COA AUDIT REPORT Angeles City Pampanga ES2013

EXECUTIVE SUMMARY

INTRODUCTION Angeles City was created on January 1, 1964 with the enactment of R.A. 3700 otherwise known as the Charter of Angeles City. The City is composed of 33 barangays and was transformed into a highly urbanized city pursuant to Memorandum Circular No. 83-49 of the then Ministry of Local Government . Pursuant to R.A. No. 7160 or the Local Government Code of 1991, the City, like other local government units, enjoys autonomy in managing, deciding and planning its own administrative, fiscal and development affairs in conformity with the national government‘s thrust for sustainable social and economic growth. It is under the leadership of City Mayor Edgardo D. Pamintuan who was reelected for his second term and ably supported by City Vice-Mayor Vicky Vega-Cabigting who was reelected for her third term and eleven Sangguniang Panlungsod members composed of six reelectionists, four newly elected and one ABC President.

FUNCTIONS AND OBJECTIVES 1. To enhance economic development for the upliftment of the living condition of the constituents. 2. To enforce all laws and ordinances relative to the governance of the municipality and the exercise of its corporate power. 3. To exercise supervision and control of all programs, projects, services and activities of the city. 4. To initiate and maximize the generation of resources and revenues for the implementation of development plan. 5. To provide comfort and convenience thru better service to constituents.

FINANCIAL HIGHLIGHTS The following comparative data show the financial condition, results of operations and sources and application of funds of the City Government of Angeles:

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2013 Financial Position Assets 2,099,618,812.88 Liabilities 1,224,368,642.85 Equity 875,250,170.03 Results of Operations Income 1,159,784,588.45 Expenses 1,069,746,722.95 Gain/(Loss) on sale of Disposed Assets 289,628.14 Subsidy/Other Funds/Donations 25,236,165.25 Excess of Income Over Expenses 65,091,328.39 Sources and Application of Funds Appropriations 1,336,173,040.00 Obligations 1,070,698,331.90 Balances 265,474,708.10

2012

Increase/(Decrease)

1,991,205,647.47 1,167,849,196.31 823,356,451.16

108,413,165.41 56,519,446.54 51,893,718.87

1,082,568,138.40 1,010,660,754.70

77,216,450.05 59,085,968.25

134,427.47

155,200.67

32,420,471.73

(7,184,306.48)

39,621,339.44

25,469,988.95

1,329,438,220.35 1,017,730,298.27 311,707,922.08

6,734,819.65 52,968,033.63 (46,233,213.98)

OPERATIONAL HIGHLIGHTS For CY 2013, the City aimed to implement projects that dwell on the main concerns and immediate needs of the people of Angeles. The following are the agency’s major accomplishments vis-a-vis their targets during the year: Targeted Programs 20% Development Fund

Particulars Institutional Development Projects (1 project) Physical and Social Development Projects (3 projects) Economic and Community Development Projects (35 projects)

% of Accomplishment 0%

Budgeted Amount P12,400,000.00

26%

7,618,149.00

2,000,000.00

19%

34,100,000.00

2,989,611.92

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Expenditures P0.00

Targeted Programs Gender and Development Local Disaster Risk Reduction and Management Fund Solid Waste Development Program

Health Services

Particulars Various Programs Quick Response and Mitigation Fund

Hauling, tipping and disposal of residual solid waste Design and construction of a two storey building of the RLMMC

% of Accomplishment 80.06%

Budgeted Amount P42,560,343.00

28.00%

44,211,930.00

12,494,134.38

96.00%

59,266,351.20

56,725,941.65

97.20%

50,000,000.00

47,986,499.33

P205,944,843.20

P156,270,951.31

TOTAL

Expenditures 34,074,764.03

SCOPE OF AUDIT The audit covered the financial transactions and operations of the City of Angeles for the year ended December 31, 2013. The objectives of the audit were to (a) ascertain the level of assurance that may be placed on management’s assertion on the financial statements; (b) recommend agency improvement opportunities; and (c) determine the extent of implementation of prior year’s audit recommendations.

INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS We rendered a qualified opinion on the fairness of presentation of the financial statements of the City Government of Angeles for the year ended December 31, 2013 because as discussed in Part II of the Report a) the accuracy and existence assertions of the Inventories account are doubtful because of (1) non-submission of a complete Physical Inventory Report; (2) non-submission of Summary of Supplies and Materials Issued to the Accounting Department for recording of issuances in the books of accounts; and (3) unreconciled balances of some inventory items with inventory reports b) the accuracy, correctness and existence assertions on the Property, Plant and Equipment (PPE) with a carrying value of P1.18 billion are doubtful because of (1) non-completion of physical inventory; (2) non-maintenance of updated Acknowledgement Receipts for Equipment (ARE); (3) inclusion of donated/unlocated property items totaling P49,450,107.28; (4) non-maintenance of subsidiary ledgers at the Accounting Office; (5)

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unreconciled property and accounting records; and (6) absence of land title in the name of the city to prove the ownership of land valued at P8 million. To address the above-cited observations, we recommended that management (a) create an inventory committee to conduct complete inventory count of all inventory items every end of a semester in accordance with regulations and ensure that a physical inventory report is submitted and reconciled with the balances per accounting records; (b) require the GSO employees concerned to submit the Summary of Supplies and Materials Issued to the Accounting Department and to maintain/update the stock cards in accordance with regulations and reconcile the balances per stock cards with the balances per accounting records; and (c) investigate and make appropriate action on discrepancies, if any. We also recommended that management (a) create an inventory committee to conduct complete inventory count of all property, plant and equipment at least once a year in accordance with regulations and reconcile with the balances per accounting records; (b) require the GSO to update the AREs and maintain a complete file thereof; (c) require the Accounting Department to maintain Equipment Ledger Cards/subsidiary ledger cards; (d) investigate and make appropriate actions on discrepancies, if any; (e) require the GSO to obtain required documents and cause the transfer of land title amounting to P8 million in the name of the city; (f) require the accounting department to record the donated medical equipment totaling P12,901,000.00; and (g) investigate and make an appropriate action to identify and locate the missing property amounting to P36,549,107.28. The other significant findings and recommendations on the accounts and operations of the city are as follows: 1. The collectibility of Other Receivables account on livelihood projects of various cooperatives totaling P1,297,849.66 was doubtful because (1) there were no available records that can be used to validate them; (2) the accounts remained dormant for 10 to 19 years; and (3) no action was taken/initiated by management for their write-off contrary to the guidelines provided under COA Circular No. 97-001 dated February 5, 1997. We recommended that the City Accountant and other concerned officials comply with the requirements needed in the write-off of the accounts in accordance with the provisions of COA Circular No. 97-001 dated February 5, 1997. 2. The City has not transferred the balance of P4,314,919.02 of the Ospital Ning Angeles Development Fund (ONADF) from the Trust Fund to the General Fund; hence, the balance was not incorporated in the annual budget of the City contrary to Sections 308 and 325 of RA 7160. We strongly recommended that management fully implement the transfer of funds of the ONADF to the General Fund in accordance with accounting and auditing rules and regulations to present the correct financial position and results of operations of the City.

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3. Purchase requests for the procurement of drugs and medicines were not supported/accompanied by a certification signed by the requisitioning officer that the drug products being requisitioned or procured fall within and conform with the Philippine National Drug Formulary (PNDF) Volume I in violation of Paragraph II.2 of the Department of Health Administrative Order No. 163 s. 2002 dated October 16, 2002. We recommended that management require the requisitioning officer to attach a certification that the drug products being requisitioned or procured fall within and conform with PNDF Volume I, current edition in compliance with Paragraph II.2 of DOH AO No. 163 s. 2002. Also, we recommended that the list of drugs/medicines in the Purchase Order should indicate the generic names of the drugs listed in the Purchase Request and enclosed in parenthesis the brand name of the drug offered by the winning supplier for easy verification of the items requisitioned and delivered. 4. The remittance of the 30 percent share from the basic Real Property Tax (RPT) and 50 percent share from Community Tax Certificate (CTC) collections of 12 barangays for 2013 totaling P9,263,585.44 were not remitted within the prescribed period required under Section 271(d) of RA 7160, thus hampering the delivery of basic services and the implementation of development programs and projects of the barangays. We recommended that management see to it that all barangay shares from the Real Property Tax and Community Tax Certificate collections are remitted to the LGUs concerned within the prescribed period in accordance with Section 271(d) of RA 7160. 5. The remittance of P231,360.47, out of the 5% share from collections of affiliation fees amounting to P416,314.17 to the Regional Committee on Affiliation and Training of Students (RCATS) was short by P184,953.70; minimal amount was expended for the procurement of supplies and equipment; and none for attendance of affiliation trainers to trainings inspite the substantial balance of P3,389,646.89 of the account at year end in violation of Sections 10.2.1 and 10.2.2 of Department of Health (DOH) Administrative Order No. 5-A s. 1996 dated February 17, 1996, thereby defeating the purpose for which the fund was created. We recommended that management determine the training needs of the hospital personnel (attendance to seminars of affiliation trainers) and the procurement of necessary hospital equipment needed chargeable against the trust funds to maximize the use of the fund, instead of accumulating the same in the bank for years.

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We also recommended the immediate remittance of the full 5% share of the RCATS from the collections in compliance with the DOH Administrative Order No. 5-A s. 1996. 6. The delayed/deficient implementation and reporting of the Supplemental Feeding Program (SFP) by the City Social Welfare and Development Office (CSWDO) resulted in the non-measurement of the impact of the program to determine the attainment of its objectives and the non-granting of additional funds by the source agency (DSWD), thereby depriving the intended beneficiaries of improved and sustained nutritional status. We recommended that management fast track the implementation of the program and submit the necessary liquidation and administrative reports to the DSWD Regional Office No. III in accordance with the requirements of the program in order to measure the effectiveness thereof. We also recommended that management justify and submit the legal basis in the grant of honorarium to CSWDO officials and why they should not be disallowed in audit. 7. The Special Education Fund (SEF) budget covered non-priority expenditures amounting to P2 million contrary to Section 272 of Republic Act 7160 and DepEd-DBM-DILG Joint Circular Nos. 01, 01-A and 01-B dated April 14, 1998, March 14, 2001 and June 25, 2001, respectively, thereby leaving meager funds for more important projects such as construction and repair of school buildings, facilities and equipment; educational research; acquisition of books and periodicals; and sports development. We recommended that the Local School Board (LSB) be guided by the provisions of RA 7160 and the DepEd-DBM-DILG Joint Circulars in the preparation of the SEF Annual Budget and identify the priority expenditures pursuant thereto. Any issues or conflicts arising from its implementation and cases not covered by the provisions thereof shall be submitted to the DepEd for resolution and in consultation with the City government. We also recommended that the LSB stop the charging of water and electric consumption of autonomous high schools to the SEF for they have their own budget for said expenditures and instead utilize the funds for the needs of other schools. 8. Representation Expenses (RE) and Extraordinary and Miscellaneous Expenses (EME) totalling P5,399,759.42 and P2,101,534.00, respectively of the Office of the City Mayor and P869,130.20 of the Office of the City Vice-Mayor were incurred during the year, mostly on meals and flower arrangements which are considered excessive/immoderate in violation of COA Circular No. 2012-003 dated October 29, 2012 and Administrative Order No. 103 dated August 31, 2004. vi

We recommended that management exercise due prudence in the utilization of the scarce resources of the government in order to be able to deliver the basic services to the constituents of the City. Comply with the provisions of AO No. 103 dated August 31, 2004 on the continued adoption of austerity measures in the government and COA Circular No. 2012-003 dated October 29, 2012. 9. The imposition of slaughter fees of P0.50 was way below the required rate of P3.50 under the Tax Ordinance No. 61 Series of 2011 and the absence of an actual head count report of slaughtered chickens to support the accuracy and correctness of collections resulted in foregone annual income of the City amounting to at least P8.1 Million. We recommended that management require the office responsible to oversee the activities of the slaughterhouses to see to it that proper monitoring and documentation of the actual head count of chicken heads being slaughtered are complied with to support the correctness of the fees being collected. We also recommended that management impose and collect the full amount of slaughter fee of P3.50 per head in compliance with the provisions of Section 6.F.01. of the Tax Ordinance No. 61 Series of 2011 to recoup the substantial collection deficiency. 10. The non-examination of the books of accounts and non-confirmation of the declared gross receipts with other government agencies in the application for renewal of business license of corporation resulted in the under collection of business taxes by a total of P4,940,321.08 because of the under declaration of gross receipts from taxable years 2010-2012. We recommended that management, through its Treasury Department, exert effort to collect immediately the tax deficiency due the City in accordance with Article H, Section 3.H.12(f) of the Angeles City Tax Ordinance No. 61, Series of 2011 pursuant to Section 145 of RA 7160. Legal remedies should be resorted to enforce collection, if warranted. 11. Honoraria/allowances amounting P6,194,000.00 were granted to officials and personnel of various National Government Agencies (NGAs) who are assigned at the City government, other than those authorized by the Department of Budget and Management (DBM) Compensation Policy Guidelines No. 98-01 dated March 23, 1998 and were not reported by the City to the mother agency of the concerned employees in violation of COA Circular No. 76-25 dated March 31, 1976, 76-25-A dated June 30, 1976 and 85-25E dated April 25, 1985, thereby depleting the resources of the agency instead of utilizing them for the implementation of its priority programs.

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We recommended that management limit the grant of honoraria/allowances to those which are authorized under DBM Compensation Policy Guidelines No. 9801 dated March 23, 1998 and monthly report of allowances granted should be submitted to the mother agency of the NGA personnel assigned in the City for monitoring purposes and to ensure that no double compensation occurs pursuant to Section 3 of COA Circular 86-25E dated April 25, 1985. 12. Honoraria totaling P 829,972.63 were granted to officers and members of various special committees without the required documents to determine the regularity of the same contrary to DBM Budget Circular No. 2007-2 dated October 1, 2007, COA Circular No. 2012- 001 dated June 14, 2012 and Section 4, par. 6 of PD 1445. We recommended that management submit the required documents of the remaining three committees/programs pursuant to the provisions of Budget Circular No. 2007-2 dated October 1, 2007 to facilitate the audit and verification of the propriety of the payments of honoraria. 13. The low accomplishment rate in the implementation of the disaster prevention and mitigation and disaster preparedness plans and programs of the Local Disaster Risk Reduction & Management Fund (LDRRMF) was an indication of the non-attainment of the objective of the Angeles City Disaster Risk Reduction & Management Plan for 2013 of enhancing the capacities of the City and its constituents to effectively understand, prepare, respond and recover from the impacts of natural and man-made disasters. The ACDRRMC and the Office of the City Accountant continuously failed to submit a copy of the report on the utilization of the Local Disaster Risk Reduction & Management Fund (LDRRMF) and other dedicated risk reduction and management resources to the Office of the Local Auditor as required under Section 12.c.24 of R.A. 10121 and Section 5.1.5 of COA Circular No. 2012-002 dated September 12, 2012. Unutilized/unexpended fund balance in 2012 amounting to P17,408,011.66 was not constituted as a Special Trust Fund to be used solely for the purpose of supporting disaster risk reduction and management activities within the next five years in violation of Section 3 of Rule 18 of the IRR of R.A. 10121 and Section 5.1.10 of COA Circular No. 2012-002 dated September 12, 2012. To address the above observations, we recommended that management consider the following courses of action on the allocation, utilization and reporting of the Local Disaster Risk Reduction and Management Fund (LDRRMF): a. Require the Angeles City Disaster Risk Reduction & Management Council (ACDRRMC) to study and evaluate its Annual ACDRRMPlan and determine constraints/reasons for the minimal implementation of its plans viii

and program, especially the disaster prevention and mitigation and disaster preparedness programs resulting in the failure to attain its intended objectives. b. Require the ACDRRMC to regularly prepare a Report on the Utilization of the LDRRMF and submit the same to the COA Auditor. Likewise, require the ACDRRMC to make the report public through publication and postings in conspicuous places and its website. Also, require the City Accountant to comply with the reportorial requirements on the Accounting and Reporting Guidelines for the Local Disaster Risk Reduction & Management Fund (LDRRMF) of the LGU, National Disaster Risk Reduction & Management Fun (NDRRMF) given to LGUs and Receipts from Other Sources; and c. Require the City Accountant to transfer from the regular funds of the City the 2012 and 2013 unutilized balances of the LDRRMF amounting to P17,408,011.66 and P50,665,765.62 to a Special Trust Fund in compliance with rules and regulations to support disaster risk reduction and management activities within the next five years. 14. The Annual Gender and Development Plan and Budget and the GAD Accomplishment Report of the City were not in accordance with the guidelines set forth under the Philippine Commission on Women (PCW), Department of Department of the Interior and Local Government (DILG), Department of Budget and Management (DBM) and the National Economic and Development Authority (NEDA) Joint Circular No. 2013-01, thereby failing to mainstream gender perspectives in their policies, programs and projects. We recommended that management comply with the provisions of PCW/DILG/DBM/NEDA Joint Circular 2013-01 particularly on the procedures to be followed in the formulation, development, submission, implementation, monitoring and evaluation including accounting of results of agency annual GAD Plans and Budgets (GPBs) and GAD Accomplishment Reports (AR) in order to mainstream gender perspectives in their policies, programs and projects. 15. Various expenses amounting to P5,535,733.36 on development programs, activities and projects charged to the GAD budget were not attributable to the efficiency and effectiveness in addressing realization of the objectives of the country’s commitments, plans and policies on women’s empowerment, gender equality and gender and development. We recommended that management thru its GAD Focal Point Systems (GFPS) take the lead in mainstreaming gender in agency PAPs. As such, they shall coordinate the preparation of the agency GPB and the GAD AR, monitor its implementation and report on its results to ensure that the different concerns of women and men are addressed equally and equitably in their PAPs in accordance with the provisions of PCW/DILG/DBM/NEDA Joint Circular 2013-01. ix

16. The Priority Development Assistance Fund (PDAF) intended for programs and projects totaling P4,100,000.00 of which P1,500,00.00 has been in the books since 2008 and a fund transfer amounting to P2,100,000.00 from the Municipality of Magalang, Pampanga for the scholarship program at the City College of Angeles, Angeles City remained unutilized as of December 31, 2013 thus, the intended recipients were deprived of the benefits derived therefrom. These have not been reverted to the Bureau of Treasury in compliance with Executive Order No. 431 dated May 30, Section 3.2 of COA Circular No. 2012001 dated June 14, 2012 and Supreme Court Decision re: G.R. No. 208566, G.R. No. 208493, and G.R. No. 209251 all dated November 19, 2013. We recommended that management revert all dormant/unutilized accounts and lapsed SAROs to the Bureau of Treasury in compliance with Executive Order No. 431 dated May 30, 2005 and COA Circular No. 2012-001 dated June 14, 2012 and Supreme Court Decision re: G.R. No. 208566, G.R. No. 208493, and G.R. No. 209251 all dated November 19, 2013. 17. Funding allocation for the priority development projects amounting to P65,558,149.00 under the 20% Economic Development Fund (EDF) was less than the statutory budget requirement of P93,172,997.80 by P27,614,848.80. There was also a low implementation rate of 57.30% of the programmed priority projects during the year resulting in the non-attainment of desirable socioeconomic development and environmental management outcomes essential in the attainment of the constitutional objective of a desired quality life for the constituents pursuant to the provisions of Joint Memorandum Circular (JMC) No. 2011-11 of DILG and DBM dated April 13, 2011 and DILG Memorandum Circular No. 2010-138 dated December 2, 2010. To address the above-cited observations, we recommended the following courses of action: a) that management see to it that the budgetary requirement for the 20% Economic Development Fund (EDF) be appropriated for the formulated plans/programs and projects in its Annual Investment Plan (AIP) pursuant to the provisions of Joint Memorandum Circular (JMC) No. 2011-11 of DILG and DBM dated April 13, 2011 and DILG Memorandum Circular No. 2010-138 dated December 2, 2010; b) that the Local Development Council (LDC) fully/completely identify the priority projects in accordance with those covered under Section 3 of the JMC. The Bids and Awards Committee (BAC) should plan and calendar the implementation of the projects and stop the practice of bidding them out at the end of the year since the funding for these should have been automatically set aside for the purpose upon release of the IRA of the agency averaging P38 Million per month or P7.6 Million per month for x

the EDF in accordance with Chapter 6 Section 105 Volume 1 of the NGAS Manual for LGUs; c) that the head of the agency see to it that there is maximum utilization and implementation of the 20% EDF during the year to ensure the attainment of the desirable socio-economic development and environmental management outcomes essential in the attainment of the constitutional objective of a desired quality life for the constituents. 18. The remaining prior years’ audit disallowances amounting to P32,000.00 and current year’s audit charges totaling P6,075,739.81 remained unsettled as of December 31, 2013, in violation of COA Circular No. 2009-006 dated September 15, 2009. We recommended that management enforce the immediate settlement of the prior years’ audit disallowances and enforce immediately the collection from the contractors concerned the underpayment of business taxes as a result of under declaration of gross receipts. STATUS OF IMPLEMENTATION RECOMMENDATIONS

OF

PRIOR

YEAR’S

AUDIT

Evaluation of the extent of implementation by management of 15 recommendations contained in the 2012 Annual Audit Report disclosed that five recommendations were fully implemented, seven were partially implemented and three remained unimplemented.

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