MLB 2009-03

Special Audits Office
Report No. 2009-03

Government-Wide Performance Audit
Management of Loans and Borrowings
Local Government Units

Republic of the Philippines
Commission on Audit
Special Services Sector
SPECIAL AUDITS OFFICE
Commonwealth Avenue, Quezon City Philippines
Tel. No.: (+632) 931-7455/ Telefax No.: (+632) 931-9235
August 4, 2010
Honorable JESSE M. ROBREDO

Secretary
Department of the Interior and Local Government
10th Floor, A. Francisco Gold Condominium II
EDSA cor. Mapagmahal St., Quezon City
Sir:
We are pleased to transmit the report on the government-wide performance

audit on the management of loans and borrowings of selected Local Government
Units (LGUs). The audit, covering sixteen (16) LGUs, was conducted pursuant to
COA Office Order No. 2009-018 dated January 8, 2009. The results of the audit
were forwarded to that Office and the concerned LGUs between March 17-19,
2010 for comments, which were incorporated in this report where appropriate.
The audit was conducted to determine whether loans and borrowings by

LGUs were effectively managed taking into consideration the LGU’s debt service
capacity, the implementation procedures and the benefits derived from such loans
and borrowings. The audit covered the review of loans and borrowings contracted
by selected LGUs from CYs 2006 to 2008 and evaluation of projects funded
therefrom. It also covered validation of projects implemented/constructed prior to
CY 2006 which were funded out of loans with substantial balances as of CY 2006.
We look forward to the proper implementation of the recommendations

that fall within your jurisdiction and we would appreciate being informed on the
actions taken thereon within one month from receipt thereof.
Very truly yours,
By Authority of the Chairman:
SUSAN P. GARCIA
Director IV
Contents Page
Part I Executive Summary 1
Background 2
Audit Objective 3
Evaluation Criteria 3
Audit Scope and Methodology 3
Audit Conclusion 5
Management’s Reactions to Audit Observations 7
Team’s Rejoinder 9
Audit Recommendations 10
Part II Credit Financing Facilities 11
Introduction 12
Financing Alternatives 12
Laws, Rules and Regulations on LGU Credit Financing 14
LGU Loan Cycle 19
Bond Flotation Process 20
Profile of Loans and Borrowings of LGUs 21
Loan Conditions/Securities 25
Part III Audit Observations 28
Chapter 1 Adequate and Appropriate Policies for

Assessing LGUs’ Borrowing Capacity 29
Introduction 30
Observations 31, 36, 53, 57
Management’s Comments and Team’s
Rejoinder 36, 47, 55, 60
Chapter 2 Proper Maintenance of Loan Records 62
Introduction 63
Observations 63, 72
Rejoinder 67
Chapter 3 Responsive Programs and Projects 74
Introduction 75
Observation 76
Rejoinder 83
Contents Page
Chapter 4 Effective Loan Utilization and Project

Implementation 88
Introduction 89
Observations 90, 96, 102, 105, 107, 121
Rejoinder 93, 101, 104, 117, 132
Chapter 5 Compliance with Existing Laws and

Regulations 135
Introduction 136
Observations 136, 139
Rejoinder 138
Part IV Recommendations 142
Part V Annexes 148
1-1 Schedule of Interest Expenses on Bonds (City Governments

of Pasay, Antipolo and Puerto Princesa)
1-2 Comparative Costs Between Borrowing from Banks and

Flotation of Bonds (City Governments of Pasay, Antipolo
and Puerto Princesa)
2-1 Schedule of Unrecorded Loan Releases, Principal

Amortization and Interest Expenses (Mandaluyong City)
2-2 Schedule of Book and Bank Balances (Puerto Princesa City)
2-3 Comparative Schedule of Loans Payable and Interest

Expenses Balances (Cabanatuan City)
2-4 Schedule of Unrecorded and Erroneous Transactions

(Pasay City)
3-1 Schedule of Projects Not defined and/or Not Included in the

LGUs’ Development Plans/Annual Investment
Plans/Programs
4-1 List of Projects Not Yet Implemented and for Completion

(Parañaque City)
Part I
Executive Summary
1
EXECUTIVE SUMMARY
BACKGROUND
Under the Local Government Code (LGC) of 1991, LGUs were given more powers
by allowing them the widest possible space to decide, initiate and innovate. Among
the powers given to LGUs under the said Code are the powers to create
indebtedness and to enter into credit and other financial transactions.
LGUs are authorized to avail credit facilities and issue bonds, debentures, securities,
collaterals, notes and other obligations, subject to existing rules and regulations, and
to finance self-liquidating, income-producing development or livelihood projects
identified as priority projects in the approved local development plan or the public
investment program. They may also avail of credit lines from any government or
private banks and lending institutions for purposes of stabilizing local finances.
At present, LGUs are borrowing from government and private financing

institutions, Municipal Development Fund Office and pension funds. Some
large-sized LGUs have also floated bonds to finance income generating and self-
liquidating projects.
Reflected in the Consolidated Financial Report for LGUs, the consolidated loans
and bonds payable of LGUs increased from P35.097 billion as of December 31,
2006 to P44.565 billion as of December 31, 2008, as tabulated below:
(In Million)
Source Bonds Payable Loans Payable Total
2006 2008 2006 2008 2006 2008
Domestic P 2,604.3 P 3,340.3 P 31,944.9 P 36,845.4 P 34,549.2 P 40,185.7
Foreign - - 548.3 4,379.3 548.3 4,379.3
Total P 2,604.3 P 3,340.3 P 32,493.2 P 41,224.7 P 35,097.5 P 44,565.0
While borrowings by LGUs were, to some extent, being monitored by the Bureau of
Local Government Finance (BLGF) of the Department of Finance (DOF), some
legislators expressed alarm over possible abuse by some LGU officials in securing
loans in amounts exceeding their paying capacity. This may result in the need to
allocate a lion’s share of their Internal Revenue Allotment (IRA) to repay the loans,
leaving little or no funds for the delivery of essential public services.
2
EXECUTIVE SUMMARY
AUDIT OBJECTIVE
The audit was conducted to determine whether loans and borrowings by LGUs were
effectively managed taking into consideration the LGU’s debt service capacity, the
implementation procedures and the benefits derived from such loans and
borrowings.
EVALUATION CRITERIA
The team considered the following evaluation criteria in assessing the effectiveness
of LGUs in managing their loans and borrowings:
• Adequate and appropriate policies for assessing LGU’s

borrowing capacity;
• Proper maintenance of loan records;
• Responsive programs and projects;
• Appropriate loan utilization and project implementation; and,
• Compliance with existing rules and regulations
AUDIT SCOPE AND METHODOLOGY
The audit covered the review of loans and borrowings contracted by selected LGUs
from CYs 2006 to 2008 and evaluation of projects funded therefrom. It also
covered validation of projects implemented/constructed prior to CY 2006 which
were funded out of loans with substantial balances as of CY 2006. The LGUs
covered in the audit are presented below:
Caloocan City
Malabon City
National Capital Mandaluyong City
Region (NCR) Marikina City
Parañaque City
Pasay City
3
EXECUTIVE SUMMARY
Region I Dagupan City
Angeles City
Region III Bataan Province
Cabanatuan City
Antipolo City
Rizal Province
Region IV Lucena City
Palawan Province
Puerto Princesa City
Region XI Davao City
To achieve the audit objective, the team adopted the following audit techniques,
among others:
• Reviewed existing policies, guidelines and mechanism on contracting loans

and borrowings by LGUs;
• Reviewed LGU’s Annual Development Plan/Public Investment Program to

assess whether the projects identified and funded from loans and borrowings
are aligned to the priority plans and projects of the LGU;
• Reviewed and analyzed loans/borrowing utilization reports and disbursement

vouchers to determine whether loans were utilized for the intended purpose/s;
• Interviewed personnel involved in the implementation of projects funded from

loans and borrowings; and
• Inspected selected projects funded from loans and borrowings to assess their
condition, extent of utilization and conformity with plans,
specifications/requirements and timelines.
4
EXECUTIVE SUMMARY
AUDIT CONCLUSION
Overall, the audit concluded that the LGUs’ loans and borrowings may not be
considered effectively managed due to deficient criteria for evaluating LGU’s debt
service capacity, unrecorded loans and borrowings, and deficiencies in the
implementation procedures. These deficiencies resulted in financial difficulty for a
number of LGUs to meet loan obligations, wastage of government resources, and
non-attainment of the LGUs’ development objectives.
The results of deficient criteria for evaluating LGU’s debt service capacity are
evident in the following:
• The LGUs’ borrowing capacity was assessed based only on the debt service
ceiling set under the LGC of 20% of their regular income. The net available
funds of LGUs prior to contracting were not considered. Thus, seven (7)
LGUs with net available funds ranging only from zero to P0.19 million were
able to contract loans with required yearly amortizations of P0.75 million to
P25.13 million. In effect, the LGUs were allowed to contract loans in excess of
their borrowing capacities. This eventually resulted in payment of additional
interest and penalty, forfeiture of projects funded therefrom and continuous
cycle of loan restructuring. A number of these LGUs could hardly provide
sufficient budget to meet their yearly amortization even if the same were way
below the 20% debt service cap.
• The economic or useful life of the projects and the remaining term of the
incumbent officials were not considered in determining the maximum
repayment period for each loan. Loans were contracted for as long as
seventeen (17) years which exceeded the economic or useful life of the
financed projects and the remaining term of incumbent officials. Thus, out of
the loan balance of P3.80 billion as of December 31, 2008 of nine (9) LGUs,
twenty-one (21) projects financed therefrom in the amount of P1.34 billion
were no longer functional, not being used or abandoned. A number of loans
contracted as early as CY 1979 to CY 1987 have also remaining substantial
unpaid balances of P45.10 million as of December 31, 2008.
These problems were compounded by deficiencies in the implementation

procedures as discussed below:
• The specific programs and projects to be implemented within a specified

period were not defined in the development plans and programs of some
LGUs. Despite absence of specific programs/projects for implementation,
loans were continuously contracted. In other cases, loans were contracted for
the implementation of projects not covered in the development plans and
programs. This is true in the case of a number of loan-funded projects costing
P3.79 billion which were neither specifically identified in the loan agreements
nor included in the list of priority projects. The necessity of these projects are,
therefore, questionable.
5
EXECUTIVE SUMMARY
• Around P1.03 billion were used by six (6) LGUs for purposes other than those
for which the loans were contracted at the expense of intended projects which
remained unimplemented, partially completed or unpaid as of December 31,
2008.
• The projected revenues of a number of projects were not realized due to

delayed/non-completion of projects, unutilized rentable spaces and delayed
collection of rental fees on occupied spaces. Thus, LGUs continuously
subsidize amortization and operating expenses of these projects in amounts
ranging from P64.96 million to P296.29 million. In other cases, projects were
contracted without adequate study and evaluation resulting in the termination
of some project components and delayed completion of the projects.
• Implementation of loans intended for lending to micro, small and medium

enterprises was not closely monitored resulting in substantial uncollected
balances from beneficiaries. Thus, loan repayments, which were likewise
delayed, were shouldered by the concerned LGUs.
• School building projects funded out of loans of LGUs covered in the audit
were constructed without proper coordination with the Department of
Education (DepEd). As a result, a number of additional school buildings were
constructed in schools without need for the same in the presence of other
schools with pupil-classroom ratio of 65:1 to as high as 447:1. School chairs
purchased by the Provincial Government of Bataan also exceeded the total
requirements by 4,834 units.
• Three (3) LGUs availed of bond flotation which may not be considered cost
effective as this entailed higher incidental expenses than regular loans.
• Out of 113 loan-funded projects inspected by the team, 54 projects were

neither in accordance with plans and specifications nor of acceptable
workmanship. Eleven (11) projects implemented by two (2) LGUs were found
deficient by P6.28 million, while deficiencies of 43 other projects implemented
by three (3) LGUs could not be quantified due to the absence of detailed
computations. These projects are of poor workmanship, with missing/
uninstalled items or with changes in designs.
The legal requirements on the disposition of loan proceeds were, likewise, not
observed in the following instances:
• Loan proceeds and interest income from bond flotation amounting to P2.33
billion were utilized by six (6) LGUs without covering appropriation or in
excess of the approved appropriation in violation of existing regulations.
These loans, along with the interest income derived from bond flotation, were
also not included in the LGUs’ budgets as among the sources of income.
6
EXECUTIVE SUMMARY
• Payments out of loans by the City Government of Dagupan for the

construction of Malimgas Market costing P283.47 million and by the City
Government of Puerto Princesa for the supply/installation of synthetic track
oval costing P17.50 million were not fully documented in violation of Section
4(4) of P.D. 1445. As such, the validity, propriety and legality of the said
claims cannot be assessed.
• Loan releases, repayments and disbursements in the total amount of P460.78

million were not recorded in the books of accounts of four (4) LGUs.
In addition, a number of LGUs were not maintaining subsidiary ledgers to record

loan/bond transactions by loan/bond issues which resulted in difficulty of
monitoring correct balances of the accounts and propriety of expenses charged
thereon.
MANAGEMENT’S REACTION TO AUDIT OBSERVATIONS
The team issued, on various dates, audit observation memoranda highlighting the
deficiencies noted during the audit. In a number of cases, these observations were
discussed with the concerned officials of the LGUs in an exit conference conducted
after each audit. In addition, the team forwarded a copy of the draft audit report to
the 16 LGUs covered in the audit, and to the DOF, Department of the Interior and
Local Government (DILG) and BLGF between March 17 to 19, 2010 for comments.
Except for the DILG and three (3) LGUs, all the concerned agencies submitted their
comments on one or some observations contained in the audit observation
memoranda or draft audit report which were incorporated in the audit report, where
appropriate.
Generally, the LGUs claimed that:
• On the contracting of loans with term in excess of the economic life of

the projects and beyond the remaining term of the incumbents
− The loan term was agreed upon by the lending institutions and the
LGUs, and longer repayment period would require lower loan
amortization and less financial burden to the LGUs.
• On unused garbage bins
− Garbage bins found by the team during inspection to be

unused/undistributed are being deployed/used during special events
or reserved for contingencies.
7
EXECUTIVE SUMMARY
• On loans in excess of borrowing capacity
− The City Government of Antipolo’s loan under the Special

Education Fund (SEF) is still within its borrowing capacity.
Computation of borrowing capacity should consider available funds
under the General Fund.
− The team’s computed maximum borrowing capacity for the

Provincial Government of Palawan was incorrect. The Annual
Regular Income (ARI) for CYs 2006 to 2008 presented by the team
is relatively lower than the figures reflected in the records of the
Province.
• On deficiencies noted in the LGUs’ development plans
− The Annual Investment Programs (AIPs) and other development

programs were prepared in accordance with established guidelines.
The Programs, Projects and Activities (PPAs) were defined in
general terms to allow flexibility, and that specific PPAs were
indicated in the Comprehensive Development Plans (CDPs) of
cities/municipalities in the case of a province.
• On the implementation of school building projects without proper

coordination with DepEd
− The Medium Term Development Plan (MTDP) and AIP were

prepared as a result of planning workshops and conferences and
that the projects were identified with the aid of the Local School
Board/DepEd and based on requests from or priorities submitted by
various school officials.
• On the deficiencies noted in the implementation of projects
− The costs corresponding to the deficiencies noted in a number of

projects implemented by the City Government of Parañaque were
used in the implementation of projects in other locations/barangays,
some items were not included in the plans and/or not installed and
replaced with other items of work.
8
EXECUTIVE SUMMARY
TEAM’S REJOINDER
The team agrees that longer repayment period would result in lower amortization.
However, it would no longer be reasonable both to the next administration and the
City/Provincial Government if the loan term would still exceed the economic life of
the project implemented, and way beyond the remaining term of the incumbent
officials. Likewise, the next administration may have different thrusts and
priorities. It may not also be appropriate for the City or Provincial Governments to
contract loans for the purpose of purchasing goods and equipment which are not
really needed and intended merely to be used during special occasions.
Moreover, while it is true that during CYs 2006 to 2008, amortization for loan under
the SEF of the City of Antipolo can still be fully serviced, its net income is
relatively lower than the required yearly amortization, for principal alone, of the
new loan. The LGU’s loan even exceeded the BLGF’s certification, which was
already based on the total income generated under the SEF and the City’s share
from IRA. It cannot, therefore, be claimed that the loan under SEF is still within its
borrowing capacity. The team’s computation of the maximum borrowing capacity
of LGUs is based on the LGU’s actual regular annual income and not on the total
income as reflected in the LGU’s Annual Budget.
On the other hand, projects to be funded out of loans should be specifically

identified before contracting for loan. Ideally, these projects should have been
included and specified in the AIP and development programs.
The alleged requests from the the DepEd officials for the construction of additional
school buildings were not forwarded to the team. Nonetheless, granting that the
DepEd officials indeed requested for these projects, such requests should have been
validated with Basic Education Information System (BEIS) - Quick Counts
Instructional Analysis, which is readily available. The Instructional Room Analysis
provided by the School Divisions of Cabanatuan City and Provinces of Palawan and
Rizal clearly identified the schools actually in need of classrooms. As discussed in
the report, some additional school buildings were constructed in schools without
need for the same.
Lastly, it cannot be said that costs equivalent to project deficiencies were used in the
implementation of other projects and/or replaced with another work item as these
were not reflected in the documents supporting the payments. The accomplishment
reports supporting payments disclosed that these projects were reported
accomplished in accordance with plans and specifications. It cannot, therefore, be
claimed now that the costs of deficiencies were used in other projects and/or
replaced with other items. The team was, likewise, not informed of any changes
during inspection and was not provided copy of change/variation orders.
9
EXECUTIVE SUMMARY
RECOMMENDATIONS
Considering that LGUs are continuously securing loans and borrowings to finance
development and investment projects, the team recommended measures under Part
IV of the report to address these deficiencies.
In general, the team recommended that the DILG, DOF, National Economic and
Development Authority (NEDA) and Department of Budget and Management
(DBM) should consider establishing appropriate guidelines for managing LGUs’
loans and borrowings to avoid contracting of loans beyond their paying capacity and
ensure that these are used for the purpose(s) intended. The guidelines should
prescribe the following, among others:
• the maximum borrowing capacity should not only consider the 20% debt
service ceiling but also the LGUs’ net available funds prior to contracting of
loans/borrowings;
• the loan/borrowing terms should consider the type/nature and economic or
useful life of the projects to be financed and the remaining term of the
incumbent LGU officials;
• the alignment of loans to support development plans and investment programs
identifying their priority projects;
• the specific purposes for which loan may be secured; and,
• the requirement for the LGUs to maintain subsidiary ledgers for each
loan/borrowing.
On the other hand, the LGUs should conduct self-assessment of their capacity to
repay the loan taking into consideration their net available funds, ensure that
utilization of loan proceeds is covered by appropriation ordinance, determine the
most cost effective borrowing scheme, contract loans only upon proper evaluation
of priority projects, and allocate sufficient funds to cover total contracted liabilities.
The implementation of projects should also be closely monitored to ensure that
construction conforms with plans and specifications.
To further ensure that the loans were used only for the purpose(s) intended, the
LGUs should maintain complete subsidiary ledgers for loans and borrowings to
record all transactions, particularly releases, repayments and all charges thereon.
10
Part II
Credit Financing Facilities
11
CREDIT FINANCING FACILITIES
INTRODUCTION
LGUs have been conferred more power, authority, responsibilities, and resources
under Republic Act No. 7160 or the 1991 LGC. In line with this policy, LGUs are
authorized to create their own sources of revenue and to levy taxes, fees, and
charges that accrues exclusively to LGUs. They are, likewise, given the power to
create indebtedness, as the need arises, to source funding requirements for
development projects that could not be funded from regular sources.
As presented in the LGUs’ Consolidated Financial Report, during CYs 2006 to

2008 alone, provinces, cities and municipalities have availed of loans and
borrowings amounting to P28.50 billion. With these availments, loans and
borrowings balances as of December 31, 2008 amounted to P44.56 billion, as
tabulated below:
Loans and Borrowings

LGU Category (In Million)
2006 2007 2008 Total
Provinces P 2,939.86 P 2,339.58 P 2,308.99 P 7,588.43
Cities 2,903.96 5,471.15 5,144.90 13,520.01
Municipalities 2,401.58 2,538.00 2,450.83 7,390.41
Total P 8,245.40 P 10,348.73 P 9,904.72 P 28,498.85
Balance as of Dec. 31 35,097.44 44,237.28 44,564.97
FINANCING ALTERNATIVES
LGUs have a wide array of financing alternatives. The LGC authorizes various
financing schemes that can be availed of by LGUs in the implementation of local
development projects. Among these are the following:
Traditional funding sources of LGUs include internally-generated

revenue from real property and business taxes, fees and charges, and
Traditional economic enterprises; IRA from the national government representing
Funding the LGU’s share in internal revenue collections as of three (3) years
Sources earlier; share in the national wealth; share in value-added taxes;
financial aid and donations in kind from local or foreign sources.
12
Sections 295 to 299 of the LGC authorize LGUs to secure

short, medium or long-term loans and advances backed by
bonds, securities, collaterals, notes and other obligations to
finance self-liquidating and income-generating projects. Long-
term loans are suitable for costly long-term and income-
generating projects as it allows future users to share in the
payment of the project cost. Sources of LGU borrowings are:
• Bank Loans
Government banks are the main source of loans of LGUs.
As a condition for lending, Government Financial
Institutions (GFIs) require LGUs to consider them as their
depository banks, and in some cases, to issue authority to
automatically debit their accounts at the time repayments
fall due.
• Bond Flotation
Under the LGC, provinces, cities, and municipalities are
authorized to issue bonds to finance self-liquidating,
income-producing development or livelihood projects
Borrowings
included in the local development plans or public
investment programs.
Bond flotation as a source of financing for LGUs is said to
be an improvement over bank borrowing as the LGU creates
a debt instrument with term and conditions that meets its
needs and the needs of the investor. Bonds bring in a wide
variety of investors and offer the opportunity of lower
interest rates to LGU issuers than would typically be
available through a bank loan. This is, however, also subject
to a number of bank charges.
• Municipal Development Fund (MDF)
LGUs can also avail loans from the MDF for specific
purposes, project components and activities. These are
amortized by LGUs out of their regular fund sources.
When loans from GFIs or Municiapal Development Fund Office

(MDFO) are difficult to access, LGUs can turn to the private
sector for innovative financing packages, foremost among which
are Build-Operate-Transfer (BOT) and joint venture schemes.
Under the BOT, a private contractor builds and finances an
Private Sector infrastructure facility, and supports its operation and maintenance
Tie-Ups to be recovered from pre-established fees and charges collectible
within an agreed cooperation period. The manner of disposition
of the facility at the end of the cooperation period is dependent
on the provisions of the contract. Under a joint venture scheme,
the LGU participates in the operation of the project.
13
LAWS, RULES AND REGULATIONS
The availment of credit facilities by LGUs are governed by the following laws, rules
and regulations:
Laws, Rules and

Provisions
Regulations
Local Government Code (R.A. 7160)
It shall be the basic policy that any LGU may create

indebtedness, and avail of credit facilities to finance local
infrastructure and other socio-economic development projects
Sec. 296. General in accordance with the approved local development plan and
Policy public investment program.
An LGU may avail of credit lines from government or private

banks and lending institutions for the purpose of stabilizing
local finances.
An LGU may contract loans, credits and other forms of

indebtedness with any government or domestic private bank
and other lending institutions to finance the construction,
installation, improvement, expansion, operation, or
maintenance of public facilities, infrastructure facilities,
housing projects, the acquisition of real property, and the
implementation of other capital investment projects, subject to
such terms and conditions as may be agreed upon by the LGU
Sec. 297. Loans , and the lender. The proceeds from such transactions shall
Credits, and Other accrue directly to the LGU concerned.
Forms of
Indebtedness of Local An LGU may, likewise, secure from any government bank and
Government Units lending institution short, medium and long-term loans and
advances against security of real estate or other acceptable
assets for the establishment, development, or expansion of
agricultural, industrial, commercial, house-financing projects,
livelihood projects, and other economic enterprises.
Government financial and other lending institutions are hereby

authorized to grant loans, credits, and other forms of
indebtedness out of their loanable funds to LGUs for purposes
specified above.
14
Laws, Rules and

Provisions
Regulations
Sec. 298. Deferred LGUs may, likewise, acquire property, plant, machinery,
Payment and Other equipment, and such necessary accessories under a supplier’s
Financial Schemes credit, deferred payment plan, or other financial scheme.
Subject to the rules and regulations of the Central Bank and

the Securities and Exchange Commission, provinces, cities
and municipalities are hereby authorized to issue bonds,
debentures, securities, collaterals, notes and other obligations
Sec. 299. Bonds and to finance self-liquidating, income-producing development or
Other Long-Term livelihood projects pursuant to the priorities established in the
Securities approved local development plan or the public investment
program. The sanggunian concerned shall, through an
ordinance approved by a majority of all its members, declare
and state the terms and conditions of the bonds and the
purpose for which the proposed indebtedness is to be
incurred.
Provinces, cities and municipalities may, upon approval of the

majority of all members of the sanggunian concerned and in
amounts not exceeding their surplus funds, extend loans,
Sec. 300. Inter-Local grants, or subsidies to other LGUs under such terms and
Government Loans, conditions as may be agreed upon by the contracting parties.
Grants, and Subsidies
LGUs may, upon approval of their respective sanggunian,
jointly or severally contract loans, credits, and other forms of
indebtedness for purposes mutually beneficial to them.
The President, or his duly authorized representative, may,

through any government financial or other lending institution,
relend to any province, city, municipality, or barangay, the
Sec. 301. Loans from proceeds of loans contracted with foreign financial institutions
Funds Secured by the or other international funding agencies for the purpose of
National Government financing various development projects.
from Foreign Sources
Repayment or amortization of loans including accrued interest
thereon, may be financed partly from the income of the
projects or services and from the regular income of the LGU,
which must be provided for and appropriated regularly in its
annual budget until the loan and the interest thereon shall have
been fully paid.
15
Laws, Rules and

Provisions
Regulations
LGUs may enter into contracts with any duly prequalified

individual contractor, for the financing, construction,
operation, and maintenance of any financially viable
infrastructure facilities, under the build-operate-and-transfer
(BOT) agreement, subject to the applicable provisions of R.A.
No. 6957 authorizing the financing, construction, operation
and maintenance of infrastructure projects by the private
Sec. 302. Financing sector and the rules and regulations issued thereunder and
Construction, such terms and conditions provided in this Section.
Maintenance,
Operation, and LGUs shall include in their respective local development
Management of plans and public investment programs priority projects that
Infrastructure Projects may be financed, constructed, operated and maintained by the
by the Private Sector private sector under this Section. It shall be the duty of the
LGUs concerned to disclose to the public all projects eligible
for financing under this Section, including official notification
of duly registered contractors and publications in newspapers
of general or local circulation and in conspicuous and
accessible public places. Local projects under the BOT
agreement shall be confirmed by the local development
councils.
x x x.
LGUs shall appropriate in their respective annual budgets

Sec. 310. Remedies such amounts as are sufficient to pay the loans and other
and Sanctions indebtedness incurred or redeem or retire bonds, debentures,
securities, notes and other obligations issued under this Title:
Provided, That failure to provide the appropriations herein
required shall render their annual budgets inoperative.
LGUs shall maintain special accounts in the general fund for

the following:
• Public utilities and other economic enterprises;
• Loans, interests, bond issues, and other contributions
for specific purposes; and
• Development projects funded from the share of the
Sec. 313. Special local government concerned in the internal revenue
Accounts to be allotment and such other special accounts which may
Maintained in the be created by law or ordinance.
General Fund
Receipts, transfers, and expenditures involving the foregoing
special accounts shall be properly taken up thereunder.
16
Laws, Rules and

Provisions
Regulations
Profits or income derived from the operation of public utilities

and other economic enterprises, after deduction for the cost of
improvement, repair and other related expenses of the public
utility or economic enterprise concerned, shall first be applied
for the return of the advances or loans made therefore. Any
excess shall form part of the general fund of the LGU
concerned.
Full provision shall be made for all statutory and contractual

Sec. 324. Budgetary obligations of the LGU concerned: Provided, however, That
Requirements the amount of appropriations for debt servicing shall not
exceed twenty percent (20%) of the regular income of the
LGU concerned.
Department of Finance (DOF) Regulations
Sec. 1. Criteria in Determining the Loanable Amount of an

LGU Applying for MDF Sub-Loan
a) for non-revenue generating projects:
- shall not exceed 10% of the current year

estimated annual regular income, plus IRA
for the current year as estimated by the DBM,
multiplied by the annuity factor of 12 years at
14% per annum (5.660) or the prevailing
MDF-PGB interest rate.
Resolution No. 04-95
dated April 27, 1995 b) for revenue-generating projects:
- shall not exceed 18% of the current year

estimated annual regular income, plus IRA
for the current year as estimated by the DBM,
multiplied by the annuity factor of 12 years at
14% per annum (5.660) or the prevailing
interest rate.
Sec. 2. Debt Service Limitation
- That in no case shall both the existing and

proposed loan amortizations exceed 20% of the
current year estimated annual income from
regular sources plus IRA for the current year as
estimated by the DBM.
17
Laws, Rules and

Provisions
Regulations
All requests/applications for certification of maximum

borrowing and debt service capacities referred to the Bureau
of Local Government Finance (BLGF) shall be supported by
the following requirements:
• Statement of Actual Income and Expenditures for the

Local Finance past three (3) years duly signed by the Local
Circular No. 1-2000 Accountant
dated January 19, 2000 • Certification from the Local Treasurer of the IRA
received (gross and net) for the past three (3) years
• Certification from the Local Assessor of the Taxable
Assessed Value for the past three (3) years and the
dates of the last successful conduct of the general
revision of real property assessments
• Certification of existing loans with the following
details:
− Kind of Loan and Other Obligations
− Purpose of Loan and Other Obligations
− Lending Agencies
− Date of Approval and Maturity
− Terms and Conditions
− Amortization
− Remaining Balance of Loans and Other
Obligations
• COA Annual Audit Report for the past three (3) fiscal
years
Bangko Sentral ng Pilipinas (BSP) Regulations
To ensure the effective implementation of the debt service

Circular Letter limit on local government borrowings as stipulated in Section
dated May 28, 2002 324(b) of the LGC of 1991, all Banks and Non-Banks with
to all Banks and Quasi-Banking Functions (NBQBs) shall require each
NBQBs borrowing LGU to present a certificate of its debt service and
borrowing capacity, duly certified by the BLGF-DOF.
18
LGU LOAN CYCLE
The loan cycle covers all the processes/activities involved in managing a loan. It
starts from the determination of loanable amount, identification of projects to be
financed out of the loan amount to monitoring and reporting of loan utilization. The
phases of a loan cycle and the activities involved in each phase are presented in the
diagram below:
PLANNING
• Identification of projects
included in the LGUs
AIP/LDP for funding through
loan. The selected projects
should be covered with
project feasibility studies/
plans
• Authority from the legislative
council to enter into loan
agreement/borrowing
• Establishment/Determination
of level of borrowing,
amount of loan to be availed
of, and borrowing and CONTRACTING
REPORTING paying capacity
• Identification of the
• Monitoring and • Loan negotiation
appropriate type and source
reporting of loan • Preparation of
of credit financing
utilization documentary
• Assessment of impact of the
• Evaluation of loan new loan on the existing loan
requirements for loan
management signing
• Ratification by the
legislative council
of loan terms and
conditions
• Loan signing
SERVICING
• Payment of interest and

principal amortizations
• Recording and accounting
of all loans and loan-related
transactions
• Loan restructuring
19
BOND FLOTATION PROCESS
Bond issuance as an alternative source of project financing involves four (4) major
participants, namely: financial advisor, underwriter, trustee and a guarantor. Of the
16 LGUs covered in the audit, 4 LGUs opted to float bonds amounting to P1.94
billion during CYs 2000 to 2004 to finance the construction of public market/mall,
socialized housing, park with commercial area and toll parking complex, and
hospital. The bond issuance process is shown below:
Financial Advisor
Project Identification
Feasibility Study
Financial Package
(1)
Credit Rating
Sets up trust fund
(2) Credit-Rating
and sinking fund
(3) Agency
Trustee LGUs
Issues copies of
official statement and
application forms
(4)
Remits bond
proceeds
(8)
Underwriter
LGUGC Pays bond Sells bonds

proceeds (5)
Issues bond (7)
certificates
(9)
Debt
Service
Guarantees
(10)
payment of bonds
(6) Investors
LGUGC = LGU Guarantee Corporation
20
PROFILE OF LOANS AND BORROWINGS OF LGUs
As reported in the COA’s Annual Financial Reports for CYs 2004 to 2008, the
LGUs’ consolidated loans and bonds payable balances as of year-ends ranged from
P30.34 to P44.56 billion, as shown in the following diagram:
Loans and Bonds Payable

2004-2008
50 44.23 44.56
45
36.29 42.1 41.22
40 35.09
In Billion Pesos
35 30.34
33.57
32.49
30
27.66
25
20
15
10
5 2.72 2.6 3.34
2.68 2.13
0
2004 2005 2006 2007 2008
Bonds Payable Loans Payable Total
Of these amounts, total loan balances of the 16 LGUs covered in the audit as of
December 31, 2008 ranges from P123.85 million to P1.16 billion as presented
below:
Loans and Bonds Payable

as of December 31, 2008
1200 1159.67
1123.18
998.51
1000
935.4
800
In Million Pesos
694.83 692.45
600 556.26 562.51
445.95
380.48 368.6
400 350.56
306.58
251.97 240.28
200
123.85
0
Mandaluyong
Pasay
Marikina
Paranaque
Caloocan
Malabon
Dagupan
Angeles
Cabanatuan
Antipolo
Lucena
Puerto Princesa
Davao
Bataan
Rizal
Palawan
LGUs
21
The loans contracted by the LGUs in amounts ranging from P22.07 million to P1.0
billion during CYs 2006 to 2008 to finance infrastructure projects and purchase
equipment and loans contracted prior to 2006 with balances as of December 2008
are tabulated below:
LGU Loan and Borrowing Profile
Contracted Amount Reported

Date Released Balance as
Lender Amount Term Purpose
Contracted 2006-2008 of 12/31/08
(In Million)
(In Million)
NCR
Parañaque City
09-26-06 P 1,000.00 10 Construction/repair/maintenance of P 1,000.00 P 1,000.00
12-01-05 137.50 7 various public infrastructure projects 28.89 95.58
PNB
05-12-05 50.00 5 - 21.85
City’s IT project
05-07-02 50.00 7 - 5.75
Total 1,237.50 1,028.89 1,123.18
Note: On January 6, 2009, the City entered into a loan agreement with LBP up to principal amount of P1.102 billion to buy-
out loans with PNB for 10-year term. The remaining computerization loan balances to PNB were paid on January 27, 2009.
Caloocan City
PVB 11-06 86.00 6 Restructuring of unpaid PVB loan 86.00 49.58
Construction/improvement of various
infrastructure projects and
LBP 11-21-06 1,000.00 10 947.60 885.82
improvement of computerization
systems
Total 1,086.00 1,033.60 935.40
Malabon City
Construction of City Hall and Sports
03-28-06 470.00 12 427.66 416.87
LBP Complex
10-24-05 24.80 5 Digital Infrastructure Project 24.54 11.12
MDF 09-30-91 22.11 21 Street improvements - 8.65
DBP 09-04-79 12.48 20 Construction of Public Market - 9.31
Total 529.39 452.20 445.95
Mandaluyong City
MDF 2006 38.70 15 Socialized housing project 30.02 30.02
Construction of 4 storey- Highway
06-28-07 51.68 10 51.68
Hills Elem. School
Construction of various infrastructure
06-16-06 285.00 10 278.82
projects
LBP 09-19-05 100.00 10 - 337.20
Construction of Executive Building
07-01-05 200.00 5 74.92
Construction of Medium Rise
12-18-98 220.00 11 -
Socialized Housing
12-18-98 32.34 11 Take-out of PNB loan -
PSF 04-01-05 1.00 12 Isang Produkto Isang Bayan Program - 0.63
Various drainage improvement
MDF 1991 20.00 21 - 6.50
projects
DBP 10-15-83 8.46 13 No data - 6.13
Total 957.18 435.44 380.48
Pasay City
05-08 35.10 7 IRA Monetization 35.10 35.10
11-28-07 135.99 1 For financial expenses of the City 135.99 (.43)
Purchase of 1 unit sewage truck and
PNB 04-02-04 17.82 5 - 24.93
1 unit Uniloader
22

Contracted 2006-2008 of 12/31/08
(In Million)
(In Million)
Completion of Pasay City Gen.
12-09-99 72.40 9 P - P (2.63)
Hospital (loan 2)
11-11-99 P 67.00 9 Purchase of Heavy Equipment - (4.25)
Construction of PCGH Annex bldg.
03-24-97 300.00 9 - 0.46
and acquisition of medical equipment
For allowances/bonuses of City
1997 116.00 1 - 3.08
officials and employees
PNB- Construction of Pasay City Market
Trustee 08-16-04 500.00 7 - 500.00
(Bonds)
and Commercial Complex
Total 1,244.31 171.09 556.26
Marikina City
Construction of various buildings and
PVB 04-04-06 500.00 5 359.66 275.35
other infrastructure projects
Road concreting; drainage
DBP 01-21-00 400.00 10 improvement; and to refinance - 66.75
existing loan with PVB and LBP
Concreting of roads and construction
MDF 01-19-90 40.00 20 - 8.46
of public market
Total 940.00 359.66 350.56
Region I
Dagupan City
08-11-06 25.00 5 Monetization of IRA 21.77 15.48
LBP 08-04-05 40.00 5 Purchase of dredging machine - 12.83
11-18-04 282.00 15 Construction of Malimgas Market - 223.66
Total 347.00 21.77 251.97
Region III
Province of Bataan
05-24-07 200.00 10 Construction of various 184.00 173.78
03-21-07 100.00 10 infrastructure projects 96.02 88.03
257.40 12 Construction of school buildings -
LBP 05-18-05 230.82
17.60 5 Fabrication of armchairs -
Construction of Bataan Transport
11-22-99 63.00 5 - 73.39
Terminal
Construction of various
DBP 12-22-06 150.00 9 142.13 128.81
infrastructure projects
Total 788.00 422.15 694.83
Angeles City
IRA monetization (2001-2004
2008 25.46 7 25.46 25.46
differential)
05/07 45.00 10 Construction of school buildings 41.50 39.76
06-27-05 43.55 7 Purchase of equipment & garbage bins 43.55 29.70
LBP
Computerization of Ospital Ning
2005 10.00 5 9.9 6.81
Angeles
Construction of San Nicolas Public
2004 186.00 10 94.50 160.06
Market
2004 5.00 15 Construction of socialized housing 5.00 4.51
DBP Construction of slaughterhouse and
2001 20.00 10 - 10.62
purchase of equipment
Construction of Angeles City Public
ESF 1987 23.92 25 - 23.92
Market
23

Contracted 2006-2008 of 12/31/08
(In Million)
(In Million)
1984 5.60 25 Construction of Angeles City Abattoir P - P 5.60
DOF 1983 0.36 10 Equipment Pool - 0.14
Total P 364.89 P 219.91 P 306.58
Cabanatuan City
09-02-08 29.10 7 IRA monetization 29.10 29.10
05-12-08 90.00 9 Construction of school buildings 67.40 67.40
LBP
12-14-06 85.00 Construction of Cesar E. Vergara 63.75 58.53
15
06-11-04 215.00 Highway and Bridge - 187.13
WB- 01-28-03 80.00
15 Construction of drainage system - 278.81
LBP 07-02-00 300.00
WaterWorks Corp. No data 0.07
Total 799.10 160.25 621.04
Region IV
Antipolo City
Construction of school building, land
DBP 09-28-08 750.00 12 acquisition and other related 16.70 16.70
expenditures
Take out of bonds issued for the
LBP 12-17-07 292.34 3.5 construction of the City Mall of 292.34 208.81
Antipolo
BSP 03-26-03 11.53 15 Purchase of lot - 9.51
LBP 03-30-02 16.17 10 Purchase of relocation site - 5.26
Total 1,070.04 309.04 240.28
Province of Rizal
12-09-05 300.00 7 Construction of various school 299.68 245.20
LBP
07-13-04 300.00 7 buildings - 123.40
Total 600.00 299.68 368.60
Province of Palawan
09-08-08 63.69 7 IRA monetization 63.69 63.69
DBP
09-17-08 150.00 7 Early retirement 146.19 146.19
Construction of Southern Palawan
10
03-27-07 40.00 Hospital and Tabud-Pulot Road 97.39 42.78
60.00 10 Construction of school buildings(SEF)
04-27-06 60.00 3 Purchase of multicabs 59.55 11.91
Various infrastructure projects,
LBP 04-27-06 248.00 10 FMR; nursery; public and school 237.81 199.45
buildings
FMR and improvement of Provincial
10-12-03 170.00 10 - 105.43
Hospital and PEO Office
02-24-02 250.00 10 Construction/concreting of roads 1.92 102.53
09-16-99 200.00 17 Water projects 8.30 20.47
Total 1,241.69 614.85 692.45
Construction/renovation of PPC
Sports Complex
Coastal development
01-25-08 290.00 10 256.93
LBP Purchase of heavy equipment 775.96
Construction of school buildings,
drainage system and roads
12-28-07 510.00 10 Take-out of PVB Loan 510.00
24

Contracted 2006-2008 of 12/31/08
(In Million)
(In Million)
Waste Containerization and
DBP 11-19-03 185.40 8 P - P 4.66
Transport System
ADB Construction of terminal, motorpool,
(PRMDP) 11-17-99 157.45 15 - 127.89
sanitary landfill
Total P 1,142.85 P 766.93 P 998.51
Lucena City
08-04-08 22.07 7 Monetization of IRA Receivable 22.07 22.07
Construction of QMH compound and
10-10-05 45.00 7 DFA building, and rehab of 44.96 2.97
LBP Pleasantville Road.
Construction of FMR, road networks
06-21-04 75.85 7 - 31.17
and bridge Phase II
11-12-03 49.60 7 Construction of road networks Phase I - 5.47
Construction of 15 units school
DBP 06-08-05 80.00 7 18.40 62.17
buildings
Total 272.52 85.43 123.85
Region XI
Davao City
IRA monetization of 2001-2004
05-08 142.62 7 142.62 142.62
differential
Traffic Signalization System Phase II 125.22 111.52
PTA Green Park Development 65.16 55.05
Purchase of additional mobile
94.51 74.26
garbage bins
01-19-07 610.00 10
Sanitary Landfill Project 235.78 213.22
Rehabilitation of Magtuod, New
12.03 12.03
Carmen Road Section
Acquisition of infrastructure
LBP - 63.39
machineries and equipment
Upgrading of Solid Waste
- 112.27
Management and Collection System
Construction of FMR 151.63 109.14
09-24-04 990.00 10
Construction of urban drainage and
117.74 106.29
flood control projects
Traffic Signalization System Phase I 138.19 96.72
Land development for shelter and
33.30 30.35
urban land reform program
11-24-99 300.00 10 Construction of Artica Dome - 32.81
Total 2,042.62 1,116.18 1,159.67
LOAN CONDITIONS/SECURITIES
Loans extended by the lenders to the LGUs are usually subject to the condition that
the LGUs shall, among others, assign to the lenders, by way of security and
payment, the LGU’s IRA and realty taxes and other revenues in the event the IRA
and realty taxes would not be sufficient to service the loan amortizations. By way
of a “Deed of Assignment”, the LGU assigns, transfers and conveys to the lender its
25
share from the IRA, the realty taxes and other revenues as a security and payment of
the loan.
The securities/collaterals of some of the loans contracted by the 16 LGUs covered
in the audit are presented below:
Loan
LGU Lender Amount Collateral
(In Million)
Assignment of IRA, revenues from Real

Parañaque City PNB P1,000.00 Property Taxes and all applicable portions of
other revenues
Caloocan City LBP 1,000.00
24.80
Malabon City LBP 363.60
Assignment of IRA and other income and
106.40
revenues
200.00
100.00
LBP
Mandaluyong City 285.00
51.68
ADB-MDFO 30.02 Assignment of IRA
67.00
99.32 Assignment of IRA, revenues from Real
PNB 17.82 Property Taxes and all applicable portions of
Pasay City
135.99 other revenues
3.30
LBP 35.10 Assignment of IRA
• For infrastructure/priority development
projects – assignment of deposits with 90%
loan value
• For construction/improvement of school
Marikina City PVB 500.00
building – assignment of a portion of
annual collection of SEF equivalent to
quarterly amortization of loan
• Other acceptable collateral
25.00 Assignment of IRA
Assignment of IRA, rental income and
Dagupan City LBP 40.00
parking fee and mortgage on real properties
282.00
100.00
Assignment of IRA
Bataan Province LBP 200.00
150.00
SEF and insurance coverage on school
Cabanatuan City LBP 90.00
buildings
Angeles City LBP 45.00 Assignment of IRA and SEF
Antipolo City DBP 750.00 Assignment of SEF
22.07
45.00
LBP
Lucena City 75.85 Assignment of IRA
49.60
DBP 80.00
26
Loan
LGU Lender Amount Collateral
(In Million)
P 300.00
Rizal Province LBP 300.00
290.00 Assignment of IRA and all other revenues and
Puerto Princesa LBP
510.00 income
Assignment of IRA and funds deposited and
150.00
DBP maintained with the Lender
63.69 Assignment of IRA
Palawan Province Assignment of IRA and SEF and Real Estate
100.00
Mortgage
LBP
248.00
Assignment of IRA and Real Estate Mortgage
60.00
Assignment of IRA and Real Estate Mortgage
Davao City LBP 610.00 including existing and future improvements
on the property
27
Part III
Audit Observations
28
Chapter 1
Adequate and Appropriate Policies
for Assessing LGUs’ Borrowing Capacity
29
ADEQUATE AND APPROPRIATE POLICIES FOR
ASSESSING LGUs’ BORROWING CAPACITY
INTRODUCTION
The State recognizes that in view of devolution to the local governments of

functions used to be carried out by the national government, LGUs may resort to
borrowings to finance their investment needs. Thus, under Sections 296 to 301 of
the LGC, local governments are authorized to avail loans, credits and other forms of
indebtedness and inter-local government loans, grants and subsidies, including
funds secured by the national government from foreign sources.
To ensure that the loans will be paid when due, LGUs are required under Section
303 thereof to appropriate in their respective annual budgets, such amounts
sufficient to pay the loans and other indebtedness incurred, or redeem or retire
bonds and other obligations issued. Failure to do so would render the LGU’s annual
budget inoperative. The amount to be appropriated for debt servicing is, however,
limited under Section 324 of the LGC to not more than twenty percent (20%) of the
regular income of the concerned LGU.
This provision is being used as the basis for determining the LGUs’ borrowing
capacity. The audit, however, disclosed that this criterion alone may not be
considered adequate, and may not even be an appropriate basis for assessing the
LGUs’ borrowing capacity on account of the following:
• Records show that the 20% debt service ceiling is beyond the capacity of a
number of LGUs to provide. These LGUs could not even provide sufficient
budget for their yearly amortization even if the said amortization was way
below the 20% debt service cap.
• The net available funds of LGUs prior to contracting were not considered.
Thus, LGUs were able to contract loans in excess of their actual borrowing
capacities.
• The maximum repayment period for each loan was determined without
considering the economic or useful life of the projects or the remaining term of
incumbent officials. LGUs contracted loans for terms ranging from 3 to as long
as 17 years. Thus, a number of loans were still being paid/serviced when the
projects financed therefrom were no longer operational, already replaced/
demolished, unutilized, uncompleted, forfeited or damaged/deformed.
• The cost effectiveness of available financing schemes was not assessed. Thus,
the availment of bond flotation by LGUs may not be considered cost effective
when compared with regular loans due to higher associated incidental expenses
30
OBSERVATIONS
1. The assessment of the LGUs’ borrowing capacity was primarily based on the
maximum amount allowed for debt servicing which is set at 20% of their
regular income. The net available funds of the LGUs prior to contracting,
which ranged only from zero to P0.19 million in the case of seven (7) LGUs,
were not considered. These LGUs were able to contract loans with required
amortizations for the year that was way above their net available funds at
P0.75 million to P25.13 million. As such, four (4) LGUs were not able to
manage repayments of loans which eventually resulted in payment of
additional interest and penalty, forfeiture of project implemented out of loans
and continuous cycle of loan restructuring. A number of LGUs could even
hardly provide sufficient budget to meet their yearly amortization even if the
said amortization was way below the 20% debt service ceiling.
Under Sections 295 to 297 of the LGC of 1991, LGUs are allowed to create
indebtedness and enter into credit and other financial transactions with any
government or domestic private bank and other lending institutions to finance
infrastructure and other projects. In relation thereto, it was provided under
Article 403 of its Implementing Rules and Regulations (IRR) that the DOF may
provide technical assistance to any LGU in the availment of credit facilities,
flotation of bonds, contracting of loans, and other indebtedness and shall issue
such guidelines as may be necessary for the purpose.
Thus, under DOF-Local Finance Circular No. 1-2000 dated January 19, 2000,
the DOF mandated the BLGF to issue the Certificate of Maximum Borrowing
and Debt Service Capacities of the Provinces, Cities and Municipalities. Such
certification shall be issued upon evaluation of the maximum borrowing and
debt service capacities of the LGUs based on documentary requirements
submitted to BLGF.
The BLGF’s assessment is basically anchored on the provisions under Section

324(b) of the LGC that the amount of appropriation for debt servicing shall not
exceed twenty percent (20%) of the regular income of the concerned LGUs.
The net available funds of the LGUs prior to contracting, which ranged only
from zero to P0.19 million in the case of seven (7) LGUs, were not considered.
Thus, these LGUs were able to contract loans ranging from P45 million to P500
million with required amortizations for the year that was way above their net
available funds at P0.75 million to P25.13 million, as tabulated on the next page:
31
Total Per Budget (In Million) Loan (In Million)

Estimated Available Amortiza-
CY Balance tions Due
LGU Date Amount
Before for the
Income Expenditures
Contracting Year
2006 P 1,982.20 P 1,892.24 P 89.96* 06/16/06 P 85.00 P 1.80

Mandaluyong
2007 2,117.69 2,117.68 0.01 06/28/07 51.68 0.75
Marikina 2006 1,200.29 1,200.29 - 04/04/06 500.00 0.91
Angeles 2007 543.98 543.98 - 05/07 45.00 1.36
Cabanatuan 2008 596.80 596.80 - 05/12/08 90.00 2.37
03/21/07
Bataan 2007 1,040.05 1,039.86 0.19 300.00 6.74
05/24/07
Puerto
2008 1,279.79 1,279.70 0.09 02/25/08 290.00 25.13
Princesa
2006 920.91 920.91 - 04/27/08 308.00 4.41
Palawan 2007 1,053.58 1,053.53 0.05 03/27/07 100.00 1.90
2008 1,078.46 1,078.44 0.02 09/17/08 150.00 5.55
* Appropriated in October 2006 under Supplemental Budget No.1 but not for debt service.
These LGUs, except for Angeles City, were not even able to realize their
estimated incomes for the year with differences amounting to P27.47 million to
P602.40 million, as shown below:
Income (In Million)

LGU CY
Budgeted Actual Difference
2006 P 2,046.03 P 1,783.99 P 262.04

Mandaluyong City
2007 2,140.12 1,794.55 345.57
Marikina City 2006 1,200.29 1,089.79 110.50
Angeles City 2007 617.49 657.22 (39.73)
Cabanatuan City 2008 596.80 569.33 27.47
Province of Bataan 2007 1,148.53 546.13 602.40
Puerto Princesa City 2008 1,360.35 1,134.38 225.97
2006 1,100.95 832.66 268.29
Province of Palawan 2007 1.142.82 886.71 256.11
2008 1,090.97 974.88 116.09
The team further noted that a number of LGUs could even hardly provide a
budget to meet their total yearly amortization even if the said amortization was
way below the 20% debt service ceiling. This is true in the following LGUs
where the amounts budgeted for their loan repayments during the years covered
in the audit were not sufficient to meet their total repayment requirements:
32
(In Million)
Approp- Amorti- 20% of Actual Loan Amortization Not
riation zation Regular Loan Covered by Appropriation
LGU Year for Debt Income Repayments
Schedules Per Actual
Service (RI) Schedule Payments
(a) (b) (c) (d) (a) – (b) (a) – (d)
Parañaque 2008 P 80.00 P 148.85 P 470.15 P119.92 P 68.85 P 39.92
Malabon 2008 41.77 64.21 63.30 56.57 22.44 14.80
2007 62.00 66.59 67.60 57.71 4.59 -
Dagupan
2008 60.00 63.54 81.94 46.66 3.54 -
2006 39.45 83.25 102.68 28.80 43.80 -
Angeles 2007 69.11 106.30 104.06 50.71 37.19 -
2008 118.49 123.06 180.55 50.39 4.57 -
Bataan 2007 12.74 41.54 179.45 23.92 28.80 11.18
Puerto 2007 153.24 156.84 297.60 138.99 3.60 -
Princesa 2008 168.57 199.68 255.92 174.79 31.11 6.22
In the case of Angeles City, review of its Certified Statements of Income and
Expenditures, and Annual Income for CYs 2006 to 2008 revealed that it was not
in a position to provide appropriation sufficient to meet its amortization
schedule. Its estimated revenues were only sufficient to address its estimated
expenditures. Thus, provision of full appropriation for loan amortizations would
already result in budget deficit, as illustrated below:
Estimated Loan Amortizations

CY Expenditures & Due Not Covered By
Income
Subsidies Appropriation
2006 P 535,375,279.59 P 535,375,279.59 P 43,798,912.00

2007 543,975,279.59 543,975,279.59 37,190,168.80
2008 958,259,143.01 958,259,143.01 4,572,624.27
The City Government of Puerto Princesa is in a more difficult financial position

with net deficit of P43.008 million and unbudgeted loan amortization of P31.12
million in CY 2008.
The 20% debt service ceiling as the sole criterion for assessing the borrowing
capacity of LGUs may be considered deficient. This allows the LGUs to avail
loans in excess of their borrowing capacities which further resulted in payment
of additional interest and penalty, forfeiture of the project implemented out of
loans and continuous cycle of loan restructuring as in these cases:
• Additional interest and penalty charges
Parañaque City was delayed in its payment of amortizations on two (2)

loans necessitating payments of additional interest amounting to
P164,091.82, as detailed on the next page:
33
Billing Statement Repayment (Debit Advice/Repayment Schedule)

Loan Interest on
Due Date Amount Date Paid Amount
Unpaid Interest
Comp. Loan 2 07/24/08 P 3,735,181.25 08/01/08 P 3,735,181.25 P 54,448.61
10/11/07 7,000,000.00 -
10/11/07 14,080,393.88
10/19/07 7,080,393.88 12,414.94
Infra Loan 2
01/11/08 14,573,606.58 01/21/08 14,415,197.81 34,038.35
(P1.0 B)
04/11/08 14,415,197.81 04/25/08 14,415,197.81 44,232.93
07/11/08 14,415,197.81 07/17/08 14,415,197.81 18,956.99
Total P164,091.82
Based on the schedule submitted by the Accounting Office and on LBP

debit memos, Puerto Princesa City paid P2,633,178.08 as penalty
charges for delayed payments on its PVB and LBP loans as shown below:
Lender 2006 2007 2008 Total

PVB P2,011,235.86 P 334,758.68 P - P2,345,994.54
LBP - - 287,183.54 287,183.54
Total P2,633,178.08
• Refinanced loans
In view of the difficulties of the following LGUs to meet their

amortization requirements, a number of loans were restructured to avoid
payment of additional surcharges:
Original Loan Remaining Restructured Loan

LGU Lender Amount Term Balance Loan Term
Date Lender Date
(Million) (Yrs.) (In Million) (Million) (Yrs.)
09-26-06 P 1,000.00 10 P 1,000.00 P 1,000.00 10
LBP 1/2009
Parañaque PNB 12-01-05 137.50 7 95.58 102.00 4
Total P 1,137.50 P 1,095.58 P 1,102.00
Puerto
PVB Various loans 10 510.00 LBP 12/2007 510.00 10
Princesa
09/16/99 -
Palawan LBP 1,028 10-17 582.57 PVB 8/14/09 1,100.00 10
03/27/07
• Forfeiture of project
The Province of Bataan contracted a loan of P200 million on December 1,

2000 with the Home Development Mutual Fund (Pag-ibig Fund) to
finance the development of Bataan Peninsula Heights Housing Project
(BPHHP). The loan was secured by a Real Estate Mortgage covering 725
TCTs with an area of 449,865 sq. m. in the project site and additional 997
sq. m. of land, both owned by the Province.
34
The development and co-development of the BPHHP were awarded to

Bataan Provincial Development Corporation, a stock corporation created
by the Province of Bataan, and Bataan Peninsula Real Estate
Development under Sangguniang Panlalawigan (SP) Resolution Nos.
61-2001 and 02-2001, respectively.
Out of the total contracted loan of P200 million, only P143,053,590 were
released on various dates payable until January 16, 2004. These loan
releases were taken up in the books of accounts as Mortgage Payable.
The Province, however, failed to pay its obligations on due date. It only
managed to pay interest of P71.58 million. Thus, on January 19, 2007, it
executed a Deed of Assignment (Dacion En Pago) with Pag-ibig to settle
its outstanding obligations which already amounted to P225,467,995.83
as of July 31, 2006. The Deed of Assignment assigns, transfers and
conveys to Pag-ibig the entire mortgaged property consisting of 725
TCTs with an area of 449,865 sq. m. in the project site and additional 997
sq. m. of land, both owned by the Province.
The assignment of these properties in a way resulted in the wastage of

P71.58 million representing interest so far, paid by the Province and lost
of real properties owned by the Province with a total area of 450,862 sq.
m. (449,865 + 997).
The project as developed is presented below:
Gate of BPHHP BPHHP Housing Units
Unoccupied BPHHP Housing Units
35
Management’s Comments Team’s Rejoinder

Response provided by Angeles City
On non-provision of budget for loan amortizations
A meeting/dialogue with the Local Finance The team appreciates the actions
Committee composed of the City Budget taken by the City in ensuring
Officer, City Treasurer, and the City appropriation of the full amount
Accountant was made/called by the City needed to pay loan amortizations and
Mayor together with the City Administrator in considering its financial condition
and discussed thoroughly the said audit from hereon before contracting
observation to avoid recurrence in the another loan.
future.
The City Mayor has advised the City
Budget Officer and City Treasurer to take
corrective action on this by providing the
necessary funding/budget in our next
annual Supplemental Budget and that a
thorough study/assessment on its capacity
to pay such loan be taken preference before
any loan be availed of in the future to avoid
such financial constraints.
2. The economic or useful life of the projects and the remaining term of the
repayment period for each loan. Thus, loans were contracted for as long as 17
years which sometimes exceeded the economic or useful life of the financed
projects and the remaining term of the incumbent officials. Out of the loan
balance of P3.80 billion as of December 31, 2008 of nine (9) LGUs, 21
projects financed therefrom in the amount of P1.34 billion were no longer
functional, not being used or abandoned. A number of loans contracted
during CYs 1979 to 1987 have also substantial remaining unpaid balances of
P45.10 million as of December 31, 2008.
The types of projects that may be funded out of loans, credits, and other forms
of indebtedness with any government or domestic private bank and other
lending institutions are defined under Section 297(a) of R.A. 7160. These
projects include construction, installation, improvement, expansion, operation
or maintenance of public facilities, infrastructure facilities, housing projects,
and other capital investment projects and acquisition of real property.
Pursuant to such provision, records of LGUs disclosed that they contracted

loans with various lending institutions during CYs 1998 to 2008 amounting to
P11,918.33 million with P7,305.46 million released during CYs 2006-2008. As
36
presented in Part II of the report, the loans contracted during CYs 2006 to 2008
were secured by the assignment of the LGUs’ IRA.
The team, however, noted that while loans were continuously being contracted,
the economic or useful life of the projects and the remaining term of the
repayment period for each loan. Review of loan agreements showed that these
loans were contracted in loan terms ranging from 3 years to as long as 17 years
for projects such as roads, school buildings, garbage bins and multicabs, as
shown below:
Contract Release Balance

Lending
LGU Amount Loan as of 12/31/08 Purpose/Projects
Agency Date
(In Million) Term (In Million)
9/26/06 P1,000.00 10 P1,000.00 P1,000.00
Various infrastructure projects
12/01/05 137.50 7 137.50 95.58
Parañaque PNB
5/12/05 50.00 5 50.00 5.75
IT Program
5/07/02 50.00 7 50.00 21.85
LBP 11/21/06 1,000.00 10 947.60 885.82 Various infrastructure projects
Caloocan
PVB 11/06 86.00 6 86.00 49.58 Restructuring of unpaid PVB loan
MDF 2008 38.70 15 30.02 30.02 Socialized housing units
6/28/07 51.68 10 51.68 School building
6/16/06 285.00 10 278.82 Various infrastructure projects
9/19/05 100.00 10 - 337.20
Mandaluyong LBP Executive Building
7/01/05 200.00 5 74.92
12/18/98 220.00 11 - Medium Rise Socialized Housing
12/18/98 32.34 11 - Take-out of PNB loan
PSF 4/01/05 1.00 12 - 0.63 Isang Produkto Isang Bayan Program
7/05 24.80 5 24.54 11.12 Digital Infrastructure Project.
Malabon LBP
3/28/06 470.00 12 427.66 416.87 Malabon City Hall/Sports Complex
PVB 04/06/00 500.00 5 359.66 275.35 Parang ES and other infra projects
Marikina
DBP 01/21/00 400.00 10 - 66.75 Refinance and other infra projects
2008 25.46 7 25.46 25.46 IRA monetization
05/07 45.00 10 41.50 39.76 School buildings
06/27/05 43.55 7 43.55 29.70 Equipment and garbage bins
12/20/05 10.00 5 9.90 6.81 Computerization project.
Angeles LBP 4/02/04 94.50 Market
186.00 10 160.06
1/21/04 91.50 San Nicolas market
2004 5.00 15 5.00 4.51 Socialized housing
DBP Slaughterhouse and equipment
2001 20.00 10 - 10.62
09/02/08 29.10 7 29.10 29.10 IRA monetization
LBP 05/12/08 90.00 9 67.40 67.40 School buildings
Cabanatuan 06/11/04 215.00 15 - 187.13 Cesar E. Vergara Highway
WB- 01/28/03 80.00
15 - 278.81 Drainage system
LBP 07/02/00 300.00
05/24/07 200.00 10 184.00 173.78
Various infrastructure projects
03/21/07 100.00 10 96.02 88.03
LBP
Bataan 257.40 12 - School buildings
05/18/05 230.82
17.60 5 - Armchairs
DBP 12/22/06 150.00 9 142.13 128.81 Various infrastructure projects
School buildings
Land acquisition
DBP 09/28/08 750.00 12 16.70 16.70
Other related expenditures (arm
Antipolo
chairs, computers, books and others)
12/17/07 292.34 3.5 292.34 208.81 Take out of bonds
LBP
03/30/02 16.17 10 - 5.26 Relocation site
BSP 03/26/03 11.53 15 - 9.51 Lot
09/08/08 63.69 7 63.69 63.69 IRA monetization
DBP
09/17/08 150.00 7 146.19 146.19 Early Retirement Program
Palawan
40.00 Hospital and Road
03/27/07 97.39 42.78
60.00 10 School buildings
37
Contract Release Balance

Lending
LGU Amount Loan as of 12/31/08 Purpose/Projects
Agency Date
(In Million) Term (In Million)
P 60.00 3 P 59.55 P 11.91 Multicabs
04/27/06
248.00 10 237.81 199.45 Various infrastructure projects
LBP FMR, Provincial Hospital and PEO
10/12/03 170.00 10 - 105.43
Office
02/24/02 250.00 10 1.92 102.53 Roads
09/16/99 200.00 17 8.30 20.47 Water projects
Various infra projects and heavy
01/25/08 290.00 10 256.93
LBP 775.96 equipment
Puerto 12/28/07 510.00 10 510.00 Take out of PVB loan
Princesa Waste Containerization &Transport
DBP 11/19/03 185.40 8 - 94.66
System
ADB 11/17/99 157.45 15 - 127.89 Terminal, motorpool, sanitary landfill
IRA monetization of 2001-2004
05/08 142.62 7 142.62 142.62
differential
125.22 111.52 Traffic Signalization System Phase II
LBP 65.16 55.05 PTA Green Park Development
01/1907 610.00 10 94.51 74.26 Additional mobile garbage bins
235.78 213.22 Sanitary Landfill Project
12.03 12.03 Magtuod, New Carmen Road
Davao - 63.39 Infra machineries and equip.
Compaction vehicles and new waste
- 112.27
containers/mobile garbage bins
09/24/04 990.00 10 151.63 109.14 FMR
LBP
117.74 106.29 Drainage and flood control projects
138.19 96.72 Traffic Signalization System Phase I
33.30 30.35 Land development
07/00 300.00 10 150.00 32.81 Artica Dome
Total P11,918.33 P7,305.46 P7,748.23
As may be noted, the repayment period for the same projects varies and far
exceeded the 3-year term of the local officials. In a number of instances, the
repayment period even exceeded the useful life of the projects financed. This is
illustrated in the 28 projects implemented by nine (9) LGUs costing P1,337.86
million which were already damaged, replaced, no longer operational or
portions unutilized at the time of inspection with still remaining unpaid loan
balances as of December 31, 2008 of P3,801.45 million.
Project
Cost Balance
Useful Life Loan
(In Million) as of
Project Condition as of Team’s Inspection in 2009 of Project Term/
/Date 12/31/08
(In Years) Due Date
Completed/ (In Million)
Acquired
Parañaque City
Real Property
No longer existing; replaced by another
and Business
P50.00 computerization project in 2005 as it was 7 years
Taxation 3 P 5.75
2002 found to be inadequate to address the 2009
Computerization
current requirements of the City.
Project
Demolished on November 24, 2008 to
give way for the construction of Hall of
Construction of Justice Bldg. The construction of the
2.46
Legislative Hall of Justice was already programmed 3 7 years
2005
Offices as early as CY 2005 and was allocated 2012
P100 million in the City’s Budget for CY
2008.
38
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
P 95.58
On going construction of the City Hall of Justice
All 3 streets were already partly damaged 10 years

2.8
upon inspection. 2018
P2.49
8/2006
Asphalt overlay St. Francis St. St. John St. St. Simon St.
and selective
patching of
Fifteen (15) of the 45 streets were partly
roads in various 10 years
or totally damaged upon inspection in 1.5
streets/ 2018
June 2009.
barangays 1,000.00
39.94
12/2007
Agustinian St. Dandelion St

(Sample projects)
Three (3) of the 21 streets were already

19.12 partly or totally damaged while one (1) 2.5 10 years
3/2007 was already concreted upon inspection in 2018
June 2009.
3rd St., Reyes Compound overlaid

on March 27, 2007 (Sample project)
39
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
Of the seven (7) streets and two (2)
parking lots overlaid, two (2) were
already concreted, one (1) overlaid again
under another project and one (1) already 2.6
damaged with cracks upon inspection in
June 2009.
P3.99
10/2006
Already concreted
Along Pracasio St.,
Along Gomburza St.,
Sto. Niño
(Sample projects)
Of the 18 streets overlaid, one (1) was

already partly damaged while a portion
of another street was already concreted
upon inspection in June 2009.
10 years
10.99 2018
2.5
1/2007
Ems St., 4th Estate Subdivision
Nine (9) units streetlights installed on

Feb. 27, 2006 were already replaced by
the DPWH during rehabilitation of
Installation of bridge.
118 units
streetlights 0.43 3
along Pres. 2/27/06
Quirino
Avenue, Don
Galo
Along Quirino Avenue, Don Galo

1.33 The 77 units installed in G.G. Cruz St.,
10/25/06 Baclaran on Oct. 25, 2006 were non-
operational as the service entrances were
no longer connected to the power lines.
Apparently, the parklights were installed
without prior arrangement with the
concerned barangays regarding funding
for related expenses.
Parklights installed at G.G. Cruz St.
40
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
43 units of the 87 parklights installed on

Oct. 25, 2006 in the inner alleys of Sitio
Libio St., Sto. Niño were no longer
operational as the residents/homeowners
were not willing to shoulder the
electricity cost.
Installation of P0.74
289 parklights 10/25/06
in different
barangays:
Parklights installed at Sitio Libio St., Sto. Niño

2 10 years
The 40 units parklights installed on Oct. 2018
25, 2006 in Elsie Gatches St., BF Homes
were non-operational.
0.69
10/25/06
Along E. Gatches St.
Caloocan City
No longer existing as of audit date as this
was totally replaced by the project of the
National Government.
Widening of
2 10 years P885.82
sidewalk and 0.42
2016
RAE Crossing, 03/06/07
Maligaya Creek
Widening of sidewalk & RAE Crossing
At the time of inspection, the project is

being rehabilitated by the DPWH. The
railings and five (5) RC pipes installed
under the project were removed.
Improvement of
Lateral Canal at 1.00
2 10 years
Mardeco 2007
Compound 2016
Lateral Canal at Mardeco Compound
41
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
Mandaluyong City
The butterfly pavilion is no longer used
as intended and no longer maintained. It
is presently being used as storage. It was
gathered that its operation was stopped
due to costly maintenance of the
pavilion.
Butterfly P5.25
2 10 years P337.20
Pavilion 2007
2016
Butterfly Pavilion
Malabon City
Based on the replies to the questionnaires
administered by the team, out of 125 5 years 11.12
reports to be generated, only 71 can be 2010
generated from the system as tabulated
below:
No. of Reports
Not Operational
Office To be Operating as
Generated Since As of of 12/31/08
Installation 12/31/08
Assessor’s Office 22 8 - 14
Business Permits and
28 5 - 23
Licensing Office
Treasurer’s Office 39 5 - 34
Malabon City
Digital 24.80 Budget Office 26 26 - -
Infrastructure 12/31/06 Office of the City Council
2 - 2 -
Project (MCDIP) Secretariat
Local Building Office 8 - 8 -
Total 125 44 10 71
The reports that cannot be generated are

being produced manually. Further
evaluation also revealed that some
reports being generated by the systems
were not accurate. This is true in the List
of Establishments being generated by the
system. All businesses engaged by the
same person in the same address
although of different lines are counted by
the computer as one establishment
resulting in incorrect number of
establishments.
42
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
Upon inspection, around 2,399 sq.m.
10 years
remained unoccupied: P416.87
2018
Area
Project
(sq.m.)
Malabon City Government Center
Ground Floor 324
Construction of 2nd Floor 327
Malabon City P342.97 9th Floor 859
10th Floor 859
Government 8/20/08
Center
2nd Floor 9th Floor 10th Floor
Malabon Sports Complex

Stall No. 3 15
Stall No. 5 15
Construction of Stall No. 3 Stall No. 5

87.50
Malabon Sports
6/15/06
Complex The City officials explained that the
vacant spaces are rentable spaces. Since
January 2008, the City had reportedly
posted six (6) streamers in different
strategic places around Malabon.
Unfortunately, however, the City has yet
to receive positive response for said
actions.
Angeles City
The software for the Hospital
Information System was no longer
operational. The hospital intends to
totally replace the system as it is
inadequate to meet current hospital
Ospital Ning needs.
Angeles 9.90 5 years
3 6.81
Computerization 1/04/07 2010
Project
Idle Hardwares
Upon inspection, some spaces in the 1st

floor were not occupied while the entire
San Nicolas 190.84 10 years
2nd floor was vacant. There were only 160.37
Public Market 9/19/06 2014
few vehicles parked at the 3rd floor.
Based on the City’s records, of the 747
43
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
available stalls/spaces, only 176 were
occupied/rented out.
As of December 31, 2008, the City had

already paid loan amortizations of
P73.81 million on principal and interest
for this project which started operation in
December 2006.
Antipolo City
The lot was intended as a relocation site
for deserving landless residents of the
City. Upon inspection, the purchased lot
remained unoccupied and unutilized.
Acquisition of
lot at Boso- P16.17 10 years
P5.26
boso, San Jose, 3/31/00 2012
Antipolo City

The synthetic track oval could no longer
be used as wide gaps had developed in
between rubber tracks due to shrinkage, 2 10 years 256.93
Construction/ needing total replacement. 2017
Improvement of
PPC Sports
Complex-Supply 17.50
and installation 2/2008
of synthetic track
oval
Deformed Damaged /portion

The recorded book value as of December
31, 2008 of P5,250,272.50 or 10% of the
total cost represents scrap value.
Acquisition of
8,502 plastic 41.99
2 10 years 94.66
bins of varying 2/2004
2018
sizes
44
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
Province of Palawan
Regravelling,
reshaping,
cleaning and The costs are not capitalized in the
P 41.75
repair of culverts CY 2006 LGU’s books of accounts. Apparently, 10 years
1 P199.45
and vegetation/ these are expected to last for less than a 2016
trimming of year.
roadside trees
Davao City
As reported by CENRO, 2,952 units
were already damaged as of August
2008. Upon inspection, 2,099 other units
under the custody of the following
offices remained unutilized:
Office No. of Units

CENRO 2,080
Various barangays 19
Total 2,099
This indicates that the number of bins

purchased in 2005 and 2007 were more
than the needs of the City. It may be
Purchase of noted that in the study in 2005, which
Mobile was submitted to LBP, only 18,000
Garbage Bins garbage bins were needed to be procured.
124.48 10 years 112.27
- 20,250 units
8/24/05 2 2017
97.15 10 years 74.26

- 9,584 units
4/2007 2018
Damaged bins Bins at Bago Aplaya

at Brgy 15B
Bins stored at CENRO Compound
The project construction, which was

started in 2000, was suspended in 2002
as it was found to be structurally
Construction defective. Meantime, the City is
148.10 10 years
of a sports continuously paying principal and 32.81
2000 2010
astrodome called interest amortization on the loan. As of
(start)
Artica Dome December 31, 2008, total payments
already amounted to P189.88 million.
45
Project
Cost Balance
Useful Life Loan
(In Million) as of
/Date 12/31/08
(In Years) Due Date
Acquired
Upon inspection on August 10, 2009, the

Lizada Drainage Area and Bago Aplaya
of Dumoy Drainage Area were
Urban Drainage uncompleted and abandoned as these
10 years P106.29
and Flood were terminated due to design issues.
2017
Control Payments made to the contractor for
-Lizada Area partial accomplishments amounted to
P28.29
-Bago Aplaya P5.90 million.
27.57
07/31/08
Lizada Drainage Area Bago Aplaya
Total P1,337.86 P3,801.45
Further review of records disclosed that even loans obtained by these LGUs
from CYs 1979 to 1987 have still balances in substantial amounts as of
December 31, 2008, as shown below:
Contract Balance
Term
LGU Lender Amount Project as of 12/31/08
Date (Years)
(Million) (In Million)
Malabon DBP 09-04-79 P 12.48 20 Malabon City Market P 9.31
Mandaluyong DBP 10-15-83 8.46 13 No data 6.13
1987 23.92 25 Angeles City Market 23.92
ESF
Angeles 1984 5.60 25 Angeles City Abattoir 5.60
DOF 1983 0.36 10 Equipment Pool 0.14
Total P 50.82 P 45.10
Borrowing allows the LGU to carry out a more ambitious capital program than
otherwise would be possible. However, the attendant burdens associated with
long-term borrowing, such as huge finance charges, the relatively short span of
time benefit of projects financed and the restrictions imposed on the LGUs’
IRA and other sources of funds, should be considered by the LGU in
determining the most reasonable repayment period for its loan.
46

Response provided by Malabon City
We are confirming the accuracy of this report. We appreciate the action taken by
During our technical assessment in the Real the City and its commitment to
Property System, wherein your team make the systems useful in order to
specifically mentioned, we, at the attain the project’s objective.
Management Information System Division,
The issue being raised, however, is
found out that indeed these codes are being
contracting of loans for a term
produced manually because the linkage in the
exceeding the life span of the
program could not be established, thus,
project. As it is, while the system
producing a RUN-TIME ERROR.
is no longer functioning as
Also, Codes B-12, B-13,B-19,B-20 and B-21 perceived, the City is still
of the Business Permits and Licensing System amortizing the loan contracted to
(BPLS) and Codes TB-10, TL-10, TL-11, TL- finance this project.
21 and TL-22 are experiencing the same
problem.
We called the attention of Geodata’s MCDIP
Project Manager Mr. Rommel Chavez to fix
the problems in the systems at the soonest
possible time, despite the fact that Geodata’s
contract has already expired last May 20,
2007. Mr. Chavez replied that they are going
to send programmers to correct the technical
glitches in the Real Property Tax System,
Business Permits and Licensing System,
Treasury Operations and Collections System
and the Administrative Systems as well.
In the case of the codes BUD-1 up to BUD-25
of the Budget Operating Systems and the
Building Permits and Automation System, the
virus was so lethal. It damaged all of the
systems internal linkages and its contents and
the only remedy at this point is for the Budget
Office and the Local Building Office to start
encoding information in their BOS and BPAS
all over again so that they will be able to use
all the other system capabilities. During the
course of your evaluation, programmers from
Geodata arrived in our office and were
immediately given the instruction to proceed
to the Budget Office and Local Building
Official to re-install the systems and recover
all valuable files from the BOS and BPAS.
But due to the enormity of the damage and
despite diligent efforts by the programmers to
retrieve the files and all the other important
information installed in the computer,
47

according to them, all the contents of the PC
were severely damaged and are way beyond
recovery.
We would like to assure you that all the
systems were all accounted for, including the
codes, and the same were installed within the
cooperation period. The inaccuracies and
errors in the system, upon detection, were
immediately reported to Geodata a few years
ago but were not given prompt action.
Geodata’s reply was that their contract has
already expired and that their programmers
are deployed in various projects.
Rest assured that we are doing our very best to
make the system useful in order to generate
the much-needed revenues for the City, in
turn, would translate to better services to our
constituency.
Response provided by Davao City
On non-utilization of Mobile Garbage Bins
The CENRO shall advise all barangays to The team appreciates the City’s
reuse damaged bins as composting bins or as efforts to maximize the use of
temporary storage for recovered recyclables. mobile garbage bins (MGB) and
It shall also advise barangays to return the formulation of SWM
unutilized bins to CENRO for redeployment Ordinance for proper use and
to other barangays. It shall again remind maintenance of the MGBs.
barangays to retrieve bins found inside the However, the issue being raised by
properties of residents or business the team is contracting of loan for
establishments. The draft SWM Ordinance of a term of 12 years for projects that
Davao City contains provision for the use and would last for only about two (2)
maintenance of bins. years. In such case, the City
Government is still amortizing for
The 2,952 damaged bins (with cracks, missing projects which were no longer
wheels or lids) can still be reused as being used for the purpose
composting bins and temporary storage for intended. Moreover, the need for
recyclable materials by the barangays. These such number of bins may also be
alternative uses shall be recommended to deemed questionable considering
barangays that have damaged bins. that while these were delivered for
Some of the mobile garbage bins stored at about 2 to 3 years by now, a
CENRO are deployed during special events. number still remained unutilized.
The 50 bins reported by the audit to have been
deployed during the Kadayawan is just one
area, which is the Osmena Park. A total of
150 units were actually deployed.
48
The remaining 360-liter and 660-liter bins are

intended to be distributed in time with the
deployment of the additional compactor trucks
as part of Phase 2 of the project. Some of
these units were also stored as a contingency
to replace the bigger bins at the public markets
and malls that are more prone to damage.
The study submitted to LBP showed that

18,000 units were estimated to be procured.
However, because of the lower bid price of
the supplier and the devaluation of the dollar
at the time of the acquisition of the bins, the
City was able to purchase 20,250 units for the
same loan amount.
In computing the required storage capacity of

mobile garbage bins, it must be considered
that the collection frequency is not daily for
all sources. Although waste from public
markets, malls, hospitals and major
thoroughfares are collected everyday, there
were more areas, especially outside the
Poblacion District and in residential
subdivision, wherein the collection is 2 or 3
times a week. There is even small number of
areas wherein collection is done just once a
month due to distance. This means that the
capacity of the bins should be enough to
temporarily store the volume that is
accumulated in between garbage collection
schedules. Thus, for a daily waste generation
of about 2,130 cubic meters a day and an
average garbage collection interval of 3 days,
6,390 cubic meters of storage capacity is
required.
The 6,356 cubic meters total bin capacity can

provide the City adequate storage to contain
the generated waste taking into consideration
the frequency of collection for different
locations, incidence of bulky green waste (tree
trimmings, durian shells, coconuts) being
placed inside bins, and the delays in collection
due to unavoidable circumstances such as
disruption due to heavy rainfalls and
equipment breakdown.
49
The remaining 360 and 660 liter mobile

garbage bins will be distributed upon the
deployment of the additional 10 compactor
trucks.
On the non-completion of Artica Dome

The City has still to decide whether to This is a very clear example of
continue the project. For one thing, the wasting government resources on
project cannot be used for other purposes account of inadequate planning and
considering that in the deed of donation, one feasibility studies before
of the conditions set is that the donated undertaking construction activities.
property “shall be used as a site for the 15,000
seat capacity Sportsdome and its ancillary
facilities such as tennis courts, swimming
pool, gymnasium and a city training center
which shall be known as the Davao City
Artica Sportsdome.”
In the instance the City will continue the
project, it has to implement the
recommendation of the Task Force. The
report of the Task Force submitted on March
8, 2004, was premised on the condition and
understanding that all cost, expenses,
expenditures and other monetary liabilities
which maybe required by the measures, study
and procedures, technical and otherwise, shall
be shouldered by and for the account of the
Contractor and the Consultant.
The implementation of the above
recommendation may take a long time since
the concerned contractor and consultant has
their own interest to protect, hence, will not
take the findings as it is. They will find ways
to counteract the findings and may file counter
charges.
The loan proceeds used for the construction of
the Artica Dome may be considered wasted
since the project as of this date did not serve
its purpose. It can not be converted to other
purposes to make it beneficial considering that
that the deed of donation was specific in
donating the property.
The City had signed the Memorandum of
Agreement when it applied for a loan and,
therefore, has to honor its obligation by
paying the amount as it falls due.
50

On the construction of San Nicolas Market
When the previous administration entered into The team is illustrating the effects
a loan agreement with Land Bank of the of contracting long-term loan for
Philippines for the reconstruction of a public project that may not even be
market, which is the San Nicolas Public considered feasible.
Market, our office, the City Planning and
Development Office (CPDO) was not
informed nor consulted and neither was
involved in the LGU’s loan negotiation. The
previous administration was being advised
then by a financial consultant whose services
were hired specifically for matters involving
loans to finance capital-intensive projects like
the public market.
On the non-payment of ESF loan used for the construction of new public market
It was cited on Appropriation Ordinance No. As of audit date, no legal opinion

169 that the City Council unanimously has been rendered by the national
approved a resolution holding in abeyance the government. The City should have
appropriation/funding for mandatory debt taken the necessary actions to be
service for interest payment and loan informed of the status of its
amortization on the loan obtained by the City outstanding ESF loan to avoid
Government from the Land Bank of the further charges.
Philippines until such time the national
government agencies concerned have rendered
their legal opinion on the legality of the loan
transaction.
Response provided by the Province of Palawan

The loan term was agreed upon by both the It is true that longer repayment
lending institution and the Province. Longer period would entail lower loan
repayment period would not use-up or exhaust amortization and thus, lesser
the Province’s annual/present financial financial burden to the Province.
resources allowing it to provide funds for the However, the loan term should not
other basic services requirements of its exceed the estimated life span of
constituents. the projects being funded out of
loans. As discussed in the report,
the Province secured loan with a
term of 10 years to finance
maintenance project with a useful
life of only about a year. This
condition may affect the thrusts
and priorities of the incoming
administration.
51
The social and economic benefits of the The team is not questioning
funded projects would redound to the recipient construction of projects with
communities long after the incumbency of the estimated useful life that may
present leadership and his successors outlast the loan term but the use of
(Southern Palawan Provincial Hospital, the the loan proceeds with loan term of
school buildings, PEO Office and road 10 years for road maintenance
concreting). project with useful life of only
around a year.
The Tabud-Pulot Road is a fourteen-
kilometer new cross road construction that
stretches through rolling to mountainous
terrain connecting two interior barangays of
the two municipalities (Quezon and Espanola)
with predominantly agricultural areas
producing rice, corn, coconut, banana and
rootcrops. The problems addressed by the
project would positively impact on the socio-
economic condition of the benefited farmers
and other barangay residents. It shortens
travel time from Quezon to Sofronio Española
or vice versa by 45 minutes.
Prior to the assumption to Office of the
present leadership, the loan agreement for the
World Bank funded Water Projects has been
in force. Certainly, the economic or useful
life of most, if not all, of the projects would go
beyond the 17-year repayment period as
efforts for sustained viable operations is taken
cared of by a management office (Utilities
Division, PPDO) that ensures the empower-
ment of the local water associations as well as
assures the community of continuing supply
of potable water.
A total of 39 road sections consisting of 284
kilometers were rehabilitated/improved/
maintained in 13 municipalities in the
province of Palawan having a total cost of
P49.90M. The same were identified in the
2006 Annual Investment Program (page 120)
under Other Priority Projects lumped as
Rehabilitation of Provincial Roads and
Bridges amounting to P50M.
We do recognize that the useful life of There is no question about the
rehabilitation and regular maintenance of benefits of efficient and effective
roads and bridges may last for less than a year. road maintenance. Projects of this
Nonetheless, the management’s effort is nature should be charged from the
52

banked on the perspective that money spent regular maintenance budget and
on efficiently managed road maintenance will not from loan with repayment
show a far greater rate of return than any other period of 10 years. Should this
capital road expenditure. Furthermore, it is become a practice, the Province
becoming increasingly apparent that to would be continuously amortizing
maximize the utilization of other public loans used for projects that need
services, such as schools, hospitals and public another rehabilitation using
markets, well-maintained roads are essential. another loan, thereby further
Improved road transport will bring prosperity adversely affecting the finances of
to outlaying areas to everyone’s benefit. the Province.
Efficient and Effective road maintenance will:
• Conserve the valuable resources in the
existing road network;
• Provide the need for and delay expen-
sive rehabilitation and construction;
• Provide worthwhile employment for less
skilled persons, in relatively large
numbers if labor intensive methods are
adopted (e.g., cleaning and repair of
culverts, vegetation control, and
trimming roadside trees)
• Show a far higher internal rate of return
than construction projects, i.e. generally
above 100%
• Above all, the efficient and effective
delivery of practically all other public
services depends on adequate road
conditions, especially in rural areas.
3. Loans obtained by three (3) LGUs during CYs 2006 to 2008 even exceeded
their borrowing capacity by P49.02 million to P540.17 million.
As discussed above, the BLGF issues Certificate of Maximum Borrowing and

Debt Service Capacities (MDSCs) of the LGUs. The BLGF’s computation of
the consolidated Debt Service Ceiling (DSC), Net Debt Service Ceiling (NDSC)
and Borrowing Capacity (BC) is based on the following factors:
DSC = 20% (Average Annual Regular Income (ARI*) for the last 3 years + IRA for the current year)
NDSC = DSC – all loans, which are payable during the year, including principal and interest
amortizations, Sinking Fund, etc.
BC = Net DSC x Annuity Factor
* ARI includes revenues from real property taxes, business taxes, economic enterprises, fees and other
charges
53
To assess whether the LGUs’ loans were within their BCs at the time of
contracting loans, the team recomputed their maximum borrowing capacities
considering the above discussed factors. Computation disclosed that three (3)
LGUs obtained loans in excess of their borrowing capacities by P49.02 million
to P540.17 million after considering their respective Annual Amortizations
(AAs) for existing loans, as presented below:
In Million
BC Loan in
Average MDSC AAs of NDSC Loan
LGU CY (4 x Annuity Excess of
ARI (1 x 20%) Existing Loan (2-3) Factor) Amount
BC
(1) (2) (3) (4) (5) (6) (5-6)
Antipolo (SEF) 2008 P 146.52 P 29.30 P - P 29.30 P 209.83 P 750.00 P 540.17
Puerto Princesa (GF) 2007 1,077.21 215.44 124.90 90.55 581.10 800.00 218.90
2006 887.51 177.50 164.03 13.47 86.47 308.00 221.53
Palawan (GF) 2007 997.75 199.55 191.61 7.94 50.98 100.00 49.02
2008 1,037.23 207.45 194.19 13.25 68.19 150.00 81.81
Note: Annuity Factor = 6.4177 for loan payable in 10 years at 9% interest rate
Apparently, while the BLGF Certificate is required, the same is not being used
to determine the maximum loanable amount of the LGUs. Records disclosed
that in at least two (2) cases, loans were contracted in excess of the BLGF’s
certified loanable amounts:
NDSC Borrowing Capacity

Loan
LGU (In Million) (In Million) Remarks
Contracted
BLGF Team’s BLGF Team’s
(In Million)
Certification Computation Certification Computation
As the City’s loan was

obtained under SEF, the
team computed the
NDSC using the ARI
Antipolo P 64.059 P 29.303 P 411.111 P 188.058 P 750.00
generated from SEF
while BLGF used the
ARI generated under the
GF excluding the SEF.
Puerto
Princesa 90.152 90.547 578.568 581.103 800.00
Considering that Antipolo City has no budgets for school buildings during CYs
2005 to 2008 to set aside for amortizations and with net income of only between
P32 million to P54 million under the SEF, it will have a hard time financing the
additional yearly amortization of P75 million, for principal alone.
On the other hand, the City of Puerto Princesa and the Province of Palawan
were not able to provide the team with the feasibility study to ascertain the
viability and financial sustainability of the projects funded out of the loans
obtained. Thus, the team could not ascertain whether the funded projects would
earn sufficient income to finance the required loan amortization.
54

Response provided by Antipolo City
With due respect with the team As discussed in the report, the City’s
observation, the P750 million loan which contracted loan of P750 million even
finances the education-related projects of exceeded the BLGF’s Certification
the City under SEF is still an obligation which was already based on the total
of the LGU. As such, its capacity to income generated including IRA.
service the loan shall consider not only
the income generated under SEF but also
the total income generated by the City
including the IRA as reflected in the
BLGF certification on the LGU’s
borrowing capacity.
Projected cash flow showed that SEF The very reason for securing loans for
could support its operations and meet the construction of school buildings is
maturing obligations, including the DBP due to insufficiency of SEF budget to
loan amortizations. Please note that the finance construction. In fact, there were
expenses pertaining to construction of no budgets for school buildings during
school buildings and other educational CYs 2006 to 2008 under SEF. This
related expenses were already accelerated being the case, there is no budget that
via the DBP loan. The expenses to be can be set aside in the coming years.
budgeted for these items in the future Moreover, as reflected in the SEF
shall be substituted by amortization of the records, it generated net income
DBP loan, hence, the priority operating ranging only from P32 million to P54
expenses would not be affected. million during CYs 2006 to 2008. This
is relatively lower than the additional
yearly amortization of P75 million, for
principal alone, under the new loan.
Response provided by the Province of Palawan
The comment regarding the Province’s The team computed the Province’s
borrowing capacity for the period when borrowing capacity based on the factors
we obtained the loans from LBP and considered by the BLGF in its
DBP in CYs 2006 to 2008 surfacing that determination of MBC and NDSC of
said loans exceeded the borrowing LGUs. ARI, which is one of the factors
capacity by P312.61M cannot hold true. considered in the computation,
First, the Annual Regular Income (ARI) excludes other income/non-regular
for CYs 2006 to 2008 shown on the income. As such, ARI is lower than the
AOM does not coincide with the records total income.
of the Provincial Government, Annual
Relatively, the Average ARI is
Budget for CY 2006 is P920.907M; CY
computed using the actual ARI for the
2007- P1,025.080M; and CY 2008-
past three (3) years consistent with the
P1,036.335M. The ARI presented by the
formula for computing NDSC and
audit team appears relatively lower than
MBC. For this reason, the Average
our records. Nevertheless, from the
ARI derived by the team cannot be
discrepancy, the AOM is unavailing.
compared with the total income
reflected in the Annual Budget.
55
Because of the discrepancy, the excess of As discussed in the report, it was

loan over borrowing capacity as apparent that while the BLGF
computed by the team finds no resonance Certification is required, the same is
with facts. Furthermore, the Province not being used to determine the
side-by-side with the BLGF and DOF maximum loanable amount of the
conducts a thorough assessment of our LGUs.
financial capacity to repay and the impact
Moreover, despite repeated requests,
it would have on our finances.
the Province failed to furnish the team
Moreover, financial institutions require
with a copy of BLGF certification. We
LGUs to secure BLGF certifications to
cannot, therefore, assess if the
determine its financial readiness hence
Province’s loans are still within the
our capacity to pay takes much scrutiny
BLGF certification, or it actually
and would not come close to any excess
secured BLGF certification.
of loan over borrowing capacity.
We may have failed to provide the Team While the projects may have been
with the prescribed feasibility study but identified and prioritized based on
we would want to assure you that funded needs, this should have been covered
projects in the amount of P308M were with a feasibility study demonstrating
identified and prioritized based on needs the viability and financial sustainability
and problem analysis. These projects of the projects. As discussed in the
include the following – Construction of report, out of CY 2006 loan of P308
Southern Palawan Hospital and Tabud- million with a loan term of ten (10)
Pulot Road – 40M; School Buildings – years, P41.75 million were used for
60M; Multi-cabs – 60M; and Various regravelling, reshaping, clearing and
infrastructure projects – 248M. repairing culverts, and
vegetation/trimming of roadside trees
which may be considered regular
maintenance activities. These projects
have useful lives of barely one (1) year
and not appropriate to be funded from
loan with ten (10) year-term.
Please be informed that we shall be The team appreciates the Province’s
subjecting the foregoing projects (except plan of evaluating/monitoring the
Various Infrastructure Projects – 50M) to impact of projects implemented out of
a post evaluation/benefit monitoring to loans. This activity should be integrated
determine if the intended beneficial with the regular monitoring activities of
impacts as indicated in the Project the Province.
Profiles contained in the Priority
Development Program & Projects – Land
Bank of the Philippines Loan Assisted
Investment Package, 2006 were indeed
realized.
56
4. The cost effectiveness of available credit financing schemes was not assessed.
Some LGUs resorted to bond flotation scheme which may not be considered
cost effective in view of higher associated incidental expenses in relation to
regular loans. Another LGU also incurred additional interest and cost of
documentary stamps of P690,162.83 for purchasing Letter of Credit/Trust
Receipt Line ahead of the time for the release of loan.
One of the credit financing schemes available to the LGUs under the LGC is
bond flotation. This is specifically provided under Section 299 of the LGC,
which states that subject to the rules and regulations of the Central Bank and the
Securities and Exchange Commission, provinces, cities and municipalities are
hereby authorized to issue bonds among others, to finance self-liquidating and
socio-producing development or livelihood projects established as priority
projects in the approved local development plan or the public investment
program.
Pursuant to such provision, the Cities of Pasay, Antipolo, Caloocan and Puerto
Princesa floated bonds in the aggregate amount of P1,940 million upon the
authorization of their respective Sangguniang Panlungsod:
Bond
LGU Authority Amount Bond Name Purpose
(In Million)
CO 2864 Pasay Kanluran Construction of City Public Market
Pasay 10/21/03 P 500.00 Bonds and Commercial Complex
CO 104-2002
Construction and development of
1/09/02 Antipolo City
Antipolo 500.00 Antipolo City Government
CO 2003-164 Bonds
Commercial Complex
11/12/03
CO 121 Proposed housing and relocation site
Puerto SP Res. No. 334-99 320.00 Green Bonds of the existing squatter families of
Princesa 9/27/99 Puerto Princesa Bay
Katipunan Bond Redevelopment and construction of
185.00 Series (KBS) A the Caloocan Poblacion Public Market
Construction of the Caloocan City
CO 0317 series of
Caloocan 225.00 KBS B Hall Park with Commercial Area and
2000
Toll Parking Complex
Rehabilitation and construction of the
210.00 KBS C
Caloocan City General Hospital
Total P1,940.00
Under these authorities, these Cities entered into Trust Indenture Agreements
(TIA) with financial institutions in the amounts authorized under the terms
presented on the next page:
57
Agreement
Annual
LGU Amount Term Trustee Guarantor
Date Interest Rate
(In Million)
7 years from the Philippine LGU
Pasay 8/2004 P 500.00 issue date or until 12.44% National Guarantee
August 2011 Bank (PNB) Corp.
7 years from the
issue date or Rizal
Malayan
January 2011, Commercial
Antipolo 2/02/04 400.00 12.10% Insurance
inclusive of 3 years Banking Corp.
Company
grace period on (RCBC)
principal payment
Prevailing
7 years from the weighted average
Puerto
2/18/00 320.00 issue date or until of 182-day TB
Princesa
February 24, 2006 plus a spread of 2
LGU
½% per annum
PNB Guarantee
Prevailing
Series: Corp.
7 years from the weighted average
“A”- 185.00
Caloocan 11/15/00 issue date or of 182-day TB
“B”- 225.00
December 5, 2007 rate plus a spread
“C”- 210.00
of 2% per annum
Total P1,840.00
As provided in the LGU’s respective TIA, the proceeds of the sale of bonds
shall be used for the construction and development of projects and the following
expenses:
Puerto
Purpose Pasay Antipolo Caloocan
Princesa
Direct deduction from the proceeds of the sale
• Financial Advisory Fee √ √ √ √
• Cost of printing of bond certificates √ √
• Trustee’s primary issuance √
• Transfer Agent’s fees, if any √
• Documentary Stamp Tax √ √
• Mobilization expenses which shall include the
Guarantee Fee payable to the Guarantor √
• Underwriting fee √ √
• Guarantee Fee √
• Commission √ √
• Other expenses which may be incurred or
charged to the account of the City in connection
with the bond flotation √ √
Expenses during the construction phase and until all project related expenses have been paid and settled
• Trustee Fee √ √ √
• Works Engineer’s Fee √ √
• Annual Credit Rating √
• Expenses of the Project Monitoring Board √
• Any and all taxes related to the project and those
necessary for the issuance of the bond
certificates √ √
• Reasonable project expenses as may be
determined by the parties √ √
• Transfer Agent’s fees, if any √
58
As scheduled, the bonds issued are subject to the payment of interest expenses,
incidental expenses, and various fees until the bonds are fully redeemed.
Records of the City Governments of Antipolo, Pasay and Puerto Princesa
revealed that these Cities have incurred incidental and interest expenses ranging
from P158.671 million to P321.129 million, as tabulated below:
Puerto
Nature of Expenses Antipolo* Pasay
Princesa
Incidental Expenses
Advisory Fee P 12,000,000.00 P 5,000,000.00 P 9,600,000.00
Trust Fee 4,853,562.50 9,999,999.92 7,791,089.20
Guarantee Fee 14,000,000.00 19,987,235.13 9,600,000.00
Underwriting Fee 6,600,000.00 7,894,736.81 3,200,000.00
Project Monitoring Committee/Board
8,630.00 256,468.40 -
Expenses
Documentary Stamps 1,200,351.01 2,500,000.00 480,000.00
Annual Rating Review - 55,000.00 -
Works Engineer - 4,345,076.44 -
Sub-total 38,662,543.51 50,038,516.70 30,671,089.20
Interest Expense (Annex 1-1) 225,349,174.29 271,090,717.99 128,000,000.00
Total P264,011,717.80 P321,129,234.69 P158,671,089.20
*Based on RCBC’s Schedule of Disbursments as of 2/19/2007
These loans were eventually taken out/converted to regular loans in the

following manner:
Amount Terms
LGU Date Lender
(In Million) (Years)
Antipolo City 09/28/07 LBP P 300.00 3.5
02/24/05 PVB 129.30 7.0
12/28/07 LBP 510.00* 10.0
Caloocan City – Bonds Series “A” 05/12/03 PVB 185.00 5.0
* Total PVB loans taken out
Considering the associated incidental expenses, the funds generated through

bond flotation may not be considered cost effective. The team noted that direct
borrowing from government banks may only cost a total of P128.48 million to
P270.16 million for interest and incidental expenses using the same interest
rates imposed on bonds. These are P30.19 million to P50.97 million lower than
the interest and incidental expenses incurred by the Cities from bond flotation,
as summarized below and presented in detail in Annex 1-2.
Expenses Under
Principal
LGU Expenses Bond Direct Borrowing Difference
(In Million)
Flotation Scheme from the Banks
Interest P 271,090,717.99 P 267,660,925.00 P 3,429,792.99
Pasay P 500.00 Incidental 50,038,516.70 2,500,000.00 47,538,516.70
Total 321,129,234.69 270,160,925.00 50,968,309.69
Interest 225,349,174.29 225,349,174.29 -
Antipolo 400.00 Incidental 38,662,543.51 2,000,000.00 36,662,543.51
Total 264,011,717.80 227,349,174.29 36,662,543.51
59
Expenses Under
Principal
LGU Expenses Bond Direct Borrowing Difference
(In Million)
Flotation Scheme from the Banks
Interest P 128,000,000.00 P 128,000,000.00 P -
Puerto
150.62 Incidental 30,671,089.20 480,000.00 30,191,089.20
Princesa
Total P 158,671,089.20 P 128,480,000.00 P 30,191,089.20
The only incidental expense to be incurred in case of borrowing from banks is

the cost of documentary stamps equivalent to 0.5% of the loan amount.
Apparently, the most cost effective borrowing scheme was not assessed before
deciding on bond flotation scheme.
In another case, the team noted that Dagupan City, in relation to its loan with
the LBP for the acquisition of two (2) units dredging machine, applied for a 121
days commercial Letter of Credit (LC) in March 2005 with expiry date of July
30, 2005. For the opening of LC, the City incurred expenses of P241,947.88
representing commission and documentary stamps. The loan was, however,
released only on August 4, 2005. Thus, the LC had to be extended until such
date. In the process, the City incurred additional expenses of P690,162.83. The
additional expenses were automatically debited by the Bank from the City’s
bank account:
Due date Interest Documentary Stamps Total

07/04/05 P 305,272.57 P 74,170.00 P 379,442.57
08/04/05 320,720.26 - 320,720.26
Total P 625,992.83 P 74,170.00 P 690,162 .83
This expense could not have been incurred had the City opened an LC only
upon the release of the loan.

Response provided by Pasay City
During the time that the construction of the Any amount set aside to redeem
said Public Market and Mall was being issued bond will also form part of
mulled, Pasay City has an outstanding the computation of borrowing
obligation with the bank on a short term capacity. Thus, it would really not
repayment scheme thus the City cannot matter whether financing scheme
afford adding up to its bank borrowing as it would be thru bank borrowing or
will overshoot the limit for payment on bond flotation.
borrowings.
The purpose of the Bond Flotation is noble as
The team is not questioning the
it is the intention of the Chief Executive to
City’s intention but its failure to
allot a certain portion of the flotation to small
assess the most reasonable and cost
investors of Pasay City giving them a chance
effective financing scheme. It is
to buy the floated bonds in small tranches
not also true that repayment of the
while in the meantime that repayment of the
60

bond will start after seven (7) years when all bonds will start after seven (7)
the debts of the City has been paid for. years. As provided in the TIA,
bonds issued will be repaid semi-
annually within seven (7) years
x x x. with 18 months grace period on
principal. Payment of interest starts
six (6) months after the bond
issuance.
The propriety of using the Bond Flotation It is also true that under R.A. 7160,
was thoroughly discussed by the City bond flotation is one of the credit
Council not to mention that NEDA and the financing scheme available to
BANK have given their imprimatur on the LGUs. Thus, the team is not
said scheme. questioning the issuance of bonds
per se but the City’s failure to
conduct assessment of the most
cost effective scheme to raise
funds considering a number of
available credit financing schemes.
Finally, management will take into The team appreciates the
consideration the observation and will device management’s reaction to the audit
scheme to increase collection and follow the observation and its commitment to
recommendation/s of the commission and comply with the audit
will not repeat the same. recommendations.
61
Chapter 2
Proper Maintenance of Loan Records
62
PROPER MAINTENANCE OF LOAN RECORDS
INTRODUCTION
Loans and borrowings of LGUs form part of their sources of income and receipts
and, therefore, should be properly and accurately accounted for in their books of
accounts. Thus, under R.A. 7160 and Section 105 of the National Government
Accounting System (NGAS) Manual for LGUs, Volume I, LGUs are required to
maintain special accounts in the general fund to record receipts, transfers and
expenditures. Each special account should have complete subsidiary ledgers to
record the assets, liabilities and equity. The accounts to be used in accounting for
loans, bonds and related transactions are prescribed under COA Circular No. 2004-
008 dated September 20, 2004.
The audit revealed that a number of LGUs were not properly and accurately
maintaining loan records. Thus, loan balances cannot be accurately established and
propriety of expenses charged thereon could hardly be assessed. There were no
subsidiary ledgers maintained to record loan/bond transactions by loan/bond issues.
This is evident on unrecorded or erroneously recorded loans/bonds transactions.
OBSERVATIONS
1. Proper maintenance of loan records was not yet observed by a number of

LGUs. Loan records of nine (9) LGUs, out of sixteen (16) LGUs, were not
properly maintained. As such, the reported account balances of loans
payable, recorded interest expenses and other related transactions were either
overstated or understated on account of apparent difficulty in monitoring
unrecorded and erroneous transactions.
To ensure that the loan proceeds are properly accounted for and used for the
purpose intended, it was provided under Section 313 of the Local Government
Code that the LGUs shall maintain special accounts in the general fund to
record loans, interests, bond issues, among others. It was also provided therein
that receipts, transfers and expenditures involving such loans shall be properly
taken up under the said accounts.
Under the NGAS Manual, Volume I, the special accounts shall be maintained
through the use of complete subsidiary ledger in order to provide adequate
information as to the assets, liabilities and equity of each special account. For
bond issues, the sub-code to be used is “23”.
63
For long-term indebtedness covering bonds issued to domestic creditors, the

prescribed account under COA Circular No. 2004-008 dated September 20,
2004 is “Bonds Payable-Domestic”. This account is debited for the
settlement/payment of matured bonds and credited for bonds issued/floated.
The LGU is, likewise, required under the said Circular to maintain Sinking
Fund account for the liquidation of long-term debt. The account is debited for
the setting aside of cash as sinking fund and is credited for the liquidation of
long-term debt.
Records showed that as of December 31, 2008, the 16 LGUs covered in the
audit have outstanding loans/bonds payable balances of P8,791.74 million.
This consists of balances of loans obtained from various lending institutions
such as LBP, DBP, PVB, PNB and MDFO and other lending institutions.
Further evaluation, however, disclosed that while the loan amount may be
considered significant, nine (9) LGUs, out of 16 LGUs audited, were not
properly maintaining their loan records resulting in inaccurate loan balances.
These deficiencies in record maintenance are discussed below:
As of 12/31/2008
Loans
LGU/Lender Balance Remarks
Contracted
(In Million)
Parañaque These Cities maintain individual

P1,237.50 P1,123.18
City/PNB subsidiary ledgers (SL) for each loan
account to keep track of loan releases
and principal payments. There were,
however, no SL to account for interest
expenses and expenditures charged
364.89 306.58 against each loan. Expenditures out of
Angeles City/
the loans were integrated among the
LBP, ESF, DBP,
transactions under the General/Special
MDF
Education Fund while interest
payments were accounted under
Interest Expense account.
Puerto Princesa These Cities are not maintaining

1,142.85 998.51
City/ LBP, DBP individual SL for each loan to keep
track of releases, principal and interest
payments, and expenditures charged
thereon. The expenditures and interest
Cabanatuan City/ 692.85 562.51 expenses were integrated among the
LBP, DBP, expenditures under the General/Special
WaterWorks Education Fund while only general
Corp. ledgers in the General Fund were
maintained for loans payable.
64
As of 12/31/2008
Loans
LGU/Lender Balance Remarks
Contracted
(In Million)
The City maintains individual SL by

lending institution to keep track of
releases and principal payments.
P 948.50 P 380.48 There were no SL per loan account to
Mandaluyong
record releases and charges thereon,
City/ LBP, PSF,
principal amortization and interest
DBP, MDF, ADB
payments, and other loan-related
transactions. These transactions were
integrated among the transactions under
the General Fund.
The City is maintaining individual SL

for each loan to record all loan related
Marikina City/
transactions except interest expenses
LBP, PNB 940.00 350.56
which are integrated into the interest
expense accounts.
The City maintains individual SL for

Davao City/ each loan account except for NHA loan
1,892.62 1,159.67
LBP in the amount of P42.69 million.

each loan account including LBP loan
Dagupan City/
for the construction of Malimgas
LBP 322.00 251.97
Market. However, there were improper
charges against this account.

each loan except for the bonds issued in
August 2004. The bond proceeds,
Pasay City/
redemptions, interest expenses, and
LBP, PNB 744.31 56.26
expenditures charged thereon were
integrated among the transactions in the
Trust Fund or General Fund.
Total P 8,285.521 P 5,189.72
The inability of these LGUs to properly maintain records resulted in inaccurate

records/balances due to difficulty of monitoring/detecting unrecorded and
erroneous recording of loan transactions or difficulty of monitoring the
utilization of loan proceeds, as manifested in the following:
65
Balance Unrecorded/
as of Erroneous
LGU/Lender Remarks
12/31/08 Transactions
(In Million)
This represents unrecorded loan releases,

principal and interest payments with details
presented as Annex 2-1:
Mandaluyong Amount
P 337.202 P 132.422 Particulars
City/ LBP (In Million)
Loan releases P 106.847
Principal amortization 19.391
Interest payments 6.184
Total P 132.422
This represents erroneous recording of

amount. Contracted loan amount of P6.00
Angeles City/
6.000 1.000 million was recorded instead of the actual
DBP
loan releases of P5.00 million for socialized
housing project contracted in CY 2005.
This represents unrecorded loan releases,

and principal and interest repayments. The
unbooked loan releases represent direct
Puerto Princesa releases by the LBP to contractors upon
City/ compliance with certain requirements. On
LBP 775.958 30.165 the other hand, the full loan amount of
DBP 94.664 P185.398 million from DBP was booked
instead of actual loan releases of only
P183.236 million. Details are presented as
Annex 2-2.
This represents unrecorded loan with the

Davao City/ National Housing Authority (NHA)
- 42.690
NHA contracted on May 15, 1979. The loan was
fully settled on April 14, 2008.
This represents erroneous recording of

principal amortization and interest expense
with details shown as Annex 2-3:
Cabanatuan
562.447 9.981 Amount
City/LBP Particulars
(In Million)
Interest expense P 8.232
Principal amortization 1.749
Total P 9.981
The loan ledger for account “Market and

Dagupan Slaughterhouse - Malimgas Market”
- 1.460
City/LBP included incidental expenses incurred
during loan application.
66
Balance Unrecorded/
as of Erroneous
LGU/Lender Remarks
12/31/08 Transactions
(In Million)
The amount of P372.177 million represents

unrecorded interest income/expense,
P 372.177 payments to Izumo and bond redemption,
and sinking fund balance as of December
31, 2008 which was not reflected in the
books.
The amount of P78.987 million represents
Pasay City/ expenses erroneously included and/or
PNB- Trustee P 500.000 erroneous entries. Incidental and unrelated
(Bonds) expenses were included in the Construction
in Progress account, trust fee payment was
78.987 debited to Cash In Bank account instead of
to Other Financial Charges, and Construc-
tion In Progress was credited instead of
Cash In Bank, and Construction in Progress
account balance as of May 5, 2006 was
erroneously forwarded (Annex 2-4).
The non-maintenance of subsidiary records

to account expenditures, interest payments
Paranaque City/
1,123.180 - and other loan-related transactions rendered
PNB
it difficult to monitor proper utilization of
loan proceeds.

Mandaluyong City
The City shall immediately coordinate with The team appreciates management’s
the City Treasury Department and reconcile immediate action on the deficiencies
our records pertaining to the outstanding noted.
loans and their corresponding interest
payments.
The City will now maintain a subsidiary
ledger for these accounts.
Davao City
It has been noted that the MOA between the Henceforth, the City Accountant
City and the NHA was made in 1979 and a should ensure that all liability
revised MOA was signed in 1981, accounts are recognized in the
expanding the scope of the project. At this books.
time, the City Accountant was not directly
involved in this activity considering that the
67
Accounting Office is under the Office of the

City Treasurer. This is also the first time
that the City incurred a loan payable to the
National Office, hence seemed an unusual
account at that time. The lack of
involvement resulted to non-focus and lack
of analysis of the account. During that
time, payments made by the lot owners
were remitted as payment of loan to NHA.
The collection was under a Trust Fund
account and payment was made to NHA for
whatever collection gathered from the
awardees.
The City Government of Davao had

committed itself the best way possible to
collect the receivables from the SIR
beneficiaries. However, due to economic
problems, many recipients have been
making delayed payments and most of them
even defaulted in their monthly
amortization for more than three
consecutive months. They have written the
City Government asking for help that they
will be spared from automatic nullification
of the agreement as agreed upon. These
letters were forwarded by the City Planning
Development Coordinator to the City Legal
Officer for an opinion. The City Legal
Officer issued an opinion that accepting
payments after the Agreement to Sell had
been automatically nullified is illegal,
however, it also recommended the passage
of remedial legislation to help awardees the
continued stay, possession and enjoyment
of the lots awarded, considering that the
awardees belong to the marginalized sector
of the population.
In view of this legal opinion, the City

Planning and Development Coordinator
sent a recommendation to the Loan Finance
Committee for the payment and full
settlement of the loan charged to the current
appropriation for debt servicing, in order
not to incur further interest.
68
The loan repayment to NHA was charged

against the current obligation for Debt
Servicing as provided for under the Annual
Budget-Development Fund 2008. Although
it has been included in the schedule of loans
supporting the 2008 budget, the City
considered the amount of P26,676,256.09 a
valid obligation that has to be paid to avoid
incurring more interest and surcharges.
Futhermore, charging it to Debt Servicing is
an appropriate action since it is a loan of the
City Government.
Moreover, the amount of P26,676,256.09 as
full payment of loan to NHA was taken up
as Accounts Receivables in the General
Fund to be paid from the collection of SIR
beneficiaries under Trust Fund.
Cabanatuan City
On erroneous recording of loan transactions
The errors in accounting entries were The team appreciates the adjustment
already adjusted as of June 30, 2009 per undertaken by the City to correct its
Journal Entry Voucher No. 101-2009-06- records. However, as discussed in the
6279. report, unless the City maintains SL
An entry was made reclassifying the Loans for each loan account to record all
Payable-Foreign account to Loans Payable- related transactions, the presence of
Domestic account in the amount of unrecorded and/or erroneous
P1,150,000.00. An adjusting entry was also transactions could not be easily
made to correct the amount of detected and corrected.
P8,983,394.66 which was debited to Loans
Payable – Foreign instead of Interest
Expense account.
On the maintenance of special accounts/subsidiary ledgers
The City Government of Cabanatuan The maintenance of special account

presently maintains six special accounts for for each loan is required under
General Fund that includes General Proper, existing regulations. This will
Market Operation, Slaughterhouse facilitate the City’s monitoring of
Operation, Transportation System, Hospital receipts and expenditures, and
and 20% Development Fund. These special repayments of principal and interest
accounts have their own separate financial amortization of each loan account.
statements, general and subsidiary ledgers.
Loans and interest were included in the
special account for General Fund Proper.
69
Although there was no separate special The documents forwarded to the

account for Loans and Interest, we maintain team are subsidiary ledgers for Loans
a subsidiary ledger for our Loans Payable Payable account classified into
classified per Creditor (Land Bank, World domestic and foreign loans only.
Bank, Development Bank). In addition, we There were no subsidiary ledgers for
maintain separate updated files on each loan each loan account. The City is,
particularly specifying the amount of loan, likewise, not maintaining subsidiary
principal and interest payments, as well as ledgers to account interest expense
the outstanding balance of each loan. In and expenditures charged from each
fact, data on these loans were given to the loan.
Special Audit Team immediately upon
request.
Based on the recommendations, I have The team appreciates the City’s
already instructed the City Accountant to commitment to maintain special
maintain special accounts for loans and account for loans and subsidiary
related interest and to keep separate ledgers for loans and related
subsidiary ledgers for record receipts, transactions.
expenditures and interest payments on these
loans.
Pasay City
The City agrees with the team’s We appreciate management’s

recommendations and has already instructed commitment to effect the
the current Officer-in-Charge of the adjustments.
Accounting Office to make necessary
adjustments on the affected accounts.
Currently, the City is scouting for a
Certified Public Accountant with enough
experience in government accounting
programs so as to put in proper order the
operation of the said office. However, due
to small salary being offered and coverage
of the salary standardization law, the City
cannot find any takers.
Parañaque City
We recognize the need to conform to the Meantime that the City’s

provisions of Section 105 of the Manual on computerized system does not
the New Government Accounting System include the setting up of Special
(NGAS) regarding the maintenance of the Accounts, maintenance had to be
Special Accounts in the General Fund for done manually.
the public utilities, other economic
enterprises and for loans, interests, bond
issues and other contributions for specific
70

purposes. However, the chart of accounts in
the computerized accounting system and the
installed accounting system itself does not
currently provide for the set-up of the
Special Accounts and the sub-codes and
subsidiary ledgers. Enhancement in the
program suggests additional negotiations
with the software developer that will entail
extra costs on the part of the city
government; hence, a different proposal to
this effect needs to be presented to
management at the appropriate time.
Receipts of the proceeds from loans were While it is true that all four (4) loans
recorded in our books under “Loans of the City with balances as of
Payable, Domestic” (account 444), with the December 31, 2008 were obtained
corresponding subsidiary for each kind of from a single bank, these loans were
loan. Interest payments were all accounted contracted on various dates and for
under Interest Expenses (account 975), different purposes. As such, each
without any other subsidiary account since loan has different amounts of interest
the City has drawn the loan from a single and principal repayments. In the
bank, and without any other interest absence of subsidiary ledgers for
expense. It is also with the corresponding interest for each loan, interest
appropriations and allotments under the payments for each loan could not be
Registry as Financial Expenses. We have easily established.
provided your office the necessary
schedules of loans which were classified
according to their use aka computer loan,
infrastructure loan, and the year they are
drawn. Said schedule clearly depict the
receipts and payment throughout the years
2006 up to present, as shown in the account
balances as of December 31, 2008 Financial
Statements since at the time of audit,
Financial Reports for 2009 were still being
prepared.
However, we have not maintained The loans were obtained by the City
subsidiary record to account for expenditure for specific purposes. Hence, there is
for each loan for the reason that proceeds of a need to maintain subsidiary ledgers
said loan were all credited under the to account for the utilization of each
General Fund of the City. Consequently, loan and to easily monitor whether
disbursements out of said loan were loan proceeds were utilized for the
integrated among the transactions under the intended purposes.
General Fund.
As per your premise that it is difficult to As discussed in the report, there were
monitor whether loan proceeds were used indications that the loan proceeds
71

for the purpose/s intended, or there were were used for other purposes. The
indications that loan proceeds were used for City’s Cash in Bank balance was
the other purposes, the undersigned is not only P46.89 million as of December
aware of any such fact because payment of 31, 2008 while uncompleted and
each disbursement in the City under the unpaid completed projects intended
General Fund is recorded out of single to be financed out of the loan
account. proceeds still amounted to P421.41
million.
The reason why this Office was not able to This only shows that the Accounting
record PN No. 9161-TL08-004-004 for Office is not coordinating with the
P1,219,618.58 and PN No. 9161-TL08004- banks on the submission of
005 for P2,491,228.91 was because this documents supporting loan
office was not provided copies of said transactions.
promissory notes and copies of
disbursement vouchers of contractors.
Loans covering said PNs were recorded and
reflected in the City’s 2009 financial
statement as per attached JEVs. As to other
unbooked releases, we have secured copies
of DVs from contractors which represent
direct releases by the Land Bank of the
Philippines and these were already taken up
in our books last year.
On Development Bank of the Philippines The amounts to be recorded in the

loan, the difference of P2.162 million books should represent the amounts
represents withholding tax withheld from actually released.
the voucher of contractor which remain
unremitted during the time of audit.
2. Loan documents for loan with remaining balance were not duly maintained.
Thus, the accuracy of the loan balance of P7,237,275.25 as of December 31,
2008 obtained by the City Government of Mandaluyong from the DBP could
not be validated.
Records show that the City Government of Mandaluyong has outstanding loans
payable amounting to P144.102 million as of December 31, 2008. This
includes balance of loan obtained from the DBP in the amount of P7,237,275.25
composed of the following:
72
Particulars Amount
Principal P 6,132,739.78
A/R Borrower 8,000.00
Penalty Charges-Litigation Expenses/Advances 207,344.13
Additional Interest-Litigation Expenses/Advances 466,422.22
Litigation Expenses Advance 375,605.50
Gross Receipts Tax 47,163.64
Total P 7,237,275.27
The validity of this account could, however, not be assessed by the team due to
the failure of the City to provide the team with relevant documents. Despite
repeated requests, the City could not provide the team with a copy of the loan
agreement with the DBP and/or details of the loan. The City could not even
identify the loan’s purpose and repayment terms and conditions. Apparently, the
City is not maintaining records/documents pertaining to loans with outstanding
balances.
Based on information obtained by the City Auditor from the DBP in February
2009, the bank granted the City on October 15, 1983, a loan of P8,463,872.09
with maturity date of October 15, 1996. It is payable semi-annually within 13
years with no provision on interest. The City was able to pay a total of only
P2,430,167.67 from February 1984 to January 1992. Of this amount,
P2,331,132.31 was applied to principal and P99,035.36 to other charges leaving
an outstanding balance of P6,132,739.78 as of January 31, 1992. This balance
now rose to P7,237,275.25 as presented in the table above.
73
Chapter 3
Responsive Programs and Projects
74
RESPONSIVE PROGRAMS AND PROJECTS
INTRODUCTION
Section 296 of R.A. 7160 authorizes LGUs to create indebtedness or avail credit
facilities, as well as, credit lines to boost their financial resources. These credit
financing schemes are designed to enable LGUs to effectively undertake local
infrastructure and other socio-economic development projects included in their
approved local development plan and public investment program.
For this purpose, the Local Development Council (LDC), created under Section 106
of the same Act, shall initiate the formulation of a comprehensive multi-sectoral
development plan to be approved by the Sanggunian. Such plans/programs
specifying the proposed projects are required under Article 410 of the IRR of the
Act to be submitted to the local finance committee before the calendar for budget
preparation, for inclusion in the local government budget, as well as, in the budgets
of National Government Agencies (NGAs) or Government-Owned or Controlled
Corporations (GOCCs) concerned.
The LGUs’ plans and programs are defined/contained in the following:
• Comprehensive Development Plan (CDP) - this is the multi-sectoral plan which

embodies the vision, sectoral goals, objectives, development strategies and policies
to be adopted within the term of the LGU officials.
• Local Development Investment Program (LDIP) - presents the list of

projects/programs indicating the financing resources, to be implemented yearly
within a three to six-year period. The projects were lifted from the CDP.
• Annual Investment Program (AIP) - constitutes the annual slice of LDIP and
contains the most priority projects/programs to be implemented for the current year.
These documents serve as guide to the LGUs in ensuring the effective utilization of
their meager resources and/or contracting of loans/borrowings.
The audit disclosed that the plans and programs of some LGUs were not explicit.
The specific programs and projects to be implemented were not well defined in the
CDP, LDIP and AIP. While this is the situation, loans were still contracted. The
necessity of implementing projects costing P3.785 billion out of loans is, therefore,
questionable.
75
OBSERVATION
The comprehensive multi-sectoral development plans of twelve (12) LGUs were

not well-prepared as the specific programs and projects to be implemented were
not defined. Even in the absence of specific programs/projects for
implementation, loans were continuously contracted. Thus, the programs/projects
to be covered by the contracted loans were, likewise, not identified. In other
cases, while projects were specifically identified in the LGUs’ development plans
and programs, projects implemented were not included therein. This is true in the
case of 783 loan-funded projects costing P3.785 billion which were not defined in
the loan agreement and/or not included in the list of priority projects. Their
necessity are, therefore, questionable.
As provided under Section 296 of R.A. 7160, LGU may create indebtedness, and
avail of credit facilities to finance local infrastructure and other socio-economic
development projects in accordance with the approved local development plan and
public investment program. The LGUs’ plans and programs are defined in any of
the following documents:
• Medium-Term Development Plan (MTDP)

• Local Development Plan (LDP)
• Annual Investment Plan (AIP)
• Development Investment Plan (DIP)
• Comprehensive Development Plan (CDP)
• Annual Development Plan (ADP)
• Proposed Programs for Development (PPD)
• Plans and Programs (PP)
Under existing regulations, the LGUs’ actions and initiatives should be within the
bounds of such plans and programs. The team, however, noted that while these
reports were supposed to guide the LGU officials in the performance of their
functions, in some cases, these were not properly and well prepared. The specific
programs and projects intended to be implemented within a specified period were
not clearly defined therein.
Despite unclear and unplanned programs and projects, loans were, just the same,
continuously contracted. The projects to be covered by the loans were, likewise, not
specified. In cases where the specific priority projects/programs were defined in the
LGUs’ MTDP, projects implemented were not among those identified as priority
projects. This is clearly illustrated in the discussions on the next page with details
attached as Annex 3-1.
76
Not defined and/or

included in the plans
Remarks
Amount
No.
(In Million)
Parañaque City
Not all projects to be implemented by the City were clearly defined in its
CYs 2005-2008 LDP and AIP. Some projects were defined in general
terms such as concreting of various roads, construction of various
drainage systems, and installation of streetlights at various barangays.
Even without specific projects for implementation, a loan was just the
same contracted. The projects to be implemented out of the loan were, 8 P237.28
likewise, not identified in the loan documents. This is illustrated in a
number of projects costing P237.28 million covered in the loan agreement
and described merely as:
Project Amount
1. Installation of 289 units parklights at different
P 4,996,048
barangays of Paranaque City
2. Installation of 1,086 units parklights at different
22,398,986
barangays of Paranaque City
Sub-total P 27,395,034
1. Improvement of different Health Centers 5,000,000
2. Improvement of different Day Care Centers 5,000,000
3. Proposed installation of streetlights at various
10,000,000
barangays of Parañaque City
4. Proposed road asphalting of various roads of
50,000,000
Parañaque City
5. Proposed concreting and improvement of drainage
40,000,000
system at various barangays of Parañaque City
6. Proposed asphalt overlay and selective asphalt
99,879,987
patching of various roads of Parañaque City
Sub-total P209,879,987
Total P 237,275,021
The installation of parklights costing P27.40 million was not even 15 189.66
included in the LDP and AIP. In addition, 15 other projects (5 completed
and 10 for implementation) implemented out of loans were also not
included in the LDP and AIP.
Caloocan City
The projects to be implemented were merely categorized in CYs 2000-

2005 DIP and CY 2008 AIP into capital and non-capital projects and
described as construction of roads, public buildings and bridges, and
improvement and maintenance of public facilities. Even without
identifying the specific projects for implementation, the City entered into 234 897.39
loan agreement for P1 billion, of which P897.39 million were already
released as of November 2008. Thus, the projects to be funded out of the
loan were not also specified in the loan agreement and SP Resolution
authorizing the City Mayor to enter into loan contract.
77
Not defined and/or

Remarks
Amount
No.
(In Million)
The City Budget Office later allocated the P1 billion loan into:
Office/ Amount
Allotment Class
Program (In Million)
City Engineering Property, Plant and Equipment P 900
Property, Plant and Equipment
Executive Direction
(IT Equip. & Software – 20M 100
and Supervision
Other PPE – 80M)
Total P 1,000
The allocation for P900 million under the City Engineering Office was
supported by a list of infrastructure projects consisting of 234 projects at
an estimated cost of P897.39 million.
Marikina City
Not all projects to be implemented were specified in CY 2008 AIP and

CYs 2006-2007 Philippine Investment Plan (PIP). Other projects were
merely categorized or described in general terms such as construction of
various school buildings, structures, roads, drainage system, sidewalk,
curbs and gutter without indicating the locations and the fund
requirements. Thus, loan amounting to P500 million was contracted with 19 P 149.15
only one (1) project amounting to P200 million identified. The balance of
P300 million have no specific projects for implementation.
Verification of projects implemented out of the loan showed that 19

projects costing P149.15 million cannot even be categorized among the
programs and projects stated in general terms in the AIP and PP.
Mandaluyong City
Some projects to be implemented under CYs 2005-2009 MTDP and CYs

2006-2007 ADP were stated in general terms except for projects to be
accomplished under drainage and street improvements which were
specified in the CY 2006 Supplemental Budget No.1. Thus, out of the
loans of P336.68 million, only projects amounting to P204.58 million
were clearly identified in the loan agreement. Other projects amounting to
P132.10 million included in the loan agreement have no specific project 15 235.71
locations.
Verification of projects implemented out of the loans further showed that

projects costing P235.71 million cannot even be categorized among the
projects described in general terms. These include construction of school
buildings, drainage and other infrastructure projects which are not
included in the ADP.
Rizal
The projects to be implemented under CYs 2006-2010 CDP and CYs 109 586.01
2004-2006 AIP were stated in general terms. Thus, the locations of the
78
Not defined and/or

Remarks
Amount
No.
(In Million)
school building projects to be constructed out of the loan entered into in
the amount of P600 million were not also specified in the loan agreement
and SP Resolution authorizing the City Mayor to enter into loan contract.
The Province constructed 109 school buildings costing P586.01 out of the
loan.
Cabanatuan City
The projects under the education sector were stated in CYs 2006-2008
AIP in general terms as shown below:
Project 2006 2007 2008

SOCIAL DEVELOPMENT- Education
- Priority list of schools P 5M P 11.4M P 15M
that needs construction/ (school bldg.- 5 @ 3 (MOOE) (MOOE) 45 P 90.00
repair classrooms each)
Thus, the specific locations of the 47 school buildings to be constructed

out of the loan entered into in the amount of P90 million were not
identified/listed in the loan agreement and in the Local School Board
(LSB) and SP resolutions authorizing the City Mayor to enter into loan
contract. Reported accomplishments showed that there were 45 school
buildings constructed out of the loan.
The projects to be implemented were merely categorized in CYs 2004-

2009 MTDP/DIP/AIP in general terms/descriptions as illustrated below:
Program/
Location Expected Output Budget/Cost
Project
CY 2004-2006 MTDP
Infrastructure Sector
Concreting of city and P 42,126,500
Concreting of
barangay roads: 6 meter wide,
roads
20 mm thick
The project consists of 13,730,000
Selected construction/rehabilitation of
Barangay Barangays identified support facilities
Infrastructure needed by each barangays such
Projects as day care centers, multi-
purpose buildings, school
building repairs, etc.
Total P55,856,500
CY 2007-2009 CDIP
Rehabilitation/ Consist of rehabilitation and/or 18,000,000
maintenance maintenance of City and/or
of City/ Citywide Barangay roads especially in
Barangay rural barangays.
roads
Total P 18,000,000
79
Not defined and/or

Remarks
Amount
No.
(In Million)
Program/
Location Expected Output Budget/Cost
Project
CY 2008 AIP
• 1 km. of road rehabilitated
Rehabilitation/ • 398 km. of graveled road
improvement maintained
and Citywide • 1 km. of asphalt road P 10,000,000
maintenance maintained
of City roads • 8 km. of concrete road
maintained
Total P 10,000,000
The team noted that while these were the programs considered in the
MTDP, CDIP and AIP of the City as priority programs, the City entered
into loan agreements with PVB in CY 2006 and LBP in CY 2008, in the 2 P 78.00
total amount of P73 million, instead for the purchase of the equipment and
the construction of 2-storey 6-classroom school building at Mangingisda
Elementary School. The equipment to be purchased were also not listed in
the loan agreement.
Antipolo City
Not all projects to be implemented were defined in the CYs 2000-2010

CDP and AIP. Some projects were categorized in general terms, as
presented below:
Source of Expected
Program/Project Cost
Fund Output
Amended CY 2008 AIP
Social Services 20% DF 1 additional P 13,900,000
Development Program school site
Purchase/Construction and SEF Physical Needs 400,000,000
Improvement of Assessment of
Government Facilities for Public School
Education, Culture, Sports Building
and Manpower satisfied
Development
Total P413,000,000
CY 2000-2010 CDP
Construction of Local & 153 classrooms 43,000,000
Classrooms in Various National in 14 public
Barangays Program schools
Total P 43,000,000
Thus, the specific locations of the school building projects and other
projects to be funded from the loan entered into in the amount of P750 3 750.00
million were not also identified in the loan agreement.
80
Not defined and/or

Remarks
Amount
No.
(In Million)
Angeles City
Only projects to be funded out of the 20% Development Fund were

defined in CYs 2006-2008 AIP. Thus, locations of the school building
projects to be constructed out of the contracted loan of P45 million were
not specified in the loan agreement. Records showed that there were eight
(8) school buildings constructed costing P44.58 million. 10 P 98.47
Likewise, the computerization of ONA, purchase of equipment and bins

for solid waste management costing P53.98 million were funded out of
P55 million loans though not included in the AIP.
Lucena City
The programs and projects to be implemented under CYs 2003-2008

MTDP/AIP/ADP were well-defined. However, the City contracted loans
amounting to P250.45 million with only projects costing P170.45 million
specified in the loan agreements. The specific projects to be implemented
out of the remaining balance of P80 million were not indicated. 23 136.50
Verification of the projects implemented further disclosed that among the

projects implemented are road concreting, improvement of resettlement,
and construction of school buildings costing P136.50 million. These
projects were not included in the City’s development plans/programs.
Bataan
The Province’s CYs 2006-2010 MTDP and AIP contain the specific
programs and projects to be implemented. The programs and projects to
be funded out of loans amounting to P450 million were, however, not
specified in the loan agreements. Thus, out of 363 projects implemented
out of the loan proceeds, 272 projects costing P290.38 million were not 272 290.38
included in the MTDP or AIP. Out of these projects, 11 projects costing
P12.37 million were also intended to be funded by the national
government thru DPWH. The Province should not have obtained loans
for projects under the jurisdiction of the national government.
Palawan
While the programs and projects to be implemented were well defined in

the Province’s CYs 2003-2012 MTDP or AIP, loans amounting to P408
million were contracted with only projects costing P188 million clearly
defined in the loan agreements. Other projects costing P220 million were 28 46.76
merely categorized as infrastructure projects, construction of JTR type
school buildings/classrooms or construction of school buildings. Thus, 28
projects costing P46.76 million implemented out of loans were not
included in the MTDP or AIP.
Total 783 P 3,785.31
81
As these projects were neither defined in the loan agreements, not listed as priority
projects in the plans and programs of the concerned LGUs nor supported with
feasibility studies, the needs for these projects are questionable. There is, therefore,
no assurance that these projects would be beneficial to the constituents and should
be prioritized over other projects.
As discussed under Chapter 1, Adequate and Appropriate Policies for Assessing

LGUs’ Borrowing Capacity, as of inspection date, 20 loan-funded projects costing
P1.34 billion were no longer being used/fully used, abandoned and/or eventually
replaced by another project of the national government.
In addition, the following school buildings contracted by the Provincial Government

of Rizal and the City Government of Marikina were also not being used as
instructional rooms, but rather, as principal guidance/faculty office, canteen/H.E.
room or clinic, as tabulated below:
Project Cost
LGU Name of School Remarks
Description (In Million)
Dona Nieves Songco ES, 2 storey – 8
P 4.72 1 room is utilized as Principal’s Office
Angono classrooms
Carlos Botong Francisco
NHS, Angono
Ground Floor- 2 rooms are utilized as

2 storey- 6
4.67 Principal’s Office, and Guidance and
classrooms
Clinic Room
Don Joaquin Guido ES, 2 storey-4

4.90 1 room is utilized as H.E. Room
Angono classrooms
Bilibiran ES, 2 storey-8
6.08 1 room is utilized as Principal’s Office
Binangonan classrooms
Guronasyon NHS,
Binangonan
2 storey- 8 3 rooms are utilized as Principal’s

7.52
classrooms Office, Guidance Room and Canteen
Province
of Rizal
Calumpang ES, 2 storey – 8 2 rooms are utilized as Guidance and

5.89
Binangonan classrooms Clinic Rooms
2 storey-6 2 rooms are utilized as Faculty and HE
Muzon ES, Taytay 5.65
classrooms Rooms
Benjamin Esguerra NHS, 2 storey-6 2 rooms are utilized as Principal’s
5.93
Taytay classrooms Office and Faculty Room
2 storey-6
Jansenville ES, Cainta 5.97 1 room is used as Principal’s Office
classrooms
2 storey-4
Sitio Simona ES, Taytay 4.98 1 room is used as Principal’s Office
classrooms
3 storey-9
F.P. Felix ES, Cainta 5.57 1 room is used as Principal’s Office
classrooms
Total P 61.88
82
Project Cost
LGU Name of School Remarks
Description (In Million)
3 storey-9 11.94 4 rooms are being used as HE and
classrooms Workshop rooms while another 2
Marikina rooms are utilized as Library and
Malanday NHS
City Reading Center
3 storey-21 7 rooms are utilized as HE and
P 53.63
classrooms Workshop rooms
Total P 65.57
Under the DepEd policy, no new classrooms shall be constructed unless the same is
intended to be used as instructional room. This is a clear indication that a number of
projects implemented out of loans were actually not at all needed.

The City Planning and Development Office It is true that the City furnished the
(CPDO) has furnished the audit team with team with AIP for CYs 2006-2008 to
Annual Investment Plan (AIP) for CYs 2006 – be funded out of 20% Development
2008 which included the priority projects to be Fund. These AIPs did not include
funded out of the 20% Development Fund. This computerization, solid waste
is contrary to the previous administration. As management and school building
mentioned in the Audit Observation projects.
Memorandum, there were indeed no
development plans. It could be presumed that
the past leadership had other considerations they
found imperative when it decided to proceed
with the projects.
However, as I take over the reins of CPDO, it is The team appreciates the CPDO’s
my vision that my office functions as mandated commitment to formulate the City’s
in the Local Government Code, Secretariat of development plans and public
the Local Development Council and “integrator investment programs.
of development plan”. Given these functions, I
assure that our City will be armed and guided by
development plans and public investment
programs that arose from public consultation
and popular vote.
Response provided by Antipolo City
The Annual Investment Program (AIP) and Granting that the AIP/CDP in general
other development programs are prepared based terms already complied with the
on the guidelines prescribed under Joint requirements of the JMC, the City
Memorandum Circular (JMC) 001-Series of should at least have identified the
2007 issued by the NEDA, DOF, DBM and specific projects to be implemented
DILG. during the year, conducted feasibility
and investigation on the necessity of
such projects before contracting
83

Based on this Circular, Programs, Projects and loans. As it is, loans were contracted
Activities (PPAs) are identified and consolidated even without identifying the
by sector (General, Social & Economic locations of school building projects
Services). and other projects to be funded
therefrom. There is, therefore,
practically no basis yet for
contracting.
The PPAs are defined in general terms so as to The projects to be included in the
allow flexibility particularly in citing the AIP and development programs are
locations of these projects. supposed to be priority projects. A
project may be considered as priority
project upon conduct of feasibility
study. As discussed in the report, the
City contracted loans without even
identifying the particular projects to
be funded out of such loan.
These projects are proposed by members of the There were no documents provided
City Development Council (CDC) & various to the team to support this statement.
stakeholders and are considered on the merit of There is, therefore, no proof that
its necessity to the City. these projects were proposed by the
members of the CDC and were
indeed evaluated and found
necessary.
There are instances when a project cannot be This only manifests that loans were
implemented because of reasons relative to its not actually based on needs. Projects
ownership (e.g. a deed of donation that is still on are implemented not because they are
process) and other factors. Having defined the really needed but merely because
projects in general terms allows the City funds were already available.
Government to relocate and re-align the
available funds of the project.
However, the consolidated PPAs reflected in the The team was not provided with a
AIP are lifted from projects w/ specific locations copy of the separate listing prepared
and details. The City Planning and Development by the CPDO with specific locations
Office (CPDO) prepares a separate listing of and details. Granting that there is
these projects as a reference and guide in the one, the same was apparently not
prioritization of projects. considered in the contracting of loans
as the projects to be funded from
loans were also not identified in the
loan agreement.
The Physical Needs Assessment of Public If the Physical Needs Assessment of
School Buildings on the other hand, became the Public School Building was the basis
basis for the loan granted by Development Bank for the loan, then the cost should
of the Philippines (DBP). The data provided in have been P400 million only and not
the Audit Observations is just the summary of P750 million.
84

specific projects included in the study. Hence, it
did not show the details of the projects under the
loan.
The expected output indicated in the AIP is the The attached list did not include a
satisfaction of the Physical Needs Assessment. number of projects to be
This means that the details provided in the study implemented out of loans.
are the same lists as the projects to be funded by Apparently, the projects not included
the loan. This study was further refined through in the list were actually not
the reconciliation of the CPDO recommended by the CPDO.
findings/recommendation with that of the
DepEd. The details required by the Commission
on Audit, therefore, are indicated on a separate
plan as herein attached.
Response provided by Province of Rizal
The Programs, Projects and Activities (PPAs) in The team was not provided with the
the provincial Comprehensive Development CDPs of cities/municipalities with
Plan (CDP) are only indicative in the sense that PPAs stated in specific terms. As
they are in response to the gaps identified. They discussed in the report, the CDP and
are general in nature. It is in the CDPs of AIP of the City of Antipolo also
cities/municipalities that the PPAs are stated in contain generic projects. Besides,
specific terms. AIP 2004-2006 used the entry even in the loan agreement, the
“provincewide” as the inclusion of specific particular projects to be funded
PPAs would only make the AIP voluminous. therefrom were not identified.
With the proposed preparation of the 6-year
The team, however, appreciates the
PDIP and of its annual slice which is the AIP, it
process of formulating criteria for the
is hoped that only prioritized programs/projects
prioritization of programs/projects.
will be included in the AIP. The PDIP
Committee will formulate the criteria for the
prioritization of programs/projects, the total cost
of investment of which will be based on the
projected/estimated income of the province for
the year.
Response provided by Lucena City
The projects funded by the loan were While it is true that the prioritization
compilations of request by Barangays. There of the projects to be included in the
has been a regular convening of the City MTDP and AIP should be initiated
Development Council. Since the Council was by the City Development Council,
given authority by the Local Government Code the contracting of loans is the
to prioritize project, its members submitted list responsibility of the City
of projects for funding. It was found out later, Government. Thus, the list to support
however, that the list of projects submitted by the loan should no longer come from
the Council’s members was different from the the City Development Council but
projects that was submitted when the MTDP and rather derived from the approved
AIP was completed. It is good to note that the MTDP and AIP. As discussed in the
85

contents of the MTDP and AIP came from the report, out of P250.45 million
submitted list of projects by the Council’s contracted loan, P80 million have no
members. It was not checked whether the list of particular projects for
projects submitted by the Council’s member implementation.
for loan funding were the same projects that they
submitted when the MTDP and AIP were
drafted and finalized.
Those projects were actually included in the As mentioned by the team, the
development plans, although they were stated in programs and projects to be
general terms. The loans subject of the audit implemented under the City’s
were obtained sometime in year 2003, the MTDP/AIP/ADP for CY 2003-2008
current set of officers, particularly the City are specific and well-defined.
Accountant as well as the City Treasurer, were However, loans amounting to
not truly aware what really transpired that time. P136.50 million were used for
Nevertheless, it is presumed that proper projects not included in the
documentary requirements were complied with development plans/programs.
considering that one of the basic requirements
for loan release is the Certification of Debt Apparently, while the City’s
Service Capacity issued by the Bureau of Local development plans/programs may
have been compliant, these were not
Government Finance (BLGF). One of the
totally adopted in the implementation
requirements for issuance of such certification is
of loan projects.
the City’s Development Plans/Programs. And
since the loan were released it is but proper to
assume the said Certification was issued and
City’s Development Plans/Programs submitted
to BLGF was compliant.
Response provided by Marikina City
There were amendments made in the original list The team understands that there
of projects as defined in the Annual Investment could be changes in the AIP.
Plan (AIP) due to circumstances that However, such proposed changes
necessitated flexibility on the part of the city should be documented before the
government. Construction of 3-storey (21 projects are implemented. In this
classrooms) school building at Park 4, Brgy. case, the team was not provided with
Malanday came as an offshoot of the deferment a copy of the revised AIP during and
of a similar project in Barangay Parang. The after the audit.
deferment stemmed from the division of Parang
into two barangays: Parang and Fortune. Said Moreover, there were apparently no
division affected the plan in terms of strategic feasibility studies undertaken to
location and the attendant need to establish assess the necessity of newly
public high school in the area. identified projects. As discussed in
the report, not all newly constructed
The construction of DepEd Building had long classrooms in Malanday National
been contemplated on. Being the nerve center of High School were being utilized as
public education in the city, its importance bears instructional classrooms.
no amplification.
86
The city government deemed it practical to

move the project to Malanday where there is
equally an urgent need for additional
classrooms. A similar project, though, for the
initially targeted barangay will remain under
consideration for the future (with significant
modifications in the plan). xxx.
The foregoing were all deemed priority projects.

They are aimed to provide the city with
additional impetus for improved livability and
competitiveness.
Response provided by Province of Palawan

We have attached the corrected Schedule of The Province claimed that all the 44
Projects not defined and/or Not Included in the projects being questioned by the
LGU’s Development Plans/Annual Investment team were included in its MTDP and
Plans/Programs (Part V Annexes 3-1 of the draft AIP. Thus, the team re-evaluated the
COA Report) duly indicating the source plan list but was able to trace only 16
documents as basis for funding. projects in the MTDP or AIP. The 28
other projects can not be traced in the
MTDP or AIP.
Response provided by Cabanatuan City
We, however, value your recommendation that The team appreciates the City’s
the City identify the specific projects to be action to amend its Annual
covered in the City’s Annual Investment Plan. Investment Plan.
We are now in the process of amending our AIP
to include specifics on the projects that we plan
to undertake.
87
Chapter 4
Effective Loan Utilization and Project
Implementation
88
EFFECTIVE LOAN UTILIZATION AND PROJECT IMPLEMENTATION
INTRODUCTION
LGUs obtain loans and avail of other forms of borrowings for various purposes
which include, among others, the implementation of local infrastructure and other
socio-economic projects. To maximize the benefits to be derived therefrom and to
avoid wastage of government resources, these should be utilized for the purposes
intended, efficiently and effectively, and in accordance with existing laws, rules and
regulations.
The audit disclosed that the implementation of projects by the LGUs covered in the
audit may not be considered efficiently and effectively undertaken on account of the
following:
• In six (6) LGUs, out of the total loan and bond releases of P3.12 billion, P1.03
billion were used for purposes other than those intended to be financed out of the
borrowings, while a number of projects remained unimplemented, partially
completed or unpaid as of December 31, 2008.
• Projected revenues on a number of projects were not realized due to delayed/non-

completion of projects, unutilized rentable spaces and delayed collection of rental
fees on occupied spaces. As a result, LGUs continuously subsidize amortization
and operating expenses of the projects in amounts ranging from P64.96 million to
P296.29 million.
• Inadequate study and evaluation of projects prior to contracting for loan, resulted
in termination of some components and delayed utilization of the projects.
• Implementation of loans intended for lending to Micro, Small and Medium

Enterprises under the “Isang Bayan, Isang Produkto, Isang Milyong Programa ni
Pangulong GMA” was not closely monitored resulting in substantial uncollected
balances. Thus, loan repayments which were likewise delayed, were shouldered by
the LGUs.
• School building projects funded out of loans of the LGUs covered in the audit
were constructed without proper coordination with the Department of Education.
Thus, there were additional school buildings constructed in schools without need
for the same while there are other schools with significantly high pupil-classroom
ratio. Even school chairs purchased for SYs 2004-2005 and 2007-2008 exceeded
the total requirements.
• Some projects implemented out of loans were not in accordance with plans and
specifications.
89
OBSERVATIONS
1. Out of the total releases of P3.12 billion to six (6) LGUs, P2.53 billion were
expended of which P1.03 billion were used for purposes other than those
intended to be financed out of the borrowings. This is in the presence of a
number of unimplemented, partially completed or unpaid projects as of
December 31, 2008 which were included in the LGUs’ development plans as
priority projects.
Records disclosed that between the period CYs 2000 to 2006, the following six
(6) LGUs entered into various agreement for the issuance of bonds and/or
contracting of loans in the amount of P3.21 billion with various banking
institutions. Of the total contracted borrowings of P3.21 billion, P3.12 billion
were released of which P2.53 billion were expended, as shown below:
Releases Total Amount

LGU Amount Expended
As of
(In Million) (In Million)
Puerto Princesa City April 11, 2002 P 320.00 P 343.24
Marikina City June 30, 2009 472.98 472.98
Lucena City April 30, 2006 79.94 79.32
Caloocan City December 31, 2008 947.60 920.55
Parañaque City September 30, 2008 1,000.00 415.39
Province of Palawan December 31, 2008 297.37 297.37
Total P 3,117.89 P 2,528.85
Evaluation of records revealed that while the bonds and loans were contracted
for specific purposes, significant amounts of proceeds therefrom were not
utilized for the purposes stipulated in the loan contracts/trust indenture
agreement or as approved in the SP Resolutions. Of the total releases of P3.12
billion, of which P2.53 billion were spent, of which P1.03 billion were utilized
for purposes other than for which the loans were contracted, as illustrated below:
Loan Total Loans Utilization of Loan for Other Purpose

Contract Purpose Per Loan
Amount Released
Date Agreement/SP Resolution Amount
(In Million) (In Million) Particulars
(In Million)
Marikina City
Building at the Marikina Sports
Park, 4-storey Diagnostic Center
Building, market malls, multi- Construction of Convention
purpose covered gymnasiums, Center, Marikina Hotel, Pio
04/04/06 P 500.00 P 472.98
school buildings, DepEd Office del Pilar St, Concepcion II
P 60.19
Building, street drainage and
sidewalk concreting and dredging
of city canals/waterways
90

Amount Released
(In Million)
Sub-total P 60.19
Lucena City
Wages of casual employees
assigned at the City
06/08/05 P 80.00 P 79.94 Fifteen (15) units school buildings Engineering Office (CEO) 0.59
with accomplishments not
related to the project.
Sub-total 0.59
Palawan Province
Infrastructure Projects (Farm to
Market Roads); Establishment of
Rubber Tree Nursery and
Plantation; Construction of South
Road maintenance and
Provincial Hospital; Sports
rehabilitation projects
Complex; JTR Type School
− regravelling, reshaping,
Buildings/Classrooms; Jail
04/27/06 308.00 297.37 cleaning and repair of
Extension and Administration 41.13
culverts and vegetation/
Building and its perimeter fence;
trimming of roadside trees
Completion of multi-purpose
of roads
building at PEO Compound; and,
Acquisition of 300 units
reconditioned barangay mobile
patrols.
Sub-total 41.13
Caloocan City
Equity portion of term loan 1
269.00
Developmental and public welfare to 6
projects included in its approved Interest amortization for the
LDP/PIP. loan covering June to October 9.44
2007
Improvement of roads, bridges, Cost of 46 projects (net of tax)
11/21/06 1,000.00 947.60
including alleys, rip-rap and not included in the list of 180.18
drainage system; projects intended to be
financed out of the loan
Construction and improvement of Remittance to BIR pertaining
public buildings, and other to projects not intended to be 3.99
infrastructure financed out of the loan
Sub-total 462.61
Parañaque City
Utilization of loan proceeds
were incorporated in other
Various infrastructure projects expenses. However, as of
09/26/06 1,000.00 1,000.00 (with lists attached to the December 31, 2008, 374.52
agreement) unimplemented and unpaid
completed projects amounted
to P421.41 million while the
91

Amount Released
(In Million)
City’s Cash in Bank account
balance under the general fund
was only P46.89 million.
Sub-total P 374.52
Development of proposed housing
and relocation site of existing
Bond redemption and payment
02/18/00 P 320.00 P 320.00 squatter families (Barangay 88.77
of interest
Mangingisda Socialized Housing
Project)
Sub-total 88.77
Total P3,208.00 P3,117.89 P1,027.81
It was further noted that while part of the loan and bond proceeds were utilized
for other purposes, the following projects intended to be financed out of the
borrowings remained unimplemented, partially completed or unpaid as of
December 31, 2008:
Funds Used for

LGU Unimplemented Projects
Other Purposes
• Market Malls on E. dela Paz and M. Cruz Streets;

Marikina City • Three (3) out of five (5) various-storey school buildings P 60.19
• Five (5) multi-purpose covered gymnasiums
Construction of various roads in Zone 6 consisting of Brooke’s

Point, Bataraza, Balabac, Quezon and Rizal.
Province of Only P124.97 million were used for the construction/improvement 41.13
Palawan of roads, replacement of bailey bridge and erosion control/slope
protection out of P170 million intended for the construction
(concreting/and or opening) of farm to market roads.
• 19 projects costing P63.333 million out of 234 infrastructure

Caloocan City projects to be implemented 462.61
• Computerization and other PPE with a budget of P100 million
Cost
Particulars
(In Million)
34 uncompleted P 388.74
4 for completion 21.19
6 completed but unpaid 11.48
Total P 421.41
Parañaque City Details are shown on Annex 4-1. 374.52
The submission of the required Certificate of Completion and

Acceptance of the Projects duly signed by the City Mayor,
certified by the Project Engineer/s and City Engineer and
validated by the Bank’s appraisers before the final drawdown is
released was, apparently, not enforced by the Bank.
92
Funds Used for

LGU Unimplemented Projects
Other Purposes
418 housing units in various stages of completion:

Status of Completion No. of Units
With floor slabs and septic tanks only 178
With septic tanks only 188
No initial development 52
Total 418
After 75.97% accomplishment by the Contractor, the project was

suspended and subsequently stopped due to lack of funds.
As a result, the project which should have been completed

Puerto Princesa sometime in August 2001 and used by the intended beneficiaries P 88.77
City remained uncompleted. This was confirmed by the team during
inspection on September 22, 2009. Since the City took over the
implementation of the project, with 576 uncompleted units, only
158 units were completed as of August 31, 2009.
This is another indication that the priorities of the LGUs are not clear.

Response provided by Parañaque City
The audit team noted that despite full release This is an indication that the
of the loan, which started in 2006, not all priority projects of the City were
projects intended to be covered by the loan not clear at the time it contracted
proceeds were completed. This is because not the loan and that there was no
all projects listed in the schedule were proper study and evaluation of
implemented during said period due to some projects prior to implementation.
reasons or another. Example is the increase in
total project cost in which the difference to the
original contract is material. Some have
problems in the implementation of the project,
or in some cases, the City ascertained the fact
that some projects could be deferred for some
significant and timely project.
The Bank did not enforce the submission of a The submission of a Certificate of
Certificate of Completion and Acceptance of Completion and Acceptance of the
the Projects duly signed by the City Engineer Projects before the final drawdown
before the final drawdown of the loan. This is released is one of the conditions
action is their prerogative and a clear in the loan agreement. As such,
indication of the trust bestowed upon the City. while it may be the prerogative of
However, management was able to submit all the Bank, the City as a party to the
93

documentary requirements including the loan contract is also bound to
certificates of completion and acceptance comply with such condition. The
which were all attached to the disbursement City’s compliance to this
vouchers before payments were effected. requirement could have ensured
Should the bank be requiring these the completion of all the projects
documents, reproduction copies maybe intended to be funded from the
requested from the Office of the COA Auditor loan. The reasons cited for non-
who keeps custody of the disbursement implementation/completion of the
vouchers and its supporting documents. projects are manifestations that the
City’s priority projects were not
identified prior to loan contracting.
With regards to the City’s Cash in Bank The City’s Cash in Bank balance
account balance which as per Special Audit is of only P46.89 million as of
deemed insufficient to finance total December 31, 2008 was not
expenditures including loan repayments, it is sufficient to fund uncompleted and
worth mentioning that as per our records, we unpaid completed projects which
have only paid P164,091.82 as additional still amounted to P421.41 million.
interest payment/penalty in the payment of our This indicates that part of the loan
loan amortizations. We believed that with the proceeds were used for other
improved collection efficiency of the City purposes. On the other hand, the
Treasury, the City Government will be able to payment of additional interest and
cope with its commitment to deliver better penalty on loan amortizations was
basic services to its citizens and continue to a manifestation that the City is
earn the trust of the banking institution, in its having difficulty in meeting its
capability to meet its repayment obligations. repayment obligations.
Response provided by Province of Palawan
The 39 road sections consisting of 284 The Infrastructure Projects – Farm

kilometers of provincial roads to Market Roads as indicated in the
rehabilitated/improved/maintained in 13 Province’s AIP constitutes
municipalities with a total cost of P49.90M concreting and/or opening of new
form part of the Infrastructure Projects (Farm roads. As such, the rehabilitation
to Market Roads – P170M) indicated in and maintenance of roads
Section 1.2 of the Loan Agreement for Term undertaken could not be considered
Loan 7 with the Land Bank of the Philippines. as part of the Infrastructure
The same were identified in the 2006 Annual Projects –Farm to Market Roads
Investment Program (page 120) under Other for which the loan was contracted.
Priority Projects lumped as Rehabilitation of
Provincial Roads and Bridges amounting to
P50M.
Most of these Provincial Roads were
constructed and turned-over to the Province
by PIADP, a National project without
budgetary allocation for repairs and
maintenance.
94
There were no funds used for other purposes. The use of loan amounting to
To reiterate, the 39 road sections consisting of P41.13M for road maintenance and
284 kilometers of provincial roads rehabilitation projects when the
rehabilitated/improved/maintained in 13 loan was intended for construction
municipalities are Farm to Market Roads that of Farm to Market roads which
form part of the Infrastructure Projects (Farm involves concreting and/or opening
to Market Roads – P170M) indicated in of new roads, constitutes use of
Section 1.2 of the Loan Agreement for Term loan for other purpose.
Loan 7 with the LBP.
The observation that “only P124.97M were
The specific projects to be
used for the construction/improvement of
implemented under the loan
roads, replacement of bailey bridge and
component Infrastructure Projects-
erosion control/slope protection” proves that
Farm to Market Roads amounting
the Infrastructure Projects (Farm to Market
to P170 million were not identified
Roads – P170M) indicated in Section 1.2
in the loan agreement and in the
(Purpose of the Loan) of the Loan Agreement
appropriation ordinance allocating
with LBP do not refer to page 93 of the 2006
the loan proceeds. Thus, the team
AIP (Construction of various roads in Zone 6
used as reference the Province’s
consisting of Brooke’s Point, Bataraza,
AIP for 2006 to determine the
Balabac, Quezon and Rizal) as the indicative
Farm to Market Roads projects
funding requirements for the said projects is
intended to be implemented during
P172 M.
this year. Under the “Farm to
Market Road Development
Program”, the Province
programmed the construction of
various roads in Zone 6 composing
of Brooke’s Point, Bataraza,
Balabac, Quezon and Rizal, and
under “Other Priority Projects”,
the rehabilitation of provincial
roads and bridges provincewide. In
the absence of documents showing
the specific farm to market roads
projects intended to be funded
from loan, the team maintains that
the farm to market roads
programmed in the AIP are the
ones intended to be accomplished
out of the loan.
95
2. Projected revenues on a number of income generating projects were not

realized. Thus, LGUs are subsidizing loan amortizations and operating
expenses of these projects.
Records disclosed that during CYs 1999 to 2006, among the projects funded by
the LGUs out of loans are several income generating projects enumerated as
follows:
Contract Project
LGU Lender Amount Purpose Cost
Date
PNB (Pasay Construction of Pasay City Public
Pasay City Kaunlaran 02/05/04 P500.00 Market and Commercial Complex P500.00
Bonds)
Construction of Bataan Common
Bataan 11/22/99 116.18 63.00
Terminal Project
Dagupan City Construction of public market and
01/21/04 282.00 282.00
parking lot/area
Construction/Completion of San
01/21/04 91.50 91.50
Nicolas Public Market
Angeles City LBP Construction of third floor
2004 94.50 parking area at San Nicolas Public 94.50
Market
Construction of Cesar E. Vergara
01/27/03 130.00 130.00
Highway
Cabanatuan City
Completion of Cesar E. Vergara
10/06 85.00 85.00
Highway
Total P1,299.18 P1, 246.00
The implementation of these projects was awarded to various contractors at a

total cost of P1.28 billion, as shown below:
Contract
Project/Contractor Description
Amount
2-storey building designed to be used as follows:

Construction of Pasay City
Public Market and No. of Stalls /
Floor Purpose
Commercial Complex Parking Lots
Wet Market Section 500 stalls
Ground P 536,263,737.56
Izumo Contractor, Inc. Dry Market Section 400 stalls
Floor
Rental spaces 230 stalls
Rental space 534 stalls
2nd floor
Parking space 72 parking
Rooftop Parking space lots
3-storey building to be used as minibus and jeepney

terminal and mall:
Construction of Bataan No. of

Floor Purpose
Common Terminal Stalls
Mini bus and jeepney
93,623,419.45*
Ground
Prestige Construction terminals
Floor
6
2nd Floor Rental spaces 102
3rd Floor 70
96
Contract
Project/Contractor Description
Amount
Construction of Public
Market and Parking Area 3-storey building consisting of 666 stalls on the
(Dagupan City) ground and 2nd floors and a parking area on the 3rd P 250,980,000.00
floor.
Metropolis Construction,Inc.
Construction/Completion
of San Nicolas Public 3-storey building with 747 stalls/spaces and parking
Market and Parking Area area at the third floor with 300 slots 190,836,675.87
AL-B Const. & Haidee
Const. & Dev’t. Corp.
Construction of Cesar E. Concreting of the following project components:

Vergara Highway
(Cabanatuan City) Length Amount
Project Component
(Meter) (In Million)
1. Road and Pavement 9,498.42 P 98.00
2. Bridge 1 16.00 4.20
3. Bridge 2 30.00 14.20 142,867,000.00
F.F. Cruz and Co., Inc. 4. Cesar Vergara Bridge 783.80 210.60
(Phase I & II) Total 10,328.22 327.00
Contingency 23.00 62,784,000.00
By Administration Total P 350.00
(Phase III)
Total P1,277,354,832.88
* Based on actual payments made to the contractor. Management was not able to provide a copy of contract to the team.
As projected in their respective Project Feasibility Studies/Viability Reports

(except for the construction/completion of San Nicolas Public Market and
parking area), these projects were expected to generate income sufficient to
cover both interest and principal repayments during the term of the bonds/loans,
and related operating expenses.
Records, however, showed that these projections did not materialize. Income
being generated from these projects as of December 2008 were not sufficient to
meet their operating expenses and principal repayments. These LGUs were
subsidizing the operating costs of these projects in amounts ranging from
P64.96 million to P296.29 million, as shown below:
(In Million)
Net Income Principal LGU
LGU/Project CY Income Expenses
(Loss) Repayment Subsidy
(a) (b) (a-b=c) (d) (d-c=e)
2005 P - P - P - P 61.69 P 61.69
Pasay City
2006 4.68 - 4.68 80.24 75.56
Public Market and Commercial
2007 14.14 - 14.14 98.32 84.18
Complex
2008 78.94 14.71 64.23 139.09 74.86
Sub-total 97.76 14.71 83.05 379.34 296.29
2006 2.39 12.52 (10.13) 12.54 22.67
Bataan 2007 2.30 12.14 (9.84) 12.82 22.65
Common Terminal
2008 2.31 10.74 (8.43) 12.73 21.16
Sub-total 7.00 35.40 (28.40) 38.09 66.49
97
(In Million)
Net Income Principal LGU
LGU/Project CY Income Expenses
(Loss) Repayment Subsidy
(a) (b) (a-b=c) (d) (d-c=e)
2005 P 20.66 P 4.36 P 16.30 P 40.25 P 23.95
Dagupan City 2006 20.91 12.23 8.68 46.20 37.52
Public Market and Parking Area 2007 16.52 12.59 3.93 43.58 39.65
2008 17.89 11.31 6.58 32.84 26.26
Sub-total 75.98 40.49 35.49 162.87 127.38
2006 6.55 10.47 (3.92) 15.59 19.51
Angeles City
San Nicolas Public Market* 2007 6.27 11.75 (5.48) 16.96 22.44
2008 8.57 35.32 (26.75) 28.30 55.05
Sub-total 21.39 57.54 (36.15) 60.85 97.00
2004 0 6.19 (6.19) 0 6.19
Cabanatuan City 2005 0 12.35 (12.35) 0.20 12.55
Cesar E. Vergara Highway 2006 0 11.99 (11.99) 0.40 12.39
2007 0 12.29 (12.29) 1.51 13.80
2008 0 15.51 (15.51) 4.52 20.03
Sub-total 0 58.33 (58.33) 6.63 64.96
Grand Total P202.13 P206.47 P( 4.34) P647.78 P652.12
* Based on the reports of the combined operation of San Nicolas Market and Angeles City Public Market during CYs
2006 to 2008, as there were no separate records maintained for each market.
The construction of Cesar E. Vergara Highway was started on April 3, 2003 and
was scheduled to be opened in the mid-2005 but remained uncompleted. As
proposed in the feasibility study, a toll fee will be charged to the users.
Projected income from the highway's toll operation ranged from P121.67
million in Year 1 to P233.12 million in Year 14.
This is an indication that the project feasibility studies were not realistic. The
non-attainment of the projected revenue or project objective may also be
attributed to delayed completion of the project, unutilized rentable spaces, or
delayed collection of rental fees on occupied spaces, as thoroughly discussed
below:
Construction of Pasay City Public Market and Commercial Complex

The project, which started on June 28, 2004, was intended to be completed within
1,095 calendar days or on May 27, 2007. The contract period was, however,
extended by 270 days or until February 21, 2008 in view of the issuance of three
(3) change/variation orders for various reasons, as tabulated below:
Contract Justification
• To increase column spacing at mall areas.
• To suit field condition upon verification at site
• Unforeseen existing structures for demolition which incurred
Change Order No. 1
additional labor and equipment.
• Additional temporary market
• Revision in design to suit actual field condition
Additional requirements as instructed by the City Engineer’s
Change Order No. 2
Office
Additional items of work not included in the original contract,
Change Order No. 3 Change Order No. 1 and Change Order No. 2 as required by the
City Mayor
98
The project was still not completed within the extended project completion date.
Based on the post completion and turn-over report, the project was completed only
on January 23, 2009 or 337 days after its supposed completion period of February
21, 2008.
As of February 2008, the stalls for the wet and dry markets were already fully
occupied. On the other hand, as of May 29, 2009, only 45 stalls out of 764
projected stalls for rental in the mall areas located in the ground and second floors
were occupied.
Construction of Bataan Common Terminal – Province of Bataan

During the eight-year period, the Province was not able to invite stall occupants. A
number of spaces for rent were not utilized to generate income. Records of the
Province showed that starting CY 2006, the leasing of spaces was stopped
including those spaces which were already occupied. This condition was confirmed
during the team’s inspection of the project on August 24, 2009. All stalls, from the
ground to the third floors, were unoccupied. Only the minibus and jeepney
terminals in the ground floor were operating. Thus, the reduction in income from
around P3.031 million in 2005 to around P2.391 million in 2006. This would then
mean that the Province has to continuously subsidize the project to keep the
terminal operating and meet its loan obligations.
Construction of Public Market and Parking Area - Dagupan City

Records of the City showed that since the project started operation in CY 2005, not
all available spaces for rent were occupied. This condition was confirmed during
the team’s inspection of the project on September 15, 2009. Of the 666 available
stalls in the first and second floors, only 236 stalls were occupied, while the parking
area in the third floor is no longer utilized. Thus, its income is not sufficient to
cover operating and other expenses. This would, then, mean that the City has to
continuously subsidize the project to keep it operating and meet its loan obligations.
Records also showed that aside from unoccupied stalls, rental fees for occupied
stalls were not collected on time. As of December 31, 2008, uncollected rental fees
99
amounted to P5,704,358.18 representing delinquencies from 1 to as long as 640

days.
Construction of San Nicolas Public Market and Parking Area - Angeles City
The project was reported complete on September 19, 2006 and started operation in
December 2006. As of December 31, 2008, out of the loan used to finance this
project, P73,811,239.94, representing principal and interest, were already paid by
the City. The loan balance of P160.37 million is payable until CY 2014.
Inspection by the team of the market on October 9, 2009 revealed that not all
spaces/stalls in the 1st floor were occupied, while the 2nd floor was entirely vacant.
On the other hand, there were only few vehicles parked at the 3rd floor parking area
with 300 slots. Based on the City’s records, of the 747 available stalls/spaces, only
176 were presently occupied/rented out. The 2nd and a portion of the 3rd floors of
the market have, for several years, remained unproductive. Thus, these areas have
failed to financially contribute to the repayment of loan amortization.
2nd Floor 3rd Floor- Parking Area 1st Floor
Construction of Cesar E. Vergara Highway - Cabanatuan City

The project was not adequately planned and the financial capability of the City to
undertake the project was not fully evaluated. The estimated cost of the project was
P400 million, of which P350 million will be sourced from loan, however, the City
was able to obtain a loan of only around P215 million. The short financing of P185
million could hardly be financed by the City. Thus, the project remained
uncompleted.
Picture
100

The unceremonious removal of the local chief This is a clear example of absence
executive in September 2006 affected much of or insufficient market studies. The
the project of the City. There were variation team, however, appreciates
orders made by the administration of Allan management’s efforts to fill up
Panaligan which, of course, is beyond the unoccupied spaces to at least
control of the present administration. On the generate income sufficient to fund
issue of subsidy because of shortfall in the market operating expenses and
collections, management has not foreseen said bond redemptions.
incident as during the conduct of the
feasibility study, the other factors affecting the
collection are not present. At present,
management is exerting all its efforts in trying
to fill the vacancies in the mall area to arrest
the shortfall in the collections.
Your recommendation is well-taken. The The team appreciates the City’s

Cesar E. Vergara Highway is one of the commitment and drive to complete
flagship projects of the City. Although, we the project as the loan will soon be
know that the project is quite ambitious, the amortized.
city is doing it’s best to complete the project
amidst our limited resources. We still have
unreleased loan of about P21 million and
equity of about P5 million in our Continuing
Appropriations which are earmarked for the
completion of the project.

As for your observation that the city is paying The team appreciates the City’s
for the loan used for the project that is not action on leasing out the 2nd floor
yielding the income it was projected to earn to to PAJUSCO Realty Corporation.
be a viable enterprise as the city still has to as this would augment the market’s
subsidize the operations of the market. The operating income. However, this
public market is an economic enterprise and, income alone will not be sufficient
therefore, should be an income-generating to meet the operating cost and loan
endeavor of the city government and not a amortization for this project. As
liability, forever relying on government discussed in the report, in CY 2008
resources for its operation. The alone, this project, along with
administration of Mayor Francis L. Angeles City Public Market
Nepomuceno, in its desire to reverse the generated net loss of around
negative trend and turn the San Nicolas Public P26.76 million. This is another
Market into a real economic enterprise which case of absence or inadequate
will contribute to the city coffers and not be a market studies.
drain, has now entered into a lease contract
101

with PAJUSCO Realty Corp., the city will
lease out 4,777.65 sq.m. at P100.88. This
amount is equivalent to P481,969.33 per
month and P5,783,632 per year.
3. Implementation of Urban Drainage and Flood Control Project, and Roads

and Drainage Project at Los Amigos Resettlement Area Phase I costing
P260.65 million was delayed due to inadequate study and evaluation. Thus,
while loan was already being amortized, the benefits to be derived from the
project could not yet be enjoyed by the City’s constituents.
The Davao City’s Urban Drainage and Flood Control Project is composed of 18
main drainage areas with each drainage area comprising of several sub-areas.
The project, divided into 18 drainage area projects, was awarded to a single
contractor, DM Consunji, Inc., on October 4, 2006 for a total contract cost of
P241.70 million to start on February 5, 2007. The project components follow:
Project Contract Amount

1. Lizada Area Drainage P 28,290,522.53
2. Dumoy Area Drainage 27,565,942.92
3. Matina Aplaya Area Drainage 37,327,668.82
4. Ma-a Area Drainage 18,727,345.22
5. Mamay Area Drainage 31,461,146.97
6. Bo. Obrero Area Drainage 15,514,215.00
7. Lanang Area Drainage 14,560,376.26
8. Sasa Area Drainage 17,802,287.11
9. Kawayan Area Drainage 2,197,867.82
10. F. Torres St. 3,124,543.48
11. J.P. Laurel –DLPC Area 2,345,766.51
12. Quirino-Central Bank and San Pedro 1,547,561.08
13. Mc Arthur – GSIS 2,084,986.30
14. Sto. Nino Matina Drainage 3,396,662.73
15. NHA – Matina River 16,649,434.22
16. Suazo-Magsaysay 12,580,737.58
17. Marfori Drainage 2,940,963.15
18. Sta. Ana Avenue 3,581,972.30
Total P241,700,000.00
102
The original contract cost of P241,700,000 was reduced to P109,355,069 due to

deletion and/or revision of the following items of works in the amount of
P132,344,931:
Amount Increased/
Drainage Areas Reasons
Decreased
1 Lizada Area Drainage P 24,197,732.64 With design issue
2 Dumoy Area Drainage 17,126,198.85 1 sub-area is for redesigning
3 Matina Aplaya Area Drainage 37,327,668.82 With design issue
4 Lanang Area Drainage 2,914,782.61 1 sub-area is for redesigning
5 Sasa Area Drainage 13,935,002.40 For future DPWH implementation
6 F. Torres ST. 3,124,543.48 Already undertaken by DPWH
7 Quirino-Central Bank and San Pedro 1,547,561.08 To be undertaken by City Eng’g.
8 NHA-Matina River 16,649,434.22 With design issue
9 Sta. Ana Avenue 3,581,972.30 Already undertaken by DPWH
10 Ma-a Area Drainage 7,757,388.87
11 Mamay Area Drainage 346,205.48
12 Bo. Obrero Area Drainage 1,641,257.25
13 Kawayan Area Drainage (12,962.61)
14 J.P. Laurel -DLPC Area 277,523.59 With Variation orders
15 Mc Arthur-GSIS 63,539.51
16 Sto. Nino Matina Drainage 242,946.82
17 Suazo-Magsaysay 1,624,223.78
18 Marfori Drainage (88.09)
Total P132,344,931.00
The new contract dated January 19, 2007 stipulated that the projects shall be
completed within 365 calendar days. The project commenced on February 5,
2007 and should, therefore, be completed by February 5, 2008. In view of
various revisions, the original completion date of February 5, 2008 was moved
to July 31, 2008. The project was reported 100% complete as of July 31, 2008
and the contractor was fully paid of the contract cost of P109,355,069.
In lieu of the terminated items of work, the City proposed new drainage sub-
areas. Of the 19 proposed new projects with estimated cost of P140.64 million,
only two (2) were reported completed as of August 2009. The rest are still on-
going, for processing of contract documents or still for programming.
Similarly, another project, the construction of roads and drainage project at Los
Amigos Resettlement Area-Phase I costing P18,946,505.88, financed under
Term Loan 3 - Land Development for shelter and urban land reform program
component of the P990 million loan, was also suspended on June 8, 2009 due to
boundary conflict. This project has only 18 days remaining in the contract time
and needs re-survey by the City Planning and Development Office. Apparently,
this project was also not adequately planned.
103
Thus, while the benefits from the Urban Drainage and Flood control projects are
yet to be fully enjoyed by the City’s constituents due to uncompleted and
unimplemented components, the City was already repaying the loan starting
June 18, 2007. As of December 31, 2008, the City had already paid P17.73
million representing principal and interests out of its total loan releases of
P117.74 million, as tabulated on the next page:
Loan Releases Repayments

Date Amount Date Amount
3/28/07 P 36,255,000.00 06/18/07 P 1,317,413.33
3/28/08 74,137,528.00 09/18/07 1,484,798.59
12/19/07 1,389,392.17
03/14/08 1,541,810.92
03/24/08 2,232,223.05
11/24/08 7,348,306.00
06/25/08 1,523,206.64
07/01/08 3,367,342.44
09/19/08 4,877,393.87
Total P117,740,834.00 P17,733,581.01

On the assessment of project’s condition and utilization
Please be informed that the project has The team is not saying that the project
not been totally and permanently has been totally or permanently
abandoned. In fact, right now the office abandoned. The team merely
is exploring possibility of continuing with illustrated the adverse effect of
the project. implementing project without adequate
study and evaluation. As discussed in
Thus, when materialized, that particular the report, the City is already
section that was already partially amortizing loans for projects which
implemented will still be used and form were not fully implemented.
part of the new structure which will
eventually become functional
infrastructure.
On the suspension of project due to boundary conflict
The issue on boundary conflict was not This is a manifestation that projects are
evident at first because of existing being proposed and started in the
perimeter fence. There was encroachment absence of appropriate survey.
on the property at the start of the project.
Hence, an actual ground relocation survey
was made to settle the apparent boundary
conflict or overlapping of lots plotted
from the technical description vis-à-vis
the actual ground situation.
104

On the City’s repayment of loan although the projects have not been completed
or yet to be implemented
The recommendation of the COA-SAO is The team appreciates management’s

well taken considering the fact that it is commitment to properly study and
always made sure that every project of the evaluate projects prior to
city, not only those funded from loan, are implementation.
properly studied and evaluated prior to its
implementation.
The project is well coordinated with It is true that the national government is
DPWH. Pursuant to R.A. 7160, it is the required under R.A. 7160 to coordinate
LGU who has the primary jurisdiction with LGUs in case of projects to be
over its territorial boundary for the implemented under their territorial
implementations of its plans and boundaries. In the absence of coor-
programs. Where there are projects dination by the national government,
coming from the National Government or the City should keep track of projects
any other entities, the same shall implemented, being implemented and
coordinate with LGU concerned and not even those for implementation by these
the other way around, for project offices. As it is, there were projects
information, reference and avoidance of already implemented by the DPWH but
prior project citing and project still being proposed by the City for
duplication. implementation. This is a
manifestation of absence of survey.
4. The LGUs may not be considered effective in implementing loans intended for
lending to Micro, Small and Medium Enterprises. The implementation of this
program was not closely monitored resulting in substantial uncollected
balances. As such, loan repayments, which were likewise delayed, were
shouldered by the LGUs.
In addition to the loans contracted by the LGUs with the lending institutions,
some LGUs were also availing loans from the President’s Social Fund (PSF)
which were intended for lending to Micro, Small and Medium Enterprises. Of
the 16 LGUs covered in the audit, two (2) availed loans from the PSF of
P1 million each. These loans were accounted for and utilized by these LGUs as
follows:
105
Amount of
Purpose Treatment Utilization
Loan/Date
Mandaluyong City
Loan assistance P 1,000,000 On May 20, 2005, a check The GLMPC is lending the fund
for the was issued payable to the to various borrowers in the
implementation of April 2005 Green Ladies Multi-Purpose maximum amount of P20,000 at
“Isang Bayan, Cooperative (GLMPC). The 14% interest plus service charge.
Isang Produkto, transfer of fund from the City As reported by the GLMPC to
Isang Milyong to GLMPC was recorded in the Office of the President,
Pisong Programa the Trust Fund books on the around P2.916 million were
ni Pangulong same date as Donation. At already released to 318
GMA” this point, the liability borrowers from January 2008 to
account to PSF was not yet December 2008. As of October
recognized. In June 2008, 14, 2008, 97 borrowers with
the receivable from GLMPC aggregate principal loan
was recorded in the amount balances of P592,242.71 were
of P1,187,500 and the loans considered delinquent. As such,
payable to the PSF was GLMPC is requesting for the
recorded in the General Fund condonation of the balance of its
of the City. P1 million loan from the Office
of the President. While such
request was not granted, the
Office of the President is willing
to grant a one-year moratorium
in addition to waiving of all
penalties and interest.
Dagupan City
Provision of P 1,000,000 Receipt of loan was taken up Of the P1 million loan, the City
financial as Government Equity under was able to grant loans to 28
assistance in the December the Trust Fund which was beneficiaries in December 2004
form of a soft loan 2002 later reclassified to “Due to and in April 2005 in the total
to qualified micro NGAs” instead of Loans amount of P675,000. As of
entrepreneurs Payable account audit date, the recorded
engaged in bangus receivable as of CY 2006 from
processing and the beneficiaries in the amount
vending of fresh of P405,888.68 remained
and processed uncollected.
bangus.
Total P 2,000,000
Notably, the LGUs may not be considered effective in the implementation of

these types of programs. The LGUs were not able to closely monitor the
implementation of the programs resulting in substantial uncollected balances.
As repayment is among the responsibilities of the LGUs under the
Memorandum of Agreement, LGUs have to continue repaying the loans
irrespective of the results of their collection efforts. Moreover, the City
Government of Mandaluyong did not execute a MOA with the GLMPC.
106
As of December 31, 2008, these LGUs have so far repaid P1.046 million while
collection amounted to only P0.769 million, as tabulated below:
Amount of Amount LGU’s LGU’s

Remarks
Loan Relent Collection Amortization
Mandaluyong City
The City started amortizing loan to
PSF in July 2006 until October 2007.
GLMPC started paying the City only
on June 18, 2008 for the months of
P 1,000,000 P 1,000,000 P 496,562.50 P 450,937.50
July and October 2007 or two (2)
years after, and continuously remitted
its payments until April 13, 2009 for
the month of January 2009.
Dagupan City
A one time payment of amortization
was made in September 4, 2007
covering the period December 2004 to
December 2006. The balance of
P405,000 pertains to quarterly
1,000,000 675,000 272,111.49 595,000.00 principal amortization of P50,625
from March 2007 to September 2008.
The interest charges were waived by
the PSF. Collections from
beneficiaries were delayed by 38 to 42
months as of December 31, 2008.
P2,000,000 P 1,675,000 P768,673.99 P1,045,937.50
5. School building projects funded out of loans of the LGUs covered in the audit
were implemented without proper coordination with the Department of
Education. Thus, a number of additional school buildings were constructed
in schools without need for the same while school chairs purchased exceeded
the total requirement.
In CYs 2004 to 2007, the Provincial Governments of Bataan, Rizal and Palawan
and City Governments of Cabanatuan and Marikina entered into loan
agreements for a loan of P1.205 billion under SEF and GF to finance various
education-related projects, as shown below:
Date Amount Term Releases

LGU Purpose
Contracted (In Million) (Years) Date Amount
Construction of 84 school
buildings with 312 classrooms,
08/16/05- repair of 540 classrooms, 5 units
Bataan 05/18/05 P 257.400 12 01/26/07 P 257.400 comfort rooms, 2 library/office
and 1 guidance office
08/16/05- Fabrication of 16,000 pcs. school
17.600 5 17.600
09/21/06 chairs
Sub-total 275.000 275.000
107
Date Amount Term Releases

LGU Purpose
Contracted (In Million) (Years) Date Amount
07/31/04-
02/09/04 P 300.000 7 P 299.683 Construction of various school
07/31/06
Rizal buildings within different
05/11/06-
12/09/05 300.000 7 299.841 municipalities
04/16/07
Sub-total 600.000 599.524
06/29/07-
Palawan* 03/27/07 40.000 10 39.738 Construction of school buildings
11/28/08
Sub-total 40.000 39.738
Cabanatuan 07/22/08- Construction of 47 school
05/12/08 90.000 9 87.200
City 12/17/08 buildings with 125 classrooms
Sub-total 90.000 87.200
Marikina 01/11/07- Construction of Parang
04/04/06 200.000 9 73.054
City** 04/08/09 Elementary School
Sub-total 200.000 73.054
Total P1,205.000 P1,074.516
* Contracted loan was P60 million
** Contracted loan was P500 million
The amounts loaned for school buildings and chairs were intended to
supplement the school building and furniture programs being implemented by
the national government. While this is the case, the LGUs did not closely
coordinate with the school officials for the identification of schools most in
need of classrooms and chairs.
This is clearly illustrated in the construction of 88 school building/classroom

projects costing P209.41 million in the following schools with practically no
need for the same as the classroom-pupil ratios of Instructional Rooms (IR) are
very well within the standard of DepEd of one classroom for every 45 students:
Classrooms Cost Total Total Classroom-

LGU School
Constructed (In Million) Enrollment IR Pupil Ratio
Elementary
Balut ES, Pilar 2 P 1.18 312 8 39
Camachile ES, Orion 4 1.18 140 8 18
Batangas II ES, Mariveles 2 1.13 181 8 23
Legua ES, Orani 1 .66 118 4 30
Minanga ES, Morong 2 1.30 132 4 33
Sto. Nino ES, Dinalupihan East 1 .66 221 6 37
Alauli ES, Pilar 2 1.15 487 13 37
Bataan Morong ES, Morong 2 1.32 1,393 35 40
SY 2005-2006 San Pablo ES, Dinalupihan West 2 1.22 377 9 42
Cabcaben ES, Mariveles 4 4.82 2,370 56 42
Secondary
Limay National HS, Limay 6 3.40 2,757 65 42
Dr. Victoria B. Roman HS, Pilar 3 1.58 379 10 38
Mabatang National HS, Abucay 2 .36 239 6 40
Nagbalayong HS, Morong 2 1.08 310 7 44
Saysain HS, Bagac 3 .77 311 7 44
Bataan School of Fisheries, Orion 6 3.07 1,167 26 45
Sub-total 44 24.88
108

LGU School
Elementary
Buhangin ES 6 P 5.33 204 6 34
Pipindan ES 6 5.35 468 12 39
Bangad ES 2 1.66 321 12 27
Limbon-Limbon ES 4 2.74 202 6 34
Rizal
Term II Loan Patunhay-Calahan ES 6 4.88 550 16 34
SY 2003-2004 Pagkalinawan ES 4 2.43 256 9 28
Sto. Nino ES 6 5.19 143 8 18
Secondary
Talim Nat’l HS 1 1.37 444 12 37
Bagumbong Natl HS 6 4.86 579 14 41
Elementary
Libis ES 6 6.51 878 20 44
Talim ES 6 6.49 422 15 28
Tuna Balibago ES 6 6.74 32 3 11
Rizal Sampad ES 6 6.70 266 7 38
Term III Loan Sipsipin ES 4 3.04 583 13 45
SY 2005-2006 Palay-Palay ES 3 2.34 227 7 32
Punta ES 6 5.98 330 9 37
Calero Lanang Primary Sch. 4 4.68 167 4 42
Niogan ES 6 5.98 544 12 45
Pinagsabiran ES 4 4.59 206 5 41
Sub-total 92 86.86
Elementary
Malbato ES, Coron 1 .77 104 3 35
Palawan
SY 2006-2007 Maglalambay ES, Busuanga 1 .77 213 6 35
Salvacion ES, Busuanga 1 .81 382 11 35
New Busuanga ES, Busuanga 1 .81 218 6 36
Cheey ES, Busuanga 1 .77 359 9 40
Buluang ES, Busuanga 1 .77 242 6 40
Barangonan ES, Linapacan 1 .77 79 2 39
Canimango Primary School, Culion 1 .77 86 4 21
Palawan Binudac ES, Culion 1 .77 166 5 33
SY 2006-2007
Mendoza ES, Roxas 2 1.23 153 5 31
Tanatanaen ES, Dumaran 1 .77 187 6 31
Cuyo Study Center, Cuyo 1 .80 837 22 38
Princesa Urduja ES, Narra 2 1.32 909 21 43
Sandoval ES, Narra 1 .81 408 10 41
Igang-igang ES, Bataraza 1 .77 166 4 41
Puntabaja ES, Rizal 1 .79 1,197 29 41
Candawaga ES, Rizal 1 .76 216 5 43
Secondary
Sibaltan Nat’l. HS, El Nido 1 .77 141 5 28
San Miguel Nat’l. HS, Linapacan 1 .81 376 10 38
Sub-total 21 15.84
Elementary
Cabanatuan East District
City Sta. Romana MES 3 2.57 364 9 40
SY 2007-2008 Imelda ES 4 3.35 918 24 38
F.A. Reyes MES 3 2.57 688 16 43
109

LGU School
J.P. Melencio ES 3 P 2.57 1,117 30 37

Mabini Homesite ES 3 2.54 538 14 38
West District
Sumacab Este ES 2 1.78 189 7 27
Cabanatuan North ES 3 2.57 418 18 23
Pagas ES 2 1.80 260 7 37
San Josef ES 2 1.80 930 28 33
P.G. Crisostomo ES 3 2.57 1,132 27 42
Lazaro Francisco ES 3 2.54 3,208 85 38
Sumacab ES 5 4.15 911 26 35
North District
Dalampang ES 2 1.80 137 6 23
Polilio ES 4 1.80 241 8 30
Sto. Nino ES 2 2.57 165 6 28
Buliran ES 3 2.57 265 11 24
Pula ES 2 1.78 188 6 31
Daan Sarile ES 3 2.57 467 17 27
Caudillo ES 2 1.78 160 5 32
Cinco-Cinco ES 3 2.57 222 7 32
Mayapyap ES 3 2.57 1,098 33 33
Balite ES 3 2.57 318 12 27
Ibabao Bana ES 2 1.78 273 7 39
Caalibangbangan ES 2 1.78 1,040 28 37
M.R. del Rosario ES 3 2.57 526 16 33
Talipapa ES 3 2.57 254 8 32
South District
Bagong Buhay PS 2 1.78 82 6 14
Ciriaco Mariano ES 3 2.57 163 7 23
L.O. Francisco ES 3 2.57 398 13 31
Macatbong ES 3 2.57 422 11 38
Bagong Sikat ES 3 2.54 504 14 36
Calikid Norte ES 3 2.57 335 8 42
Cabu ES 3 2.57 601 14 43
Luis O. Renon MES 3 2.57 412 11 37
Sub-total 96 81.83
TOTAL 253 P209.41
As there were no needs for additional classrooms, inspection of the two (2)
schools in Palawan disclosed that the constructed rooms were not used as
instructional rooms but as principal’s office and library.
On the other hand, while the following schools were in need of additional
classrooms, the number of classrooms constructed exceeded their needs, as
tabulated on the next page.
110
Total No. of Total Excess

Enroll- Total Existing Classrooms Available Class-
LGU Name of School Municipality
ment Needs IR Constructed Classrooms rooms
(a) (b) (c) (d) (e) (b – e)
Elementary
BEPZ ES Mariveles 1,021 23 21 4 25 2
Bataan
IRA for Sisiman ES Mariveles 693 16 14 4 18 2
SY 2005- Balon ES Mariveles 994 23 20 5 25 2
2006
Secondary
JC Payumo HS Dinalupihan 1,525 34 32 3 35 1
Elementary
M. C. San Juan ES Cardona 1,391 31 30 6 36 5
Lagundi ES. Morong 637 15 13 6 19 4
San Guillermo ES Morong 931 21 20 6 26 5
Rizal Pililla ES, Unit 11 Pililia 1,567 35 34 6 40 5
IRA for
SY 2003- Wawa ES Tanay 1,342 30 28 6 34 4
2004 San Andres ES Tanay 98 3 2 6 8 5
Felix M.
Taytay 946 22 19 6 25 3
Sanvictores ES
Secondary
Janosa Natl. HS Binangonan 1,339 30 29 8 37 7
Elementary
Rizal Tatala ES Binangonan 599 14 12 6 18 4
IRA for Tomas Claudio
Morong 1,293 29 28 4 32 3
SY200- Mem ES
2006 Bombongan ES Morong 353 8 7 6 13 5
Pantay ES Teresa 603 14 12 6 18 4
Marikina Secondary
City
IRA for Concepcion HS
SY200- Malanday 1,924 43 21 30 51 8
(Malanday NHS)
2006
In the case of Marikina City, instead of constructing school building in Parang

Elementary School, two (2) school buildings consisting of 30 classrooms were
built in Malanday National High School. Based on DepEd’s BEIS-Quick
Counts for SY 2005-2006, Malanday National High School is indeed in need of
classrooms as its pupil-classroom ratio is high at 92:1. Considering the existing
classrooms of 21, its actual need is less than 30. Thus, as reflected in the SY
2009-2010 BEIS, the construction of additional 30 classrooms already resulted
in the pupil-classroom ratio of 38:1.
Based on the Principal’s report of enrollment and attendance as of January
2010, only 32 classrooms were being used as instructional rooms with 36 to 68
students per section while the newly constructed buildings are being utilized, as
follows:
Building Particulars No. of Rooms

Instructional Room (IR) used as:
Workshop room 1
MCF Building 1
Academic classroom 1
Science Laboratory 2
H. E. Room 3
111
Building Particulars No. of Rooms

Non-Instructional Room used as:
Library 1
Reading Center 1
Sub-total 9
IR used as:
Workshop room 3
Academic classroom 14
MCF Technology Building 2
H. E. Room 2
H.E. Room (not usable after typhoon Ondoy) 2
Sub-total 21
Total 30
The funds used for these projects should have been focused on schools badly in
need of classrooms. Records disclosed that the following schools with
significantly high pupil-classroom ratio, of as high as 447:1 as reflected in the
Instructional Room Analysis (IRA), were not given priority in the selection of
schools:
Classroom:
IRA Total Total
LGU Name of School Municipality Student
SY Enrollment IR
Ratio
Elementary
A. G. Llamas ES Mariveles 3,833 71 54
Sapa ES Samal 336 6 56
Sta. Isabel ES Dinalupihan 227 4 57
Pentor PS East 57 1 57
Panibatuhan PS Morong 114 2 57
Sto. Nino Biaan ES Mariveles 460 8 58
Tipo ES 2005-2006 Hermosa 1,065 18 59
Townsite ES (Townsite PS) 626 10 63
Mariveles
Ipag ES 819 12 68
St. Francis II (Petron School) Limay 478 6 80
Sapang Balas PS Dinalupihan East 80 1 80
Pulo PS Hermosa 28 0 -
Bataan Biaan Aeta School Mariveles 38 0 -
Secondary
Pablo Roman NHS Pilar 1,995 38 53
Samal NHS Samal 1,362 25 54
Hermosa NHS Hermosa 2,027 36 56
Mariveles NHS, Poblacion Annex 644 11 59
Mariveles
Mariveles NHS, Cabcaben 2,420 40 61
Pagalanggang HS – Annex 123 2 62
Dinalupihan
Luakan NHS 2,323 37 63
Balsik NHS 2005-2006 Hermosa 1,743 27 65
Mariveles NHS, Poblacion Mariveles 3,044 46 66
Morong NHS – Mabayo Annex Morong 269 4 67
Orani National NHS Orani 1,882 27 70
Pagalanggang HS Dinalupihan 1,845 26 71
Morong NHS Morong 1,329 18 74
Orion HS Orion 1,168 15 78
Elementary
Saint Gregory ES Cainta 504 0 -
Kasiglahan Village ED Rodriguez 4,713 19 248
Rizal Franciso Felix ES Unit I 1,652 7 236
San Francisco ES 1,300 7 186
Cainta
Kabising ES 2,022 13 155
Exodus ES 2,539 17 149
112
Classroom:
IRA Total Total
SY Enrollment IR
Ratio
Arinda ES 1,440 10 144
Sitio Tapayan ES Taytay I 2,437 19 128
Sto. Nino ES 1,391 11 126
2003-2004 San Mateo
Dona Pepeng ES 796 7 114
Abuyod ES Teresa 545 6 91
Hapay na Mangga ES Taytay 507 6 84
M.C. San Juan Elem. Sch. Cardona 1,391 30 46
Lagundi Elem Sch. 637 13 49
Morong
San Guillermo E/S 931 20 46
Pililla Elem. Sch., Unit 11 Pililia 1,567 34 46
Wawa Elem. Sch., 1,342 28 48
Tanay
San Andres E/S 98 2 49
Felix M. Sanvictores E/S Taytay 946 19 50
Secondary
Janosa Natl. H/S Binangonan 1,339 29 46
Kasiglahan Village NHS Rodriguez 1,788 4 447
Don Jose Ynares MNHS Binangonan 2,169 13 167
Morong NHS Morong 3,621 26 139
Cardona NHS Cardona 2,065 17 121
Rizal Montalban Heights NHS Montalban 1,028 9 114
2003-2004
Catalino Salazar NHS Cardona 795 7 114
Teresa NHS Teresa 1,923 19 101
Macabud NHS Rodriguez 238 3 79
Sampaloc NHS Tanay 1,589 23 70
Baras NHS Baras 1,011 18 56
Daraetan NHS Tanay 280 5 56
Elementary
Lipat-lipat PS Pililia 207 0 -
Saint Gregory ES Cainta II 504 0 -
Kasiglahan Village ES Rodriguez 6,075 22 276
Ampid I ES San Mateo 1,049 9 117
Rodriguez Heights ES Rodriguez II 2,071 18 116
Bagong Pag-asa ES Taytay II 2,073 14 149
Amityville ES 2005-2006 Rodriguez II 854 5 171
Tatala E/S Binangonan 599 12 50
Tomas Claudio Mem E/S 1,293 28 46
Morong
Bombongan E/S 353 7 50
San Isidro E/S Rodriguez 2,136 42 51
Pantay E/S Teresa 603 12 50
Arinda ES Cainta I 1,600 9 178
Secondary
Bayugo Nat’l H/S Jalajala 647 14 46
San Mateo NHS-Sto Nino Annex San Mateo 942 3 314
Taytay NHS-Floodway Annex 2005-2006 Taytay 2,299 10 229
San Mateo NHS San Mateo 6,164 43 143
Taytay NHS-Lupang Arenda Annex Taytay 908 4 227
Elementary
Concepcion ES Agutaya 530 10 53
Matarawis ES Agutaya 53 1 53
Banuang Daan ES 125 2 63
2005-2006
Decalachao ES 210 3 70
Coron
Decabobo ES 149 2 75
Palawan Borac ES 347 4 87
Bono Bono ES 306 6 51
Rio Tuba South ES 433 8 54
Rio Tuba North ES 765 6 96
Sayab lI PS 72 1 72
2005-2006 Bataraza
Marangas West ES 225 3 75
Tarusan ES 327 4 82
Bulalacao ES
Taratak ES 170 1 170
113
Classroom:
IRA Total Total
SY Enrollment IR
Ratio
Barangka ES 90 0 -
Brooke’s Point
El Salvador ES 114 1 114
II (S. Espanola)
South
Mary Edward Venturanza ES
Brooke’s Point 172 2 86
San Rafael ES 109 2 55
San Isidro ES Busuanga 172 3 57
New Calawit ES 194 2 97
Alava ES 125 1 125
Culion
Galoc ES 129 2 65
Nagpadalan ES 90 1 90
Itangil ES-Bolo PS Annex Dumaran 37 0 -
Malolon ES 70 0 -
Diapila ES 265 5 53
El Nido
Teneguiban ES 172 3 57
Narra West ES (Pilot West ES) 255 3 85
Cacaingan ES 102 2 51
Narra District I
Tacras ES 167 3 56
Burirao ES 83 1 83
Malugbong ES 255 5 51
Quezon
Tagbae ES 146 1 146
(Quezon-
Palawan Isugod ES 209 2 105
Rizal)
Calumpang ES 214 2 107
San Dionisio ES 154 3 51
Ibangan ES Roxas South 106 2 53
New Barbacan PS 191 1 191
Buayan ES 96 1 96
San Vicente
T.D.C. ES 126 2 63
Canigue ES 310 6 52
Taytay I
Bantulan ES 104 2 52
Caroroy ES Taytay II 282 4 58
Bulalo ES Taytay I 119 1 119
Secondary
El Nido NHS El Nido (Bacuit) 782 14 56
Narra NHS Narra 1,839 25 74
Nicanor Zabala NHS Roxas 262 3 87
Dumaran NHS – Bacao NHS Dumaran 177 2 89
San Vicente NHS San Vicente 941 10 94
Sumbiling NHS (Rio Tuba NHS) Bataraza 235 2 118
2005-2006
Bunog NHS Rizal (Marcos) 239 2 120
Calategas NHS Narra 246 2 123
Isugod NHS Quezon 192 1 192
Isaub NHS-San Juan Comm. Sch. Aborlan 82 0 -
Ransang NHS Rizal (Marcos) 191 0 -
Tinitian NHS Roxas 47 0 -
Elementary
M.S. Garcia ES 413 8 52
East District
ACA ES 2007-2008 732 12 62
Cabanatuan
Palagay ES North District 282 5 56
City
Secondary
Eastern Cabu NHS 777 14 55
2008-2009 South District
San Josef NHS 1,555 24 65
Elementary
L. Victorino ES 1,673 34 49
Industrial Valley ES 994 20 50
District I
Marikina
Marikina ES 2,030 37 55
City Barangka ES 2005-2006 1,730 28 62
H. Bautista ES 3,041 46 66
SSS Village ES District II 2,247 31 72
Parang ES 5,251 65 81
114
Classroom:
IRA Total Total
SY Enrollment IR
Ratio
Fortune ES 2,885 34 85
Sto. Nino ES 3,011 34 89
Nangka ES 3,719 38 98
St. Mary ES 864 8 108
Concepcion ES 2,412 20 121
Malanday ES 5,070 40 127
Kapitan Moy 1,953 15 130
Concepcion Integrated School District I 3,978 30 133
Elementary
Kalumpang ES 1,431 31 46
L. Victorino ES 1,766 21 84
Industrial Valley ES District I 1,134 20 57
Marikina ES 2,179 42 52
Barangka ES 1,916 20 96
H. Bautista ES 3,539 38 93
SSS Village ES 2,849 29 98
Parang ES 4,977 47 106
2009-2010
Marikina Fortune ES 3,539 34 104
City Sto. Nino ES 3,283 47 70
District II
Nangka ES 4,102 32 128
St. Mary ES 932 8 117
Concepcion ES 2,838 53 54
Malanday ES 5,312 59 90
Kapitan Moy 1,934 16 121
Secondary
Tanong HS (Marikina HS-Tanong) District I 2,057 27 76
Marikina HS 5,539 61 91
District II
Parang HS 4,563 46 99
2005-2006
Sta. Elena HS District I 4,638 42 110
Marikina Heights NHS District II 1,449 12 121
Secondary
Tanong HS (Marikina HS-Tanong) District I 2,759 32 86
Marikina HS 5,072 57 89
District II
Parang HS 2,874 50 57
Sta. Elena HS District I 4,923 41 120
2009-2010
Marikina Heights NHS District II 1,428 13 110
Fortune HS 2,002 31 65
District II
Nangka HS 2,066 27 77
The team further noted that the construction of school buildings at Cabanatuan
City was implemented by administration with the labor undertaken thru
“pakyaw” contract. Review of disbursements for the “pakyaw” contracts
disclosed that each building was covered by separate “pakyaw” contract.
Analysis of the claims covering P13.84 million, however, revealed that while
projects amounting to P6.63 million were not yet reported to have been started,
claims for labor contract were already paid, as presented on the next page.
115
Pakyaw Contract Reported Payments

Name of School/School Building
No. Start of Period
Constructed Date Amount Amount
Construction Covered
District I
1 D.S Garcia ES (2-cl) P 238,355.00 11/15/08 8/1-13/08 P 72,935.00
2 F.A. Reyes Memorial ES (3-cl) 479,400.00 12/26/08 8/1-20/08 148,250.00
3 J.P. Melencio ES (3-cl) 7/28/08 479,400.00 11/11/08 8/1-22/08 168,640.00
4 Mabini Homesite ES (3-cl) 479,400.00 9/1/08 8/1-20/08 149,900.00
5 Cabanatuan East Central School (3-cl) 479,400.00 10/27/08 8/1-27/08 196,512.00
District II
6 P.G. Crisostomo ES (3-cl) 479,400.00 9/20/08 8/11-30/08 149,900.00
7 Sumacab Norte ES (2-cl) 341,235.00 8/15-29/08 102,275.00
10/6/08
8 Sumacab Norte ES (3-cl) 7/28/08 479,400.00 8/1-20/08 149,900.00
9 San Josef ES (2-cl) 324,275.00 9/24/08 81-30/08 239,125.00
10 Sumacab Este ES (2-cl) 324,275.00 9/4/08 8/1-15/08 102,275.00
District III
11 Balite ES (3-cl) 479,400.00 9/29/08 8/1-9/8/08 268,310.00
12 Buliran ES (3-cl) 479,400.00 9/20/08 8/1-20/08 150,350.00
13 Caalibangbangan ES (2-cl) 341,225.00 9/5/08 8/1-15/08 102,275.00
14 Cinco-Cinco ES (3-cl) 479,400.00 81-30/08 248,235.00
10/14/08
15 Daan Sarile ES (3-cl) 479,400.00 81-30/08 230,250.00
16 Dalampang ES (2-cl) 7/28/08 341,225.00 10/28/08 8/1-10/5/08 341,225.00
17 Ibabao-Bana ES (2-cl) 324,275.00 9/9/08 8/1-15/08 102,275.00
18 Talipapa ES (3-cl) 479,400.00 10/6/08 8/2-31/08 283,664.00
19 Pula ES (2-cl) 324,275.00 8/27/08 8/1-15/08 102,275.00
20 Pamaldan ES / M.R. del Rosario ES (3-cl) 479,400.00 10/8/08 8/1-9/29/08 417,055.00
21 Mayapyap ES (3-cl) 479,400.00 9/18/08 8/1-20/08 149,900.00
22 Mayapyap National HS (3-cl) 479,400.00 8/29/08 8/1-20/08 149,900.00
District IV
23 Bagong Sicat ES (3-cl) 479,458.00 9/12/08 8/1-30/08 307,790.00
24 Cabu ES (3-cl) 479,400.00 9/3/08 8/1-30/08 457,690.00
25 Kalikid Norte ES (3-cl) 7/28/08 479,400.00 9/4/08 8/1-20/08 149,900.00
26 Camp. Tinio ES (3-cl) 479,400.00 9/2/08 8/1-20/08 149,900.00
27 Camp. Tinio National HS (3-cl) 479,400.00 9/8/08 8/1-30/08 307,790.00
28 Luis O. Renon Memorial, Kalikid Sur (3-cl) 7/15/08 502,675.00 9/30/08 7/16-31/08 172,900.00
29 Macatbong ES (3-cl) 479,400.00 8/1-20/08 149,900.00
7/28/08 8/30/08
30 Bagong Buhay ES (2-cl) 341,225.00 8/1-15/08 102,275.00
31 Ciriaco Mariano ES (3-cl) 7/15/08 502,675.00 9/29/09 7/16-9/18/08 502,575.00
32 Bakod Bayan ES (2-cl) 7/28/08 341,225.00 10/1/08 8/6-9/23/08 302,155.00
Total P13,834,998.00 P6,628,301.00
Such condition casts doubt on the validity of the claims for “pakyaw” contract.
The procurement of school chairs was, likewise, not properly coordinated with
the DepEd Division Office. The purchase of school chairs by the Provincial
Government of Bataan exceeded the requirements. This is clearly illustrated in
the following cases where procurement exceeded the needs of the entire
Division:
Total Existing No. No. of Chairs Excess
School Year Over (Under)
Enrolment of Chairs Procured Purchases
2004-2005 107,730 96,564 11,166 16,000 4,834
2007-2008 111,623 114,451 (2,828) 2,828
116
As maybe noted, excess purchases in SY 2004-2005 remained unused during

SY 2007-2008 despite increase in enrollment. As reflected in the Division’s
School Furniture Analysis, available chairs within the Division’s territory still
exceeded the enrolment figures by 2,828.

Province of Palawan
On the inclusion of the 25 school building projects that were funded by the LBP loan
All projects were taken from the various Apparently, the MTDP and AIP
plan documents prepared by the Province were not well coordinated with the
as a result of the planning workshops and DepEd officials or were not based
conferences conducted by the on BEIS-Quick Counts
Provincial Development Council. These Instructional Rooms Analysis.
are the MTDP (2003-2012) and the AIP
(CYs 2003 & 2005).
Likewise, eleven of the said projects were It means then that the school
based from the BEIS-Quick Counts buildings are not really needed in the
Instructional Room Analysis of the schools where these are constructed.
Division of Palawan for School Year 2005- The BEIS for subsequent year still
2006. Please take note that the document reflected excessive classrooms for
used by the Province was one school year these schools.
ahead of what the Team used as basis in
determining classroom demand of the
schools.
The inclusion of the 2 projects in the This means that there is a need to
MTDP 2003-2012 of the Province is proof reassess the prioritization and
that the 2 projects had been prioritized and ranking procedures being adopted by
ranked based on its economic, social, the Province particularly for school
technical and environmental viability and building projects.
its contribution to the economic strategies
identified by the different zones or
municipal clusters.
The inclusion of the 19 projects in the AIP
indicated that these projects had undergone
the prioritization process through broad-
based participatory planning and consensus
building during the three-level planning
workshops and annual conventions and/or
conferences of appropriate planning
bodies. Please be informed that the
schools or districts are represented during
the MDC Annual Planning Conventions.
117
Nine of the 11 projects were taken from the The team is not questioning the
BEIS-Quick Counts Instructional Room criteria adopted by the Province as
Analysis of the Division of Palawan for these are also the criteria being
School Year 2005-2006 that were color adopted by the DepEd in its analysis
coded “Red” or “second priority”. Please be of needs of schools.
informed that the province conducts its own
ocular inspection to validate the need to
construct school buildings. From
our end, construction of school buildings is
being pursued to:
• add or increase the number of
classrooms of the recipient
school due to high
student/pupil-classroom ratios;
• replace very old classrooms
which are dilapidated and are
not conducive for learning;
• replace temporary school
buildings as “self-help” project
of the Barangay and/or the
PTCA;
A review of the 10 schools (of the 11) given The team is not questioning the
high priority (those that were color coded prioritization of schools which are
“Black” or “first priority”) in the BEIS- color coded “Black” as these are first
Quick Counts Instructional Room Analysis priority in the BEIS but construction
of the Division of Palawan for School Year in schools with sufficient classrooms
2005-2006 showed: (1) Four are categorized as reflected in the BEIS.
as primary schools and/or annex schools,
hence are offering only grades I to IV; (2)
Five are located in the Municipality of
Dumaran; (3) Nine are located in
sitios; (4) These 10 schools are offering
combination and/or multi-grade classes as
indicated by its enrollment size.
While these 10 schools are the most in need This is the very reason why selection
of classrooms, the limitation of financial of schools should be based on needs,
resources is a given in any situation, hence, proper planning and prioritization.
prioritization of proposals is done to Not all needs of schools can be
identify projects with the greatest addressed at the same time.
contribution in the attainment of objectives Constructing additional classrooms
and targets for the period through a set of in schools not in need may not be
criteria agreed upon by the planning body. considered appropriate in the
The non-inclusion of these schools for presence of unserved needs in other
funding of the LBP loan package could be schools.
attributed to the foregoing reasons.
118
The management would like to emphasize As discussed in the report, 21

that school building projects are well- classrooms were constructed in
coordinated with the Dep-Ed officials and schools with pupil-classroom ratio of
that contrary to the allegation in the Team’s only between 21:1 to 43:1 in the
Rejoinder, these school buildings are indeed presence of other 56 schools with
really needed in the different schools where pupil-classroom ratio of around 51:1
these are constructed. In fact, these are not to as high as 192:1. Upon inspection
really needed but are “badly needed” of two (2) schools, the newly
because of the sad reality that most schools constructed rooms were merely used
of the Dep-Ed are lacking in classrooms to as principal’s office and library.
be used for so many enrollees therein.
Rest assured that prioritization and ranking Based on the observations noted by
procedures being adopted by the province the team, there is a need to re-assess
for school building projects are well- the prioritization and ranking
assessed and guaranteed to be always in procedures adopted by the Province
accordance with the basic auditing rules. in selecting school building projects.
On the use of the classrooms as principal’s office and library
Please be assured that we would coordinate The Schools Division Office uses
this matter with the School Division Office new classrooms for non-instructional
the soonest to correct it and make the purposes, as apparently, there are
concerned school officials more conscious already excessive classrooms.
of their social responsibilities and
accountabilities.
Cabanatuan City
On claims for labor contract
Your recommendation is well-taken. We For projects undertaken by
apologize for the discrepancies on the Administration, the City should
reported start of construction but planning ensure that all pre-construction
and pre-construction activities, such as activities, if any, are accurately
formworks and fabrication of steel reflected in the supporting documents
reinforcement of columns, footings and to avoid misconception.
beams date back to July 2008. All of these
projects were made on by administration
where we contracted services of Pakyaw
Groups to do the labor for the school
buildings. The earliest payments made by
the City Government to these Pakyaw
Groups were on October 2008.
Based on your recommendation, I have
instructed the City Officials concerned to The team appreciates the City’s
double-check the payment made to Pakyaw immediate action to this observation.
Contractors and ensure that reported
accomplishments under their contracts are
validated.
119

On the identification of school buildings to be funded out of loan
One of the requirements for the approval of As discussed in the report, the
the loans with the Development Bank of the specific location of school buildings
Philippines is the identification of places to be constructed out of P90 million
where the individual school buildings are to were not indicated in the loan
be constructed. With the aid of the Local agreement. It would appear that the
School Board and requests from various City identified the locations only to
school officials within the City, we have meet the requirements of the banks.
identified those places which are in dire
need of classrooms as well as those which
we anticipate to need these classrooms in
the near future.
We did not base our selection on a single The Instructional Room Analysis
statistics like the Instructional Rooms provided by the City School Division
Analysis but on the collective data based on reflects the entire City’s inventory of
each school’s geographical location, classrooms and student population
population, age of the present structures, and as such, identifies and prioritizes
experience and the likes. We did not only the schools actually in need of
think of the present but we also anticipated classrooms.
on the future.
Moreover, provision for future needs
may only be considered appropriate
if all current needs were sufficiently
addressed. As discussed in the report,
based on Instructional Room
Analysis report, there are still five
(5) schools with pupil-classroom
ratio of as high as 65:1 during the
period under audit. The needs of two
of these schools were confirmed by
the team upon inspection. On the
other hand, 96 classrooms were
constructed in schools with only
between 14:1 to 43:1 pupil-classroom
ratio.
Province of Rizal
Identification of school building projects are The identification of projects was

based on the priorities submitted by the made only after the loan was
Dep-Ed, Division of Rizal. Attached are contracted. While it is true that most
some of the lists that we were able to of the identified school building
retrieve from the files. projects were based on priority lists
submitted by the DepEd, these were
not in conformity with the Division’s
Instructional Room Analysis. As
discussed in the report, 92
120

classrooms were constructed in
schools with only between 11:1 to
45:1 pupil-classroom ratio in the
presence of a number of schools with
pupil-classroom ratio of between
46:1 to as high as 447:1.
6. Fifty-four (54) loan-funded projects implemented by four (4) LGUs, with an

aggregate cost of P538.87 million, were either not in accordance with plans
and specifications or of poor workmanship. Eleven (11) of these projects,
implemented by two (2) LGUs, were found to be deficient by P6.28 million
while deficiencies in 43 other projects implemented by three (3) LGUs could
not be quantified due to the absence of detailed cost computation. These
projects were found to be of poor workmanship, with missing/uninstalled
items or with changes in designs.
In CYs 2006 to 2008, the City Governments of Parañaque, Malabon and

Cabanatuan and the Provincial Government of Bataan entered into contracts
with PNB, LBP and DBP in an aggregate loan amount of P2.01 billion to
finance the construction/improvement of the following projects:
Contract
LGU Lender Amount Purpose
Date
(In Million)
Parañaque City
PNB 09/26/06 P 1,000.00 Various infrastructure projects
(By Contract)
337.70 Malabon City Government Center
Malabon City 05/28/06 25.90 Malabon City Hall Parking
(By Contract) LBP
106.40 Malabon Sports Complex
Sub-total 470.00
11.50 Water System Facilities
20.00 School Buildings and Support Facilities
16.10 Improvement of Health Care Services
DBP 12/22/06 91.50 Roads and Drainage System
Improvement of Delivery of Social
10.90
Services
Bataan Province Sub-total 150.00
(By Contract) 50.92 Community Development Projects
31.49 Roads and Bridges
03/21/07 9.15 Flood Control and Drainage System
LBP 5.13 Public buildings
3.31 Water System
73.16 Public buildings
05/24/07
51.78 Community Development Projects
121
Contract
LGU Lender Amount Purpose
Date
(In Million)
P 50.65 Roads and Bridges

14.78 Flood Control and Drainage System
9.63 Water System
Sub-total 300.00
Cabanatuan City
DBP 05/12/08 90.00 47 school buildings with 125 classroom
(By Administration)
Total P 2,010.00
To determine whether the projects were implemented in accordance with plans

and specifications, the team conducted inspection of selected projects
implemented by Malabon City, Parañaque City and Bataan Province, and assess
the inspection reports of the COA Engineers assigned at Cabanatuan City.
Inspection disclosed that out of 113 completed projects covered by the team, 54
were considered deficient as these were either not in accordance with plans and
specifications or of poor workmanship. Out of the 54 deficient projects, 11
projects implemented by Parañaque City and Bataan Province were found
deficient by P6.28 million, as described below:
Deficiencies
Project Contract Cost
Nature/Item Cost
Parañaque City
4-storey Parañaque The following items were not found
Community Hospital during inspection:
(PCH) Building (Phase
2) located along Quirino a) 1 set - 2.20 m x 4.20 m Tinted
Avenue, La Huerta Glass on Aluminum Frame P40,000.00
Analok Finish at the Operating
P 21,967,347.71
Room
b) 2 sets - 2.20m x 4.40m Tinted
Glass on Aluminum Frame 90,000.00
Analok Finish at the Operating
Room
Sub-total 130,000.00
4-storey PCH Building
(Phase 3)
a) 1 lot Wall Paper at the whole 4th

floor not installed 1,109,729.71
9,966,587.74 b) 1 lot Sprinkler not installed 693,584.81
Sub-total 1,803,314.52
122
Deficiencies
Nature/Item Cost
Multi-purpose Hall The following items were not found
(Chapel) and Day Care during inspection:
Center including
perimeter fence in P 1,782,499.68 Electrical
Eldorado, Don Bosco a) 7 units – Post type acrylic
amglobe lantern with coupling &
socket without bulb, half clear
model # C-68-TC P 8,722.00
b) 2 units – straight lamp post with
steel plate, anchor bolt, nut washer
model # S-2-10 2,772.00
Cabinets
a) Counter Cabinets 10,718.11
b) Overhead Cabinets – 2 units 7,048.68
c) Built-in Cabinet 13,939.61
Sub-total 43,200.40
Installation of 289 units Forty-one (41) units of parklights in
parklights at different two (2) barangays were not found
barangays 4,990,033.98 during inspection. 707,928.55
Quantity
Per Estimated
Brgy. POW Installed Diff. Cost
Sitio Libjo,
Sto. Nino 100 87 13 P224,465.15
G.G. Cruz,
Baclaran 77 49 28 483,463.40
G.G. Cruz, Baclaran Sitio Libjo,
Sto. Niño Total 177 136 41 P707,928.55
Asphalt patching and

selective asphalt at Asphalted area is short by 1,292 sq. m. P 683,799.65
different roads
Area (sq.m.)
Location COA
POW Variance
Verification
Bricktown Village.
Mercury St. 1,189.50 1,014.00 -175
BetterLiving Subdivision
India St. 2,097.60 1,840.00 -257
La Huerta
Mercury St., Bricktown 19,117,656.60 P. Dandan to
Village Mamamante 1,983.20 943.10 -1,040
P. Dandan to
Del Pilar St. 1,363.20 1,228.00 -135
Northwest Subdivision
Edinburgh St. 548.10 863.10 +315
Net Variance -1,292
Cost of Variance
Asphalt:
1,292 x .05 x 2.33 x 4,090 = P615,618.62
Edinburgh St., Bitumul:
Northwest Subdivision (150.51/20) x 9,060 = 68,181.03 P683,799.65
Asphalt overlay and

selective patching at 39,933,429.76 Asphalted area is short by 2,319 sq. m. 1,189,744.62
various barangays
123
Deficiencies
Nature/Item Cost
Area (sq.m.)
Location Street COA
POW Variance
Verification
Bricktown Vill. Saturn 1,373.50 1,291.50 -82.00
Topland Vill. Topland Ave. 1,560.00 1,464.00 -96.00
UPS 1 Subd. Narra 1,468.50 1,521.90 +53.40
Dollar Lane, Villanueva
Village UPS 4 Subd. Santan 1,080.00 1,062.00 -18.00
Daisy 1,560.00 1,508.00 -52.00
Orchids 1,920.00 240.00 -1,680.00
Ilang-ilang 1,560.00 1,482.00 -78.00
Marcelo Green Vill. Marcelo Ave. 2,700.00 2,250.00 -450.00
Villanueva Vill. Dollar Lane 1,170.00 5.14 +32.76
4th Estate Subd. Bulletin 316.20 321.30 +5.10
Saturn St., Bricktown
Vill. Sunset 462.00 508.20 +46.20
Net Variance -2,319
Computed Cost Variance
Asphalt:
2,319 x. 05 x 2.33 x 4,004.80 = P1,081,950.78
Bitumul
(270.16/20) x 7,980 = 107,793.84
Ilang-ilang St., UPS 4 P1,189,744.62
Subd.
Sub-total P97,757,555.47 P4,557,987.74

Bataan Province
Concreting of Brgy. Required area of pavement not
Road, Capitangan, attained: P1,453,385.81
Abucay, Bataan
Per Statement
of Work Per COA
Description Unit Accomplished Inspection
(SWA)
Qty. Amount Qty. Amount
Sub-grade sq.
875 P 22,982.35 383.00 P 10,059.70
Preparation m.
Aggregate
cu.
Sub-base 151 84,506.29 66.07 36,974.30
m.
Course
Aggregate cu.
96 76,764.87 42.13 33,688.58
Base Course m.
sq.
PCCP 875 744,740.17 383.00 325,983.41
971,900.00 m.
Total P928,993.68 P752,804.86
Deficiency P522,287.69
The required length of 175 l.m. was

not accomplished as only a total
length of 76.60 l.m. with average
width of 5.00 m. was obtained during
inspection.
Riprap and embankment structures

were presented in lieu of the
deficiency in the construction of
PCCP. However, there were no
documents presented to justify the
124
Deficiencies
Nature/Item Cost
changes. Per Statement of Work
Accomplished, the original plan was
100% accomplished. Thus, the
construction of riprap and
embankment of structures were not
considered by the Province as
accomplishments of the contractor.
Concreting of Brgy.
Per COA
Bayan-Bayanan Road, Per SWA
Description Unit Inspection
Dinalupihan, Bataan Qty. Amount Qty. Amount
Sub-grade
sq. m. 875 P 22,950.70 710.00 P 18,622.85
Preparation
Aggregate
Sub-base cu. m. 151 85,995.55 122.48 69,750.36
Course
Aggregate
cu. m. 96 77,607.28 78.10 63,136.76
P 970,483.25 Base Course
PCCP sq. m. 875 741,032.44 710.00 601,294.89
Total P927,585.97 P752,804.86
The accomplished PCCP (Item 311)

was only 710 sq.m. (142 m. x 5 m.)
instead of the required 875 sq. m. per
Program of Work (POW) or deficient
by 165 sq.m.
Construction of River
Control Panilao, Pilar, Per SWA
Per COA
Bataan Description Inspection
Amount Amount
Excavation for Structure P 18,461.80 P 6,461.53
Steel Sheet Piling 2,817,172.28 2,240,899.46
Pile Cap at Concrete Class “A” 184,942.26 126,815.75
Boulder Fill & Filler 148,403.81 91,584.86
Rubble Concrete with Plaster 510,492.27 457,393.81
Total P3,679,472.42 P2,923,155.41
Deficiency P 756,317.01
The required length and height of

35.00 m x 7.50 m was not attained.
3,888,110.00 The project measured 28.0 m x 5.40 m
only.
The required length and height,

including the slope of the structure,
were not indicated in the approved
plan. Thus, measurement of quantity
take off was not done.
Based on photographs submitted, Item

VII-Boulder Fill and Filler were not
accomplished. The team also noted
lateral and longitudinal cracks during
inspection.
125
Deficiencies
Nature/Item Cost
Required elevation of pavement not P 266,741.88
attained:
While the required area was attained,

the finished elevation of the pavement
of the following projects was almost
the same with the existing natural
ground in the area. The required
thickness for Items 200 and 201 is
0.15 m. and 0.10 m., respectively,
while that for the PCCP is 0.175 m. or
a finished elevation of +0.425 m. from
the natural grade line. However, this
was not apparent at the time of
inspection. Corrective application of
Aggregate Base Course of 0.075 m.
thick was considered in the
computation for purpose of
comparative evaluation.
Concreting of Brgy.
Road, Mang Juan
Subdivision, Abucay, Description Unit
Per SWA Per COA Inspection
Bataan Qty. Amount Qty. Amount
Aggregate
Sub-base cu.m. 233 P133,804.53 0 P 0.00
P 1,457,150.00 Course
Aggregate
cu.m. 149 123,362.51 111.375 92,211.41
Base Course
Total P257,167.04 P 92,211.41
Deficiency P 164,995.63
Concreting of Brgy.
Road, Brgy. New San Per SWA
Per COA
Description Unit Inspection
Jose, Dinalupihan,
Qty. Amount Qty. Amount
Bataan
Aggregate
Sub-base cu. m. 151 P83,341.19 0 P 0.00
Course
972,476.00 Aggregate
cu. m. 96 74,199.92 72.187 55,794.41
Base Course
Total P157,541.11 P 55,794.86
Sub-total 8,260,119.25 1,720,127.69

Total P106,017,674.72 P 6,278,115.43
On the other hand, deficiencies in 43 other projects which were found to be of

poor workmanship and with missing/uninstalled items or with changes in
designs, could not be quantified due to the absence of detailed computation.
These projects are tabulated on the next page:
126
Project Contract Cost Deficiencies

Bataan Province
The following items were missing, not
installed/constructed:
 The required handrail was not installed
 Instead of steel casement window, analoc type
windows were installed.
Construction of Multi-
purpose Hall at Brgy. Balut, P 805,150.00
Orani, Bataan
Repair/Rehabilitation of  Part of the grills were already missing (square

Stage, Brgy. Calungusan, bar)
Orion, Bataan  Handrails were not installed. Instead, metal
grills were provided as part of the perimeter
fence
436,300.00  Configuration of the stage was changed
without documents to justify such changes
such as revised plans, variation orders and
back-up computations (additive/deductive).
Two sets of wall (left & right) measuring 2.0
m. x 3.0 m. were not constructed.
5 sets of manholes and 34.50 l. m. or 36” Ø
Reinforced Concrete Pipes were not constructed.
Construction of Drainage
System at Bataan Provincial
Jail, Capitol Compound, 1,581,011.70
Balanga City
Although the required area of 875 sq. m. was

attained, damaged portion measuring about 9.0 m. x
2.5 m. was noted.
Concreting of Brgy. Road,
Brgy. Laon, Abucay, Bataan 972,280.31
Sub-total 3,794,742.01
Malabon City
Penthouse:
Construction of Malabon City
Government Center Per plan, the Penthouse with an area of 11 m x 24 m should
be covered to be used as multi-purpose hall. Upon
contracted with J. D. Legaspi 342,971,777.77 inspection, only half of the court with an area of 5.5 m. x
Construction 24 m. was covered.
Only four (4) units ceiling mounted air conditioning units

were installed instead of eight (8) units as reflected in the
plan.
127

Second Floor Air Conditioning Units:
The approved plans call for the installation of seven (7)

units split-type ceiling mounted and five (5) units window-
type air condition but no air condition units were installed.
Mechanical Works-Elevator:
The plans and specifications call for four (4) units induction
motors with 11 kw motor capacity with a power supply of
3-phase, 230 volts, 60 Hz (frequency). However, the
induction motors installed had specifications of 380 volts,
1,300 rpm, 50 Hz frequency. The induction motor with a 50
Hz frequency used to drive the elevator car is not
compatible with the frequency of the electric power used in
the Philippines which is 60 Hz. The utilization of these
motors shortens the normal operating service life of the
machines.
Water line-Cistern Pump to Elevated Water Tank:
The two (2) units transfer pumps installed had specification

of 10 HP only instead of 15 HP at P330,000 each as called
for in the Bill of Quantities.
Elevated Water Tank to Supply Downfeed:
The two (2) units booster pumps installed had capacity of 5

HP only instead of 10 HP at P81,250 as per Bill of
Quantities.
Doors and Windows:
Per plans and specifications, glass windows should have

12mm thickness. As per Bill of Quantities, windows were
costed on a lot basis which amounted to P6,285,360.40.
Inspection disclosed that thickness of windows installed in
the entire building measured only 6 mm.
Sub-total P 342,971,777.77
Cabanatuan City
Design of windows at rear elevation not followed, poor
workmanship on plastering, faucet at CR not yet installed,
3-classroom, Cabu ES 2,461,064.70 manhole at CR still open and outlet pipe from CR to septic
tank not yet installed.
Windows at CR not yet painted, poor workmanship on

plastering, design of rear windows not followed, septic tank
3-classroom, Ciriaco Mariano ES 2,461,064.70
not yet completed.
2-classroom, Bagong Buhay ES

Ceiling already sagging and warping, no fittings for
plumbing yet, no interior beam at the CR, faucet already
1,720,457.94 defective, design of windows at rear elevation not followed,
wooden doors already warping (not kiln-dried), detail of
steel grills not followed.
128
No fittings for water closet yet. Ceiling already warping,

manhole at CR still not painted, door knob at CR already
defective, design of windows at rear elevation not followed,
3-classroom, Bangad ES P 2,461,064.70 a crack was noted between the classroom and corridor
causing the latter to be of lower elevation, railing already
removed from the concrete post, painting at endwalls
already faded.
No fittings for water closet yet, design of windows at rear

elevation not followed, poor workmanship on firewalls was
3-classroom, Bagong Sikat ES 2,437,166.10 noted, door hinges already defective, traces of roof leaks
were observed on the ceiling, improper notching of columns
and beams was also noted.
Severe crack was noted on the wall, no fittings for water

closet yet, perimeter of the windows not painted, ceiling
3-classroom, Camp Tinio ES 2,437,166.10 already warping, electrical installation already defective (3
units-20 watts fluorescent lights were already defective),
design of windows at rear elevation not followed.
3-classroom, Camp Tinio HS

already warping, electrical installation already defective (3
2,437,166.10 units-20 watts fluorescent lights were already defective),
2-classroom, Bakod Bayan ES

1,739,576.82 already warping, electrical installation already defective (3
units-20 watts fluorescent lights were already defective),
Glass jalousie windows not installed, already with roof

leaks as evidenced by the marks on the ceiling, ceiling
already warping and sagging, poor workmanship on
plastering of windows and door jambs was noted, electrical
3-classroom, Kalikid Sur ES 2,461,064.70
fixtures not yet operational, door knob already defective,
fittings for water closet not yet installed, no interior beam at
CR, some of decostones already missing, no tissue and soap
holder installed at CR.
All windows at rear elevation not provided with decostones,

3-classroom,
2,461,064.70 two classrooms not provided with downspouts at the rear
Kalikid Norte ES
portion.
All windows at rear elevation not provided with decostones,

3-classroom,
fittings for water closet not yet installed, roof leaks traced
Juan Bautista ES (Lagare) 2,437,166.10
on the ceiling, railing already detached from the concrete
post.
Door hinges and knobs already defective, minimal use of

hangers for ceiling, window grills not in accordance with
3-classroom, Talipapa ES 2,461,064.70
specifications, no downspout and window moulding at the
rear.
Door hinges and knobs already defective, minimal use of

2-classroom, Ibabao-Bana ES hangers for ceiling, window grills not in accordance with
1,720,457.94
specifications, no downspout and window moulding at the
rear.
129

3-classroom, Polilio ES
P 2,461,064.70 Door knob and hinges already defective, minimal use of
hangers for inside ceiling, window grills not in accordance
2-classroom, Polilio ES 1,720,457.94 with specifications, no concrete moulding for rear windows.
Door knob and hinges already defective, minimal use of

2-classroom, Sto. Nino ES
1,720,457.94 hangers for inside ceiling, window grills not in accordance
with specifications, no concrete moulding for rear windows.

3-classroom, Cinco-Cinco ES hangers for inside ceiling, window grills not in accordance
2,461,064.70
with specifications, no concrete moulding for rear windows,
no bulb at CR.
2-classroom, Caalibangbangan ES

1,720,457.94
no bulb installed along corridor, at the CRs and rear eaves.

2-classroom, Caudillo ES 1,720,457.94
no bulb at CR.

3-classroom, Pamaldan HS 2,461,064.70 hangers for inside ceiling, window grills not in accordance

3-classroom, Pamaldan ES 2,461,064.70 hangers for inside ceiling, window grills not in accordance
1-classroom, D.S. Garcia ES
Defective door knobs, only 3 pieces of downspout installed,

526,686.29
no glass jalousie window installed.
4-classroom, Imelda ES
No bulb and glass window at CR, no glass jalousie window

3,479,153.64 installed, no bulb along corridor, defective electrical
installation/wiring, defective door knob.
No bulb and glass window at CR, no glass jalousie window

installed, no bulb along corridor, defective electrical
3-classroom, F.A. Reyes ES 2,437,166.10
installation/wiring, defective door knob, no water closet
fitting installed.
3-classroom, J.P. Melencio ES
2,461,064.70 No bulb and glass window at CR, no glass jalousie window

installed, no bulb along corridor, defective electrical
installation/wiring, defective door knob.
130
P 2,461,064.70 Defective door knobs, only 3 pieces of downspouts

3-classroom, East Central School
installed, no glass jalousie window installed.
Incomplete electrical wiring, no bulb at the corridor,

defective door knobs, roof leaks were traced on the ceiling,
3-classroom, Mabini ES 2,437,166.10
CR without steel window casement, no receptacle installed
at the CR, incomplete downspout.
3-classroom, Balite ES 2,461,064.70 No light bulb at the corridor, defective door knobs and
hinges.
2-classroom, Dalampang ES
1,739,576.82 Defective door knobs and window grills.
Defective door knobs, 5 pieces of downspouts not installed,

3-classroom, Buliran ES 2,461,064.70
still no grout at the CR.
3-classroom, Mayapyap HS
No downspout installed, CR without window, defective

2,437,166.10
door knobs and roof leaks were noted.
3-classroom, Mayapyap ES
No daylight installed, no receptacle installed, defective door

2,461,064.70
knobs and hinges, no downspout installed.
3-classroom, Daang Sarile ES
No daylight installed along corridor, defective door knobs,

2,461,064.70
no bulb and tile grout at CR.
No daylight installed along corridor, defective ceiling

boards, defective door knobs, no downspout installed and
3-classroom, Mabini Science HS 2,437,166.10
no glasses for windows.
Incomplete electrical wiring, no handrail installed, only 6

3-classroom, P. Crisostomo ES pieces downspouts installed, half concrete mouldings and
1,739,576.82
no bulb installed at CR.
Incomplete ceiling board, defective doors and knobs, no

2-classroom, San Josef ES 1,739,576.82
bulb at the corridor and CR.
5-classroom, Sumacab Norte ES
No bulb installed along corridor, with roof leaks, defective

4,200,641.52 ceiling boards, no concrete mouldings at the rear portion of
the building and no bulb installed at the CR.
131

2-classroom,
Sumacab Este ES
No bulb installed at CR and along corridor, defective
electrical installation/wiring, defective doors and knobs,
P 1,720,457.94
defective ceiling boards, no concrete moulding at the rear
windows.
Sub-total 86,082,358.31
Total P 432,848,878.09
Despite repeated requests, the City Government of Malabon was not able to
provide the team with the as-built plan and specifications and variation order/s
of the Malabon City Government Center, particularly those items with
revisions/changes from original plans and specifications.
On the other hand, the following projects costing P2.75 million of the
Provincial Government of Bataan cannot be evaluated due to the absence of
Pre-repair Inspection Report for the repair of school building and Section Plans
for the construction of drainage system at the Provincial Jail:
Name of Project Amount Remarks
Repair activity/works on the structure cannot

Repair of 3-Classroom School
be identified as the pre-repair inspection
Building at Pita Elementary P 1,166,550.00
reports were not submitted and repair works
School, Dinalupihan, Bataan
done were not highlighted in the plans.
The submitted one sheet-approved plan

Construction of Drainage labeled as Site Development plan was
System at Bataan Provincial Jail, inadequate to complete detailed computation
1,581,011.70
Capitol Compound, Balanga of the POWs. Section Plans which show the
City, Bataan details of Item IV- Concrete and Masonry and
Item V-Pipe Filter were not submitted.
Total P 2,747,561.70
Apparently, the implementation of these projects was not closely supervised by

the LGU’s Engineering Office to ensure that the plans and specifications were
complied with. As it is, these deficiencies would adversely affect the benefits to
be derived from these projects.

Response provided by Parañaque City
Construction of four-storey Parañaque Community Hospital (PCH) Building (Phase 2 and 3))
The items mentioned in the audit During inspection of the projects, the
observation which were not found during team requested the City Engineering
inspection of the constructed four (4) storey Office representative who accompanied
Parañaque Community Hospital (PCH) the team to present or locate the 3 sets
132

Building, Phase 2 were actually installed. of tinted glass on aluminum frame and
However, due to the revisions of contract wallpaper found not installed.
and work programs for the improvement of However, these items were not
the building, it may cause damage to the presented to the team until the audit of
installed items. However, we are insuring the City was completed. It must be
that after all the improvements have been noted that the contractor was already
done, all the items not found during fully paid for the projects.
inspection shall be re-installed again.
The wallpaper that has been removed from The team again requested that these
the wall of the 4th floor, PCH phase 3 items claimed to have been dismantled
building, shall be re-installed again when all
be presented to the team for validation
the air conditioning units and other utilities
but such request was again not heeded.
needed to be installed to the building has
As stated above, the project was 100%
already been completed to avoid further
paid with the SWA reflecting these
damage. Please be assured that we will items as 100% accomplished.
notify all concerned agencies upon
completion of the work.
This is a clarification of our previous The City now claims that the items
comments on your AOM-PAR-07(A) which were reported accomplished and
regarding the reinstallation of 1 lot Wall paid were actually not accomplished
Paper at the 4th floor and Tinted Glass on but replaced by another item. Although
Aluminum Frame Analok Finish at a new POW and plans were now
Operating Room (1 set -2.20m x 4.20m and submitted, these cannot be considered
2 sets 2.20m x 4.40m) of the Four (4) storey for the following reasons:
Parañaque Community Hospital (PCH) • There were no change orders
Building (Phase 2 and 3) located at La submitted to support such
Huerta, this City. After further evaluation changes.
and study of the project, this office opted
the Installation of Double Drop Meralco • The new items claimed to have
Power Line and Elevator Automatic replaced the wall paper and tinted
Voltage Regulator, Lead Glass at the X-ray glass on aluminum frame were not
Room instead of reinstallation of Wallpaper reported accomplished in the
and Aluminum Frame Analok (as shown at SWA supporting the payments.
the attached POW and plans). The said This is an indication that these are
prioritized items solved the electrical not considered replacements of
problem of the hospital due to additional the missing items.
loads being required to the additional ACU
units of the said building and meet the other
requirements of the DOH for the renewal of
the Certificate of Operation of the Hospital.
Construction of Multi-Purpose Hall and Day Care Center including perimeter fence
As per verification on the plan, the said These items were included in the
items (7 units amglobe lantern and 2 units approved POW supporting payments.
lamp post) were not included. The plans submitted to the team did not
include electrical plan.
133

As per verification, the said cabinets The approved POW and plan
(counter, overhead and built-in cabinets) supporting payments for this project
were replaced by a movable divider included installation of counter,
cabinets. overhead and built-in cabinets. There
were no change orders or any
documents attached to the payment
indicating any revision of the original
plan.
Installation of 289 units parklights at different barangays
As per request of Barangay Baclaran and Based on the approved POW, the
Barangay Sto. Niño, the said missing parklights were to be installed in Sitio
parklights were relocated to other location Libjo in Brgy. Sto. Niño and at G.G.
within their respective Barangays. Cruz St. in Brgy. Baclaran. There were
no documents to support the relocation
of these items. Besides, the specific
locations where the unaccounted
parklights were installed cannot even
be identified by the City.
Asphalt patching and selective asphalt at different roads
During the actual laying of the asphalt, it The POW for the project specified the
was found that certain portions of the streets streets and the length/area to be
are still in good condition. For this reason, asphalted. Based on the documents
we opted to utilize remaining materials to supporting payments for this project,
other streets that needed immediate the asphalts were installed in the
repair/patching. locations indicated in the POW. There
were no documents to support any
changes from the original plan. The
specific streets asphalted cannot even
be identified by the City.
Your recommendation is well-taken. While The team appreciates the City’s action
some of these school buildings were to this observation.
reported to be 100% complete, none of
these are fully-paid yet. We take note of
the deviations and deficiencies submitted
to us by the Technical Audit Specialist of
COA and forwarded the same to our
contractors. We will tend our final payment
to our contractors only after the school
buildings are completed and the defective
materials/items replaced. We will request
for a re-inspection on the deficiencies noted.
134
Chapter 5
Compliance with Existing Laws and Regulations
135
COMPLIANCE WITH EXISTING LAWS AND REGULATIONS
INTRODUCTION
The availment of loans and the implementation of projects funded out of loans are
guided by certain laws, rules and regulations. Among these are the provisions of
Section 305 of R.A. 7160, which requires that payments out of the LGUs treasury
shall be in pursuance of an appropriation ordinance or law, and Sections 4(4) of
P.D. 1445 and 344 of R.A. 7160, which requires complete documentation of claims
against government funds and the requisite signatories thereon.
These loans and borrowings partake the nature of government resources and should,
therefore, be covered by appropriation ordinance authorizing their utilization as
required under Section 306 of R.A. 7160. Projects to be financed from these
sources must be closely supervised and monitored to avoid wastage of government
resources and attain the full benefits to be derived therefrom.
The audit, however, revealed that these laws and regulations were not strictly
observed. Loans contracted and bonds floated by six (6) LGUs amounting to P2.33
billion and interest income of P45.90 million generated out of bond flotation were
utilized without appropriation ordinance. These were, likewise, not included in the
LGUs’ budgets as among the sources of income.
It was also noted that payments out of loans for the implementation of projects of
two (2) LGUs were not even covered by disbursement vouchers. The
disbursements were booked merely on the basis of promissory notes and debit/credit
advices and without supporting documents to establish the validity, propriety and
legality of the claims such as bid and contract documents, and inspection and
acceptance reports.
OBSERVATIONS
1. A number of LGUs were not complying with existing laws and regulations on
the proper disposition of loan proceeds. Loan proceeds and interest income
from bond flotation amounting to P2.33 billion were utilized by six (6) LGUs
without covering appropriation ordinance or in excess of the approved
appropriation in violation of existing regulations. These loans and interest
income derived from bond flotation were, likewise, not included in the LGUs’
budgets as among the sources of income.
136
Under Section 306 of R.A. 7160, “receipts” refer to income realized by the local
government from its operations and activities or received in the exercise of its
corporate functions. These could be in the form of charges for services
rendered, conveniences furnished, price of commodity sold, as well as loans,
contributions or aids from other entities, except provisional advances for
budgetary purposes. As loans form part of the total receipts of the local
government, charges thereon should only be in pursuance of an appropriation
ordinance or law as provided for under Section 305 thereof.
Evaluation of records, however, disclosed that of the 16 LGUs covered in the

audit, six (6) LGUs did not include receipts from loans and interest income
from bond flotation, which amounted to P2.33 billion as of December 31, 2008
as source of income in the preparation of their respective budgets. Moreover,
proceeds from these loans were utilized either without covering appropriation
ordinance or in excess of the approved appropriation in violation of the above-
mentioned provisions.
As of December 31, 2008, P1.50 billion were already spent without the
covering appropriation or in excess of the appropriation, as tabulated below:
Loan As of December 31,

Period
City Amount 2008 (In Million) Purpose
Contracted
(In Million) Released Utilized
Parañaque 2006-2008 P1,000.00 P 999.99 P 415.39 Various infrastructure/priority
Marikina 2006 500.00 359.66 348.16 development projects
New market and acquisition of
Dagupan 2004 362.00 319.05 319.05
two dredging machines
Cesar Vergara Highway and
Cabanatuan 2006-2008 175.00 153.75 131.15 Bridge Project, and 47 school
buildings
Road network, school buildings,
Lucena 2003-2005 250.45 240.97 240.97
and other infrastructure projects.
Pasay City Public Market and
Commercial Complex has
approved appropriation of P500
million. Actual expenditures,
however, amounted to
P545,900,266.08, or in excess of
appropriation by P45,900,266.08
Pasay 2004-2008 45.90 45.90
as of February 8, 2009. The
excess expenditures were
sourced from interest income
earned from the bond flotation
which were, likewise, not
recorded in the City’s books of
accounts as receipts or income.
Total P2,333.35 P2,073.42 P1,500.62
137

The City Government has been obtaining SP Resolutions only authorizes the
loans from various lending and financial City Mayors to contract for loan. A
institutions for the past twenty-three years. separate ordinance is required to
These loans were covered by Sanggunian authorize the utilization of the loans.
Resolutions authorizing the City Mayor to
negotiate with these financial and lending
institutions, as well as, Sanggunian
Resolution ratifying the loan agreement
entered into by the City Government. The
purpose for which these loans were
obtained was embodied in the Loan
Agreements, which were ratified by the
Sanggunian Panglungsod. Proceeds of these
loans were directly credited to the City
Government’s bank accounts. Since the
purpose of these loans were already
approved and ratified by the Sanggunian
Resolutions, receipts of these loans were
automatically appropriated, utilized and
accounted for based on the purpose of the
loan.
To wit, receipts of the loans for the Cesar Team’s review of the City’s annual
Vergara Highway and Bridge Project were and supplemental budgets showed
appropriated to Capital Outlay – Roads, that there was no appropriation for
Highways and Bridges while receipts of the “Capital Outlay-Roads, Highways
loan for the construction of School and Bridges” budgets in CY 2006.
Buildings were appropriated to Capital Likewise, SEF budgets included only
Outlay – School Buildings. Further, these repairs of school buildings
loans were recorded in the Registry of amounting to P1 million. It is very
Appropriations, Allotments and Obligations clear then that these projects were not
and the unexpended amount at the end of covered by appropriations.
the year were included in the Continuing
Appropriations.
We adhere to your observation that a The team appreciates the City’s
separate appropriation ordinance is commitment to ensure that utilization
necessary to authorize the utilization of the of loans will be covered by separate
loan proceeds for the specific projects/ appropriation ordinance.
purpose this was intended. In our previous
loans, we made sure that all receipts which
were automatically appropriated were
utilized based on purpose for which these
loans were granted. In our future loans, we
will abide by your recommendation and
ensure that these shall be covered by
separate appropriation ordinance.
138

Response provided by Lucena City
The appropriation ordinances covering the While the purposes of the loans were
receipt and utilization of the loans were indicated in the loan agreements, an
deemed not necessary at that time. The appropriation ordinance is required to
release as well as the utilization of the authorize the utilization of the loan
proceeds of the loan were clearly laid out in proceeds. The SP Resolutions only
the loan agreement. Also, specific fund authorized the City Mayor to
allocation for each project was discussed negotiate and contract for loans.
and been subjected to deliberation in the These projects were not also included
Sangguniang Panlungsod. Nevertheless, in the City’s annual and
rest assured that the recommendation supplemental budgets for CYs 2003-
presented in the AOM shall be strictly 2006.
followed next time.
Management adopts its reply in Chapter 2 The issue raised by the team was not
on the issue of recording in the accounting only on the non-recording of interest
office wherein the commission noted the income from bond flotation but also
absence of proper recording. Management the absence of appropriation
is looking for a good accountant. ordinance covering the utilization of
interest income for the payment of
project expenditures.
2. Payments out of loans by the City Government of Dagupan for the

construction of Malimgas Market costing P283.47 million and by the City
Government of Puerto Princesa for the supply/installation of synthetic track
oval costing P17.50 million were not fully documented in violation of Section
4(4) of P.D. 1445. As such, validity, propriety and legality of the claims
cannot be assessed.
Section 37 of the Manual on NGAS for LGUs, Volume I provides, among

others, that disbursements shall be covered by Disbursement Vouchers (DVs) or
payrolls and paid either by check or in cash. The DVs are required under
Section 344 of R.A.7160 to be certified by the local budget officer, accountant
and treasurer as to validity, propriety, and legality, and duly approved by the
head of the department or office who has administrative control of the fund
concerned. The DVs are also required under Section 4(4) of P.D. 1445 to be
supported with complete documentation.
139
Records disclosed that the City Governments of Dagupan and Puerto Princesa
contracted loans in the total amount of P572 million with the LBP to finance the
following projects which were undertaken by contract and administration:
Date of Amount
LGU Purpose
Loan (In Million)
P 252.00
Dagupan City 01/21/04 Malimgas Public Market and Parking Lot/Area
30.00
Sub-total 282.00
50.00 PPC Sports complex and other facilities
150.00 Coastal Development Phase II-C, II-A and III-B
Puerto Princesa Acquisition of heavy equipment and service
01/25/08 50.00
City (PPC) vehicle
Other development projects such as school
40.00
buildings and drainage systems
Sub-total 290.00
Total P 572.00
As disclosed in the loan agreements, proceeds of the loans will be released

based on the following schedule:
Percentage of Completion Amount (In Million)

Order
of Puerto Puerto
Dagupan Dagupan
Release Princesa Princesa
Complete loan documentation & compliance of the

1st P 37.80 P 7.50
pre-release requirements
2nd 20% 50% 37.80 17.50
3rd 40% 85% 37.80 17.50
4th 60% 100% 37.80 7.50
5th 80% 37.80
6th 100% 37.80
7th Request of the LGU & the contractor 25.20
Total P 252.00 P 50.00
As stipulated in the loan agreement of Dagupan City, LBP shall issue a

domestic LC in accordance with the contract executed between the City and the
contractor. The drawdown from the LC shall be subject to the verification and
inspection of the Bank Appraiser, a “Certificate of Payment” indicating the
amount to be paid to the contractor approved by the Local Chief Executive and
the designated architect of the project, and Promissory Note issued by the LGU
to the bank.
140
Direct releases to the contractors were recorded in the books of the city
governments on the following bases:
Contract Amount
Project Contractor Cost Released Basis of Release and Recording
Dagupan City
Loan proceeds were released directly to the

contractor on the basis of the approved Certificate
Construction Metropolis
of Payments and Promissory Notes issued by the
of Malimgas Construction P 283.472 P 281.909
City. Based on these notes and credit advices
Market Inc.
issued by the LBP, loans and payments to
contractors were recorded in the books of the City.
Sub-total 281.909
Construction/ Claims of the contractors were directly paid by
rehab. of PPC A.R. Ilustre, Jr. LBP by debiting the City’s bank account and
P 19.947 P 19.470 crediting the contractors’ bank accounts based on
Sports Construction
Complex processed DVs.
Supply/ The LBP provides the City with Promissory

Crayons
installation of Notes, DVs and debit memos as basis for
Sporting 17.500 17.500
synthetic track preparing Journal Entry Vouchers (JEVs) to
Goods
oval record loan releases and payments to contractors.
Construction
By
of billeting 11.780 11.780
Administration
venues
Sub-total 48.750
Total P 330.659
Review of JEVs and supporting documents showed that while payments to

other contractors were covered with DVs, payments to Metropolis Construction,
Inc. for the construction of Malimgas Market and to Crayons Sporting Goods
for the supply/installation of synthetic track oval were no longer covered with
approved DVs.
These were not also supported with the required documents such as bid and
contract documents, plans and specifications, program of work and detailed cost
estimates, statement of work accomplished, certificate of acceptance and
inspection reports. Payments to the contractors were recorded in the books of
the LGUs based only on the Promissory Notes and debit or credit advices.
In the absence of duly approved DVs and supporting documents, the validity,
propriety and legality of the payments cannot be assessed.
141
Part IV
Recommendations
142
RECOMMENDATIONS
RECOMMENDATIONS
In order to address the noted deficiencies, the team recommends the following
measures:
• The DILG, DOF, NEDA and Department of Budget and Management

(DBM) should consider establishing appropriate guidelines for managing
LGUs’ loans and borrowings. The guidelines should prescribe the
following, among others:
 the maximum borrowing capacity should not only consider the 20%
debt service ceiling but also the LGUs’ net available funds prior to
contracting of loans/borrowings;
 the maximum repayment period for each loan/borrowing should
consider:
− the type/nature and economic or useful life of the projects
to be financed
− the remaining term of the incumbent LGU officials
considering that the new administration may have different
priorities;
 the alignment of loans to support development plans and investment
programs identifying their priority projects;
 the specific purposes for which debt may be incurred; and,
 the requirement for the LGUs to maintain subsidiary ledgers for
each loan/borrowing.
• The LGUs should:
 Conduct a thorough study/ assessment on their capacity to repay the

loan before contracting taking into consideration their net available
funds and the benefits to be derived from the projects to be covered;
 Conduct a comparative assessment of available borrowing schemes
to determine the most cost-effective borrowing scheme;
 Coordinate with the DPWH and other concerned agencies in case
of improvement/rehabilitation of roads to avoid undertaking
rehabilitation works on roads included in the program of these
agencies;
143
RECOMMENDATIONS
 For future projects, ensure the completeness of project design prior

to selection and awarding of contract to avoid time lags in project
completion;
 Take the necessary steps to maximize the utilization of existing

projects and closely monitor the project implementation to ensure
conformity with plans and specifications and the submission of
required documents;
 Maintain separate SLs for loans/bonds payable, expenditures and

interest payments for every loan obtained or bonds issued as
required under Section 313 of R.A. 7160 and Section 105 of the
NGAS Manual Volume 1 for LGUs. This will facilitate detection of
unrecorded loan releases, principal and interest repayments,
interest income from bond flotation and charges thereon;
 Recognize liability for loans based on actual availments/releases to

avoid overstatement of loan balances;
 Strictly utilize the proceeds of loans and borrowings for the

intended purpose/s;
 Provide sufficient funds for loan/bond repayments or LGU equity to

ensure completion of projects on time;
 Assess the need for classrooms by properly coordinating with their

respective DepEd Division Office before implementing school
building projects. Refrain from contracting loans under the
General Fund for the implementation of school-related projects;
 Strictly adhere to Section 305 (a) of R.A. 7160. Ensure that

utilization of loan proceeds and interest income from bond flotation
are covered by appropriation ordinance;
 Ensure that disbursements out of loan proceeds are fully

documented and all loan related transactions are recorded in the
books. Strictly comply with the provisions of Section 37 of the
Manual on NGAS for LGUs- Volume I, Section 344 of R.A. 7160
and Section 4(4) of P.D. 1445; and,
 Stop availing loans intended for relending as it is apparent that

LGUs’ monitoring system on this area is weak.
144
RECOMMENDATIONS
• In particular, the following LGUs should take the following actions:
LGU Actions to be Undertaken
 Negotiate with the contractor for the installation of

system capabilities which were not installed during
the cooperation period and for the eradication of
Malabon City virus that affected the systems’ capabilities and
ensure proper updating and maintenance of the
systems;
Parañaque
City, Bataan &  Require the concerned contractors to refund the
Cabanatuan amounts corresponding to the deficiencies noted in
City project implementation or to complete or replace
defective materials/items installed.
 Consider the distribution of the 2,130 garbage bins

stored at the CENRO;
Davao City
 Record all loans to reflect long-term liabilities
accurately. The City Accountant should correct the
entry made for the loan repayment;
 Reconcile recorded balances of loans payable and

interest expenses with the balances per bank to
Puerto reflect the correct balances. Coordinate with the
Princesa City bank on the submission of complete documents
supporting loan transactions for proper and timely
recording;
 Use the proper accounts in recording obligations and

payments for loan principal and interest
Cabanatuan
amortizations. The balances of the Loans Payable
City
and Interest Expense accounts should be adjusted to
reflect the correct balances;
 Make the necessary adjusting entries to reflect the

correct amount of the asset account-Market and
Slaughterhouse - Malimgas Market;
Dagupan City
 Reclassify the loan balance which was taken up as
Due to NGAs to Loans Payable account;
 Adjust the Loans Payable account for unreleased

Angeles City
loans;
145
RECOMMENDATIONS
LGU Actions to be Undertaken
 Reconcile Cash In Bank balances with the PNB’s

records and effect all necessary adjustments;
 Take up under Construction-In-Progress account

only payments for project work accomplishments
which are part of contract cost and reclassify bond-
Pasay City
related transactions to their appropriate accounts;
 Maintain Sinking Fund account to record cash set

aside for the payment of principal and interest
amortizations and record bond redemptions as a
reduction of the balance of Bonds Payable account.
146
Submitted in compliance with COA Office Order Nos. 2009-018, 2009-018A,
2009-018B and 2009-018C dated January 8, 2009, February 5, 2009, April 3, 2009
and May 6, 2009, respectively.
147
Part V
Annexes
148
Annex 1-1
City Governments of Pasay, Antipolo and Puerto Princesa

Schedule of Interest Expenses on Bonds
Maturity
Interest Principal Total
Dates
Pasay
Feb. 2005 P 31,787,533.33 P P 31,787,533.33
Aug. 2005 29,906,479.17 29,906,479.17
Feb. 2006 29,348,511.11 29,348,511.11
Aug. 2006 25,890,038.89 25,890,038.89
Feb. 2007 28,375,866.67 25,000,000.00 53,375,866.67
Aug. 2007 19,945,483.54 25,000,000.00 44,945,483.54
Feb. 2008 19,722,270.00 25,000,000.00 44,722,270.00
Aug. 2008 19,368,010.28 50,000,000.00 69,368,010.28
Feb. 2009 19,496,525.00 50,000,000.00 69,496,525.00
Aug. 2009 * 14,625,000.00 50,000,000.00 64,625,000.00
Feb. 2010 * 12,375,000.00 50,000,000.00 62,375,000.00
Aug. 2010 * 10,125,000.00 75,000,000.00 85,125,000.00
Feb. 2011 * 6,750,000.00 75,000,000.00 81,750,000.00
Aug. 2011 * 3,375,000.00 75,000,000.00 78,375,000.00
Total P271,090,717.99 P 500,000,000.00 P771,090,717.99
* Interests from Aug 2009 to 2011 are assumed at 9% flat rate
Antipolo
Sept. 2004 P 24,737,777.78 P P 24,737,777.78
Mar. 2005 24,066,363.32 24,066,363.32
Sept. 2005 22,369,084.44 22,369,084.44
Mar. 2006 22,819,474.44 20,000,000.00 42,819,474.44
Sept. 2006 18,871,990.67 25,000,000.00 43,871,990.67
Mar. 2007 17,571,957.64 25,000,000.00 42,571,957.64
Sept. 2007 18,320,000.00 30,000,000.00 48,320,000.00
Mar. 2008 7,272,526.00 30,000,000.00 37,272,526.00
Sept. 2008 15,480,000.00 30,000,000.00 45,480,000.00
Mar. 2009 13,920,000.00 30,000,000.00 43,920,000.00
Sept. 2009 12,360,000.00 32,000,000.00 44,360,000.00
Mar. 2010 10,840,000.00 32,000,000.00 42,840,000.00
Sept. 2010 9,200,000.00 56,000,000.00 65,200,000.00
Mar. 2011 7,520,000.00 90,000,000.00 97,520,000.00
Total P 225,349,174.29 P 400,000,000.00 P 625,349,174.29
Puerto Princesa
Aug. 2000 P 19,387,448.89 P 19,387,448.89
Feb. 2001 21,104,800.00 21,104,800.00
Aug. 2001 22,725,840.00 22,725,840.00
Feb. 2002 23,283,688.91 23,283,688.91
Aug. 2002 16,262,648.90 16,262,648.90
Feb. 2003 64,000,000 15,367,680.00 79,367,680.00
Aug. 2003 11,712,711.11 11,712,711.11
Feb. 2004 64,000,000 11,601,976.89 75,601,976.89
Aug. 2004 9,170,666.67 9,170,666.67
Total P 128,000,000 P150,617,461.37 P278,617,461.37
The interest rate is at prevailing weighted average of 182-day Treasury Bill plus a
spread of 2 ½ % per annum. The statistics were based on the PNB Statement of
Receipts and Disbursements on the flotation of bonds for the period from Feb. 24
to April 30, 2004.
1 of 1
Annex 1-2
Comparative Costs Between Borrowing from Banks and Flotation of Bonds
BONDS LOAN
Interest
Principal Interest Total Balance Principal Interest Total Balance
Rate
Pasay City
8/6/2004 P500,000,000.00 P500,000,000.00
8/6/04-2/6/05 12.4386 P - P 31,787,533.33 P 31,787,533.33 500,000,000.00 P - P 31,096,500.00 P 31,096,500.00 500,000,000.00
2/7/05-8/6/05 11.8965 - 29,906,479.17 29,906,479.17 500,000,000.00 - 29,741,250.00 29,741,250.00 500,000,000.00
8/6/05-2/6/06 11.4842 - 29,348,511.11 29,348,511.11 500,000,000.00 - 28,710,500.00 28,710,500.00 500,000,000.00
2/7/06-8/6/06 10.2988 - 25,890,038.89 25,890,038.89 500,000,000.00 - 25,747,000.00 25,747,000.00 500,000,000.00
8/7/06-2/7/07 11.1036 25,000,000.00 28,375,866.67 53,375,866.67 475,000,000.00 25,000,000.00 27,759,000.00 52,759,000.00 475,000,000.00
2/8/07-8/6/07 8.3517 25,000,000.00 19,945,483.54 44,945,483.54 450,000,000.00 25,000,000.00 19,835,287.50 44,835,287.50 450,000,000.00
8/7/07-2/6/08 8.5749 25,000,000.00 19,722,270.00 44,722,270.00 425,000,000.00 25,000,000.00 19,293,525.00 44,293,525.00 425,000,000.00
2/7/08-8/6/08 9.0142 50,000,000.00 19,368,010.28 69,368,010.28 375,000,000.00 50,000,000.00 19,155,175.00 69,155,175.00 375,000,000.00
8/7/08-2/6/09 10.1721 50,000,000.00 19,496,525.00 69,496,525.00 325,000,000.00 50,000,000.00 19,072,687.50 69,072,687.50 325,000,000.00
2/7/09-8/6/09 9.0000 50,000,000.00 14,625,000.00 64,625,000.00 275,000,000.00 50,000,000.00 14,625,000.00 64,625,000.00 275,000,000.00
8/7/09-2/6/10 9.0000 50,000,000.00 12,375,000.00 62,375,000.00 225,000,000.00 50,000,000.00 12,375,000.00 62,375,000.00 225,000,000.00
2/7/10-8/6/10 9.0000 75,000,000.00 10,125,000.00 85,125,000.00 150,000,000.00 75,000,000.00 10,125,000.00 85,125,000.00 150,000,000.00
8/7/10-2/6/11 9.0000 75,000,000.00 6,750,000.00 81,750,000.00 75,000,000.00 75,000,000.00 6,750,000.00 81,750,000.00 75,000,000.00
2/7/11-8/6/11 9.0000 75,000,000.00 3,375,000.00 78,375,000.00 - 75,000,000.00 3,375,000.00 78,375,000.00 -
Sub-total P500,000,000.00 P271,090,717.99 P771,090,717.99 P500,000,000.00 P267,660,925.00 P767,660,925.00
Incidental Expenses 50,038,516.70 2,500,000.00
Total P321,129,234.69 P270,160,925.00
Antipolo City
3/8/2004 P 400,000.000.00 P 400,000,000.00
3/8/04-9/8/04 12.1000 P - P 24,737,777.78 P 24,737,777.78 400,000,000.00 P - P 24,737,777.78 P 24,737,777.78 400,000,000.00
9/8/04-3/8/05 11.9667 - 24,066,363.32 24,066,363.32 400,000,000.00 - 24,066,363.32 24,066,363.32 400,000,000.00
3/8/05-9/8/05 10.9414 - 22,369,084.44 22,369,084.44 400,000,000.00 - 22,369,084.44 22,369,084.44 400,000,000.00
9/8/05-3/8/06 11.3467 20,000,000.00 22,819,474.44 42,366,666.68 380,000,000.00 20,000,000.00 22,819,474.44 42,366,666.68 380,000,000.00
3/8/06-9/8/06 9.7167 25,000,000.00 18,871,990.67 43,347,243.48 355,000,000.00 25,000,000.00 18,871,990.67 43,347,243.48 355,000,000.00
9/8/06-3/8/07 9.8450 25,000,000.00 17,571,957.64 42,571,957.64 330,000,000.00 25,000,000.00 17,571,957.64 42,571,957.64 330,000,000.00
1 of 2
Annex 1-2
BONDS LOAN
Interest
Principal Interest Total Balance Principal Interest Total Balance
Rate
3/8/07-9/8/07 7.5768 30,000,000.00 18,320,000.00 48,320,000.00 300,000,000.00 30,000,000.00 18,320,000.00 48,320,000.00 300,000,000.00
9/8/07-3/8/08 8.5596 30,000,000.00 7,272,526.00 37,272,526.00 270,000,000.00 30,000,000.00 7,272,526.00 37,272,526.00 270,000,000.00
3/8/08-9/8/08 8.5000 30,000,000.00 15,480,000.00 45,480,000.00 240,000,000.00 30,000,000.00 15,480,000.00 45,480,000.00 240,000,000.00
9/8/08-3/8/09 8.5000 30,000,000.00 13,920,000.00 43,920,000.00 210,000,000.00 30,000,000.00 13,920,000.00 43,920,000.00 210,000,000.00
3/8/09-9/8/09 8.5000 32,000,000.00 12,360,000.00 44,360,000.00 178,000,000.00 32,000,000.00 12,360,000.00 44,360,000.00 178,000,000.00
9/8/09-3/8/10 8.5000 32,000,000.00 10,840,000.00 42,840,000.00 146,000,000.00 32,000,000.00 10,840,000.00 42,840,000.00 146,000,000.00
3/8/10-9/8/10 8.5000 56,000,000.00 9,200,000.00 65,200,000.00 90,000,000.00 56,000,000.00 9,200,000.00 65,200,000.00 90,000,000.00
9/8/10-3/8/11 8.5000 90,000,000.00 7,520,000.00 97,520,000.00 - 90,000,000.00 7,520,000.00 97,520,000.00 -
Sub-total P400,000,000.00 P 225,349,174.29 P625,349,174.29 P400,000,000.00 P 225,349,174.29 P 625,349,174.29
Incidental Expenses 38,662,543.51 2,000,000.00
Total P 264,011,717.80 P 227,349,174.29

08/24/00 P19,387,448.89 P - P19,387,448.89 P 320,000,000.00 P19,387,448.89 P - P 19,387,448.89 P320,000,000.00
02/24/01 21,104,800.00 - 21,104,800.00 320,000,000.00 21,104,800.00 - 21,104,800.00 320,000,000.00
08/24/01 22,725,840.00 - 22,725,840.00 320,000,000.00 22,725,840.00 - 22,725,840.00 320,000,000.00
02/24/02 23,283,688.91 - 23,283,688.91 320,000,000.00 23,283,688.91 - 23,283,688.91 320,000,000.00
08/24/02 16,262,648.90 - 16,262,648.90 320,000,000.00 16,262,648.90 - 16,262,648.90 320,000,000.00
02/24/03 15,367,680.00 64,000,000.00 79,367,680.00 256,000,000.00 15,367,680.00 64,000,000.00 79,367,680.00 256,000,000.00
08/24/03 11,712,711.11 - 11,712,711.11 256,000,000.00 11,712,711.11 - 11,712,711.11 256,000,000.00
02/24/04 11,601,976.89 64,000,000.00 75,601,976.89 192,000,000.00 11,601,976.89 64,000,000.00 75,601,976.89 192,000,000.00
08/24/04 9,170,666.67 - 9,170,666.67 192,000,000.00 9,170,666.67 - 9,170,666.67 192,000,000.00
Sub-total P150,617,461.37 P128,000,000.00 P278,617,461.37 P150,617,461.37 P128,000,000.00 P278,617,461.37
Incidental Expenses as October 31, 2004 30,671,089.20 480,000.00
Total P158,671,089.20 P128,480,000.00
2 of 2
Annex 2-1
Mandaluyong City
Schedule of Unrecorded Loan Releases,
Principal Amortization and Interest Expenses
CYs 2006-2008
Unrecorded Loan Releases
Loan Date Maturity

PN No. Amount Granted
No. Granted Date
TL005-001-012 54253 P 56,982,608.00 12/21/2006 6/16/2016
Sub-total for 2006 56,982,608.00
4808M7073232010 55175 2,000,000.00 8/31/2007 8/1/2011
4808TL073257000 62846 7,874,650.00 11/23/2007 6/16/2016
4808TL073260010 63500 13,000,000.00 12/4/2007 6/28/2017
4808TL073257010 64692 6,060,000.00 12/20/2007 6/16/2016
4808TL083260020 64654 13,000,000.00 12/20/2007 6/28/2017
Sub-total for 2007 41,934,650.00
4808TL083260030 74749 7,930,000.00 5/16/2008 6/28/2017
Sub-total for 2008 7,930,000.00
Total P106,847,258.00
Unrecorded Principal Amortization
Loan Repayments, CYs 2006-2008

Amount Granted Difference
No. Bank Accounting
54037 P204,267,534.00 P61,280,260.20 P57,875,801.30 P3,404,458.90
220,000,000.00 65,999,999.88 62,333,333.22 3,666,666.66
54265
199,973,449.50 101,762,804.66 96,390,711.40 5,372,093.26
54057 69,920,000.00 17,917,690.60 15,932,919.36 1,984,771.24
55175 29,999,997.00 12,424,684.86 11,284,561.17 1,140,123.69
64692 278,821,155.62 45,854,580.25 42,988,643.74 2,865,936.51
74749 51,680,000.00 2,871,111.12 1,914,074.08 957,037.04
Total P1,054,662,136.12 P308,111,131.57 P288,720,044.27 P 19,391,087.30
Unrecorded Interest Expenses
Period
Loan No. Loan Applied Interest
Covered
Apr. 2008 P143,127.18
54037 P32.32M
Dec. 2008 39,412.44
182,539.62
Apr. 2008 154,150.69
54265 220.00M
Dec. 2008 29,976.26
184,126.95
1 of 2
Annex 2-1
Period
Loan No. Loan Applied Interest
Covered
Apr. 2008 677,546.13
199.973M
Dec 2008 518,259.87
1,195,806.00
Apr. 2008 414,215.03
Aug. 2008 439,185.66
54057 69.92M
Dec. 2008 379,329.21
Aug. 2006 -
1,232,729.90
1,299,110.40 8,748.28
7,494,681.60 48,787.30
55175 10,500,000.00 Sept. 2007 73,232.88
4,183,500.00 31,422.54
4,522,705.00 36,050.14
198,241.14
1,299,110.40 8,981.88
7,494,681.60 49,588.10
55175 10,500,000.00 Nov. 2007 74,434.93
4,183,500.00 31,938.31
4,522,705.00 36,641.88
201,585.10
2,000,000.00 Sept. 2007 1,479.45
55175 2,000,000.00 Oct. 2007 13,520.55
2,000,000.00 Nov. 2007 16,541.10
31,541.10
64692 29,961,250.61 Aug. 2007 232,028.68
27,000,000.00 183,082.19
38,500,000.00 261,061.64
35,977,212.36 243,955.00
56,982,608.60 386,388.92
33,675,230.00 228,345.74
13,850,070.17 93,914.86
64692 Apr. 2008
16,303,398.83 110,550.44
29,961,250.61 203,161.90
9,400,785.26 63,745.05
3,235,950.00 21,942.40
7,874,650.00 55,988.67
6,060,000.00 43,508.94
1,895,645.75
Aug. 2008 391,375.71
74749 51,680,000.00
Dec. 2008 438,354.10
829,729.81
Total P6,183,974.05
Summary:
Unrecorded loan releases P 106,847,258.00
Unrecorded principal amortization 19,391,087.30
Unrecorded interest expenses 6,183,974.05
Total P 132,422,319.35
2 of 2
Annex 2-2
Schedule of Book and Bank Balances
Amount Per
Lender/Particulars Difference
Bank Books
LBP
Loan Releases * P827,385,460.84 P823,674,613.35 P 3,710,847.49
Principal Payments 49,680,150.04 47,716,426.08 1,963,723.96
Interest Payments 54,680,603.60 55,874,657.79 (1,194,054.19)
Sub-total P931,746,214.48 P927,265,697.22 P 4,480,517.26
DBP
Loan Releases** P183,236,389.43 P185,398,000.00 P (2,161,610.57)
Principal Payments 105,895,326.17 90,733,944.10 15,162,282.07
Interest Payments 33,533,881.29 20,848,672.44 12,685,208.85
Sub-total P322,665,596.89 P296,980,616.54 P25,684,980.35
Total P30,165,497.61
* Sample unrecorded transactions include LBP loan releases amounting to P3,710,847.49 out of the
P290 million loan were not recorded. These were covered by Promissory Note (PN) Nos. 9161-TL08-
004-004 dated August 21, 2008 for P1,219,618.58 and 9161-TL08-004-005 dated December 16, 2008
for P2,491,228.91. These represents direct releases to contractors upon compliance with certain
conditions.
** The City took up the full amount of DBP approved loan of P185.398 million instead of only P183.236
million representing actual loan releases.
1 of 1
Annex 2-3
Cabanatuan City
Comparative Schedule of Loans Payable and Interest Expenses Balances
CYs 2006 to 2008
Per GL Should Be Difference

Particulars Remarks
(a) (b) (b - a)
Loans Payable
2006
Domestic Loans
Principal payment of
P1,250,000 was
taken up under
LBP - Const. of
P149,400,000.00 P 150,650,000.00 P 1,250,000.00 Domestic Loans
CEV Highway
instead of Foreign
Loans.
Foreign Loans
WB-LBP -
Const. of
331,800,297.25 330,550,297.25 (1,250,000.00)
Drainage
System
Total P 481,200,297.25 P 481,200,297.25 P -
2007
Domestic Loans
P1,250,000 was
LBP - Const. of taken up under
P169,144,434.36 P170,394,434.36 P1,250,000.00
CEV Highway Domestic Loans
instead of Foreign
Loans.
Foreign Loans
Obligation set up for
interest expense
WB-LBP - amounting to
Const. of P8,232,128.77 was
303,066,902.69 309,550,297.25 6,483,394.56
Drainage debited to Loans
System Payable account
instead of Interest
Expense account.
Total P472,211,337.05 P479,944,731.61 P7,733,394.56
2008
Domestic Loans
P1,250,000 was
LBP - Const. of taken up under
P282,380,322.12 P283,630,322.12 P1,250,000.00
CEV Highway Domestic Loans
instead of Foreign
Loans.
Foreign Loans
Obligations set up for
interest expenses
280,066,902.59 286,550,297.25 6,483,394.66
instead of Interest
Expense account.
Total P562,447,224.71 P570,180,619.37 P7,733,394.66
1 of 2
Annex 2-3
Per GL Should Be Difference
Particulars Remarks
(a) (b) (b - a)
Interest Expense
2006
Domestic Loans
LBP - Const. of
P11,990,997.95 P11,990,997.95 P -
CEV Highway
Foreign Loans
WB-LBP -
Const. of
39,604,621.56 39,604,621.56 -
Drainage
System
Total P 51,595,619.51 P 51,595,619.51 P -
2007
Domestic Loans
LBP - Const. of
P12,784,274.49 P12,784,274.49 P -
CEV Highway
Foreign Loans
Obligations set up for
interest expenses
29,677,303.95 37,909,432.72 8,232,128.77
instead of Interest
Expense account.
Total P 42,461,578.44 P 50,693,707.21 P 8,232,128.77

2008
Domestic Loans
LBP - Const. of
P18,462,881.50 P18,462,881.50 P -
CEV Highway
Foreign Loans
WB-LBP - Erroneous recording
Const. of of principal payment
36,197,784.27 35,699,050.16 (498,734.11)
Drainage of P498,734.11 as
System interest expense.
Total P54,660,665.77 P54,161,931.66 P (498,734.11)
2 of 2
Annex 2-4
Pasay City
Schedule of Unrecorded and Erroneous Transactions
Particulars Amount
Unrecorded transactions
• Interest Income recognized by the Bank P 47,683,438.00
Fund Trust Acct. No. Total

Trust Fund 126321 P 1,163,489.24
Project Fund 126341 42,875,040.43
Sinking Fund 126331 3,644,908.33
Total P 47,683,438.00
• Payments to Izumo covering progress billing numbers 126,843,685.45

16 to 20 and releases of retentions already deducted by
the bank from the Project Fund
• Bond redemption as of December 31, 2008 125,000,000.00
• Interest Expenses recognized by the bank 308,433.33
• Sinking Fund Balance as of December 31, 2008 72,342,000.00
Total P 372,177,556.78
Erroneously recorded transactions
• Debiting of Trustee Fee to Cash in Bank account instead P 1,395,833.35
of to Other Financial Charges and crediting to
Construction in Progress instead of Cash in Bank
• The Construction in Progress account balance forwarded
as of May 5, 2006 in the subsidiary ledger is 2,348,243.15
P14,799,167.82 instead of P 17,147,410.97
• Inclusion of incidental expenses in the Construction in 75,242,644.99
Progress account.
Particulars Amount
Payments for interest, documentary P47,360,673.02
stamps, trust fees, PMB per diems
and meeting expenses and works
engineer.
Payments for guarantee fee, 27,881,971.97
underwriting fee which were
included in the contract cost for
the construction of Pasay City
Public Market and
Commercial Complex
Total P75,242,644.99
Total P 78,986,721.49
1 of 1
Annex 3-1
Schedule of Projects Not Defined and/or Not Included in the LGUs’
Development Plans/Annual Investment Plans/Programs
Not Not
Projects Defined Included
(In Million)
Parañaque City
1. Rehab. of comfort rooms of Parañaque City Hall Bldg. P 2.39
2. Repair and improvement of Parañaque Elementary School Central 3.44
3. Improvement of Parañaque Elementary School Unit 2 0.36
4. Const. of school building at Parañaque E/S Central 100.00
5. Fabrication and installation of steel grills at Tambo E/S 0.34
6. Forty eight (48) units push carts at various barangays 0.95
7. Parañaque City College 50.00
8. Rehabilitation of lamp posts along Dr. A. Santos Ave. 6.26
9. Rehabilitation of sidewalk, curbs and gutter (Phase 4), Dr. A. Santos Ave. 20.28
10. Construction of lighting facilities (lamp posts) along two sides of Daang 0.40
Batang
11. Installation of 132 units parklights at Filipinas Ave. 3.31
12. Riprapping and const. of perimeter fence Annex 41 0.29
13. Installation of 289 units parklights at different barangays 5.00
14. Installation of one thousand eighty six (1,086) units parklights at different 22.40
barangays (partial)
15. Various projects at Brgy. Marcelo Green 1.00
16. Roofing of stage - Camachile NAI, Sun Valley 0.14
17. Proposed improvement of Vitalez Barangay Hall (Partition) 0.50
Sub-total 217.06
18. Improvement of different Health Centers P 5.00
19. Improvement of different Day Care Centers 5.00
20. Proposed installation of streetlights at various barangays of Parañaque City 10.00
21. Proposed road asphalting of various roads of Parañaque City 50.00
22. Proposed concreting and improvement of drainage system at various 40.00
barangays of Parañaque City
23. Proposed asphalt overlay and selective asphalt patching of various roads of 99.88
Parañaque City
Sub-total 209.88
Caloocan City
24. Improvement of drainage at A.P. Aquino (Gen. San Miguel to Geisa Sts.) 4.18
25. Improvement of sidewalk & installation of streetlights along Samson Road 20.55
26. Improvement of pathwalk at Sangandaan Cemetery 2.43
27. Improvement of alley (Arcadio Sitio, alley 1) 1.55
28. Improvement of drainage along I. Rodriguez St. 3.27
29. Covered court at A. Bonifacio E/S – additional work 0.44
30. Improvement of lateral canal at Mardeco Compound, Sangandaan 1.05
31. Construction of stage, Sugpo covered court, Sugpo alley, Dagat-dagatan 1.97
32. Covered parking & play area, Sugpo alley, Dagat-dagatan–additional work 0.44
33. Improvement of alleys and plazas at Block 54, Barangay 8 0.30
34. Improvement of drainage along Torres Bugallon and upgrading of 2.20
pathwalk, Barangay 9
35. Improvement of sidewalk along Sabalo St. (Tanigue to Salmon St.)- 1.43
additional work, Barangay 12
1 of 19
Annex 3-1
Not Not
(In Million)
36. Improvement of Bangayngay St., Barangay 12 5.70
37. Improvement of Pusit alley and adjacent alley, Barangay 12 3.30
38. Construction of 2-storey office, chapel and stage at Padas St., Barangay 12 2.23
39. Covered court at Padas St., Barangay 12 2.80
40. Improvement of alleys-shellhouse, Barangay 12 4.52
41. Improvement of Alimasag alley (Kapak-Lapu-Lapu), Barangay 12 3.41
42. Improvement of alleys along Tambakan Area, Barangay 12 2.32
43. Improvement of alleys and concreting of plaza, Barangay 14 6.18
44. Upgrading of alley and open space at Block 2, Dagat-dagatan 1.07
45. Improvement of alleys, Barangay 14 0.91
46. Upgrading of Pla-pla St. (Tanigue to Langaray Sts.), Barangay 14 6.66
47. Upgrading of Tamban St. and Tulya alley, Barangay 16 3.69
48. Covered court at Libis Espina, Barangay 16 4.51
49. Improvement of Libis Espina Looban (Tanigue-Tamban Sts.) 3.28
50. Construction of PUJ, Tricycle and Pedicab Assessment Office at ground 1.54
floor, City Hall
51. Renovation of Katipunan Hall, A. Mabini St., Barangay 16 3.83
52. Repair and renovation of Mayor’s Office and clerical pool, Barangay 16 4.54
53. Improvement of Tahong alley (Tamban and adjacent alleys), Barangay 20 3.26
54. Upgrading of Libis Orkana, Barangay 20 1.10
55. Covered court at Tamban St. – additional work 0.40
56. Upgrading of Torsillo St., Barangay 22 3.19
57. Improvement of Tilapia St., Dagat-dagatan, Barangay 22 3.21
58. Improvement of drainage at Silanganan St., Barangay 26 2.64
59. Improvement of drainage along Martinez St., Barangay 27 1.31
60. Improvement of drainage along Perpetua St., Barangay 27 0.96
61. Improvement of drainage at. L. Asistio St., Villa Maria & Villa Maria 2.18
Interior, Barangay 27
62. Improvement of alleys at Block 10, Barangay 27 1.33
63. Upgrading of E. Castillo St., Barangay 27 1.68
64. Upgrading of parking space alley at Block 3, Barangay 28 2.20
65. Upgrading of Tuna Street, Barangay 28 5.80
66. Concreting and improvement of drainage at Kasarinlan H/S Compound, 1.66
Barangay 28
67. Improvement of alley at PAMAS-SAWATA, Barangay 28 2.71
68. Improvement of Taytay St., Barangay 30 3.10
69. Upgrading and improvement of drainage at San Mateo, Barangay 30 4.50
70. Rehabilitation of covered court at Tuna St., Dagat-dagatan, Barangay 31 0.26
71. Upgrading of Talilong St. – additional work, Barangay 31 0.67
73. Improvement of Victoria St., Barangay 32 .59
74. Covered court LRTB, Sawata Area 2, Maypajo, Barangay 32 0.30
75. Improvement of Damayan St., Damayan Extension and Riverside, 3.58
Maypajo, Barangay 32
76. Upgrading and Improvement of drainage at Mariano St., Barangay 33 2.08
77. Construction of 3-storey multi-purpose building, Barangay 34 5.20
78. Upgrading of Maypajo E/S Compound, Barangay 35 1.44
79. Upgrading of alleys at Block 8, 9 and 10, Maypajo, Barangay 35 4.58
80. Covered court at Marulas E/S, Barangay 36 4.30
2 of 19
Annex 3-1
Not Not
(In Million)
81. Widening of sidewalk at RAE crossing Maligaya creek, Barangay 39 0.44
82. Improvement of sidewalk and installation of streetlights along RAE, 23.06
Barangay 39
83. Improvement of drainage at F. Roxas St. and 1st Avenue, Barangay 40 0.81
84. Improvement of Lakambini St. & drainage along P. Sevilla St., Barangay 42 2.54
86. Covered court-additional work, Barangay 43 0.31
87. Improvement of drainage at N. Carpio St., Barangay 54 0.86
88. Improvement of 7th &8th Avenue, Baltazar St., P. Galauran I, II and III, 11.29
Barangay 56
89. Road widening and improvement of drainage along 8th Avenue, 9th Avenue, 6.42
Barangay 61
90. Improvement of sidewalk along RAE, Barangay 61 6.48
91. Sidewalk shed along Caloocan H/S, 10th Avenue, Barangay 62 3.11
92. Sidewalk shed along Caloocan H/S, 9th Avenue, Barangay 62 3.89
93. Rehabilitation of Gregoria de Jesus E/S building, Barangay 62 1.59
94. Repair of roofing and ceiling at Caloocan Science H/S, Barangay 62 1.50
95. Rehabilitation of Caloocan H/S gym, Barangay 62 5.44
96. Extension of Science Building – additional work, Barangay 62 0.42
97. Repair of E. Rodriguez E/S building 1.30
98. Improvement of drainage along Vibora St., Barangay 65 1.41
99. Improvement of drainage along Aglipay St., Barangay 65 2.18
100. Improvement of P. Pablo, Barangay 67 2.11
101. Improvement of Florencia St., Barangay 67 3.85
102. Improvement of alleys and drainage at Baltazar 1, Barangay 69 1.86
103. Improvement of drainage at Esguerra St. & alleys and concreting of 0.46
Baltazar III – additional work, Barangay 70
104. Covered court, Barangay 73 3.90
106. Improvement of alley and drainage, Barangay 78 2.69
107. Improvement of sidewalk and installation of streetlights along Mc Arthur 4.29
Highway, Barangay 78
108. Improvement of sidewalk and installation of streetlights along EDSA, 26.28
Barangay 81
109. Renovation of covered court at Morning Breeze Subdivision, Barangay 82 3.59
110. Improvement of alley, Morning Breeze Subd., Barangay 82 1.38
111. State at Morning Breeze, Barangay 83 0.69
112. Improvement of Benin St.-additional work, Barangay 86 0.35
113. Improvement of drainage at 8th St., Barangay 87 18.87
114. Concrete reblocking of 8th St., Barangay 89 6.95
115. Improvement of drainage along S. Asistio St., Barangay 89 2.61
116. Improvement of drainage along 11th Ave., Barangay 90 6.90
117. Construction of barangay hall at 12th Ave., Rosal St., Barangay 96 6.19
118. Construction of barangay hall at 11th Avenue, Barangay 98 1.73
119. Covered court at Dorotea – additional work, Barangay 99 0.43
120. Covered court at Tandang Sora E/S, Barangay 105 4.56
121. Improvement of drainage system along 2nd St., Barangay 107 26.16
122. Construction of stage at Cecilio Apostol E/S, Barangay 109 1.38
123. Covered court at Cecilio Apostol E/S – additional work, Barangay 109 0.25
3 of 19
Annex 3-1
Not Not
(In Million)
124. Improvement of drainage along M.H. del Pilar, Barangay 109 2.15
125. Improvement of drainage system at M. H. del Pilar, Barangay 113 1.23
126. Installation of streetlights, Barangay 114 1.78
127. Improvement of V. Mapa Street, Barangay 122 4.30
128. Improvement of 5th Avenue, Magsaysay St., Barangay 124 3.37
130. Construction of box culvert along Tagaytay St., Barangay 130 5.78
131. Improvement of drainage along Malvar Ext., Malolos Avenue 3.26
132. Improvement of Repolyo alley & Sayote Alley, Barangay 133
133. Improvement of drainage system along Gen. Malvar St., Barangay 135 11.28
134. Improvement of drainage along General Tirona St., Barangay 138 11.18
135. Improvement of F. Aguilar, Barangay 139 2.97
136. Repair of 3-storey building of Bagong Barrio H/S, Barangay 142 1.12
137. Improvement of alleys at Bagong Barrio, Barangay 144 2.07
138. Improvement of pathwalk, Barangay 144 1.36
139. Improvement of pathwalk, Barangay 145 2.80
140. Improvement of sidewalk and installation of streetlights at Malolos St., 11.88
Bagong Barrio, Barangay 146
141. Construction of 3-storey, 6-classroom building, Bagong Barrio E/S 11.28
142. Improvement of Santoll alley, Macopa alley, M. de Castro and adjacent 1.46
alley, Barangay 148
143. Improvement of pathwalk (Phase II), Barangay 150 2.23
144. Improvement of pathwalk (Phase I), Barangay 150 3.24
145. Improvement of Milagrosa Extension NLEX, Barangay 151 2.38
146. Improvement of Bayanihan St., Ipil alley and Narra alley, Barangay 152 0.87
147. Improvement of Milagrosa Extension, Barangay 154 1.70
148. Improvement of Malumanay and Malolos Exterior Sts., Bagong Barrio, 0.92
Barangay 154
149. Improvement of Lirio St., Barangay 155 0.39
150. Improvement of alley and drainage system at Camia St. and Rosal 1.23
Extension, Barangay 155
151. Repair of barangay hall, Barangay 156 1.03
152. Construction of 2-storey 4-classroom school building at East Bagong 7.22
Barrio E/S, Barangay 156
153. Concrete reblocking at Reparo road/Baesa, Barangay 160 1.42
154. Improvement of Cleofer St. and adjacent alleys, Sta. Quiteria, Barangay 162 2.18
155. Improvement of drainage along Simplicio St., Barangay 163 1.21
156. Improvement of drainage along Rivera St., Talipapa, Barangay 164 5.81
157. Senior Citizen’s Office, Talipapa covered court, GSIS, Talipapa – 0.16
additional work, Barangay 164
158. Columbarium at Kaybiga Cemetery, Barangay 165 3.70
159. Construction of 2-storey 4-classroom building at Kaybiga H/S, Barangay 165 4.40
160. Concrete reblocking along P. dela Cruz St., Barangay 166 0.51
161. Covered court at Dolmar – additional work, Barangay 167 0.39
162. Covered court at Sunriser Subdivision, Llano, Barangay 167 4.71
163. 1-unit deepwell (near NPC covered court), Barangay 168 0.13
164. 1-unit deepwell at RECOM 168 HOA, Deparo 0.13
165. 2-unit deepwell (near MRF and La Consolacion College) 0.26
166. 1-unit deepwell at Masikap HOA, Deparo 0.13
4 of 19
Annex 3-1
Not Not
(In Million)
167. Covered court at Deparo E/S, Barangay 168 4.65
168. Extension of eaves, concrete bleachers and slabs, BF Homes 2.71
169. Construction of 2-storey barangay hall at Ninang Helen St., BF Homes, 3.30
Phase II, Barangay 169
170. Covered court at Amparo Novaville – additional work, Barangay 170 0.24
171. 2-unit deepwell at Recomville I, Bagumbong, Barangay 171 0.26
172. Covered court at Union Village, Bagumbong, Barangay 171 4.35
173. Covered court at Sampaguita Subdivision, Barangay 171 4.35
174. 2-unit deepwell at Recomville II, Bagumbong, Barangay 171 0.26
175. Additional bleacher at Bagumbong H/S, Barangay 171 3.46
176. Covered court at Villa Luisa Subd., Bagumbong 0.39
177. Improvement of roads and drainage system at Bagumbong Dulo Ext. 2.59
178. Improvement of road and drainage at Merry Homes and Golden Harvest, 5.23
Barangay 172
179. Construction of 2-storey, 8-classroom building, Urduja E/S, Urduja 14.99
Village, Barangay 172
180. Improvement of drainage along Camarin Road, Barangay 172 6.60
181. Covered court at Senate Village, Bagumbong, Barangay 173 4.20
182. Covered court at Hillcrest Subdivision, Barangay 173 4.21
183. Concreting of road at King Solomon Extension, Barangay 174 0.67
184. Improvement of Rose St., PHHC I, Camarin, Barangay 174 1.54
185. Improvement of roads at La Forteza Subd., Ph-1, Barangay 174 4.28
186. Improvement of King Solomon and drainage system existing pavement, 9.44
Camarin
187. Additional work – road widening and improvement of drainage along 1.26
Zabarte to Capt. Samano Road, Barangay 175
188. Construction of 3-storey 6-classroom building at Sampaguita H/S, 12.11
Barangay 175
189. Improvement of road at Dona Ana Subd., Barangay 175 7.89
190. Improvement of road and drainage system going to Franville Subdivision, 7.95
Barangay 175
191. Additional work – Covered court at Bicol Area, Camarin D, Barangay 175 0.35
192. Improvement of road at Phase 10, Barangay 176 7.65
193. Improvement of road and drainage system at Phase 8B, Pkg 5, Barangay 176 3.29
194. Improvement of drainage at Phase 2 Pkg 2, Bagong Silang 2.97
195. Improvement of drainage at Ph10, Pkg 4, Bagong Silang 3.57
196. Improvement of road leading to Tala H/S PhV, Bagong Silang 6.42
197. Improvement of road and drainage at Ph4B, Bagong Silang 3.16
198. Covered court at Phase 8, Tuluyan, Bagong Silang 4.63
199. Retaining wall back of Bagong Silang H/S 1.58
200. Covered court at Ph7, Pkg 10 near slaughterhouse at Bagong Silang 3.97
201. Covered court at Ph3, Pkg 2, Bagong Silang 4.68
202. Covered court at Ph5, Pkg 1, Bagong Silang 4.68
203. Covered court at Ph8, Bagong Silang 4.68
204. Gawad Kalinga Park at Ph9, Bagong Silang 1.73
205. Road widening and improvement of drainage at Ph1 to Ph5, Barangay 176 33.06
206. Improvement of roads and drainage system at Ph9, Bagong Silang 2.72
207. Additional work – covered court at Ph7C, Pkg 6, Bagong Silang 0.40
208. Additional work – construction of 2-storey, 8-classroom building, Kalayaan 1.62
5 of 19
Annex 3-1
Not Not
(In Million)
H/S, Ph10B, Barangay 176
209. Additional work-covered at Ph9, Crusher, Bagong Silang 0.38
210. Additional work-covered at Ph5A near Paulino Compound, Bagong Silang 0.43
211. Concreting of St. Claire St., Capitol Parkland, Barangay 177 2.99
212. Improvement of Camia St. and drainage system, Ilang-ilang St., Dama de 11.63
Noche, PHHC, Barangay 177
213. Concreting of Maligaya Oval, Barangay 177 4.03
214. Shed at Caloocan City hall North, Zapote Camarin 1.75
215. Additional work-covered court at Cielito H/S Annex 1, Barangay 177 0.40
216. Improvement of Everlasting St., Barangay 177 6.89
217. Improvement of roads and drainage at Alma Hose Subd., Camarin 7.15
218. Additional work – covered court at Kalupawa, Barangay 177 0.40
219. Improvement of Espina St., Capitol Parkland, Barangay 177 1.75
220. Construction of stage at Caloocan E/S North, Barangay 178 1.39
221. Construction of stage at Bagong Silang E/S, Barangay 178 1.39
222. Improvement of Mangga St. and drainage system at PHHC II 9.86
223. Improvement of Malvar St., Pag-asa, Barangay 178 3.30
224. Improvement of pathwalk & drainage at Villa Imelda-Tawid, Barangay 178 1.71
225. Improvement of Banaba and drainage at Quirino Highway-Bangkal 8.11
226. Improvement of Caimito St. and drainage system, Barangay 178 5.72
227. Improvement of Quisumbing road and drainage system at La Suerte 2.82
Subdivision and Lucky Ville Subd., Barangay 178
228. Improvement of road at Petchayan at Ph4, Pkg 1 & 2, Barangay 178 3.10
229. Improvement of drainage system and concreting of Reparo road, Camarin 4.23
230. Improvement of Alibangbang Street, Barangay 179 1.66
231. Improvement of Anahaw St., Barangay 179 11.71
232. Improvement of Anapia road, Amparo Subd., Barangay 179 3.04
233. Improvement of Kupang St., Amparo Subd., Barangay 179 3.04
234. Concreting of Akle road, Amparo Subd., Barangay 179 1.09
235. Amparo Oval court, Amparo Subd., Barangay 179 11.54
236. Improvement of Lukban St. and Balimbing St., Amparo Subd., Barangay 179 2.58
237. Improvement of Acacia St., Rimas St., and Anahaw St., Barangay 179 2.31
238. Improvement of Malanting roads and drainage system, Barangay 179 16.96
239. Concreting of road and rip-rapping of Waray Hills, Pangarap Village 3.43
240. Covered court with rip-ripping at Mountain Heights H/S, Barangay 183 4.54
241. Improvement of road and drainage system, Barangay 183 3.35
242. Covered court with rip-ripping at Banker’s Village 2, Barangay 184 5.46
243. Improvement of road and drainage system along MLQ H/S, Malaria 6.69
244. Additional work-covered court at Sampaguita St., Malaria 0.40
245. Additional work-covered court at Ph10, Pkg 6, Acco Homes, Barangay 185 0.41
246. Improvement of Bernadeth St. and drainage system, Barangay 186 1.65
247. Improvement of St. Martha – St. Isabel Sts and drainage, Barangay 186 2.65
248. Improvement of St. James & St. Theresa’s drainage system, Barangay 186 3.07
249. Improvement of road & drainage along Glorietta Park, Tala, Barangay 187 7.18
250. 2-unit deepwell at Tala, Barangay 187 0.27
251. Improvement of pathwalk and drainage at Bo. San Jose, Barangay 187 2.57
252. Improvement of pathwalk and drainage at Bo. San Lozaro, Tala 6.17
253. Extension of barangay hall at Tala 1.72
254. Covered court at NHC Te Subd., Barangay 188 3.78
6 of 19
Annex 3-1
Not Not
(In Million)
255. Improvement of roads & drainage at Rosal St.,Bo. San Lazaro, Barangay 188 7.04
256. Improvement of Mulawin St., Barangay 188 1.57
257. Covered court at Sta. Riza, North, Barangay 188 4.50
Sub-total 897.39
Marikina City
258. Construction of 3-storey 21-classroom at Purok 4, Brgy. Malanday 53.05
259. Construction of Convention center at Marikina Hotel 60.82
260. Construction of Main Drainage Outfall at J. Molina St. 16.61
Roadside Improvement
261. Balete Loop, Fortune 5.33
262. Branding Iron St, Concepcion II 2.34
263. Shorthorn St, Concepcion II 0.82
264. Kennedy St., San Roque 3.05
265. Paddocks St, Concepcion II 0.23
266. Oxford St, Rancho Estate II, Concepcion II 0.45
267. Kanlaon St, Concepcion II 0.19
268. Mt. Everest St, Concepcion II 0.26
269. Morgan St, Concepcion II 1.20
270. Hampshire St, Concepcion II 0.39
271. Mt. Samat St, Concepcion II 0.17
272. St. Jude Circle St, St. Claire Subdivision Concepcion I 0.98
273. St. Joseph St, Concepcion I 0.27
274. Emerald St, Concepcion I 0.81
275. Diamond St, Concepcion I 0.56
276. Mira Verde Subd., Nangka 1.62
Sub-total 149.15
Mandaluyong City
School Buildings
277. Bonifacio Javier High School 13.01
278. Highway Hills Elem. School 56.05
Drainage & Street Improvements
279. San Rafael St. 15.63
280. Sanggumay & Pinagtipunan Sts. 10.58
281. Kings Road & Wack-Wack Road 7.64
282. A.T. Reyes St. 10.06
283. M. Gonzaga St. 11.99
284. J. Luna St. 6.99
285. Rev. Aglipay St. (Asphalting) 3.90
Other Infrastructure Projects
286. Construction of PNP/Fire Pocket Park and Parking 4.94
287. Improvement of Sidewalk Pavement & Perimeter Fence 19.36
288. Improvement of City Hall Park 22.91
289. Plant Box/RTU Sidewalk Development of Boni Ave. & Center Island 20.15
290. Construction of Hulo Fire/Police Sub-station & Office Building 21.49
291. Improvement of San Francisco Center Island 11.01
Sub-total 235.71
7 of 19
Annex 3-1
Not Not
(In Million)
Province of Rizal
Angono
292. Const. of 2-storey, 6-rooms at Angono NHS 5.02
293. Const. of 2-storey, 6-rooms at Carlos Botong Francisco Memorial NHS, 4.67
Angono, Rizal
294. Const. of 2-storey, 6-rooms at Doña Nieves Siongco ES 4.72
295. Const. of 2-storey, 4-rooms Ynares School Bldg., Joaquin Guido ES 4.89
296. Const. of 2-storey, 6-rooms Ynares School Bldg.,Angono School for the 6.22
Arts, San Martin Subd., Brgy. San Isidro
297. Const. of 2-storey, 8- rooms Ynares School Bldg., Doña Nieves Songco 7.39
Mem. ES Brgy. Mahabang Parang
Baras
298. Const. of two (2)-storey, six (6)-rooms Ynares School Bldg. at Painaan ES 6.33
Binangonan
299. Const. of 2-storey, 6-rooms at C. Ynares, Sr.Memorial ES 5.00
300. Const. of 2-storey, 6-rooms at Darangan ES 4.80
301. Const. of 2-storey, 6-rooms at Janosa NHS 5.19
302. Const. of 2-storey, 6-rooms at Macamot ES., 4.87
303. Const. of 2-storey, 6-rooms at Pipindan ES 5.35
304. Const. of 2-storey, 8-rooms at Bilibiran ES 6.08
305. Const. of 2-storey, 6-rooims at Lunsad ES 4.89
306. Const. of 1-storey, 1-room Ynares School Building at Talim NHS 1.36
307. Const. of 2-storey, 6-rooms at Buhangin ES 5.32
308. Const. of 2-storey, 6-rooms at Pinagdilawan ES 5.31
309. Const of 2-storey, 8-rooms at Calumpang ES 5.89
310. Const. of 1-storey, 2-rooms Ynares School Building at Bangad ES 1.66
311. Const. of 1-storey, 4-rooms at Limbon- Limbon, ES 2.74
312. Const. of 2-storey, 6-rooms at Sitio Mata ES 4.90
313. Const. of 2-storey, 6-rooms at Tagpos Elem. Sch., 4.68
314. Const. of 2-storey, 8-rooms at Vicente Madrigal NHS, (Pila-pila-Annex) 6.36
315. Const. of 2-storey, 6-rooms at Don Jose Ynares Sr. Mem. ES 4.91
316. Const. of 1-storey, 8-rooms Ynares School Bldg., Janosa ES 6.44
317. Const. of 2-storey, 11-rooms Ynares School Bldg., Tayuman ES 10.92
318. Const. of 2-storey, 6-rooms Ynares School Bldg., Libis ES 6.50
319. Const. of two (2)-storey, eight (8)-rooms Ynares School Bldg., Guronasyon 7.51
NHS (Bilibiran Annex), Bilibiran
320. Const. of 2-storey, 6-rooms Ynares School Bldg., Doña Susana Madrigal 6.05
Mem. School
321. Const. of 2-storey, 6-rooms Ynares School Bldg., Tatala ES 5.97
322. Const. of 2-storey, 6-rooms Ynares School Bldg., Talim ES 6.49
Cainta
323. Const. of 2-storey, 6-rooms at Ynares Sch. Bldg., St. Anthony ES 5.51
324. Const. of 2-storey, 6-rooms Ynares School Bldg., F.P. Felix ES (Unit 1) 5.56
Brgy. San Andres
325. Const. of 2-storey, 6-rooms Ynares School Bldg., Halang ES Brgy. San 5.71
Isidro, Cainta,Rizal
326. Const. of 2-storey, 6-rooms Ynares School Bldg., Planters ES Brgy. San 5.92
Andres,
327. Const. of 2-storey, 6-rooms Ynares School Bldg., Jansenville ES 5.97
8 of 19
Annex 3-1
Not Not
(In Million)
328. Const. of 2-storey, 6-rooms Ynares School Bldg., Marick ES Brgy. Sto. 5.96
Domingo
329. Const. of 2-storey, 6-rooms Ynares School Bldg., St. Gregory ES Cainta, 5.79
Rizal
330. Const. of 2-storey, 6-rooms Ynares School Bldg., San Juan ES 5.90
331. Const. of 2-storey, 4-rooms Ynares School Bldg.(Phase-1), Dalig ES 4.40
332. Const. of 2-storey, 6-rooms Ynares School Bdg., Tuna Balibago ES 6.74
333. Const. of 2-storey, 6-rooms Ynares School Bldg., M.C. San Juan ES 6.17
334. Const. of 2-storey, 6-rooms Ynares School Bldg. at Sampad ES 6.70
335. Const. of 2-storey, 6-rooms at M.C. San Juan E/S 4.75
336. Const. of 2-storey, 6-rooms at Patunhay-Calahan ES 4.88
Jalajala
337. Const. of 2-storey, 6-rooms at Sipsipin ES 4.84
338. Const. of 1-storey, 4-rooms at Pagkalinawan ES 2.43
339. Const. of 2-storey, 6-rooms at Bagumbong NHS 4.86
340. Const. of 1-storey, 3-rooms Ynares School Bldg., Bayugo NHS 2.39
341. Const. of 1-storey, 4-rooms Ynares School Bldg., Sipsipin ES 3.03
342. Const. of 1-storey, 3-rooms Ynares School Bldg., Palay-Palay ES 2.34
343. Const. of 2-storey, 6-rooms Ynares School Bldg., Punta ES 5.98
Morong
344. Const. of 1-storey, 4-rooms Ynares School Bldg., Tomas Claudio MES 3.22
345. Const. of 2-storey, 4-rooms Ynares School Bldg., Calero Lanang PS 4.67
346. Const. of 2-storey, 6-rooms Ynares School Bldg., Bombongan ES 6.01
347. Const. of 2-storey, 6-rooms at Lagundi ES 4.73
348. Const. of 1-storey, 6-rooms at Timoteo Reyes Memorial E/S 3.61
349. Const. of 2-storey, 6-rooms at Maybancal ES 4.79
350. Const. of 2-storey, 6-rooms at San Guillermo ES 4.83
Pililia
351. Const. of 2-storey, 6-rooms at Malaya NHS 5.45
352. Const. of 2-storey, 6-rooms at Pililla ES, Unit 1l 4.93
353. Const. of 2-storey, 6-rooms at Pililla NHS 4.67
354. Const. of 2-storey, 6-rooms Ynares School Bldg., Niogan ES 5.98
Rodriguez
355. Const. of 2-storey, 8-rooms at Gen. Licerio Geronimo NHS, San Jose- 5.93
Annex
356. Const. of 2-storey, 6-rooms at Geronimo ES 4.95
357. Const. of 2-storey, 6-rooms at Ynares School Bldg., Licerio Geronimo 5.44
NHS ( Burgos Annex), Brgy. Burgos
358. Const. of 2-storey, 6-rooms Ynares School Bldg., San Isidro ES 6.18
359. Const. of 2-storey, 6-room Ynares School Bldg. at Tagumpay ES 5.96
San Mateo
360. Const. of 2-storey, 4-rooms at Gulod Malaya ES 3.50
361. Const. of 2-storey, 6-rooms at Malanday ES, San Mateo, Rizal 4.87
362. Const. of 2-storey, 8-rooms at Justine Vicente Santiago ES 6.01
363. Const. of 2-storey, 8-rooms at San Mateo ES 5.87
364. Const. of 3-storey, 15-rooms at San Mateo NHS 14.26
365. Const. of 3-storey, 3-rooms at Ynares Sch. Bldg. at San Mateo NHS 2.22
366. Const. of 2-storey, 6-rooms at Silangan NHS 5.28
367. Const. of 2-storey, 6-rooms at Banaba ES 5.05
9 of 19
Annex 3-1
Not Not
(In Million)
368. Const. of 2-storey, 6-rooms at Silangan ES 5.02
369. Const. of 2-storey, 8-room at Gen. Licerio Geronimo NHS Burgos-Annex 5.80
370. Const. of 2-storey, 6-rooms Ynares School Bldg., Silangan ES 6.21
371. Const. of 2-storey, six (6)-rooms Ynares School Bldg. at Dulong Bayan ES 6.30
372. Const. of 2-storey, 6-rooms Ynares School Bldg. @ Guitnang Bayan ES 6.40
Brgy. Guitnang Bayan I
373. Const. of 2-storey, 6-rooms Ynares School bldg.@ Maly ES 6.18
Tanay
374. Const. of 2-storey, 6-rooms at Wawa ES 4.71
375. Const.of 2-storey, 6-rooms at Sto. Niño ES 5.19
376. Const. of 2-storey, 6-rooms at San Andres ES 5.19
377. Const. of 2-storey, 6-rooms at Ynares Sch. Bldg. at Simeon Bendaña ES 5.50
378. Const. of 1-storey, 4-rooms Ynares School Bldg. @ Sta. Ines NHS 3.40
379. Const. of 2-storey, 4-rooms Ynares School Bldg. @ Pinagsabiran ES 4.60
380. Const. of 2-storey, 6-rooms Ynares School Bldg. @ Little Tanayville ES, 6.15
Brgy. Tandang Kutyo, Tanay, Rizal
381. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Simeon R. Bendana Sr. 5.91
Mem ES Tanay, Rizal
382. Const. of 2-storey, 6-rooms Ynares School Bldg. @ Ilaya ES 6.05
383. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Balimbing ES 5.82
Taytay
384. Const. of 2-storey, 6-rooms at Ynares Sch. Bldg. at Muzon ES 5.65
385. Const. of 2-storey, 6-rooms at Kapalaran ES 4.87
386. Const of 2-storey, 8-rooms at Felix M.Sanvictores ES 6.29
387. Const. of 2-storey, 6-rooms at San Isidro ES 4.70
388. Const. of 2-storey, 6-rooms at Taytay ES 4.92
389. Const. of 2-storey, 4-rooms Ynares School Bldg.@ Dolores ES 3.20
390. Const. of 2-storey, 6-rooms Ynares School Bldg. @ Taytay NHS, Sta. Ana 5.93
Annex, Taytay, Rizal
391. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Muzon ES 5.96
392. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Rosario Ocampo ES 5.96
393. Const. of two (2)-storey, 8-rooms Ynares School Bldg. at San Isidro ES 7.43
394. Const. of two (2)-storey, 4-room Ynares School Bldg. at Sitio Simona ES 4.98
395. Const. of two (2)-storey, 6-room Ynares School Bldg @ San Juan ES 5.73
Teresa
396. Const. of 2-storey, 6-rooms at Bagumbayan E/S 4.92
397. Const. of 2-storey, 8-rooms at Teresa ES 6.00
398. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Quiterio San Jose ES 6.23
399. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Pantay ES 5.82
400. Const. of 2-storey, 6-rooms Ynares School Bldg.@ Teresa ES 5.98
Sub-total 586.01
Cabanatuan City
401. D.S. Garcia ES 1-classroom school building
402. F.A. Reyes Memorial ES 3-classroom school building
403. Imelda ES 2 2-classroom school buildings
404. J.P. Melencio ES 3-classroom school building
405. Mabini Homesite ES 3-classroom school building
406. Sta. Romana Memorial ES(Sta. Arcadia E/S 3-classroom school building
10 of 19
Annex 3-1
Not Not
(In Million)
407. Cabanatuan East Central School 3-classroom school building
408. Honorato C. Perez, Sr. Memorial Science HS/Cabanatuan City Science HS
3-classroom school building
409. Cabanatuan North ES3-classroom school building
410. Lazaro Francisco ES 3-classroom school building
411. P.G. Crisostomo ES 3-classroom school building
412. Pagas ES 2-classroom school building
413. Sumacab Norte ES 2-classroom school building
414. Sumacab Norte ES 3-clasroom school building
415. San Josef ES 2-classroom school building
416. Sumacab Este ES 2-classroom school building
417. Balite ES 3-classroom school building
418. Buliran ES 3-classroom school building
419. Caalibangbangan ES 2-classroom school building
420. Caudillo ES (2CL School Bldg.)
421. Cinco-Cinco ES 3-classroom school building
422. Daan Sarile ES 3-classroom school building
423. Dalampang ES 2-classroom school building
424. Ibabao-Bana ES 2-classroom school building
425. Talipapa ES 3-classroom school building
426. Polilio ES 2-classroom and 3-classroom school buildings
427. Sto. Niňo ES 2-classroom school building
428. Pula ES 2-classroom school building
429. Pamaldan ES / M.R. del Rosario E/S 3-classroom school building
430. Mayapyap ES 3-classroom school building
431. Mayapyap National HS 3-classroom school building
432. Pamaldan HS / M.R. del Rosario HS 3-classroom school building.)
433. Bagong Sicat ES 3-classroom school building
434. Cabu ES 3-classroom school building
435. Kalikid Norte ES 3-classroom school building
436. Camp. Tinio ES 3-classroom school building
437. Camp. Tinio National HS 3-classroom school building
438. Juan L. Bautista ES, Lagare 3-classroom school building
439. Cesar E. Vergara Memorial HS, Lagare 3-classroom school building
440. L.O. Francisco ES, Bangad 3-classroom school building
441. Luis O. Renon Memorial, (Kalikid Sur) 3-classroom school building
442. Macatbong ES 3-classroom school building
443. Bagong Buhay ES 2-classroom school building
444. Ciriaco Mariano ES 3-classroom school building
445. Bakod Bayan ES 2-classroom school building
Sub-total 90.00*
* Actual project costs amounted to P106.86 million. The excess of P16.86 million represent LGU’s equity.
Angeles City
446. Acquisition of heavy equipment and bins for solid waste management 43.99
447. Computerization of ONA 9.90
448. Balibago HS (8-Classroom, 3-Storey Bldg.) 9.04
449. Francisco G. Nepomuceno Memorial HS (4-Classroom, 2-Storey Bldg.) 5.32
450. Philippine High School for Arts/C.M. Recto Comm. & Tech. HS (Const. 6.86
11 of 19
Annex 3-1
Not Not
(In Million)
of 6-Classroom, 3-Storey Building)
451. Angeles City NHS, Brgy. Pampang (Const. of Additional 4-Classroom, 2- 5.33
Storey Building)
452. Marisol ES, Bgy. Ninoy Aquino (Const. of 6-Classroom, 2-Storey Building) 6.56
453. Alberto G. Pabalan ES, Brgy. Balibago (Const. of 2-Classroom, 2-Storey 2.16
Building)
454. E.M. Ganzon ES, Brgy. Anunas (Const. of Additional 2-Classroom, 2- 2.56
Storey Building)
455. Balibago HS, Brgy. Balibago (6-Classroom, 3-Storey Bldg. Realigned from 6.75
Pulungbulu HS)
Sub-total 98.47
Antipolo City
456. Construction of school buildings 500.00
457. Land acquisition 150.00
458. Other related expenditures 100.00
Sub-total 750.00
Lucena City
LBP-Phase I
459. Construction of Sabina Road 1.87
460. Concreting of Allarey Road 4.00
461. Construction of Solcomville Road 21.22
462. Concreting of Villa Juliana Road 3.17
463. Concreting of DZLT-Cleade Heights Road 6.58
464. Improvement of Improvement of Resettlement Area 2.54
LBP-Phase II
465. Road improvement from Markdown Subdivision to Marketview Subd. 7.20
466. Concreting of Afable Road 4.15
LBP-Phase III
467. Rehabilitation of Pleasantville Subdivision 14.44
DBP - Construction of fifteen (14) elementary/secondary school buildings
468. Lucena City National High School, Dalahican 12.02
469. Lucena City National High School, Cotta 16.96
470. Lucena City National High School, Ibabang Dupay 4.21
471. Lucena East III Elementary School, Bel Air 4.42
472. Lucena Eat I Elem. School, Marketview 4.20
473. Lucena East VIII Elementary School, Ibabang Dupay 4.18
474. Lucena Talao-Talao Elementary School 4.17
475. Elvira Razon Elementary School, Ibabang Dupay 4.15
476. Lucena West III Elementary School 2.89
477. Lucena Zaballero Elementary School, Gulang-Gulang 2.82
478. Lucena San Lorenzo Elementary School, Ibabang Dupay 2.93
479. Mayao Parada Elementary School 2.84
480. Mayao Crossing Elementary School 2.82
481. Kanlurang Mayao Elementary School 2.72
Sub-total 136.50
Province of Bataan
Abucay
482. Construction of Multi-purpose (BNAS) - Bangkal 4.18
12 of 19
Annex 3-1
Not Not
(In Million)
483. Construction of hanging bridge (Bayan Aeta) - Bangkal 0.97
484. Concreting of Brgy. Bangkal Road 0.97
485. Road concreting of Pinagpatayan Road 1.94
486. Concreting of Brgy. Calaylayan Road 0.97
487. Rehabilitation of Calaylayan Health Center 0.98
488. Road concreting Bagong Buhay St. - Capitangan 0.48
489. Concreting of Brgy. Capitangan Road 0.97
490. Concreting of Brgy. Gabon Road 0.97
491. Construction of Footbridge 0.11
492. Concreting of Brgy. Road 1.26
493. Concreting of Doña Josefa road 0.97
494. Road concreting 62 LM, W=4 LM at Sitio Macopa 0.27
495. Construction of riprap/open canal - Salian 0.97
496. Concreting of Brgy. Siongco Subd. Ombo 0.97
Bagac
497. Improvement of Bagac District Hospital 1.17
498. Concreting of Sampaloc St. 1.94
499. Construction of concrete pavement Bagac H/S 0.21
500. Construction of water system at Brgy. Parang 1.24
Balanga City
501. Concreting of Brgy. Bagong Silang Road 0.97
502. Construction of concrete gutter at Zamora St. 0.17
503. Construction of Bataan General Hospital and ward building 4.86
504. Concreting of Brgy. Camacho Road 0.97
505. Improvement of Multi-purpose bldg. at 24th IB 0.92
506. Perimeter fence & pathwalk at 24th IB 0.35
507. Water system at 24th IB 0.68
508. Construction of Multi-purpose bldg at 305th 0.97
509. Repair of PSWD Capitol 1.60
510. Concreting of Brgy. Cataning Road 0.97
511. Concreting of Brgy. Cupang North Road 0.97
512. Concreting of Brgy. Cupang Proper Road 0.97
513. Augmentation Multi-purpose - Cupang West 0.97
514. Construction of drainage - Cupang West 0.48
515. Concreting of Brgy. Dangcol Road 0.97
516. Concreting of Brgy. Dona Francisca Road 0.97
517. Construction of perimeter fence (BTM) 4.91
518. Repair of Bataan Transport Mall 0.34
519. Concreting of Brgy. Ibayo Road 0.97
520. Concreting of Brgy. Lote 0.97
521. Repair/Improvement of Provincial Tourism Office 0.57
522. Construction of distribution pipeline of Provincial Jail 0.13
523. Installation of rotary ventilator of Provincial Jail 0.10
524. Construction of drainage system of Provincial Jail 1.58
525. Completion of RTC Branch at Capitol 0.09
526. Extension of crime lab office at Capitol Compound 0.61
527. Proposed extension of Civil Service File & Records Room 0.09
528. Improvement of repair bay area at Motorpool 2.91
13 of 19
Annex 3-1
Not Not
(In Million)
529. Improvement/repair of Oplan Kalinga at Capitol 0.25
530. Construction of Genset Housing at Capitol 0.63
531. Road concreting (Villa Carolina) Itaas 4.86
532. Concreting of Brgy. Pto. Rivas Ibaba Road 0.97
533. Concreting of Brgy. San Jose Road 0.97
534. Concreting of Brgy. Tanato Road 0.97
535. Construction/rehab. of Bat. Gen. Hospital (Phase 4) 38.72
536. Construction of elevated water steel tank at PHO 0.18
537. Concreting of Brgy. Tenejero Road 0.97
538. Concreting of Brgy. Tuyo Road 0.97
539. Repair of Police Quarter 03-BT-02 P-04 bldg 0.98
540. Repair/rehab of police quarter (P-23) 1.19
541. Repair of security quarter 0.16
Dinalupihan
542. Rehab. of brgy. hall - 14th St. Aquino 0.69
543. Construction of open canal - 14th St. Aquino 0.23
544. Construction of open canal - 14th St. Gen Luna 0.84
545. Construction of open canal - 14th St. Mabini Proper 0.37
546. Road concreting - 14th St. Torres 0.97
547. Road concreting - 14th St. Zamora 0.97
548. Road concreting - Bangal 0.97
549. Construction of one (1) classroom bldg at Bayan Bayanan Primary School 0.70
550. Steel drainage cover 0.39
551. Concreting of sidewalk 0.66
552. Concreting of Brgy. Colo Road 0.97
553. Concreting of Brgy. J.C. Payumo Road 0.97
554. Construction of four (4) units comfort rooms at Kataasa ES 0.14
555. Concreting of Brgy. Kataasan Road 0.97
556. Construction of waiting shed at Layac Junction 0.18
557. Construction of open canal - Luacan 0.70
558. Concreting of Brgy. Magsaysay Road 0.97
559. Construction of four (4) classroom bldg at Magsaysay HS 2.50
560. Construction of comfort room at Magsaysay HS 0.54
561. Construction of Brgy. Hall 0.74
562. Road concreting - Maligaya 0.97
563. Road concreting - Naparing 0.97
564. Concreting of brgy. road 0.97
565. Concreting of Brgy. Old San Jose Road 0.97
566. Construction of Multi-purpose Bldg. at Brgy. Padre Dandan 0.81
567. Road concreting - Pagalanggang 0.97
568. Concreting of Brgy. Pagalanggang Road 0.97
569. Road concreting - Pag-asa 0.97
570. Construction of one (1) classroom bldg at Pandatung ES 0.67
571. Road concreting - Payangan 0.97
572. Concreting of Brgy. Pinulot Road 0.97
573. Road concreting 45 L.M. 0.29
574. Concreting of Brgy. Pita Road 0.97
575. Repair of three (3) classroom bldg. at Pita ES 1.17
14 of 19
Annex 3-1
Not Not
(In Million)
576. Road concreting 0.97
578. Concreting of Brgy. Roosevelt Road 0.97
579. Street lights 0.39
580. Improvement of cops kabayan & daycare 0.30
581. Improvement of ward (vinyl tiles) JC Payumo Hospital 0.06
582. Completion of Multi-purpose (Bataan State College) - San Ramon 2.91
583. Concreting of Brgy. San Simon Road, Dinalupihan, Bataan 0.97
584. Construction of one (1) classroom bldg at San Simon ES 0.67
586. Repair of two (2) classroom school bldg at Sta. Catalina ES 0.48
588. Stage construction 0.58
589. Road concreting - Sto. Niño 0.49
590. Concreting of Brgy. Sto. Niño Road 0.97
591. Improvement of brgy. hall at Torres 0.34
592. Concreting of Brgy. Tubo-tubo Road 0.97
593. Repair Health Center - Tucop 0.20
594. Concreting of Brgy. Tucop Road 0.97
Hermosa
595. Concreting of Brgy. Almacen Road 0.97
596. Concreting of Brgy. Bacong Road 0.97
597. Construction of waiting shed 0.15
598. Concreting of Brgy. Balsik Road 0.97
599. Concreting of Brgy. Bamban Road 0.97
600. Road concreting - Burgos Soliman 3.41
601. Road Concreting - Catanin 0.97
602. Construction of streetlights - Culis 0.29
603. Construction of brgy. Hall - Culis 0.59
604. Concreting of Brgy. Mabuco Road 0.97
605. Concreting of Brgy. Maite Road 0.97
606. Concreting of Brgy. Mambog Road 0.97
607. Concreting of Brgy. Pandatung Road 0.97
608. Concreting of Brgy. Saba Road 0.49
609. Construction of Saba Health Center at Brgy. Saba 0.51
610. Construction of multi-purpose pavement at Saba 0.42
612. Construction of brgy. hall Sto.Cristo 0.78
613. Concreting of Brgy. Sumalo Road 0.97
615. Concreting of Brgy. Tipo Road 0.97
616. Construction of 1 classroom bldg at Tucop ES 0.67
Limay
618. Construction of deepwell 0.41
619. Repair of brgy. hall 0.34
620. Construction of footbridge at Sitio Riverside, Lamao 2.42
621. Fabrication of mesh wire fence at Brgy. St. Francis 0.10
15 of 19
Annex 3-1
Not Not
(In Million)
Mariveles
622. Road concreting at Waling-waling & Dahlia Street 1.58
623. Construction of water system - Alas-asin 2.34
624. Road concreting - Alas-asin 0.83
625. Road concreting - Alion 0.49
626. Road concreting w/ open canal at Sitio Tibag 0.16
627. Construction of 3 units conc. stairs at Balon Anito River 0.19
628. Completion of brgy. hall at Balon Anito 0.87
629. Road concreting - Baseco 0.73
630. Installation water pipe - Baseco 0.17
631. Pathwalk - Baseco 0.73
632. Repair of senior citizen 0.19
633. Road concreting at Sitio Paliparan 0.97
634. Improvement of Muti-purpose at Ma. Cristina 0.39
635. Construction of stage at Maria Cristina Square (Plaza) 0.63
636. Construction of Muti-purpose pavement 0.31
637. Construction of streetlights - Cabcaben 0.23
638. Rehab. of break water - Cabcaben 0.27
639. Construction of drainage - Cabcaben 0.34
640. Improvement of Basketball Court (Zone 6) - Camaya 0.34
641. Construction of pathwalk - Camaya 0.77
642. Concreting of pathway 0.24
643. Construction of concrete steps/pathwalk 0.34
644. Construction of Multi-purpose (CC) at PUP - Malaya 3.30
645. Repair of five (5) classroom at PUP 1.12
646. Repair/Improvement of hallway at PUP 0.35
647. Rehab. Basketball court - Malaya 0.49
648. Repair of nine (9) classroom school bldg at Malaya E/S 3.53
649. Road concreting at Sitio Villa Carmen 0.97
650. Road concreting - Mt. View 0.52
651. Road concreting at Brgy. Upper Laya 0.70
652. Construction of open canal - Poblacion 0.58
653. Construction of perimeter fence brgy. hall - Poblacion 0.29
654. Construction of open canal - Poblacion 0.23
655. Construction of open canal - San Carlos 0.26
656. Installation of open canal steel grating 0.18
657. Pathwalk - San Isidro 0.49
658. Road concreting at Sitio Agwawan 1.17
659. Road concreting - Sisiman 0.36
660. Road concreting 200m at Sitio Casoy 0.64
Morong
661. Concreting of Brgy. Binaritan Road 1.94
662. Repair of five (5) classroom school bldg at Kanawan E/S 1.57
663. Concreting of Brgy. Mabayo Road 1.94
664. Construction of water system at Mabayo H/S 0.66
665. Improvement of perimeter fence CEDTPC Bldg. 0.36
666. Concreting of Brgy. Nagbalayong Road 1.94
667. Irrigation canal at Nagbalayong 1.07
16 of 19
Annex 3-1
Not Not
(In Million)
668. Rehab. of Morong Health Center (Lying In) 2.91
669. Covered court - Poblacion 4.76
670. Concreting of Brgy. Poblacion Road 1.94
671. Repair of Health Center, Poblacion 0.27
672. Concreting of Brgy. Sabang Road 1.94
Orani
673. Additional concreting of road (30 L.M.) 0.18
674. Multi-purpose hall 4.18
675. Construction of Multi-purpose - Balut 0.81
676. Construction of water system 0.41
678. Road concreting - Calero 0.43
679. Road concreting - Dona 0.97
680. Repair of Sunrise bldg. (convert to Training Center) 3.41
681. Construction of brgy. hall - Kabalutan 0.97
682. Proposed conversion of power system Orani D Hospital 0.97
683. Construction of water system at Sitio Talahib 0.41
684. Construction of Orani Municipal Hall - Aug Fund - Orani 4.86
685. Concreting of Brgy. Tugatog Road 0.78
686. Rehabilitation of Bayan Health Center 0.30
687. Rehabilitation of Talimundoc Health Center 0.48
688. Improvement of Brgy. Hall 0.93
689. Construction of open canal - Pacar 0.38
691. Additional concreting of road (50 L.M.) 0.27
692. Construction of open canal 0.43
693. Construction of open canal - Parang-parang 0.97
694. Completion of Brgy. Hall 0.66
695. Construction of two (2) storey brgy. hall 1.46
696. Completion of Brgy. Hall 0.73
697. Renovation of daycare - Bagumbayan 0.10
698. Fabrication of concrete footsteps 0.04
699. Bridge Construction (Sitio Ormoc) Pag-asa 1.46
700. Construction of brgy. hall - Balut 0.78
701. Repair/rehab of brgy. stage at Calusungan 0.44
702. Road concreting (150 LM) at Kabilang I 0.78
703. Fabrication of Steel Grating 0.04
704. Road regraveling at Sitio Araro 0.68
705. Construction of Health Center at Brgy. San Vicente 0.81
706. Construction of road pathwalk 0.19
707. Construction of road shoulder 0.53
Pilar
708. Construction of water system at Brgy. Ala-uli, Pilar, Bataan 1.71
709. Upgrading of brgy. road 0.48
710. Upgrading of Multi-purpose hall & stage 0.78
711. Concreting of road 0.46
712. Upgrading of Multi-purpose hall 0.36
713. Construction of open canal water distriution pipeline drug 0.66
17 of 19
Annex 3-1
Not Not
(In Million)
714. Concreting pavement & covered pathway Drug rehab 0.44
715. Completion of perimeter fence (electrical & plastering) 0.29
716. Multi-purpose bldg 1.38
717. Repair of brgy. hall at Pantingan, Pilar, Bataan 0.29
718. Completion of drug rehab - Liyang, Pilar, Bataan 4.85
719. Completion of perimeter fence drug treatment - Pilar 1.56
720. Widening of Poblacion bridge 0.97
721. Construction of pathwalk at Sitio Pitong Gatang 0.25
722. Extension of brgy. Hall 0.92
723. Construction of multi-purpose hall senior citizen 0.81
724. Barangay Stage 0.63
Samal
726. Construction of water system of Calaguiman E/S 0.56
727. Road concreting - East Daang Bago 0.59
728. Construction of streetlights - East Daang Bago 0.19
729. Concreting of Brgy. Gugo Road 0.97
730. Completion of senior citizen bldg at Sitio Bubuyog, Ibaba 0.14
731. Concreting of Brgy. Imelda Road 0.97
732. Rehabilitation of Imelda Samal Health Center 0.81
733. Construction of brgy. hall - Lalawigan 0.99
734. Construction of one unit deepwell (freeflow) at Brgy. Lalawigan 0.53
735. Rehabilitation of Muti-purpose hall 0.19
736. Road concreting of Sitio Mautot 0.97
737. Construction of Solar Drier 0.37
738. Concreting of Brgy. Palili Road 0.97
739. Improvement of Samal Cooperative Bldg. 0.26
740. Concreting of Brgy. San Juan Road 0.97
741. Improvement of training center at San Juan 0.31
742. Construction of waiting shed at San Juan 0.14
743. Construction of streetlight/open canal - San Roque 0.97
744. Covered court (Samal Plaza) - San Roque 4.18
745. Construction of water system - Sapa 0.51
746. Concreting of Brgy. Sta. Lucia Road 0.97
747. Construction of streetlight - Tabing Ilog 0.44
748. Construction of Multi-purpose - Tabing Ilog 0.47
749. Concreting of Brgy. West Calaguiman Road, 0.71
750. Construction of streetlights - West Daan Bago 0.19
751. Construction of free flow - West Daan Bago 0.53
752. Upgrading of J.P. Laurel 0.97
753. Improvement of CR, Construction of S. Tank & Canopy (Veterans) 0.08
Sub-total 290.38
Palawan
754. Rehabilitation/Maintenance of Alimanguan - Kemdeng Road (Pkg N-06-03) 1.60
755. Replacement of Villa Constancia Bailey Bridge (Pkg. N-06-05) 5.00
756. Erosion Control/Slope Protection (El Nido Pob. - Leo Airport Road) 3.01
(Pkg. N-06-06)
757. Rehabilitation/Maintenance of Guadalupe-San Nicolas Road (Pkg. N-06-08) 1.03
18 of 19
Annex 3-1
Not Not
(In Million)
758. Rehabilitation/Maintenance of New Quezon - Cheey Road (Pkg. N-06-09) 0.64
759. Rehabilitation/Maintenance of New Busuanga - New Quezon Road (Pkg. 0.78
N-06-09)
760. Improvement/Rehabilitation of PNAC Road (Pkg. S-06-01) 0.17
761. Improvement/Rehabilitation of San Juan Road (Pkg. S-06-01) 0.50
762. Rehabilitation/Maintenance of Magbabadil - Baraki Road (Pkg. S-06-01) 0.38
763. Improvement/Rehabilitation of Plaridel-Apis-Cabigaan Road (Pkg. S-06-01) 0.55
764. Improvement/Rehabilitation of Junction Tigman Road (Pkg.S-06-01) 0.45
765. Improvement/Rehabilitation of Bobosawin-Aporawan - Culandanum Road 1.54
(Pkg. S-06-01)
766. Rehabilitation/Maintenance of Lapu-Lapu Road Section (Pkg. S-06-02) 0.35
767. Rehabilitation/Maintenance of Batang-Batang Feeder Road (Pkg. S-06-02) 0.40
768. Rehabilitation/Maintenance of Abo-Abo - Isugod Road (Pkg. S-06-03) 4.68
769. Rehabilitation/Maintenance of Ipilan - Linao Road (Pkg. S-06-05) 0.37
770. Rehabilitation/Maintenance of Ipilan - Mainit Road (Pkg. S-06-05) 0.51
771. Rehabilitation/Maintenance of Junction - Mainit Road (Pkg. S-06-05) 0.21
772. Rehabilitation/Maintenance of Mati Feeder Road (Pkg. S-06-05) 0.54
773. Rehabilitation/Maintenance of Tub Tub - Amas Road (Pkg. S-06-05) 0.31
774. Rehabilitation/Maintenance of Salogon Feeder Road (Pkg. S-06-05) 1.88
775. Rehabilitation/Maintenance of Malatgao-Culandanum-Panas-Tina Road 0.81
(Pkg. S-06-06)
776. Multi-purpose Building, SPS Gov't. Center - PEO Compound 2.90
777. Construction of DepED Bldg SPS Govt Center 15.00
778. New Barbacan ES (Pkg. N-07-01) 0.81
779. Cagbanaba ES (Pkg. N-07-03) 0.77
780. Cuyo Study Center (Pkg. N-07-04) 0.80
781. Salvacion NHS (Pkg. N-07-09) 0.77
Sub-total 46.76
782. Acquisition of service vehicle and various heavy equipment 73.00
783. Construction of 2-storey 6 classroom school building 5.00
Sub-total 78.00
Grand Total P2,682.43 P1,102.88
19 of 19
Annex 4-1
Parañaque City
List of Projects Not Yet Implemented and For Completion
Project/
Name of Project Location
Contract Cost
Not Yet Implemented
Building and Building Structures
1. Rehabilitation of Sampaloc Site II Elementary School B.F. Homes P 2,699,587.34
2. Construction of school building at Baclaran E/S Baclaran 90,000,000.00
3. Improvement of Don Galo Elementary School Don Galo 1,170,926.26
4. Repair, improvement and construction of additional stairway at Don Galo 3,392,683.58
Paranaque National High School (Annex)
5. Improvement of Sports Complex at Don Galo Don Galo 787,836.03
6. Repair and improvement of San Agustin Elementary School Moonwalk 3,537,147.08
7. Improvement of RTC Branch 260 office located at 3rd and 4th San Antonio 108,274.66
floor, Paranaque City Hall
8. Rehabilitation of drainage at ground floor left wing, Paranaque San Antonio 150,000.00
City Hall
9. Repair and improvement of Paranaque Elementary School San Dionisio 3,443,598.36
Central
10. Improvement of Paranaque Elementary School Unit 2 San Dionisio 358,273.66
11. Construction of School building at Paranaque E/S Central San Dionisio 100,000,000.00
12. Improvement of community precinct 7 San Dionisio 929,113.70
13. Science High School building located at Paranaque National San Dionisio 50,000,000.00
High School
14. Repair and improvement of Sto. Nino Elementary School Sto. Nino 3,207,879.68
15. Rehabilitation of Tambo Elementary School Tambo 5,713,749.86
16. Rehabilitation of Camp Claudio Elementary School Tambo 4,403,546.03
17. Fabrication and installation of steel grills at Tambo E/S Tambo 339,049.00
18. Paranaque City College Paranaque 50,000,000.00
Land and Land Improvements
19. Construction of secondary wall (fence) at Hur St., Annex 35 Don Bosco 148,595.42
20. Riprapping and improvement of basketball court at Annex 35
(Phase 3) Don Bosco 600,318.89
21. Installation of streetlights along Quirino Ave., Brgy. Don Galo Don Galo and
and Tambo Tambo 7,575,496.21
22. Construction of footbridge and concreting of pavement at Sitio Merville 184,275.25
Malaya
23. Construction of lighting facilities (lamp posts) along two sides of Moonwalk 400,000.00
Daang Batang
24. Construction of one (1) unit deepwell at Moonwalk High School Moonwalk 900,000.00
25. Repair and improvement of Phimra gym located at Moonwalk Moonwalk 2,175,079.97
Village (Phase 1)
26. Dredging and desilting of Parañaque river Parañaque River 5,528,000.00
27. Installation of lights at parking area, Parañaque City Hall San Antonio 1,200,000.00
28. Road concreting of Cemetery Road with perimeter fence San Dionisio 5,000,000.00
(pathwalk)
29. Installation of 174 streetlights at various subdivision/ mission San Isidro 2,283,040.88
areas
30. Concreting of basketball court at Valenzuela Cmpd. Sto Nino 359,626.15
31. Construction of tricycle terminal and talipapa Sto. Nino 1,000,000.00
32. Construction of one (1) unit deepwell at Sun Valley E/S Sun Valley 900,000.00
33. Improvement of basketball court at Florencio Bernabe Sr. Tambo 248,782.33
Ave. (Seaside Cmpd.)
34. Concreting and improvement of drainage system at various Various 40,000,000.00
barangays
Sub-total 388,744,880.34
1 of 2
Annex 4-1
Project/
Name of Project Location
Contract Cost
For Completion
35. Rehabilitation of lamp posts along Dr. A. Santos Avenue 6,259,881.58
36. Const. of 1 unit deepwell at Dr. Arcadio High School BF 900,000.00
37. Cistern located at Ground Floor San Antonio 1,034,088.54
38. Installation of streetlights Sucat Road 13,000,000.00
Sub-total 21,193,970.12
Total P 409,938,850.46
2 of 2

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Special Audits Office

Report No. 2009-03

Management of Loans and Borrowings

Local Government Units

Honorable JESSE M. ROBREDO

We are pleased to transmit the report on the government-wide performance

The audit was conducted to determine whether loans and borrowings by

We look forward to the proper implementation of the recommendations

Very truly yours,

By Authority of the Chairman:

Part I Executive Summary 1

Part II Credit Financing Facilities 11

Part III Audit Observations 28

Chapter 1 Adequate and Appropriate Policies for

Chapter 2 Proper Maintenance of Loan Records 62

Chapter 3 Responsive Programs and Projects 74

Chapter 4 Effective Loan Utilization and Project

Chapter 5 Compliance with Existing Laws and

Part IV Recommendations 142

Part V Annexes 148

1-1 Schedule of Interest Expenses on Bonds (City Governments

1-2 Comparative Costs Between Borrowing from Banks and

2-1 Schedule of Unrecorded Loan Releases, Principal

2-2 Schedule of Book and Bank Balances (Puerto Princesa City)

2-3 Comparative Schedule of Loans Payable and Interest

2-4 Schedule of Unrecorded and Erroneous Transactions

3-1 Schedule of Projects Not defined and/or Not Included in the

4-1 List of Projects Not Yet Implemented and for Completion

At present, LGUs are borrowing from government and private financing

• Adequate and appropriate policies for assessing LGU’s

AUDIT SCOPE AND METHODOLOGY

Region I Dagupan City

Region XI Davao City

• Reviewed existing policies, guidelines and mechanism on contracting loans

• Reviewed LGU’s Annual Development Plan/Public Investment Program to

• Reviewed and analyzed loans/borrowing utilization reports and disbursement

• Interviewed personnel involved in the implementation of projects funded from

These problems were compounded by deficiencies in the implementation

• The specific programs and projects to be implemented within a specified

• The projected revenues of a number of projects were not realized due to

• Implementation of loans intended for lending to micro, small and medium

• Out of 113 loan-funded projects inspected by the team, 54 projects were

• Payments out of loans by the City Government of Dagupan for the

• Loan releases, repayments and disbursements in the total amount of P460.78

In addition, a number of LGUs were not maintaining subsidiary ledgers to record

MANAGEMENT’S REACTION TO AUDIT OBSERVATIONS

Generally, the LGUs claimed that:

• On the contracting of loans with term in excess of the economic life of

• On unused garbage bins

− Garbage bins found by the team during inspection to be

• On loans in excess of borrowing capacity

− The City Government of Antipolo’s loan under the Special

− The team’s computed maximum borrowing capacity for the

• On deficiencies noted in the LGUs’ development plans

− The Annual Investment Programs (AIPs) and other development

• On the implementation of school building projects without proper

− The Medium Term Development Plan (MTDP) and AIP were

• On the deficiencies noted in the implementation of projects

− The costs corresponding to the deficiencies noted in a number of

On the other hand, projects to be funded out of loans should be specifically

As presented in the LGUs’ Consolidated Financial Report, during CYs 2006 to

Loans and Borrowings