Findings No.6 COA Annual Audit Report 2006

July 25, 2008

6. Due to the failure of management to implement in CY 2006 City Ordinance No. 06-4682, an Ordinance adopting the direct subsidy scheme to subsidize cost of power in accordance with Section 2.1.1 of DILG-DOE Joint Circular No. 95-01, the city constituents were deprived of the benefits that could have been derived there from.

Section 294, Book II of the Local Government Code, provides that: “x-x-x- at least 80% of the proceeds derived from the development and utilization of hydrothermal, geothermal and other source of energy shall be applied solely to lower the cost of electricity in the LGU where such source of energy is located.”

To implement the above-quoted provision, Section 2.1.1 of DILG-DOE Joint Circular No. 95-01, dated October 31, 1995, which prescribes the “Guidelines and Procedures on the Utilization of the Share of National Wealth Taxes, Royalties, Fees or Charges”, provides, that “either one or a combination of two basics approaches can be employed in the implementation of reduction in cost of electricity, namely, subsidy and non-subsidy schemes.”

The utilization of the 80% share derived from national wealth taxes has been dormant since CYs 2004 to 2005. City Ordinance No. 05-4682 dated January 11, 2005 was not implemented in CY 2005 due to serious administrative problems in preparing the billings for the household consumers who have different and individual billing periods. It was difficult to apply the direct subsidy provision of the Ordinance, which classifies the household consumers on KWH consumption but each with different billing periods; which would entail so much man-hours and computers data base or programming activities on the part of the Iligan Light and Power, Incorporated. Thus, at the end of CY 2005, balance per book of the 80% share from National Wealth accumulated to about P61 Million.

Again, the Sangguniang Panlungsod enacted SP Resolution No.06-193, embodying City Ordinance No. 06-4925 dated February 28, 2006, amending City Ordinance No. 05-4682. The Ordinance provides that the delivery of the subsidy to the individual household consumers be made semi-annually, but each group of household consumers, namely; 1 to 100 KWH consumption, 101 to 300 KWH consumption, and 301 and above KWH Consumption to be credited with a P28.00; P24.00 and P20.00 per month, respectively of direct subsidy.

For the initial implementation of the ordinance, the average monthly consumption for a duration of nine (9) months (divided by 9) from April 2005 to December 2005, shall serve as basis of determining the category under which the household consumer shall qualify. The delivery of the direct subsidy to the household consumers shall be computed in accordance with the following schedule:

For the direct subsidy benefits which accumulated from April 2005 (when the Ordinance took effect) to December 2005, to be applied for the next billing period of each household consumer upon the implementation of the ordinance;

For the direct subsidy benefits which accumulated from January 2006 to June 2006; to be applied to the billing period of each household consumer after June 2006;

For the direct subsidy benefits which accumulated from July to December 2006; to be applied to the billing period of each household consumer after December 2006; and

The billing period for each household consumer, after every six (6) months after/from December 2006 and infinitum or until the ordinance remains in force and effect.”

Worthy of notice, Section 2 of City Ordinance No. 06-4925 states that: “The collections or receipts of remittances and those to be collected and/or received in the future, from the National Power Corporation, and other government or privately owned entities, which may hereafter be legally bound to remit the share to the City of Iligan, hereafter constituted as a Trust Fund with Special Account Code under this Ordinance, shall be appropriated and correspondingly disbursed to subsidize to and pay a portion of the electric bills for the residents of Iligan City x-x-”. However, it may not prosper to consider collections from National Wealth as “Trust Fund”. National Wealth is classified as Special Accounts of the General Fund; the use thereof requires legislative appropriations.

The project, however, was not implemented in CY 2006 depriving the people of Iligan City the timely benefits that could have been derived from the 80% proceeds of the utilization and development of the national wealth.

Management reasoned out that the non-implementation of the program could be attributed to some administrative problem that has to be ironed out on the part of the Iligan Light and Power Incorporated. The implementation of the Ordinance will take-off during the first quarter of CY 2007.

Recommendation:

Cause the amendment of Section 2 of City Ordinance No. 06-4682 reclassifying proceeds from National Wealth to Special Accounts of the General Fund before implementation. There being no stated amount appropriated under City Ordinance No. 06-4682, an Appropriation Ordinance stating the amount appropriated has to be enacted for the program to prosper.

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