Transmittal Letter

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

June 30, 2014

Honorable Benjamin C. Abalos, Jr. City Mayor4/F Executive BuildingCity Government ComplexMaysilo Circle, PlainviewMandaluyong City

Dear Mayor Abalos:

We are pleased to transmit the report on the results of the audit on the accounts and operations of the City of Mandaluyong for calendar year ended December 31, 2013, pursuant to Section 43 of Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the Philippines, and in line with the Commissions effort towards informing management on how fiscal responsibility has been discharged.

Our audit was conducted in accordance with the Philippine Public Sector Auditing Standards, and we believe that it provided reasonable bases for the results of the audit.

We rendered a qualified opinion on the fairness of presentation of the financial statements due to material scope limitation resulting from gaps and deficiencies as discussed in the Independent Auditors Report in Part I hereof. We were unable to obtain sufficient appropriate audit evidence and apply alternative audit procedures on those gaps and deficiencies owing to the status of the agencys records.

The significant observations and recommendations that need immediate action are as follows:

1. Reclassification and adjustments to Other Assets account totaling P290.484 million consisting of accumulated unidentified reconciling items in cash, reciprocal accounts and other accounts pertaining to prior years and dormant account balances are of doubtful validity in the absence of adequate supporting documents and evidences. We have recommended that Management require the Accounting Department to exhaust all possible means to locate the supporting documents and substantiate the adjustments made to Other Assets and perform thorough review of the reclassification and adjustments made.

2. Accrued payables at year-end totaling P100.282 million and outstanding prior years obligations amounting to P25.834 million were not supported with adequate documents.We have recommended that Management direct the Accounting Department and Treasury Department to establish the validity of accrued payables of P100.282 million and review prior years accruals of P25.834 million that remain unpaid as of audit date.

3. Absence of details of Land account and discrepancy of P132.144 million between balance per books and GSD inventory report create doubt on the reasonable valuation of Land account of P359.511 million.

We have recommended that Management require the Accounting Department to maintain subsidiary record and details of Land account and Registry of Public Infrastructures; and create a survey/inspection and appraisal committee to verify the existence and present status of properties listed in the Inventory Report.

4. Failure to prepare and maintain lapsing schedule on depreciation expense and ledger cards for each category of property and equipment casts doubt on the fairness of presentation of depreciation expense for the year totaling P107.347 million; unaccounted difference of P43.819 million between the physical inventory report and balance per books of PPE account.

We have recommended that Management create an Adhoc Committee to establish and determine the appraised values and the remaining useful life of the assets; direct the Accounting Department to prepare lapsing schedule to support depreciation expense, maintain ledger cards for each category of PPE item and reconcile the GSD physical inventory report with the accounting records.

5. Various unrecorded reconciling items in the bank reconciliation statements with net amount of P43.015 million and absence of bank reconciliation statements on eight bank accounts with balances totaling P17.484 million.

We have recommended that Management require the Accounting Department to perform immediate identification and thorough analysis/verification of all outstanding reconciling items of P43.015 million and prepare bank reconciliation statements on the remaining eight accounts.

6. Adjustments on prior years expenditures totaling P44.597 million were not supported with vouchers and supporting documents to establish validity of the recorded adjustments.

We have recommended that management establish internal accounting control on recording of expenditures and obligations in the proper period; substantiate validity of adjustments on prior years expenditures totalling P44.597 million.

7. Difference in the balances of reciprocal accounts Due from Other Funds and Due to Other Funds amounting to P36.241 million was not eliminated/adjusted as of December 31, 2013 and were not substantiated due to the absence or inadequacy of vouchers and supporting documents.

We have recommended that Management require the Accounting Department to review and analyze the reconciling items of reciprocal accounts and take-up the necessary adjustments in the books of accounts.

8. Failure to record RPT and SET receivable accounts at the beginning of the year due to absence of certified list of taxpayers and updated assessment roll.

We have recommended that Management direct the City Treasurer to maintain Real Property Tax Account Register/Taxpayers Index Card and submit the certified list of taxpayers to the City Accountant at the beginning of the year.

The other audit observations together with the recommended courses of action which were discussed by the Audit Group with concerned Management officials and staff during the exit conference conducted on May 27, 2014 are discussed in detail in Part II of the report.

We request that the recommended remedial measures be immediately implemented and we will appreciate being informed of the action(s) taken thereon by submitting the duly accomplished Agency Action Plan and Status of Implementation (AAPSI) Form, within 60 days from receipt hereof.

We acknowledge the support and cooperation that you and your staff extended to the Audit Team, thus facilitating the completion of the report.

Very truly yours,

Copy furnished:

The President of the PhilippinesThe Vice-PresidentThe Chairman, Senate Finance CommitteeThe Speaker, House of RepresentativesThe Chairman, Appropriations CommitteeThe Secretary, Department of Budget and ManagementThe Secretary, Department of the Interior and Local GovernmentThe Secretary, Sangguniang Panlungsod, Mandaluyong CityUniversity of the PhilippinesNational Library