* The Commission on Audit flagged Cebu City for misreporting over P21.85 billion in expenditures across 2024 and 2025 by recording committed obligations rather than actual cash disbursements.
* COA found accounting discrepancies, including an unrecorded P1.188 billion variance in maintenance expenses caused by missing documentation and recording errors in the City’s e-Budget system.
* Cebu City Hall officials committed to implementing COA's recommendations, integrating the City's accounting and budget systems as of April 2026 to track real disbursements and improve transparency.
STATE auditors have flagged Cebu City for misreporting more than P21.85 billion in expenditures over two fiscal years, citing accounting practices that made the City’s financial records and budget execution data unreliable.
In its 2025 audit report, the Commission on Audit (COA) revealed that Cebu City recorded P11.18 billion in expenditures for 2024 and P10.67 billion for 2025 as actual spending. However, those figures were drawn from committed funds rather than money that had actually been paid out.
Accounting practices obscure actual City spending
The issue centers on the distinction between two public accounting concepts: obligations and disbursements. An obligation represents money that a government office has committed or earmarked for planned projects and services. A disbursement is the money actually paid out to vendors, contractors, or personnel.
Because committed funds are not always paid out within the same reporting period, presenting obligations as actual expenditures creates a distorted picture of budget execution.
According to COA, drawing actual expenditure figures from the City’s Statement of Appropriations, Allotments, Obligations and Balances instead of cash disbursements violates International Public Sector Accounting Standards 1 and 24. These standards require local governments to present an accurate and faithful picture of their financial standing.
Discrepancies traced to delayed records and system misclassifications
Auditors also identified specific accounting discrepancies between the Statement of Comparison of Budget and Actual Amounts and the Statement of Financial Performance. These included a gap of P4.11 million in personnel services and P1.188 billion in maintenance and other operating expenses.
The City classified these variances as “Entity Differences.” COA clarified that this classification applies only when a budget completely excludes certain programs or agencies covered by the financial statements. In Cebu City’s case, the gaps stemmed from unrecorded or delayed transactions, such as spending approved by the City Budget Office that the City Accounting Office had not yet recorded due to missing documentation.
This was not the first time auditors noted the practice. COA previously raised a similar observation in the City’s 2024 audit report, pointing to recording errors in the City’s e-Budget system.
Impact on public transparency and oversight
When a local government presents promised payments as actual expenditures, it weakens fiscal transparency. Accurate financial reports allow taxpayers and oversight bodies to track whether allocated funds are being actively spent or delayed in administrative processes. Misclassifying these figures makes it difficult to assess how efficiently public resources are being used.
City Hall moves to reform reporting systems
To resolve the accounting issues, COA recommended that the City establish a reliable tracking mechanism for actual disbursements, reconcile conflicting financial statements and strengthen coordination between the City Budget Office and the City Accounting Office. Auditors also urged continued coordination with COA’s Accounting System Development and Other Services Office to fix technical issues in the recording software.
Local officials have committed to implementing the recommended changes. In a response dated April 14, 2026, the City Budget Office stated it would enforce proper document tagging to ensure expenses match correct budget lines.
In a separate response dated April 20, 2026, the City Accounting Office said it had linked the City’s Electronic New Government Accounting System with the e-Budget system to track real disbursements across spending categories, while continuing to coordinate with oversight bodies to ensure reporting variances are properly classified.
