Marikina City Audit Report

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT

on the
City of Marikina
For the Year Ended December 31, 2011
EXECUTIVE SUMMARY
A. Highlights of Financial Operation

For the calendar year 2011, the appropriations of the City Government of Marikina
for the General and the Special Education Funds totaled P1.857 billion. Obligations
charged against these appropriations amounted to P1.401 billion.
Appropriations
Obligations
Current Appropriation
General Fund
Special Education Fund
Sub-total
1,512,295,020
130,000,000
1,642,295,020
1,231,098,127
121,976,626
1,353,074,753
Continuing Appropriation
General Fund
Sub-total
Grand Total
205,205,848
9,496,632
214,702,480
1,856,997,500
41,694,794
5,855,642
47,550,436
1,400,625,189
The City realized an aggregate income of P1.524 billion or an increase of P533,631

from last years P1.523 billion.
Operating Income consists of Tax Revenue of P679.307 million from P707.567
million last year resulting to a decrease by P28.261 million or 3.99 per cent due to
the reduction of Real Property Tax by 50 per cent as per Ordinance No. 88, series of
2010, and General Income of P845 million from P816.205 million last year with an
increase of P28.795 million or 3.53 per cent. Share in the Internal Revenue
Allotment increased by P38.352 million or 7.12 per cent.
Total operating and financial expenses of P1.340 billion registered an increase of
P140.496 million or 11.71 per cent from last years P1.200 billion.
The expenses were classified as follows: Current Operating Expenses, P1.198
billion, Financial Expenses, P5.360 million, Subsidies, Donations and Extraordinary
Expenses, P136.694 million.
B. Scope of the Audit
Financial and compliance audit were conducted on the accounts and transactions of
the City Government of Marikina for Calendar Year 2011. The audit was aimed at
ascertaining the fairness of the presentation of the Citys financial statements and
compliance to laws, rules and regulations.
C. Auditors Opinion on the Financial Statements

The Supervising Auditor rendered a qualified opinion on the fairness of the
presentation of the financial statements in view of the variance of P96.252 million as
of December 31, 2011 between the balance per books and balance per physical
count of the Citys property and equipment which has not been reconciled. Likewise,
no Physical Inventory Report of the Citys recorded inventory amounting to P63.540
million as of December 31, 2011 was submitted. Also, various property and
equipment as well as liability accounts include reconciling items amounting to
P732.328 million and P6.164 million, respectively. Consequently, the accumulated
depreciation totalling P156.259 million of those property classifications with
reconciling items is understated since depreciation was not computed on the
Reconciling Items account. Reconciling Items are those balances of the accounts
that cannot be identified or accounts without details. Further, the Other Receivables
account includes dishonored checks amounting to P7.388 million which have been
outstanding for over three years. The inadequacy of records did not permit us to
apply alternative procedures to establish the validity and correctness of the balances
of the mentioned accounts.
Moreover, the adjusting entry made on the cost of land with tax declaration named
under the City Government of Marikina debiting the Land account and crediting the
Land-Reconciling items amounting to P570.231 million using market values rather
than the purchase cost of the land is erroneous because the said market value is not
yet the cost of these lands at that time the balances were recorded in the Reconciling
Items account in 2004 or earlier. Further, the non-reversal of the fully paid accounts
of the 798 beneficiaries of the Relocation Program of the City resulted in the
overstatement of the payable account and understatement of the Income account.
The payable account should be debited and income should be recognized upon full
settlement by the beneficiary of the contract amount.
D. Significant Audit Findings and Recommendations
The following are the significant findings and recommendations in the audit of the
City Government of Marikina for the year 2011:
1. Net variance amounting to P96.252 million between the Result of Physical

Inventory and balances per Books of the Property and Equipment account was
not reconciled by the General Services Office (GSO) and Accounting Office;
thus, rendering the account balance doubtful. (Finding No. 1.1, page 27)
We also noted that a substantial amount of balances per books of the various
Property and Equipment accounts amounting to P732.328 million as of
December 31, 2011 were identified as Reconciling Items. These reconciling
items refer to those balances of the accounts, which cannot be identified, or
those accounts without details.
We reiterated our previous years recommendation that the City Accountant, in
coordination with the GSO, fast-track the analysis and reconciliation of the
balances per books with the property records. Also, for properties whose values
ii
cannot be determined, their estimated values as well as their remaining useful

lives may be assigned by an appraisal committee.
We further recommended that extra effort be exerted in the analysis of the
accounts in the Reconciling Items and prepare necessary adjusting journal
entries to reflect the correct balances of the affected accounts at year-end. The
Accounting Office may secure list/s from other departments of the City
concerning the items that were possibly included in the account.
2. The adjustment made in December 2011 on cost of land with tax declaration
under the name of the City Government of Marikina in the amount of P570.231
million debiting Land account and crediting the Land-Reconciling Items using the
market value of the parcels of land resulted in the understatement of the Equity
account by the difference between the market value (appraised cost) and the
purchase cost of the said properties. On the other hand, the presence of
reconciling items in the Land account in the same amount casts doubts on the
accuracy/correctness of the account balance as of December 31, 2011. (Finding
No. 1.2, page 29)
We recommended that Management:
a. Analyze the remaining accounts in the Land-Reconciling Items;
b. Ensure that the parcels of land included in the adjustment made are those
previously included in the Land-Reconciling Items; and
c. Adjust the amount recorded in the adjustment made to effect the acquisition
costs of the parcels of land with tax declaration under the name of the City.
3. Several items in the Property and Equipment accounts without acquisition costs
reflected in the Property, Plant and Equipment Schedule amounting to P4.118
million still have accumulated depreciation which resulted in negative net book
values for the affected accounts. (Finding No. 1.3, page 30)
We recommended that Management analyze the affected accounts and
accordingly prepare the adjusting journal entries to reflect the correct balances of
the accounts at year-end.
4. Ownership for parcels of land totalling 44,365.14 square meters acquired by the
City for the period from 2006 to 2011 are evidenced only by either Deed of
Absolute Sale, Deed of Forfeiture of Memorandum Agreement with
Conveyances. (Finding No. 1.4, page 31)
We recommended that Management take steps to have the land titled in the
name of the City to prove legal ownership on these parcels of land.
5. The following deficiencies were noted in the audit of the Inventory account:
5.1 Except for Office Supplies Inventory, the report on the result of physical count
of the rest of the recorded inventory of supplies and materials of the City
amounting to P63.540 million as of December 31, 2011 was not submitted,
iii
contrary to Section 156 of COA Circular No. 92-386 dated October 20, 1992.
(Finding No. 2.1, page 32)
5.2 Comparison between the Subsidiary Ledger (Accounting records) and the
Stock Card (Warehouse records) of sampled inventory items as of December
31, 2011, also disclosed variances in quantity. (Finding No. 2.2, page 32)
5.3 Moreover, the unit cost of cement purchased during the year varied oddly
from P195 per bag to P275 per bag while the price of cement was stable in
CY 2011 per the Department of Trade and Industry price watch. We noted
that the said prices varied depending on the supplier. (Finding No. 2.3, page
33)
a. Come up with an Inventory Report on the result of physical inventory. A copy
of the said Report, including the reconciliation of any variance between the
GSO and Accounting Records, should be furnished the Auditors Office at the
prescribed period;
b. Reconcile variances between the balances per books and the warehouse
records and make necessary adjustments to reflect the correct balances of
the inventory accounts; and
c. Look into the varied prices of the same inventory items purchased from
different suppliers.
6. Non-reversal of the fully paid accounts of the 798 beneficiaries of the Relocation
Program of the City resulted in the overstatement of the payable account and
understatement of the Income account. (Finding No. 3, page 34)
We recommended that Management require the Accounting Office and MSO to
analyze the accounts concerning the Relocation Program, reconcile their records
and make the necessary adjustments.
To prevent the accumulation of
paid/settled accounts in the payable account, we further recommended that the
City Treasurer and the Officer in Charge of MSO to furnish the City Accountant
with copies of the Certificates of Full Payment and the Status Report (with status
of payment for each beneficiary), respectively.
7. Various payable accounts, which include Reconciling Items totalling P5.428
million, which are without details, casts doubts on the accuracy/correctness of
the payable accounts as of December 31, 2011. (Finding No. 4.1, page 35)
We recommended that Management require the Accounting Office to analyze the
Reconciling Items in the various payable accounts and to prepare necessary
adjusting journal entries to reflect the correct balances of the accounts at yearend.
8. Guaranty Deposits Payable account totalling P1.413 million as of December 31,
2011 for which related transactions were undertaken in 2007 and earlier have
been dormant for more than five years as well as abnormal (debit) balances
iv
totalling P1.979 million under the Special Education Fund which have a negating
effect resulting in the understatement of the account. Moreover, Reconciling
Items totalling P735,319 which are without details are included in the account
balance. (Finding No. 4.2, page 36)
dormant and abnormal balances and accordingly make the necessary
adjustments. Reconciling Items should likewise be analyzed and broken down to
names of recipients/claimants. Existence of the claims should be determined.
9. Account Other Receivables revealed that 93.65 per cent or P7.388 million of the
account total represents dishonored checks in payment of real property, business
and other taxes or fees as of December 31, 2011. (Finding No. 5, page 36)
We recommended that Management exert extra efforts to collect the soonest
possible time, the accounts representing dishonored checks.
We also recommended that Management discontinue accepting check payments
from those whose checks have been previously dishonored by the bank; thus,
the City Treasury Office should maintain a master list of these taxpayers.
Management should likewise adopt a policy regarding the matter.
10. Non-compliance with the full provisions of RA 10121, otherwise known as the
Philippine Disaster Risk Reduction and Management Act of 2010, nonimplementation of City Ordinance No. 32, Series of 2011, and unavailability of a
Disaster Risk Reduction and Management Plan, precluded the City to effectively
manage their budgeted fund for Local Disaster Risk Reduction and Management.
(Finding No. 6, page 38)
We recommended that Management look into the immediate and full
implementation of RA 10121 and City Ordinance No. 32, Series of 2011 in order
that necessary plans for risk reduction and the proper utilization of the fund can
be attained/achieved.
11.Priority Development Assistance Fund (PDAF) totalling P8.771 million granted to
the City of Marikina by Congressional Representatives and Senators for specific
purposes and recipients was not utilized or fully utilized, as to its purpose; thus,
depriving the constituents of the maximum benefits that could be derived
therefrom. (Finding No. 7, page 39)
We recommended that Management utilize fully the PDAF granted to the City. If
the purpose of a certain PDAF is completed or is no longer needed, the City may
request for realignment with the concurrence of the proponent legislator as
provided for under National Budget Circular No. 529 dated February 21, 2011.
12.Surcharge and interest imposed on late payments of business tax were not in
accordance with the provisions of Sections 167 and 168 of RA 7160 resulting in
financial loss. (Finding No. 8, page 41)
a. impose and collect surcharge and interest from business establishments who
pay business taxes after the January 20 deadline or of each subsequent
quarter in compliance with Section 168 of RA 7160; and
b. require that related provisions of Ordinance No. 12, s. 1998 on the
procedures for the payment of license fees and fixing the date of payment be
amended/revised to conform to Sections 167 and 168 of RA 7160.
13.Analysis of the submitted copies of CY 2011 Purchase Orders disclosed that the
City outsourced the printing of tarpaulins despite the Citys own equipment
(tarpaulin printer) and personnel in charge for the printing of the same. Also, bid
documents and other pertinent supporting documents were not attached to the
disbursement vouchers and said deliveries of tarpaulin materials were charged
directly to expense. (Finding No. 9, page 42)
We recommended that Management properly plan its purchases to ensure
availability of supplies in sufficient quantities and to avoid overlapping of
transactions. Bid documents should be attached to the disbursement vouchers
and the purchased tarpaulin materials should be recorded to the inventory
account.
14.Copies of Contracts together with all supporting documents were not submitted
to the City Auditors Office on time contrary to Section 3.1 of COA Circular No.
2009-001 dated February 12, 2009. (Finding No. 10, page 43)
We recommended that Management require officials concerned to submit on the
prescribed time as stated under COA Circular No. 2009-001, copies of contracts
and to set up a mechanism in the routing of the required documents.
Other observations are discussed in detail in Part II of this Report.
E. Status of Implementation of Prior Years Audit Recommendations
Of the 12 audit recommendations contained in the previous years Annual Audit
Report, six were fully implemented, five were partially implemented and one was not
acted upon by the agency.
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TABLE OF CONTENTS
PART
II
SUBJECT
AUDITED FINANCIAL STATEMENTS
Independent Auditors Report
Statement of Management Responsibility for Financial Statements
Consolidated Balance Sheet
Consolidated Statement of Income and Expenses
Consolidated Statement of Cash Flows
12
Notes to Consolidated Financial Statements
13
DETAILED AUDIT FINDINGS AND RECOMMENDATIONS
III
IV
PAGE
NO.
Financial and Compliance Audit
STATUS OF IMPLEMENTATION OF PRIOR YEARS AUDIT

RECOMMENDATIONS
27
46
ANNEXES
Annex A
Consolidated Balance Sheet (By Fund)
50
Annex B
Consolidated Statement of Income and Expenses (By Fund)
53
Annex C
Consolidated Statement of Cash Flows (By Fund)
57
Annex D
Statement of Appropriations, Allotments, Obligations

and Balances (By Fund)
58
PART I
AUDITED FINANCIAL STATEMENTS
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
INDEPENDENT AUDITORS REPORT

HON. DEL R. DE GUZMAN
City Mayor
City of Marikina
We were mandated by the 1987 Constitution to audit the accompanying financial statements
of the City of Marikina, which comprise the Balance Sheet as of December 31, 2011, and the
Statements of Income and Expenses and Cash Flows for the year then ended, and the
summary of significant policies and other explanatory notes.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
statements in accordance with generally accepted accounting principles in
and for such internal control as management determines is necessary
preparation of financial statements that are free from material misstatement,
fraud or error.
these financial
the Philippines
to enable the
whether due to
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Philippine Standards on Auditing. These
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial statements are free from material
misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entitys preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes assessing the accounting principles used and the
reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
:
Consolidated Financial Statements
Pages 4 12
Consolidated Financial Statements

Pages 4 12
See MS Excel File
NOTES TO FINANCIAL STATEMENTS

(All amounts in Philippine Peso unless otherwise stated)
1. General/Agency Profile
The City of Marikina was created on July 20, l996 by virtue of Republic Act No. 8223. The
City comprises of 16 barangays and two Congressional Districts with the passage of
Republic Act No. 9364.
For the year 2011, the focal point of Mayor Del R. De Guzmans governance is still the
people. The status of living of people, particularly the vulnerable members of society,
provides the most important yardstick of community management. Much has been done
on infrastructure development and other areas of community building, and it is high time
that efforts be geared toward human upliftment. The present administration has adopted
its governance philosophy, Tunay na Kaunlaran, Tao Naman. Mayor Del R. De Guzman
shifted the focus of governance on people especially on the vulnerable sectors and less
privileged constituents.
The 7K program of the city translates this philosophy into concrete action and results in the
areas of Health (Kalusugan), Education (Karunungan), Peace and Order (Kapayapaan at
Kaayusan), Livelihood (Kabuhayan), Environment (Kalikasan), Housing (Katiyakan sa
Paninirahan), and Good Governance (Katapatan at Makataong Paglilingkod).
Among the priority projects in the areas of the 7K program are the following:
KABUHAYAN
Facilitate the registration of new business establishments
Hiring of volunteers by the City Government with the attendant provision
of opportunities to hone skills and earn income
Reactivation of the Marikina Shoe Commission
Establishment of the Marikina Shoe Trade Fair
Conduct of various capability building programs
Facilitate employment of job seekers through various jobs fair
KARUNUNGAN
Completion of College Education Program for City Employees
Establishment of new and bigger City Library
Repair and rehabilitation of public schools damaged by Ondoy
Completion of SSS and St. Mary Elementary Schools
Revitalization of PLMAR for better organization and implementation of
quality education
Integration of Gender and Development into DepEds Alternative Learning
System
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KALUSUGAN
Expansion of PHILHEALTH beneficiaries
Acquisition of new dental chairs and instruments to replace those
damaged by Ondoy
Upgrading of the various facilities in the Marikina Sports Center
Establishment of Nangka Health Center
Transfer of Kalumpang and Sta. Elena Health Centers to new locations
KAPAYAPAAN AT KAAYUSAN
Establishment of Marikina Anti-Drug Abuse Council Office
Renovation of Marikina Rehabilitation Center
Organization of Local Disaster Risk Reduction and Management Council
Upgrading of street lights in major thoroughfares
Retooling of the local PNP with the provision of new vehicles and
equipments
KAPALIGIRAN/KALIKASAN
Installation of two (2) more Septage Treatment Facilities in partnership
with the Manila Water Company
Zero Garbage visibility
Relocation of Material Recovery Facility to a more appropriate site
Reactivation of Marikina Bikeways Office
Expansion of the River Park Development to include the development of
ground golf facilities, edible park and empty lot farming
KATIYAKAN SA PABAHAY
Demolition of new illegally constructed structures in settlement sites to
give way to legitimate beneficiaries
Improvement in the Community Mortgage Program (CMP) collection
efficiency rate
Facilitate take-out to beneficiaries under the Marikina Originated CMP
Project
KATAPATAN, KAHUSAYAN SA PAMAMAHALA AT MAKATAONG
PAGLILINGKOD
Implementation of the Simplified Business Transaction Process
Expansion of Wide Area Network
Establishment of the Marikina Control Facility (a central monitoring and
dispatch center)
The City maintains three (3) funds: the General, Special Education and Trust Funds.
Likewise, special accounts are maintained under the General Fund books for the 20%
Development Fund and the operation of economic enterprises, namely: Marikina Hotel,
Pamantasan ng Lungsod ng Marikina (PLMAR), and Marikina Sports Park (MSP).
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2. Summary of Significant Accounting Policies

Basis of Financial Statement Preparation
The consolidated financial statements have been prepared in accordance with the
Generally Accepted State Accounting Principles and Standards.
Revenue and Expense Recognition
Separate registries are maintained to monitor appropriations, allotments and obligations.
The agency uses accrual basis of accounting for expenses. Under this method, all
expenses are recognized when incurred and reported in the period to which they relate.
The agency adopts the modified accrual method of accounting for Real Property Taxes.
Other taxes, fees and charges and other revenues, as well as Internal Revenue Allotments,
are accounted on cash basis.
Financial expenses such as interest expense are separately classified from maintenance
and other operating expenses.
Inventories
Supplies and materials purchased for inventory purpose are recorded using the perpetual
inventory system. Regular purchases are coursed thru the inventory account and
issuances thereof are recorded as they take place except those purchased out of petty
cash fund which shall be for immediate use and not for stock. Such case shall be charged
immediately to the appropriate expense accounts. Cost of ending inventory of supplies and
materials are computed using the moving average method.
Receivable
Real Property Tax Receivable and Special Education Tax Receivable are established at the
beginning of the year based on RPT Account Register/Taxpayers Index Card submitted by
the Treasurers Office.
Property and Equipment
The costs of public infrastructures, such as roads, bridges and other infrastructures for
general public use are excluded from the Property and Equipment account and recorded in
the Registry of Public Infrastructures.
Infrastructures under construction are valued following the construction period theory.
Property and equipment are carried at cost less accumulated depreciation. For donated
land which cost cannot be determined, valuation were made at market value.
The straight-line method of depreciation is used in depreciating property and equipment
with estimated useful lives ranging from five (5) to fifty years. A residual value equivalent to
ten percent of the cost of asset is set and depreciation starts on the following month after
purchase/construction.
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Payable
Payable accounts are recognized and recorded in the books of accounts only upon
acceptance of the goods/inventory and rendition of services to the agency.
3. Cash
This account is broken down as follows:
2011
2010
General Fund
Cash in Vault
Cash - Disbursing Officers
Cash in Bank - Local Currency , Current Account
Cash in Bank - Local Currency, Time Deposits
2,578,067
1,849,429
15,021,430
43,706
454,195,862
630,115,980
566,435,299
291,853,181
1,038,230,658
923,862,296
388,445
585,252
42,250,765
-
31,745,254
52,556,323
42,639,210
84,886,829
9,718
118,989

Cash in Vault
Cash in Bank - Local Currency , Current Account
Trust Fund
Cash in Vault
Cash - Disbursing Officers
182,082
Cash in Bank - Local Currency, Current Account
54,079,751
52,636,733
55,919,445
54,167,225
110,190,996
106,922,946
1,191,060,864
1,115,672,072
The Cash in Vault account consists of collections from real property taxes, fees, charges
and other revenues at year end which were deposited on January 2 to February 7, 2012.
Cash in Bank-Local Currency, Current account represents bank deposits under interestbearing current account for the General, Special Education and Trust Funds.
Cash Disbursing Officers include cash advances granted to Mayor Del R. De Guzman
amounting to P15,000,000.00 for Confidential and Intelligence activities; Evelina P. Elen
amounting to P11,430.00 for the renewal of permit to carry and surety bond of firearms and
registration/emission test/insurance of RP vehicles; Rommel C. Felipe amounting to
P10,000.00 for the transfer of license and permit to carry firearms; and Soledad S.
16
Solomon amounting to P182,082.38 for the Feeding Program of Congressman Miro

Quimbo and DSWD.
Cash in Bank-Local Currency, Time Deposit account consists of excess funds placed in
Philippine Veterans Bank and Land Bank of the Philippines-Marcos Highway Branch.
4. Receivables
This account includes the following:
2011
2010
General Fund
Due from Officers and Employees
136,946
151,846
Loans Receivable - Others
329,458
329,458
335,789,721
236,965,372
32,467,257
44,141,242
Real Property Tax Receivable

Due from NGAs
Other Receivables
7,382,406
7,326,327
376,105,788
288,914,245
162,853,421
128,004,946
506,887
504,985
163,360,308
128,509,931
Due from Officers and Employees
49,621
49,621
Loans Receivable - Others
35,500
35,500

Special Education Tax Receivable
Other Receivables
Trust Fund
Due from NGAs
5,232
Other Receivables
1,324,000
85,121
1,414,353
539,551,217
418,838,528
The Due from Officers and Employees account substantially consists of bike loans under
the Bike Loan Program for City employees payable in six months as salary deduction and
advances to employees for their seminar and trainings.
The account Loans Receivable - Others represents loan assistance to the community
under the Community Mortgage Program, as per Sangguniang Panlungsod Resolution No.
2000, series of 2003. The assistance is extended to qualified borrowers who are residents
of the City, payable in six months with an interest of five percent per annum. Also included
in this account is the Livelihood Loan assistance under the Isang Bayan, Isang Produkto,
Isang Milyong Piso Programa of former President Gloria M. Arroyo.
Included in the account Due from NGAs is the balance of the CYs 2000 and 2001
unprogrammed Internal Revenue Allotment (IRA) from the Department of Budget and
17
Management (DBM), for Local Government Units which did not avail of the IRA
monetization program, amounting to P13.632 million and P20.448 million as of December
31, 2011 and 2010, respectively. It also consists of the balance of IRA differential from
DBM due to the reenactment of the General Appropriations Act for CYs 2001 and 2004
amounting to P18.734 million, and P23.418 million as of December 31, 2011 and 2010,
respectively. Also included in the account is the overpayment of Community Tax Certificate
to Bureau of Internal Revenue amounting to P28,116 and P175,716 as of December 31,
2011 and 2010, respectively.
Other Receivables include dishonored checks in the amount of P1.028 million from
payment of real property taxes in prior years which are uncollectible due to absence of
document. A request for an authority to write-off has already been made.
5. Inventories
This account consists of the following:
2011
General Fund
Office Supplies Inventory
Accountable Forms Inventory
Drugs and Medicine Inventory
Medical, Dental and Laboratory Supplies Inventory
Other Supplies Inventory
Construction Materials Inventory
2010
7,156,558
1,597,620
3,715,529
1,796,275
2,239,586
54,190,896
70,696,464
6,425,654
265,574
2,772,056
1,807,528
1,374,291
39,579,532
52,224,636
The Construction Materials Inventory consists of construction and materials for the repair
and maintenance and the construction of agency assets by administration.
6. Prepayments
The account consists of the following:
General Fund
Prepaid Insurance
Advances to Contractors
Advances to Contractors
2011
2010
1,100,222
1,242,249
2,342,471
692,402
1,756,549
2,448,951
78,976
78,976
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2,342,471
2,527,927
The Prepaid Insurance represents the unexpired portion of prepaid insurance for property
and equipment of the City.
Advances to Contractors account represents 15 per cent mobilization fee granted to
Square Meter Trading and Construction for the construction of Marikina Sports Park
Building.
7. Investments in Securities
This account consists of Investments in Stocks amounting to P1.198 million and P320,540
for the General Fund and Special Education Fund, respectively, representing 151,614
preferred shares with Meralco at P10.00/share.
8. Property and Equipment

This account consists of the following:
2011
General Fund
Land
Land Improvements
Buildings
Office Equipment, Furniture and Fixtures
Machineries and Equipment
Transportation Equipment
Other Property and Equipment
Accumulated Depreciation
Construction in Progress

Buildings
Other Property and Equipment
Public Infrastructures
Balance carried forward
2010
1,038,323,533
225,143,345
1,178,466,266
85,973,097
168,965,315
127,070,237
84,382,967
2,908,324,760
(248,065,380)
2,660,259,380
158,558,870
2,818,818,250
1,069,224,717
231,269,297
1,067,843,359
81,948,690
106,963,140
130,583,484
76,797,613
2,764,630,301
(200,250,754)
2,564,379,546
266,480,335
2,830,859,882
693,965,510
17,019,017
25,191,881
3,105,000
24,796,568
764,077,976
(49,758,201)
714,319,775
636,549,318
18,487,110
25,214,321
3,105,000
23,282,192
2,491,736
709,129,677
(28,595,917)
680,533,760
19
Balance forwarded
Trust Fund
Other Property, Plant and Equipment
Total Net Book Value
714,319,775
31,480,458
745,800,233
680,533,760
83,212,058
763,745,818
261,215
73,115
286,720
283,831
61,497,617
62,402,498
(690,633)
61,711,865
3,030,923
64,742,788
3,629,361,271
261,215
73,115
286,720
283,831
61,497,617
62,402,498
(700,525)
61,701,973
5,448,699
67,150,672
3,661,756,372
Most of the property and equipment were acquired prior to CY 2002. The depreciation
reflected in the books pertains to assets which were acquired by the City from CY 2002 to
present. For assets acquired prior to CY 2002, appraisal of PPEs will be undertaken to
serve as basis for the computation of depreciation. Included in the account are property
and equipment of Marikina Hotel amounting to P2.561 million which was declared lost by
the General Services Office after the take over from Prime Global last November 26, 2011.
Land represents the value of lot located at Barangay Sta. Elena, Marikina City where the
City Hall is located and other lots acquired by the agency.
The decrease of P162.071 million in Construction in Progress, represents finished projects
reclassified to account, Public Infrastructures.
9. Other Assets
2011
General Fund
2010
49,506,209
880,324
49,506,209
-
50,386,533
49,506,209
This account consists of various obsolete and unserviceable property of the agency.
20
10. Current Liabilities

This account is broken down as follows:
2011
General Fund
Accounts Payable
Due to Officers and Employees
Due to BIR
Due to GSIS
Due to PAG-IBIG
Due to PHILHEALTH
Due to Other NGAs
Due to LGUs
Due to Other Funds
Guaranty Deposits Payable
Other Payables

Accounts Payable
Due to Officers and Employees
Due to BIR
Due to GSIS
Due to PAG-IBIG
Due to PHILHEALTH
Other Payables
Trust Fund
Due to BIR
Due to Other NGAs
Due to LGUs
Performance/Bidders/Bail Bonds Payable
Trust Liability - DRRMF
Other Payables
2010
113,226,012
21,713,067
151,789,176
15,563,891
1,862,580
3,861,724
10,593,328
10,580,780
1,611,819
587,861
62,029,295
2,663,154
1,129,721
35,748,746
251,165,582
1,581,993
596,041
54,957,696
30,850,486
655
1,129,721
33,812,934
304,725,097
3,375,428
12,992
182,068
150,461
31,441
31,842
178,685
26,008
3,988,924
26,639,709
15,805
27,574
135,002
29,447
28,779
178,685
11,760
27,066,761
6,707
28,719,732
23,635,427
106,020
7,049,428
67,583,117
43,925,346
171,025,777
426,180,283
4,766
11,782,821
21,660,751
106,020
7,688,689
55,032,145
96,275,192
428,067,050
21
The Accounts Payable represents the amount due to suppliers and contractors for the
delivery of goods and services for the year 2011 and prior years.
The Due to Officers and Employees account significantly consists of unclaimed salaries
and terminal leave pay of city employees.
The Due to BIR, GSIS, PAG-IBIG and PHILHEALTH are the amounts payable for withheld
taxes, premiums and loan payments. The following balances of the amount due to national
government agencies and government-owned and/or controlled corporations were remitted
on February 10, 2012:
Bureau of Internal Revenue
Government Service Insurance System
Home Development Mutual Fund
Philippine Health Insurance Corp
2,013,501
8,901,768
1,525,883
617,500
13,058,652
The Due to Other NGAs represents the 5 per cent contribution of the City to MMDA and
Priority Development Assistance Fund of various senators and congressmen.
The Due to LGUs represents payable to various barangays as part of advance payment of
Real Property Tax for 2011.
The Guaranty Deposits Payable represents 10 per cent retention fee from contractors for
various projects implemented by the agency.
The Performance/Bidders/Bail Bonds Payable are liabilities arising from the receipt of cash
to guarantee the performance of contract/court order.
The Other Payables account includes collection for the account of housing beneficiaries
under the Emergency Relocation Center of which 798 beneficiaries have fully paid their
balances. Adjustment on the account will be made upon submission of the Marikina
Settlements Office and Treasurers Office of the list of fully paid beneficiaries. Also
included are the account of private entities or institutions as bond for existing projects of
contractors, and supervision and restoration deposits of the Philippine Long Distance
Telephone (PLDT), Manila Water Sewerage System (MWSS) and other contractors.
11. Long-Term Liabilities

This account consists of the balance of the Citys P500 million loan from the Philippine
Veterans Bank (PVB) which was acquired in August 25, 2006 and will mature on November
17, 2013. This was approved thru Sangguniang Resolution No. 59 dated April 5, 2006 for
various infrastructure projects of the City.
22
12. Deferred Credits

This account consists of:
2011
General Fund
Deferred Real Property Tax Income
Other Deferred Credits
Deferred Special Education Tax Income
2010
335,789,721
9,103,405
344,893,126
236,965,372
15,578,630
252,544,001
162,853,421
14,266,047
177,119,468
522,012,594
128,004,946
17,853,124
145,858,070
398,402,071
Other Deferred Credits account consists of real property tax payments which are under
protest due to the increase in real property taxes that took effect in Calendar Year 2002,
and advance payment of Real Property Tax for 2012. It also includes Interest Free Loan
for City Employees who were victims of typhoon Ondoy as per City Ordinance No. 151,
series of 2009.
13. Government Equity
The change in the balance of the account is as follows:
2011
Government Equity, Beginning
2010
4,303,481,958
Adjustment to Beginning Balance

Add: Net Income
Total
4,754,105,546
(6,091,366)
5,435,289
184,215,532
302,924,514
4,481,606,124
5,062,465,349
Add (Deduct) Prior Years' Adjustment

a. Additions
Interest Earned
Refund of Salaries
Reversion of Accounts Payable
Reclassification of Account
Reversion of Expense
Overpayment to Suppliers
Lost PPE
Returned Bond
Internal Revenue Allotment
Reversion of Paid Under Protest
Unrecorded Income
Inter-fund Transfer
Double Entry
Adjustment on PPE
425
15,793
32,962
53,701,964
76,325,547
12,914
2,470,220
17,533,749
4,650,710
50,572
810
189,375
1,013,496
7,963,429
548
6,051,482
16,620
24,365,094
1,966,668
270,480
136,600
96,091,152
2,779,000
103,457,307
23
b. Reduction
Liquidation of Cash Advance
Refund of Collection
23,936
15,500
246,246
Payment of Salaries
962,005
Other MOOE
326,041
151,800
Reversion of Accounts Payable
617,939
7,642,250
Repairs and Maintenance

Unrecorded Issuance of Inventory
Depreciation Expense
Supplies Expense
Communication Expense
Inter-fund Transfer
Reclassification of Account
Adjustment of PPE
719,348
131,789
69,826
801
336,375
1,383,172
3,020
594
16,514,044
17,286,807
66,661
2,962,552
(19,357,036)
Deduct: Receipt/Transfer of PPE/

Completed Infrastructures
3,062,606
33,166,276
7,401,074
2,417,776
600,671
Roads, Highways and Bridges
47,190,532
689,560,176
Parks, Plazas and Monuments
743,960
14,889,965
Irrigation, Canals and Laterals
4,233,858
65,265,991
Transfer to Registry:
Waterways, Aqueducts, Seawalls,

River Walls and Others
15,808,311
Other Public Infrastructures
16,807,117
Government Equity, End
(87,201,554)
4,471,138,686
67,560,035
(829,274,423)
4,303,481,958
14. Operating Income

The City realized an aggregate income of P1.524 billion or an increase of P533,631 from
last years P1.523 billion.
Operating Income consists of Tax Revenue of P679.307 million from P707.567 million last
year resulting to a decrease by P28.261 million or 3.99 per cent due to the reduction of
Real Property Tax by 50 per cent as per City Ordinance No. 88, Series of 2010, and
General Income of P845 million from P816.205 million last year with an increase of
P28.795 million or 3.53 per cent. Share in the Internal Revenue Allotment increased by
P38.352 million or 7.12 per cent.
15. Expenses
Total operating and financial expenses of P1.340 billion registered an increase of P140.496
million or 11.77 per cent from last years P1.200 billion.
24
The expenses were classified as follows: Current Operating Expenses, P1.198 billion,
Financial Expenses, P5.360 million, Subsidies, Donations and Extraordinary Expenses,
P136.694 million.
16. Local Disaster Risk Reduction Management Fund (LDRRMF)

The LDRRMF represents the amount set aside by the LGU to support its disaster risk
management activities pursuant to RA 10121, otherwise known as the Philippine Disaster
Risk Reduction and Management Act of 2010. The amount available and utilized during
the year totaled P146,439,876 and P8,701,713, respectively, broken down as follows:
Particulars
Amount
Utilized
Available
Balance
Current Year Appropriation: 2011

Quick Response Fund (QRF)
22,805,199
4,235,649
18,569,550
53,212,131
4,198,564
49,013,567
76,017,330
8,434,213
67,583,117
70,422,546
267,500
70,155,046
Mitigation Fund (MF)

MOOE
Capital Outlay
Total
Continuing Appropriation:
Special Trust Fund
Total
146,439,876
8,701,713
137,738,163
17. Other Matters

City Government of Marikina represented by its City Treasurer, Ricardo L. Castro
Versus Primeglobal Hotels, Inc., and/or John Rex T. Tiu, in his capacity as the
Corporate Treasurer, Incorporator and members of the Board of Directors, Lei P. Tiu,
Eric A. Acejo, Marian Michelle E. Mazo and Dominic Frederick D. Francisco, in Their
capacities as Incorporators and members of the Board of Directors, Civil Case No.
11-1477-MK, Regional Trial Court, Branch 272, Marikina City.
The above-entitled case is a complaint for Collection of Sum of Money with Damages with
Application for Writ of preliminary Attachment against above-named defendants for their
failure to comply with their obligation under the Contract of Lease dated April 8, 2011 over
the Marikina Hotel and Convention Center in the total amount of P11,709,159.15, broken
down as follows:
P 6,000,000.00 2,394,591.58
39,096.50
469,636.07
215,214.00
P11,709,159.15
Unpaid rent from June to November 2011

(note: City took over the leased premises on
November 26, 2011
Meralco Bill
PLDT Bill
value of lost properties
receivables from hotel clients
25
The Honorable Court in its Order dated January 13, 2012 granted the application for writ of
preliminary attachment which should only be issued against defendant Primeglobal Hotels,
Inc. and required the City to post a bond in the amount of P2,000,000. However, in its
Order, it declared that the amount due to the City should only be P7,709,159.15
considering that Primeglobal paid the City P2M as advance rent and P2M as security
deposit.
The possible contingent claims of the City would be in the amount of P7,709,159.15
(P11,709,159.15 P4Million, advance rent and deposit), exclusive of interests, other
unpaid utility bills (water) and other damages as may be awarded by the court.
26
PART II
DETAILED AUDITED FINDINGS AND
RECOMMENDATIONS
DETAILED AUDIT FINDINGS AND RECOMMENDATIONS

Financial and Compliance Audit
1. Deficiencies noted in the audit of Property and Equipment
1.1. Net variance amounting to P96.252 million between the Result of Physical
Inventory and balances per Books of the Property and Equipment account
was not reconciled by the General Services Office and Accounting Office,
thus, rendering the account balance doubtful.
In our previous audits, it has been observed that the variance between the
physical inventory and balance per books of the Property and Equipment account
was not reconciled by the General Services Office (GSO) and Accounting Office,
thus, rendering the account doubtful.
Our audit of the CY 2011 transactions of the account also revealed a net variance
of P96,252,243 between the balance per books as of December 31, 2011 and the
result of the annual physical inventory conducted by the GSO as shown in Table 1.
Table 1 - Variance between balance per books and physical inventory
(excluding the Construction in Progress)
Per Books
General Fund
P 2,908,324,760
764,077,977
P 3,672,402,737
Per Inventory
Report
P 3,524,211,408
51,939,086
P 3,576,150,494
Variance
(P 615,886,648)
712,138,891
(P 96,252,243)
Section C.3 Chapter V of the Manual on Property Custodianship states that:

After the physical inventory taking, the Inventory Committee shall
reconcile the results of the count with the property and accounting
records. The inventory listing of the supplies and materials shall be
checked against the stock cards maintained by the Property and
supply ledger cards maintained by the Accounting and finally
against the control accounts. On the other hand, the inventory
listing of equipment shall be checked with the property card
maintained by the Property as against the equipment ledger cards
maintained by the Accounting and the total thereof shall be
compared with those in the general ledger
Moreover, Section 491, Volume I of the Government Accounting and Auditing
Manual (GAAM) provides that:
All discrepancies between physical and book inventories must be
investigated and cleared immediately.
If necessary, written
explanations shall be required from persons responsible
27
We also noted that a substantial amount of the balances per books of the various
property and equipment represents reconciling items which amounted to
P732,328,250 as of December 31, 2011 as shown in Table 2. Reconciling items
refer to those balances of the accounts, which cannot be identified, or those
accounts without details.
Table 2 Reconciling items per Property and Equipment classification and
corresponding Accumulated Depreciation
General Fund
Land
Land
Improvement
Office Buildings
as of December 31, 2011
Reconciling Items
Property and
Equipment
SEF
Total
General Fund
SEF
Total
P323,667,528
P323,667,528
225,143,345
225,143,345
P 2,106,835
P 2,106,835
116,034,657
116,034,657
16,534,641
16,534,641
11,546,488
11,258,780
6,712,410
4,493,710
4,493,710
21,083,083
School Buildings
Markets and
Slaughterhouses
5,475,119
6,712,410
Other Structures
14,253,201
849,363
15,102,564
21,083,083
Office Equipment
IT Equipment
and Software
Other
Machineries and
Equipment
Other
Transportation
Equipment
Other Property
and Equipment
17,878,188
635,805
18,513,994
2,759,573
1,319,082
4,078,655
92,240
92,240
16,891,491
5,166,458
22,057,949
434,298
434,298
2,493,227
898
2,494,125
478,000
478,000
2,508,794
14,602,726
P23,163,802
14,602,726
P732,328,250
33,845,769
P113,975,904
P 709,164,448
P 6,071,370
P31,996,572
43,255,352
2,508,794
3,800,441
P42,283,450
37,646,210
P156,259,354
While we recognize the efforts of the GSO and Accounting Office for the
reconciliation of the said variances which led to a significant decrease from
P691,000,000 of the previous year to only P96,252,243 for CY 2011, the presence
of the Reconciling Items in the balances per books, notwithstanding the
unreconciled variance, casts doubts on the accuracy/correctness of the recorded
balances. Since the property items in the Reconciling Items cannot be identified,
these are possibly not included in the property records of GSO; thus, the total
variance will now total to P828,580,493. Moreover, the difference between the
market value (appraised cost) and the purchase cost of the parcels of land
adjusted in the Reconciling Items noted in Finding 1.2 below, will also add up to
the total variance.
Consequently, the accumulated depreciation of those property classifications
with Reconciling Items amounting to P156,259,354 as of December 31, 2011 as
presented in Table 2, is understated because depreciation was not computed on
the Reconciling Items. Also, the yearly depreciation is understated and the
income for each year is then overstated.
28
We reiterated our previous years recommendation that the City Accountant, in

coordination with the GSO, fast track the analysis and reconciliation of the
balances per books with the property records. Also, for properties whose values
cannot be determined, their estimated values as well as their remaining useful
lives may be assigned by an appraisal committee.
We further recommended that extra effort be exerted in the analysis of the
accounts in the Reconciling Items and accordingly prepare adjusting journal
entries to reflect the correct balances of the affected accounts at year-end. The
Accounting Office may secure list/s from other departments of the City
concerning the items that were possibly included in the account.
Management appreciated that their efforts to decrease the difference between
the balance per book and physical inventory of the GSO has been recognized. It
will serve as their inspiration to fast track the analysis and on-going
reconciliation. Concerning the reconciling items which are classified under the
Property and Equipment account without detailed breakdowns, actual physical
inventory of the GSO is a big help to correct the account. Management also
replied
that as per properties whose values cannot be determined, an
indorsement letter had already been sent to the appraisal committee to determine
their estimated value as well as their remaining useful lives.
1.2. Erroneous valuation of land adjusted in the Reconciling Items account
In December 2011 an adjusting entry was made on cost of land with tax
declaration under the name of the City Government of Marikina debiting the Land
account and crediting the Land-Reconciling Items amounting to P570,230,834.
Reconciling items refer to those balances of the accounts, which cannot be
identified, or those accounts without details. These accounts have been in the
books since 2004 or earlier.
Our verification of the said adjusting entry disclosed that market values were
used to record the adjustment. If these parcels of land were confirmed to be part
of those previously debited under the Land-Reconciling Items account, the
market value should not be credited but rather the purchase cost of the land
because the said market value is not yet the cost of these lands at that time the
balances were recorded in the Reconciling Items account in 2004 or earlier. The
difference between the market value (appraised cost) and the purchase cost of
these pieces of land should be recorded crediting an Equity account.
Further, we noted that except for those recorded under the said adjustment,
parcels of land acquired by the City are recorded at purchase cost. Generally
accepted accounting principles provides that if an item of property, plant and
equipment is revalued, the entire class of property, plant and equipment to which
that asset belongs shall be revalued. The increase shall be recognized and
accumulated in equity.
The adjustment made crediting the Land-Reconciling Items using the market value
of the parcels of land resulted in the understatement of the Equity account by
the difference between the market value (appraised cost) and the purchase
cost of the said parcels of land. On the other hand, the presence of reconciling
29
items in the Land account casts doubts on the accuracy/correctness of the

account balance as of December 31, 2011.
a. Analyze the remaining accounts in the Land-Reconciling Items;
b. Ensure that the parcels of land included in the adjustment made are those
previously included in the Land-Reconciling Items; and
c. Adjust the amount recorded in the adjustment made to effect the acquisition
costs of the parcels of land with tax declaration under the name of the City.
1.3.
Property and Equipment with zero acquisition costs but with accumulated
depreciation
Several items in the Property and Equipment accounts without acquisition costs
reflected in the Property, Plant and Equipment Schedule and as shown in Table 3
below, still have accumulated depreciation which resulted in negative net book
values for the affected accounts.
Table 3 Property and Equipment with zero acquisition cost but with
accumulated depreciation
Construction and Heavy Equipment

Land Improvement
IT Equipment and Software
Medical, Dental and Laboratory Equipment
Technical and Scientific Equipment
Other Machineries and Equipment
Motor Vehicles
Other Property, Plant and Equipment
Total
Acquisition
Cost
0
0
0
0
0
0
0
0
Accumulated
Depreciation
P 710,062
2,731,873
151,953
1,867
44,522
31,834
368, 646
76,902
P 4,117,659
These items were acquired in various dates from 2002 to 2008 and with
estimated useful lives that range from five to 30 years. The occurrence of such
transactions casts doubts on the accuracy and correctness of the Property and
Equipment and the depreciation expense and income for the year and prior
years.
We recommended that Management analyze the affected accounts and
accordingly prepare the adjusting journal entries to reflect the correct balances of
the accounts at year-end.
Management has subsequently adjusted the affected accounts. Upon our
evaluation of the adjustment, however, we noted that there was no analysis
made on the accounts. The basis of the said adjustment was merely the Audit
Observation Memorandum. The details comprising the balances of the accounts
should first be identified/analyzed before any adjustment is made.
30
1.4. Ownership for parcels of land totalling 44,365.14 square meters acquired
by the City for the period from 2006 to 2011 are evidenced only by either
Deed of Absolute Sale, Deed of Forfeiture or Memorandum of Agreement
with Conveyances.
Land title refers to that upon which ownership is based. The Certificate of Land
Title is the best evidence of ownership. It is the evidence of the right of the
owner or the extent of his interest, and by which means he can maintain control
and as a rule assert right to exclusive possession and enjoyment of the property
(Registration of Land Titles and Deeds by Pena, Pena, Jr., Pena, 1994 Edition).
Inspection made on the proof of ownership of land owned by the City disclosed
that parcels of land with a total area of 44,365.14 square meters, with total
acquisition cost of P20,598,762 (excluding those which were acquired through
Deed of Forfeiture), are only evidenced by either Deed of Absolute Sale, Deed of
Forfeiture or Memorandum of Agreement with Conveyances. These pieces of
land, which were purchased by the City for the period from 2006 to 2011, remain
untitled or titles were not yet transferred in the name of the City as of December
31, 2011.
Deed of Forfeiture was executed for delinquent real property taxpayers whose
property was auctioned to satisfy said obligations. Said auctions are being
forfeited in favor of the City when there is failure of any bidder to bid the total
amount satisfying the delinquent real property tax.
On the other hand,
Memorandum of Agreement with Conveyances was made for parties whose lots
will be affected by a proposed road widening project and other project of the City.
To avoid tedious and expensive process of expropriation, the party and the City
amicably settled thereby the affected owner of the lot cedes, transfers and
conveys absolute ownership of the lot to the City.
We recommended that Management take steps to have the land titled in the
name of the City to prove legal ownership on these parcels of land.
Management submitted a status/list of properties acquired by the City pending
transfer of Transfer Certificate of Title (TCT) in its name. Among the various
remarks/status in the said list include- still for application for segregation and
approval of Subdivision Plan before the Land Registration Administration; for
assessment of capital gains tax and documentary stamp tax; expropriation case
on going, etc. Management claimed that the title for land with a total area of
3,443.25 sq.m. were already transferred in the name of the City.
Upon verification, however, the TCTs of the total land area of 3,443.25 sq.m. are
among the TCTs which we have already counted during the ocular inspection,
thus, the total area of 44,365.14 square meters remain untitled in the name of the
City.
31
2.
Deficiencies noted in the audit of the Inventory account

2.1. Inventory Report not submitted
Except for Office Supplies Inventory, the report on the result of physical count of
the rest of the recorded inventory of supplies and materials of the City amounting
to P63,539,904 as of December 31, 2011 was not submitted, contrary to Section
156 of COA Circular 92-386 dated October 20, 1992 which states that:
Sec. 156 Annual Inventory of Supplies or Property The local
chief executive shall require an annual physical inventory of all
supplies or property of the local government unit as of December
31 of each year, to be conducted by office or department by a
committee of three (3) consisting of the representative of the local
chief executive as chairman and the general services officer,
municipal or Barangay treasurer, as the case may be, and the
supply accountable officer of the department or office concerned,
as members. The inventory report shall be submitted to the local
chief executive and copy furnished the provincial, city or municipal
auditor concerned.
The veracity of the recorded balance of the inventory account could not be
ascertained due to the absence of the said Report and the corresponding
reconciliation of any variance between the GSO and Accounting records.
2.2.
Variance between the Stock Card and Subsidiary Ledger

Comparison between the Subsidiary Ledger (Accounting records) and the Stock
Card (Warehouse records) of sampled inventory items as of December 31, 2011,
disclosed variances in quantity as shown below:
Table 4 Variances in quantity between Subsidiary Ledger and Stock Card
Description
Portland Cement 40kg (per bag)

Welding Rod* (in kilos)
Tex Screw- 21/2
Rivets Screw 1/8 x (per piece)
QDE Marikina C. Green Destiny ( per gal)
QDE Marikina Magenta Solid EZ Coat (per gal)
QDE Black Boysen (per gal)
GI Nipple x 4 (per pc)
GI Pipe with thread 3 dia. X 20 sch. 40 (per pc.)
Halide Lamp Hid Lamp 150w (per set)
Per
Accounting
Records
19,325
5,421
1,050
8,500
136
435
89
444
809
161
Per Stock
Card
5,418
3,172
0
6,387
24
345
56
458
682
20
Variance
13,907
2,249
1,050
2,113
112
90
33
(14)
127
141
*various item codes per Accounting Records
The inadequacy of submitted records, like the Physical Inventory Report and the
reconciliation between the records of GSO and Accounting Office, did not permit
us to apply alternative procedures to validate the correctness of the balances of
the sampled inventory items.
32
2.3. Questionable Unit Costs

The unit cost of cement purchased during the year varied oddly from P195 per
bag to P275 per bag while the price of cement was stable in CY 2011 per the
Department of Trade and Industry price watch. We noted that the said prices
varied depending on the supplier.
Also, the unit costs for inventory items in Table 5 were noted to be questionable.
Table 5 Dissimilar Unit Costs
Description
Tex Screw -2 (per piece)
Rivets Screw 1/8 x (per piece)
GI Nipple x 4 (per piece)
Unit Cost
Per Accounting
Per Stock Cards
Records
1,176.31
2.50
146.84
0.30
7,554.52
38.00
The unit costs per Accounting Records are calculated using the weighted
average method while the unit costs per Stock Cards are based on the actual
purchase/acquisition cost. The big difference of the unit costs between the two
records, however, casts doubts on the correctness of the recorded inventory item
since the acquisition cost and the quantity in every purchase, are also considered
in the determination of the weighted average.
The inadequacy of submitted records, like the Physical Inventory Report and the
reconciliation between the records of GSO and Accounting Office, did not permit
us to apply alternative procedures to validate the correctness of the recorded
inventory.
a. Come up with an Inventory Report on the result of physical inventory. A copy
of the said Report, including the reconciliation of any variance between the
GSO and Accounting records, should be furnished the Auditors Office at the
prescribed period;
b. Reconcile variances between the balances per books and the warehouse
records and make necessary adjustments to reflect the correct balances of
the inventory accounts; and
c. Look into the varied prices of the same inventory items purchased from
different suppliers.
Management replied that regarding the matter of the Inventory Report which
were not submitted, this has been coordinated with the GSO, the officer in
charge in the inventory of supplies and materials and they took note of it in
compliance with COA Circular 92-386. The double coding referring to the same
item will be adjusted once the Accounting has verified and reconciled with the
GSO. Management also averred that the variance between the Stock Card and
33
Subsidiary Ledger resulted from non-issuances or late issuances of the

Summary of Supplies and Materials Issued. Also, another reason for the
variance is that the description codes used in Purchase Orders differ from the
existing description codes that resulted to the creation of new item codes.
Management is now in the process of reconciliation and adjustment of the item
codes in inventory account.
3.
Non-reversal of
the fully-paid accounts of
Relocation Program of the City of Marikina.
the beneficiaries of the
Other Payables account of the General Fund with a total amount of P35,748,746
as of December 31, 2011 includes accounts totalling P34,997,149 or 97.90 per
cent representing collections from the beneficiaries of the Relocation Program of
the City of Marikina as shown in Table 6.
Table 6 Accounts concerning Relocation Program of Marikina
Particulars
ERC Originators fee
Emergency Relocation Center
Reconciling Items
Total
Amount
185,512
31,156,723
3,654,914
P 34,997,149
P
The payable account (Other Payables) is being created whenever a beneficiary

pays the monthly amortization. The account shall be debited and Income shall
then be recognized upon full settlement by the beneficiary of the contract amount.
Our analysis of the records maintained by the Accounting Office showed that no
beneficiary has fully paid his/her account. However, interview with the Officer-InCharge of the Marikina Settlement Office (MSO), the implementor of the said
program, as well as the Status Report submitted by the said Office disclosed that
as of December 31, 2011, they have already awarded 798 land titles to those
who have fully paid their amortization. The City Treasurer has likewise issued the
Certificates of Full Payment to them. This showed that the Other Payables
account still includes fully settled accounts as of December 31, 2011.
The non-reversal of the payable account resulted in the overstatement of the
account by the total amount fully settled by the 798 beneficiaries and
understatement of the Income account by the same amount.
We recommended that Management require the Accounting Office and MSO to
analyze the accounts concerning the Relocation Program, reconcile their records
and make the
necessary adjustments.
To prevent the accumulation of
paid/settled accounts in the payable account, we further recommended that the
City Treasurer and the Officer in Charge of MSO to furnish the City Accountant
with copies of the Certificates of Full Payment and the Status Report (with status
of payment for each beneficiary), respectively.
Management replied that the Accounting Office has coordinated with the
Marikina Settlements Office (MSO) regarding the fully paid beneficiaries under
34
the Relocation program and that the Treasury Office has already furnished the
Accounting Office copies of list of paid beneficiaries with the Certificate of Full
Payment in order to update the books.
Further, the three offices concerned
namely the Treasury Office, City Accounting Office and the MSO agreed that the
Treasury Office will periodically furnish the Accounting Office and the MSO a list of
fully paid beneficiaries and copies of Certificate of Full Payment for the
necessary adjustments in the books to prevent the accumulation of paid/settled
accounts in the Payable account and for the MSO to transfer the TCT to the
beneficiaries who have fully settled their accounts.
4. Long-outstanding and abnormal balances
4.1Reconciling items on various accounts P5,428,478
Various payable accounts shown in Table 7 include Reconciling Items totalling
P5,428,478. These accounts refer to withheld premiums and loan payments to
GSIS, Pag-IBIG and PHILHEALTH, which remain unremitted to the said
institutions as of December 31, 2011 and real property tax payments which are
under protest. On the other hand, Reconciling Items refer to those balances of the
accounts that cannot be identified or accounts without details. These
accounts have been in the books since CY 2004.
Table 7 Accounts with Reconciling Items
Due to GSIS
Due to Pag-IBIG
Due to PHILHEALTH
General
Fund
P 902,329
771,977
498,399
0
P2,172,705
SEF
P
54,082
19,466
9,740
3,172,485
P3,255,773
Total
P 956,411
791,443
508,139
3,172,485
P5,428,478
The presence of the Reconciling Items casts doubts on the accuracy/correctness

of the payable accounts as of December 31, 2011.
Reconciling Items in the various payable accounts and to prepare necessary
adjusting journal entries to reflect the correct balances of the accounts at yearend.
Management has subsequently adjusted the subject reconciling items in the
various affected accounts to Prior Years Adjustments account. The financial
statements, however, can no longer be corrected after the adjustment to correct
the balances as of December 31, 2011; thus, said adjustment will be reflected in
the ensuing financial statements.
4.2. Guaranty Deposits Payable - P1,412,625
35
Guaranty Deposits Payable account includes balances totalling P1,412,625

which have been outstanding for more than five years as of December 31, 2011
as shown in Table 8. Guarantee deposits, as disclosed in the Notes to Financial
Statements, pertain to the 10 per cent retention fee from contractors for various
projects implemented by the City. Said retention fees should be due for release
after the defects liability period, upon final acceptance of the works. Since the
transactions are dated from 2007 and earlier and the projects are already
operational, all the transactions relative to the construction of these agency
assets are deemed completed; thus, said retention fees should have already
been released.
Table 8 Long-outstanding accounts
Fund
General Fund
Trust Fund
Total
Amount
P1,129,720
178,685
104,220
P1,412,625
In addition, there are abnormal (debit) balances totalling P1,979,178 under the
Special Education Fund and Reconciling Items amounting to P735,319.
The abnormal balances have a negating effect resulting in the understatement of
the account by P1,979,178. On the other hand, the presence of Reconciling
Items in the account casts doubts on the accuracy and correctness of the overall
account balance as of December 31, 2011.
dormant and abnormal balances and accordingly make the necessary
adjustments. Reconciling Items should likewise be analyzed and broken down to
names of recipients/claimants. Existence of the claims should be determined.
Management has subsequently made adjustments after analyzing the accounts.
The financial statements, however, can no longer be corrected after the
adjustment to correct the balances as of December 31, 2011; thus, said
adjustment will be reflected in the ensuing financial statements.
5.
Dishonored checks
Our audit of the account Other Receivables revealed that 93.65 per cent or
P7,388,463 of the account total represents dishonored checks in payment of real
property, business and other taxes or fees as of December 31, 2011. Included in
the dishonored checks is the amount of P1,029,743, which was already
requested for authority to write off.
Table 9 shows that most of the accounts have been outstanding for over three
years now.
36
Table 9 Aging of dishonored checks

General Fund
Less than 1 yr
1 yr to 2 yrs
2 yrs to 3 yrs
3 yrs to 4 yrs
More than 4 yrs
Less than 1 yr
More than 4 yrs
Total
Amount
P 364,181
81,143
243,359
4,810,680
1,382,213
2,916
503,971
P7,388,463
We noted that
there are cases wherein the
City Treasury Office still
acknowledges checks as payment for taxes from taxpayers whose checks have
previously been dishonored by the bank. For CY 2011 accounts, the check
payments of a certain taxpayer have been dishonored by the bank monthly from
January to December 2011.
These uncollected accounts representing dishonored check payments deprived
the City of resources needed to implement its projects.
We recommended that Management exert extra efforts to collect the soonest
possible time, the accounts representing dishonored checks.
We also recommended that Management discontinue accepting check payments
from those whose checks have been previously dishonored by the bank; thus,
the City Treasury Office should maintain a master list of these taxpayers.
Management should likewise adopt a policy regarding the matter.
Management replied that all cases of dishonored checks were already referred to
the City Legal Office for appropriate action. Regarding CY 2011 accounts wherein
the check payments of a certain taxpayer have been dishonored by the bank
monthly from January to December 2011, the said condition transpired due to the
Compromise Agreement entered into by the complainant (City Treasurer), assisted
by the Legal Officer and the accused for violation of BP 22. Regarding the
recommendation that the City Treasury Office should maintain a master list of
taxpayers with cases of dishonored checks, a logbook is maintained by the
Treasury staff on taxpayers whose checks were dishonored and returned by the
bank. Moreover, in compliance to the recommendation, the Treasury Office will
stop accepting check payments for those whose checks have been previously
dishonored by the bank and shall adopt a policy regarding thereof.
6.
Deficiencies noted in the audit of Local Disaster Risk Reduction and

Management Fund (LDRRMF), formerly Calamity Fund.
37
Section 12.a of Republic Act 10121 (RA 10121) otherwise known as The
Philippine Disaster Risk Reduction and Management Act of 2010, provides that a
Local Disaster Risk Reduction and Management Office (LDRRMO) should be
established in every city which shall be responsible for setting the direction,
development, implementation and coordination of disaster risk management
programs within their territorial jurisdiction.
In compliance with the above provisions, the Sangguniang Panlungsod approved
Ordinance No. 32, Series of 2011, institutionalizing the organizational capability of
the City of Marikina for disaster risk reduction and management, on April 13, 2011
and by the City Mayor on May 3, 2011. The said Ordinance created the Marikina
City Disaster Risk Reduction and Management Council (MCDMC) and the
Marikina City Disaster Risk Reduction and Management Office (MCDMO). Also
included in the Ordinance are the roles of the Barangay officials as well as the
volunteers.
Our audit of the Local
Disaster Risk Reduction and Management Fund
(LDRRMF), formerly Calamity Fund, disclosed the following:
6.1. No approved Disaster Risk Reduction and Management Plan
The City had no approved Disaster Risk Reduction and Management Plan for CY
2011 and the corresponding Work and Financial Plan was not prepared.
The Ordinance specifically provides that the MCDMO shall design, formulate and
program the Disaster Risk Reduction and Management Plan. The MCDMC, as
the policy-making body of the City on matters related to disaster risk reduction
and management, approves the Marikina City Disaster Risk Reduction and
Management Plan, monitors, and evaluates the implementation of the same.
The City has only a List of Pre-Disaster Preparedness Programs and PostDisaster Activities. To facilitate proper monitoring and evaluation of programs
and projects, said Plan should have explicitly defined time frames/schedules of
implementation, resources/sources of funding and targets/expected output.
Projects should address specific programs or objectives and each project should
comprise activities. The Office that will implement the program/project/activity
should also be included in the Plan.
6.2. No MCDMO
The City has not yet formed the MCDMO. At present, the Head of the City
Transportation Management and Development Office is temporarily handling the
disaster matters in concurrent capacity. An accessible and functioning Office is
necessary to perform the assigned duties and functions mandated in the
Ordinance.
6.3
Programs not effectively accomplished
38
For CY 2011, the City Government of Marikina appropriated the amount of

P76,017,330 or 5 per cent of its estimated revenues from regular sources as its
Calamity Fund or LDRRMF, 70 per cent or P53,212,131 of the fund is for mitigation
and disaster preparedness and the 30 per cent or P22,805,199 for the Quick
Response Fund.
The City expended only P8,434,212 or 11.10 per cent of its LDRRMF for CY 2011
(P4,235,649 from the Mitigation Fund and P4,198,563 from the Quick Response
Fund). We noted that the charges from the 70% Mitigation Fund were mostly on
repairs and maintenance and depreciation expenses. Programs, projects and
activities like purchase of tools and equipment, conduct of training and disaster
drills, etc., which are very important in the preparedness of the community for any
disaster, were not undertaken considering that the City of Marikina is disasterprone.
The non-compliance with the full provisions of RA 10121, non-implementation of
the City Ordinance, and unavailability of a Disaster Risk Reduction and
Management Plan, precluded the City to effectively manage their budgeted fund
for Local Disaster Risk Reduction and Management.
We recommended that Management look into the immediate and full
implementation of RA 10121 and City Ordinance No. 32, Series of 2011 in order
that necessary plans for risk reduction and the proper utilization of the fund can
be attained/achieved.
Management replied that to date, the Local Disaster Risk Reduction and
Management Council has issued Resolution No. 1, Series of 2012 dated
February 21, 2012. In the Resolution, the Council has resolved the utilization of
the 5 per cent of the Calamity Fund and has identified and allocated the amount
of P123.530 million to various programs and projects. With regard to the office,
the MCDMO has not yet been organized as Management is trying to locate first
an available area big enough to accommodate various equipment and facilities
related to disaster preparedness. Hence, to properly run the said office,
department head and staff who possess the required knowledge and skills
demanded by the job are still being identified.
7.
Unutilized Priority Development Assistance Fund (PDAF) granted to the

City of Marikina
Priority Development Assistance Fund (PDAF) granted to the City of Marikina by
Congressional Representatives and Senators
for specific
purposes and
recipients, showed a balance of P17,924,909 as of December 31, 2011.
Table 10 shows the PDAF extended to the City from 2004 to 2008 which were not
fully implemented or utilized for the programs/projects these were intended
totalling P5,670,593.
Table 10 PDAF not fully utilized
39
SARO
No.
Purpose
No data
available
Medicare coverage of Indigent families, Gawad

Kalinga and Various expenses
04044
Bike Loan
06-07493
No data
available
2,000 pcs Marikina Books

forwarded balance
2005
08-04520
DepEd Flagpole @ Knights of Columbus & var.

expenses
No data available
2008
6,492,000
2,189,431
2004
500,000
200,000
2004
330,000
150,043
2008
3,200,000
42,138
P 15,522,000
P5,670,593
040658
Year
Granted
03-0663
Nutrition Cooking Demonstration @ Community

Nutrition Center
08-01505
various expenses
Amount
Granted
Balance as
of Dec. 31,
2011
2008
P 4,000,000
P2,612,177
2004
2007
500,000
500,000
309,250
80,000
Not available
87,554
Likewise, Table 11 shows the PDAF granted in 2004 and 2006 which the City of
Marikina was not able to implement/utilize at all totalling P3,100,000.
Table 11 Unutilized PDAF
SARO No.
02-0392
No data available
08-6340
Total
Year
Granted
2004
2004
2006
Amount
Granted
2,000,000
100,000
1,000,000
P3,100,000
Balance as of
Dec. 31. 2011
2,000,000
100,000
1,000,000
P3,100,000
More benefits from programs/projects could have been extended to the

constituents of Marikina City had the PDAF been fully utilized as to its purpose.
We recommended that Management utilize fully the PDAF granted to the City. If
the purpose of a certain PDAF is completed or is no longer needed, the City may
request for realignment with the concurrence of the proponent legislator as
provided for under National Budget Circular No. 529 dated February 21, 2011.
Management averred that the City will assure the utilization of the remaining
balance of PDAF especially those with clear purpose for its use and identified
target beneficiaries. Management has, nonetheless, decided to communicate
with the originator of the PDAF with no clear purpose for its possible realignment
to programs in connection with Children-In-Conflict-with-the-Law shelter.
40
8.
Surcharge and interest imposed on late payments of business tax were not
in accordance with the provisions of Sections 167 and 168 of RA 7160
resulting in financial loss
Section 168 of the Local Government Code (RA 7160) provides that
The sangunian may impose a surcharge not exceeding 25% of the
amount of taxes, fees or charges not paid on time and an interest at
the rate not exceeding 2% per month of the unpaid taxes, fees or
charges including surcharges, until such amount is fully paid but in
no case shall the total interest on the unpaid amount or portion
thereof exceed 36 months.
Ordinance No. 12, series of 1998 was enacted prescribing the procedure for the
payment of license fees in the City of Marikina and fixing the date thereof. The
City imposed and computed surcharges and interests on late payments of
business taxes based on the 7-days grace period from receipt of notice of
assessment instead of the January 20 deadline as required under Section 167 of
RA 7160.
During the month of February 2011, business establishments, who paid beyond
the January 20 deadline, per records of the Business Permit and Licensing Office
numbered about 11,508. Out of these, 87 were sampled to have not been
subjected to surcharge and interest which amounted to about P5,826,587.
The non-imposition of surcharges and interests based on the January 20
deadline required under Section 167 of RA 7160 deprived the City of additional
resources for its operations and projects.
a. impose and collect surcharge and interest from business establishments who
pay business taxes after the January 20 deadline or of each subsequent
quarter in compliance with Section 168 of RA 7160; and
b. require that related provisions of Ordinance No. 12, s. 1998 on the
procedures for the payment of license fees and fixing the date of payment be
amended/revised to conform to Sections 167 and 168 of RA 7160.
Management replied that Section 168 of RA 7160 states that the Sanggunian
may impose surcharge not exceeding 2 per cent per month of the unpaid taxes,
fees or charges including surcharges, until such amount is fully paid but in no
case shall the total interest on the unpaid amount or portion thereof exceed 36
months. The provision of the Local Government Code is not self-executing and
needs an enabling ordinance to enforce it. Philippine Law on Local Government
Taxation provides that Surcharges and penalties are collectible only if so
expressly imposed in an Ordinance, either specifically or generally, and only at
rates provided for, which may be less than 25 per cent in the case of surcharges,
or 2 per cent per month in the case of interest charges. In view of the foregoing,
the City Council enacted Ordinance No. 12, series 1998 prescribing the
procedure for the payment of license fees in the City of Marikina and fixing the
41
date thereof. There is no manifest discrepancy in the provisions of Local

Government Code and the Ordinance that gives life to it. For it is within the
power of the Sanggunian to impose penalty and surcharge at any rate provided
not to exceed two per cent and 25 per cent respectively, they can also provide for
the manner of its imposition.
Management further commented that the BPLOs contribution to the coffer of the
city has consistently improved despite the fact that there were two ordinances
enacted by the City Council that gives reprieve to the taxpayer. The business tax
rates being used is still that of a municipality.
Our rejoinder:
While it is within the power of the Sanggunian to provide for the manner of the
imposition of surcharges and interests on late payments of business taxes, the
enacted ordinance should be aligned with the law specifically on Section 167 of
RA 7160. This will encourage the taxpayers to pay on time.
9.
Deficiencies noted in the purchase of tarpaulins

Analysis of the submitted copies of CY 2011 Purchase Orders disclosed that the
City outsourced the printing of tarpaulins despite the Citys own equipment
(tarpaulin printer) and personnel in charge for the printing of the same. For the
period from May to July 2011, the City outsourced 719 pieces of tarpaulins of
various sizes spending a total of P414,246.
Management (GSO) is agreeable that they have their own equipment, however,
the document processes from preparation of Purchase Request (PR) to the
approval of Obligation Request (ObR) for the purchase of the needed supplies
would take for example from January 12, 2011 to July 21, 2011. Pending receipt of
the approval and the processing of procurement, various promotional and
informational campaigns for the City ensued which necessitated the outsourcing
of the printing of tarpaulins not to mention the various requests from constituents
which likewise have to be addressed by the City. The tarpaulin for the events for
the period were outsourced pending receipt of the delivery of consumables since
the belated printing of tarpaulins for specific events would no longer serve its
purpose.
The above-mentioned tarpaulin materials and other supplies amounting to
P1,427,400 were delivered on July 2011, thus, those should have been enough
to print subsequent tarpaulins which were outsourced in August to December
2011 amounting to P658,932.
Our subsequent audit of disbursements pertaining to purchases of materials for
tarpaulin printing also showed that aside from the 120 rolls of tarpaulin materials
delivered in July 2011, another 120 rolls of 8 x 50m, 12-ounce tarpaulin and 24
gallons of solvent ink and other materials were again purchased in September to
December 2011 which totalled to P1,427,400. This is equal to the original
purchase as to amount, item and quantity.
42
We also noted that bid documents and other pertinent supporting documents
were not attached to the disbursement vouchers and said deliveries of tarpaulin
materials were charged directly to expense.
We recommended that Management properly plan its purchases to ensure
availability of supplies in sufficient quantities and to avoid overlapping of
transactions. Bid documents should be attached to the disbursement vouchers
and the purchased tarpaulin materials should be recorded to the inventory
account.
We
also
recommended
that
Management
submit
accomplishment/output of the in-house tarpaulin printer from May to July 2011.
Management submitted the required accomplishment/output of the in-house
tarpaulin printer for CY 2011 on May 9, 2012.
Our rejoinder:
Our
verification of the submitted accomplishment/output showed that the
tarpaulins printed in-house for the period from January to August 2011 included
some tarpaulins that were also outsourced in various dates from March to August
2011.
10.
Copies of Contracts together with all supporting

documents were not submitted to the City Auditors Office on time
COA Circular No. 2009-001 dated February 12, 2009 states that:
Section 3.1 Contracts
3.1.1 Within five working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities,
including government-owned and controlled corporations and their
subsidiaries, a copy of said contract and each of all the documents
forming part thereof by reference or incorporation shall be furnished
to the Auditor of the agency concerned. In case of agencies
audited on an engagement basis, submission of a copy of the
contract and its supporting documents shall be to the Auditor of the
mother agency or parent company as the case may be.
It has been observed that contracts and its supporting documents were not
submitted within five days after perfection. Review of the submission of
contracts showed that the delay ranged from 16 days to 160 days.
The delayed submission of the contracts hinders the conduct of a timely review,
evaluation and determination of the reasonableness of price of the transactions.
We recommended that Management require the officials concerned to submit on
the prescribed time as stated under COA Circular No. 2009-001 copies of
contracts and to set up a mechanism in the routing of the required documents.
43
Management replied that they are exhausting all strategies to ensure full
compliance and those new strategies will be implemented in response to the
recommendation in the routing of documents. The Office of the City
Administrator also prepared a Memorandum dated March 19, 2012 to all
departments concerned reminding strict compliance to the stated COA Circulars.
11.
Compliance to laws, rules and regulations on Gender and Development

Joint Circular No. 2004-1 dated April 5, 2004 issued by the Department of Budget
and Management, the National Economic and Development Authority and the
National Commission on the role of Filipino Women defines Gender and
Development (GAD) as a development approach that seeks to equalize the
status and condition of and relations between women and men by influencing the
processes and outputs of policymaking, planning, budgeting, implementation,
and monitoring and evaluation so that they would deliberately address the
gender issues and concerns affecting the full development of women.
It is required in the said Joint Circular that agencies prepare an Annual GAD Plan,
which shall include activities that are either client-focused or organizationfocused and that the cost of implementing the GAD activities be part of their
approved budget.
Republic Act No. 9710, otherwise known as An Act Providing for the Magna Carta
of Women, directed all departments, including their attached agencies, offices,
bureaus, state universities and colleges, government-owned and controlled
corporations, local government units, and other government instrumentalities to
adopt gender mainstreaming as a strategy to promote womens human rights and
eliminate gender discrimination in their systems, structures, policies, programs,
processes, and procedures.
The Citys GAD plans and programs for CY 2011 included Alternative Learning
System, Livelihood Program, Support Project for Working Mothers, and Maternal
and Child Care: Towards Zero Death.
Review of the approved budget of the City for CY 2011 vis--vis expenses of the
Citys GAD activities revealed that the City had allotted a total of P5,100,671 for
GAD activities and had disbursed a total of P2,561,612 for the period from
January to December 2011.
Table 12 Allotment vs. Expenses
Training
Office supplies
Printing and binding
Other maintenance and operating expenses
Travelling
Gasoline and oil
Repairs and maintenance
Depreciation
ALLOTMENT
1,290,671
180,000
2,500,000
500,000
4,000
126,000
500,000
5,100,671
EXPENSES
422,833
5,872
1,806,000
226,400
100,507
2,561,612
44
12.
Compliance with tax laws

Out of the taxes totalling P57,552,189.64 which were withheld from employees,
suppliers and contractors in CY 2011, the City has remitted the amount of
P55,500,834.91 during the year. The balance of P2,051,354.73 as of December
31, 2011 was remitted in February 2012.
13.
Summary of unsettled suspensions, disallowances and charges

Suspension
Balance, December 31, 2010
Add: Issuances
Less Settlements:
Current Issuances
Prior Years Issuances
Balance, December 31, 2011
Charge
0
2,603,909.75
2,603,909.75
Notices of
Disallowance
0
0
0
2,603,909.75
0
2,603,909.75
0
0
0
0
0
0
0
0
0
0
0
0
The suspension amounting to P2,603,909.75 was issued in August 25, 2011 due
to non-submission of required documents, but was subsequently settled in
December 29, 2011.
45
PART III
STATUS OF IMPLEMENTATION OF PRIOR
YEARS AUDIT RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEARS

AUDIT RECOMMENDATIONS
Of the 12 audit recommendations contained in the previous years Annual Audit Report, six were fully
implemented, five were partially implemented and one was not acted upon by the agency.
Audit
Observation
Recommendation
1. There was a difference of

P691.09 million between the
Property,
Plant
and
Equipment (PPE) balance
per books and the physical
inventory, thus rendering the
said amount doubtful. This
was due to the failure of the
General Services Office
(GSO) and the Accounting
Office to reconcile the
Inventory Report with the
accounting and property
records.
We strongly recommend that

the City Accountant, in
coordination with the GSO,
fast-track the reconciliation of
the Inventory Report with the
balance per books and
property records. It is also
recommended that for those
properties whose values
cannot be determined, their
estimated values as well as
their remaining useful life
may be assigned by an
appraisal committee.
CY 2010 Reconciliation
AAR
between
the
Accounting Office
and the General
Services Office is
on-going up to the
time that they will
come up with the
same balance per
books
and
physical inventory.
Partially
implemented
2. Unpaid obligations in CY
2007 and prior years
amounting to P6.78 million,
which did not have any
supporting documents to
prove validity and existence,
were still recorded under
Accounts Payable (401)
We
advise
the
City
Accountant to immediately
revert these undocumented
accounts payable to the
Government Equity account
as required under Section 98
of PD 1445.
CY 2010 Adjusted as per

AAR
JEV Nos. 201101-000991, 201107-008890, 201107-008892, 201107-008891.
Fully implemented
3. The Construction in Progress

(CIP)
accounts
were
overstated by P328.72
million
because
the
completed projects of prior
years were not fully
transferred
to
their
appropriate PPE account.
We recommend the review of

the CIP accounts so that all
completed projects could be
transferred to PPE. Further, it
is recommended that the
Status Report of Projects
Undertaken
by
the
Engineering
Office
be
submitted quarterly to the
City Accountant so that there
will be a basis for the
preparation of the Journal
Entry Voucher (JEV) that will
record the transfer.
CY
2010
AAR
Partially
implemented
Ref.
Management
Action
Reconciliation of
the CIP accounts
per Engineering
and Accounting
Office records is
on-going.
Status of
Implementation
Reiterated
in
Finding No. 1.1
Reason for
Partial/Nonimplementation
There
was
a
difference
of
P96,252,243.00
between the PPE
balance per books
and the physical
inventory as of
December 31, 2011.
Verification is still ongoing.
Still included in the

Construction
in
Progress account is
the cost of MSP 8th
storey deck building
amounting
to
P111,923,121.27.
The
Accounting
Office
and
Engineering Office
are still reconciling
records
regarding
finished projects for
the preparation of
JEV to record the
transfer.
There
are
still
projects not yet fully
paid and transfer of
the same will be on
the basis of full
payment for the
completed projects.
46
Audit
Observation
4.
Recommendation
Ref.
Management
Action
Status of
Implementation
Wages, allowances and

benefits of volunteers and
non-regular
employees
totaling P20.50 million were
erroneously charged against
the allotment for Personal
Services (PS), thereby
overstating the PS and
understating
the
Maintenance and Other
Operating
Expenses
(MOOE). On the other hand,
various expenses such as
traveling/training,
intelligence/
confidential
expenses and Other MOOE
amounting to P8.66 million
were erroneously recorded
as Extraordinary Expenses
(883), thus overstating said
account by the same
amount and understating
the appropriate expense
accounts.
We recommend that the

practice of utilizing the
allotment
for
Personal
Services for payment of
expenses other than those
for personal services be
discontinued. It is further
recommended that the City
Accountant and the City
Budget Officer should be
extra careful in the budget
utilization and in recording
and classifying expenses.
CY
2010
AAR
This practice had

been
stopped
upon receipt of
the
Audit
Observation
Memorandum.
Fully
implemented
5. Supplemental Budgets were

not supported by new
revenue sources. Likewise,
the budget for Continuing
Appropriations
were
realigned to other projects
and to MOOE.

supplemental budgets be
backed-up with new revenue
source/s, and duly certified
as such by the City
Treasurer. On the other
hand, realignments should
only be made within the
same allotment class and
Continuing Appropriations
should be supported with the
list
of
projects
for
implementation to ensure
that it is utilized for the
purpose for which it was
intended.
CY
2010
AAR
All supplemental
budgets
were
supported
by
savings from last
years budget duly
certified by the
City Treasurer.
Fully
implemented
6. Of the P135.63 million

appropriation for the 20%
Development Fund, P20.63
million or 15.21% was
utilized for purposes other
than those provided under
Department of Budget and
Management (DBM) and
Department of the Interior
and Local Government
(DILG) Joint Memorandum
Circular No. 1, series of
2005, dated September
20,2005.
We
reiterate
our
recommendation that the
20% Development Fund be
utilized only for the purposes
for which it was intended
and
for
the
City
Development Council to
prepare
an
Annual
Development Plan that is in
line with the abovementioned circular.
CY
2010
AAR
The Citys Annual

Development Plan
is now in line with
the DBM and
DILG
Joint
Memorandum
Circular
No.1,
dated September
20, 2005.
Fully implemented
Reason for
47
Audit
Observation
7.
Recommendation
Ref.
Management
Action
Status of
Implementation
Reason for
The Annual Procurement

Plan (APP) that supported
the approved Annual Budget
for the procurement of
goods and infrastructure
projects did not contain the
detailed list of goods and
infrastructure projects to be
procured during the year,
contrary to Section 7 of RA
9184.
It is recommended that the

department
heads
be
required to submit to the Bids
and Awards Committee (BAC)
Secretariat their individual
Project
Procurement
Management Plans (PPMPs)
showing the detailed list of
goods and infrastructure
projects to be procured during
the year. These PPMPs shall
be consolidated by the BAC
Secretariat into an Annual
Procurement Plan to support
the appropriated amount in
the approved Annual Budget.
CY
2010
AAR
The
BAC
Secretariat
submitted
the
revised APP in
accordance with
Section 7 of RA
9184.
Fully implemented
8. The City has yet to come up

with a clear-cut policy and
detailed guidelines in the
grant of financial assistance
to qualified constituents and
to Peoples and Nongovernmental organizations.
It is recommended that policy

guidelines in the grant of
financial assistance conform
with Section 36 and pertinent
portions of Section 458 (5) of
RA 7160.
CY
2010
AAR
The City has

already come up
with
Executive
Order # 021,
series of 2010,
Guidelines for the
grant
of
assistance
to
Indigents
and
Organizations.
Fully implemented
9. The Marikina Revenue Code

of 1995 has yet to be
updated to conform with the
Local Government Code,
hence, the Citys revenue
raising power has not been
maximized.
We reiterate our previous

recommendation that the City
Mayor coordinate with the
Sangguniang Panlungsod for
the codification of all revenue
ordinances.
Existing
ordinances should likewise
be reviewed to determine
conformity with the Local
Government Code.
CY 2010 Proposals for the

AAR
upgrading of the
Marikina Revenue
Code
were
already
transmitted
to
the
legislative/
City Council to
conform with the
Local Government
Code.
Partially
implemented
The City Council has

not acted on the
proposals
for
upgrading
the
Marikina Revenue
Code.
10. Submission of copies of

contracts, job orders, and
purchase orders were
delayed by a period ranging
from 12 to 100 days, while
copies
of
delivery
documents were likewise
delayed by a period ranging
from 35 to 64 days.

General Services Office be
required to submit to the City
Auditors Office copies of
purchase orders, job orders,
letter orders and contract
within five days from
perfection and for notices of
deliveries to be submitted
within twenty-four hours from
acceptance.
CY
2010
AAR
The Office of the

City Administrator
issued
a
Memorandum
reminding
all
departments to
comply with the
requirement.
Partially
implemented
The GSO complied

with the submission
of the purchase
orders and job orders
including
delivery
documents, but it
was still delayed.
11. The Citys continuous failure

to establish a written,

management prioritize and
CY
2010
The Management
Information
Partially
implemented
Reiterated
in
Finding No. 10
The
Remote
Contingency Servers
48
Audit
Observation
comprehensive and tested
disaster
recovery
and
business continuity plan;
and formal policies and
procedures to perform
backup and to provide
offsite servers/storage of
data
files,
databases,
program
and
documentation, may result
in Information Technology
(IT) losses.
12.
Other
Receivables
representing
dishonored
checks for the years 1981 to
1987 totalling P1.03 million
remained in the books for 23
to 29 years despite the
absence of documents to
enforce collection.
Recommendation
carefully
study
the
contingency plan presented
to them by the MISCC in
order to prevent the risks of
loss or damage to data files,
hence,
ensuring
the
continuous operation of the
management
information
system.
Ref.
AAR
We
advise
the
City
Accountant to follow-up with
the Office of the City Mayor
the request for authority to
write-off dishonored checks
based on the verification
made by the City Treasurers
Office. The request for writeoff shall be filed with the
Commission Proper of the
Commission on Audit, thru
the City Auditors Office.
CY
2010
AAR
Management
Action
System and Call
Center ensured
that they have
tested backup and
recovery plan in
case
disaster
occurred. They
have the Business
Continuity Plan
List. The BGMSGSO prioritized
the MISCC on the
use of generators
in case of power
failure. There are
personnel
assigned to the
attendance kiosk
machine in case
of
malfunction.
They have set up
procedures
for
post-disaster
recovery
and
normalization of
IS service and
optimized
the
existing wireless
equipment
in
keeping up with
the
changes
caused
by
Typhoon Ondoy.
Status of
Implementation
Not
implemented
Reiterated
Finding No.5
in
Reason for
to be located at the
6th floor of the New
Marikina
Sports
Center has not yet
been approved by
the management.
The request of the

City for authority to
write-off has been
forwarded to the
COA.
49
PART IV
ANNEXES
Annexes, pages 50 - 64

Marikina City Audit Report

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Marikina City Audit Report

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Republic of the Philippines

ANNUAL AUDIT REPORT

For the Year Ended December 31, 2011

A. Highlights of Financial Operation

The City realized an aggregate income of P1.524 billion or an increase of P533,631

C. Auditors Opinion on the Financial Statements

1. Net variance amounting to P96.252 million between the Result of Physical

cannot be determined, their estimated values as well as their remaining useful

AUDITED FINANCIAL STATEMENTS

Independent Auditors Report

Statement of Management Responsibility for Financial Statements

Consolidated Balance Sheet

Consolidated Statement of Income and Expenses

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

DETAILED AUDIT FINDINGS AND RECOMMENDATIONS

Financial and Compliance Audit

STATUS OF IMPLEMENTATION OF PRIOR YEARS AUDIT

Consolidated Balance Sheet (By Fund)

Consolidated Statement of Income and Expenses (By Fund)

Consolidated Statement of Cash Flows (By Fund)

Statement of Appropriations, Allotments, Obligations

Republic of the Philippines

INDEPENDENT AUDITORS REPORT

Consolidated Financial Statements

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

Special Education Fund

Cash in Bank - Local Currency, Current Account

Cash in Bank - Local Currency, Time Deposits

Solomon amounting to P182,082.38 for the Feeding Program of Congressman Miro

Loans Receivable - Others

Real Property Tax Receivable

Due from Officers and Employees

Loans Receivable - Others

Special Education Fund

Due from NGAs

8. Property and Equipment

Special Education Fund

10. Current Liabilities

Special Education Fund

11. Long-Term Liabilities

12. Deferred Credits

Adjustment to Beginning Balance

Add (Deduct) Prior Years' Adjustment

Reversion of Accounts Payable

Repairs and Maintenance

Deduct: Receipt/Transfer of PPE/

Roads, Highways and Bridges

Parks, Plazas and Monuments

Irrigation, Canals and Laterals

Waterways, Aqueducts, Seawalls,

Other Public Infrastructures

Government Equity, End

14. Operating Income

16. Local Disaster Risk Reduction Management Fund (LDRRMF)

Current Year Appropriation: 2011

Mitigation Fund (MF)

17. Other Matters

Unpaid rent from June to November 2011

DETAILED AUDIT FINDINGS AND RECOMMENDATIONS

Section C.3 Chapter V of the Manual on Property Custodianship states that:

We reiterated our previous years recommendation that the City Accountant, in

items in the Land account casts doubts on the accuracy/correctness of the