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Findings No.4 COA Annual Audit Report 2005

July 26, 2008

4. Equipment rental income was decreased by P10,746,482 or 46% compared to last year, causing budgetary constraint on the part of the auditee to pay its monthly loan amortization and maintenance of the said equipment.


Equipment rental income is one of the sources of revenue of the province, it ranks as the first most important sources of the total business income of the auditee.

Income derived from equipment rental are purely local shares that would augment financial resources. Before the auditee apply for equipment loan a project feasibility study had been prepared in order to achieve a positive result. It would help attain a level of financial stability sufficient to pay for its monthly obligations and maintenance.

In the review of the financial statement submitted by the auditee it was found out that there was a material decrease of P10,746,482 or 46% of equipment rental realized during the year compared to the previous year.

Presented below is the equipment income collection for the year 2005 compared to CY 2004 in graphical manner, as follows:

Interview conducted with the concerned officials and employees disclosed that the causes for the reduction of the equipment rental were as follows:

a) Some equipment were utilized by the provincial government as equity on the foreign assisted projects;


b) The provincial government has utilized some equipment on the implementation of the 20% Development Fund Projects and other projects funded by the national government;

c) Other equipment are under repair; and

d) Some of the municipalities who availed of the equipment loan offered by the Land Bank of the Philippines discontinue leasing the equipment of the province.

With the above intervening factors, a significant reduction of rental income occurred.

Further verification disclosed that, per 2005 budget the auditee estimated to collect the amount of P21,293,476.56 for equipment rental however only P12,694,965.14 was realized with a collection deficiency of P8,598,511.42 or 40%. The actual income might not be sufficient for the monthly loan amortization and maintenance of the said equipment.

The official concerned justified that some of the equipment are not in good condition and most of the municipalities availed for equipment loan thus causing reduction of equipment rental. However, they assured us to close monitor the proper maintenance of the equipment inorder to be available for rental and to increase rental income this ensuing year.

RECOMMENDATION

Instruct the Provincial Engineer to monitor the proper maintenance of these equipment, so that it could be utilized if needed.

Furthermore, require the Provincial Equipment Maintenance Engineer to give priority for the repair of the heavy and light equipment in order to be available for rental purposes.

Advertise to the public that the Provincial Engineer’s Office have available equipment for rental.

Written by admin · Filed Under Commission on Audit, Lanao del Norte 

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