EXECUTIVE SUMMARY

A. INTRODUCTION

Republic Act No. 8990 converted the Municipality of San Fernando, Pampanga
into a Component City known as the City of San Fernando.

The Act is a consolidation of House Bill No. 6766 and Senate Bill No. 2192
which was finally passed by the House of Representatives and Senate on November 28,
2000 and November 15, 2000, respectively. It was approved by then President Joseph E.
Estrada on January 5, 2001 and was mandated by a Plebiscite on February 4, 2001.

The City of San Fernando is the capital of Pampanga and the regional seat of
government in Central Luzon. It is located 67 kilometers north of Metro Manila. It is
composed of 35 barangays and has a land area of 6,774 hectares.

It is strategically located at the heart of Central Luzon, and is accessible thru

provinces in all directions, be it North in Tarlac and Pangasinan, West in Bataan and
Zambales, East in Nueva Ecija and South in Bulacan on to Metro Manila.

B. FINANCIAL HIGHLIGHTS

Presented below are the comparative presentations of the current year and
previous year’s financial position, and the plans and targets vis-à-vis accomplishments of
the City in terms of developmental projects.

Financial Position

Type of Accounts 2017 2016 Increase (Decrease) Percentage

Assets ₱ 3,358,802,590.98 ₱ 2,800,568,407.77 ₱ 558,234,183.21 19.93%
Liabilities 1,111,305,467.60 926,580,041.95 184,725,425.65 19.94%

Government Equity 2,247,497,123.38 1,873,988,365.82 373,508,757.56 19.93%

Results of Operations

2017 2016 Increase (Decrease) Percentage

Total Revenue ₱ 1,512,609,363.03 ₱ 1,424,402,301.71 ₱ 88,207,061.32 6.19%
Total Expenses 1,217,426,355.22 1,104,787,813.25 112,638,541.97 10.20%
Surplus (Deficit) 342,644,113.98 318,430,001.96 24,214,112.02 7.60%

i
Budget Utilization

2017 2016
Purpose
Target Accomplishment % Target Accomplishment %
Social
₱197,883,284.52 ₱152,908,081.25 77.27% ₱163,808,790.00 ₱134,101,860.00 81.86%
Development
Economic
231,362,661.77 148,008,393.27 63.97% 241,064,300.00 156,245,870.00 64.82%
Development
Environmental
Management - - - - - -
Total ₱429,245,946.29 ₱300,916,474,52 70.10% ₱404,873,090.00 ₱290,347,730.00 71.71%

C. SCOPE OF AUDIT

The audit covered the examination, using risk-based approach, of the accounts
and financial transactions of the City of San Fernando, Province of Pampanga for CY
2017 particularly those contained in the Memorandum dated October 12, 2017 of the
COA Local Government Sector Assistant Commissioner. Part II of this Report contains
the audit exceptions on the 2017 Audit Focus and Thrusts for the Local Government
Sector and other high-risk accounts.

The audit was aimed to (a) verify the level of assurance that may be placed on
management’s assertions on the financial statements; (b) determine compliance of
management with the laws, rules and regulations on the pre-identified audit thrusts/areas
and recommend agency improvement opportunities thereon ; and (c) determine the extent
of implementation of prior year’s audit recommendations.

D. INDEPENDENT AUDITOR’S REPORT

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

statements because the accuracy of the year-end balances of the accounts under the
Property, Plant and Equipment (PPE) amounting to ₱1,489,318,005.05 was not
established due to: (a) 32 unrecorded motor vehicles due to lack of pertinent information;
(b) land valued at ₱149,280,000.00 not yet registered in the name of the City; (c) variance
amounting to ₱32,998,460.36 between records of the City General Services Office and
City Accounting Office; and (d) delayed recognition of fixed assets in the books of
account amounting to ₱696,509.94.

For the above deficiencies, we reiterated our recommendations that the Local
Chief Executive require the:

(a) City Accountant to: (i) record the land and other properties that remained not
recognized in the books; (ii) classify the PPE accounts to its proper
category/group; (iii) use the EUL in the computation of depreciation expense as
prescribed in COA Circular No. 2003-007; (iv) adopt the principles prescribed in
PPSAS 17 for proper accounting of the City’s PPE;
ii
 (b) require the official concerned to facilitate the transfer of title of all the City
properties to recognize the ownership thereof.;

(c) instruct the CGSO and CAO to effect the reconciliation of all PPE accounts;

(d) investigation of the properties not found during the physical count and take
appropriate actions against accountable personnel/officials as warranted; and

(e) Property Team to identify additional personnel to reinforce the inventory team
to pave the way for the completion of the physical count of all properties for a
more reliable information on PPE and fair presentation of the asset accounts in the
financial statements at year-end.

E. SUMMARY OF OTHER SIGNIFICANT AUDIT OBSERVATIONS AND

RECOMMENDATIONS

We commend management for the favorable observations noted, to wit:

1. The City has substantially implemented its 10-Year Solid Waste Management
Plan (SWMP) in adherence to the salient provisions of R.A. No. 9003 otherwise known
as the Ecological Solid Waste Management Act of 2000 as manifested by the (a) conduct
of intensified information and education campaigns (IECs) regarding waste segregation,
collection and disposal; (b) regular monitoring of its component barangays on the
implementation of solid waste management at barangay level for CY 2017; and (c)
conduct of Waste Analysis Characterization Study (WACS) as a requirement in the
updating of the City’s 10-Year Solid Waste Management Plan (SWMP).

2. The City was able to adequately plan, budget, implement, and monitor gender-
responsive programs with the use of GAD Code and Harmonized Gender and
Development Guidelines (HGDG) in compliance with Joint Memorandum Circular 2013-
01 of the DILG, PCW, DBM, and NEDA, further promoting gender-equality to uplift the
status of the intended beneficiaries.

3. The City was ranked the highest among the Cities in Central Luzon for being a
Child-Friendly City and has been consistently functional in various child development
services. For CY 2017, the City allocated ₱6,565,835.27 equivalent to one percent (1%)
of the Internal Revenue Allotment of ₱656,583,527.00 for the strengthening and
implementation of programs, projects and activities of the Local Councils for the
Protection of Children (LCPC) as provided under Section 15 of Republic Act No. 9344

4. The City Government of San Fernando generally complied with the provision of
Section 5(b) of R.A. 8291, otherwise known as the Government Service Insurance
System (GSIS) Act of 1997 in the withholding and remittance of the GSIS premiums of
all its employees as well as the government share for CY 2017.

iii
5. The City has consistently complied with the Revenue Regulations in the
withholding of taxes from the salaries and wages of personnel and payments of purchases
and business contracts for CY 2017 and in the remittance thereof to the Bureau of
Internal Revenue (BIR) through Electronic Filing Payment System (EFPS) within the
prescribed period.

However, the other significant audit observations noted during the audit which
need to be addressed together with the corresponding recommendations are summarized
below. These are discussed in detail in Part II of the Report. Management views and
comments were incorporated in the report where appropriate.

1. Cash Advance for Confidential Funds (CF) of ₱4,500,000.00 remained

unliquidated as of year-end although the purpose for which it was granted had already
been served. In addition, the cash advance vouchers together with the supporting
documents were not submitted on time precluding the Audit Team from a timely review
on the adequacy of documents in the granting thereof contrary to Sections 6.1.8.4 and
6.2.2 of COA-DBM-DILG-GOCC-DND Joint Circular No. 2015-01 dated January 8,
2015. (Observation No. 4)

We recommended that the City Accountant ensure the timely submission of cash advance
vouchers for Confidential Fund along with the pertinent documents to enable the auditor
for a timely review in the grant thereof as well as the immediate submission of
liquidation documents to the ICFAU at the COA Central Office pursuant to Sections
6.1.8.4 and 6.2.2 of COA-DBM-DILG-GOCC-DND Joint Circular No. 2015-01 dated
January 8, 2015.

2. Several unserviceable heavy equipment and transport vehicles with a total

carrying value of ₱3,589,343.19 remained undisposed at year-end and were lodged at
various locations unprotected from sun, rain and other elements thereby causing further
deterioration or wear and tear which is not in accordance with Section 379 of Republic
Act (RA 7160). (Observation No. 5)

We recommended that the LCE (a) require the Disposal Committee to proceed with the
prompt disposal of unserviceable assets in accordance with prescribed procedures; (b)
direct the City General Services Officer to ensure that all government properties no
longer serviceable are disposed of at the earliest opportunity to prevent further
deterioration and reduction in their economic value.

3. Deviations from the pertinent provisions of the Revised Implementing Rules and
Regulations (RIRR) of R.A. No. 9184 were noted in the procurement of goods and
infrastructure projects, resulting in higher Approved Budget for the Contract for two
projects by ₱5,247,459.77 and in reduced transparency in the bidding process.
(Observation No. 6)

iv
We recommended that the (a) Bids and Awards Committee (BAC); TWG and BAC
Secretariat (i) abide by the latest/applicable rules and regulations of the DPWH in the
evaluation of the correctness of the ABC for infrastructure projects; (ii) invite the
appropriate observers at all stages of the procurement process and notify them of any
change/s in schedule; (iii) improve compliance by the City in the posting of procurement
activities within the required media and within the prescribed time;(b) General Services
Officer (i) cause the contract to be signed within the required period of ten (10) calendar
days from receipt of NOA by the contractor for all procurements;(c) City Accountant (i)
see to it that progress payments on projects are subjected to retention; (d)City Engineer
(i) require the contractors to address the issue on warranty security and issue an amended
certificate of acceptance to save the City from possible unnecessary expenditures in the
future; (ii) discontinue the practice of automatically issuing certificate of acceptance on
projects after completion; (iii) require the contract awardee to post warranty security for
all procurements; (iv) along with the BAC, TWG, BAC Secretariat, implementing or
procuring officers, keep abreast with the latest guidelines on the procurement of goods,
services and civil works and on their contract implementation to obtain reasonable
assurance that the City obtained and implemented its contracts at the most advantageous
terms and in a transparent and correct manner.

4. The 20% Development Fund (DF) was adequately budgeted at ₱151,405,592.31

for CY 2017. However, the City failed to maximize the utilization thereof completing
only 38.31% of its targeted projects as of December 31, 2017. Further, it was observed
that management failed to sufficiently monitor the utilization of the planned programs
and projects thus hindered the attainment of developmental objectives and deprived the
intended beneficiaries of the benefits that could be derived therefrom contrary to Joint
Memorandum Circular (JMC) No. 2017-1 dated February 2, 2017 of the DILG and
DBM. (Observation No. 7)

We recommended that Local Chief Executive: (a) require the CEO to complete the
remaining projects in the AIP for CY 2017; (b) direct the City Engineering Office and
City Planning and Development Officer to undertake the effective and efficient
implementation of the proposed projects within their targeted completion period; and (c)
require the Planning and Development Coordinator to coordinate with the CBO and CEO
regarding the utilization of 20% DF and prepare accurate year-end report thereon
showing actual completed projects.

5. The Special Education Fund (SEF) registered an over-all utilization rate of

72.51% or ₱145,345,605.66 wherein the bulk thereof was for the construction and repair
of school buildings in accordance with the DepEd-DBM-DILG Joint Circular No. 1, s.
2017. However, 13.55% or ₱19,689,116.87 went to non-priority expenses which was not
in accordance with the afore-stated SEF guidelines. (Observation No. 8)

We recommended that the Local School Board of City of San Fernando: (a) furnish the
Audit Team a copy of the Teacher Deployment Analysis Report and Registry of
Qualified Applicants (RQA) for CY 2017; and (b) utilize the Special Education Fund
only for purposes explicitly allowed in DepEd-DBM-DILG Joint Circular No. 1, s. 2017.

v
6. Funds received under the Bottom-up Budgeting (BUB) totaling ₱13,404,000.00
and ₱3,105,200.00 in CY’s 2016 and 2017 were not yet fully implemented registering a
low accomplishment rate of 20.13% and 26.09% respectively, which may possibly defeat
the main objective of the program in increasing the citizens’ access to local service
delivery, contrary to Joint Memorandum Circular No. 7 dated November 3, 2015 of the
Department of Budget and Management (DBM), Department of Interior and Local
Government (DILG), Department of Social Welfare and Development (DSWD), and
National Anti-Poverty Commission (NAPC). (Observation No. 9)

We recommended that the Local Chief Executive direct the GPBP focal person of the
respective implementing offices to: (a) complete the remaining projects and strictly
monitor the implementation of projects as targeted and planned; (b) take note of any gap
for future inputs especially on the delay of implementation and completion of GPBP-
funded projects and programs; and (c) submit and coordinate with the City Accounting
Office regarding the timely liquidation of project disbursements to their source agencies.

7. Majority or 77% of the Fund for Senior Citizens (SCs) and Person With
Disabilities (PWDs) amounting to ₱14,069,259.65 was spent for the General Assembly of
SCs and PWDs, hence, the utilization thereof did not fully meet the objective in
addressing the needs of the intended beneficiaries, contrary to the Expanded Senior
Citizens Act of 2010. (Observation No. 10)

We recommended that Management: (a) in coordination with the CSWD and OSCA
consider proposing other beneficial programs for SCs and PWDs aside from the conduct
of General Assemblies; (b) consider the procurement of meals through direct payment
instead of coursing it through a cash advance; (c) conduct measures to give priority to
only those who are indigent and qualified are included in the City’s database; and (d)
conduct sufficient information dissemination regarding programs in order to increase the
number of attendees in the City’s programs.

8. Management has substantially observed the provisions of R.A. No. 10121 and
DILG Memorandum Circular No. 2012-079 on the following: (a) 5% allocation of the
Local Disaster Risk Reduction and Management Fund (LDRRMF); (b) composition
requirement of the City Disaster Risk Reduction and Management Council (CDRRMC);
(c) maintenance of City Disaster Risk Reduction and Management Office (CDRRMO);
(d) implementation of the Long-Term Local Disaster Risk Reduction and Management
Plan; and (e) establishment of an organized Incident Command System. However, it
failed to include the unexpended LDRRMF of previous years in the LDRRMF
Investment Plan and to establish a permanent evacuation center which could have
enhanced its disaster preparedness mechanism as suggested under DILG Memorandum
Circular No. 2012 -079. (Observation No. 11)

We commended the Management on its continuous efforts in addressing disaster risk

reduction and management and climate change issues by substantially adhering to the
provisions of RA 10121, DILG Memorandum Circular 2012-079 and NDRRMC
Memorandum Circular No. 4, s. 2012. On the other hand, we recommended that the

vi
Management (a) prioritize the establishment of permanent evacuation centers and
warehouse dedicated only for DRRM use to be fully disaster-ready at all times; and (b)
comply with the essential facilities listed in the provisions of Unnumbered Joint
Memorandum Circular of DILG, DSWD, DOH and DepED series of 2013 entitled
“Guidelines on Evacuation Center Coordination and Management” in the establishment
of evacuation centers.

F. SUMMARY OF TOTAL SUSPENSIONS, ALLOWANCES AND

CHARGES

Total suspensions, disallowances and charges at year-end stood at ₱6,998,010.00,

₱0.00, and ₱0.00, respectively.

G. IMPLEMENTATION OF PRIOR YEAR’S UNIMPLEMENTED AUDIT

RECOMMENDATIONS

Of the 96 prior year’s audit recommendations, 69 were fully implemented, 12

were partially implemented and 15 were not implemented at all.

vii