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EXECUTIVE SUMMARY

INTRODUCTION

Mandaue was elevated into its cityhood status on August 30, 1969 by virtue of

Presidential Proclamation 586 and the approval of RA 5519 or City Charter of Mandaue

by Congress on June 21, 1969. It gained its distinction as a highly urbanized city on

February 15, 1991. It has jurisdiction over 27 barangays. As of 31 December 2016, it

had a personnel complement of 2,768 as follows:

Nature of Appointment to Office Quantity

Elective Officials 13 Permanent Positions 562 Job Orders 2,193

2,768

In 2015, Mandaue was given a certification as one of the Islands of Good Governance,

one of only five (5) LGUs in the country to be given this distinction. It was also the only

LGU invited to be an exhibitor during the APEC Leaders Meeting in Manila. Mandaue,

representing the Philippines, was also chosen as the APEC Low Carbon Model Town

2015, besting Russia and Malaysia.

These accomplishments were achieved because of each employee’s commitment to

making Mandaue better.

FINANCIAL HIGHLIGHTS

Comparative analysis of the Statement of Financial Position, as graphically illustrated,

showed an increase in Assets and Equity, and a decrease in Liabilities. On the other hand,

the Statement Financial Performance exhibit an increase in income and a decrease in

expenses.

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The following graph illustrates the increase of Allotments and Appropriations and

decrease of Obligations during the year:

SCOPE OF AUDIT

The audit covered the operations of the City of Mandaue. The objectives of the audit

were to ascertain the fairness of presentation and reliability of the LGU’s financial

statements/position and results of operations, to determine whether the programs, projects

and activities for the year were attained in an efficient, economical and effective manner.

We also conducted compliance audit to check the validity and propriety of the

transactions and adherence to pertinent laws, rules and regulations.

AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

We rendered an adverse opinion on the fairness of presentation of the financial

statements of the City for the year 2016 due to the material deficiencies enumerated

below:

1. The balance of the Property, Plant and Equipment (PPE) accounts as of December 31,

2016 totalling P2,820,894,331.52 which represents 50.62% of total assets, is

unreliable due to incomplete conduct of physical inventory and non-maintenance of

Property, Plant and Equipment Ledger Cards (PPELC).

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2. The accuracy and existence of the Cash in Bank accounts aggregating to

P1,781,100,046.01 which constitutes 31.96% of total assets, could not be ascertained

due to the non-preparation of bank reconciliation statements for 13 bank accounts.

3. The Real Property Tax and Special Education Tax Receivables set up during the year

amounting to P197,245,732.84 and P158,256,109.86, which represents 3.54% and

2.84% of the total assets respectively, could not be relied on since these were not

based on the Certified List of Taxpayers prepared by the Treasurer.

4. The accuracy of the balances of the reciprocal accounts Due To Other and Due From

Other Funds is doubtful due to the unreconciled difference of P100,289,378.02 which

comprise 1.80% of total assets.

5. Dormant accounts totaling P28,008,782.05, .50% of total assests, were carried in

various asset accounts and subsidiary records were not maintained thus casting doubt

on the validity of the reported balances.

6. Cash advances for travels, special purpose, intelligence and confidential funds

amounting P27,295,746.83 which constitutes .49% of total assets, remained

unliquidated even after the purpose has been served/ completed at year-end thus

expenses were not recognized during the period it was spent.

SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

In addition to the above, the following are the significant observations and

recommendations in the audit and/or evaluation of the operations of the City for CY

2016. These and other audit observations are fully discussed in Part II of this Report.

1. Construction of fourteen (14) infrastructure projects costing P190,739,298.90

incurred delay in its completion resulting from several suspensions.

We recommend that Management look into the contractor’s failure to complete the

project within the contract period and re-compute the actual work-days, with

considerations of suspensions and extensions, in order to determine whether there was

breach of contract committed by the contractor and to demand for possible liquidated

damages.

2. Advance payment of 15% of the contract amount for mobilization cost for the Design

and Construction of the Mandaue City Public Market of the City totaling

P57,813,989.92 was made without complete documentation thereby casting doubt on

the legality, regularity and propriety of the transaction.

We recommend that Management direct officials concerned to submit the required

documents. We further recommend that Management enforce strict compliance with

Section 4 (6) of Presidential Decree No. 1445, COA Circular No. 2012-002 and the

Revised IRR of R.A. 9184 which require complete documentation of the transactions.

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3. Procurement of two (2) units Tank Fire Fighting Vehicle in the total amount of

P44,960,000.00 and 16 sets Archery uniforms and other items totaling P1,549,375.00

did not comply with the prescribed procurement process, thus defeating the purpose

of public bidding.

We recommend that the BAC submit the required documents and explanation on the

basis on the award of the contract to Boston Home, Inc. when it did not fully comply

with the procurement procedures required under RA 9184. We also recommend that

Management refund the disallowed amount on the 16 sets of archery uniforms and

other items or appeal this with the COA Regional Office No. VII.

Henceforth, we recommend that the BAC members comply strictly with the proper

procurement procedures pursuant to the provisions of R.A. 9184 and its IRR and to

perform their tasks as required for an efficient and effective procurement process and

remind them of their accountabilities.

4. Consulting Services with contracts totaling P4,334,000.00 entered into by the City

were made through negotiated procurement instead by public bidding.

We recommend that the BAC explain the basis of the award of contracts to various

consultants when it did not fully comply with the procurement procedures required

under RA 9184 and submit the required documents.

Henceforth, we recommend that the BAC members comply strictly with the proper

procurement procedures pursuant to the provisions of R.A. 9184 and it’s IRR and to

perform their tasks as required for an efficient and effective procurement process and

remind them of their accountabilities.

5. The procurement of land in the amount of P3,585,274.50, the payment of just

compensation (structures/improvements) for Road Right of Way (RROW) totaling

P947,171.50 and expenses totaling P778,900.00 for various activities of the

Executive Sports Committee for the 2008 Mandaue City Fiesta Celebration and

payment for postpaid mobile plans totaling P73,362.37, were not supported with

complete documentary requirements.

We recommend that Management comply with the requirements indicated in the

Notice of Suspension issued and require the accountable officer of expenses totaling

P778,900.00 for various activities of the executive sports committee for the 2008

Mandaue City Fiesta Celebration and payment for postpaid plans totaling P73,362.37

to settle the amount disallowed.

Henceforth, we recommend that Management ensure that all payments are supported

with complete documentary requirements.

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6. Cash advances for travels, special purpose, intelligence and confidential funds

amounting to P27,295,746.83 remained unliquidated even after the purpose has been

served/ completed at year-end.

We recommend that the City Mayor direct all accountable officers to fully liquidate

their cash advances immediately for the long-outstanding accounts and henceforth,

enforce strict liquidation at year-end pursuant to COA Circular 97-002 dated February

10, 1997. Otherwise, we recommend that the Accountant cause the withholding of the

AO's salary in accordance with paragraph 5.9 of the mentioned circular.

7. The City did not adopt the perpetual inventory method in recording the procurement

of drugs and medicines and medical, dental and laboratory supplies totaling

P1,181,926.80 thus, resulting in the misstatements in the presentation of inventory

and expense accounts in the financial statements.

We recommend that Management direct the officials concerned to use the perpetual

inventory method in recording drugs and medicines and medical, dental and laboratory

supplies as provided in the Manual on the NGAS, Volume I for LGUs, and make the

adjustments in the books, if necessary.

SETTLEMENT OF ACCOUNTS

Suspensions and disallowances amounting P83,462,039.64 and P97,154,080.81

respectively, remained unsettled as of December 31, 2016.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ RECOMMENDATIONS

Of the one hundred six (106) audit recommendations embodied in the CY 2015 and prior

years’ Annual Audit Reports, three (3) were fully implemented, twenty-eight (28) were

partially implemented, and seventy-five (75) were not implemented, as discussed in Part

III of this Report.