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Findings No.3 COA Annual Audit Report 2005

July 28, 2008

3. The agency implemented the increase of Representation and Transportation Allowances (RATA) in spite of exceeding the limitation of expenses for personal services prescribed under existing laws, rules and regulations.

Section 325 (a) of R. A. 7160 provides that the total appropriations, whether annual or supplemental, for personal services of an LGU for one (1) fiscal year 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 or lower class provinces, cities, and municipalities, of the total annual income from regular sources realized in the next preceding fiscal year.

Local Budget Circular 79 dated April 1, 2005, provides guidelines for the implementation of the revised rates of RATA in Local Government Units. Section 3 thereof, expressly provides that the grant of the revised rates is subject to the 45%/55% limit on allowable personal services expenditure prescribed under Republic Act No. 7160 or the “Local Government Code of 1991.”

Verification of records showed that with the issuance of Local Budget Circular No. 79, the increase of RATA rates was implemented by the city at the 90% category. It paid the new rates to authorized officials effective April 2005. The Local Sanggunian enacted Supplemental Budget No.6 under Resolution No. 2005-06 to support the funding requirement of the increase.

In the budget review, however, the Provincial Budget Officer-designate disallowed the additional appropriation for the RATA differential in view of already exceeded PS.

Management failed to consider in its Annual Budget, the limitation on personal services expenditure, which exceeded by 24%. (Annex 2) Contrary to the provisions of Sections 325 (a) and 331 (b) of R.A. 7160, the 45% PS limit for component cities was not followed. The implementation of increase in RATA rates had already exceeded allowable PS expenditure wherein additional PS cost of P535,392.50 was incurred.

The City Budget Office informed that the annual budget exceeded the PS limitation as a continuing implementation of the salary standardization law. There being no disallowance in its review, they believe it is within the bounds of law, thus, omitted the PS limitation in the computation of the increased RATA rates. With this observation, they promised to strictly implement the rules on budgeting.

Recommendation

Require the Budget Officer to adhere to the 45%/55% Personal Services limitation in formulating budgets. Refrain from implementing increases that may cause incurrence of excess PS expenditure and disallowance. Require the officials and employees concerned to refund the amount of RATA received in excess of the budget ceiling for personal services.


Written by admin · Filed Under Commission on Audit, Oroquieta 

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