Findings No.6 COA Annual Audit Report 2005

July 25, 2008

6. Demolished structures representing the two (2) Public Markets the Slaughterhouse as a result of the implementation of its redevelopment thru Build-Operate –Transfer (BOT) arrangement with a total market value of 20,640,262.09 were not dropped from the books of accounts in accordance with the provisions of COA Circular 92-386.

Section 125 of NGAS Volume I state that disposal of supplies or property procedures shall be in accordance with applicable rules and regulations on supply and property management of in the local government units and shall use the Form – Annex 51 – Inventory and Inspection Report of Unserviceable Property thereof.

Moreover, Section 162 of COA Circular No. 92-386 dated October 20, 1992, otherwise known as the Rules and Regulations on Supply and Property Management in the Local Government provides that when supplies or property of any local government unit have become unserviceable for any cause or are no longer needed, the same shall be disposed of in accordance with the procedures prescribed in these rules and regulations.

Under Section 164 of the said Circular, the Local Chief Executive shall be responsible for the disposal of real property, buildings and other physical structures.

Under the last paragraph of Section 167, it was provided that the general services officer shall through the Local Chief Executive, file an application for its disposal with the City Auditor who shall conduct an inspection and determination whether the subject property is with or without value.

The Circular also define the role of the City Auditor, that is to conduct the inspection to determine whatever the building subject for disposal are with value or without value.

If after the inspection the same was found valuable, the committee on awards shall appraise the building and proceed for the disposal in accordance to the mode provided in the COA Circular No. 92-386.

Then after the disposal, said property shall be dropped from the Book of Accounts by returning the properly accomplished Inventory, Inspection and Appraisal form duly acted upon together with any records or documents evidencing the disposal to the City Accountant with the information that the property listed may now be dropped from the book of accounts of the City as provided under Section 194 of the Circular.

The projects of the Redevelopment of Carmen and Cogon Market and the City Slaughterhouse through the Build Operate and Transfer scheme and other arrangement scheme as provided under Republic Act No. 7718 was finally implemented of the City Government.

In the implementation of the above-mentioned project the City Government entered into the following Redevelopment Contract with the project proponent as follows:

A. Carmen Market:

1. Financing and Construction Carmen Public Market and Commercial Complex with UKC Builders Inc. on August 15, 2003 , which shall be completed within three hundred sixty five (365) calendar days from receipt of Notice to Proceed in the amount of P118,006,529.81.

B. Cogon Market:

1. Construction of a three-storey Public Market and Commercial Center Complex with UKC Builders Inc. on February 16, 2004 which shall be completed within two hundred forty (240) calendar days from receipt of Notice to Proceed in the amount of P252,487,477.20.

C. City Slaughterhouse:

1. Construction of Large Modern Abattoir Complex within Mega Integrated Apo Livestock Farm Corporation and AVM Bernardo Engineering on November 24, 2004 which shall be completed within seventeen (17) months from receipt of Notice to Proceed in the amount of P48,538,800.00

As a result of the execution of the above-mentioned redevelopment contract agreement, the market building of Carmen and Cogon as well as the City Slaughterhouse building become unserviceable, hence subject for disposal.

Review and verification of the documents submitted to our office showed that no records of disposal was made in accordance with provisions above-mentioned.

The agreement of Redevelopment of the two (2) markets obliged the City Government to provide and surrender the possession of the site for the Public Market and Commercial Complex and the corresponding right-of-way.

While the agreement for the redevelopment for the City Slaughterhouse obliged the Project Proponent-Operator for its account, disposed all dilapidated non-usable materials that can be found at the existing City Slaughterhouse. The agreement allowed the proponent to sell the scrap materials to cover transportation, disposal and other incidental cost.

The City Accountant disclosed that a journal entry has been made to drop the aforementioned from the nooks of accounts of the city government on the basis of the amount indicated in the Tax Declaration based on original acquisition cost. Subject properties being part of the Property, Plant and equipment account is also subject for reconciliation being done, thus, entry was only made as required.

Rejoinder

The journal entry made to drop the aforementioned demolished property from the city’s book of accounts was not in accordance with the cited provisions thus, validity and accuracy of the amount dropped from the books of accounts cannot be validated due to lack of proper documentation and due also of the absence of property ledger card for that matter.

Recommendation

Drop from the book of accounts pursuant to the procedures on the disposal and dropping of accounts provided under the pertinent provisions of COA Circular 92-386, and in accordance with Section 125 of the New Government Accounting System (NGAS) Manual, Volume I.

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Written by admin · Filed Under Cagayan de Oro, Commission on Audit