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Findings No.4 COA Annual Audit Report 2006

July 25, 2008

4. Non-compliance of the procedures contemplated in COA Circular No. 94- 013 dated December 13, 1994 in the release of P1.1 Million financial assistance to the Iligan City-MSU-Farmers Academy stalled the settlement and/or liquidation thereof.

In January 20, 2003, to open an avenue towards redirecting Iligan City’s thrusts, a Memorandum of Agreement was entered into by and between the City Government of Iligan (CGI) and the Mindanao State University System (MSUS). Thus, the creation of the “Iligan City Mindanao State University Farmers Academy”, with the main objective of producing graduates in agriculture who will return to farms.

Some of the salient features of the partnership terms and conditions provided under the Memorandum of Agreement were the following:

A. Obligation of the parties

The College of Agriculture, Mindanao State University, Marawi

City

From its present faculty strength, the College of Agriculture, MSUS shall assign a Director who shall implement the programs of the IC-MSU Farmers Academy. The Academy Director shall be responsible to both the MSUCA Dean and MSUS President and the City Government of Iligan City. The Director shall submit to these agencies annual budgetary requirements and annual reports and from time to time shall defend the same before the Farmers Academy Council of Administrators;

The MSUCA upon the recommendation of the Farmers Academy Council of Administrators (FACAd) shall select and assign faculty members to teach in the IC-MSU-Farmers Academy, unless, otherwise, the local school board fund can warrant the hiring of additional faculty members, However, the selection, initial ranking and re-ranking of faculty shall be done using the MSUS’ existing ranking scheme and by the MSU Ranking Scheme Committee following usual rules of the Civil Service Commission;

The MSUCA shall serve as the academic degree granting unit of the Iligan City-MSU Farmers Academy which will include usual procedure of submitting graduating students to the University Council deliberations and the Board of Regents. The MSUCA shall award diploma, certificates HONORS CAUSA and other academic documents.

2. The Iligan City Government

The City Government, through the Office of the City Agriculturist shall augment both the teaching and non-teaching staff of the Academy, subject to the usual and normal requirements and procedure of recruitment of the MSUS using its BOR approved Ranking Scheme and those prescribed by the Commission on Higher Education (CHED);

The Iligan City Government through its poverty alleviation fund, local school board fund and other sourced funds shall provide an annual seed money for the operation of the IC-MSU Farmers Academy Learn and Earn Scheme projects, these being the practical portion of the various curricular offerings. An initial seed money of ONE MILLION FIVE HUNDRED THOUSAND PESOS (1.5 M) will be used to operate the Learn and Earn Scheme the beneficiaries of which are the students of the MSU Farmers Academy and the members of Iligan City MSUFA Multi-purpose Cooperative;

Except for the teaching force, the Agricultural technicians, the Academy Secretary/Registrar, the Iligan City Government who will hire two personnel; the Administrative Officer II and the Bookkeeper upon the recommendations of the Academy Director;

The ONE MILLION FIVE HUNDRED THOUSAND (P1,500,000.00) be made into a TRUST FUND which shall be deposited in separate account under the Iligan City-Mindanao State University Farmers Academy account;

At the inception of the implementation of the program in CY 2003, It was suggested that the financial assistance/annual seed money to the academy shall be released through the Mindanao State University System following the procedures prescribed under COA Circular No. 94-013 dated December 13, 1994, entitled “Rules and Regulations in the Grant, Utilization and Liquidation of Funds Transferred to Implementing agencies”.


The Circular was issued to ensure that:

the transfer is properly taken up in the books of both agencies,

the transferred funds are used only for the intended purpose, and that

proper accounting and reporting is made of the utilization of the funds.

Some of the General Guidelines prescribed in the Circular are the following:

The Source Agency (SA) shall enter into an agreement with the Implementing Agency (IA) for the undertaking by the latter of the project of the former. The Agreement shall provide for the requirements for project implementation and reporting:

The check shall be issued in the name of the IA (MSUS) for deposit to its trust account in its authorized government depository bank. The IA (MSUS) shall issue its official receipt in acknowledgment.

A separate subsidiary record for each account shall be maintained by the IA (MSUS) whether or not a separate bank account is opened.

Within ten (10) days after the end of each month/end of the agreed period for the Project, the IA (MSUS) shall submit the Report of Checks Issued (RCI) and the Report of Disbursement (RD) to report the utilization of the funds to the SA (CGI). Only actual project expenses shall be reported. The reports shall be approved by the Head of the IA (MSUS).

The SA (CGI) shall draw a Journal Voucher to take up the reports. The amount to take up the liquidation per the RCI shall be net of the cash advances granted by the IA (MSUS) to its accountable officers in accordance with Commission on Audit Circular No. 90-331 dated May 3, 1990.

The IA (MSUS) Auditor shall audit the disbursements out of the trust accounts in accordance with COA Regulations.

The IA (MSUS) shall return to the SA (CGI) any unused balance upon completion of the project.

For the year in review, P1.1 Million of the P1.5 Million appropriations earmarked for Iligan City-MSU-Farmers Academic have been released. It was covered by Disbursement Voucher No. 101-06-02 -00532 under check No. 559946 dated February 24, 2006 in amount of P1,100,000.00.

The payment, however, was made directly to the “ILIGAN CITY-MSU-FARMERS ACADEMIC”, instead of the Mindanao State University System that will implement the project. The covering Journal Entry Voucher was a debit to “Due from GOCC account ” of P1,100,000.00 and a credit to “Cash-in-Bank – Local Currency – Current account” of same amount. This paved the way for the utilization of the amount of P1,100,000.00 by the Iligan City-MSU-Farmers Academy, by-passing the Mindanao State University System.

The schemed adopted partakes the nature of a cash advance to the Iligan City-MSU-Farmers Academy, which posed some nagging problem that has to be ironed out because the project requires inter-agency implementation. There would have been no problem for the liquidation of this account had payment thereof was made directly to the Mindanao State University System. As contemplated, liquidation thereof shall be on the basis of the financial/fund utilization report of the Mindanao State University System (Implementing Agency) to the City Government of Iligan (Source Agency).

During the exit conference, management officials in attendance failed to justify their action taken. However, they promised to exert efforts for the early liquidation/settlement of the amount granted/released.

Recommendation:

Require all persons involved in the processing of the claim to explain why subject payment was made in the name of the “ILIGAN CITY –MSU – FARMERS ACADEMY”, and not to the “Mindanao State University System”, the implementing agency.

Direct the City Accountant to effect the necessary adjustment in the books of accounts by drawing a correcting Journal Entry Voucher debiting “Cash Disbursing Officer account” in the name of the person/official accountable pending liquidation/settlement thereof, and crediting Due from GOCC account.

Written by admin · Filed Under Commission on Audit, Iligan City 

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