Findings No.6 COA Annual Audit Report 2006

July 25, 2008

6. City Officials were granted the revised rates of Representation and Transportation Expenses (RATA) totaling P1,321,690.59, in violation of Item 3 of DBM Local Budget Circular No. 79 dated April 1, 2005 and Section 325 (a) of Republic Act No. 7160.

Section 325 (a) of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, prescribes that the maximum allowable Personal Services (PS) cost that a local government unit may incur shall not exceed forty-five percent (45%) in the case of first to third class provinces, cities and municipalities, and fifty-five percent (55%) in the case of fourth class or lower of the total annual income from regular sources realized in the next preceding fiscal year. Said PS limitation/cap is provided to ensure that LGUs shall have a balanced budget and reasonable amounts/funds are allocated to the delivery of basic services and development projects.

Item 3 of the Department of Budget and Management Local Budget Circular No. 79 dated April 1, 2005 provides that the grant of revised rates of RATA is subject to the 45%-55% limit on allowable personal services expenditure prescribed under RA No. 7160, “Local Government Code of 1991.”

Resolution No. 112-2006 dated April 10, 2006 of the Office of the Sangguniang Panlalawigan resolved to pass in review the Annual Budget CY 2006, General Fund and Special Accounts, including the 20% Development Fund Plan CY 2006 of Gingoog City, Misamis Oriental, pursuant to Appropriation Ordinance No. 2006-01, subject however to the findings/observations and recommendations made by the Local Finance Committee per 1st Endorsement dated April 5, 2006 of the Provincial Budget Office which shall form an integral part thereof.

The lst Indorsement dated April 5, 2006 of the Office of the Provincial Budget, Province of Misamis Oriental provides partly and we quote:

“1. The City has still exceeded the 45%-55% PS Limitation pursuant to Local Budget Circular No. 75 computed below:

AB

2005

AB

2006Total Regular Income (CY 2003/2004)P 296,936,845.00P 292,477,428.9345% thereof133,621,580.25131,614,843.01Total PS Cost Salaries of existing Personnel P 95,252,361.00P 93,217,985.00 Statutory & Contractual Obligation 18,342,444.0014,954,456.00Benefits & Allowances41,449,351.0045,351,689.00Total PS CostP 155,044,156.00P 153,524,130.00

Total EXCESS over PS CapP 21,422,575.75P 21,909,286.99

Notwithstanding the disclosed, reduction of PS Cost Level maintained by the city, the increase in the appropriation for WAGES under the Personal Services of the Office of the City Agriculturist is not exempted from the PS Cap, hence, cannot be recommended.

Except for the above-mentioned items not allowable, all other items of appropriation covered in these Annual Budgets are favorably recommended for approval having substantially complied with the requirements under Section 324 and 325 of RA 7160, subject further to the following conditions:

Prior compliance on the conditions cited under paragraph 1, 2 and 3 shall be made.

The continued grant of the revised rates of RATA to all officials, department heads and assistant department heads of that city is strictly subject to above PS Cap. Henceforth, ensuing adjustments in RATA cannot be made in the presence of the existing PS Excess.” . . .

Verification of records disclosed that the City granted its officials, department heads and assistant department heads the revised rates of RATA since the effectivity of DBM Local Budget Circular in 2005. Total amount paid reached to P1,321,690.59. [Annex A].

The continued grant of the revised rates of RATA to all its officials, department heads and assistant department heads violated Item 3 of DBM Local Budget Circular No. 79 dated April 1, 2005 and Section 325 (a) of Republic Act No. 7160.

During the exit conference, the City Accountant justified that during one of their executive conference among the head of offices, they agreed to stop the granting of RATA to all its officials starting January 2007 and resolved to prepare a justification letter address to the Provincial Budget Officer of the Province of Misamis Oriental who made the exception of the granting of the new rates of RATA.

Recommendations:

Stop the practice of granting the revised rates of RATA authorized under DBM Local Budget Circular No. 79. Strictly comply with existing laws, administrative rules and regulations as provided for in any grants of benefits.


Explanation is required why the department heads, assistant department heads and other officials of the City were granted the revised rates of Representation and Transportation Allowance in spite of the prohibition enumerated in Item 3 of DBM Local Budget Circular No. 79 and Section 325 (a) of Republic Act No. 7160.

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