Digos City 2007 COA Value for Money Audit 3
July 4, 2010
3. Project designs formulated by the Office of the City Planning and Development Coordinator did not indicate specific programs/projects prioritized for implementation during the year, instead focused more on the maintenance and other operating expenses chargeable under the program, resulted to the non-implementation of various developmental projects of the City.
Programs and projects funded out of the Twenty Percent (20%) Development Fund as embodied in the Annual Investment Plan (AIP) for calendar year 2007 in the total amount of P 50,800,000.00 were the following, viz:
1. Peace and Order Program
2. Tourism Development Program
3. Barangay Development Program
4. Sports Development Program
5. Support to Public Employment Service (SPES)
6. Waterworks Program
7. Street Lighting Program
8. Technical Education & Skills Development Program
9. Planning & Development Program
10. Capability Enhancement Program
11. GIS Research and Development Program
12. FS on Planning and Management
13. FS on Housing
14. Anti-Drug Campaign Program
15. GAD Program
16. FS on Land Use and Management Study on Land Use of
Offshore Areas
17. SME Development Program
18. Environment Protection and Mgt Program for CENRO and
Agriculture
19. DIDP (Annual Dues/GIS Training)
20. Community Development Program
21. Health Program
22. Children Welfare Program
23. Crop Production Program
24. Goat Dispersal Program
25. Hog Dispersal Program
26. Astray Dog Program
27. Rabies Control Program
28. Massive Deworming Program
Sangguniang Panlungsod Resolution No. 06-373 dated December 28, 2006 was passed adopting the Local Development Council Executive Committee Resolution No. 2006-03 dated December 05, 2006 on the programs and projects enumerated under the 20% Development Fund in the total amount of P50,800,000.00.
However, during the year, Resolution No. 07-159 adopting Res. No. 02-2007 realigning the following programs was passed to finance various identified priority projects and/or other funds’ augmentation in the amount P5,050,000.00.
1. Feasibility Study on Land Use and Management P 2,700,000.00 2. Feasibility Study on Housing 1,800,000.00 3. SME Development Program 300,000.00 4. Technical Education and Skills Development Program 250,000 Total P 5,050,000.00
Moreover, Resolution No. 07-271 was also passed to realign the allocation of P2,300,000.00 for FS on Planning and Management , in addition to the previous year’s 20% Development Surplus to augment cost of other identified priority projects for the City.
During the review and evaluation of the 20% Development Fund, it should be noted that there exist some developmental programs/projects. However analysis made on the project designs formulated by the Office of the City Planning and Development Coordinator and other concerned departments showed that majority of them has no specific program/or identified tangible projects to be undertaken but instead, a listing of expenditures chargeable under the program was reflected. In effect, appropriations under the 20% Development Fund during the year were only utilized to augment maintenance and other operating expenses of selected offices/departments in the city and only few developmental projects and programs materialized, as shown below, viz:
PROGRAMS
MOOE CAPITAL OUTLAY
PS
REMARKS 1. GIS Research 1,200,000.00 200,000.00
100,000.00
2. Planning & Dev.
Program
1,300,000.00 300,000.00
IT Equipment & Software/Commu-
nication Equipment
SUB-TOTALS
2,500,000.00
500,000.00
100,000.00
3. Capability
Enhancement
Program
1,045,000.00 1,000,000.00
Off. Supplies-CTO, City Court-Office
Bldgs, Office Equipt & IT Equipt
Capability
Enhancement
Program
55,000.00
City Disaster
4. Barangay Dev.
Program
600,000.00
520,000.00
IT Equipt/Other
Machin .& Equipt.
Barangay Dev.
Program 300,000.00 City Veterinarian Barangay Dev.
Program 332,000.00 CAO
Barangay Dev.
Program
768,000.00
150,000.00
330,000.00
City Mayor
City Agri-IT Equipt
& Comm. Equipt.
OCPDC-IT Equipt
& Office Equipt.
5. Comm. Disease
Prevention Prog.
100,000.00
6. Project Mon. &
Support Program
550,000.00
7. Capability
Enhancement
Support Program
820,000.00
2,380,000.00
City Mayor, CTO, City Admin, Military/Police
City Mayor-Office
Equipment, Motor Vehicles, CGSO -Office Equipt &F/F
City Fiscal- IT
Equipment, Office Equipt & Motor Vehicles
8. Community Dev.
Program
1,067,204.90 Community Dev.
Program 2,000,000.00 City Mayor - Donations Community Dev.
Program 500,000.00 City Mayor SUB-TOTAL 8,137,204.90 4,380,000.00 0.00
Community Dev.
Program 519,784.00 Brgy. Matti Community Dev.
Program 150,000.00 City Veterinarian Community Dev.
Program 193,000.00 City Treasurer Community
Development
Program 532,000.00 CPDC- IT Equipt,
Office & Communi-
cation Equipment
9. Information &
Dissemination
637,000.00 103,000.00
F/F,Comm.Equipt,
Tech &ScientEquipt
10. City Disaster
Preparedness
200,000.00 300,000.00
Arts,Archeo Spec.
11. Crop Production
Program
300,000.00
12. Goat Dispersal
Program
300,000.00
Work & Other Animal
13. Hog Dispersal
Program
300,000.00
Work & Other Animal
14. Sports Dev.
Program
1,203,721.84 15. DIDP 400,000.00
16. GAD Program 200,000.00
17. Support to PESO 1,200,000.00
18. Anti-Drug
Campaign
1,200,000.00
19. Tourism
Program
2,000.000.00
20. SME Dev.
Program
260,000.00
SUB-TOTALS
8,463,505.84
1,535,000.00
0.00
21. Environmental
Mgt. Program
1,900,000.00
22. Rabies Control
Program
150,000.00
23. Massive
Deworming
Program
100,000.00
24. Astray Dog
Control Program
150,000.00 150,000.00
Other Structures
25. Waterworks
Program
1,678,986.00
26. Street Lighting
Program
1,000,000.00 27. Health Program 1,000,000.00
SUB-TOTAL 5,978,986.00 150,000.00 0.00
GRAND TOTALS 25,079,696.74 6,565,000.00 100,000.00
Further evaluation also disclosed some audit comments and observations in some disbursements incurred under the 20% Development Fund, enumerated as follows :
1. Anti-Drug Campaign Program should be incorporated in the Peace and Order Program.
2. GAD Program appropriation should be taken from the General Fund Proper and not from the 20% Development Fund. As authorized under the Annual General Appropriations Act, at least five percent (5%) of the total agency budget appropriations shall corresponds the activities supporting GAD.
3. A total of P100,000.00 in the GIS Research & Development Programs was appropriated under Personal Services for payment of overtime and night pay. Section 4.0 of Joint Memorandum Circular No. 1, s. 2005 of DILG and DBM dated September 20, 2005 prohibits the inclusion of personal services in the appropriation for development projects under the 20% development fund. Payment of wages to job orders under the PESO and GIS Research Program was accounted in the General Services.
4. Post audit of Account 765-Other Supplies Expenses disclosed that items purchased such as sports paraphernalia, construction supplies and materials, pumps and pipes were distributed without any attached requests from various recipients. For construction materials and supplies, no program of work attached to support said distribution. In effect, the project could not be properly monitored and evaluated. Supplies maybe accounted and accountability maybe pinpointed but the status of distribution could not be determined whether personal or for public purposes for which the program was intended marked as Annex III.D.
5. Post Audit of Account 755- Office Supplies Expenses disclosed that requisitions and purchases of Computer inks, toners, cartridges and book paper long /short appeared to be excessive considering the type/class function of requisitioning offices/departments It is done in volume per transaction and the next time around by volume again for a period of less than a month. (Annex III.E)
6. Purchases of IT Equipment and Software were charged under the Planning and Development, Capability and Enhancement Support, Barangay Development and Community Development Programs as Capital Outlays distributed to different offices in the city and even to other government agencies within the city, as per project design. No specific program to support the necessity of procuring the same. Computer purchases were already excessive, as shown on the next page:
NAME OF SUPPLIERS/ DEALERS
No. of
Laptop
Computers
Delivered
No. of Desktop
Computer
Delivered
TOTALS
REMARKS 1. T. Bros. Ent. – payment
of 3 units computer
3
3 2/27/2007- for
use of OCPDC 2. T. Bros. Ent.-payment
of 3 units laptop
3
3 3/12/2007 for use of OCPDC 3. T. Bros. Ent.-payment
of 3 units desktop
3
3 4/18/2007 for use of OCPDC 4. T. Bros. Ent .- payment
of 2 units laptop
2
2 4/24/2007 – for
use of OCPDC 5. T. Bros. Ent.-payment
of 2 units desktop
2
2 5/8/2007 – for
use of OCPDC 6. T. Bros. Ent.-payment
of 2 units desktop
2
2 5/8/2007 – for
use of OCPDC 7. T. Bros. Ent.-payment
of 2 units desktop
2
2 5/28/2007 – for
use of OCPDC 8. T. Bros.Ent.- payment
of 1 unit laptop
1
1 6/5/2007 – for
use of OCPDC 9. Chalcedony Mrktg. -
payment of 3 units
laptop
3
3
10/15/2007 – for
use of OCPDC 10. Chalcedony Mrktg. -
payment of 1 unit
desktop
1
1
10/15/2007 for
use of OCPDC 11. Golden Sky Trading -
pymt of 2 units desk-
top & 1 unit laptop
1
2
3
10/25/2007 for
use of OCPDC GRAND TOTALS 10 15 25
Post audit of the vouchers pertaining to procurement of computers disclosed that the participating and winning bidders were all neophytes, not a bonafide dealer as evidenced in their issued Official Receipts which started Serial No. 0001, 0002, 0003 and so on. A bonafide dealer must be a registered merchant licensed as manufacturer, producer, regular dealer or service establishment with reputable establishment for at least three (3) months prior to the public bidding he intends to participate, especially these pertains to an IT Equipment.
Two (2) shopping forms of the participating and winning bidder on a separate transaction has alterations. The altered quoted amount is the lowest. It has been observed that in some shopping forms the color of the ballpen used on the amount quoted and the signature of the dealer/supplies when compared, were not the same. Address of supplier/bidder is sometimes not indicated.
7. Consultancy Services and Honoraria of various committees were also charged to Other Professional Services under the Capability Enhancement Program, as per project design.
8. At year end, the following programs/projects remained unimplemented, viz:
MOOE 1. Children’s Welfare Program P 250,000.00 2. Padigosan Activity 250,000.00 3. Coastal Resource Program 200,000.00 P 700,000.00 CAPITAL OUTLAY 1. History Marker
(Other Structures)
P 1,000,000.00 2. Terminal (Land Improvements) 1,000,000.00 3. Bry. Goma (Office Buildings) 500,000.00 4. IT Equipment and Software 500,000.00 5. School Buildings 700,000.00 6. Community Development Prog.
(IT Equipment and Software)
65,000.00
3,765,000.00 T O T A L
P 4,465,000.00
9. DILG-DBM Joint Circular No. 1 s. 2005 dated September 20, 2005 provides the guidelines on the appropriation and utilization of the 20% Development Fund but was not given much attention and consideration in the formulation and planning of the activities for developmental tangible projects.
It was also learned that the formulation of the plans, programs and projects were undertaken only by the Executive Committee of the Local Development Council and Office of the City Planning and Coordinator without participation of the supposed members of the City Development Council wherein all the Punong Barangays of the city are regular members. Through the participation of all Punong Barangay and non-governmental organizations, the City could have address the needs of its constituents as far as tangible projects and programs are concerned. Realignment of projects and programs should also be decided by the City Development Council, to be approved by the Executive Committee and concurred/authorized by the Sangguniang Panlungsod.
During the exit conference, management informed us that they will evaluate thoroughly the programs and projects laid down under the 20% Development Fund and make some amendments, if warranted.
Recommendation for Digos City Government:
Programs formulated under the 20% Development Fund should have specific project designs, planned activities and targeted output to be used as guide in its implementation in order to measure its accomplishment. This should be made prior to the approval of the utilization of the fund by the Sangguniang Panlungsod.
Adhere strictly to the guidelines provided under DILG-DBM Joint Circular No. 1 s. 2005 dated September 20, 2005 relative to the appropriation and utilization of the 2o% Development Fund.
The City Development Council should actively participate in the formulation of the development plans, program and projects of the city government.
Digos City 2007 COA Value for Money Audit 2
July 4, 2010
2. The amount of P1,900,000.00 transferred to the Provincial Environment and Natural Resources Office intended for a study in intensifying environmental protection and management program of the city were utilized for a study on Offshore Management , thus defeating the purpose for which the fund was created and unnecessary expenditures were incurred.
For calendar year 2007, one of the priority projects of the City Government was the implementation of Environmental Protection and Management. This was included in the Annual Investment Plan of the City Government for 2007 and funded out of the 20% Development Plan totaling P1,900,000.00.
The need to identify, rationalize and manage the use of its resources as vital element of the environment to reduce over exploitation and the purpose to strengthen the capacities of the Local Government Unit in addressing threats to depleting water resources as well as intensifying environmental protection had prompted the Sangguniang Panglungsod to come up with SP Resolution No. 07-037 dated February 8, 2007 authorizing the City Mayor to enter a Memorandum of Agreement with the Provincial Environment and Natural Resources Office represented by Mrs. Ruth M. Tawantawan, Provincial Environment and Natural Resources Officer.
A Memorandum of Agreement (Annex III.C) had been executed by the Honorable City Mayor and the Provincial Environment and Natural Resources Officer on February 19, 2007 objectively for the Improvement and Management of the Environmental Resources including but not limited to identification of water sources and/or any projects concerning environmental protection as identified by the Management Committee. With the execution of the Memorandum of Agreement, the amount of P1,900,000.00 had been transferred to the Provincial Environment and Natural Resources for its implementation.
Stipulation in the Memorandum of Agreement were as follows:
1. The parties shall collaborate and combine human, technical materials and financial resources.
2. The parties hereby agree to meet periodically to apprise each other of the progress of implementation
3. The PENRO-DENR will help provide the necessary technical assistance, available data, maps and information to be utilized in the conduct of activity.
The Management Committee per Memorandum of Agreement who are tasked to manage the implementation of the said project were as follows;
1. Ruth M. Tawantawan PENR Officer
2. Romeo S. Aniñon City Planning and Development
Officer
3. Henrietta E. Masiwel City Accountant
4. Salvador L. Dumogho III City Councilor
It appears that all the members of the Management Committee were from the City Government of Digos except the Provincial Environment and Natural Resources Officer.
We coordinated with the Audit Team Leader and Accountant of the Department of Environment and Natural Resources and information gathered relative to the project implementation were the list of expenditures from the Office of the Accountant-Provincial Environment and Natural Resources Office as enumerated on the next page:
Consultancy Services P 1,440,000.00 Office Equipment 5,287.00 Furniture and Fixtures 23,580.00 IT Equipment and Software 51,728.50 Communication Equipment 19,696.00 Technical and Scientific Equipment 21,950.00 Traveling Expenses – Local 26,596.00 Training Expenses 16,104.30 Telephone Mobile – Cell Cards 29,000.00 Advertising Expenses 20,000.00 Gasoline, Oil and Lubricants 49,809.88 Office Supplies Expenses 43,448.32 General Services 10,600.00 Other MOOE 5,000.00 Honorarium 137,200.00 Total P 1,900,000.00
The project implementation or the preparation of the feasibility study was made thru hiring a consultant costing P1,440,000.00. The hiring of a consultant was not specifically stipulated in the MOA nor this project was covered with a project design to serve as guide in its implementation. The participation of the Provincial Environment and Natural Resources was only to provide technical assistance , available data, maps and information needed in the activity of which can also be provided by the Local Government Unit concerned thru City Environment and Natural Resources Office in coordination with the Provincial Environment and Natural Resources thus , this project can be implemented without the need of transferring the fund which only entailed additional operating expenses as well as inappropriate utilization of the fund to project implemented such as office equipment, furniture and fixtures, It Equipment , Communication equipment (cellphone), Technical and Scientific Equipment(digital camera) and cellcards. All of the furniture and fixtures and equipment acquired thru the city’s subsidy will now be recorded as property of the Department of Environment and Natural Resources since acquisition was made by them.
In the Terms of Reference (TOR), the feasibility study conducted by the consultant was on Offshore Management which covers the following Scope of Services:
1. Review/Inventory of existing occupants along the shorelines and actual sketching of their occupant.
2. Formulation and preparation of feasibility Studies and Market Study assessment and the
3. Formulation and preparation of a detailed Business and Marketing Plan and Strategies.
The above-mentioned scope of services was certified as completed and in accordance with the approved plans and specifications indicated in the terms of reference by Provincial Environment and Natural Resources Officer of the Department of Environment and Natural Resources.
It was also noted that in the Annual Investment Plan of the City of Digos, a separate program for Feasibility Study on Land Use and Management of Offshore Areas in the amount of P2,700,000.00 was formulated and planned. However, said amount was realigned to other identified priority projects pursuant to Sangguniang Panglungsod Resolution No. 07-159 dated August 23, 2007.
The project implemented was a clear deviation of what the City Government had expected. The feasibility study conducted was on Offshore Management, basically for its business and marketing plans and strategies while the purpose of the City Government was to address the threats of depleting water resources and to intensify environmental protection to reduce overexploitation.
During the exit conference, the City Mayor informed us that it was the created Management Committee who had decided to undertake the feasibility study on the Offshore Management and thought that it was an initial action towards the fulfillment of their intentions as agreed per Memorandum of Agreement. Likewise, the member of the created Management Committee justified that the said study was relevant to environmental protection and management. Considering that the study had been perfected, they will still utilize the same in the pursuance of their objectives. Further, he assured us that our recommendation will be strictly observed and complied.
Recommendation for Digos City Government:
Refrain from transferring funds to other government agencies for the implementation of programs/projects which can be performed by the City Government to ensure that its implementation is within and in line of the program and to avoid incurrence of other unnecessary expenditures. Project designs or proposals should be required and thoroughly evaluated before any agreement be executed.
Digos City 2007 COA Value for Money Audit 1
July 4, 2010
VALUE FOR MONEY AUDIT
1. The objectives of the City Government in uplifting the economic condition of the barangay officials of the 26 barangays by providing livelihood assistance of P230,000.00 for each barangay or a total of P5,980,000.00 were not achieved due to the failure of the recipients to utilize the said amounts for the purposes specifically stated in their project designs.
During the year, one of the thrusts of the City Government of Digos is to provide economic services to all sectors of the community through livelihood assistance with the sole purpose of uplifting their economic conditions. During the year, livelihood programs were extended to the barangay officials through a Memorandum of Agreement executed between the City Government of Digos and the Association of Barangay Captains of Digos City on March 11, 2007. As agreed, the City Government will provide a livelihood assistance program in the amount of P230,000.00 for each barangay which will be supported with specific project designs for projects like cattle fattening, goat raising and hog raising. The amount of P230,000.00 per barangay will be divided among the 11 barangay officials.
It was observed that in the barangay level, the financial assistance were distributed to the barangay officials thru payroll system and cash was received individually by the beneficiaries. The procurement of hogs, cattle or goat, depending on their project designs were to be undertaken by each of the recipient.
Based on the ocular inspection we conducted and interviews we made with the different barangay officials who were recipients of the livelihood assistance/program of the city government, we learned that out of the 26 barangays, 21 barangays had no livelihood projects implemented or realized.
It was stated in the Memorandum of Agreement that the Liga ng Barangay shall actively participate in the distribution, implementation, monitoring and evaluation to ensure that usage of funds are in accordance with the duly approved project designs and shall see to it that every barangay shall comply the submission of their quarterly report to the Office of the Mayor. These responsibilities of the Liga ng mga Barangay were not given due attention and compliance was neglected. On the other hand, the City Government also failed to monitor the proper implementation of the livelihood projects, hence their objectives in uplifting the economic conditions of their barangay officials were not realized.
Had these livelihood projects been fully implemented, monitored and supervised, the benefits that could be derived therefrom can be extended to the constituents of their respective barangays.
During the conference, the City Mayor shared his disappointment on the poor outcome of the said projects. He informed us that considering the fact that the projects were not implemented, they will require the barangay officials concerned to refund the amount so that the same could be used by the other constituents of the city.
Recommendation for Digos City Government:
Require the Barangay Officials of the 26 barangays who were recipient of the livelihood projects but had not implemented the project to refund the amount received by them to the City Government of Digos City and require them to submit written justification/explanation for failure to implement their proposed project.
Financial assistance for livelihood projects should be properly monitored and on site inspection should always be conducted.
Digos City 2007 COA Audit 4
July 4, 2010
4. Approval of the disbursement vouchers made by the City Administrator as authorized by the Honorable Mayor had no limitations as to the amount and nature of transactions as required in the provision of Section 39 of New Government Accounting System.
Provision of Section 39 of the New Government Accounting System, Volume I, is hereby reproduced as follows, thus:
“Approval of disbursements by the Local Chief Executive (LCE) himself shall be required whenever local funds are disbursed, except for regularly recurring administrative expenses such as: payroll for regular or permanent employees, expenses for light, water, telephone and telegraph services, remittances to government creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the DBM and others where the authority to approve may be delegated. Disbursement vouchers for expenditures appropriated for the operation of the Sanggunian shall be approved by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as the case may be”.
In the review and post-audit of the disbursement vouchers of the City Government, it was observed that most of the disbursement vouchers and checks were signed and approved by the City Administrator with the word “By Authority of the City Mayor” irrespective of the amounts and nature of transactions. Pursuant to the regulations of Section 344 of Republic Act No. 7160, the approval of disbursements involving regularly recurring administrative expenses can be delegated and the rest of the disbursement vouchers shall be approved by the local chief executive himself.
While the provisions of Section 345 of Republic Act No. 7160 and Section 40 of the New Government Accounting System allows the City Administrator to countersign checks drawn in settlement of obligations of the local government, irrespective of the amounts, the approval of the disbursement vouchers by the local chief executive himself is mandatory.
When the matter was discussed with the City Administrator, he informed us that the authority given to him by the City Mayor was very broad and that he thought that as long as he was instructed by the City Mayor to act on the transactions of the agency, it was regular and legal. He further informed us that he never signed any disbursement vouchers if the City Mayor is out of office and an Officer in Charge was designated.
Nonetheless, the Honorable City Mayor acknowledged our findings and assured us the proper implementation of our recommendations.
Recommendation for Digos City Government:
Comply strictly with the provisions of Section 39 of the New Government Accounting System, Volume I. Strictly limit the authority being given to the City Administrator and designated Officer in Charge as provided by the existing laws and regulations.
Digos City 2007 COA Audit 3
July 4, 2010
3. Procurement of supplies, materials and equipment which can not be considered common use supplies in the total amount of P28,248,721.45, were done through shopping method which are not in accordance to the provisions of Section 52 of RA No. 9184.
As a general rule, the procuring agencies shall adopt public bidding as the general mode of procurement. However, they may, in order to promote economy and efficiency, resort to any of the alternative methods of procurement provided under Rule XVI of Republic Act No. 9184 otherwise known as the Government Procurement Reform Act. And in all instances, the procuring entity shall ensure that the most advantageous price for the government is obtained.
Provision of Section 52 of RA No. 9184 allows the shopping methods as one of the alternative modes of procurement of goods. Shopping is a method of procurement of goods whereby the procuring entity simply requests for the submission of price quotations for readily available off-the-shelf goods or ordinary/regular equipment to be procured directly from the suppliers of known qualifications. This method of procurement shall be employed only in any of the following cases:
a) When there is an unforeseen contingency requiring immediate purchase. Provided, however, that the amount shall not exceed P50,000.00.
b) Procurement of ordinary or regular office supplies and equipment not available in the Procurement Service involving an amount not exceeding Two Hundred Fifty Thousand Pesos (P250,000.00). Provided, however, that the procurement does not result in splitting of contracts; as provided in Section 54.1 of the IRR-A; Provided, further, that at least three (3) price quotations from bonafide suppliers shall be obtained.
Likewise, as defined under the Implementing Rules and Regulations of Republic Act No. 9184, common-use supplies refer to those goods, materials and equipment that are repetitively used in the day-to-day operations of procuring entities in the performance of their functions. Common-use supplies shall be those included in the Price List of the Procurement Service (PS) of the Department of Budget and Management (DBM).
Review of the transactions of the agency for CY 2007, particularly the disbursement vouchers involving procurement, purchase orders, inspection and acceptance reports, revealed that most of the procurement made were done through the shopping method. Further review of the Disbursement Vouchers (DVs) involving amounts ranging from P50,000.00 to P250,000.00, showed that most of the items purchased were those that can not be considered commonly used supplies such as construction materials, medicines, streetlights, laptop computers, rice, spare parts, office equipment, etc. as shown in Annex III.B. With this range, a total amount of P28,248,721.45 was incurred for the purchases using the shopping method, most of which do not satisfy the conditions set forth in the provisions of Section 52 of RA 9184 whereby shopping method can be resorted to.
Inquiry with the management disclosed that they chose to adopt the shopping method of procurement the reason being they thought that all items below P250,000.00 could already be procured through this alternative method.
While the law allows the use of the shopping method as an alternative mode of procurement, the same should be limited to those ordinary office supplies and materials not available in the Procurement Service attached to the Department of Budget and Management and those supplies/materials/equipment needed in times of unforeseen contingencies. The use of shopping method in most of its procurement will limit participation of eligible and qualified suppliers or contractors since bid opportunities are not widely disseminated. Moreover, this predisposes the management to split purchase requests and purchase orders.
During the exit conference, the Bids and Awards Committee gave us the assurance that all purchase requests emanating from any department of the City Government will be thoroughly evaluated and that those supplies and materials that are not ordinary and are not regularly used in the daily operations of their agency will undergo bidding processes.
Recommendation for Digos City Government:
Refrain from using the shopping method of procurement for those supplies and materials which are not ordinary or those that are not regularly used in their day to day activities and operations. Follow strictly the provision of Section 52 of Republic Act No. 9184. In the procurement of goods and infrastructure projects, public bidding should always be considered.
Digos City 2007 COA Audit 2
July 4, 2010
2. Payment of P416,000.00 to four individual consultants hired by the City were erroneously classified under Other Professional Services (Account 799) instead of Consultancy Services (Account 793), thus overstating the former and understating the latter.
Provisions of Section 112 of Presidential Decree No. 1445 provides that each government agency shall record its financial transactions and operations conformably with generally accepted accounting principles and in accordance with pertinent laws and regulations.
The Revised Chart of Accounts provided under COA Circular No. 2004-008 dated September 20, 2004 states that account Consultancy Services (793) shall be used to record the cost of hiring consultants for special/technical services not available to the concerned agency while account Other Professional Services (799) shall be used to record the cost of other professional services contracted by the agency not classified under specific professional services.
In the review of the financial transactions of the agency, it was found out that the City Government hired the services of four (4) consultants to undertake services relative to Tourism, Education, Health and Youth Affairs with consultancy payment ranging from P12,000.00 – P20,000.00 per month. Breakdown of the total payment for consultancy services amounting to P416,000.00 as shown on the next page:
Erroneous recording of the expenses incurred for consultancy services resulted to the overstatement of account Other Professional Services (799) in the total amount of P416,000.00 and understatement of account Consultancy Services (793) in the same amount.
During the exit conference, the City Accountant assured us the preparation of the necessary adjusting entries in their books of account.
Recommendation for Digos City Government:
Advise the City Accountant to cause the immediate adjustments in the books of accounts for a fair presentation of the accounts in the financial statements. Draw a Journal Entry Voucher (JEV) to correct the misclassified accounts.
Digos City 2007 COA Audit 1
July 4, 2010
FINANCIAL AND COMPLIANCE AUDIT
1. The failure to record depreciation expenses totaling P5,117,829.30 for the period from January to April 2007 for all depreciable assets of the agency resulted to the overstatement of its net income and book value of Property, Plant and Equipment and understated the Accumulated Depreciation accounts.
Provisions of Section 4, Letter O of the New Government Accounting system (NGAS) Manual, Volume I states that:
“Depreciation – The straight line method of depreciation shall be used. A residual value equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start on the second month after purchase/completion of the Property, Plant and Equipment. Public infrastructures shall not be charged any depreciation.”
COA Circular Letter No. 2004-003 dated October 4, 2004 provides the guidelines in the computation of Depreciation Expenses of Government Property, Plant and Equipment with revised useful life and adjustments arising from revision pursuant to the provisions of COA Circular No. 2003-007 dated December 11, 2003.
Review and analysis of the Property, Plant and Equipment accounts subject to depreciation disclosed that the agency had provided and recorded the total amount of P12,789,069.89 as depreciation expenses for all its depreciable assets for calendar year 2007. Further verification revealed that the said amount of P12,789,069.89 represents depreciation expenses for the period from May to December 2007 only and the depreciation expense totaling P5,117,829.30 for the period from January to April 2007 were not recorded. Please see Annex III.A for the details.
Inquiry made with the City Accountant revealed that the failure to provide and record the depreciation expenses for the period January to April was unintentional and it was incurred due to some technical problems encountered during the installation of the Electronic New Government Accounting System (ENGAS). When the ENGAS was introduced in the City last July 2007, the cut off period was April 30, 2007 and all balances of the accounts as of that date became the beginning balances. Accordingly, they were previously using the ECPAC System of recording the accounting transactions wherein it only provides depreciation for the entire year only at the end of the year. Hence, when they adopted the ENGAS with the cut off period of April 30, 2007, no depreciation was ever set-up and the depreciation was only set effective May 2007. Moreover, she informed us that they had encountered so many problems during the ENGAS installation which causes undue delays in the submission of the trial balances and financial statements.
The failure to record the depreciation expenses for the period from January to April 2007 for all its depreciable assets resulted to the overstatement of the reported income and correspondingly overstated the book value of property, plant and equipment and understated the Accumulated Depreciation accounts.
During the exit conference, the City Accountant assured us that proper adjustments and corrections will be made in the ensuing year.
Recommendation for Digos City Government:
Require the City Accountant to effect the necessary adjustments and corrections in their books of accounts. Draw a Journal Voucher to record the unrecorded depreciation expenses totaling P5,117,829.30.
