EXECUTIVE SUMMARY

A. Introduction

The City of Caloocan was created on February 6, 1962 by virtue of Republic Act
No. 3278, dubbed as the “Gateway to the North” because of its location and
proximity to road networks joining towards North.

Pursuant to Republic Act No. 7160 or the Local Government Code of 1991, the City,
like other government units, enjoy its autonomy in managing, deciding and planning
its own administrative, fiscal and development affairs in conformity with the national
government thrust for sustainable social and economic growth.

For CY 2020, the City had 5,235 plantilla positions distributed among the
36 departments/offices. Of the total, 16 are elective, 1,608 are permanent, 118 are
co-terminous, 259 are casual employees 247 are contractual and 2,987 are job order
employees.

B. Scope and Objectives

The audit covered the accounts and operations of the City of Caloocan for the period
January to December 31, 2020. The audit was conducted in accordance with
International Standards of Supreme Audit Institutions (ISSAI) to: (a) verify the level
of reliance that may be placed on management’s assertions on the financial
statements; (b) determine the extent of compliance with applicable laws, rules and
regulations; (c) recommend agency improvement opportunities; and (d) ascertain the
extent of implementation of prior year’s audit recommendations.

C. Financial Highlights

For CY 2020, the City’s assets, liabilities and equity for the year were
P21.772 billion, P9.939 billion and P 11.833 billion, respectively. The said accounts
have increased by P1.358 billion, P1.248 billion and P109.692 million, respectively,
details shown as follows:

2020 2019 Increase/Decrease

Assets 21,771,799,844 20,413,742,917 1,358,056,927
Liabilities 9,938,639,767 8,690,275,057 1,248,364,710
Equity 11,833,160,077 11,723,467,860 109,692,217

While the City’s income, expenses and net income for the same year were
P8.903 billion, P8.819 billion and P83.798 million, respectively. The said accounts
have also increased by P2.630 billion, P3.589 billion and decreased by
P959.326 million, respectively in CY 2020, presented as follows:

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 2020 2019 Increase/Decrease
Income 8,903,099,005 6,273,266,424 2,629,832,581
Expenses 8,819,300,379 5,230,141,957 3,589,158,422
Net Income 83,798,626 1,043,124,467 (959,325,841)

On the other hand, the City’s appropriation and obligation for CY 2020 have total
balances of P9.773 billion and P7.370 billion, respectively, and have also increased
by P713.519 million and P1.134 billion, respectively in the same year.

2020 2019 Increase/Decrease

Appropriation 9,772,864,120 9,059,344,628 713,519,492
Obligation 7,370,458,157 6,236,101,233 1,134,356,924

D. Operational Highlights

The City’s reported major accomplishment for implemented infrastructure projects

on the 1st quarter of CY 2020, however for the 2nd to 4th quarters of CY 2020, due
to the onset of COVID-19 Disease, most of the appropriations allocated for various
programs, projects and activities were realigned for COVID-19 related expenses to
address the basic needs of the constituents and curtail the further spread of the virus,
as follows:

 Implemented infrastructure projects such as installation of streetlights, roads

and drainage improvements, improvement of street and pathwalks,
construction of rip-raps and box culverts, among others;

 Procurement of relief goods, personal protection equipment, among others for

support operations during COVID-19 emergency response and for the
immediate needs, sustenance and protection of the City’s constituents from
the effect and further threat of COVID-19 virus;

 Provision of financial and food assistance to the City’s constituents most

especially the less fortunate and marginal sector of the City, to ensure their
financial stability and support in times of the pandemic;

 Procurement of necessary medical, laboratory supplies and equipment, drugs

and medicines to ensure availability of the same in the various City Health
Centers, Caloocan City Medical Center and Caloocan North Medical Center;

● Conducted free consultation and examinations under the health care and social
services for the less privileged constituents;

● Implemented various health care and social services such as Medical Mission,
Operation Tule, Family Planning, Maternal Care and Child Health Program,

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 Adolescent Care, Nutrition, Dental, and Tuberculosis Program for its
constituents;

● Provided various services clients in the form of financial assistance (medical

and burial), free legal assistance, free birth registration/discounted corrections
of birth certificates, medical check-up/provision of medicines; and

● Access to low cost education through the University of Caloocan City.

E. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements due to errors and deficiencies that misstated the affected account
balances, discussion of which are included in Part II of the report and summarized
as follows:

1. The accuracy of the reported balance of Cash–Local Treasury account could not
be established due to unreconciled difference of P3.820 million between the
accounting books and the City Treasurer’s Office records caused by: (a) incorrect
recording in the subsidiary ledgers; (b) unupdated cashbook; and (c) absence of
reconciliation contrary to COA Circular No. 2015-009 dated December 1, 2015
and Section 26 of the New Government Accounting System (NGAS) Manual for
Local Government Units (LGUs), Vol. II.

We recommended that the:

a. City Accountant and the City Treasurer immediately reconcile their records
and submit to the Office of the City Auditor the reconciliation statements
supported with complete documentations;

b. City Accountant record only the amount of cash received by the Local
Treasurers and credit the account for deposits to Authorized Government
Depository Banks (AGDB) in compliance with COA Circular No. 2015-009;

c. City Treasurer record and update the transactions in the cashbook daily, foot
and close the books at the end of each month in compliance with Section 26
NGAS Manual for LGUs, Vol. II; and

d. City Accountant and the City Treasurer prepare reconciliation reports of their
books of accounts at least quarterly to ensure compliance with Section 181(c)
of the GAAM, Vol. I.

2. The Cash in Bank-Local Currency account was overstated by P15.398 million

due to: (a) unrecorded/unadjusted book reconciling items in CY 2020 and prior
years in the net amount of P21.594 million; (b) non-cancellation of stale checks
totaling P4.217 million; (c) inclusion of Deposit in Transit as bank reconciling

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item amounting to P0.027 million; (d) existence of negative balances of two bank
accounts totaling P0.991 million; and (e) non-inclusion of City’s five bank
accounts totaling P1.014 million.

We recommended that Management require the:

a. City Accountanting Office (CAO) to-

 Coordinate with the City Treasurer’s Office (CTO) to secure the

necessary debit and credit memos from the concerned banks to support
the unrecorded reconciling items;

 Conduct immediate identification and thorough verification of all

outstanding reconciling items not yet taken up in the books in order to
establish the correct balances of the Cash in Bank accounts and thereafter
furnish the City Auditor’s Office the copies of Journal Entry Voucher, for
validation purposes;

 Effect the necessary adjusting entries for stale checks amounting to

P4,216,996.86 and deposit in transit of P27,204.21;

 Record the five bank accounts with balances totaling P1,014,365.14

which were not included in the CIB accounts; and

 Prepare BRS for the 14 bank accounts.

b. CTO to-

 Send a written notice to the payees one month before the check becomes
stale as required in Section 59 of the NGAS Manual;

 Stale checks shall be reported and attached to the RCI prepared at the
period of cancellation;

 Request for the re-issuance of the check amounting to P27,204.21 from

the issuer; and

c. CTO and the CAO to:

 Provide evidence that the checks are not outstanding, voided and no
obligations exist, for improperly reported stale checks; and

 Exert full efforts in identifying and analyzing the possible cause of the
negative balances and effect the necessary adjusting journal entries in the
books of accounts.

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3. The reported balance of Cash in Bank account in the Financial Statement as of
December 31, 2020, cannot be ascertained due to: (a) non-confirmation of
10 bank accounts totaling P128.646 million; (b) non-submission of the Bank
Reconciliation Statements of 14 bank accounts totaling P190.720 million; and
(c) absence of necessary documents supporting the BRS.

We recommended that Management require the City Accounting Office to:

a. Coordinate with the PNB, PVB and DBP to determine the nature and details
of the 10 unconfirmed bank accounts and also request for the bank statements
from the said banks for reconciliation purposes and effect the necessary
adjusting entries with complete supporting documents.

b. Submit the BRS with supporting documents of the 14 bank accounts totaling
P190,719,730.05 in compliance with Paragraphs 3.2 and 3.4 of COA Circular
No. 96-011.

c. Submit copies of the debit/ credit memos, cancelled and paid checks and all
other supporting documents for the 35 BRS, in compliance with Paragraph
3.5 of COA Circular No. 96-011.

4. The Cash in Bank-Local Currency, Current Account (CIB-LCCA) under the

Trust Fund totaling P15.831 million has been dormant for more than five years,
hence, the existence of the same cannot be ascertained.

We recommended that Management require the CAO to reconcile its records with
the records of the SA, to facilitate the remittance of fund balances to the
concerned SA, and the preparation of necessary adjusting entries in the books.

5. The existence, validity and reliability of Property, Plant and Equipment accounts
totaling of P19.402 billion cannot be ascertained due to: (a) unreconciled
discrepancies between the accounting records and the Report on the Physical
Count of Property, Plant and Equipment (RPCPPE) totaling P1.462 billion; and
(b) unidentified prior years’ balances of P608.885 million.

We reiterated our previous year’s recommendation that Management require the:

a. GSO and CAO in coordination with various offices and departments to

continuously reconcile their records and make the necessary adjustments;

b. CTO to provide copies of the TCTs to the GSO to facilitate identification and
location of the real estate properties of the City; and

c. CAO to determine the composition of the unidentified prior years’ balances

in order to determine if the same were fully depreciated and/or no longer
existing.

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 6. The correctness and reliability of the balances of the Construction in Progress
accounts in the total amount of P297.743 million could not be ascertained due to:
(a) unidentified beginning balances of P245.524 million; (b) inclusion of
completed projects of P18.508 million; and (c) absence of detailed information
on accounting entries totaling 33.711 million.

We recommended that the Management require the CAO and CED to:

a. Exert more effort to locate the relevant information/documents pertaining to

the beginning balances of the CIP accounts in CYs 2012 and prior years;

b. Coordinate with the City Engineers’ office to determine whether the projects
implemented in CYs 2014 to 2019 were unfinished or already completed, and
prepare accounting entries to transfer the CIP Accounts to the respective asset
accounts and compute for the depreciation and accumulated depreciation;
and

c. Provide necessary information and copies of the JEVs for the correcting/
adjusting entries, to ensure the accuracy of balances of the CIP and other
affected accounts in the financial statements.

F. Other Significant Observations and Recommendations

The following are the other significant findings and recommendations in the audit of
the City of Caloocan for CY 2020:

1. The City maintains several accounts with the PNB totaling P86.887 million
contrary to Section 5.2 of Department of Finance (DOF) Circular No. 01-2017
dated May 11, 2017, thus, exposing government funds to the risk of possible loss
in case of bankruptcy of the said private bank.

We recommended that Management require the:

a. CAO to request from PNB a copy of the confirmation of balances for all
accounts maintained in the said bank, if any, prepare Bank Reconciliation
Statements for the five PNB bank accounts and make the necessary
adjustments in the books; and

b. CTO to immediately transfer the remaining deposits from PNB, to any of the
AGDB listed under Section 5.2 of the DOF DC No. 01-2017.

2. Cash advances totaling P80.543 million remained unliquidated as of

December 31, 2020, due to the failure of the accountable officer to liquidate the
said advances within the prescribed period and non-observance of the guidelines
in the granting and liquidation of cash advances under COA Circular
No. 97-002 dated February 10, 1997, and Section 89 of PD No. 1445.

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 We reiterated our prior year’s recommendation that Management require the City
Accountant to:

a. Exert earnest efforts to locate the documents/whereabouts of the accountable

officers with cash advances since CY 2002 to determine whom to issue
demand letters for the liquidation of the CAs, if not, payment of the same if
proven not utilized at all;

b. Strictly monitor the liquidation of cash advances by sending demand letters

regularly, particularly to accountable officers and employees who are still in
active service;

c. Initiate the filing of appropriate charges against the accountable officers who
failed to settle their accountabilities after due demand;

d. Strictly comply with the general guidelines in the in the granting and
liquidation of cash advances under COA Circular No. 97-002 dated
February 10, 1997, and Section 89 of PD No. 1445; and

e. Enforce strictly the pertinent provisions of Paragraph 9(1)(2)(3) of COA

Circular No. 2012-004 dated November 28, 2012.

3. Accounts Payable for General Fund, Special Education Fund and Trust Fund of
P25.299 million were outstanding for more than two years without details and
supporting documents, hence, the reported balance of the said account in the
financial statements is of doubtful validity.

We reiterated our previous years’ recommendation that the Management require

the CAO to:

a. Analyze and conduct a thorough review of the transactions and their

supporting documents and check the existence of actual claimants; and
b. If the transactions were not substantiated with necessary documents and the
payable accounts were found to be non-existing without identified valid
claimants, the funds intended for the said obligations should be adjusted and
reverted to the unappropriated surplus in accordance with the pertinent
provisions of PD No. 1445.

4. Other Payables account in the Trust Fund (TF) totaling P4.647 million remained
dormant for seven years and more, hence, the validity, and reliability of the
reported balance in the financial statements cannot be ascertained.

We recommended that if the payables were proven to be undocumented and

without valid claimants, Management should request the Sanggunian to pass a
resolution/ordinance to transfer the dormant balances to the General Fund to be
utilized for COVID-19 related expenses.

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 5. Out of the fund transfers from National Government Agencies (NGAs) totaling
P2.122 billion, P1.938 billion were fully utilized, P75.542 million were partially
utilized and P108.622 million were not utilized for intended programs, projects
and activities (PPAs), thus depriving the primary beneficiaries/ constituents of
the City of the use, benefits and services of the said PPAs.

We recommended that Management require:

a. The responsible officials to immediately utilize the funds so that the intended
benefits be enjoyed and availed of by the constituents;

b. If already implemented, require the CAO to prepare Fund Utilization Report

to eliminate the liability from the Due to NGAs account; and

c. The CAO and CTO to return to the source agencies the unspent balance of
the fully implemented PPAs.

The aforementioned observations together with the corresponding recommendations were

discussed with Management officials concerned during the exit conference on
June 18, 2021. Management views and comments were incorporated in the report, where
appropriate.

G. Summary of Total Audit Suspensions, Disallowances and Charges as of

year-end

The unsettled audit suspensions and disallowance amounted to P26.296 million and
P72.311 million, respectively, at the end of the year as reported in the Statement of
Audit Suspensions, Disallowances and Charges.

H. Status of Implementation of Prior Years’ Audit Recommendations

Of the 79 audit recommendations contained in the CYs 2019, 2018, 2017 and 2016
Annual Audit Report (AAR), 33 or 41.77 percent were implemented and 46 or
58.23 percent were partially implemented during the year.

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