EXECUTIVE SUMMARY

A. Introduction

The City of Caloocan was created on February 6, 1962 by virtue of Republic Act
No. 3278, dubbed as the “Gateway to the North” because of its location and
proximity to road networks joining towards North.

Guided with the core principle of “Tao ang Una”, the City ensured the establishment
of projects, programs, institutions and linkages that are not just responsive but also
innovative and proactive to the needs of the citizenry. The delivery of basic public
service remains the core of the City’s mission, and the goal to incorporate practices
that are meant to set example and be among the best practices in governance.

For CY 2021, the City had 5,269 plantilla distributed among the 36
departments/offices. Of the total, 16 are elective, 1,806 are permanent, 303 are
casual employees, 30 are contractual, 279 consultant and 2,835 are job order
employees.

B. Financial Highlights

For CY 2021, the City’s assets, liabilities and equity for the year were
P22.935 billion, P10.014 billion and P12.921 billion, respectively. The said
accounts have increased by P1.282 billion, P41.515 million and P1.240 billion,
respectively, as shown in the graph below.

Financial Position
25,000,000,000.00

20,000,000,000.00

15,000,000,000.00

10,000,000,000.00

5,000,000,000.00

0.00
2021 2020 Increase/Decrease
Assets 22,935,453,003.60 21,653,500,856.65 1,281,952,146.95
Liabilities 10,014,478,644.59 9,972,963,562.58 41,515,082.01
Equity 12,920,974,359.01 11,680,537,294.07 1,240,437,064.94

Assets Liabilities Equity

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While the City’s revenue, expenses and net income for the same year were
P8.698 billion, P7.488 billion and P1.210 billion, respectively. The said accounts
have also decreased by P143.736 million, decreased by P1.313 billion and
increased by P1.170 billion, respectively in CY 2020, presented as follows:

Financial Performance

10,000,000,000.00
8,000,000,000.00
6,000,000,000.00
4,000,000,000.00
2,000,000,000.00
-
(2,000,000,000.00)
CY 2021 CY 2020 Increase/
(Decrease)
Income 8,697,681,705.11 8,841,418,035.46 (143,736,330)
Expenses 7,487,786,941.63 8,801,287,095.94 (1,313,500,154)
Net Income 1,209,894,763.48 40,130,939.52 1,169,763,824

Income Expenses Net Income

On the other hand, the City’s appropriation and obligation for CYs 2021 and 2020
have total balances of P9.158 billion and P5.854 billion and P9.773 billion and
P7.370 billion , respectively, and have decreased by P614.376 million and
P1.516 billion, respectively, presented as follows:

Appropriations and Obligations

12,000,000,000.00
10,000,000,000.00
8,000,000,000.00
6,000,000,000.00
4,000,000,000.00
2,000,000,000.00
-
(2,000,000,000.00)
(4,000,000,000.00)
2021 2020 Increase/(Decrease)
Appropriations 9,158,487,805.04 9,772,864,120.05 (614,376,315.01)
Obligations 5,854,487,838.01 7,370,458,157.18 (1,515,970,319.17)

Appropriations Obligations

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C. Operational Highlights

Some of the reported significant accomplishments by the City for CY 2021 are as
follows:

a. Best practices on Coronavirus Disease (COVID-19) Response:

 Provided logistical support/relief assistance to the constituents during

lockdown periods – P179,999,313.36

 Established In-city Isolation/Quarantine Facilities at:

o Kanlungan /Convan North Caloocan
o MBAS High School Annex, South Caloocan
o San Gabriel Elementary School
o La Consolacion College
o Tala Elementary School
o Bagbagion Elementary School, Dagat Dagatan -Barangay 28 Open Space
and Bagumbong in partnership with the National Government
Organization (NGO)
o Notre Dame of Greater Manila School
o Container Vans at Caloocan City Medical Center (CCMC)/CCM North
Center (CCMNC) by the Department of Public Works and Highways
o CCMC/CCMNC Hospital Based
o LGU collaboration with Sogo Hotel and Aliw-Inn
o Collaboration with three hotels for off-site quarantine sites
o Provided meals with counterparts from NGOs/ Civil Society
Organizations (CSOs) to quarantine facilities, for the repackers at North
and South Caloocan, and for the Ayuda para sa TODA

 Vaccination program:

o The City Government put-up 45 sites located in strategic locations, to

meet the requirement of providing vaccination to 80% (national target set
by DOH) of the 1.7 million population of the City.
o Provided mobile vaccination for the bed ridden senior citizens and
persons with disabilities;
o Provided off-site vaccination to frontline service providers such as fast-
food chain crew (i.e. Jollibee, Chowking, McDonalds), food delivery
service crew (Grab, Food Panda, etc.)
o Conducted information dissemination using the Department of Health
van;
o Provided mobile vaccination services thru “ResBakuna Jeep” to areas far
from designated vaccination sites;

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  Provided burial assistance to the indigent deceased Covid 19 patients -
financial assistance amounting to P5,000.00 for senior citizens and
P2,000.00 for non-senior citizens

 Acquired Mobile Crematorium stationed at Caloocan City Public Cemetery

b. Improvement of Health Services was done through the Construction of 2-story

Health Center with Lying-in amounting to P15,748,000.00. For various health
services programs, drugs and medicines, and medical, dental, laboratory
supplies, were procured to ensure the availability of the same in various health
centers, Caloocan City Medical Center and Caloocan North Medical Center, -
P156,920,061.00.

c. To make the city safer to its constituents and more accessible to investors, the
City Government implemented the following infrastructure projects in various
barangays:

 Installation of 322 Streetlights: 176 and 146 North and South Caloocan,
respectively, in the total amount of P42,643,057.10

 Improvement of roads/path walk and drainage system amounting to

P68,680,761.00

 Improvement of Roads at North Caloocan (Asphalt Overlay) –

P35,000,000.00 and Alleys – P6,155,000.00

d. For the City’s Social Welfare Services, financial assistance was provided to its
indigents constituent (medical and burial) during people's day - P63,000,000.00

D. Scope and Objectives of Audit

The audit covered the accounts and operations of the City of Caloocan for the year
ended December 31, 2021. The objectives of the audit are to: (a) verify the level of
reliance that may be placed on management’s assertions on the financial statements;
(b) determine compliance with existing laws, rules and regulations; (c) recommend
agency improvement opportunities; and (d) ascertain the extent of implementation
of prior years’ audit recommendations.

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E. Auditor’s Opinion on the Financial Statements

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

statements due to the deficiencies noted in the audit that materially affected the
balances/totals of certain accounts, which are discussed in detail in Part II of the
report and summarized as follows:

1. Inaccurate balances of the Cash in Bank (CIB) - Local Currency (LC), Current
Account (CA); LC, Savings Account (SA); and LC, Time Deposits (TD)
affected the reliability and existence of the CIB account balance as of
December 31, 2021, in the aggregate of P4.997 billion due to:
(a) Unrecorded/unadjusted book reconciling items of total additions of
P0.201 million and total deductions of P18.784 million, or a total of
P18.985 million; (b) Negative balance of two bank accounts amounting to
P0.991 million; (c) Dormant balances of the CIB - LCCA and LCSA totaling
P260.075 million; (d) Non-existing account with the Development Bank of the
Philippines (DBP) that remained recorded in the books as LCTD amounting to
P30 million; (e) Closed accounts included in the balance of CIB – LCCA
amounting to P11.757 million; and (f) Non-preparation of the Bank
Reconciliation Statements (BRS) for 21 bank accounts. Moreover, the City
continues to maintain deposits with the Philippine National Bank (PNB), which
ceased to be an Authorized Government Depository Bank (AGDB) amounting
to P86.224 million, contrary to Department of Finance (DOF) Circular
No. 01-2017 dated May 11, 2017.

We reiterated our recommendation to:

a. Management to require the City Accounting Department (CAD) to:

 Coordinate with the City Treasurer’s Office (CTO) to secure the

necessary documents or proof of transactions from the banks concerned
to support the recording of the reconciling items; and

 Conduct immediate and thorough verification of all outstanding

reconciling items not yet taken up in the books to establish the correct
balances of the CIB accounts and thereafter furnish the City Auditor’s
Office with copies of Journal Entry Vouchers (JEVs) taking up the
adjustments.

b. The CAD and the CTO to exert full efforts in identifying and analyzing the
possible cause of negative balances and effect the necessary adjusting
journal entries in the books of accounts.

c. Management require the CTO and CAD to:

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  Exert efforts in the verification/validation of these dormant accounts to
see the possibility of closing these accounts and/or reclassifying them to
other bank accounts under the same fund. Consolidate the balances with
the bank accounts for the same purpose/source of funding.

 Reconcile the City’s records with the records of the Source Agencies
regarding the dormant accounts under trust fund transferred from NGAs
to facilitate the return of the balances to the SAs concerned.

 Effect the necessary adjustment/s in the book of accounts, as warranted

by transaction documents.

d. CAD further review its records and verify/reconcile with the bank regarding
Account No. xxxx-xxxx-24 and make the necessary adjustment/s in the
books.

e. Management require the CTD and the CAD to exert full efforts in
identifying and analyzing the cash balances and effect the necessary
adjusting journal entry in the books of accounts, as warranted.

f. Management require the:

 CAD to prepare the BRS for all bank accounts in compliance with
Sections 3.2 and 3.4 of COA Circular No. 96-011;

 CTO to request from the banks concerned, copies of bank statements of

the City’s bank accounts; and

 CAD and CTO to establish an effective coordination system so that the

City’s cash accounts are adequately backed-up with confirmed bank
balances and supported with appropriate documents.

2. The City continues to record reimbursements from PhilHealth for hospital

charges under “cash basis” accounting, instead of recognizing the revenue when
earned (“accrual basis” accounting), contrary to Paragraph 7 of the International
Public Sector Accounting Standards (IPSAS) 1. This incorrect accounting
practice, which was already pointed out in prior audit but still persists, resulted
in the understatement of the accounts: Due from GOCCs by P34.909 million,
Due to Officers and Employees by P9.689 million, Hospital Fees by
P47.691 million and Government Equity by P31.103 million; and
overstatement of the account Due to GOCCs by P53.573 million, as of
December 31, 2021. Collectively, using the cash basis accounting distorts the
fair presentation of the City’s financial statements as of year-end of CY 2021.
This practice also deprived the City of a valuable revenue stream available for
budgeting by not recognizing claims for hospital charges, which could have
been used to provide better health care services to its constituency.

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 We recommended that Management require:

a. The CAD to:

 Strictly adopt the accrual basis of accounting pursuant to IPSAS 1, which

is the financial reporting framework adopted in government;

 Review and analyze the claims and reimbursements to and by PhilHealth

on hospital fees and charges for CY 2021 and prior years, and make the
necessary adjusting journal entries, as warranted; and

 Henceforth, strictly comply with Section 21 of RA No. 11223.

b. The CCMC and the CCNMC to furnish the CAD copies of the hospital
claims to PhilHealth for proper recording pursuant to IPSAS 1 and Section
21 of RA No. 11223.

3. Cash advances (CAs) granted by the present (July 1, 2013 to CY 2021) and past
(June 30, 2013 and prior years) administrations amounting to P0.106 million
and P74.275 million, respectively, or a total of P74.381 million remained
outstanding as of December 31, 2021, contrary to COA Circular No. 97-002
dated February 10, 1997. Thus, the non-liquidation of the CAs prevented
Management from ascertaining whether the CAs were appropriately utilized for
the purpose for which they were granted and overstated the balances of the
Advances accounts by P74.381 million and the Government Equity accounts
for those pertaining to prior period transactions in the amount of
P74.3 million and understated the related Expense accounts by
P0.081 million.

We recommended that Management require:

a. The CAD to -

 Strictly enforce the liquidation of CAs granted to AOs within the

reglementary period and immediate refund of any unspent amount; and

 Submit to the City Legal Officer the cases of the deceased AOs and those
who have already resigned and whose location cannot be traced for
appropriate legal remedies.

b. The City Legal Officer to recommend to the City Mayor the appropriate
action to be done to recover the unliquidated cash advances; and

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 c. We also recommended that Management initiate action to request the write-
off of the dormant CAs following the requirements and procedures provided
under COA Circular No. 2016-005.

4. The existence, validity, accuracy and reliability of the Property, Plant and
Equipment (PPE) account balance with a carrying value of P11.38 billion as of
December 31, 2021, could not be ascertained due to the following:

a. Unreconciled discrepancy of P2.528 billion between the accounting records

and the Report on the Physical Count of Property, Plant and Equipment
(RPCPPE);

b. Unidentified items in 15 PPE accounts valued at P328.477 million and four

PPE accounts with negative balances totaling P62.678 million were
recorded in lump-sum amounts;

c. Inaccurate computation of depreciation in the aggregate amount of

P583.865 million;

d. Non-derecognition of: (i) undetermined value of replaced/removed

materials incident to the repairs, renovation and rehabilitation of 13
buildings and structures amounting to P246.52 million; (ii) assets deemed
unserviceable worth P110.427 million remained in the books at year-end;
and (iii) assets no longer needed totaling P6.337 million and already
transferred without cost to other local and national government agencies in
CY 2018 were still included as PPE; and

e. Absence of physical inventory taking of PPE under SEF.

Thus, contrary to Paragraph C.3, Chapter 5 of the Manual on Property
Custodianship, Paragraphs 43, 71, 82, 83 of IPSAS 17 on PPE and
Paragraphs 5.1, 5.8 and 5.12 of COA Circular No. 2020-006 dated
January 31, 2020.

We recommended the following:

a. The GSD and the CAD, in coordination with other departments/offices

concerned, establish an effective process flow to address the noted gaps and
reconcile their records for the necessary adjustments

b. Management require the CAD to locate documents relative to the

unidentified PPE items to facilitate reconstruction of the remaining balances
of the said accounts.

c. Management, in the case of the unsettled PPE discrepancies after all efforts
done, to evaluate if their case would qualify in the application for the One-

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 Time Cleansing of PPE Account Balances for Disposition of Non-
Existing/Missing PPEs allowed under COA Circular No. 2020-006 dated
January 31, 2020, subject to full compliance of the requirements under Item
Nos. 7 and 8 thereof.

d. Management require the CAD to:

 Set-up an effective review level within the CAD so as to detect errors,

inaccuracies and oversight in the accounting process, like the
completeness of agency assets that are subjected to depreciation, the
accuracy of information used, and the timing and computation of
depreciation;

 Comply with Paragraph 42 of IPSAS 3 with regard to change in

accounting estimates;

 Observe PAG 3 of IPSAS 17 in the initial recognition of depreciation of

PPE; and

 Effect the necessary adjustments.

e. Management create a dedicated appraisal committee from the

offices/departments concerned to:

 Compute and determine the proper value of the removed/replaced costs

of parts/materials that need to be derecognized in the books following
the provisions of IPSAS and furnish COA a copy of the committee’s
appraisal report;

 Consider the use of the cost of the replacement as allowed in Paragraph

85 of IPSAS 17, should it be impracticable to determine the carrying
amount of the replaced parts; and

 Include as part of the standard operating procedure, the appraisal of

costs of replaced/removed materials whenever there are repairs,
renovations or rehabilitations made in any of the City’s buildings.

f. Management require the CAD to derecognize in the books, the costs of

replaced/removed materials incident to the repairs, renovations and
rehabilitations made based on the report of the appraisal committee.

g. Management require the AMD–GSD to initiate immediate disposal to

ensure fair valuation of the assets on the books.

h. Management require:

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  The Inventory Committee to immediately prepare the IIRUP for
approval of the City Mayor; and

 The AMD–GSD to immediately submit to the CAD the approved

IIRUP supported with pertinent documents for derecognition in the
books.

i. Management require the Inventory Committee to strictly conduct physical

inventory of PPE pursuant to COA Circular No. 2020-006 to come up with
reliable PPE balances that are verifiable as to existence, condition and
accountability.

5. The correctness of the balance of the Construction in Progress (CIP) account in

the amount of P308.196 million could not be ascertained due to absence of
record/relevant documents to support the validity and reliability of unreconciled
prior period balances carried-forward up to December 31, 2021.

We recommended that the CAD coordinate further with the CED to identify the
projects composing the unaccounted CIP accounts reported in 2013 and in prior
years and locate the records/relevant documents pertaining thereto in their
custody so that necessary adjustment could be made to the accounts affected.

6. The year-end unexpended amounts of DRRMF from CYs 2017 to 2021 were
incorrectly computed, contrary to Section 21 of RA No. 10121, which resulted
in the net understatement of the recorded Trust Liabilities – DRRMF account
by P94.671 million, and misstated the related Asset, Liability, Expense and
Government Equity accounts.

We recommended and Management agreed to require the CAD to:

 Use the approved appropriations as the correct basis in calculating the

unexpended balance of DRRMF for transfer to the special trust fund,
pursuant to Section 21 of RA No. 10121; and

 Effect the necessary adjustments in the GF and TF books and the

memorandum entries for the Subsidiary Ledger accounts.

F. Summary of Other Significant Observations and Recommendations

1. Taxes withheld in CY 2021 were not remitted in full as of December 31, 2021,
leaving an unremitted amount of P2.401 million, in breach of the Revenue
Memorandum Circular No. 23-2007, depriving the government of the
immediate use of the collections for authorized purposes and may cause the
imposition of unnecessary penalties against the City.

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 We recommended that the Management require the CAD to remit the
P2.401 million and comply strictly to Revenue Memorandum Circular
No. 23-2007, to avoid penalties that may be imposed by the BIR. Otherwise,
the responsible official shall be held liable for the payment of penalties resulting
from the delay as provided under the National Internal Revenue Code of 1997.

2. Out of 188 barangays, 164 or 87% are reported to have established their
Materials Recovery Facility (MRF)/Materials Recovery System (MRS) which
is not in accordance with Section 32 of RA No. 9003. As a result, the drive for
solid waste avoidance and volume reduction through source reduction and
waste minimization measures was not fully achieved at the barangay level.

We recommended that the City, through the SWM Board, continue with the
proper implementation of the project by assisting each barangay or cluster of
barangays, specifically those with no MRF/MRSs yet, in providing or
establishing an MRF that is designed in accordance with the requirements of
RA No. 9003 to attain the maximized gain aimed to be achieved by the law.

The aforementioned observations together with the corresponding

recommendations were discussed with Management officials concerned during the
Exit Conference on May 31, 2022. Management views and comments were
incorporated in the report, where appropriate.

G. Summary of Audit Suspensions, Disallowances and Charges

As of December 31, 2021, unsettled suspensions and disallowances amounted to

P26.296 million and P72.311 million, respectively, with details shown below:

This Period January 1

Beginning Balance Ending Balance
Particulars to December 31, 2021
January 1, 2021 December 31, 2021
Issued Settled

Notice of Suspensions 26,296,269.76 - - 26,296,269.76

Notice of Disallowances 72,310,604.84 - - 72,310,604.84

Notice of Charge - - - -

Total P98,606,874.60 - - 98,606,874.60

H. Status of Implementation of Prior Year’s Audit Recommendations

Of the 91 audit recommendations contained in the CYs 2020, 2019, 2018, 2017 and
2016 Annual Audit Report (AAR), 42 or 46.15% were implemented and 49 or
53.85% were partially implemented during the year.

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