Mindanao Daily

Bayugan City 2008 COA Audit 9

9. The purchase of 2 units Isuzu dumptruck was awarded to JVF Commercial and Project Development Support Services with a contract price of Php8,550,000.00 only but the amount debited by the bank from the City’s account was Php9,323,680.00, thus, there was an over charged in the amount of Php773,680.00.      Section 4 of Presidential Decree 1445 provides that no money shall be paid out of any treasury or depository except in pursuance of an appropriation law or other specific statutory authority.      Per purchase order (Annex H) dated August 11, 2008, the contract amount was Php8,550,000.00 only.             However, upon verification the amount debited was Php9,323,680.00 which is in excess by Php773,680.00.            Thus, the excess amount debited is no longer authorized because during the bidding the approved budget for the contract is only Php8,600,000.00 as reflected in the approved purchase request (Annex I).            The City Administrator commented that a demand will be made to the supplier to refund the excess amount paid.            Notice of disallowance is being prepared by the auditor regarding this over payment made by the City.      Recommendation for Bayugan City Government:            Direct the supplier to refund the excess payment since the corresponding amount has no back up authority for its disbursement.

Bayugan City 2008 COA Audit 8

8. The amount of Php9,323,680.00 was debited to the account of the City in the Land Bank of the Philippines for the payment of 2 units Isuzu Dumptruck thru Letter of Credit on December 9, 2008 but said heavy equipment were not yet delivered in Bayugan and not yet accepted and inspected by the LGU, hence, an advance payment was made.      Provisions of Section 88 of Presidential Decree 1445 provides the prohibition against advance payment for any government transactions.      In December 9, 2008, the account of the City was debited in the amount of Php9,323,680.00 (Annex E) representing payment of 2 units of Isuzu dumptruck thru Letter of Credit. The Authority to Debit the account was signed by the Assistant City Treasurer and dated December 10, 2008 (Annex F) while the Obligation Request was dated December 16, 2008 (Annex G).            However, upon verification as to the delivery of the equipment, the BAC Chairman commented that said equipments were not yet delivered in Bayugan as per his certification dated February 13, 2009.            Hence, an advance payment was made.            In the exit conference conducted last February 23, 2009, the Supply Officer declares that the heavy equipments were already delivered in the City of Bayugan and that a request will be made for COA to inspect said deliveries.      Recommendation for Bayugan City Government:            Management should refrain from paying in advance and to comply strictly on the provision of the law to avoid any implications that may arise in the future due to said transactions.

Bayugan City 2008 COA Audit 7

7. The disbursing officers and some employees failed to settle their cash advances as of December 31, 2008 thus balance as of year-end reached to Php6,738,144.13 providing no basis for its proper accounting.      COA Circular No. 97-002 dated February 10, 1997 provides the guidelines for the grant, utilization and liquidation of cash advances, as well as the limitations.      Section 4.1.2 of the above circular provides that no additional cash advances 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. All cash advances shall be fully liquidated at the end of the year except for petty cash fund.      The year-end report shows a balance of Php6,738,144.13 (Annex D) in cash advance which is composed of the following expenditures:Special Events ExpensesP1,778,188.81Intelligence Expenses4,630,000.00Travelling Expenses329,955.32      Some accountable officers, by reason of resignation, retirement and abandonment of office were not able to settle their cash advances.      The Special Disbursing Officers failed to settle their advances as of year-end despite the City Accountant’s constant reminders.            Cash advances were still granted to disbursing officers despite its non-liquidation of prior advances because of the need and so as not to hamper public service accordingly.             Thus, unliquidated balances as of year-end had no basis for its proper accounting.      According to the City Accountant, much of the unsettled cash advances as of year-end is contributed to the advances for special events like the “Araw ng Bayugan” and “Naliyagan Festival” to mentioned a few.
Recommendation for Bayugan City Government:      Management should direct the concerned officials and employees to settle their cash advances. If still no liquidation has been made, cause the withholding of their salaries.      Management should be strict in the granting of additional cash advance unless full liquidation of the previous cash advance is made.

Bayugan City 2008 COA Audit 6

6. The Local Government failed to appropriate at least five (5%) of the current appropriations for the Gender and Development programs and activities as required under Section 31 of GAA 2008, thus programs gearing towards gender-responsive governance were not undertaken during the year.      Provisions of Section 31 of the General Appropriation Act of 2008 states that the all departments, including their agencies, offices, bureaus, SUCs, GOCCs, LGUs and other instrumentalities shall formulate a Gender and Development (GAD) Plan designed to address gender issues within their concerned sectors xxxxxxxxxxx. The cost of implementing the GAD Plan shall be at least five percent (5%) of the agency’s or local government’s total FY 2008 budget appropriations.      The General Appropriation Act of 2008 or RA 9498 requires LGUs to set aside at least 5% of the budget/appropriations for GAD plans and projects.            However, the LGU failed to appropriate the mandatory 5% for GAD.            Thus, programs and activities geared towards gender-responsive governance could not be undertaken because of the non-appropriation of the required at least 5% of the annual budget.            According to the representative of the City Social Welfare Department, even if there was no separate appropriation for GAD there were still activities conducted geared towards gender-responsive governance which were sourced out from the Office appropriations.      Recommendation for Bayugan City Government:            Management should incorporate in their Annual Budget the required minimum 5% appropriation for Gender and Development programs and activities and in compliance with Section 31 of GAA 2008.

Bayugan City 2008 COA Audit 5

5. Procurement of some supplies, materials and equipment by the City Government totaling to P8,811,449.56 were not done through competitive bidding in violation to provisions of Section 10 of Article IV of RA 9184.      Provisions of Section 10 of IRR-A of RA 9184 clearly states that all procurement shall be done through competitive bidding.      One principle in the formulation of RA 9184 is that equal opportunity could be extended to eligible and qualified private contracting parties.       Some purchases of the City totaling to Php8,811,449.56, as disclosed in audit, were not done through competitive bidding (Annex C).             The condition existed because purchased were done as the need of it arises.            It was observed that there were several purchases of supplies and materials in a month which could have merited the conduct of public bidding if procurement of such items was done in bulk.             Further observed that the Annual Procurement Plan prepared by each office were not made operational or use as basis on the actual or projected consumption of that office so bulk purchase through public bidding could be undertaken every quarter.      The City Accountant suggested during the exit conference that BAC Members and even department heads should be oriented on the procurement law. Because aside from the fact that the BAC members were not equipped with knowledge on the procurement law, some department heads also will try to resort on the fastest way to procure their supplies and that’s through emergency purchase. In some instances, each department procures its own supplies.      The Supply Officer agreed on the suggestion of the City Accountant and further suggested that the preparation of the annual procurement plan of each department should be religiously done so the APP could be made operative and be the basis for the conduct of bidding.Recommendation for Bayugan City Government:      Direct the BAC to follow RA 9184 in all procurement to be undertaken by the City and the General Services Officer to make use of the APP prepared by each office to come up with a consolidated APP for the City so consumption of each office could be projected and bidding could be undertaken every quarter.

Bayugan City 2008 COA Audit 4

4. Some employees net take home pay is as low as Php300.00 contrary to the provisions of Section 41 of GAA 2008 or RA 9498, thus the possibility of making them less productive.       Provision of Sec. 41 of GAA 2008 is hereby reproduced as follows:            Section 40: “deductions from salaries, emoluments or other benefits accruing to any government employee chargeable against the appropriations for personal services may be allowed for the payment of individual employee’s contributions or obligations due the following:      a. The BIR, GSIS, HDMF and PHIC;b. Mutual benefits associations duly operating under existing laws which are managed by, and for the benefit of, government employees not covered by compulsory membership in the GSIS; andc. Associations / cooperatives organized and managed by government employees for their benefit and welfare.      PROVIDED, That such deductions shall not reduce the employee’s monthly net take home pay to an amount lower than Three Thousand Pesos (P3,000.00), after all authorized deductions: PROVIDED FURTHER, That in the event total authorized deductions shall reduce net take home pay to less than Three Thousand Pesos (P3,000.00), authorized deductions under item (a) shall enjoy first preference, those under item (b) second preference, and so forth.”            Post-audit of the payroll transactions of the LGU disclosed that there were still some employees who were receiving a monthly net take home pay of below Three Thousand Pesos (Php3,000.00) or as low as P300.00 despite prior years audit finding and recommendation (Annex B) because there were many deductions reflected in the payroll other than those authorized by law.            The continuous existence of this condition is not of help to the employees because the amount could not even sustain them for a day or a week of subsistence considering that the pay period is bi-monthly. The condition could also possibly result to employees being unproductive and ineffective in the performance of their duties and responsibilities.      The City Accountant commented that sometime her office finds it difficult to monitor the loans of some employees because there were some lending institutions which do not require the certification of net take home pay as one requirement for the release of the employees’ loans. However, the Accountant will take the necessary action to address this condition.Recommendation for Bayugan City Government:      Direct the City Accountant to take the necessary monitoring on this matter and to comply with the provisions of Section 41 of the General Provisions of 2008 General Appropriations Act.

Bayugan City 2008 COA Audit 3

3. Annual physical inventory taking was still not undertaken by the City Government despite yearly recommendations to carry out the activity as required under Section 124 of the NGAS Manual, Vol. I, thus existence, condition and whereabouts of some of the property could not be determined and the validity of the PPE account as recorded amounting to Php261,530,391.53 could not be ascertained.            Section 124 of the Manual on NGAS, Vol. I states that being the officer responsible, one has to take care of the property like a good father of the family.             As a head and being the one who is immediately and primarily responsible for all government funds and property pertaining to his agency (Section 102 of PD 1445), it is just important to conduct the actual inventory taking which is a vital method of checking the existence and condition of property and in the determination of the accuracy of balances as recorded in the books.            The conduct of the actual count is a must for LGUs whose properties are increasing every year just like the City of Bayugan. For CY 2008 alone a remarkable increase in the PPE account of 45.58% as compared to last year balance of Php192,311,296.62 took place.                  However, the City failed to recognize the importance of undertaking the activity.                               An alternative procedure could neither be done due to the absence of individual property ledger card for those properties acquired or purchased before the implementation of eNGAS.      Thus existence, condition and whereabouts of some of the property could not be determined and the validity of the PPE account as recorded amounting to Php261,530,391.53 could not be ascertained.            The City Administrator commented that this concern will be given preferential attention in the ensuing year as the necessity in conducting the activity rises as agency’s properties increases a result of continued implementation of projects planned and purchased of additional equipment, vehicles and other fixed assets.      Recommendation for Bayugan City Government:      Direct the committee on inventory taking created in CY 2008 to finish the initial inventory conducted and to submit the corresponding reports to the Auditor concerned and to the City Accountant for reconciliation with the accounting records.

Bayugan City 2008 COA Audit 2

2. Some revenue collectors still held their collections as longer as 53 days before remitting the same to the liquidating officer despite prior years audit findings contrary to Section 26 of COA Circular No. 92-382 thus, exposing government funds to possible loss and misuse.      At the close of the business day, the collectors are obliged to turn-over all of their collections intact to the treasurer.             “In case of collectors assigned to the field and when travel time to the treasurer’s office is more than one day, turn over of their collection shall be made at least once a week, or as soon as the collection reach P5,000.00” (COA Circular No. 92-382)            Post-audit of collections of the City still shows delayed in the remittance of collections by some revenue collectors despite prior years audit findings.                   Though withholding of the collections for longer period of time were minimal already as far as number of occurrence is concerned but it is still alarming because collections were being held as longer as 53 days (Annex A). Some collections even reached as much as P39,850.00 before the same was remitted to the liquidating officer.      The practice of holding collections beyond the period dictated by law deprives the City of the immediate use of the fund and exposes government resources to possible loss and misuse.      The City Treasurer commented during the exit conference that actions will be taken to eliminate this practice.
Recommendation for Bayugan City Government:      Direct the Revenue Collectors to remit their collections daily and intact as required under the provisions of Section 26 of COA Circular No. 92-382 to avoid the occurrence of misappropriation and possible loss of the fund.

Bayugan City 2008 COA Audit 1

FINDINGS AND RECOMMENDATIONS
For CY 2008, the City of Bayugan was able to accomplish projects in relation to their mandate as a political and corporate body. The programs and projects implemented were beneficial to its constituents. However, despite of these accomplishments, there were still deficiencies noted during audit as follows:
1. The official travel of the City Treasurer to Bali, Indonesia on May, 2008 amounting to Php88,383.00 was charged to the funds created for the purpose of defraying the expenses incident to the general revision of real property assessment contrary to Section 309(b) of RA 7160 or the Local Government Code of 1991.      Section 309(b) of RA 7160 states that trust funds shall consist of private and public monies which have officially come into the possession of the local government or of local government official as trustee, agent or administrator, or which have been received as guaranty for the fulfillment of some obligation. A trust fund shall only be used for the specific purpose for which it was created or for which it came into the possession of the local government unit.             It is very clear that the used of funds created with a specific purpose is prohibited.            The fund for the general revision was created to defray the expenses incident to the general revision of real property assessment which is mandated under Section 275 of the Local Government Code, hence, the fund is considered as trust fund since it was created with a specific purpose.            In the audit of the trust fund, the claim for travel of the City Treasurer to Bali, Indonesia was charged to the General Revision fund which is not within the purpose in which the fund was created.                                                      Thus, the amount of Php88,383.00 is inappropriately charged to the fund.      Management made no comment on this matter.Recommendation for Bayugan City Government:      The amount of Php88,383.00 should be returned back to the general revision fund so it can be fully utilized on its intended purpose of creation.