COA calls out inaccuracies in Cebu City’s financial statements

CEBU CITY, Philippines – The Commission on Audit (COA) has flagged the Cebu City government for inaccuracies and errors in its 2022 financial statements.

These findings were revealed in the report by state auditor Jenny Dayola, dated April 14. The official audit report on the city government was published on COA’s website on July 25.

The COA report brought to light major concerns regarding the financial statements:

Firstly, the records of Cebu’s Department of General Services (DGS) and the City Accounting Office displayed an unreconciled difference of over P119.147 million.

Dayola’s report raised concerns about the accuracy of the local government’s reported year-end balances for Property, Plant, and Equipment, totaling around P4.54 billion. 

State auditors noted that the city government posted P2.078 billion in its Reported Inventories account despite not conducting a comprehensive physical count of its entire inventory.

COA also criticized the local government for failing to acknowledge earned deferred revenue of around P256.99 million from pre-collected property taxes, resulting in a lower reported income in 2022. 

Deferred revenue, in accounting, refers to income received before the delivery of goods or services. It is treated as a liability on the balance sheet until the products or services are provided, at which point it is recognized as revenue, ensuring proper matching with associated expenses.

A fourth concern raised by COA was the misrecording of purchased goods and supplies amounting to more than P364.32 million, which were categorized as expenses but should have been recorded as inventory in the government’s books of accounts.

The audit report also identified multiple errors and omissions affecting city hall’s Cash in Bank account, “…such as (a) non-recognition of the credits/ deposits to the City’s bank accounts totaling P68,607,739.85, (b) non-recording of various disbursements in the books aggregating P123,200,815.21, and inclusion of P1,319,126.78 from closed bank accounts in the total reported cash in bank balance at year-end.”

City hall responds

Cebu City’s legal officer, Jerone Castillo, agreed with the findings but noted that concerns raised by state auditors were due to recurring transactions from previous administrations that remained unresolved.

“So, just because these issues aren’t necessarily from Mayor Mike Rama’s administration, it doesn’t mean he won’t take action,” Castillo told a press conference on Friday, August 4.

Castillo, who also heads city hall’s budget and finance office, directed the DGS to initiate the reconciliation of its recorded figures with those documented by the city accounting office. 

He said the other concerns raised in the annual audit report had been referred to the city government’s legal department for further review.

“If there are any acts of fraud or corruption, that is another issue…. We must thoroughly investigate this, review all details, and respond appropriately,” Castillo said

He also said that they had met with state auditors, including City Administrator Collin Rosell and other department heads, months earlier to discuss the COA findings.

Earlier, on Wednesday, August 2, Castillo confirmed they had received a copy of the memorandum. 

Rappler also learned that the city council had obtained a copy of the COA report earlier, and included it in its regular session agenda on July 12. – Rappler.com