status of Audit of Suspensions, Disallowance and Charges

There were no suspensions, disallowances, and charges as of year-end as stated in the

Statement of Audit Suspensions, Disallowances and Charges as of December 31,
2019.

H. Status of Implementation of Prior Years’ Audit Recommendation

Of the 42 audit recommendations contained in the CYs 2016, 2017 and 2018 Annual
Audit Reports, 18 or 42.86 percent were fully implemented, 18 or 42.86 percent were
partially implemented and six or 14.28 percent were not implemented by the Agency.