EXECUTIVE SUMMARY

A. Introduction

Malabon became a highly urbanized city by virtue of Republic Act (RA) No. 9019
on March 5, 2001. It is the vision of the City Government of Malabon, pursuant to
its charter and in line with RA No. 7160, the Local Government Code of 1991, to
exercise all the powers granted by law in achieving efficient and effective
governance of the City for the promotion of general welfare as defined in Section
16 thereof.

The manpower resources of the City Government as of December 31, 2019 totaled
2,625 broken down as follows:

Permanent/Regular 693
Casual 244
Elective Officials 15
Co-terminus 16
Job Order Personnel 1,317
CMPI/CMU Personnel:
Full/Part Time Instructors 269
Contractual w/ salary grade 64
Student Assistants 7
Total 2,625

B. Financial Highlights

Presented below are the results of operations for CYs 2019 and 2018:

Increase
2019 2018
(Decrease)
Assets P 3,459,573,365 P 2,972,627,545 P 486,945,820
Liabilities 1,042,587,368 886,407,658 156,179,710
Government Equity 2,416,985,997 2,086,219,887 330,766,110

Financial Position
4,000,000,000
Amount

3,000,000,000
2,000,000,000
1,000,000,000
0
Assets Liabilities Net Equity
2019 3,459,573,365 1,042,587,368 2,416,985,997
2018 2,972,627,545 886,407,658 2,086,219,887

i
 Increase
2019 2018
(Decrease)
Income P 1,792,062,922 P 1,686,086,967 P 105,975,955
Expenses 1,495,546,293 1,382,999,092 112,547,201
Transfer, Assistance and
Subsidy To (Net) 60,454,412 47,451,231 13,003,181
Surplus for the period 236,062,217 255,636,644 (19,574,427)

Financial Performance
2,000,000,000
Amount

1,500,000,000
1,000,000,000
500,000,000
0
Transfer,
Assistance Surplus for
Income Expenses
and Subsidy the Period
To (Net)
2019 1,792,062,922 1,495,546,293 60,454,412 236,062,217
2018 1,686,086,967 1,382,999,092 47,451,231 255,636,644

Increase
2019 2018
(Decrease)
Tax Revenue P 691,175,973 P 662,201,910 P 28,974,063
Share from Internal Revenue
Collections 832,646,874 762,824,864 69,822,010
Other Share from National
Taxes - 3,026,730 (3,026,730)
Service and Business Income 264,382,464 253,327,972 11,054,492
Shares, Grants and
Donations 2,907,163 3,549,643 (642,480)
Other Income 950,448 1,155,848 (205,400)
Total P 1,792,062,922 P 1,686,086,967 P 105,975,955

Sources of Income
0% 0%
Tax Revenue
0%
15% Share from Internal Revenue
39% Collections
Other Share from National
Taxes
Service and Bussiness Income
46%
Shares, Grants and Donations

ii
 The appropriations, allotments and obligations for CYs 2019 and 2018, are as
follows:

Increase
2019 2018
(Decrease)
Appropriations P 2,236,397,238 P 2,129,624,466 P 106,772,772
Allotments 2,120,007,243 2,020,207,441 99,799,802
Obligations 1,742,332,698 1,457,824,961 284,507,737

C. Operational Highlights

For Calendar Year (CY) 2019, the City Government reported the following major
accomplishments:

Programs and Projects Amount

1. a) Installed 1,123 sets of led streetlights; rehabilitated the P 225.536 million
pathwalk, waiting sheds at various barangays, national
high school auditorium, Oreta sports center and multi-
purpose hall; b) repaired/maintained; classrooms,
electrical wiring for upgrading the service entrance at
various barangays, various barangays multi-purpose
halls, old and new Oreta building, CMPI comfort room,
city amphitheater, various health facilities and dental
room of Ospital ng Malabon and open space;
c) constructed school main gates at various barangays,
Catmon Integrated school covered court and two-storey
multi-purpose building; d) greening and beautification of
C-4 road and e) re-waterproofing of exterior walls of
Ospital ng Malabon.

2. Undertaken various projects that upgraded/rehabilitated P 53.047 million

3,436.80 linear meters of road and alleys including
drainage. The city had also coordinated with the
national government through the Department of Public
Works and Highways, Malabon-Navotas District
Engineering Office (DPWH-MNDEO) that implemented
the maintenance, improvement and rehabilitation of
roads and alleys amounting to P238.179 million

3. Implemented various flood control projects such as the P 15,040 million

improvement of drainage, regular declogging, and
desilting of canals and water ways and pumping stations.

iii
 Other Programs and Projects

1. Maintained and operated Flood Control Facilities (26 pumping stations and 80
food gates out of the existing 52 pumping stations and 120 flood gates
respectively, in the area) thru the City Engineering Department (CED) and in
coordination with the Department of Public Ways and Highways (DPWH)-
Malabon Navotas District Engineering Office and Metropolitan Manila
Development Authority (MMDA) that would help minimize if not totally
eradicate the flooding occurrence in the City;

2. Two housing projects have been completed; a) Malabon Homes, a 3 low rise
building (LRB) located at Labahita St., Barangay Longos with 180 units
intended for informal settler families. b) L ‘Oasis Malabon Economic
Housing, a public-private partnership (PPP) project consisting of 6 medium
rise buildings (MRBs) with 674 units located at Governor Pascual cor. Reyes
St. Barangay Baritan;

3. The number of informal settler families (ISFs) was decreased to 23,120 from
23,124 due to the relocation of 4 ISFs to Malabon Homes Housing Project;

4. Malabon City crime rate increased by 14 crime incidents or 3.12 percent

(from 2,493 in 2018 to 2,479 in 2019) but the Crime Solution Efficiency rate
decreased from 71.40 percent to 61.73 percent in 2019; and

5. For its effort on anti-illegal drug activities, 18 out of the 21 barangays in

Malabon were already declared as “Drug Cleared Barangay”. The number of
Persons Who Use Drugs (PWUDs) surrendered increased from 5,269 in 2018
to 5,315 in 2019. However, 2,134 or 40.15% were already rehabilitated.

The City has received awards/recognitions as follows:

Award/Recognition Description
1. Plaque of Recognition for being For exemplifying commendable
Finalist of the 2019 Most initiatives toward good governance
Business-Friendly Local reforms that promote trade and
Government Unit – City Level 1A investments and significantly
contribute to local economic
development. The plaque of
recognition was given on Oct. 2, 2019
at the PICC Headquarters, 3/F
Commerce and industry Plaza,
McKinley Hill, Fort Bonifacio, Taguig
City

iv
 Award/Recognition Description
2. Special Citation in recognition of For the city’s efforts to boost urban
Malabon City’s efforts to boost tourism through Malabon Tricycle
urban tourism through Malabon Tours awarded by PCCI during the
Tricycle Tours 45th Philippine Business Conference
and Expo held on October 16, 2019 at
Fiesta Pavilion, Manila Hotel

3. Seal of Good Local Governance For the three consecutive years of

(SGLG) for 2019 commitment to good local governance,
transparency and public accountability
awarded by the DILG last November
5, 2019 at Manila Hotel

D. Scope and Objectives of Audit

The audit covered the accounts and operations of the City of Malabon for the period
January to December 31, 2019. The objectives of the audit are to (a) verify the
degree of assurance that may be placed on management’s assertions on the financial
statements; (b) recommend agency improvement opportunities; (c) determine
compliance with existing laws, rules and regulations; and (d) determine the extent
of implementation of the prior years’ audit recommendations.

E. Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements due to the noted errors and deficiencies that misstate the
affected account balances, details of which are discussed in Part II of the report and
summarized as follows:

1. The reported Cash and Cash Equivalents account balance of P677.531 million
is unreliable due to (a) the non- recording of the necessary adjustments of the
reconciling items for General Fund (GF) in the amount of P19.772 million and
P5.894 million pertaining to the unrecorded disbursements and unidentified
reconciling items, respectively, totaling P25.666 million carried over from
CYs 1999 to 2003; and (b) discrepancies between the book and bank balances
of (P27.364) million for all other Fund accounts and P4.684 million for the
Special Educational Fund (SEF) which cannot be adjusted/ascertained in the
absence of supporting documents and the Bank Reconciliation Statement
(BRS), which are not in alignment with the requirements of Sections 3.2, 3.3
and 3.4 of Commission on Audit (COA) Circular No. 96-011.

v
 We recommended that:

a. The City Treasurer –

 Coordinate with the depository banks as regards the documents to

support the unadjusted and unidentified reconciling items under the
GF;

 Upon receipt of the monthly Bank Reconciliation Statements, check

the completeness of the debit memo/credit memo (DM/CMs) and other
documents and immediately inform the bank/s of any missing items;

b. The City Accountant –

 Assign personnel to prepare the bank reconciliation statements on a

monthly basis for all depository accounts pursuant to COA Circular
No. 96-011;

 Submit bank reconciliation statements for all the bank accounts

maintained by the City to the Office of the City Auditor; and

 Effect immediately adjusting entries in the books of accounts for all

reconciling items identified in the BRS.

2. The year-end Real Property Tax (RPT)/Special Educational Tax (SET)

Receivables balance and Deferred RPT/SET income are overstated by
P105.575 million due to erroneous computation of the set up receivables
which adversely affected the fairness of presentation of the account in the
financial statements as of December 31, 2019.

We recommended that:

a. The City Treasury Department (CTD) and City Accounting Department

(CAD) review the accuracy of the recorded RPT/SET Receivables; and

b. The CAD adjust the overstatement amounting to P105,574,987.50 to the

CY 2020 beginning balance and for the prior years, if any.

3. The City did not conduct the physical inventory of supplies and materials to
establish their existence and validity at year-end, thereby casting doubt on the
fairness of presentation of the various inventory accounts totaling P33.468
million as of December 31, 2019, contrary to the requirement of Sections 120
and 124 Volume I of the NGAS Manual for LGUs.

vi
 We reiterated our prior year’s audit recommendation that:

a. The City General Services Department (CGSD) conduct an inventory of

supplies and materials as of year-end and submit the Report on the
Physical Count of Inventories (RPCI) to the CAD for reconciliation and
adjustment, if any, and to the Auditor’s Office in accordance with Section
124 Volume I of the NGAS Manual for LGUs;

b. The CAD prepare and maintain Supplies Ledger Cards per stock to ensure
that all purchases and issuances of supplies and materials are recorded, in
conformity with Section 120 Volume I of the NGAS Manual for LGUs;
and

c. The CAD reconcile accounting records with the CGSD records and RPCI
to arrive at the correct amount of inventories as of year-end.

4. The total balance of Property, Plant and Equipment (PPE) accounts of

P2.858 billion is unreliable due to (a) unreconciled difference of
P208.008 million between the books and the Report on the Physical Count of
PPE (RPCPPE) of P2.650 billion; and (b) inclusion of unserviceable items
amounting to P1.785 million, contrary to the requirements of Section 114
Volume I of the NGAS Manual for LGUs.

We reiterated our prior year’s audit recommendations that:

a. The CGSD, CAD and the Inventory Committee complete the

reconciliation of the RPCPPE with the accounting and property records;

b. The CAD effect the necessary adjustments to correct the balances of the
PPE accounts based on the results of the reconciliations made;

c. The CGSD to –

 Cause the immediate disposal of unserviceable items and the CAD to

record the dropping from the books of the items disposed; and

 Initiate the process of transferring the respective TCT’s in the City’s

name to establish its rightful ownership.

5. The donated E-trikes in the amount of P93.314 million were not recorded in
the books of accounts contrary to International Public Sector Accounting
Standard (IPSAS) 17, resulting to the understatement of the assets and equity
accounts by the same amount.

We recommended that the Management cause the recording of the donated

E-trikes amounting to P93,314,326.53 in the books of accounts.

vii
 6. The E-Trike Continuance Trust Account (ECTA) Fund amounting to
P1.974 million was not recorded and deposited in the Trust Fund Account in
violation of Section 15 of the NGAS Manual for LGUs and Section 307 of RA
No. 7160 or the Local Code of the Philippines, resulting to understatement of
the Cash In the Treasury Account and Other Liabilities Account balances at
year-end.

We recommended that Management effect immediately the adjustments on

the deposits made to the ECTA Fund and the corresponding cash accounts.

F. Other Significant Observations and Recommendations

The following are the other significant observations and recommendations in the
audit of the City of Malabon for CY 2019:

1. Long outstanding balances of P3.369 million under the Trust Fund (TF) -
Other Payable accounts remained dormant and unclaimed for two to 11 years
and were not reverted to the General Fund (GF) pursuant to the provision of
Section 98 of Presidential Decree (PD) No. 1445.

We recommended that Management cause the reversion to the GF the Other

Payable accounts of P3,369,276.29 which remained outstanding and
unclaimed for more than two years to 11 years.

2. The City could have saved P3.353 million in interest and other charges had it used
the P664.430 million invested in High Yield Savings Account (HYSA) Time
Deposits instead of availing of various long-term loans, contrary to Section 2 of PD
No. 1445.

We recommended that Management:

a. Evaluate the cost/benefit between obtaining credit financing and in

maintaining time deposits, in line with Section 2 of PD No. 1445; and

b. Pay the loan in full to avoid incurrence of additional interest/loss in the

amount of P28,999,465.75.

3. The non-imposition of the ten percent (10%) Amusement Tax and

non-monitoring of the gross receipts from cockpit arenas and non-
implementation of the required procedures in the monitoring and validation of
gross receipts from cinemas, in violation of the provisions of Sections 2H.02,
2h.05, and 2H.06 (a-d) of City Ordinance No. A10-2016 deprived the City of
additional/higher income.

viii
 We recommended that the CTD thru Business Tax Management Division
(BTMD):

a. Strictly implement and enforce the provisions of Section 2H.06 (a-d) of

City Ordinance No. A10-2016;

b. Impose and collect immediately the ten percent (10%) amusement tax on
admission on cockpits for the past five years;

c. Require the owners and/or operators of movie houses and cockpits to

register their admission tickets as required in Section 2H.06 (c) of City
Ordinance No. A10-2016 and record the serial numbers in the logbook
for control purposes; and

d. Create a monitoring unit and assign competent personnel to conduct

validation of receipts, and periodic inspections as required in Section
2H.06 (d) of the Ordinance.

4. The City was not able to generate the projected revenues for CY 2019 totaling
P1.900 billion as shown by the substantial shortfall of P108.112 million in
actual income realized for the year, indicating that the estimates may not have
been based on reasonable and/or realistic figures submitted by the Local
Finance Committee as required under Section 316 of RA No. 7160.

We recommended that the City officials concerned undertake careful planning

and execution of the proposed annual budget on the basis of reasonable and/or
realistic projection of revenues for the ensuing year, in accordance with the
intent of local government budgeting that will support the proper allocation of
expenditures as provided under Section 316 of RA No. 7160.

The aforementioned observations together with the corresponding recommendations

were discussed with Management officials concerned through Audit Observation
Memoranda. Management views and comments were incorporated in the report,
where appropriate.

G. Settlement of Suspensions, Disallowances and Charges

As of December 31, 2019, audit disallowances totaling P11.087 million remained

unsettled, details as follows:

Balance Issued in Balance

Particulars Settled in 2019
1/1/ 2019 2019 12/31/ 2019
Suspensions P 4,557,276 - P 4,557,276 -
Disallowances 11,086,980.10 - - P 11,086,980

ix
 We reiterated the previous year’s recommendations that the Local Chief Executive
direct concerned officials to coordinate with all persons responsible/liable and
facilitate the settlement of all outstanding audit suspensions and disallowances as
required under existing rules and regulations. It was also advised that unsettled
disallowances be endorsed to the City Legal Office for necessary action/disposition.

H. Status of Implementation of Prior Years’ Audit Recommendations

Of the 72 audit recommendations contained in the Calendar Years (CYs) 2018,

2017, 2016 and 2015 Annual Audit Reports (AARs), 12 or 16.67 percent were fully
implemented, 46 or 63.89 percent were partially implemented and 14 or 19.44
percent were not acted upon by Management. The partially and unimplemented
recommendations are reiterated in this report.