EXECUTIVE SUMMARY

Introduction

The City Government of Baguio (City) was created on September 1, 1909 by

virtue of Philippine Commission Act No. 1963. It was first named by the natives as
Bagiw, an Ibaloi term, which means a submerged slimy waterplant called “lumot”.
Known as the City of Pines, Baguio City is also called the "Summer Capital of the
Philippines". The City which was designed by premier American Architect and Urban
Planner Daniel H. Burnham, is now one of the most popular tourist destinations in the
country as well as the educational center, north of Manila.

Baguio City is composed of 128 barangays, divided and distributed from among
its 20 administrative districts. Its continual development is a product of the cooperation
of both its legislative and executive body in synchronicity with the staunch support of its
citizenry. To this end, the City Government of Baguio envisions to sustain and maintain
a "Progressive, Peaceful and Clean and Green Baguio, a Center for Education, Trade and
Family-Oriented Tourism - Managed by God-Loving and Strong-Willed Leaders in
Partnership with Self-Reliant and Disciplined Citizens."

The City of Baguio is governed by a Mayor, a Vice Mayor and the 14-member
City Council or Sangguniang Panlungsod. In addition, the city is represented in the
national congress by a lone representative.

It is headed by Mayor Benjamin B. Magalong, who was elected for his 1st term in
the May 2019 election.

For CY 2019, the City had 1689 plantilla positions distributed among the 18
departments/offices and the five adjunct national offices. Of the total plantilla positions,
16 are elected officials while 1,611 and 62 have permanent and co-terminous
appointments, respectively. It has also 385 casuals and 270 job order personnel.

The audit covered the accounts and operations of the City Government of Baguio
for the year ended December 31, 2019, with the used of integrated results and risk-based
audit methodology.

Financial Highlights

A. Comparative presentation of City’s total assets, liabilities, government equity, income

and expenses under the under the General Fund, Special Education Fund and Trust
Fund for calendar years 2019 and 2018 is presented in the following table:

i
 A.1. Total Assets, Liabilities and Government Equity

Particular 2019 2018

Total Assets ₱ 9,709,120,135.13 ₱ 8,510,309,947.73
Total Liabilities 3,758,718,963.03 3,030,318,345.82
Total Government Equity 5,950,401,172.10 5,479,991,601.91
Total Liabilities and Government Equity ₱ 9,709,120,135.13 ₱ 8,510,309,947.73

A.2. Income and Expenses

Particular 2019 2018

Total Income ₱ 2,108,739,246.93 ₱ 1,910,296,093.75
Total Expenses (1,340,084,626.28) (1,181,957,987.24)
Transfers, Subsidy (78,334,279.12) (38,209,544.71)
Net Income ₱ 690,320,341.53 ₱ 690,128,561.80

B. Comparative presentation of the appropriations, allotments, obligation and balances

for calendar years 2019 and 2018:

CY 2019

Supplemental/
Account Appropriations Allotment Obligations Appropriations Allotment
Adjustments
Total Current ₱55,050,200.87 ₱2,234,550,200.87 ₱2,234,550,200.87 ₱1,681,617,849.14 - ₱552,932,351.73
Total Continuing (12,539,149.87) 1,202,282,933.92 1,202,282,933.92 203,289,040.01 - 998,993,893.91

CY 2018

Supplemental/
Account Appropriations Allotment Obligations Appropriations Allotment
Adjustments
Total Current ₱34,570,000.00 ₱2,091,019,064.00 ₱2,091,019,064.00 ₱1,558,057,974.00 - ₱532,961,089.94
Total Continuing (28,704,148.56) 962,099,896.37 962,099,896.37 165,340,144.20 - 796,759,752.17

Opinion of the Auditor on the fairness of presentation of the financial statements

We rendered a qualified opinion on the fairness of presentation of the financial

statements of the City Government of Baguio because the accuracy and reliability of the
balance of the Property, Plant and Equipment (PPE) account with a total book value of
₱2,003,196,725.86 could not be ascertained due to: (a) unaccounted balance of PPE
marked “for reconciliation” amounting to ₱182.385 million; (b) property recorded in the
General Ledger but not in the Report of Count of Property, Plant and Equipment
(RCPPE) amounting to ₱181.158 million; (c) unrecorded property amounting to ₱23.789

ii
million included in the report on physical count (RCPPE); and (d) inconsistent
acquisition cost of various property between the accounting and property records
amounting to ₱6.160 million.
We have recommended that the City Accounting Office and the General Services
Office reconcile their records to ensure the correctness and reliability of the PPE account
balance.

Summary of Significant Observations and Recommendations

1. The validity and accuracy of adjustments made in the amount of ₱148,067,240.00

to the Land Account under the PPE cannot be established due to non-submission
of relevant supporting documents thereby precluding complete
validation/verification of the pertinent accounts contrary to the provisions of
COA Circular No. 2010-001.

We have recommended that Management require the concerned offices to submit

the aforementioned relevant documents to substantiate the recorded adjusting
entry and to establish the validity, regularity and propriety of the subject
adjustment on the Land account.

2. The completion of the project “Reforestation/Urban Greening Project, Access

Road Opening and Construction at Botanical Garden”, otherwise known as
“Establishment of Baguio City Arboretum (Phase 2)” with a contract cost of
₱12,292,367.92 is delayed with the contractor incurring a significant negative
slippage of 48.82% as of December 31, 2019, depriving the constituents of the
timely use of the facility.

We have recommended that Management: a) conduct an inventory of work

accomplished by the contractor and impose liquidated damages at least equal to
one-tenth of one percent (.01%) of the cost of the unperformed portion for every
day of delay as required under Section 68 RA 9184; and b) require the contractor
to engage a catch up program in order to fast track the completion of the project to
avoid termination of contract as stipulated also under section 68 of RA 9184

3. Out of the 534 remaining Local Development projects from CY 2008 to 2019,
only 12.36% or 66 projects were reported as completed as of December 31, 2019
while the rest remained unimplemented defeating the purpose for which the fund
was created as prescribed under the DILG and DBM Joint Memorandum Circular
(JMC) No. 2017-1 dated February 22, 2017.

We have recommended that Management: a) verify the status and determine the
actual accomplishments of the local development projects that were awarded and
on-going as of December 31, 2019, and impose liquidated damages for projects
that incurred delays; and b) enhance monitoring control in the implementation of
local development projects including the procurement process to immediately
address problems encountered that could affect the timely completion of projects.

iii
4. The programs, projects and activities (PPAs) indicated in the City’s Report on the
Utilization of Local Disaster Risk Reduction and Management Funds Programs
Plans and Activities, disclosed 64 activities of which only 24 activities or 37.50
percent was fully implemented at year end for various reasons, thus, the goals and
objectives of the LDRRMP were not fully attained.

We have recommended that Management require the City Disaster Risk

Reduction Management Council (CDRRMC) and the concerned implementing
offices: a) review and allocate reasonable cost-effective budgets for the Plans,
Programs and Activities (PPAs) in the LDRRMP in order to avoid the under/over
budgeting of resources that could have been allocated to other PPAs; b) Continue
to coordinate with the General Services Office and the Bids and Awards
Committee in order to expedite the procurement of disaster response and rescue
equipment and the bidding process, respectively; and c) Monitor regularly the
implementation of Projects, Plans and Activities in the LDRRMP to maximize
utilization of fund allocation.

5. Collection of market stall rentals was not efficient resulting to delinquency of

payments ranging from 3 months to 17 years totalling ₱ 966,613.00 contrary to
the provisions of City Tax Ordinance No. 2000-001.

We have recommended that Management: a) monitor the delinquencies as

reflected in the monthly report of stall rentals, intensify the collection thereof and
avail of other available remedies to collect from non-compliant and delinquent
lessees; b) upgrade or enhance the market database system so that it can generate
all reports that the market administrator and management may need from time to
time; and c) conduct regular monitoring of vacant stalls to forestall the continuous
billing of lessees who vacated their stalls and the unauthorized use of the vacant
stall.

6. Final and executory audit disallowances and audit charges amounting to

₱522,792.81 and ₱3,479,925.31, respectively, remained unsettled as of December
31, 2019 contrary to the provisions of COA Circular No. 2009-006 dated
September 15, 2009.

We recommended that Management exhaust all available remedies provided

under the laws, rules and regulations in enforcing immediate compliance for the
settlement of the Charges and for Disallowances without pending appeal to COA
as provided in the RRSA.

Status of Implementation of Prior Years’ Audit Recommendations

Of the 54 audit recommendations embodied in the previous years’ audit reports, 9

were fully implemented, 36 were partially implemented and 9 were not implemented
during the year.

iv