Verification disclosed that for CY 2006, per data gathered the amount of P2,758,420.42 still to be collected from stall rentals and taxes imposed on them daily. The list of receivables further revealed that there are some stall owners occupying more than one stall, and records showed that rental receivable accumulated to P2,758,420.42. (Appendix B)

Upon ocular inspection on the site, it was observed that some stalls are closed and vacant and that the market vendors are already outside displaying their goods.

The situation occurs because management failed to monitor and/or evaluate the status of the project to determine whether policies promulgated could still be feasible or effective tools nowadays.

It was further revealed that the Collectors have been diligently doing their duties, even reported for work during holidays, Saturdays and Sundays, however despite their efforts, they still remains uncollected. Rental amounting to P2,758,420.42, if collected this could be channeled to other productive endeavors.

RECOMMENDATION:

The authorities concerned should evaluate existing policies and ordinances particularly on stall rentals. Further, offer to other interested occupants, the stalls rented by these delinquent stallholders, who could not afford to pay the tax imposed.

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Section 8 of COA Circular No. 94-001 dated January 20, 1994, provides:

“The Chief Accountant, Bookkeeper or other authorized official performing accounting and/or bookkeeping function of the audited agency shall ensure that (a) the reports as submitted by the accounting officers are immediately recorded in the books of accounts and submitted to the auditor within ten (10) days from such receipt, xxx”

As of February 27, 2007, the following disbursement vouchers, payrolls, official receipts and accounting reports were not submitted to the Auditor’s Office on time for verification.

ReportsUnsubmittedGeneral Fund (GF)Disbursement VoucherNov – Dec. 2006PayrollsNov – Dec. 2006Official ReceiptsNov – Dec. 2006Checks Disbursements

Journal

Nov – Dec 2006Cash Disbursements

Journal

Nov – Dec 2006Cash Receipts JournalNov – Dec. 2006Special Education FundDisbursement VouchersNov – Dec 2006PayrollsNov – Dec 2006Official ReceiptsNov – Dec 2006Checks Disbursements

Journal

Nov – Dec 2006Cash Disbursements

Journal

Nov – Dec 2006Cash Receipts JournalNov – Dec 2006Trust Fund Disbursements VouchersNov – Dec 2006PayrollsNov – Dec 2006Official ReceiptsNov – Dec 2006Checks Disbursements

Journal

Nov – Dec 2006Cash Disbursements

Journal

Nov – Dec 2006 Cash Receipts JournalNov – Dec 2006

The delayed/non-submission of the reports prevented the Auditor’s Office from conducting timely audit, hence deficiencies noted, if any, could not be relayed immediately to the management for corrective action.

RECOMMENDATION:

Remind the City Accountant to comply strictly the provision of COA Circular No. 94-001, Section 1 on the timely submission of the accounts so as not to delay examination and settlements of accounts.

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Sec. 101 (2) of P.D. 1445 provides that “Every officer/employee of any Government Agency whose duties permit or require the possession or custody of government funds or property shall be accountable therefore and for safekeeping thereof in conformity with law.

COA Circular 97-002 Sub-Section 7.1 states, “Each accountable officer with a total of cash accountability of P2,000.00 or a more shall be bonded. The amount of bond shall depend on the total accountability of the officer as fixed by the head of the Agency in accordance with the schedule determined by the Bureau of Treasury.”

Per interview conducted with the Manager of the Economic Enterprises Operations in the market, we gathered that collecting functions were handled by eleven persons fielded to more or less 883 stall owners whose daily collections reached P118,714.00. However, it was noted that eight of the eleven collectors are Job orders personnel who are not bonded. We were then informed that aside from these eleven personnel, there are four regular item holders of Revenue Collection Clerks who are detailed in some divisions, such as CENRO, City Treasurer’s office and Licensing Division due to general revamp of personnel because of change of political administration.

In effect, the Manager was forced to utilize the personnel who are not qualified to handle collecting functions and are not bonded in -violation to the aforementioned provision.

RECOMMENDATION:

Transfer the four (4) Revenue Collectors back to market operations. Follow bonding requirements to protect government from losses in the event that these job order personnel will incur cash shortages.

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Sec. 313. Special Accounts to be maintained in the General Fund-Local government units shall maintain special accounts in the general fund for the following:

Public utilities and other economic enterprises;

Loans, interests, bond issues, and other contributions for specific purposes and

Development projects funded from the share of the local government unit concerned in the internal revenue allotment and such other special accounts which may be created by law or ordinance. xxx”

Sec. 105 of COA Circular No. 2002-003 of the New Government Accounting System dated June 20, 2002 provides that Local Government Unit shall maintain special accounts in the General Fund for public utilities and other economic enterprises, loans and other contributions for specific purpose and such other special accounts, which maybe created by law or ordinance.

Sec. 110 of said circular also provides that at the end of the year, post closing trial balance shall be prepared for each special account. Also, the following statements shall be prepared which shall form part of the schedules of the general fund trial balance:

Balance Sheet

Statements of Income and Expenses; and

Statements of Cash Flows

During the year under audit, it was revealed that the City Accountant failed to maintain the required financial statements for the operations in the market and bus terminal and other economic enterprise operations of the City. Operating costs and expenses were not charged against their respective appropriations, but were charged against the regular funds of the City. Further, no separate financial statements were prepared for each economic enterprise.

As a result the LGU could not determine whether the income generated by these economic enterprises are sufficient to meet their respective operating costs and the information as to correct status of assets, liabilities and equity for such special accounts are immediately determined.

RECOMMENDATION:

Require the City Accountant to maintain/prepare the required financial statements for the city economic enterprise pursuant to Sec. 313 of R.A. 7160.

Expenses of each economic enterprise should be charged against its respective appropriations. Separate financial statements should be prepared for each economic enterprise pursuant to Sections 105 and 110 of the New Government Accounting System Manual, Volume I to reflect their actual financial condition and results of operation.

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3. Completed Public Infrastructure project of Artesian Wells, Reservoirs, Pumping Station and Conduits amounting to P10,882,346.88 and Irrigation Canals and Laterals amounting to P425,352.87 still remained in the General Fund books in violation of the provision of Sec. 50, Volume I of the New Government Accounting System Manual.

Sec. 50, Volume I of the New Government Accounting System Manual provides among others that “For public infrastructures funded out of regular income, the Construction in Progress account is transferred to the Public Infrastructures account upon completion. At the end of the year, the latter account is closed to the Government Equity and the asset is recorded in the Registry of Public Infrastructures (RPI).

Verification disclosed that completed Public Infrastructure project of Artesian Wells, Reservoirs, Pumping Station and Conduits amounting to P10,882,346.88 and Irrigation Canals and Laterals amounting to P425,352.87 remained in the General Fund books.

We get the opinion of the City Accountant relative to the above condition and we were able to get his favorable action and said situation was already corrected last January 2007 in the financial statements.

The above-cited condition is violative to the provision of Sec. 50, Volume I of the New Government Accounting System that completed Public Infrastructure project shall be closed to the Government Equity and the asset is recorded in the Registry of Public Infrastructure.

RECOMMENDATION:

Strict observance of the above-mentioned regulations is much enjoined.

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Sections 97 and 104, Volume I of the New Government Accounting System Manual provide that:

“Sec. 97. Project Expenditures – The construction period theory shall apply for expenditures on infrastructure projects of the Trust Fund. For other projects, expenditures shall be debited to the appropriate expenditure account. Expenditures shall be close to Project Equity account at year-end or upon completion, whichever comes first.

The Project Equity account was later converted to Government Equity account pursuant to COA Circular No. 2004-008 dated September 20, 2004 providing for the Revised Chart of Accounts.

Sec. 104, Volume I of the New Government Accounting System Manual provides guidelines for the pro-forma accounting entries for Trust Fund, particularly par. v thereof that upon completion of the project, the accounts shall be transferred to the General Fund Books.”

Verification disclosed that Land valued at P2,527,610.74 and Office Building valued at P4,488,485.14 were still reflected in the Trust Fund books despite the completion of the project.

We referred the situation to the City Accountant and he explained that he overlooked compliance of the said regulations during the year end and willing to observe compliance this ensuing year.

The above condition is violative of the provisions of Sec. 97,Volume I of the New Government Accounting System Manual, as amended, and Sec. 104 of the same manual.

RECOMMENDATION:

Advise the City Accountant to effect the transfer of the completed projects funded out the trust fund accounts to the general fund books in conformity to the provisions of Sec. 97, Volume I of NGAS, as amended and Sec. 104 of the same manual.

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Verification disclosed that the Inventory Committee conducted the physical inventory of the Property, Plant and Equipment of the city. However, it was revealed that no property/accounting records were maintained by the General Services Office and Accounting Office for the previous years starting December 31, 2002 downwards costing P196,187,686.19.(Appendix A ) Only the property, plant and equipment procured for the last four years which amounted to P251,010,215.54 were inventoried.

The unavailability of the records caused the non-reconciliation of the balances between the accounting records and the records maintained by the City General Services office.

Similar observations caused the auditor’s qualified opinion in the previous year’s Annual Audit Report and since the accounting and property records were unavailable for the previous years procurement from December 31, 2002 downwards, the same observation is reiterated in this year’s report.

In effect, the condition affected the account’s presentation in the financial statements.

RECOMMENDATION:

To reduce the risk of misstatement of the Property, Plant and Equipment accounts, consider the following:

1. Require the CGSO and Accounting Office to complete the recording of the PPE on the property cards and equipment ledger cards;

2. Require the CGSO and Accounting Office to reconcile the PPE account for the procurement of the assets for the period December 31, 2002 downwards;

3. Require CGSO to submit the Report of the Physical Count of the Property, Plant and Equipment to the Office of the Auditor; and

4. Require the CGSO to submit the Inventory and Inspection Report of Unserviceable Property to the Office of the Auditor.

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Section 89 of P.D. 1445 states that:

“Limitations on Cash Advances – No cash advance shall be given for a legally authorized specific purpose. A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served. No additional cash advance shall be allowed to any official or employees unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”

Verification revealed that cash advances amounting to P670,000.00 was granted to the City Treasurer without any specific purpose. Further, it was revealed that the said amount was granted in the form of short-term borrowings. These cash advances were granted since September 2005 and up to the end of year same were still reflected in the books as due from the officers and employees. Moreover, same was granted for personal purpose and not for a legally authorized specific purpose.

This condition existed because the management failed to impose stricter guidelines on the granting of cash advances.

When the City Treasurer was asked for comment, she pointed out that the cash advances would be returned/liquidated on the first week of March 2006.

This resulted to the LGUs weak control over its resources.

Recommendation:

Comply strictly on the provisions of Sec. 89 of P.D. 1445 on the granting of cash advances. Strict guidelines should be implemented to strengthen control measure as regards granting of cash advances.

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Review of contracts by the Regional Technical Services Office, Commission on Audit resulted to the disallowance amounting to P98,242.24.

Contract review report by the Regional Technical Services Office, Commission on Audit shall serve as the guide of the Auditor in the post-audit of civil works transactions.

The Auditor requested for technical assistance from the RTSO to conduct contract review on civil works projects of the LGU. As a result of the review, it was revealed that a total disallowance of P98,242.24 was noted in the contract review performed by the Regional Technical Services Office, Commission on Audit.

Below are the contracts which had disallowances/variances, to wit:

ContractorTitle of ProjectAmount

Contract/DisallowedRemarks

1.CB Garay Philwide Builders

Construction of New Integrated Bus Terminal (Extra Works)

7.2 M P 59,988.24

Representing Material Testing is recommended for disallowance considering that it is already part of the Indirect Cost as stipulated under DPWH Department Order No. 57, series of 2002.2.Brillantes ConstructionConcreting of City Street, Mt. Kitanglad St. to Purok 3, Phase 3 Section (Phase II), Poblacion, Valencia City.916 M 30,360.00Noted variance considered unnecessary.3. E.S. Quillo Mini Enterprises

TOTALConstruction of Drainage Canal System, Phase II at Mindanawa Creek, Poblacion, Valencia City

1.88 M 7,894.00

P98,242.24

========

Representing cost of Material Testing is recommended to be deducted from the Contract amount.

Recommendation:

Deduct from the Contract Cost the disallowed amount of P98,242.24 as a result of the contract review undertaken by the Regional Technical Services Office, Commission on Audit.

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Contract Review and Inspection, particularly, on civil works projects to be undertaken by the Regional Technical Services Office shall be the guide of the Auditor in his post-audit of these transactions. In addition, the contract review report is a condition precedent prior the conduct of inspection of the completed projects by the RTSO.

Verification disclosed that contract documents which were returned to management due to lack of supporting attachments were not complied with by submitting the required documents so that the RTSO can proceed with the contract review, any deficiencies discovered will be rectified immediately prior the conduct of inspection. (Annex C)

Due to the nature of the lacking documents that are still to be prepared and seriousness of the consideration spent by management in the preparation of the documents caused the delay in the submission of the same.

In effect, the desired contract review report cannot yet be made by the RTSO prior to the receipt of the complete supporting documents.

Recommendation:

Submit the lacking documents required by the RTSO, COA so that the desired contract review report can be prepared and subsequently transmitted to the LGU and used a guide of the Auditor in his post-audit activity.

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