EXECUTIVE SUMMARY

Introduction

The City of Dasmariñas, Cavite was created by virtue of Republic Act (RA) No. 9723
dated October 15, 2009 and was ratified and approved on November 26, 2009 in a
plebiscite held on November 25, 2009. The City is composed of 75 barangays. It is a
lone congressional district of the Province of Cavite.

The consolidated financial statements of the City for the Fiscal Year 2017 have been
prepared in accordance with and comply with the Philippine Public Sector Accounting
Standards (PPSAS). The consolidated financial statements are presented in pesos, which
is the functional and reporting currency of the City. The Accounting policies have been
applied starting the Calendar Year (CY) 2015.

The Organizational Structure of the City is as follows:

a. Key Officials

City Mayor : Hon. Elpidio F. Barzaga, Jr.

City Vice-Mayor : Hon. Raul Rex D. Mangubat
Members of the Sanggunian:
1. Hon. Reynaldo C. Canaynay
2. Hon. Resty M. Encabo
3. Hon. Roderick M. Atienza
4. Hon. Martin John T. Reyes
5. Hon. Nickanor N. Austria, Jr.
6. Hon. Fulgencio C. Dela Cuesta, Jr.
7. Hon. Teofilo F. Campano
8. Hon. Tagumpay P. Tapawan
9. Hon. Angelo C. Hugo
10. Hon. Aquino I. Garcia
11. Hon. Eric S. Aledia
12. Hon. Mamerto B. Noora, Jr.
13. Hon. Ramiro Mabini L. Podaca
City Accountant : Ma. Teresa L. Mendoza
City Treasurer : Ramon G. Llacer

b. No. of Personnel Complement

Consultants : 47
Permanent : 703
Temporary/Casual/Contractual/Job Order : 1425
Elective Officials : 15
Coterminous : 36
Total 2,226
Financial Highlights

For CY 2017, the City generated a total income of P2,527,563,132.26, from local
taxes, permits and licenses, service and business income, internal revenue allotment and
other receipts which is higher by P412,151,988.47 from last year’s income of
P2,115,411,143.79 The total funds utilized for the year amounted to P1,803,978,147.24
out of the current and continuing appropriations of P3,584,025,733.58.

The Total Assets, Liabilities, Equity, Income and Expenses for CY 2017 are as
follows:

2017 2016 Increase/Decrease

Assets P 6,431,667,725.02 P 5,285,914,951.15 P 1,145,752,773.87

Liabilities 975,529,991.74 797,546,291.35 177,983,700.39
Equity 5,456,137,733.28 4,488,368,659.80 967,769,073.48
Income 2,527,563,132.26 2,115,411,143.79 412,151,988.47
Expenses 1,546,901,256.86 1,330,084,870.46 216,816,386.40

Scope of Audit

Financial, compliance and value for money audits were conducted on the accounts
and operations of the City for CY 2017. The audit was conducted to ascertain the
fairness of the presentation of the financial statements and compliance of the City with
laws, rules and regulations, as well as the economical, efficient and effective utilization
of resources.

Audit Opinion on the Financial Statements

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

financial statements based on the following:

1. The reported balances of Property, Plant and Equipment (PPE) accounts with
total net amount of P3,128,158,019.48, representing 49 percent of the total
assets of P6,431,667,725.02 as of year-end, were unreliable due to the
aggregate discrepancy of P138,202,518.39 between the Accounting records
and the Report on the Physical Count of Property, Plant, and Equipment
(RPCPPE), contrary to Section 114 of the Manual on the New Government
Accounting System (MNGAS), Volume I.

2. The Real Property Tax (RPT) and Special Education Tax (SET) Receivables
of P287,104,245.31 each or a total of P574,208,490.62 set at the beginning of
the year were still based on estimates pending completion of the newly
installed Real Property Tax Administration System (RPTAS), contrary to
Section 20 of the Manual on the New Government Accounting System
(MNGAS), Volume I, thus affecting the reliability of the year-end balances of
 the RPT and SET Receivables and Deferred Real Property Tax and Special
Education Fund Tax.

3. Bank Reconciliation Statements (BRS) were either significantly delayed or

not prepared for the 22 bank accounts of the City, contrary to Commission on
Audit (COA) Circular No. 96-011 dated October 2, 1996, thus casting doubts
on the validity or correctness of the Cash in Bank account balance of
P2,898,213,309.41 as at December 31, 2017.

4. Accumulated rental and other market fees totaling P22,292,917.32 and

P8,578,809.25 for the period 1994 to 2016 and 2017, respectively, remained
uncollected and unrecorded as of December 31, 2017 due to leniency in the
implementation of Tax Ordinance No. 01-s-97, thus understating the
receivables and depriving the City of additional funds that can be used in its
operations.

5. The reported balances of Drugs and Medicines Inventory and Medical, Dental
and Laboratory Supplies Inventory in the books of accounts totaling
P48,311,344.46 and the inventories generated by BIZBOX amounting to
P21,421,372.82 and P11,134,286.17 or a total of P32,555,658.99, had a
difference of P15,755,685.47, thus rendering the account balances unreliable.
Moreover, the other inventory accounts totaling P18,701,699.85, had no
Report of Physical Count of Inventories (RPCI) submitted to validate its
existence and correctness.

6. The correctness of the Accounts Payable in the financial statements at

year-end amounting to P254,203,640.17 could not be relied upon due to the
following:

a. the amount of P8,353,110.19 had no supporting documents, contrary to

Section 4(6) of Presidential Decree (PD) No. 1445 and Section 4(s),
Volume I of the Manual on the New Government Accounting System
(MNGAS);

b. the amount of P348,888.76 had been outstanding for more than two years,
contrary to Section 98 of the same Decree; and

c. furthermore, the amount of P21,708,773.40 paid transactions were

inadvertently included in the said balance of accounts payable at year-end
as shown in the schedule.
Significant Observations and Recommendations

For the exceptions cited above:

1. We reiterated our previous years’ recommendations that the City Mayor

direct the:

a. City Accountant and the City General Services Officer (GSO) to analyze
and reconcile the discrepancy of P138,202,518.39 between the Accounting
records and RPCPPE and make the necessary adjustments in the books;

b. City Accountant to maintain Property, Plant and Equipment Ledger Cards

(PPELC) and Real Property Ledger Cards (RPLC) for individual property
item owned by the City for reconciliation with the General Ledger and
Property records;

c. City Accountant and the City GSO to review the composition of the PPE
account and group them accordingly by type or category of assets to
expedite reconciliation between their records; and

d. City GSO to:

 submit copy of the RPCPPE to the Auditor in the prescribed format

not later than January 31 of each year; and

 prepare the Inventory and Inspection Report of Unserviceable Property

(IIRUP) and the Waste Material Report for unserviceable properties
worth P7,372,702.94 and coordinate with the City Accountant for their
dropping in the books of accounts after compliance of requirements for
disposal.

We also recommended that the City Mayor instruct the City GSO to tag the
equipment at the Pagamutan ng Dasmariñas with information as to property
number, location/office, account code, serial number, date and signature of the
GSO.

2. We reiterated our previous year’s recommendations that the:

a. City Mayor direct the City Assessor to undertake close monitoring of any
sign of recurrence of system related errors even with the newly installed
Real Property Tax Administration System (RPTAS) already in use to
avoid experiencing similar problems in the past and enable the City
Treasurer to come up with an accurate certified list of taxpayers and tax
due and collectible every beginning of each year; and
 b. City Assessor and Treasurer to evaluate the integrity of information
generated by the RPTAS to ensure fair presentation of the RPT and
SET Receivables and Deferred Real Property Tax and Special Education
Fund Tax at the end of the year.

3. We recommended that the City Accountant prepare Bank Reconciliation

Statements (BRS) for all existing bank accounts of the City in compliance
with the pertinent provisions of COA Circular No. 96-011 on the preparation
of the BRS to achieve an accurate financial reporting of Cash in Bank
account. In case of continued failure to do so, appropriate sanctions maybe
recommended to be imposed.

4. We reiterated our previous recommendations that:

a. the City Mayor instruct the Market Administrator to exert efforts in the
collection of the subject overdue rental and other market fees. In the event
that the entire overdue amount of P30,871,726.57 is not fully settled, he
shall be required to make a formal report on the reasons thereof for proper
disposition;

b. the City Accountant take up in the books of accounts the uncollected

rental and other market fees that are deemed realizable; and

c. the City Mayor, thru the Sangguniang Panlungsod, review and evaluate
market operations, specifically the collection of market fees, and strictly
implement the policy on the cancellation of lease right and/or eviction of
delinquent stallholders.

5. We recommended that the City Mayor require:

a. the City Accountant and the General Services Officer (GSO) to reconcile
the discrepancy of P15,755,685.47 between inventory report and
accounting records for Drugs and Medicines Inventory and Medical,
Dental and Laboratory Supplies Inventory and effect the necessary
adjustment/s;

b. the GSO to prepare and submit to the Audit Team the RPCI for the other
inventory accounts totaling P18,701,699.85 and henceforth require the
preparation of the same and submit to the Auditor concerned not later than
July 31 and January 31 of each year for the first and second semesters,
respectively; and

c. that henceforth, require the GSO to prepare and submit to the City
Accountant the weekly Summary of Supplies and Materials Issued and the
City Accountant to prepare a Journal Entry Voucher and record the
 consumption of inventories in the books of accounts to reflect reliable
inventory balances.

6. We recommended that the City Accountant –

a. ensure that all recorded payables are valid claims such that they are duly
supported with all required documents and drop from the books those that
are not;

b. see to it that payables which have been outstanding for two years and
those without valid claims be reverted/adjusted to Unappropriated Surplus;
and

c. prepare Journal Entry Voucher (JEV) to correct the error of including paid
transactions totaling P21,708,773.40 as part of the Accounts Payables.

The other deficiencies noted in the audit of the accounts and transactions of the
City are as follows:

1. The City Accountant used account Advances to Special Disbursing Officer in

recording the amount granted to regular disbursing officer for salaries and
wages of officers and employees and other personnel benefits and for petty
cash totaling P52,770,867.13 and P946,769.52, respectively, thus the
appropriate account Advances for Payroll was not recognized in the City’s
books of accounts, contrary to COA Circular No. 2015-009. Likewise, the
recorded debits to Petty Cash was understated.

We recommended that the City Mayor require the City Accountant to use the
account Advances for Payroll to record cash advances for the payment of
salaries and wages and other personnel benefits and Petty Cash to record the
amount of cash granted for payment of authorized petty or miscellaneous
expenses in compliance with COA Circular No. 2015-009 dated December 1,
2015 to ensure proper classification of accounts in the financial statements.

2. Payments made by the City to Job Order (JO) workers for services rendered
totaling P125,698,103.97, were taken up in the books of accounts as Salaries
and Wages–Casual/Contractual under Personal Services (PS) instead of
Maintenance and Other Operating Expenses (MOOE), thus resulting in
overstatement and understatement of Salaries and Wages–Casual/Contractual
under PS and appropriate General Services accounts under MOOE,
respectively, by the same amount.

We recommended that the City Mayor instruct:

a. the City Accountant to reclassify the payments made to Job Order workers
totaling P125,698,103.97 to appropriate MOOE accounts;
 b. that henceforth, the City Budget Officer to consider the proper
classification of account in the preparation of the ensuing year’s annual
budget; and

c. the City Budget Officer and Accountant to discontinue the practice of

utilizing the allotment for PS for payment of expenses other than those for
personal services.

3. All requests for the purchase of drug products by the City for the Pagamutan
ng Dasmariñas aggregating P40,098,288.73 were not accompanied by
certifications signed by the requisitioning officer/s that the drugs being
requisitioned fall within and conform with the Philippine National Drug
Formulary (PNDF). Of this amount, P733,031.00 were not listed in the
Philippine National Formulary (PNF) Volume I, 8th edition (2017), as
mandated by Rule No. 36 of the Implementing Rules and Regulations (IRR)
of Republic Act No. 9502 and Executive Order (EO) No. 49, thus the potency
and cost-effectiveness of the drugs and medicines are not ensured.

We recommended that the City Mayor require:

a. the Hospital Administrator and Pharmacist to submit certifications that all

requisitioned drug products fall within and conform with PNDF Volume I,
current edition;

b. the Hospital Administrator and Pharmacist to secure authority from the

Head of the National Drug Policy Office for the purchase of drug products
worth P733,031.00 which were not listed in the PNDF; and

c. that henceforth, the City Accountant to ensure that the requirements for
the purchase of drugs and medicines are complied with before effecting
payments.

4. Goods purchased out of the Local Disaster Risk Reduction and Management
Fund (LDRRMF) for stockpiling totaling P6,026,795.05, were taken up in the
books as direct expense, contrary to Commission on Audit (COA) Circular
No. 2014-002, thus resulting in the overstatement of expense and
understatement of inventory accounts by an amount equivalent to the
inventory still on hand. Likewise, the goods could not be accounted due to
incomplete documentations, contrary to Section 4(6) of PD No. 1445, casting
doubt on the propriety of disbursements.

We recommended that the:

a. City Accountant and the General Services Officer comply with the
accounting and reporting guidelines on the receipt and utilization of the
 LDRRMF prescribed in COA Circular No. 2014-002 dated April 15, 2014
to present fairly the expense and inventory accounts of the City; and

b. City Mayor require the General Services Officer or the City Social Worker
Development Officer and LDRRMO to submit to the Audit Team the
distribution list/recipients of the relief goods worth P6,026,795.05, to
avoid the issuance of Notice of Suspension.

5. Only 61 percent or P214,033,697.86 worth of development projects were

implemented in CY 2017, thus affecting the optimal utilization of the 20
percent Development Fund to attain the desired socio-economic and
development intents of the fund, contrary to paragraph 5 of the Department of
the Interior and Local Government (DILG) and Department of Budget and
Management (DBM) Joint Circular No. 2017-1 dated February 22, 2017.

We recommended that the City Mayor require the OIC, City Planning and
Development Coordinator to expedite the implementation of the development
projects funded out of the 20% Development Fund in accordance with the
guidelines set forth in DILG and DBM Joint Memorandum Circular No.
2017-1 dated February 22, 2017 to ensure optimum utilization of the fund and
attain the desired socio-economic and environmental outcomes.

6. Deliveries of 1,500 pieces foldable chairs amounting to P2,250,000.00 out of

Special Education Fund (SEF) were inspected and accepted even though
delivered items were not in accordance with the specifications as stated in the
purchase order, thus resulting in loss or wastage of government resources.

We recommended that the City Mayor instruct the General Services Officer to
require the supplier to put “PROPERTY OF THE CITY OF DASMARIÑAS”
sticker on the foldable chairs. Otherwise, compute and deduct the
corresponding cost of stickers and require the supplier to refund the amount.

We also recommended that henceforth, the City’s Inspection Committee and

end-user carefully inspect the specifications of the delivered items and refrain
from accepting deliveries which do not conform with the specifications
indicated in the purchase orders and purchase requests to avoid wastage of
government resources.

7. Only 27 percent or P31,960,344.24 out of P119,010,614.95 allocated for

Gender and Development (GAD) related activities was utilized, hence
defeating the purpose for which the fund was established. Moreover, the GAD
expenditures could not be readily determined due to non-maintenance of
separate subsidiary ledgers, contrary to Section 10 of the Manual on the
National Government Accounting System (MNGAS), Volume II for Local
Government Units (LGUs).
 We recommended that the City Mayor direct the:

a. GAD Focal Point to ensure the full implementation of the City’s GAD
Plan and Budget as mandated by Joint Circular No. 2004-1 of the DBM,
NEDA and NCRFW; and

b. City Accountant to maintain separate subsidiary ledger for GAD

expenditures to ensure correctness of relevant reports thereon and
facilitate validation thereof.

8. Submission of disbursement and collection reports to the Auditor’s Office was

delayed, ranging from 7 to 220 days, contrary to Section 7.2.1(a) of the Rules
and Regulations on Settlement of Accounts (RRSA) prescribed by COA
Circular No. 2009-006 dated September 15, 2009. Moreover, there were
delays of 41 to 181 days in the submission of the year-end financial
statements and schedules by the City Accountant, contrary to Section 41 of
PD No. 1445 and COA Circular No. 2010-01.

We reiterated our previous recommendations that the:

a. City Mayor require the City Accountant to strictly observe the time-frame
provided under Section 7.2.1(a) of the RRSA prescribed by COA Circular
No. 2009-006 and Section 41 of PD No. 1445 on the submission of the
year-end financial reports, together with the supporting schedules for a
timely examination and review of the financial transactions of the City.
The provisions of Section 122 of PD No. 1445 should likewise be
enforced for non-compliance thereof; and

b. City Accountant should address the causes of the delayed submission of

accounts. We suggested that she devise a work plan to hasten the
preparation and submission of the financial statements and their schedules.

9. Three units operation microscope and one unit high frequency digital breast
x-ray machine worth P2,355,000.00 and P10,140,000.00, respectively, were
left idle/unused since their acquisition in 2015 and 2016 due to lack of space
for the former and trained personnel to handle the operation of the latter,
thereby running the risk of wasting government funds and depriving patients
of the benefits that could be derived from the use of these equipment.

We recommended that the City Mayor instruct the Hospital Administrator to

exhaust all possible means in order to immediately provide space for three
operation microscope worth P2,355,000.00 and necessary training for
designated hospital personnel to handle the operation of the high frequency
digital breast x-ray machine worth P10,140,000.00. The City may also
consider hiring already trained digital breast x-ray machine technician to
facilitate immediate use of the said equipment.
 We also recommended that actual needs and overall capability assessment be
conducted in future purchase of medical or highly technical equipment to
avoid possible wastage of government funds and in order to provide the
benefits that could be derived from the use of such equipment.

The above observations and recommendations were discussed with the concerned
City officials and staff in an exit conference held on April 19, 2018. Management’s
views and comments were incorporated in the report, where appropriate.

Status of Implementation of Prior Year’s Audit Recommendations

Of the 29 prior year’s audit recommendations embodied in the 2016 Annual Audit
Report, 17 were fully implemented, 2 were partially implemented and 10 remained not
implemented by the City Government.