EXECUTIVE SUMMARY

A. INTRODUCTION

The Metropolitan Manila Development Authority (MMDA) was created by virtue

of Republic Act No. 7924. In accordance with its mandate, the MMDA, as a special
development and administrative region, shall plan, monitor and coordinate and in the
process exercise regulatory and supervisory authority, the delivery of metro-wide
services within Metro Manila without diminution of the autonomy of the Local
Government Units (LGUs) concerning purely local matters. Seven basic services are
lodged with MMDA, to wit: Development Planning; Transport and Traffic
Management; Waste Disposal and Management; Flood Control and Sewerage
Management; Urban Renewal, Zoning, Land Use, Planning and Shelter Services;
Health and Sanitation, Urban Protection and Pollution Control; and Public Safety.

In addition, MMDA took jurisdiction over the Flood Control Management in the
National Capital Region from the Department of Public Works and Highways.

The Authority is still headed by Chairman Bayani F. Fernando and assisted by a

Deputy Chairman, a General Manager, Assistant General Manager for Finance and
Administration and an Assistant General Manager for Planning. Total Personnel
complement is 6,101.

B. FINANCIAL HIGHLIGHTS

The Metropolitan Manila Development Authority’s financial condition and results

of operations for Calendar Year 2007 compared with that of preceding year are as
follows:

Group of Accounts

2007 2006 Inc/(Dec)

Total Assets P5,490,811,026.45 P5,166,457,973.37 P324,353,053.08
Total Liabilities P1,571,083,282.96 P1,015,087,111.85 P555,996,171.11
Residual Equity P3,919,727,743.49 P4,151,370,861.52 P(231,643,118.03)

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Sources and Application of Funds
1. General Fund (Local/National/Special Purpose)

2007 2006 Inc/(Dec)

Allotment Received
Current Appropriations
Continuing Appropriations
Special Purpose
Total Allotment
Total Expenditures
Unexpended Balance
P2,837,412,000.00 P2,435,969,000.00 P401,443,000.00
210,080,749.67 163,353,560.79 46,727,188.88
1,137,444,869.00 1,137,444,869.00
4,184,937,618.67 2,599,322,560.79 1,585,615,057.88
4,024,572,702.55 2,296,773,845.43 1,727,798,857.12
P160,364,916.12 P302,548,715.36 P(142,183,799.24)

2. Fund Transfers from Other Government Agencies

Beginning Fund Liquidation

Governmen Balance
Balance Transfers s
t Agencies 12/31/2007
1/1/2007 CY 2007 CY 2007
Department
of Public
Works and
Highways P326,034,38 P748,099,72 P616,427,86 P457,706,24
(DPWH) 0.81 4.00 2.78 2.03
Manila
International
Airport
Authority 49,680,000. 22,800,882. 26,879,117.
(MIAA) 00 76 24
Pasig River
Rehabilitatio
n
Commission 19,116,735. 5,349,479.9 23,626,215.
(PRRC) 48 8 840,000.00 46
TOTAL P394,831,11 P753,449,20 P640,068,74 P508,211,57
6.29 3.98 5.54 4.73

3. Metro Manila Urban Transport Integration Project (MMURTRIP)

Particulars 2007 2006 Inc/(Dec)

Fund 102
Loan Proceeds (LP) P169,768,10 P172,796,30 P(3,028,200.
8.40 8.68 28)
Government 45,182,725.1 40,404,000.0 4,778,725.
Counterpart (GC) 9 0 19
Total P214,950,83 213,200,308. P
3.59 68 1.750,524.91
Total Expenditures 112,700,128. 99,836,166.4 12,863,961
16 1 .75
Unexpended Balance P102,250,70 P113,364,14 P(11,113,436

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 5.43 2.27 .84)

C. OPERATIONAL HIGHLIGHTS
The Authority reported having significantly accomplished its targets for CY 2007. The details
of these accomplishments are shown in its 2007 Annual Accomplishment Report.

D. SCOPE OF AUDIT
The audit covered the accounts and operations of the Metropolitan Manila
Development Authority for the Calendar Year 2007. Examination was done to
ascertain the fairness of presentation of the Authority’s financial position and results
of operations, the reliability of accounting records and propriety/validity of
disbursements and, the extent of compliance by the MMDA with applicable laws,
rules and regulations. Likewise, the audit was conducted to determine whether the
agency’s resources were used economically and efficiently and its intended objectives
were achieved.

The following were some of the constraints and/or limitations in the audit of MMDA
accounts and transactions for the year 2007:

1. Delayed/non-submission of financial reports/documents prevented

substantiation of the propriety of certain disbursements.

2. Failure of the management to fully establish subsidiary ledger account

beginning balances for the purpose of implementing the e-NGAS prevented
substantiation of some accounts.

E. AUDITOR’S REPORT

The Auditor rendered an adverse opinion on the fairness of presentation of the

financial statements mainly because of the significance of audit findings which are
summarized in the succeeding paragraph together with the corresponding
recommendations.

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F. SUMMARY OF SIGNIFICANT OBSERVATIONS AND
RECOMMENDATIONS

The observations and recommendations were discussed with the concerned MMDA
officials whose views and/or comments were considered in the preparation of this
report. These observations and recommendations are summarized as follows:

1. Account Cash in Bank-Local Currency, Current Account consisting of

eleven (11) bank accounts in the total amount of P 536.26M did not agree with the
balance per bank statement of P594.59M or a difference of P58.33M due to the
failure of the Accounting Services to update the preparation of monthly bank
reconciliation statements and make the necessary adjustments for various
reconciling items, thus rendering the balance inaccurate.

We reiterate our prior year’s recommendations that Management should:

a. Make proper representation with concerned depository banks for

the timely submission of monthly bank statements, personally follow-up
or ask the banks for copies of bank statements, if the agency is not being
furnished with copies of such statements at the end of each month.

b. Require the Accounting Services to prepare monthly bank

reconciliation statements and make the necessary adjustments for
reconciling items to ensure that the monthly balance of account Cash in
Bank – Local Currency, current account is accurate.

2. Cash advances granted during the year under Payroll Fund and Advances
to Officers and Employees amounted to P221.32M, of which P219.66M or 99%
were liquidated, leaving a balance of P1.65 but despite the high turn-out of
liquidation, the total outstanding balance as of year-end still remained at P9.13M,
because of the non-liquidation of prior years’ cash advances of P7.48M, thus
overstating the said accounts and understating the related expense accounts
considering the time that has elapsed.

We recommend that Management takes administrative/appropriate legal action

against accountable officers who have not liquidated nor initiated the settlement
of their long outstanding cash advances. For accounts of those accountable
officers who could not be located after exerting all out efforts, management may
request an authority from COA for the write-off such accounts.

3. The balance of account Cash in Bank – Local Currency, Time Deposits of

P195.51M representing High Yield Savings Accounts (HYSA) maintained by the
agency at the Land Bank of the Philippines did not reconcile with the balance per
bank and the Agency’s Passbooks which both show an aggregate year-end
balance of P196.25M showing a difference of P0.74M, thus casting doubt on the
correctness of the account balance as shown in the agency’s books.

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We recommend that Management require the agency’s officials concerned to:

a. Maintain individual subsidiary ledgers for the four (4) HYSAs;

b. Request from the banks the records of HYSA transactions for years 2005
and below in order to reconcile the balances per books and per banks, and
thereafter, prepare monthly reconciliation of balances for each account;

c. Record accrued interest income not yet credited by the banks at year-end;
and

d. Remit to the Bureau of the Treasury all interest income already credited by
the bank to the account of the agency in the absence of any authority
specifically provided by law to use income therefrom.

4. The balance of account Due from LGUs representing 5% statutory

mandatory contributions totaling P3.15B did not reconcile with the LGUs’
records as per confirmation of account balances, thus casting doubt on the
accuracy and collectibility of the balances thereof.

We recommend that Management should:

a. Exert best efforts to reconcile the accounts with the concerned LGUs and
collect amount due from LGUs pursuant to R.A. 7924; and

b. Make arrangement with concerned LGUs for possible offsetting of

accounts due from and due to concerned LGUs.

5. The laxity in the collection of accounts due from various employees and
contractors that comprise the Other Receivables resulted in the accumulation of
long outstanding account balance totaling P50.41M. Moreover, negative balances
shown under account Other Receivables were not corrected nor adjusted to
appropriate accounts.

We recommend and management agreed to:

a. Collect all accounts when due or demandable to prevent the accumulation

of uncollectible accounts;

b. Collect the amount due from various contractors;

c. Check and confirm the individual balances due from various employees
and prepare a collection scheme (monthly installment) for valid claims;
and

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 d. Make the necessary adjustment/correction of accounts with negative
balances.

6. The balance of Accounts Payable amounting to P475.25M did not tally

with the subsidiary ledgers totaling P501.65M or a difference of P26.30M thus
casting doubt on the correctness of account balance.

We recommend that the Accounting Services should:

a. Collate all documents which support the accounts payable to be able to

determine which accounts are not supported with valid documentation;

b. Revert accounts payables that may be found undocumented:

c. Establish individual beginning account balances for purposes of correcting

the negative balances and to prevent the recurrence of abnormal balance of
accounts; and

d. Reclassify payables to officers and employees to account Due to Officers

and Employees.

7. Accounts Due to PAG-IBIG and PHILHEALTH still carry negative

balances of P14.01M and P.72M, respectively, casting doubt on the correctness of
the accounts.

We reiterate our prior year’s audit recommendations that the concerned officials
should:

a. Reconcile the accounts with the concerned government agencies and

prepare the necessary adjustments for any differences that may be noted;

b. Make proper representation with the said agencies for the refund of over
remittances;

c. Review the amount to be remitted to government agencies; and

d. Implement a system of control in the processing and recording of

transactions that would prevent the recurrence of similar errors.

8. Out of the balance of account Due to Other NGAs amounting to

P493.59M, the amount of P20.50M has been outstanding for over ten years due to
non settlement thereof with source agencies and non availability of pertinent
documents.

We reiterate our previous audit recommendation that Management should

validate/reconcile the balance of fund transfers received long time ago and

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settle/liquidate the same with source agencies. For outstanding accounts amounts
of which are negligible or the source agencies no longer exist, we recommend that
the related funds be remitted to the National Treasury as required under EO338.

9. The balances of the accounts Loans Payable-Domestic and Loans Payable-

Foreign amounting to P70.11M and P18.24M, respectively, or a total of P88.35M
have been outstanding for over a number of years, the validity of which was not
ascertained due to the absence of supporting documents.

We reiterate our prior years recommendations that Management should:

a. Exert effort to trace/locate the documents pertaining to the loans;

b. Confirm and reconcile the loan account balance with financing banks; and

c. Make the necessary adjustments in the books.

We likewise recommend that the loans be checked/verified with the Bureau of the
Treasury, and the Privatization and Management Office considering the
possibility that the loans might have been paid already by the government.

10. Despite the implementation of various flood control projects, heavy

flooding in several parts of Metro Manila recurs whenever heavy rains hit the
metropolis, causing losses in terms of productivity.

We recommend that the agency/ units concerned should:

a. Revisit MMDA Resolutions passed by the Metro Manila Council,

particularly MMDA Resolution No.02-08 for its effective implementation;

b. Intensify campaign on the proper disposal of waste and garbage, including

the conduct of seminars on barangays /places where indiscriminate
dumping of waste remained uncontrolled;

c. Implement/complete flood control projects ahead of the rainy season; and

d. Request from DBM the necessary funds for the rehabilitation of old
existing pumps to improve their level of efficiency.

11. Most of the bays installed along Commonwealth Avenue have not been
serving their real intended purpose as only few vehicles and riding public have
been using them as loading, unloading and waiting area notwithstanding that the
same had been completed more than a year ago.

We recommend that Management should:

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 a. Conduct proper planning/studies before installing the bays to avoid
wastage of government resources:

b. Install signage and directional signs along the bays; and

c. Enforce traffic rules and regulations on use of loading and unloading bays.

12. Due to changes of plans/works and work items and problems encountered
in the project implementation which were supposed to be resolved/settled during
the pre-procurement activities, several infrastructure projects implemented by the
agency, that would develop/improve certain major roads and ease the traffic
flows, were not completed on dates as originally planned or as stipulated in the
original contracts, thus the benefits to be derived therefrom by the public have
been postponed to later dates.

We recommend that Management should:

a. Strictly implement the pertinent provisions of R.A. 9184 and its

Implementing Rules and Regulations; and

b. Initiate measures and take immediate action on issues/problems which

cause the delay in the completion of the remaining projects still being
undertaken.

c. Adopt a system of monitoring and supervision that would prevent further

delay in the completion of the remaining projects.

C. IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Out of the Twenty Six (26) Audit Recommendations contained in the 2006
Annual Audit Report, twelve (12) were fully implemented, eight (8) were partially
implemented and six (6) were not implemented as of December 31, 2007.

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