EXECUTIVE SUMMARY

Introduction

The City of Calaca was added to the list of cities in the Province of Batangas after cityhood
was ratified in a plebiscite on September 3, 2022. It is located west of Batangas and comprises
approximately 11,064.03 hectares of land mostly devoted to commercial establishments and
housing communities. Its population was reported at 70,521 at the end of 2010.

The City is envisioned to be a model for academic excellence, public health and safety,
environmental preservation, and good governance, providing equal opportunity for all its
constituents in a peaceful, friendly atmosphere through the God-centered leadership of the
incumbent elected officials.

The City due to its dynamic rise has become a bustling investment destination partly because
of the implementation of a one-stop-shop” system of licensing and issuance of business
permits.

The organizational structure of the City is as follows:

a. Key Officials

City Mayor Hon. Sofronio C. Ona, Jr.

Vice Mayor Hon. Jerry Raphael I. Katigbak

Members of the Sanggunian Hon. Deovic M. Ontangco

Hon. Robenson M. Sale
Hon. Prima C. Dajoyag
Hon. Michael Jones C. Salazar
Hon. RexnerJown V. Pastoral
Hon. Divina A. Opelanio
Hon. Caesar Ryan H. Noche
Hon. Cedric M. De Joya
Hon. Eric B. Atajar
(ABC President)
Hon. Lindzey B. Endozo
(SK Federation – President)

OIC-City Accountant Ms. Joy Marie V. Catibog

City Treasurer Atty. Lita M. Tenorio-Maligaya

b. No. of Personnel Complement:

Permanent 159
Co-Terminus 11
Job Order 285
Elective Officials 12
Temporary 2
Total 469

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Audit Objectives

The objectives of the audit are to (a) verify the assurance that may be placed on
Management’s assertions on the financial statements; (b) recommend agency improvement
opportunities; (c) determine compliance with existing laws, rules and regulations; and
(d) determine the extent of implementation of prior years’ audit recommendations.

Scope of Audit

The audit covered the accounts and operations of the City Government of Calaca for the
period January 1 to December 31, 2022. The audit was made in accordance with International
Public Sector Accounting Standards (IPSAS) and we believe that it provided a reasonable
basis for the audit results.

Financial Highlights

For the Calendar Year (CY) 2022, the City Government of Calaca generated revenue of
P891,526,814.72 sourced from local taxes, Internal Revenue Allotment (IRA), service,
business, and other sources of income including subsidy. Total appropriations/allotments of
P1,770,668,234.20 of which a total of P863,125,530.83 or 49.75 percent was obligated during
the year, thus leaving an unexpended balance of P907,542,703.37 or 51.25 percent.

The total assets, liabilities, equity, income and expenses of the City for CYs 2022 and 2021
are as follows:
2022 2021 Increase/
(Decrease)
Assets P2,329,557,609.66 P 2,220,508,393.95 P 109,049,215.71
Liabilities 949,131,218.44 880,584,228.93 68,546,989.51
Equity 1,380,426,391.22 1,339,924,165.02 40,502,226.20
Income 891,526,814.72 763,013,232.98 128,513,581.74
Expenses
Personnel Services 118,105,044.41 97,341,153.24 20,763,891.17
MOOE 540,604,294.79 739,034,370.09 (198,430,075.30)
Non-cash expenses 136,275,579.88 120,222,233.19 16,053,346.69
Financial Expenses 9,683,058.66 10,859,106.88 (1,176,048.22)
Transfers, Assistance
and Subsidy from (to) (22,885,414.53) (768,705.00) 22,116,709.53
Surplus/(Loss) 63,973,422.45 (205,212,335.42) 269,185,757.87

Independent Auditor’s Report on the Financial Statements

In our opinion, except for the effects of the matters described in the Bases for Qualified
Opinion section of our report, the accompanying financial statements present fairly, in all
material respects, the financial position of the City Government of Calaca, Batangas as at
December 31, 2022, and its financial performance, its cash flows, and its comparison of
budget and actual amounts for the year then ended in accordance with International Public
Sector Accounting Standards (IPSASs).

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Bases for Qualified Opinion

The existence, fairness, and condition of the Property, Plant, and Equipment (PPE) account
with a net book value of P1,717,285,799.08 could not be fully ascertained due to (a) an
unreconciled difference of P23,174,224.14 between the Report in the Physical Count of
Property, Plant, and Equipment and accounting records; and (b) lapses in recognition of
several PPE in the financial statements.

In addition, the reported cash deficiency of the City has increased to P222,584,838.90 in the
Calendar Year 2022 due to (a) lapses of the Local Finance Committee to determine the
income reasonably projected as collectible resulting in under collection of P538,473,185.28
or 37.66 percent of the total estimated revenue of P1,430,000,000.00 and (b) existence of
deficit in Special Education Fund of P69,315,155.63, which affected the City’s financial
position and capability to settle its obligations.

Moreover, the reliability and fairness of year-end Real Property Tax and Special Education
Tax Receivables could not be ascertained due to an unreconciled difference of
P30,993,107.57 between the accounting and treasury records.

Further, the City of Calaca failed to substantiate several assets and payable accounts with an
aggregate amount of P10,423,974.41 that have been dormant for a long time, affecting the
accounts' validity and existence in the financial statements.

Lastly, the accuracy and reliability of Due to NGAs totalling P13,096,249.53 could not be fully
ascertained due to (a) erroneous recording of the receipt of P3,767,586.75 with specific
purposes in the General Fund and not in the Trust Fund, (b) the amount of P5,501,212.40 are
carry over balances subject for reconciliation, and (c) the misclassification of entries totaling
P731,000.00.

For the exceptions cited above, we recommended that the City Mayor:

1. Instruct the:

a. OIC- City Accountant to (i) coordinate with the City General Services Office (CGSO)
to evaluate the causes of the material discrepancy of P23,174,224.14and make a
reconciliation thereof; and (ii) coordinate with the City Engineering’s Office (CEO) for
the documents necessary to record/reclassify the projects to their proper accounts and
record the related Depreciation Expense, Accumulated Depreciation, and
Accumulated Surplus; and

b. CEO to expedite the processing of claims of the completed infrastructure projects by

contract and submit the same to the Office of the City Accountant (OCA) to prevent
the delayed recognition of the said infrastructure assets in the books.

2. Direct the:

a. LFC (i) to analyze the trend in the collection of tax revenues for the last five years and
determine the amount of income which has reasonable assurance of the collectivity
and use the data as inputs or benchmark in the preparation of Annual Budget for the
ensuing fiscal year; and (ii) to prepare the City’s plan for reduction of the cash deficit
to a zero level as soon as possible;

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 b. City Treasurer to continue the daily monitoring of cash availability and preparation of
Status Report of Cash for submission to the Office of the City Mayor and concerned
department heads;

c. City Budget Officer, OIC- City Accountant and City Treasurer to constantly and
regularly exercise diligence, prudence, and proper control in the disposition of the
City’s funds and limit expenditures within the total income realized and collected during
the year to totally eliminate the cash deficiency of the City; and

d. LFC and other concerned department heads to strictly follow the Budget Operation
Manual for Local Government Units, 2016 Edition under Local Budget Circular No. 112
of the Department of Budget and Management.

3. Instruct the:

a. City Treasurer to furnish the OIC-City Accountant a duly certified list of unpaid taxes
supported with details containing the name of the taxpayer and the amount due to
establish reliable balances of RPT and SET Receivable at the beginning of each year;
and

b. City Treasurer and OIC-City Accountant to analyze and reconcile their records to
determine the deficiencies noted between their records and make necessary
adjustments.

4. Require the:

a. OIC-City Accountant, in coordination with respective offices, to prioritize the

determination and verification of the composition of the dormant asset and payable
accounts by tracing back and retrieving all possible information, documents and
records pertinent thereto within 60 days from receipt hereof; and

b. City Administrator to submit to the Audit Team the results of validation of the dormant
asset and payable accounts and the actions taken thereon duly supported with
relevant and sufficient documents within 60 days upon receipt hereof, for evaluation;
and

c. the concerned departments to prepare the request for the write-off/adjustments of the
receivable accounts and the reversion of the long outstanding payables, with authority
from Sangguniang Panlungsod, both showing that the accounts have been dormant
for a long time and duly supported with complete documentation. Include applicable
certifications and proof of the actions and the extent of validation undertaken thereon.

5. Direct the OIC-City Accountant to (a) prioritize the reconciliation of records and evaluation
of the available documents within 60 days from receipt hereof to establish the updated
status of the balances of the fund transfers particularly those grants with carry-over
beginning balances; and (b) prepare the appropriate adjusting journal entries for the
(i) transfer of the grants and donations recognized in the GF book; and (ii) reclassification
of the misclassified livelihood financial assistance.

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Other Significant Observations and Recommendations

Summarized below and on the next page are the other significant audit observations and
recommendations in the audit of the City of Calaca for the year 2022:

1. The reliability and fairness of year-end Real Property Tax (RPT) Receivable and Special
Education Tax (SET) Receivable of the City of Calaca could not be ascertained due to
non-availment of remedies for collection of tax delinquencies of P89,034,152.86, contrary
to Sections 258, 259, 260 and 263 of Republic Act (RA) No. 7160.

We recommended that the City Mayor instruct the City Treasurer and City Administrator
to coordinate and jointly exert extra efforts in the collection of delinquent accounts and
adopt necessary measures to enable the maximum collection of unpaid taxes.

2. Unexpended balances totaling P110,565.89 were not remitted to the Source Agencies
(SA) after attainment of the intended purposes, thus, depriving the SA of resources that
could put to better use in other activities, contrary to COA Circular No. 94-013.

We recommended the City Mayor to direct the City Accountant to coordinate with the
implementing units to assess the needs for those unexpended fund balances from NGAs.
Should the funds be proven no longer needed, remit immediately to the SA, but if still
needed, request authority to use the fund for other related projects of the City.

3. The City of Calaca expended P30,093,399.87 out of the P61,674,698.24 budget for the
20% Development Fund (DF) despite the absence of the Comprehensive Development
Plan (CDP) and the corresponding Local Development Investment Program (LDIP),
contrary to Section 3.2.1 of the DBM-DOF-DILG JMC No. 1 dated November 4, 2020 and
Sections 106 and 305 (i) of RA No. 7160, thereby affecting the sound evaluation of the
efficiency and effectiveness of project implementation funded by the 20% DF.

We recommended that the City Mayor instruct the Local Development Council to submit
a ratified CDP and LDIP that will specifically serve as the basis for the identification of
development projects to be prioritized during CY 2022 and applicable years thereafter.

4. The technical viability of projects totaling P121,999,069.15 implemented by the City of

Calaca was not properly established during the preliminary engineering study resulting in
the granting of numerous work suspensions, contrary to Annexes A and E of the RIRR of
RA No. 9184, thus affects the timely delivery of the desired benefits to intended
users/beneficiaries.

We recommended that the City Mayor enforce timely project implementation by requiring
the City Engineer in coordination with City Planning and Development Officer to:

a. conscientiously carry out detailed engineering addressing any issues on the viability
of the project sites to ensure that projects are implementation-ready before they are
posted for bidding;

b. thoroughly review and evaluate the Program of Works to ensure that project designs
and estimates are properly prepared and suit the needs of end-users and that all
phases of the projects are covered to minimize time extensions;

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 c. ensure full coordination with other government agencies, among others, DPWH,
DepEd, and DENR including the community and private entities, to achieve effective
and more synchronized planning and implementation of projects;

d. submit written justifications and explanations regarding the aforementioned

observations within 15 days from receipt thereof; and

e. strictly monitor and supervise of the status/progress of projects being implemented.

5. Implementation of three infrastructure projects with total contract costs of P39,807,563.93

was beyond the time frame specified in the contract agreement and may be subjected to
contract termination, contrary to Section III, A.2, Annex “I” of the RIRR of RA No. 9184
and Item 4.0 of GPPB Circular No. 03-2019 dated March 8, 2019, while one project
amounting to P1,996,063.40 has right-of-way (ROW) issues, an indication of inadequate
conduct of detailed engineering, inconsistent with Paragraph 1, Annex A of the same RA,
thereby delaying their implementation and depriving the government and the public of the
essential benefits that could have been derived therefrom.

We recommended that the City Mayor direct the City Engineer in coordination with the
City Planning and Development Officer to:

a. require the contractors to devise a catch-up program within 15 days from receipt
hereof in order to fast track the completion of the projects with a prolonged
implementation period to avoid rescission of the contract;

b. take appropriate actions to resolve t h e n ot e d ROW issue within 20 days from receipt
hereof;

c. evaluate the viability of the infrastructure project which has yet to start for possible
contract termination and reprogramming of the funds appropriated therein;

d. take appropriate actions for the delay in the completion of the project by imposing
liquidated damages of at least one-tenth of one percent of the cost of the unperformed
portion for everyday of delay; and

e. intensify and perform regular monitoring and supervision and improve its operations to
accomplish the mandated targets it committed for the year to ensure the immediate
completion of the delayed projects.

Summary of Total Suspension, Disallowances, and Charges as of Year-End

As of December 31, 2022, the Statement of Audit Suspensions, Disallowances and Charges
(SASDC) showed unsettled suspension, disallowances and charges totalingP21,975,550.00
as summarized below:
Notice of Notice of Notice of Total Amount
Suspension Disallowance Charge
Balance, January 1, 2022 P0.00 P21,975,550.00 P0.00 P21,975,550.00
Add: Notice of
Suspensions/Disallowances/
Charges issued during the
year 0.00 0.00 0.00 0.00

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 Notice of Notice of Notice of Total Amount
Suspension Disallowance Charge
Less: Settlement during the
year 0.00 0.00 0.00 0.00
Balance, December 31, 2022 P0.00 P21,975,550.00 P0.00 P21,975,550.00

Status of Implementation of Prior Years’ Audit Recommendations

Of the 31 prior years’ audit recommendations embodied in the CYs 2021 and 2020 Annual
Audit Reports, 15 were fully implemented, 15 were partially implemented while the remaining
one was not implemented by the City Government of Calaca.

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