LipaCity2017 Audit Report

amounting to P57,520,394.
43; and (e) adjustments/reclassifications made on PPE of

P341,965,966.42 for CY 2017 which were not supported by Journal Entry Vouchers
(JEVs) and other documentary requirements.
We recommended that the City Mayor require:
a) the Accounting Office to carefully evaluate and properly classify PPE

items into its proper account classification in accordance with the revised
Chart of Accounts for Local Government Units (LGUs) as prescribed
under COA Circular No. 2015-009 dated December 1, 2015;
b) the City Accountant and the General Services Officer (GSO) to exert
more effort to reconcile their records on PPE and conduct an in depth
verification and analysis of PPE accounts; identify/investigate causes of
the noted discrepancies in the balances of accounts to bring the two
records in agreement; and effect the necessary adjustments in both
records, if warranted;
c) the GSO to prepare and submit to the Disposal/Appraisal Committee a

duly accomplished Inventory and Inspection Report of Unserviceable
Property (IIRUP) and the Waste Material Report together with the other
documentary requirements to facilitate the determination of the appraised
value and mode of disposal of the unserviceable properties; and
d) the Accounting Office to submit to COA the Journal Entry Vouchers

(JEVs) and other supporting documents used as basis of
adjustments/reclassifications made on the PPE amounting to
P341,965,966.42.
2. The Road Networks ledger and property cards for all roads and its components were
not prepared and maintained by the Accounting Office and the General Service Office
(GSO), respectively, due to the non-submission of the complete description and cost
segregation of road components for road projects by the Engineering Office, thus
casting doubts on the validity, accuracy and existence of the recorded Road Networks
of P102,252,004.13, net of depreciation as of year-end. The account Road Networks
was also not properly disclosed in the Notes to Financial Statements as required under
Annex B of COA Circular No. 2015-008 dated November 25, 2015.
We recommended that the City Mayor require the:
a) General Services Officer (GSO) to prepare and maintain Road Networks property
cards;
b) City Engineer to provide the City Accountant and the GSO with the complete
description and cost segregation of road components for road projects; and
c) City Accountant to prepare and maintain property ledger cards for Local Road
Networks and disclose the information for the said property in the Notes to
Financial Statements in accordance with the prescribed format as provided under
COA Circular No. 2015-008 dated November 25, 2015.
3. The reliability of the year-end balances of the Inventory accounts of the City in the
amount of P50,764,527.77 could not be ascertained due to lack of documents and
records to support the cost presented in the financial statements, contrary to Section
111 of Presidential Decree (PD) No. 1445 and Sections 114, 115, 119, 120, 121 and
124 of the Manual on New Government Accounting System (MNGAS) for Local
Government Units (LGUs), Volume I, thus affecting the fair presentation and
reliability of the City’s financial statements.
a) Inventory Committee to start the physical count of all Inventory items for General
Fund (GF) and Special Education Fund (SEF) at an earlier date or before the end
of each prescribed period to give the members an ample time to prepare the RPCI
in proper form by type and submit the same to the Auditor’s Office with the
certification and approval of the Agency Head not later than July 31 and January
31 of each year;
b) City Veterinary Office and General Services Office to coordinate with the
Accounting Office for the proper reclassification of the Veterinary Supplies and
Medicines account;
c) Accounting Unit and the GSO to maintain supplies ledger cards and stock cards,
respectively, for each inventory item/stock;
d) Accounting Unit to take up all purchases of items to Inventory account and record
the issuance based on Summary of Supplies and Materials Issued (SSMI) only;
e) Accountant and the GSO to conduct periodic reconciliation of their records and
prepare adjustment of the affected accounts, if necessary; and
f) Community Social Welfare and Development Office/City Accounting Office to

submit an explanation on why there was an inventory for Welfare Goods for
Distribution when there was no known calamity that struck the City or
Sangguniang Panlungsod Resolution declaring the City in the State of Calamity
for CY 2017.
4. Refunds of cash advances of P20,367,643.06 were more than the need for payments
or 56 to 100 percent higher than their liquidations/payments/disbursements of
P9,911,496.94 due to excessive cash advances granted to the Disbursing Officer (DO)
resulting in excessive amount of cash in the custody of the DO averaging to
P4,493,367.40 per month, contrary to COA Circular No. 97-002 dated February 10,
1997, thus may expose government funds to possible loss or misuse if not properly
monitored.
We recommended that the City Mayor instruct the City Accountant and the City
Treasurer to ensure that all cash advances are supported with duly approved payrolls
and disbursement vouchers with their net payments as basis for drawing cash
advances in accordance with Section 49 of the MNGAS for LGUs, Volume I and
COA Circular No. 97-002 dated February 10, 1997 to avoid possible loss or misuse of
government funds.
5. Procurement of inventories amounting to P10,518,109.32 delivered in CY 2016 were

not recorded and accounted for as Accounts Payable, in violation of Section 112 of
Presidential Decree (PD) No. 1445 and Section 4(a) of the Manual on New
Government Accounting System (MNGAS). The related transaction was recognized
in CY 2017 debiting the expense accounts as payment was made, thus overstating the
said accounts and understating the City’s Surplus for the year.
We recommended that the City Mayor require the City Accountant to see to it that all
valid/lawful obligations are properly taken up in the accounts of the year they were
incurred, pursuant to Section 112 of PD No. 1445 and Section 4(a) of the MNGAS
for LGUs, Volume I.
6. There was no control mechanism in place on the selection/screening and monitoring

process on the grant of scholarship/financial assistance in the pursuit of higher
education for CY 2017 totaling P97,566,242.80, contrary to Section 458 (a) (5) (xi) of
Republic Act (RA) No. 7160. Likewise, these were paid even without the necessary
supporting documents as required in Section 4(6) of the Presidential Decree (PD) No.
1445, thus created doubts on the validity and regularity of the disbursements for these
transactions.
We recommended that the City Mayor direct:
a) the concerned officials to consolidate in one office the handling and selection of
City scholars to avoid the availment of more than one scholarship and to
conceptualize one Scholarship Program with rigid rules and regulations that will
cater all the poor and deserving students of the City to ensure the proper
utilization of the scarce resources of the government;
b) the concerned officials to evaluate the scholarship programs and determine the
students who have more than one scholarship and to require the students to refund
the amount received for other scholarship assistance;
c) the Accounting Office to use the Scholarship account instead of Donation account
in recording transactions pertaining to the grant of educational assistance;
d) the respective Office to transfer the preparation of payroll for Sagip Eskwela and
MAS Educational Financial Assistance Program to the Accounting Office to
adhere to sound internal control;
e) the concerned Office to revisit the Implementing Guidelines and Work Program
for Sagip Eskwela and make necessary amendment on the amount being granted;
f) the City Community Affairs Office to submit to the Audit Team the documents to
support the grant of MAS College Scholarship for Indigents;
g) the concerned office to refrain from paying financial assistance to post graduate
students and other students who can afford to support their studies, instead focus
on those less privileged who cannot even attend to high school or college level;
h) the concerned Office to revisit the guidelines set for the grant of Financial
Assistance to College Students which stated that it can be granted to students even
with failing grades or dropped subjects, provided the beneficiaries are in school at
the current semester;
i) the members of the Sangguniang Panlungsod who represented the City in the
MOA with grantees of Scholarship Program to desist from entering into such
agreements in behalf of the City for lack of power and authority; and
j) the stoppage of granting scholarship/financial assistance to students enrolled in

the Prestigious/Private Universities/Colleges and give priority to the less
privileged students.
7. Procurement of goods, services and infrastructure projects with a total contract cost
of P210,732,076.83 were awarded to 16 contractors/suppliers even with doubtful and
without complete eligibility documents, rendering the winning bidders as ineligible,
due to the failure of the Bids and Awards Committee (BAC) to properly evaluate the
eligibility requirements submitted by the bidders, thereby rendering the legality of the
contracts with the City doubtful and questionable, aside from being contrary to
Sections 23.1, 23.6, 25.3, 34.1, 34.2 and 34.3 of the 2016 Revised Implementing
Rules and Regulations (RIRR) of Republic Act (RA) No. 9184.
We recommended that the City Mayor direct the BAC and TWG to:
a) explain in writing why they shall not be held liable for their failure to conduct
thorough evaluation of the submitted Tax Clearance Certificate and annual
income tax returns of the bidders during post-qualification proceedings;
City Government of Lipa, Batangas
Agency
AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION

Audit Observations and Recommendations
For the Calendar Year 2017
As of _________________________
Agency Action Plan Reason for

Partial/Delay/ Action
Audit Audit Status of
Ref. Target Non- Taken/Action to
Observations Recommendations Implementation
Action Person/Dept. Implementation Implementation, if be Taken
Plan Responsible Date applicable
From To
__________________________________ _________________
Name and Position of Agency Officer Date
Note: Status of Implementation may either be (a) Fully Implemented (FI), (b) Ongoing (O), (c) Not Implemented (NI), (d) Partially Implemented (PI), or
(e) Delayed (D)
EXECUTIVE SUMMARY
Introduction
On June 20, 1947, Lipa became a chartered City by virtue of Republic Act (RA)
No. 162 signed by then President A. Roxas. Lipa City is located in the southwestern part
of Luzon at the heart of Batangas Province. It consists of 72 barangays, 13 of which are
urban and 59 are rural.
The City of Lipa has the following mission and vision:
Mission
“To provide Lipeño with better quality of life through the implementation
of prompt, efficient and responsive programs and projects concerning
infrastructure, information and communication technology, health,
education, environment, disaster risk reduction, livelihood, peace and
order”
Vision
“A progressive and caring, livable and God-loving city that provides

meaningful administration and services.”
Its Organizational structure is as follows:

a) Key Officials
City Mayor : Hon. Meynardo A. Sabili

Vice Mayor : Hon. Eric B. Africa
Members of the Sanggunian :

1. Hon. Camille Angeline M. Lopez
2. Hon. Mark Aries P. Luancing
3. Hon. Gwendolyn Ku Wong
4. Hon. Joel D. Pua
5. Hon. Ralph Peter S. Umali
6. Hon. Oscar M. Gozos II
7. Hon. Merlo P. Silva
8. Hon. Leonilo A. Catipon
9. Hon. Avior R. Rocafort
10. Hon. Aries Emmanuel D. Mendoza
11. Hon. Nonato R. Monfero
12. Hon. Emmanuel A. De Castro
13. Hon. Paulino V. Querubin
City Accountant : Ms. Ma. Belen M. Villanueva

City Treasurer : Mr. Doroteo P. Rosales
i
b) No. of Personnel Complement
Permanent 998
Casual/Temporary 94
Job Order 693
Elective Officials 15
Coterminus 73
Total 1,873
Financial Highlights
For Calendar Year (CY) 2017, the City Government of Lipa generated a total
income of P2,024,019,413.04 from local taxes, permits and licenses, service and business
income and internal revenue allotment, while total funds utilized for the year amounted to
P1,631,952,838.72.
The total assets, liabilities, equity, revenue and expenses for CY 2017 compared
with that of the preceding year, are as follows:
CY 2017 CY 2016 Increase/Decrease

Assets P3,396,783,100.37 P2,859,626,962.45 P537,156,137.92
Liabilities 1,017,802,787.72 878,621,891.27 139,180,896.45
Equity 2,378,980,312.65 1,981,005,071.18 397,975,241.47
Revenue 2,024,019,413.04 1,458,414,286.04 565,605,127.00
Expenses 1,631,952,838.72 1,175,859,258.85 456,093,579.87
Scope of Audit
Financial, compliance and value for money audits were conducted on the accounts
and operations of the City for CY 2017. The audit was conducted to ascertain the fairness
of the presentation of the financial statements and compliance of the City with laws, rules
and regulations as well as the economical, efficient and effective utilization of resources.
Audit Opinion on the Financial Statements
The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the City of Lipa as of December 31, 2017 due to the following:
1. The accuracy, reliability and existence of the recorded balances of Property, Plant and
Equipment (PPE) amounting to P3,090,039,104.97 (gross of depreciation) as of year-
end were doubtful due to: (a) misclassification of different PPE accounts amounting
to P4,908,307.06; (b) unreconciled discrepancies of P636,228,959.47 between the
Accounting and General Services Office (GSO); (c) inclusion of the unserviceable
properties valued at P974,285.25 in the City’s books of accounts; (d) unaccounted
balances/no supporting schedules of unserviceable properties stated in the summary
report of Report of Physical Count of Property, Plant and Equipment (RPCPPE)
ii
amounting to P57,520,394.43; and (e) adjustments/reclassifications made on PPE of
monitored.

not recorded and accounted for as Accounts Payable in violation of Section 112 of
For the deficiencies cited above, we recommended that the City Mayor require
the:
a) Accounting Office to carefully evaluate and properly classify PPE items into its
proper account classification in accordance with the revised Chart of Accounts for
Local Government Units (LGUs) as prescribed under COA Circular No. 2015-009
dated December 1, 2015;
iii
b) City Accountant and the General Services Officer (GSO) to exert more effort to
reconcile their records on PPE and conduct an in depth verification and analysis of
PPE accounts; identify/investigate causes of the noted discrepancies in the balances
of accounts to bring the two records in agreement; and effect the necessary
adjustments in both records, if warranted;
c) GSO to prepare and submit to the Disposal/Appraisal Committee a duly

accomplished Inventory and Inspection Report of Unserviceable Property (IIRUP)
and the Waste Material Report together with the other documentary requirements to
facilitate the determination of the appraised value and mode of disposal of the
unserviceable properties;
d) Accounting Office to submit to COA the Journal Entry Vouchers (JEVs) and other
supporting documents used as basis of adjustments/reclassifications made on the PPE
amounting to P341,965,966.42;
e) General Services Officer (GSO) to prepare and maintain Road Networks property
cards;
f) City Engineer to provide the City Accountant and the GSO with the complete
description and cost segregation of road components for road projects;
g) City Accountant to prepare and maintain property ledger cards for Local Road
Networks and disclose the information for the said property in the Notes to Financial
Statements in accordance with the prescribed format as provided under COA Circular
No. 2015-008 dated November 25, 2015;
h) Inventory Committee to start the physical count of all Inventory items for General
Fund (GF) and Special Education Fund (SEF) at an earlier date or before the end of
each prescribed period to give the members an ample time to prepare the RPCI in
proper form by type and submit the same to the Auditor’s Office with the certification
and approval of the Agency Head not later than July 31 and January 31 of each year;
i) City Veterinary Office and General Services Office to coordinate with the
Accounting Office for the proper reclassification of the Veterinary Supplies and
Medicines account;
j) Accounting Unit and the GSO to maintain supplies ledger cards and stock cards,
respectively, for each inventory item/stock;
k) Accounting Unit to take up all purchases of items to Inventory account and record the
issuance based on Summary of Supplies and Materials Issued (SSMI) only;
l) Accountant and the GSO to conduct periodic reconciliation of their records and
prepare adjustment of the affected accounts, if necessary;
iv
m) Community Social Welfare and Development Office/City Accounting Office to
submit an explanation on why there was an inventory for Welfare Goods for
Distribution when there was no known calamity that struck the City or Sangguniang
Panlungsod Resolution declaring the City in the State of Calamity for CY 2017;
n) City Accountant and the City Treasurer to ensure that all cash advances are supported
with duly approved payrolls and disbursement vouchers with their net payments as
basis for drawing cash advances in accordance with Section 49 of the MNGAS for
LGUs, Volume I and COA Circular No. 97-002 dated February 10, 1997 to avoid
possible loss or misuse of government funds; and
o) City Accountant to see to it that all valid/lawful obligations are properly taken up in
the accounts of the year they were incurred, pursuant to Section 112 of PD No. 1445
and Section 4(a) of the MNGAS for LGUs, Volume I.
The other significant observations and recommendations in the audit of the City
Government of Lipa for CY 2017 are summarized as follows:
supporting documents as required in Section 4(6) of the Presidential Decree (PD) No.
1445, thus created doubts on the validity and regularity of the disbursements for these
transactions.
a) the concerned officials to consolidate in one office the handling and selection of
City scholars to avoid the availment of more than one scholarship and to
conceptualize one Scholarship Program with rigid rules and regulations that will
cater all the poor and deserving students of the City to ensure the proper
utilization of the scarce resources of the government;
b) the concerned officials to evaluate the scholarship programs and determine the
students who have more than one scholarship and to require the students to refund
the amount received for other scholarship assistance;
c) the Accounting Office to use the Scholarship account instead of Donation account
in recording transactions pertaining to the grant of educational assistance;
d) the respective Office to transfer the preparation of payroll for Sagip Eskwela and
MAS Educational Financial Assistance Program to the Accounting Office to
adhere to sound internal control;
v
e) the concerned Office to revisit the Implementing Guidelines and Work Program
for Sagip Eskwela and make necessary amendment on the amount being granted;
f) the City Community Affairs Office to submit to the Audit Team the documents to
support the grant of MAS College Scholarship for Indigents;
g) the concerned office to refrain from paying financial assistance to post graduate
students and other students who can afford to support their studies, instead focus
on those less privileged who cannot even attend to high school or college level;
Assistance to College Students which stated that it can be granted to students even
with failing grades or dropped subjects, provided the beneficiaries are in school at
the current semester;
i) the members of the Sangguniang Panlungsod who represented the City in the
MOA with grantees of Scholarship Program to desist from entering into such
agreements in behalf of the City for lack of power and authority; and
j) the stoppage of granting scholarship/financial assistance to students enrolled in

the Prestigious/Private Universities/Colleges and give priority to the less
privileged students.
7. Procurement of goods, services and infrastructure projects with a total contract cost
of P210,732,076.83 were awarded to 16 contractors/suppliers even with doubtful and
without complete eligibility documents, rendering the winning bidders as ineligible,
due to the failure of the Bids and Awards Committee (BAC) to properly evaluate the
eligibility requirements submitted by the bidders, thereby rendering the legality of the
contracts with the City doubtful and questionable, aside from being contrary to
Sections 23.1, 23.6, 25.3, 34.1, 34.2 and 34.3 of the 2016 Revised Implementing
Rules and Regulations (RIRR) of Republic Act (RA) No. 9184.
a) explain in writing why they shall not be held liable for their failure to conduct
thorough evaluation of the submitted Tax Clearance Certificate and annual
income tax returns of the bidders during post-qualification proceedings;
b) submit their basis for rating the legal, technical and financial documents
submitted by bidders as “Passed” during the preliminary evaluation and post-
qualification considering that they appeared to be ineligible but were awarded a
contract, otherwise the transactions will be disallowed in audit;
c) be more cautious in evaluating the legal, technical and financial documents

submitted by bidders during preliminary evaluation and post-qualification before
recommending the award of the contract; and
vi
d) impose administrative sanctions/penalties to the contractors/suppliers for the
submission of eligibility requirements containing false information or falsified
documents.
8. The appropriation for Confidential Expenses of P12,000,000.00 for the CY 2017 was
withdrawn in full by the Local Chief Executive thru cash advance on January 12,
2017 and the disbursement voucher thereof and its supporting documents were
submitted to the Audit Team 47 days after the prescribed period, contrary to the
various provisions of Joint Circular No. 2015-01 dated January 8, 2015 of the
Commission on Audit (COA), Department of Budget and Management (DBM),
Department of the Interior and Local Government (DILG), Governance Commission
for GOCCs (GCG) and Department of National Defense (DND). Moreover, the said
cash advance remained unliquidated at year-end.
a) City Accountant, City Budget Officer, and other local officials concerned to
strictly observe Item 6.1.5 of the Joint Circular wherein cash advances should be
limited to three month requirements only;
b) City Accountant to submit to the Audit Team, for review and verification, the
disbursement voucher for the grant of cash advance for confidential expense,
together with all the required and proper supporting documents, within seven days
upon release of checks, pursuant to the above regulation;
c) City Budget Officer to ensure that appropriation for Confidential Expenses should
be stated as such and not for Confidential/Intelligence Expense to avoid
confusion, considering that LGUs are limited only to Confidential Fund and
therefore their appropriations should only be for Confidential Expenses in
compliance with Joint Circular No. 2015-01;
d) City Accountant to provide clarifications on the period covered of the cash

advance drawn and the reason thereof; and
e) City Accountant, City Budget Officer, and other local officials concerned to
process and pay claims with complete documentation only.
We further recommended that the City Mayor liquidate the cash advance for
Confidential Expenses within the period provided under COA-DBM-DILG-GCG-
DND Joint Circular No. 2015-01 dated January 8, 2015.
9. The City availed the services of Ready Forms, Incorporated for the printing of various
accountable forms worth P3,689,795.00 from 2014 to 2017 in violation of Office of
the President of the Philippines Memorandum Circular No. 180, s. 2009 dated August
13, 2009, Department of the Interior and Local Government (DILG) Memorandum
vii
Circular No. 2012-32 dated February 15, 2012, and GPPB Resolution No. 05-2010
October 29, 2010, thus rendering the legality of the transactions doubtful.
We recommended that the City of Lipa discontinue the purchase of accountable forms
from RFI and strictly comply with Office of the President of the Philippines
Memorandum Circular No. 180, s. 2009 and DILG Memorandum Circular No. 2012-
32 dated February 15, 2012, and GPPB Resolution Nos. 05-2010 dated October 29,
2010; 04-2011 dated February 25, 2011; 08-2012 dated April 27, 2012 and 24-2012
dated November 23, 2012.
10. The City of Lipa allowed and accepted a provisional/improvised/unofficial receipt as

evidence of receipt of check/payment for the procurement of security services from
St. Vicentinian Security Services, Inc. amounting to P3,565,457.44, thus government
was deprived of the appropriate taxes it could have derived from the value added tax,
withholding and income tax returns filed by this contractor, contrary to Section 264
and National Internal Revenue Code (NIRC) of 1997, BIR Revenue Memorandum
Order No. 18-2012, Revenue Memorandum Circular No. 2-2014. Moreover, these
were paid even without the necessary supporting documents as required in Section
4(6) of the Presidential Decree (PD) No. 1445, COA Circular 2012-001 dated June
14, 2012 and Revised Implementing Rules and Regulations (IRR) of Republic Act
(RA) No. 9184, thus validity, legality and correctness of the claims could not be
established that may result in suspension or disallowance in audit.
a) Cashier to accept only valid Official Receipt as evidence of payment by the City
for all transactions in accordance with the BIR regulations and provide
justification in writing on submitted invalid ORs/provisional receipts for the
above transactions;
b) BAC/TWG Secretariat to properly plan and consolidate the bidding for security
services and conform with the procedures and documentary requirements
necessary in all conduct of public bidding from the preparation of bidding
documents up to the awarding and implementation of contracts;
c) Accountant to submit the required supporting documents to prevent the issuance

of Notice of Suspensions/Disallowance, and to see to it that claims should be
supported with complete documentations to establish their validity, legality and
correctness of the claims; and
d) Employee in-charge in the internal audit under the Accounting Office, to exercise
utmost diligence in processing claims. He/She should be properly oriented with
the provisions of COA Circular No. 2012-001 relative to documentary
requirements for common government transactions.
viii
11. Various lapses in the conduct of bidding and award of contract were noted for the
procurement of janitorial services amounting to P2,274,441.34, thus proved to be
grossly and manifestly disadvantageous and uneconomical for the City, created doubt
on the procurement process and placed the outcome of the bidding questionable.
Moreover, payments for the said disbursements were not supported by the required
documentations, contrary to Section 4(6) of Presidential Decree (PD) No. 1445, COA
Circular 2012-001 and Revised Implementing Rules and Regulations (IRR) of
Republic Act (RA) No. 9184, thus the propriety and legality of the claims could not
be ascertained.
a) Project Management Office (PMO) or concerned end-users and the BAC to

conduct market research and to gather information about the products or services,
its specifications and prices, among others, as inputs to the ABC. Support the
preparation of ABC with proof of canvass conducted;
b) the GSO and BAC Secretariat to ensure that the ABCs of items for bid are based
from careful determination of price reasonableness as circumstances warrant,
update the prices of items in the ABC before the conduct of actual
bidding/procurement;
c) BAC to set a precise, complete and clear technical specifications (e.g. delivery
schedule, manpower requirements, supplies and materials, etc.), a clear statement
of the required standards of workmanship, materials, performance of the goods
and services to be procured;
d) BAC to include in the ABC/PR/PO and in the contract agreement the detailed
breakdown of the contract cost, and the direct and indirect cost such as janitorial
supplies and materials to be provided by the contractor as to kind, quantity and
amount;
e) BAC to properly evaluate the technical specifications submitted by bidders as

contained in the bid proposal and conform with the procedures and documentary
requirements necessary in all conduct of public bidding from the preparation of
bidding documents up to the awarding and implementation of the contract;
f) members of the BAC to observe diligence in the conduct of eligibility checking

and post-qualification of the LCB to ensure that the City transacts businesses
with bonafide and legitimate suppliers only;
g) concerned officials to submit written explanations/comments on the noted

deficiencies;
ix
h) BAC Secretariat in coordination with the City Accountant, to submit the required
supporting documents for audit purposes and to prevent the issuance of Notice of
Suspension/Disallowance; and
i) City Accountant to check thoroughly the completeness of supporting documents

before processing and approving the payment of said disbursements/claims.
12. Payment for the garbage hauling/disposal and deodorizers, and wages of 19 Job Order
employees (JO) for the period January to June 2017 amounting to P23,987,718.38
and P590,890.58, respectively, were charged to CY 2017 20% Development Fund,
contrary to the guidelines set under Department of the Interior and Local Government
(DILG) and Department of Budget and Management (DBM) Joint Memorandum
Circular (JMC) No. 2017-1, thus limiting the implementation of projects that will
contribute to the attainment of desirable socio-economic development and
environmental management outcomes.
We recommended that the City Mayor direct the Local Development Council (LDC)
to strictly comply with the guidelines in the DILG-DBM JMC No. 2017-1 dated
February 22, 2017, on the appropriation and optimum utilization of the 20%
Development Fund on projects that partake the nature of investment or capital
expenditures.
Ensure that only capital expenditures are charged to the 20% Development Fund.
13. The City Government of Lipa granted additional incentives/allowances to Barangay

functionaries such as Treasurer, Secretary, Clerk, Administrative Assistant and the
like amounting to P769,200.00 for CY 2017, contrary to Section 4.2 of Department of
Budget and Management (DBM) Local Budget Circular (LBC) No. 63 dated October
22, 1996.
We recommended that the City Mayor require the City official concerned to
provide/submit legal basis on the grant of additional allowance/honorarium to the
aforecited barangay employees, otherwise, these will be disallowed in audit being
considered irregular expenditures.
14. Effectiveness of the City’s internal control and/or procurement procedures in utilizing
Special Education Fund (SEF) were doubtful due to the absence of proof of warranty
security and incomplete documentary requirements, contrary to Revised
Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184, thus
placing doubts on the validity of the bidding process and exposing the City to risk
that any manufacturing defects will not be corrected by the supplier.
x
We recommended that the City Mayor:
a) require the City Accountant to withheld retention money in an amount equivalent

to at least one percent (1%) of every progress payment, or a special bank
guarantee equivalent to at least one percent (1%) of the total contract price. The
said amounts shall only be released after the lapse of the warranty period or, in the
case of Expendable Supplies, after consumption thereof; and
b) instruct the BAC to submit the above documents for further evaluation of the
transaction. Strictly adhere with the Revised IRR of RA No. 9184 and other
related rules and regulations especially on the completeness of documents in each
stage of the bidding/procurement process.
15. Projects amounting to P2,992,497.19 which were excluded in the City’s Local
Disaster Risk Reduction Management Plans (LDRRMP) were charged to the City’s
Local Disaster Risk Reduction Management Fund (LDRRMF) while prioritized
program in the said plan with a total budget of P34,450,000.00 remained
unimplemented at the end of the fiscal year, in violation of National Disaster Risk
Reduction Management Council (NDRRMC), Department of Budget and
Management (DBM) and Department of the Interior and Local Government (DILG)
Joint Memorandum Circular (JMC) No. 2013-01, thereby depriving the City’s
constituents of the immediate benefits of the intended projects for which the Fund
was created.
We recommended that the Disaster Risk and Reduction Office along with the other
implementing offices such as General Services, Engineering and Welfare and
Development to closely monitor the undertaking of the proposed projects funded out
of LDRRMF so that the fund utilization be aligned with the City’s Local Disaster
Risk Reduction Management Investment Plan (LDRRMIP) and the Projects,
Programs and Activities envisioned to strengthen the City’s capacity for risk
reduction and management be fully implemented.
16. The Annual Procurement Plan (APP) prepared by the City is incomplete, inadequate
and lacked the necessary information on the mode of procurement, schedule of each
procurement activity, brief description of the programs/projects, source of funds,
among others, as required under Section 7 of the Revised Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 9184 and Government Procurement
Policy Board (GPPB) Circular No. 07-2015 dated July 16, 2015, thus relevance and
usefulness of APP as a planning and control tool was not attained, resulting in
uncoordinated procurements that do not promote efficiency, economy and
transparency. The APP was likewise not submitted to the GPPB and posted in
accordance with Section 1(a) of Executive Order (EO) No. 662, series of 2007, as
amended.
xi
We recommended that the City Mayor require the General Services Officer, BAC
Secretariat and all the Department Heads to:
a) formulate the City’s APP in accordance with Section 7 of the Revised IRR of RA
No. 9184;
b) ensure that all the necessary information required in the APP and its amendments
are reflected therein for its continuous relevance and usefulness as a planning and
control tool;
c) submit the duly approved copy of APP to the GPPB in accordance with Section
1(a) of Executive Order No. 662, series of 2007, as amended;
d) attach the authenticated photo copy of the APP to the disbursement vouchers for
the payment of all types of procurement, in compliance to COA Circular 2012-
001 dated June 14, 2012; and
e) include in the APP, provisions for foreseeable emergencies based on historical

records as well as the manner of procurement thereof.
17. The report on compliance with COA findings and recommendations or the Agency
Action Plan and Status of Implementation (AAPSI) for Calendar Year (CY) 2016 was
not accomplished and submitted to COA, as required under Section 96 of the General
Provisions of Republic Act (RA) No. 10717, otherwise known as the General
Appropriations Act (GAA) for Fiscal Year 2016.
We recommended that the Management follow strictly the above provisions of law on
the submission of the Agency Action Plan and Status of Implementation (AAPSI)
within the specified period to give enough time for the Auditor to review, monitor
and evaluate the action taken by the management on the audit recommendations.
18. The list of all ongoing government projects/program/activities and those that are to be
implemented during the year, as well as information that the appropriate signboards
and/or public notices have been already posted were not provided/submitted to the
Office of the Auditor at the beginning of the year as required under COA Circular No.
2013-004 dated January 30, 2013 resulting in the delay in the validation, inspection
and reporting of the said projects/program/activities.
We recommended that the City Mayor require the City Engineer to submit to COA
the list of all ongoing government projects/programs/activities and those that are for
implementation during the year, as well as information that the appropriate
signboards and/or public notices have been already posted in accordance with COA
Circular No. 2013-004 within the prescribed period.
xii
19. The required notification/request for inspection together with the copies of
Acceptance and Inspection Report for all deliveries were not furnished to the COA,
thus depriving the Auditor of the opportunity to conduct inspection, contrary to Item
2 of COA Circular No. 96-010 dated August 15, 1996 and Section 116 of COA
Circular No. 92-386 dated October 20, 1992.
We recommended that the City Mayor instruct the General Services Officer to submit
the Request for Inspection/Notice of Deliveries together with copies of the
Acceptance and Inspection Report (AIR) to the Audit Team within 24 hours after
acceptance and inspection of all the deliveries by the Management.
The above, together with the other findings and recommendations contained in the
report were discussed with the concerned City officials and staff during the exit
conference conducted on May 18, 2018. Management’s views and reactions were
considered in the report, where appropriate.
Status of Implementation of Prior Year’s Audit Recommendations
Of the 51 prior year’s audit recommendations contained in the CY 2016 Annual

Audit Report, 16 were fully implemented, 8 were partially implemented, and the
remaining 27 were not implemented by the City Government of Lipa.
xiii
TABLE OF CONTENTS
Part Subject Page

I Audited Financial Statements
 Independent Auditor’s Report 1
 Statement of Management’s Responsibility for 4
Financial Statements
 Statement of Financial Position (All Funds) 5
 Statement of Financial Performance (All Funds) 6
 Statement of Changes in Net Assets/Equity (All Funds) 7
 Statement of Cash Flows (All Funds) 8
 Statement of Comparison of Budget and Actual 9
Amounts (All Funds)
 Notes to Financial Statements 11
II Observations and Recommendations 55
III Status of Implementation of Prior Year’s Audit 158

Recommendations
IV Annexes
A Statement of Financial Position (By Fund) 187
B Statement of Financial Performance (By Fund) 188
C Statement of Changes in Net Assets/Equity (By Fund) 189
D Statement of Cash Flows (By Fund) 190
E Property Plant and Equipment Included in the List of 191
Military, Police and Security Equipment as per GL
F Property Plant and Equipment Included in the Motor 192
Vehicles Account in the General Ledger
G Property Plant and Equipment Included in the Office 193
Equipment Account in the General Ledger
H Schedule of Payment for MAS College Scholarship for 208
Indigents
I List of Winning Bidders with Spurious Bidding Documents 209
J List Barangay Projects Awarded to ARE Construction 212
K SO-LEN Builders and Construction Supply TCC No. NO- 213
ARMD-05-05-ROO61-2017 issued on May 5, 2017
L SO-LEN Builders and Construction Supply Certificate of 214
PhilGEPS Registration No. PhilGEPS-2005-18124 with List
of Eligibility Documents
L1 SO-LEN Builders and Construction Supply Balance Sheet as 216
of December 31, 2016
L2 SO-LEN Builders and Construction Supply Mayor’s Permit 217
No. 4053 for CY 2017 issued on February 2, 2017
L3 SO-LEN Builders and Construction Supply DTI Certificate of 218
Registration Number 03694190
Part Subject Page
L4 SO-LEN Builders and Construction Supply PCAB License 219
M Income Statement as of December 31, 2016 of TATAO Shirts 220
and General Merchandise
N Page 9 of 10 of Annual Income Tax Return (ITR) for CY 221
2016 of TATAO Shirts and General Merchandise
O BIR Certificate of Registration (COR) of TATAO Shirts and 222
General Merchandise
P BIR Certificate of Registration (COR) of Bandevilla 223
Pharmacy
Q Schedule of Wages of Job Order Charged to 20% 224
Development Fund
R Gender and Development (GAD) Expenditures 225
PART I - AUDITED FINANCIAL STATEMENTS
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
===========================================================================
INDEPENDENT AUDITOR’S REPORT

Honorable MEYNARDO A. SABILI
City Mayor
Lipa City, Batangas
We have audited the accompanying combined financial statements of the City of Lipa,
Batangas, which comprise the Statement of Financial Position as of December 31, 2017, and
the Statement of Financial Performance, Statement of Changes in Net Assets/Equity,
Statement of Comparison of Budget and Actual Amounts, and Statement of Cash Flows for
the year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with the Philippine Public Sector Accounting Standards and for
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatements whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Philippine Public Sector Standards on
Auditing. Those 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 amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making these risks assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
1
Basis for Qualified Opinion
1. The accuracy, reliability and existence of the recorded balances of Property, Plant and
Equipment (PPE) amounting to P3,090,039,104.97 (gross of depreciation) as of year-
end were doubtful due to: (a) misclassification of different PPE accounts amounting
to P4,908,307.06; (b) unreconciled discrepancies of P636,228,959.47 between the
Accounting and General Services Office (GSO); (c) inclusion of the unserviceable
properties valued at P974,285.25 in the City’s books of accounts; (d) unaccounted
balances/no supporting schedules of unserviceable properties stated in the summary
report of Report of Physical Count of Property, Plant and Equipment (RPCPPE)
amounting to P57,520,394.43; and (e) adjustments/reclassifications made on PPE of
monitored.

not recorded and accounted for as Accounts Payable, in violation of Section 112 of
2
3
4
City Government of Lipa
STATEMENT OF FINANCIAL POSITION
(All Funds)
As of December 31, 2017
(With Comparative Figures for CY 2016 )
Note 2017 2016

ASSETS
Current Assets
Cash and Cash Equivalents 4 P 1,014,353,384.60 P 895,550,326.46
Investments 5 220,000,000.00 0.00
Receivables 6 114,688,634.49 53,984,789.48
Inventories 7 50,764,527.77 28,625,680.79
Prepayments and Deferred
Charges 8 10,625,378.33 559,138.49
Total Current Assets 1,410,431,925.19 978,719,935.22
Non-Current Assets
Property, Plant and Equipment
(Net) 9 1,986,351,175.18 1,880,907,027.23
Total Non-Current Assets 1,986,351,175.18 1,880,907,027.23
TOTAL ASSETS P 3,396,783,100.37 P 2,859,626,962.45
LIABILITIES
Current Liabilities
Financial Liabilities 10 250,368,781.96 167,147,338.91
Inter-Agency Payables 10 63,290,290.48 41,504,671.50
Intra-Agency Payables 10 50,857,747.47 15,095,062.95
Trust Liabilities 10 97,567,724.19 57,264,586.99
Deferred Credits/Unearned
Income 10 236,244,363.35 189,740,495.68
Total Current Liabilities 698,328,907.45 470,752,156.03
Non-Current Liabilities
Financial Liabilities 11 319,473,880.27 407,869,735.24
Total Non-Current Liabilities 319,473,880.27 407,869,735.24
TOTAL LIABILITIES 1,017,802,787.72 878,621,891.27
NET ASSETS/EQUITY
Government Equity 2,378,980,312.65 1,981,005,071.18
TOTAL LIABILITIES AND
NET ASSETS/EQUITY P 3,396,783,100.37 P 2,859,626,962.45
(See accompanying Notes to Financial Statements)
5
STATEMENT OF FINANCIAL PERFORMANCE
(All Funds)
For the Year Ended December 31, 2017
Note 2017 2016

REVENUE
Tax Revenue 12 P 696,810,285.85 P 604,226,240.48
Share from Internal Revenue
Collections 13 789,236,143.00 669,747,769.00
Share from National Taxes 14 235,132.27
Service and Business Income 15 189,505,323.60 182,451,565.22
Share, Grants and Donations 16 2,605,977.36 1,988,711.34
Total Revenue 1,678,392,862.08 1,458,414,286.04
LESS: CURRENT OPERATING

EXPENSES
Personnel Services 18 480,864,887.50 477,757,263.34
Maintenance and Other
Operating Expenses 19-23 615,412,434.21 531,440,307.07
Non-Cash Expenses 25 124,256,076.17 140,011,493.38
Financial Expenses 26 24,595,003.68 26,650,195.06
Total Current Operating
Expenses 1,245,128,401.56 1,175,859,258.85
Surplus (Deficit) from Current

Operation 433,264,460.52 282,555,027.19
Add (Deduct):
Transfers, Assistance and
Subsidy From 17 345,626,550.96 37,146,080.86
Transfers, Assistance and
Subsidy To 24 (386,824,437.16) (37,052,909.10)
Surplus (Deficit) for the Period P 392,066,574.32 P 282,648,198.95
6
STATEMENT OF CHANGES IN NET ASSETS/EQUITY
(All Funds)
2017 2016
Balance at January 1 P 1,981,005,071.18 P 1,688,126,815.58

Add (Deduct)
Change in Accounting Policy 0.00 0.00
Prior Year Adjustments 0.00 10,230,056.65
Restated Balance 1,981,005,071.18 1,698,356,872.23
Add (Deduct) Changes in net assets/equity during the year
Adjustment of net revenue recognized
directly in net assets/equity 5,908,667.15 0.00
Surplus (Deficit) for the period 392,066,574.32 0.00
Total Changes for the period 397,975,241.47 282,648,198.95
Balance at December 31 P 2,378,980,312.65 P 1,981,005,071.18
7
STATEMENT OF CASH FLOWS
(All Funds)
(With Comparative Figures for CY 2016)
Note 2017 2016
Cash Flows from Operating Activities
Cash Inflows
Collection from Taxpayers P 633,572,720.67 P 545,223,548.15
Share from Internal Revenue Allotment 789,236,143.00 669,747,769.00
Receipts from Business/Service Income 184,099,670.24 177,594,917.15
Interest Income 4,620,984.04 4,856,648.07
Other Receipts 27 526,923,961.89 534,512,200.48
Total Cash Inflows 2,138,453,479.84 1,931,935,082.85
Cash Outflows
Payment of Expenses 564,520,737.65 0.00
Payment to Suppliers and Creditors 81,069,230.13 570,797,733.79
Payment to Employees 318,691,066.83 292,615,642.69
Interest Expenses 0.00 25,646,456.50
Other Expenses 28 541,259,615.19 810,350,729.44
Total Cash Outflows 1,505,540,649.80 1,699,410,562.42
Net Cash Flows from Operating Activities 29 632,912,830.04 232,524,520.43
Cash Flows from Investing Activities
Cash Outflows
Purchase/Construction of Property, Plant and Equipment 204,001,014.85 138,643,206.40
Purchase of Bearer Biological Assets 236,607.15 0.00
Total Cash Outflows 204,237,622.00 138,643,206.40
Net Cash Flows from Investing Activities (204,237,622.00) (138,643,206.40)
Cash Flows from Financing Activities
Cash Inflows
Proceeds from Loans 0.00 195,567,045.19
Total Cash Inflows 0.00 195,567,045.19
Cash Outflows
Payment of Loan Amortization 89,872,149.90 75,889,127.63
Total Cash Outflows 89,872,149.90 75,889,127.63
Net Cash Flows from Financing Activities (89,872,149.90) 119,677,917.56
Total Cash Provided by Operating, Investing
and Financing Activities 338,803,058.14 213,559,231.59
Add: Cash at the Beginning of the Year 31 675,550,326.46 681,991,094.87
Cash Balance at the End of the Year P 1,014,353,384.60 P 895,550,326.46
8
9
10
Notes to Financial Statements
(All amounts in Philippine Peso)
Note 1 – Profile
Lipa City became a Chartered City by virtue of Republic Act No. 162 signed
by the then President Manuel A. Roxas on June 20, 1947. It is located at the
southwestern part of Luzon in the heart of Batangas Province. It consists of
72 barangays, of which 13 are urban and 59 are rural. It is comprised
approximately of 20,940 hectares of land mostly devoted to agriculture,
commercial establishments and housing communities. Its present population
was reported at 340, 239 at the end of 2017.
The City is envisioned to be a globally competitive, livable and God loving

City that provides meaningful administration of services towards an
empowered and vibrant community.
The City Government of Lipa is headed by the City Mayor as its local chief
executive and supported by the Sangguniang Panlungsod Members, local
officials and employees.
Under the leadership of Hon. Meynardo A. Sabili and guided by his 7-points
agenda, I HELP, more meaningful plans are brought to reality.
 Infrastructure
Construction of wider roads, bridges and drainage, school buildings,

gymnasiums, barangay health and day care centers and multi-purpose
halls are completed to enhance community development and promote
trade and commerce in the locality as well as City’s disaster
preparedness activity. A three-storey parking building has been
constructed in the City’s public market to lessen the traffic problem
and to promote its public market. A medical arts section building is
also being constructed at Ospital ng Lipa to enhance public health
services. Five traffic lights system are also introduced and constructed
in five heavily congested areas of the city to lessen the traffic problem.
 Information and Communication Technology
There are ongoing programs for the enhancement of the Information and
Communication Technology in the City Government. Being aware of the
dynamism of today’s technology, the City Mayor fully supports all
development plans and sustaining efforts towards better information
communication. In addition to new IT equipment which were provided in the
City’s departments, an internet website is being maintained to promote the
City in the cyber world with website address www.lipa.gov.ph. The site also
11
provides reports in compliance with the full disclosure policy to promote
transparency in governance. The City Government maintained the Business
Permit and Licensing System (BPLS), Real Property Tax Administration
System (RPTA) and Statement of Receipts and Expenditure (SRE) system to
ensure continuous effective and efficient delivery of services to all taxpayers.
The City is also adopting the Electronic - New Government Accounting
System (e-NGAS) in the preparation of its financial statements and reports as
well as the Electronic Budget System (e-Budget).
 Health
HEALTH is the primary thrust of the City’s 7-Point Agenda. The City
Government continuously provides its constituents the benefit of free
medicines, free medical, and dental and laboratory services. Pre and post
natal maternal care, free new-born screening, and expanded programs on free
immunization for babies, free circumcision and dengue/h-fever control
program were afforded to the Lipeños. It provides P30,980,214.41 MAS
Health Card to its indigent constituents which they can use for hospitalization
and medications. Aside from this, the City Government continuously provides
its constituents PhilHealth Card to indigent families. From January to
December 2017, the City provided P10,252,800.00 Philhealth membership
benefits to indigent Lipeños.
Due to successful management, the City was awarded by the Provincial

Government of Batangas for Highest Case Detection Rate and Treatment
Success Rate for All Form in the Implementation of the Tuberculosis Control
Program in Batangas
The operation of City-run and owned hospital for less privilege Lipeños is still
the priority project of the Local Chief Executive. A three-storey building was
erected in Marawoy, Lipa City to provide health services to all Lipeños.
 Education
The administration places high regard to education and sees it as a vehicle that
will carry its people towards better life and better future. The City
Government has allocated P51,603,942.80 to deserving youths for their high
school, and college education. The City Government also allotted
P20,046,118.50 for Sagip Eskwela Program to support elementary students of
indigent families. The City Government also opened the door to more
students in Kolehiyo ng Lungsod ng Lipa, a City-owned and managed college
school which provides free tertiary education to all Lipeños.
One of the most effective projects of the City is the opening of Lipa City
Center for Training and Development which was established last September
14, 2011. Mayor Meynardo Sabili believed that educating individuals and
12
giving them proper training would ensure decent jobs to more Lipeños locally
and abroad. In coordination with TESDA, free trainings on courses like Auto
Mechanic, Motorcycle Engine, Electronics, Computer Hardware Servicing,
Massage Therapy, Cosmetology, Housekeeping and Electrical Maintenance is
given to trainees. This year, the City spent P3,671,180.53 for TESDA
programs and projects. The City was also awarded as the 2017 Regional and
National KABALIKAT Awardee (Most Outstanding LGU Partner in Region
IV-A in the Promotion and Enhancement of Technical Education and Skills
Development, conferred by TESDA on August 23, 2017 at TESDA Central
Office Taguig City, Metro Manila.
 Environment
The City’s Environmental Management Program includes its vow to construct

a Material Recovery Facility in every barangay as well as the establishment of
an Integrated Solid Waste Management Facility.
The City continues its Bantay-Ilog Project, Coastal Clean - up, and the Tree
Planting Project in addition to the strict enforcement of General Ordinance
No. 1 Series of 2011 or “Ordinance Prohibiting the Use of Plastic Bags on
Dry Goods and Regulating Its Use on Wet Goods and Totally Banning
Styrofoam in the City of Lipa” and General Ordinance Number IV Series of
2012 or “Ordinance Banning Smoking in Public Places and Inside Public
Utility Vehicles within the City of Lipa”.
 Livelihood
The present administration continued the livelihood and cooperative training

programs to inculcate entrepreneurial skills for locals. Continuous job fairs
were held in cooperation with the private sector. The City Government also
conducted training seminars to different groups to help them increase their
income. Some of them are Peanut Processing Demo, Fabric Conditioner
Making, Chayote Chutney Making Demo, Soya Processing Demo, Dish
Washing Liquid Making, Meat Processing, Bracelet Making and
Cosmetology. Trainings for Ornamental Fish Culture and Honeybee
Production are also provided for constituents to encourage and cultivate their
skills and venture into sustainable income projects.
The City Government also conducted Microfinance Program which provided

capital loan assistance to Lipeños ranging from P2,000.00 to P20,000.00. In
addition, the City Government has provided livelihood assistance to small
scale entrepreneurs and most number of beneficiaries are from the women
sector.
13
 Peace and Order
As the City's economy becomes more vibrant, the Mayor wants to keep the
peace and security that its people enjoy. He has requested additional police
personnel to increase police visibility in order to preempt any unlawful
attempts.
Disaster Awareness Seminars were conducted with different sectors in the

community to inform and orient on the proper course of action/response in
case a disaster takes place.
Note 2 – Statement of Compliance and Basis of Preparation of Financial

Statements
The consolidated financial statements of the City Government of Lipa have

been prepared in accordance with and comply with the Philippine Public
Sector Accounting Standards (PPSAS). The combined financial statements are
presented in pesos, which is the functional and reporting currency of the City.
The accounting policies have been applied starting year 2015.
Note 3 – Summary of Significant Accounting Policies
3.1 Basis of Accounting
The financial statements are prepared on an accrual basis in accordance

with the Philippine Public Sector Accounting Standards (PPSAS).
3.2 Consolidation
The controlled entities (funds) are all those over which the controlling
entity has the power to govern the financial and operating policies. Inter-
group transactions, balances and unrealized gains and losses on
transactions between entities and funds are eliminated in full. The City
maintains special accounts under the General Fund (GF) for the
following:
 General Fund – Proper

 20% Development Fund
 Market Fund
 Kolehiyo ng Lungsod ng Lipa (KLL) Fund
 Ospital ng Lipa Fund
The City Government of Lipa maintains the General Fund (GF),

Special Education Fund (SEF) and Trust Fund (TF).
14
3.3 Revenue Recognition
Revenue from Non-Exchange Transactions
Taxes, Fees and Fines
The City recognizes revenues from taxes and fines when the event
occurs and the asset recognition criteria are met. To the extent that there
is a related condition attached that would give rise to a liability to repay
the amount, liability is recognized instead of revenue. Other non-
exchange revenues are recognized when it is improbable that the future
economic benefit or service potential associated with the asset will flow
to the entity and the fair value of the asset can be measured reliably.
The LGU availed of the 5–year transitional provision for the recognition
of Tax Revenue-Real Property and Special Education Tax. For the first
year, there will be no change in policy for the recognition of the
aforementioned tax revenue.
Transfers from Other Government Entities
Transfers from other government entities are measured at fair value and
recognized on obtaining control of the asset (cash, goods, services and
property) if the transfer is free from conditions and it is probable that the
economic benefits or service potential related to the asset will flow to
the City and can be measured reliably.
Revenue from Exchange Transactions
Interest Income
Interest income is accrued using the effective yield method. The

effective yield discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount.
The method applies this yield to the principal outstanding to determine
interest income each period.
3.4 Property, Plant and Equipment
All property, plant and equipment are stated at cost less accumulated
depreciation. Cost includes expenditure that is directly attributable to the
acquisition of the items. When significant parts of property, plant and
equipment are required to be replaced at intervals, the City recognizes
such parts as individual assets with specific useful lives and depreciates
them accordingly. Likewise, when a major inspection is performed, its
cost is recognized in the carrying amount of the plant and equipment as
15
a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in surplus or deficit as incurred.
Where an asset is acquired in a non-exchange transaction for nil or
nominal consideration the asset is initially measured at its fair value.
Depreciation on assets is charged on a straight-line basis over the useful

life of the asset.
Depreciation is charged at rates calculated to allocate cost or valuation

of the asset less any estimated residual value of five percent (5%) over
its remaining useful life based on COA issuances on the prescribed
useful life of assets:
TABLE OF ESTIMATED USEFUL LIFE OF

PROPERTY, PLANT AND EQUIPMENT
(COA Circular No. 2003-007 dated December 11, 2003)
Estimated
Property, Plant and Equipment Useful Life
(in years)
 Land Improvements
 Land Improvements 10
 Runways/taxiways 20
 Railways 40
 Electrification, Power and Energy
Structures 10
 Buildings – those that are
predominantly
 Wood 10
 Mixed 20
 Concrete 30
 Leasehold Improvements (Note 1)

 Land 10
 Building
 Wood 10
 Mixed 20
 Concrete 30
 Office, Equipment, Furniture and Fixtures

 Office Equipment 5
 Furniture and Fixtures 10
 IT Equipment - Hardware 5
 Library Books 5
16
Estimated
Property, Plant and Equipment Useful Life
(in years)
 Machineries and Equipment

 Machineries 10
 Agricultural, Fishery and Forestry 10
 Airport Equipment 10
 Communication Equipment 10
 Construction and Heavy
Equipment 10
 Firefighting Equipment and
Accessories 7
 Hospital Equipment 10
 Medical, Dental and Laboratory
Equipment 10
 Military and Police Equipment 10
 Sports Equipment 10
 Technical and Scientific
Equipment 10
 Other Machineries and
Equipment 10
 Transportation Equipment
 Motor Vehicles 7
 Trains 10
 Aircraft and Aircraft Ground
Equipment 10
 Watercrafts 10
 Other Transportation Equipment 10
 Other Property, Plant and Equipment 5
Note 1 - The estimated useful life shall depend on the length of the lease. It shall
be the period of the lease or the estimated useful life of the assets, as given,
whichever is shorter.
Leased assets may consist of vehicles and machinery. The assets’

residual values and useful lives are reviewed, and adjusted
prospectively, if appropriate, at the end of each reporting period. An
asset’s carrying amount is written down immediately to its recoverable
amount, or recoverable service amount, if the asset’s carrying amount is
greater than its estimated recoverable amount or recoverable service
amount. The City derecognizes items of property, plant and equipment
and/or any significant part of an asset upon disposal or when no future
economic benefits or service potential is expected from its continuing
use. Any gain or loss arising on derecognition of the asset (calculated as
17
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the surplus or deficit when the asset is
derecognized.
Public Infrastructures were not previously recognized in the books. The

LGU availed of the 5-year transitional provision for the recognition of
the Public Infrastructure. For the first year of implementation of the
PPSAS, the City will not recognize the Public Infrastructure in the books
of accounts.
3.5 Financial Instruments
Financial Assets
Initial Recognition and Measurement
Financial assets are classified as financial assets at fair value through

surplus or deficit, loans and receivables, held-to-maturity investments or
available-for-sale financial assets, as appropriate. The City determines
the classification of its financial assets at initial recognition.
Purchases or sales of financial assets that require delivery of assets

within a time frame established by regulation or convention in the
marketplace (regular way trades) are recognized on the trade date, i.e.,
the date that the City commits to purchase or sell the asset.
The City’s financial assets include: cash and short-term deposits; trade
and other receivables; loans and other receivables and quoted and
unquoted financial instruments.
Subsequent Measurement
The subsequent measurement of financial assets depends on their

classification.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. After
initial measurement, such financial assets are subsequently measured at
amortized cost using the effective interest method, less impairment.
Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the
effective interest rate. Losses arising from impairment are recognized in
the surplus or deficit.
18
Impairment of Financial Assets
The City has not yet recognized impairment as of the reporting date
while waiting for applicable COA rules and regulations.
Financial Liabilities
Initial recognition and measurement
Financial liabilities within the scope of IPSAS 29 are classified as

financial liabilities at fair value through surplus or deficit or loans and
borrowings, as appropriate. The City determines the classification of its
financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and, in the
case of loans and borrowings.
The City group’s financial liabilities include trade and other payables,
bank overdrafts, loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Loans and Borrowings
After initial recognition, interest bearing loans and borrowings are

subsequently measured at amortized cost using the effective interest
method. Gains and losses are recognized in surplus or deficit when the
liabilities are derecognized as well as through the effective interest
method amortization process.
Amortized cost is calculated by taking into account any discount or

premium on acquisition and fees or costs that are an integral part of the
effective interest rate.
3.6 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and cash at bank,
deposits on call and highly liquid investments with an original maturity
of three months or less, which are readily convertible to known amounts
of cash and are subject to insignificant risk of changes in value. For the
purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits as defined above, net
of outstanding bank overdrafts.
19
3.7 Inventories
Inventory is measured at cost upon initial recognition. To the extent that

inventory was received through non-exchange transactions (for no cost or
for a nominal cost), the cost of the inventory is its fair value at the date of
acquisition.
After initial recognition, inventory is measured at the lower of cost and

net realizable value. However, to the extent that a class of inventory is
distributed or deployed at no charge or for a nominal charge, that class
of inventory is measured at the lower of cost and current replacement
cost.
Net realizable value is the estimated selling price in the ordinary course
of operations, less the estimated costs of completion and the estimated
costs necessary to make the sale, exchange, or distribution. Inventories
are recognized as an expense when deployed for utilization or
consumption in the ordinary course of operations of the City.
3.8 Changes in Accounting Policies and Estimates
The City recognizes the effects of changes in accounting policy

retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.
The City recognizes the effects of changes in accounting estimates

prospectively by including in surplus or deficit.
3.9 Borrowing Costs
Borrowing costs are recognized under the allowed alternative treatment,

wherein costs are recognized as expense in the period in which they are
incurred, except the costs that are directly attributable to the acquisition,
construction, or production of a qualifying asset which are recognized as
part of the cost of the asset. Such borrowing costs are capitalized over
the period during which the asset is being acquired or constructed and
borrowings have been incurred. Capitalization ceases when construction
of the asset is complete. Further, borrowing costs are charged to the
statement of financial performance.
3.10 Related Parties
The City regards a related party as a person or an entity with the ability
to exert control individually or jointly, or to exercise significant
influence over the City, or vice versa. Members of key management are
regarded as related parties and comprise the Governor, Mayors, Vice-
20
Governors and Vice-Mayors, Sanggunian Members, Committee
Officials and Members, Accountants, Treasurers, Budget Officers,
General Services and all Chiefs of Departments/Divisions.
3.11 Budget Information
The annual budget is prepared on the modified cash basis, that is, all
planned costs and income are presented in a single statement to
determine the needs of the City. As a result of the adoption of the
modified cash basis for budgeting purposes, there are bases, timing or
entity differences that would require reconciliation between the actual
comparable amounts and the amounts presented as disclosures of the
statement of comparison of budget and actual amounts. Explanatory
comments are provided in the notes to the annual financial statements;
first the reasons for overall growth or decline in the budget are stated
followed by the details of overspending or underspending on line items.
3.12 Significant Judgments and Sources of Estimation Uncertainty
Judgments
In the process of applying the City’s accounting policies, management

has made judgments, which have the most significant effect on the
amounts recognized in the consolidated financial statements.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below. The City
based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. However, existing
circumstances and assumptions about future developments may change
due to market changes or circumstances arising beyond the control of the
City. Such changes are reflected in the assumptions when they occur.
Useful Lives and Residual Values
The useful lives and residual values of assets are assessed using the
following indicators to inform potential future use and value from
disposal:
a) The condition of the asset based on the assessment of experts

employed by the City;
21
b) The nature of the asset, its susceptibility and adaptability
to changes in technology and processes;
c) The nature of the processes in which the asset is deployed; and
d) Changes in the market in relation to the asset
Impairment of Non-Financial Assets
The City has not yet recognized impairment as of the reporting date
while waiting for applicable COA rules and regulations.
.
3.13 Financial Instruments - Financial Risk Management
Exposure to currency, commodity, interest rate, liquidity and credit risks

arises in the normal course of the City’s operations. This note presents
information about the City’s exposure to each of the mentioned risks,
policies and processes for measuring and managing risk, and the City’s
management of capital. Further quantitative disclosures are included
throughout these financial statements. Fair values set out below, is a
comparison by class of the carrying amounts and fair value of the City’s
financial instruments.
The fair value of the financial assets and liabilities are included at the
amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced sale or
liquidation.
The following methods and assumptions were used to estimate the fair
values:
a) Cash and short-term deposits, trade receivables, trade payables and

other current liabilities approximate their carrying amounts largely
due to the short-term maturities of these instruments;
b) Long-term fixed-rate and variable-rate receivables/borrowings are

evaluated by the City based on parameters such as interest rates,
individual creditworthiness of the customer and the risk
characteristics of the financed project. Based on this evaluation,
allowances are taken to account for the incurred losses of these
receivables and market-related interest rates. As at December 31,
2016, the carrying amounts of such receivables, net of allowances,
are not materially different from their calculated fair values;
c) Fair value of quoted notes and bonds is based on price quotations

at the reporting date. The fair value of unquoted instruments, loans
22
from banks and other financial liabilities, obligations under finance
leases, as well as other non-current financial liabilities is estimated
by discounting future cash flows using rates currently available for
debt on similar terms, credit risk and remaining maturities;
d) Fair value of financial assets is derived from quoted market prices

in active markets, if available;
e) Fair value of unquoted available-for-sale financial assets is

estimated using appropriate valuation techniques
Fair Value Hierarchy
The City uses the following hierarchy for determining and disclosing the
fair value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical

assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as
price) or indirectly (i.e., derived from prices);
Level 3: Techniques which use inputs that have a significant effect on

the recorded fair value that are not based on observable market
data.
Credit Quality
Credit quality is assessed risk of default attached to counterparties to

which the City extends credit and also those parties with whom the LGU
invests. As such, the credit quality assessed extends to the customers,
investments and banks servicing the LGU.
For financial statement purposes, the investments and balances with

banks are limited to the investments, loans receivable and cash and cash
equivalents line items in the statement of financial position. The LGU
follows Department Order No. 27-05 of the Department of Finance
(DOF) in the maintenance of depository accounts. It also determines
credit quality of the investments and banks using information obtained
from external rating agencies.
The customer base of the City is diverse and consists of individuals,

companies, non-profit organizations and government entities. Credit
ratings, from external rating agencies, are not readily available for all
customers. Also, it is not financially viable to obtain external credit
23
ratings for all customers due to the nature of the customer base.
Furthermore, the City, as a local government authority, is mandated
under Republic Act No. 7160 or the local Government Code to provide
basic services to all its constituents irrespective of their financial
standing. As such, the City is required, by legislation, to extend services
and extended payment terms to all customers irrespective of their
financial standing. For the purpose of determining the credit quality of
customers, the City applies its past experience with customers in
determining the risk of default posed by customers.
Investments
The City limits its exposure to credit risk by investing with only
reputable financial institutions that have a sound credit rating (rated BB
and above), which are within the specific guidelines set in accordance
with the City Finance Committee and the Sanggunian approved
investment policy. Consequently, the City does not consider there to be
any significant exposure to credit risk.
Receivables
Receivables are amounts owed by consumers. The City has a credit risk
policy in place, and the exposure to credit risk is monitored on an
ongoing basis. The City is compelled, by its constitutional mandate, to
provide all of its residents with basic minimum services, without
recourse to an assessment of creditworthiness. There were no material
changes in the exposure to credit risk and its objectives, policies and
processes for managing and measuring the risk during the year under
review.
The City’s maximum exposure to credit risk is represented by the

carrying value of each financial asset in the statement of financial
performance. The City has no significant concentration of credit risk,
with exposure spread over a large number of consumers, and is not
concentrated in any particular sector or geographic area.
The City establishes an allowance for impairment that represents its

estimate of anticipated losses in respect of receivables.
Cash and Cash Equivalents
The City limits its exposure to credit risk by investing cash and cash
equivalents with only reputable financial institutions that have a sound
credit rating, and within specific guidelines set in accordance with the
Sanggunian's approved investment policy. Consequently, the City does
not consider there to be any significant exposure to credit risk.
24
Liquidity Risk
Liquidity risk is the risk of the City not being able to meet its obligations
as they fall due. The City’s approach to managing liquidity risk is to
ensure that sufficient liquidity is available to meet its liabilities when
due, without incurring unacceptable losses or risking damage to the
City’s reputation.
Capital Management
The primary objective of managing the City’s capital is to ensure that

there is sufficient cash available to support the City’s funding
requirements, including capital expenditure, to ensure that the City
remains financially sound. The City monitors capital using a gearing
ratio, which is net debt, divided by total capital, plus net debt. In a
capital intensive industry, a gearing ratio of 54.5% or less can be
considered reasonable. Included in net debt are interest bearing loans
and borrowings, payables, less investments.
Note 4 – Cash and Cash Equivalents

Particulars 2017 2016
General Fund
Cash on Hand
Cash – Local Treasury P713,712.63 P964,158.51
Cash in Bank – Local Currency
Cash in Bank – Local Currency, Current
Account
DBP 0655-002127-030 255,183,651.44 111,855,530.37
Land Bank LB160-0000-1602107449 360,723,717.73 291,084,419.62
Phil. National Bank 501853100011 - 58,787.44
Phil. Veterans Bank - 2,588,555.95
Sub-total 615,907,369.17 405,587,293.38
Total Cash and Cash Equivalent P616,621,081.80 P406,551,451.89
SpSpecial Education Fund (SEF)

Cash on Hand
Cash – Local Treasury - 200.00
Cash in Bank – Local Currency, Current
Account
DBP 0655-002125-030 35,247,336.60 37,882,929.88
Land Bank LB1602107457 221,106,751.58 114,535,334.89
Sub-total 256,354,088.18 152,418,264.77
Total Cash and Cash Equivalent P256,354,088.18 P152,418,467.77
25
Trust Fund
Cash on Hand
Cash – Local Treasury 4,400.00 -
Cash in Bank – Local Currency, Current Accnt
DBP 0655-2126-080 Lipa TF SLRF 28,719.55 207,659.12
DBP 0655-2128-030 Lipa TF Regular 50,947,571.08 45,488,891.34
DBP 0405-018007-030 Trust Services 7,301,416.48 7,246,515.04
Land Bank 1602107465 TF Regular 75,957,849.51 43,637,344.30
Land Bank 1602108135 TF Philhealth
Hospital 4,630,710.00 -
Land Bank 1602108143 TF Philhealth
Professional Fee 2,507,548.00 -
Sub-total 141,373,814.62 96,580,409.80
Cash Equivalents
Cash in Bank – LCCA, Time Deposits
DBP SSD 0655-025785-160 - 20,000,000.00
Total Cash and Cash Equivalent 141,378,214.62 116,580,609.80
Grand Total Cash and Cash Equivalent P1,014,353,384.60 P895,550,326.46
4.1 Cash on Hand
Cash on Hand pertains to Cash-Local Treasury consisting of the sum of

collections received by the City Treasurer’s Office on December 29, 2017 and
was deposited on January 2, 2018.
The Cash – Local Treasury for the General Fund amounting to P713,712.63
pertains to land tax, cash tickets and market fees, while that in the Trust Fund
amounting to P4,400.00 represents the collection of TMD Citation fee.
4.2 Cash in Bank – Local Currency
Cash in banks earns interest based on the prevailing bank deposit rates. Short-
term deposits are made for varying periods, depending on the immediate cash
requirements of the City and earn interest at the respective short-term deposit
rate. The City’s bank balances are amounting to P1,013,635,271.97.
The City maintains DBP Account Number 0655-131-513-500 for e-GOV

payment system of Home Development Mutual Fund (Pag-IBIG) and
Philippine Health Insurance Corporation (PhilHealth) remittance purposes.
This account has no maintaining balance. The City transfers fund to the
account whenever there is outstanding balance for remittance to these
agencies. However this account earns bank interest quarterly. The interest
earned to this account is transferred to the General Fund account. Last
26
December, e-GOV account earned net interest of 21.61 which was requested
for transfer to General Fund account in January 2018.
Note 5 – Investments
This pertains to Cash in Bank – LCCA, Time Deposits which are placed in
financial institution which offered more advantageous interest rate for thirty
(30) days term.
General Fund
DBP0655-002127-160 P150,000,000.00
Special Education Fund
DBP0655-016363-160 70,000,000.00
Trust Fund
DBP SSD#0655-025785-160 -
Cash and Cash Equivalents P220,000,000.00
Note 6 – Receivables
Loans and Receivables Accounts

2017 2016
General Fund
Real Property Tax Receivables P1,216,901.04 P1,985,672.16
Loans Receivables-Others 25,204,516.34 25,828,997.00
Total P26,421,417.38 P27,814,669.16

Special Education Tax Receivables 20,533,474.88 1,985,672.16
Grand Total P46,954,892.26 P29,800,341.32
The balances of Real Property Tax (RPT) Receivables (General Fund) and
Special Education Tax (SET) Receivables represent uncollected real property
taxes as of December 31, 2017. Seventy percent (70%) of the total balance of
Real Property Tax Receivables represents the share of the City, while thirty
percent (30%) represents the share of barangays.
Inter – Agency Receivables

2017 2016
Trust Fund
Due from LGUs P637.00 P637.00
Transfers from other government agencies represent those funds received for
specific projects undertaken by the City for specific purpose. These funds
were received on the basis of the project budgets submitted. Accordingly, the
City is contractually bound to spend these funds only in connection with the
projects. Furthermore, the contracts stipulate that the funds received for the
27
project may only be applied to the costs incurred for the project, as and when
the phases of the project are certified as complete. The conditions remaining
therefore represent phases of the projects that are yet to be certified as
complete. Return of the unspent portion of the fund is subject to the conditions
stated in the respective Memorandum of Agreements executed between the
City and the proponent government agencies.
Inter-Agency Receivables
2017 2016
General Fund
Due from Other Funds P7,327,903.01 P7,351,074.52
Due from Other Funds 709,180.26 5,044,702.63
Trust Fund
Due from Other Funds 42,820,664.20 2,699,285.80
Total P50,857,747.47 P15,095,062.95
Due from Other Funds account (General Fund) was consists of one month
loan amortization for DBP Trust Services Account in Trust Fund pursuant to
Prompt Payment Agreement executed last 2013 as part of loan agreement with
Philippine Veterans Bank. It also contains bank interest income from savings
deposit of other funds for the month of December 2017 which will be
transferred to General Fund in CY 2018. There was also transfer of funds
from General Fund to Trust Fund purposely for the opening of Trust Fund
account at Land Bank of the Philippines with bank account number 1602-
1081-43 and 1602-1081-35 amounting to P10,000.00 each intended for
Philhealth collections for claims and reimbursement of Professional Fees and
Hospital Charges at Ospital ng Lipa with Sanggunian Resolution Number 290
dated November 21, 2017. This was recorded as receivable from Trust Fund
and will be transferred back to General Fund in CY 2018.
Due from Other Funds account (SEF) includes the balance of the disallowed
Allowances and Honoraria of non-teaching personnel wherein another
P281,899.29 has been transferred to Special Education Fund to partially settle
the said obligation with Check Number LBP 742404 dated December 13,
2017 and JEV Number 2017-12-10875.
Due from Other Funds account (Trust Fund) includes the remaining balance
of Community Based Monitoring System from General Fund which will be
transferred to Trust Fund in CY 2018 purposely for the said project with
Sanggunian Ordinance Number 2017–26. This also includes CY 2017
Unexpended Quick Response and Mitigation Fund and the unexpended
balance of MOOE of Local Disaster Risk Reduction and Management Fund
(LDRRMF) which will be transferred in CY 2018.
28
Advances
2017 2016
General Fund
Advances to Special Disbursing Officer P12,000,000.00 P3,750,000.00
Advances to Special Disbursing Officer (SDO) amounting to P12,000,000.00

pertains to the cash advance of the City Mayor for the
Confidential/Intelligence Fund. The liquidation for the said account was
already submitted and duly received at the Office of the Chairman of the
Commission on Audit on January 24, 2018.
Other Receivables
2017 2016
General Fund
Receivables - Disallowances/Charges P4,501,030.10 P5,057,025.10
Other Receivables 283,077.66 190,473.11
Total 4,784,107.76 5,247,498.21
Trust Fund
Due from NGOs/POs 91,250.00 91,250.00
Total P4,875,357.76 P5,338,748.21
The account Other Receivables includes P85,076.52 which pertains to the

receivable balance as of December 31, 2003 wherein there were some
unidentified payees. This amount was already requested to be written off by
the Office of the City Accountant in a letter to COA dated December 28,
2010.
Note 7 – Inventories
Inventory Held for Consumption

2017 2016
General Fund
Accountable Forms Inventory P1,286,427.50 P1,364,200.90
Office Supplies Inventory 4,344,054.10 -
Other Supplies and Materials Inventory 3,097,239.00 -
Animal/Zoological Supplies Inventory 855,885.75 607,441.88
Drugs and Medicines 18,369,214.26 15,496,617.65
Medical Dental and Laboratory
Supplies Inventory 22,087,910.50 10,836,939.36
Agricultural Supplies Inventory 287,337.66 320,481.00
Total 50,328,068.77 28,625,680.79
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Inventory Held for Distribution
Welfare Goods for Distribution 436,459.00 -
Total Inventories P50,764,527.77 P28,625,680.79
No inventory item was pledged as security during the current or prior financial
year.
Note 8 – Prepayments and Deferred Charges
Prepayments
2017 2016
General Fund
Advances to Contractors P2,037,202.25 P549,508.11
Other Prepayments 9,630.38 9,630.38
Total 2,046,832.63 559,138.49

Advances to Contractors 8,578,545.70 -
Total 8,578,545.70 -
Total Prepayments P10,625,78.33 P559,138.49
Advances to Contractors (General Fund) consist of advances made to

Abratique and Associates Philippines Inc. for the installation of traffic
lights.While for the Special Education Fund consist of advances made to
Struktura Teknika Services Co. for the construction of Lipa Academy of
Sports Culture and Arts (LASCA).
The Other Prepayments in the amount of P9,630.38 pertains to prior year’s

prepayment balance, which was requested to be written off by the Office of
the City Accountant in a letter to COA dated December 28, 2010.
Note 9 – Property, Plant and Equipment, net of Accumulated Depreciation
General Fund
Property, Plant and Equipment PPE
(Net of Depreciation As of Dec. 31, Adjustment PPE
2016 As of Dec. 31, 2017
Land and Other Land Improvements
Land P177,995,724.10 P- P177,995,724.10
Other Land Improvements 4,650,611.06 689,218.92 5,339,829.98
Total Land and Other Land
Improvements 182,646,335.16 689,218.92 183,335,554.08
30
General Fund
Property, Plant and Equipment PPE Adjustment PPE
(Net of Depreciation) As of Dec. 31, 2016 As of Dec. 31, 2017
Infrastructure Assets
Road Networks 48,276,871.75 53,975,132.38 102,252,004.13
Water Supply Systems 4,194,006.03 6,121,700.74 10,315,706.77
Total Infrastructure Assets 52,470,877.78 60,096,833.12 112,567,710.90
Buildings and Other Structure

Buildings 217,962,345.44 12,925,147.05 230,887,492.49
School Buildings 62,264,538.03 (4,564,344.00) 57,700,194.03
Hospitals and Health Centers 141,508,798.55 7,352,023.54 148,860,822.09
Markets 126,585,317.73 315,855,192.99 442,440,510.72
Slaughterhouses 29,389.09 - 29,389.09
Other Structures 109,406,413.69 6,926,388.15 116,332,801.84
Total Buildings and Other Structure 657,756,802.53 338,494,407.73 996,251,210.26
Machinery and Equipment

Machineries 1,104,352.82 - 1,104,352.82
Office Equipment 8,792,279.95 (442,399.60) 8,349,880.35
Information and Communication
Technology Equipment 24,200,761.77 (1,838,817.92) 22,361,943.85
Agricultural and Forestry
Equipment 2,440,911.74 (485,955.00) 1,954,956.74
Communication Equipment 10,534,917.77 (341,736.50) 10,193,181.27
Construction and Heavy
Equipment 4,855,739.93 1,287,190.00 6,142,929.93
Disaster Response and Rescue
Equipment 1,573,169.66 410,124.83 1,983,294.49
Medical Equipment 177,629,040.70 (20,619,759.36) 157,009,281.34
Military, Police and Security
Equipment 13,791,816.06 (1,594,237.02) 12,197,579.04
Sports Equipment 52,119.59 446,907.00 499,026.59
Other Machinery and Equipment 8,390,405.13 (743,953.74) 7,646,451.39
Total Machinery and Equipment 253,365,515.12 (23,922,637.31) 229,442,877.81
Transportation Equipment
Motor Vehicles 38,043,567.57 (1,627,743.16) 36,415,824.41
Watercrafts 45,711.99 (10,650.12) 35,061.87
Other Transportation Equipment 30,689.65 - 30,689.65
Total Transportation Equipment 38,119,969.21 (1,638,393.28) 36,481,575.93
Furniture, Fixtures and Books

Furniture and Fixtures 12,641,581.36 (484,130.30) 12,157,451.06
Books 1,128,756.78 (39,440.76) 1,089,316.02
Total Furniture, Fixtures and Books 13,770,338.14 (523,571.06) 13,246,767.08
Other Property, Plant and Equipment

Other Property, Plant and
Equipment 898,962.28 (17,083.88) 881,878.40
31
Total Other Property, Plant and
Equipment 898,962.28 (17,083.88) 881,878.40
Construction in Progress
Construction in Progress –
Infrastructure Assets - 14,376,754.34 14,376,754.34
hConstruction in Progress –
Buildings and Other Structures 296,125,501.48 (290,471,416.01) 5,654,085.47
Total Construction in Progress 296,125,501.48 (276,094,661.67) 20,030,839.81
Total Property, Plant and Equipment
(Net of Accumulated Depreciation) P1,495,154,301.70 P97,084,112.57 P1,592,238,414.27

Land P18,467,120.00 - P18,467,120.00
Other Land Improvements 136,995.72 - 136,995.72
Total Land and Other Land
Improvements 18,604,115.72 - 18,604,115.72
Buildings
School Buildings 347,450,598.65 (24,712,869.96) 322,737,728.69
Other Structures 9,853,734.73 (1,270,812.61) 8,582,922.12
Total Buildings 357,304,333.38 (25,983,682.57) 331,320,650.81
Machinery and Equipment

Office Equipment 3,793,500.40 - 3,793,500.40
Information and Communication
Technology Equipment 1,822,531.75 831,345.00 2,653,876.75
Communication Equipment 175,539.06 (18,240.00) 157,299.06
Medical Equipment 70,590.34 - 70,590.34
Other Machinery and Equipment 112,138.75 (13,893.00) 98,245.75
Total Machinery and Equipment 5,974,300.30 799,212.00 6,773,512.30

Furniture and Fixtures 3,801,542.13 894,393.16 4,695,935.29
Total Furniture, Fixtures and Books 3,801,542.13 894,393.16 4,695,935.29
Other Property, Plant and Equipment

Equipment 68,434.00 - 68,434.00
Total Other Property, Plant and
Equipment 68,434.00 - 68,434.00
Construction in Progress –
Buildings and Other Structures - 32,650,112.79 32,650,112.79
Total Construction Progress - 32,650,112.79 32,650,112.79
Total Property, Plant and Equipment
(Net of Accumulated Depreciation) P385,752,725.53 P8,360,035.38 P394,112,760.91
Grand Total P1,880,907,027.23 P105,444,147.95 P1,986,351,175.18
The adjustment column relates to reclassifications between the different

classes of assets and transfer to other categories of assets including inventory
and intangible assets.
32
The City measured the residual value of all items of property, plant and
equipment, but does not expect a residual value of these assets, because these
will be utilized for their entire economic lives and do not have a significant
scrap value. During the current financial year, the City reviewed the
estimated useful lives and residual values of property, plant and equipment,
where appropriate and adjustments were made based on PPSAS 17
provisions where residual value is set at 5% of the carrying value as of
January 1, 2015.
Major additions/purchases made during the year are listed hereunder:
GENERAL FUND
Particulars Amount
Other Land Improvements
Construction of Covered Pathway at Brgy. Malagonlong LC P 997,194.00
Construction of Covered Pathway at Brgy. 3 LC 497,955.73
Sub-Total 1,495,149.73
Infrastructure Assets
Road Networks
Improvement of Road at Brgy. Anilao Labac LC 997,807.95
Improvement of Road at Brgy. Halang LC 997,974.80
Construction of Sidewalk, Curb & Gutter at Brgy. Tibig LC 997,586.41
Improvement of Drainage System at Brgy. Malagonlong LC 997,235.21
Improvement of Road at Villa Lourdes Subd Brgy. Mataas na Lupa LC 998,595.42
Improvement of Drainage System at Brgy. San Carlos LC 997,176.83
Construction of Drainage System at Villa Lourdes Subd Brgy. Mataas na
997,950.20
Lupa LC
Improvement of Drainage System at Brgy. San Jose LC 997,909.72
Construction of Drainage System at A.Bonifacio St.. Brgy 10 LC 997,255.10
Improvement of Drainage System at Brgy. Kayumanggi LC 997,104.41
Improvement of Road at Brgy. Bulaklakan LC 1,996,917.26
Improvement of Drainage System at Brgy. San Lucas LC 997,060.90
Improvement of Drainage System at Brgy. Balintawak LC 997,917.66
Construction of Drainage System at Brgy. Pagolingin West LC 997,723.18
Improvement of Drainage System at Public Mkt. Bldg. Brgy. 3 LC 1,796,599.43
Construction of Drainage System at Brgy. Pinagkawitan LC 997,976.26
Construction of Drainage System at Brgy. Sto. Niño LC 997,933.70
Construction of Drainage System at Brgy. Pinagtongulan LC 997,145.73
Construction of Drainage System at Brgy. Inosluban LC 997,806.68
Rehabilitation of Drainage System at Brgy. 10 LC 497,981.98
Concreting of Road at Brgy. Pinagkawitan LC 997,989.66
Concreting of Road at Brgy. Sampaguita LC 997,921.53
Improvement of Road at Obispo Obviar S.t cor. Pres. Katigbak St. LC 2,296,806.73
Improvement of Drainage System at Villa Lourdes Subd. at Brgy. Mataas
na Lupa LC 1,096,951.74
Concreting of Road at Brgy. Kayumanggi LC 997,783.73
Improvement of Road at Brgy. 2 LC 997,999.19
Concreting of Road at Brgy. Anilao Labac LC 997,945.96
Concreting of Road at Brgy. Banay Banay to Brgy. Pangao LC 997,204.71
33
GENERAL FUND
Particulars Amount
Concreting of Road at Brgy. Mataas na Lupa LC 997,684.34
Improvement of Road at Brgy. San Jose LC 1,495,948.18
Improvement of Road at Brgy. Sabang LC 997,900.67
Construction of Footbridge at Brgy. Pagolingin East LC 997,898.28
Concreting of Road at Brgy. Sico LC 997,228.80
Concreting of Road at Brgy. Tambo LC 997,886.73
Construction of Drainage System at Brgy. Pusil LC 997,576.68
Improvement of Road at Brgy. Pagolingin Bata LC 997,548.00
Improvement of Road at Brgy. Latag LC 997,867.94
Improvement of Road at Brgy. Anilao LC 998,723.48
Improvement of Drainage System at Urban District (Package 2-Brgy. 1
1,396,837.95
and 7) LC
Concreting of Road at Brgy. Sto. Toribio LC 1,996,368.59
Improvement of Road at Brgy. Bulaklakan LC 1,495,919.63
Concreting of Road at Brgy. 7 LC 997,185.79
Construction of Drainage System at Brgy. Bolbok LC 997,676.00
Construction of Drainage System at Brgy. Rizal LC 997,658.38
Construction of Drainage System at Brgy. Tangob LC 997,672.35
Improvement of Drainage System at Brgy. Pagolingin West LC 997,800.94
Improvement of Drainage System at Brgy .San Guillermo LC 997,274.19
Improvement of Drainage System at Brgy. 10 LC 997,760.51
Improvement of Drainage System at Brgy. Anilao LC 997,667.17
Construction of Slope Protection at Brgy. Halang LC 1,496,183.80
Improvement of Drainage System at Brgy. Malagonlong LC 997,830.91
Improvement of Drainage System at Brgy .Pagolingin Bata LC 497,978.47
Sub –Total 56,970,339.86
Construction of Deep Well w/ submersible pump and accessories at KLL
Brgy. Marawoy LC 3,939,026.59
Construction of 14 units Artesian Well at Various Brgys. of LC 1,789,197.97
Construction of 5 units Artesian Well at various Brgys. of LC 697,672.60
Sub –Total 6,425,897.16
Buildings
Buildings
Construction of Evacuation Center at Social Welfare Village City Park
1,996,675.54
Subd. Sabang Lipa City
Improvement of Multi Purpose Bldg.at Brgy. Tanway LC 998,258.34
Construction of Multi Purpose Bldg. at Brgy. Cumba LC 997,934.50
Construction of Multi Purpose Bldg. at Lamar Subd. (Phase I) Brgy.
Sabang LC 997,936.42
Improvement of National Child Development Center at City Park Subd.
Sabang LC 997,966.80
Improvement of Multi Purpose Bldg. at Brgy. 4 LC 997,559.81
Improvement of Multi Purpose Bldg. at Brgy. Bulacnin LC 497,868.26
Construction of Multi Purpose Bldg. (Phase I) at Brgy. San Benito LC 997,915.91
Construction of Multi Purpose Bldg. Phase I at Brgy. 2 LC 997,991.55
Construction of Multi Purpose Bldg. Phase II at Brgy. FAB LC 997,962.92
Improvement of Multi Purpose Bldg. at Brgy. 1 LC 996,811.70
Improvement of Multi Purpose Bldg. at Brgy. Malitlit LC 997,242.59
Construction of Multi Purpose Bldg. (Phase I) at Brgy. Sto. Toribio LC 1,995,651.83
34
GENERAL FUND
Particulars Amount
Improvement of Multi Purpose Bldg. at Brgy. San Salvador LC 1,296,480.03
Construction of Multi Purpose Bldg./Brgy. Hall Phase 2 at Brgy. San
Benito LC 997,984.04
Improvement of Multi Purpose Bldg. at Brgy. Mabini LC 498,142.90
Completion of Multi Purpose Bldg. at Brgy. Tangway LC 1,197,478.40
Improvement of Multi Purpose Bldg. at Brgy. Lumbang LC 798,220.90
Construction of Social Hygiene and Rabbies Center Phase I at Brgy.
Marawoy LC 2,994,939.62
Renovation of Lipa City Youth and Cultural Center at Brgy. 1 LC 5,991,873.36
Sub –Total 28,242,895.42
Hospitals and Health Centers
Rehabilitation and Repainting of Urban District (Main) Health Center LC 597,841.28
Construction of Medical Arts Section Phase II at ONL Brgy. Marawoy LC 9,985,099.45
Construction of Medical Arts Section Phase III at ONL Brgy. Marawoy
Lipa City 4,993,691.99
Sub –Total 15,576,632.72
Markets and Slaughterhouses
Improvement of Public Market Facilities 6,491,670.23
Construction of Roofing at Public Market Bldg. 3 (Phase I) LC 4,992,194.19
Construction of Lipa Public Market Parking Building at Brgy. 3, LC 299,788,888.88
Construction of Stalls and Market Tricycle Terminal at Public Market LC 2,494,932.96
Improvement and Rehabilitation of Public Market Bldg. 3 LC 14,981,825.27
Sub –Total 328,749,511.53
Other Structures
Installation of Streetlights at Brgy. San Carlos LC 997,589.06
Installation of Streetlights at Brgy. San Sebastian LC 997,573.44
Installation of Streetlights at Brgy. Sico LC 997,344.69
Installation of Streetlights at Brgy. Antipolo del Norte LC 997,871.25
Installation of Streetlights at Brgy. 6 LC 997,793.75
Construction of Boundary Arch at Brgy. Calamias LC 498,199.44
Construction of Social Welfare Village at City Park Subd. Brgy. Sabang
LC 997,997.38
Improvement of Facilities in Multi Purpose Bldg. of Brgy. Sico LC 997,485.27
Improvement of Covered Court at Brgy. San Celestino LC 997,255.66
Installation of streetlights at Brgy. Marawoy to Bulacnin 1,495,986.63
Installation of Streetlights at Brgy. Tangob LC 997,643.13
Construction of Covered Court at Sitio Balagbag, Brgy. Dagatan LC 1,696,774.64
Construction of Covered Court at Brgy. Duhatan LC 3,493,981.78
Sub –Total 16,163,496.12
Machineries and Equipment
Office Equipment
Purchase of Various Office Equipment 1,654,000.00
Information and Communication Technology Equipment

Purchase of Various Information and Communication Technology
Equipment 3,406,429.50
Communication Equipment
Purchase of Sound System 299,940.00
35
GENERAL FUND
Particulars Amount
Construction and Heavy Equipment
2 unit Isuzu 16 footer Reconditioned Garbage Truck 1,990,000.00
Disaster Response and Rescue Equipment

Purchase of Various Disaster Response and Rescue Equipment 741,383.00
Military, Police and Security Equipment

9pcs. Body Armor Level 3A 480,000.00
Sports Equipment
Purchase of Various Sports Equipment for ALCUAA 2017 528,000.00
Transportation Equipment
Motor Vehicles
Purchase of Toyota 3.0L GL Grandia 1,732,000.00
Purchase of Toyota Fortuner G DSL A/T 1,630,000.00
Sub –Total 3,362,000.00
Construction in Progress – Infrastructure Assets
Installation of traffic lights at Lipa City 14,376,754.34
Construction in Progress – Buildings and Other Structures

Construction of Lipa City Center for Training and Development Phase I at
Brgy. 2 LC 5,654,085.47
Total P484,462,514.85
SPECIAL EDUCATION FUND

Particulars Amount
Machineries and Equipment
Information and Communication Technology Equipment
23pcs Lenovo Intel Core i5 Laptop P920,000.00

Furniture and Fixtures
Purchase of 394pcs Sentinel Arm Chair 1,457,800.00
Construction in Progress – Buildings and Other Structures
Construction of Lipa Academy of Sports, Culture and Arts (LASCA)
Phase II at Brgy. Marawoy LC 32,650,112.79
Total P35,027,912.79
Note 10 – Current Liabilities
2017 2016
General Fund
Accounts Payable P88,209,925.52 P39,501,584.79
Due to Officers and Employees 1,825,216.31 5,222,538.48
36
Other Payables 11,763,820.76 4,502,401.81
Loans Payable – Domestic (Current) 87,555,014.82 89,031,309.75
Total 189,353,977.41 138,257,834.83

Accounts Payable 13,036,746.98 3,127,465.00
Other Payables 5,058,547.32 162,000.00
Total 18,095,294.30 3,289,465.00
Trust Fund
Other Payables 42,901,555.25 25,600,039.08
Bonds Payable - Domestic 17,955.00 0.00
Total 42,919,510.25 25,617,994.08
Grand Total P250,368,781.96 P167,147,338.91
For the CY 2017, the currently maturing portion of Loans Payable–Domestic is as

follows:
Type of Loan Creditor Amount

Construction of Ospital ng Lipa Philippine National Bank P12,484,887.48
Purchase of equipment for Ospital

ng Lipa Philippine National Bank 4,479,894.18
Additional loan for the

Construction of Ospital ng Lipa Philippine National Bank 3,062,499.96
Construction of Lipa public market

parking building Philippine Veterans Bank 33,631,511.64
Purchase of additional Equipment

for Ospital ng Lipa Philippine Veterans Bank 33,896,221.56
Total P87,555,014.82
Inter-Agency Payables
General Fund
Due to BIR P10,818,719.94 P9,823,013.49
Due to GSIS 9,501,012.82 174,055.90
Due to Pag-IBIG 1,485,182.91 1,404,757.75
Due to PhilHealth 537,319.69 519,894.69
Due to NGAs 253,776.64 220,472.14
Due to LGUs 3,873,575.94 -
Total 26,469,587.94 12,142,193.97
37
General Fund
Due to BIR P286,308.43 P118,993.24
Due to GSIS 7,795.09 7,795.09
Total 294,103.52 126,788.33
Trust Fund
Due to BIR P677,624.34 P551,880.36
Due to NGAs 7,464,798.47 7,438,092.63
Due to LGUs 28,384,176.21 21,245,716.21
Total 36,526,599.02 29,235,689.20
Grand Total P P63,290,290.48 P41,504,671.50
The Due to BIR, GSIS, Pag-IBIG and PhilHealth accounts represent the amount
deducted from the salaries of officials and employees and are remitted to the respective
government agencies immediately on the month following the month for which these
were deducted. While Due to NGAs represents balances of funds received by the City
for specific purposes.
The Due to NGAs in the General Fund pertains to collection of ante mortem for
remittance to National Treasury while that of Trust Fund represents the 5% share of the
DPWH in the building permit fees collection.
Due to LGUs in General Fund pertains to 30% share of 72 barangays in Real Property
Tax, 50% share in Community Tax Certificate, share in Environmental Management
Fee (EMF), and aid to barangay wherein, the City has already written a letter to
different barangays to process the transfer of trust fund held in the City’s account to
their barangay account to ensure their immediate use of funds for development projects.
Intra-Agency Payables

General Fund
Due to Other Funds P43,529,844.46 P7,743,988.43
Due to Other Funds 50,970.65 79,607.19
Trust Fund
Due to Other Funds 7,276,932.36 7,271,467.33
Total P50,857,747.47 P15,095,062.95
Trust Liabilities
2017 2016
Trust Fund
Bonds Payable -Domestic P17,955.00
Guaranty/Security Deposits Payable P25,911.55 25,911.55
38
Trust Liabilities 123,206.00 1,000,000.00
Trust Liabilities - Disaster Risk
Reduction and Management Fund 97,418,606.64 56,220,720.44
Total P97,567,724.19 P57,264,586.99
The Trust Liabilities account of P123,206.00 pertains to the balance of Project

Equity Share/City Counterpart on Bottom-up Budgeting (BuB) for Community
Based Monitoring System/Capacity Development Project referred as DILG-BuB
CBMS/CapDev Guidelines project.
Deferred Credits/Unearned Income

2017 2016
General Fund
Deferred Real Property Tax
Income P1,216,901.04 P1,985,672.16
Other Deferred Credits 214,493,987.43 185,769,151.36
Total 215,710,888.47 187,754,823.52

Deferred Special Education Tax
Income 20,533,474.88 1,985,672.16
Grand Total P236,244,363.35 P189,740,495.68
Other Deferred Credits account consists of:
1% Deferred Real Property Tax SEF P104,999,647.79

30% Deferred Real Property Tax 31,499,894.34
70% Deferred Real Property Tax 73,499,753.44
Deferred Income from refund of PERA 3,070,436.86
Deferred Income from Refund of Disallowances per
several COA NFDs 1,424,255.00
Total P214,493,987.43
Refund of PERA refers to the amount of disallowed Personnel Economic

Relief Allowance for which a Receivable account was set-up together with the
Deferred Income from Refund of PERA account.
The refund of Disallowances based on several COA NFDs refers to the

amount disallowed on payment of salaries and 13th month differentials to City
Vice Mayor and Members of the Sangguniang Panlungsod (SP) for years
2004 – 2009 based on Step 8, and payment of Transportation Allowance (TA)
to the City Officials, City Vice-Mayor and some Members of SP for the
period January 1 – June 30, 2010 for which Receivable accounts were set up
together with the Deferred Income from Refund of Disallowances accounts.
39
These are as follows:
Def. Inc. from COA NFD dated 6-16-10 and ND No.

P159,393.00
2006-007-101(04)
Def. Inc. from refund of disallowance per COA NFD
189,126.00
2010-001-101-(09)
258,151.50
2010-007-101(10) / ND2010-006-101(10)
212,524.00
2010-002-101(05)
212,524.00
2010-003-101(06)
208,437.00
2010-004-101-(07)
184,099.50
2010-005-101-(08)
Total P1,424,255.00
Note 11 – Non-Current Liabilities
2017 2016
General Fund
Loans Payable – Domestic 319,473,880.27 407,869,735.24
Total P319,473,880.27 P407,869,735.24
The long term portion of Loans Payable – Domestic is as follows:
Type of Loan Creditor Amount

Construction of Ospital ng Lipa Philippine National Bank 39,535,477.17
Additional loan for the Construction
of Ospital ng Lipa Philippine National Bank 12,760,416.59
Construction of Lipa public market
parking building Philippine National Bank 189,792,461.69
Purchase of additional Equipment
for Ospital ng Lipa Philippine Veterans Bank 77,385,524.82
Total P319,473,880.27
Note 12 – Tax Revenue

2017 2016
General Fund
Tax Revenue – Individual and Corporation
Community Tax P12,490,707.33 P10,987,489.46
Tax Revenue – Property
Real Property Transfer Tax 28,012,139.67 28,203,740.85
40
Real Property Tax- Basic 121,364,347.23 106,608,037.76
Tax Revenue – Goods and Services
Amusement Tax 8,964,649.03 8,713,372.25
Business Tax 336,992,483.04 288,105,046.55
Franchise Tax 4,122,362.20 2,347,570.23
Tax on Delivery Trucks and Vans 1,640,725.00 1,413,275.00
Tax Revenue – Fines and Penalties
Tax Revenue – Fines and Penalties-Taxes
on Individual and Corporation 327,117.39 331,914.11
Tax Revenue – Fines and Penalties-
4,967,744.46 5,172,528.98
Property Taxes
Tax Revenue – Fines and Penalties –
Taxes on Goods and Services 7,523,406.53 16,338.25
Tax Revenue – Fines and Penalties – Other
Taxes 0.00 29,730.23
Sub Total 526,405,681.88 451,929,043.67

Special Education Tax 70,404,603.97 152,297,196.81
Sub-Total 170,404,603.97 152,297,196.81
Grand Total P696,810,285.85 P604,226,240.48
Note 13 – Share from Internal Revenue Collection

2017 2016
General Fund
Internal Revenue Allotment P789,236,143.00 P669,747,769.00
Note 14 – Share from National Taxes

2017 2016
General Fund
Share from Expanded Value Added Tax P235,132.27 0.00
Note 15 – Service and Business Income

2017 2016
General Fund
Service Income
Permit Fees P50,448,848.57 P51,919,856.44
Registration Fees 1,112,844.00 769,309.00
Registration Plates, Tags and Sticker
Fees 423,240.00 358,290.00
Clearance and Certification Fees 8,051,578.70 7,429,451.83
Inspection Fees 6,859,252.67 5,520,390.71
Occupation Fees 6,153,710.00 5,267,140.00
Fees for Sealing and Licensing of
Weights and Measures 243,125.00 225,321.76
Fines and Penalties – Service Income 19,645.45 569,905.25
41
Other Service Income 12,701,502.95 13,726,383.37
Business Income
School Fees 13,581,858.00 8,377,619.00
Rent/Lease Income 238,887.46 387,838.75
Receipts from Market Operations 28,727,385.63 26,125,537.23
Slaughterhouse Operation 10,621,850.64 2,934,070.50
Receipts from Cemetery
Operations 638,900.00 573,210.00
Garbage Fees 7,953,900.00 7,267,970.00
Hospital Fees 36,857,711.89 41,556,280.84
Interest Income 4,871,082.64 4,856,648.07
Fines and Penalties 0.00 4,586,342.47
Total P189,505,323.60 P182,451,565.22
Note 16 – Share, Grants and Donation

2017 2016
General Fund
Share
Share from PCSO P2,605,977.36 P1,988,711.34
Note 17 – Transfers, Assistance and Subsidy From

2017 2016
General Fund
Subsidy from General Fund
Proper/Other Special Accounts P345,626,550.96 P16,474,158.46
Subsidy from Other Funds - 20,671,922.40
P345,626,550.96 P37,146,080.86
Subsidy from General Fund Proper represents transfer of Market Parking Building
to Market Fund and transfer of Medical Arts Building to Ospital ng Lipa Fund.
Note 18 – Personnel Services

2017 2016
General Fund
Personnel Services
Salaries and Wages – Regular P293,071,782.78 P285,526,941.16
Salaries and Wages – Casual/
17,809,232.24 9,973,399.61
Contractual
Other Compensation
Personnel Economic Relief
Allowance (PERA) 25,795,604.07 25,933,072.99
Representation Allowance (RA) 4,404,875.00 4,918,536.60
Transportation Allowance (TA) 3,136,250.00 3,403,125.00
Clothing/Uniform Allowance 5,360,000.00 5,450,000.00
42
Subsistence Allowance 2,451,425.00 2,368,692.84
Laundry Allowance 233,200.00 561,700.00
Hazard Pay 1,247,915.17 841,936.03
Longevity Pay 940,000.00 875,000.00
Overtime and Night Pay 1,287,504.33 1,044,672.42
Year-End Bonus 48,939,341.30 46,176,383.65
Cash Gift 5,415,750.00 5,565,750.00
Other Bonuses and Allowances
Personnel Benefit Contribution
Retirement and Life Insurance
Premiums 34,831,823.86 33,086,846.06
Pag-IBIG Contribution 1,288,600.00 1,300,334.53
PhilHealth Contribution 3,076,637.50 2,967,150.25
Employees’ Compensation
Insurance Premiums 1,284,018.90 1,291,913.36
Other Personnel Benefit
Terminal Leave Benefits 13,748,468.12 4,300,935.74
Other Personnel Benefits 15,847,909.23 12,348,539.27
Total General Fund P480,170,337.50 P447,934,929.51

Personnel Services
Salaries and Wages – Regular 389,550.00 8,376.96
Salaries and Wages – Casual/
-
Contractual 407,100.00
Other Compensation
Personnel Economic Relief
-
Allowance 727.28
Honoraria 75,000.00 60,000.00
Other Bonuses and Allowances 230,000.00 29,345,079.19
Personnel Benefit Contribution

Retirement and Life Insurance
Premiums - 1,005.24
Employees’ Compensation
Insurance Premiums - 45.16
Total Special Education Fund 694,550.00 29,822,333.83
Grand Total P480,864,887.50 P477,757,263.34
Other Personnel Benefits pertains to ten (10) days monetization, and Productivity
Enhancement Incentives (PEI).
43
Note 19 – Maintenance and Other Operating Expenses
2017 2016
General Fund
Traveling Expenses
Traveling Expenses – Local P7,109,932.79 P6,013,993.14
Training and Scholarship Expenses
Training Expenses 5,152,896.52 4,981,404.48
Scholarship/Grants Expenses 58,232,442.80 78,389,956.80
Supplies and Material Expenses
Office Supplies Expense 12,160,075.68 5,824,331.05
Accountable Forms Expense 1,764,171.80 450,666.90
Non-Accountable Forms Expenses 269,610.00
Animal/Zoological Expense 1,445,971.51 342,883.02
Food Supplies Expense 5,486,899.63 953,476.55
Welfare Goods Expenses 49,903.00 13,469,178.50
Drugs and Medicines Expenses 23,265,786.35 23,597,996.11
Medical, Dental and Laboratory
12,138,755.14 20,969,955.92
Supplies Expenses
Fuel, Oil and Lubricants Expenses 20,728,338.84 18,580,194.20
Agricultural and Marine Supplies
Expenses 1,084,734.00 669,207.00
Textbooks and Instructional
Materials Expenses 1,690,405.50 1,722,560.62
Other Supplies and Materials
7,151,059.15 5,290,549.05
Expenses
Utilities Expenses
Water Expenses 4,308,803.90 5,149,685.58
Electricity Expenses 36,420,177.84 30,822,949.95
Communication Expenses
Postage and Courier Services 90,247.00 29,500.00
Telephone Expenses 3,473,325.91 3,913,513.21
Internet Subscription Expenses 1,149,074.79 955,890.90
Awards/Rewards and Prizes
Prizes 1,420,800.00 841,800.00
Confidential, Intelligence and
Extraordinary Expenses
Confidential Expenses 3,750,000.00 1,250,000.00
Extraordinary Expenses 1,949,184.00 1,608,540.00
Total General Fund 210,292,596.15 225,828,232.98

Traveling Expenses
Traveling Expenses – Local 143,925.26 843,436.00
Training and Scholarship Expenses
Training Expenses 27,800.00 48,800.00
Supplies and Material Expenses
44
Drugs and Medicines Expenses 309,408.23 98,620.00
Medical, Dental and Laboratory
Supplies Expenses 22,267.85 100,000.00
Textbooks and Instructional
Materials Expenses 21,605,421.00
Other Supplies and Materials
Expenses 9,082,531.27 5,138,431.30
Awards/Rewards and Prizes
Awards/Rewards Expenses 538,877.00
Prizes 194,800.00 125,000.00
Total Special Education Fund 31,925,030.61 6,354,287.30
Grand Total P242,217,626.76 P232,182,520.28
Note 20 – Contracted Services

2017 2016
General Fund
Professional Services
Auditing Services P485,169.34 P354,556.89
Consultancy Services 480,000.00 615,000.00
Other Professional Services 60,485,170.05 57,344,143.19
General Services
Environmental / Sanitary Services 35,189,025.10 32,824,308.00
Janitorial Services 2,273,809.27 -
Security Services 7,725,163.33 6,996,590.00
Other General Services 71,123,287.72 52,623,934.05
Total 177,761,624.81 150,758,532.13

Professional Services
Other General Services 10,000.00 -
Other Professional Services - 61,000.00
Total 10,000.00 61,000.00
Grand Total P177,771,624.81 P150,819,532.13
Note 21 – Repairs and Maintenance

2017 2016
General Fund
Repairs and Maintenance-
Infrastructure Assets P5,537,652.50 P16,477,102.30
Repairs and Maintenance-Building
and Other Structure 7,181,544.26 5,459,783.20
Repairs and Maintenance-Machinery
and Equipment 2,281,156.30 1,878,512.67
Repairs and Maintenance-
Transportation Equipment 3,146,531.47 3,131,957.72
Repairs and Maintenance-Furniture,
45
Fixtures 42,000.00 8,500.00
Total General Fund 18,188,884.53 26,955,855.89

Repairs and Maintenance-Building
and Other Structure 1,968,165.00 2,161,835.00
Total Special Education Fund 1,968,165.00 2,161,835.00
Grand Total P20,157,049.53 P29,117,690.89
Note 22 – Taxes, Insurance Premiums and Other Fees

2017 2016
General Fund
Taxes, Duties and Licenses P50,630.00 P58,840.00
Fidelity Bond Premium 368,955.00 365,587.50
Insurance Expenses 1,480,209.18 1,162,466.94
Total P1,899,794.18 P1,586,894.44
Note 23 – Other Maintenance and Operating Expenses

2017 2016
General Fund
Advertising Expenses P1,104,042.00 P1,276,000.00
Printing and Publication Expenses 7,800,172.85 4,825,104.95
Representation Expenses 13,529,705.00 15,925,756.67
Rent/Lease Expenses 1,835,487.00 879,185.00
Membership Dues and Contribution to
Organizations 495,400.00 499,000.00
Subscription Expenses 211,535.00 249,137.00
Donations 132,224,099.74 78,970,107.71
Other Maintenance and Operating
Expenses 8,606,750.56 9,624,938.00
Total 165,807,192.15 112,249,229.33
2017 2016
Printing and Publication Expenses 4,500.00 50,000.00
Representation Expenses 4,906,713.00 3,190,795.00
Rent/Lease Expenses 1,230,800.00 -
Other Maintenance and Operating
Expenses 1,417,133.78 2,243,645.00
Total 7,559,146.78 5,484,440.00
Grand Total P173,366,338.93 P117,733,669.33
46
Note 24 – Financial Assistance/Subsidy
2017 2016
General Fund
Subsidy to General Fund Proper/Special
Accounts 345,626,550.96 16,474,158.46
Subsidy to Other Funds 41,197,886.20 20,578,750.64
Total P386,824,437.16 P37,052,909.10
Subsidy to Other Funds represents CY 2017 Unexpended Quick Response and

Mitigation Fund and Unexpended balance of MOOE of Local Disaster Risk
Reduction and Mitigation Fund (LDRRMF) which will be transferred to Trust
Fund account in CY 2018.
Note 25 – Non-Cash Expenses

2017 2016
General Fund
Depreciation Expense
Land Improvements P805,930.81 P846,425.34
Infrastructure Assets 3,299,403.90 -
Building and Other Structure 50,238,128.06 60,026,409.12
Machinery and Equipment 36,416,571.47 39,493,991.60
Transportation Equipment 5,000,393.28 5,875,737.37
Furniture, Fixtures and Book 1,620,497.36 2,206,044.24
Equipment 145,583.88 338,329.36
Total 97,526,508.76 108,786,937.03

Depreciation Expense
Building and Other Structure 25,983,682.57 30,150,220.13
Machinery and Equipment 182,478.00 247,711.76
Furniture, Fixtures and Book 563,406.84 826,624.46
Total 26,729,567.41 31,224,556.35
Grand Total P124,256,076.17 P140,011,493.38
Note 26 – Financial Expenses

2017 2016
General Fund
Interest Expenses 23,723,618.16 25,646,456.50
Bank Charges 871,385.52 1,003,738.56
Total P24,595,003.68 P26,650,195.06
47
Note 27 – Other Receipts
General Fund
Collection of employees contribution for
GSIS/PHILHEALTH/HDMF P156,623.00
Collection of local taxes for transfer to various barangays 80,324,495.47
Collection of Other Payables 3,371,827.15
Collection of other refunds 64,150.00
Collections of Intra Agency Fund Transfers 6,118,698.07
Receipt of income for transfer to NGAs 2,412,929.75
Receipt of Intra Agency Fund Transfer 31,920,825.39
Receipt of Refund from Cash Advances 53,732,241.24
Receipt of Unearned Revenues 209,999,295.57
Receipts of Shares, Grants and Donations 2,606,977.36
Collection of Receivable 2,769,051.66
Restoration of Cash from Cancelled/Stale Checks 528,677.58
Refund of Overpayment of Personnel Services 14,288.27
Total 394,020,080.51

Collections of Intra-Agency Fund Transfers 4,386,493.02
Total 4,444,793.02
Trust Fund
Collections of Intra-Agency Fund Transfers 3,060,085.80
Receipt of fund for implementation of projects 124,044,427.65
Receipt of Intra-Agency Fund Transfer 20,000.00
Receipt of Refund from Cash Advances 410,346.67
Total 128,459,088.36
Grand Total P526,923,961.89
Note 28 – Other Disbursements
General Fund
Payment of other refunds 44,674.25
Payment for Inter-Agency Payables 183,235,421.72
Payment for Intra-Agency Payables 53,321,361.11
Refund of Salary Deductions 951,904.01
Remittance of Salary Deductions from Employees 192,299,406.43
Remittance of taxes withheld to suppliers 34,467,970.61
Transfer of cash to other funds 20,000.00
Grant of loans/microfinance 1,000,000.00
Total 465,340,738.13
48
Payment for Intra-Agency Payables 79,607.19
Total 3,479,502.20
Trust Fund
Payment for Inter-Agency Payables 67,635,680.45
Payment for Intra-Agency Payables 2,076,455.36
Payment for Trust Liabilities 130,999.52
Remittance of Salary Deductions from Employees 393,606.28
Total 72,439,374.86
Grand Total P541,259,615.19
Note 29 – Reconciliation of Net Cash Flows from Operating Activities to Surplus/

(Deficit)
GENERAL FUND
a) Cash and Cash Equivalent
Cash and Cash Equivalent consist of cash on hand, balances with banks, and
investment in time deposits. Cash and Cash Equivalents included in the cash
flow statements comprise the following Statements of Financial Position
amounts:
2017 2016
Cash on hand and balances with banks 766,621,081.80 556,551,451.89
Total 766,621,081.80 556,551,451.89
b) Reconciliation of Net Cash Flows from Operating Activities to

Surplus/(Deficit)
2017
Surplus 290,548,40.15
Grant of microfinance loans - financing activity (1,000,000.00)
Due to BIR - investing activity (11,538,568.36)
Donated PPE - Breeding Stocks (investing activity) 250,000.00
Other payables - investing activity (2,496,218.15)
Non-Cash trasactions:
Prior Year Adjustment 5,832,437.15
Depreciation 97,526,508.76
Increase in Payables 130,641,752.46
Increase in Other Current Assets (23,626,541.12)
49
Increase in receivables (6,370,186.26)
Net Cash from Operating Activities P479,767,614.63
SPECIAL EDUCATION FUND
investment in time deposits. Cash and cash equivalents included in the cash
amounts:
2017 2016
Total 326,354,088.18 222,418,264.77
b) Reconciliation of Net Cash Flows from Operating Activities to Surplus/

(Deficit)
2017
Surplus P101,518,144.17
Due to BIR - investing activity (2,171,319.02)
Advances to Contractors - investing activity (4,897,516.92)
Other Payables - investing activity (3,265,011.28)
Non-Cash transactions:
Prior Period Adjustment 76,230.00
Depreciation 26,729,567.41
Increase in receivables (22,790,826.05)
TRUST FUND
investment in time deposits. Cash and cash equivalents included in the cash
amounts:
2017 2016
Total 141,378,214.62 116,580,609.80
50
b) Reconciliation of Net Cash Flows from Operating Activities to
Surplus/ (Deficit)
2017
Surplus 0.00
Non-Cash transactions:
Decrease in Receivables (21,520,990.14)
Note 30 – Local Disaster Risk Reduction and Management Fund
The Local Disaster Risk Reduction and Management Fund (LDRRMF)

previously termed as Local Calamity Fund amounting to P75,324,993.14 or 5%
of the City’s income during the year have been allocated to fund for pre-disaster
preparedness programs (70%), and Quick Response Fund (QRF) (30%). This is
pursuant to Republic Act. No 10121, An Act Strengthening the Philippine
Disaster Risk Reduction and Management System, Providing for the National
Disaster Risk Reduction And Management Framework and Institutionalizing
the National Disaster Risk Reduction and Management Plan, Appropriating
Funds therefore and for other purposes where Section 21 provides:
“Section 21. Local Disaster Risk Reduction and Management Fund

(LDRRMF). - The present Local Calamity Fund shall henceforth be
known as the Local Disaster Risk Reduction and Management Fund
(LDRRMF). Not less than five percent (5%) of the estimated
revenue from regular sources shall be set aside as the LDRRMF to
support disaster risk management activities such as, but not limited
to, pre-disaster preparedness programs including training,
purchasing life-saving rescue equipment, supplies and medicines,
for post-disaster activities, and for the payment of premiums on
calamity insurance. The LDRRMC shall monitor and evaluate the
use and disbursement of the LDRRMF based on the LDRRMP as
incorporated in the local development plans and annual work and
financial plan. Upon the recommendation of the LDRRMO and
approval of the sanggunian concerned, the LDRRMC may transfer
the said fund to support disaster risk reduction work of other
LDRRMCs which are declared under state of calamity.
Of the amount appropriated for LDRRMF, thirty percent (30%)

shall be allocated as Quick Response Fund (QRF) or stand-by fund
for relief and recovery programs in order that situation and living
conditions of people in communities or areas stricken by disasters,
calamities, epidemics, or complex emergencies, may be normalized
as quickly as possible.
51
Unexpended LDRRMF shall accrue to a special trust fund solely for
the purpose of supporting disaster risk reduction and management
activities of the LDRRMCs within the next five (5) years. Any such
amount still not fully utilized after five (5) years shall revert back to
the general fund and will be available for other social services to be
identified by the local sanggunian.”
The balance of LDRRMF as of December 31, 2017 amounted to P52,727,495.20 for

current appropriations and P21,123,942.54 for continuing appropriations solely for
the purpose of supporting disaster risk reduction and management activities, where
P15,313,352.51 has been utilized for pre-disaster preparedness programs;
P28,138,126.17 has been included in continuing appropriation (see details below).
The 30% Quick Response Fund for CY 2017 amounting to P22,597,497.94 will be
transferred to Trust Fund in CY 2018 pursuant to COA Circular on the Local
Disaster Risk Reduction and Management Fund (LDRRMF). While the unexpended
balance of Maintenance and Operating Expenses totaling P18,600,388.26 will also
be transferred to Trust Fund in CY 2018.
Continuing Appropriations CY 2017

Construction of city evacuation center brgy 2 8,087,984.60
Improvement of drainage system sto nino 997,524.57
Purchase of 1 unit pick up truck 1,303,000.00
Purchase of construction and heavy equipment 3,100,000.00
Purchase of Office equipment 150,000.00
Purchase of Communication equipment 450,000.00
Purchase of Disaster and rescue equipment 8,617.00
Purchase of Motor vehicle 13,691,000.00
Other Structure 350,000.00
Total P28,138,126.17
Note 31 – Adjustment to Cash Balance, January 1, 2017
The balance of Cash as of January 1, 2017 as shown in the Statement of Cash

Flows is adjusted to conform with PPSAS as follows:
Special
General Fund Trust Fund Total
Education Fund
Unadjusted Cash Balance, Jan. 1, 2017 P556,551,451.89 P222,418,264.77 P116,580,609.80 P895,550,326.46
Adjustments due to implementation
of the PPSAS
Presented as Investments-Cash-
LocalCurrency- Time Deposits (150,000,000.00) (70,000,000.00) (220,000,000.00)
Adjusted Cash Balance, Jan.1, 2017 P406,551,451.89 P152,418,264.77 P116,580,609.80 P675,550,326.46
52
Note 32: Reconciliation between actual amounts on a CITY GOVERNMENT OF LIPA, BATANGAS
comparable basis as presented in this statement and in Maintenance
the Statement of Financial Performance for the Year Personal and Other Financial
Ended December 31, 2017. Income Capital Outlay
Services Operating Expenses
Expenses
Comparison Statement of Budget and Actual P1,679,877,501.78 P481,252,920.03 P685,841,223.03 P113,595,768.06 P353,077,042.53
Entity Differences - - - - -
Basis Differences: 347,035,554.20 - (22,597,497.94) (89,000,764.38) (353,077,042.53)
Income not considered budgetary items 347,035,554.20 - - - -
Non-cash income 347,035,554.20
Gain on Sale of Assets
Receipts not considered as income - - - - -
Sale of capital assets
Borrowings
Budgetary items not considered as expenses - - (22,597,497.94) (89,000,764.38) (353,077,042.53)
Debt Service (Loan Amortization, Retirement of
Debt Instruments) (89,872,149.90)
Capital Expenditures (353,077,042.53)
Bank Service Charges - interest expense from
savings deposit and bank charges 871,385.52
Quick Response Fund 2017 not considered as
expense in SIE (22,597,497.94)
Timing Differences: (2,893,642.94) (388,032.53) (47,831,290.88) - -

Prepayments charged to current appropriations
Unconsumed Inventories charged to current
Appropriations (50,328,068.77)
Consumed Inventories and deferred charges
charged to prior period appropriations 28,328,978.29
Commitments
Income collected in GF on December 2017 but
transferred to SEF on January 2018 (2,973,034.96)
53
Note 32: Reconciliation between actual amounts on a CITY GOVERNMENT OF LIPA, BATANGAS
comparable basis as presented in this statement and in Maintenance
the Statement of Financial Performance for the Year Personal and Other Financial
Ended December 31, 2017. Income Capital Outlay
Services Operating Expenses
Expenses
Fourth Quarter Interest Income from savings deposit of
SEF and TF collected on December 2017 but
transferred on CY 2018 79,392.02
Obligated but not paid - (388,032.53) (25,832,200.40) - -
Per Statement of Financial Performance P2,024,019,413.04 P480,864,887.50 P615,412,434.21 P24,595,003.68 -
54
PART II - OBSERVATIONS AND RECOMMENDATIONS
OBSERVATIONS AND RECOMMENDATIONS
1. The accuracy, reliability and existence of the recorded balances of Property, Plant
and Equipment (PPE) amounting to P3,090,039,104.97 (gross of depreciation) as of
year-end were doubtful due to: (a) misclassification of different PPE accounts
amounting to P4,908,307.06; (b) unreconciled discrepancies of P636,228,959.47
between the Accounting and General Services Office (GSO); (c) inclusion of the
unserviceable properties valued at P974,285.25 in the City’s books of accounts; (d)
unaccounted balances/no supporting schedules of unserviceable properties stated in
the summary report of Report of Physical Count of Property, Plant and Equipment
(RPCPPE) amounting to P57,520,394.43; and (e) adjustments/reclassifications made
on PPE of P341,965,966.42 for CY 2017 which were not supported by Journal Entry
Vouchers (JEVs) and other documentary requirements.
One of the objectives in the audit of Property, Plant and Equipment (PPE) is to
determine that all acquisitions and dispositions/transfers are recorded in the books so that
PPE are accurately presented in the financial statements
Section 102 of Presidential Decree (PD) No. 1445 provides that the head of any
agency of the government is immediately and primarily responsible for all government
funds and property pertaining to his agency. The persons entrusted with the possession or
custody of the funds or property under the agency head shall be immediately responsible
to him, without prejudice to the liability of either party to the government.
Section 114 of Manual on New Government Accounting System (MNGAS)

requires the City/Municipal Accountant and the GSO to maintain perpetual inventory
records comprising of stock cards and property cards for supplies, property, plant and
equipment in their custody to account for the receipt and disposition of the same. The
balance per stock/property cards should always reconcile with the ledger cards of the
accounting unit. Xxx
COA Circular No. 2015-009 dated December 1, 2015 was issued to prescribe the
Revised Chart of Accounts in recording and reporting the financial transactions of the
Local Government Units (LGUs) as follows:
Account Title Office Equipment

Account Number 1-06-05-020
Normal Balance Debit
Description This account is used to record the cost incurred in the
purchase or assembly or fair value. If acquired through
donation or transfers without cost, of office equipment for
use in government operations. It includes
duplicating/photocopying machines, air conditioning units
and the like. Credit this account for disposal or derecognition
of the carrying amount of the replaced parts or major repairs.
55
Account Title Military, Police and Security Equipment
purchase or fair value, if acquired through donation or
transfers without cost, of military, police and security
equipment acquired for use in government operations, such
as: guns, armored vehicles, bomber aircraft, military tanks,
mobile cars, patrol boats, navy ships, closed circuit
television, security cameras, etc. Credit this account for
derecognition of the carrying amount of the replaced parts in
major repairs, or disposal.
Account Title Motor Vehicles

purchase or assembly or fair value, if acquired through
donation or transfers without cost, of motor vehicles for
official use such as service vehicles (cars, bus, motorcycles,
and the like). Credit this account for derecognition of the
carrying amount of the replaced parts in major repairs, or
disposal.
Account Title Other Transportation Equipment

purchase or assembly, or fair value, if acquired through
donation or transfers without cost, of other transportation
equipment which are not classified under the specific
transportation equipment accounts. Credit this account for
derecognition of the carrying amount of the replaced parts in
major repairs, or disposal.
Account Title Furniture and Fixtures

Description This account is used to record the cost of acquisition or
assembly, or fair value, if acquired through donation or
transfers without cost, of furniture and fixtures for use in
government operations. Credit this account for disposal
(sale, transfers, destruction) and adjustments.
56
Further, Sections 162, 163 and 168 of COA 92-386 dated October 20, 1992
prescribe the following:
“Sec. 162. Xxx When supplies or property of any local government unit have
become unserviceable for any cause or no longer needed, the same shall be
disposed of in accordance with the procedures prescribed in these rules and
regulations.
Sec. 163. Xxx The provincial or city general services officer or municipal or
barangay treasurer, as the case maybe, shall be responsible for disposal of
supplies or property of the local government.
Sec. 168. Xxx The following forms shall be used in the reporting of disposable
supplies or property:
a. Inventory, Inspection and Appraisal (General Form 17-A, as amended

shall be used whenever the supplies or property to be disposed are: (1)
supplies in stock accounts for consumption of the local government unit
or for sale; (2) equipment; (3) building and other physical structures;
and
b. Report of Waste Materials (General Form No. 61-A, as amended) shall

be used for disposable supplies or property not covered in Sub-
Paragraph (a) of this section.”
Audit of the Property, Plant and Equipment accounts of the City for CY 2017
revealed the following deficiencies, to wit:
a) Erroneous in Classification or Misclassification of Accounts
Verification of the copy of Subsidiary Ledger (SL) for Office and Medical
Equipment submitted by the Accounting Office disclosed the following:
 Various motor vehicles valued at P4,077,000.00 and standing server

rack/cabinet worth P59,800.00 (Annex E) were included and classified
under the Military, Police and Security Equipment account instead of
Motor Vehicles and Furniture and Fixtures, respectively.
 Bicycles, air compressor and other car accessories amounting to

P116,438.40 (Annex F) were likewise classified and listed in the Motor
Vehicle account instead of Other Transportation Equipment.
 Various furniture such as tables, chair, cabinets and the like amounting to
P655,068.66 (Annex G) were classified under the Office Equipment
account instead of Furniture and Fixtures account.
57
The deficiencies noted above affect the fair presentation of the financial
statements and render the information thereon unreliable.
b) Unreconciled Discrepancies between the Accounting and General Services

Offices
Comparative analysis of the General Ledger (GL) balances and the
RPCPPE disclosed a difference of P636,228,959.47 which could have been
adjusted, eliminated or reduced had there been maintenance of updated subsidiary
ledgers/records and regular reconciliation of records between the Accounting and
General Services Offices, as shown below:
Per Books/GL
PPE Account Per RCPPE Difference
(Gross)
Land P196,462,844.10 P157,840,285.00 P38,622,559.10
Other Land Improvement 16,506,455.58 14,843,959.31 1,662,496.27
Road Networks 105,247,211.61 105,247,211.61 0.00
Water Supply System 10,619,903.19 10,619,903.19 0.00
Buildings 386,779,818.81 273,147,085.75 113,632,733.06
School Buildings 650,604,740.85 639,855,342.20 10,749,398.66
Hospitals and Health Centers 194,867,895.30 194,867,895.30 0.00
Markets 558,869,062.40 558,869,062.40 0.00
Slaughterhouses 1,440,000.00 1,440,000.00 0.00
Other Structures 246,120,959.06 208,152,918.15 37,968,040.91
Machinery 1,104,352.82 1,104,352.82 1,104,352.82
Office Equipment 66,161,005.80 11,823,712.12 54,337,293.68
ICT Equipment 126,178,290.42 81,381,236.22 44,797,054.20
Equipment 5,399,500.00 5,399,500.00 0.00
Communication Equipment 25,696,209.17 19,313,685.92 6,382,523.25
Construction and Heavy
Equipment 11,651,725.11 11,651,725.11 0.00
Disaster Response and Rescue
Equipment 3,248,531.67 1,750,531.67 1,498,000.00
Equipment 27,654,553.60 26,804,473.60 850,080.00
Medical Equipment 235,356,573.64 6,929,643.93 228,426,929.71
Sports Equipment 645,772.58 78,072.58 567,700.00
Other Machinery and
Equipment 17,696,891.23 11,192,260.42 6,504,630.81
Motor Vehicles 95,515,401.42 89,351,001.42 7,164,400.00
Water Crafts 118,335.00 118,335.00 0.00
Other Transportation 30,689.65 30,689.65 0.00
Equipment
Furniture and Fixtures 45,458,173.32 17,412,154.51 28,046,018.81
Books 1,680,244.84 1,449,459.84 230,785.00
CIP - Infrastructure Assets 14,376,754.34 0.00 14,376,754.34
CIP - Buildings and Structures 38,304,198.26 0.00 38,304,198.26
Other Property Plant and
Equipment 5,243,011.19 3,135,647.78 2,107,363.41
Total P3,090,039,104.97 P2,453,810,145.50 P636,228,959.47
58
The differences were due to the following:
 Non-inclusion of road lot, road right of way from various barangays from
the Inventory List submitted by GSO and conformed by the Assessor
Officer for the land account;
 Land at market site PNP outpost at Brgy. 3 costing P27,865,250.00 were

also not included in the inventory list of land;
 Machinery valued at P1,104,352.82 was included/reported as

unserviceable by the GSO in the summary report of RPCPPE; and
 Non-availability of some documents of previous years’ PPE accounts,

hence accuracy cannot be relied upon.
Lack or inadequate maintenance of relevant records to further substantiate

and verify the validity and accuracy of the reported financial information cast
doubt on the reliability of the account balances reflected in the financial
statements.
c) Summary of PPE Reported in the RPCPPE as Unserviceable without

Supporting Schedules amounting to P57,520,394.43
Verification of the submitted RPCPPE revealed that various properties

amounting to P57,520,394.43 were summarized and reported as unserviceable, as
follows:
PPE Classification Amount

Office Equipment P3,961,654.93
Furniture and Fixtures 2,561,758.02
IT Equipment and Software 10,094,407.46
Library Books 1,020,856.34
Machineries 1,104,352.82
Communication Equipment 11,239,140.42
Disaster Response & Rescue Equipment 484,148.67
Construction and Heavy Equipment 1,494,925.11
Medical Equipment 971,846.23
Military Police Equipment 12,752,740.00
Sports Equipment 14,447.58
Other Machinery and Equipment 3,028,426.47
Motor Vehicles 7,766,152.45
Other Transportation Equipment 30,689.65
Other Property, Plant and Equipment 994,848.28
Total P57,520,394.43
59
Though the above PPEs were excluded in the Inventory Report, the same
was disclosed and summarized in total as unserviceable in the RPCPPE.
However, no supporting list or schedules were presented and attached to the
report. The said unserviceable properties were likewise not reported in the
Inventory and Inspection Report for Unserviceable Property (IIRUP) as required
under Section 59, Chapter 2, Volume 2 of MNGAS for LGUs.
It is worthy to mention that the City has requested for the inspection of 75
units of unserviceable Motor Vehicles with an acquisition cost of P19,357,280.00.
The said request was forwarded by the Audit Team to COA Region IV-A on
October 5, 2017.
d) Various Adjustments/Reclassifications made on PPE amounting to

P341,965,966.42 for CY 2017 were not supported by List or Schedules.
The following deductions/adjustments/reclassification during the year

from PPE were not supported with schedules as presented below:
Balance Additions/ Balance

PPE Account
12/31/2016 Deductions 12/31/2017
General Fund
School Building P62,264,538.03 (P4,564,344.00) P57,700,194.03

Office Equipment 8,792,279.95 (422,399.60) 8,349,880.35
Information and
Communication
Technology Equipment 24,200,761.77 (1,838,817.92) 22,361,943.85
Equipment 2,440,911.74 (485,955.00) 1,954,956.74
Communication Equipment 10,534,917.77 (341,736.50) 10,193,181.27
Medical Equipment 177,629,040.70 (20,619,759.36) 157,009,281.34
Equipment 13,791,816.06 (1,594,237.02) 12,197,579.04
Other Machinery and
Equipment 8,390,405.13 (743,953.74) 7,646,451.39
Motor Vehicles 38,043,567.57 (1,627,743.16) 36,415,824.41
Watercrafts 45,711.99 (10,650.12) 35,061.87
Furniture and Fixtures 12,641,581.36 (484,130.30) 12,157,451.06
Books 1,128,756.78 (39,440.76) 1,089,316.02
Equipment 898,962.28 (17,083.88) 881,878.40
Construction In Progress-
Building and Structures 296,125,501.48 (290,471,416.01) 5,654,085.47
Sub total P559,230,261.12 (P 315,950,150.85) P243,280,110.27
SEF
School Building P347,450,598.65 (P24,712,869.96) P322,737,728.69

Other Structures 9,853,734.73 (1,270,812.61) 8,582,922.12
Communication Equipment 175,539.06 (18,240.00) 157,299.06
Other Machinery and
60
Balance Additions/ Balance
PPE Account
12/31/2016 Deductions 12/31/2017
Equipment 112,138.75 (13,893.00) 98,245.75
Sub total P357,592,011.19 (P26,015,815.57) P331,576,195.62
Grand Total P916,822,272.31 (P341,965,966.42) P574,856,305.89
Deductions or credit from PPE account pertains to disposal, sale, transfer,

destruction and adjustments of the PPE. For CY 2017, various
adjustments/reclassifications amounting to P341,965,966.42 were reflected in the
Notes to Financial Statements as deductions from the PPE accounts without the
supporting documents and Journal Entry Vouchers (JEVs) to identify which
particular PPE was affected/adjusted and reclassified.
As shown in the preceding table, there was no addition but only

deductions on the following PPE account, namely:
 Office Equipment
 Furniture and Fixtures
 IT Equipment and Software
 Communication Equipment
 Motor Vehicles
However, summary of PPE purchased during the year submitted by the

GSO to COA showed a substantial amount paid for the acquisition/procurement
of PPE that should have been shown as addition on the said accounts as follows:
Total Amount of Purchases

PPE Account
during the year
Office Equipment P1,978,000,00
Furniture and Fixture 1,554,665.00
IT Equipment and Software 4,388,119.50
Communication Equipment 575,840.00
Motor Vehicles 3,362,000.00
Though the PPE acquired/purchased during the year were included in the
list in the PPE schedule submitted by the Accounting Office, the same was not
presented as PPE additions during the year as reported in the Notes to FS, thus
casting doubt on the propriety of the PPE account.
We recommended that the City Mayor require:
a) the Accounting Office to carefully evaluate and properly classify PPE items
into its proper account classification in accordance with the revised Chart of
Accounts for Local Government Units (LGUs) as prescribed under COA
Circular No. 2015-009 dated December 1, 2015;
61
b) the City Accountant and the General Services Officer (GSO) to exert more
effort to reconcile their records on PPE and conduct an in depth verification
and analysis of PPE accounts; identify/investigate causes of the noted
discrepancies in the balances of accounts to bring the two records in
agreement; and effect the necessary adjustments in both records, if
warranted;
c) the GSO to prepare and submit to the Disposal/Appraisal Committee a duly

accomplished Inventory and Inspection Report of Unserviceable Property
(IIRUP) and the Waste Material Report together with the other
documentary requirements to facilitate the determination of the appraised
value and mode of disposal of the unserviceable properties; and
d) the Accounting Office to submit to COA the Journal Entry Vouchers (JEVs)
and other supporting documents used as basis of adjustments/
reclassifications made on the PPE amounting to P341,965,966.42.
Management’s Comment:
The City Accountant in her letter dated May 28, 2018, duly received by the Audit
Team on May 31, 2018 promised to comply with the aforementioned recommendations
through collaboration with the General Services Office and other Offices concerned. She
also explained some of the noted deficiencies, to wit:
 “With respect to various motor vehicles amounting to P4,077,000.00 that

were listed under Military, Police and Security Equipment in the General
Ledger, we believe that the use or purpose of these vehicles should be
considered in classifying them into their proper accounts. In this regard, we
shall submit a query to the PNP Office, on whether these vehicles are being
used in general administrative services (e.g. as services vehicles) or utilized in
actual police operations (e.g. conduct of patrols, apprehension of suspects
and criminal elements, etc.) and shall base out adjustments on their response
to our inquiry.
 The standing server rack amounting to P59,800.00 is actually an accessory

item of CCTVs purchased by the LGU and serves as mounting/storage of the
CCTV server system and hence is properly classified under Military, Police
and Security Equipment.
 As to other PPEs currently classified under Motor Vehicles (P116,438.40)

and Office Equipment (P 655,068.66), we concur with the findings of the COA
and will make the necessary adjustments in our books. Xxxx
 We are currently working with the GSO in preparing schedules for each PPE
account with noted discrepancies between the GSO and Accounting records.
Xxxx
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 For some of these PPE accounts, the reason for the discrepancies is that the
GSO excluded some items due to absence of supporting documents, while the
Accounting Office retained the same in the LGU books, as these were already
a part of the forwarding balances during the transition form manual
accounting to E-NGAS. In this regard, we are requesting the COA’s
recommendation on the proper accounting treatment before proceeding with
any adjustments. In the meantime, we will schedule actual physical
inventories of items compromising these PPEs to verify existence, ownership
and status.
 For those discrepancies that we are able to resolve on our own, the
Accounting and GSO Office shall immediately effect the necessary adjustment
in their respective records and shall submit to the COA the relevant
documents Xxxx
 Upon completion of reconciliation, both the GSO and Accounting Office shall
resubmit the revised RPCPPE and adjusted GL accounts Xxxx
 Our Office is currently preparing a summary and compliance of JEVs for

these adjustments and reclassifications, for submission to your office.”
2. The Road Networks ledger and property cards for all roads and its components
were not prepared and maintained by the Accounting Office and the General
Service Office (GSO), respectively, due to the non-submission of the complete
description and cost segregation of road components for road projects by the
Engineering Office, thus casting doubts on the validity, accuracy and existence of
the recorded Road Networks of P102,252,004.13, net of depreciation as of year-end.
The account Road Networks was also not properly disclosed in the Notes to
Financial Statements as required under Annex B of COA Circular No. 2015-008
dated November 25, 2015.
Paragraph 27 of Philippine Public Sector Accounting Standards (PPSAS) I, Fair

Presentation and Compliance with IPSASs, provides:
“Financial statements shall present fairly the financial position, financial

performance and cash flows of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, revenue and expenses set out in PPSASs. The application of
PPSASs, with additional disclosures when necessary, is presumed to result in
financial statements that achieve a fair presentation.”
The Manual on the New Government Accounting System (MNGAS) for Local
Government Unit (LGU) provides that public infrastructures which include roads shall be
recorded in the Registry of Public Infrastructure and disclosed in the Notes to Financial
63
Statements. Moreover, under the same Manual, Public Infrastructures are not charged any
depreciation. With the adoption of the PPSAS, infrastructure assets which include road
networks shall be taken up as Property, Plant and Equipment. The annual consumption of
their service potential and loss of value through depreciation and impairment shall also be
recognized.
COA Circular No. 2015-008 dated November 25, 2015 prescribes for the
accounting and reporting guidelines on the Local Road Asset Management System as
follows:
“VI. Reporting Guidelines
1. The General Services Officer shall, at the end of the accounting period
render a Report on Local Road Network of the local government unit
concerned. Xxx
2. The total road network system shall be disclosed in the Notes to the
Financial Statements of the Agency. Xxx
3. The Inventory Committee shall prepare the Report on the Physical

Count of the Road Network System of the local government unit. Xxx
VII. Duties and Responsibilities
a. Local Accountant
1. Prepare the Journal Voucher to record the beginning balance of

the local road network and its components in the general ledger
and the Local Road Network Ledger Card Xxx, respectively;
2. Support the JV with the Registry of Public Infrastructures for

Roads, working paper on the distribution of costs for the road
components, and working paper on the determination of the
depreciated replacement cost for road components with no
available cost per registry;
3. Keep and maintain subsidiary records for roads and road

components for every road network; and
4. Prepare a lapsing schedule for the computation of the

depreciation tor each component at the end of the year.
b. General Services Officer
1. Maintain a Local Road Inventory and Road Map;
64
2. Keep a complete Local Road Network Property Card for all roads
and its components.
c. Provincial/City/Municipal Engineer
1. Provide the local accountant and the general services officer with
the complete description and cost segregation of road components
for road projects
d. Local Chief Executive
1. Enjoin the department heads' compliance with the requirements of

the circular.”
Moreover, Annex B of the same Circular requires that the total road network
system shall be disclosed in the Notes to the Financial Statements and must be in
accordance with the prescribed format as follows:
“Road Network System
The LGU has a total of ____ kilometers of roads with a total cost of Php
____. For the year ended, the agency spent a total of Php____ for local road
additions, Php ____ for major repairs and Php_____ for the regular
maintenance. Reductions in the amount of Php ___ were recorded due to
derecognition, Php ____ for impairment and Php _____ impairment were
reversed.”
For CY 2017, the City has a recorded amount of P102,252,004.13 as Road

Networks, however, the total number of kilometers of road networks, the amount spent
or local road additions, repairs and maintenance during the year, including the amount of
road derecognized were not disclosed in the Notes to Financial Statements as required
under Annex B of COA Circular No. 2015-008 dated November 25, 2015.
Further verification revealed that the prescribed Road Networks ledger and
property card for all roads and its components was not prepared/maintained by the
Accounting Office and the General Services Office, respectively, as their office was not
provided with the complete description and cost segregation of road components for road
projects by the Engineering Office.
a) General Services Officer (GSO) to prepare and maintain Road Networks

property cards;
65
b) City Engineer to provide the City Accountant and the GSO with the
complete description and cost segregation of road components for road
projects; and
c) City Accountant to prepare and maintain property ledger cards for Local
Road Networks and disclose the information for the said property in the
Notes to Financial Statements in accordance with the prescribed format as
provided under COA Circular No. 2015-008 dated November 25, 2015.
The City Accountant promised to comply with the cited COA Circular in her
letter dated May 28, 2018 duly received by the Audit Team on May 31, 2018.
Furthermore, the City Engineer, in her letter dated June 26, 2018, which was
forwarded by the City Administrator on the same date to the Audit Team, indicated that
they already furnished the City Accounting Office and the General Services Office with
the Road Network Inventory and estimated amount of property that will be the basis for
the preparation of Road Network Ledger and Property Card. She quoted that such will be
a continuous activity between the concerned Offices.
Section 111 of PD No. 1445 provides that the accounts of an agency shall be kept
in such details as is necessary to meet the needs of the agency and at the same time be
adequate to furnish the information needed by the fiscal or control agencies of the
government. Moreover, the highest standards of honesty, objectivity and consistency
shall be observed in the keeping of accounts to safeguard against inaccurate or
misleading information.
Moreover, the following provisions of the MNGAS, Volume 1, are herein quoted:
“Sec. 114. Perpetual Inventory Method. – Purchase of supplies and materials

for stock, regardless of whether or not they are consumed within the
accounting period, shall be recorded as inventory following the perpetual
inventory method. Under the perpetual inventory method, an inventory control
account is maintained in the General Ledger on a current basis. In addition,
detailed inventory records are maintained for each inventory item.
66
Regular purchases shall be coursed thru the inventory account and issuances
thereof shall be recorded as they take place, except those purchased out of the
petty cash fund which shall be for immediate use and for stock in which case
shall be charged immediately to the appropriate expense accounts.
The Chief Accountant shall maintain the perpetual inventory records

comprising of Supplies Ledger Cards (SLC) for each commodity/stock. Xxx
Such ledger cards shall contain the details of the property, plant and
equipment and livestock account in the inventory control account in the
general ledger.
The General Services Officer or the Municipal Treasurer, as the case maybe
shall likewise maintain stock cards and property cards for supplies; property,
plant and equipment; and work animals in their custody to account for the
receipt and disposition of the same. The balance per stock card/property
cards should always reconcile with the ledger cards of the accounting unit.
Xxx
Sec. 115. Moving Average Method. – The moving average method of costing
shall be used for costing inventories. This is a method of calculating cost of
inventory on the basis of weighted average on the date of issue. The Chief
Accountant shall compute the inventory cost monthly using the method. Xxx
Sec. 119. Property Records to be Maintained. – The General Services Officer

of the Local treasurer, as the case maybe, shall number each type of supplies
and maintain Stock Cards per stock number. Xxx
Sec. 120. Recording of Deliveries of Supplies or Property in the Books of

Accounts. – The Chief Accountant shall maintain Supplies Ledger Cards per
stock number, Xxx
Sec. 121. Reporting on Issuance of Supplies/materials. – The General

Services Officer or the Local Treasurer, as the case maybe, shall consolidate
weekly the RIS for which supplies and materials were issued using the
Summary of Supplies and Materials Issued (SSMI). The SSMI together with
the original copy of the RIS shall be submitted to the Chief Accountant, who
shall compute cost of supplies issued and ending inventory using the moving
average method. Based on the SSMI, a JEV shall be prepared to record the
expenditures using appropriate expenditure accounts.
Sec. 124. Inventory of Supplies or Property. – The Local Chief Executive

shall require periodic physical inventory of supplies or property. Physical
count of inventory items by type shall be conducted semestrally and reported
in the Report of Physical Count of Inventories (RPCI). This shall be submitted
to the Auditor concerned not later than July 31, and January 31 of each year
for the first and second semesters, respectively.”
67
Likewise, Volume 2 of the same Manual provides for the forms to be used
together with the instructions on how to accomplish the said forms as follows:
Sec. 56. Report on the Physical Count of Inventories (RPCI). – The Report
on the Physical Count of Inventories (Annex 48) shall be used to report the
physical count of supplies by type of inventory as of a given date. It shows the
balance of inventory items per cards and per count and shortage/overage, if
any.”
A. This form shall be accomplished as follows:
a. Type of Inventory – inventory account name such as Office Supplies

Inventory, Accountable Forms Inventory, Medical, Dental and Laboratory
Supplies Inventory, Food and Non-food Supplies Inventory, etc.
b. Date – date as of a given date
c. Name of Accountable Officer – name of the accountable officer
d. Official Designation – official designation of the accountable officer
e. LGU – unit or office where the accountable officer is assigned
f. Date of Assumption – first day of assumption of the duties and
responsibilities as accountable officer
g. Article – type of item or article (e.g. folder, bond paper, ball pen)
h. Description – brief description of the article/item (e.g. file tagboard for
legal size, 210mm x 297mm (A4) min. of 70 gms, fine point black)
i. Stock Number – assigned stock number by the Supply and Property Unit
j. Unit of Measure – e.g. piece, ream, box
k. Unit Value – cost per quantity unit
l. Balance per Card – quantity of items or articles appearing in the Supplies
Ledger Card.
m. On Hand per Count – quantity of items or articles per physical count
n. Shortage/Overage – excess of the quantity and total value of items or
articles per Supplies Ledger Cards over that of the physical count or vice
versa.
o. Remarks – whereabouts, conditions and other relevant information relative
to inventories.
B. This form shall be used to report on the physical count of inventory items by
type such as Office Supplies, Accountable Forms, Medical, Dental and
Laboratory Supplies, Food/Non-food Inventory, etc. which are owned by the
LGU.
This shall be prepared yearly every six months in four copies and shall be
certified correct by the Inventory Committee, attested by the representative of
the Auditor concerned and approved by the Head of the Agency. This shall be
distributed as follows:
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Original copy - Accounting Unit
Duplicate copy - COA Auditor
Triplicate copy - Supply and Property Unit
Quadruplicate copy - Inventory Committee file
It shall be submitted to the Auditor concerned not later than July 31 and
January 31 of each year for the first and second semesters, respectively.
Contrary to the foregoing provisions, the City failed to maintain and present the
required inventory reports that would support the existence of various inventory items
amounting to P50,764,527.77, broken down as follows:
Account Title Amount

Welfare Goods for Distribution 436,459.00
Office Supplies Inventory 4,344,054.10
Accountable Forms, Plates and Stickers Inventory 1,286,427.50
Animal/Zoological Supplies Inventory 855,885.75
Drugs and Medicines Inventory 18,369,214.26
Medical, Dental and Laboratory Supplies 22,087,910.50
Agricultural and Marine Supplies Inventory 287,337.66
Others Supplies and Materials Inventory 3,097,239.00
Total P50,764,527.77
Audit disclosed that these inventory items were not properly accounted for as
manifested in the following practices:
a. The above Inventory items pertain to General Fund only and were not supported
by Inventory/Supplies Ledger Cards per stock number.
b. The Inventory Report submitted by the GSO to COA on February 13, 2018, was
not in proper form as prescribed under Section 56 of the MNGAS for LGUs,
Volume II. The report contains only the brief description of the items, unit of
issue and the quantity counted for the following inventory items, namely:
 Drugs and Medicines

 Medical, Dental Supplies Inventory
 Agricultural Supplies
 Veterinary and Medicines Inventory
 Accountable Forms Inventory
c. The above reports were likewise not signed/certified correct by the Inventory
Committee and approved by the Head of the Agency.
d. The GSO submitted physical count of inventory for Veterinary Supplies and
Medicines as of December 31, 2017. Veterinary Supplies and Medicines account
is not among the Inventory account listed under COA Circular 2015-009 dated
69
December 1, 2015. It should had been properly classified as Other Supplies and
Materials Inventory or Animal/Zoological Supplies Inventory if it falls under this
category as per aforementioned COA Circular, described below:
Account Title Animal/Zoological Supplies Inventory

Description This account is used to record the cost of food,
medicines, veterinary and other maintenance
needs of animals for use/consumption of
government parks, zoos, wildlife sanctuaries
and botanical gardens. This also includes
supplies for zoological researches,
preservations and the like. Credit this account
for issuance to end-users, transfers or other
disposal.
e. The submitted report on Accountable Forms Inventory by the GSO did not tally
with the Report of Accountability for Accountable Forms (RAAF) With and
Without Money Value submitted by Treasurer’s Office as of December 31, 2017.
f. There is a recorded balance of P436,459.00 as of year-end for Welfare Goods for

Distribution when there was no known calamity that struck the City or
Sangguniang Panlungsod Resolution declaring the City in the State of Calamity
for CY 2017. Welfare Goods for Distribution account as per COA Circular 2015-
009 dated December 1, 2015 is described as follows:
Account Title Welfare Goods for Distribution

Description This account is used to record the cost of goods
for distribution to people affected by
calamities/disasters/ground conflicts such as
canned goods, blankets, mats, kitchen utensils,
flashlights and other similar items. Credit this
account for issuance to end-users, transfers or
write-down.
g. No physical count was conducted and reported in the RPCI as of December 31,
2017 on the following Inventory items:
 Welfare Goods for Distribution P436,459.00

 Office Supplies Inventory 4,344,054.10
 Animal/Zoological Supplies Inventory 855,885.75
 Others Supplies and Materials Inventory 3,097,239.00
Total P8,733,637.85
70
h. No balance was reflected in the City’s books of accounts as well as Report of
Physical Count for Textbooks and Instructional Materials Inventory under Special
Education Fund when there were reported payables to the following supplier as
of year-end, as follows:
Purchase Order Notice To

Supplier/Particulars PO Date Amount
(PO) No. Proceed
Felta Multimedia Inc.
Payments for robotics 2017-12-0125 12/20/17 12/21/2017 P5,652,000.00
evolution 3 package
Books on Wheel Entrp. Inc.

Payment for manipulative
and educational toys for 2017-12-0126 12/20/17 12/21/2017 5,776,800.00
kindergarten and special
children.
The foregoing instructional materials were recorded in the books of accounts on

December 29, 2017 under the Inventory account and subsequently charged to
expense account without the supporting SSMI on the same date as per Journal
Entry Voucher Nos. 2017-12-000289, 2017-12-000290 amounting to
P5,652,000.00 and P5,776,800.00, respectively.
The Audit Team was not able to verify or apply alternative auditing procedures
due to the absence of complete/updated records/inventory ledger cards. The concerned
personnel failed to submit the duly approved RPCI, misclassified inventory accounts and
issued inventory items without the required SSMI, thus the reported balances of the
Inventory accounts amounting to P50,764,527.77 is not fairly presented in the financial
statements.
a) Inventory Committee to start the physical count of all Inventory items for
General Fund (GF) and Special Education Fund (SEF) at an earlier date or
before the end of each prescribed period to give the members an ample time
to prepare the RPCI in proper form by type and submit the same to the
Auditor’s Office with the certification and approval of the Agency Head not
later than July 31 and January 31 of each year;
b) City Veterinary Office and General Services Office to coordinate with the
Accounting Office for the proper reclassification of the Veterinary Supplies
and Medicines account;
c) Accounting Unit and the GSO to maintain supplies ledger cards and stock
cards, respectively, for each inventory item/stock;
71
d) Accounting Unit to take up all purchases of items to Inventory account and
record the issuance based on Summary of Supplies and Materials Issued
(SSMI) only;
e) Accountant and the GSO to conduct periodic reconciliation of their records

and prepare adjustment of the affected accounts, if necessary; and
f) Community Social Welfare and Development Office/City Accounting Office

to submit an explanation on why there was an inventory for Welfare Goods
for Distribution when there was no known calamity that struck the City or
Sangguniang Panlungsod Resolution declaring the City in the State of
Calamity for CY 2017.
The City Accountant, in her letter dated May 7, 2018, made the following
comments and actions:
 “The City Accounting Office is already adopting the chart of accounts

prescribed through COA Circular 2015-009 and has been using the
accounts Animal/Zoological Supplies Inventory in recording
purchases of veterinary medicines and supplies. To achieve
consistency in reporting, we shall request the City Veterinary Office
and the General Services Offices, to adopt the same account title in
their reports and internal documents. A copy of said request, received
by the CVO and CGSO will be provided to your Office
 Since the transition from manual to electronic accounting, the

Accounting Department has been maintaining its General and
Subsidiary Ledgers for all inventory items through the E-NGAS
software. A compilation of our SL for inventories, in support of the
balances reported in the FS has been submitted to the COA office on
May 7, 2018
 A directive shall be issued to all LGU departments to adopt the

Requisition and Issue Slip as an internal control tool in the issuance of
the office supplies and other inventory items, and to prepare monthly
consolidation of RIS through the preparation of Summaries of Supplies
and Materials issued. The SSMI, together with the supporting RIS
shall be forwarded to the CGSO for verification before submission to
the Accounting Office. The submitted SSMI shall be our basis in
preparing Journal Entries for the issuance of inventory items.
 The City Accounting Office shall work with CGSO to schedule and
implement periodic reconciliations of their respective records/reports
72
on inventory items being respective records/reports on inventory items
being held by the LGU.
 The City Accounting Office processed the disbursement voucher for

the purchase of welfare goods for distribution since the transaction is
in accordance with the NDRRMC-DILG-DBM Joint Memorandum
Circular No. 2013-1 which permits, through section 5.2.11, under
Disaster Preparedness, the stockpiling of basic emergency supplies.
 We recognize however that in view of the prevailing guidelines on the

use of the LDRRMF, stricter internal controls must be in place with
respect to these inventory items. Xxx”
Auditor’s Rejoinder:
With regard to the City’s comment that the stockpiling of basic emergency
supplies was in accordance with the NDRRMC-DILG-DBM Joint Circular No. 2013-1,
still the Audit Team would like to remind the City Government that basic emergency
supplies with longer shelf life should be procured by the City Social Welfare and
Development Office.
monitored.
Section 49 of the Manual on New Government Accounting System (MNGAS) for

Local Government Units (LGUs), Volume I, provides the procedures in processing
payment of salaries and wages out of cash advances. It is provided therein that the
Treasurer shall gather duly certified and approved payroll indicating their net payments.
Further, COA Circular No. 97-002 dated February 10, 1997 prescribes the rules
and regulations for the granting, utilization and liquidation of cash advances to all
government agencies.
Items 4.2 and 4.3 of COA Circular No. 97-002 prescribe the following:
“4.2 Salaries, wages, allowances, honoraria and other similar payments
4.2.1 The cash advance shall be equal to the net amount of the
payroll for a pay period.
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4.2.2 The cash advances shall be supported by the following
documents:
- copy of designation by the Head of Agency in case the
AO is not a disbursing officer by appointment Xxx
4.3 Petty Operating Expenses
4.3.1 The cash advance shall be sufficient for the recurring

expenses of the agency for one month. The AO may
request replenishment of the cash advance when the
disbursements reach at least 75%, or as the need requires,
by submitting a replenishment voucher with all supporting
documents duly summarized in a report of
disbursements.”
Verification of cash advances of Ms. Carmen D. Carandang, the designated DO,

disclosed that a huge amount of cash advances were granted for payment of salaries,
wages, benefits and other miscellaneous and operating expenses of the City, which were
more than the need for payments resulting in excessive amount of cash in her custody
averaging to P4,493,367.40 per month. Shown below are the excessive cash advances
granted to her and the corresponding refunds for the period January 1 to December 31,
2017:
Month Cash Advances Liquidations Refunds

January 2017 P22,078,600.00 P9,657,438.60 P12,421,161.40
February 2017 16,998,900.00 11,660,724.81 5,338,175.19
March 2017 18,038,700.00 14,867,059.55 3,171,640.45
April 2017 17,762,700.00 14,668,327.21 3,094,372.79
May 2017 16,032,566.00 12,089,662.74 3,942,903.26
June 2017 16,010,600.00 14,722,816.14 1,287,783.86
July 2017 21,181,354.00 16,892,209.13 4,289,144.87
August 2017 13,506,800.00 10,988,058.01 2,518,741.99
September 2017 19,290,180.00 12,732,725.18 6,557,454.82
October 2017 23,066,300.00 17,342,425.79 5,723,874.21
November 2017 19,891,100.00 17,080,335.83 2,810,764.17
December 2017 24,956,000.00 22,191,608.22 2,764,391.78
Total P228,813,800.00 P174,893,391.21 P53,920,408.79
Average Monthly Cash Advances P19,067,816.67

Average payments/liquidation per month 14,574,449.27
Average Monthly Refunds 4,493,367.40
Further verification disclosed that amounts of refund were more than the payment
or 56 to 100 percent bigger than their liquidations/disbursement as shown on the next page:
74
Month Cash Advance Liquidations Refunds Percentage Purpose
January 2017 P3,290,500.00 P1,644,571.00 P1,645,929.00 50% GF-MOOE
January 2017 60,000.00 0.00 60,000.00 100% GF-KLL-PS
January 2017 100,000.00 15,000.00 85,000.00 85% GF ONL-PS
January 2017 4,548,100.00 617,032.32 3,931,067.68 86% ONL- MOOE
February 2017 7,800,000.00 3,462,539.94 4,337,460.06 56% ONL-MOOE
April 2017 1,240,500.00 45,139.33 1,195,360.67 96% GF-KLL-PS
Sept 2017 6,449,000.00 2,039,440.29 4,409,599.71 68% ONL-MOOE
October 2017 1,350,000.00 29,902.42 1,320,097.58 98% GF-KLL-PS
October 2017 5,441,000.00 2,057,871.64 3,383,128.36 62% ONL-MOOE
Total P30,279,100.00 P9,911,496.94 P20,367,643.06
Though the unused portion of cash advances were regularly refunded on month
end, the same was deposited on the first day of the month when another cash advances
were drawn for the ensuing month. The average refund in a month registered to
P4,493,406.82 for CY 2017.
The granting of cash advances based on estimates and not on actual amounts of
the payrolls and disbursement vouchers to be paid is contrary to Section 49 of the
MNGAS for LGUs, Volume I and COA Circular No. 97-002 dated February 10, 1997,
resulting in excessive cash in the hands of the Disbursing Officer. Such breakdown of
controls indicate inadequate planning for sound cash management which exposed
government funds to risk of possible loss or misuse if not properly monitored.
We recommended that the City Mayor instruct the City Accountant and the
City Treasurer to ensure that all cash advances are supported with duly approved
payrolls and disbursement vouchers with their net payments as basis for drawing
cash advances in accordance with Section 49 of the MNGAS for LGUs, Volume I
and COA Circular No. 97-002 dated February 10, 1997 to avoid possible loss or
misuse of government funds.
The City Treasurer replied thru a letter dated March 19, 2018 and quoted the
following:
“We have noted the observation and coordinated with concerned

implementing offices the subject AOM for their guidance and information.
Also related AOM was received last year, we have designated separate
disbursing officer for cash advances for special projects – MAS educational
financial assistance for senior high school, college students, SAGIP Eskwela
and others. The implementing offices verbally request extension of at least five
days for those who were not able to claim the benefits due to unavoidable
circumstances within the month of cash advance. Currently, they resolve to
shorten to two days and immediately refund the excess in cash advance.”
75
During the exit conference, the City Treasurer added that for the payroll of Job
Order and Casual employees, a cut-off period will be implemented.

not recorded and accounted for as Accounts Payable in violation of Section 112 of
Section 112 of PD No. 1445 states that “Each government agency shall record its
financial transactions and operations conformably with generally accepted accounting
principles and in accordance with pertinent laws and regulations.”
Section 04(a) of the MNGAS for LGUs, Volume I, provides that “Xxx A modified
accrual basis of accounting is used. Under this method, all expenses shall be recognized
when incurred.”
Audit of the accounts during the year revealed that there were transactions for CY
2016 amounting to P10,518,109.32, which were not accounted for as accounts payable
during that year as shown below:
Date Check No. Payee/Particulars Amount

3/14/2017 55761119 Healthline Medical Distributors Inc.- P1,235,200.96
payment for drugs and medicines
3/20/2017 55761203 Bandevilla Pharmacy-payment for 1,793,052.95
drugs and medicines
3/20/2017 55761197 EMOGEN Enterprises-payment for 678,896.87
drugs and medicines
4/7/2017 55761482 Golden King Sales & Trading-delivery 5,419,035.58
of office supplies
4/25/2017 55761702 Holy Angel Trading-delivery of 3rd and 1,391,922.96
4th quarters office supplies
Total P10,518,109.32
Procurement of drugs and medicines was obligated in CY 2016 as per Obligation

Request (ObR) No. 200-2016-11-000631 dated November 17, 2016 in the total amount of
P3,929,620.45 while for the office supplies it was covered by ObR No. 200-2016-10-
000533 dated October 20, 2016 amounting to P5,371,000.10 for Golden King Sales &
Trading and ObR Nos. 200-2016-11-000670-673, all dated November 17, 2016, for Holy
Angel Trading amounting to P1,472,180.00.
The supply and delivery of drugs and medicines was bid out on December 13,
2016 while for the procurement of the 3rd and 4th quarters office supplies was on
November 15, 2016. The Notices of Award were issued to the three suppliers of drugs
and medicines and one supplier for office supplies on December 16, 2016 based on the
BAC Resolution declaring them as the Lowest Calculated Responsive Bid as per
Resolution No. 55-2016, 55-2016a, 55-2016b and 53-2016 for Healthline Medical
76
Distributions Inc., Emogen Enterprises, Bandevilla Pharmacy and Holy Angel Trading,
respectively. On November 18, 2016, Golden King Sales and Trading was awarded as the
winning bidder as per BAC Resolution No. 40-2016 for the delivery of office supplies.
Correspondingly, a Purchase Orders (POs) were issued and conformed by the suppliers as
shown hereunder:
Date Conformed
Bidder PO No. Date of PO by the Supplier
Healthline Medical Distributions Inc. 2016-12-116 12/20/2016 12/20/2016
Bandevilla Pharmacy 2016-12-118 12/20/2016 12/20/2016
EMOGEN Enterprises 2016-12-117 12/20/2016 12/20/2016
Golden King Sales & Trading 2016-12-208 11/22/2016 11/22/2016
Holy Angel Trading 2016-12-123 12/20/2016 12/20/2016
Further verification disclosed that the office supplies were delivered by the
Golden King Sales & Trading on December 22, 23, 27 and 28, 2016 while the dates of all
the sales invoices issued by Healthline Medical Distributions Inc., as well as the signed
Acceptance and Inspection Report (AIR) were changed/tampered from December 27,
2016 to February 20, 2017 while that of EMOGEN Enterprises, and Holy Angel Trading
were all tampered and erased with correction tape.
These procurements were not booked up, thus the corresponding Inventory
accounts and Accounts Payable accounts were not recognized in CY 2016. Moreover, the
said procurements were paid in CY 2017 debiting the Expense account and crediting
Cash in Bank, hence, an overstatement of Expense account, understatement of Surplus
and understatement of Accounts Payable account for the unpaid portion thereof for CY
2017.
We recommended that the City Mayor require the City Accountant to see to
it that all valid/lawful obligations are properly taken up in the accounts of the year
they were incurred, pursuant to Section 112 of PD No. 1445 and Section 4(a) of the
MNGAS for LGUs, Volume I.
According to the City Budget Officer in her letter dated April 11, 2018, duly
received by the Audit Team on April 20, 2018, all the above mentioned transactions were
obligated and the Purchase Orders were issued in 2016, hence per Budget record said
obligations were all charged to the 2016 Appropriation.
During the exit conference, the City Accountant commented that her Office will
set a deadline for the submission of items for Accounts Payable and will coordinate with
other departments.
77
The Audit Team maintained its stand that the Accounting Office should have
recorded the prior years’ obligation as Accounts Payable of that period. The Audit Team
agreed with the Budget Officer’s contention.

supporting documents as required in Section 4(6) of the Presidential Decree (PD)
No. 1445, thus created doubts on the validity and regularity of the disbursements for
these transactions.
Section 458 (a) (5) (xi) of the same Republic Act states:
(a) The sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16
of this Code and in the proper exercise of the corporate powers of the
city as provided for under Section 22 of this Code, and shall:
Xxx
(5) Approve ordinances which shall ensure the efficient and effective
delivery of the basic services and facilities as provided for under
Section 17 of this Code, and in addition to said services and
facilities, shall:
Xxx
(xi) Establish a scholarship fund for the poor but deserving students in
schools located within its jurisdiction or for students residing
within the city”
Further, Section 4(6) of PD No. 1445 states that “Claims against government
funds shall be supported with complete documentation.”
Verification of the Annual Budget of the City Government of Lipa for General
Fund for CY 2017 enacted by Sangguniang Panlungsod Ordinance No. 2016-30 dated
December 20, 2016 and approved by the City Mayor on January 3, 2017 showed the
following programs related to the grant of scholarship and financial assistance under the
Special Projects of the City Mayor’s Office and the City Social Welfare and
Development Office:
78
Projects Amount
City Mayor's Office
Scholarship Program
a. MAS College Scholarship for Indigents P 63,723,780.00
b. Grant for Employees Education 50,000.00
c. MAS Scholarship Program for Senior High School 10,135,000.00
d. Scholarship for Public School Teachers 200,000.00
City Social Welfare and Development Office
Poverty Reduction - Sagip Eskwela Program 20,660,000.00
Total P 94,768,780.00
In addition, Ordinance No. 2017-17 dated October 10, 2017 approved

Supplemental Budget No. 2017-02 of the City Government in the amount of
P46,161,582.32 taken from the Surplus of CYs 2015 and 2016 and Savings from the
Unutilized Calamity Fund of CY 2012 for the implementation of various priority
programs, projects and activities of the local government unit wherein additional
appropriation for scholarship programs amounting to P17,892,000.00 were made, as
follows:
Office Purpose Amount

CMO Special Projects
MAS College Scholarship Program for Indigents:
Financial Assistance P12,500,000.00
Additional Appropriation for BSU payment 4,600,000.00
MAS Scholarship Program for Senior High School 792,000.00
Total P17,892,000.00
Overall, the City has appropriated a total of P112,660,780.00 or 7% of the total

Annual Budget of the City for CY 2017 of P1,641,509,410.00 in various programs and
projects specifically designed for the provision of financial assistance to students aspiring
to pursue higher education.
Review of the supporting documents for the disbursements made by the City
Government from the afore-cited appropriation for scholarship programs revealed that
different City Offices overseen the grant and processing of several scholarships and
financial assistance programs, to wit:
I. Educational Allowance for Sagip Eskwela Beneficiaries
This scholarship program was under the Poverty Reduction – Sagip Eskwela
Program of the City Social Welfare and Development Office with P20,660,000.00
budget for CY 2017. The program has the objective of implementing appropriate
measures to alleviate the poor economic condition of the disadvantaged families
through provision of educational allowance to the children and youth in pursuit of
their longing dreams to attain higher level of education. The beneficiaries will receive
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P900.00 quarterly after passing the following criteria/guidelines and policies set by
the City:
1. Child is enrolled in elementary or high school level in any public schools in

Lipa City and or adjacent municipality and residing in 72 barangays of Lipa
City.
2. Family is not recipient of Pantawid Pamilyang Pilipino Program of the DSWD
to avoid duplication of service.
3. Family is a resident of Lipa City for at least one (1) year.
4. Child may be eligible being categorized as person with disability or PWD
(physical or mental retardation), may be a son or a daughter of a solo parent
(caused by separation or death of one parent) and may be an abandoned,
neglected, orphaned or child’s family is in crisis situation (disaster victim).
5. Child should have a passing grade of 75% at the end of school year.
6. Parents of Sagip-Eskwela beneficiaries should attend Family Development
Session and meetings being conducted by CSWDO.
7. Other members of the family can also avail of other scholarship program that is
being extended by the City Government on tertiary level of education.
II. MAS Educational Financial Assistance Program for Senior High School (SHS)
Students
This type of financial assistance is being facilitated and monitored by the City
Community Affairs Office. Beneficiaries shall receive P3,000.00 every semester. To
be eligible, they must meet the following criteria:
1. The applicant must be Senior High School student in a private school.

2. He/She must be a resident of Lipa City.
3. He/She must present proof of enrolment on a semester basis.
4. Only one member per family is qualified for the benefit.
5. The benefit can be renewed per semester provided the list of requirements is
complied with.
6. He/She must have no financial assistance or scholarship from the barangay or
province.
III. MAS Educational Financial Assistance Program for Senior High School (SHS)
Students
This financial assistance program is being supervised and monitored by the

City Community Affairs Office. Beneficiaries shall receive P5,000.00 for the whole
academic year to sustain the educational cost for indigent families. To be eligible,
they must meet the following criteria:
1. The applicant must be Senior High School.

2. He/She must be a resident of Lipa City.
3. He/She must present proof of enrolment during the whole academic year.
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4. Only one member per indigent family is qualified for the benefit.
IV. MAS Educational Financial Assistance Program for Senior High School (SHS)
Student of Lipa Academy of Sports, Culture and Arts (LASCA)
This is a special project of the City Government to help the Department of

Education (DepEd) in advocating Sports, Culture and Arts track in the City of Lipa.
This program is being facilitated and monitored by the City Community Affairs
Office as well. A grantee is entitled to P3,000.00 cash benefit every semester. All the
eligibility criteria for the Financial Assistance to SHS apply to this kind of
scholarship except that this is primarily for students enrolled to Lipa Academy of
Sports, Culture and Arts.
V. MAS Education and Financial Assistance Program for College Students
According to its Implementing Guidelines, the grantee will receive P5,000.00

cash benefit each semester and must be a resident of Lipa. This program is also under
the City Community Affairs Office. It is for high school graduate/college
level/graduate/post graduate studies or review. In addition, it has the following
measures:
1. The privilege is granted to all beneficiaries regardless of the grades submitted

even with failing grades or dropped subjects, provided the beneficiaries are in
school at the current semester.
2. The grant is likewise given to more than one member in the family provided the
beneficiaries are not grantees of other scholarship schemes given by the City
Government.
VI. MAS College Scholarship for Indigents
In this kind of scholarship program, the City Government of Lipa entered into
a Memorandum of Agreement (MOA) with ten (10) leading schools/colleges in Lipa
City, Tanauan City, Batangas City and nearby areas for the following number of
students as indicated on the said MOA:
Number of
Schools Scholarship Grant
Beneficiaries
1. Batangas College of Arts 50 50% of the tuition fee
and Sciences, Inc. (BCAS)
2. Batangas State University 2,126 100% of tuition fee and
- Category A 50% of miscellaneous
No maximum fee;
- Category B 100% of the tuition fee
3. First Asia Institute of At least 50 50% of the tuition fee
Technology and Humanities
(FAITH)
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Number of
Schools Scholarship Grant
Beneficiaries
4. Lipa City Colleges (LCC) – Agreed number 50% of the tuition fee
College
5. Lipa City Colleges (LCC) – Agreed number 100% of the tuition fee
Post Graduate Degree
6. Lyceum of the Philippines 500 50% of the tuition fee
University – Batangas, Inc.
(LPU – Bats)
7. Lyceum of the Philippines – 5 50% of the tuition fee and
Laguna (LPU – Laguna) miscellaneous fees
8. Lyceum of the Philippines – 5 50% of the tuition fee and
St. Cabrini College of Allied miscellaneous fees
Medicine, Inc.
9. University of Batangas, Inc. 100 50% of the tuition fee
(UB)
10. Royal British College (RBC) Not specified 50% tuition and
miscellaneous fees
amounting to P7,075.00
11. STI College – Lipa (STI) 100 50% of the tuition fee
The City Community Affairs Office (CCAO) handles the screening of the
qualified applicants for endorsement to respective schools. According to its MOA,
after each semester, the concerned school shall bill the City the total amount of
Tuition and Miscellaneous Fee incurred by the City Scholars.
VII. Scholarship Programs initiated by some of the City Councilors
For CY 2017, the following Scholarship Programs were undertaken by some

of the members of the Sangguniang Panlungsod:
Number Amount
Sponsor City Total
Program Project Title of per
Councilor Amount
Scholars Scholar
1 Barangay Educational Hon. Ralph 62 P6,000.00 P372,000.00
Development Assistance Peter S. Umali
Assistance Program
2 Utilization of Legislative Hon. Avior R. 16 5,000.00
Barangay Education Rocafort 80,000.00
Development Fund Assistance
Program (LEAP)
3 Utilization of Legislative Hon. Avior R. 42 10,000.00 420,000.00
Barangay Education Rocafort
Development Fund Assistance
Program (LEAP)
4 MAS Elementary Legislative Hon. Nonato 45 10,000.00 450,000.00
Scholarship Education R. Monfero
Program Assistance
Program (LEAP)
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Number Amount
Sponsor City Total
Program Project Title of per
Councilor Amount
Scholars Scholar
5 Barangay Educational Hon. Ralph 93 6,000.00 558,000.00
Development Assistance Peter S. Umali
Assistance Program
6 MAS High School Legislative Hon. Nonato 42 10,000.00 420,000.00
Scholarship Education R. Monfero
Program Assistance
Program (LEAP)
7 Barangay Hon. Joel D. Pua Hon. Joel D. 50 8,000.00 400,000.00
Development Educational Pua
Assistance Program Assistance
Program
8 Barangay Lipeno Education Hon. 40 10,000.00 400,000.00
Development Assistance Emmanuel A.
Assistance Program Program (LEAP) De Castro
9 Utilization of LEAP Hon. Avior R. 60 10,000.00 600,000.00
Barangay (Legislative Rocafort
Development Fund Education
Assistance
Program)
10 Barangay Educational Hon. Ralph 125 3,000.00 375,000.00
Development Financial Peter S. Umali
Assistance Program Assistance
Total 575 P4,075,000.00
Under the above scholarship programs, the respective City Councilors entered
into a Memorandum of Agreement with the specified number of grantees stating
thereat the responsibilities of both parties. The amount received per scholar was based
on each work program. Target scholars include elementary, high school, senior high
school and college students.
This Educational Assistance Program is intended to provide educational

assistance to students who do not excel academically or whose grades do not belong
to the top of their class or to the average students. According to its Work Programs, it
is envisioned to provide education assistance to such sector of students who do not
possess the grade of an honor student but are capable of maintaining passing or
acceptable grades.
VIII. MAS College Scholar
A scholarship program wherein a selected students are granted P5,000.00

assistance for Tuition Fee and a monthly allowance of P1,500.00 and increased to
P2,500.00 effective on July 2017.
For CY 2017, the City disbursed a total amount of P97,566,242.80 for the above
mentioned programs, as shown on the next page:
83
Number of Grant per
Scholarship Program Charged to Amount (Gross)
Scholars Scholar
I. Sagip Eskwela 6,136 - 6,628 Donation P300.00 per P19,413,300.00
month
II. Financial Assistance to 2,231 Donations 3,000.00 6,693,000.00
SHS (various schools)
III. Financial Assistance to 799 Scholarships 5,000.00 3,995,000.00
SHS (Lipa City
Colleges)
IV. Financial Assistance to 2,692 Scholarship 5,000.00 13,460,000.00
College (1st semester)
V. Financial Assistance to 1,841 Donations 5,000.00 9,205,000.00
College (2nd semester)
VI. MAS College 1 – 1,972 Scholarship 50% to 100% 40,189,942.80
Scholarship for Indigents of Tuition and
Miscellaneous
Fee
VII. Scholarship Programs 575 Donations P3,000.00- 4,075,000.00
initiated by some of the P10,000.00
City Councilors
VIII. MAS College Scholars 21-26 Scholarship P1,500 to 535,000.00
P2,500 per (January to
Monthly October 2017
Allowance only)
plus P5,000.00
Tuition Fee
Total P97,566,242.80
Evaluation and analysis of the supporting documents of the payments for the
above programs disclosed the following observations:
A. Different Kind of Scholarship Programs are administered by different Offices of the

City, thus resulted in dual scholarship granted to various beneficiaries and
contravening that Office’s own set of standards
As presented in the preceding tables, the City has more or less eight
Scholarship Programs administered by different Offices of the City Government of
Lipa such as the City Mayor’s Office (CMO), City Social Welfare and Development
Office (CSWDO), City Community Affairs Office (CCAO) and some of the City
Councilors’ Office. The guidelines set for the scholarship programs when compared
showed different processes of application, retention, settlement, duration and amount
granted. Verification of the grants for scholarship initiated by some of the City
Councilors made through check payment, on a test basis, showed that the following
students received more than one scholarship assistance from the City Government:
Check Check DV/ Payee Nature of Payment Amount

Date No. Payroll
No.
7/26/2017 LBP 4881-17- 1 Carmela Educational P 6,000.00
741323 07 Maandal Assistance (Hon.
Ralph Peter S. Umali)
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Check Check DV/ Payee Nature of Payment Amount
Date No. Payroll
No.
9/11/2017 DBP 6048-17- 2 Carmela Educational 8,000.00
55762353 09 Maandal Assistance Program
(Hon. Joel D. Pua)
4/25/2017 DBP 4908-17- 1 Gio Angelo Legislative Education 10,000.00
55761648 07 Castillo Assistance Program
(LEAP)
11/28/2017 LBP 7139-17- 2 Gio Angelo Legislative Education 10,000.00
741913 10 Castillo Assistance Program
(LEAP)
3/14/2017 DBP 1166-17- 1 Harvi Dalagan Educational 6,000.00
55761069 02 Assistance (Hon.
11/29/2017 LBP 7940-17- 2 Harvi Dalagan Educational Financial 3,000.00
3/14/2017 DBP 1166-17- 1 Jorgina Educational 6,000.00
55761070 02 Antonette Assistance (Hon.
Dalusong Ralph Peter S. Umali)
8/17/2017 LBP 5604-17- 2 Jorgina Legislative Education 10,000.00
741715 08 Antonette M. Assistance Program
Dalusong (LEAP)
3/14/2017 DBP 1166-17- 1 Karyl Niko Educational 6,000.00
55761114 02 Valencia Assistance (Hon.
11/29/2017 LBP 7940-17- 2 Karyl Nico Educational Financial 3,000.00
742098 11 Valencia Assistance (Hon.
3/14/2017 DBP 1166-17- 1 Rochelle Pesa Educational 6,000.00
11/29/2017 LBP 7940-17- 2 Rochelle Ann Educational Financial 3,000.00
742070 11 Pesa Assistance (Hon.
Subtotal (1st Grant) 40,000.00
(2nd Grant) 37,000.00
Total P 77,000.00
The amount of P37,000.00 represents payment for the second scholarship

grant received by the scholars from the City. The said payment contravenes the terms
and conditions of the Educational Assistance Program in which it was stated that a
grantee of a certain scholarship program should not be a recipient of another
scholarship assistance, thus rendered the amount, irregular. The amount determined
was based only on verification made on check payments. The scarce resources of the
government should be proportionately distributed to the people and not only for a few
individuals. On the other hand, the duplication of payment may be associated to the
number of City Offices granting educational assistance to its constituents. If there is
85
only one Office that will handle the processing of the application and grant of
scholarship, there will be a tighter control over replication of service.
B. Different Mode of Payment to Grantees
Educational Assistance paid to student-grantees was made on different mode,

such as cash advance made by a Disbursing Officer then distributed through payroll,
check payments directly to partner schools and check payable to students, as follows:
Number of Amount
Scholarship Program Mode
Scholars (Gross)
I. Sagip Eskwela 6,136 - 6,628 Cash Advance and P19,413,300.00
distributed through
Payroll
II. Financial Assistance 2,231 Cash Advance and 6,693,000.00
to SHS (various distributed through
schools) Payroll
III. Financial Assistance 799 Check Payment to 3,995,000.00
to SHS (Lipa City School
Colleges)
IV. Financial Assistance 2,692 Cash Advance and 13,460,000.00
to College (1st distributed through
semester) Payroll
V. Financial Assistance 1,841 Cash Advance and 9,205,000.00
to College (2nd distributed through
semester) Payroll
VI. MAS College 1 – 1,972 Check Payment to 40,189,942.80
Scholarship for School
Indigents
VII. Scholarship Programs 575 Check Payment to 4,075,000.00

initiated by some of Student
the City Councilors
VIII. MAS College 21-26 Cash Advance and 535,000.00
Scholars distributed through (January to
Payroll October 2017
only)
Total P97,566,242.80
Bulk of financial assistance to various student grantees were distributed

through payroll, contrary to Section 9 of COA Circular No. 92-382 dated July 3,
1992 which states:
“Disbursements by check - All disbursements shall be made by check, except

as otherwise provided herein.”
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C. Improper Charging of Scholarship Grant to Donations account
Of the total amount paid by the City Government for Scholarship assistance
on CY 2017, P39,386,300.00 was charged to Donations account instead of the
Scholarship Grants/Expense account, contrary to the prescribed Revised Chart of
Accounts for Local Government Units under COA Circular No. 2015-009 dated
December 1, 2015 wherein Scholarship Grants/Expense is described as follows:
Scholarship Grants/Expenses
5-02-02-020
Debit
This account is used to record the costs of scholarships granted by the

government to individuals in the pursuit of further learning, study or
research.
The misclassification of accounts may render misconception to the reader of

the financial statements, thereby affecting the decision making capability of the
concerned officials.
D. City Social Welfare and Development Office (CSWDO) has the full control over the
selection/screening process and preparation of the payrolls of Educational Allowance
for Sagip Eskwela Program
Similar to the audit observations stated in the Annual Audit Report for CY
2015, inquiry revealed that the CSWDO still has full control over the
selection/screening process and preparation of the payrolls of Sagip Eskwela
Program, contrary to sound internal control where no person or office shall have
complete control over any transaction.
In addition, according to the Work Program of Sagip Eskwela Project under

the Poverty Alleviation Program of the City, beneficiaries shall receive P900.00
quarterly or P3,600.00 (P900.00 x 4 quarters) for the whole year upon passing the
criteria/guidelines set by the City. Audit of disbursements for the release of the
allowance showed, however, that only P3,000.00 was received by each student on CY
2017, to wit:
Quarter Number of Amount per Total Payment

Scholars Quarter
1st Quarter 6,136 P900.00 P5,522,400.00
2nd and 3rd Quarters 6,628 1,200.00 7,953,600.00
4th Quarter 6,597 900.00 5,937,300.00
Total P3,000.00 P19,413,300.00
It is to be noted though, that on the Work Program for the second quarter, only
one month corresponding to P300.00 will be paid for the projected 6,666
87
beneficiaries. This indicates that the allowance will be for 10 months only and not for
the four quarters of the year. Thus, for a clearer guidelines, the work program should
be revised to indicate that the amount to be received by a student-grantee per month is
P300.00 or P3,000.00 for the whole year.
E. Different Set of Rules and Regulations per Memorandum of Agreement (MOA) per
School for MAS College Scholarship for Indigents and Insufficient Documentary
Requirements
The MOA with various schools have different set of rules and regulations.
However, it is commonly stated in each MOA that before the payment will be made
by the City, the partner College or University shall submit its statement of account
particularly indicating therein the name, course, year level, academic period, tuition
fee assessment, academic discount, if any, and the amount payable by the City
Government.
Audit of the payments made to the partner schools amounting to

P40,189,942.80 (Annex H) revealed that disbursements were based only on the said
billing statements provided by the respective schools. No separate document was
prepared by the concerned City Office evidencing the number of student-grantee
covered by the payment which should be attached to the disbursement voucher to
counter check the claim made by the schools. In addition, documents from the
beneficiaries such as their certificates of academic performance and school
registration forms were not submitted to the Audit Team to verify the propriety of
allowing the grantees to continue the scholarship privilege as contained on the
retention policy of the scholarship assistance.
Further review of the MOA and the payments made with partner schools
showed the following observations:
1. The Billing Statement provided by the Batangas State University (BatStateU)

showed that it was intended for scholars enrolled at its Main Campus and Branch
Campuses such as Alangilan, Malvar, Lipa and Rosario, to wit:
Number of Scholar
School 1 semester
st
2nd semester AY
AY 2015-2016 2015-2016
Main Campus 71 71
Alangilan Campus 97 93
Malvar Campus 423 369
Lipa Campus 1,374 1,276
Rosario Campus 7 7
Total 1,972 1,816
According to Section 4.1 of the Selection Policies stated in the MOA

between BatStateU and the City Government of Lipa, beneficiaries must be a
resident of Lipa. However, the CCAO, the Office in-charge with the processing of
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scholarship applications, failed to submit the application documents of the said
grantees despite demand, thereby having no documents to verify the residency of
1,816-1,972 scholars. Meanwhile, only the billing statement which indicated the
name, course, year level, general weighted average, and amount of tuition fee of
beneficiaries was attached to the claim. The absence of any document to prove
such affects the legitimacy and correctness of the payments made. Compliance
with Section 458 of the Local Government Code of the Philippines which states
that the Sangguniang Panlungsod should establish a scholarship fund for the poor
but deserving students in schools located within its jurisdiction or for students
residing within the city could not be ascertained.
2. Grant of Scholarship Assistance to 64 Post Graduate students without the

necessary supporting documents
The City Government of Lipa and Lipa City Colleges entered into two
Memorandum of Agreements for the provision of scholarship assistance to the
prospect college and post graduate students of the later. In the MOA for the post
graduate students, it was indicated on Item G that the City Government shall
screen and check the documentary requirements for eligibility to be submitted by
the student applicants, as follows:
 Personal letter addressed to the City Mayor written by the parents or the
students themselves;
 Certificate of Indigency issued by the Punong Barangay;
 Voter’s ID or COMELEC certification; and
 Enrolment Form or Certificate of Registration
For CY 2017, the City paid a total of P647,216.28 for the 100% Tuition
Fees of the 64 post graduate students taking up Master in Business
Administration, Master in Public Administration and Master of Arts in Education
for the 2nd semester of AY 2016-2017 and 1st semester of AY 2017-2018.
Audit showed, however, that the application documents to support that

each scholars are qualified to receive financial assistance were not submitted to
the Audit Team. Thus, verification of such could not be made.
F. Grant of Scholarship Assistance to 457 Post Graduate students of different

institutions within CALABARZON and Metro Manila under the MAS Education and
Financial Assistance Program for College Students
According to its Implementing Guidelines, this program covered a wide range

of recipients including the high school graduate, college level, graduate, post
graduate studies or review. Audit of the first and second release of financial
assistance under this program amounting to P13,460,000.00 and P9,205,00.00,
respectively, revealed that the City granted support to 457 post graduate students of
89
different schools within CALABARZON and Manila totalling P2,285,000.00 or
P5,000.00 each beneficiaries, such as:
 AMA Computer University - Quezon City

 Batangas State University
 Centro Escolar University
 De La Salle – Araneta University, Inc.
 De La Salle Lipa
 De La Salle University – Dasmariñas
 Golden Gate Colleges
 Jose Rizal University
 Laguna College of Business and Arts
 Laguna State Polytechnic University
 Lipa City Colleges
 Lyceum of the Philippines University
 New Era University
 ORTEA Review Center
 Pamantasan ng Lungsod ng Manynila
 Philippine Christian University
 Philippine College of Health and Sciences
 Philippine Normal University
 Polytechnic University of the Philippines
 RESA Review Center
 Rizal College of Taal
 San Pablo Colleges
 San Sebastian Recoletos
 St. Dominic Savio College - Caloocan City
 St. Jude College Inc.
 St. Luke's College of Medicine
 Tanauan Institute, Inc.
 The Philippine Women’s University
 University of Asia and the Pacific
 University of Batangas
 University of Perpetual Help – Dr. Jose G. Tamayo Medical University
 University of the Philippines Los Baños
 University of the Philippines Manila College of Medicine
 University of the Philippines Open University
These students are taking courses such as Juris Doctor, Doctor of Medicine,
Doctor of Veterinary Medicine, Doctor of Business Management, Doctor of
Philosophy in Education, Doctor of Education in Education Management, Doctor in
Curriculum and Supervision, Doctor of Philosophy in Education Major in Special
Education and Inclusive Education, Doctor of Philosophy in Psychology, Doctor in
School Leadership and Management, Master of Science in Medical Laboratory,
Master of International Hospitality Management, Master of Arts in Psychology,
Master of Public Management, Master of Arts in Education (MAED) in Filipino,
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MAED in Curriculum and Instruction, MAED in Guidance and Counseling, MAED
in Mathematics, Master of Science in Criminology, Master of Science in Computer
Science, Master of Arts in Nursing, Master in Management Technology, Master of
Public Administration and Master of Business Administration, and taking review
classes for various Board Examination such as Bar and Certified Public Accountant
Examination, among others.
Additionally, Item B.2 of the Program’s Implementing Guidelines stated that

the privilege is granted to all beneficiaries regardless of the grades submitted even
with failing grades or dropped subjects, provided the beneficiaries are in school at the
current semester. This is a very clear violation of the aforementioned Section 458 of
RA 7160 which highlighted that the scholarship assistance should be for the poor but
deserving students.
Furthermore, it was observed that the City Community Affairs Office

(CCAO) was also the office in charge of the selection, processing and preparation of
the payrolls for the grant of this financial assistance. This is contrary to sound
internal control system as mentioned earlier.
G. Some of the Sangguniang members entered into a MOA with various student grantees
Section 458 of the Local Government Code of the Philippines identified the
powers, duties, functions and compensation of the Sangguniang Panlungsod. They
are:
(a) The sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of
this Code and in the proper exercise of the corporate powers of the
city as provided for under Section 22 of this Code, and shall:
Xxx
(b) The members of the sangguniang panlungsod of component cities shall

receive a minimum monthly compensation corresponding to Salary
Grade twenty-five (25) and members of the sangguniang panlungsod
of highly-urbanized cities shall receive a minimum monthly
compensation corresponding to Salary Grade twenty-seven (27), as
prescribed under R.A. 6758 and the implementing guidelines issued
pursuant thereto.
For the current year, the total scholarship assistance distributed under this
Program amounted to P4,075,000.00, as shown on the previous table, which was
entered into and between the City Government of Lipa, represented by the
concerned City Councilor and the specified number of grantees. In reference to
the above powers, duties and functions of a member of Sangguniang Panlungsod,
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he/she was not given an authority to enter into any contract or memorandum of
agreement in behalf of the City Government, thereby rendering the above
payment as an irregular disbursement for lack of legal basis.
It was also observed that for the scholarship assistance being granted by
most of the City Councilors, one of the requirements to qualify is that the
students’ family must have an annual income of P10,000.00 or below, however,
review of the documents showed that the portion for such on the application form
of the students was not filled out by the claimants. Hence, verification could not
be made by the Audit Team. Meanwhile, based on the student’s profile, it was
noticed that most of the parents of the grantee are working in a private or even in
the government institutions thereby earning an annual income of more than the
P10,000.00 threshold. As such, additional measure should be implemented by the
concerned office to ensure that only those needy students are granted with the
benefits.
H. MAS College Scholarship granted mostly to students enrolled in Private/Prestigious

Universities/Colleges with High Matriculation Fee.
As of October 2017, disbursement amounting to P535,000.00 was made under

this Scholarship Program. Verification of the supporting documents revealed that a
monthly allowance of P1,500.00 each was given to 26 students from January to May
2017 in addition to onetime payment of P5,000.00 for tuition fee per student. On July
2017, the number of students decreased to 21, in which some of the previous
student’s name remained while some other were added. The allowance of P1,500.00
was then increased to P2,500.00 per scholar per month. Further scrutiny of the duly
paid payrolls disclosed that some of the students listed thereat are the
daughter/son/relative of some of the department heads or employee of the City
Government. The payment was also not supported with any implementing rules and
guidelines, work program or memorandum of agreement. The payrolls for January to
February 2017 was only supported by Transcript of Records, Certificate of Final
Grade and Certificate of Enrollment of the listed students who are mostly enrolled at
the Arellano Law Foundation, St. Scholastica’s College, De La Salle Lipa, Philippine
Christian University Corporation, University of Perpetual Help-Dr. Jose G. Tamayo
Medical University, Philippine State College of Aeronautics, University of the
Philippines Los Baños, Lipa City Colleges, Ateneo de Manila University, University
of Sto. Tomas, University of the Philippines and Batangas State University which are
mostly private institution having a very high matriculation fee.
Payment for the tuition fees of these student-grantees clearly contradicts the
provision of Section 458 of the Local Government Code of 1991 to the disadvantage
of the more needy constituents.
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a) the concerned officials to consolidate in one office the handling and

selection of City scholars to avoid the availment of more than one
scholarship and to conceptualize one Scholarship Program with rigid
rules and regulations that will cater all the poor and deserving students of
the City to ensure the proper utilization of the scarce resources of the
government;
b) the concerned officials to evaluate the scholarship programs and

determine the students who have more than one scholarship and to
require the students to refund the amount received for other scholarship
assistance;
c) the Accounting Office to use the Scholarship account instead of Donation

account in recording transactions pertaining to the grant of educational
assistance;
d) the respective Office to transfer the preparation of payroll for Sagip

Eskwela and MAS Educational Financial Assistance Program to the
Accounting Office to adhere to sound internal control;
e) the concerned Office to revisit the Implementing Guidelines and Work

Program for Sagip Eskwela and make necessary amendment on the
amount being granted;
f) the City Community Affairs Office to submit to the Audit Team the
documents to support the grant of MAS College Scholarship for
Indigents;
g) the concerned office to refrain from paying financial assistance to post

graduate students and other students who can afford to support their
studies, instead focus on those less privileged who cannot even attend to
high school or college level;
Assistance to College Students which stated that it can be granted to
students even with failing grades or dropped subjects, provided the
beneficiaries are in school at the current semester;
i) the members of the Sangguniang Panlungsod who represented the City in

the MOA with grantees of Scholarship Program to desist from entering
into such agreements in behalf of the City for lack of power and
authority; and
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j) the stoppage of granting scholarship/financial assistance to students
enrolled in the Prestigious/Private Universities/Colleges and give priority
to the less privileged students.
As per letter from one of the City Councilor dated May 15, 2018, and received by
the Audit Team last May 18, 2018:
“In paragraph A of the said AOM that states: “Different kind of scholarship
programs administered by different Offices of the City thus resulted to dual
Scholarship granted to various beneficiaries and contravening their Office’s
own set of standard”, it was observed that hereunder listed three (3) grantees
of educational/financial assistance of the Office of the undersigned had
received dual assistance of the Office of the undersigned had received dual
assistance. First in the March 2017 worth Six Thousand pesos (P6,000.00)
and the Second was in November 2017 amounting Three Thousand Pesos
(P3,000.00), viz: Xxxx
It must be noted that the undersigned consistently emphasized the real and
applicable School Year (SY) in our Work Program (WP) for SY is one the
basic criteria specified in the said WP that is ,”They must not be a recipient of
any scholarship/educational grants/assistance being provided by the City
Government of Lipa”.
Thus, the fact presented above that the said assistance were given separately
in two(2) different school year, those were SY 2016-2017 and SY 2017-2018
respectively, and understanding the difficulty of the concerned ordinary
parents in sending their children even in public schools considering the daily
individual expenses of a typical junior school high students which includes but
not limited to transportation fee, snacks/meal and other school related
projects, the said assistance though provided twice to the same recipient was
but of different school year, is just petty easement to their families’ financial
burden.
Finally, the concerned vouchers and its attachments were subjected to usual
procedure thus approval made is presumed tantamount to its regularity”
The City Administrator, during the exit conference, promised to set one policy for
the Scholarship Programs of the City Government this coming year. He also provided an
answer per letter dated June 26, 2018 citing that the Community Affairs Office has
already created the general guidelines in availing the MAS Scholarship and Financial
Assistance which was implemented beginning the first semester of Academic Year 2018-
2019. A copy of the said guidelines was also forwarded to the Audit Team. In addition,
he mentioned that the members of the Sangguniang Panlungsod are already desisting
from entering into various memoranda of agreement with scholarship grantees. Instead,
94
there shall now be an orderly handling and selection of scholars, as well as grant of
financial assistance, through the Community Affairs Office.
The Audit Team gave credence on the clarification submitted by one of the City
Councilor and the action of the City in forming a uniform guidelines for the
implementation of all its Scholarship Programs, however there still remain unaccounted
students who received two scholarship assistance for CY 2017. Moreover, review of the
new guidelines set showed that financial assistance for graduate and post graduate
students will be continued, the same with the Senior High School students enrolled at
private and prestigious schools, thus not complying fully with the above
recommendations.
Meanwhile, no comment or answer was made on recommendations under letter b,

c, d, e, f, h and j.
7. Procurement of goods, services and infrastructure projects with a total contract

cost of P210,732,076.83 were awarded to 16 contractors/suppliers even with
doubtful and without complete eligibility documents, rendering the winning bidders
as ineligible, due to the failure of the Bids and Awards Committee (BAC) to
properly evaluate the eligibility requirements submitted by the bidders, thereby
rendering the legality of the contracts with the City doubtful and questionable, aside
from being contrary to Sections 23.1, 23.6, 25.3, 34.1, 34.2 and 34.3 of the 2016
Revised Implementing Rules and Regulations (RIRR) of Republic Act (RA) No.
9184.
Section 12 of RA No. 9184 states that among the functions of the BAC is to
undertake post-qualification proceedings.
One of the powers granted to the BAC under Section 12 of RA No. 9184 and its
RIRR is to determine the eligibility of prospective bidders. Such determination is
conducted using the non-discretionary “pass/fail” criterion wherein the BAC merely
checks whether a particular requirement is present, missing, incomplete, or patently
insufficient which makes the process very simple and efficient. Hence, if the bidder’s tax
clearance is invalid or not submitted during the opening of bids, the bidder is disqualified
for such, receipt or any other documents in exchange are not acceptable.
Section 23.1 of the Revised IRR of RA No. 9184, also known as the Government
Procurement Reform Act, 2016 edition provides:
“For purposes of determining the eligibility of bidders using the criteria

stated in Section 23.4 of this IRR, only the following documents shall be
required by the BAC, using the forms prescribed in the Bidding Documents:
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a) Class ‘A’ Documents
Legal Documents
i. Registration certificate from SEC, Department of Trade and Industry

(DTI) for sole proprietorship, or CDA for cooperatives;
ii. Mayor’s/Business permit issued by the city or municipality where the
principal place of business of the prospective bidder is located, or the
equivalent document for Exclusive Economic Zones or areas. Xxx;
iii. Tax Clearance per EO No. 398, s. 2005, as finally reviewed and
approved by the Bureau of Internal Revenue (BIR);
Xxx
23.6 Notwithstanding the eligibility of a bidder, the Procuring Entity

concerned reserves the right to review the qualifications of the bidder
at any stage of the process if the Procuring Entity has reasonable
grounds to believe that a misrepresentation has been made by the said
bidder, or that there has been a change in the bidder’s capability to
undertake the project from the time it submitted its eligibility
requirements. Should such review uncover any misrepresentation
made in the eligibility requirements, statements or documents, or any
changes in the situation of the bidder which will affect the capability of
the bidder to undertake the project so that it fails the eligibility
criteria, the Procuring Entity shall consider the said bidder as
ineligible and shall disqualify it from obtaining an award or contract,
in accordance with Rules XXI, XXII and XXIII of this IRR.
Xxx
25.3 The Omnibus Sworn Statement executed by the bidder, or its duly
authorized representative, shall contain the following:
Xxx
Xxx
(c) Each of the documents submitted in satisfaction of the bidding

requirements is an authentic copy of the original, complete, and
all statements and information provided therein are true and
correct;
Xxx”
96
Section 34, Rule X of the Revised IRR of RA No. 9184 provides the objective
and process of post-qualification. It was stated under Section 34.1 of the said RIRR that
the Lowest Calculated Bid (LCB)/Highest Rated Bid (HRB) shall undergo post-
qualification in order to determine whether the bidder concerned complies with and is
responsive to all the requirements and conditions as specified in the bidding documents.
Further, Section 34.3 of the same RA provides that the post-qualification shall
verify, validate and ascertain all statements made and documents submitted by the bidder
with LCB/HRB using the non-discretionary criteria, as stated in the bidding documents.
These criteria shall consider, but shall not be limited, to the following:
 Verify, validate and ascertain licenses, certificates, permits, and agreements

submitted by the bidder;
 Verification and validation of the bidder’s stated competence and experience,
and the competence and experience of the bidder’s key personnel to be
assigned to the project;
 Verification of availability and commitment of equipment units that will be
used by the bidder in the contract;
 Checking of the bidder’s performance in its ongoing government and private
contracts;
 Inspection and/or testing of the product and after-sales and/or maintenance
capabilities;
 Ascertainment of the sufficiency of the bid security as to type, amount, form,
wording and validity period; and
 Verification of the bid price and/whenever applicable, the required Credit
Line Commitment or the Net Financial Contracting Capacity of the bidder.
The requirement under Section 34.2 of the Revised IRR of RA No. 9184 for the
submission of Tax Clearance is based on Executive Order (EO) No. 398. Section 1 of
EO No. 398 requires the submission of Tax Clearance issued by the BIR to prove full and
timely payment of taxes of all persons desiring to enter into or participate in any contract
with the government.
The Tax Clearance Certificate issued by the BIR is one of the major requirements
to qualify as an eligible bidder in any bidding of government projects. The rationale of
this is the government wants to award projects to those companies which are complying
with the tax regulations and paying the right taxes.
The same Executive Order further states that:
“Section 3. To ensure continuing compliance with tax laws, all government

contracts shall include a stipulation that the private contracting party shall pay
taxes in full and on time and that failure to do so will entitle the government to
suspend payment for any goods or services delivered by the private contracting
party.
97
All government contracts shall likewise include a stipulation requiring the
private contracting party regularly present, within the duration of the contract, a
tax clearance from the Bureau of Internal Revenue as well as copy of its income
and business tax returns duly stamped and received by the Bureau of Internal
Revenue and duly validated with the tax payments made thereon.”
Failure to submit the above requirements on time or a finding against the veracity
of such shall be ground for the forfeiture of the bid security and disqualify the bidder for
award.
Furthermore, Government Procurement Policy Board (GPPB) Circular No. 05-

2017 dated April 10, 2017 was issued requiring all procuring entities and bidders to
strictly observe the mandatory submission of PhilGEPS Certificate of Registration and
Membership under Platinum Category in lieu of the Class “A” eligibility documents as an
eligibility requirement during competitive bidding effective May 1, 2017.
On July 31, 2017, GPPB issued Circular 07-2017 for the deferment of the
implementation of the mandatory submission of PhilGEPS Certificate of Registration and
Membership to provide prospective bidders with additional time to register with PhilGEPS
under the Platinum Membership category and to synchronize with the PhilGEPS
modernization. Thus, bidders may still submit their Class “A” Eligibility Documents
required to be uploaded and maintained current and updated in the PhilGEPS pursuant to
Section 8.5.2 of the 2016 Revised IRR of RA 9184, or if already registered in the
PhilGEPS under Platinum category, their Certificate of Registration and Membership in
lieu of their uploaded file of Class “A” documents, or a combination thereof. In case the
bidder opted to submit their Class “A” Documents, the Certificate of PhilGEPS
Registration (Platinum Membership) shall remain as a post-qualification requirement to be
submitted in accordance with Section 34.2 of the same IRR.
Moreover, Section 65.3 of the same IRR provides:
“65.3. Private individuals who commit any of the following acts, and any
public officer conspiring with them, shall upon conviction, suffer the
penalty of imprisonment of not less than six (6) years and one (1) day
but not more than fifteen (15) years:
a) Submitting eligibility requirements of whatever kind and nature

that contain false information or falsified documents calculated to
influence the outcome of the eligibility screening process or
conceal such information in the eligibility requirements when the
information will lead to a declaration of ineligibility from
participating in competitive bidding.
b) Submitting Bidding Documents of whatever kind and nature that

contain false information or falsified documents or conceal such
98
information in the Bidding Documents, in order to influence the
outcome of the public bidding.”
Furthermore, Section 69.1 of the same RIRR provides:
“69.1 In addition to the provisions of Rules XXI and XXII of this IRR, the
Head of the Procuring Entity, subject to the authority delegated to the
BAC, if any, shall impose on bidders or prospective bidders, the
administrative penalty of suspension for one (1) year for the first
offense, and suspension of two (2) years for the second offense from
participating in the competitive bidding process, as well as
disqualification from further participating in the competitive bidding
being undertaken by the Procuring Entity concerned, where
applicable, for the following violations:
a) Submission of eligibility requirements containing false information

or falsified documents.”
Audit of transactions disclosed that the following Bidders/Contractors/Suppliers

were awarded contracts in the total amount of P210,732,076.83 (Annex I) for bidding
held on December 14, 2016 and paid in CY 2017 and all bidding in CY 2017, despite
their failure to submit complete eligibility requirements, as follows:
a. KLR Trading was awarded a total contract amount of P3,489,655.09 for the four
infrastructure projects with bidding held on December 14, 2016. However,
verification disclosed that there was no Tax Clearance Certificate (TCC)
submitted by the said Contractor during the bidding. The TCC was issued on
March 17, 2017, after the bidding and attached this clearance only during
payments/claims on April 4, 2017.
b. Two bidders namely, ARE Construction and Supply and Earthclean

Environmental Management Corp. were declared LCRB, hence, were given a
Notice of Award on August 25, 2017 and January 23, 2017, respectively.
However, verification disclosed that there was no TCC submitted by the
aforementioned contractors during the bidding. ARE Construction and Supply
submitted Certificate of PhilGEPS Registration under Blue Membership category
which was valid until August 27, 2017 only. The said contractor was also given
various Notices of Award and entered into a contract (Annex J) with the different
barangays of the City of Lipa despite having incomplete documentary
requirements.
c. The following bidders were declared the LCRB by the BAC. Consequently, they
were given a Notice of Award and entered into a contract with the City for
various infrastructure projects/delivery of goods and services as shown on the
following page:
99
Bidders Qty. of Total Contract TCC No. Date of Issue
Projects Amount of TCC
Awarded
SOLEN Builders and 22 P55,054,301.56 10-13RO161-2016 Oct 13, 2016
Construction Supply 05-05-R0061-2017 May 5, 2017
TEN TEN Builders and 13 11,071,389.13 8-12-R0318-2016 Aug. 12, 2016
Construction Supplies
DLG KONSTRAK 11 14,369,653.82 11-14-G0220-2016 Nov. 16, 2016
5-20-G0220-2016 May 20, 2016
FG and E'S Construction 6 26,955,696.00 04-12-R0242-2016 April 12, 2016
2K8 Builders and 10 10,274,281.50 07-07-R0286-2016 July 7, 2016
Construction Supplies 3-31-R0487-2017 March 31, 2017
Corp.
Prime Mover’s Phils. 10 19,961,400.79 07-07-R0283-2016 July 7, 2017
Construction and
Supplies Inc.
D.D. Rosal Construction 3 2,993,805.99 11-07-R0358-2016 Nov. 7, 2016
7MG Hauling Services 1 35,028,150.00 2-10-R0032-2017 Jan. 5, 2017
Phil. Corp.
RARE LYON 1 977,670.00 05-15-R0141-2017 May 15, 2017
Mechandizing
A.Q.Loisaga Maintenance 1 2,995,000.00 11-21-R0387-2016 Nov. 21, 2016
and Janitorial Service
and Supply
Bandevilla Pharmacy 1 1,867,763.50 05-12-R0035-2015 Feb 15, 2016
Golden King Sales & 1 5,725,773.45 07-20-R0238-2016 July 20, 2016
Trading
Abeth & Lulu Rice Store 3 17,931,510.00 03-13-R0092-2017 March 13, 2017
The above named suppliers were awarded a contract, however, the

submitted Tax Clearance Certificates were not in the Official List of Released Tax
Clearance for Bidding Purposes of the BIR portal, thus their authenticity appeared
doubtful. The BAC should have declared them ineligible during the post-
qualification process.
d. More so, verification of the membership status at PhilGEPS website disclosed that
the following bidders were awarded with contract by the City of Lipa but they
were not included in the list of registered supplier/contractors under Platinum
Membership category:
 Abeth and Lulu Rice Store

 Bandevilla Pharmacy
 Golden Kings Sales & Trading
 Ten Ten Builders and Construction Supply
 Prime Movers Phil Constructions and Supplies Inc
 D.D. Rosal Construction
 RARE LYON Mechandizing
 A.Q.Loisaga Maintenance and Janitorial Service and Supply
On the bidding held on March 27, 2017, 2K8 Builders and Construction
Supplies and Prime Mover’s Phils. Construction and Supplies Inc. submitted page
100
1 only of the 3 pages of the Certificate of PhilGEPS Registration under Platinum
Category, hence authenticity of the Class “A” documents uploaded cannot be
verified.
e. For being the bidder with the Lowest Calculated Responsive Bids, a Notice of
Award (NOA) dated August 15, 2017 was given to SO-LEN Builders and
Construction Supply for five infrastructure projects amounting to P12,078,510.29
as shown below:
Contract Name Contract Amount

Installation of Street Lights at Brgy. San Sebastian, Lipa City P997,573.44
Improvement of Drainage Sysytem,at Brgy Sto. Niño, Lipa City 997,524.57
Improvement of Drainage System at Brgy. Anilao, Lipa City 997,667.17
Improvement of Drainage System at Brgy. 10, Lipa City 997,760.51
Construction of City Evacuation Center at Brgy.2, Lipa City 8,087,984.60
Total P12,078,510.29
The above contractor submitted Certificate of PhilGEPS Registration

under Platinum Category and TCC from BIR. Verification from PhilGEPS
website disclosed that the said bidder was indeed registered with the PhilGEPs on
June 20, 2017 as per Certificate No. 2005-18124.
However, further scrutiny of the Certificate submitted by SO-LEN

Builders and Construction Supply revealed the following:
 TCC No. NO-ARMD-05-05-ROO61-2017 issued on May 5, 2017 was not in

the Official List of Released Tax Clearance for Bidding Purposes of the BIR
portal for the month of May 2017 (Annex K).
 Eligibility Documents as stated in the Certificate of PhilGEPS Registration

under the Platinum Category showed the following (Annex L):
 On Audited Financial Statements column (Annex L1)

i. The amount stated in the Current Liabilities is P17,547,035.00 but
P5,500,000.00 as per attached FS
ii. The amount stated in the Total Liabilities is P23,047,035.00 but
P5,500,000.00 as per attached FS
iii. The BIR Regional District Office Code stated is 049 but it should be
059
 Tax Clearance – TCC is not in the Official List of Released Tax Clearance
for Bidding Purposes of the BIR portal for the month of May 2017. Shown
as TCC Number NO-ARMD-05-05-R0051-2017 but per questionable
TCC the TCC Number is NO-ARMD-05-05-R0061-2017
 Mayor’s/Business Permit – Signatory: Meynard Sabili instead of

Meynardo A. Sabili (Annex L2)
101
 DTI Certificate – DTI Certificate Number 036394190 should have been
03694190 (Annex L3)
 PCAB License Category – C should be D as per attached document

(Annex L4)
f. Meanwhile, TATAO Shirts and General Merchandise was awarded a contract

through public bidding in the total amount of P10,563,462.35 for CY 2017 as
follows:
Purchase Purchase Particulars Amount

Order Date Order Date
1/25/2017 2017-01-0003 Sports Materials P552,095.00
1/25/2017 2017-01-0004 Athlete uniform-STACAA meet 3,285,242.85
6/28/2017 2017-06-0027 Bags for Daycare & Kindergarten 1,485,937.50
7/5/2017 2017-07-0012 Bags, umbrella & raincoat 1,459,875.00
11/29/2017 2017-11-0067 Uniform, Provincial Meet 3,261,651.00
11/29/2017 2017-11-0066 Sports Materials 518,661.00
Total P10,563,462.35
As support to one of the technical documents, the said supplier submitted

the certified copy of following as their completed projects:
 Purchase Order issued by the City of Lipa on December 7, 2016 for the
delivery of bags, umbrella and raincoat in the amount of P1,461,000.00
 Disbursement Voucher from the Municipality of San Jose for the supply and
delivery of medals and trophies amounting to P84,448.56 dated December
19, 2016
Moreover, the following payments, net of taxes, were made in CY 2016

by the City Government to the subject supplier:
Date Check No. Particulars Amount

3/1/2016 LBP 701904 P95,654.00
3/1/2016 LBP 701905 96,000.00
3/8/2016 LBP 701907 Delivery of bags 230,400.00
4/27/2016 LBP498409 Sport Uniform-STCAA 2016 2,571,778.56
5/14/2016 DBP52239165 30,000.00
5/25/2016 DBP52239277 27,360.00
6/2/2016 DBP52239389 244,800.00
8/11/2016 DBP52240182 28,752.00
9/5/2016 DBP52240505 57,216.00
10/13/2016 DBP52241078 254,400.00
12/31/2016 LBP 703320 Delivery of tshirts 9,600.00
12/31/2016 LBP 703321 Delivery of hand fan 24,000.00
Total P3,669,960.56
102
However, in the submitted audited financial statements duly received by
the BIR, the reported Total Sales in the CY 2016 Income Statement as well as in
the annual Income Tax Return (ITR) filed with the BIR was only P440,350.00,
hence there was misrepresentation on the part of the supplier (Annex M). More
so, no payment for the quarterly and in the annual income tax return was made by
the supplier. The creditable tax withheld was likewise not reported in the annual
income tax return when the City withhold taxes on income subject to the
expanded withholding tax and final tax on their transactions with the City of Lipa
for CY 2016 amounting to P3,669,960.96. The computed amount of withholding
taxes for these transactions amounted to P152,915.04 while the amount of
P3,927.84 was withheld by the Municipality of San Jose as per Disbursement
Voucher No. 200-16-12-037, however these were not reported as creditable tax
withheld in the annual ITR filed for CY 2016 (Annex N).
TATAO Shirts and General Merchandise also violated Section 3 of the

BIR Regulations No. 16-2011 dated October 27, 2011 which states:
“Section 3. VAT EXEMPT TRANSACTIONS – Section 4.109.-1(B)(1)

(e)(1), (p)(4), (q) and (v) of Revenue Regulations No. 16-2005, as
amended, is hereby further amended to read as follows:
Xxx
(e) Services subject to percentage tax under Title V of the Tax Code, as
enumerated below:
1. Sale or lease of goods or properties or the performance of services

of non-VAT-registered persons, other than the transactions
mentioned in paragraphs (A) to (U) of Sec.109 (1) of the Tax Code,
the gross annual sales and/or receipts of which does not exceed the
amount of One Million Nine Hundred Nineteen Thousand Five
Hundred Pesos (P1,919,500.00) Xxx (Effective CY 2018 the VAT
threshold is increased to P3M under R.A. 10963 otherwise known
as the TRAIN Law)” (emphasis ours)
The registered tax type of subject supplier is percentage tax as per BIR
Certificate of Registration (COR) (Annex O). It should have been a Value Added
Taxes (VAT) because its gross annual sales for CY 2016 exceeded the P1.9M
threshold. For the City of Lipa alone, it was awarded of more than P10M contract
for CY 2017. Same is true with Bandevilla Pharmacy. It reported a gross annual
sales of P6,463,118.00 as per submitted Financial Statements and annual income
tax return for CY 2015 on the bidding in December 2016, however in the BIR
COR issued on December 23, 2011 whose line of business is retail of
pharmaceuticals, medical, cosmetics and toilet articles, showed that it is not
paying percentage or VAT taxes. Only the annual registration fee of P500.00 and
annual income tax return is required of her, contrary to Section 3 of the BIR
103
Regulations No. 16-2011 dated October 27, 2011 (Annex P). Obviously, the
government was deprived of the appropriate taxes it could have derived from the
income tax returns filed by these Contractors/Suppliers.
Based on the BAC minutes of post-qualification of various dates, the BAC

Committee certified, attested and approved by the BAC Secretariat, BAC
Members and BAC Chairman the Resolutions on the following premises as
follows:
“That the bidders submitted their intentions to bid as well as their

eligibility requirements for validation;
That the bidders were found to be qualified based on the documents

submitted and presented in the bidding;
That upon careful examination, validation and verification of all the

eligibility, legal, technical and financial requirements submitted by the
bidders, the committee was able to identify the Lowest Calculated
Bids;
That the committee agreed to recommend to the Head of Procuring

Entity for approval of the said Resolution.”
Hence, declared as the Lowest Calculated Responsive Bidders,

correspondingly, they were given a Notice of Award.
The BAC should have declared them as ineligible or disqualified since the
start of the bidding, and during the post-qualification process, for the
absent/spurious/expired/invalid Tax Clearances and questionable Financial
Statements/Income Tax Returns, thus cast doubts on the declaration of the bidders
with the LCB conducted by the BAC and affecting the legality of the contracts
entered into by the City and these Contractors/Suppliers.
The Tax Clearance must be valid and existing at the time it is submitted to
BAC and must be submitted within three calendar days from receipt of the notice
from the BAC that the bidder has the Lower Calculated Bid. Failure to comply
with the requirement for the submission of a valid Tax Clearance shall be ground
for post-disqualification of the bidder.
The misrepresentation made by the named contractors/suppliers affects the

procurement process of the City and placed the outcome of the bidding doubtful.
a) explain in writing why they shall not be held liable for their failure to
conduct thorough evaluation of the submitted Tax Clearance Certificate and
104
annual income tax returns of the bidders during post-qualification
proceedings;
b) submit their basis for rating the legal, technical and financial documents
submitted by bidders as “Passed” during the preliminary evaluation and
post-qualification considering that they appeared to be ineligible but were
awarded a contract, otherwise the transactions will be disallowed in audit;
c) be more cautious in evaluating the legal, technical and financial documents

submitted by bidders during preliminary evaluation and post-qualification
before recommending the award of the contract; and
d) impose administrative sanctions/penalties to the contractors/suppliers for

the submission of eligibility requirements containing false information or
falsified documents.
The BAC Secretariat, in his letter dated June 26, 2018, duly noted by CGSO, one
of the BAC members alleged that it was in good faith on their part that they believed that
the documents submitted by the suppliers/contractors are valid. It was also the same
reason that they certified those documents as “Passed”. He also stressed out that for the
imposition of sanctions/penalties, they will refer them to the higher authority to take
whatever actions that should be meted to those suppliers. He promised to make measures
to improve the evaluation process of the documents.
The City Engineer, in her letter dated June 26, 2018, forwarded by the City
Administrator on the same date to the Audit Team, stated that they have already required
the concerned contractors to submit the updated TCC. She insisted that those TCC which
do not appear in the BIR portal may be due to the late updating of the BIR system.
The Audit Team would like to stress out that the audit was made on consummated
transactions which transpired in CY 2017, thus documents or any evidence that would be
submitted should be valid for such period.
8. The appropriation for Confidential Expenses of P12,000,000.00 for the CY 2017 was
withdrawn in full by the Local Chief Executive thru cash advance on January 12,
2017 and the disbursement voucher thereof and its supporting documents were
submitted to the Audit Team 47 days after the prescribed period, contrary to the
various provisions of Joint Circular No. 2015-01 dated January 8, 2015 of the
Commission on Audit (COA), Department of Budget and Management (DBM),
Department of the Interior and Local Government (DILG), Governance
Commission for GOCCs (GCG) and Department of National Defense (DND).
Moreover, the said cash advance remained unliquidated at year-end.
105
COA-DBM-DILG-GCG-DND Joint Circular No. 2015-01 provides the guidelines
on the entitlement, release, use, reporting and audit of Confidential and/or Intelligence
Funds of the National, Corporate and Local Government Agencies in the country. The
following sections provide, among others:
“4.1.3 LGUs whose peace and order is a priority concern and which have
duly allocated CF, but not IF, in their annual appropriation
ordinances, provided, that, specific amount for POP is included in
their Peace and Order and Public Safety Plan and, provided further,
that there is a specific appropriation for POP in their annual budget.
The computation of allowable CF of an LGU shall be based on the
budget of the LGU's POP only.
6.1.5 Cash advances shall be limited to the requirements for three (3)
months. The disbursement voucher (DV) shall clearly state the
duration of implementation of the projects. If the implementation of the
project will extend to more than three months, additional amount may
be granted only after liquidation of the previous cash advance. If on
the other hand cash advances are drawn monthly, liquidation shall
also be done monthly. Cash advances shall be granted only upon the
certification of the Agency Accountant stamped or printed on the
disbursement voucher (DV) that previous cash advance for the same
purpose, project or activity given to the SDO requesting cash advance
has been liquidated and proper accounting thereof was made in
accordance with this Joint Circular.
6.1.7 The following are the required documents to support the DV for the
grant of cash advance for CF and IF common to NGAs, GOCCs and
LGUs:
Xxx
a. Certified copy of the Physical and Financial Plan where

disbursements of the cash advance of the CF/IF shall be based;
and
Xxx
6.1.8 In addition to those mentioned in 6.1.7, the following are the required
documents to support DV for the grant of cash advance for CF and IF
for a specific sector;
Xxx
6.1.8.3 For LGUs
106
Xxx
c. Certified copy of the minutes of the meeting evidencing the 2/3

votes of the Local Peace and Order Council approving the POP
and the release of the CF;
6.1.8.4 Within seven (7) days after release of check, the cash advance voucher
with covering transmittal letter (Annex D) enumerating the supporting
documents shall be submitted by the Agency Accountant or authorized
representative in a sealed envelope, to the concerned COA Audit Team
Leader (COA ATL) for post audit.
6.2 Liquidation of Cash Advance
Xxx
6.2.2 All cash advances for CF and IF shall be liquidated within 30 days
after every quarter, or from the approved target date of completion of
the project/activity, or after the cash advance had been fully utilized
whichever comes first in accordance with the following procedures:
Xxx
6.2.2.7 All cash advances for CF and/or IF shall be liquidated at year-

end.
Xxx”
The approved Annual Budget of the City Government of Lipa for CY 2017
showed an appropriation for Confidential Expenses of the Local Chief Executive for a
total amount of P12,000,000.00, under Sangguniang Panlungsod Ordinance No. 2016-30
dated December 20, 2016.
Audit revealed, however, that the full amount of appropriation for Confidential
Expenses of P12,000,000.00 has been withdrawn in full as Advances to Special
Disbursing Officer on January 12, 2017 under LBP Check No. 703557, per Disbursement
Voucher No. 0060-17-01 dated January 12, 2017. This is contrary to Section 6.1.5 of the
aforecited Joint Circular which provides that cash advances shall be limited to three (3)
months requirements only, whereby if the implementation of the project extends to more
than three months, additional amount may be granted only after liquidation of the
previous cash advance. If, on the other hand, cash advances are drawn monthly,
liquidation shall also be done monthly.
Further, as in the previous periods, the corresponding disbursement voucher for

the said cash advance and its supporting documents have been submitted only to the
Audit Team on March 7, 2017 or 47 days beyond the prescribed period of seven (7) from
107
the date of release of check on January 12, 2017. The pertinent late submission to the
Audit Team of the subject disbursement voucher precluded the timely review of the
transaction so that any deficiencies and/or errors committed could be immediately
detected and corrected.
Moreover, the Minutes of the meeting of the City Peace and Order Council
merely mentioned that the Council unanimously approved the POP and supported the
release of the CF, but the names of those who voted for such were not enumerated
thereby hampering the verification of the validity and accuracy of the number of votes.
Furthermore, the disbursement voucher again stated that the cash advance was for
Confidential/Intelligence Fund, which is contrary to Section 4.1.3 of the above Joint
Circular, where the Local Government Units may have allocated Confidential Fund only
but not Intelligence Fund leading to misrepresentation or confusion considering that no
appropriation was made for Intelligence Expenses based on the City’s Budget for CY
2017.
The Audit Team noted though that on the Physical and Financial Plan for
Confidential Expenses, as submitted by the City Government, all the programs, projects
and activities such as anti-illegal drugs, anti-terrorism activities, monitoring of activities
of subversive and dissident groups, identification/information on crimes, and
maintenance of safe houses were all targeted for the first quarter of CY 2017 only.
Lastly, verification of the financial statements as of December 31, 2017, disclosed

that the subject cash advance remained unliquidated. Documents relative to the
liquidation of this cash advance was submitted to the Office of the Chairman of the
Commission on Audit only on January 24, 2018.
Due to the failure to fully liquidate the subject cash advance, the corresponding
expenses incurred were not taken-up in the books of the City Government, thus
understating the expenses and overstating receivable account by the same amount,
rendering the reliability of the financial statements doubtful.
a) City Accountant, City Budget Officer, and other local officials concerned to
strictly observe Item 6.1.5 of the Joint Circular wherein cash advances
should be limited to three month requirements only;
b) City Accountant to submit to the Audit Team, for review and verification,
the disbursement voucher for the grant of cash advance for confidential
expense, together with all the required and proper supporting documents,
within seven days upon release of checks, pursuant to the above regulation;
c) City Budget Officer to ensure that appropriation for Confidential Expenses

should be stated as such and not for Confidential/Intelligence Expense to
108
avoid confusion, considering that LGUs are limited only to Confidential
Fund and therefore their appropriations should only be for Confidential
Expenses in compliance with Joint Circular No. 2015-01;
d) City Accountant to provide clarifications on the period covered of the cash

advance drawn and the reason thereof; and
e) City Accountant, City Budget Officer, and other local officials concerned to
process and pay claims with complete documentation only.
We further recommended that the City Mayor liquidate the cash advance for
Confidential Expenses within the period provided under COA-DBM-DILG-GCG-
DND Joint Circular No. 2015-01 dated January 8, 2015.
The City Accountant, City Budget Officer and other officials concerned, during
the exit conference, promised to comply with the recommendations.
9. The City availed the services of Ready Forms, Incorporated for the printing of
various accountable forms worth P3,689,795.00 from 2014 to 2017 in violation of
Office of the President of the Philippines Memorandum Circular No. 180, s. 2009
dated August 13, 2009, Department of the Interior and Local Government (DILG)
Memorandum Circular No. 2012-32 dated February 15, 2012, and GPPB Resolution
No. 05-2010 October 29, 2010, thus rendering the legality of the transactions
doubtful.
Office of the President of the Philippines Memorandum Circular No. 180, s. 2009
dated August 13, 2009 provides:
“Section 1. General Mandate – The National Printing Office (NPO) shall

continue to be the primary and main provider of printing
services to national, provincial, city and municipal governments,
agencies and instrumentalities, including government
corporations, as mandated by law, subject to the qualifications
prescribed herein.
Section 2. Printing of accountable forms with money value and specialized

accountable forms. The NPO shall have exclusive jurisdiction
over the printing of accountable forms with money value and
specialized accountable forms of the requisitioning office or
agency, subject to the following guidelines:
a. All requisitions for the printing of accountable forms with

money value and those which are specially designed for the
agency’s requirements shall be submitted to the NPO.
109
Xxx
d. The NPO shall be the sole distributor of all the forms printed
by the accredited security printers which will be paid by the
NPO for the services they have rendered. Xxx
Xxx
Section 4. Xxx.
Provided, finally, that prior written waiver by the NPO should be

secured by the requisitioning office before it commences the
proper procedure in contracting the services of private printers;
said waiver, if warranted, shall be promptly issued by the NPO,
taking into consideration the target completion time of the
requisitioning office.
Xxx”
Further, Department of the Interior and Local Government (DILG) Memorandum

Circular No. 2012-32 dated February 15, 2012 was issued to implement GPPB
Resolution No. 05-2010 as reiterated in Section 21 of RA No. 10155 (The General
Appropriations Act of 2012) providing for certain prohibitions in the printing of
accountable forms and high quality volume requirements.
The said Memorandum Circular states:
“In furtherance of GPPB Resolution No. 05-2010 dated October 29, 2010
(Providing Guidelines on the Procurement of Printing Services) issued by the
Office of the Press Secretary, now the Presidential Communications
Operations Office (PCOO) by virtue of Executive Order No. 4 dated July 30,
2010, engagement of private printer services in the printing of Accountable
Forms and Sensitive High Quality/Volume Requirements are strictly
prohibited, which provides as follows:
Policy Statement 1.2 Xxx However, printing of Accountable Forms

and Sensitive High Quality/Volume Requirements shall only be
undertaken by the recognized government printers, namely:
Bangko Sentral ng Pilipinas, National Printing Office, and Asian
Productivity Office Production Unit, Inc.”
Parallel thereto, Section 21 of Republic Act No. 10155, the General

Appropriations Act (GAA) for Fiscasl Year (FY) 2012 entitles “An Act
Appropriating Funds for the Operation of the government of the Republic of
the Philippines from January one to December Thirty One” provides that:
110
“Section 21 – Printing and Publication Expenditures. Departments, bureaus,
offices or agencies are hereby given the option to engage the services of
private printers in their printing and publication activities, subject to public
bidding in accordance with Republic Act No. 9184, its Revised Implementing
Rules and Regulations, and to pertinent accounting and auditing rules and
regulations : PROVIDED, That the printing of accountable forms, sensitive,
or high volume printing printers, namely: Bangko Sentral ng Pilipinas,
National Printing Office and Asian Productivity Office Production Unit, Inc.”
Relative thereto and guided by the above-said provisions, all Local Chief
Executives are directed to:
(a) strictly observe Policy Statement 1.2 of Resolution 05-2010, utilizing the
services of Bangko Sentral ng Pilipinas, National Printing Office, and APO
Production Unit, Inc. in the printing and publication of Accountable Forms;
(b) direct the Local Treasurer to refrain from posting the printing of Accountable
Forms in the PHILGEPS; and
(c) direct the Bids and Awards Committee to stop conducting public bidding as
far as Accountable Forms are concerned pursuant to the GPPB Guidelines.
Likewise, the GPPB has issued several clarifications on the matter such as GPPB
Resolution No. 24-2012 dated November 23, 2012 and Resolution No. 08-2012 dated
April 27, 2012, clarifying the guidelines on the procurement of Printing Services and
both uphold the validity of GPPB Resolution Nos. 05-2010 and 04-2011 and address all
the issues related to such Resolutions.
In addition, Annex A paragraph 4.3.2 of the Guidelines on the Procurement of

Printing Services of GPPB Resolution No. 05-2010 emphasized that the printing of
accountable forms should only be undertaken by Recognized Government Printers, and
resorting to private printing services involving Accountable Forms is possible only when
there is a determination by the Presidential Communications Operations Office (PCOO)
that no RGP can undertake the printing services due to time constraints and equipment
limitation.
Further, the then Acting Director of the National Printing Office, in his letter
dated October 29, 2015 requested the Honorable Chairman of the Commission on Audit
for investigation of the irregularities in the procurement of Accountable Forms by
different local government units (LGUs) from Ready Forms Incorporated as the said
printing company was blacklisted in December 2009.
The City of Lipa availed the services of Ready Forms Incorporated for the
printing of various accountable forms worth P3,689,795.00 from CYs 2014 to 2017,
details as shown on the next page:
111
Particulars Quantity Check No. Check Date Amount
Cash Tickets P10.00 14,000 pcs. D47094881 12/23/2014 P140,000.00
Personalized Form 51 pad/100 5,400 pads D47094881 12/23/2014 540,000.00
Personalized Form 56-continous form 48,600pcs D47094881 12/23/2014 182,500.00
Accountable Forms 5,995 pads D47094087 11/26/2014 59,950.00
Cash Tickets P10.00 14,790 pcs L7011065 12/29/2015 147,900.00
Personalized Form 51 pad/100 5,445 pads L7011065 12/29/2015 544,500.00
Personalized Form 53 1,039 pcs L7011065 12/29/2015 5,195.00
Personalized Form 56-continous form 49,200 pcs L7011065 12/29/2015 184,500.00
Cash Tickets P10.00 1,000 pads L703440 12/28/2016 147,000.00
Personalized Form (108/set) 3,750 set L703440 12/28/2016 405,000.00
Personalized Form 56-continous form 200 pads L703440 12/28/2016 36,500.00
Personalized Form 56-continous form 2,500 pads D52240744 09/21/2016 461,250.00
Cash Tickets P10.00 (145/pad) 1,200 pads L741879 11/27/2017 174,000.00
Form 51 (107/pad) 4,500 pads L741879 11/27/2017 481,500.00
Form 56 continuous (3.60/set) 5,000 sets L741879 11/27/2017 180,000.00
Total P3,689,795.00
Following the mandate of GPPB Resolution No. 05-2010 dated October 29, 2010,
and GPBB Resolution No. 04-2011 dated February 25, 2011, procuring entities have the
option to engage the services of private printers for their printing and publication
expenditures, subject to public bidding in accordance with RA No. 9184 and pertinent
accounting and auditing rules and regulations. PROVIDED, that printing of accountable
forms, sensitive, or high volume printing requirements shall only be taken to the
recognized government printers namely; Bangko Sentral ng Pilipinas, National Printing
Office and APO Production Unit, Inc.
Had the RFI been included among the recognized government printers, it could
transact in the printing of accountable forms, sensitive, or high volume printing
requirements among government sectors.
But in view of the clear and specific provisions of the GPPB and the mandate of
DILG Memorandum Circular No. 2012-32 dated February 15, 2012, the procurement of
accountable forms, sensitive, or high volume printing requirements is limited only
among the recognized government printers. The issuance of GPPB Resolution Nos. 08-
2012 and 24-012 has specifically mention Ready Forms, Inc questioning the validity of
the issuance of GPPB Resolution No. 05-2010, but resolved to firmly uphold the validity
of the latter resolution.
We recommended that the City of Lipa discontinue the purchase of

accountable forms from RFI and strictly comply with Office of the President of the
Philippines Memorandum Circular No. 180, s. 2009 and DILG Memorandum
Circular No. 2012-32 dated February 15, 2012, and GPPB Resolution Nos. 05-2010
dated October 29, 2010; 04-2011 dated February 25, 2011; 08-2012 dated April 27,
2012 and 24-2012 dated November 23, 2012.
112
The City Accountant made the following comments on her letter dated May 28,
2018 duly received by the Audit Team on May 31, 2018:
 “I already issued an instruction to concerned personnel of our department not to

process disbursement vouchers for printing of accountable forms, payable to
Ready Forms Inc.
 Our review of the Accountable Forms Inventory account revealed that there was
no utilization for the January to May 2018 period and hence, no payment to any
private printers, including RFI has yet been made, relative to this account. Xxxx
 We shall refer to the above issuances in our pre-audit of DVs for the procurement
of accountable forms Xxx”
The City Treasurer, in his letter dated June 26, 2018, noted that the City has
availed of the service of RFI in CYs 2014 to 2017 following the appropriate pubic
bidding processes under Republic Act No. 9184 and that the bidding was an outcome of
the implementation of the City of the Revenue Collection Systems – RPTA and BPLS
which consequently entails that accountable forms be customized in such a structure that
can deliver better security and control. He added that at the same time, the utilization of
papers from RFI was to put a halt to spoiled accountable forms from NPO that would
always get crumpled in the process of printing or could not be printed on at all. In
compliance with the recommendation, he said that the request for bidding for accountable
forms was immediately cancelled upon the receipt of the subject AOM. Accordingly, the
order for and purchase of accountable forms from NPO were undertaken and they already
requested from NPO a quotation for personalized accountable forms with certain security
features and are of high quality as that offered by RFI.
10. The City of Lipa allowed and accepted a provisional/improvised/unofficial receipt as

evidence of receipt of check/payment for the procurement of security services from
St. Vicentinian Security Services, Inc. amounting to P3,565,457.44, thus government
was deprived of the appropriate taxes it could have derived from the value added
tax, withholding and income tax returns filed by this contractor, contrary to Section
264 and National Internal Revenue Code (NIRC) of 1997, BIR Revenue
Memorandum Order No. 18-2012, Revenue Memorandum Circular No. 2-2014.
Moreover, these were paid even without the necessary supporting documents as
required in Section 4(6) of the Presidential Decree (PD) No. 1445, COA Circular
2012-001 dated June 14, 2012 and Revised Implementing Rules and Regulations
(IRR) of Republic Act (RA) No. 9184, thus validity, legality and correctness of the
claims could not be established that may result in suspension or disallowance in
audit.
Section 4(6) of PD No. 1445 states that, “Claims against government funds shall
be supported with complete documentation.”
113
Revenue Regulation No. 18-2012, dated October 22, 2012, provides, among
others, that taxpayers must apply for the printing of their new receipts at least sixty (60)
days (or April 30) before the expiry of their old receipts on June 30, 2013 and requiring
the issuance and use of new sets of receipts on July 1, 2013 and to surrender all unused
receipts 10 days after the printing of the receipts.
On May 2, 2013 the BIR also issued Revenue Memorandum Order (RMO) No.
12-2013 to provide for penalties since very few taxpayers were complying with the said
regulations. The BIR states that taxpayers who apply for authority to print receipts
beyond April 30, 2013 shall pay a penalty of P1,000.00. However, those who apply for
said authority beyond June 30, 2013 and/or on or before June 30, 2013 but failed to use
the new sets of receipts starting July 1, 2013 shall pay the maximum penalty (of
P50,000.00) as provided for in Section 264 of the Tax Code.
BIR again issued Revenue Memorandum Circular No. 44-2013 extending the
validity of all unused/unissued principal and supplementary receipts/invoices printed
prior to January 18, 2013, the effectivity date of RR 18-2012, from June 30, 2013 to
August 30, 2013.
However, a new update sent out on August 13, 2013 is the Revenue Memorandum
Circular 52-2013 which clarified the usage of all unused receipts (principal and
supplementary). Businesses can still use their old receipts until October 31, 2013,
provided that they meet these two (2) criteria:
1) Old/Current ATP was released after January 1, 2011. This can be seen in the
receipts themselves and the ATP form; and
2) A new ATP was already issued on or before August 30, 2013.
After October 31, 2013, all principal and supplementary receipts and invoices
printed before January 18, 2013 shall no longer be valid. Issuance of these receipts shall
be deemed to be an issuance of an invalid receipt or deemed as if no receipts were issued,
and a violation of Section 264 of the National Internal Revenue Code.
To fully implement the requirements under RR No. 18-12, a certified true copy of
the Authority to Print (ATP) shall be included as attachment in any application for tax
clearance. Accordingly, non-submission of ATP shall be a ground for non-issuance of tax
clearance for whatever purposes.
On January 13, 2014 Revenue Memorandum Circular No. 2-2014 was issued to
clarify the issuance of Official Receipt as required by Government Auditors as evidence
of receipt of payment for disbursement where the payee/recipient is a dealer, supplier or
any business establishment required by the BIR to issue such. The said Revenue
Memorandum Circular states that:
114
“Revenue Regulations No. 18-2012 and Revenue Memorandum Order (RMO)
No. 12-2013 in relation to Section 106, 108, 113 and other pertinent
provisions of the national Internal Revenue Code (NIRC), as amended,
mandate that:
1. Sales Invoice (Cash or Charge) shall be issued as Principal evidence in

the sale of goods and/or properties;
2. Official Receipt shall be issued as Principal evidence in the sale of
services and/or lease of properties; and
3. Commercial Receipts/Invoices such as delivery receipts, order slips,
purchase orders, provisional receipts, acknowledgement receipts,
collection receipts, credit/debit memo, job orders and other similar
documents that form part of the accounting records of the tax payer
and/or issued to their customers evidencing delivery, agreement to sell or
transfer of goods and services, shall be Supplementary evidence only.”
Further, Chapter I, Title X of the National Internal Revenue Code (NIRC) of 1997
(as amended by RA 10021) provides the following:
“Sec. 264. Failure or refusal to Issue Receipts or Sales or Commercial

Invoices, Violations related to the Printing of such Receipts or Invoices and
Other Violations. -
(a) Any person who, being required under Section 237 to issue receipts or
sales or commercial invoices, fails or refuses to issue such receipts of
invoices, issues receipts or invoices that do not truly reflect and/or
contain all the information required to be shown therein, or uses
multiple or double receipts or invoices, shall, upon conviction for each
act or omission, be punished by a fine of not less than One thousand
pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and
suffer imprisonment of not less than two (2) years but not more than
four (4) years.
(b) Any person who commits any of the acts enumerated hereunder shall
be penalized in the same manner and to the same extent as provided
for in this Section:
(1) Printing of receipts or sales or commercial invoices without

authority from the Bureau of Internal Revenue; or
(2) Printing of double or multiple sets of invoices or receipts; or
(3) Printing of unnumbered receipts or sales or commercial invoices,

not bearing the name, business style, Taxpayer Identification
Number, and business address of the person or entity.
115
Further, COA Circular No. 2012-001 dated June 14, 2012 prescribed the revised
guidelines and documentary requirements for common government transactions. Among
those, pertaining to the procurement of security services as follows:
“9.1 Procurement through public bidding
Basic requirements for all types of procurement through public bidding
- Authenticated photocopy of the approved APP and any amendment

thereto
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9.1.3.2 General Support Services (Security, Xxx and similar services)
Additional Documentary Requirements
- Appropriate approved documents indicating the following:
 The number of personnel involved and their corresponding

rates/salary
 Schedule of work and places of assignment or station/visits
indicating, among others, the number of hours per visit
- Approved documents indicating the minimum requirements of the

agency on the number of security personnel to be involved in the
project
- The population of the agency where the services are rendered (for
security service controls)
- Accomplishment Report
- Request for Payment
- Contractor’s Bill
- Certificate of Acceptance
- Record of Attendance/Service
- Proof of remittance to concerned government agency and/or
GOCCs [BIR/Social Security System (SSS)/Pag-Ibig]
- Such other documents peculiar to the contract and/or to the mode
of procurement and considered necessary in the auditorial review
and in the technical evaluation thereof.”
Section 54.1 of the revised IRR of RA No. 9184 which provides:
“Splitting of Government Contracts is not allowed. Splitting of government

contracts means the division or breaking up of Government Contracts into
smaller quantities and amounts, or dividing contract implementation into
artificial phases or sub-contracts for the purpose of evading or circumventing
116
the requirements of law especially the necessity of public bidding and the
requirements for the alternative methods of procurement.”
COA Circular No. 76-41 dated July 30, 1976 also prohibits the splitting of
requisitions, purchase orders, vouchers and others.
The City Mayor entered into a contract agreement with St. Vicentinian Security
Services Inc. on June 27, 2017 for the procurement of Security Services for the Lipa City
Hall Compound, Kolegio ng Lungsod ng Lipa (KLL) and Ospital ng Lipa (OnL) for the
period January to December 31, 2017. Said procurement was bid out on January 17, 2017
and St. Vicentinian Security Services Inc. was declared as the Single Responsive Bid
correspondingly, was awarded a contract as per BAC Resolution Nos. 63-2016, 64-2016
and 65-2016, for Lipa City Hall Compound, ONL and KLL, respectively, all dated
January 17, 2017 as follows:
Office Concerned No. of Security Guard Total Amount

Kolehiyo ng Lungsod ng Lipa 15 P2,691,000.00
Ospital ng Lipa 12 2,152,800.00
Lipa City Hall Compound 19 3,408,600.00
Total 46 P8,252,400.00
Verification of the payments for the foregoing transactions disclosed that of the
P7,312,594.24 payment of the City for the procurement of Security Services to St.
Vicentinian Security Services for CY 2017, only the amount of P563,410.76 was issued
an Official Receipt while the amount of P3,183,726.04 was issued an Acknowledgement
Receipt as evidence of receipt of check/payment. For the period March to July and
September 2017, the said contractor issued a provisional/improvised/invalid/unofficial
receipt for 24 transactions in the total amount of P3,565,457.44. The said receipt, a
provisional receipt is not registered with the Bureau of Internal Revenue (BIR). It has no
Authority to Print, no Tax Identification Number (TIN) and the validity and the name of
the accredited printer were not stated. Details of the payments with issued provisional
receipts are as follows:
Check Provisional Receipt

Date Check No. Amount Date No. Amount
3/22/2017 55761254 P487,769.59 3/23/2017 4446 P487,769.59
3/22/2017 55761255 308,065.00 3/23/2017 4444 308,065.00
3/22/2017 55761256 385,081.25 3/23/2017 4445 385,081.25
4/7/2017 55761474 111,081.13 4/11/2017 4603 111,081.13
4/7/2017 55761475 140,702.77 4/11/2017 4604 140,702.77
4/7/2017 55761479 88,864.90 4/11/2017 4605 88,864.90
4/24/2017 55761624 140,702.77 4/26/2017 4701 140,702.77
4/24/2017 55761625 111,081.13 4/26/2017 4702 111,081.13
4/24/2017 55761626 88,864.90 4/26/2017 4703 88,864.90
5/22/2017 740437 140,702.77 5/23/2017 4811 140,702.77
5/22/2017 740438 111,081.13 5/23/2017 4812 111,081.13
5/22/2017 740439 88,864.90 5/23/2017 4813 88,864.90
6/5/2017 740631 140,702.77 6/8/2017 4830 140,702.77
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Check Provisional Receipt
Date Check No. Amount Date No. Amount
6/5/2017 740632 111,081.13 6/8/2017 4831 111,081.13
6/5/2017 740633 88,864.90 6/8/2017 4832 88,864.90
6/22/2017 740824 140,702.77 6/29/2017 4959 140,702.77
6/22/2017 740825 111,081.13 6/29/2017 4960 111,081.13
6/22/2017 740826 88,864.90 6/29/2017 4961 88,864.90
7/7/2017 741010 88,864.90 7/11/2017 4942 88,864.90
7/7/2017 741011 140,702.77 7/11/2017 4943 140,702.77
7/7/2017 741012 111,081.13 7/11/2017 4944 111,081.13
9/22/2017 55762519 88,864.90 10/2/2017 5411 88,864.90
9/22/2017 55762520 111,081.13 10/2/2017 5412 111,081.13
9/22/2017 55762521 140,702.77 10/2/2017 5413 140,702.77
Total P3,565,457.44 P3,565,457.44
Issuance of these receipts by the supplier shall be deemed to be an issuance of an

invalid receipt or deemed as if no receipts were issued, and a violation of Section 264 of
the National Internal Revenue Code and Revenue Memorandum Circulars.
Further verification disclosed that the transactions were processed and paid
without complete supporting documents, contrary to COA Circular No. 2012-001 dated
June 14, 2012 and Revised IRR of RA No. 9184. The following documents were not
attached to the claims, to wit:
 Authenticated photocopy of the approved APP and any amendment thereto

 Certification from the Head of BAC Secretariat on the posting of advertisement at
conspicuous places
 Print out copies of advertisement posted in agency website
 Printout copy of posting of Notice of Award, Notice to Proceed and Contract of
Award in the PhilGEPS
 Evidence of Invitation of three observers in all stages of the procurement
 Approved documents indicating the schedule of work and places of assignment or
station.
 Detailed breakdown of the contract cost showing in sufficient details the
derivation of the direct and indirect cost
 Approved documents indicating the minimum requirements of the agency on the
number of security personnel to be involved in the project
 The group classification of personnel to determine the Equivalent Equipment
Monthly Statutory Minimum Wage Rate in accordance with the applicable rules
implementing Republic Act No. 6727
 The population of the agency where the services is rendered.
 The names/identification of the guards assigned in Lipa City Hall compound,
KLL and Ospital ng Lipa
 Schedule of their duty/post in City Hall compound, KLL and Ospital ng Lipa
 Accomplishment Report of the guards
 Record of Attendance/Service of the guards
 Request for Payment
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 Proof of remittance to concerned government agency and/or GOCC [BIR/Social
Security System (SSS)/Pag-Ibig/Philhealth]
 Official Receipt
 Such other documents peculiar to the contract and/or to the mode of procurement
and considered necessary in the auditorial review and in the technical evaluation
thereof.
More so, the payment for the security services started on January 25, 2017, two
days ahead before the contract of services/agreements was signed by both parties on
January 27, 2017 for the three Offices.
There was also no discussion in the minutes during the bidding and in the post-
qualification on the basis of award to the security services provider such as the following:
 Are all guards to be employed have licensed

 Are their firearms licensed
 The number and kind of communication devices
 The completeness of the uniform and other paraphernalia
 Other details necessary for their basis in the contract agreement
Also, the number of guards in the Bid Proposal, Purchase Order (PO) and in the
Abstract of Bids stated that the guards to be employed are 228 for the Lipa City Hall
Compound, 144 for ONL and 180 for the KLL whereas the number of guard per contract
of service numbered to 19 for Lipa City Hall, 12 for ONL and 15 for KLL.
Though procurements of security services were subjected to public bidding, these

were bid out on a per office basis. These were not consolidated, instead were made on the
basis of split requisitions, contract agreements/purchase orders, disbursement vouchers
and checks, contrary to Section 54.1 of the Revised IRR of RA No. 9184.
Non-submission of the documents precluded the Auditor from reviewing and

evaluating such transactions, thus validity, legality and correctness of the claims could
not be established that may result in suspension or disallowance in audit.
a) Cashier to accept only valid Official Receipt as evidence of payment by the

City for all transactions in accordance with the BIR regulations and provide
justification in writing on submitted invalid ORs/provisional receipts for the
above transactions;
b) BAC/TWG Secretariat to properly plan and consolidate the bidding for

security services and conform with the procedures and documentary
requirements necessary in all conduct of public bidding from the preparation
of bidding documents up to the awarding and implementation of contracts;
119
c) Accountant to submit the required supporting documents to prevent the
issuance of Notice of Suspensions/Disallowance, and to see to it that claims
should be supported with complete documentations to establish their
validity, legality and correctness of the claims; and
d) Employee in-charge in the internal audit under the Accounting Office, to

exercise utmost diligence in processing claims. He/She should be properly
oriented with the provisions of COA Circular No. 2012-001 relative to
documentary requirements for common government transactions.
According to the City Treasurer in his letter dated May 9, 2018 duly received by
the Audit Team on May 11, 2018, they already noted the observation and immediately
demanded from the St. Vicentinian Security Services Inc. the submission of appropriate
official receipts and accordingly submitted the copies of the said official receipts and
acknowledgement receipts to the Audit Team on the same date.
Despite the submission of the required official and acknowledgment receipts and
justifications, other supporting documents cited remain unsubmitted to the Audit Team.
11. Various lapses in the conduct of bidding and award of contract were noted for the
procurement of janitorial services amounting to P2,274,441.34, thus proved to be
grossly and manifestly disadvantageous and uneconomical for the City, created
doubt on the procurement process and placed the outcome of the bidding
questionable. Moreover, payments for the said disbursements were not supported
by the required documentations, contrary to Section 4(6) of Presidential Decree
(PD) No. 1445, COA Circular 2012-001 and Revised Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 9184, thus the propriety and legality of
the claims could not be ascertained.
Section 4(6) of PD No. 1445 states that “Claims against government funds shall
be supported with complete documentation.”
COA Circular No. 2012-001 dated June 14, 2012 prescribed the revised
guidelines and documentary requirements for common government transactions. Among
those cited in Item 9, pertaining to the procurement of janitorial services are as follows:
“9.1 Procurement through public bidding
Basic requirements for all types of procurement through public bidding
- Authenticated photocopy of the approved APP and any amendment

thereto
120
Xxx
9.1.3.2 General Support Services (janitorial, Xxx and similar services)
Additional Documentary Requirements
- Appropriate approved documents indicating the following:
 The number of personnel involved and their corresponding

rates/salary
 Schedule of work and places of assignment or station/visits
indicating, among others, the number of hours per visit
- The scaled floor plans of the building and other area/s covered by the
service contract (for janitorial services)
- Detailed breakdown of the contract cost showing in sufficient details
the derivation of the direct and indirect cost (e.g. quantities and cost of
materials, spare parts, and supplies, etc. furnished by the contractor
- The group classification of personnel to determine the Equivalent
Equipment Monthly Statutory Minimum Wage Rate in accordance with
the applicable Rules Implementing RA No. 6727
- Accomplishment Report
- Request for Payment
- Contractor’s Bill
- Certificate of Acceptance
- Record of Attendance/Service
- Proof of remittance to concerned government agency and/or GOCCs
[BIR/Social Security System (SSS)/Pag-Ibig]
- Such other documents peculiar to the contract and/or to the mode of
procurement and considered necessary in the auditorial review and in
the technical evaluation thereof.
In addition, Section 3.1.1 of COA Circular No. 2009-01 prescribes the manner
on which perfected government contracts are to be submitted to the Auditor, to wit:
“Within five (5) 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.”
Further, pertinent provisions of the 2016 Revised IRR of RA No. 9184, otherwise
known as the Government Procurement Reform Act, provides:
121
“Section 13. Observers
13.1. To enhance the transparency of the process, the BAC shall, during
the eligibility checking, shortlisting, pre-bid conference,
preliminary examination of bids, bid evaluation, and post-
qualification, invite, in addition to the representative of the COA, at
least two (2) observers, who shall not have the right to vote, to sit in
its proceedings where:
Xxx
13.3. Observers shall be invited at least five (5) calendar days before the
date of the procurement stage/activity. The absence of observers will
not nullify the BAC proceedings: Provided, That they have been duly
invited in writing. The Procuring Entities should ensure that the
invitation is received at least five (5) calendar days before each
procurement activity. In the event that a procurement activity has to be
postponed, the observers shall be notified immediately of the change in
schedule.
Xxx
Section 23. Eligibility Requirements for the Procurement of Goods and

Infrastructure Projects
23.1. For purposes of determining the eligibility of bidders using

the criteria stated in Section 23.4 of this IRR, only the
following documents shall be required by the BAC, using
the forms prescribed in the Bidding Documents:
a) Class “A” Documents
Legal Documents
i) Registration certificate from SEC, Department of Trade

and Industry (DTI) for sole proprietorship, or CDA for
cooperatives.
ii) Mayor’s/Business permit issued by the city or

municipality where the principal place of business of
the prospective bidder is located, or the equivalent
document for Exclusive Economic Zones or Areas.
In cases of recently expired Mayor’s/Business permits,

it shall be accepted together with the official receipt as
proof that the bidder has applied for renewal within the
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period prescribed by the concerned local government
unit, provided that the renewed permit shall be
submitted as a post qualification requirement in
accordance with Section 34.2 of this IRR.
iii) Tax clearance per E.O. 398, 2005, as finally reviewed

and approved by the Bureau of Internal Revenue (BIR).
Failure to submit the above requirements on time or a

finding against the veracity of such shall be ground for the
forfeiture of the bid security and disqualify the bidder for
award.
Xxx
Section 37.1.6. The BAC, through the Secretariat, shall post, within three
(3) calendar days from its issuance, the Notice of Award in
the PhilGEPS, the website of the procuring entity, if any,
and any conspicuous place in the premises of the procuring
entity.”
Rule VI, Section 17.1 of the same IRR, states that the bidding documents shall be
prepared by the procuring entity following the standard forms and manuals prescribed by
the GPBB. The bidding documents shall include the following:
“a) Approved Budget for the Contract;
Xxx
h) Form of bid, Price Form, and list of Goods or Bill of Quantities.
Xxx”
As defined under Section 31 of RA No. 9184 and its IRR, the ABC shall be the
upper limit or ceiling for acceptable bid prices. If a bid price, as evaluated and calculated
in accordance with this IRR, is higher than the ABC, the bidder submitting the same shall
be automatically disqualified.
Rule II, Section 7.2 of the same IRR of RA No. 9184 provides that no
procurement shall be undertaken unless it is in accordance with the approved APP of the
procuring entity.
Also, the Government Procurement Policy Board (GPPB) Guidelines, Volume I

states, among others, under Section 4 that “In determining the ABC, the Project
Management Office (PMO) or end-user unit has to consider several factors, namely: (a)
the appropriation for the project or procurement, whether taken from the current year’s
appropriations or continuing appropriations; (b) the market price of the goods and /or
123
services being procured; and (c) inflation and cost of money which are directly related to
the procurement time table.”
Pursuant to the preceding guidelines, the PMO or end-user unit is required to

conduct market research and to gather as much information about the goods and services
needed. They should have already gathered the required information about the products,
its specifications and prices, among others as inputs to the ABC.
The ABC as reflected in the Annual Procurement Plan (APP) or Project

Procurement Management Plan (PPMP) shall at all times consistent with the
appropriations for the project.
The Ospital ng Lipa represented by the City Mayor, Hon. Meynardo A. Sabili,
entered into a contract agreement with the Contractor, A.Q. Loisaga Maintenance and
Janitorial Services and Supply, for the provision of Janitorial Services for the Ospital ng
Lipa, for CY 2017 amounting to P2,274,441.34. The contract has the following
provisions, among others:
1. “That the CONTRACTOR shall provide labor, cleaning materials, tools and
equipment for the janitorial services of Ospital ng Lipa – Lipa City Government,
that will attend to the general upkeep and housekeeping of the building.
2. That the CONTRACTOR shall provide seven (7) janitors to maintain cleanliness
within the areas covered by this Contract. These janitors shall render eight (8)
hour of work in three (3) shifts daily, as follows:
6:00 am 2:00pm
2:00pm 10:00pm
10:00pm 6:00am
3. That the nature of services the CONTRACTOR shall provide are the following:
a. Sweeping, dusting and floor polishing of all rooms, corridors, lobbies and
entrances;
b. Cleaning and wiping of all electric fans, exhaust fans, glass tops, furniture
and fixtures, counters, doorknobs, glass partition and screens (window and
door);
c. Cleaning, sanitizing and disinfecting of comfort rooms, lavatories, sinks, etc.
and removal of spot stains from floors and other surfaces;
d. Report leaking faucets, broken window glasses and etc. to the Hospital
Housekeeper;
e. Disposition of pathological and general waste from various areas within the
hospital premises to the designated garbage depository;
f. Maintains cleanliness and orderliness of various wards, areas and comfort
rooms within the hospital premises;
124
Xxx
7. That the CONTRACTOR shall provide periodic general cleaning services when
and where needed, as may be required by the Hospital.
Xxx
14. That for and in consideration of the janitorial services rendered and supplies
delivered, The hospital shall pay the CONTRACTOR the amount of TWO
MILLION TWO HUNDRED SEVENTY FOUR THOUSAND FOUR HUNDRED
FORTY ONE & 34/100 (P2,274,441.34) for seven (7) janitors and materials, or
P17,827.38 per janitor per month on the basis of eight (8) hours a day inclusive
of Saturdays, Sundays and Holidays. (ANNEX “A”)”
The Janitorial Services for the period January 25 to December 15, 2017 were
paid in lump sum on December 18, 2017 as per Check No. 742623 amounting to
P2,071,325.10, net of tax, based on the Summary of Janitorial Services and Materials
rendered for January 25 to December 15, 2017 prepared by the Contractor as follows:
Date Janitorial Material Used Total

Services
January 25-31, 2017 P28,178.78 P23,030.00 P51,208.78
February 2017 124,791.66 74,605.00 199,396.66
March 2017 124,791.66 74,730.00 199,521.66
April 2017 124,791.66 81,230.00 206,021.66
May 2017 124,791.66 74,730.00 199,521.66
June 2017 124,791.66 74,730.00 199,521.66
July 2017 124,791.66 89,730.00 214,521.66
August 2017 124,791.66 74,730.00 199,521.66
September 2017 124,791.66 74,730.00 199,521.66
October 2017 124,791.66 81,230.00 206,021.66
November 2017 124,791.66 74,730.00 199,521.66
December 1-15, 2017 60,383.05 74,730.00 135,113.05
Total P1,336,478.43 P872,935.00 P2,209,413.43
Percentage 60% 40% 100%
A monthly Statement of Account was issued per month together with the monthly
List of Delivery Receipt with materials used by the janitors. The delivered materials used
for the year were summarized as follows:
Qty. Particulars Cost/ Unit Amount

218 All Purpose Cleaner/Sanitizer (gal) P350.00 P76,300.00
89 Glass Cleaner/Sanitizer (gal) 450.00 40,050.00
138 Floor Liquid Cleaner/Sanitizer (gal) 450.00 62,100.00
135 Furniture/Metal Polish (gal) 480.00 64,800.00
92 Bowl Cleaner (gal) 285.00 26,220.00
340 Powder Soap (kilo) 85.00 28,900.00
125
Qty. Particulars Cost/ Unit Amount
55 Chlorox (liter) 100.00 5,500.00
4 Mop Head Wringler/Squeezer (set) 6,500.00 26,000.00
2 Garbage Bin with Wheel 8,500.00 17,000.00
4,450 Garbage Bag XXL (pc) 7.00 31,150.00
33 Dust Mop Head 24" (pc) 2,500.00 82,500.00
33 Dust Mop Handle for 24" (pc) 2,500.00 82,500.00
69 Mop Handle Aluminum (pc) 495.00 34,155.00
138 Mop Head Cotton (pc) 150.00 20,700.00
90 Push Brush Plastic (pc) 125.00 11,250.00
138 Soft Broom (pc) 165.00 22,770.00
69 Dust Pan Plastic (pc) 75.00 5,175.00
560 Rags-Pranela (pc) 25.00 14,000.00
1,070 Rugs- Round (pc) 5.00 5,350.00
107 Tiolet Brush(pc) 75.00 8,025.00
116 Scrubbing Pad (pc) 135.00 15,660.00
144 Scotch Brite (pc) 45.00 6,480.00
164 Air Freshener Air Mist (320ml can) 200.00 32,800.00
162 Air Disinfectant Spray (170 g can) 250.00 40,500.00
323 Multi Insect Killer Spray 350.00 113,050.00
Total P872,935.00
As can be gleaned from the foregoing table it showed that 40% of the payments
for Janitorial Services represented the cost of materials provided by the contractor and
being charged to the City Government. What was stated in the contract is the full amount
of P2,274,441.34 for seven (7) janitors and materials or P17,827.38 per janitor per month.
There was no provision in the contract on the detailed breakdown of the contract cost,
and the direct and indirect cost such as janitorial supplies and materials to be provided by
the contractor as to kind, quantity and amount. Hence, there was a tendency for the
contractor to deliver excessive and unnecessary supplies and materials.
Further verification disclosed the following deficiencies:
1. The authenticated photocopy of the approved Annual Procurement Plan (APP)

and any amendment thereto was not attached to the bidding documents.
2. Procurement of janitorial service was not included in the APP.
3. Bidding was not supported by the required detailed Approved Budget for the
Contract (ABC). The BAC did not prepare the base price of each items subjected
to bidding or the detailed breakdown of the ABC, instead they based the bidding
on the Purchase Request and the Obligation Request (OBR) and/or total budget
for the year for janitorial services, hence there was no upper limit or ceiling for
acceptable bid prices. There was also no basis or information about the goods or
services to be bid as to complete detail, specifications, the no. of janitors to be
employed, the materials to be delivered and the prices and how they were able to
arrive for the total ABC.
126
The ABC serves as the upper limit or ceiling price for participating contractor and
suppliers, thus when the ABC is unrealistic or unreasonable, quotation of bidders
would tend to be excessive.
4. In the bid proposal of the bidder and accepted by the BAC, there is no mention as
to how many janitors are to be employed, the cost of each item, the provisions for
supplies and materials to be provided by the contractor and other necessary
details, as shown below:
5. The Purchase Request (PR) and the Obligation Request (ObR) which served as
the basis of their ABC were likewise not completely filled-up, do not have the
details and complete specifications/information as to numbers of janitors and the
quantity, particulars and value of the janitorial supplies to be procured. The only
information stated therein are as follows:
Item Description F.P.P Account Code Estimated Cost

Janitorial Services 4421 5-02-12-020 P3,000,000.00
January 1, 2017 to December 31, 2017
6. The same was likewise not discussed in the minutes of bidding and on BAC
Resolution No. 62-2016, both dated January 17, 2018, declaring A.Q. Loisaga
Maintenance and Janitorial Service and Supply as the Single Responsive Bidder
for Janitorial Services for Ospital ng Lipa for the amount of P2,995,000.00, hence
the BAC has no basis for the award of the contract.
7. It was only mentioned on Item 14 of the Contract for the Provision of Janitorial
Services that CONTRACTOR shall provide seven (7) janitors and materials, or
P17,827.38 per janitor per month on the basis of eight (8) hours a day inclusive of
Saturdays, Sundays and Holidays.
8. The stated “ANNEX A” in item 14 of the contract was not provided/attached.
9. The Contract Agreement is undated and was notarized only on December 13,
2017.
127
10. The janitorial services for the period January 25 to December 15, 2017 were paid
in lump sum on December 18, 2017 as per Check No. 742623 amounting to
P2,071,325.10, net of tax.
11. Tax Clearance Certificate submitted by A.Q. Loisaga Maintenance and Janitorial
Services and Supply, the TCC No. NO-ARMD-11-21-RO387-2016 issued on
November 21, 2016 was not in the Official List of Released Tax Clearance for
Bidding Purposes of the BIR portal for the month of November 2016.
12. The Contract was submitted/furnished to Office of the COA, one month after the
execution thereof, contrary to Section 3.1.1 of COA Circular No. 2009-001.
13. No notifications to two observers and COA representative were made in all stages
of the bidding process thus, proof of enhanced transparency in the evaluation
process was not ascertained.
14. Copy of proof of posting of Notice of Award in the PhilGEPS was not submitted.
15. The following additional documentary requirements were also not attached to the
claim:
a) Appropriate approved documents indicating the following:
 The number of personnel involved and their corresponding rates/salary

 Schedule of work and places of assignment or station/visits indicating,
among others, the number of hours per visit
b) The scaled floor plans of the building and other area/s covered by the
service contract (for janitorial services)
c) The grouped classification of personnel to determine the Equivalent
Equipment Monthly Statutory Minimum Wage Rate in accordance with
the applicable rules implementing RA No. 6727
d) Accomplishment Report
e) Request for Payment
f) Contractor’s Bill
g) Certificate of Acceptance
h) Record of Attendance/Service
i) Proof of remittance to concerned government agency and/or GOCCs
[BIR/Social Security System (SSS)/Pag-Ibig]
Non-preparation of the detailed specifications of the ABC and the absence of

supporting documents cast doubt on the legality, propriety of the above disbursements
and the veracity of the bidding and procurement process, contrary to Section 4(6) of PD
No. 1445, COA Circular No. 2012-001 and Revised IRR of RA No. 9184.
128
a) Project Management Office (PMO) or concerned end-users and the BAC to

conduct market research and to gather information about the products or
services, its specifications and prices, among others, as inputs to the ABC.
Support the preparation of ABC with proof of canvass conducted;
b) the GSO and BAC Secretariat to ensure that the ABCs of items for bid are
based from careful determination of price reasonableness as circumstances
warrant, update the prices of items in the ABC before the conduct of actual
bidding/procurement;
c) BAC to set a precise, complete and clear technical specifications (e.g. delivery
schedule, manpower requirements, supplies and materials, etc.), a clear
statement of the required standards of workmanship, materials, performance
of the goods and services to be procured;
d) BAC to include in the ABC/PR/PO and in the contract agreement the

detailed breakdown of the contract cost, and the direct and indirect cost such
as janitorial supplies and materials to be provided by the contractor as to
kind, quantity and amount;
e) BAC to properly evaluate the technical specifications submitted by bidders

as contained in the bid proposal and conform with the procedures and
documentary requirements necessary in all conduct of public bidding from
the preparation of bidding documents up to the awarding and
implementation of the contract;
f) members of the BAC to observe diligence in the conduct of eligibility

checking and post-qualification of the LCB to ensure that the City transacts
businesses with bonafide and legitimate suppliers only;
g) concerned officials to submit written explanations/comments on the noted

deficiencies;
h) BAC Secretariat in coordination with the City Accountant, to submit the

required supporting documents for audit purposes and to prevent the
issuance of Notice of Suspension/Disallowance; and
i) City Accountant to check thoroughly the completeness of supporting

documents before processing and approving the payment of said
disbursements/claims.
129
The City Government provided no clarification or answer on the above

observations except for the request for additional 30 working days within which to
submit comments per letter dated May 23, 2018 of the City Assistant Legal Officer.
12. Payment for the garbage hauling/disposal and deodorizers, and wages of 19 Job
Order employees (JO) for the period January to June 2017 amounting to
P23,987,718.38 and P590,890.58, respectively, were charged to CY 2017 20%
Development Fund, contrary to the guidelines set under Department of the Interior
and Local Government (DILG) and Department of Budget and Management (DBM)
Joint Memorandum Circular (JMC) No. 2017-1, thus limiting the implementation of
projects that will contribute to the attainment of desirable socio-economic
development and environmental management outcomes.
DILG and DBM JMC No. 2017-1 dated February 22, 2017 provides the
guidelines on the appropriation and utilization of the 20 % of the Annual Internal
Revenue Allotment (IRA) for development projects. Items 2 and 3 thereof, states:
“2.0 GENERAL POLICIES
2.1 In accordance with Section 287 of RA No. 7160, every LGU shall
appropriate in its annual budget no less than twenty percent (20%)
of its annual IRA for development projects.
2.2 The 20% DF shall be utilized to finance the LGU's priority

development projects, as embodied in its duly approved local
development plans and Annual Investment Program (AlP), which
should be directly supportive of the Philippine Development Plan
and Public Investment Program.
2.3 All development projects to be funded under the 20% DF shall

contribute to the attainment of desirable socio-economic
development and environmental management outcomes of the
LGU, and shall partake the nature of investment or capital
expenditures.
3.0 ALLOWABLE DEVELOPMENT PROJECTS CHARGEABLE AGAINST

THE 20% DF
3. Social Development
3.1.1 Construction or rehabilitation of health centers, rural health

units or hospitals, including purchase of lot for the purpose;
3.1.2 Purchase of ambulance and medical equipment;
130
Xxx
3.2 Economic Development
3.2.1 Construction or rehabilitation of communal irrigation or water

impounding system and purchase of postharvest facilities;
Xxx
3.3 Environmental Management
3.3.1 Reforestation and urban greening;
3.3.2 Construction or rehabilitation of sanitary landfills, material

recovery facilities;
3.3.3 Purchase of garbage trucks and other equipment for

environmental management and protection purposes;
3.3.4 Implementation of flood and erosion control projects such as

Xxx;
3.3.5 Other environmental management projects that promote air

and water quality, as well as productivity of the coastal or
freshwater habitat, agriculture land and forest land, such as
Xxx.”
On the other hand, Items 4.1 to 4.7 mentioned the list of expenditures that are not
covered under the 20 % DF, as follows:
“4.0 Expenditure Items Not Allowed to be Charged against the 20% DF
The following expenditure items shall not be allowed to be charged

against the 20% DF or included in the appropriations for allowable
development projects:
4.1 Personal Services expenditures, such as salaries, wages,

overtime pay and other personnel benefits;
4.2 Administrative expenses, such as supplies, meetings,

communication, water and electricity, petroleum products, other
general services, and the like;
4.3 Traveling expenses, whether domestic or foreign;
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4.4 Registration or participation fees in training, seminars,
conferences or conventions;
4.5 Purchase of administrative office' furniture, fixtures, equipment

or appliances-,and
4.6 Purchase, maintenance or repair of motor vehicles or motor

cycles, other than those specified in item 3.0 hereof.
Likewise, Section 5 of the same Joint Memorandum Circular states:
“It is the responsibility of every local chief executive to ensure that the
20% DF is optimally utilized to help achieve the desirable socio-
economic development and environmental outcomes of the LGU.
The utilization of the 20% DF, whether willfully or through

negligence, for any purpose other than those expressly prescribed by
law or public policy shall be subject to the sanctions provided under
RA No. 7160 and other applicable laws.”
For CY 2017, the City Environmental and Natural Resources Office (CENRO)
prepared a Work Program for the Utilization of the 20% Development Fund for the
Implementation of Environmental Management Projects as follows:
Name of Project How to be Period of Budgeted

Program undertaken Implementation Amount
Environmental Bantay Ilog Hiring of 7 Job Jan. 1-June 30, P243,040.00
Management Project Order Personnel 2017
for the clean-up
activities of river
system/ Tree
planting species
Forest Resources Tree Planting Hiring 8 JOs to April 1-June 30, P125,000.00
Management Project perform 2017
reforestation
activities in the
grassland area of
Mt. Malarayat
Forest Reserve in
the portion of
Brgy Malitlit,
Lipa City
Environmental Environmental Rehiring of four Jan 1-June 30, P148,800.00

Management Education and (4) JOs 2017
Advocacy (Technical
Assistant)
132
In line with this, 19 JO employees with the position of Administrative Aide I at a
daily rate of P280.00 to P300.00 were paid on a monthly basis out of the cash advances
of the Disbursing Officer.
For the period January to June 2017, wages of 19 JO employees amounting to

P590,890.58, were charged to Other General Services under the 20% Development Fund.
(Annex Q)
Personal Services expenditures, such as salaries, wages and administrative

expenses, such as supplies, meetings, other general services, and the like are expenditure
items not allowed to be charged against the 20 % Development Fund as per Items 4.1 to
4.7 of DILG-DBM JMC No. 2017-1.
Moreover, the following expenditures were likewise charged to 20%

Development Fund, as shown below:
Date Check No. Payee Amount

9-Jun-17 55762048 ECOTECH AGRI Ventures P151,200.00
21-Mar-17 55761220 7MG Hauling Services Corp. 4,184,250.00
5-Sep-17 55742211 SB HAIN Ent. & General Services 2,779,537.50
12-Oct-17 55762816 SB HAIN Ent. & General Services 2,779,537.50
9-Nov-17 59375118 SB HAIN Ent. & General Services 2,689,875.00
20-Nov-17 59375301 SB HAIN Ent. & General Services 2,779,537.50
14-Dec-17 59375306 MERHAN Trading 307,584.00
20-Dec-17 59375311 SB HAIN Ent. & General Services 2,809,425.00
Total P23,987,718.38
The foregoing expenses were not among those included to be financed from the
said fund as provided under the aforementioned JMC.
We recommended that the City Mayor direct the Local Development Council
(LDC) to strictly comply with the guidelines in the DILG-DBM JMC No. 2017-1
dated February 22, 2017, on the appropriation and optimum utilization of the 20%
Development Fund on projects that partake the nature of investment or capital
expenditures.
Ensure that only capital expenditures are charged to the 20% Development
Fund.
During the exit conference, the City Accountant claimed that starting July 2017,
the City has stopped the charging of payment for deodorizers and wages of Job Order
employees to the 20% Development Fund. Meanwhile, charging of payment for garbage
hauling/disposal to the said fund will be stopped in CY 2018.
133
The City Administrator, in his letter dated June 26, 2018, ensured that
appropriation under 20% Development Fund in the CY 2018 LGU Budget will be in
accordance with the prevailing Joint Memorandum Circular.
13. The City Government of Lipa granted additional incentives/allowances to Barangay

functionaries such as Treasurer, Secretary, Clerk, Administrative Assistant and the
like amounting to P769,200.00 for CY 2017, contrary to Section 4.2 of Department
of Budget and Management (DBM) Local Budget Circular (LBC) No. 63 dated
October 22, 1996.
DBM LBC No. 63 dated October 22, 1996 provides the Position Clarification and
Compensation of Barangay Officials and Personnel. The LBC was addressed to all
Provincial Governors, City and Municipal Mayors, Barangay Chairmen,
National/Provincial/City/Municipal Presidents, Liga ng mga Barangay, Regional
Directors of the Department of the Interior and Local Government, Department of
Finance, Department of Budget and Management, Civil Service Commission,
Commission on Audit, Provincial/City/Municipal Auditors and all other officials
concerned.
Specifically, Section 4.2 of the cited LBC states that, “The province and the city
or municipality where the barangay belongs cannot grant additional compensation to the
barangay officials and employees in the form of honorarium or salary increase
chargeable against either provincial, city, municipal or barangay funds.”
Meanwhile, Section 393 (a) of Republic Act (RA) No. 7160 or the Local
Government Code pointed out that “Barangay officials, including barangay tanods and
members of the lupong tagapamayapa, shall receive honoraria, allowances, and such
other emoluments as may be authorized by law or barangay, municipal or city ordinance
in accordance with the provisions of this Code, but in no case shall it be less than One
thousand pesos (P1,000.00) per month for the punong barangay and Six hundred pesos
(P600.00) per month for the sangguniang barangay members, barangay treasurer, and
barangay secretary: Provided, however, That the annual appropriations for personal
services shall be subject to the budgetary limitations prescribed under Title Five, Book II
of this Code.”
Moreover, Section 95 of the above cited RA provides:
“Sec. 95. Additional or Double Compensation – No elective or appointive

local official or employee shall receive additional, double, or indirect
compensation, unless specifically authorized by law, nor accept without the
consent of Congress, any present, emoluments, office or title of any kind from
any foreign government. Xxx”
134
Further, under COA Circular No. 2012-003 dated October 29, 2012, which
prescribes the updated guidelines for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant and unconscionable expenditures. The term
“irregular expenditure” signifies an expenditure incurred without adhering to established
rules, regulations, procedural guidelines, policies, principles or practices that have gained
recognition in laws. Irregular expenditures are incurred if funds are disbursed without
conforming with prescribed usages and rules of discipline. There is no observance of an
established pattern, course, mode of action, behavior, or conduct in the incurrence of an
irregular expenditure. A transaction which fails to follow or violates appropriate laws,
rules of procedure is likewise illegal, hence, disallowable in audit.
Verification of the cash disbursements/payrolls of the City Government revealed

that an incentives in the form of allowance/honorarium at P300.00 each month were
distributed quarterly to Barangay Treasurer, Secretary, Clerk and Administrative
Assistant of the 72 barangays of the City of Lipa. The said allowances were charged to
Maintenance and Other Operating Expenses (MOOE) under the accounts Other
Professional Services and Other General Services. For the CY 2017, the City
Government had already incurred the amount of P769,200.00 for the grant of additional
allowances to barangay employees as shown hereunder:
No. of JEV
Period District Charged to Amount
Beneficiaries Date No.
January to East 50 7/26/2017 2017-07- Other P40,200.00
March 2017 005847 Professional
Services
January to North 45 7/26/2017 2017-07- Other 40,500.00
Services
January to South 48 7/25/2017 2017-07- Other 40,500.00
Services
January to Urban 27 7/26/2017 2017-07- Other 24,300.00
Services
January to West 48 7/25/2017 2017-07- Other 43,200.00
Services
April to June East 44 7/25/2017 2017-07- Other 39,600.00
2017 005758 Professional
Services
April to June North 45 7/26/2017 2017-07- Other 39,600.00
Services
April to June South 45 7/25/2017 2017-07- Other 40,500.00
Services
April to June Urban 27 7/26/2017 2017-07- Other 24,300.00
135
No. of JEV
Period District Charged to Amount
Beneficiaries Date No.
Services
April to June West 48 7/25/2017 2017-07- Other 43,200.00
Services
July to East 46 12/29/2017 2017-12- Other General 41,100.00
September 012297 Services
2017
July to North 48 12/29/2017 2017-12- Other General 46,800.00
2017
July to South 49 12/29/2017 2017-12- Other General 42,900.00
2017
July to Urban 28 12/29/2017 2017-12- Other General 26,100.00
2017
July to West 48 12/29/2017 2017-12- Other General 42,900.00
2017
October to North 48 12/29/2017 2017-12- Other General 43,200.00
December 012311 Services
2017
October to East 48 12/29/2017 2017-12- Other General 41,400.00
2017
October to West 48 12/29/2017 2017-12- Other General 43,200.00
2017
October to South 47 12/29/2017 2017-12- Other General 41,400.00
2017
October to Urban 28 12/29/2017 2017-12- Other General 24,300.00
2017
Total P769,200.00
The work program, as prepared by the City Community Affairs Officer (CCAO),
noted by the City Administrator and duly approved by the City Mayor, for the
disbursement indicated that the program has the objectives of recognizing the effort and
the support being exerted by the barangay appointees through the grant of additional
benefits/incentives and encouraging them to continuously support the thrust and
developmental programs in their barangays.
The Audit Team expresses no objection on recognizing the contribution and hard
work being manifested by the said barangay appointees, however, the grant of additional
incentives run counter on the aforementioned section of LBC No. 63 which in effect
136
resulted in double compensation considering that they are already receiving honorarium
as stated in Section 393 of RA No. 7160. In view of the foregoing, the payment made to
the barangay employees was considered without basis and, thus illegal.
We recommended that the City Mayor require the City official concerned to
provide/submit legal basis on the grant of additional allowance/honorarium to the
aforecited barangay employees, otherwise, these will be disallowed in audit being
considered irregular expenditures.
The City Accountant promised to provide the legal basis of the allowances
granted to Barangay officials and employees.
14. Effectiveness of the City’s internal control and/or procurement procedures in

utilizing Special Education Fund (SEF) were doubtful due to the absence of proof of
warranty security and incomplete documentary requirements, contrary to Revised
Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184, thus
placing doubts on the validity of the bidding process and exposing the City to risk
that any manufacturing defects will not be corrected by the supplier.
Revised IRR of RA No. 9184, series of 2016 states:
“Section 62. Warranty
62.1. For the procurement of Goods, in order to assure that manufacturing

defects shall be corrected by the supplier, a warranty security shall be
required from the contract awardee for a minimum period of three (3)
months, in the case of Expendable Supplies, or a minimum period of
one (1) year, in the case of Non-expendable Supplies, after acceptance
by the Procuring Entity of the delivered supplies.
The obligation for the warranty shall be covered by either retention

money in an amount equivalent to at least one percent (1%) of every
progress payment, or a special bank guarantee equivalent to at least
one percent (1%) of the total contract price. The said amounts shall
only be released after the lapse of the warranty period or, in the case
of Expendable Supplies, after consumption thereof: Provided,
however, That the supplies delivered are free from patent and latent
defects and all the conditions imposed under the contract have been
fully met.”
For CY 2017, the City Government of Lipa has an appropriated budget for SEF,
including supplemental budget of P214,188,260.00, P159,299,134.87 of which was
obligated for the calendar year.
137
Audit of the disbursement vouchers (DVs) on the utilization of SEF revealed that
the retention money representing warranty security equivalent to 1% of the contract price
was not deducted from the amount paid. Further examination of the supporting
documents showed that there was no attached proof of any special bank guarantee which
can serve as warranty security in lieu of the retention money. Details as follows:
Date Check No. Payee Particulars Amount
Apr. 24, 2017 540226 AAA Lucky Supply and Delivery of P981,690.00
Trading Laptops
Apr. 24, 2017 540227 AAA Lucky Supply and Delivery of 1,457,800.00
Trading Armchairs
Nov. 20, 2017 763523 Infinite Powertech Supply and Delivery of 445,050.00
Scientific Robotic Materials
Equipment Sales
Total P2,884,540.00
Even though payments for the supply of laptop computers and armchairs were
supported by “Warranty Against Defects” certificate from the company, the certificate
was not among warranty security prescribed by RA No. 9184.
A warranty is required in the procurement of goods to ensure that the supplier,

manufacturer or distributor, as the case may be, will correct any manufacturing defect.
The LGU may proceed against the warranty whenever any patent or latent defects are
determined to be present in the goods procured, and the same are determined within the
period covered by the warranty.
Absence of the retention money or special bank guaranty exposes the City to risk
that upon claims arising under the warranty and the supplier will not repair or replace the
defective goods or parts within the period specified in the contract, the City cannot
proceed to call any warranty security.
The City conducted public bidding on various dates for the procurement of the
following goods and infrastructure projects under SEF, to wit:
Check DV Nature of the

Payee Amount
Date Number No. Transaction
Feb. 10, 540206 0474- FG and E's Supply and Delivery P 2,161,835.00
2017 17-02 Construction of materials for the use
Supply of brigada eskwela and
maintenance of various
School
Mar. 16, 540220 1232- Tatao Shirts Supply and Delivery 3,285,242.85
2017 17-03 & General of Uniforms for the
Merchandise use of STCAA Meet
2017
138
Check DV Nature of the
Payee Amount
Date Number No. Transaction
Mar. 29, 540222 2084- Capkeez Supply and Delivery 2,782,725.00
2017 17-03 Refreshment of Foods for the use of
STCAA Meet 2017
Apr. 24, 540226 1922- AAA Lucky Supply and Delivery 981,690.00
2017 17-03 Trading of Laptops Computers
for the use of DepEd
Apr. 24, 540227 1746- AAA Lucky Supply and delivery of 1,457,800.00
2017 17-03 Trading armchair for DepEd
Aug. 01, 763502 5142- Solen Supply and delivery of 1,968,165.00

2017 17-07 Builders painting materials for
the Balik Eskwela
2017
Sept. 22, 763517 5475- Rex Supply and Delivery 9,731,571.00

2017 17-08 Bookstores of Supplementary
Inc. Reading Materials
Dec. 28, 763533 9665- Capkeez Supply and Delivery 1,569,168.00

2017 17-12 Refreshment of Foods for the use of
2017 Provincial Meet
Dec. 29, 763536 9540- Tatao Shirts Supply and Delivery 3,261,651.00
2017 17-12 & General of Uniforms for the
Merchandise participation to the
2017 Provincial Meet
Total P27,199,847.85
However, audit of the DVs along with the supporting documents revealed the
following:
a. Some of the bidding documents were not submitted to the Audit Team
“Section 17. Form and Contents of Bidding Documents
17.1.1 The Bidding Documents shall be prepared by the procuring

entity following the standard forms and manuals prescribed by
the GPPB. The Bidding Documents shall include the following:
Xxx
139
d) Instructions to Bidders, including scope of bid, documents
comprising the bid, criteria for eligibility, bid evaluation
methodology/criteria in accordance with the Act, and post-
qualification, as well as the date, time and place of the
prebid conference (where applicable), submission of bids
and opening of bids;
Xxx
l) Form of Contract and General and Special Conditions of

Contract”
The Philippine Bidding Documents (PBD) for the Procurement of Infrastructure

Projects discussed on specific section the mandatory bidding documents such as
Invitation to Bid, Instruction to Bidders, Bid Data Sheet, General Conditions of
Contract and Special Conditions of Contract.
The Audit Team noted that the following bidding documents were not submitted,
thereby placing doubts on the completeness of the information provided to each
bidder:
 Instruction to Bidders
 Bid Data Sheet
 General Conditions of Contract
 Special Conditions of Contract
b. Notification to observers were not made during all of the stages of the
bidding process, thus proof of enhanced transparency in the evaluation
process was not ascertained.
Pertinent provisions of the 2016 Revised IRR of RA No. 9184 states:
“Section 13. Observers
13.1. To enhance the transparency of the process, the BAC shall,

during the eligibility checking, shortlisting, pre-bid conference,
preliminary examination of bids, bid evaluation, and post-
qualification, invite, in addition to the representative of the
COA, at least two (2) observers, who shall not have the right to
vote, to sit in its proceedings where:
Xxx
13.3. Observers shall be invited at least five (5) calendar days before
the date of the procurement stage/activity. The absence of
observers will not nullify the BAC proceedings: Provided, That
140
they have been duly invited in writing. The Procuring Entities
should ensure that the invitation is received at least five (5)
calendar days before each procurement activity. In the event
that a procurement activity has to be postponed, the observers
shall be notified immediately of the change in schedule.”
Examination of documents supporting the project’s bidding process revealed that

the invitations to two observers and COA representative was not made on all of
the stages of the bidding process, thus compliance with the above provision and
proof of enhanced transparency in the evaluation process was not ascertained.
c. Proof of posting of Notice of Award in PhilGEPS was not submitted
“37.1.6 The BAC, through the Secretariat, shall post, within three (3)
calendar days from its issuance, the Notice of Award in the
PhilGEPS, the website of the procuring entity, if any, and any
conspicuous place in the premises of the procuring entity.”
The proof of posting of Notice of Award in PhilGEPS was not among those
documents submitted to the Audit Team, thus compliance with the above
provision was not ascertained.
d. Certification from the Head of BAC Secretariat on the posting at

conspicuous places was not attached to the bidding documents
Revised IRR of RA No. 9184 series of 2016 also provides that:
“21.2. Advertising and Posting of the Invitation to Bid/Request for

Expression of Interest
21.2.1. Except as otherwise provided in Section 54.2 of this

IRR and for the procurement of common-use goods and
supplies, the Invitation to Bid/Request for Expression of
Interest shall be:
a) Posted at any conspicuous place reserved for this

purpose in the premises of the Procuring Entity
concerned for seven (7) calendar days as certified
by the head of the BAC Secretariat of the Procuring
Entity concerned. Xxx”
Review of the supporting documents for the payment of infrastructure projects

under the SEF, showed that Certification from the Head of the BAC Secretariat
proving that invitation to bid was posted at conspicuous place or at the premises
141
of the City Government of Lipa, was not among the documents supporting the
procurement transaction. The absence of such Certification placed doubts on the
transparency of the procurement process which in effect prevented the wide
dissemination and the competitiveness of the process in terms of extending equal
opportunity to enable private contracting parties who are eligible and qualified to
participate in public bidding. It also casts uncertainty on whether the City
acquired the goods on the best price with the most competitive offer.
We recommended that the City Mayor:
a) require the City Accountant to withheld retention money in an amount

equivalent to at least one percent (1%) of every progress payment, or a
special bank guarantee equivalent to at least one percent (1%) of the total
contract price. The said amounts shall only be released after the lapse of the
warranty period or, in the case of Expendable Supplies, after consumption
thereof; and
b) instruct the BAC to submit the above documents for further evaluation of the
transaction. Strictly adhere with the Revised IRR of RA No. 9184 and other
related rules and regulations especially on the completeness of documents in
each stage of the bidding/procurement process.
According to the BAC Secretariat, in his letter dated June 26, 2018, duly noted by
one of the BAC members, they are exerting efforts to require the supplier to submit
warranties needed and ensure that they will comply with the recommendation as well as
the submission of other documentary requirements.
The City Administrator being the BAC Chairman and the City Accountant during
the exit conference, promised to implement the above recommendations. He also reported
in his letter dated June 26, 2018 that they already called the attention of the BAC
Secretariat and TWG to include warranty security, which could be either a special bank
guarantee or retention money equivalent to at least one percent (1%) of the payment, in
the supporting documents or in the face of the disbursement vouchers.
15. Projects amounting to P2,992,497.19 which were excluded in the City’s Local
Disaster Risk Reduction Management Plans (LDRRMP) were charged to the City’s
Local Disaster Risk Reduction Management Fund (LDRRMF) while prioritized
program in the said plan with a total budget of P34,450,000.00 remained
unimplemented at the end of the fiscal year, in violation of National Disaster Risk
Reduction Management Council (NDRRMC), Department of Budget and
Management (DBM) and Department of the Interior and Local Government
(DILG) Joint Memorandum Circular (JMC) No. 2013-01, thereby depriving the
City’s constituents of the immediate benefits of the intended projects for which the
Fund was created.
142
The NDRRMC, DBM and DILG issued JMC No. 2013-01 dated March 25, 2013,
which serve as a guide to Local Government Units in the allocation and use of the Local
Disaster Risk Reduction Management Fund (LDRRMF), states:
“3.0 Declaration of Policy
The recently approved National Disaster Risk Reduction and Management

Plan (NDRRMP) 2011-2028 shall become the basis in the preparation of
Local Disaster Risk Reduction and Management Plan (LDRRMP) to be
validated and accustomed to the local needs for prevention and mitigation,
preparedness, response, rehabilitation and recovery.
Section 2(e) of RA 10121 provides that it is the policy of the State to develop,
promote, and implement a comprehensive NDRRMP that aims to strengthen
the capacity of the national government and the LGUs, together with partner
stakeholders, to build the disaster resilience of communities, and to
institutionalize arrangements and measures for reducing disaster risks,
including projected climate risks, and enhancing disaster preparedness and
response capabilities at all levels.
The LDRRMP shall be the basis in the allocation of LDRRMF. The LGUs
have to “formulate and implement a comprehensive and integrated LDRRMP
in accordance with the national, regional and provincial framework, and
policies on disaster risk reduction in close coordination with the local
development councils (Section 12(6) of RA No. 10121) Xxx.”
The City Government of Lipa appropriated 5% of the City’s regular income

amounting to P75,324,993.14 as CY 2017 Local Disaster Risk Reduction Management
Fund, P22,597,497.94 of which was allotted as Quick Response Fund (QRF) while
P52,727,495.20 is allocated as Mitigation Fund for disaster prevention and mitigation,
preparedness, response, rehabilitation and recovery. For CY 2017, P15,313,352.51 of the
Mitigation Fund was utilized to the following projects:
Projects, Programs and Activities (PPAs) Amount

Construction of Slope Protection P 1,496,183.80
Improvement/Construction of Drainage System 8,479,318.92
Installation of Street Lights 2,992,497.19
Construction of Artesian Well 697,672.60
Rescue Equipment and Fire Extinguisher 741,383.00
Welfare Goods for distribution to disaster victims 436,459.00
Trainings 169,900.00
Other Rescue Equipment/Supplies 299,938.00
Total P15,313,352.51
Inspection of the City’s Local Disaster Risk Reduction Management Investment

Plan (LDRRMIP) revealed that the Mitigation Fund was utilized for the installation of
143
streetlights amounting to P2,992,497.19 despite the fact that the said project was
excluded in the LDRRMIP.
The Local DRRM Offices (LDRRMOs) design, program and coordinate DRRM
activities consistent with the National DRRM Plan and develop the Local DRRM Plan of
their respective LGUs. The LDRRMPs shall be consistent and aligned with the targets set
by the NDRRMP. Expenditures from the City’s LDRRMF outside the approved
LDRRMP exposes the City with the risk that projects implemented were not in line with
National Government’s priority activities and placed the effectiveness of the City
Disaster Risk Reduction and Management Office’ (CDRRMO) planning activities
questionable.
Further examination of the Accomplishment Report (AR) submitted by the

CDRRMO and the LDRRMF Utilization Report from the City Accountant showed that
the following PPAs provided in the LDRRMP amounting to P34,450,000.00 were not
among the projects undertaken and completed by the Office, thus placing doubts on the
implementation of the said programs, to wit:
Schedule of
Unimplemented Projects for CY Implementing Implementation
Budget
2017 Office Starting Completion
Date Date
Preparedness and Mitigation
projects charged to
Maintenance and Other
Operating Expenses
Information sharing between CSWD/ January December P3,500,000.00
LGU's communities and CCAO 2017 2017
National Government
Printing of IEC materials LDRRMO January December 100,000.00
(Poster, Flyers, Pamphlets, 2017 2017
and Tarpaulin
Disaster Mitigation and CHO January December 3,000,000.00
Prevention Program Activities 2017 2017
(Flu vaccine for senior citizen)
Preparedness and Mitigation
projects charged to Capital
Outlay
Repair and Improvement of CGSO January December 500,000.00
Disaster Operation Center 2017 2017
Fabrication and Erection of CGSO CRO January December 450,000.00
Guyed Antenna for the Radio LDRRMO 2017 2017
Communication
Purchase of 26 units Rescue CGSO January December 20,800,000.00
Vehicle LDRRMO 2017 2017
Electrification, Power and CEO January December 3,000,000.00
Energy Structure at Various 2017 2017
Barangays in Lipa City
144
Purchase of Heavy Equipment CEO CGSO January December 3,100,000.00
(2 units Dump Truck & 1 unit 2017 2017
Grader)
Total P34,450,000.00
As a result, the constituents as well as the City Government were deprived of the
benefits that could have been derived had the PPAs been completed on scheduled date,
January-December 2017, to avoid hazards and mitigate its potential impact by reducing
vulnerabilities and exposure, while those for disaster preparedness could have established
and strengthened capacities of communities to anticipate, cope and recover from the
negative impacts of emergency occurrences and disasters. Had these projects and
programs been fully implemented during the year, the intended benefits thereof could
have been appreciated now by the beneficiaries of said projects, mitigating the effects of
any disaster.
We recommended that the Disaster Risk and Reduction Office along with
the other implementing offices such as General Services, Engineering and Welfare
and Development to closely monitor the undertaking of the proposed projects
funded out of LDRRMF so that the fund utilization be aligned with the City’s Local
Disaster Risk Reduction Management Investment Plan (LDRRMIP) and the
Projects, Programs and Activities envisioned to strengthen the City’s capacity for
risk reduction and management be fully implemented.
The City Administrator in his letter dated June 26, 2018, furnished the Audit
Team a copy of Sangguniang Panlungsod Resolution No. 185 which listed the details of
the proposed budget for Calamity Fund 2017 and includes, among others, the installation
of streetlights in the following barangays, under Electrification, Power and Energy
Structure:
 Barangay Sico P1,000,000.00

 Barangay San Carlos 1,000,000.00
 Barangay San Sebastian 1,000,000.00
The Audit Team recognized that installation of streetlights may be considered as a

project under the City’s Disaster and Risk Reduction Fund, but it will not fall under the
category “Electrification, Power and Energy Structure” which is the item included in the
proposed budget for Calamity Fund for 2017.
Annex D of the NDRRMP for 2011-2028, entitled “2011-2016 Philippine

Development Plan’s Goals and Strategies on Disaster Risk Reduction and Management
(DRRM) and Climate Change Adaptation (CCA)” provides as presented on the following
page:
145
Incorporated in
Vision/Objective Goal DRR/CCA Strategies the DRRM
Priority Areas
Chapter 5 – Accelerating Infrastructure Development
Speed up the To adapt to Institutionalize DRR
provision of safe, climate change and CCA in
efficient, adequate, and mitigate the infrastructure sector
reliable, cost- impacts of natural Xxx
effective and disasters Energy Prevention and
sustainable  Intensify Mitigation
infrastructure development and
utilization of
renewable energy
and environment-
friendly alternative
energy
resources/technolo
gies; and
 Assess the
vulnerability of
energy facilities to
climate change and
natural disasters
(e.g. El Nino and
La Nina)
Electrification, Power and Energy Structure does not pertain to streetlights,

though streetlights use electricity. It includes infrastructures that will promote renewable
energy or structures that will serve as energy sources both in routine circumstances and in
the extreme circumstances of an emergency such as construction of solar panels and wind
turbines and other sources of sustainable energy.
Moreover, the City Government did not comment on the reason of non-
implementation of its programmed PPAs amounting to P34,450,000.00.
16. The Annual Procurement Plan (APP) prepared by the City is incomplete,
inadequate and lacked the necessary information on the mode of procurement,
schedule of each procurement activity, brief description of the programs/projects,
source of funds, among others, as required under Section 7 of the Revised
Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184 and
Government Procurement Policy Board (GPPB) Circular No. 07-2015 dated July
16, 2015, thus relevance and usefulness of APP as a planning and control tool was
not attained, resulting in uncoordinated procurements that do not promote
efficiency, economy and transparency. The APP was likewise not submitted to the
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GPPB and posted in accordance with Section 1(a) of Executive Order (EO) No. 662,
series of 2007, as amended.
Section 7 of the Revised IRR of RA No. 9184 provides, among others, the
following regulations pertinent to procurement planning and budgeting linkage:
Section 7.1 states:
“All procurement shall be within the approved budget of the procuring entity
and should be meticulously and judiciously planned by the procuring entity.
Consistent with government fiscal discipline measures, only those considered
crucial to the efficient discharge of governmental functions shall be included
in the Annual Procurement Plan (APP). For purposes of this IRR, a
procurement project shall be considered crucial to the efficient discharge of
governmental functions if it is required for the day to day operations or is in
the pursuit of the principal mandate of the procuring entity concerned. The
APP shall include provisions for foreseeable emergencies based on historical
records. In the case of infrastructure projects, the APP shall consider the
appropriate timing/phasing of related project activities, such as, engineering
design and acquisition of right of way, to reduce/lower project costs.(a)”
Section 7.2 also provides:
“No procurement shall be undertaken unless it is in accordance with the

approved APP of the procuring entity. The APP shall bear the approval of
the Head of the Procuring Entity or second-ranking official designated by the
Head of the Procuring Entity to act on his behalf, and must be consistent with
its duly approved yearly budget.”
Section 7.3 enumerates the data that should be included in the PPMP for their
different programs, activities, and projects (PAPs).
“Xxx
7.3.5. As soon as the GAA, corporate budget, or appropriation ordinance, as

the case may be, becomes final, the end-user units shall revise and
adjust the PPMP to reflect the budgetary allocation for their
respective PAPs. The revised PPMPs shall be submitted to the BAC,
through its Secretariat, for the final recommendation of the methods of
procurement. Xxx
7.4 Updating of the individual PPMPs and the consolidated APP for each
procuring entity shall be undertaken every six (6) months or as often
as may be required by the Head of the Procuring Entity. The updating
of the PPMPs shall be the responsibility of the respective end-user
units of the Procuring Entities, while the consolidation of these
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PPMPs into an APP shall be lodged with the BAC Secretariat, subject
to approval of the Head of the Procuring Entity.”
In addition, COA Circular 2012-001 dated June 14, 2012 provides that one of the
basic requirements for all types of procurement is authenticated photo copy of the
approved Annual Procurement Plan (APP) and any amendment thereto.
Submission of APP based on the approved budget to the GPPB and its Technical
Support Office (TSO) is prescribed under Section 3e of Administrative Order (AO) No.
46, series of 2015 and Executive Order (EO) No. 662, series of 2007, as amended.
On March 13, 2017, GPPB-TSO issued a one-time extension for the submission
of CY 2017 APP from January 31, 2017 to April 15, 2017, in accordance with the
following guidelines:
1. “The APP must be prepared in accordance with the approved budget. Xxx
2. The APP must be prepared in the format prescribed under the GPPB Circular
No. 07-2015 on the preparation of the APP, which may be viewed using this
link: http/www.gppb.gov.ph/issuance/Circulars/Circular%2007-2015.pdf
3. The APP must be approved by the head of the Procuring Entity.
4. The Annual Procurement Plan for Common Use Supplies and Equipment
(APP-CSE) is submitted to the DBM-PS and not to the GPPB. xxx
5. Electronic copies of approved and signed APP must be sent to
app@gppb.gov.ph”
APP is also one of the requirements in the grant of Performance Based Bonus for
FY 2017 as per Department of Budget and Management (DBM), Office of the President
of the Philippines (OP), Department of Finance (DOF) and Presidential Management
Staff (PMS) Memorandum Circular No. 2017-1 dated March 9, 2017 with the following
provisions:
“4.0 ELIGIBILITY CRITERIA
4.1 Each agency must satisfy the following conditions to be eligible

for the grant of PBB.
A. Good Governance Conditions: Satisfy 100% of the Good

Governance Conditions for FY 2017 set by AO 25 Inter-
Agency Task Force (IATF) as provided in Section 5.0. Xxx
5.0 FY 2017 GOOD GOVERNANCE CONDITIONS
Xxx
a.5 FY 2017 Annual Procurement Plan (APP-nonCSE) in the format

prescribed under GPPB Circular No. 07-2015, which should be
148
posted not later than one month after the issuance of this Circular
and the FY 2018 Annual Procurement Plan for Common-Use
Supplies and Equipment (APP-CSE) based on the guidelines to be
issued by the DBM through a separate circular letter.
Xxx
7.15 The Head of Procuring Entity (HOPE), Chairman and Secretariat of

the bids and Awards Committee (BAC) shall not be entitled to the FY
2017 PBB if the Department/Agency fails to submit the following:
a. FY 2017 Annual Procurement Plan (APP-nonCSE) to the GPPB

not later than one month after the issuance of this Circular in the
format prescribed under GPPB Circular No. 07-2015.
b. FY 2018 Annual Procurement Plan-Common-Use Supplies and

Equipment (APP-CSE) to the DBM-Procurement Service on or
before November 30, 2017.”
On July 16, 2015, GPPB issued Circular No. 07-2015 to reiterate the requirement
in the preparation of the APP and inform all procuring entities to prepare the APP in the
format approved by the GPPB.
The APP shall contain the following information, among others:
1. Name of the project/procurement;

2. Project management office/end-user unit;
3. General description of the project/procurement;
4. Procurement methods to be adopted;
5. Time schedule for: a) advertisement/posting; b) submission and
receipt/opening of bids; c) award of contract; and d) contract signing.
6. Source of funds; and
7. Approved Budget for the Contract
The APP is a requisite document that the agency must prepare to reflect the entire
procurement activity (i.e., goods, services, civil works to be procured) that it plans to
undertake within the calendar year. It should be submitted to the GPPB on or before the
end of January of the budget year, and shall be posted in accordance with Section 1(a) of
EO No. 662, series of 2007, as amended.
The APP for CY 2017 prepared and submitted by the City to the Audit Team
lacked the necessary information on the mode of procurement, schedule of each
procurement activity, brief description of the programs/projects, source of funds, among
others, without considering regular office supplies, equipment requirements,
infrastructure projects and other provisions for foreseeable emergencies based on
historical records including the method of procurement. It was further noted that only the
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budget for each department was reflected in the APP for some object of expenditures.
Only few infrastructure projects were likewise included in the APP for the year.
The APP submitted was likewise incomplete, not updated, not consolidated by
the BAC Secretariat, not the basis for public bidding and not within the approved budget
of the City. Obviously, as if the APP was prepared for purposes of compliance only and
not as per actual requirement in every procurement. In addition, the same was not
submitted to the GPPB and posted in accordance with Section 1(a) of EO No. 662, series
of 2007, as amended.
Authenticated photo copy of APP was also not attached to the vouchers, contrary
to COA Circular 2012-001 dated June 14, 2012.
Thus, the City’s APP did not serve as an effective tool in the procurement which
resulted in unplanned purchases, thus defeating the purpose of efficiency and economy in
the procurement process.
The non-inclusion of infrastructure projects in the APP may also result in

confusion on the part of the BAC in identifying the projects that have to be prioritized.
More so, the absence of the mode of procurement to be adopted for each project defeated
the purpose of the APP. The same shall be updated every six (6) months or as often as
maybe required by Head of Procuring Entity to suit to the actual needs of the agency.
We recommended that the City Mayor require the General Services Officer,
BAC Secretariat and all the Department Heads to:
a) formulate the City’s APP in accordance with Section 7 of the Revised IRR of
RA No. 9184;
b) ensure that all the necessary information required in the APP and its
amendments are reflected therein for its continuous relevance and usefulness
as a planning and control tool;
c) submit the duly approved copy of APP to the GPPB in accordance with
Section 1(a) of Executive Order No. 662, series of 2007, as amended;
d) attach the authenticated photo copy of the APP to the disbursement vouchers
for the payment of all types of procurement, in compliance to COA Circular
2012-001 dated June 14, 2012; and
e) include in the APP, provisions for foreseeable emergencies based on

historical records as well as the manner of procurement thereof.
150
As per the City Administrator in his letter dated June 26, 2018, he narrated that
the BAC Secretariat shall be responsible for the consolidation of all departments’ PPMP
into indicative APP. He added that the City Accounting Office has included the
authenticated photocopy of the APP in the list of required attachments to the
disbursement voucher subject to that Office’s pre-audit, effective CY 2018. Lastly, he
quoted that as to his knowledge, the GSO is revising the 2018 APP to conform to the
prescribed format and once revised, the authenticated relevant portion of such shall also
be included as a requirement in the pre-audit of disbursement vouchers of the City
Accounting Office for alternative mode of procurement.
The City Government, however, did not comment on the submission of copy of
APP to the GPPB in accordance with the cited EO No. 662, series of 2007, as amended.
17. The report on compliance with COA findings and recommendations or the Agency
Action Plan and Status of Implementation (AAPSI) for Calendar Year (CY) 2016
was not accomplished and submitted to COA, as required under Section 96 of the
General Provisions of Republic Act (RA) No. 10717, otherwise known as the
General Appropriations Act (GAA) for Fiscal Year 2016.
Section 96 of the General Provisions of Republic Act No. 10717 or the 2016
General Appropriations Act provides:
“Within sixty (60) days from receipt of the COA Annual Audit Report,
agencies concerned shall submit to the COA, either in printed form or by way
of electronic document, a status report on the actions taken on said audit
findings and recommendations using the prescribed form under COA
Memorandum No. 2014-002 dated March 18, 2014, copy furnished the DBM,
the House Committee on Appropriation and the Senate Committee on
Finance.
The head of agency concerned and the agency’s web administrator or his/her
equivalent shall be responsible for ensuring that said status reports are posted
on the agency’s website.
Failure to submit said statement and report shall, render any disbursement
from said income void and, subject the erring officials and employees to
disciplinary actions in accordance with Section 43, Chapter 5, and Section 80,
Chapter 7, Book VI of E.O. No. 292, and to appropriate criminal action under
existing penal laws.
The City of Lipa has not submitted the required status report in hard and soft copy
on the actions taken in audit recommendations within sixty (60) days from receipt of the
151
Annual Audit Report. The AAR for CY 2016 was received by the City personnel on June
30, 2017, however the required AAPSI was submitted to the Audit Team only on April
16, 2018, upon demand.
It shall be the duty and responsibility of the Head of Agency and the agency’s
web administrator or his/her equivalent to comply with the reportorial and documentary
submissions mandated in this Act.
We recommended that the Management follow strictly the above provisions

of law on the submission of the Agency Action Plan and Status of Implementation
(AAPSI) within the specified period to give enough time for the Auditor to review,
monitor and evaluate the action taken by the management on the audit
recommendations.
During the exit conference, the City Accountant, promised to comply with the
recommendation regularly.
18. The list of all ongoing government projects/program/activities and those that are to
be implemented during the year, as well as information that the appropriate
signboards and/or public notices have been already posted were not
provided/submitted to the Office of the Auditor at the beginning of the year as
required under COA Circular No. 2013-004 dated January 30, 2013 resulting in the
delay in the validation, inspection and reporting of the said
projects/program/activities.
COA Circular No. 2013-004 dated January 30, 2013 as amended by COA
Circular No. 2015-006 dated August 20, 2015 provides for the information and publicity
on Programs/Projects/Activities of Government Agencies (PPAs).
Under Item 2.1 of the said Circular, all government agencies are required to
submit at the beginning of the year to the Supervising Auditor (SA) and Audit Team
Leader (ATLs) a list of all ongoing government PPA and those that are to be
implemented during the year. The list shall include the project name; implementing unit,
office and division if it is not the agency as a whole; brief description of the PPA;
contractor or supplier, if any; mode of procurement; funding source; cost or approved
budget; project duration including start and completion dates; location and other
information on the PPA may be requested by the SA or ATL anytime for audit purposes.
Further, Item 2.2 provides for the notification to the public in the form of
announcement and/or publicity relating to PPAs should be made at the least possible cost,
taking into account that the nature of and purposes of such notification, announcement
and/or publicity, is to inform the public of the essential features/elements of the PPAs.
152
Moreover, for reporting and monitoring purposes, it is also prescribed in the same
Circular that the Head of the Agency shall inform the SA and ATL within ten days after
the award of the infrastructure project or before the start of the program/activity that the
appropriate project signboards and/or public notices are already posted, for the SA/ATL’s
validation.
Records showed that the City has implemented various infrastructure projects and
activities, however at the beginning of the year, the Audit Team was not provided with
the list of the ongoing projects and those that are to be implemented during the year. The
Audit Team was likewise not informed that the appropriate project signboards and/or
public notices are already posted, preventing the Auditor to conduct review, validation,
and inspection of the said projects/program/activities.
It is worth mentioning, however that the Quarterly Report on Government

Projects/Programs/Activities was regularly prepared and submitted to the Audit Team.
We recommended that the City Mayor require the City Engineer to submit
to COA the list of all ongoing government projects/programs/activities and those
that are for implementation during the year, as well as information that the
appropriate signboards and/or public notices have been already posted in
accordance with COA Circular No. 2013-004 within the prescribed period.
The City Engineer, in her letter dated June 26, 2018, forwarded by the City
Administrator on the same date to the Audit Team, alleged that the infrastructure projects
for implementation in the approved budget are generic in entries and not conclusive of its
final concept and location, hence they cannot submit the list of projects for
implementation but all projects for bidding/implementation were subsequently submitted
to the Audit Team for contract review while the required Quarterly Accomplishment
Reports were faithfully submitted.
The Audit Team maintained its recommendation that the City should submit the
above report as required by the COA Circular No. 2013-004 dated January 30, 2013.
19. The required notification/request for inspection together with the copies of
Acceptance and Inspection Report for all deliveries were not furnished to the COA,
thus depriving the Auditor of the opportunity to conduct inspection, contrary to
Item 2 of COA Circular No. 96-010 dated August 15, 1996 and Section 116 of COA
Circular No. 92-386 dated October 20, 1992.
Item 2 of COA Circular No. 96-010 dated August 15, 1996 states that “The
agency official responsible for accepting deliveries of procured items shall, within
twenty-four (24) hours from such acceptance, notify the Auditor of the time and date of
153
the scheduled deliveries xxx In case of partial delivery of any item in the P.O., the copy
to be submitted shall indicate which items have been delivered and which have not.”
Section 116 of COA Circular 92-386 dated October 20, 1992, otherwise known as
the Rules and Regulations on Supply and Property Management in the Local
Governments, provides that “Surprise and Selective Inspections by the Local Auditor’s –
The Provincial, City or Municipal Auditor or their representatives shall conduct surprise
and selective inspections of deliveries soon after their acceptance by the local
government units.”
Moreover, pertinent provision of COA Circular No. 2009-002 dated May 18,
2009 is also quoted as follows:
“6.0 DUTIES AND RESPONSIBILITIES OF AGENCY OFFICIALS
Xxx
6.09. Furnish the auditor copies of delivery documents within twenty-four

(24) hours after acceptance of deliveries of goods and services, regardless
of whether or not the transaction is subject to pre-audit.” (emphasis ours)
For CY 2017, the Audit Team was not notified of the deliveries and furnished
with the copies of the Acceptance and Inspection Report (AIR) within 24 hours after
acceptance. Consequently, the Auditor was not able to perform ocular
validation/inspection at the most proximate period where the evidence of delivery is still
verifiable. Moreover, compliance by the supplier on the terms and conditions on the
agreement and specifications of the items procured could not be validated immediately.
We recommended that the City Mayor instruct the General Services Officer
to submit the Request for Inspection/Notice of Deliveries together with copies of the
Acceptance and Inspection Report (AIR) to the Audit Team within 24 hours after
acceptance and inspection of all the deliveries by the Management.
The General Services Officers promised to comply with the recommendation.
Gender and Development
The Annual Gender and Development (GAD) Plan showed that out of the total
annual budget of the City Government of Lipa of P1,586,247,827.68, 14.51% of which or
P230,183,591.14 of which was allocated to GAD Projects. Annual GAD
Accomplishment Report (AR) showed that total GAD expenditures amounting to
P232,574,531.96 (Annex R) exceeded the annual budget by P2,390,940.82, details as
shown on the page that follows:
154
Projects grouped by gender issues GAD
GAD Budget Difference
addressed Expenditure
Client Focused GAD Programs P159,998,729.00 P 159,698,596.82 P 300,132.18
Organization Focused GAD Programs 2,904,427.00 2,470,500.00 433,927.00
Attributed Programs 67,280,435.14 70,405,435.14 (3,125,000.00)
TOTAL P 230,183,591.14 P 232,574,531.96 P (2,390,940.82)
Client-focused activities seek to address the gender issues of the LGU's clients or
contribute in responding to the gender issues of the sector such as gender stereotyping,
lack of knowledge on GAD issues, inadequate space/lack of facilities and refreshments to
comfortably accommodate women, pregnant women, and mothers with little kids as they
wait to process their permits, etc.
Organization-Focused programs intends to create the organizational environment

for implementing gender-responsive policies, programs and projects and address the gap
in knowledge, skills and attitudes of key personnel on gender mainstreaming, the gender
issues of employees in the workplace, subject to the mandate of the organization,
availability of equal training opportunities for women and men employees.
Attribution to the GAD budget of a portion or the whole of the budget of an

agency’s major programs is a means toward gradually increasing the gender
responsiveness of government programs and budgets. Details of attributed program as
follows:
GAD GAD Attributed
Total Project Attributed Program Cost per
Attributed Programs Difference
Cost Program Cost GAD
per GAD Plan Accomplishment
Concreting/Improvement P19,500,000.00 P14,625,000.00 P14,625,000.00 P 0.00
of Road
Installation of Streetlights 9,000,000.00 4,500,000.00 6,750,000.00 (2,250,000.00)
Installation of CCTV 3,500,000.00 1,750,000.00 2,625,000.00 (875,000.00)
Kolehiyo ng Lungsod ng 61,873,913.52 46,405,435.14 46,405,435.14 0.00.
Lipa
Total P93,873,913.52 P67,280,435.14 P70,405,435.14 P(3,125,000.00)
The increase of the project cost attributed to the GAD budget was due to the
change of the Harmonized Gender and Development Guidelines (HGDG) Score, which
serve as the basis of the portion of the total project that can be attributed to GAD, after
the implementation of the programs. During the GAD planning and budgeting phase, the
City subject the program to gender analysis using this HGDG tool, as per Philippine
Commission on Women (PWC), National Economic Development Authority (NEDA),
Department of Budget and Management (DBM) Joint Circular No. 2012-01, to wit:
155
During the preparation of its GAD AR, the City again administered the HGDG
test to determine the extent that the targeted HGDG score was attained. The score became
the basis in determining the actual expenditure that can be attributed to the GAD budget.
Details as follows:
Preparation of
Planning and Budgeting Phase
Accomplishment Report
Attributed Programs
HGDG % Attributable HGDG % Attributable
Score Project Cost Score Project Cost
% Amount % Amount
Concreting/Improvement
15.17 75% P14,625,000.00 16.33 75% P14,625,000.00
of Road
Installation of Streetlights 12.50 50% 4,500,000.00 16.33 75% 6,750,000.00
Installation of CCTV 12.50 50% 1,750,000.00 16.33 75% 2,625,000.00
Kolehiyo ng Lungsod ng
18.05 75% 46,405,435.14 15.83 75% 46,405,435.14
Lipa
Total P67,280,435.14 P70,405,435.14
The City gathered and established 66.82% of the sex-disagregated data through
the conduct of the Community-Based Monitoring System (CBMS) in 2017, lower than
the target of 90%. Data gathering was extended due to data loss, poor access to CBMS
Portal.
Compliance with Tax Laws
Taxes withheld from the City employees, contractors, and dealers were regularly
remitted to the Bureau of Internal Revenue (BIR).
156
Statement of Audit Suspensions, Disallowances and Charges (SASDC)
As of December 31, 2017 the Statement of Audit Suspensions, Disallowances

and Charges (SASDC) showed an unsettled disallowances of P40,397,539.66 (Annex S)
as summarized below:
Notice of Notice of Notice of Total Amount

Suspension Disallowance Charge
Balance, Dec. 31, 2016 P 0.00 P40,558,810.66 P 0.00 P40,558,810.66
Add: Notice of Suspensions/
Disallowances/Charges issued
during the year 0.00 0.00 0.00 0.00
Subtotal
Less: Settlement during the 0.00 161,271.00 0.00 161,271.00
year
Balance, December 31, 2017 P 0.00 P40,397,539.66 P 0.00 P40,397,539.66
Out of the P40,397,539.66 balance of disallowance as of December 31, 2017,

only the amount of P161,271.00 was refunded/settled by City Officials in CY 2017, while
disallowances amounting to P36,036,078.48 were still on appeal with the COA Regional
Office.
Official Development Assistance (ODA) Funded Project
The City of Lipa has no ODA-funded project for CY 2017.
Compliance with Government Service Insurance System (GSIS) regulation
Premiums withheld, including monthly loan amortization, from City employees

and officials were regularly remitted to the GSIS.
157
PART III - STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT
RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS
As of December 31, 2017
Of the 51 prior year’s audit recommendations embodied in the CY 2016 Annual Audit Report, 16 were fully implemented, 8 were
partially implemented, and 27 were not implemented by the City Government of Lipa. Details are presented below:
Reason for
Status of
Audit Observations Recommendations Management’s Action Partial/Non-
Implementation
Implementation
1. The existence, accuracy and We recommended that the The City GSO submitted to the Partially No reason
reliability of the reported City Mayor instruct the City Audit Team the RPCPPE on Implemented provided
balances of Machinery and GSO to cause the immediate April 25 and May 30, 2017, as
Equipment, Transportation submission to the Audit well as their revised report on
Equipment except Motor Team of the RPCPPE of the Infrastructure Projects, Buildings
Vehicles; Furniture, Fixtures City Government so as to and Other Structures owned by
and Books and Other Property, determine the existence of the City. However, any proof of
Plant and Equipment accounts these properties, and for her reconciliation between the
with net book value of to reconcile the records records of CGSO and
P277,955,493.61 were not maintained by her Office Accounting Office was not
ascertained due to non- with the City Accounting furnished to the Audit Team.
submission by the GSO of the Office so that the balances of
Report on the Physical Count of PPE accounts being
Property, Plant and Equipment presented in the financial
(RPCPPE), while the submitted statements of the City
Inventory Reports on Land Government would attain
Improvement, Infrastructure fairness of presentation as of
Assets and Buildings and Other year-end.
Structures did not reconcile
with the reports of the
Accounting Office of
P1,072,319,620.47, thus
affecting the fair presentation of
these accounts in the financial
statements of the City as of
158
Reason for
Status of
Implementation
Implementation
December 31, 2016, with total
amount of P1,350,275,114.08.
2. One hundred twenty-two We recommended that the

motor vehicles worth City Mayor require both the
P18,439,077.45, out of the 233 Officer-in-Charge of the
vehicles owned by the City Offices of the City
Government, were not duly Accountant and the City
accounted for while 48 General Office to reconcile
vehicles valued at the records of motor vehicles
P17,995,285.00 appearing in being maintained by their
the GSO records were not offices for fair presentation
recorded in the books of of Motor Vehicles account in
accounts of the City the City’s financial
Government, thus, affecting statements. Both officials
the fair presentation of Motor should act on the following:
Vehicles account with a
reported balance of  Locate the 122 units of  The 122 units not accounted Fully
P85,989,001.42, gross at year- vehicles that were not for are as follows: Implemented
end. Moreover, 15 accounted during the
unserviceable/junked vehicles physical inventory through 1. 111 units of condemned
totaling P4,923,305.00 were retrieval of all documents vehicles for which the
not yet disposed of as of year- related to their acquisition, CGSO has initiated
end, contrary to COA Circular including copies of actions regarding their
No. 92-386. Further, all the Memorandum disposal.
City’s motor vehicles were not Receipts/Acknowledgeme
marked as government nt Receipt for 2. 4 units of vehicles
property, contrary to the Equipment/Property donated to National
provisions of COA Circular Acknowledgement Government Offices (two
No. 75-6 dated November 7, Receipt, which contained for Bureau of Fire
1975.
159
Reason for
Status of
Implementation
Implementation
the names of persons to Protection, one for
whom said vehicles had Department of the
been entrusted to, and Interior and Local
make them accountable for Government and one for
the loss, if any. If proven Bureau of Jail
futile, proper procedures Management and
on dropping from the Penology) and
books of accounts may be maintained in the City’s
an option; records for the purpose
of recording fuel
consumption and repairs
of subject vehicles which
were charged to City’s
funds.
3. 7 units of vehicles which

are still serviceable but
were not available for
inspection during the
inventory.
Summary:
Condemned 111
Donated 4
Unavailable during count 7
Total 122
160
Reason for
Status of
Implementation
Implementation
 Locate the supporting  The discrepancy is accounted Fully
documents of 48 units of for as follows: Implemented
vehicles worth
P17,995,285.00 which are 1. The CGSO classified all
not recorded in the books Transportation
of the City Government, Equipment, including the
but were included in the 48 subject units, under
Report of Inventory of Motor Vehicles Account.
Motor Vehicles
maintained by the GSO. 2. The CGSO submitted a
Accordingly, record the single consolidated
same in the books of report regardless of
accounts considering that source of funds, while
these vehicles are in
existence and being used 3. The Accounting
in the operation of the City Department followed
Government; established guidelines in
the booking of
Transportation
Equipment based on the
required asset accounts
and source of funds.
 Cause the immediate  The CGSO has already Partially Request already
disposal of all initiated the necessary Implemented forwarded to the
unserviceable/junked proceedings in connection Office of the
vehicles through proper with the disposal of 75 Supervising
disposal procedures of unserviceable/junked Auditor per letter
government property vehicles and the required dated September
pursuant to COA Circular documents for the same have 14, 2017.
161
Reason for
Status of
Implementation
Implementation
No. 92-386. This action been submitted to the Audit
could lead to recovery of Team on June 29, 2017 and
whatever salvage value September 8, 2017.
that these properties still
carry for the best interest
of the City Government;
 Make the necessary  The City Accounting Office Fully

adjustment on the Report and the CGSO now Implemented
of Inventory of Motor reconciled their respective
Vehicles of the acquisition records on these eight
costs of eight vehicles vehicles.
with over/understatement
of P371,768.31;
 Cause the marking of  The LGU claimed that all Partially Still some of the
every motor vehicles owned vehicles are now have Implemented LGU owned
owned by the City been marked with the vehicles are not
Government in accordance Official Seal of Lipa City, carrying the
with COA Circular No. for proper identification. Official LTO
75-6; and license plates
and had not yet
 Ensure that all  The LGU claimed that all Partially been marked
government vehicles carry owned vehicles are now Implemented with the Official
the LTO issued plate carrying the Official LTO Seal of Lipa
number in its appropriate license plates. City, for proper
place for easy identification.
identification and
monitoring.
162
Reason for
Status of
Implementation
Implementation
3. The account balances of We recommended that the The City Treasurer’s Office Partially The detailed
Accountable Forms Inventory City Mayor direct the OIC- presented the justification for the Implemented schedule for this
of P1,364,200.90, and City Accountant and the unreconciled balances in their account, as
Animal/Zoological Inventory of corresponding heads of the management comment dated promised on
P607,441.88 did not reconcile Offices of Treasury and April 17, 2017. letter dated June
with the recorded stocks on Veterinary to reconcile the 13, 2017 by the
hand of the City Treasury and differences noted in order to As for the discrepancy in the City
City Veterinary Offices of arrive at the correct balances Animal/Zoological Supplies Administrator,
P1,636,384.90 and of accounts at any given Inventory, the LGU has reasoned remain
P308,335.00, respectively, period. out that the outstanding balance unsubmitted.
resulting in the of P607,441.88 per Accounting
under/overstatement of the record is the amount of
accounts, which affected the purchases at year end which was
fair presentation of accounts in recorded as Accounts Payable
the financial statements of the while the Veterinary Office’s
City Government of Lipa for Supply Officer justify that there
year-end 2016. was only a partial delivery at the
end of 2016, thereby resulting in
lesser inventory amount per
actual inventory report compared
to the amount recorded by the
Accounting Office.
Likewise, require all Not Complete and

accountable officers of Implemented updated
inventory items to maintain inventory ledger
complete and updated cards and
inventory ledger cards and inventory stock
inventory stock cards per cards per
class/category of property as class/category of
a means of control, and to property are still
163
Reason for
Status of
Implementation
Implementation
protect the integrity of not maintained.
information being reported in See Part II,
the financial statements of Observation No.
the City Government. 3
4. The combined outstanding We recommended that the The incumbent City Accountant Fully
balance of loans with the City Mayor instruct the OIC- reasoned out that the differences Implemented
Philippine Veterans Bank and City Accountant and the City noted was due to the fact that the
the Philippine National Bank of Treasurer to make proper City’s payments of loan
P496,901,044.99 was representation with the amortization for the month of
inconsistent with the banks’ Philippine Veterans Bank December 2016 were recorded
recorded amount of and the Philippine National only by both banks in January
P501,988,442.27 as of Bank in order to reconcile the 2017, thus the statement issued
December 31, 2016 or a difference of P5,087,397.28 by both banks to the Audit Team
difference of P5,087,397.28. from the recorded did not include the amounts paid
Likewise, payments of the outstanding loan obligations, by the City Government.
principal amount and interests and the total payments made Likewise, in the submitted
during the year of to principal amounts and explanations made by the City
P76,675,052.63 and interest expenses, for fair Administrator on June 14, 2017,
P23,906,550.50, respectively, presentation of the affected the discrepancies noted by the
did not tally with the total accounts in the financial Audit Team have been given
banks’ records of statements of the City of Lipa detailed explanations.
P75,359,241.31 and as of December 31, 2016.
P23,801,727.13, thus affecting
the fair presentation of the
respective accounts in the
financial statements of the City
of Lipa.
164
Reason for
Status of
Implementation
Implementation
5. The City Treasurer failed to We recommended that the The City Treasurer’s Office Fully
secure authority from the City Mayor instruct the City (CTO) secured an authorization Implemented
Sangguniang Panlungsod (SP) Treasurer to transfer to from the Sangguniang
to place into Time Deposit current account the total time Panglungsod, which was granted
accounts the total amount of deposits of P240,000,000.00, through SP Resolution No. 79,
P240,000,000.00 with the which the City Government dated April 4, 2017. This
Development Bank of the of Lipa has been maintaining authorizes Mr. Doroteo P.
Philippines, contrary to Section with the Development Bank Rosales, City Treasurer, “to
21 of Commission on Audit of the Philippines, Lipa City invest the City Government’s
(COA) Circular No. 92-382, Branch since March 2014, idle funds in term deposit like
thus failing to safeguard the due to absence of authority time deposit or investment
said funds from possible loss. from the SP and to ensure savings account with any
safety of the funds from government financial institution
unforeseen events, which for a period of thirty (30) days
may be brought by only.”
uncertainty in the banking
sector. In addition, the amount of
P20,000,000.00 included in the
P240,000,000.00 time deposit,
was already returned to the
current account per JEV No.
2017-04-000154 dated April 17,
2017.
6. Excessive cash advances were We recommended that the Not See Part II,
being granted to one Disbursing City Mayor stop immediately Implemented Observation No.
Officer averaging P26.69 the grant of excessive cash 4
million a month for payment of advances to one Disbursing
various operating expenses and Officer to avoid possible loss
of various payrolls, which are or improper utilization of
not equal to the net amount of City funds. Likewise, require
165
Reason for
Status of
Implementation
Implementation
the payrolls, contrary to the both the City Treasurer and
provisions of COA Circular No. the OIC-City Accountant to
97-002, that could lead to enforce strictly, the rules and
improper utilization of cash regulations on the granting
and/or possibility of loss of said and utilization of cash
funds. advance, pursuant to COA
Circular No. 97-002 dated
February 10, 1997, as The City Treasurer’s Office has
follows: issued the following comments:
 Limit the amount of cash  There are no cash advances Not Recommendation
advances for Payroll Fund beyond the maximum cash Implemented was not
to the net amount of the accountability of bonded addressed.
payrolls for a particular officers.
period only;
 Set a fixed amount of cash  Cash advances beyond Not Recommendation

advance for the payment maximum accountability are Implemented was not
of recurring operating delegated to other disbursing addressed.
expenses only, where each officers.
transaction should not
exceed P15,000.00.
Replenishment of the fund
should be made when
disbursements reached
75% to ensure availability
of sufficient funds for
other recurring
obligations;
166
Reason for
Status of
Implementation
Implementation
 Have a separate cash  Separate cash advances for Fully
advance for Payroll Fund, each fund and payment of Implemented
and another cash advance recurring operating expenses
for the payment of are followed as
recurring operating recommended.
expenses, and at no
instance should operating
expense be charged to the
cash advance for Payroll
Fund, and payroll to the
cash advance for operating
expenses. Petty operating
expenses should be
limited only to recurring
expenses; and
 Require that payment of  RATA of City Officials are Fully

RATA to City Officials be now being paid through the Implemented
coursed thru the ATM.
Automatic Teller Machine
(ATM) considering that
this expenditure is
recurring and attached to
the position of the
personnel concerned, thus
saving time, effort, and
manpower resources.
7. The cash advance vouchers for We recommended that the Not See Part II,
confidential expenses of the City Mayor strictly comply Implemented Observation No.
Local Chief Executive for with the provisions of Joint 8
167
Reason for
Status of
Implementation
Implementation
Calendar Year 2016 totaling Circular No. 2015-01 of the
P5,000,000.00 were not COA, DBM, DILG,
submitted to the Audit Team Governance Commission of
within the required seven days the GOCC, and DND on the
upon release; appropriation was use of Confidential Funds.
for Intelligence Fund instead of He should require the OIC-
Confidential Fund; duration of City Accountant, City Budget
implementation was not limited Officer, and other local
to three months; and other officials concerned to:
deficiencies, which are contrary
to the provisions of Joint  submit to the Audit Team,  The LGU submitted the Not Still not within
Circular (JC) No. 2015-01 of for review and documents to the Audit Implemented the period
the COA, Department of verification, the Team, on March 7, 2017, in prescribed,
Budget and Management Disbursement Voucher connection with the cash despite being
(DBM), Department of the (DV) for the grant of cash advance for Confidential earlier - from
Interior and Local Government advance for confidential Expenses amounting to 271 to 47 days
(DILG), Governance expense, together with all P12,000,000.00, beyond the due
Commission for Government- the required and proper date
Owned or Controlled supporting documents,
Corporations (GOCCs) and within the prescribed
Department of National period pursuant to the
Defense (DND), thus, hindered above regulation;
the early submission of
liquidation reports to COA  use the term  In compliance, the City has Fully
Intelligence and Confidential Confidential Fund instead stopped the use of the term Implemented
Fund Audit Unit (ICFAU). of Intelligence Fund when “Intelligence Fund” and has
appropriating funds for adopted the appropriate term,
the confidential expenses “Confidential Funds” as
under the Peace and appropriate for Local
Order Program (POP) of Government Units.
168
Reason for
Status of
Implementation
Implementation
the City, as appropriate
only for local government
units;
 strictly observe  The City Government still Not See Part II,
Section 6.1.5 of the Joint does not comply with Implemented Observation No.
Circular, where cash Section 6.1.5 of the subject 8
advances should be Joint Circular.
limited to three months,
and any additional
amount should only be
granted after the
liquidation of previous
cash advances; and
 process and pay Not See Part II,

claims with complete Implemented Observation No.
documentation only. 8
8. Cost of hauling garbage and We recommended that the In compliance with this Partially Full
disposal, wages of Job Orders City Mayor require the Local recommendation, the LGU has Implemented implementation
and procurement of various Development Council to appropriated the costs of garbage was made on CY
supplies and services totaling ensure that only programs hauling and disposal in 2018.
P38,600,985.49 had been and projects geared towards Maintenance and Other
charged against the 20% the attainment of socio- Operating Expenses under
Development Fund, contrary to economic development and General Fund on CY 2018
Joint Memorandum Circular environmental management Budget. Meanwhile, wages of
No. 2011-1 of the DILG and outcomes that partake the job orders and procurement of
DBM dated April 13, 2011, nature of investment or various supplies and services for
resulting in the improper capital expenditures, as July to December 2017 were not
169
Reason for
Status of
Implementation
Implementation
utilization of the Fund and mandated by the law and its anymore charged to 20%
depriving the other programs or implementing rules and Development Fund.
projects applicable to the real regulations, will be given
intent of development, thus, the allocation under the 20%
objectives of the fund was not Development Fund to ensure
fully attained. the full realization of the
purpose for which the Fund
was created.
9. The City Government of Lipa We recommended that the On March 15, 2018, the Audit Not Awaiting for the
entered into a contract procuring entity headed by Team was furnished of the Implemented result of Appeal
agreement in CY 2014 with the the City Mayor and the Appeal Memorandum of the Memorandum
four winning bidders for the members of the Bids and City on Notice of Disallowance filed to the
Purchase of Medical Equipment Awards Committee and the No. 17-001-100-(16) dated Regional Office
totaling P169,481,107.17 Technical Working Group, November 2, 2017 duly received
without the appropriate the City Budget Officer, City by persons liable from January 9
approved budget and Treasurer and the City to March 5, 2018.
availability of funds for the Accountant submit
project; items purchased were explanations/justifications A separate Appeal Memorandum
not included in the approved why the Purchase of Medical was filed as well by Hon.
Annual Procurement Plan Equipment of Leonilo A. Catipon, City
(APP) for the CY 2014; P169,481,107.17 should not Councilor on March 16, 2018.
Performance Security were not be disallowed in audit, in
posted before the signing of view of the absence of
contracts/Purchase Orders; approved budget for the
Invitation to Bid did not include contract at the start of the
brief description for the items procurement process and the
to be procured, the manner of non-availability of funds
awarding on a per item basis, when contracts were entered
the source of funding and the into on June 23, 2014, as
contract duration and schedule required under Sections 85
170
Reason for
Status of
Implementation
Implementation
of delivery; and the and 86 of PD No. 1445,
specifications of the procured where non-compliance, as
medical equipment were not provided under Section 87 of
completely indicated in the Bid PD No. 1445, means that
Offer and Purchase Order, contracts entered into shall
contrary to the provisions of be void and the officer or
Presidential Decree (PD) No. officers entering into the
1445, Republic Act (RA) No. contract shall be liable to the
7160 and Revised government or other
Implementing Rules and contracting party for any
Regulations (IRR) of RA No. consequent damage to the
9184, thus, casts doubt on the same extent as if the
propriety of the disbursements. transaction had been wholly
between private parties.
We likewise recommended Not

that the honorable members Implemented
of the Sangguniang
Panlungsod submit
explanation/justification why
the Supplemental Budget was
approved thru SP Ordinance
No. 2014-08 and SP Special
Ordinance No. 158-2015
even though the said
purchase of medical
equipment was not included
in the approved Annual
Procurement Plan of the City
for CY 2014.
171
Reason for
Status of
Implementation
Implementation
Further, require the City Not
General Services Officer and Implemented
the Chief of Hospital of
Ospital ng Lipa to address
immediately the deficiencies
noted by the COA Technical
Audit Specialists as a result
of the Technical Evaluation
Report issued by them.
10. The Contract for the We recommended that the On March 15, 2018, the Audit Not Awaiting for the
Construction of Lipa Public procuring entity headed by Team was furnished of the Implemented result of Appeal
Market Parking Building the City Mayor, the City Appeal Memorandum of the Memorandum
amounting P296,788,888.88 Budget Officer, OIC-City City on Notice of Disallowance filed to the
was entered into by the City Engineer, and the OIC-City No. 17-001-100-(16) dated Regional Office
Government with the Asset Accountant submit November 2, 2017 duly received
Builders Corporation on May 8, explanations/justifications by persons liable from January 9
2014 without the availability of why the Construction of Lipa to March 5, 2018.
funds for the project, contrary Public Market Parking
to Section 86 of Presidential Building of P296,788,888.88 A separate Appeal Memorandum
Decree No. 1445; while the should not be disallowed in was filed as well by Hon.
grant of extension of contract audit, in view of the non- Leonilo A. Catipon, City
time from 548 to 719 calendar availability of funds when Councilor on March 16, 2018.
days due to unfavorable contract was entered into on
weather conditions violated the May 8, 2014, as required
provision of Section 10.2 of under Section 86 of PD No.
Annex “E” of the Revised 1445, where non-
Implementing Rules and compliance, as provided
Regulations (IRR) of Republic under Section 87 of PD No.
Act No. 9184, thus casts doubt 1445, means that contracts
on the propriety of the entered into shall be void and
172
Reason for
Status of
Implementation
Implementation
disbursement. the officer or officers
entering into the contract
shall be liable to the
government or other
contracting party for any
consequent damage to the
same extent as if the
transaction had been wholly
between private parties.
We likewise recommended Not

that the City Engineering Implemented
personnel who prepared and
recommended to the City
Mayor the approval of
extension of contract time to
719 calendar days on the
account of unfavorable
weather condition submit
explanation/justification on
the actions taken by them,
which was contrary to
Section 10.2 of Annex “E” of
the Revised IRR of RA No.
9184.
11. Expenditures incurred We recommended that the On March 15, 2018, the Audit Not Awaiting for the
during CY 2015 corresponding City Mayor stop immediately Team was furnished of the Implemented result of Appeal
to the financial/medical the approval for payment of Appeal Memorandum of the Memorandum
assistance under the Blue any unpaid prior year’s City on Notice of Disallowance filed to the
Card/Health Card Program of expenses charged against the Nos. 17-006-100-(16) to 17-042- Regional Office
173
Reason for
Status of
Implementation
Implementation
the City Mayor in the amount appropriation of current year 100-(16) dated November 2,
of P8,165,313.54 were charged pursuant to the provisions of 2017 to November 7, 2017 duly
against the appropriation for Sections 336 and 350 of the received by persons liable from
CY 2016, contrary to Sections RA No. 7160. January 9 to March 7, 2018.
336 and 350 of RA No. 7160.
Instruct the City Budget Not
Officer and the City Implemented
Accountant to strictly comply
with the aforecited provisions
of Sections 336 and 350 of
RA No. 7160 to ensure that
the funds are exclusively
used for the purpose for
which they were
appropriated, and to prevent
unauthorized utilization of
funds.
Officials who caused the
approval and payment of
such kind of transactions are
jointly and severally liable
for any audit disallowances
in view of the violations of
existing rules and
regulations.
12. Procurement of 61,363 We recommended that the In compliance for the year 2017, Partially Pending full
sacks (five kilos per sack) of City Mayor instruct the Head transactions of similar nature to Implemented compliance in
rice, totaling P13,469,178.50, of the City Disaster Risk those cited in the AOM were not CY 2018
for distribution to participants Reduction and Management processed in the current year
in the City’s Disaster Council (CDRRMC) to stop (2017). Instead, the following
174
Reason for
Status of
Implementation
Implementation
Mitigation activity and Disaster the procurement and were conducted under disaster
Preparedness Seminar was distribution of rice instead of preparedness which are within
charged against the allocation cash for labor in disaster the guidelines for the utilization
of the Local Disaster Risk mitigation activity, and for of the LDRRMF, and wherein
Reduction and Management food in disaster preparedness no distribution of rice were
Fund (LDRRMF), contrary to seminar as such undertaking conducted:
the provisions of Joint is not among the activities
Memorandum Circular (JMC) chargeable against the  Standard First Aid w/
No. 2013-1 of the National LDRRMF and has no bearing CPR Training
Disaster Risk Reduction and with the real intent of  Ambulance Operations
Management Council LDRRMF. Course
(NDRRMC), DBM, and the  Rope Rescue Technical
DILG, resulting in improper Require the CDRRMC to Course
utilization of the Fund. strictly follow the projects
and activities that can be
charged against the
LDRRMF as prescribed in
Joint Memorandum Circular
No. 2013-1 dated March 25,
2013 of the NDRRMC, DBM
and the DILG to ensure that
funds thereof are fully
utilized in accordance with
the real intention of setting
up the Funds.
Meanwhile, require the No document was submitted Not The required

CDRRMO to submit the Implemented documents were
necessary documents to not yet submitted
substantiate that disaster by the
mitigation activities actually CDRRMO to the
175
Reason for
Status of
Implementation
Implementation
occurred, otherwise, the Audit Team.
distribution of 25,000 sacks
of rice of P5,487,500.00
would be considered as
irregular expenditures against
LDRRMF. As to the
procurement of 36,363 sacks
at a total cost of
P7,981,678.50 for disaster
preparedness seminar, it is
already considered as
irregular expenditure.
13. The 61,363 sacks of rice We recommended that the The City Government furnished Fully
distributed to the participants of City Mayor direct the City the Audit Team a copy of a Implemented
the City’s Disaster Mitigation Administrator to ensure the certification from the SP
and Preparedness activities with City’s strict compliance with Secretary that the City Mayor
total cost of P13,469,178.50 the provision of EO No. 51, has requested for authority to
were procured from a rice whereby the NFA shall be enter into a MOA with the NFA,
retailer instead of from the the supplier of rice that the and that said request is still with
National Food Authority government entity would the SP.
(NFA), contrary to EO No. 51. need in connection with its
functions, unless a waiver is
issued by the NFA.
Likewise, instruct the The LGU also submitted two Fully

concerned official to submit certifications. The first one, Implemented
to the Audit Team the dated September 18, 2017,
required waiver from the which certifies as to the NFA’s
NFA for the procurement of decision to place on standby the
rice for three consecutive supply of rice to the DSWD’s
176
Reason for
Status of
Implementation
Implementation
years since 2014, as National Supplemental Feeding
compliance with previous program, BJMP’s rice allocation
years’ audit recommendation to inmates and to other
for similar transactions, has consumers pending the release of
remained not complied with the selling price bulletin for the
by the City Government. newly arrived VIEW72 imported
rice 25% brokens from Vietnam.
The second, dated February 1,
2018, certifies as to the
unavailability of premium and/or
fancy rice variety for distribution
to accredited retailers,
government and private
institutions and others.
14. The reasonableness of the We recommended that the The City ENRO submitted a Fully
contract price of City Mayor direct the detailed breakdown of the Implemented
P23,458,905.69 for the hauling officials concerned to submit Approved Budget for the
and disposal of the City’s the detailed breakdown of the Contract on June 14, 2017.
garbage for the period March 3, ABC and of the contract
2016 to November 2016 was amount showing in sufficient
not ascertained due to detail its derivation,
inadequacy of information and including the number of
documents supporting the “paleros”/laborers/crew,
contract, contrary to Section prices/costs of spare parts,
4(6) of PD No. 1445, various machine shop costs and other
Sections of RA No. 9184 and maintenance parts used in the
its IRR, COA Circular No. detailed breakdown of the
2012-001, and other pertinent contract amount so as to
laws, rules and regulations. determine the reasonableness
of the contract price of
177
Reason for
Status of
Implementation
Implementation
P23,458,905.69.
Likewise, require the No other document or Not No other

concerned City officials to justification was submitted to the Implemented document or
submit all the required Audit Team. justification was
documents found lacking as submitted to the
support documents, and the Audit Team.
necessary
clarifications/justifications
for the deficiencies noted to
substantiate the payments
made. Also, strict compliance
with the procedures and
documentary requirements
for government procurement
prescribed in the aforecited
laws, rules and regulations
should be adopted so as to
ensure that all contracts
entered into by the City
Government is valid and
legal.
Further, require all city Not Claims were still

officials to process, approve Implemented paid even with
and pay claims only with lacking
complete documentation to documents
protect the interest of the
City Government.
178
Reason for
Status of
Implementation
Implementation
15. Allowances of school We recommended that the For CY 2017, no payment for Fully
teachers under the National City Mayor stop immediately allowances of school teachers Implemented
Government were paid out of the payment of allowances to was made out of SEF.
the appropriation for SEF school teachers out of the
during CY 2016 totaling appropriation of the SEF as
P29,026,476.92, contrary to such expense is contrary to
Section 272 of RA No. 7160 the provisions of Section 272
and its Implementing Rules and of RA No. 7160, and its IRR
Regulations (IRR) under JC as embodied under JC No. 01
No. 01 s 1998 of the DBM, s 1998 of the DBM, DECS,
Department of Education, & DILG.
Culture and Sports (DECS) and
DILG, thus depriving funds for Consequently, require the On March 15, 2018, the Audit Not Awaiting for the
other priority expenses of SEF concerned school teachers to Team was furnished of the Implemented result of Appeal
that are necessary for the well- refund the total amount of Appeal Memorandum of the Memorandum
being of school children. P29,026,476.92 to the City City on Notice of Disallowance filed to the
Treasury so as to provide No. 17-004-200-(16) dated Regional Office
SEF sufficient funds to November 6, duly received by
finance the operation and persons liable from January 9-
maintenance of public 30, 2018.
schools in the City of Lipa.
Likewise, require the Local The LSB ensured that expenses Fully
School Board (LSB) to charged against SEF were in Implemented
ensure that expenditures accordance with the latest SEF
charged against the SEF regulations
include only those among the
priority list of expenses to be
charged against SEF as
provided under JC No. 01 s.
1998, thus ensuring the
179
Reason for
Status of
Implementation
Implementation
welfare of school children
and that SEF are being
utilized only for the purpose
for which it was created.
If funds are available and the Not

City Council approves, said Implemented
allowances may be charged
against the General Fund so
as to pursue continuously the
City Government’s assistance
to all public school teachers.
16. Fixed monthly Traveling We recommended that the For CY 2017, payment of fixed Fully
Allowance of P4,000.00 and City Mayor stop the grant of monthly Traveling Allowance Implemented
Task Force Allowance of fixed monthly Traveling and Taskforce Allowance to the
P4,000.00 were paid to 43 Allowance and Taskforce members of PNP personnel and
Security Aides, comprising of Allowance to the members of some City Hall employees was
several Philippine National PNP personnel and some stopped upon the receipt of
Police (PNP) personnel and City Hall employees as such AOM.
City employees, contrary to EO allowances are not covered
No. 248, as amended by EO by any specific law
No. 248-A, further amended by authorizing the grant to
EO No. 298; COA Circular No. government officials and
2013-003; and Section 95 of employees. Hence, the total
RA No. 7160, thus affecting amount of P2,204,000.00 as
regularity and validity of Traveling and Taskforce
expenses totaling Allowances to members of
P2,204,000.00. PNP personnel and several
City employees as Security
Aides are considered double
180
Reason for
Status of
Implementation
Implementation
compensation that is
prohibited under Section 95
of RA No. 7160.
Consequently, require the On March 15, 2018, the Audit Not Awaiting for the
refund of the total amount of Team was furnished of the Implemented result of Appeal
P2,204,000.00 from the Appeal Memorandum of the Memorandum
concerned personnel. City on Notice of Disallowance filed to the
No. 17-005-100-(16) dated Regional Office
November 6, duly received by
persons liable from January 9-
30, 2018.
17. The payment of We recommended that the For CY 2017, payment of Partially
P2,967,700.00 to officials and City Mayor stop giving allowances to some of the Implemented
employees of the National approval on the payment of concerned national government
Government Agencies (NGAs) allowances to national officials and employees was
stationed in the City was not in government officials and stopped after the receipt of
accordance with the provisions employees not specifically AOM.
of Section 458 (1) (xi) of RA included under Section
No. 7160, Local Budget 458(1)(vi) of RA No. 7160,
Circular (LBC) No. 62, and LBC No. 62 dated July 29,
Item 2.0 of DBM 1996, and DBM
Compensation Policy Guideline Compensation Policy
No. 98-1, resulting in the Guidelines No. 98-1, to
improper utilization of City prevent unnecessary
funds. disbursement of government
funds.
181
Reason for
Status of
Implementation
Implementation
Henceforth, require the On March 15, 2018, the Audit Not Awaiting for the
refund of P2,967,700.00 from Team was furnished of the Implemented result of Appeal
the concerned national Appeal Memorandum of the Memorandum
government employees City on Notice of Disallowance filed to the
considering that they are not Nos. 17-050-100-(16) to 17-054- Regional Office
among those officials entitled 100-(16) all dated November 13,
to receive said allowances. duly received by persons liable
from January 9 to March 6,
2018.
18. The City Government of We recommended that the On March 15, 2018, the Audit Not Awaiting for the
Lipa created Board of Trustees City Mayor stop approving Team was furnished of the Implemented result of Appeal
for the Ospital ng Lipa (ONL) the payment of honorarium to Appeal Memorandum of the Memorandum
and the Kolehiyo ng Lungsod members of the Board of City on Notice of Disallowance filed to the
ng Lipa (KLL), where Trustees of the ONL and Nos. 17-048-100-(16) to 17-049- Regional Office
allowances ranging from KLL unless sufficient legal 100-(16) both dated November
P5,400.00 to P8,000.00, and basis for the grant of said 13, duly received by persons
P3,000.00 to P5,000.00, honorarium, other than the liable from January 9 to March
respectively, were granted to aforementioned Special 5, 2018.
Board Members, consisting of Ordinances, has been
City officials and employees, submitted to the Audit Team
contrary to existing government for further evaluation and
laws, rules and regulations. analysis of the matter on
hand. Otherwise, the
payment of said honoraria
would be considered an audit
disallowance.
19. Payment of honoraria to We recommended that the On March 15, 2018, the Audit Not Awaiting for the
City officials and employees, City Mayor stop immediately Team was furnished of the Implemented result of Appeal
182
Reason for
Status of
Implementation
Implementation
and other designated the approval of payments of Appeal Memorandum of the Memorandum
individuals for their honoraria to members of City on Notice of Disallowance filed on the
membership to various various executive committees Nos. 17-043-100-(16) to 17-047- Regional Office
committees created thru considering that 100-(16) all dated November 13,
Executive Orders (EOs) of the membership to such duly received by persons liable
City Mayor, was not in committees do not entail from January 9 to March 5,
accordance with the existing them to receive honoraria, 2018.
government laws, rules and and to discontinue granting
regulations on the grant of thereof, pursuant to the cited
honorarium, thus considered an provisions of government
irregular disbursement in the laws, rules and regulations to
total of P1,875,177.50. avoid incurrence of irregular
expenditure.
Consequently, require the Not

concerned City officials and Implemented
employees to refund the
amount they received as
honoraria as such payment is
without legal basis, hence, an
irregular expenditure in the
total amount of
P1,875,177.50.
20. Copies of the monthly We recommended that the In compliance, reports Fully
Report on Utilization of the City Mayor require the City’s corresponding to CY 2016 and Implemented
LDRRMF and other disaster LDRRMO and/or the City January to May 2017 were
risk reduction and management Accountant to regularly submitted to the Audit Team and
resources for CY 2016 were not prepare a monthly Report on since then, the City has complied
submitted to the Audit Team, the Utilization of the with the monthly reportorial
contrary to Section 12.c.24 of LDRRMF and submit the requirements for LDRRMF.
183
Reason for
Status of
Implementation
Implementation
RA No. 10121 and Section same to the Audit Team
5.1.5 of COA Circular No. within the period prescribed
2012-002 dated September 12, by the above regulation for
2012, thus, hindered the timely immediate audit action so
review and verification of the that corresponding result may
expenses charged against the be brought to the attention of
said fund. concerned officials the
soonest possible time for
their immediate and
appropriate action.
21. The concerned City We recommended that the The City, through the City Legal Not Eventhough
officials have not fully enforced City Mayor avail all legal Office, issued various demand Implemented demand letters
the seven COA Order of remedies to enforce the letters to the concern persons were sent to the
Execution (COE) relative to the collection of the outstanding liable. However, as of December concern persons
collection of audit balance of P1,432,733.18 out 31, 2017, there still remains liable, no refund
disallowances of P4,810,132.50 of the total audit P1,271,461.18 balance from was received by
from the corresponding persons disallowances of Notice of Disallowance with the City for CY
found liable thereon, resulting P4,810,132.50 from all COE. 2017.
in the uncollected amount of persons liable therefor, as
P1,432,733.18. appropriate NDs and COA
COE have been duly issued
and receipted by them, so as
to protect the interest of the
City Government.
22. Copies of at least 80 We recommended that the In compliance, the City Not The City
perfected contracts totaling City Mayor instruct the Engineering Office has Implemented reasoned out that
P107,059,423.53, entered into Chairman of the Bids and submitted 2016 contracts to the it took more than
by the City of Lipa with several Awards Committee of the Audit Team and has provided four months
184
Reason for
Status of
Implementation
Implementation
contractors, were not submitted City Government to cause the justifications for cited delays. before the
to the Audit Team within five immediate submission of For CY 2017, the City still failed contract was
working days upon perfection contracts for infrastructure to submit contracts and purchase ratified by the
of contracts, where numbers of projects, including all orders within five (5) days upon Sangguniang
days delayed averages to 104 documents forming part perfection. Panlungsod,
days, contrary to COA Circular thereof, to the Audit Team hence the
No. 2009-001, thus, causing within five days upon incurrence of
undue delay on the required perfection of said contracts late submission
audit actions to the detriment of for the required review and
the City Government. analysis, so that any
observation/s that may be
found in the course of
analysis or evaluation of the
subject documents, be
immediately relayed to the
concerned City officials, and
corresponding measures be
implemented for the best
interest of the City
Government.
23. The validity and propriety We recommended that the The CTO submitted on June 7, Fully
of the payments made to the City Mayor require the 2017 original copy of Official Implemented
Union of Local Authorities of concerned city officials to Receipt (OR) No. 2485 dated
the Philippines, Inc. (ULAP submit the corresponding August 12, 2016 from ULAP
Inc.) as annual membership Official Receipts of the amounting to P20,000.00 and
dues and to the Leagues of payment made to ULAP and certified true copy of OR No.
Cities of the Philippines (LCP) LCP so as to substantiate the 4894 dated September 6, 2016
amounting to P 220,000.00 was payments made and to avoid amounting to P200,000.00
not ascertained due to absence the suspension of the issued by LCP.
of officials receipts issued by aforementioned
185
Reason for
Status of
Implementation
Implementation
the said Leagues, contrary to disbursements.
Section 4(6) of PD No. 1445.
186
PART IV - ANNEXES
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amounting to P57,520,394.

43; and (e) adjustments/reclassifications made on PPE of

We recommended that the City Mayor require:

a) the Accounting Office to carefully evaluate and properly classify PPE

c) the GSO to prepare and submit to the Disposal/Appraisal Committee a

d) the Accounting Office to submit to COA the Journal Entry Vouchers

We recommended that the City Mayor require the:

We recommended that the City Mayor require the:

f) Community Social Welfare and Development Office/City Accounting Office to

5. Procurement of inventories amounting to P10,518,109.32 delivered in CY 2016 were

6. There was no control mechanism in place on the selection/screening and monitoring

We recommended that the City Mayor direct:

j) the stoppage of granting scholarship/financial assistance to students enrolled in

AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION

Agency Action Plan Reason for

The City of Lipa has the following mission and vision:

“A progressive and caring, livable and God-loving city that provides

Its Organizational structure is as follows:

City Mayor : Hon. Meynardo A. Sabili

Members of the Sanggunian :

City Accountant : Ms. Ma. Belen M. Villanueva

CY 2017 CY 2016 Increase/Decrease

Audit Opinion on the Financial Statements

5. Procurement of inventories amounting to P10,518,109.32 delivered in CY 2016 were

c) GSO to prepare and submit to the Disposal/Appraisal Committee a duly

We recommended that the City Mayor direct:

j) the stoppage of granting scholarship/financial assistance to students enrolled in

c) be more cautious in evaluating the legal, technical and financial documents

We recommended that the City Mayor require the:

d) City Accountant to provide clarifications on the period covered of the cash

10. The City of Lipa allowed and accepted a provisional/improvised/unofficial receipt as

We recommended that the City Mayor require the:

c) Accountant to submit the required supporting documents to prevent the issuance

We recommended that the City Mayor require the:

a) Project Management Office (PMO) or concerned end-users and the BAC to

e) BAC to properly evaluate the technical specifications submitted by bidders as

f) members of the BAC to observe diligence in the conduct of eligibility checking

g) concerned officials to submit written explanations/comments on the noted

i) City Accountant to check thoroughly the completeness of supporting documents

13. The City Government of Lipa granted additional incentives/allowances to Barangay

a) require the City Accountant to withheld retention money in an amount equivalent

e) include in the APP, provisions for foreseeable emergencies based on historical

Status of Implementation of Prior Year’s Audit Recommendations

Of the 51 prior year’s audit recommendations contained in the CY 2016 Annual

Part Subject Page

II Observations and Recommendations 55

III Status of Implementation of Prior Year’s Audit 158

INDEPENDENT AUDITOR’S REPORT

Management’s Responsibility for the Financial Statements

5. Procurement of inventories amounting to P10,518,109.32 delivered in CY 2016 were

Note 2017 2016

(See accompanying Notes to Financial Statements)

Note 2017 2016

LESS: CURRENT OPERATING

Surplus (Deficit) from Current

(See accompanying Notes to Financial Statements)

Balance at January 1 P 1,981,005,071.18 P 1,688,126,815.58

The City is envisioned to be a globally competitive, livable and God loving

Construction of wider roads, bridges and drainage, school buildings,