09-MalabonCity2018 - Part2-Observations - and - Recomm

OBSERVATIONS AND RECOMMENDATIONS
The audit covered the different thrust areas for Calendar Year (CY) 2018 identified by
the Assistant Commissioner, Local Government Sector as well as those areas and
accounts identified during the risk assessments conducted by the Office of the Director
and the Audit Group. The results are presented in detail in the following discussions.
FINANCIAL AND COMPLIANCE AUDIT
1. The balance of the Property, Plant and Equipment (PPE) accounts of

P2.487 billion is unreliable due to (a) unreconciled difference of
P315.766 million between the book balance and the Report on the Physical
Count of PPE (RPCPPE) of P2.171 billion; (b) presence of items costing below
P10,000 amounting to P63.021 million which should have been reclassified to
the semi-expendable accounts; and (c) inclusion of unserviceable items
amounting to P5.152 million.
Unreconciled difference of P315.766 million between the

books and the RPCPPE
1.1 Paragraph 4, Section 114, Volume I of Manual on NGAS for LGUs (NGAS
Manual, for brevity) provides:
The General Services Officer or the Municipal Treasurer, as

the case may be shall likewise maintain stock cards and
property cards for supplies; property, plant and equipment;
and work animals in their custody to account for the receipt
and disposition of the same. The balance per stock
card/property cards should always reconcile with the ledger
cards of the accounting unit. They should also reconcile with
other property records like Acknowledgement Receipt for
Equipment (ARE).
1.2 During the year, the Inventory Committee had conducted the physical count of
all properties of the City and submitted the RPCPPE as of December 31,
2018.
1.3 As of December 31, 2018 the GL balance of PPE accounts from all funds
amounted to P2,486,770,575.75 while the RPCPPE totalled
P2,171,004,105.69, showing a difference of P315,766,470.06. It was also
noted that several PPE accounts have no corresponding physical count per
RPCPPE records.
1.4 Verification of the account disclosed that the unreconciled difference was due
to the inability of the concerned Inventory Committee, the City General
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Services Department (CGSD) and the CAD to conduct reconciliation of the
said account as required under Paragraph 4, Section 114, Volume I of the
NGAS Manual, as a result, the balance of PPE accounts is unreliable.
Presence of items costing below P10,000.00 amounting to

P63.021 million which should have been reclassified to the
respective semi-expendable accounts
1.5 Sections 3 and 4.0-4.3 of COA Circular No. 97-005 dated July 1, 1997 states:
3.0 INCREASE OF CAPITALIZATION BENCHMARK
The capitalization benchmark for items categorized as

Furniture, Fixtures, Equipment, Books and Work Animals
(8-79-000) is hereby increased from P1,500.00 and
P10,000.00
4.0 CONTROL MEASURES
In order to maintain adequate control over furniture,

fixtures, equipment, books and work animals costing below
P10,000.00 and classified as Inventories-Semi-expendable
Supplies, Containers and Property, the following internal
control measures and accounting shall be instituted by the
concerned agencies.
4.1 Furniture, fixtures, equipment, books and work animals

costing below P10,000.00 per unit of item shall be
recorded as semi-expendable property or other
appropriate equivalent asset account in the concerned
agency's books of accounts. In addition, Memorandum
Receipts (MRs) shall be maintained for purposes of
control and accountability.
4.2 The following accounts shall be used to record items

classified as semi-expendable property:
Account Code Account Title
8-72-600 Inventories-Semi-Expendable
Supplies, Containers and
Property
8-86-600 Deferred Credits Semi-

Expendable Supplies,
Containers and Property
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3-07-000 Supplies and Materials
4-36-000 Furniture, Fixture, Fixtures,

Equipment, and Books Outlay
4.3 A separate inventory-taking of all furniture, fixtures,

equipment, books and work animals classified under
the category of semi-expendable Supplies, Containers
and Property and Fixed Asset accounts shall be done
every year in accordance with existing rules and
regulations. Results of such inventory-taking shall be
reconciled with the books of accounts and
adjustment(s), if any, shall be immediately effected.
1.6 Analysis of the PPE accounts revealed that there were numerous items costing
below P10,000.00 totaling P63,020,721.00, which were not reclassified to the
semi-expendable items as required under COA Circular No. 97-005. As a
result, the PPE accounts is overstated by the same amount due to the non-
reclassification of these items, consequently, PPE balances at year-end is
unreliable.
Inclusions of unserviceable items amounting to

P5.152 million.
1.7 Further review of RPCPPE noted the inclusion of assets which were marked
unserviceable amounting to P5,152,532.16. These assets are no longer useful
and helpful in the operations or activities of the City. More often than not,
these assets are left unattended. It would be wiser if these assets are
immediately disposed of and the proceeds, if any, can augment the income of
the City and will redound to the benefit of its constituents. Consequently, it
will de-clog the storage area of the City.
1.8 Finally, the presence of these unserviceable assets in the PPE accounts is not
reflective of the true nature and value of its asset in relation to the usefulness
in the operation of the City towards the attainment of its goals and objectives.
1.9 Other observations -
a. Of the 227 parcels of land valued at P88,487,987, only 109 valued at

P40,332,706 are with Transfer Certificate of Title (TCT) which validates
ownership of the properties by the City. The 118 parcels of land valued at
P48,155,281 are without TCT.
b. There were items in the PPE with remarks as cannot be located/missing
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amounting to P1,079,879.40, without formal report or letter demanding
explanation from the end-user on the circumstances or whereabouts of the
missing, lost or cannot be located items.
1.10 We reiterated last year’s recommendations that:
a. The CGSD and the Inventory Committee complete the reconciliation

of the RPCPPE with the CAD and CGSD records;
b. The CAD –
 Effect the necessary adjustments to correct the balances of the PPE

accounts based on the results of the reconciliation made;
 Reclassify items costing below P10,000.00 to the appropriate semi-

expendable accounts; and
c. The CGSD cause the immediate disposal of unserviceable items and

the CAD to record the dropping from the books of the items disposed.
Management comments/actions:
1.11 Management informed that there is still ongoing reconciliation of records

between CGSD’s RPCPPE and accounting records. Anent thereto, the General
Services Inventory Team upon consultation with CAD was able to reconcile
discrepancies with CGSD’s encoded figures in their database amounting to
P82,942,728.04.
1.12 It was further mentioned that the CAD already identified semi-expendable
items included in the PPE accounts and were already adjusted in the books of
the City.
1.13 Management’s reconciliation of PPE records and identification of semi-

expendable items included in the PPE accounts are subject to verification by
the CAO.
1.14 The Executive Order will be amended to include common office supplies and
other supplies, medicines and other inventory items.
2. The reported cash account balance of P702.969 million is unreliable due to the
(a) unrecorded disbursements and unidentified reconciling items in the
amount of P19.772 million and P5.894 million, respectively, carried over from
CYs 1999 to 2003 in the General Fund (GF) books; and (b) discrepancies
between the book and bank balances of P4.684 million for the Special
Education Fund (SEF), P1.438 million for Trust Fund (TF) and P386,506.72
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for the City of Malabon University (CMU), which cannot be
adjusted/ascertained in the absence of supporting documents and Bank
Reconciliation Statements (BRS).
2.1 Sections 3.2, 3.3 and 3.4 of COA Circular No. 96-011 dated October 2, 1996
require the City Accountant, within 10 days from receipt of the Bank
Statements (BS) to (a) reconcile the same with the General Ledgers (GLs) and
prepare the Bank Reconciliation Statements (BRS), (b) draw Journal Entry
Vouchers (JEVs) to record all valid reconciling items that require adjustment
and correction in the GL, and (c) submit to the Auditor within 10 days after
the end of each month, the BRS including the paid checks and original copies
of debit/credit memos for verification.
2.2 Comparison of the General Ledger (GL) balances as of December 31, 2018 of
the Cash in Bank-Local Currency, Current Account (LCCA) for all funds
against the balances confirmed by the depository banks disclosed
discrepancies for the current year amounting to P1,437,897.43 for TF and
P386,506.72 for CMU, totaling P1,824,404.15, as shown below:
Balance Balance per

Book balance Net Difference
Account No. per Book Bank
per BRS
(a) (b) (a-b)
0652-10xx-xx P365,567,159.57 P 365,662,784.79 P398,508,219.86 P(32,845,435.07)
0652-10xx-xx 406,838.73 406,838.73 406,838.73 -
0652-10xx-xx 7,979,100.47 7,979,100.47 8,299,594.67 (320,494.20)
0652-10xx-xx 1,509,370.49 1,509,370.49 1,509,370.49 -
0652-10xx-xx 152,435,158.74 152,435,158.74 155,589,906.39 (3,154,747.65)
0652-10xx-xx 1,673,750.00 1,673,750.00 1,673,750.00 -
288-539xxxx - 1,227.72 - 1,227.72
0652-10xx-xx - 3,150,418.11 3,659,514.11 (509,096.00)
00652-10xx-xx - 3,578,670.98 2,684,295.98 894,375.00
11568470600xxxx - 96,865.94 96,807.85 58.09
10037000xxxx - 13,338,247.99 12,065,862.11 1,272,385.88
0652-10xx-xx - 4,532,269.05 4,534,564.03 (2,294.98)
0652-10xx-xx - 411,901.65 1,071,726.83 (659,825.18)
0652-10xx-xx - 513,878.69 511,565.83 2,312.86
0652-10xx-xx - 74,076,497.43 75,035,559.85 (959,062.42)
0652-10xx-xx - 2,981,990.00 3,723,358.00 (741,368.00)
0652-10xx-xx - 6,781,080.00 8,449,110.00 (1,668,030.00)
0651-12xx-xx - 178,050.00 208,067.03 (30,017.03)
Total P529,571,378.00 P639,308,100.78 P678,028,111.76 P(38,720,010.98)
Less: Outstanding Checks (36,895,606.83)
Net Discrepancy (Current) (1,824,404.15)
with prior years discrepancies
11568470xxxx 25,744,857.23 25,744,857.23 79,156.66 25,665,700.57
11568470xxxx - 9,706,933.04 5,023,404.33 4,683,528.71
Total P30,349,045.94
2.3 The prior years’ reconciling items totaling P25,665,700.57 appearing in the
BRS of the GF from CYs 1999 to 2003 could not be effected in the books by
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the City Accounting Department (CAD) since these pertain to unrecorded
disbursements of P19,771,952.96 and unidentified reconciling items of
P5,893,747.61 with no pertinent/supporting documents.
2.4 Likewise, the net discrepancy of P4,683,528.71 for SEF, which pertains to
prior years’ discrepancy between the book and bank balance which could not
be identified due to the absence of BRS and documents pertaining thereto.
2.5 Furthermore, it was noted that the CAD only prepares BRS for the seven bank
accounts out of the 20 bank accounts maintained by the City.
2.6 The absence of BRS for SEF, TF and CMU was already noted and raised in
the previous audit reports. The importance of preparing the monthly BRS as a
control measure that may lead agency officials to uncover irregularities in the
handling of cash asset by responsible officials is again emphasized.
Consequently, if the book balance reconciles with the bank balance after
considering the valid reconciling items, it provides added assurance that the
City’s cash transactions are recorded accurately in the books.
2.7 We reiterated the prior year’s recommendations that -
a. The City Treasurer coordinate with the depository banks as regards

the documents to support the unadjusted and unidentified reconciling
items under the GF;
b. The City Accountant -
 Assign personnel to prepare the BRS on a monthly basis for all

depository accounts pursuant to COA Circular No. 96-011; and
 Effect immediately the adjusting entries in the books for reconciling

items identified in the BRS.
2.8 The City Treasurer discussed that their Office have exerted so much efforts to
locate all missing documents as regards the unrecorded transactions, more
specifically missing disbursement vouchers and payrolls with a total amount
of P4,302,262.41. Moreover, it was mentioned that series of coordination with
the authorized depository bank concerned were done, but in spite of their
diligent efforts, still no result was obtained. Furthermore, the City Treasurer
mentioned that there is a move to request for write-off on the said
unreconciled balance.
2.9 Meanwhile, Management informed that the CAD, City Treasury Department
(CTD) and City Legal Department (CLD) are in close coordination in
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determining the exact amount and those liable for the unreconciled items.
Based on the initial findings, several of the persons responsible were already
deceased, however the CLD is in the process obtaining facts and supporting
documents.
2.10 The Management further asserted that it took three to six months for the banks
to act on their request for copies of bank statement, hence, the delay. The
CAD is planning to use snapshot from the bank to start preparing BRS while
awaiting the receipt of the bank statements. CAD is also currently verifying
the reconciling items in order to effect the adjusting entries.
Auditor’s Rejoinder:
2.11 The City Auditor’s Office (CAO) suggested to report every detail that
transpired during the fire incident way back in CY 2004 and attach all
supporting documents, in order to support their claim for write-off.
3. The City did not conduct physical inventory of supplies and materials and did
not maintain supplies ledger cards and other inventory records to support the
balances per books, thereby casting doubt on the correctness of the inventory
accounts balance of P27.890 million at year-end.
3.1 Sections 120 and 124, Volume I of the NGAS Manual provide:
Sec. 120. Recording of Deliveries of Supplies or Property in

the Books of Accounts. - The Chief Accountant shall maintain
Supplies Ledger Cards per stock number; Property, Plant and
Equipment Ledger Cards for each category of assets; and Real
Property Ledger Cards for land. x.
Sec. 124. Inventory of Supplies or Property. - The local chief

executive shall require periodic physical inventory of supplies
or property. Physical count of inventory items by type shall be
conducted semestrally and reported in the Report of the
Physical Count of Inventories (RPCI). This shall be submitted
to the Auditor concerned not later than July 31 and January
31 of each year for the first and second semesters,
respectively.
3.2 The details of the year-end balances of Supplies Inventory account of

P27,889,774.13 are shown below:
Supplies and Materials General City of Special Total

Inventory Accounts Fund Malabon Education
University Fund
Medical, Dental & P146,880.00 - - P146,880.00
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Supplies and Materials General City of Special Total
Inventory Accounts Fund Malabon Education
University Fund
Laboratory Supplies for
Distribution
Office Supplies Inventory 679,908.55 P123,081.80 - 802,990.35
Accountable Forms,
Plates & Stickers 1,789,315.75 79,800.00 5,350.00 1,874,465.75
Non-Accountable Forms
Inventory 1,297,772.70 - - 1,297,772.70
Food Supplies Inventory 3,458,800.00 - - 3,458,800.00
Drugs & Medicines
Inventory 2,771,809.76 11,266.00 - 2,783,075.76
Medical, Dental and
Laboratory
Supplies Inventory 10,838,656.24 - - 10,838,656.24
Agricultural and Marine
Supplies Inventory 215,839.50 - - 215,839.50
Textbooks and
Instructional
Materials Inventory 119,479.58 - - 119,479.58
Other Supplies Inventory 6,272,712.25 79,102.00 - 6,351,814.25
Total P27,591,174.33 P293,249.80 P5,350.00 P27,889,774.13
3.3 Verification disclosed that the CGSD failed to conduct the semestral physical
inventory of supplies and materials, and no report thereon was submitted to
the City Auditor’s Office, in accordance with the afore-cited regulation.
3.4 Further analysis revealed that Supplies Ledger Cards for inventory accounts
were not maintained by the CAD to support the balance as of year-end, as
required under Section 120, Volume I of the NGAS Manual.
3.5 We recommended that Management require:
a. The Inventory Committee to conduct a semestral inventory of

supplies and materials and prepare inventory report which shall be
reconciled with the CGSD and CAD records before submission to the
City Auditor’s Office in accordance with Section 124, Volume I of the
NGAS Manual; and
b. The CAD to maintain Supplies Ledger Cards to ensure that all

purchases and issuances of supplies and materials are recorded, in
conformity with Section 120, Volume I of the NGAS Manual.
Management comment/action:
3.6 Management thru CGSD informed that they maintain a Ledger/Stock Card for
the inventory of supplies. For the inventory of supplies, they will conduct as
such pending the amendment of the Executive Order on Inventory Committee
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of which to include supplies. Nevertheless, they informed that they will
comply with the recommendations.
4. The City was not able to meet its over-all revenue projections for CY 2018 in
the amount of P627.205 million due to lack of periodic review of collection
performance of the Income accounts.
4.1 Section 316 of R.A. No. 7160 and Local Budget Circular (LBC) No. 112
dated June 10, 2016 or the Budget Operations Manual for CY 2016 requires
that a Quarterly Report of Income, a budget document (LBAC Form No. 1),
be prepared by the City Treasurer, certified correct by the by the City
Accountant and submitted to the Local Finance Committee (Committee for
brevity), thru the City Budget Officer, on or before the 10 th day of the month
following the ending quarter. This document provides information to the
members of the Local Finance Committee (LFC) on the trend of reported
income and at the same time prepared them on appropriate action for revenue
accounts that missed the projections or account/s with income estimate/s but
without registered collections.
4.2 It was noted that the Committee did not use the Quarterly Report of Income
(QRI) as basis in the conduct of the semi-annual review as required under
Section 316 of R.A. No. 7160, to check the performance vis-à-vis the targets
set at the beginning of the year. Also, the Committee did not use the Report of
Revenues and Receipts (RRR) rendered by the CAD which contained the
same information with that of the Quarterly Report earlier mentioned, as a
tool in the periodic review of the financial performance.
4.3 Analysis of the projected revenue and realized income of the City contained in
the Approved Annual Budget for CY 2018 and Statement of Income and
Expenses reported in the CY 2018 Financial Statements, respectively,
revealed that Management was not able to meet its over-all revenue
projections for the CY 2018 by the net amount of P627,205,230.10, as
summarized below:
2018
Particulars Revenue Difference Remarks
Actual revenue
Targets
Tax Revenues 300,800,000 185,810,504 (114,989,496) Decrease
Tax On Business 283,493,000 23,920,848 (259,572,152) -do-
Other Taxes 35,831,000 31,486,002 (4,344,998) -do-
Regulatory Fees - Business 98,529,000 257,939 (98,271,061) -do-
Regulatory Fees - Non-Business 12,144,600 731,300 (11,413,300) -do-
Service Fees 97,455,536 45,574,071 (51,881,465) -do-
Receipts From Economic Enterprise 91,884,000 10,470,424 (81,413,576) -do-
Unified Traffic Management Fund 13,445,000 - (13,445,000) -do-
Other Extraordinary Receipts 1,393,000 5,147,124 3,754,124 Increase
Shares From National Tax Collections 765,024,864 769,396,557 4,371,693 -do-
Total Receipts P 1,700,000,000 P1,072,794,770 P(627,205,230)
4.4 Further review showed that (a) nine revenue accounts totaling P28.802 million
realized income more than the targets; (b) eight revenue accounts amounting
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to P147.678 million missed the projected income; (c) 57 revenue accounts
P514.984 million have income estimates but without reported collections; and
(d) five revenue accounts totaling P6.655 million have registered collections
but without income estimates, as shown in the details as follows:
a. Nine revenue accounts realized income more than the targets by P28.802
million
Actual Revenue
Projections/
No. Particulars Amount Per FS Difference Remarks
Targets
2018
1 Penalties - RPT P10,800,000.00 P16,402,528.48 P5,602,528.48 Increase
2 Annual Fixed Tax on Delivery
2,000,000.00 2,540,360.00 540,360.00 Increase
Truck or Van
3 Tax On Transfer Of Real Property
12,250,000.00 18,996,641.57 6,746,641.57 Increase
Ownership
4 Community Tax (C & C1) 4,820,000.00 12,164,435.63 7,344,435.63 Increase
5 Fees on Weight And Measures 252,000.00 257,938.79 5,938.79 Increase
6 Sanitary Inspection Fees 4,200,000.00 4,555,350.44 355,350.44 Increase
7 Garbage Fees 17,530,000.00 21,478,623.43 3,948,623.43 Increase
8 Interest Income 1,073,000.00 3,986,605.56 2,913,605.56 Increase
9 Lotto Share 2,200,000.00 3,544,962.60 1,344,962.60 Increase
Total P55,125,000.00 P83,927,446.50 P28,802,446.5
b. Eight revenue accounts missed the projected income by P147.678 million
Actual Revenue
Projections/
No. Particulars Amounts Per FS Difference Remarks
Targets
2018
1 Real Property Taxes P290,000,000.00 P169,407,976.00 P(120,592,024.00) Decrease
2 Franchise Tax 31,600,000.00 21,380,487.80 (10,219,512.20) Decrease
3 Professional Tax 631,000.00 324,925.00 (306,075.00) Decrease
4 Business Plates 1,000,000.00 731,300.17 (268,699.83) Decrease
5 Hospital Fees (ONM) 33,134,546.00 19,421,177.42 (13,713,368.58) Decrease
6 Parking Fees 150,000.00 117,600.00 (32,400.00) Decrease
7 Market Rental (Income Decrease
From Market) 7,950,000.00 6,467,400.00 (1,482,600.00)
8 Cemetery Fee 2,600,000.00 1,536,779.00 (1,063,221.00) Decrease
Total 367,065,546.00 219,387,645.39 (147,677,900.61)
c. 57 revenue accounts have income estimates of P514.984 million but

without reported collections
Actual
Projections/ Revenue
No. Particulars Difference Remarks
Targets Amounts Per
FS 2018
1 Tax on Business of Printing And -
Publications P2,056,000.00 P (2,056,000.00) Decrease
2 Amusement Tax 837,000.00 - (837,000.00) Decrease
3 Other Business Taxes 247,000,000.00 - (247,000,000.00) Decrease
4 Community Tax (A & B) 10,700,000.00 - (10,700,000.00) Decrease
5 Fines And Penalties 7,430,000.00 - (7,430,000.00) Decrease
6 Mayor's Permit 27,120,000.00 - (27,120,000.00) Decrease
7 Permit On Occupation Or -
Calling 6,850,000.00 (6,850,000.00) Decrease
8 Zonal/Locational Clearances 14,395,000.00 - (14,395,000.00) Decrease
9 Slaughter Permit Fees 1,199,000.00 - (1,199,000.00) Decrease
10 A. Meat Handler Fees 66,000.00 - (66,000.00) Decrease
11 Dressed Chicken 1,075,000.00 - (1,075,000.00) Decrease
12 Signboard Permit Fees 3,500,000.00 - (3,500,000.00) Decrease
13 Cockfighting Permit Fees 1,920,000.00 - (1,920,000.00) Decrease
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Actual
Projections/ Revenue
No. Particulars Difference Remarks
Targets Amounts Per
FS 2018
14 Building Permit Fee 16,655,000.00 - (16,655,000.00) Decrease
15 Electrical Permit Fee 10,415,000.00 - (10,415,000.00) Decrease
16 Mechanical Permit Fee 8,000,000.00 - (8,000,000.00) Decrease
17 Occupancy Permit Fee 550,000.00 - (550,000.00) Decrease
18 Subdivision / Development Fee 52,000.00 - (52,000.00) Decrease
19 Plumbing Permit Fee 3,950,000.00 - (3,950,000.00) Decrease
20 Electronic Permit Fee 1,362,000.00 - (1,362,000.00) Decrease
21 Excavation 532,000.00 - (532,000.00) Decrease
22 Supervision 221,000.00 - (221,000.00) Decrease
23 Ambulant Vendors 65,000.00 - (65,000.00) Decrease
24 Fine And Penalties - Permit & -
Licenses 350,000.00 (350,000.00) Decrease
25 Marriage Application Fee 88,000.00 - (88,000.00) Decrease
26 Marriage License Fee 72,600.00 - (72,600.00) Decrease
27 Secpa 35,000.00 - (35,000.00) Decrease
28 Burial Permit 330,000.00 - (330,000.00) Decrease
29 Exhumation/Removal Of -
Cadaver 245,000.00 (245,000.00) Decrease
30 Embalming Permit 100,000.00 - (100,000.00) Decrease
31 Entrance Fee /Cadaver 380,000.00 - (380,000.00) Decrease
32 Transfer Permit Fee Of Cadaver 125,000.00 - (125,000.00) Decrease
33 Mayor's Certificate 530,000.00 - (530,000.00) Decrease
34 Health Certificate (BPLO) 2,750,000.00 - (2,750,000.00) Decrease
35 Health Certificate (Health -
Office) 400,000.00 (400,000.00) Decrease
36 Mayor's Clearance 25,000.00 - (25,000.00) Decrease
37 Police Clearance 5,000,000.00 - (5,000,000.00) Decrease
38 Dog Ownership / Registration 214,000.00 - (214,000.00) Decrease
39 Ceso - Malabon City Ordinance 500,000.00 - (500,000.00) Decrease
40 Other Fines And Penalties 350,000.00 - (350,000.00) Decrease
41 Secretary's Fees / Certification -
Fees 7,170,000.00 (7,170,000.00) Decrease
42 Civil Registry Fees 4,000,000.00 - (4,000,000.00) Decrease
43 Pharmacy (ONM) 9,000,000.00 - (9,000,000.00) Decrease
44 Laboratory & Radiology -
Services (ONM) 15,753,000.00 (15,753,000.00) Decrease
45 Hospital Fees (PBM) 6,513,490.00 - (6,513,490.00) Decrease
46 Registration Of Fishing Vessel 4,500.00 - (4,500.00) Decrease
47 A. Building 3,200,000.00 - (3,200,000.00) Decrease
48 B. Sports Complex 1,320,000.00 - (1,320,000.00) Decrease
49 C. MRH 550,000.00 - (550,000.00) Decrease
50 Ferry Rental 120,000.00 - (120,000.00) Decrease
51 City of Malabon Polytechnic -
Institute 9,470,000.00 (9,470,000.00) Decrease
52 City of Malabon University 66,674,000.00 - (66,674,000.00) Decrease
53 Motorized Tricycle Operation's -
Permit 5,445,000.00 (5,445,000.00) Decrease
54 Pedicab Permit Fees 1,200,000.00 - (1,200,000.00) Decrease
55 Traffic Violation 6,800,000.00 - (6,800,000.00) Decrease
56 Nha Amortization (Tañong -
Urban Bliss) 105,000.00 (105,000.00) Decrease
57 Sale Of Scrap 215,000.00 - (215,000.00) Decrease
Grand Total P514,984,590.00 P(14,984,590.00)
d. Five revenue accounts have registered collections of P6.655 million but

without income estimates, as shown in details
Actual
Revenue
No. Particulars Budget Difference Remarks
Amounts Per
FS 2018
1 Affiliation (30%) - P1,320.00 P1,320.00 Increase
2 Rental Income - 2,466,245.24 2,466,245.24 Increase
3 Income From Grants and Donations - 4,670.58 4,670.58 Increase
49
Actual
Revenue
No. Particulars Budget Difference Remarks
Amounts Per
FS 2018
4 Miscellaneous Income - 1,155,847.71 1,155,847.71 Increase
5 Incremental Collection Of V.A.T. - 3,026,730.48 3,026,730.48 Increase
Total - P6,654,814.01 P6,654,814.01
4.5 Evidently, the City had not exceeded its targets on the overall. In connection
therewith, we have examined the reported realized income for the period
covering CYs 2014 to 2018 as published in the Annual Audit Report (AAR)
of the City to ascertain whether it was able to attain its target trends on its
revenue accounts intended to finance its major projects, programs and
activities (PPAs).
4.6 For the year under review, it was noted that the City could have performed
better had there been periodic review of its financial performance.
4.7 Analysis of the revenue trends for the five-year period disclosed that
collections under the identified revenue accounts under the GF accounts
registered the following movements, summarized below:
Revenue Trends
or With reported zero

Fluctuating
Decreasing
Increasing
Zero Value
Account 2014 2015 2016 2017 2018
Local Taxes 367,061,166.00 349,480,862.44 404,523,739.86 605,834,796.00 662,678,208.22 2 0 8 6

Share from National Taxes 526,173,863.00 600,995,512.00 654,556,172.00 710,939,060.00 765,851,594.48 1 0 1 0
Permits and Licenses 65,177,804.00 59,773,640.42 61,295,514.06 76,781,611.00 87,705,339.10 1 0 2 3
Service and Business Income 146,374,208.00 171,651,639.89 164,454,651.97 187,629,545.56 253,453,171.38 1 0 6 2
Other Income 15,649,367.00 479,724.90 1,652,508.42 1,735,010.44 1,155,847.71 0 0 1 2
Shares, Grants and Donations 3,109,793.00 105,458,924.45 16,886,587.65 3,112,403.00 3,549,633.18 0 1 1 0
TOTAL OPERATING INCOME P1,058,368,397.00 P1,228,066,663.68 P1,242,073,659.90 P1,509,250,815.00 P1,686,688,454.97 5 1 19 13
4.8 Conditions where revenues are not realized and where income is collected,
despite the absence of projections, are caveat of the need to improve the
forecasting mechanism of the City.
4.9 It bears to stress that realization of the target estimates guarantee the funding
of projects, programs and activities (PPAs) of the City essential in the delivery
of public service to its constituents. Conversely, the inability to attain the said
projected income could result to non-implementation of certain PPAs.
4.10 It was observed that the City Treasurer monitors the accounts by maintaining
track of the actual collections and targets, but still, forecasting issues remained
unaddressed to date due to the absence of concrete deliberation on the revenue
generation income forecasting. This is evident in the revenue accounts that
consistently did not attain its target over the years as discussed above. No
information was gathered whether the Committee concluded a meeting from
time to time during the year to discuss the monitoring of the performance
efficiency on revenue generation.
50
4.11 Had the Committee religiously conducted proper deliberation on the revenue
generation with particular consideration on the (a) trends; (b) actual limitation
on the realization of income; and (c) income estimates submitted to the
Bureau of Local Government Finance (BLGF) by the City Treasury, they
could have offered a realistic and systematic revenue forecasts.
4.12 Finally, had there been periodic review of performance, alternative steps
would have been taken, if not to avoid, at least the Committee had minimize
the gap between the projected versus the realized income.
4.13 We commended, however, the CTD as the lead Department along with the
CBPLD and CAD, for being instrumental in the increase and efficient
collection of revenues of P28,802,446.50.
4.14 We recommended the following:
On revenue accounts that reported decreases in collections -
a. The City Business Permits and Licensing Department (CBPLD)

conduct an analysis of the identified revenue accounts pertaining to
business tax to address the decreasing trend in collection; and
b. The City Treasury Department (CTD) look into the possible causes
of the decline in the identified revenue accounts pertaining to RPT
and strategize to improve collection; and
On revenue accounts that reported collections without income estimates

and those revenue accounts that have targets but without reported
collections –
c. The Committee faithfully exercise its mandate under Section 316,

Article I, Chapter III of the said Act to have realistic projections for
each revenue accounts and exert efforts to collect the projected
amount.
4.15 The City Treasurer has assured that the Committee is doing its best to meet
target collection revenues for the year; regular meetings were conducted with
all the Revenue Generating Offices to come up measures to increase revenue
and those who obtained a decrease in collections were given warnings;
continuous coordination with barangay officials for assistance in the campaign
for real property tax collections.
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5. The assessment and collection of Real Property Taxes (RPT) on improvements
and machineries were still based on the 1992 Schedule of Fair Market Values
(SFMV) of properties instead of an updated schedule, thus, resulted in lower
assessed values and lower RPT collection.
5.1 Section 219 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991, provides that the City Assessor shall undertake a
general revision of real property assessments within two years from the
effectivity of the Code and every three years thereafter.
5.2 Joint Circular No. 2010-01 dated October 20, 2010 by the Department of the
Interior and Local Government (DILG) and Department of Finance (DOF)
enjoined all Provinces, Cities and Municipality of Pateros, Metro Manila to
prepare the Schedule of Market Values (SMVs) of Real Property and to
conduct the General Revision of Property Assessments in their Respective
Jurisdictions.
5.3 In relation thereto, Section Nos. 214 of R.A. No. 7160 and 305 of its
Implementing Rules and Regulations (IRR) provides that the provincial, city,
or municipal assessor may recommend to the Sanggunian concerned
amendments to correct errors in valuation in the schedule of fair market
values. The Sanggunian concerned shall, by ordinance, act upon the
recommendation within 90 days from receipt thereof.
5.4 A General Revision of Fair Market Values of Real Property was conducted in
the latter part of CY 2016. As a result, City Ordinance No. A09-2016 was
enacted with three years staggered implementation of the SFMV on land and
two years deferred implementation of the SFMV on land improvement and
machinery, effective CY 2017.
5.5 The City had recognized that there was a wide discrepancy between the
existing assessment and the fair and current market value of the real
properties. The current fair market value of properties had increased ranging
from 400 percent to more than 500 percent. Had the general revision of real
property assessments been made earlier and implemented, the RPT collections
should have correspondingly increased. Thus, the City was deprived of higher
income for many years which could have been used to fund priority projects
and programs.
5.6 However, barely one year from the implementation of City Ordinance
No. A09-2016, the same was amended by City Ordinance No. 16-2017 which
stopped the implementation of the imposition of the next 50 percent of the
SFMV on land and the implementation of the SFMV on land improvements
and machineries allegedly due to various appeals and requests from the
taxpayers.
52
5.7 To date the City Assessor is still using the outdated 1992 SFMVs on
improvement and machineries, which was approximately 12 to 25 percent
only of the current fair market values of real property in the City and
50 percent of the market value on land based on CY 2016 revised SFMVs.
Thus, collection for the year of RPT was not yet reflective of the property’s
current market value.
5.8 The expected increase in RPT collections from the full implementation of the
SMVs of Real Property was abruptly aborted affecting additional funding for
projects and programs of the City. It is noted that RPT collections for
CY 2017 had increased by P104,310,330.49 or 62 percent due to the
implementation of the 50 percent of the revised SFMV on land. However,
collections for CY 2018 had registered an increase of P28,475,266,81 or
10.45 percent only when the CY 2016 revised SFMV on land and
improvements and machineries was held in abeyance pending further review.
5.9 We recommended that Management adopt and implement an updated

Schedule of Fair Market Values for land, land improvements and
machineries to increase RPT collections which can be used to fund
programs and projects and activities of the city to benefit its constituents.
5.10 Management informed thru the CAD that they are now in the process of
finalizing the preliminary SFMV to be reviewed by the Bureau of Local
Government Finance (BLGF).
6. The City was not able to create an Internal Audit Service (IAS)/unit that will
function in accordance with the provisions of R.A. No. 4177 and
Administrative Order Nos. 70 and 278.
6.1 Sections 2 and 3 of R.A. No. 4177 amending R.A. No. 3456 states:
Section 2. There shall be created, organized and operated in all

branches, subdivisions and instrumentalities of the government,
including government-owned and/or controlled corporations to
be known as agency for purposes of this Act, internal audit
services which shall assist management to achieve an efficient
and effective fiscal administration and performance of agency
affairs and functions.
Section 3. The Internal Audit Service shall be under the direct

administrative supervision and control of the heads and/or
assistant heads of the agency. It shall be organized as an
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independent staff unit and shall correspondingly perform staff
functions. xxx.
6.2 DBM Budget Circular No. 2004-4 dated March 22, 2004, provides:
4.0 Policy Guidelines
4.1 On the Organization and Staffing of an IAU
xxx
4.1.2 Based on the foregoing functions, Internal audits of

government entities shall consist of operations audit
and financial audit. The determination of the
effectiveness and adequacy of security and
management controls over information systems and
databases and their integrity are deemed part of
operations audit and financial audit.
4.1.3 A government entity may organize and staff its IAU as

follows:
xxx
4.1.3.2 LGUs
LGU Organizational Structure and

Head of IAU
Highly Urbanized The IAU in a highly urbanized city may
City be a department to be headed by a City
Government Head II, SG-26.
The IAU in a city government may have

two units/groups on operation audit
and financial audit. The head of each
group shall be classified in accordance
with LBC No. 53.
4.2 On the Allocation/Reallocation of Positions to the Internal

Auditing Assistant or Internal Auditor Classes
4.2.1 The allocation/reallocation of positions to the Internal

Auditing Assistant or Internal Auditor classes shall be
based on the duties and responsibilities listed in
Annex A.
54
6.3 The above provisions of law are amplified by Administrative Order (AO)
Nos. 70 and 278 that directed the strengthening of the internal control systems
of government offices and agencies of the government, which provides among
others, the following:
Section 1, A.O. No. 70 –
All heads of government offices, agencies, government-owned

and/or controlled corporations, including government financial
institutions, State Universities and Colleges (SUCs) and local
government units, shall organize an Internal Audit Service
(IAS) in their respective offices.
The IAS shall be an integral part of the office and shall assist
in the management and effective discharge of the
responsibilities of the office, without intruding into the
authority and mandate of the Commission on Audit (COA)
granted under the Constitution. xxx
Section 2, A.O. No. 278 –
xxx. However, it shall not be responsible for or required to

participate in procedures which are essentially a part of
regular operating activities or in operations which are the
primary responsibility of another unit in the organization. The
IAS shall be detached from all functions of routine operating
character, such as the following (underscoring ours):
 Pre-audit of vouchers and counter-signature of checks; and,

 All activities related to operations enumerated therein
Section 3.1, A.O. No. 278 –
In the performance of their function, the internal auditors

should be able to exercise independence to render impartial
and unbiased judgments essential to the proper conduct of the
audit.
6.4 Validation of the organizational structure of the City disclosed that there is no
internal audit service that is functioning in accordance with the above-quoted
provisions of the law.
6.5 However, sometime in CY 2015 the City issued Executive Order (EO)
No. 15-12-23-026, series of 2015 which provides the establishment of the
Interim Malabon City Internal Audit Service under the Office of the City
Mayor with the following duties and functions:
55
 Advise the Local Chief Executive (LCE) on all matters relating to
management control and operations audit;
 Conduct management and operations audit of LGU functions, programs,

projects, activities, and outputs and determine the degree of compliance
with their mandate, policies, government regulations, established
objectives, systems and procedures/ processes, and contractual
obligations;
 Review and appraise systems and procedures, organizational structures,

asset management practices, financial and management records, reports
and performance standards of the LGU;
 Analyze and evaluate management deficiencies and assist top management

by recommending realistic courses of action; and
 Perform such other related duties and responsibilities as may be assigned

or delegated by the LCE or as may be required by law.
6.6 Moreover, as provided in Section II of the said EO, the structure of the IAS
should be composed of one officer, designated by the Local Chief Executive,
and two personnel from the existing manpower of the Office of the LCE.
6.7 It was noted however, that such personnel complement is quite small and not
in accordance with the requirement provided for in Sections 4.1.2, 4.1.3.2 and
4.2.1 of DBM Budget Circular No. 2004-4, thus, duties and functions laid out
in the EO was not carried out efficiently and effectively due to inadequacy of
personnel.
6.8 Also, it should be emphasized that qualifications standard should be observed

in filling up the plantilla position of the IAS. Currently, the IAS designated
Head is a lawyer with one staff (Job Order), who is a computer secretariat
graduate.
6.9 It was informed that the Management is presently working on the preparation
of a draft ordinance for the creation of IAS.
6.10 Due to aforesaid conditions, the present IAS, constituted under E.O. No. 15-
12-23-026, series of 2015, does not function as it purports to be and actual
work performed does not conform to those enumerated in Administrative
Order No. 278, such as, among others:
 Ascertaining the reliability and integrity of financial and operational

information and the means used to identify, measure, classify and report
such information;
56
 Ascertaining the extent of compliance and reviewing the systems
established to ensure compliance with government policies, plans and
procedures, laws and regulations which have impact on operations;
 Reviewing and evaluating the soundness, adequacy and application of

accounting, financial and other operating controls and promoting the most
effective control at reasonable cost;
 Reviewing operations and programs to ascertain whether or not results are

consistent with established objectives and goals and whether or not such
programs are being carried out as planned;
 Evaluating the quality of performance of groups/individuals in carrying

out their assigned responsibilities; and
 Recommending corrective actions on operational deficiencies observed.
6.11 As a result, some weaknesses in the internal control system were pointed out
in the current and previous years’ audit reports that compromised the
reliability of financial information and operational efficiency. These may
have been minimized, if not eliminated, with the proper functioning of an IAS
that will perform the above-mentioned activities.
6.12 We reiterated our previous year’s recommendation that Management

create and organize an IAS independent of the CAD.
6.13 The Interim Malabon City IAS is currently working closely with the City
Councils on the drafting of a proposed ordinance for the creation of Internal
Audit Service Office to include the reorganization of personnel in each of the
City Departments.
7. The balance of Accounts Payables and Due to Officers and Employees of

P1.360 million had remained outstanding and unclaimed for two years or more
and were not reverted to the GF of the City pursuant to the provision of
Section 98 of PD 1445.
7.1 Section 98, PD 1445 on reversion of unliquidated balances of accounts

payable states:
The Commission upon notice to the head of the agency

concerned, may revert to the unappropriated surplus of the
general fund of the national government, any unliquidated
57
balance of accounts payable in the books of the national
government, which has been outstanding for two years or more
and against which no actual claim, administrative or judicial,
has been filed or which is not covered by perfected contract on
record. This section shall not apply to unliquidated balances of
accounts payable in trust funds as long as the purposes for
which the funds were created have not been accomplished.
7.2 Analysis of the accounts for all funds disclosed that total Accounts Payables
of P1,039,813.25 and Due to Officers and Employees of P320,266.62 has
remained outstanding and unliquidated for two years or more casting doubt on
the propriety of the recorded accounts.
7.3 It bears to stress that it is unusual that an employee or any person/entity will
not pursue his/their claim for payment and for the City to withhold the
payment which remained unclaimed two years to more than three years
already.
7.4 In view thereof, we recommended that the Management cause the

reversion to the GF of Accounts Payable and Due to Officers and
Employees accounts which remained outstanding and unclaimed for two
years or more.
7.5 The Management informed that the CAD had already identified the payees on
the Accounts Payable which balances remained unpaid/unclaimed for more
than two years. By observing due process, the Management will first send
letters to the payees informing them about their unclaimed balances before the
CAD will make the necessary reversions.
7.6 The CAO maintained that Management should put time frame on the
reversion of the said unclaimed payables.
8. The contract for the collections, hauling and disposals of the City’s garbage
does not incorporate the salient features under Sections 6.4-10, 7.1a-e and
7.2 a-d, and 11 of City Ordinance No. 09-2003, dated July 17, 2003 and does
not include provision on the sanctions when the garbage collected is below the
minimum requirement per day, to ensure compliance and enforcement of the
regulations for the adequate protection of the interest of the City.
8.1 Section Nos. 6.4-10; 7.1a-e and 7.2a-d of City Ordinance No. 09-2003 entitled
An Ordinance adopting guidelines and procedures for a unified approach on
58
Solid Waste Management for Malabon City, state the following pertinent
provisions:
Section 6. Solid Waste Collection System
1.4 All trips during collection shall be required to have a

trip ticket indicating the Barangay as well as the route
the trip will cover.
1.5 Only the authorized garbage collector shall be allowed

to handle the waste from the generators.
1.6 Selling, scavenging and sorting or "bulasi" by the

garbage collection crew shall not be allowed at all times.
Violation of this rule shall be the cause of outright
dismissal of the employee and the contractor shall be
held liable for its crew and may cause the suspension or
termination of the contract of the contractor.
1.7 All garbage collectors, drivers and those involved in

the collection of waste shall be required to wear proper
uniforms and identification cards to be prescribed by the
City Health Department. They must possess an up-to-date
health certificate issued by the Local Health Officer.
1.8 The garbage collectors shall empty and return all

containers to the designated collection area with care.
Paper and other temporary containers shall be collected.
1.9 The garbage collector shall not dent, bent or otherwise

damage or alter the condition of the container.
1.10 Waste collected shall only be transported directly to the

prescribed disposal site.
Section 7. Waste Collection Truck Standards
7.1 Collection Equipment Standard
a. All collection equipment shall be registered with the

City Government to ensure the proper markings,
safety and sanitation of the vehicle.
b. All collection equipment shall be provided with

visible and proper markings of plate and body
number on both sides, name and telephone number of
59
the contractor. Markings shall have a minimum of
twenty (20) centimeters or eight (8 inches) in height.
c. All collection trucks shall be in good body condition

and equipped with tools and spare tires. No sacks nor
any eyesore must be seen hanging in the truck.
d. All collection trucks shall meet the emission

standards set by the DENR including smoke-belching
standards.
e. Collection trucks and all equipment shall be kept

clean and properly maintained and shall be washed
after each disposal.
7.2 Waste collection/Transport Standard
a. All trucks shall be properly covered to prevent

spillage of garbage and escape of odor when
travelling.
b. All trucks shall have complete taillights, flasher, side

mirror, plate number, tailgate, wiper and horn.
c. Reckless driving/irresponsible driver/under the

influence of alcohol, regulated and prohibited drugs
shall not be allowed.
d. Owners and operators of trucks shall sanitize,

disinfect and deodorize the collection trucks before
leaving the dispatching area and after its disposal.
8.2 The review of the contract for hauling services and garbage disposal of the
City for CY 2018 revealed that the above-mentioned provisions of the said
City Ordinance were not incorporated therein.
8.3 The inclusions of the salient features of the Ordinance in the contract will
substantially guide compliance by the garbage contractor of their duties and
responsibilities, and sanctions and penalties for non-compliance and violation
thereof. This will demonstrate seriousness and determination of the official
concerned in the implementation of programs designed to protect the health
and well-being of its residents.
8.4 Furthermore, the contract has no provision on the deduction from the monthly
billing if condition under Section 7 of the Terms of Reference, as stated
60
below, is not met by the contractor, i.e.; the amount of waste collected is less
than 700 cubic meters in a certain day, hence, disadvantageous to the City.
Considering the estimated population of the City and the

amount of waste generated per person per day, the Contractor
is bound to collect not less than Seven Hundred Cubic Meters
(700 cu. m.) of waste per day, including City and National
Holidays.
8.5 It is clear that the contractor is obliged to collect, haul and dispose not less
than 700 cubic meters of waste per day. However, there was no provision or
procedure for corresponding deduction/penalty in case the contractor failed to
meet the required volume of garbage to be collected. Review of payments for
the period January 1 to August 31, 2018 disclosed that there was no deduction
made on the monthly billing when the contractor failed to collect the required
daily volume of garbage as shown in the Summary of Garbage Hauling Trips
prepared by the City Environmental and Natural Resources Office (CENRO),
thus, disadvantageous to the City.
8.6 We recommended that Management:
a. Incorporate in the contract agreement the salient features under

Sections 6.4-10, 7.1a-e and 7.2a-d and 11 of City Ordinance No. 09-
2003, dated July 17, 2003 to ensure compliance and enforce sanctions
for non-compliance therewith; and
b. Provide procedures for the computation of deduction against monthly

billing whenever the garbage collected is below the minimum
requirement of 700 cubic meter per day.
8.7 The Management informed thru the CENRO that the contract is already
existing thus they will comply with the recommendations of the CAO upon
execution of the subsequent contract.
8.8 Management is not precluded in amending the CY 2019 contract.
SOLID WASTE MANAGEMENT
9. Out of the 21 barangays, only three have constructed Materials Recovery

Facilities (MRF), of which only two were operating as of CY 2018, thus, the
objective of the Solid Waste Management Program in putting up waste
61
facilities to ensure environmentally-sound methods in solid waste
management, in accordance with Section 32 of Republic Act (RA) No. 9003,
was not attained.
9.1 Section 32 of Republic Act 9003 otherwise known as the Solid Waste
Management Act requires:
There shall be established a Material Recovery Facility (MRF)

in every barangay or cluster of barangays. The facility shall
be established in a barangay-owned or leased land or any
suitable open space to be determined by the barangay through
its Sanggunian. For this purpose, the barangay or cluster
barangay shall allocate a certain parcel of land for the MRF.
The MRF shall received mixed waste for final sorting,
segregation, composting and recycling. The resulting residual
wastes shall be transferred to a long term storage or disposal
facility or sanitary landfill.
9.2 Interview with the concerned CENRO Officer revealed that of the 21
barangays in the City, only three barangays, namely Catmon, Dampalit and
Hulong Duhat, complied in putting up the required MRF. The remaining 18
barangays had tied up agreements with various junkshop owners to have their
junkshops functions as MRF in their locality. The said barangays sold
recyclable wastes to the junkshops who in turn sold them to recycling
facilities.
9.3 However, ocular inspection conducted by the Audit Team on the three
barangay MRFs disclosed that barangay Hulong Duhat MRF is already non-
operational, and only two barangays (Dampalit and Catmon) are fully
operational and compliant as designed. More so, inspection of the junkshops
disclosed that only segregated waste such as plastic and glass bottles, old
news papers, cardboards and the like are accepted by them. Thus, the
agreement with these junkshops do not substitute for the MRFs which are
supposed to receive collected mixed waste for final sorting, segregation,
composting and recycling, with the residual waste turned over to the garbage
contractor for transfer to a long term storage/disposal facility landfill.
9.4 As visualized, MRF will separate different materials found in solid waste in
order to promote recycling and reuse of resources to reduce the volume of
waste for collection and disposal. Hence, without MRF facilities in the City’s
barangays, the objective of ensuring environmentally-sound methods in solid
waste management may not be attained.
9.5 We recommended that the Management consider prioritization of the

establishment of the required MRF in every barangay or a cluster of
barangays in the City in compliance with Section 32 of RA No. 9003.
62
9.6 Management thru the CENRO informed that the problem of barangays is the
land area for the establishment of MRF. It was further mentioned that the
barangays had a tie up with junkshops which is recognized by MMDA, which
is continuous up to now.
9.7 Finally, they advised that the Department of Environmental and Natural
Resources (DENR) will be funding three barangays (Barangays Niugan,
Panghulo and San Agustin) for the establishment of MRF.
GENDER AND DEVELOPMENT
10. The established Gender and Development (GAD) Database lacks the sex
disaggregated data required by the Monitoring and Evaluation (M & E) Team
to be used in evaluating the outcome of the City’s GAD policies, programs and
projects (PPAs) necessary for the preparation and submission of the
corresponding reports to the DILG, in compliance with Sections 4. B, 5.1 and
5.8 of Joint Circular (JC) No. 2013-1 of the Philippine Commission on Women
(PCW), Department of Interior and Local Government (DILG), National
Economic and Development Authority (NEDA) and Department of Budget
and Management (DBM).
10.1 Section 4 Letter B (Institutional Mechanisms to Implement Magna Carta of

Women) of JC No. 2013-1 of PCW, DILG, NEDA and DBM, states:
B. Establishment and Maintenance of GAD Database
1. LGUs, through their Local Planning and Development

Offices (LPDO), shall spearhead the setting up and
maintenance of the GAD database to serve as basis for
gender-responsive planning, programming and policy
formulation. The GAD database, which can either be
manually operated or developed through software, shall
form part of the overall management information system
(MIS) of the LGU.
10.2 Sections 5.1 and 5.8 (Monitoring and Evaluating the Implementation of the
Magna Carta of Women) of the aforementioned JC requires:
Section 5.1 - All LGUs, shall establish, enhance, strengthen

and/or maintain a gender responsive
monitoring and evaluation (M&E) system. In
63
establishing and/or strengthening an M&E
System, the LCE of provinces, cities and
municipalities shall issue an Execute Order or
Administrative Order creating M&E Team.
Section 5.8 - All M&E activities shall be included in the

annual GPB.
10.3 The City’s GAD Focal Point System (GAD FPS) established the GAD
Database and created the gender responsive M&E Team. The M&E System
will have an important role in the gender responsive planning, programming
and policy formulation, as well as the evaluation of outcomes of the LGU
GAD PPAs of which the Evaluation Report shall be submitted to the DILG.
10.4 Verification from the Focal Person itself revealed that the M&E System are
not fully operating. The functions of the GAD M&E Team to evaluate the
outcomes of the City’s GAD plans, programs and policies and submit the
corresponding report to the DILG are not fully put into practice. Also, sex
disaggregated data is not sufficient to conduct gender analysis. In this regard,
the efficiency of the gender-responsive plans, programs and policies cannot
be determined.
10.5 We recommended that Management strengthen and develop the GAD

Database system to include sex disaggregated data and provide technical
assistance to the City’s Planning Office in ensuring that the established
GAD Database is systematically operating.
10.6 Management has submitted GAD database dated May 30, 2019.
11. The constituted GAD Focal Point System (GFPS) Executive Committee and the
created Technical Working Group (TWG) by the City under Executive Order
No. 17-07-11-012 dated July 11, 2017, series of 2017 were not fully compliant
with Rule VI, Section 37 C of the IRR of RA 9710 and JC No. 2013-1 of PCW-
DILG-DBM and NEDA, since the other sectors were not represented. Thus, this
may affect the effective and efficient implementation and monitoring of the
GFPS on PPAs towards addressing gender issues and concerns.
11.1 Rule VI, Section 37 C of the IRR of RA 9710 provides:
All government departments including their attached agencies,

offices, bureaus, SUCs, GOCCs, LGUs and other government
instrumentalities shall establish or strengthens their GFP
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System or a similar GAD mechanism to catalyze and
accelerate gender mainstreaming within the agency or LGU.
For LGUs, the GFP executive committee shall be chaired by

the LCE with the department heads and Chairs of the
Sanggunian Committee on Women, Children and Family, and
Appropriations, and representatives from the PNP's Women's
Desk, Indigenous People (IPs), and Persons with Disabilities,
private sectors, and other non-government organizations as
member. The GFP TWG or secretariat shall be composed of,
but not limited to, technical staff from the various departments
and concerned Sanggunian Committees. The GFP TWG Chair
shall be elected among the GFP TWG members. The
secretariat shall be designated by the GFP TWG Chair.
11.2 Section 4.1A.2 of PCW-DILG-DBM and NEDA JMC No. 2013-1 likewise
directs:
The LGU GFPS to establish as ExeCom and TWG, the

composition and the process of selection of which, are as
follows:
GFPS Executive Committee (ExeCom)
Chairperson Local Chief Executive

Members LGU Department Heads
Chairs of Sangguian Committees on Women,
Children and Family
Chairs of the Sanggunian Committees on
Appropriations
Representatives from the PNPs Women’s Desk
Representative from the Indigenous Peoples (IPs)
Representative from Persons with Disabilities
(PWDs)
Representative from the Private Sector
Representative from the Academe
Representative from recognized and/or accredited
Non-Government Organizations
Representative from Womens Associations
GFPS Technical Working Group (TWG)
Chairperson Shall be elected from among the GFPS TWG

members and shall be made official through the
issuance of a Memorandum duly signed by the
LCE and endorsed by his or her immediate
65
GFPS Executive Committee (ExeCom)
supervisor or concerned LGU Department Head
Members Key staff from the various LGU offices/departments

or committees and groups represented in the GFPS
Executive Committee, including a representative
from the LCE's office and members from the private
sector, academe and civil society organizations, as
appropriate.
11.3 The City Mayor issued Executive Order (EO) No. 17-07-11-012 series of
2017 dated July 11, 2017, reorganizing the Malabon GAD GFPS and TWG.
However, review of the said Executive Order disclosed the following
observation that may affect the efficient and effective performance of the
mandated functions of the GFPS:
 Representative from PNP Women's Desk, Indigenous People (IPs),

Persons with Disabilities (PWDs), Private Sector, Academe and
Recognized and/or Accredited NGOs were not designated or included as
members of the ExeCom;
 Names or identities of the designated representative from various

offices/organizations were not specified; and
 Official and permanent GAD Office or unit was not established.
11.4 We recommended that Management ensure that the GFPS Executive

Committee and the TWG representatives from the committees/councils,
national/regional government agencies, academe, private sector and civil
society organizations (CSOs) operating at the local level for effective
gender mainstreaming, and have establish a permanent GAD Office.
11.5 The Management informed that they are still working on the modification of
existing GAD Code and GAD-GFPS Executive Committee to ensure active
participation of various stakeholders to be part of the GAD-GFPS ExeCom.
LOCAL DISASTER RISK REDUCTION MANAGEMENT (LDRRM)
12. The Local Disaster Risk Reduction Management Office (LDRRMO) is not
compliant on the timely submission to the City Auditor of the Monthly Report
on Sources and Utilization of Disaster Risk Reduction Management Fund
(DRRMF) as required under Section 5.1.5 of COA Circular No. 2012-002 dated
66
September 12, 2012, hence, prompt evaluation on how the funds were utilized
on implemented PPAs cannot be ascertained. Moreover, the City Auditor’s
Office was not furnished with a copy of the City’s Annual Work and Financial
Plan for CY 2018.
12.1 Section 5.1.5 of COA Circular No. 2012-002 dated September 12, 2012
requires:
A Report on Sources and Utilization of DRRMF using the

format in Annex B shall be prepared and certified correct by the
Local Accountant. The Local Disaster Risk Reduction and
Management Officer shall submit the report on or before the
15th day after the end of each month through the LDRRMC and
Local Development Council (LDC) to the COA Auditor of the
LGU.
12.2 The Monthly Report on Sources and Utilization of DRRMF was not
submitted through the LDRRM Council and Local Development Council to
the CAO within the time frame required as stated in the above cited Circular,
with delays ranging from 31 to 141 days. Moreover, the required reports for
the months of January, February and September 2018 were not submitted.
12.3 A copy of the City’s Annual Work and Financial Plan for CY 2018 was not
provided to the CAO as bases for the timely review and validation of the
Monthly Report on Sources and Utilization of DRRMF, thus, the propriety of
the charges made to the LDRRMF could not be determined.
12.4 We recommended that the City’s LDRRMO:
a. Submit to the CAO the Monthly Report on Sources and Utilization

of DRRMF on or before the 15th day after the end of each month as
required under Section 5.1.5 of COA Circular No. 2012-002 dated
September 12, 2012; and
b. Furnish the CAO with a copy of the Annual Work and Financial
Plan as basis in the evaluation and monitoring of the
implementation of LDRRMs PPAs.
12.5 The Management had furnished the CAO a copy of the City’s CY 2018
Annual Work and Financial Plan and assured close coordination with the
CAD for the timely release and submission of the utilization report of
DRRMF.
67
12.6 In addition, the CAD commented that they will prepare the utilization report
based on available records on hand before the deadline and any adjustments
thereto will be properly reflected to the next reporting period in order to
prevent delay in the submission of said report.
SPECIAL EDUCATION FUND (SEF)
13. Various expenditures and procurement of the disaster response and rescue
equipment amounting to P2.576 million and P795,868.00, respectively, were
charged against the SEF which is not in accordance with Section 1 of R.A.
No. 5447 and pertinent provisions of JC No. 01, s. 2017 of DepEd, DBM and
DILG.
Various expenditures amounting to P2.576 million charged

against the SEF instead of GF
13.1 The Special Education Fund (SEF) was created under R.A. No. 5447 on
September 25, 1968 to contribute to the financial support for the goals of
education as provided by the Constitution. The fund shall be constituted from
the proceeds of an additional Real Property Tax and a certain portion of the
taxes on Virginia-Type Cigarettes and duties on imported Leaf Tobacco.
13.2 Under Section 272 of R.A. 7160 or the Local Government Code, the
allocation from which the proceeds of the SEF shall be used, giving due
consideration to the priority programs as determined and approved by the
Local School Board (LSB), is limited only for the following purposes:
1. Operation and maintenance of public schools;

2. Construction and repair of school buildings, facilities and equipment;
3. Educational research;
4. Purchase of books and periodicals; and
5. Sports development.
13.3 Section 458 of R.A. No. 7160 provides the powers, duties, functions and
compensation of the Sanggunian Panlungsod, which include:
(1) Approve ordinances and pass resolutions necessary for an

efficient and effective city government, and in this
connection, shall:
xxx
(xi) When the finances of the city government allow, provide for
additional allowances and other benefits to judges,
prosecutors, public elementary and high school teachers,
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and other national government officials stationed in or
assigned to the city;
13.4 Moreover, Section 4 of DepEd, DBM and DILG Joint Circular No. 01,
s-2017 dated January 19, 2017 provides:
4.0 Allowable Expenses Chargeable Against the SEF
4.1 in all instances, the allocation for the following expenditure

items chargeable against the SEF shall be net of the
budgetary provision for the same or related items in the
budget for the DepEd and the ECCD Council, and that
which may be funded out of the Special Purpose Funds:
4.1.1 Operation and maintenance of public schools:
4.1.1.1 Payment of compensation/allowances of

teachers locally hired in elementary and
secondary schools identified to have
shortages per the teacher deployment
analysis of DepEd; the rates of
compensation/allowances shall be
determined by the LSB based on funds
available, but not to exceed the salary
schedule being implemented by the local
government unit (LGU) concerned:
Provided, that for the purpose of hiring
teachers chargeable against the SEF, the
LSB in each province, city or municipality
shall utilize the list found in the Registry of
Qualified Applicants (RQA);
4.1.1.2 Payment of salaries/wages of utility workers

and security guards hired in public
elementary and secondary schools which
have not been provided such position in the
DepEd budget; and
4.1.1.3 Payment of expenses pertaining to the

operation of schools, which may include
utilities and communication expenses.
4.1.2 Construction and repair of school buildings:
4.1.2.1 Construction, repair and maintenance of

school buildings and other facilities for
69
public elementary and secondary schools,
which are deemed to have shortage of
classrooms or of other facilities, as the case
may be, per DepEd classroom deployment
analysis, subject to existing standards/
specifications set by DepEd and/or
Department of Public Works and Highways;
furthermore, this item shall be given priority
in the SEE Budget; and
4.1.2.2 Acquisition and titling of school sites.
4.1.3 Facilities and equipment:
4.1.3.1 Acquisition of laboratory, technical and

similar apparatus, and information
technology equipment and corollary
supporting services (e.g. internet
connection, maintenance, etc.), subject to
the prevailing requirements and
specifications set by the DepEd.
4.1.4 Educational research:
4.1.4.1 Educational research other than the research

subject areas funded in the DepEd budget,
subject to the prevailing policies and
guidelines of the DepEd.
4.1.5 Purchase of books and periodicals:
4.1.5.1 Purchase of library books and periodicals for

the libraries of the different elementary and
secondary schools in the province, city, and
municipality, and purchase of instructional
materials, workbooks and textbooks needed
by public elementary and secondary schools,
subject to the prevailing policies and
guidelines of the DepEd.
4.1.6 Sports development:
4.1.6.1 Expenses for school sports activities at the

national, regional, division, district,
municipal and barangay levels, as well as for
other DepEd related activities, subject to the
70
prevailing requirements and specifications
set by the DepEd.
4.1.7 Funding for the ECCD Program, particularly for the

following purposes:
4.1.7.1 Direct services related to the implementation

of the ECCD program, such as
salaries/allowances of locally hired Child
Development Teachers and/or Day Care
Workers, etc.;
4.1.7.2 Organization and support of parent

cooperatives to establish community-based
ECCD programs;
4.1.7.3 Provision of counterpart funds for the

continuing professional development of
ECCD public service providers;
4.1.7.4 Provision of facilities for the conduct of the

ECCD Program; and
4.1.7.5 Payment of expenses pertaining to the

operations of National Child Development
Centers, including, but not limited to,
utilities (i.e. electricity and water expenses)
and communication (i.e. telephone
expenses).
13.5 The CY 2018 SEF Annual Budget under the Local School Board (LSB)
Resolution No. 18-02, S-2018 dated January11, 2018 and CY 2018
Supplemental Budget per LSB Resolution No. 18-05, S-2018 dated July 24,
2018, amounting to P114,070,621.60 and P76,666,012.35, respectively, were
distributed as follows:
% to Total
Expenditure Annual Supplemental Total
Budget
Personal Services P18,354,898.56 P83,000.00 P18,437,898.56 10%
Maintenance and
Operating
Expenses (MOE) 93,865,723.04 1,929,308.79 95,795,031.83 50%
Capital Outlay 1,850,000.00 74,653,703.56 76,503,703.56 40%
Total P114,070,621.60 P76,666,012.35 P190,736,633.95 100%
13.6 Analysis and examination of the SEF account on the disbursements made
relative to personal services for CY 2018, showed that the payment of
honoraria of Alternative Learning System (ALS) totaling P1,369,274.64,
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should be charged to DepEd pursuant to Section 3 of Executive Order
No. 356 dated September 13, 2004, renaming the Bureau of Non-Formal
Education to Bureau of Alternative Learning System, which states:
Section 3, Funds necessary to carry out the provisions of this

Executive Order shall be taken from the present funds available
in the Department of Education and shall thereafter be
included in the General Appropriations Act.
13.7 Moreover, although ALS is considered non-formal extension classes,

payment of honoraria related to ALS was not among the authorized existing
allowances payable to teachers as of December 1997 and prior to the
implementation of the JC No. 1, S-2017.
13.8 Further, review of the disbursement vouchers of the MOE charged to SEF,
revealed that the following expenditures should be charged to the DepEd
fund:
 Fuel, oil and lubricants expenses totalling to P904,935.30 on the various

vehicles used by the LSB;
 Repairs and maintenance amounting to P182,000.00 on the two service

vehicle of the LSB;
 Insurance premium of P100,969.87 on various vehicles of the LSB; and
 Payment of the yearly renewal of registration of the service vehicles of the

LSB amounting to P19,143.42.
13.9 It is clearly stated in the aforementioned provisions that SEF shall be utilized
primarily for the operations and maintenance of public schools. While the
aforesaid expenses may not be considered unlawful, these should not be
charged against SEF but may be charged to the GF, whenever authorized.
Further, the operations of the DepEd Division Office are already funded in
the General Appropriations Act, hence, expenses of said Office are
chargeable to DepEd appropriation.
Procurement of the disaster response and rescue equipment

amounting to P795,868.00
13.10 Verification revealed that expenses for the procurement of emergency

equipment and materials, and warning signals and emergency materials
amounting to P297,453.00 and P498,415.00, respectively, were not within
the enumerated items of expenses allowable to be charged to the Local
School Board (LSB) budget.
72
13.11 Taking into consideration the provisions of the aforementioned law, the
acquisition of disaster response and rescue equipment, although intended for
the safety and welfare of the employees, teachers and students of public
elementary and high school within the City’s jurisdiction, is not chargeable
against the SEF. The same should be charged against the LDRRMF under
the GF, which was specifically set aside to support the City’s disaster risk
management activities pursuant to RA No. 10121, otherwise known as the
Philippines Disaster Risk Reduction and Management Act of 2010.
13.12 The utilization of the SEF for purposes other than what the law allows,
defeats the very reason for which the fund was established. It also depleted
the resources of the LSB, thereby depriving the students of the benefits that
could be derived had the fund been utilized in the implementation of priority
PPAs needed to improve the delivery of basic educational services.
13.13 We recommended that the City Mayor:
a. Direct the City official concerned to comply with the pertinent

provisions of JC No. 1, S-2017 by ensuring that only allowable
expenditures shall be paid out of the SEF;
b. Instruct the LSB that in the preparation of the Annual School Board
Budget, prioritize the PPAs pursuant to R.A. 5447, Section 272 of
R.A. 7160 and JC No. 01, S-2017 of DepEd, DBM and DILG.
c. Direct the LSB to stop appropriating and paying honoraria of the

ALS trainers, fuel, oil and lubricants, repairs and maintenance,
insurance premium and yearly renewal of registration of LSB’s
service vehicles as priority expenses chargeable against SEF; and
d. The Management cause the refund from the LDRRMF, the amount of
P795,868.00 representing the cost of disaster response and rescue
equipment charged to SEF.
13.14 Management has informed that they will comply with the audit
recommendations and the relevant provisions on the utilization of SEF.
14. The Officer-In-Charge (OIC) City Accountant is concurrently designated as

OIC-City Assessor since February 2018, thus, performing two incompatible
functions contrary to the basic principle on internal control pertaining to
segregation of duties and responsibilities.
73
14.1 The basic Codes under the Generally Accepted Accounting Principles or
GAAP for Internal Control Procedures issued by the Financial Accounting
Standards Board dictates that:
Internal control is the process designed to ensure reliable

financial reporting, effective and efficient operations, and
compliance with applicable laws and regulations.
Safeguarding assets against theft and unauthorized use,
acquisition, or disposal is also part of internal control.
Control activities are the specific policies and procedures

management uses to achieve its objectives. The most important
control activities involve segregation of duties, proper
authorization of transactions and activities, adequate
documents and records, physical control over assets and
records, and independent checks on performance.
14.2 Internal controls are designed to prevent fraud and clerical errors that may
compromise the accuracy of an agency's financial statements. Solid internal
controls can also reduce losses from theft of agency assets and identify
underperforming employees. These controls should be implemented by the
agency before any financial information is given to external auditors, lenders
or investors.
14.3 Separating duties among different employees reduces the opportunity for any
one person to commit fraud. It also creates double-check procedures to cut
down on clerical errors. The employee who handles record keeping should
not have physical custody of the asset.
14.4 The segregation of duties is a basic building block of sustainable risk

management and internal controls for a business. The principle of which is
based on shared responsibilities of a key process that disperses the critical
functions of that process to more than one person or department. Without this
separation in key processes, fraud and error risks are far less manageable.
14.5 In the same vein, Articles III and IV of Republic Act No. 7160 otherwise
known as the Local Government Code of 1991, prohibit the acceptance by a
public officer of any office other than that which he holds, of any function that
would result in the attempt by one person to unfaithfully and impartially
discharge the duties of one, toward the incumbent of the other.
14.6 It bears to stress that authorization of journal entries originating from the City
Assessment Department resulting from their assessment, cannot be carried out
by the same person who posts journal entries from this report like in the case
of the CAD. Another example is in case when the City Assessor prepares the
list of Real Property Units (RPUs) subject to validation of the City
74
Accountant, which in case of the same person thus creates incompatibility in
the functions.
14.7 In order to identify and establish effective controls, the Management should
continually assess the risk, monitor control implementation, and modify
control procedures as the need arises. Independent checks of performance,
which are carried out by employees who did not do the work being checked,
help ensure the reliability of accounting information and the efficiency of
operations.
14.8 As a result, the OIC- City Accountant who is likewise currently designated as
the OIC-City Assessor is evidently performing two incompatible functions in
violation of basic principle on internal control pertaining to segregation of
duties and responsibilities.
14.9 We recommended that the City Mayor hire or designate a new Head
either of the City Assessor’s Office or the Accounting Office to ensure
that no one person should be responsible for two incompatible functions.
14.10 While the Management interposed objections to the Auditor’s observation,

nevertheless, they informed that they will seriously consider the
recommendations. As a matter of fact, they are now currently evaluating the
qualifications of applicants.
15. The submission of disbursement vouchers, payrolls, liquidation reports, reports

of collections and deposits and accounting reports were delayed from three to
nine months, thus, precluded the City Auditor’s Office from conducting timely
audit of the transactions and informing management of deficiencies noted, if
any.
15.1 Section 7 of COA Circular No. 94-001 dated January 20, 1994, requires the
City Treasurer to submit within five days after the end of the month the
monthly report of collection and/or disbursements and other required report to
the City Accountant for recording in the books of accounts.
15.2 COA Circular No. 2009-006, dated September 15, 2009, Prescribing the Use
of the Rules and Regulations on Settlement of Accounts, provides under
paragraph 7.2, Responsibility of the Agency Accountant, as follows:
1. The Chief Accountant, Bookkeeper or other authorized

official performing accounting and/or bookkeeping
functions of the audited agency shall ensure that:
75
a) the reports and supporting documents submitted by the
accountable officers are immediately recorded in the
books of accounts and submitted to the Auditor within
the first ten (10) days of the ensuing month;
15.3 Furthermore, Section 41 (2) of Presidential Decree No. 1445 provides:
To carry out the purposes of this section, the chief accountant

or the official in charge of keeping the accounts of a
government agency shall submit to the Commission year-end
trial balances and such other supporting or subsidiary
statements as may be required by the Commission not later
than the fourteenth day of February. xxx
15.4 The submission by the CAD of disbursement vouchers, revenue and

miscellaneous transactions were delayed by two to 10 months. As a result,
the City Auditor’s Office was precluded from conducting timely audit of the
financial transactions of the City and ascertaining the correctness of the
disbursement, collection and miscellaneous transactions, and from promptly
informing management of deficiencies, if any.
15.5 As of December 31, 2018, records showed that the latest submission of
accounts and reports covered only the period as follows:
Accounts and Reports Latest Submission as of December 31, 2018
GF SEF TF CMU
Check disbursement journal Aug 2018 June 2018 June 2018 June 2018
Cash disbursement journal Aug 2018 June 2018 Feb. 2018 June 2018
Cash receipt journal Aug 2018 June 2018 June 2018 June 2018
Report of check issued Aug 2018 May 2017 June 2018 June 2018
Report of disbursements Aug 2018 May 2018 June 2018 May 2018
Report of Coll & Deposit Aug 2018 May 2018 June 2018 May 2018
General Journal Jan.& July March to May May 2018 Jan to April
2018 2018 2018
Trial balance Aug 2018 June 2018 July 2018 July 2018
Monthly Bank Recon Statement Oct 2018 none none none
(6 bank accts. only)
15.6 We reiterated last years’ recommendation that:
a. The City Treasurer’s Office, particularly the Disbursing Officer,

submit disbursement vouchers and payrolls with complete supporting
documents; and
b. The CAD install measure that will facilitate the timely submission of
disbursement vouchers, payrolls, official receipts, accounting reports
and financial statements within the prescribed period of submission.
76
15.7 The Management thru CAD informed that they are doing their best effort in
order to update submission for a timely audit.
16. Remittances of loan payments to LBP and Malabon City Government

Employees Multi-Purpose Cooperative (MCGEMPC) totaling P11,934.82 were
made, although there was no corresponding deduction from employees’ payroll
and overpayment/over refund of employees’ salary and withholding taxes
totaling P42,176.85 has remained unsettled/unadjusted contrary to Section 4
paragraph (1) and (4) of PD 1445.
16.1 Section 4, P.D. 1445 states that:
(1) No money shall be paid out of any public treasury of

depository except in pursuance of an appropriation law or
other specific statutory authority.
xxx
(4) Fiscal responsibility shall, to the greatest extent, be shared

by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.
16.2 Verification from the schedules of Other Payables and other accounts for all
funds disclosed the following information. This may be considered as
lost/wasted funds unless efforts are exerted for the immediate recovery of the
same from the concerned employees/BIR.
Particulars Amount
a. Other Payables- MCGEPC Loan (GF) (over P( 900.00)
remittance/remittance w/o corresponding payroll deduction)
b. LBP Mobile Loan System (GF) Over remittance/ remittance (11,034.82)
without corresponding deduction from employee’s payroll
c. Other Account Receivable (TF) Payment of tax refund the 42,176.85
corresponding tax of which was already remitted to BIR in
CYs 2015 and 2016)
16.3 The amount to be remitted should be limited only to the amount of deduction
from employee’s salary for loan payments to MCGEPC and LBP Mobile
Loan System. Hence, the over remittances incurred were improper, if not
illegal, as it may constitute unauthorized disbursement of funds and without
corresponding appropriation. While they may claim that the over/double
remittances were due to error or omission, efforts should have been exerted to
remedy or recover the fund from the person/s that caused the overpayment
and should not be left unsettled for a long time. There is a need to identify
and pinpoint responsibility and accountability otherwise, Management will
77
just forgo one’s error or omission for loss of funds to the prejudice of the City
and its constituents.
16.4 The over remittances for salary deduction were shown in negative account
balances or recognized as receivable accounts, hence, efforts are to be exerted
to recover the lost or wasted funds. If the recovery of the funds may not be
possible, the same shall be collected from the person/s that was responsible
for incurring the overpayment or the improper disbursement of funds.
16.5 We recommended that:
a. Management –
 Exert efforts to recover the amount of lost/wasted funds due to

over/double remittances to different NGAs and overpayment of
employees’ salaries;
 Identify the person/s who caused the over/double remittance or

overpayment and make him/her/them accountable; and
b. The CAD institute appropriate measures to minimize, if not eliminate,

the occurrence of over/double remittances.
16.6 Management informed that CAD is currently verifying and reconciling the
City’s account with the balances reported in order to update and make the
necessary adjusting entries and to recover the amount of over/double
remittances. CAD has also issued corrective measures to strengthen
internal control.
16.7 The CAD likewise noted that there is no overpayment of salaries, it is only on
taxes. With regard to the LBP loans, they are the one’s crediting to the
account of the individual, not the CAD. Furthermore, they apprised the CAO
that they will ask LBP for the issuance of Certification whether the same has
been credited, as they will not credit it to the account of City.
16.8 The CAO will verify the assertion of the CAD.
COMPLIANCE WITH TAX LAWS, RULES AND REGULATIONS
17. Various Inter-Agency Payable accounts include unremitted withheld taxes,

contributions, premiums and loan payments to BIR, GSIS and Pag-IBIG
covering the period July 2014 to November 2018 totaling P674,818.55,
78
P1.370 million and P924,671.35, respectively. Furthermore, over/double
remittances of taxes and contribution made to BIR, GSIS, Pag-IBIG and
PhilHealth from October, 2015 to December 31, 2018 totaling P480,280.42,
P28,961.91, P9,664.12 and P2,936.81, respectively, had remained
unsettled/unadjusted.
17.1 Section 4, P.D. 1445 Fundamental principles. - Financial transactions and

operations of any government agency shall be governed by the fundamental
principles set forth hereunder, to wit:
(1) No money shall be paid out of any public treasury of

depository except in pursuance of an appropriation law or
other specific statutory authority.
xxx
(4) Fiscal responsibility shall, to the greatest extent, be shared

by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.
17.2 Verification from the schedules of Due to BIR, GSIS, Pag-IBIG, Philhealth
and Due from NGAs accounts and other accounts for all funds disclosed that
various over/double remittances for withholding taxes to BIR and for
contributions to GSIS, Pag-IBIG, and Philhealth and others were made from
CYs 2014 to 2017, which were shown in the books in abnormal negative
balances. This may be considered as lost/wasted funds already unless efforts
are exerted for the immediate recovery of the same.
Unremitted taxes and contributions
17.3 The analysis of the Due to BIR account disclosed that taxes withheld from
contractors/suppliers on 1 percent, 2 percent, 3 percent and 5 percent and
from employees’ salaries totaling P674,818.55 remained unremitted at year-
end. Breakdown as follows:
Particulars Period Amount
General Fund August 2014 to November 2018 P560,205.40
SEF January to September 2018 19,770.56
Trust Fund December 2017 9,834.60
City of Malabon University (CMU) March 2015 to November 2018 85,007.99
Total P674,818.55
17.4 Moreover, the Due to GSIS and Due to Pag-IBIG accounts amounting to
P1,370,493.76 and P924,671.35, respectively, consisting of contributions,
premiums and loan payment deduction covering the period May 2015 to
November 2018 were still unremitted as of December 31, 2018.
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17.5 The prescribed remittance period of the withholding and contributions to the
National Government Agencies was not met.
Over/double remittance of taxes and contributions
17.6 Verification from the schedules of Due to BIR, Due to GSIS, Due to Pag-
IBIG, and Due to PhilHealth accounts for all funds disclosed that various
over/double remittances for withholding taxes to BIR and for contributions to
GSIS, Pag-IBIG, and PhilHealth were made from CYs 2015 to 2018, which
were shown in the books in negative balances. Details as follows:
Account Amount
Due to BIR
General Fund P 184,058.55
CMU 240,307.06
SEF 33,133.63
Trust Fund 22,781.08
Total 480,280.42
Due to GSIS
General Fund 28,761.91
CMU 200.00
Total 28,961.91
Due to Pag-IBIG
General Fund 8,364.12
CMU 300.00
SEF 1,000.00
Total 9,664.12
Due to Philhealth
General Fund P2,936.81
* Due to BIR and Due to Pag-IBIG were recorded as over remittances
17.7 The amount to be remitted should be limited only to the amount of withheld
taxes and deduction from employee’s salary for contribution to GSIS,
Philhealth and Pag-IBIG and for salary loan payments. Hence, the
over/double remittances incurred were improper, if not illegal, as it may
constitute unauthorized disbursement of funds and without corresponding
appropriation. While they may claim that the over/double remittances were
due to error or omission, efforts should have been exerted to remedy or
recover the fund from by person/s that caused the overpayment and should
not be left unsettled for a long time. There is a need to identify and pinpoint
responsibility and accountability otherwise, Management will just forgo one’s
error or omission involving the loss of funds to the prejudice of the City and
its constituents.
80
17.8 The over/double remittances for withholding taxes and salary deduction were
shown in negative account balances or recognized as receivable account,
hence, efforts are to be exerted to recover the lost or wasted funds. If the
recovery of funds may not be possible, the same shall be collected from the
person/s that was responsible for incurring the overpayment or the improper
disbursement of funds.
17.9 We recommended that:
a) The City Treasurer remit immediately to the BIR, GSIS, Pag-IBIG

and PhilHealth the unremitted taxes, contributions and loan
payments;
b) Management exert efforts to recover the amount due to over/double

remittances to the different NGAs, and identify the person/s who
caused the over/double remittance or overpayment and make
him/her/them accountable; and
c) The CAD institute appropriate measures to minimize, if not to

eliminate, the occurrence of over/double remittances.
17.10 Management informed thru CAD that they will review the computation to
reconcile the balances. Furthermore, it was informed that CAD will exert
effort and make queries with the concerned NGAs on how to request for the
refund of over/double remittances. Finally, CAD commented that they are
continuously remitting in CY 2019 the unremitted balances of Due to BIR,
GSIS and Pag-IBIG. The unremitted balances as of March 2019 of the Due to
BIR, GSIS and Pag-IBIG amount to P165,136.91, P211,190.83 and
P218,715.84, respectively.
18. Status of Credit Financing
18.1 The City Government of Malabon has outstanding loans with the Land Bank
of the Philippines (LBP) contracted in CYs 2009 to 2014 relative to the
construction of the city hall building, two-level parking structure, city sports
complex building and infrastructure projects. As of December 31, 2018, total
outstanding obligations amounted to P52,684,188.49 consisting of loans for
the procurement of various Infrastructure Projects of P3,454,444.49,
Hospital Equipment-Pagamutang Bayan ng Malabon of P31,949,464.30 and
the Construction of Bahay Pag-asa of P7,875,000.00, and
upgrading/rehabilitation of Barangay Hulong Duhat Library of
P4,951,000.00, which were contracted from August 17 to December 20, 2017
and a loan for the 3-Storey Government Building with Roof Deck of
81
P4,454,279.70 contracted on October 30, 2018. Amortizations of principal
loan and interest expense paid during the year, totaling P32,776,039.83 and
P3,340,165.06, respectively, were properly and promptly recorded in the
books of the City.
18.2 We commended the Management for the prompt payment of loan

amortizations and proper recording in the books of the accounts of the
infrastructure projects funded thru the various loans.
STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGE
19. The audit suspensions and disallowances totaling P4.557 million and
P11.087 million, respectively, remained unsettled as of the year-end.
19.1 Section 7.1.1 of COA Circular No. 2009-006 dated September 15, 2009
provides that the head of the agency, who is primarily responsible for all
government funds and property pertaining to the agency, shall ensure, among
others, that the settlement of disallowances and charges is made within the
prescribed period and that the requirements of transactions suspended in audit
are complied with.
19.2 As of December 31, 2018, audit suspensions and disallowances totaled

P4,557,275.75 and P11,086,980.10, respectively, as shown below.
Particulars Balance Issued in Settled in 2018 Balance

1/1/ 2018 2018 12/31/ 2018
Suspensions P28,642,631.25 P4,557,275.75 P28,642,631.25 P 4,557,275.75
Disallowance 11,981,840.10 - 894,860.00 11,086,980.10
s
19.3 Notices of Disallowance totaling P11,086,980.00 were issued for the

following deficiencies:
 P10,702,000.10 - overpayment of salaries due to payroll register padding

in CYs 2009 to 2013. Appeal Memoranda were filed with the Office of
the Director, Local Government Sector, National Capital Region, by the
concerned City Officials in October and November 2014, and
January 2015. Administrative case/criminal charges for malversation of
public funds and violation of RA 3019 were filed by the City Legal Office
before the city prosecutor against the perpetrators of the payroll register
padding. The appeals were denied in a COA Decision issued by the
Regional Director, LGS-NCR in May, 2016 which affirmed the NDs
issued by this Office.
 P384,980.00 - unauthorized hiring of consultants in CY 2005 by then City

Vice-Mayor. COA Order of Execution dated March 4, 2013 was issued to
82
and received by the Local Chief Executive, for the enforcement of the
Supreme Court En Banc Decision/Resolution (GR No. 182069) and COA
Decision No. 2008-022 dated February 15, 2008 both affirming the audit
disallowance. Demand letters were sent through mail on April 2, 2013 by
the City Legal Office to the payees. The CAD has recorded the
Receivables in the books of accounts and no refund/payment has been
made since the report writing.
19.4 We reiterated the previous year’s recommendations that the Local Chief
Executive direct concerned officials to coordinate with all persons
responsible/liable and facilitate the settlement of all outstanding audit
suspensions and disallowances as required under the existing rules and
regulations. It was also advised that unsettled disallowances be endorsed
to the City Legal Office for necessary action/disposition.
19.5 The audit suspensions of P4,557,275.75 was already settled on February 27,
2019 upon issuance of a Notice of Settlement of
Suspension/Disallowance/Charge (NSSDC) No. 2019-001 in view of the
submission of documents by the City Accountant which have been evaluated
and found substantially compliant to the requirement of the NS. Moreover, a
case for six counts of Estafa through falsification had been heard already at
the Sandiganbayan for the ND relative to CY 2013 payroll padding.
83

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OBSERVATIONS AND RECOMMENDATIONS

FINANCIAL AND COMPLIANCE AUDIT

1. The balance of the Property, Plant and Equipment (PPE) accounts of

Unreconciled difference of P315.766 million between the

The General Services Officer or the Municipal Treasurer, as

Presence of items costing below P10,000.00 amounting to

3.0 INCREASE OF CAPITALIZATION BENCHMARK

The capitalization benchmark for items categorized as

4.0 CONTROL MEASURES

In order to maintain adequate control over furniture,

4.1 Furniture, fixtures, equipment, books and work animals

4.2 The following accounts shall be used to record items

Account Code Account Title

8-86-600 Deferred Credits Semi-

4-36-000 Furniture, Fixture, Fixtures,

4.3 A separate inventory-taking of all furniture, fixtures,

Inclusions of unserviceable items amounting to

1.9 Other observations -

a. Of the 227 parcels of land valued at P88,487,987, only 109 valued at

b. There were items in the PPE with remarks as cannot be located/missing

1.10 We reiterated last year’s recommendations that:

a. The CGSD and the Inventory Committee complete the reconciliation

 Effect the necessary adjustments to correct the balances of the PPE

 Reclassify items costing below P10,000.00 to the appropriate semi-

c. The CGSD cause the immediate disposal of unserviceable items and

1.11 Management informed that there is still ongoing reconciliation of records

1.13 Management’s reconciliation of PPE records and identification of semi-

Balance Balance per

2.7 We reiterated the prior year’s recommendations that -

a. The City Treasurer coordinate with the depository banks as regards

b. The City Accountant -

 Assign personnel to prepare the BRS on a monthly basis for all

 Effect immediately the adjusting entries in the books for reconciling

Sec. 120. Recording of Deliveries of Supplies or Property in

Sec. 124. Inventory of Supplies or Property. - The local chief

3.2 The details of the year-end balances of Supplies Inventory account of

Supplies and Materials General City of Special Total

3.5 We recommended that Management require:

a. The Inventory Committee to conduct a semestral inventory of

b. The CAD to maintain Supplies Ledger Cards to ensure that all

b. Eight revenue accounts missed the projected income by P147.678 million

c. 57 revenue accounts have income estimates of P514.984 million but

d. Five revenue accounts have registered collections of P6.655 million but

or With reported zero

Local Taxes 367,061,166.00 349,480,862.44 404,523,739.86 605,834,796.00 662,678,208.22 2 0 8 6

4.14 We recommended the following:

On revenue accounts that reported decreases in collections -

a. The City Business Permits and Licensing Department (CBPLD)

On revenue accounts that reported collections without income estimates

c. The Committee faithfully exercise its mandate under Section 316,

5.9 We recommended that Management adopt and implement an updated

Section 2. There shall be created, organized and operated in all

Section 3. The Internal Audit Service shall be under the direct

4.0 Policy Guidelines

4.1 On the Organization and Staffing of an IAU

4.1.2 Based on the foregoing functions, Internal audits of

4.1.3 A government entity may organize and staff its IAU as