STATE auditors identified significant procedural failures in how the City of Naga in southern Cebu distributed millions of pesos in cash aid.
The Commission on Audit (COA) flagged the City for deficiencies in the handling of P102.358 million intended for year-end incentives. The funds, distributed in 2023 and 2024, were meant for senior citizens, solo parents and persons with disabilities (PWDs), but auditors found that a lack of written guidelines led to duplicate payments, budget overruns and the inclusion of deceased individuals on the payroll.
The big question
How did the absence of implementing guidelines compromise the integrity of the City’s financial aid distribution?
Mayor Valdemar Chiong said on Wednesday, Dec. 10, 2025, that his office had addressed the findings.
“We just had our COA entrance conference this morning. I asked them what issues we had not addressed. They told me we answered the audit observations they made. There may still be some issues, but these have been answered by my team,” Chiong said.
Breakdown of funds
The audit covered a total of P102,358,000 released in two batches. In 2023, the City released P53.688 million, distributed from Dec. 7, 2023, to Jan. 7, 2024. In 2024, the release amounted to P48.67 million, distributed from Dec. 10 to Dec. 31.
Checks were issued to city treasurers to facilitate these payments. On Dec. 5, 2023, a check was issued to the former city treasurer for the second semester of 2023, which included social pensions. On Dec. 6, 2024, a check was issued to the acting city treasurer for the 2024 incentives. Each beneficiary was slated to receive P2,500.
Absence of screening criteria
State auditors attributed the deficiencies to the City’s failure to establish written implementing guidelines for both years. A city social officer admitted to auditors that no formal criteria existed to determine eligibility.
Without clear rules on cut-off dates, identification requirements or handling of deceased beneficiaries, the City accepted lists provided by barangays without screening them. The social officer revealed that the City Treasurer’s Office requested these lists and used them as the sole basis for cash advances.
Irregularities in the payroll
This lack of verification resulted in a payroll filled with errors, according to COA.
Auditors found duplicate names, deceased individuals and persons listed under multiple categories. Specific discrepancies for the 2023 unclaimed incentives of P5.77 million included:
233 deceased beneficiaries: Amounting to P582,500.
21 double entries: Amounting to P52,500.
2,773 beneficiaries without remarks: Amounting to P932,500.
COA also identified 16 individuals who appeared to have received the incentive more than once by being listed under multiple categories. Verification was hampered because PWD and solo parent IDs are reissued with new numbers upon renewal, and the City provided no complete database of birthdates for cross-checking.
Budget released before approval
The audit revealed that the City violated Section 305 of the Local Government Code by releasing funds before they were legally appropriated.
In 2023, the cash advance exceeded the budget by P2.95 million to cover 1,180 additional beneficiaries. The check was encashed on Dec. 6, 2023. However, the supplemental budget authorizing this amount was not approved until Dec. 14, 2023, and was signed by the mayor on Dec. 18.
Explanation
In a written explanation, the City management attributed the double payments to the use of separate tellers for senior, solo parent and PWD payrolls. These tellers could not cross-check names during the payout and assumed the City Social Welfare and Development Office (CSWDO) had already screened the lists.
Management further noted that they could not demand refunds for the double payments because no written guidelines existed in 2023 and 2024 to enforce such actions.
Liquidation delays and financial impact
Administrative lapses also led to significant delays in reporting. The 2023 cash advance was not liquidated until March 2024, and the liquidation was submitted only after COA issued an audit observation memorandum.
Unclaimed incentives totaling P7.3 million from 2024 were refunded only in January and February 2025. Additionally, COA found that the “other payables” account had ballooned to P22.6 million due to accumulated unclaimed incentives from 2017 to 2023. This figure represented 71 percent of the City’s total payables as of Dec. 31, 2024, which auditors said overstated the account and affected the fair presentation of financial statements.
Requirements for future distribution
To correct these systemic issues, COA has directed the City to formulate clear implementing guidelines that specify eligibility, requirements, claim periods and rules for deceased beneficiaries.
The City was also ordered to create a centralized beneficiary database through the CSWDO to track updates and prevent duplication. Finally, COA required a written explanation for the premature release of the 2023 funds and ordered the coordination of the CSWDO to verify the eligibility of the unclaimed incentives recorded under prior years. / CDF