Findings No.2 COA Annual Audit Report 2005

July 28, 2008

2. Office buildings and Other structures in the General Fund amounting to P127,389,381.86 were not insured with the General Insurance Fund against any insurable risk, in violation of Republic Act No. 656.

Republic Act No. 656 provides for the insurance of all government property, assets and its interests against any insurable risk. Furthermore, the insurance of all property, assets and interests of the government, which are required to be insured with the General Insurance Fund, as administered by the Government Service Insurance System, is further reiterated under Administrative Order No. 141 dated August 17, 1994.

However, records revealed that the city’s Office Buildings in the amount of P99,042,865.73 and Other Structures totaling P28,346,516.13 were not insured with the Government Service Insurance System as mandated under RA No. 656 against any insurable risk.

In an interview with the City Treasurer and the Acting Accountant, the property were not insured because no amount was appropriated for the purpose. This was further brought to the attention of the City Mayor in a conference held in October, 2005 and in response gave assurance to appropriate an amount for the insurance of the city’s property and assets, for the property to be insured in the ensuing year.

If the city’s property, assets and interests would not be insured against any insurable risk, and loss or damage to such property occur, there could be no way for the city to be indemnified or compensated from such loss or damage. The officials and employees responsible for such loss or damage could also be meted with the appropriate administrative sanctions.

Recommendation

Appropriate an amount for the insurance of the city’s property, assets and interests and ensure that these property, assets and interest are insured with the General Insurance Fund against insurable risk, in order for the city to be indemnified or compensated for any damage to, or loss of it’s property due to fire, earthquake, storm or other fortuitous events or casualty.

3. The depository accounts of the City maintained at PNB Ozamiz City Branch amounting to P2,207,756.62 were deducted of monthly bank charges because these have been dormant for years, thus depleting the Cash in Bank balance.

Section 311 of the Local Government Code authorizes the local treasurers to maintained depository accounts in the name of their respective local government units to any authorized depository bank. The City Government of Tangub had opened sixteen (16) accounts to the authorized depository banks. One of them is PNB Ozamiz Branch with three (3) accounts and their balances as of December 31, 2005, namely:

FundNature of DepositAccount No.AmountGeneral FundCurrent Account455-860004-2P 111,829.24General FundCurrent Account455-86000-501,983,957.07Trust FundSavings Account455-514095-4111,969.69TotalP 2,207,756.60

Verification of the Cash in Bank accounts revealed that those maintained with PNB Ozamiz Branch were deducted monthly bank charges of P20.00, P50.00 and P220.00 thereafter, in accordance with the existing bank policy. These accounts had not moved for the past 7 years. Neither deposit nor withdrawal had been made by the city government too. Total bank charges amounted to P8,430.00 after an interest income of P3,385.48 was credited, thus leaving a balance of P2,207,756.60. (Annex 4)

Further, the following accounts listed below were also dormant, but were not deducted with bank charges, namely:

FundNature of DepositAccount No.AmountGeneral FundCurrent AccountLBP 0812-1039-89P 56,808.21General FundSavings AccountDBP 5-08283-835-02,353.06Trust FundCurrent AccountLBP 0812-1025-912,090,457.36Trust FundSavings AccountLBP 0811-0103-40334,186.90Trust FundCurrent AccountRBTC 21-00036-51,976,020.17Trust FundCurrent AccountLBP 0812-1039-9755,092.17Trust FundCurrent AccountLBP 0812-1048-291,009,952.47TotalP 5,524,870.34

Because of dormancy, the Cash in Bank account was subjected to bank charges, thereby depleting the balances of these accounts.

In our conference with the Local Chief Executive, we informed her of our findings, particularly on the deposits made with the different depository banks. She concurred with our findings and we quote:

“We did not anticipate that these accounts which have no more transactions and or non-moving would be subjected to monthly bank charges. We shall see to it that these accounts would be activated; if not, we will close the accounts and transfer these accounts to any moving account.”

Despite the assurance, we informed the City Mayor that we will follow-up the matter to ensure that closing and or transferring of the accounts would be done.

Recommendation

Require the City Treasurer to activate the dormant accounts, otherwise close the accounts and or transfer the accounts to any moving account maintained at its authorized depository banks to prevent further depletion of the Cash in Bank Balances.

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