THE Commission on Audit (COA) has raised serious concerns over the financial management of the Mandaue City Government.
In a qualified opinion issued on the city’s 2024 financial statements, COA cited numerous accounting deficiencies, unrecorded assets, and compliance lapses that collectively cast doubt on the accuracy of Mandaue’s year-end financial picture.
The findings were contained in COA’s Executive Summary for Calendar Year 2024, a comprehensive assessment of the city’s finances, operations, and adherence to auditing rules.
The report revealed that although Mandaue City showed increases in its assets, liabilities, and equity during the year, several gaps in financial recording and project management prevented auditors from giving a clean opinion.
Based on COA’s analysis, the city’s assets reached P35.77 billion, reflecting an increase of P412 million compared to the previous year.
Liabilities similarly rose to P2.79 billion, while equity improved modestly to P32.98 billion.
Despite these gains, the city ended the year with a lower net surplus of P141.6 million, a significant decline from the P411 million posted in 2023.
Auditors attributed the drastic drop partly to higher operating expenses, including increases in personnel services and maintenance.
The audit, however, focused less on income fluctuations and more on accounting weaknesses that COA said distorted the fair presentation of the city’s finances.
Infrastructure
One of the most notable issues was the non-recording and non-reclassification of completed infrastructure projects amounting to P106.36 million, which should have been transferred to the appropriate Property, Plant, and Equipment (PPE) accounts.
COA said these projects had already been completed in 2024 but remained unreconciled in the books, resulting in what auditors described as an “unreliable” PPE and Construction in Progress balance.
COA also pointed out inconsistencies in the city’s accounts payable, which by year-end had reached P720.18 million.
A portion of this amount consisted of payables that had been outstanding for more than two years, as well as payables that were “improperly booked,” raising questions about completeness and validity.
The audit team said such entries require careful scrutiny to ensure that the city is not carrying obligations that either no longer exist or should have been adjusted in previous years.
At the same time, COA identified irregularities in the city’s Real Property Tax (RPT) and Special Education Tax (SET) receivables. Auditors reported mismatches between the recorded receivables and their deferred accounts, noting a net variance of more than P1.16 million.
The city also failed to reclassify P29.89 million in SET advance payments to income despite these being already realized.
Some payments were also misclassified, including P555,797 in RPT advance payments that had not yet been earned but were already transferred to income accounts.
Another major concern involved the city’s failure to recognize impairment losses for damaged infrastructure assets valued at P636.38 million. COA said since these assets already suffered damage, the city should have reflected the diminished value in its books to more accurately show its asset condition.
The non-recognition of impairment resulted in an overstatement of the city’s assets, said COA.
COA further noted that the city did not record depreciation and amortization expenses for the third and fourth quarters of 2024, again leading to overstated asset values.
Cash advances, letterhead
The audit also highlighted the city’s unliquidated cash advances, which reached P20.97 million by December 31, 2024. These advances consisted of travel funds and other specific-purpose disbursements that had not yet been accounted for, preventing the timely recognition of expenses and the proper closure of financial records.
Similarly, the city’s bank reconciliation statements contained unadjusted reconciling items amounting to P1.39 million, a sign that discrepancies between the city’s books and actual bank balances were not yet resolved.
COA warned that consistent failure to clear reconciling items may expose the city to risks related to inaccurate cash reporting.
In addition, auditors discovered that P3.06 billion worth of land and buildings owned by the city and used for rental purposes or capital appreciation were not recorded as investment property, further contributing to incomplete asset reporting.
Beyond accounting lapses, COA also scrutinized the city’s procurement and project planning practices. One of the more striking observations involved the procurement of 150,000 pieces of securitized letterhead costing P15.48 million.
By the end of 2024, city offices had used only 669 pieces, leaving 149,331 pieces worth P15.4 million in storage. COA said the purchase was made without “meticulous and judicious planning,” leading to excessive overstocking.
Auditors also flagged the city for the inefficient utilization of its 20 percent Development Fund, with P306.65 million in appropriations remaining unused during the year.
COA said the projects funded under the development fund were not “procurement- and implementation-ready,” in violation of joint memorandum guidelines from the Department of the Interior and Local Government and the Department of Budget and Management.
The audit also raised questions about the city delegation’s travel to Japan for the 12th Asian Smart Cities Conference in Yokohama and the signing of a memorandum of understanding in Osaka.
The trip, which cost P922,943.08 was not kept at the “barest minimum,” COA said, noting the delegates had not submitted complete narrative reports detailing their roles and accomplishments during the event. State auditors said the absence of these documents hindered COA’s ability to determine whether the expenses were justified and whether the city benefited from the trip.
As part of the overall audit picture, COA also reported P76.5 million in audit suspensions and P105.18 million in audit disallowances that remained unresolved as of the end of 2024. These figures reflect issues from previous and current audit periods that the city still needs to settle.
Finally, the report noted that the city’s compliance with past audit recommendations remained uneven. Out of 126 previous recommendations, only 47 were implemented, while 62 remained unimplemented.
COA said the persistence of recurring issues indicates the need for stronger financial controls and more consistent adherence to government accounting standards.
With the audit’s release, COA encouraged the city government to address the deficiencies promptly, implement corrective measures, and improve financial management systems to ensure more accurate reporting in future audit cycles. / CAV