INTRODUCTION

Valenzuela, the youngest city in Metro Manila, used to be a town in the Province of Bulacan carrying the name Polo. By virtue of Executive Order No. 46 signed by then President Diosdado Macapagal, this town was named Valenzuela in honor of the revolutionary leader, Dr. Pio Valenzuela. In the mid-seventies, the Municipality of Valenzuela was separated from Bulacan Province and became a part of the Metropolitan Manila. On February 14, 1998, former President Fidel V. Ramos signed Republic Act No. 8526 converting the Municipality of Valenzuela into a highly urbanized city to be known as the City of Valenzuela. Like all other local units, Valenzuela City aims to provide the basic services of food, shelter, education, health and nutrition, social and economic services to its constituents.

For the year 1999, the City realized income in the aggregate of P809,068,702.69. The amount of P709,635,100.59 was derived from tax revenue; P92,785,656.10 from operating and miscellaneous revenue; and P6,647,946.00 from grants and aids. It was noted that there was an increase in collection by P195,739,879.15 or 31.91 percent over that of CY 1998.

Appropriation for CY 1999 was pegged at P1,081,811,486.18 of which P690,524,977.30 was utilized and expended as follows: P250,199,707.85 for personal services; P293,057,346.58 for maintenance and other operating expenses; and P147,267,922.87 for capital outlays. It was noted that there was an increase in expenditures by P74,023,576.77 or 12.01 percent over that of CY 1998. It is noteworthy that funding for personal services was within the 45 percent limitation prescribed under Section 325 of RA 7160.

The financial condition of the City was generally good. The total assets posted P1,347,242,637.68 or an increase of 27.91 percent over CY 1998. Total liabilities scaled to P351,451,583.59 or a slight mark-up of 5.79 percent. Residual Equity rose to P995,791,054.09 or a notable 38.09 percent increase. Remarkable is the cumulative results of operation totalling P332,258,933.94 registering 63.70 percent increase over the preceding year. Valenzuela City projected a liquidity ratio of 2.42:1 indicating its ability to meet current obligations.

SCOPE OF AUDIT

A financial and compliance audit was conducted on the accounts and operations of the City of Valenzuela for CY 1999. The audit consisted of review of operating procedures; validation of the city’s programs and projects; interview of officials and employees; verification, reconciliation and analysis of accounts; and such other procedures considered necessary under the circumstances.

A Value for Money Audit was likewise conducted, the result of which is contained in a separate audit report.

STATE AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

The auditor rendered a qualified opinion on the fairness of presentation of the financial statements because of the following reasons: 1) Undocumented recording of heavy equipments among the fixed assets accounts, and the long-term liability of P38,124,992.43; 2) Unbooked heavy equipments and shoptools worth P7,052,056.92 purchased out of the proceeds of a Sub-loan Agreement under the MMINUTE II-FRINGE Program; with local counterpart of P3,041,466.32 and 3) Overstatement of the Inventory-Supplies and Materials of P7,503,251.75 representing consumable items directly issued to end-users.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

For the findings cited above, it is recommended that the Chief Executive make available the contract of loan to warrant assumption of the long term liability and the Property Office produce the documents evidencing receipt of the heavy equipments and shoptools. As to the inventory-supplies and materials account, the Property Office should be required to complete the Monthly Report of Supplies Issued for the City Accountant to make the necessary adjustments in the books of accounts.

The findings and recommendations were discussed with management and their comments on our audit observations are incorporated in this report, where appropriate.

Other significant findings and recommendations are the following:

1. Five hundred sixty two infrastructure contracts worth P62.5 million were awarded to contractors without the benefit of competitive public bidding violating Section 536 of the Government Accounting and Auditing Manual, (GAAM) Volume I, and DILG Memorandum Circular No. 94-185.

Require the conduct of competitive public bidding in the award of government contracts. Adopt the aforementioned guidelines, rules and regulations governing LGU-funded infrastructure projects.

2. Barangay Council Fund totalling P8,109,470.91 remained unremitted to the different barangays thus depriving the 32 barangays of the benefits due in the use of its fund.

Cause the immediate transfer of the barangay council fund held in trust by the City to its 32 barangays.

3. Fifty three units of motor vehicles and heavy equipments were not registered with the Land Transportation Office under the name of the City.

Collate documents that warrant ownership over the vehicles and immediately register these with the Land Transportation Office.

4. Failure of the City Treasurer to conduct inspection of business establishments and examination of the latters’ books of accounts required under Section 171, RA 7160 resulted in loss of collectible revenues.

Require the City Treasurer to allot ample time for the continuous inspection of business establishments and examination of taxpayers’ books of accounts.

Instruct the City Treasurer to conduct information dissemination to inform the public that the law authorizes the inspection of business establishments and the examination of taxpayers books of accounts.

Instruct the City Treasurer to find alternatives for the successful adherence to Section 171 of RA 7160.

5. Weak internal control over the collection of amusement taxes resulted to loss of revenue that should have been realized by the city.

Institute control measures to ensure that income from amusement taxes are correctly reported by amusement operators. Dispatch inspectors on a regular basis.

6. Acquisition of supplies through personal canvass, in some instances, exceeded the P150,000.00 limitations in all items in any one (1) month contrary to Section 367 of the Local Government Code depriving the City of discounts in prices for bulk purchases.

Limit acquisition of supplies through personal canvass to P150,000.00 for all items in one (1) month; otherwise, subject such acquisition through competitive public bidding.

STATUS OF IMPLEMENTATION BY THE AUDITEE OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Four recommendations embodied in the previous year’s Annual Audit Report were implemented, while three were partially implemented.

The implementation of the previous year’s recommendation on the revenue audit of real property tax yielded the collection of P23,196,109.24 from delinquent realty taxes thus registering a 212.44 percent mark-up or P15,772,103.90 variance compared to the 1998 figure. This provided the much needed funds for the agency’s plans and programs aimed at delivering services to its constituents.