MILF names Said Sheik as new ceasefire panel chair
July 25, 2010
US Undersecretary visits Cotabato
July 21, 2010
Cotabato City 2008 COA Audit 10
July 2, 2010
10. Excessive expenditures particularly on personal services resulted to yearly deficit/overdraft of huge amount in the operation of markets thus leading to ineffective performance of the LGU.
Mega Market and City Central Arcade are the two public markets of the City Government of Cotabato which are self-liquidating because they earned income as economic enterprises. These places are the centers of economic activities and the establishment, administration, management operation thereof plays a vital role in enabling the city government to deliver basic services to the local populace.
Decrial provisions portion of Section 337 of Republic Act No. 7160 is hereby reproduced as follows:
“Disbursement in accordance with appropriations in the approved annual budget may be made from any local fund in the custody of the local treasurer, but the total disbursement from any local fund shall in no case exceed fifty percent (50%) of the uncollected estimated revenue accruing to such local fund in addition to the actual collections. Provided, however, that no cash overdraft in any local fund shall be incurred at the end of the fiscal year.”
38
Review and analysis of the Statement of Income and Expenses of the Mega Market and City Central Arcade for the past five years shows the following figures:
2004
2005
2006
2007
2008
Revenues
11,996,757.34
10,737,559.19
7,659,752.64
8,222,024.00
10,,486,171.75
Less: Expenditure
12,734,361.31
13,435,494.72
10,760,558.17
12,891,231.13
13,902,749.61
Net Loss
(737,603.97)
(2,697,935.53)
(3,100,805.53)
(4,669,207.13)
(3,416,577.89)
Based on the above data, the two public markets have been incurring loss for the past five years and more. This means that the revenues from operations of the said public markets cannot fully recovered its operating expenses, thus, the deficit/overdraft is being subsidies by General Fund. This is in violation of the above provision because there is a cash overdraft which is equivalent to loss in the operation of the market.
Evaluation of expenditures incurred in the operation of the market disclosed that huge amounts are utilized for payment of personal services. Verification of the Staffing and Compensation Profile of the mega market and central arcade revealed the following as shown below:
Position/Title
Total
SG (Step)
Authorized Salary/Annum
1. Key Positions with RATA
City Market Administrator
1
23/2
270,876.00
2. Other Technical Positions
a) Market Supervisor IV
b) Market Supervisor III
c) Market Supervisor II
d) Market Supervisor I
e) Market Inspector II
f) LRCO II
g) LRCO I
h) RCC II
i) Security Guard I
j) Metro Aide I
25
1
1
1
2
1
1
2
12
2
2
22/8
18/8
14/6
10/3-5
8/2
15/5
11/2-3
7/1-8
3/2-8
2/5-8
302,052.00
248,556.00
187,392.00
282,648.00
117,828.00
193,776.00
288,636.00
1,428,468.00
176,436.00
167,628.00
3. Administrative Positions
a) Administrative Officer V
b) Administrative Officer III
c) Administrative Assistant VI
d) License Inspector II
e) Administrative Assistant I
f) Administrative Aide VI
g) Security Guard I
h) Metro Aide I
23
1
1
1
1
1
1
8
9
18/6
14/6
12/5
8/2
7/2
6/5
3/1-8
2/1-8
236,568.00
187,392.00
166,788.00
120,768.00
112,860.00
110,832.00
694,704.00
727,608.00
Other Compensation
3,376,699.00
Total
49
P 9,398,515.00
The above table showed that there are 49 personnel assigned at the Mega Market and City Central Arcade with total compensation of P 9,398,515.00. However, for the year under audit, actual expenditures for personal services amounted to P9,539,857.70 while expenses for MOOE amounted to P4,486,284.27 or a total of P13,902,749.61 which exceeded the actual revenues of P10,486,171.75 by P3,416,577.86 or 33%.
Interview conducted with Samaon S. Mundas, the City Market Administrator admitted that the yearly deficit/overdraft incurred by the market is attributable to the increasing statutory obligation on personal services. He stressed out that there is too many staff holding permanent position doing almost the same or duplicate functions, i.e. 5 supervisors, 14 collectors and 6 Administrative Staff, the presence and existence of this overstaff manpower greatly affect the financial condition of the economic enterprises of the city government. Furthermore, out of 49 personnel assigned at the market, two (2) of its personnel are detailed at the OCM-Permit, License, Processing & Records Division.
On the other hand, additional income of P 4,232,064.52 could have been realized had the delinquent stall owners pay their monthly rental and occupancy of vacant stalls be awarded to the legitimate vendors as shown below:
Mega Market
City Arcade
Total
Vacant Stalls
3,004,128.00
0.00
3,004,128.00
Delinquent Rental
506,533.84
721,402.68
1,227,936.52
Total
3,510,661.84
721,402.68
4,232,064.52
Details hereto attached as Annex J and K.
During the ocular inspection conducted by the audit team inside the premises of the Mega Market, we noted the existence of idle spaces and vacant stalls. Among the observations of the audit team are enumerated hereunder, to wit:
1. Almost 75% of the fish section building stalls remain idle and unutilized due to its unimproved and degrading physical condition.
2. The North Transient Areas (NTA) comprising about 400 sq. meters more or less needs improvement and renovation.
3. Bagsakan Center were not fully utilized due to inappropriate location hence, a large portion remain unproductive.
4. About 806 stalls at the Ground Floor of the Mega Market remain vacant and unoccupied due to poor facilities and sanitation.
5. Poor building maintenance, sanitation and other improvements of unutilized spaces and stalls are not readily addressed for better and more productive use.
6. No specific rate of rentals or ordinance provided by Sangguniang Panlungsod for the 2nd Floor of the Mega Market.
Moreover, the audit team found out that there are vendors displaying their merchandise, commodities, and foodstuffs along the aisles, stairways and over the perimeter fence of the Mega Market which cause disturbance and inconvenience to the buying public and proved to be disadvantageous to the legitimate vendors in violation to Section 70 of City Ordinance No. 465 series of 1994 are quoted hereunder as follows:
“All items…shall be displayed in the market stalls, or premises so as not to hamper, obstruct or impede the passage of aisles/alleys or to inconvenience the market goers…..”
Finally, auditorial review disclosed further that the budget preparation for the Mega Market and City Central Arcade are not based on the reasonable revenues considering the income from preceding periods. Section 316 of RA 7160 provides that the one of the functions of the Local Finance Committee is to “Determine the income reasonable projected as collectible for the ensuing year.”
Comparison of estimated and actual income for the past 5 years showed:
Collection
Over(Under)
Year
Actual
Estimated
Estimate
2008
10,486,171.75
13,380,315.00
(2,894,143.25)
2007
8,222,024.00
13,060600.00
(4,838,576.00)
2006
7,659,752.64
12,742,000.00
(5,082,247.36)
2005
10,737,559.19
13,352,528.00
(2,614,968.81)
2004
11,996,757.34
13,275,200.00
(1,278,442.66)
The above data revealed that estimated income which is the bases of appropriation of the Mega Market and Central Arcade in annual budget, have been overstated for the past five years. For the year 2008 alone, the collection efficiency of the two markets is only 78% computed as follows:
Actual Collection
10,486,171.75
Estimated Collection
÷13,380,315.00
Collection Efficiency Rate
78%
Had the Local Finance Committee strictly comply with the existing regulation in determining the reasonableness of projected income of the Mega Market and the Central City Arcade, the yearly deficit/overdraft in the operations of its economic enterprises could be minimize.
Recommendation for Cotabato City Government:
We recommend to the Local Chief Executive that appropriation for personal services in the operation of the markets shall be reduced or appropriate measures shall be instituted for proper matching of income against expenditures to avoid the incurrence of overdraft.
Send demand letter/notice to all delinquent stallholders otherwise impose appropriate action after three months for non-compliance. Further, formulate strategies to make the vendors occupy vacant stalls in the Mega Market instead of vending outside to generate revenue to finance the Market operational needs.
Moreover, install enough supply of water and general lightings; make sure that the janitors assigned in the market sweep regularly and the security guard to secure the premises from thieves. Such being the scenario, the illegal vendors will likely encourage to get stalls inside the market which is beneficial to the city government, vendors and in public in general.
Finally, the Local Finance Committee shall scrutinize more the prevailing conditions that affect the collections of revenues. Allowance for doubtful accounts shall be set up at the beginning of the year. The expenditure shall be based on net realizable value, that is, total revenues minus allowance for doubtful accounts. As such, the deficit can be minimized if cannot be eradicated.
Cotabato City 2008 COA Audit 9
July 2, 2010
Value for Money Audit
9. Some Programs/Projects/Activities undertaken by the agency funded under the 20% Community Development Fund were not in accordance with the guidelines set forth in the Joint Memorandum Circular No. 1, series of 2005 hence, it resulted to non-attainment of the LGU’s objective of maximum public service to its constituents.
Section 287 Republic Act 7160 also known as the Local Government Code of 1991 provides that “Each local government unit shall appropriate in its annual budget no less than 20% of its Internal Revenue Allotment for development projects”
The 20% of the IRA intended for development projects shall be utilized for the following:
1. Social Development
1.1 Establishment or rehabilitation of Productivity Enhancement Center for out-of-school youths, women, minors, displaced families, indigenous people, differently-abled persons and older persons;
1.2 Establishment or rehabilitation of Manpower Development Center;
1.3 Construction or rehabilitation of health centers, rural health unit or hospital, and purchase of medical equipment;
1.4 Construction or rehabilitation of local government-owned potable water supply system;
1.5 Installation of street lightning system;
1.6 Preservation of cultural/historical sites.
1.7 Other programs or projects of similar nature.
2. Economic Development
1.1 Implementation of a livelihood/entrepreneurship development program or project.
1.2 Construction/rehabilitation of a communal irrigation or water impounding system and purchase of post harvest facilities such as farm or hand tractor with trailer, thresher, mechanical drier and the like.
1.3 Construction/rehabilitation of farm-to-market roads.
1.4 Construction/rehabilitation of local roads or bridges; and
1.5 Other programs or projects of similar nature.
3. Environmental Management
1.1 Construction/rehabilitation of sanitary landfill or controlled dumpsite and purchase of a garbage truck or related equipment.
1.2 Community reforestation or urban greening projects.
1.3 Flood control programs or projects such as de-clogging of canals or de-silting of rivers.
1.4 Other environmental management programs or projects that promote air and water quality, as well as productivity of coastal or freshwater habitat, agricultural land and forest land.
The City of Cotabato had formulated the Executive-Legislative Agenda which is equivalent to the City’s Medium Term Development and Investment Plan with the participation of non-government organizations, other private sector associations and the general public to address the current needs and in the formulation of Annual Investment Plan, which have been duly approved by the Honorable Members of the Sanggunian under Resolution No. 3713 dated June 23, 2005.
For Calendar year 2008, the city had appropriated the amount of P55,078,822.00 under the 20% Development Fund approved by the Sangguniang Panlungsod on January 8, 2008 under Appropriation Ordinance No. 3447 for the implementation of three (3) development projects of the said locality.
Out of the appropriation of P55,078,822.00, only P44,329,345.64 or 80% was expended thereby leaving an unexpended balance of P10,749,476.36 or 20%.
Evaluation conducted by the Audit Team Leader disclosed that majority of programs implemented by the city government under the 20% ADP consist of augmentation of manpower requirements to support the mandated functions of some of office proponents with an aggregate amount of P16,351,575.38 comprising of 480 personnel assigned/detailed at the 27 offices of the city, details of which are summarized below, to wit:
Program/Project/Activity Expenditures
1. Barangay Health Services Project P 2,281,834.27
2. Enhancement of Garbage Collection & Disposal 3,604,237.07
3. Maintenance of Parks, Plaza and City Street 1,027,440.75
4. Systematic Management of Traffic Flow 2,747,987.77
5. Security Public Safety of the City Legislative
Building 252,069.60
6. Enhancement of Administrative Services in the
Executive Dept. 314,225.21
7. Coordinative Efforts & Monitoring Activity of
all Programs & Projects in Aid 58,978.78
8. Planning Monitoring & Evaluation Program for
Infrastructure Development. 349,581.18
9. Maintenance & Protection of Communication
Facilities & other Structure 705,267.26
10. Medical Emergency Response Program 148,987.78
11. Regulation & Control Measure for Proper
Implementation of Major Project 176,657.55
12. Local Legislative Backstaffing 1,551,862.77
13. Revenue Generation Project 483,639.08
14. Proper Monitoring of Population Movement 17,346.70
15. Enhancement of employment of Students & Skilled
Workers 235,320.86
16. Administrative Support to City Budget Office 58,854.88
17. One Stop Shop Processing Center for the City Socio-
Eco Concern 58,011.45
18. Financial Management & Control Initiatives of all
Projects of City 400,412.48
19. Tourism Promo Program 59,977.20
20. Investment promotion Program 97,831.81
21. Maintenance of Flood Control Drainage & Sanitation 456,819.96
22. Preliminary Engineering, Quality Control Equipment
Support & Barangay Affairs 1,264,231.00
TOTAL P 16,351,575.38
Based on the foregoing programs undertaken by the city government, substantial amount of the 20% Development fund were not actually utilized for development projects as mandated by law but were used for payment of personal services amounting to P 16,351,575.38 or 37% of the whole amount appropriated for the 20% ADP.
One of the proponents of the program, the City Health Office commented that the project allows their office to bring down the various programs and projects to the grass root level at the barangays, it augmented the personnel complement of the OHS with the additional services of 37 Barangay Health Aides/Midwives; 1 Dentist; 1 Dental Aide; 1 Laboratory technician and 1 fumigator. Because of this project, 43 Barangay Health Centers became operational over the 37 barangays of the city.
Review and analysis of the financial transactions of the city government disclosed further that some of its programs/activity/project funded under the 20% of the annual IRA was not in accordance with the guidelines set forth in the Joint Memorandum Circular No. 1, series of 2005 issued by DILG and DBM dated September 20, 2005. Enumerated hereunder are the programs not in line with the said circular totaling P2,959,438.19 or 7% are as follows:
Program/Project/Activities Expenditures
1. Preservation of Peace & Harmonizing the P 198,433.58
Relationship of Policemen
2. Program Support to Cotabato City Website 48,000.00
3. Support to Project Monitoring Committee 54,624.20
4. Physical Fitness Exercise for City Officials
and Employees 12,000.00
5. Lupong Tagapamayapa Incentive Award 59,510.00
6. Search for Outstanding Barangay Peace and
Order council and celebration 15,416.00
7. Animal Health & Disease Control Program 47,753.75
8. Strengthening of Info Delivery & Promotion
Activity 478,029.16
Sub-total P 913,766.69
All of the above transactions disbursed by the city government totaling P913,766.69 are not development projects but rather recurring expenses chargeable against Maintenance and Other Operating Expenses, such as Cotabato City Website, expenses should be charge under Internet Expenses, while strengthening of information delivery & promotion activity covers TV coverage of all important and major activities of the city government and conduct of media assemblies and broadcasting should be properly charged under Advertising Expenses.
9. Barangay Planning Workshop/Lakbay Aral 113,210.00
10. City Planning Workshop 39,898.00
11. Training on Brgy Gov’t/Adm. & Dev’t for
the new sets 100,000.00
12. Capability Building Programs for the first
and second employees 50,000.00
13. Study on Improvement of Mega Market Operation 49,353.50
Sub-total 465,671.50
The above transactions funded from the 20% amounting to P465,671.50 were utilized for payment of trainings and seminars/workshops conducted by the City Government, particularly the City Planning and Development Office. As such, appropriate account shall be properly charge against Maintenance & Operating Expenses (MOOE) under sub- account “Training Expenses” (753). Again, these are not development project mandated by law.
14. Araw ng Kutabato Celebration 600,000.00
15. Barangay Foundation Day 80,000.00
16. Shariff Kabunsuan Festival 2008 500,000.00
Sub-total 1,180,000.00
Every 20th of June, the City of Cotabato celebrates its founding anniversary activities, while 25th of June commemorate the founding anniversary of the 37 barangays of the city and December 19 marks the Shariff Kabunsuan Festival. Cash advances amounting to P 1,180,000.00 were drawn for that purpose. Likewise, expenses for this activity shall be appropriately charge against Maintenance and Other Expenses under the General Fund.
17. Financial Assistance to the CBO & Brgy Tanods 300,000.00
18. Financial Assistance to the Metro Kutawato Dev’t
Program Alliance 100,000.00
Sub-total 400,000.00
Financial Assistance given by the city government amounting P400,000.00 shall be properly charge against the account title “Donation” (878), these are amount of donations to other levels of government/individuals/institution.
Other programs included in the 20% ADP which the audit team considered not proper to be formed part of the allocation for the 20% Development fund but rather classified as Capital Outlay are as follows:
1. Strengthening the Meat Delivery of the City’s Slaughterhouse with total expenditures of P529,600.36. This transaction covered procurement of one (1) unit Delivery Van used by the Slaughterhouse. The funding should come from Capital Outlay considering it is Motor Vehicle Equipment.
2. Establishment of a Digital Base Map of the Geographic Information with an actual expenditures of P488,700.00. This transaction covered acquisition of two (2) workstations, scanner, digitizer and other peripheral devices. The funding should also come from Capital Outlay considering it is IT Equipment and Software.
And finally, under Infrastructure Development Projects, the City Government had utilized P 17,475,216.67 or 39% of the whole amount of 20% ADP for payment of Domestic Loans for Development Projects, while, the Engineering Office completed eight (8) projects. Among the projects implemented are Opening of Road from Kamasi to Dumpsite and Pagalungan Road, Concreting of Javier Street and Repair and Rehabilitation of Santos Street, Martinez Street, Rosales Street, SK Pendatun Street and Sousa Street. However, two (2) infra projects were not implemented by the City Engineering Office, i.e. The Rehabilitation of the Old City Hall and Construction of Children’s Park amounting to P 1.2 million and P 1 million, respectively.
Had the agency strictly observed and followed the guidelines on the appropriation and utilization of the 20% for the implementation of development projects, the objectives of the LGU to deliver the basic services will effectively and efficiently carried out to the benefit of the constituents.
During our exit conference Engr. Dong K. Anayatin, City Planning and Development Officer cited some compelling reasons that prompted them to consider for funding under the 20% CDF some of these programs and projects, viz:
1. Several projects like Enhancement of Garbage Disposal, Maintenance of Parks and Plaza and City Streets, Flood Control, etc. have very positive impact to our environment. Though not explicitly stated to address and implement solid waste management in the city, these projects intend to maintain cleanliness and sanitation which in effect make our city worthy live-in.
2. Some projects like Management of Traffic Flow, Security and Public Safety, Medical Emergency Program, Barangay Health Service Project, etc. are all intended to reinforce related programs to further enhance delivery of basic social services which are also mandated under Section 287 of the Republic Act 7160 otherwise known as the Local Government Code.
3. Other projects like Revenue Generation Project, Investment promotion, Tourism Promotion Program, Animal Health and Disease Control are all supportive of the city’s economic development program.
Moreover, most of the functions of the national line agencies were devolved to the Local Government Units but without the appropriate funding support. This is not to mention the every now and then issuances and orders issued from time to time for the LGUs to implement. Hence, it is left with no option but to utilize the fund to support its operations and/or implementation.
Finally, Cotabato City like the other LGUs are still very dependent on its Internal Revenue Allotment (IRA). Unlike more progressive cities of the Philippines like Makati City, Quezon City, Manila City, etc. which can afford to provide funding support to its pet programs and projects out of its local revenues.
Recommendation for Cotabato City Government:
Implement the programs and projects funded from the 20% of the Annual Internal Revenue Allotment (IRA) in accordance with the guidelines set forth in the Joint Memorandum Circular No. 1, s. 2005 issued by the Department of the Interior and Local Government and the Department of Budget and Management.
Cotabato City 2008 COA Audit 8
July 2, 2010
8. Preparation and submission of monthly trial balances were found delayed by 36 to 134 days contrary to provisions of Section 70 of NGAS Manual, thus precluding the management and the auditor to determine/monitor the agency’s financial condition in a given period.
“ Section 70. Pre-Closing Trial Balance.-The pre-closing trial balance prepared from the general ledger accounts after the adjusting journal entries have been journalized and posted. This is also termed as adjusted trial balance.
“Monthly pre-closing trial balance for each fund shall be submitted not later than the twentieth day after the end of the month. It shall be supported by the Status of Appropriations, Allotments and Obligations, for both the current and continuing appropriations.
These reports shall b submitted to the following:
COA Unit Auditor – Original Copy
Local Sanggunian – 1 copy
Local Treasurer – 1 copy
Local Accountant – 1 copy
“The trial balance at the end of the quarter shall also be supported by a schedule of subsidiary ledger balances of the controlling accounts in the General Ledger and an additional copy shall be submitted to the COA Regional Office thru the Unit Auditor.
For the year end trial balances, however, Section 72 of the same manual states that the same shall be submitted not later than 14th day of February after the end of the calendar year with the following supporting schedules:
a.) Status of Appropriations, Allotments and Obligations
b.)Subsidiary Schedule of General Ledger Account Balances
c.)Summary of Public Infrastructures
This is a prior year’s audit observation but is reiterated in this report because the City Accounting Office failed to comply with existing rules and regulations on the submission of monthly trial balance.
Delay of 36 to 191 days was still observed by the audit team in the preparation and submission of monthly trial balances. Details of date received by the City Auditors Office are shown below, to wit:
A. General Fund:
Trial Balance
Date Received
Prescribed Period for Submission
No. of Days Delayed
Submitted to CAO
January, 2008
15-May-08
20-Feb-08
85 days
February, 2008
10-Jun-08
20-Mar-08
82 days
March, 2008
14-Jul-08
20-Apr-08
85 days
April, 2008
27-Aug-08
20-May-08
99 days
May, 2008
30-Sep-08
20-Jun-08
102 days
June, 2008
30-Sep-08
20-Jul-08
72 days
July, 2008
9-Dec-08
20-Aug-08
111 days
August, 2008
20-Jan-09
20-Sep-08
122 days
September, 2008
20-Jan-09
20-Oct-08
92 days
October, 2008
26-Jan-09
20-Nov-08
67 days
November, 2008
20-Dec-08
B. SEF:
Trial Balance
Date Received
Prescribed Period for Submission
No. of Days Delayed
Submitted to CAO
January, 2008
28-Apr-08
20-Feb-08
68 days
February, 2008
11-Jun-08
20-Mar-08
83 days
March, 2008
17-Jun-08
20-Apr-08
58 days
April, 2008
27-Aug-08
20-May-08
99 days
May, 2008
18-Sep-08
20-Jun-08
90 days
June, 2008
18-Sep-08
20-Jul-08
60 days
July, 2008
5-Nov-08
20-Aug-08
77 days
August, 2008
11-Dec-08
20-Sep-08
82 days
September, 2008
20-Jan-09
20-Oct-08
92 days
October, 2008
26-Jan-09
20-Nov-08
67 days
November, 2008
20-Dec-08
C. Trust Fund:
Trial Balance
Date Received
Prescribed Period for Submission
No. of Days Delayed
Submitted to CAO
January, 2008
29-Aug-08
20-Feb-08
191 days
February, 2008
29-Aug-08
20-Mar-08
162 days
March, 2008
29-Aug-08
20-Apr-08
131 days
April, 2008
29-Aug-08
20-May-08
101 days
May, 2008
29-Aug-08
20-Jun-08
70 days
June, 2008
23-Jan-09
20-Jul-08
187 days
July, 2008
23-Jan-09
20-Aug-08
156 days
August, 2008
23-Jan-09
20-Sep-08
125 days
September, 2008
23-Jan-09
20-Oct-08
95 days
October, 2008
23-Jan-09
20-Nov-08
64 days
November, 2008
23-Jan-09
20-Dec-08
34 days
The failure of the agency to prepare and submit these important financial reports on time defeated the management purpose to make an accurate, timely and reliable concrete plan for the city’s development. Likewise, the absence of these reports will prevent the city officials and the auditor concerned to monitor/detect any unfavorable condition such as occurrence of overdraft in appropriations of deficit resulting from overspending against income realized.
During the exit conference, the City Accountant expressed their readiness for the e-NGAS roll out. In the event the electronic NGAS will be installed, there will possibly be an improvement in the submission of the financial report on time considering that computerization of the NGAS will provide users with greater ease and a more comprehensive financial management information system.
Recommendation for Cotabato City Government:
We recommend that the Honorable City Mayor should require the Office of the City Treasurer to submit financial reports to the Office of the City Accountant within the prescribed period in order to prepare and submit monthly trial balances on time for proper monitoring and timely decision making of the management.
Cotabato City 2008 COA Audit 7
July 2, 2010
7. Payment of Fuel, Oil and Lubricants in the amount of P150,000.00 were disbursed through issuance of Accountable Form No. 51-W by the Cotabato City Police Office contrary to Section 4 of Presidential Decree No. 1445.
Section 4 of PD 1445 otherwise known as the Government Auditing Code of the Philippines states that:
xxx
(6)Claims against government funds shall be supported with complete documentation.
(7)All laws and regulations applicable to financial transactions shall be faithfully adhered to.
Record shows that the City Government of Cotabato had appropriated in their FY 2008 Annual Budget, approved by the Sangguniang Panlungsod on January 8, 2008 under Appropriation Ordinance No. 3447, the amount of P613,200.00 purposely to augment the maintenance and other operating expenses of the Philippine National Police, Cotabato City Police Office for the effective and efficient delivery of public service broken down as follows:
Fuel, oil & lubricant Exp. (761) P508,200.00
Rep. & Maint.- Motor Vehicle (841) 105,000.00
Total MOOE P613,000.00
Audit disclosed that payment of Fuel, oil and lubricants chargeable against the allotment of Cotabato City Police Office were disbursed covered by the following:
Check # Date DV # Amount
1462482 1/18/08 101-0801-436 P30,000.00
1463032 2/12/08 101-0802-1030 30,000.00
1463532 3/04/08 101-0803-1697 30,000.00
1464245 4/10/08 101-0804-2823 30,000.00
1464905 5/13/08 101-0805-3649 30,000.00
P150,000.00
Scrutiny of the disbursement revealed that the documents supporting the claims of Fuel, Oil and Lubricants (761) were paid through issuance of Accountable Form No. 51-W by the Cotabato City Police Office, to wit:
AF #51 Date Amount Nature of Collection
3311722B 1/21/08 P30,000.00 Payment of Fuel, Oil & Lub. Jan,’08
3311723B 2/12/08 30,000.00 “ Feb,’08
3311724B 3/04/08 30,000.00 “ Mar.,’08
3311725B 4/10/08 30,000.00 “ Apr.‘08
3311726B - 30,000.00 “ May’08
Total P150,000.00
Based on the above facts, the agency officials failed to comply with the basic requirements set forth in Section 4 of PD 1445. To effect disbursement of public funds for the settlement of government obligations, the following documents to support the payment of Fuel, Oil and Lubricant should be attached to the voucher as follows:
1. Purchase Request
2. Purchase Order
3. Certificate of Acceptance
4. Inspection Report/Waiver of inspection
5. Charge Invoice
6. Cash/Invoice/Official Receipts
7. Canvass Sheet/Price Quotation
8. Abstract/Summary of Canvass
9. Driver Trip Ticket
In the absence of these supporting documents, the financial transactions covering payment of Fuel, Oil and Lubricants is deemed illegal.
During the exit conference, the Secretary to the Mayor informed the audit team that as early of June 2008, they already stopped giving financial assistance to the Philippine National Police because it contradict the existing accounting and auditing rules and regulations promulgated by the COA. They resorted to the proper procedures by issuing withdrawals of gasoline and payment are made directly to the supplier.
Recommendation for Cotabato City Government:
We recommend that the agency officials, particularly, the City Budget Officer, the City Accountant and the City Treasurer who certifies to the existence of appropriation, the completeness of supporting documents and the availability of funds respectively to carefully examine all the supporting documents before payment will be effected to avoid accountability in the performance of your official duties and functions.
Cotabato City 2008 COA Audit 6
July 2, 2010
6. Projects completed out of the General Fund during the year amounting to P5.716 million were not recorded in their appropriate Property, Plant and Equipment (PPE) accounts, resulting in the overstatement of accounts construction in progress-roads, highways & bridges and building and other structures by P4.028 million and P1.69 million respectively.
The New Government Accounting System (NGAS) Manual, Volume III and COA Circular No. 2004-008 dated September 20, 2004 provides that account
Construction in Progress should be used to record the cost/appraised value of government assets, roads, highways and bridges, irrigation canals and other infrastructure projects which are still under construction including software development.
It is clear therefore, that only the cost or appraised values of unfinished projects or those which are still being undertaken should remain in the books of accounts as construction in progress at year end.
Verification of the Construction in Progress account disclosed that agency assets amounting to P 5.716 million completed during the year were not recorded in their appropriate asset accounts. The completed projects undertaken by the City Engineering Office are all evaluated and inspected by the Technical Service Office (TSO), Regional Office XII, Cotabato City. Details of projects are as follows:
Name of Project Amount
1. Opening of Road-Salaam Bridge to Dumpsite P 1,000,000.00
2. Opening of Road-FMTR 1,000,000.00
3. Proposed Construction of Road –Javier Street 1,000,000.00
4. Proposed Rehab. of Rosales Street 235,000.00
5. Rehabilitation of Road at SK Pendatun Ext. 345,000.00
6. Rehabilitation of Road at Sousa Street 448,000.00
7. Improvement of Brgy Health Center-RH 2 60,000.00
8. Improvement of Brgy Health Center-RH 4 135,000.00
9. Improvement of Brgy Health Center-RH 6 70,000.00
10. Improvement of Brgy Health Center Poblacion Mother 119,000.00
11. Improvement of Brgy Health Center Kalanganan Mother 50,000.00
12. Rehabilitation of Day Care Center- RH 2 85,000.00
13. Rehabilitation of Day Care Center- RH 4 112,000.00
14. Rehabilitation of Day Care Center- RH 6 62,000.00
15. Rehabilitation of Day Care Center- Poblacion Mother 115,000.00
16. Rehabilitation of Day Care Center- Kalanganan Mother 120,000.00
17. Rehabilitation of Day Care Center- Poblacion 2 45,000.00
18. Rehabilitation of Day Care Center- Poblacion 5 40,000.00
19. Rehabilitation of Day Care Center- Poblacion 7 85,000.00
20. Rehabilitation of Day Care Center- Poblacion 8 Kalantungan 40,000.00
21. Rehabilitation of Day Care Center- Bagua Mother 95,000.00
22. Rehabilitation of Day Care Center- Kalanganan II 60,000.00
23. Comfort Room Ceiling of RH-Mother (DCC) 45,000.00
24. Rehabilitation of Day Care Center- RH 5 45,000.00
25. Rehabilitation of Day Care Center- RH 7 80,000.00
26. Rehabilitation of Day Care Center- RH 9 25,000.00
27. Rehabilitation of Day Care Center- RH 10 65,000.00
28. Rehabilitation of Day Care Center- Tamontaka 4 90,000.00
29. Rehabilitation of Day Care Center- Tamontaka 5 45,000.00
Grand Total P5,716,000.00
Inquiry conducted that the City Engineer’s Office failed to furnish the City Accounting Office with the list of completed projects, thus preventing the latter to make the necessary adjustment to the PPE accounts.
Likewise, the City Accountant admitted to have overlooked the proper recording of transactions in the books of accounts and assured us to correct and adjust the affected accounts immediately.
Recommendation for Cotabato City Government:
Instruct the City Accountant to make the necessary adjustments to reclassify completed projects to their appropriate PPE accounts. The City Engineer’s Office should regularly furnish the City Accounting Office with the list of completed projects to enable the latter to make the necessary adjustments to the PPE accounts.
Cotabato City 2008 COA Audit 5
July 2, 2010
5. The validity and correctness of Property, Plant and Equipment (PPE) accounts totaling P 409.487 million could not be ascertained due to incomplete inventory of building and structures and the continued failure of the Inventory Committee to reconcile the result of physical inventory with the property and accounting records as required under Section C3, Chapter V of the Manual on Property Custodianship, thus the difference of P309.308 million between the book balance and that of the inventory report.
The pertinent provisions of the Manual on Property Custodianship, relating to the accountability and responsibility of government officials/employees over property, plant and equipment (PPE) state as follows:
“Section C3, Chapter V “After the physical inventory taking, the Inventory Committee shall reconcile the results of the count with the property and accounting records. The inventory listing of the supplies and materials shall be checked against the stock card maintained by the property and the supply ledger cards maintained by the accounting and finally against the control accounts. On the other hand, the inventory listing of the equipment shall be checked with the property card maintained by the property as against the equipment ledger cards maintained by the accounting and the total thereof shall be compared with those in the general ledger.”
Our verification of the property, plant and equipment (PPE) accounts for General Fund showed a year-end balance of P409.487 million (net of depreciation), broken down as follows:
Balance Net/Addition Balance
Dec. 31, 2007 (Reduction) Dec. 31, 2008
Land P 55,383,327.00 - 55,383,327.00
Land Improvements 50,031,076.80 5,518,883.21 55,549,960.01
Office Buildings 101,619,599.02 245,620.80 101,865,219.82
School Buildings 3,735,899.00 13,299,279.05 16,965,178.05
Hospitals & Health Centers 1,299,421.00 479,310.85 1,778,732.02
Market & Slaughterhouse 48,364,401.52 - 48,364,401.52
Other Structures 6,887,419.98 84,557.40 6,971,977.38
Office Equipment 9,846,655.77 7,470,248.50 17,316,904.27
Furniture and Fixtures 1,500,797.21 - 1,500,797.21
IT Equipment & Software 5,807,879.00 933,585.00 6,741,464.00
Library Books 219,913.00 - 219,913.00
Machineries 66,217,410.00 - 66,217,410.24
Agriculture, Fishery &
Forestry Equipment 2,151,437.23 - 2,151,437.23
Communication Equipment 2,621,763.85 - 2,621,763.85
Heavy Construction Equipment 43,656,765.49 - 43,656,765.49
Firefighting Equipment &
Accessories 213,217.54 - 213,217.54
Medical, Dental & Laboratory
Equipment 927,000.00 - 927,000.00
Technical & Scientific Equipment - 61,985.00 61,985.00
Military & Police Equipment 453.20 - 453.20
Other Machineries & Equipment 27,360,035.62 - 27,360,035.62
Motor Vehicles 29,649,658.56 (240,000.00) 29,889,658.56
23
Watercrafts 4,400,748.00 - 4,400,748.00
Roads, Hi-ways & Bridges 51,450.00 - 51,450.00
Const. in Prog.- Roads, Hi-ways
& Bridges 6,676,457.00 640,982.91 7,317,440.29
Const. in Prog.- Parks, Plazas &
Monuments 3,494,391.33 - 3,494,391.33
Const. in Prog.- Other Public Infras 2,371,286.64 892,188.24 3,263,474.88
Items in Transit 2,950,945.00 (2,950,945.45) - .
Total P473,714,577.10 27,003,411.51 504,385,105.52
Less: Accum. Depreciations 50,491,098.00 94,898,070.52
Net Book Value P423,223,479.10 27,003,411.51 409,487,035.00
On January 07, 2008, the Honorable Mayor issued a memorandum to all department heads to submit on the Report on the Physical Count of Property, Plant &
Equipment through the Office on General Services. In addition, an inventory committee was created consisting of representatives from the Office of the City Mayor, Office on General Services (GSO), City Accounting and Internal Audit Services (CAIAS) and Sangguniang Panlungsod Office (SPO) to conduct a physical count of the city’s all properties and equipments as of December
31, 2008. The inventory committee started the physical count of PPE on June 30, 2008 duly witnessed by a representative from the City Auditor’s Office (COA). However, of the subject PPE accounts, only 21 offices out of 41 offices were subjected to physical inventory and included in the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) submitted to the General Services Office while the 20 offices failed to submit their RPCPPE. Schedules of physical count conducted per office as shown on Annex I and summarized as follows:
Per book P 409,487,035.00
Per actual count 100,179,237.00
Difference P 309,307,798.00
In view of the fact that the inventory taken was incomplete due to Building and other structures were not included in the physical inventory, hence, the RPCPPE was not reconciled with the accounting records. It was also noted that the General Services Office do not maintain property cards while the ledger cards of the City Accountant’s Office were incomplete and not updated.
In addition to the audit of PPE accounts, acquisition of one (1) unit Motorcycle (Honda XTM-125) dated January 28, 2008, issued under check #237-0001462700, DV #101-0712-11559 in the amount of P64,500.00 for the use of the OCM-Tourism, Trade and Industry Division was erroneously classified by the City Accounting Office under account the account R/M-Motor Vehicle (841).The proper classification of account title should be Capital Outlay- Motor Vehicle (214). The improper classification of these accounts resulted in the understatement of the account PPE under sub-account Equipment and Machinery, particularly Motor Vehicle.
Management informed us that they are exerting full efforts to establish the correct value of their property, plant and equipment and they are in the process of reconciling the accounting records with the inventory reports. Stock cards and Subsidiary ledger cards are already maintained at the general Services Office and the Accounting Office respectively although this subsidiary ledger are for the current year purchases only.
Recommendation for Cotabato City Government:
Instruct the General Services Officer and the City Accountant to exert extra effort to update and reconcile their respective records to reflect the correct balances of the property, plant & equipment accounts in the financial statement. A complete physical inventory of buildings and structures should be conducted by the Inventory Committee to facilitate reconciliation.
Cotabato City 2008 COA Audit 4
July 2, 2010
4. The agency’s books of accounts appearing in the General Ledger (GL) consisting of Accounts Receivable (121), Other Receivables (149) and Other Investments (197) stated at P2,001,696.58, P1,718,777.71 and P4,506,171.39, respectively remained outstanding and non-moving for more than seven (7) years, hence considered dormant and unreliable accounts.
The pertinent portion of Section 58 of Presidential Decree 1445 states that:
“Audit of Assets- The examination and audit of assets shall be performed with a view to ascertaining their existence, ownership, valuation and encumbrances as well as the propriety of items composing the respective asset accounts; determining their agreement with records; proving the accuracy of such records; xxx”
As of December 31, 2008, review and analysis of the agency’s trial balance shows that three (3) accounts totaling P8,225,645.62 considered to be dormant existing in the books of accounts which have been long outstanding and non-moving for more than seven (7) years, as shown, to wit:
Accounts Amount
1) Account Title - Accounts Receivable P 2,001,696.58
Account Number - 121
Description - Amount due from customers arising from
Service rendered, trading/business transaction
Or sale of merchandise or property
2) Account Title - Other Receivables P 1,718,777.71
Account Number - 149
Description - Amount due from other debtors not falling under any of the specific receivable account.
3) Account Title - Other Investments P 4,506,171.33
Account Number - 197
Description - Amount placed on other investments
And marketable securities
Total P 8,226,645.62
Verification of accounting records pertaining to the above-maintained dormant accounts revealed that the City Accounting Office did not maintain Subsidiary Ledger (SL). The SL is a book of final entry containing the details or breakdown of the balances of the controlling account appearing in the General Ledger (GL). Posting for the subsidiary ledger generally comes from the source documents.
Interview conducted with the City Accounting personnel revealed further that the balances of said dormant accounts were brought forwarded since the adoption of the New Government Accounting System (NGAS) in the year 2002. The absence of these subsidiary ledgers to reconcile to their respective control account which is the GL cast doubts to the validity or existence of the said dormant accounts, hence confirmation of the amount due from customers could not be facilitated.
During the exit conference, the City Accountant admitted that he had no knowledge about the existence of the said accounts as it appeared already in the trial balance long before he joined the local government unit. There was no subsidiary ledger to rely on the validity of the said accounts.
As a result, the agency asset is overstated by P8,226,645.62 thus misleading the user of the financial statement.
Recommendation for Cotabato City Government:
We recommend that the Local Chief Executive to request an authority for the writing off of these dormant accounts pursuant to Section 36 of Presidential Decree 1445 (PD 1445). However, proper documentation and justification as well as action taken by management must also be submitted.
Cotabato City 2008 COA Audit 3
July 2, 2010
3. The accounts Due from Officers and Employees (123) from all funds amounting to P 34.247 million representing cash advances granted in current and previous years remained unliquidated while Petty Cash Fund in the amount of P222 thousand also remained outstanding as of year end due to non-adherence to the rules and regulations in the liquidation of cash advances as embodied in COA Circular No. 97-002 dated Feb 10, 1997.
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, Item 5 thereof requires the accountable officers to liquidate cash advances as follows:
“5.1.2. Petty Operating Expenses and Field Operating Expenses- within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year..”
“51.3 Official Travel- within sixty (60) days after return to the Philippines in case of foreign travel or within thirty (30) days after return to his permanent official station in the case of local travel, as provided for in EX 248 and COA Circular No. 96-004.”
“5.8 All cash advances shall be fully liquidated at the end of each year. Except for petty cash fund, the AO shall refund any unexpended balance to the Cashier/Collecting Officer who will issue the necessary official receipt.
The non-compliance with the requirements on liquidation carries the penalty of withholding of salary and institution of other sanctions as provided under item 9.3 of the said circular.
As of December 31, 2008, the accounts Due from Officers and Employees (123) shows the following balances in the books of accounts:
FUNDS AMOUNT
1. General Fund P31,893,213.49
2. Special Education Fund 1,353,066.71
3. Trust Fund 1,000,651.95
Total 34,246,932.15
Analysis showed that of the unliquidated cash advances under the General Fund totaling P 31.893 million, the amount of P 30.654 represents advances granted to officials and employees who are still in active services (Annex D) while the remaining P1.239 million pertains to advances granted to elective city officials and barangay officials and persons who already retired, resigned, decease and/or whereabouts unknown (Annex E).
As discussed in finding No. 2, included in the accounts Due from Officers and Employees are the unliquidated cash advances of P 13 million representing the confidential and intelligence funds under the General Fund (GF).
On the other hand, unliquidated cash advances under Special Education Fund in the amount of P 1,353,066.71 (Annex F) still remained outstanding and long overdue for quite sometimes ranging from one year to five years, most of the officials and employees who were granted advances are from the Department of
Education and Culture under the Local School Division, while unliquidated cash advances under Trust Fund amounted to P 1,000,651.95, these are cash advances granted for special purposes although the purpose was already served the cash advances remained unliquidated.(Annex G).
Likewise, Petty Cash Fund in the amount of P222,366.77 granted to petty cash custodian in the year 2008 and earlier were not settled/liquidated by the accountable officer as required under Section 48 of the NGAS, Volume 1, quoted hereunder:
Section 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the LGU for one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amount received.
At the end of the year, the petty cash fund shall be fully liquidated by preparing a Report of Disbursement supported by the list/summary of PCVs, the PCVs and its supporting documents. The ALOBS setting up the fund at the beginning of the year shall be cancelled. Another ALOBS shall be prepared taking up the liquidation and recorded in the RAAO based on the actual expenses incurred. Unused cash shall be returned to the Treasurer who shall issue an Official Receipt to acknowledge the amount returned. A new Cash Advance for Petty Cash Fund shall be set up in the ensuing year.
Details of aging of Petty Cash Fund are shown in Annex H and summarized as follows:
Years Amount Remarks
2008 P141,068.00 current, liquidation at year-end
2007-2006 46,270.00 overdue, 1 year above
2005-2004 25,000.92 overdue, 3years above
2003-2002 10,027.85 overdue, 5 years above
Total 222,366.77
Considering that the above Petty Cash Fund (104) was overdue for almost two (2) to five (5) years above and its purpose in which it was granted had been served. The responsible Petty Cash Custodian should have settled or submit the liquidation documents to the City Accounting Office for proper accounting thereof. This office further observed that additional cash advances were granted to the Accountable Officer (AO) despite non-liquidation of previous Petty Cash Fund, to
wit:
AO Previous C/A Addt’l Total
2007 2008
1. Barroga, Gilda Vivien 10,000.00 10,000.00 20,000.00
2. Dizon, Jocelyn 10,000.00 10,000.00 20,000.00
Total P20,000.00 P20,000.00 P 40,000.00
The failure to liquidate advances granted to concerned officers and employees could have been prevented had all unliquidated cash advances been required to be settled at the end of the year in accordance with auditing regulations.
During the exit conference, the City Accountant assured the audit team that he will issue demand letters to all accountable officer (AO) with unliquidated cash advances which he will endorsed to the Secretary to Mayor, the latter shall then issue memorandum to all department head concerned to demand their personnel under his jurisdiction for settlement of their cash advances. The demand letters will give them enough time to liquidate their cash advances. Otherwise, the unliquidated amount will be deducted to their salary.
The existence of these accounts in the books of the agency will adversely affect the true and fair presentation of the financial position as of year end.
Recommendation for Cotabato City Government:
We recommend that concerned officers and employees be directed by the Local Chief Executive to immediately settle their unliquidated cash advances and petty cash fund. If warranted, withholding of salaries of those who failed to comply with the requirements must be imposed. It is suggested that management monitor closely outstanding cash advances and demand the immediate liquidation/settlement of same pursuant to Section 4.1 of COA Circular No. 97-002 and Executive Order 298.
Moreover, the City Accounting Office should exert extra effort by not allowing of granting additional cash advances or petty cash fund unless previous cash advances/petty cash fund were fully settled or liquidated.
It is advised further that the City Accountant should request an authority for the writing off of cash advances of those accountable officials aging 10 years and above and those already dead pursuant to Section 36 of Presidential Decree No. 1445. However, proper documentation and justification as well as action taken by management for the liquidation/refund must also be submitted.
