INTRAMUROS ADMINISTRATION

EXECUTIVE SUMMARY

Introduction

1. The Intramuros Administration (IA) was created under Presidential Decree (P.D.)
No. 1616 dated April 10, 1979, which was later amended by P.D. 1748 on December 10,
1980. It is responsible for the restoration and development of Intramuros, as a monument
to the Hispanic period of the Philippine history, to ensure that the general appearance of
Intramuros shall conform to Philippine-Spanish architecture of the sixteenth to the
nineteenth century.

2. Under National Budget Circular (NBC) No. 377 dated August 4, 1984, the IA is
authorized to establish and maintain Revolving Fund into which shall accrue all revenues
from its operating and commercial transactions. Commercial projects under the
Revolving Fund include those for the Plaza San Luis Complex, Puerta Isabel, Tiendas del
Parian, Fort Santiago, San Diego Gardens, Puerto Real Gardens and National Irrigation
Administration (NIA) Compound.

3. The revenues which accrue to the Revolving Fund consist mainly of:

a. Sale of entrance tickets

b. Reservation fees of function areas
c. Rental of tenants
d. Others - Fees for locational clearance
• Fees for building permit
• Rental of place for shooting/filming
• Caterer’s fee (10% of contract price of caterers)

4. For the year 2006, the following are major programs and projects of Intramuros
Administration:

a. Tourism Development and Promotion includes

• Improvement/enhancement of tourism facilities
• Promotion of Intramuros
b. Heritage Conservation
• Restoration/Reconstruction of walls and fortifications/historic
structures
• Research and library services
• Conservation and maintenance of museum collection
c. Urban Renewal and Community Development
• Land use and zoning
• Regulation/enforcement and community relations
d. Business and commercial activities includes maintenance of commercial
facilities owned by Intramuros Administration.
5. The other accomplishments of the agency are presented in Table 1.

Table 1 – Other Accomplishments

Activity Accomplishments Targets % of Accomp

No. of museum collection conserved 7,000 7,000 100%

No. of domestic/foreign visitors guest 634,341 700,000 90%
received
No. of special events organized 7 12 58%
No. of permits issued 228 120 190%
No. of locational and developmental 860 600 143%
clearance issued

Financial Highlights

6. For 2006, the Agency earned a total income of P39.82 million from the operations
of its commercial projects under the Revolving Fund which is 0.07% lower than that of
its revenues in CY 2005 amounting to P42.95 million. The amount earned and the source
thereof is shown in Table 2.

Table 2 – Sources and Amount of Revenues Earned

2006 2005
Permit Fees P .11 P .18
Clearance and Certification fees .32 .25
Inspection Fees 1.31 1.04
Other Service Income 6.71 9.56
Rent Income 8.79 9.50
Fines and penalties .26 1.02
Other Business Income 22.32 21.40
TOTAL P 39.82 P 42.95

7. The IA’s consolidated results of operations for CY 2006 and financial condition
as of year-end are summarized in Tables 3 and 4.
 Table 3 –Sources and Applications of Funds for CY 2006

In Million Pesos
2006 2005
A. Sources of Funds:
• Annual Appropriation
GAA P 30.25 P 28.96
• Allotments 30.91 28.82
• Obligations 30.91 28.65
• Subsidy Income from the
National Government.
1. Notice of Cash Allocation 29.87 27.39
2. Tax Remittance Advice 1.32 1.39
• Income from Commercial
Operations 39.82 42.95
B. Application of Funds:
• Expenses
1. Personnel Services 19.58 20.58
2. MOOE 58.36 62.43
• Acquisition of PPE 0.50 1.37

Table 4 – Financial Condition as of Year-End

In Million Pesos
Particulars 2006 2005
Total Assets
Cash P 6.06 P 8.32
Receivables 25.56 26.72
Inventories 6.20 5.48
Property, Plant and Equipment 290.98 296.95
Other Assets 42.01 40.06
Total Liabilities
Current 22.10 21.10
Deferred Credits 5.54 5.43
Equity 344.09 352.05

Scope of Audit

8. The audit covered the operations and financial transactions of the Intramuros
Administration for calendar year 2006. The objectives of the audit were to ascertain the
fairness and reliability of the IA financial position, the results of its operations and the
cash flows for the year then ended and to determine the extent of compliance with
existing laws, rules and regulations. Compliance audit was also conducted to ascertain
the validity and propriety of transactions selected through sampling.

Audit Opinion on the Financial Statements

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

statements for reasons cited in the Audit Certificate and discussed in Part II of this report.

Summary of Observations and Recommendations

10. The results of the current year’s audit were communicated with the Management
through our Audit Observation Memoranda and during the exit conference. Their
responses/reactions were incorporated in this report, were appropriate. The summary of
our observations and recommendations are presented as follows:

Uncollected and Unrecorded IA’s Share in Parking and Towing Fees by the
Contractor

10.1 IA’s share in the collected parking and towing fees covering the period
May 2004 to December 2006, amounting to at least P5.09 million were
not billed and remained uncollected from the Operator. Also, penalties
due for late remittances by the Operator totaling P0.55 million were not
imposed to, or collected from, the Operator.

Further, the uncollected amounts due from the Operator were not
recorded in the books, thus, Accounts Receivable and income accounts
were understated by P5.64 million.

We recommended that the Subsidiaries Management Division:

a. immediately serve bills for the unpaid IA’s share in the

parking and towing fees to the Operator and furnish the Chief
Accountant for recording of the same in the books of accounts;
and

b. thereafter, prepare a monthly statement for the IA share of the

parking and towing fees including the penalty, if any, every
15th day of the month to be taken up in the IA books.

Management commented that the SMD will be instructed to prepare

the bill for the unpaid shares together with the amount previously
deducted from the contractor representing the corresponding parking
fees covered by the waivers approved by the Administrator.

Renewal of the Contract on Pay Parking Management Operation on a Month

to Month Basis for More than Allowable Period of Six Months.
10.2 Contract for pay parking management operation which expired in May
2006 was renewed on a month to month basis, for a period of seven
months which was beyond the period of extension allowed/prescribed by
Government Procurement Policy Board.

We recommended that the Management speed up the awarding of the

new contract to the winning bidder for the parking and towing
services.

Management informed that the Notice of Award was ready for

signature of the Administrator.

Non-Reimbursement of the Fund Deficit for the DOT’s Visit Philippines

Project Charged to the IA Revolving Fund.

10.3 Project fund deficit of the Visit Philippines Project (VPP) from CYs
2003 to 2006 totaling P18.11 million was charged against the IA’s
Revolving Fund which was not allowed under PD 1616. As at year-end,
the share in the expenses of the participating agencies for the VPP had
not been reimbursed to the IA.

We recommended that the IA:

a. Determine the amount due from the participating agencies of
the Projects guided by the memorandum issued by then
Secretary Gordon on the sharing of expenses;
b. Inform the concerned agencies of their unpaid share for the
Project with the request for reimbursement of the amount due
from them; and
c. Upon receipt of the share, return the same, together with the
amount disbursed by the IA, to the Revolving Fund of the IA.

We also recommended that the restriction/limitation of P.D. No. 1616

on the utilization of the Revolving Fund be strictly complied with.

Management stated that from the inception of the project, IA made it

clear that it had no funds to share in the funding requirements for the
VPY project. IA was made the collecting agency for all the revenues
within the commercial areas of WOW for payment of all the required
utilities including manpower (security, janitorial, street sweepers, and
tanods). However, the income was not sufficient to cover the
expenses. During the task force meetings, it was agreed that expenses
incurred in excess of the actual revenues were to be reimbursed by
DOT, hence, the request of IA for the purpose had been made.
Unfortunately, no reimbursement has been done yet by DOT.
Payment of Incentive Benefits to IA Personnel Without Specific Law
Authorizing Such Grant and Violative of PD 1616 for Charging the Same
Against the Revolving Fund

10.4 Payment of allowances/benefits to IA personnel in CY 2006 totaling

P6.64 million was not anchored on a law authorizing such grant.
Moreover, charging of the same against the Revolving Fund under
accounts “Other Personnel Benefits” and “Other Maintenance and
Operating Expenses” was not allowed under PD1616.

We recommended that the IA Administrator submit legal basis for the

grant of incentive benefits to the IA personnel for CY 2006. In the
absence of such legal basis, audit disallowances for the refund of the
unauthorized allowances from the concerned DOT officials and
employees shall be issued.

Management commented that the payment of such benefits to IA

employees is in consonance with the privilege given by the DOT to all
its employees. Nevertheless, the IA will secure authority from the
Office of the President for the grant of the allowances and the
charging of the same to the Revolving Fund.

Accuracy of the Balance of Account “Land”

10.5 The book balance of Land account at P26.81 million was not supported
with details or breakdown. However, per property records, the IA owns
10 land property covered with ownership/transfer titles, seven of which
were stated to have been acquired at total cost of P19.08 million, and
three were without cost or value data. Of the latter three lots, two had
market value of P404.49 million based on 2002/1997real property tax
declaration.

We recommended and the Management agreed that:

a. The Property Officer update its records on the ownership and

real property tax declaration documents, and provide the
Accounting Office with the same; and

b. The Chief Accountant make the necessary accounting

adjustments to update the books with the correct value of land
property IA’s real properties under Land account.
 We also recommend that the Management consider hiring the services
of a licensed real estate appraiser to conduct appraisal of IA’s land
property, giving priority to those acquired without cost data.

Semi-Expendable Supplies and Property Classified as Other Deferred

Credits Account (Previous Year’s Finding)

10.6 The cost of semi-expendable properties in the amount of P3.82 million

was erroneously recorded as Other Deferred Credits since 2002 when
the new government accounting system was implemented, hence
overstating Other Deferred Credits account and understating
Government Equity account by the same amount.

We recommended that the Accountant be directed to determine

composition of the semi-expendable supplies and properties, and
thereafter, to make the necessary reclassification from account Other
Deferred Credits to Government Equity account.

The Chief Accountant committed to prepare a listing of the semi-

expendable supplies and properties and effect the necessary
adjustment as soon as possible.

Collection of Outstanding Accounts Receivables (Previous Year’s Finding)

10.7 Receivables from lessees/concessionaires of the IA barely decreased by

P0.77 million from CY 2005 of P16.17 million to CY 2006 of P15.39
million. The bulk of these receivables or P10.50 million had been
uncollected for more than three years to ten years.

We recommended that the Management undertake the following:

a. Direct the Subsidiary Management Division to conduct

periodic monitoring of the status of account of each
lessee, in coordination with the Accounting Unit;
b. Strictly implement the sanctions stated in the contract of
lease for delinquent concessionaires;
c. Consider engaging the services of legal consultant/s, as
authorized by Section 2 of P.D. 1616, to handle the cases
of IA.

Management commented that:

a. Manpower complement for SMD will be added to

handle the monitoring of accounts;
 b. IA has been implementing sanctions as provided for in
the lease agreements, however, some contracts which
involve legal questions/concerns have to be referred to
the Office of the Solicitor General for appropriate
action;

c. IA will look into the possibility of engaging the services

of legal consultants to handle the legal matters of IA
particularly the collection of accounts in collaboration
with the Office of the Solicitor General.

Cash Deficiency to Cover Funds Held In Trust and Accounts Payables

10.8 The year-end balance of cash-in-bank at P5.83 million was not

sufficient to cover the funds/collections held in trust by the agency
totaling P16.55 million for remittance to the agencies concerned or for
safekeeping until their purposes are served, and for payment of
obligations incurred during the last quarter in the amount of P6.26
million. This clearly indicates that there had been utilization of funds
for purposes other than those for which these were received, amounting
to at least P16.98 million.

We also recommend that the Management:

a. Submit proper and immediate accounting of all the funds held in

trust, ascertaining the cause/s of the cash deficiency, and taking
immediate action to address the same;

b. Henceforth, refrain from charging expenses from revolving fund not

authorized by PD 1616, and close monitoring of the funds held in
trust to ensure that these funds are utilized only for their intended
purposes; and

c. Require the Accountant to reclassify the account Other Payables

amounting to P14,465,649.31 to their respective proper accounts
as presented in Table 11.

The Management commented that analysis and reconciliation of the

cash-in-bank and its related liability accounts will be made.
Furthermore, reclassification and adjustment of account Other
Payables shall be effected as soon as possible.

Implementation of Prior Year’s Audit Recommendations

11. Out of the six audit recommendations contained in the 2005 and 2004 Annual
Audit Reports, one was fully implemented, four were partially implemented and one not
implemented.
12. We hereby reiterate full implementation of previous year’s audit
recommendations, which are partially implemented/not implemented:

12.a Direct the Subsidiaries Management (SMD) to exert more efforts in collecting the
outstanding balances of the tenants both the prior and current periods and strictly
enforce the provisions of the contracts on the settlement of accounts on time to
prevent accumulation of accounts. Likewise, we recommended that the Accountant
be directed to request for write-off of accounts proven to be no longer collectible in
accordance to Section 36 of P.D. 1445. Further, after proper due proceedings, IA,
thru the SMD, consider disposing the items under the agency custody the proceeds
of which to be applied to the accounts on the concerned tenants.

12.b Direct the Accountant to conduct reconciliation of the records of the agency with
those of the Procurement Services relative to office supplies delivered vis-à-vis the
advance payments made.

12.c Direct the Accountant and the Property Officer conduct a reconciliation of their
respective records on Property, Plant and Equipment, Library Books and Museum
Collections to reflect the correct balances oft eh PEE accounts