Findings No.5 COA Annual Audit Report 2004

July 28, 2008

The management prepared Supplemental Budget No. 4 for salaries, extra cash gift and honoraria despite the uncertainty of its revenues contrary to sound management practice.

Section 321 of Local Government Code (RA 7160) provides that budgetary proposals shall be included and considered in the budget preparation process. After the local chief executive concerned shall have submitted the executive budget to the sanggunian, no ordinance providing for a supplemental budget shall be enacted except when supported by funds actually available as certified by the local treasurer or by new revenue source.

Audit revealed that the Local Finance Committee certified Supplemental Budget No. 4 for CY 2004 dated December 22, 2004 without available funds for the following expenses:

Personal ServicesExtra Cash GiftP 4,205,000.00 Salaries and Wages for Casual Employees

3,853,856.00Maintenance & Other Operating Expenses

367,598.00Capital Outlay266,800.00Non-OfficeFirearms959,080.50Charter Anniversary 200,000.00Honoraria for – MOMPO, CVOs, BHW & BNS

3,964,200.00TotalP 13,816,534.50

It was noted that one of the sources of funds of Supplemental Budget No. 4 was itemized as “Bridge Financing as replenishment for funds used on infrastructure projects and counterparts of various foreign assisted projects” will be generated out of bank loan from the Philippine National Bank Ozamiz City Branch in the amount of P 10,000,000.00 which unfortunately was not received by the city as of year end.

In effect, unpaid expenditures amounting to P5,896,625.00 was incurred and were not recorded as payables in the books of accounts, broken down as follows (Annex 3):

Salaries and Wages for Casual EmployeesP 2,075,425.00Honoraria for MOMPO, CVOs, BHW & BNS3,821,200.00Total unrecorded payablesP 5,896,625.00

When interviewed, the City Accountant justified that loan proceeds of the Bridge Financing will be used to pay the said expenditures.

It is emphasized to management that availment of the loan could not be made in the absence of projects. In case management availed of a loan, the same could not be used to pay the above accounts.

Recommendation:

The Local Finance Committee should ensure that sufficient funds are available before certifying any proposed supplemental budget. The City Accountant is advised to seek from the Sanggunian Panglungsod authority to charge against CY 2005 appropriations the payment of the unpaid obligations amounting to P 5,896,625.00.

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