The Commission on Audit reported that the Cebu City Government failed to distribute P280.75 million in real property tax (RPT) shares to its 80 barangays from fiscal years 2020 to 2025.
State auditors issued a qualified opinion on the City's 2025 financial statements, noting that this non-distribution violates the mandatory 30 percent share for barangays under the Local Government Code.
City departments cite technical software discrepancies and reporting gaps as the cause for the delay and are currently working to reconcile the financial data to enable the release of funds.
THE Cebu City Government has failed for six years to distribute P280.75 million in real property tax (RPT) collections to its 80 barangays, according to the Commission on Audit (COA). State auditors revealed that the unreleased funds, which accumulated from fiscal years 2020 to 2025, represent the barangays’ legally mandated 30 percent share of advance property tax collections. Under government accounting rules, these funds should have been recorded as liabilities and released during the years the taxes became due.
The delay has left a significant portion of local tax revenues sitting in the City’s treasury instead of being sent to the communities where the taxes were collected. To understand the bottleneck, it helps to look at how these funds are categorized. The money is tied up in the City’s Deferred RPT account, which holds property taxes collected in advance. These advance payments cannot be recognized as actual City revenue until the specific tax year arrives. Once that year begins, the City is supposed to claim its own share of the revenue and immediately set aside the barangays’ 30 percent share as a liability, preparing it for release.
Instead, the City kept the entire amount in the deferred account. According to COA’s 2025 Audit Report, this accounting failure overstated the City’s Deferred RPT account by exactly P280,749,187.19, while understating its “Due to Local Government Units” account by the same amount. The undistributed millions grew steadily over the six-year period, starting at P26.23 million in 2020, rising to P33.12 million in 2021, P39.22 million in 2022, P48.67 million in 2023, P57.45 million in 2024 and peaking at P76.06 million in 2025.
Legal obligations and accounting gaps
This systemic accounting failure was a primary reason why COA issued a qualified opinion on Cebu City’s 2025 financial statements. A qualified opinion is a formal warning from auditors indicating that while the City’s financial records are mostly accurate, there are specific, significant areas — like these unrecorded liabilities — that do not comply with standard accounting practices.
The non-distribution directly violates Section 271 of Republic Act 7160, also known as the Local Government Code. Under this law, a City is entitled to keep 70 percent of basic RPT collections for its general fund, but must distribute the remaining 30 percent to its component barangays. This share is split evenly: half goes directly to the specific barangay where the taxed property is located and the other half is divided equally among all 80 barangays in the city.
The law is clear that these funds must be released directly to barangay treasurers on a quarterly basis, within five days after the end of each quarter, without requiring any further administrative action or being subjected to holds. While the Cebu City Accounting Office successfully recorded the City’s own 70 percent share — amounting to P340.33 million from 2020 to 2024 and P177.47 million for 2025 — the corresponding 30 percent share for the barangays was never recorded as an obligation or sent out.
Delays hinder local community projects
The financial holding pattern has directly affected local governance and neighborhood development across Cebu City. By holding onto the P280.75 million, the City Government has limited the ability of individual barangays to fund local public services, basic infrastructure and community programs.
State auditors pointed out that this is not a new problem, as they have been flagging the issue annually for several years.
“The issue on the non-distribution of 30 per cent share of the barangays was still not yet acted upon,” COA said.
This persistent delay means that local barangay leaders have had to manage their communities without the regular, predictable funding guaranteed to them by national law. COA emphasized that the ongoing failure to transfer these funds continues to deprive local officials of the resources necessary to implement vital grassroots projects.
Technical glitches block fund releases
City officials attribute the six-year delay to technical issues and software discrepancies. The City Accounting Office, the City Treasurer’s Office and the Management Information and Computer Services office are currently working together to reconcile the discrepancies in the Deferred RPT accounts before any money can be released.
In official responses sent to auditors in early 2026, the City’s departments explained that they are reviewing the software used to collect property taxes. The City’s IT department discovered that the system had gaps in generating the detailed reports needed to calculate exactly how much money belongs to each individual barangay. A comparison of monthly reports against accounting records revealed discrepancies, which may have been caused by manual adjustments made by the treasurer’s office after the initial collection reports were compiled.
While COA acknowledged that the City is finally trying to clean up its financial data, the commission stressed that the reconciliation must be completed within a strict, definite timeframe. Auditors have instructed the city treasurer to provide a clear distribution schedule so the accounting office can officially record the outstanding millions as liabilities. Furthermore, COA recommended that the mayor step in to set firm deadlines for the software reconciliation, ensuring that Cebu City finally complies with the law and resumes regular, quarterly tax distributions to its barangays. / JGS