EXECUTIVE SUMMARY

A. Introduction

Urdaneta City is a home of the biggest fruits and vegetables wholesale market in
Northern Luzon and one of the largest livestock markets in the Philippines. It is fast
emerging as an investment destination owing to its strategic location and a peaceful
environment conducive for business trading, undoubtedly a consequence of Urdaneta
City being recognized as a Hall of Fame Awardee as the Cleanest, Greenest and Safest
City in Region I for three consecutive years.

The City’s vision and mission statements are as follows:

Urdaneta City is envisioned to be a center of agro-industrial development

and educational advancement, a city with a viable solid waste
management, admirable traffic system, sustainable social services and
equitable opportunity, and a community of God-loving, well-disciplined,
self-reliant, and development-oriented people. It shall be an urban growth
center and a model of good governance in Northern Luzon.

It is the mission of the City Government of Urdaneta City to provide

adequate infrastructure facilities and basic social services, to promote a
healthy and safe environment, to practice good governance and dynamic
leadership in ensuring political stability and economic self-sufficiency,
and to promote people participation in policy formulation and project
implementation

Urdaneta City is under the leadership of City Mayor Amadeo Gregorio E. Perez IV who
is ably supported by Vice Mayor Franco SJ. Del Prado and eleven
SangguniangPanglungsod (SP) members. The City is complemented by the total
workforce of 1,189 personnel consisting of 224 regulars and 965 casuals.

For CY 2015, the City continuously aimed to (a) enhance economic development for the
upliftment of the living condition of the constituents; (b) enforce all laws, rules and
regulations including its ordinances relative to the governance of the City and the
exercise of its corporate power; (c) exercise supervision and control over all programs,
projects and activities of the City; (d) initiate and maximize the generation of resources
and revenues for the implementation of the development plan of the City; and (e) provide
comfort and convenience thru better service to its constituents.
B. Financial Highlights

We present below the financial position, sources of funds, appropriations and obligations
of the City during the year:

Increase
2015 2014 %
(Decrease)
Assets ₱1,449,631,091.18 ₱1,308,381,758.64 ₱141,249,332.54 9.74
Liabilities 322,431,845.85 339,493,268.44 (17,061,422.59) (5.29)
Government Equity 1,127,199,245.33 968,888,490.20 158,310,755.13 14.04
Income 773,708,559.60 717,377,057.77 56,331,501.83 7.28
Expenses 604,326,080.71 603,382,552.53 943,528.18 0.16
Appropriations 810,023,567.10 843,842,836.87 (33,819,269.77) (4.00)
Obligations 659,269,967.45 672,219,136.15 (12,949,168.70) (1.93)

C. Operational Highlights

For CY 2015, the City Government of Urdaneta had implemented 84 various

infrastructure projects funded from various sources with a total contract cost amounting
to ₱31,348,241.62. The aforementioned projects some were validated by the Audit Team
on a sampling basis.

Funding Source No. of Projects Project Cost (₱) Project Status

Implemented
20% Economic 61 22,504,282.82
56 completed
Development fund
5 on going
(EDF)
Special Local Road 1 On going
1,987,594.46
Fund (SLRF)
Department of 12 completed
14 3,869,780.06
Agriculture (SARO) 2 on going
4 completed,
DILG 8 2,986,584.28
4 on going
Total 84 31,348,241.62

D. Scope of Audit

A financial and compliance audit was conducted on the accounts and transactions of the
City ofUrdaneta for the calendar year 2015 to ascertain the fairness of the presentation of
the financial statements and compliance of the agency to laws, rules and regulations. The
audit focus on the review of operating procedures, inspection on sampling basis of the
programs and projects, interview with local government officials/employees, verification,
reconciliation, analysis of accounts and such other procedures considered necessary
under the circumstances. Likewise, a Revenue Audit was conducted on the Market
Operations and Real Property to determine whether collections for the year were attained
in an efficient, economical and effective manner. The audit was aimed to inform the
auditee where improvement could be instituted in the field of revenue, expenditure and
management of resources.

Results of audit were communicated through Audit Observations Memoranda and were
discussed in an exit conference with management and other concerned officers and
employees.

E. Opinion on the State Auditor’s Report on the Financial Statements

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

statements of the City of Urdaneta for CY 2015 due to reasons as stated in the
Independent Auditor’s Report.

F. Other Significant Audit Observations and Recommendations

For the deficiencies stated in the Independent Auditor’s Report which were the reasons
for the qualified opinion rendered on the financial statements, we have recommended
Management to reconcile the general ledger controlling account balance with the listing
of the General Services Office and the City Assessor’s Office in order to identify the
discrepancies committed and consequently prepare the necessary adjustments. We also
recommended the City Accountant to coordinate with the City GSO, City Assessor and
City Legal Officer on the proper documentation and inventory of the titles of the land
which are still in the name of former owners/donors/vendors to the City Government to
avoid third party claims. The City Accountant and the City GSO to maintain updated real
property ledger cards to effectively control and monitor movement in the Land Account
and finally present the true financial position of the City.

Hereunder are other significant audit observations noted during the audit and the
corresponding recommendations which are discussed in detail in Part II of this report.
Management views and comments including those given during the exit conference
conducted on April 4, 2015 were incorporated in the report, where appropriate.

5. Validity, accuracy and existence of Property, Plant and Equipment (PPE) accounts as
of December 31, 2015 cannot be relied upon due to discrepancy of records between
the PPE book balance of ₱1,487,398,145.61 and the Reports of Physical Count of
PPE (RPCPPE) of ₱1,276,045,296.05 or a discrepancy of ₱211,352,849.56 in
violation of Section 114 of the Manual on National Government Accounting System
(MNGAS), Volume I.

We have recommended Management the following courses of action:

e. Reconcile the general ledger controlling account balance with the listing of
the General Services Office and the City Assessor’s Office in order to identify
 the discrepancies committed and consequently prepare the necessary
adjustments.

f. The City Accountant to coordinate with the City GSO, City Assessor and the
City Legal Officer on the proper documentation and inventory of the real
properties owned by the City.

g. Facilitate the transfer of the titles of the land which are still in the name of
former owners/donors/vendors to the City Government to avoid third party
claims.

h. The City Accountant and the City GSO to maintain updated real property
ledger cards to effectively control and monitor any movement in the Land
Account in order to present the fairly the financial position of the City.

6. Advances for Officers and Employees, Advances to Special Disbursing Officer

and Advances for Payroll fund in the total amount of ₱2,454,793.06, ₱998,080.11
and ₱5,817,806.25 , respectively remained unliquidated as of December 31, 2015,
contrary of the provisions embodied in COA Circular 97-002 dated February 10,
1997 and Section 89 of PD 1445, thus, exposing the funds to possible misuse or
misapplication and overstating the asset accounts and understating the expense
accounts.

We have recommended that Management require all accountable officers

and employees with outstanding cash advances to immediately settle
and/or liquidate their respective accountability, pursuant to COA Circular
97-002 dated February 10, 1997 and Section 89 of PD 1445.

In the event that the officials and employees concerned fail to

settle/liquidate their cash advances as of January 31, 2016, file an
appropriate Malversation charges against them under Articles 217 and
Article 218 for failure to liquidate the said cash advance, both under the
Revised Penal Code or criminal prosecution under Section 128 of P.D. No.
1445 as provided under Section 9 of COA Circular No. 2012-004, dated
November 28, 2012.

7. Unexpended balances of Priority Development Assistance Fund (PDAF) received

from legislators and cash proceeds received from other sources totaling
₱4,296,302.30 were not remitted/returned to the National Treasury/source
agencies in violation of COA Circular No. 94-013 dated December 13, 1994 and
Executive Order No. 431 dated May 30, 2005, thus depriving the government of
its opportunity for the immediate use of funds for other vital projects.

We have recommended that the City Treasurer be instructed to immediately

return the unused amount to the source agency all excess or unused funds so
that these may be utilized in other important and urgent projects. We also
 recommended the City Treasurer to remit the unexpended balances of PDAF
to the National Treasury together with the earned interests that have accrued
to the principal amount that is currently maintained in the bank.

8. The Real Property Tax and Special Education Tax Receivables with ₱ 0 balance
in the Consolidated Trial Balance as of December 31, 2015 was not accurate
because the partial list of delinquent taxes amounted to ₱13,929,956.62. The
delinquent taxes are part of the Receivable accounts . The inaccuracy resulted to
the understatement of receivables account.

We recommended that the Accounting and Treasury coordinate closely and

make proper adjustments on the subject receivables in order that the
accounting records jibe with the treasury records to reflect the correct
amount of receivables. Likewise, the City Treasurer in coordination with the
City Assessor prepare and furnish the City Accountant a duly certified list of
taxpayers showing the names and amount due and collectible based on
RPTAR/Taxpayer’s index card to provide an accurate and reliable basis in
the setting-up of receivables for real property taxes and special education
taxes for fair presentation of the accounts in the financial statements.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Out of the 14 audit recommendations contained in the 2014 Annual Audit Report,
5 were implemented, 6 were partially implemented and 3 were not implemented.