Findings No.11 COA Annual Audit Report 2005
July 25, 2008
11. The agency failed to prepare an Annual Procurement Program due to the failure of some department heads to submit Procurement Management Plan, violative with the pertinent provisions of the IRR of RA 9184. Read more
Findings No.10 COA Annual Audit Report 2005
July 25, 2008
10. The non-transfer of ownership in favor of the City Government of land acquired through purchased worth P93.3 Million exposed the city of possible risk in court litigation in the future. Likewise, land acquired through donation has not been recorded in the book. Read more
Findings No.9 COA Annual Audit Report 2005
July 25, 2008
9. The enactment of City Ordinance No. 05-4719 in CY 2005 resulted to the released of loans to 204 individuals in the total sum of P2,475,108.01 as of December 31, 2005. The RLAO, COA Region X opined that the Ordinance, in so far as pertinent, is legally infirmed
Sections 4 & 5 of City Ordinance No. 05-4719, series of 2005, read:
“Section 4. – Creation of the City Livelihood REVOLVING Trust Fund – The Annual Twenty Percent (20%) livelihood funds of the city’s share in the utilization and development of the National Wealth, and all other monies which the City Government of Iligan stands to receive in the future from any entities, private or public, for/or in support of livelihood projects, proceeds from sales coming from the livelihood projects of the city and payments of CLAP loans, shall be integrated to comprise the City livelihood REVOLVING Trust Fund, under a separate Account Code”, and,
“Section 5. – Annual Share of SEA-K in the Twenty Percent (20%) Livelihood Funds Derived from the Utilization of the National Wealth – Starting Year 2005, and the years thereafter, Ten Percent (10%) of the Twenty Percent (20%) Livelihood Funds, which is portion of the city’s share from the Utilization of the National Wealth, shall be appropriated as share for the Self Employment Assistance-Kaunlaran (SEA-K) Program. The amount shall be deposited to SEA-K’s Trust Fund.”
Worthy of notice, in said Ordinance under Section 12 (B), under the captioned Self-Help Groups Loan, states:
“The minimum loanable amount is Five Thousand Pesos (P5,000.00) and maximum amount of Twenty Thousand Pesos (P20,000.00) only per member of self-help Group. This will cover any self-help projects. The loan shall carry a four percent (4%) interest per annum at diminishing balance.”
It was stressed to management that the fund assistance that any government may provide shall be limited to accredited Non-Governmental Organizations or People’s Organizations having legal personalities, the purpose of which is to implement developmental projects. Certainly, private individual is not among those contemplated in COA Circular No. 96-003 dated February 27, 1996 qualified to receive financial assistance from government institution.
Anent the foregoing, the Regional Legal and Adjudication Office, COA Region X, in affirming our view, in its 2nd Endorsement dated October 3, 2005 (copy attached as Annex E of this report), opined that the Ordinance is legally infirmed, on matters hereunder discussed:
RA 7160 authorized the maintenance by LGUs of only three funds, the General Fund (Section 308, RA 7160) and two special funds-the Special Education Fund and Trust Funds (Section 309, RA 7160). Each fund is an independent fiscal accounting entity, subject to special regulations, restrictions, or limitations [Section 306(h), RA 7160]. The revenues/receipts that are to be accounted under each fund and the nature and object of disbursements that should be paid out of the fund are all provided for by law. The establishment of special trust using 20% of the share in the proceeds from the development and utilization of the national wealth is even more unauthorized. Such share is revenue that should accrue to the General Fund (Section 289, Chapter 2, Title Three, Book II, RA 7160). This would mean that it should be accounted as income and should be closed to the surplus account at year-end, that disposition of which is subject to budgeting (Section 294, RA 7160), that disbursement of which must satisfy the requirement of appropriation [Section 305(a), RA 7160] and obligation (Section 344, RA 7160). These conditions will loss its relevance if and when the 20% is to be accounted as trust receipt under the so-called special trust funds. Besides, the code did not provide that development and livelihood projects funded either from the Internal Revenue Allotment or from the Share in the National Wealth be treated as trust receipts, what is permitted instead is simply the maintenance of special accounts in the general fund for a proper monitoring of its implementation (Section 313, RA 7160).
The propriety of using 20% of the share in the proceeds from the development and utilization of the national wealth for credit assistance purposes. While it may be argued that the projects being considered are strictly for livelihood, the disposition is still proprietary which in our considered view runs repugnant to Section 294 of RA 7160. Lending is never contemplated in the subject provision. The 20% is to be spent on projects that will benefit the constituents, free of any burden. This can be inferred from the defined usage of the 80%, which is corollary to the 20%. Spending the latter for lending purposes will limit the application of the fund to qualified borrowers. This will in effect constrict public purpose as envisioned under the cited law.
Explicit is the condition that the 20% shall be appropriated for (a) local development projects and (b) local livelihood projects. The term “appropriated” signifies a legislative duty, further implying submission by the local chief executive of his recommended projects/programs to be funded. The revolving nature of the special trust funds created under the subject ordinance defeats compliance to these conditions. In view of the foregoing, these local development and livelihood projects are not to be considered as referring to those appearing in the project proposals submitted by borrowers supporting their respective loan applications.
Our review of the loans transactions for the year 2005 funded from the 20% national wealth disclosed the following information.
Analysis of Loan Receivables – Others
As of December 31, 2005
PeriodCY 2005CY 2004Increase/DecreaseCoveredNo.AmountNo.AmountNo.AmountIndividual204P2,475,108.011P83,008.01203P2,352,100.00Group/NGOs175,498,277.50122,911,340.0052,586,586.50Total221P7,933,385.5113P2,994,348.01208P4,939,037.50
As can be readily seen from above, there was a massive grants of individual loans in CY 2005, it showed an increased of 203 accounts totaling P2.352 Million, from 1 account of P83,008.01 in CY 2004 to 204 accounts totaling P2.475 Million at year end of CY 2005.
While City Ordinance No. 05-4719 prescribes procedures in processing and approval of loans, it failed, however, to designate or assign an Office that should be responsible in handling, nursing and collecting loans already granted.
During the exit conference, the representative of the City Development and Livelihood Office informed that an appeal had already been filed with the COA Central Office on the matter. Meanwhile, they have temporarily stopped their lending operations.
Recommendations
Refrain from using the 20% of the share in the proceeds from the development and utilization of the national wealth for credit assistance purpose, more specifically to individuals.
Take positive steps to collect repayment of loans granted to individuals in the total sum of P2,475,108.01 considering that the basis in the granting of these loans is legally infirmed.
Findings No.8 COA Annual Audit Report 2005
July 25, 2008
8. Payments of honorarium amounting to P425,200.00 to certain city officials and employees, which were improperly charged against appropriation for livelihood projects, is in violation to Section 294 of RA 7160. Read more
Findings No.7 COA Annual Audit Report 2005
July 25, 2008
7. No appropriate action has been taken towards the liquidation of financial assistance in the total sum of P7.334 Million extended to some Non-Government Organizations. Liquidation thereof is prescribed under COA Circular No. 96-003. Read more
Findings No.6 COA Annual Audit Report 2005
July 25, 2008
6. Payments of Productivity Incentive Allowance to elementary and secondary public school teachers totaling P647,611.80 were charged to Special Education Fund, in violation to Section 272 of RA 7160 and DECS, DBM & DILG Joint Circular No.1 of 1998.
Sections 272 of RA 7160 explicitly provide that:
“The proceeds of Special Education Fund shall be allocated for the operation and maintenance of public schools, construction and repair of school buildings, facilities and equipment, educational research, purchase of books and periodicals and sports development as determined and approved by the Local School Board.” (Underscoring supplied)
By way of implementation, Joint Circular No. 01 series of 1998 of DECS, DBM and DILG, under the caption “4.0 Prioritization of Expenses chargeable to SEF”, provide that:
“The Local School Boards shall give priority to the following expenses chargeable against Special Education Fund (SEF)”:
”Operation and Maintenance of public schools, including organization of extension, non formal, remedial and summer classes as well as payment of existing allowances of teachers granted by local government units chargeable against SEF as of December 1997, provided that any additional allowances that may be granted to teachers by LGUs shall be charged to the general fund of LGUs subject to existing budgeting rules and regulations. xxx” (Underscoring supplied)
The audit reveals the payments of productivity incentive allowance made to elementary and secondary public school teachers was charged to Special Education Fund for CY 2005 in the total sum of P647,611.80, as follows:
1. School Supervision – General SupervisionP 324,454.002. Public Education – Elementary Education163,036.803. Public School – Secondary Education160,161.00 TotalP647,611.80
While the claimed per se may not be illegal, these allowances must not be charged against the Special Education Fund. but maybe charged to the General Fund whenever authorized.
The Commission (COA) has ruled, “Special Education Fund cannot be legally disbursed for the payment of teacher’s additional monthly allowance.” However, the local government unit is empowered to provide additional allowances and other benefits to public elementary and high school teachers stationed in or assigned at the City/ Municipality when its finances allow, as contained in the following decisions:
COA Decision No. 96-287 dated June 4, 1996, denying the request of then Manila City Mayor Alfredo Lim for authority to use the SEF for the grant of monthly allowances to teachers assigned in that City, but the sanggunians, however, have the power to appropriate such amounts from the General Fund;
COA Decision No. 96-651 dated November 21, 1996 granting a compensatory allowance of P1,000.00 per month to teaching and non teaching personnel of Mandaue City, but this should be taken from the General Fund and not from the Special Education Fund.
During the exit conference, the representative of the City Division Superintendent of Schools, Division Office, DepEd, Iligan City asked for reconsideration. After further discussion, she asked that she be given time to refer the matter to the City Superintendent for comment.
Recommendations
In conformity with the provisions of Republic Act No. 7160 relating to the defined usage or utilization of the Special Education Fund, refrain from providing productivity incentive allowance/ honoraria to DepEd personnel.
The management is not precluded, however, should its finances allow, providing appropriation in regard to these expenses under the General Fund of the City.
Findings No.5 COA Annual Audit Report 2005
July 25, 2008
5. Funds transferred to the Barangays to implement city development projects totaling P63.258 as of December 31, 2005 were not properly monitored to keep track on the full implementation thereof and the subsequent liquidation of the funds.
In line with the Barangay Empowerment Policy of the City, the City Mayor authorized the release of funds taken from the 20% Development Fund, by way of fund transfer, following the guidelines prescribed under COA Circular No. 93-331. The fund or cash/money transferred shall be taken up as Due from LGUs (138) in the books of accounts of the city and as a trust liability (8-84-100) by the implementing barangay.
Other terms and conditions of the agreement were as follows:
The fund to be transferred to the Implementing Barangay shall be (a) in an amount sufficient for three months operation subject to replenishment upon submission of the reports of disbursements by the (Implementing Barangay), or (b) the total project cost, as may be determined by the City Mayor.
Within ten (10) days after the end of each month/end of the agreed period for the Project, the Implementing Barangay shall submit the Report of Checks Issued (RCI) and the Report of Disbursement (RD) to report the utilization of the funds to the City Accounting Office, furnishing a copy thereof to the Office of the City Auditor. Only actual project expenses shall be reported. The Punong Barangay of the Implementing Barangay shall approve the reports.
Upon receipt of the report, the City Accounting Office shall draw a Journal Voucher to take up the reported expenses in the books as prescribed in COA No. 93-331 dated May 3, 1993.
In no case shall the fund transferred be utilized for the payment of additional compensation to employees in the form of allowances, incentive pay, bonuses, honorarium, or other forms of additional compensation, except as may be authorized by law or existing regulations, nor shall it be used to create new positions, to augment salaries of barangay personnel, other than for the intended purpose.
During the year, total funds released to forty two (42) barangays amounted to P63,258,419.68 recorded under “Due from LGU” account. At year-end, the amount remained outstanding due to the failure of the barangays to submit liquidation reports, such as the Report of Checks Issued (RCI) and/or the Report of Disbursement (RD). This can also be attributed to the failure of the City Accounting Office to monitor prompt liquidation thereof.
Had these been liquidated during the period Due from LGUs account of P63.258 Million would have been substantially lesser. Amounts already disbursed against the funds for CY 2005 would have been adjusted to Plant, Property & Equipment account for capital expenditures, and to the appropriate expense accounts, in the case of expenses.
During the exit conference, the management agreed and promised to implement the recommendations.
Recommendations
Require all barangays concerned to submit their respective liquidation reports, such as the Report of Checks Issued (RCI) and/or the Report of Disbursement (RD), to the City Accounting Office as prescribed in COA Cir. No. 93-331 dated May 3, 1993.
Defer the subsequent release of similar funds for those barangays with unsettled cash advances.
Findings No.4 COA Annual Audit Report 2005
July 25, 2008
4. Updating of bank reconciliation is still a problem. Non-compliance of COA Circular No. 96-011 placed the correctness of the balance per book of three current/demand deposits of P33,764,527.46 doubtful.
Findings No.3 COA Annual Audit Report 2005
July 25, 2008
3. The management grants additional cash advances despite the non-liquidation of previous ones. The practice had caused the accumulation of unliquidated cash advances to P32.260 Million as of December 31, 2005, in violation to COA Circular No. 97-002 dated February 10, 1997.
COA Circular No. 97-002 dated February 10, 1997, prescribes the rules and regulations on the grant, utilization and liquidation of cash advances. Cash advances granted to regular and/or special disbursing officers are recorded in the books of accounts under Cash- Disbursing Officers account.
Review of the year-end balances of Cash – Disbursing Officers account for CYs 2005 and 2004 shows the following data:
(In Million Pesos)
Kind of FundCY 2005CY 2004Variance1. General FundP28.567P20.332P8.2352. SEF1.7870.6061.1813. Trust Fund1.9052.179(0.274)TotalP32.259P23.117.P9.142
The compositions of item 1 CY 2005 (P28.567 Million -GF) are the following accounts:
No. of AccountsTotalRegular Disbursing Officers8P9.476 Special Disbursing Officers14919.091Total157P28.567
107 of the 149 numbers of special disbursing officers are dormant or non-moving for more than three (3) years. Liquidation of cash advances was the subject of our letter dated January 31, 2005 to the City Mayor (Annex B).
Among the prescribed rules and regulations on cash advances are the following:
No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made. (Section 89, PD 1445 and Section 4.1.2, COA Cir. 97-022)
A cash advance shall be reported on as soon as the purpose for which it was given has been served. (Section 4.13, COA Cir. 97-002)
When a cash advance is no longer needed or has not been used for a period of two (2) months, it must be returned to or refunded immediately to the collecting officer. (Section 5.7, COA Cir. 97-002)
All cash advances shall be fully liquidated at the end of each year. Except for petty cash fund, the Accountable Officer shall refund any unexpended balance to the Cashier/Collecting Officer who will issue necessary official receipt. (Section 5.8, COA Cir. 97-002)
No officer or employee shall be granted a cash advance unless s/he is properly bonded in accordance with law. The amount of cash advance, which may be granted, shall not exceed the maximum amount covered by the bond. (Handbook on Cash Management & Control System)
Of the P9.142 Million over-all increased of outstanding cash advances at year-end, P8.235 Million pertains to unliquidated cash advances from the General Fund attributable to the following accounts:
NamePositionCash AdvancesLiquidationBalanceF. AlmanzorLTOO III2,140,451.00225,346.00P1,915,105.00G. TanClerk III988,000.00336,334.00651,666.00A. BrionesClerk III1,204,800.0013,787.851,191,012.15LM MataSGRR0 II3,215,011.723,031,307.34183,704.38J. SaytasR. Officer II2,067,774.45174,179.151,893,595.30R. NadayagLTOO IV1,635,000.00-1,635,000.00Leticia YuAdm Officer II 977,600.00-977,600.00TotalP12,228,637.17P3,780,954.34P8,447,682.83
Further review of the above accounts disclosed the following deficiencies, details thereof are shown in Annex C of this report:
Additional cash advances were allowed in 2005 to all of the above-designated Special Disbursing Officers, despite their respective unliquidated previous multiple cash advances granted on different dates and our previous audit recommendations on the matter.
Cash advances were not reported/liquidated on as soon as the purpose (s) for which it were given have been served.
Cash advance (s) not used for a period of two (2) months were not returned to or refunded to the collecting officer.
Bonds of Saytas, Mata, Almanzor, Briones and Tan were insufficient on various dates as against their respective cash advances granted on various dates.
During the exit conference, the management through the City Accountant informed the audit team that he had already referred the matter to the Office of the City Legal Officer for action.
Recommendations
Require all regular and special disbursing officers to submit their respective liquidation on all cash advances already due for liquidation, file appropriate legal action, if necessary.
Stop the practice of granting additional cash advances to those who have still outstanding cash advance
Findings No.2 COA Annual Audit Report 2005
July 25, 2008
2. Non-disclosure in the Notes to Financial Statements detailed composition of Government Equity balance of P1,878,587.12 as of December 31, 2005. This information is required under Section 80, Vol. I, of the Manual of the New Government Accounting System for Local Government Units. Read more
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