2025 annual audit report: City gets ‘qualified’ opinion

CEBU, Philippines — The Commission on Audit (COA)-7 has issued a “qualified opinion” on the Cebu City Government’s 2025 financial statements, citing deficiencies in financial reporting, asset management, infrastructure implementation, procurement, and the use of development funds.

In its annual audit report, COA said the qualified opinion means that, except for specific issues identified by auditors, the city’s financial statements were fairly presented in accordance with applicable accounting standards. While less severe than an adverse opinion, it indicates that material misstatements and accounting lapses affected the reliability of the city's financial statements.

The audit was conducted to determine the fairness of the city’s financial statements, assess the propriety of financial transactions, recommend operational improvements, and evaluate compliance with previous audit recommendations.

As of December 31, 2025, Cebu City reported total assets of P34.08 billion, up from P31.30 billion in 2024. Liabilities increased to P13.43 billion, while equity rose to P20.65 billion.

The city posted revenues of P9.67 billion, higher than the P9.22 billion recorded in 2024. Personnel services amounted to P2.67 billion, while maintenance and other operating expenses reached P4.95 billion. The city ended the year with a net surplus of P326.15 million, up from P242.94 million the previous year.

The city government employed 7,576 workers, consisting of 19 elected officials, 1,438 permanent employees, four temporary personnel, 189 coterminus employees, 2,887 casual workers, 58 contractual employees, and 2,981 job order workers.

COA flagged unreliable reporting involving P10.67 billion in expenditures, discrepancies involving P12.59 billion worth of property, plant and equipment, and unreliable inventory balances totaling P5.15 billion.

Deferred real property taxes were overstated by P280.75 million because the city failed to distribute the barangays' 30-percent share.

The audit also cited overstated deposits for letters of credit, unresolved bank reconciliation items amounting to P91.73 million, unrecorded desalination and wastewater treatment facilities at the South Road Properties, failure to recognize two donated Super Family Health Centers worth P22.9 million, and the non-recognition of P9.32 million in estimated liabilities arising from pending court cases.

COA likewise found that mandatory remittances were not fully complied with, including P16.6 million in GSIS premiums, P4.7 million in PhilHealth contributions, P2.2 million in Pag-IBIG contributions, and P2.2 million in withheld taxes. Long-outstanding accounts payable also reached P546 million.

Among the report's major findings were deficiencies in the long-delayed Cebu City Medical Center (CCMC) project.

COA cited shortcomings in engineering, contract documentation, and technical requirements involving five contracts worth P1.13 billion, with total contract amounts reaching P1.90 billion. The deficiencies contributed to project delays and contract terminations.

The audit also noted the incomplete construction of medium-rise residential buildings in Lorega worth P108.45 million, excessive costs amounting to P38.6 million in the city's digital traffic system, and an overpayment of P6.9 million in the renovation of the Cebu City Sports Center track oval due to noncompliance with technical specifications.

Road projects in Pardo-Toong and Adlaon were likewise found to have implementation deficiencies.

COA also identified procurement lapses, including P180.5 million worth of overstocks, undistributed relief goods intended for Typhoon Tino victims, and the purchase of P42.4 million worth of Smart TVs without adequate procurement planning.

The city utilized only P344.45 million, or 7.98 percent, of the P4.32 billion appropriated under its 20 Percent Development Fund in 2025.

The audit showed that 41 priority infrastructure projects worth P2.11 billion were delayed or not implemented due to procurement bottlenecks and project readiness issues.

COA warned that the low utilization of development funds significantly constrained the city's ability to deliver infrastructure and socioeconomic programs.

Carbon Market issues

At the Carbon Public Market, delinquent stall rentals reached P5.07 million, aggravated by the absence of lease contracts.

COA recommended that the City Treasurer's Office and the Market Operations Division execute lease agreements to clearly define the rights and obligations of both parties in cases of payment default.

The audit also found insufficient documentation supporting the P50-million revenue-sharing arrangement under the Carbon Market Redevelopment Project, preventing auditors from determining whether the arrangement was reasonable.

In addition, COA flagged inconsistencies in the selection of the project's joint venture partner, citing deviations from National Economic and Development Authority (NEDA) and Department of the Interior and Local Government (DILG) guidelines.

Cash advances, dormant funds

Unliquidated cash advances reached P32.19 million, including P6.46 million spent for the Batang Pinoy National Finals in General Santos City.

Barangay financial assistance totaling P404.06 million, some dating back to 2009, also remained unliquidated. Transfers amounting to P131.56 million to non-government organizations and people's organizations likewise remained unliquidated.

COA also reported substantial dormant and unutilized funds, including P767 million in unused national government grants, P210 million from government-owned and controlled corporations, P52 million from other local government units, and P161 million in PhilHealth income.

Priority development projects worth P4.32 billion remained unimplemented.

The audit further questioned the distribution of 166,600 sacks of rice worth P49.89 million charged against disaster funds, saying the activity was not aligned with disaster preparedness measures.

COA also flagged P24.1 million in irregular COVID-19 van rental transactions dating back to 2022 and cited inadequate documentation for donations intended for calamity victims.

As of year-end, audit suspensions totaling P495.01 million and audit disallowances amounting to P832.91 million remained unsettled. Of the 206 audit recommendations issued in previous years, only 86 had been fully implemented, leaving 120 still unaddressed.

COA has directed Cebu City officials to implement the remaining recommendations and submit an Agency Action Plan within 60 days. — (FREEMAN)