THE annual audit of a local government unit often feels like technical bookkeeping, but the recent findings by the Commission on Audit (COA) on Cebu City’s 2024 financial statements illustrate a critical tension: the difference between planning to spend money and actually spending it.
When a government’s reported expenditures are questioned, it’s not just an accounting problem; it directly affects public services, development projects and the basic trust between citizens and their local officials. The issues identified — from how the City records spending to why crucial development funds sit unused — raise significant concerns about the transparency and efficiency of public fund management.
Quick recap of the event
The COA issued a qualified opinion on the Cebu City Government’s 2024 financial statements. The central finding was that the City listed P11.18 billion in obligated funds as actual expenditures in its performance report, despite the money not yet being disbursed. COA stressed that this practice distorts the city’s spending picture and affects the “reliability, transparency and accountability” of its financial reports. A qualified opinion suggests that the financial statements are largely accurate, except for the material issues flagged by the auditors.
The big picture context
This audit issue connects to a recurring theme in local governance across the Philippines: the persistent gap between financial capacity and implementation capacity. Government accounting rules require local units to report expenditures on a cash basis — showing the actual money released — to give a clear, honest picture of spending. The use of obligated amounts, which are commitments to spend money but not the actual release of cash, obscures the true rate of implementation.
The failure to fully utilize funds, particularly the 20 percent Local Development Fund (LDF), is a nationwide operational challenge. The LDF is mandated for development projects like infrastructure, social services and disaster resilience. When these funds are underspent, as Cebu City’s P3.9 billion LDF which saw only 7.4 percent utilization (P290.8 million), it signifies project backlogs that directly delay essential public services.
Why the financial reporting matters
The COA findings affect ordinary people in several ways:
Delayed Public Services: The alarmingly low 7.4 percent utilization of the LDF means that crucial infrastructure, health and social service projects were either delayed or not implemented. This slows down the City’s socio-economic development and keeps vital services out of reach for residents.
Wasted Funds on Waste Management: The City’s high spending on waste disposal — P407.7 million in hauling and tipping fees — is a consequence of the non-operational materials recovery facilities (MRFs) and poor segregation enforcement. This cost is a drain on public resources that could be used for other services, stemming from a failure to comply with environmental laws like Republic Act 9003.
Doubt on Asset Control: Issues like the P1.46-billion unreconciled difference in Property, Plant and Equipment (PPE) and the unrecorded donated assets, including patrol motorcycles and K9 working dogs, create a lack of clarity on what the City truly owns. This makes it harder to properly manage, secure and account for public property.
Voices & perspectives
The COA’s perspective, as the state’s independent auditor, is clear: compliance with standard accounting rules is non-negotiable for transparency.
COA stressed that using obligated amounts “does not accurately show how much the City truly spent during the year.”
Auditors warned that the “delayed or non-implementation” of LDF projects is “hindering Cebu City’s socio-economic development and delaying crucial public services.”
While the City did post a P242.9-million surplus in 2024 (reversing the 2023 deficit of P579.7 million) due to higher revenues, this positive financial result is contextualized and overshadowed by the serious deficiencies in operational and financial reporting. The surplus is meaningless if the money meant for development isn’t being used effectively.
How the audit findings break down Financial Reporting Distortions
The biggest issue is the reporting of P11.18 billion in obligated funds as spent. Government units must report on a cash basis to ensure figures represent actual money released. Using obligated amounts inflates the reported expenditure, making it appear that the City is implementing projects faster than it actually is. This is the main reason for the qualified opinion.
Inventory and asset reliability
The City’s assets are a concern. P4.25-billion worth of inventories could not be fully validated due to missing physical counts. Furthermore, a P1.46-billion unreconciled difference exists between the City Accounting Office and the Department of General Services’ records for PPE. Donated assets worth P25.99 million, like the K9 working dogs and motorcycles, were also not properly recorded as income or assets. This systemic failure to account for public property weakens accountability and increases the risk of loss.
Operational and compliance deficiencies
Key operational issues persist:
Poor LDF Utilization: Only 7.4 percent of the P3.9 billion LDF was spent. COA has urged the City to strengthen project evaluation and adopt real-time monitoring to prevent bottlenecks.
Persistent Waste Management Costs: The City spent P407.7 million on hauling and tipping fees because most barangay MRFs are non-operational.
Treasurer’s Office Deficiencies: Collections from 2020 to 2024 were not deposited daily as required, exposing the funds to potential loss.
What’s next for Cebu City’s finances
The COA audit serves as a formal mandate for the Cebu City Government to implement corrective actions. What to watch for includes:
Resolution of Prior Year Deficiencies: The City has a backlog of audit concerns, with 102 out of 174 prior recommendations remaining unimplemented. This includes outstanding P423.8 million in suspensions and P833 million in audit disallowances. The failure to act on these signals a deep-seated lack of compliance that must be addressed.
LDF Implementation Plan: The City will be under pressure to show concrete steps toward improving the utilization of the LDF. COA explicitly recommended adopting a real-time monitoring tool to track project readiness and execution.
Asset Reconciliation and Cleansing: The City must prioritize the reconciliation of accounting and general services records to accurately determine its asset base and finally account for all inventories and property.
The full weight of the qualified audit opinion now rests on the City Government to demonstrate that it can move beyond simply obligating funds to efficiently spending them, thus ensuring public resources are effectively converted into public services. / CAV